Alex Davis
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Sources with Alex Heath · A quiet investor’s $10 billion bet on AI, chips, and defense
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Is Value Investing Dead?
Alex Davis says the only thing he wrestles with before writing a check is regulatory, meaning whether a regulatory problem was a reason to pass. The price is not the wrestle. He published a letter saying value investing is dead, and he allows that the line may have been taken out of context. The claim underneath is that nobody knows where the valuation of most of these companies ends, or what the ceiling is.
Anthropic, two years ago, is the example. A model that marked the company at $30 billion and called the result a 2x would have missed a path to $100 billion of annual recurring revenue inside two years. The habit he is arguing with is buying a good company only at a discount. He states
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Will Defense Startups Become the New Prime Contractors?
Alex Davis expects new prime contractors for the first time in 100 years, and a defense-tech market that does not look like the old one. Working at Lockheed was not the job people wanted, and starting a company on that scale used to be too large a mountain. He thinks that company can be built now.
Anduril and Shield are the first two he sees starting to look like primes, and he expects more after them. Open models, in his view, can become the next large defense companies. How those groups end up working together is still open, and he calls the opportunity massive. He also says the model companies themselves are becoming defense companies, including work with the Pentagon, and that protectin
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Why Will Speculative Data-center Landlords Get Hurt?
Alex Davis does not think there are too many neoclouds. He thinks there are not enough good ones. Alex Heath reads back a line Davis wrote: back owner-users, not speculative landlords, because this will not end well. Davis agrees. The people he means are projects that are not well funded, that take five years to build what should take two, or that hold a piece of land, a large family parcel in Texas is the example, without a real way to find customers or financing.
Memory prices have gone to about five times where they were two years ago, and they have doubled in the last year. That cost was not in the old math. Chips are then up about 15 percent each, and a newer chip is already the next q
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What Is Alex Davis Building at Groq After the Nvidia Deal?
Alex Heath describes an early investment in Groq, the inference-chip company, and a $20 billion licensing deal with Nvidia. Jonathan and much of the core team went to Nvidia. The assets stayed, and Alex Davis is running them as an inference cloud. Davis says he is usually not that early. The team was willing to change its story, and Jonathan was an easy person to back.
The deal he describes is a non-exclusive license that closed very fast at the end of last year. Most investors would have distributed the proceeds. People instead went to Nvidia to help build chips, and the sites still had to serve inference for running models and for reinforcement learning. Groq had about 53 megawatts alread
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Why Did Alex Davis Double Down on Palantir Before Its IPO?
Alex Davis says Disruptive had been in Palantir for about 10 years when COVID arrived. While other people were sheltering in place, Palantir was planning to go public, which he took as a very Palantir way to think. A chance to bring in a couple of large investors, including a big insurance company, was the moment they doubled down. Holding a company for 10 years had not been the goal. At that moment, if he could write a check to anything, it was Palantir. He puts the company then at maybe $10 to $15 billion, and he does not want to be wrong on the figure. Looking back, he calls it a half-trillion-dollar company. They did not yet know the listing would be a direct listing. There was hardly a
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Why Invest More After a Startup's Valuation Goes Up?
Alex Davis keeps the list of companies Disruptive wants to own. Sometimes it is 20 names, sometimes 15, and he holds the list. Names come on and off. The job is to forecast which of them are the investments that matter, then follow them, including a company that is still too early and one that is about to break through. Missing a round at one price is not a reason to refuse a later round. The firm is the opposite of an investor who feels the chance was missed.
A higher valuation can be the moment for a larger check. The business has become something they can underwrite, or there is more they can do to take the company to market. Pitch decks are not how the good investments arrived. The weak
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Why Are Top Startups Blocking SPV Investors?
Alex Heath asks why leave deal-by-deal vehicles, where limited partners could see each company, for a fund. Alex Davis says this is the first real fund. Large special-purpose vehicles were a different market in 2012. A decade of groups that call themselves family offices, some with hundreds of investors, has made it hard for a company to know who is actually on the cap table.
A company that is 10 times oversubscribed, and that could take $10 billion, would rather take the money from a discretionary fund than from vehicles it cannot identify. He also treats the structure as a regulatory problem. Managing over $150 million is one line at which a firm can be an exempt reporting advisor, and so
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How Does a $10 Billion Fund Become Ten Checks?
Alex Davis says the firm has already been writing some of the largest checks in growth-stage companies, especially over the last five or six years, after 15 years at it. A fund is the more fixed version of that habit. The rule is a set number of checks each year, and a check means a company. Cut the list to 10 of the best companies they think they can help, divide the fund by that count, and the average check is large enough that $10 billion is a coherent pool.
He treats $10 billion as the goal and describes a range of $5 billion to $10 billion. Limited partners leaned toward the top of the range, as long as the firm keeps finding outlier companies and keeps doing the work behind the scenes
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Why Does Alex Davis Only Back Companies That Are Already Winning?
Alex Davis says Disruptive was not built as a fee business by people who had left banking for venture. The question was whether private companies that already looked headed for the public market could be bought before the listing, first for friends and a few institutions, and whether that could be a firm. What stayed true, in 2012 and again over the last year, is a short list of companies that are alone in their category, and the demand to own them early.
Amazon, about 25 years ago, is his picture of the point. He remembers it then as a $300 million private company with a $60 million public float. It looked expensive. It is a $3 trillion business now. A basis that starts before a company li
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Why Raise a $10 Billion Fund When Valuations Look Frothy?
Alex Heath asks why announce a $10 billion growth fund when valuations look frothy. Alex Davis calls this a market of haves and have-nots, and the right time to back a few companies rather than many. Around 2011 he remembers a total of about $10 billion of venture-backed private companies, before anyone called them unicorns. He puts the count now at 5,000 to 6,000, and says it has gone parabolic.
The firm does not try to cover every pitch. The opening is the top half-dozen to 20 companies, the ones that stayed private and still need capital. A company that stands alone in its category can deserve $5 billion, $10 billion, or maybe $100 billion while it is still private. That is not a plan to
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Why Does Alex Davis Wish He Had Backed Closed Models Harder?
Alex Davis does not point to regrets in what Disruptive did. Fifteen years later he does know answers he did not have then. This stretch, with the firm in the middle of what is being built, is not a stretch they have been in before. He would have doubled down on the closed models and supported them with more compute. He says the same about defense.
The rest of the record is one he is content with. The team is in good shape, investors are happy with what the firm has done, and he sleeps well. The next couple of years are for working out what the next decade looks like. He calls it the most fun job in the world, one that does not feel like going to work. The hours are long because the compani