1. Letter from our Partner
Richard Raizes, Chief Investment Officer
Capital is concentrating. It is flowing into technology infrastructure and hardware, while a historic wave of new offerings attracts even more. Companies raised a record $251 billion in the first half of this year, surpassing the 2021 peak. The queue behind them is larger than what has already cleared.
Markets like this reward participation. They also punish the absence of a framework.
The framework must be simple enough to use under pressure, broad enough to apply across industries, and durable enough to survive changes in the cycle.
We are trying to separate two groups of companies that can look nearly identical while capital is abundant: businesses doing well because capital is flowing toward them, and businesses that will continue compounding after the direction of that flow changes.
So we ask two questions.
Is the growth cyclical or secular? Is demand being pulled forward by one large investment cycle, or will the business still be adding customers after that cycle ends?
Is the business self-sustaining or dependent on capital markets? Can it finance its growth through operations, or does it need financing markets to remain open?
The answers create a simple framework. A framework you cannot hold in your head will not get used when you need it most, and those moments are rarely calm.
Separating the most vulnerable from the most durable businesses over time
The most dangerous corner is cyclical growth paired with capital markets dependency. These businesses need demand and financing to remain strong at the same time. At today’s valuations, they also need pricing, capacity absorption, customer spending, and investor confidence to hold together.
The risk is that these conditions rarely weaken one at a time. Slower demand makes capital more selective. More expensive capital slows expansion. Weakening growth then exposes the economics underneath. That is where our shorts come from.
Our long capital sits in the opposite corner: secular growth funded from within.
The strongest applied technology companies turn innovation into adoption, revenue, margins, and operating leverage. They serve customers they already understand through distribution they already control. Their success depends less on investor appetite and more on the value they create.
Most portfolios already own the infrastructure and platform layer through market-cap-weighted indexes. Adding more is not diversification. It is doubling down on the same capital cycle.
We would rather own the businesses applying these technologies through customers, distribution, and workflows they already control.
This is not a view against technology. The technology can be transformative while the investment still fails.
Bandwidth exploded after 1999, yet many fiber companies went to zero. Shale reshaped global energy, yet heavily financed producers were wiped out. Software kept expanding after 2022, yet capital-dependent companies repriced the hardest.
The theme did not kill those investments. The funding model and the durability of growth did.
We can believe in the future while remaining disciplined about who will capture its economics. Technological importance, business quality, and investment attractiveness are not the same thing.
The theme can be right. The company can be real. The growth can be extraordinary.
And the investment can still be wrong.
2. Net Performance Overview 1
Disclaimer: Past performance is not indicative of future results. See Footnote 1 for methodology and important disclosures.
3. From Our Data and Technology Team 5
3A. Adversarial Models
We added adversarial models to Plutus21 Edge using our knowledge graphs, and the investment committee has to address the results of these models before an investment can proceed.
For every potential long or short position, Edge now builds the strongest case it can for why the investment thesis could be wrong. It challenges the underlying assumptions, identifies conflicting evidence, maps hidden dependencies, and highlights the conditions that would cause the thesis to break.
3B. Short Catalysts
We added more robust short catalysts and structural screeners to the knowledge graph. Edge can now identify not only whether a business appears fundamentally vulnerable, but also what could cause the market to recognize and reprice that vulnerability.
The system connects structural weaknesses, deteriorating fundamentals, capital market activity, stock supply-side dynamics, industry pressure, and company-specific events to help us evaluate both the strength of a short thesis and the timing of the catalyst.
4. From Our Research Team
Investors understand that hardware is cyclical but overestimate their ability to identify the turn before everyone else.
In 2000, semiconductor prices peaked 10 months before earnings and earnings expectations, with the median stock already down roughly 50% when earnings and earnings expectations finally declined.
Protection must be built into the entry price or position structure because shared exit signals usually arrive after the damage.
Enterprise AI implementation struggled to measure output and responded by rewarding token consumption instead.
Engineers believed artificial intelligence made them 20% faster but were actually 19% slower, while greater token use did not improve accuracy.
Token growth driven by game incentives, inefficient systems, and subsidized pricing should not be mistaken for productive demand.
Hardware historically traded at a discount because it is cyclical, capital intensive, and structurally lower margin.
The median hardware multiple rose 35% in one quarter and moved above the rest of the market for the first time in the sample of 10 years.
We are systematically reducing infrastructure exposure and increasing application-layer exposure ahead of an expected mean reversion.
A 4.2% initial float and two-to-three-times oversubscription create a favorable short-term scarcity setup.
Nearly nine times the initial float could become eligible to trade within six months, materially changing the supply-and-demand balance.
The short-term trade is driven by scarcity and unlocks, while the long-term outcome depends on adoption, fundamentals, and valuation.
5. Closing Comments
Whether you are actively investing or still exploring, we focus on finding differentiated opportunities within long-term secular adoption themes and companies positioned to compound over time.
We welcome your questions, feedback, and perspective: [email protected]
Thank you for reading.
Onward and Upward,
Hamiz, Richard, Daniyal, Brad, and the Plutus21 Team
Footnotes
Sources: Yahoo Finance, Bloomberg, Plutus21 Research, StockUnlock
1. Performance results are for informational purposes only and are not investment advice or a solicitation to invest. All figures are net of applicable management and performance fees, trading costs, and expenses unless stated otherwise. Where exact fees, costs, or expenses cannot be confirmed, reasonable estimates are used and identified as such. Past performance does not guarantee future results, and actual outcomes may differ due to market conditions, portfolio composition, and other factors and risks. Returns for Blockchain Opportunities I (Fund), Blockchain Opportunities II (Fund), and Blockchain Genesis (Fund) reflect standard fees (2% annual management fee and 20% performance fee under a high water mark). 2025 figures are audited. Calculations rely on NAV Fund Administration and are subject to revision. Axiom (Fund, SMA) performance shown represents a composite of (i) a separately managed client account at Interactive Brokers (IBKR) from November 2024 through January 2026, and (ii) the Axiom Fund from February 2026 onward. The separately managed account was managed using a substantially similar investment strategy, but is not the same vehicle as the Axiom Fund. Net of fees as follows: Axiom (1.5% annual management fee, accrued monthly; 15% performance fee, accrued quarterly). Results from the separately managed account are provided for informational purposes only and do not represent actual fund performance. These results may not be indicative of the performance that the Axiom Fund would have achieved during the same period. Differences in fees, expenses, execution, and portfolio construction may produce materially different results. Figures are unaudited. Calculations rely on IBKR Portfolio Analyst and are subject to revision. Annualized returns for periods of less than three years may be misleading and are shown for informational purposes only. Actual results may vary. All data and sources may be subject to revision.
2. YTD = Year-to-Date
3. ITD = Inception-to-Date
4. CAGR = Compounded Annual Growth Rate. For strategies with less than one year of track record, this figure is not annualised to avoid misleading results
5. For informational purposes only; not an offer to buy or sell any security or product. For full disclaimers, click here.
Disclaimer(s)
The information provided, including any accompanying materials and communications (collectively, the "Information"), is for informational purposes only and does not constitute investment advice or an offer to sell or solicit an offer to buy any securities, financial instruments, or investments. Plutus21 Investment Management, L.L.C., Plutus21 Capital Management, L.L.C., Plutus21 Holdings Inc. ("Plutus21"), and their affiliates are not responsible for any trading decisions, damages, or other losses resulting from the use of this Information.
The Information is not intended to provide, and should not be relied upon for, accounting, legal, tax, or investment advice. Participants are strongly encouraged to consult their own professional advisors on any investment, legal, tax, or similar matters.
Any opinions or estimates expressed reflect our judgment as of the date of this information and are subject to change without notice. While we believe the sources of the Information to be reliable, we do not guarantee its accuracy or completeness. The financial data presented have not been audited and are subject to change, including, but not limited to, changes in accounting treatment or reallocations.
Investing in digital assets and securities, including those related to Web3 and AI technologies, involves significant risks, including price volatility and illiquidity, and may not be suitable for all investors. Past performance is not indicative of or a guarantee of future results. There is no assurance that any investment strategy will achieve its objectives.
Plutus21 and its affiliates may have positions in the digital assets or securities discussed and may trade in them in ways that may differ from those discussed. This may create a conflict of interest, and Plutus21 is under no obligation to disclose such conflicts.
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