Wellum’s Warning: The Tech Boom Is Starting to Crack
Speakers
Jonathan Wellum
— CEO & CIO, RockLinc Investment Partners
Summary
Jonathan Wellum warns that the AI-driven tech boom and the wave of mega IPOs are showing classic signs of a bubble, with sky-high valuations and speculative FOMO reminiscent of the dot-com era. He urges investors to separate durable business value from hype, avoid overpaying for unproven dreams, and instead focus on high-quality companies with strong moats and predictable cash flows. He identifies value in large-cap tech leaders Amazon, Apple, and Alphabet, as well as Mercado Libre and Sprott Inc.
- Warns of speculative fever in AI and mega IPOs, drawing parallels to the 1999-2000 internet bubble.
- Advises caution on IPOs like CoreWeave where insiders are cashing out at peak valuations.
- Highlights Amazon, Apple, and Alphabet as value opportunities in big tech due to wide moats and strong cash flow.
- Favors Mercado Libre for its dominant position in South America and current undervaluation.
- Likes Sprott Inc as a commodity-focused asset manager with strong brand and takeout potential.
- Recommends avoiding overhyped, unproven businesses and waiting for better entry points after the hype fades.
- Encourages investors to study Ben Graham and David Dodd’s “Security Analysis” to build a value framework.
Ideas
Avoid CoreWeave: insiders exit at high valuations.
CoreWeave and similar mega IPOs are being brought to market at opportunistic times when private investors can sell into sky-high expectations. Insiders taking money off the table and post-lockup selling pressure historically lead to significant short-term underperformance. Investors should avoid buying these IPOs at the offering and wait for better, more informed entry points.
Alphabet has a massive moat and cash flow.
Alphabet (Google/YouTube/Waymo/DeepMind) holds number one or number two positions across multiple secular growth verticals. It enjoys a massive moat, abundant cash flow, and operates in areas growing faster than the overall economy. The company is predictable enough for valuation, and its market positions are entrenched, allowing time to react if competitive erosion begins.
Apple is a consumer staple with strong moat.
Apple is effectively a consumer staple wrapped in technology. Its ecosystem (iPhone, iPad, MacBook) creates high switching costs and customer lock-in, giving it a wide moat. It generates large predictable free cash flows that can be valued reliably. The business is a leader in a market it controls, making it a quality compounder.
Amazon offers hidden value and strong moat.
Amazon is a dominant business with a powerful moat and massive free cash flow. Its reinvestment strategy depresses near-term margins but builds lasting market share. The space ambitions (Blue Origin) are not priced in, offering hidden upside if they succeed. The stock has historically pulled back sharply (e.g. 40–45% in 2022-23), which created buying opportunities, and the current valuation is attractive given its durable growth and ability to raise prices when it wants.
Mercado Libre undervalued, dominant in South America.
Mercado Libre is the leading e-commerce and fintech platform across much of South America, analogous to Amazon but with stronger local dominance. It is currently reinvesting heavily in the business, which depresses near-term earnings and has created a very low valuation. That reinvestment is strengthening its market position and competitive moat, setting the company up for durable long-term growth and the ability to compete with Amazon regionally.
Sprott Inc great commodity play, takeout candidate.
Sprott Inc is a high-quality asset manager that controls a suite of commodity-focused ETFs. It is a superior way to play the commodity space because it captures fee-based revenue at the parent level. Additionally, Sprott possesses one of the best brands in the commodity investment niche, making it an attractive long-term takeout candidate.
