Investment management company Vulcan Value Partners recently released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. All the strategies of Vulcan Value Partners delivered positive results in the year. The Large Cap Composite (Net) returned -1.5% in Q4 and 7.9% YTD, the Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, The Focus Composite (Net) retuned 0.1% in Q4 and 7.1% YTD, Focus Plus Composite (Net) returned 0.1% in Q4 and 6.2% YTD and the All-Cap Composite ...

Group 1: Investment Performance - Vulcan Value Partners reported positive results across all strategies in Q4 2025, with the Large Cap Composite returning -1.5% in Q4 and 7.9% YTD, and the Small Cap Composite gaining 3.2% in Q4 and 9.5% YTD [1] - The Focus Composite and Focus Plus Composite both returned 0.1% in Q4, with YTD returns of 7.1% and 6.2% respectively, while the All-Cap Composite returned 1.3% in Q4 and 10.7% YTD [1] - The firm improved its price-to-value ratios despite overvalued markets, focusing on safety and long-term gains over short-term performance [1] Group 2: Salesforce, Inc. Overview - Salesforce, Inc. is recognized as the world's leading SaaS vendor for customer relationship management (CRM) and salesforce automation (SFA) software, including AI agents [3] - The company has a strong product portfolio that includes marketing automation, customer service automation, analytics, application integration, and enterprise collaboration [3] - Salesforce aims for over 10% organic top-line growth and significant margin expansion through FY2030, supported by successful data points related to Agentforce, including triple-digit revenue growth [3] Group 3: Salesforce, Inc. Stock Performance - Salesforce, Inc. experienced a one-month return of -13.73% and a 52-week loss of 36.27% [2] - As of January 26, 2026, Salesforce's stock closed at $229.40 per share, with a market capitalization of $218.389 billion [2]

Group 1: Investment Performance - Vulcan Value Partners' strategies delivered positive results in 2025, with the Large Cap Composite returning -1.5% in Q4 and 7.9% YTD, and the Small Cap Composite gaining 3.2% in Q4 and 9.5% YTD [1] - The Focus Composite and Focus Plus Composite both returned 0.1% in Q4, with YTD returns of 7.1% and 6.2% respectively, while the All-Cap Composite returned 1.3% in Q4 and 10.7% YTD [1] Group 2: Market Context and Strategy - Despite overvalued markets, the firm improved its price-to-value ratios, prioritizing safety and long-term gains over short-term performance, reminiscent of the late 1990s dot-com bubble [1] - The firm is maintaining its investment discipline in light of potential overvaluation in AI-related businesses [1] Group 3: Company Focus - Ryan Specialty Holdings, Inc. - Ryan Specialty Holdings, Inc. is a specialty products and solutions provider for insurance brokers, with shares trading between $48.90 and $77.16 over the past 52 weeks, closing at $50.40 on January 22, 2026 [2] - The company generates approximately 55% of its revenue from brokerage and 45% from delegated authority businesses, with the excess and surplus brokerage market representing 26% of commercial property and casualty premiums [3] - The excess and surplus market has grown at an 11% CAGR over the past 25 years, while the admitted market has grown at a 4% CAGR, indicating a favorable growth outlook for Ryan Specialty [3] - Ryan Specialty's delegated authority business does not retain balance sheet risk, and the company has experienced organic growth at a double-digit rate for the past 15 years [3] - Current pricing headwinds in the commercial property sector are viewed as a short-term issue, with the stock price currently below its long-term intrinsic value, presenting an investment opportunity [3]

Core Insights - Cisco's stock has surpassed its dot-com peak for the first time, reaching $80.25, exceeding the previous record of $80.06 set on March 27, 2000 [2] - The company's market capitalization now stands at $317 billion, making it the 13th most valuable tech company in the U.S. [5] - Cisco is positioning itself to benefit from the AI boom, reporting $1.3 billion in quarterly AI infrastructure orders [7] Historical Context - In the early 2000s, Cisco was a key player in the internet boom, providing essential networking equipment [1][3] - The dot-com bubble burst shortly after Cisco's peak, leading to a significant decline in the Nasdaq [3][4] - Despite the market collapse, Cisco survived and diversified through acquisitions, including Scientific-Atlanta and various software companies [4] Current Market Position - Cisco's stock has increased by approximately 36% in 2025, outperforming the Nasdaq's 22% gain [7] - The current AI market is experiencing a level of excitement reminiscent of the dot-com era, with Nvidia emerging as the leading infrastructure provider [6] - Nvidia's market cap is $4.5 trillion, significantly overshadowing Cisco's current valuation [6]

Core Viewpoint - GMO warns that the AI sector is exhibiting classic signs of an investment bubble, characterized by high valuations and rampant speculation [1][7] Group 1: AI Bubble Concerns - The firm has consistently cautioned about an AI bubble, reiterating its bearish stance as market exuberance grows [1] - Quantum computing stocks have surged by over 1200% in the past year, leading to valuations that make other stocks appear undervalued [2] - GMO's concerns are specifically focused on the AI trade, suggesting that there are still opportunities in other areas of the stock market [2] Group 2: Market Comparisons - The current market environment is compared to the dot-com bubble of 2000, which should provide some reassurance to investors [3] - Dynamic, valuation-driven asset allocation strategies have historically helped investors avoid significant losses during market bubbles [3] Group 3: Investment Opportunities - GMO identifies developed market value stocks and non-US small-cap value stocks, particularly in Japan, as attractive investment opportunities [4] - The firm emphasizes that investors can shift their portfolios away from AI stocks without sacrificing long-term expected returns [6]

Core Viewpoint - Nvidia has issued a seven-page rebuttal to counter accusations of accounting practices similar to those of Enron, defending its financial transparency and business integrity [1][3]. Group 1: Nvidia's Defense - The rebuttal addresses claims of hidden debt and inflated revenue through special purpose vehicles and vendor financing, which are reminiscent of past corporate scandals [1]. - Nvidia's response is a direct reaction to criticisms from Michael Burry, who has raised concerns about the company's revenue recognition and stock-based compensation practices [2][3]. Group 2: Michael Burry's Position - Burry does not label Nvidia as a fraud but compares it to Cisco Systems, suggesting it reflects the excesses of the current AI boom [4]. - He criticizes Nvidia's memo as "disingenuous," arguing that it fails to address his main points regarding stock-based compensation and chip depreciation [4]. Group 3: Historical Context - The comparison to Cisco highlights the potential risks of overvaluation in the tech sector, as Cisco's stock soared 3,800% from 1995 to 2000 before experiencing a significant decline [6][7]. - Cisco's experience serves as a cautionary tale about the consequences of overly optimistic demand forecasts and subsequent overcapacity in the market [7]. Group 4: Current Market Dynamics - Burry notes that major tech companies, referred to as the "Five Horsemen," are investing nearly $3 trillion over three years in AI data centers, significantly increasing demand for Nvidia's GPUs [8].

Core Insights - Jim Cramer has declared the end of the "Year of Magical Investing," indicating a shift in market sentiment as investors focus on solid earnings rather than speculative growth [1][2] - The current market environment, characterized by high interest rates and stretched valuations, has prompted Cramer to issue a warning to Wall Street, which he believes is caught in a fantasy phase [2][3] AI Boom Analysis - Cramer suggests that the AI boom may be losing momentum, drawing parallels to the late-1990s dot-com bubble, with Goldman Sachs noting Big Tech's planned capital expenditures of $349 billion for 2025 despite lagging profits [3] - Morgan Stanley analysts assert that the AI boom is not just beginning but is already in its "seventh inning," indicating a mature phase of the market cycle [4] OpenAI Concerns - Cramer criticizes the inflated valuations surrounding companies like OpenAI, which has seen its valuation soar from $29 billion in early 2023 to $300 billion by late 2025, despite only $13 billion in annualized sales [6] - The company is making significant financial commitments, including billions for supercomputing infrastructure and contracts reportedly worth "hundreds of billions," raising concerns about sustainability [6] - Cramer likens the current AI investment climate to a "bubble déjà vu," reminiscent of past speculative booms, and highlights the potential need for government support as indicated by OpenAI's CFO [6] Market Sentiment - Despite Cramer's cautionary stance, Wall Street appears to remain optimistic and engaged in high-risk investments, reflecting a disconnect between market realities and investor behavior [7]

Market Overview - US stocks experienced a rally as investors anticipated a potential end to the longest government shutdown in history, with the Dow Jones Industrial Average rising by 390 points (0.8%), the S&P 500 increasing by 1.6%, and the Nasdaq climbing by 2.4% [1][2] Government Shutdown Impact - The Senate is expected to vote on a deal to fund the government through January 30, 2026, although the House of Representatives will not reconvene until Wednesday, likely prolonging the shutdown for a few more days [2][5] - The shutdown has lasted just over 40 days, marking a historical record [2] Technology Sector Performance - Tech stocks, particularly those involved in AI, led the market rally, with Nvidia shares increasing by 6.2% and Broadcom rising by 3% [2] - Palantir's shares surged by 9% following a previous decline due to concerns over overestimated AI potential [3] - Microsoft shares rose by 2%, breaking an eight-day losing streak, the longest since 2011 [4] Economic Sentiment - Consumer sentiment dropped to its lowest level in over three years, with a reading of 50.3, reflecting a 6.2% decrease from the previous month and about a 30% decline from the same time last year [7] - Broader economic concerns, particularly regarding inflation, continue to affect consumer perceptions, with rising prices across various goods [8]

Core Viewpoint - Hedge fund billionaire Michael Burry has made a significant bet against popular AI stocks Palantir and Nvidia, indicating a potential downturn in the AI sector [1][4]. Group 1: Michael Burry's Investment Strategy - Burry's hedge fund, Scion Capital Management, has allocated 66% of its $1.4 billion portfolio to put options on Palantir and 14% to put options on Nvidia, totaling over $1 billion in bets against these stocks [3][4]. - This strategy reflects Burry's historical approach, as he previously profited from a similar strategy during the 2008 financial crisis by betting against subprime mortgage-backed securities [1][2]. Group 2: Performance of AI Stocks - The AI boom, initiated by OpenAI's ChatGPT in November 2022, has led to substantial stock price increases, with Palantir and Nvidia shares rising 2,000% and 1,300%, respectively [5]. - Palantir has gained popularity among retail investors, particularly due to its AI platform launched in April 2023, which has driven nine consecutive quarters of revenue growth [6]. - Nvidia is recognized as a leader in AI infrastructure, holding over 90% market share in data center GPUs and establishing a strong position in generative AI networking equipment [7]. Group 3: Market Context and Comparisons - The S&P 500 has increased by 75% since the launch of ChatGPT, with an annual compounding rate of 20%, drawing parallels to the dot-com bubble [8]. - The S&P 500's cyclically adjusted price-to-earnings (CAPE) ratio reached 39.5 in October, the highest in 25 years, indicating extreme market valuations similar to those seen during the dot-com bubble [10]. - Historical data suggests that the S&P 500 has typically performed poorly following such high CAPE ratios, with an average decline of 30% over three years after surpassing a CAPE of 39 [12].

Group 1 - The 2025 outlook highlights major risks facing the bull market and potential drivers for new highs [1] - The Invesco Nasdaq 100 ETF (QQQ) has shown significant performance, with nearly 30% gain in the past 12 months, contributing to the S&P 500's success [3] - There is a potential for QQQ to rise another 30%, reminiscent of the dot-com bubble era, driven by a hyper-focus on AI stocks [4] Group 2 - The market's current performance is heavily reliant on QQQ, while other stocks in the S&P 500 are lagging behind [5] - The concentration of wealth among the largest stocks has increased, with smaller caps facing challenges due to "debt cliffs" [6] - The outlook suggests that while QQQ may continue to rise, it could eventually roll over, impacting the broader market [7]