Companies

Zuckerberg is aggressively investing in his new vision of the metaverse, as evidenced by the top talent hire of Apple's head of design, Alan Dye. Back in 2021, when Facebook changed its name to Meta, the company defined the metaverse as an immersive digital world you would step into, with Horizon Worlds and Quest headsets at the center. At Meta Connect in September, Zuckerberg revised that definition. The metaverse is now a blend of AI glasses and virtual reality, with the real world as the canvas and an assistant in your line of sight. That’s bad news for VR and good news for the new canvas Dye will now paint.

For the past month the market has been nervous that the AI bull market may be approaching an end. The latest pulse on that topic came this week from AWS re:Invent 2025. Amazon's message was clear, they are accelerating its AI buildout and agents will have a profound impact on the future of work. Unfortunately the market is not buying it, with shares of AMZN, GOOG, NVDA, MSFT, and META down an average of 0.5% in the day following the bullish comments from Amazon, while the Nasdaq is flat.

At Deepwater, we own shares of META, and we believe the company is well-positioned to leverage AI at scale to drive ad-revenue growth. That said, I’m disappointed in one of the company’s most recent AI products. We tested Meta AI running on the new Meta Display in a side-by-side comparison against ChatGPT’s video conversation tool running on an iPhone. Meta AI understood about 90% of prompts and delivered satisfactory answers roughly half the time, while ChatGPT understood 100% of prompts and provided satisfactory responses 98% of the time.

The 2% decline in NVDA shares following October results and January guidance, both of which were above whisper expectations, reflects investor concerns that, when it comes to AI, it can’t get any better. While the concern is understandable, most signs suggest that growth for Nvidia and the broader AI infrastructure buildout is still in its infancy.

It's becoming more clear that demand for the new iPhone Air is soft. Recent third party estimates suggest the new form factor accounts for around 5% of iPhone sales. Before it went on sale, I and the Street had estimated it would account for 15% of sales. Despite that headwind, the iPhone is growing at its fastest rate in four years, largely thanks to a massive upgrade pool showing up, albeit nine months late.

Meta is putting a lot of effort into wearables, but based on our recent testing of the new Meta Display, they have a long way to go before they get the right formula. We ordered our Meta Display as soon as it was announced and got it 26 days later. Our bottom line is that while the tech is impressive, we find it hard to recommend the product based on its limited use cases. However, we continue to believe Meta is making the right move by investing around $18B annually into Reality Labs, but the return on that investment will take years.

I remain positive on shares of NVDA and believe over the next two years growth will be higher for longer. That said, the cross currents around next week’s earnings set up a Catch-22 for the AI complex, because stronger guidance can amplify worries about overspending, while a modest raise can be read as the first sign that growth is normalizing faster than expected. As for changes to Street estimates, Jensen’s comments on October 28 suggest the consensus CY26 growth estimates will increase from the current 39% y/y growth to 45%.

The shareholder meeting was a good day for Elon. Investors overwhelmingly approved his $1T pay package with more than 75% in favor. That's a win for TSLA investors for two reasons. First, it gives Elon the control and financial carrot he wanted, which means he will stay engaged at Tesla. Second, the high level of support likely means investors will continue to look past near-term challenges and stay the course with hope for the long term. Elon made it clear that the long term is anchored in the success of Optimus. Separately, during Musk's presentation and Q&A, he floated the idea of building a fab, an outcome I put in the unlikely category over the next five years.

One nagging question around AI is what the long-term business models will look like and whether these companies will be able to charge enough to become profitable. We looked at the ten most popular paid consumer subscription apps to get a better sense of historical pricing power. On average, their prices have increased 1.7% faster per year than the rate of inflation. The bottom line: this is good news for ChatGPT, Grok, Gemini, Claude and Perplexity, because it shows that if you get consumers hooked, you can gradually start raising prices.

On Thursday after the markets close we'll find out if Musk's pay package is approved by shareholders. While the $1 trillion in potential payouts grabs headlines, what's at stake goes beyond compensation, it's about control of the company. I believe the package will pass. If I’m wrong and it’s voted down, my sense is that this has become personal. While he likely wouldn’t outright quit Tesla, he would meaningfully reduce his time at the company. In the end, a “No” vote would be a loss for Tesla investors.

Over the past two months, Nvidia has made five major investments totaling $15B in near-term commitments and $100B in long-term commitments. During that same period, the company has also invested in approximately seven private companies and established twelve new partnerships. In total, Nvidia has made about twenty-five strategic announcements. The common thread that ties them together: Jensen Huang’s belief that the future of work is shifting from tools to bots.

Apple’s September iPhone numbers missed expectations, rising 6% year over year compared to expectations of a 10% increase. That negative was more than offset by positive guidance, which implies iPhone growth in December will be closer to 12%, versus expectations of 6%. Clearly, iPhone is on a roll. After December, it will have averaged 10% growth in each of the past three quarters, compared to a 0.5% decline in the two years prior. I expect that momentum to carry into mid-next year. Now, the focus increasingly shifts to the high bar set for the new Siri, expected around April of next year. Anticipation of that release should move shares higher.