How to adapt to the AI disruption; SaaS may be exempt from the carnage; Michael Burry's critique of Palantir Technologies; David Berman's tale of our 'boda boda' adventure
1) I've said many times before how I believe AI is going to change the world. And we can already see this unfolding as the technology improves...
In a recent blog post, AI entrepreneur Matt Shumer argues that the implications are enormous. And the post has gone viral after being republished in Fortune: Something big is happening in AI – and most people will be blindsided.
He highlights the step-change progress in AI models just in the last few months:
I've always been early to adopt AI tools. But the last few months have shocked me. These new AI models aren't incremental improvements. This is a different thing entirely.
The experience that tech workers have had over the past year, of watching AI go from "helpful tool" to "does my job better than I do", is the experience everyone else is about to have. Law, finance, medicine, accounting, consulting, writing, design, analysis, customer service. Not in 10 years. The people building these systems say one to five years. Some say less. The market was spooked enough this month that it wiped out $1 trillion worth of software value in just a week. And given what I've seen in just the last couple of months, I see more disruption, and soon.
He then gives advice on how to adapt to this disruption. He emphasizes not having an ego about AI and start using it seriously, not just as a search engine. He also notes how early adapters will have an advantage in the workplace and in pursuing their dreams.
He also says to focus on personal relationships, accountability, and trust, as those aren't easily replaced by AI. And importantly, he says we should rethink the advice we give our kids about the job market, as their future will look very different from ours.
This piece of advice encapsulates Shumer's overall message:
Here's a simple commitment that will put you ahead of almost everyone: spend one hour a day experimenting with AI. Not passively reading about it. Using it. Every day, try to get it to do something new... something you haven't tried before, something you're not sure it can handle. Try a new tool. Give it a harder problem. One hour a day, every day. If you do this for the next six months, you will understand what's coming better than 99% of the people around you. That's not an exaggeration. Almost nobody is doing this right now. The bar is on the floor.
And he concludes:
I know the next two to five years are going to be disorienting in ways most people aren't prepared for. This is already happening in my world. It's coming to yours.
I know the people who will come out of this best are the ones who start engaging now – not with fear, but with curiosity and a sense of urgency.
We're past the point where this is an interesting dinner conversation about the future. The future is already here. It just hasn't knocked on your door yet.
It's about to.
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2) Addressing Shumer's point that "the market was spooked enough this month that it wiped out $1 trillion worth of software value in just a week"...
Software and Software as a Service ("SaaS") stocks have seen the most carnage, triggered by fears that AI could soon render their business models obsolete.
Just look at the iShares Expanded Tech-Software Sector Fund (IGV), which tracks this sector...
After peaking around $118 in September, it has fallen 31% – and 23% of that is from the start of this year. Here's a five-year stock chart:
Some individual stocks are down much more...
One of dozens of examples I could cite is HubSpot (HUBS), which develops consumer-relationship management software. Its stock has fallen nearly 70% in the past year:
While speculators are licking their wounds, every investor I know is looking for opportunity in the carnage – including, of course, me and my team at Stansberry.
We're still doing work on this sector, so I'm not ready to pound the table on any particular stock yet. But in general, I love bottom fishing in bombed-out sectors, especially when the companies have fabulous margins, cash flows, and balance sheets.
And there's a good argument that at least some of these companies will be able to withstand – and even benefit from – the rise of AI. This X post by entrepreneur Finbarr Taylor makes the case well: In Defense of SaaS.
He starts by referencing Shumer's post:
Matt Shumer's "Something Big Is Happening" post went viral this week – 5 million views and counting – arguing that AI is transforming everything and most people aren't paying close enough attention. He's right.
But then he argues that SaaS should be exempt from AI's disruption:
But somewhere between "AI is transformative" and "sell all software," the logic breaks down. The market heard "AI changes everything" and concluded "therefore software is worthless." That's a non sequitur. The entire point of Shumer's piece is that people should be using these AI tools seriously – and the tools they should be using are, well, SaaS products with paid subscriptions.
I think this is one of the biggest overcorrections happening in public markets right now. And I think the logic underpinning it is a textbook case of reductionism – mistaking one ingredient for the whole meal.
3) One somewhat beaten-down stock that claims to be a software/SaaS business – but isn't – is Palantir Technologies (PLTR). It's my second least favorite among my "Stinky Six" (after Carvana (CVNA), which I discussed in yesterday's e-mail).
PLTR is down 29% since I added it to my list on October 29. But I think that's just the start of its collapse, for reasons I've explained in 11 prior e-mails (archive here).
My views were reinforced when I read these two in-depth essays (subscription required) by my old friend Michael Burry of The Big Short fame, who's now writing on Substack:
- Palantir's New Clothes: Foundry, AIP, & the Failure of Reason (February 12)
- Palantir: An Accounting (February 18)
In them, he highlights many troubling issues, including:
- Questionable accounting for revenue recognition, accounts receivable (which is soaring), research and development, and stock-based compensation
- Excessive spending and executive compensation
- A business model that more closely resembles one of the large consulting firms, like Accenture (ACN), rather than a much more attractive software/SaaS company
He comes up with a funny metric – the B/S ratio:
I count 5 Palantir stock billionaires – Peter Thiel, Alex Karp, Joe Lonsdale (gone since 2009), Stephen Cohen and the alleged industrial spy/SPACster Shyam Sankar.
During 2025, Palantir earned $4.5 billion in revenues.
This makes for, I believe, the first Billionaire:Sales (B/S) ratio greater than 1 in global stock market history.
Such B/S speaks to egregious stock based compensation paired to remarkably few dollars of revenue. But it really is an expectations ratio. And if it is the highest in history, so are expectations for Palantir.
He concludes:
I am left more convinced that Palantir does not earn the margins it says it does, does not have the earnings it says it does, and does not have the software subscription model it says it does.
Palantir is a consultant riding a bubble of AI FOMO demand, and will trade well below $100 billion market cap in my opinion. In the long run, revenues shrink, and it is likely acquired for relatively cheap. That is, after all, what happened to DiamondCluster and Razorfish...
Both companies had traded to about 20x sales at their peaks [and both went to almost zero].
I do believe today's AI Consultancy arc will play out in similar fashion. A rhyme, to some extent, if not a repetition.
Needless to say, I continue to recommend avoiding this stock at all costs.
4) Many readers got a kick out of my story in yesterday's e-mail about my friend David Berman and me racing to the airport in Nairobi on the back of two boda bodas, cheating death (video here).
Below is what David sent to his six children, describing what he experienced. This line in particular makes me cry with laughter: "Each man for himself, Whitney's motto."
It was clear with morning traffic that we'd miss the once-a-day 9 a.m. flight, so Whitney, intent on getting there, decided to jump from the safety of the car, and with 40 minutes to go, hop on a motorbike "boda boda" taxi, to get through traffic.
He was about to abandon me.
What choice did I have, even though Whitney is the adventurer and iron man, so rather than be stuck in Nairobi through Monday, I hopped onto the nearest boda boda and took my big carry-on suitcase – without a helmet.
I was hanging onto this African man's jacket for dear life, he spoke not a word of English but later did ask which airport.
Whitney was out of sight, I had no clue which airport (there are two), and there we were, weaving in and out through traffic, potholes, bumps, people, bikes, side markets, and so forth.
It was the stuff of novels. Complete chaos.
Luckily, we saw Whitney – don't know how – so at least we knew which airport.
We had no way of communicating. Off he was again.
Each man for himself, Whitney's motto.
To understand how ludicrous the drive to the airport was, one needs to picture this tropical green environment with its motorbikes, boda bodas, tuk-tuks, loads of people walking, mud roads, concrete roads with potholes, mixed with trucks and cars, traffic, then no traffic, continually repeating itself.
This was organized chaos. Kind of like I remember India.
After 30 minutes we were stuck, as we needed to get onto a toll road, the only way to the airport, and motorbikes are not allowed.
So I got off the bike, in the middle of nowhere, and by some double miracle Whitney arrived and so did his folks in the car – traffic had eased and they caught up to us, so our whole adventure was for naught!
They dropped us off at the airport at 8:45 for a 9 a.m. flight. Without our bags, we dashed to the gate through security with only backpacks, leaving his elderly folks and my suitcase behind. Thankfully they held the plane for us.
In the air, I went to the toilet – I needed it!
Now we're here on this tropical island – no bag, but health intact, sipping piña coladas:
Best regards,
Whitney
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