Coatue's Lucas Swisher: AI capex demand is real, stablecoins are crypto's second killer use case, and quality is the only ZERP lesson that matters

go check it out. Used by anthropic and monday. com. Uh, welcome to the stream. Our next guest is Lucas. How you doing, Lucas? Good to meet you, Lucas. What's going on? I'm doing good. Uh, this is the first pot I've been on with two guys with better hair than me. So, I don't know about that.

You're looking you're looking sharp. You look fantastic. You're looking sharp. You came prepared. Next time would love a suit, but uh the background is a good The background is fantastic. The background helps. New York City. It's not fake, believe it or not. We're at Hedge Fund HQ, 9 West 57th. So, no way. Amazing.

Beautiful. Uh break down what it means to be at Hedge Fund HQ. Uh talk about life at a crossover. Um I want to talk about the state of the markets. I want to talk about uh CO2's reporting and analysis. It's a very condensed uh it's a very condensed report.

It's very accessible, but it still feels like it has a little bit of the the the deeper analysis that you don't get from some VCs. So, I enjoy that. Uh what's the overall temperature on the markets today? Yeah, I think we uh we're still pretty optimistic, right?

I think you uh you have a really complex environment, right? the NASDAQ and and the S&P got off to their worst start since NASDAQ conception in 1971 um through April 18th, but since then um you've had a lot of good news, right? Inflation has been lower than people thought.

Tariffs haven't affected inflation as much as people thought. Um the US consumers been really strong. Performance in companies has been really strong, I think, in the public markets, but also in the private markets, which is giving people a lot of confidence. And so, I think we feel good.

I think the only kind of question mark we have is is there this delayed effect to tariffs on inflation and what does that what does that even mean right like we haven't had a situation like this in 50 years you know so like what is it what really happens economists don't know we don't know and so predicting that is really tough um and we put up a surplus that's an immediate crazy we put up a surplus in June uh which you don't see much from the from Uncle Sam free cash flow and then the uh The PPI came in today, a leading indicator for inflation, lower than every single economist predicted, right?

I don't think you usually see. So, I think it leaves a lot of room for for optimism. Yeah. Did you read into the the earning season that we're going into? JP Morgan beat earnings. Uh, sounds pretty bullish for the American economy.

The Wall Street Journal said, uh, the US economy showed signs of resilience despite escalating threats of a global trade war. A sign that American corporations and the consumer are still charging ahead. You love to hear it. Jamie Diamond said, "We've basically been in this soft landing now for some time period.

It's been resilient. Hopefully that will continue. " Uh, is he talking about soft landing coming off of the end of Zerp or just the start of the year? What is your interpretation of uh of Jaime Diamond's analysis of the American economy?

Yeah, I think it's basically coming off of ZERP and coming off of that whole era, right?

And I think economists were predicting and a lot of people have predicted a recession for the last couple of years and you know maybe we've been in a mild one for some period but I think that's been the ultimate question and um it just kind of hasn't come to fruition the way that a lot of folks thought that a way that a lot of economists thought.

So um I think people people feel pretty good right and I think you see a lot of confidence from the big companies right you you see Meta and Zuck talking about you know building data centers the size of Manhattan and I think if we were in you know a negative environment where people weren't seeing gains from AI and all these wonderful things you know you wouldn't see that type of investment going in um and so I think it it leaves a lot of room for optimism and we talked a lot about this in our East meets West presentation which you alluded to um But AI, I think, has the potential to really improve productivity and that solves a lot of problems, right?

It can solve the national debt problem. It solves the general productivity problem. It solves the GDP problem. And so, if if what a lot of folks believe can be true about AI, then, you know, maybe there's even more room for optimism at at corporations. Yeah.

What are what are the key lessons that we should take away from the end of the ZER era, the rise of interest rates?

There were some companies that were kind of revealed to be fraudulent or kind of just overvalued, but it feels like we're already in the lesson certainly doesn't seem never invest at 100x revenue multiple because that's already worked out for people who have been investing in uh 100x revenue multiple companies for a few years and got exits because that's happened.

So what are the lessons? Yeah, I think it's a I think it's a few different things. I think one is quality matters is probably the number one lesson that I've pulled from the from kind of the Zer 2021 era, right? You guys have an amazing sponsor in a company called RAMP. Some people have heard of it.

Very small startup, but you know, doing very well. Like that's an example of an asset that's just incredibly high quality and people always thought it was super expensive. You know, people invested 200 times gross profit or 50 times gross profit.

And the reality is the best businesses compound over very long periods of time. And um if you're investing in a quality business, often at really any stage over duration, you're going to be in a great spot. I think the place where folks got in a lot of trouble is um being in sectors they aren't experts in, right?

Reaching into different sectors that they weren't experts in. You know, a lot of growth investors, you know, candidly like us, you know, chasing venture rounds with growth dollars, which I think is happening again, right? We got pockets of this in different areas. And then just way too many companies, right?

we were at the end of the kind of the SAS era in many ways without AI yet and people were funding literally everything kind of chasing yield um and chasing returns and um I think there's very few companies that are very high quality um and I think that's kind of the lesson coming out of that era is you got to back those and only those.

Yeah. Uh what is uh we don't spend a lot of time on the east coast at least this year because we're here in the studio uh but I imagine you pick up sentiment from uh like traditional hedge fund managers that might even be in the same building as you guys. What is the sentiment?

Are there are there pockets of people that are I love the volatility, we're printing, I live for this, and then other pockets that are just uh maybe maybe um uh panic, you know, people that people that might uh not not just enjoy like the chaos of sorts. Uh what are the different what are the kind of uh Yeah.

What are the different groups in your I think the biggest debate and the biggest flavor and mix that you get is just the AI doomers versus the AI optimists, right?

That's the biggest mix that I think you have in the hedge fund world and you see it, you know, once every three or four months you get a deepseek moment or you get a moment where Microsoft says they're pulling a few contracts and the market pulls back, right?

And but then you have the reverse of that whenever, you know, you see these incredible numbers out of companies like OpenAI and more recently Anthropic and then just this amazing global use of AI both in the consumer and now more recently I think you see it in the anthropic numbers in the enterprise.

you guys have talked about this with codening and other use cases and I think that's kind of the biggest debate that's happening um inside this building and you know other buildings close by and I think it's this huge contrast between Silicon Valley where it's pretty much all AI optimism and the east coast where there is a there's definitely a mix of opinions.

Interesting. Interesting. Um, do they you find the people that are bearish just uh typically don't use any of the products? They haven't haven't adopted them because I think it's one of those things. It's it's hard to just be like blanket bearish if you've never experienced a magic moment using one of the products.

Yeah, I think there's honestly I think there's a lot of that, right? Um, but I also think it's people that have studied the past cycles and they see that, you know, you do have these bubbles and, you know, maybe we're in a little bit of a bubble now.

companies, you know, getting raising at 10 billion plus uh valuations with no revenue, no product, you know, two two folks in a dream. Hopefully you guys soon. But I I also think there are pockets of of incredible things, right? They Well, yeah, even we were debating we we I was having this conversation.

It's like, okay, it's clear where OpenAI's revenue opportunity is is where the revenue is today, where where it will be. It's very clear where Anthropics is. My question like a week ago was where's Gros gonna come from? Like where are we gonna see an explosion?

And then this week we had new contract with the DoD uh and then uh and a new and then Companions which I I I'm going to go out and just predict. I think that'll be like a a billion dollar business like very quickly regardless of how people um feel about it.

So, um, so yeah, and and it's just there wasn't a there wasn't a lab that was willing to like go there, even though people know that that is a huge opportunity.

Yeah, I think I think it's super interesting and it's funny like when I was growing up, the biggest thing my mom had to worry about was like too much World of Warcraft. Now you got uh you got something like this. But I think things like this have been incredible revenue opportunities in the past, right?

You think about where people went with character AI initially, right? the absolute skyrocketing of usage that happened there. You think about a lot of these apps that have kind of conformed in and around ChatgBT. I think there's just a huge huge opportunity here.

How are you uh what what's your framework for some of these new experiments around tokenized private company uh shares uh because I I imagine a large part of the code portfolio is what companies like Republic and Robin Hood are trying to get out there in terms of giving uh access to retail.

But in general, obviously, these these experiments are not sanctioned by the companies. In fact, the companies are actually coming out and saying um and and there's this weird dynamic where there's always going to be, you know, 10, 50, 100 times more demand.

However much open AI shares you could get on on chain, there's always going to be like exceptionally more demand. And so there's if if you can actually make these experiments happen, there's just going to be wild distortions. Yeah.

I think actually I I think there there's a lot of ways you could take this but the number one takeaway that we've had from this and we talk a lot about it internally because one of the missions that we've been on recently we have a new fund called CEK which is really the idea behind it is to allow more retail investors access to our platform and I think it just shows the hunger for a normal person to get access to companies like OpenAI and SpaceX and Revolute and some of these fantastic businesses that you know normal folks can't get access to, right?

And it's this trend of companies staying private longer, not going public. It's the trend of the regulations that we have in the US of people not being able to access these types of names where um I think it just shows there's a real hunger for this, right? People are so excited to own OpenAI.

They're so excited to own SpaceX and there's no way to do it today. And I think it's going to be something that, you know, the US is going to have to grapple with and companies are going to have to grapple with because people have this insatiable demand for their for their stock. Yeah.

One one crazy update I had to my understanding of uh the value of staying private longer was this past weekend where Cognition wound up acquiring Windsurf and it felt like there were a lot of other things going on but one big one was that if if the whole company winds had gone to Google that would have been crazy FTC review but PI but small medium-sized I mean huge cognition is a fantastic business but uh you know it is a small company uh in the eyes of the FT DC, it's a private company.

It's a young company. Buying another small young company, all of a sudden much easier to put those two pieces together. So that that's kind of like an untapped the ability to move faster on the acquisition side. Potentially an an underrated benefit of staying private longer.

But are there any other uh uh you know factors that might be driving the decision to go public or private or stay private longer in your mind? Yeah, I think there are a couple others.

I think the most simple one is people want to invest really heavily and there is this perception that the public markets only rewards profitability and not growth which we actually think is not true. Sure. But it is certainly a perception.

Y um and I think folks like you know that want to invest and be unprofitable and really invest over you know a 5 10 year basis into product or R&D or sales and grow really quickly. It's hard to be a public company that way. Um, it it really is because public market investors can be fickle.

You have to report every quarter. It's harder to take a long-term mindset. And so, when you're still in that investment mode, a lot of folks want to stay private longer. And it is a benefit to not have to think on a quarterly basis the way the public company does. Yeah.

Um, I want to know about the east meets west uh like kind of mental model around the AI salaries. Uh, the hundred million dollar research offers are going mega viral in Silicon Valley. It it's just grabbed everyone's attention. Uh and the new play is the Uno reverse. Yes.

Now now companies realize that's a card you can play. But uh but but but everyone keeps drawing on the analogy of sports. But there's also the analogy of Wall Street where top traders at Citadel apparently have have pulled in a billion dollar uh bonus.

And uh Greg Ael famously made more money at Berkshire Hathway on salary than Warren Buffett did for a long time. And so this idea that like the CEO should should necessarily be the salary cap for the organization uh has not been true on Wall Street and now it seems to not be true in the AI world in tech.

But what has your reaction or or or your world's reaction been to the crazy trade deals, the AI salaries, these these I love the Uno reverse yesterday. I thought it was hilarious. Incredible. Um the I think it's it's kind of interesting because we've seen this here, right?

You saw it, I think, in in actually in growth investing in 2020 and 2021, right? A lot of careers were yanked forward and a lot of salaries were yanked forward. You saw it in in the hedge fund world and you still do with the rise of pods, right? Just like you were referring to.

And I think this happens every time there's just a big imbalance between labor supply and labor demand, right? when there's an emerging sector, an emerging market, an emerging trend, and there are very few people that can do something really well, the market just rewards that incredibly disproportionately.

And I think you're you see that in athletics all the time, you see it in hedge fund world, you see it in VC world, you see it everywhere. Um, and now we're seeing it with AI researchers. There are just so few of these people in the world.

I mean, we're talking on the order of hundreds that people really want at the end of the day and dozens of companies that have incredible balance sheets. This war is going to happen. And I think it's going to get I think it's going to get more intense. Yeah. Uh I want to talk about um competition specifically.

We were talking earlier. There's been a bunch of examples of this. The question of like uh if you're a CatchPT rapper, is CatchPT going to is OpenAI going to steamroll you? Uh we have a buddy of the show who uh runs a a company, an enterprise SAS product essentially, and uh AWS just launched a competitor.

And I'm wondering how much how much weight do you put in the bucket of like just the grit and the determination of the founder can overcome a challenge from a massive company where they have 20 startups that they're competing with and if you stick with it you can break through versus like there are fundamental market forces that could have been understood in a investment memo at the seed stage to know that it was not good to go up against this particular hyperscaler this particular growth stage startup.

How do you think about uh competition when an entrepreneur is like in the various parts of the journey?

Yeah, I think this is a this is super interesting question and um again I think it's actually one of the other differences between Silicon Valley and the hedge fund world and I see this a lot because I straddle it where I remember two years ago whenever we were first thinking about all right how does AI impact the public and private markets we're like oh well of course the public market companies are all just going to latch on to AI and they're going to dominate this and you fast forward two years and certainly Nvidia has been the case and some of the cloud providers in in certain areas But the application software companies haven't really done anything with AI, right?

Like people are like, "Oh, CRM, they're going to kill it. " You know, all this stuff. It hasn't really been the case yet, which is kind of crazy.

And you contrast that with look at what's happened in the private markets with new companies and incredible CEOs, Cursor, Cog, you know, Cognition, Harvey, Glean, Open Evidence. Like, you talk about all these companies that have come up that are competing with these huge companies and killing it.

And I think it does at the end of the day. There are certain businesses if you have a network effect. It it's hard to break into that. But even you see OpenAI versus Google, right? Um I think it's just a lot of this does come down to like the grid of the teams being able to go 996.

All this stuff matters uh a great deal more than just some incumbency advantage. How are you thinking about uh stable coins? Everybody's excited about them. Everybody wants to make money on them. It's hard to make money on them by holding them. Uh especially with the new regulation.

I put all my money in stable coins and my portfolio is flat. It's flat. Flat on the year. It didn't go down though. But but it's it's such an interesting category because uh it it it seems I shouldn't say incredibly easy but quite easy for existing financial players to add stable coins to their product.

So if you're a bank and you want to enable a company uh what your user to hold, send, buy, swap stable coins, not super difficult. Uh Circle is public.

there was a massive amount of interest but uh you know personally I look I look at stable co uh you know circle trading at at at whatever their their current PE ratio um it uh you know it talk about an expensive uh company right now so how are you guys thinking about the category are you looking to place new bets or do you think it's more of a a feature to potentially existing bets yeah I think one we're paying a ton of we're paying a ton of attention to it um and our view is this seems like the second big use case of crypto, right?

Really being able to bit if Bitcoin was the first as this, call it a store of value, call it whatever you want to call it, digital gold, then stable coins really do feel like the second really big global use case. We are trying to figure out actively how to play this, right?

You talk to the folks at Stripe, they're trying to figure this out. You know, they made a I what I think is a killer acquisition with Bridge um you talk to ramp, they're trying to figure it out, right? There's a big opportunity for ramp internationally here, I think, to be able to really move money.

Um, we're really excited about it. We're trying to figure out the right the right way to play it. We haven't seen a ton of like new companies come up, but a lot of the like more innovative, slightly bigger companies like a Stripe, I think, are going to really be able to take advantage of this.

Yeah, it's hard because you you you're excited about a broader trend, you want to deploy capital against it, and then you look at your portfolio and you're like, wait, you're really well positioned here. You're really well positioned here. Um, and sometimes the answer as usual is you just buy more Stripe.

Buy more Stripe. That's funny. Um, how are you thinking about uh robotics from the lens of a uh growth investor? There's some bright spots, areas where there's real traction. Uh, but then some of the hottest categories feel 10 years out.

And as a growth investor, you're being asked h how if I if I if I invest $200 million today, is there going to be someone else in two years that's going to come in and and write an even bigger check? So, I'm curious uh how you're thinking about that category.

Yeah, this is this is a space we've talked a lot about and obviously we're really excited about it. We have an investment out of our venture fund in a company called Skilled um which you you all may be aware of that if you haven't you should go see them um and like see the products.

It's pretty killer the advancements that they're making spin out of Carnegie Melon out in Pittsburgh. Cool. Um I think from a growth investors lens, this is like one of the hardest things, right?

Our our view and our mandate on growth investing is we invest in businesses that have real business models and that are clear or emerging leaders in their categories. And in robotics, we're still too early for that. That's just the reality.

Again, our view is um generally you want to be in the in the leader because the vast majority of the of the gain acrrues to that number one player almost always in technology some exceptions but almost always and so it's better for us as a growth investor to just wait a little bit longer and be a little bit patient.

But our view is it's coming. The question is how long?

I do think there is one exception in this in this market on the incumbency bit which is you have Tesla and you have Elon and in the robotics world it's hard to bet against him I think in a lot of ways right like he's got the power of XAI underneath him doing all the research he's got Tesla he's got all the real world data that exists out there he's got SpaceX all these things kind of mixed together and he's a founder and so it's kind of hard to bet against him in in that landscape where it seems really compelling.

Yeah. Um uh Tyler Count has this uh this take on AGI. He says AGI is here but the impact will be slow because so much of our economy is uh you know healthcare and it's like nurses in the hospital, doctors doing physical things that can't just immediately be replaced with an LLM. And so you'll see paying rent. Yeah.

Yeah. And there's all these different pieces of the economy that that might not be disrupted by LLMs. they might be disrupted by like you know AGI super intelligence robotics future. Um but how are you thinking about like the surface area of AI's impact? Uh you mentioned Harvey and legal and Glean.

feels like we're starting to map out a few of the different subcategories that could be rich pockets of value, but um how uh are there any that you think are kind of underrated or might be next up or or or where or like do do or do you agree with just Tyler Cowan's like general thesis on um you know uh AI as an advancing force or sustaining innovation in the stuff that has already been brought online essentially.

Yeah, I think I I pretty much identify with that. I think there is something uh pretty interesting, right? Which is in technology again, you almost always see the consumer first, right? You saw it in messaging, you saw it in mobile, you see it in everything. The consumer adopts really quickly first.

And we've seen that now. There was the chat GPT moment. We're two years out from that. The consumer is adopting AI. Enterprise takes a long time and getting it in the hands of people at at work like lawyers, doctors, you know, even developers to a certain extent, but not so much in this case.

You know, it takes it takes a long time. Fundamentally, people are sticky. Enterprises are sticky, processes are sticky, and so it takes a long time to get things really implemented. And I think that's kind of what we're seeing, right? You've got a couple of early use cases. Coding is by far the most obvious.

um we think it's the vast majority of of the value that's being accured in the enterprise today. Right? There was 1. 3 billion in in coding ARR added in the last 12 months outside of anthropic just in startups. And so you're seeing it there first, but I think you're also seeing pockets, right?

Legal, Harvey, Open Evidence, Medicine, Glean, Search, right? You you're starting to see it, especially in the text in text out type use cases, but I think it's going to take it's going to take time.

Yeah, it is crazy thinking about like I bet if you looked at consumers adopting like file transfer versus airdrop is probably higher than or like or like roughly the same as like in in a in a hospital are they sending more faxes like like the fax has been sticky in healthcare for and and at home we're like using like the next next next generation.

Yeah. All of a sudden are we all going to wake up and build our own CRM? Probably not. No. Right. We are still using fax machines. Yep. Totally. I think these things they take decades. Yeah. What are you tracking on the capex side for the AI buildout? I I've been reading semi analysis a lot.

There's this new uh big push in Pennsylvania. Something like $92 billion going in there from Google, Blackstone. Um Core Weeb's doing stuff. We talked to the co-founder of Coree. He was saying that um the capital markets aren't necessarily even ready to absorb the amount of demand that are there.

talking about um just like when you talk to the AI folks in Silicon Valley who are more like on the philosophy side, they're like, "Well, of course we'll build a 10 gawatt data center next year. " And and when you talk to the finance guys, they're like, "Wait, you want $500 billion to do this?

" Like eyes of Texas, you'd like next year. Exactly. But uh yeah, what what are you tracking on the on the AI capex side? What are the interesting stories? what are the interesting threads that you're pulling on over there?

Uh either data points or just narratives or or different uh market structures that you've kind of identified. Yeah, I think the the biggest thing that that we continue to follow and we continue to hear is just that everyone is computed, right?

like all these buildouts that are happening for the last couple years and again this is a big west coast east coast debate again and has been about just like capacity and like are we overbuilding and all of these things and I mean you even saw with Microsoft right it it's caused some of the friction between Microsoft and open AI very very publicly is about compute buildout and open AI not having access to enough compute right and so I think that's just what you're hearing and I think that's the most interesting thing that's happening right now is you know anthropics comput's compute constraint, they can't release new products because they can't serve them, right?

And so I think you're just going to continue to see um this buildout happen. And I think we are really we are really bullish on that trend. Um I mean we're we're heavy investors in um in Coreavee. We've uh we did a lot with them before the IPO.

Um and I think it's just been in a it's been an incredible story so far, right? And I don't think you've seen an end to the demand yet. Mhm. Last question for me. Uh what are you looking uh looking for in the autonomous vehicle market over the next one to two years? We've got uh two key players in the race.

Obviously Tesla one. Uh they have an interesting map of of their operational area down in Austin. Uh and then Whimo of course uh how how third there's also horses and traditional horses. It's autonomous and there's also pony AI I guess.

Um, but it's such an interesting dynamic because one, you have this, you know, very capex light model and then you have the polar opposite and it'll be an interesting battle from our view. But I'm curious if you have a read.

I mean, the most the thing I'm most looking forward to is just being able to use Whimo everywhere. But um, yeah, I'm I'm we're all ready for it. Um, I think the consumer demand is obviously there.

I think the biggest dynamic that's going to be interesting that the public market is paying attention to is actually what happens with Uber and like the existing networks and how does that end up playing with all these different providers that are emerging with you know Tesla which is trying to build its own network whimo which has built its own network what happens to Uber in this world and I think everybody there's a bull case and there's a bear case on this and I think everybody's trying to figure it out but um it's clear that the uni economics on this stuff work um for for Whimo already and whenever we move from Jaguars cars to something else.

Eventually, it'll probably even get a lot better, but I think it's going to be a really exciting battle. And then the second and third order effects of okay, if people are getting two hours a day of their time back, what are they going to do with it?

Probably scroll on apps, which would be good for Zuck or or they'll uh do more email different beneficiaries. Whimo should move to Paganis Pagani. They're handbuilt. It might it might it might it might affect the economics. But it is quality and it would be differentiating. I mean, apparently they have a deal.

They're talking about a deal with Toyota, so we might see some Supras. It only makes a little more sense. It makes more sense. But this is fantastic. I I really had a blast talking to you. Thanks so much for hopping on. Thanks for coming on. We'll talk to you soon. Talk soon, Lucas. Bye. Cheers. Uh I'll be right back.

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