In the 3rd quarter, the S&P 500 returned 8.1%, the Aggregate Bond Index returned 2.0%, and assets under Upholdings’ discretion returned 9.6%. Continued excitement for AI and a resumption of interest rate cuts fueled stocks. As equity multiples break new records, we’re focused on helping clients more tightly budget the next few years to protect from potential cracks to come in the market.
Upholdings: New Offering
Historically, our priority was to architect portfolios for long-term growth with minimal fees and taxes. As we’ve grown, clients have called in for more. This quarter, we rolled out RightCapital to offer more advanced planning tools. Many are celebrating the transparency they now have into their futures. You can email roman@upholdings.com for a preview.
AI is Driving the Market
We’re just fifty days away from ChatGPT’s 3-year anniversary. A few of their accomplishments:
Usage is tracking up 5x over last year driven by more users and more queries
The chatbot will reach its billionth user later this year
In 2025, OpenAI will collect $16 billion in revenue, while spending $25 billion
This record-setting rate of adoption has moved countless companies to chase their piece of AI. Annual capital expenditures from Amazon, Microsoft, Google, and Meta now exceed 1% of US GDP, up from 0.1% just ten years ago. This concentration of growth in datacenter construction may result in more volatile economic results in the years to come.
Adyen Attractive Again
Adyen’s stock price is up 25% since we last discussed the company in our 2nd quarter 2024 letter. But in recent months, it’s down 15%. US tariffs, Russia’s encroachment into Eastern Europe, and customer churn have made some investors wary of the company’s results.
In the US, their competitor Stripe receives bountiful press coverage and has leveraged relationships with US investors into a $100 billion valuation. Despite processing a similar volume of payments and running at higher profit margins, Adyen trades publicly at a $50 billion valuation. This is due, in part, to the perception of Adyen as a European company.
Adyen reports 42% of its revenue from European-domiciled companies. However, many of their customers like Spotify and LVMH generate most of their revenue outside of Europe. Thus, while Adyen trades on a European stock exchange and has European-domiciled customers, they process payments globally. In just ten years, they’ve gone from <1% of all credit card transactions to 7% today. We’re excited to see how far they can get in the next ten.
Social Impact
Expanding access to education is the best tool we’re aware of to fight against the perpetual widening of economic inequality. This quarter, we again supported Khan Academy.
Roman & Robert
Disclaimer
This letter is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be unsuitable for some investors. Speak with your financial adviser before investing. Upholdings cannot guarantee investment results. All investing involves risk, including the complete loss of invested principal.