Cheap Compute Software Winners
Gabriel Russo@gabrusso
The idea
I believe data centers and memory chips are heading for a glut over the next five years, which should make renting computing power cheap. So this basket skips the cloud giants and chipmakers carrying that extra capacity, and instead owns software companies whose biggest cost is rented servers and memory: data platforms, business AI apps, consumer apps and security software, spread across many names rather than a few bets. It keeps a modest cash reserve and is built to hold through the cycle, since the whole idea rests on compute staying oversupplied for years.
What it owns
- Workplace software firms are adding AI features that cost a lot to run today and get cheaper as computing power gets cheap. · ServiceNow, Inc.It sells AI agents that handle workflows on rented infrastructure, creating a margin expansion opportunity as compute costs fall while pricing remains stable., Palantir Technologies Inc.It runs heavy AI models for businesses and governments often on someone else's cloud, so cheaper compute lowers what each deployment costs., Salesforce, Inc.It operates AI agents for sales and service on rented compute infrastructure, benefiting from cost declines that don't require pricing changes., Adobe Inc.It generates images and video with AI models on rented compute, representing one of the most compute-intensive software workloads., HubSpot, Inc.It sells to small businesses that won't pay much extra for AI, so cheaper compute is what lets it build AI into low-price plans and still make money., Atlassian CorporationIt runs team software in the cloud with AI features on rented servers, creating margin expansion as compute costs decline., Figma, Inc.It operates a cloud-based design tool with AI features that consume compute on every user action, benefiting from infrastructure cost declines.35%
- These companies sell storage and processing that runs on rented cloud servers, so falling compute prices flow straight into their margins. · Snowflake Inc.It runs its data warehouse on rented servers from major cloud providers, so compute price declines lift gross margins directly., Datadog, Inc.It stores and processes huge piles of customer monitoring data on rented cloud servers, so cheaper compute helps twice: customers run more servers that need watching, and the hosting bill shrinks., MongoDB, Inc.It hosts customer databases on cloud providers' hardware, generating margin expansion as server and memory costs decline., Elastic N.V.It delivers search and AI data tools that rely heavily on memory and compute resources hosted in the cloud.25%
- Apps used by millions of people pay big compute bills to serve AI features, and cheaper capacity lets them do more for less. · Duolingo, Inc.It delivers AI-powered tutoring lessons to millions of learners on rented infrastructure, with subscription revenue holding steady as infrastructure costs fall., AppLovin CorporationIt runs large AI models on rented infrastructure to optimize ad targeting, lowering cost per decision as compute and memory prices decline., Shopify Inc.It hosts millions of online stores on rented cloud servers and adds AI tools for merchants, expanding margins as infrastructure costs fall., Reddit, Inc.It runs its site, search and ad targeting on rented cloud servers and is building AI features on top, so cheaper compute lowers the cost of all of that.19%
- Cloud security firms scan huge amounts of data on rented servers, so falling compute prices lower their biggest running cost. · CrowdStrike Holdings, Inc.It scans a huge stream of security events from customer computers on cloud servers, and a compute glut cuts the cost of every event it checks., Zscaler, Inc.It runs a worldwide network of data centers that inspect customer internet traffic, so cheaper servers and memory lower the cost of every bit it checks., SentinelOne, Inc.It is a smaller AI security company running on rented cloud with margins that have more room to widen as compute gets cheaper.13%
- Cash8%