AWM Insights Financial and Investment News | Smart Investing in the Age of AI

In this episode of AWM Insights, Chief Investment Officer Justin Dyer and Portfolio Manager Mena Hanna dig into the hype and reality surrounding artificial intelligence and its impact on multi-generational wealth strategies. From the soaring valuations of data centers to the lessons hidden in recent market bubbles, they break down what families should know before investing in AI-driven trends. The conversation brings practical wisdom for long-term investors, highlighting when to tread cautiously, how to diversify effectively, and why the real winners might be the quieter “picks and shovels” businesses. Tune in for a timely, experienced perspective on navigating emerging technology cycles with your legacy in mind.

Chapters
(00:00) AI Hype and the Hundred-Year Family
(01:00) Data Center Demand and Risks
(03:31) Valuations, Bubbles, and Investor Caution
(06:00) Lessons from High-Profile Speculation
(07:52) Venture Capital Strategy and Diversification
(10:56) Opportunity in Picks and Shovels Businesses
(12:15) Public Markets and Managing Concentration

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Creators and Guests

Host

Justin Dyer

Chief Investment Officer and Chief Operating Officer at AWM Capital

Host

Mena Hanna

Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

Intro Hook: Today we're gonna go a
little bit deeper on the AI topic.

It's ever-present, ever-growing,
maybe even a bubble.

You do wanna invest early, you
wanna invest without fees, and

you need to diversify because you
have no idea what company's going

to pop and what company won't.

The dosage makes the poison.

It's very true in investing.

You never wanna be overly concentrated
'cause it can really damage your

hundred-year family In this case,
it's an eight hundred percent markup.

Ideally, you invest
before the markup happens.

In Anthropic's case, you invest as
early as you possibly can, and you

have a massive multiple of your money,
potentially two to three years in.

Guess who got rich during
the last gold rush?

It was the people selling
the picks and shovels

Justin: Hey, everyone.

Welcome back to another
episode of AWM Insights.

It's your host, Justin Dyer, Chief
Investment Officer here at AWM Capital.

joined, as always, by Mina Hanna,

co-host and Portfolio
Manager here at AWM Capital.

Today, we're gonna

go a little bit deeper on the AI topic.

It's,

uh, ever

present,

um, potentially ever-growing,

and maybe even a bubble.

Who knows?

We'll kind of talk
through that a little bit,

um,

today.

But yeah, just how,

uh, specifically

how the hundred-year family
should really think about

all the hype,

all the headlines that

are, are

surrounding, uh, this general

topic,

um,

at the moment.

So, uh, yeah, without further
ado, let's jump into it.

Mina, as we always do,
try to take a step back

kind of level set, align
listeners, ourselves

with

this general

topic, the general topic
we're jumping into today,

artificial

intelligence.

Uh, data

centers

as well are part of that, right?

It, it can extend, you

know, potentially, right?

People are

saying to every part of the, the economy.

We're not gonna go

that deep and that granular today, but,

you

know, specifically, we really wanna

help the,

the,

the hundred-year family understand,

uh, what's

going on,

but, you know, maybe
even more importantly,

how, how to think about
investing around th-this topic.

Mena Hanna: Yeah.

AI and data centers are
obviously super in-intertwined.

You need a lot of,

call it just capacity, computing
capacity to run these models, for

these models to learn, train, meet
the needs of, of their users today.

So you have

these

massive plants that consume tons of
energy, they consume tons of chips.

They take up a decent
amount of space as well,

um,

and they consume a lot of

water.

So a lot of consumption that goes on
to really just work these machines

properly and

for AI

companies to be able to

monetize

their models and and
continue to improve and

enhance them.

Now,

that

space has been super, super hot
recently, obviously, because

everyone

thinks that there's going to be a
ton more AI usage, these models, and

these, call it,

warehouses

are

just going to be more in demand.

Companies,

Anthropic

leases out a lot of computing space.

Companies

like Anthropic are going to pay top
dollar, obviously, to have access,

and

as more and more businesses
and people use AI,

there's just

going to be

just going

more demand and, and, any
supply there is going to

bid up.

So what we're seeing is these data centers
get priced at pretty crazy valuations

People are making plans to build them

a whole host of new areas.

But

it's

not, it's

not, just a foolproof, call it

...strategy.

There's, there's a lot of risk here.

There's the water rights risk,
there's the energy risk, there's...

Yeah,

There, there are a lot of risks, and
you're actually also seeing companies

like OpenAI that have made commitments to

open

a lot of new data centers and
partner with a lot of people,

kind of

step back and

say, "Hey,

yeah,

" we, we wanna grow, but the
commitments that we've already

made to you

guys, we

probably can't fulfill
them for a whole host

of reasons."

Yeah lot,

lot going on there.

going

Justin: and

even, you know, upstream
from the data center hype and

valuations, the, the...

Obviously, like, artificial
intelligence is h- making

headlines all over the place, but

there's hype and crazy valuations

al- on that side

of, of, the marketplace, let's call it.

Um, and kinda like I alluded
to, you know, there, there's

belief that this is going
to have lasting impacts

throughout

the entire world,

every

kinda walk of life potentially now.

Um,

that's a pretty bold statement,
and any time you get into

a, a situation where it's like,
"Hey, this time is different,"

would say, number one,

tread lightly, tread cautiously.

Um, but at the same point in time,

any time that ha- that has
happened, there's been this

incredible technology where

there's been a, an interesting
financing envir- environment, maybe

at points that's been an outright
bubble, which we really only know about

kind of in hindsight.

Um, those technologies are actually
good, or those, you know, you could

argue those bubbles in a way are actually

good for humanity long-term, right?

'Cause it's

investing in this newfound technology,
and if it weren't for the bubble,

uh, actually happening

and,

and

this influx of money and investment going
into these companies or data centers,

we wouldn't have the
technology down the road.

Now, that's interesting and
that's kinda like philosophical,

and, you know, maybe

a student of history type,

um,

uh,

mindset,

um,

have with this.

And we wanna talk about
the 100 Year family.

We wanna say, uh, we wanna unpack
how does the under- 100 Year family,

um, how

should the 100 Year
family think about this?

Is this

something we want to invest in
because everyone's talking about it?

Uh,

do we want...

Is there any aspect of this
that we wanna be involved in,

uh, from a, the, the

100 year, supporting the 100
Year family priority standpoint?

Mena Hanna: Yeah.

And I think you have
to be thoughtful about

how you access these businesses and
how you access this trend in general.

We've seen a lot of big players

just spin

up large pools of capital

and

throw crazy money at developing
th-these data centers.

That is the bubble mentality that
typically does not work out well.

We've

seen some cracks form I kind of
highlighted the OpenAI thing,

but

that

is, that is about-- that, that's hopefully
all we're gonna see on that end, at least

for, for the

time being.

Another example of sort
of crazy hype, Allbirds.

Allbirds was a shoe company

that sold

Justin: data center, I

Mena Hanna: yeah.

It's, It, was a shoe company that sold
its shoe processing company and then

pivoted to be, um, essentially

w-- Yeah,

it was using its space to
help these companies and

sell computing power and sell

space

for companies to actually
establish computing power.

was up eight hundred
percent in one trading day,

and ever since then it's

down, it's down eighty-ish percent.

you saw

a massive spike up.

Now it's still worth twice as much
as it was, uh, as a shoe company.

there's a- Yeah.

There's a little bit of, uh,
of froth still, but you can see

there are massive moves, and if

you would've invested
in Allbirds, and it's a

tiny, tiny part of the of
the market, but invested in

Allbirds through all of the hype

and speculation when it was up eight
hundred percent, you'd have lost

a lot of money on the way down.

Justin: Yeah.

And I wanna n-both acknowledge
that and you know, a-anytime you

see pivots like that you
gotta scratch your head.

and I think you've

used

this term in the past that it

just doesn't really

quite make sense from a financial

physics standpoint.

There's gotta be

some

logic

underpinning

the broader, uh,

financial modeling that

that,

you, you, you, apply to
long-term investing, and we're

seeing some detachment from
that quote-unquote "reality."

Um, and that

always gives you some pause.

However, I wanna...

I do wanna make sure we talk about

venture capital and kinda how
we think about venture capital.

'Cause at,

at the end of the day, these companies,
not the data center side really,

that's the real estate play, but

And we can talk about that
a little bit potentially.

But,

um,

the Anthropics, OpenAIs, uh, you pick
your, your name brand AI company today,

they

started out

as venture-backed companies.

And so how do we think about

that,

right?

Where, where do we actually want
exposure when we're investing

in the world of venture capital?

Is it

that

company at the current valuations
because it's quote-unquote

private and still technically

venture, venture

capital

because

of who backed it?

Or is there some other playbook we-

we-

deploy?

Mena Hanna: Yeah.

Ideally, you invest, you
know, in this case it's

an 800% markup.

Ideally, you invest
before the markup happens.

In Anthropic's case, you
invest as early as you

possibly can, and you have
seed Series A exposure, and

you get to ride

that wave up, and you have a

massive, massive multiple of your money,

you know, potentially
two to three years in.

So-

you

wanna invest early you wanna invest
in also a basket of companies

Justin: because

'Cause you don't know.

Mena Hanna: You don't know.

Yeah.

Yeah, you don't know who
Anthropic's gonna be.

and You don't know, you

know, the company that we don't
know because it went to zero.

So you have to diversify.

You also have to get in at

the right

valuation and the right price.

We're seeing this.

A lot of people are

buying shares of Anthropic
on the open market.

They're either paying crazy fees like

10% to

20% on entry,

or they're paying a 20% to 40%
platform fee, which we were just

talking about before this call.

That

works

out if Anthropic absolutely crushes it.

But if they stagnate in terms of growth,

you're, you're really starting
at 60 cents and hoping

that, that it goes up.

That's--

I invest a dollar, I don't want 60
cents to actually go to my investment.

So when you really think about it,
you have to probably invest early.

I shouldn't say probably,
you do wanna invest early,

you wanna invest without
fees, and you need to

diversify because you have no

idea what company is going to pop and what

company

won't.

Justin: And

need to diversify not only across
companies but across company types.

We want exposure to AI.

It is

an incredible technology.

It's a little

hypey right now.

It depends on where you are.

I think it's still very
interesting at the earliest stages.

A lot of people are doing
very interesting things,

but that's what I'm getting at.

We wanna diversify there.

We don't just

want,

uh,

to be in the big

hyperscalers, as they call
it, hyperscalers are the

Anthropics OpenAIs, right?

These are the core

models.

There are interesting

tools

and technologies being
built on top of those.

There are also

the, let's call it the picks and
shovels type companies that maybe are

building or developing the technology
that can support the data centers.

Whereas the data centers
are like the gold rush or

the,

the gold mine, right?

People are chasing

or, you know, or w-want to

figure out where the next gold mine is.

Well, guess who got rich
during the last gold rush?

was the people selling the

picks and shovels.

And so we're thoughtful around
it in that sense as well.

Um,

I think that's also super,
super important to, uh,

uh, to

remember.

Mena Hanna: Yeah.

And on that end, there

are going to be a lot of boring businesses

that actually do super well.

We have a few examples in our
portfolio of boring businesses.

Just a couple to highlight.

Companies that

create

the chemicals that go into the
coolant that actually cools down

these

data centers.

That's a pretty boring business,

It's a chemicals

business, but

It's, it's, a business that's actually
doing extremely well because of

how

much coolant these

data

centers actually need.

They actually use one--

on average, data centers use
one to five million gallons of,

of water a day, which is crazy.

Other side of that too, and we're
just talking about water here,

there's a lot of energy applications
and other applications in

General,

but companies that treat and process the
water after these data centers are, are

done with them and recycle it, those are

going to

be boring businesses that
do extremely well because of

general AI.

And if you don't diversify
and if you're just looking at,

call it the,

the large language

models

and, and just the big players and
concentrating there and avoiding the rest

of the market, then you're not really
investing like a diversified professional.

You're, You're, underexposed

and, and typically that means, uh, your
risk is, is probably a lot higher than you

Justin: think

it is.

let's wrap by talking about

kind of the other side of the coin here,

the public market side
of the coin in a way.

Um, these companies are not
public yet, but there's plenty of

discussion a-about them going public.

Uh,

we know

SpaceX, which is what now SpaceX AI,

Uh, I think they

just changed the name to that.

Um, they're they're going through the
process Anthropic's supposed to go public,

at least rumors are saying that as well.

Um,

so and, and

again, kind of summarizing
where we stand, right?

We've talked about the private
market application, how we think

about the world of venture capital.

We wanna be very early.

We d- we don't really want--

Just because these companies are still
private and called venture-backed

companies at these valuations with this
hype, they're effectively trading like

public

companies, but

in a way even worse than public
companies 'cause there's like, there's

access constraints and so prices

are getting bid up, and there's
all sorts of convoluted terms and,

uh, you know,

very much buyer beware
type situations going on.

Um, but let's extend that to
the public side of things, you

know, kind of just going
through the exercise of them

going

public.

How do we think about that?

Let's remind listeners,
a hundred-year family.

Is this something where, oh, these
companies are becoming public, we

wanna put a bunch of money into
them, and be overly concentrated?

what's the playbook on
the public market so

we're, We're

really supporting the, the priorities
that are most important to that

hundred-year

family?

Mena Hanna: Yeah.

And when these companies do go public,
they're reconstituted into an index.

Typically, at this size, they're
going to be entering the index.

You have to be very thoughtful
about how you actually access

these companies after IPO.

What we typically see is a
massive rush in terms of investors

rushing into these companies.

But for the most part, you actually can't.

If you're a private
investor in this space,

after an IPO, you can't sell
the shares for six months.

you have an uh, an initial rush of
public investors trying to buy up the

shares and the market float, the number
of shares that have hit the market,

and then you have sort of

a lull phase until everyone's actually
able to sell them in six months.

There's a lot of movement and
activity that happens there.

The data actually supports

kind of avoiding these companies high
level and not over-concentrating in

them because when that six month note

comes, there's, there's a lot
of people running for the door.

And

it goes back to that theater
example that we talked about.

If there's a very narrow
exit, you kind of--

you know what's gonna happen.

Now, these are all happening in
different ways, but you really have

to be thoughtful in terms of how you
incorporate new IPOs, new companies.

You

know, we kinda saw

this with

SpaceX getting--

or Tesla, excuse me, getting
added to the S&P 500.

You have to be thoughtful in how you add

these, these, positions.

and Index funds have been
notorious for not doing them--

not doing that well.

needs to be thoughtful,
needs to be diligent.

You Can't just rush in and

buy Anthropic the second that.

it IPOs because it's,
it's more complicated

Justin: that.

that.

Yeah.

and and right, diversification is
still your friend very much on the

public markets, e- if even more so.

There's, there's a larger,
uh, larger universe that, that

you

can easily get access to.

There's a great,

uh, great old adage,

the dosage makes the poison.

It's very true in investing.

You

never wanna be overly concentrated,

uh, in

any

one company,

uh, in

any one type of investment
'cause it can really damage

your hundred-year, hundred-year,

family, and, and what's
most important to you and

and

y- you all meeting your priorities, right?

think it's always super important
to bring it back to that.

Um, we'll, we'll wrap there.

So,

uh,

hopefully interesting conversation,

kind

of wrapping a current event, current
topic that's at least very much on the

top of our heads, our minds around AI,

the

valuations we're seeing there, what that
means for venture capital investing.

As a reminder, we very much
like the earliest stages

of, of venture

capital.

You can get really good
diversification across

uh, quite a

few companies.

Um, and,

and

hope you're increasing
the odds of capturing

these, these name brands that

are not a name brand
today, but will be in,

uh, you know, whatever, three, five,

uh,

10 years down the road.

And also this idea of the picks
and shovels approach, right?

There's

going

to be, to Mina's point,

boring

companies built out of
this interesting cycle,

uh, which we

don't know exactly

when, when it will end, but
it certainly is an interesting

cycle we're in right now.

And then all the way to

the, the, idea of concentration.

You don't

want

too much concentration in any one of

the public names,

uh,

when and if these companies
actually do go public.

Um,

we just know in order to have the
confidence to meet your priorities to

build that hundred-year family, that is

that

is not

a, a recipe for long-term success.

So, uh,

again, hopefully, uh, this conversation
was interesting and worthwhile to you all.

Definitely text

questions.

Mena Hanna: 626-862-0355 We always
appreciate you listening, and

Justin: zero three five five.

We always appreciate you
listening, and until next time-

own your wealth, make an
impact, and always be a pro.