Why the AI Boom Is Just Getting Started
Speakers
Alex Sacerdote
— Founder and Portfolio Manager, Whale Rock Capital Management
Summary
Alex Sacerdote of Whale Rock Capital walks through his S-curve investment framework, explaining why AI may be the biggest S-curve yet. He details his highest-conviction investment in Anthropic, the hardware renaissance across chips and infrastructure, and why he is bearish on traditional application software. The discussion covers the coding unlock, competitive advantages of foundational models, and the structural underweight of large-cap tech by institutions.
- Whale Rock's investment framework combines S-curves, competitive advantage, and underappreciated earnings power.
- AI is described as a 'backwards L-curve' with less than 1% enterprise penetration and explosive demand.
- Anthropic is the highest-conviction position, driven by coding leadership and enterprise focus.
- The hardware industry is experiencing a renaissance with decommoditization, rising ASPs, and shortages.
- Traditional application software incumbents are under severe pressure from AI disruption; Whale Rock went net short.
- Specific hardware beneficiaries include Celestica, Elite Materials, Corning, Delta, and Advanced Energy.
- Large-cap tech is structurally underweighted by institutions, creating alpha opportunities.
- Coding is the first major unlock for AI, with agentic capabilities rapidly advancing.
Ideas
Anthropic is highest conviction AI bet.
Anthropic is the highest conviction position because of its strong coding franchise, enterprise focus, superior management, and the massive total addressable market for coding agents, with only 10 bips of knowledge workers using AI today. The foundational model layer is becoming an oligopoly (Anthropic, OpenAI, Google) with strong competitive advantages including IP, brand, scale, and recursive improvement. Anthropic's 10x sales growth and fundraising ability give it escape velocity.
Google is a top AI winner.
Google is one of our largest positions. It has a strong consumer franchise with Gemini, a huge cash cow to fund AI, and is one of three likely winners in the foundational model oligopoly. Google's enterprise strength and ability to compete in coding make it a key AI bet.
Tesla bought at 5x earnings in 2019.
Tesla was bought in 2019 at 5x earnings because the electric vehicle S-curve was just inflecting – barriers to adoption (price, range, supply chain) had been removed, leading to exponential unit growth. The underappreciated earnings power at that point was enormous.
Apple at 4x earnings during smartphone inflection.
Apple was bought at 4x earnings because the smartphone S-curve was inflecting – Jobs brought iPhone to $200, AT&T had 3G, touchscreen made it easy. Exponential unit growth and a powerful ecosystem (app store, switching costs) led to enormous earnings growth that the market didn't anticipate.
Amazon AWS had underappreciated earnings power.
Amazon was bought for AWS at a time when it was effectively free – the market was valuing it as a retail company while AWS had massive underappreciated earnings power as a cloud platform with a 7-year lead, scale advantages, and a huge TAM. The S-curve for cloud was just getting started.
Nvidia at 4x earnings was deeply undervalued.
Nvidia was bought at 4x earnings in 2023 because the AI S-curve is just beginning, with the infrastructure layer only 10% penetrated. The demand for compute is exploding, and Nvidia is the dominant chip supplier with massive earnings power not yet appreciated by the market.
Short application software incumbents.
We sold almost all application software and were net short entering 2025. The thesis is that AI is disrupting the old software model: AI products from incumbents are not good, CIO budgets are shifting to AI tokens, pricing power is eroding, seats are decreasing, and new AI-native startups could wipe out incumbents. The valuations are high and the AI exposure of most software companies is tiny (1-2% of sales).
Celestica is critical AI infrastructure with advantages.
Celestica has transformed from a commoditized contract manufacturer to a critical AI infrastructure supplier – sole supplier of Google TPU servers, dominant in liquid cooling, and has 50-60% share of cloud Ethernet switch market. AI servers are 40x more expensive than old servers and require constant innovation, making Celestica a high-growth, high-margin business with rising competitive advantages.
Elite Materials benefits from high-layer PCBs.
Elite Materials makes copper-clad laminate for PCBs. As AI servers require 40-layer boards (vs 10 for old servers) and unit volumes grow 50-60% per year, the company benefits from rising layer counts, higher ASPs, and increasing margins. It is a critical, scarce component in the AI hardware renaissance.
Corning benefits from AI fiber demand.
Corning is the dominant fiber supplier for data centers, with a very high share and a product that is thinner, more bendable, and custom-manufactured. AI needs massive fiber (e.g., one Microsoft data center uses enough to circle Earth 4.5x). Future scale-up connections (copper to fiber) will 2-3x Corning's opportunity. Its fiber business is the fastest-growing, highest-margin part of the company.
Delta and Advanced Energy gain from AI power needs.
Delta Electronics and Advanced Energy supply power supplies for AI servers. Each new Nvidia chip/rack uses 50-125% more power, driving ASPs up 40% per year for the next four years with higher margins. This is a clear beneficiary of the AI infrastructure buildout where demand outstrips supply.
Large-cap tech has structural alpha opportunity.
The Whale Rock Mega Cap Tech Fund is a new product targeting the structural underweight of the largest tech companies by institutional investors. There is alpha in large caps because it takes many diversified PMs to change their view. The largest tech companies have strong moats, global reach, and massive profit pools, and they are often part of the biggest S-curves (Nvidia, TSMC, ASML, etc.).
Up Next
This ILTB Podcast video, published June 09, 2026, features Alex Sacerdote discussing ANTHROPIC, GOOG, TSLA, AAPL, AMZN, NVDA, IGV, CLS, Elite Materials, GLW, 2308.TW, AEIS, Whale Rock Mega Cap Tech Fund. 12 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Alex Sacerdote · Tickers: ANTHROPIC, GOOG, TSLA, AAPL, AMZN, NVDA, IGV, CLS, Elite Materials, GLW, 2308.TW, AEIS, Whale Rock Mega Cap Tech Fund