The Razor’s Edge

Happy New Year! Though this week’s The Razor’s Edge touches on what may not be the happiest start for people investing in software names or tech more generally. So what’s going on? We throw together a bit of recent and longer-term history, a bit of market sentiment analysis, and some opinions on what might still work, to see why a shift has been coming for a while and why there might be more to come.

• 2:00 minute mark - Did the first week mark a change or a continuation?

We pick up this week's conversation where last week's (and so many of our past episodes left off) - what about Twitter, at this price, in this economy? We talk about the succession decision and why the set-up for the incoming CEO, intentionally set or not, is pretty attractive. We talk about Elliott Management's role in all this, and what they might be thinking about Twitter at this stage. We talk about downside and sector performance, and then we circle back to last week's discussion on the overall market volatility and why buying great companies irrespective of price can lead to more than the occasional pothole, even if the ride as a whole may turn out successful enough.

• 2:45 minute mark – Twitter’s valuation and the set up for new CEO Parag Agarwal

Docusign’s sell-off on Friday and the corresponding market (and Nasdaq) sell-off are the latest sign of market uncertainty. No one knows anything – as Monday’s rally reminds us – but the question is whether we know we don’t know. In this week’s The Razor’s Edge, we focus on the uncertainty in the market, the importance of valuation even when growth stocks work, and how to handle the volatility. This ends up being a two-parter, as we will get to Jack Dorsey’s exit from Twitter in the second part next Tuesday.

• 2:45 minute mark – Docusign initial take

• Daniel’s Docusign article

We wrap up our Future of Compute series with a leading force in the field, Naveen Rao. Rao founded Nervana Systems, the first next-gen AI chip company, which he sold to Intel. He then drove Intel's AI road map before stepping down from the company in 2020, and just recently announced the founding of MosaicML, an AI startup focused on making algorithms more efficient through what he calls here a 'benchmarking as a service' approach.

Given his interest in AI stretching back over two decades and his front seat position in the field, Rao's perspective on the competitive landscape, on how things have changed from Nervana to Mosaic, and the challenges facing merchant silicon firms is both valuable and a nice wrap-up of the three part series. He gives his take on the Nvidia/ARM deal, Intel's position, the supply chain, and a lot more.

Check out MosaicML, as well as their twitter account and Naveen's.

• 2:30 minute mark – Naveen’s entry into the AI world over his career

This week we take a break from our Future of Compute series on the Razor’s Edge to talk Peloton.

In an earnings season full of big moves and surprises, Peloton's downhill fall has been one of the headline events. As we mention on the call, who would imagine that COVID would still be a part of our lives, but Zoom and Peloton shares would be flat from June 2020? And yet, here we are.

We break down how management may have backed themselves into a corner and what it would take for Peloton to climb again. We also get into how this is a signal of the pandemic-related challenges that still face many companies in a market that, despite continuing to rise as a whole, has seen more and more companies hit potholes.

• 2:30 minute mark – Peloton’s earnings fiasco

The accelerating growth in the AI market requires different approaches from the hardware side. Cerebras's approach is that size matters and bigger is better: the company's massive wafer chip is the base of its AI intentions. CFO Tony Maslowski discusses the company's core insights and how that positions them to compete in the market. Maslowski, the former CFO at Avago Broadcom, also shares his view on the current supply chain challenges, on when these new-gen companies might go public, and on what the end game might be for the incumbent - Nvidia - and its challengers.

• 3:00 minute mark - Cerebras Origins

The semiconductor industry is in a period of transition. Supply chain problems and questions over whether we are now in a secular growth environment; changing leadership as Intel loses ground and Taiwan Semiconductor, Nvidia, and even a new generation of start-ups stake out a claim; and the new demands posed by Artificial Intelligence and its burgeoning compute needs.

We're rolling out a little Future of Compute series to cover this. We speak with several executives and experts in the field to hear what the state of semiconductors, technology usage, and artificial intelligence from the hardware and software side looks like.

We kick off with Jeff Wittich, Chief Product Officer at Ampere Computing. Wittich, like several of his Ampere colleagues including CEO/founder Renee James, is an Intel veteran. Ampere’s aim is to develop server chips designed explicitly for cloud usage, using an ARM chip framework, with the target of delivering much greater power efficiency. They seem to be gaining traction, with the most recent evidence being reports SoftBank is considering an investment in Ampere at an $8B valuation.

We speak with Jeff about Ampere’s journey, about why now is the time for Arm-based chips in servers, about how hyperscalers shape the industry’s demands, the state of semiconductors, and of course a bit on Intel and its challenges.

• 4:00 – Ampere’s story

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Before you listen, there is a The Razor's Edge newsletter now available. Written by Akram's Razor, the Razor's Edge will come out at least twice a month and include ideas, analysis, macro input, and the insights you would expect from this podcast. Check it out at: https://the-razors-edge.ghost.io

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We revisit three The Razor's Edge names from 2021. Alibaba is down in the dumps from regulatory scrutiny, Stitch Fix can't get no respect, and Twitter received a negative sell-side initiation. We talk about each of the stocks, and while on the surface it would seem that nothing beyond stock performance and our interest unites the three, there are a lot of echoes in how the market is looking at each of them, at least from our vantage point.

• 3:30 minute mark - Why the recent regulatory reports around Ant Financial aren’t shocking

• 38:00 – Why is Stitch Fix so bad? Reviewing the story, valuation, stock, etc.

• 55:30 – The Goldman downgrade and the confusion about Twitter from bulls

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Before you listen, there is a The Razor's Edge newsletter now available. Written by Akram's Razor, the Razor's Edge will come out at least twice a month and include ideas, analysis, macro input, and the insights you would expect from this podcast. Check it out at: https://the-razors-edge.ghost.io

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PagerDuty has been a regular topic on The Razor's Edge for over a year, and this month's earnings seemed to reward that attention, as the company crossed the magic 30%+ revenue growth barrier for the first time since the pandemic began.

To get more details on what drove that acceleration and what might come next, we spoke with Howard Wilson, PagerDuty's CFO. We talked about the macro climate driving PagerDuty's opportunity, the competition they are seeing and why they remain confident about it, and what product expansion looks like.

Justen Stepka, regular Razor's Edge guest and formerly of Atlassian and Docker, joined us, and the conversation went deep on strategy, tactics, and opportunities across the board. We think you'll get a lot out of this episode.

• 3:45 minute mark – The second derivative effect

The quick hit re-open trade of January/February came and went. The U.S. is facing the delta variant of COVID-19 in full, which has shaken out some of the fast money from the travel sector. And yet...

On this week's The Razor's Edge, we talk about why we think, in different ways, that the travel stocks are set up well for this year and beyond. There's a bit of the macro, a bit of a take on delta's persistence, and a lot more on Booking Holdings and Boeing as our focus companies. The full picture may not be clear, but we make a case for why there's enough visibility to make a bet at this point.

• 2:30 minute mark – The travel sector’s air pocket