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Around the Desk: This is where we at Avory think out loud, challenge narratives, and look for signal through the noise. Each episode, the Avory & Co. team dives into what’s moving markets, how companies are performing, and where opportunities may be forming. We break down earnings, macro trends, and investor sentiment — all from the lens of a concentrated, high-conviction portfolio.
*** The views expressed on Avory Podcast: Around the Desk are those of the hosts and guests and do not constitute investment advice. This podcast is for informational purposes only and should not be relied upon to make investment decisions. All investments involve risk, including potential loss of capital. Avory & Co. may hold positions in the companies discussed.
Sean: All right, you are listening to
Avery's around the Desk podcast where
we dig into markets, companies, and
ideas shaping what is coming next.
I'm Sean Emery, chief Investment
Officer, founder here at Avery and co.
You know, this conversation is for
informational purposes only and should
not be considered investment advice.
We may hold positions in some
of the companies discussed here.
Please do your own research.
You know this.
Before making any investment decisions,
you know, today I wanted to talk about,
uh, you know, what feels disconnected,
you know, macro is stabilizing something
we have been discussing, somewhat
predicting if you read our annual
letter, earnings are holding up again,
something we have been talking about.
Now here I set the tone right where we
wanted to show Jensen Wong, you know,
saying, you know, the CEO obviously
and founder of Nvidia, basically
highlighting this week that, you
know, the software selloff is the
most illogical thing in the world.
You know, it's a strong statement,
you know, he didn't have to say that.
But if you think about it, you
know, and you believe in, you know,
the AI build out, which we do.
If you believe compute demand is
exploding, which it is, uh, if you
believe NVIDIA's GPUs are going
to be, you know, sold at historic
levels, um, which they are.
Then I think you have to believe that
software demand is going to increase,
uh, and increase meaningfully.
Uh, you know, compute in itself
does not exist, uh, in a vacuum.
So AI needs really orchestration
layers, workflow layers, data platforms.
For context, it needs application layers.
You know, again, you cannot believe
in AI infrastructure and not
believe in expanding, you know,
software usage more broadly that
may aggregate to several names.
Um, and that is part of the view as well,
and I'll highlight to you, you know, here
why at least we here at Avery are, are
well positioned for that extreme scenario.
But I do think, you know, the
contradiction of, you know, um,
you know, Jensen saying this versus
what's happening, uh, and some
others that are, you know, pretty
prominent, uh, you know, in the space.
So, but let's start real quick, you know,
and, and highlight, you know, some of
the stability that's happening out there.
So here we we're looking at inflation.
If we zoom out.
You know, CPI came roughly in line,
uh, with, you know, expectations.
You know, it's right
around, you know, two to 3%.
Um, and you know, it's kind of
stayed in this, you know, mid to
range, uh, for quite some time.
Now, if we look at Reflation,
uh, which is a, a more real time
reading that's closer to 0.7,
uh, and that incorporates like a, you
know, realtime shelter, which continues
to be, you know, a burden in CPI.
But either way, I think both of these
say the same thing, that inflation.
You know, is cooling, you know, for
another discussion is, you know,
the administration announced that,
you know, tariffs, uh, you know, in
different countries could come down.
So there's news of that, which
would only add fuel, uh, to the,
you know, deflationary, you know, or
inflation easing further AI driven
productivity as well as deflationary.
Uh, and then obviously supply
chains are pretty normal these days.
Um, but you know, anything
can flare that up.
But overall, I think the inflation
story looks very, very contained.
Uh, and that should be a strong
signal, uh, as we expect, you know,
more and more rate cuts this year.
Um, now the break evens also
have, you know, shared this.
So this looks at break evens.
Um, and basically it's just a signal of
what the market expects for inflation.
You saw it perk up, you know,
at the end of 2025 and then, you
know, come down or, and then rise
in, you know, early 26 and, and.
You know, here recently
start to come back down.
So I think that's good news.
So inflation risk I think is, you
know, very much of the past and it
should be seen as much of the past.
Um, jobs, you know, jobs is kind of
the second stool that I think a lot of
people negative have held their hat on.
Our view has been, you know, 2026
we're actually more likely to see
a re-acceleration in growth than
a collapsing growth That's kind
of contrarian to the narrative.
Um, and you know, this week we
saw a hundred and, you know,
roughly 30, 170,000 jobs added.
Uh, you know, and that's not
explosive, but it's well above.
You know what estimates were.
Um, and you know, we're not
going back to 300,000 jobs.
We're not coming out of, you know,
some crazy crisis like, you know, 2020.
Um, and you know, ultimately I think
what we're seeing here now is that
jobs will likely start to pick up,
you know, going forward over the
next, you know, couple quarters.
And that'll be further evidence that,
you know, we have a pretty stable,
uh, you know, jobs market now.
Two indicators that I wanted to focus on.
We're really around, um, you know,
hourly wages and also the, uh, hours
worked, you know, hourly wages, 3.7%,
you know, continues to hover around there.
It's a good thing.
Again, if we're talking about inflation,
you know, the price of goods and services
at two point, you know, seven or 0.7
in real time.
3.7
is above that.
So people are, are making
money faster than the prices
of goods and services going up.
So that's important.
You know, again, hours work, that's
where you'll usually see, you know,
the early indications of a, a labor
market that's gonna roll over.
Usually before you fire, you just
have people work less, uh, less
hours and that actually ticked
up and is at the highest level.
You know, it's been, um.
Here we're looking at something that
I think is important and also is
counter to, you know, much of the,
you know, AI is displacing this,
or AI is displacing that, you know,
prime age labor force participation.
So these are 25, you know, 54 year olds,
highest since the early two thousands.
So if AI were, you know, massively
displacing workers, you'd
probably see weakness here first.
Um, and again, the narrative
is, is kind of counter to that.
So it's kind of, uh, strange where
again, we have, you know, some of
the highest participation rate for,
you know, this cohort of users or,
or, um, uh, citizens, uh, civilians.
And, and ultimately, you know, the
narrative is quite the opposite.
Um, this one's cool.
So, you know, we're, we're using, um, you
know, AI to, to analyze within s and p
500 transcripts, you know, uh, how many
companies are talking about layoffs.
And you could see that spiked in
2022, um, and has since come down.
That's the white line here.
So that has since come down.
Uh, and you know, the green is just
isolating for, uh, information technology.
So again, our belief is, you know,
if we're going to see layoffs,
it's more likely to come in the
form of, um, from technology, given
that they are the enablers of tech.
They know how to use software and ai.
So in theory, they would
be the ones displacing.
I know there was, you know, Amazon,
you know, getting rid of 16,000 people,
but if you go on, you know, their
job openings, they're hiring 20,000.
So again, I think, um, headlines
versus reality is, is real.
Um, so let's go into some earnings.
You know, this week, you know,
Zillow, housing market's flat.
Zillow grew 16%.
Yeah, for me that's good.
Um, you know, rentals are growing 45%
mortgages growing, you know, north of 40%
monthly active users, you know, I'll show
here on the next page, 221, growing 8%.
So, you know, user growth is accelerating.
You know, if ai, where even, I don't even
know how they got thrown into the mix.
And you'll see later that, you know,
real estate names got thrown into a.
You know, an AI mix, uh, but they're
seeing, you know, many of the things
that, uh, you look for in a good business.
So, growing across the board, uh, maybe
the most important takeaway from, you
know, this slide is that, you know, growth
is coming not only from residential,
but from rentals and also mortgage.
Um, so that's really good.
Uh, this shows the active users.
You can see that growth, you know,
hitting 8%, which is some of the.
Strongest growth they've seen.
You know, it's very hard to
replicate 221 million monthly
active users, uh, growing 8%.
Very few companies have that amount
of reach, uh, and growing that fast.
So more evidence and supporting
evidence of, you know.
One of the reasons why us here at
Avery, you know, invest in that despite
some of the, uh, volatility here.
So we're big believers.
Uh, again, not investment advice.
Here's Airbnb and it's
interesting, you know, they're
growing double digits globally.
Latin America, strong rest of the
world, strong North America, stable.
Um, you know, Chesky, you know,
CEO, founder on the call set AI's in
enabler of speed for their business.
Um, so again, I think marketplaces
like Zillow, uh, other marketplaces
that are out there, uh, you know,
some could be exposed, but when
you're that big, that broad.
Um, and that important.
I think ultimately what we're seeing
is, you know, uh, automation and AI
assisting, uh, as opposed to, uh,
being a hindrance and it's not showing
up in any of the numbers and chat.
GPTs been around since 2022.
Um, so let's get into
like the AI scare trade.
You know, there's
headlines like this, right?
We saw real estate brokerages get hit,
we saw financial services get hit.
We saw freight, you know, literally,
uh, you know, trains and planes.
You know, get hit.
Um, even kind of like, you know, the
tiniest announcement from obscure
companies were, were triggering, you
know, strange moves in different places.
And, you know, that's the, that's the
state of the market from a, uh, you
know, trading every single, uh, headline.
Um, and you know, here we're looking
at the, you know, just a headline on
Bloomberg showing, you know, real estate
stocks, uh, you know, things like, uh,
Jones Lang LaSalle, you know, CBRE.
Uh, Cushman and Wakeman, you
know, following 15% on news,
um, that AI could displace them.
Here's the, uh, the highlight that
shows, you know, some of these, uh,
financial services stocks, like, like
Charles Schwab down like 20, 25% in a
couple days, uh, on a AI tax planning
announcement from another company.
And, you know, we don't invest in any
of these companies here, but ultimately
I do think, um, this has just signaled
that, you know, uh, some of this stuff is.
Uh, indiscriminate and, you know,
many of these things, our view is,
and again, not recommendation is,
you know, many of this stuff will,
will bounce back in, in due time.
Uh, even though again, we don't own
any of these that you see on the page.
This is the, the freight, um, logistics.
So a tiny company announced a, you
know, something that they're doing
with ai and that hit, you know,
almost like physically, you know, uh,
physical companies to some degree,
you know, freight, um, forwarders.
And, you know, many of these companies
were down double digits on that news.
So again, more evidence.
Uh, this just highlights, you know,
the, you know, the mayor, the various
different categories that have gotten hit.
And I think, look, AI's gonna
stay with us, AI's not going away.
Um, so the question there for us
is, you know, a couple things.
Are we, are we going to, um.
You know, one, is it obviously
an opportunity, number one, you
know, what is our views on it?
Number two, and we, we, we shared
an article today from ourselves
with data supporting some of this.
But look, look, here's, um, Tama
Bravo, Orlando Bravo from Tama Bravo.
Just articulating that, you know,
the companies are really, really
cheap in the software space.
At most, most of this stuff is illogical.
Or not logical.
And then also, you know,
Jensen saying the same thing.
And there's many others that I could have
put on this page saying the same stuff.
Um, here's a good way to frame it as well.
So here's block, and you can see in
white up there is the bonds for block.
So if people were really concerned,
you know, there's a, there's an
old adage out there that bond
investors think with their head.
Um, and, you know, equity investors,
you know, think with their heart, uh,
to some degree and, you know, they'll,
they're very emotional, uh, day to day.
And you see that in, in
price action all the time.
Uh, all the examples I showed above,
but, you know, here's looking at blocks,
bonds, which have not gone anywhere.
If there was real credit risk,
financial risk to the companies,
usually you would see the credit
markets, the bonds of these companies.
You know, um, feel pressure and you,
you haven't seen any of that in the,
in the stocks, uh, in the world.
You know, in many of these I showed
like ServiceNow and Salesforce
and Block and some others.
You know, the, the equities, uh, you
know, uh, being volatile while the, uh,
you know, the bonds themselves, uh, not.
Um, and again, it just shows, you know,
dislocation or a disconnect between,
you know, uh, the financials and the
wellbeings of these companies versus,
you know, uh, uh, move movements.
Now this is interesting, right?
So let's assume, let's assume that the,
the view that, uh, AI is going to eat
all of software, um, you know, I can draw
a line between that happening, right?
Um, and if that does happen, let's
think through who's gonna win.
Um, and so let's say everything
migrates to the AI labs.
You have open ai, you have anthropic,
uh, anthropic is, you know, the
owner of Claude Cloud Code and,
you know, many of the other.
Um, you know, models and
different products that they
continue to announce here.
So Zoom made a $51 million investment
in, in, uh, anthropic, um, in 2023.
That investment is now worth somewhere
around, you know, two to 4 billion.
So 3 billion at the midpoint, let's say.
Um, yes, or this week, uh, anthropic had a
$380 billion, uh, raise or, or valuation.
Uh, there's views that they can go out
this year at around a trillion dollars.
Um, and you know, we just summarize.
We say, okay, look, let's assume,
let's assume, uh, AI eats all software.
Let's assume value accrues almost
entirely to the model layer.
Um, let's assume a duopoly, open AI
anthropic, uh, you know, similar to
Airbus and Boeing, similar to, uh,
you know, apple and, and Google.
Similar to many different
ecosystems that are out there.
Uh, that are infrastructure,
so everything accrues to them.
If knowledge work, uh, you know,
plus software economics, you know,
represent somewhere around tens of
trillions of value in the us then
model providers could in, you know,
theoretically, you know, justify, you
know, multi-trillion dollar valuations.
Again, we're already talking about, you
know, potentially a trillion this year,
uh, for anthropic, uh, and same for open
ai, but they would be more, they would
be worth more than, you know, the, the
compute layer and therefore, you know.
We assume that they reach, you
know, $20 trillion of market
value, uh, in a duopoly.
So it's 50 50 each, or 10 trillion.
Uh, for somebody like anthropic that
would then suggest that the value
of zoom's, uh, anthropic investments
stake alone, uh, would be, you know,
north of a hundred billion dollars.
Um, you know, adjusted for,
you know, dilution and some of
the nuances will matter, you
know, to, to get to that value.
But.
That'd be worth, you know, 10 x
or more of Zoom's current value.
So in a, in a scenario where AI eats
everything, and keep in mind we don't
own only a ai, I mean only software.
So like we own restaurants, we
own, uh, you know, a car wash.
Uh, we own some other things
that, uh, that I think, um, are
much more immune and, you know,
we're not even talking about here.
Uh, but if, if we do assume and,
and, and use that logic of AI eats
everything, then that scenario,
our company, you know, zoom would.
With a 20% stake would, would generate
200% returns to the portfolio.
Um, so pretty important.
Again, markets are not pricing, you
know, that asymmetry, I think properly.
Um, it's probably why Zoom has been the
only software stock up, uh, for the year.
But, you know, again, I think, again,
these aren't a recommendation, but I, I
think in the world where you draw the.
Linear extrapolation of,
of AI eating everything.
Um, they're well
positioned from that logic.
They also have an investment in Core
Weave and perplexity, which are two,
uh, you know, big AI companies as well.
So next page here is just showing, you
know, ramp, which shows the, uh, the
amount of credit card spend happening,
uh, on these different model platforms.
And you can just see the, the
acceleration that Anthropics seeing.
So good for them.
Good for Zoom.
Uh, on this next page
here, we, we highlight.
And this is important, what
could change the narrative,
uh, for some of these things?
You know, shoot, first,
ask questions later.
But I think there's a couple different,
you know, things that can happen.
CapEx moderates.
I don't think that's too far off actually.
You know, $650 billion is
what the hyperscalers are
spending on CapEx this year.
Uh, and they've committed to the market.
Doesn't necessarily love that.
Uh, 'cause there's no clean ROI
except for meta, which again
is a, a holding in our company.
Um, which.
There's no clean ROI as as
much for some of the others.
Um, and, you know, at $650 billion, you
know, the market again, doesn't love it.
And you know, we saw in 20 22, 20
23, the years of efficiency where the
market, you know, batted an eye and then
the, and then the companies themselves
reigned in some of their sping spending.
I'm not saying CapEx, uh, you know,
goes negative and we go the other way.
It's that seeing a peak
level of CapEx growth.
We send a signal that we are on the
other, we're cresting in terms of growth
rates for CapEx, and I think that's an
important signal that I actually do think
will happen in 2026 when, who knows.
But the second one is valuation reset.
That creates enough support where people.
Um, you know, a lot of, again,
when things happen in the
markets, they tend to happen fast.
People, um, extrapolate a point of
view all the way into the future,
uh, as opposed to, you know, adding
up, applying any sort of logic to it.
Sometimes.
I always seen that time and time
again, uh, whether it was COVID or, or
other, you know, times, uh, as well.
And ultimately, um, the importance here
is that, you know, valuations reset.
And create support.
So valuation support.
The next is retention.
So seeing companies, really software
companies and some of the other
companies that are getting hit that
aren't even like truly software.
Um.
Showing retention gains, showing,
um, you know, uh, AI revenue
coming from maybe new modules.
So you're seeing and hearing
some of that, and I'll, I'll
share some of that buybacks.
So companies, many of these software
companies, you know, haven't even
reported yet, and therefore they
can't even buy back their shares,
uh, during some of the turmoil.
And that has been acting as a
level of support over the years.
So, you know, it's kind of in this gap.
So I assume over the next,
you know, uh, month, 30 days,
45 days, as they all report.
You know, it opens those windows back up.
Number five, I think is a real reality in
2026, where you get a scare around, um,
you know, things like prompt injection.
So really like cyber malicious
activity happening with these AI
tools that I think could prompt, uh,
enterprises to slow down, you know,
their rate of adoption to some degree.
Again, look, I'm a big believer in ai.
We use it internally.
It's a big thing for us.
Uh, I think more and more AI is
gonna be used and surrounding on
us, but I'm just outlining that you
know, that we're probably gonna have
more software, not less software.
And in that case that you do have a
scenario where AI eats everything.
You know, those that own the model
layer, I think will eventually, you
know, all that value in theory in
that worst case scenario would accrue
to them and we would be just fine.
Number six is macro stability.
You obviously need macro to
continue so that the narratives
don't cross that job losses.
Uh, or, or job strength obviously, uh,
is not from a macro event as opposed
to, you know, AI displacing labor.
Um, and so that's kind of some of that.
Now what are we seeing?
So here's a, a good visual in
blue earnings for, you know, the
software index and pricing white.
And you can just see how that,
uh, is disconnected here.
You can then see Prime Books.
This is looking at Goldman
Sachs and looking at the amount
of, um, the percent weight.
Uh, uh, and net exposures that, you
know, funds have, uh, to different areas.
So they're max overweight.
I mean, in theory they could go
more max, uh, overweight, um, for
semiconductors and they're, uh.
You know, very, the, the on record
underweight, uh, to software.
So you saw that happen fast.
So again, positioning matters as you know,
at, at some point you, you get to a camp
where there's the long only community,
you know, the people that are buying these
things for, uh, you know, 3, 5, 10 years.
And really buy and hold are owning these
things and not necessarily net sellers.
So as long as you flush out, you know,
many of the net sellers, the panic
sellers that, you know, were maybe in
it for a trade, um, or skeptical about
the future, you know, those get out.
And then you eventually have,
you know, buybacks and you
know, your core long only, um.
And then you start building back up.
Um, here's showing some of the companies
this week alone and, and last week as
well, that highlighted retention going up,
highlighting, you know, either a beat and
raise for the full year, uh, highlighting
that things are rather stable.
Um, you know, other, you know, we need
more of that from many of these companies.
Again, many of them haven't reported
yet, so, uh, I think as the year goes
on, that'll be part of it as well.
Um, so that's really that again,
you know, really just to summarize
is there's a big disconnect.
Uh, earnings versus price.
EPS trending up, prices trending,
you know, down in some cases.
Uh, if you, if you own Zoom, obviously
I think you're protected for that.
Worst case, optionality of like, you
know, frontier Tech, just totally,
uh, you know, AI taking everything.
Um, but again, you know, the combination
of valuations, reset, positioning,
washed out, you know, fundamentals pretty
stable, I think ultimately is great.
Look in closing, AI is transformative.
You know, we're not dismissing that.
We use it daily.
Again, we use, uh, you know, we believe AI
is, you know, ultimately infrastructure.
It's the internet, um, that many of these
companies are gonna build on top of.
Um, and we think ultimately
it, it drives productivity.
We'll have more, uh, software, not less.
And I think that is a contrarian view.
Uh, you're hearing that from
many, uh, that are on there.
So anyways, we'll end there.
Uh, we'll be back next
week with another update.
If you wanna reach us, you know,
feel free to email the team.
Uh, and as always, follow
us on X, on LinkedIn.
You know, we post additional
insights there throughout the week.
With that, have a good weekend...