The Pragmatic Optimist’s 2025 roadmap: What comes next
AI Spending is about to ramp. Investors are shifting their focus to seize the opportunity. So, is our research.
Introducing The Pragmatic Optimist 2.0
Earlier this week, we published our first Monday Macro post for 2025, where we laid out our macroeconomic scenarios and respective S&P 500 price targets to help investors navigate the current bull market, which seems to have suddenly caught a bit of a cold.
As we enter 2025, I wanted to prepare a post on The Pragmatic Optimist’s 2025 roadmap, where we outline the forward vision for the publication in order to better align readers’ expectations with the publication’s renewed objectives.
Up until now, the content strategy at The Pragmatic Optimist (which we started in September 2023) was about connecting the dots in macroeconomics, technology, and culture in a jargon-free language to help readers understand the “big picture.”
Looking forward to 2025 and ahead, we will be narrowing down our focus to the AI value chain, where our objective is to help readers and investors navigate the evolving innovation landscape, identify rock-solid businesses with strong growth trajectories, and make long-term investments in the space with a high probability of success.
(Note: Our language will still remain jargon-free, and our quality will remain top-notch.)
But before, I wanted to quickly reintroduce ourselves and our background, especially for our new subscribers who have joined The Pragmatic Optimist over the last 3 months.
👋Let’s get reacquainted.
We are Amrita and Uttam (yes, we are married💍), the authors behind The Pragmatic Optimist.
Both of us come from a technology background, where we worked for several years in San Francisco, Bay Area. While Uttam worked in product roles at Big Tech companies such as Apple and Google, I worked in go-to-market strategy roles at enterprise SaaS (software-as-a-service) startups such as Tradeshift and Taulia (bought over by SAP).
Both of us took a deep interest in stocks and investing during those years (cough: Robinhood generation😉), but it was not until 2021 that we made a hard career pivot.
Ray Dalio was responsible for it. Well, not directly. But his book, “The Principles of Dealing with a Changing World Order” was.
It was at that moment that we decided to embark on a quest to study and disentangle how the world’s financial markets and economies work and use the insights to discover and invest in companies that sit at the intersection of key technological and cultural waves.
Less than two years later, The Pragmatic Optimist was born. In 2024, we also started actively contributing to Seeking Alpha (as individual authors), where both of us were featured in the Top Analysts in Technology, Software, and Internet.
Therefore, as we solidify our credibility in the world of finance and investments, we believe that it makes the most sense to build a tight synergy between our work on both platforms, which is where The Pragmatic Optimist 2.0 comes in.
🤖What to expect from The Pragmatic Optimist 2.0?
Up until now, The Pragmatic Optimist was a mostly free publication with the option for readers to “buy me a coffee and a muffin” to show their support.
In Pragmatic Optimist 1.0, our content strategy was centered on connecting the dots in macroeconomics, tech, and culture to form the “big picture.” During this process, our publication grew close to 7000 readers, many of whom have increasingly reached out to us for our perspectives on specific companies and industry insights within the evolving AI landscape.
As we incorporate reader feedback, we decided that it would be best for The Pragmatic Optimist 2.0 to have a narrower focus on the investment landscape in the AI value chain. Therefore, our content strategy going forward will involve understanding how different industries and companies fit into the overall AI ecosystem, how their product innovation roadmap impacts their revenue and profit cycles, and assessing industry crosscurrents and how that impacts forward valuations.
Most of our readers who have been with us are aware of how deep our analysis can get while still keeping it free from complex terms and jargon that are usually found in most other research publications.
This process does require a significant amount of time and effort on our part, and therefore, we would truly appreciate your support as we launch The Pragmatic Optimist 2.0.
In terms of subscription tiers, this is how it is going to look:
A “paid” subscription tier will get readers the following:
🌐 1 Monday Macro per quarter
🤖 9-12 industry research posts per quarter with a focus on relevant stocks 🗠 in the AI ecosystem.
(Think of more posts like the example below, but with an even sharper focus on companies’ investment cases.)
💬 Subscriber chat that contains all live trades with commentary on key events that signal an acceleration/deceleration in the companies’ profit cycles
📨 Post comments and/or DM us with any questions.
📈 Access to The Pragmatic Optimist’s portfolio (coming up in H2)
⏰⏰Please note that as an extension of our gratitude, all existing and new paid members until the end of March will be able to lock in our annual rate of $80 for a lifetime.
In the meantime, a “free” subscription tier will consist of the following:
🌐1 Monday Macro post per quarter
🤖 Access to the 2-minute summaries on AI research posts
📈Who is The Pragmatic Optimist 2.0 for?
The Pragmatist 2.0 is designed for individual investors, portfolio managers, industry analysts, or just plain AI enthusiasts who are deeply curious about the innovation cycle in the AI value chain and are looking to make sound long-term investments in companies with stronger-than-average growth trajectories in this secular trend.
The paid tier may not be a fit for you if you are interested in technical analysis, want to use options, hedges, or derivatives, or have shorter than 1-year-long investment horizons.
🚀Why launch The Pragmatic Optimist 2.0 now?
There are three reasons why we are bringing more focus to the publication’s future. As someone who loves bullet points, here I go.
1. There is a need for pragmatic optimism today, especially when pessimism feels like it is the default.
Over a year ago, when I chose the name “The Pragmatic Optimist” for the publication, I realized that it is deeply tied to who we are as people and our belief systems.
Between “optimism” and “cynicism,” one of them thrives on underestimating human ingenuity and bets against progress.
In fact, if you look over a longer frame of time, doomsday prophets have been more wrong than they have been right.
So, why does “cynicism” get it wrong every single time? It underestimates precisely what it thrives on, human ingenuity and spirit. Problems emerge, but so do solutions.
Sure, we are not living in utopia, quite the opposite, but the trajectory of progress has been unmistakable. What The Pragmatic Optimist does is that it has the audacity to see the cracks and still believe that we can claw our way out. Humanity’s done it before, against odds that made survival seem laughable. So, there’s no reason we can’t do it again, especially when the pace of innovation is accelerating and multiplying the impact of every breakthrough.
2. Tech is about to get a lot bigger.
A little over a decade ago, Marc Andreessen wrote Why Software is Eating the World. He wrote about Amazon eating books and Netflix eating entertainment and Google eating direct marketing.
When he wrote it in the third quarter of 2011, Apple AAPL 0.00%↑ was the largest company by market cap, and Microsoft MSFT 0.00%↑ was the fifth largest, but the top 10 was largely dominated by oil companies, and the market caps were much, much smaller.
Today, the Top 10 stocks of the S&P 500 index look like this:
The thing is that tech is still very, very hungry.
This is what Jensen Huang said in one of his previous interviews from late 2023.
This is the extraordinary thing about technology right now. Technology is a tool, and it’s only so large. What’s unique about our current circumstance today is that we’re in the manufacturing of intelligence. We’re in the manufacturing of the work world. That’s AI. The world of tasks doing work—productive, generative AI work, generative intelligent work—that market size is enormous. It’s measured in trillions.
Don’t be surprised if technology companies become much larger in the future because what you produce is something very different. That’s the way to think about how large your opportunity can be and how large you can be. It has everything to do with the size of the opportunity.
Meanwhile,
wrote this post, where he made the case for tech increasing its total addressable market (TAM) across different sectors of the economy as follows:The economy will get larger and structurally more profitable as the prices of energy, intelligence, and dexterity trend to zero.
If incumbents maintain their position, there will be massive opportunities for tech companies to sell plug-and-play labor and intelligence to them, essentially productizing, centralizing, on-demanding, and SaaSifying what is now a distributed, inconsistent product in human labor.
Early evidence in industries as varied as auto and defense suggests that many incumbents will not maintain their position in a sufficiently dramatic shakeup. I think the transition could be akin to what Spotify did to the music industry—growing the market but killing CDs.
If that’s the case, tech companies will both provide the infrastructure—intelligence and dexterity, and potentially energy—and build the products that serve end customers in massive markets that have been largely impervious to startups, like manufacturing and defense.
The economy will become much bigger and structurally more profitable. Companies will be able to hire more people and machines, and consumers will be able to acquire most anything more cheaply, maybe as a service.
3. You need an AI investing compass, and we can be yours.
“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s,” said Paul Krugman in 1998. This famous quote clearly demonstrates how even the sharpest analytical minds can struggle to forecast the pace of technological progress.
Up until now, the theme of AI has been concentrated on the infrastructure layer, with the Magnificent 7 now making up over 35% of the S&P 500 market cap and contributing over 70% of its returns since the beginning of 2023. This outperformance has also seen valuations expand, with the Top 10 stocks now trading at a forward price-to-earnings multiple of 30, compared to a multiple of 18.2 for the remaining 493 companies in the S&P 500 index.
However, the valuation gap between the biggest companies (the megacaps) and the rest is unlikely to persist indefinitely. If the broad AI ecosystem generates sufficient revenues to justify the earnings expectations already assumed for a handful of companies, the rest should catch up over time.
Or will it? Are we due for a wave of AI pessimism that might overshadow market sentiment in 2025?
Last summer, I wrote this post below, where I argued that AI may take longer to monetize than what investors are pricing in.
I continue to believe that return on investment will be under the spotlight in 2025.
But an even bigger question for investors to ask is where along the AI value chain should they be positioning for further upside.
So far, investor excitement has primarily been anchored in a few large semiconductor companies (Read: Nvidia😉 NVDA 0.00%↑) and hyperscalers (compute providers).
Moving forward, we believe that a broader cohort of semiconductor companies, developers (AI software), and AI Services are well positioned to offer their consumers compelling reasons to buy their products and services, which should lead to solid growth in these companies. Fortunately, these companies that we view as neo-AI beneficiaries trade at compelling valuations today, which makes them a lot more appealing given the strength of their AI product portfolio.
In our industry research posts, we will be diving deeper into the AI value chain to understand the innovation cycle and how that would translate into revenue and cash flow growth across companies in the various layers of the AI stack amid macroeconomic uncertainty. We believe that this approach will help us identify long-term investment opportunities with a lot more clarity and rigor and enable us to generate alpha in the process.
🏆Here’s some evidence of our work so far.
Before we end, I wanted to share my TipRanks rating over the past twelve months, which hopefully should speak for itself. TipRanks is an independent ratings publication that monitors every analyst’s calls on a particular company’s stock, and we monitor these ratings closely to review the performance of our analyses.
My latest rating puts my rank in the Top 3% of all analysts. Sure, having a rank in the Top 10 would have looked more glamorous, but close to 70% of my 88 ratings have generated an average return of 26.4%. Given that we just started putting out our research twelve months ago, I will take these ratings with an optimistic outlook that our ratings will just get better over time.
Here’s a glimpse of the price movements in some of my winning stocks throughout the year that include Reddit RDDT 0.00%↑ , Palantir PLTR 0.00%↑, Twilio TWLO 0.00%↑, Cloudflare NET 0.00%↑, Atlassian TEAM 0.00%↑, and Wix WIX 0.00%↑ .
Meanwhile, some of Uttam’s persistent calls on the platform that generated alpha include AppLovin APP 0.00%↑, Arista Networks ANET 0.00%↑, Broadcom AVGO 0.00%↑, Marvell MRVL 0.00%↑, Spotify SPOT 0.00%↑, and Celestica CLS 0.00%↑.
It is good to see you expanding. I always enjoy your writing. I am trying to find the best way to do the same. Do not give up. I think the more ways you can expand, the more you can earn good money here. Best of luck to both of you!
Welcome back Amrita and Uttam. I think your focus on research on the AI ecosystem will help a lot of us understand deeper the players that will thrive. It sounds like a terrific area to focus on as the potential is uncertain but will be on a large scale for many industries and sizes of companies. Keep up with the great work!