Investment Strategies in AI and Electric Vehicle Markets

Rivian is positioning itself as a leading EV player, leveraging partnerships like Volkswagen to enhance its technological capabilities.

### AI Investment Strategies: Focusing on Software and Internet Companies
* 🖥️  The investment firm's historical focus has been on software and Internet companies, where they have found sources of **differentiation through their research and experience**.
* 🤖  They are looking for **durable beneficiaries of AI**, particularly in the **infrastructure and application layers**, rather than in hardware companies.
* 🚗  One key investment is Rivian, which they see as the **number two EV player in the West after Tesla**, with a recent **$5 billion investment from Volkswagen** seen as a **major validation of their position**.
* 📊  The firm believes the legacy car industry is struggling to modernize vehicle production, and that companies like **Tesla and Rivian are leading the way** in developing **new technology infrastructure**.
* 📈  They have used Rivian's recent stock price volatility to their advantage, **building a position in the company over the past six months**.
* 🚖  Another key holding is Uber, with the firm believing that **autonomous vehicles (AVs) will go through Uber's platform, rather than around it**, for distribution and better economics.
* 💻  In addition to automotive companies, the firm owns various other AI beneficiaries, including cloud infrastructure companies like **Amazon and Microsoft**, as well as software companies like **Datadog and Roblox**.
* 🤖  The firm emphasizes the importance of being with management teams and companies that are looking to **embrace AI in various ways**, both in **enterprise and consumer-facing markets**.

Want to start with I broadly because it's what everyone's talking about, but you have this like thesis that in terms of earnings revisions or something tangible, that all the investments worth it that shows up in hardware names, I don't see too many hardware names that you're holding. Explain that to me. Yeah. So our focus has really been historically on software and Internet companies. That's primarily where kind of our sources of differentiation have been. Just in terms of our own research and experience. We've owned some hardware over time, but what one of the things that we've found difficult is just with the predictability of this early investment wave. And so we're looking for really durable beneficiaries of AI. And so we think we've found many in both the infrastructure and application layers. And so while it's been unfortunate to miss like saying in Vedere, we think it's very difficult to predict just how their fundamentals play out over the next

couple of years. And so, you know, we're happy with our strategy and focusing on what we know best. And Gail, you know, one company that you invested in that year long is Rivian. Now, this is a stock that's been under pressure, down 42% so far this year. You think over two years the stock at $50 a share is currently trading around 13. Explain to us your bullishness on this company and how much of it is riding on this deal with Volkswagen. Yes, a great question. So I've noted a lot of the conversation this morning has been about Elan and EVs and Tesla specifically. I think the market has really started to look at Tesla as kind of the only real winner in EVs in this country. There are some big Chinese companies like BYD that are successful as well, but we've really kind of tainted any other secondary players in EVs into like this,

you know, dustbin of unlikely, you know, kind of unviable companies. And we think Rivian is emerging into its promise as being the number two EV player after Tesla in the West. And so this deal that they just announced with Volkswagen about six weeks ago, we think is a massive validation of their position. Volkswagen is investing an aggregate of about $5 billion that will flow to Rivian. Rivian is only a $15 billion market cap today. Compare that with Tesla at seven or almost $800 billion. And you know, add just being here in San Francisco, we see a lot of Rivian's out in the streets. It's very reminiscent of when Tesla started to get traction with the Model S. Rivian's road map is very much following in Tesla's footsteps, going from selling $100,000 kind of high-priced cars to a mass market, and they are two and R3 models which Rivian announced are going to come in.

2026. I'm just going to jump in here. So, as you know, I covered Rivian really closely for a few years. The VW deal was big. Now, I've written that RJ Scaringe has been a so, so to speak, unreliable boyfriend. You know, the Mercedes deal didn't last long. Ford never materialized, but it indicates that Rivian can't do it on its own. Is that fair? So, I actually think it's slightly different. I think the view that we have is that the legacy car industry is really struggling with the transition to modernizing their vehicle production. And so, there's a couple of aspects to that. One is that the legacy car companies are really good at a couple of things. They're good at outsourcing, and they're good at marketing. They're not good at vertical integration, and they're not good at software. And so, if you look at even Ford's last earnings call, one of the things that

their CEO called out is that Tesla and Rivian. Those are the two companies that he called out, are really the only two companies that have developed a kind of new technology infrastructure that really modernizes the experience for customers. One of the important things now as a customer is, and I have both, you know, had a Tesla for a long time, you expect to get over-the-year updates to your car. You expect to be able to access your car through your mobile phone. And those over-the-air updates are not just to the user interface, they're to the suspension system, the braking system, which requires a lot more integration. So we think the Volkswagen deal is like a real turning point for the industry. And that Volkswagen, which owns Audi, Porsche, Volkswagen, Lamborghini, they want to infuse all of those platforms with Rivian technology. And so it opens up this new paradigm in the automotive industry where you see

that the legacy OEMs might need Rivian as a supplier of technology and software, which is a new angle to this story. And given the developments that we've seen, it's still been a pretty volatile stock. How do you hedge against that volatility in your portfolio? Yeah, so we've used that volatility to our advantage. So the company, if you remember, came public in 2021. It was one of the biggest IPOs in history. I think it came out at a $100 billion valuation because people perceived that it could be the next Tesla. Several years later, that promise, the roadmap, is starting to come into view. Obviously, that was very early for people to think that far out, but we've used that downside volatility to our advantage. So we've just purchased the stock in the last six months at around these levels. And so we're very happy taking a position in Rivian, using the downside price action to our advantage to be long-term investors to see what

this company can become. It was interesting, one of your other key holdings is also well impacted by Tesla in many ways, and that's Uber. That was the Robotaxi read across. I'm really interested in your ethos and focus on Uber and why you're so committed to the name. Yes, it's a great question. This year, in spite of Uber putting up tremendous fundamentals, one of the big overhangs on the stock has been Elon's commentary and plans around robo taxis. So, this has been a big debate in the stock market, and we actually think we're very convicted, in fact, that Avs autonomous vehicles actually will go through Uber's platform, not around Uber's platform, meaning that today the biggest player in Avs is actually Waymo, and Waymo is partnering with Uber in Phoenix, and we are anticipating potentially expansion of that agreement because if you think about Waymo going direct to consumers on its own through its own

app, it doesn't have nearly the exposure or distribution that they get through Uber. And so to better utilize their fixed capacity of cars, they are partnering with Uber to generate better utilization. We think that that is a very important understanding too, to really understand how AV companies, companies that have autonomous functionality will leverage Uber's distribution to achieve better economics. Now with Robotaxis. One of the big knocks that we have is, you know, again, as a Tesla owner, the dream that I can push a button and let my car drive around and generate revenue for me sounds great. And we love Elon's long-term visions, but we also think that it's a bit naive and that the number of customers that are likely to push that button and let their cars drive around with strangers in the back seat there, they're just a lot of real-world kind of considerations that we think make it still very far from happening.

The real-world driver is, of course, artificial intelligence as well. I go back to that as a driving force of what names you get in and get out of, because where are we undervaluing the impact of artificial intelligence in certain applications and names? Yeah. So, you know, we own many companies. So, you know, Ed pointed out that we don't do a lot of hardware, but we own a lot of companies that we expect to benefit significantly from AI. You know, obviously in the automotive space, I really talk about autonomous driving, and that's why it's important for us to have a view on Uber and whether AI's a benefit or a hindrance over time. But there are a lot of names that we own in the infrastructure space, you know, really in cloud infrastructure like Amazon and Microsoft, names that are known to everybody, but also Datadog in the software space, which is a little

bit of a tie on to companies that are investing in their cloud infrastructure. We also own a company that you wouldn't really think of as an AI beneficiary, which is Roblox, which I saw Bloomberg Intelligence actually put out a piece this morning talking about how Roadblocks is embracing AI to help their developers build games and experiences on the platform. So there are a lot of companies that are in the market, both enterprise and consumer-facing. We just want to make sure that we're with management teams and companies that are on the front foot, that are looking to embrace AI and all the different potential ways that they can.

SoMa's Simon on EV Race Between Rivian, Tesla

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Bloomberg Technology

Investment Focus on Software and Internet Companies

The investment strategy has historically centered on software and Internet companies, with a focus on durable beneficiaries of AI in both infrastructure and application layers.

The difficulty in predicting the fundamentals of hardware companies has led to a limited investment in that sector.

Rivian, despite its stock pressure, is seen as a potential winner in the EV market, with the company's success linked to its deal with Volkswagen.

Rivian is positioning itself as the number two EV player in the West, with a $5 billion investment from Volkswagen validating its growth.

The company's market cap is $15 billion, a fraction of Tesla's $800 billion.

Rivian's roadmap mirrors Tesla's, aiming to transition from high-priced cars to the mass market by 2026.

The Impact of Tesla and Rivian on the Automotive Industry

Tesla and Rivian are leading the way in modernizing the customer experience in the automotive industry through new technology infrastructure and over-the-air updates.

Volkswagen's partnership with Rivian aims to infuse its various brands with the company's technology, potentially reshaping the role of legacy OEMs.

The volatility in Rivian's stock has been used to the advantage of long-term investors, who have recently purchased shares at lower levels.

Uber's Role in the Rise of Autonomous Vehicles

Uber's stock has been impacted by Tesla's plans for robo-taxis, but the company is committed to its platform's role in the autonomous vehicle (AV) market.

Waymo, the biggest player in AVs, is partnering with Uber in Phoenix to maximize car utilization, and this partnership may expand.

The speaker believes that AV companies will leverage Uber's distribution for better economics, while also questioning the feasibility of Tesla's vision for self-driving cars generating revenue.

The Impact of Artificial Intelligence on Company Investments

Artificial intelligence is a key driver in determining which companies to invest in, with a focus on its impact in various applications.

The speaker's portfolio includes companies in automotive, cloud infrastructure, and software, all expected to benefit from AI.

Notably, Roblox is also embracing AI to support its game developers, highlighting the diverse range of companies benefiting from this technology.