Tech out, Value In?

Maybe – but another transition unlocks huge value in energy stocks

Dear readers,

After my posting last summer on Guyana we’ve had a few follow-up discussions on investment implications. At the time it seemed the momentum behind the debasement trade and AI was unstoppable, but news of the last few weeks (and a big announcement expected later this week) is pointing to a great opportunity.

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I wrote my first corporate research report on Exxon in the early 1990s as a student. Our corporate finance course instructor was a tough nut, an ex-Wall Street banker but with full Wall Street attitude. Roll calls at the beginning of every class. Five minutes late into class got you a no-show booking. Two bookings, she dropped you from the course.

Mind you, this was the time before the Internet. There were no fancy dotcoms around, no 10x engineers, no zero-to-one business models. The craziest thing ever to happen was the RJR Nabisco takeover by LBO firm Kohlberg Kravis Roberts¹. And secondly, research meant actually calling up the investor relations department to ask for hardcopies of annual reports and financial filings, because neither e-mail nor EDGAR databases existed.

From that perspective, writing a research report on Exxon as my term paper wasn’t that bad. I thought there was a special angle to it – just a few years before, supertanker Exxon Valdez had run aground in the Prince Williams Sound in Alaska, which resulted in the largest oil spill ever by that time (it was pushed from the top spot by Deepwater Horizon in 2010). So, on top of a share valuation, I was looking for any meaningful financial liabilities from the accident (Spoiler: there were basically none).

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In March 2023, the S&P500 was in the middle of a large market correction, down 17% from the peak of December 2021. The Federal Reserve had started an aggressive rate hike cycle, and bond yields exploded from around 1.5% (10-year UST) to 4%, the highest in 15 years – a nightmare scenario for equity markets whose valuations were based on “new normal”, ultra-low discount rates. After a disastrous 2022, investors braced for worse to come.

But on March 23, 2023, the world changed. Research lab OpenAI released Chatgpt-4, and what was a tool for tech afficionados before reached public consciousness. Valuations for AI-related companies exploded and drove the S&P500 from below 3,900 points to 7,000 in January 2026. You know the companies which drove the crazy spike, the Magnificent Seven. Consider Nvidia, the world’s largest company by market cap at around $4.7 trillions. Sure, Nvidia is enormously profitable – net income consistently exceeds 50% of revenues (55% in fiscal Q3 2026, i.e. calendar Q3 2025), and the company grows at an incredible rate. Paradoxically, it earns way more money than it can meaningfully use, hence the idea to lend money to its customers to buy even more Grace-Blackwell superchips. But how much can they sell in the end? If Nvidia kept its profitability forever (not going to happen), and paid out 70% of net income as dividends, it would still have to capture 10% of total capital expenditures in the U.S. economy to claim a $4.7 trillion valuation. I doubt they can do it. There’s still a lot of money going into passive/ index-replicating investments and FOMO behavior, but sooner or later realities will catch up with tech valuations.