Dear Financial Samurai,
November CPI inflation came in at just 2.7% year over year versus expectations of 3.1%. Some economists caution that this report should be taken with a grain of salt due to missing October inflation and unemployment data. Still, whatever the “true” number is, inflation remains below 3% and is not rebounding aggressively despite ongoing tariff concerns.
Personally, I’m just happy to be able to fill up my car for “only” $4.45 a gallon for premium gas, or $4.19 for regular if I don’t care. That alone feels like progress and I imagine the same sense of relief is being felt across the country.
AI Quandary: Public vs. Private Companies
As an active investor who has been building artificial intelligence investment exposure over the past couple of years, last week highlighted a fascinating contrast between public and private AI companies.
On the public side, names like Oracle, Google, and Nvidia were getting hit due to overvaluation, debt, and CAPEX concerns. Then Micron reported blowout earnings and guided profits roughly 70% higher than expectations. The report helped stabilize sentiment and reminded investors how powerful the AI demand cycle still is.
On the private side, Databricks raised $4 billion at a $134 billion valuation, up from $100 billion just a couple of months ago. The company is growing more than 55% year over year with a revenue run rate north of $4.8 billion.
Some people grumbled about how long Databricks is taking to go public, given this was a Series L round. As a shareholder through Fundrise Venture, I don’t mind at all. As long as the business keeps growing, it can stay private as long as it wants.
There are also reports of OpenAI potentially raising another $100 billion at a $750 to $830 billion valuation, up from roughly $500 billion just a couple of months ago. OpenAI is another core holding in Fundrise Venture.
Demand clearly remains overwhelming, which made me comfortable buying the recent dip in public AI stocks. At the same time, I do wonder whether there will be disappointment when these companies eventually go public, similar to the letdown investors experienced with Figma earlier this year.
Finding A Way To Rewind Time
One thing has become increasingly clear: private companies are staying private longer, with more of the gains accruing to private investors as a result. I had never even heard of a Series L funding round until this week, when Databricks raised one.
Given this reality, it only seems rational to allocate more capital toward private companies. I’ve done so through Fundrise, a long time affiliate partner, as well as through several closed end traditional venture capital funds. But traditional venture funds are almost a black box. I don’t really know what the general partners will ultimately invest in, nor whether those investments will pay off.
As I reflect on the year, one regret is not investing more in private AI companies earlier. But since I can’t go back in time, my next best opportunity is the sell off in public AI names. When a company like Nvidia drops from about $207 in October to roughly $171 in December, after strong results, it feels like the closest thing to rewinding the clock and getting another shot to invest.
Being able to leverage what we know about public companies to make smarter private company investments and vice versa is becoming one of the most important skills to cultivate going forward. Some of my tennis buddies are public fund managers overseeing enormous amounts of capital. Many are shifting more money into private companies with the expectation that these businesses will eventually go public – and that they’ll help guide them there.
Latest Posts Of The Week
The Third Rule Of Financial Independence Could Also Be Your Biggest Regret
Since I began writing about early retirement in 2009, I’ve noticed recurring landmines and regrets people encounter along the way. This post formalizes one of the most important rules I’ve learned to help you minimize regret when the grind of work becomes too much.
How Much To Spend On Cleaning Your House By Income And Net Worth
After two years of living in a larger house, my wife and I finally need some help. But since I’ve scrubbed toilets with Pine Sol for 26 years, paying for something we can do ourselves feels wrong. This post lays out guidelines to help get over guilt, laziness, and poor cost-benefit analysis.
Warning: Households Have More Wealth In Stocks Than Real Estate
I wrote this post to keep my investing FOMO in check. I recently sold a meaningful amount of Treasury bonds to buy the dip, which left our household more exposed to a potential cash crunch. If you find yourself loosening your asset allocation discipline in hopes of outsized returns, I hope this post helps you stay measured.
Enjoy The Holidays!
Given I'm not surprising my dad for his birthday again (he reads this newsletter), I can share that I’m heading back to Hawaii for 10 days starting today, this time with my wife and kids.
One of my goals is to finally see whether all the hard work remodeling my aunt's neglected two-bedroom in-law unit this summer actually makes life more comfortable for my wife and mother. Because after 5.5 months, we finally had the refrigerator and washer and dryer delivered from Best Buy! Nuts.
I hope everyone has a wonderful holiday week.
Cheers,
Sam
If you’re looking for a last-minute Christmas present, giving the gift of financial education is hard to beat. Forward them this newsletter so they can subscribe, and consider sending them a copy of Millionaire Milestones. The more someone understands their finances, the more confident they become. And the more wealth they build, the more time they can buy back in the future.