We’ve made trades in Flagship

On Wednesday, we started 2025 with the largest rebalance in Flagship’s history. The changes represent what we believe to be major themes for 2025 – in other words, we’re skating to where the puck is going while adding to some of our highest conviction ideas.

We initiated three new positions on behalf of clients in our Flagship strategy: Micron (MU), Ciena (CIEN), and Uranium Energy (UEC). 

We also added to Microsoft (MSFT), Nvidia (NVDA), and Broadcom (AVGO).  

Given the strategy is nearly 100% invested, we elected to trim Advanced Micro Devices (AMD) and exited Exxon (XOM), Apple (AAPL), and Alcon (ALC) to use the proceeds as a source of funds.

Of note: this is a longer than normal trade update. Our goal is to keep you updated on everything that’s happening with your hard-earned money and believe the size of the changes warrant a deep dive on what this means moving forward.

Let’s dive in.

Artificial intelligence needs memory, and memory means Micron

Micron (MU) is a leading semiconductor chip enterprise specializing in memory and storage solutions. The company maintains strong positioning as one of the leading players in the growing memory chip market, fueled by the insatiable demand for data storage via AI and cloud computing. We believe this stock is one of the best ways to express bullishness on AI inference – the major wave we think will accelerate in 2025.

The most important part of Micron’s business right now is high bandwidth memory (HBM), which has made it a key enabler of the wave of innovation in LLMs by providing GPUs with high speed access to stacks of co-packaged DRAM (a fancy word for temporary storage), speeding up both AI training and inference.

Specifically when it comes to developing artificial intelligence, training models require the ability to process large datasets and complex algorithms in a time-efficient manner. This is where Micron comes into play, as the company's products help transfer data between memory and processing functionality. 

If we were to believe that training these models and building out more features will require a continuous data feed that needs to be processed and analyzed quickly, it’s easy to believe that Micron’s memory and storage expertise will be foundational building blocks towards artificial general intelligence (AGI). 

While financial performance has been subpar in recent years given the company’s revenues are cyclical (i.e. Micron is disproportionally impacted by supply/demand cycles and economic downturns), we expect Micron to generate compelling revenue and earnings growth over the next few years on the back of explosive demand for AI training and inference. 

Although we expect there to be plenty of volatility for the stock along the way, organic revenue growth and margin expansion are the key components of our thesis and will be the primary drivers of share price performance for MU going forward, in our eyes.

Moving bits over fiber

You’ll notice a key theme for 2025 is centered around the second order impacts of the AI supercycle. You’re probably already familiar with the biggest winners (so far), many of which Flagship owns, but we believe there will be new beneficiaries that deserve to be a part of client portfolios.

To meaningfully improve the quality and adoption of generative AI, the world needs not just more compute (e.g., Nvidia GPUs) but more data generation. Data is like fuel for AI models, and more data requires more storage and bandwidth for transfers. Typically you’d achieve that by just building bigger data centers; however, there are significant constraints on power supply and distribution which limit the size of those data centers.

That means more data center traffic will need to flow not just inside data centers but between them across further distances. This traffic is best accommodated through the data center interconnect (DCI) optical links provided by Ciena (CIEN). Simply put, Ciena is a leader in moving bits over fiber.

The end result of that evolution should be increased data center connectivity as well as closer proximity to end users – a departure from the current dynamics of several large clusters in one specific geographic location. As such, Ciena remains among the best positioned to benefit from this transformation as companies (the largest hyperscalers, in fact) will be forced to invest heavily in optical equipment of which Ciena owns the market-leading product, market share, and superior technological advantage compared to peers. 

Not only does Ciena have generative AI tailwinds at their backs, but their services should benefit from other trends like 5G and accelerating demand for bandwidth too. Ciena controls unique technological advantages with its WaveLogic 6 product, enabling the company to become the go-to supplier for cloud service providers and hyperscalers that have tremendous resources to spend. 

As such, we expect these competitive advantages to translate directly into strong financial and market share performance over the coming 3-5 years and elected to initiate a starter position in CIEN.

Bringing uranium to Flagship

If you’ve been invested with us for a handful of years, you’ve likely read or seen our interest in uranium. It’s a foundational component of the world’s next generation of power development given nuclear power (for which uranium is the feedstock) is clean, safe, reliable, and most importantly, here to stay.

Global demand for nuclear energy has been accelerating due to its ability to deliver large amounts of reliable and constant baseload energy without the pollutive carbon emissions. As inelastic demand meets reduced supply, we believe uranium compounds used in energy production will see significantly increased pricing power which will benefit select high-quality miners like Uranium Energy (UEC). 

The thesis for UEC is driven by three components: 

Representing the largest pure-play uranium miner in the US, we believe the company is undervalued on an absolute and relative basis. Improving global sentiment alongside the shift to carbon-zero emissions sets a compelling backdrop for UEC’s continued success, allowing us to initiate a starter position in the mining company.

Of note: we have been investing in uranium since 2021 and over the past 24 months, the thesis has slowly evolved into another second-order beneficiary of the artificial intelligence supercycle. The biggest tech companies seem to agree that nuclear is a core part of their datacenter plans moving forward: Amazon signed a new agreement for nuclear energy, Three Mile Island will reopen thanks to Microsoft, and Google is aggressively moving towards nuclear energy as an alternative source of power.

You can check out the full memo for UEC linked here.

Adding to our highest-conviction ideas

In an effort to add to our highest conviction ideas, we added to our recently initiated position in Broadcom (AVGO),  Microsoft (MSFT), and Nvidia (NVDA). 

After a slight decline over the last two weeks, we elected to size up Broadcom (AVGO) to a larger position in an effort to capitalize on the price action of a leading semis player with dominant market positioning. Rich with catalysts, we’re excited to add to one of the biggest beneficiaries of increased demand for inference compute as we kick off 2025.

Microsoft (MSFT) continues to prove that it’s a compounding machine, led by one of the best management teams in the world. Its dominant IT franchise, OpenAI partnership, strong competitive moats across all layers of the cloud stack, and prime positioning to capitalize on some of the world’s largest technology trends warrant us adding ~1% to our position.

Nvidia (NVDA) has climbed the proverbial wall of worry about an AI demand “air pocket” and continues to post world-class growth driven by insatiable demand for their products and services. On the back of strong 2025 guidance and material revenue upside coming from its Blackwell chips (the company's most powerful single-chip GPU), we believe the company should continue to perform well over the medium term as the AI supercycle shifts budgets from pre-training to inference, pushing back prior air pocket concerns into 2026-27. Hence we added to our position in the stock.

Cutting our lower-conviction positions

Given that Flagship is nearly 100% invested, we elected to fully exit a handful of positions in order to fund the new additions to the strategy: Alcon (ALC), Apple (AAPL) and Exxon (XOM). We also elected to trim Advanced Micro Devices (AMD) for risk management purposes.

A decent cut in guidance from eyecare company Alcon (ALC) has weighed on the stock, and expectations for metrics remain a bit too rosy in our eyes. Following the latest earnings report, the risk/reward prospects for Alcon are not as attractive as we anticipated. We elected to exit our position entirely given the high opportunity cost of holding the stock relative to others.

Yes, you read that correctly. We exited Apple (AAPL), the largest company in the world by market cap and one of the world’s most dominant technology companies over the last two decades. 

Surprisingly, Apple has been one of the clearest losers of the AI era. Fumbles in the launch of Apple Intelligence give us concerns about a prolonged iPhone upgrade cycle weighing on this year’s earnings. And yet the stock is not cheap by any means on a valuation basis. With a full valuation and a meager earnings growth trajectory, we struggle to see how the stock moves much higher in 2025. As such, the opportunity cost of holding Apple has become too high and we’ve elected to exit given much more compelling investment opportunities elsewhere. With that said, there is certainly a world where we re-enter the iPhone giant at some point down the road if the aforementioned headwinds abate. We’ll be monitoring key signposts and it will remain on our watchlist for reinitiation should the story change.

Lastly, we exited Exxon (XOM) in an effort to replace the energy giant with more idiosyncratic energy exposure through Uranium Energy (UEC) which we believe offers a better risk/reward opportunity over the next few years.

The results of these trades maintain Flagship’s net exposure of ~100%. As always, let us know if you have any questions about the recent trades; we’re happy to assist.

– Your Titan Team

Disclosures:

As of writing, OpenAI is a 4.24% position in the ARK Venture Fund.

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