Now that Meituan, Alibaba, and JD have all reported, I wanted to try and get a clean read on where market share actually sits today. Not the perfect answer, because that doesn’t really exist here, but a reasonable estimate using the best public data we have.

The annoying part is that none of these companies make this easy. Meituan stopped giving clean food delivery GTV years ago. Alibaba gives the best disclosure, but even that revenue line is net of subsidies. JD basically buries the whole thing inside New Businesses.

So this is not me pretending I have the number nailed to the decimal. I don’t. Nobody does. But after going through the filings, earnings calls, management comments, and sell-side estimates, I do think the rough picture is pretty clear.

The short version: the last eighteen months have been brutal for Meituan, with Alibaba and JD both in full attack mode.

For newer readers, I spend a lot of time writing about China, China internet, and AI. A few related pieces that might be helpful:

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The favor first, and it’s mostly for the paid crowd. I want to know what actually pulled you in. Was it a specific name/stock, the China stuff, or just the general way I think through things? I ask because I genuinely don’t know, and I’d rather not guess.

When you write for a while you build a story in your head about who’s reading and why, and that story is usually half wrong. If a bunch of you came in for one name and I’ve been off writing about something else, I’d like to know that before I spend another three months on the wrong thing.

I put it in a quick survey, it’s four questions, takes about a minute. No pressure, and obviously feel free to skip the ones that don’t apply. I promise it's not going into a void... your responses will actually change what I write and spend time on, so weigh in.

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For what it's worth, the usual suspects aren't going anywhere. Asia/China stays front and center, and so do my largest positions. The survey is really about everything past that. I tend to start more things than I finish, and knowing what you'd actually want to read would help me close a few of those tabs.

Last thing, and then I’m done asking you for stuff. Through end of day Sunday, May 31, I’m running 30% OFF the annual plan. If you've been on the fence, this is the cheap window. And if you're already paid, ignore this part and just go yell at me in the survey.

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Thanks for reading, as always. It’s a strange and great thing that any of you do.

But I still think it’s worth writing up because nothing about the actual opportunity/thesis has changed. The stock is just less cheap than when I started.

The company is a semiconductor equipment maker. Sells the tools Chinese fabs need to build chips domestically. Cleaning, plating, furnaces, deposition, packaging. I actually first came across it through on X, he honestly knows this name and the broader semi space way better than I do. If you’re not following him you absolutely should be.

A few years ago this was basically a single cleaning-tool business. Now it ships across six or seven product categories, with the newest lines growing triple digits. And even after the recent run, it trades at a roughly ~45% discount to the public market value of its own subsidiary.

The stock’s entire market cap is less than half of what its stake in the subsidiary is worth… oh and there’s about $1 billion in net cash sitting on the balance sheet.

I believe domestic chip production in China is going to accelerate significantly over the next several years, driven by AI demand and hardened by export controls. If that view is even roughly correct, the companies selling tools into that buildout are going to do very very well. This one is already starting to do well, the market just hasn’t fully caught up to it yet IMO.

I really do think this is one of the more interesting risk/reward setups I’ve come across in a while.

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At the time, Baidu had something like $30 billion in market cap with $27 billion in net cash and equity stakes sitting on the balance sheet. You were basically getting paid to take the operating business for free.

I wrote it up, laid out a sum-of-the-parts, and the conclusion was very, very simple: even if you were deeply skeptical about AI, robotaxis, and everything else management was pitching on conference calls, the math didn’t require any of it to work…

The stock has roughly doubled since then. The original cheap-stock pitch has mostly played out and the “easy” money has been made.

But the business has also gotten more interesting, which is why I’m writing about it again. And most of that comes down to Kunlunxin.

Kunlunxin is Baidu’s chip subsidiary. I mentioned it last year but honestly I didn’t spend much time on it. It was making AI chips for Baidu’s own data centers, which was fine, but it wasn’t a real business yet.

It didn't stay that way for very long. Kunlunxin is now pursuing a dual-track IPO in Hong Kong and on Shanghai’s STAR Market with a reported target valuation of at least $14.7 billion. Jefferies has the range at $16-23 billion.

I completely missed this, and I think it’s a good example of why buying stocks trading around net cash (even in China) tends to work out. You were sitting on free call options all over the business. Kunlunxin was one I didn’t even know I had.

So I want to spend most of this post trying to actually think through what the chip business could be worth and what that means for Baidu’s valuation today.

They just reported Q1 earnings though so I guess we should start there.

Q1 2026 Results

Baidu reported on May 18th. Revenue was RMB 32.1 billion, and Baidu General Business (which strips out iQiyi) came in at RMB 26 billion, up 2% year-over-year. First quarter of positive growth in a while.

The AI-powered business crossed ~50% of General Business revenue for the first time. RMB 13.6 billion, up 49%. AI Cloud Infra did RMB 8.8 billion, up 79%. GPU cloud revenue grew 184%. Impressive huh?

Online marketing revenue was RMB 12.6 billion, down 22%. Search ads are shrinking, and honestly faster than I expected. Although part of me wonders if AI is just growing so fast that it’s making everything else look worse by comparison. A year ago search was 63% of General Business revenue. Now it’s 48%. Either way the business is moving.

Non-GAAP net income was RMB 4.3 billion at a 14% margin, adjusted EBITDA was RMB 6 billion at 19%, and they beat EPS estimates by a few percent.

The balance sheet has roughly $40.5 billion in total cash and investments against about $12.6 billion in debt and debt-like financing, so call it roughly $28 billion of net cash and investments.

That number is still in the same ballpark as when I first wrote about Baidu in 2025, helped by slightly lower debt.

The quarter confirmed what we already knew, which is that AI is becoming the business while search slowly fades into the background.

The Chips

So, back to Kunlunxin.

The quarter is mostly context. Baidu has been moving this way for a while now. AI is becoming a bigger piece of the business, and each quarter has made that a little harder to ignore.

But Kunlunxin is the part I think still needs more attention.

The company went from roughly RMB 2 billion in revenue in 2024 to an estimated RMB 3.5 billion in 2025, and it reportedly hit breakeven, with external customers (meaning not Baidu) crossing 50% of revenue for the first time.

The customer list is pretty hard to argue with: Tencent, Vivo, China Mobile (which gave them a contract worth over RMB 1 billion), with JD, Meituan, ByteDance, State Grid, and China Merchants Bank all in various stages of testing or deployment. By unit volume, Kunlunxin is the #2 domestic AI chip shipper in China behind Huawei’s Ascend.

Two years ago this was an internal cost center. Now it has a legitimate third-party customer base and it’s filing for a dual-track IPO.

The reason all of this happened is pretty obvious, at least in hindsight. Nvidia can’t sell advanced chips into China anymore, and no major Chinese company is going to build its AI future assuming that changes. Whether the restrictions ease or tighten, the pull toward domestic compute was always going to accelerate once it started. Kunlunxin happened to be in the right place with working silicon when the demand showed up.

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The bears call the top every week. The bulls won’t shut up. And both sides sound way too certain for my liking.

I saw a tweet from the other day that I thought was genuinely well put:

People keep confusing a bubble with “stocks go up and get overvalued”. A bubble is when a prevailing trend and a prevailing misconception about that trend interact reflexively, each reinforcing the other until the gap between perception and reality becomes unsustainable. A bubble is not when everyone realizes that right now every iota of AI demand eventually, at some point upstream, must move through memory OEMs. Nor is it when estimates continue rising because things are better than expected. And it’s not just when stocks trade expensive to historical valuations. The reason behind the moves in the AI infrastructure layer so far have been simply that we don’t have enough. They’ve been driven by the fundamental reality more than the perception of the future. It’s why the bulk of the most bullish parts of this cycle have been lumpy and centered around earnings season when companies uniformly come out and confirm there’s still not enough. In the bubble, the reality is driven by the market - not the other way around. Everyone keeps saying “people are gonna freak out if it’s not a bubble!”. I think that’s silly, we have a transformative new technology that needs crazy capital to fuel it coming to fruition, that has and always will result in a bubble as long as we have financial markets. But if you want to call the top in a bubble, you need a much stronger view on what the misconception is and what negative catalyst forces broad perception to align with realizing it than you do on valuation.

I think he’s right about the definition. And I think he’s wrong about where we are.

Or maybe not wrong. I don’t know. That’s sort of the whole point of what I want to say here.

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I think AI is almost certainly a bubble. I also think that’s a completely normal and expected thing to say about a revolutionary technology.

Railroads were a bubble. Radio was a bubble. The internet was a bubble. The technology was real every single time. The valuations just got ahead of themselves because humans are humans and financial markets are financial markets.

That’s the part people always forget. Calling something a bubble tells you almost nothing about timing.

You can be completely right and still get destroyed financially because you were early.

Druckenmiller told a great story about this years ago. He had already called the top in early 2000. Sold everything. Thought the tech mania had gone too far. He was right. But then he watched younger traders around him making absurd amounts of money every day while he sat there in cash feeling like an idiot.

Eventually he cracked and bought billions worth of tech stocks almost right at the top.

“So like around March I could feel it coming. I just, I had to play. I couldn’t help myself. And three times the same week I pick up the phone, don’t do it. Don’t do it. Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left Soros and I had lost $3 billion in that one play. You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and I couldn’t help myself” — Druck

This is one of the greatest investors ever. Four decades without a down year. And even he got sucked into it emotionally at the worst possible moment.

So when I see people acting completely certain on either side of this market, it honestly annoys me a little.

The person arguing that the fundamentals are real might be right today and still get crushed later when sentiment turns.

The person calling this another 1999 might also be right and still watch these stocks double before it matters.

Neither of them knows. I don’t know either. I just think admitting that is more useful than pretending otherwise.

What I do feel pretty strongly about is that risk management matters a lot more right now than squeezing out the last bit of upside. And that mostly comes down to understanding what you actually own.

A lot of people think they’re being disciplined buying semis because the forward multiples don’t look insane. But cyclical businesses almost always look cheapest near the top. The estimates assume demand stays strong, pricing stays high, and customers keep spending.

Take memory. A huge chunk of the earnings explosion recently has come from pricing power, not just volume growth. HBM demand created shortages, suppliers raised prices aggressively, and suddenly stocks screen “cheap” on forward earnings.

That works until it doesn’t.

When cycles turn, estimates get cut at the exact same time multiples compress. That combination gets ugly very fast.

I wrote about this in my Folly post last month when SOXX had already gone vertical. Since then it’s gone even higher, which honestly just reinforces the point. Being early feels exactly the same as being wrong in real time.

But I’d still rather think carefully about risk now than convince myself this time is different because stocks keep going up.

I’m not saying don’t own anything. I’m not even saying don’t own semis.

I’m just saying know what you own and what has to happen for the valuation to work.

If you’re paying huge multiples for cyclical businesses because AI demand looks endless today, you need that demand to stay elevated for a long time. Maybe it will. Maybe it won’t.

That’s a very different setup than buying a good business at a reasonable price where you don’t need everything to go perfectly.

Investors willing to think three to five years out still have a lot of opportunities right now. Real ones. Good businesses, reasonable prices, actual earnings power that doesn’t require everything to go perfectly.

The hard part is looking away from the stuff everyone else is making money on. That takes discipline. Usually the kind people only develop after getting burned.

And a lot of people in this cycle have not been burned yet. So yeah. Don’t get too cute. Don’t let the timeline bully you into doing something stupid.

Anyway, make of that what you will. Nobody actually knows how this ends. Stay humble, stay diligent, and know what you own.

The reported numbers were definitely a bit confusing/mixed. Revenue was fine, profitability was pressured, and quick commerce is still weighing on margins. None of that is new though. That has been the setup for the last few quarters.

What was different this quarter, or at least much clearer, was the shape of the business itself. The restructuring is mostly behind them, the divestitures are fading out, and you’re really starting to see Alibaba as just two businesses at this point: E-commerce and Cloud/AI.

And on the cloud side specifically, this was the quarter where management got a lot more direct about the AI revenue trajectory and where margins are heading.

Cloud

Cloud revenue grew ~38% year-over-year, with external revenue up roughly ~40%. Cloud EBITA was up ~57% on a roughly ~9% margin. Management once again guided to further acceleration from here.

AI-related products hit RMB 9 billion in the quarter, triple-digit growth for the eleventh straight quarter, now representing about ~30% of external cloud revenue.

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Alibaba and Tencent both report Wednesday morning, then Trump heads to Beijing Thursday and Friday to sit down with Xi. Earnings from the two largest China internet names and a US-China summit, all within 48 hours. There’s going to be a lot to digest.

I’m focusing on Alibaba because it’s the name I know best and the one I have the most conviction in heading into the print. Tencent and the summit will bleed into the broader read across China tech, but Alibaba is the one I care about most here.

And thankfully, Alibaba decided to report like a normal public company this time…

Last quarter was a bit ridiculous. The December quarter ended December 31st and Alibaba didn’t report until March 19th. The prior three December quarters were reported on February 7th, February 20th, and February 23rd. So for reasons nobody bothered to explain, investors got to sit around for an extra month waiting on stale numbers while the next quarter was already basically underway.

Very cool.

This time, the date went up on April 29th, about six weeks after quarter-end. I don’t know who found the calendar over there, but I appreciate the effort.

Anyway, jokes aside, this is an important print.

The stock is sitting around $140 after running all the way to $193 and then getting smoked back down toward the lower end of its 52-week range.

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Consensus is looking for revenue around RMB 246.5 billion and EPS near $0.90, which implies adjusted earnings down roughly 50% year-over-year.

So yes, the headline P&L is probably going to look ugly. No, I don’t really care.

The reason Alibaba has been beat up is not Cloud. Cloud has been working. The problem has been the quick commerce investment cycle and the margin compression that came with it. So for this print, I’m mostly watching whether the things that actually pulled the stock down are starting to turn.

Last quarter, Cloud grew 36%, quick commerce grew 56%, like-for-like revenue grew 9% excluding disposed businesses, and adjusted EBITA fell 57%.

The market saw the margin pressure and crushed the stock. I saw a business still investing aggressively into areas that could matter a lot more over the next few years, and I’ve repositioned pretty aggressively since.

Cloud

Consensus is around 40%. I think that’s about right and I personally expect roughly 41-43%.

The number I care about more is pricing.

Right before the last earnings call, Alibaba raised pricing across several AI computing and storage products. T-Head AI computing cards were raised by 5-34%, while Cloud Parallel File Storage pricing was raised by 30%. Tencent, Baidu, and Zhipu have also been pushing pricing higher across parts of the AI stack, while ByteDance is increasingly monetizing Doubao usage instead of just giving everything away.

That is a key part I don’t think people are paying enough attention to.

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The market clearly wanted more.

I’ve written about this name a lot over the past six months so I’m not going to rehash the whole thesis. What I want to do is walk through what actually happened this quarter, why I think the selloff is overdone, and where I stand.

These results shouldn’t be a surprise to those who follow the company closely, this was always going to be a rough quarter. January was the peak effect of the data incident impact. Management told us to expect Product Commerce in the 5-10% constant currency growth range and they came in at about 5%.

Total revenue was $8.5 billion, up 8%. Not a blowout, but roughly what we were told to expect.

Margins

Gross margin came in at 27%, down 228 basis points. Adjusted EBITDA margin went from 4.8% a year ago to 3.2%.

Two things drove the compression.

The first is the voucher program. Coupang committed roughly $1.2 billion in platform credits to customers after the breach, and those get netted against revenue. That means they hit the growth rate and the margin at the same time. Management said the bulk of that cost landed in Q1 with a small tail into early Q2. After that, it’s done. It doesn’t repeat.

The second is that Coupang had built out its fulfillment infrastructure, delivery routes, and supply chain commitments for a level of demand that temporarily didn’t show up. You can’t mothball a nationwide same-day logistics operation for a couple months, so they carried the full fixed cost base against lower volumes. As demand normalizes, utilization will follow.

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But if you don’t have the time, the short version is: Kaspi runs basically the entire digital economy of Kazakhstan through a single app. Payments, e-commerce, lending, groceries, travel, bill pay, all of it. 15 million monthly active users in a country of 19 million people. The thing prints money.

Back then the stock was ridiculously cheap because they’d suspended the dividend and were pouring billions into acquiring Hepsiburada, Turkey’s second largest e-commerce platform.

The market didn’t love that.

And then you’ve got the Kazakhstan label on top of it, which carries a permanent discount for most allocators. So nobody wanted to touch it. I thought the market was being waaay too pessimistic.

Fast forward to today, the Hepsiburada deal is done, the dividend is back, management is turning its attention back to shareholders, and yet the stock is still sitting at ~7x earnings and roughly ~4.5x EV/EBITDA. It hasn’t re-rated at all.

Anyways, the business has kept moving since October even if the stock hasn’t so I wanted to put out a quick update.

Tencent Takes a Stake

Tencent bought a ~3.2% stake in Kaspi on April 20th as part of a group that picked up 6 million ADSs from the Baring Fintech Venture Funds. The whole block was worth about $518 million. Lomtadze — the founder and CEO — also bought shares alongside them with his own money, as did other members of senior management.

On top of that, Spice Expeditions (a fintech investment firm), the Washington University endowment, and the University of Wisconsin Foundation came in as new holders.

“Tencent pioneered the super app ecosystem business model, and we have long admired its ability to combine innovation at scale with disciplined execution. We are delighted to welcome Tencent as one of Kaspi.kz’s largest shareholders. My own investment, together with those of key members of our senior management team, reflects our strong belief in Kaspi.kz’s Super App business model, long-term strategy and future growth opportunities…

The combination of strategic, management and highly respected institutional capital comes at an exciting time for Kaspi.kz as we build on our market leadership in Kazakhstan and expand into Türkiye.” — Mikheil Lomtadze, CEO and Co-Founder of Kaspi.kz

Look, Tencent invests in stuff all over the world. That’s kind of their thing. They were early in Shopee, MercadoLibre, tons of gaming companies. So I’m not going to sit here and pretend like a Tencent stake in Kaspi is some massive revelation about the quality of the business. They like super apps. Kaspi is a super app. Makes sense.

But Lomtadze buying more stock alongside them is a nice look too. He already owns a massive chunk of the company. He doesn’t have to buy more. He knows the tax headwinds coming, he knows the Kazakhstan base rate is at 18%, he knows Turkey is going to lose money near-term. He bought anyway. And he did it at the same time as a bunch of institutions with 20+ year time horizons.

The market liked it, stock popped about ~9% on the day. Tencent, the founder, university endowments all buying at the same time is a pretty solid vote of confidence.

The Dividend

This is the bigger deal, in my opinion.

For several quarters the market was getting increasingly frustrated with Kaspi because the company was funneling all its cash into the Hepsiburada acquisition and not returning anything to shareholders. And I mean, I get it. You’ve got this incredibly profitable business generating a ton of free cash flow and you’re just watching it go out the door to fund a Turkish e-commerce acquisition while the stock drifts lower.

That chapter is done. The board recommended a quarterly dividend of KZT 850 per ADS, which works out to roughly $1.71 per quarter at current exchange rates. Lomtadze said in his shareholder letter that this is the baseline going forward. So if you annualize that, you’re looking at about $6.84 in dividends, which at ~$86 per share is roughly a 9% yield.

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I know. That sounds obvious. It’s the thing you’re supposed to figure out before you ever buy a stock. But in certain markets it becomes easier to forget. Prices go up, everyone feels smart, the hot stuff keeps getting hotter, and eventually people start confusing the direction of the stock price with the quality of the decision.

That’s usually where the trouble starts…

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” — John Templeton

I don’t know if we’re in a bubble. Nobody really knows that in real time, and most people who scream “bubble” every week (guilty) eventually become just as useless as the people saying valuation doesn’t matter.

But I do think there are pockets of the market where expectations have moved from optimistic to goofy.

Semiconductors and many of the names riding the AI wave are probably the most obvious example.

The SOXX (Semiconductor Index) is sitting at all-time highs, up ~53% YTD and roughly ~153% over the past year.

Most of the names inside it are historically very cyclical businesses — and some don’t even look that expensive right now, which is sort of the point.

Cyclicals can look quite cheap at/near the top of a cycle.

None of this is to bash NVDA or AMD or AVGO. These are great businesses and the growth has been nothing short of remarkable. But that kind of growth doesn’t last forever, and the market is starting to price parts of the group like it might.

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But even if you believe the AI story, this move in semis has gotten pretty ridiculous. Through Friday’s close, SOXX has logged 18 consecutive up days — the longest winning streak in its history. The previous record was 15 sessions back in 2014, and that one delivered a gain of about ~8%. This streak has delivered roughly ~45%.

April is on pace to be the biggest monthly gain in semis since February 2000. If that month doesn’t ring a bell, ask someone older.

Here’s where some of the actual names inside the index are trading right now:

I’ll give it to NVDA. At ~25x forward earnings, that one you can actually defend. Highest revenue growth in the group at ~65%, cleanest financials, the most direct line to where the spending is actually going. It’s also been the worst performer on the page — up “only” ~12% YTD while everything around it has gone vertical.

The rest is where the math starts to get… silly.

• AMD at ~52x forward earnings and ~133x trailing earnings, after running ~69% in a single month.

• AVGO at ~31x forward earnings and ~82x trailing earnings.

• ARM at ~121x forward earnings and ~313x trailing earnings, up ~102% in three months.

• Intel at ~80x forward earnings, up ~87% in a single month and ~123% YTD, on TTM revenue growth of just ~1.4%.

• ON Semi at ~339x trailing earnings, while its top line is contracting ~15% year-over-year.

The hard part is that the underlying story is very much real…

AI may be the biggest tailwind the chip industry has ever seen. Demand for compute is exploding, hyperscaler capex is still going vertical, and every CEO wants some attachment to the AI story. A lot of that is true. Honestly, most of it probably is.

The problem is that a great story still has to clear the price you pay for it. And right now, for a lot of these names, the price already assumes the story plays out almost perfectly. There’s no real margin of safety left. The thesis has to land almost exactly as drawn up just to earn a decent return from here.

That doesn’t make these names wrong to own. I just personally wouldn’t own them here.

I keep hearing that AI has changed the semiconductor cycle, and maybe it has. But I’m not willing to pay up for a historically cyclical group on the assumption that “this time is different.”

At these prices, I don’t think you’re being paid to be wrong. And that’s the difference between owning a great company and owning a great company at a good price…

Understand What You Own

This is the exercise I keep running on myself.

If I had to defend every position I’m holding to a smart friend who didn’t already agree with me, could I do it?

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I’ve been watching Mark work on Meridian Holdings (MRDN) on X for a while now. The stock is down about 80% from where insiders effectively valued it in the 2024 merger. Since then, it’s gone through a reverse split, a CEO departure, and a full rebrand.

Mark hasn’t flinched. In fact, he’s been adding every week.

I know a lot of people will look at that and think he’s throwing good money after bad, but his argument is pretty simple: the company is fundamentally stronger than it was a year ago and the share price doesn’t reflect that.

He’s betting the execution catches up. Or, as he put it to me, he’ll look back at these prices as a gift... or he’ll be living down by the river.

That kind of conviction through that kind of pain/uncertainty is rare. Most people I come across can barely stay interested in a stock for more than a few months.

I don’t know MRDN as well as Mark does, but I’ve looked at it enough to find it interesting. It’s a profitable, insider-heavy gaming company trading at a fraction of its peers with some real catalysts ahead. But I haven’t done the deep work myself. Mark has. And I’ve looked at enough of his research to trust that he’s the right person to walk you through it.

What follows is entirely Mark’s work — his research, his position, his money on the line. I’m just giving him the space to lay it out. If you’d like to see more guest posts like this, let me know.

This post is free for everyone. If you want to support the work and get access to all my research, ongoing coverage of every name I follow, and full portfolio visibility, consider going paid.

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Some recent work:

Meridian Holdings (Nasdaq: MRDN) — A Rare Asymmetric Opportunity With An Unusual Share Price To Valuation Disconnection

Meridian Holdings, after executing for decades, has become a high growth and international diversified gaming powerhouse with the necessary proprietary AI technology and synergistic acquisitions required to scale globally, increase revenue, and expand margins. They are a B2B and B2C industry leader with over 1200 employees, transforming the sports-betting and i-gaming industry with their omni-channel ecosystem made up of complimentary companies now reaching 20+ jurisdictions across five continents in regulated or supported markets.

Table of Contents

1. Story and Valuation

2. The Omni-Channel Ecosystem

3. Execution and Skin-In-The-Game

4. Profitability

5. Near-Term Catalysts

6. Global TAM

7. World Cup Brand Opportunity

8. A Long History of Execution and Profitability

9. Global Footprint, Moats, and Long-Term Sector Catalysts

10. Meridianbet’s AI Tech Advantage

11. Player Acquisition Cost Advantage

12. The Content Edge: Expanse Studios

13. Subsidiaries: RKings, MexPlay, and CFAC

14. Proven Leadership with Integrity

15. Risks

16. Disclosure

1.) Story and Valuation

In April of 2024, instead of selling their company to a larger operator, Meridianbet leadership chose to go public (Nasdaq) via a reverse merger with Golden Matrix Group. After years of negotiations they settled on a value of $330 million and accepted the majority of the acquisition compensation in shares at an approximate value of $35 per share (adjusted) demonstrating deep confidence in their ability to continue scaling into new markets, aligning themselves with shareholders, and backing up the CEO’s bold statement of “setting up for the next hundred years”.

Meridianbet and its subsidiary Expanse Studio’s value of $330 million, combined with Golden Matrix, GM-AG, RKings, and MexPlay’s value of $80 million equalled a combined value of $410 million.

This was before two of their more recent acquisitions, CFAC and Fairbet, as well as prior several new valuable licenses including a $6 million Federal Brazil Lic. Add in recent growth of all 6 subsidiaries with a projected annual revenue of nearly $200 million, combined with an industry rare .86 debt ratio with over $18 million in cash, and you have roughly a half billion dollar company valuation.

After the recent share price walked down to $6.88, the company market cap has dropped from nearly $500 mil to $86 million. In my opinion, this is a valuation disconnection that screams “undervalued”. A rare asymmetric set up. It is important to keep in mind, past dilution and debt were not operational but rather acquisition driven, the majority from the Meridianbet merger, to create the ability for growth in the sector for decades to come.

2.) The Omni-Channel Ecosystem

MRDN Holdings is not a one-trick-pony but an entire omni-channel ecosystem including:

Meridianbet: Its legendary flagship brand and a leading operator in 18+ regulated markets across Europe, Africa, and South America.

RKings & CFAC: Specialists in high-volume UK-based digital competitions and Australian trade promotion lotteries.

GMAG: A core B2B segment providing advanced iGaming platform solutions and “white label” solutions.

Expanse Studios: A top-tier proprietary game developer fueling growth with over 70 original titles and growing at over 400% annually.

MexPlay: A fully regulated online casino and sportsbook capturing the expanding Mexican market.

3.) Execution and Skin-In-The-Game

With a proven 27-year history of private execution, Meridianbet, along with its decentralized accretive subsidiaries, are now Nasdaq listed and operating with dedicated CEOs and founders who have meaningful skin-in-the-game (nearly 90%) creating multiple growing and diversified B2B and B2C revenue streams.

Meridian Holdings is built for the future of digital entertainment. With years of double digit growth, record revenues and an aggressive vision for expansion into Brazil and other high-growth territories, MRDN represents a uniquely positioned opportunity for investors seeking an established operator with cutting-edge technological advantages in an early and enduring sector driven by global industry tailwinds.

Consider:

• Consistent history of double digit growth

• Industry low 0.82 debt ratio with one-offs in the rear view

• Conservatively estimated to generate $210 - $220+ million in 2026

• 12.5 million OS shares x $6.88 = market cap of $86 million

• Trading under 0.4X revenue in a 2.5X+ average sector

• At 2.5X, MRDN would have a $500 million market cap — or ~$40/share — representing nearly 600% upside

Share Structure:

• 12.5 million OS shares

• ~90% insider ownership = 1.2 million shares remaining

• 4% institutional = ~700k retail shares

• Remove 2 top shareholders (~200k shares) = ~500k shares actually available

• A single large investor could buy the entire remaining float for under $4 million

In our current market, micro/small-caps are trading on sentiment and momentum rather than fundamentals. A single large investor could buy the entire remaining open float for under $4 million. That is not a huge investment. Whoever the first large investor is, they are certainly going to pay far less than the second, third, and following investors as Meridian Holdings keeps expanding and executing.

With such limited shares available, any visibility or discovery will likely cause MRDN share price to run-up quickly. Any substantial Brazil Market capture, profitability, or an earnings beat could trigger MRDN to re-rate and rip similar to RSI that ran $2 to $20 when they turned profitable after years of consolidation while executing.

With a half dozen decentralized subsidiaries operating in over 20 jurisdictions with multiple diverse B2B and B2C revenues streams and currencies, I won’t even begin to attempt to model a valuation based on DCF or rear view numbers as they can be reverse engineered and modeled to support any thesis.

I will point out the company and all its subsidiaries are growing, paying down the majority of acquisition debt, and after a long period of share price consolidation their disruptive tech is being adopted as the company turns profitable.

4.) Profitability

Meridian Holdings was actually profitable last quarter reporting record Q4 2025 revenue of $49.6 million, adjusted net income of $3.4 million or $0.29 per share, full-year 2025 revenue of $182.9 million, up 21% YoY and beating analyst expectations.

Their balance sheet loss was due to US GAAP principles that required Meridian Holdings to write off a huge 88.4 million “Goodwill” impairment due to their share price drop that decreased the companies market cap/valuation substantially on paper. This one time non-cash goodwill and intangible asset impairment charge is a non-cash accounting adjustment with zero impact on cash flow, operations, or debt covenants.

In short, the business was profitable on an adjusted/operational basis with record revenue and positive adjusted earnings, but the GAAP net loss and big negative EPS were driven almost 100% by that one-time non-cash goodwill write-down. This is a common situation in public companies when stock prices decline sharply and does not reflect underlying business performance.

Personally, I have never seen a fiscally responsible company that is growing, decreasing debt, and doing the right thing, not eventually reflect their execution in the share price.

5.) Near-Term Catalysts

Meridian Holdings has some major catalysts including being recently granted a coveted Federal Brazil Gaming license, the upcoming expanded FIFA World Cup, and the completion of rolling out their “Atlas” AI platform in all regions. They do not have the marketing money of the bigger companies for customer acquisition, but they now have the advantage of 5 accretive subsidiaries allowing them to begin cross-marketing and scaling into their newly licensed regions.

I anticipate steady “organic” growth and estimate they start showing considerable net profit beginning 2026 Q3/Q4 earnings after the 2026 FIFA World Cup exposure boosts their brand recognition. With any new Brazil market capture or subsidiary growth, we are looking at a realistic annual revenue of $220 - $250 mil with $10 - $20 mil net or an EPS of .80 - $1.60 within the next few years.

6.) Global TAM

It is worth noting many stock promotors in this sector quote an inflated global industry TAM of $200 billion or more to show the highest possible runway. A more realistic, company-specific serviceable addressable market (SAM) for Meridian Holdings is estimated at around $15 billion. Although this number is much lower, even capturing a small percent of Meridian Holding’s realistic regional TAM would be transformative.

With that said, it is worth noting that the 2026 World Cup wagering is projected to exceed $70 billion, roughly 3X the approximately $23 billion total US 2026 Super Bowl wagering.

With a 60% increase in matches this event is set to eclipse the Super Bowl betting handles by 200 - 300%, offering smaller firms a unique stage to capture a massive global audience & establish their brands in an industry-defining moment on a worldwide stage.

7.) World Cup Brand Opportunity

The FIFA World Cup presents a monumental revenue & branding opportunity for the online gaming companies that own and control their own high-performance AI tech.

Meridianbet is one of those companies with their 5th generation “Atlas” AI tech rolled out, as well as being one of less than one hundred operators able to obtain a full Federal Brazilian Gaming Lic allowing sports-betting, i-gaming as well as retail locations.

8.) A Long History of Execution and Profitability

Meridianbet was built over 25 yrs privately with zero borrowed money and profitable the majority of their history. Unheard of in the sector. As discussed earlier, they could have sold their company and exited with $330 million but they wanted Nasdaq traded GMGI shares at a value of approximately MRDN $36. After the close of the merger in April 2024 insiders continued to buy and convert shares, now owning nearly 90% of outstanding shares. IMO, there is no way they would keep acquiring shares if they were not confident they can and will continue to execute and grow.

Over a decade ago Meridianbet, wanting to control their own tech and not spend on outsourcing, took the more expensive and difficult route to hire programmers and create their own AI system, knowing it would allow them to capitalize on “micro” and “live” B2C betting, create their own B2B content. They saw the tech advantages of having the ability to personalize each player’s account and collect valuable data that would ultimately increase margins as well as help them to comply with vast regulatory and tax requirements.

9.) Global Footprint, Moats, and Long-Term Sector Catalysts

Meridian Holdings operates in over 20 countries with different currencies, languages, and regulations, processing between a handle of between $2 - $3 billion in annual bets. They have the advantage of a proprietary tech stack as well as a closed loop ecosystem that captures value at every stage. They own their sports-book. They own their odds setting engine. They own their risk management algorithms. They own their casino platform. They own their content. These advantages are rare and will allow them to scale without 3rd party costs, thus driving higher margins in the long run.

Meridian Holdings is an emerging player with multiple B2B/B2C rev stream diversity, a large regulatory and geographic moat in a rapidly growing sector, in an international market with outstanding CAGR of 12%-15%. MRDN has positioned themselves early, as governments globally are fast tracking legislation to obtain the tax revenue while internet access, 5G, and cell service buildout allow for a long runway of access to capture a massive TAM.

Meridian Holdings not only has a regulatory and geographic moat but it is positioned to scale faster due to its proprietary tech advantages. When investors hear a name like DraftKings they immediately think of the sheer size and massive revenue generated, however Meridianbet, as small as it is, actually has comparable AI tech and a sports betting engine that exceeds DraftKings and most others in sheer volume and global breadth of betting markets.

10.) Meridianbet’s AI Tech Advantage

Meridianbet offers over 11 million betting markets per month, pre-match + live/in-play across 20,000 events, covering 800+ leagues worldwide with a deep focus on lower-tier soccer, regional competitions, and niche sports. In contrast, DraftKings offers several thousand markets daily and concentrates primarily on major U.S. leagues and high-profile events.

Meridianbet benefits from a lower-cost player acquisition strategy through its hybrid omni-channel online platform plus nearly 740 retail “Betshops” creating organic traffic and physical presence in 15+ jurisdictions.

Meridianbet, unlike DraftKings, creates their own tech & B2B content, as well as owns multiple synergistic subsidiaries while operating 5 synergistic businesses that deliver revenue diversification and scalable cross-synergies.

In the US, DraftKings and FanDuel, at 80% of the market, are clearly “The Big Dogs”, but Meridianbet’s exceptional diversity, AI-powered personalization Bet Recommender + assistant, and more efficient model, gives Meridianbet a clear competitive advantage for sustained growth in international sports betting and iGaming markets outside the saturated U.S. market.

Globally Meridianbet’s disclosed volume puts it in the top tier for sheer number of events and markets. Bet365 is the only major operator consistently described as having equal or greater breadth across lower-tier and niche sports.

In Brazil, top players Betano, Bet365, and Sportingbet dominate market share and offer deep coverage of Brazilian leagues + major international soccer, but none publicly claim higher raw event counts than Meridianbet’s 20,000/month. Meridianbet’s strength in lower-tier, regional, and niche events gives it an edge for bettors seeking variety beyond the biggest matches.

This difference matters because Meridianbet’s model emphasizes extreme breadth + AI personalization across many smaller events, while larger Brazilian-focused operators prioritize depth/odds quality on high-traffic leagues where most betting volume occurs.

The bottom line is Meridianbet is already an early leader in publicly reported event volume and global diversity. In Brazil and other emerging regions they compete head-to-head with or exceed most peers on raw numbers of betting opportunities, especially outside the major European/U.S. leagues. Bet365 remains the primary global peer in overall market depth.

11.) Player Acquisition Cost Advantage

Meridian Holdings enjoys a significant player acquisition cost advantage that drives superior unit economics compared with industry giants. The CEOs have repeatedly highlighted that the company acquires customers at a fraction of the industry norm, approximately $2 per customer in its sweepstakes operations, $7.60 per player on the RKings and CFAC tournament platforms, with the core B2C sports-book and casino business also far below peer averages although no exact sports-betting/casino CAC number has been made public.

In contrast, larger U.S. operators like DraftKings routinely spend $300 - $1,000+ per player while generating only around $300 in lifetime value, resulting in negative economics for many new users. The much lower CAC for MRDN stems from its hybrid retail/online model in less-competitive emerging markets, proprietary AI-driven personalization, decades of proprietary player data, and efficient sweepstakes-style entry points, delivering strongly positive lifetime value and sustainable profitability where many larger peers continue to burn cash on customer growth. Meridian Holding’s CEO Milosevic has flatly stated “we will not operate in an area at a loss”.

A Starkly Different Player Acquisition Strategy

Meridian Holdings, under CEO Zoran Milosevic, takes a fundamentally different approach to player acquisition than U.S. giants like DraftKings and FanDuel. While the larger operators pour hundreds of millions, and often over $1 billion annually into high-cost celebrity endorsements, influencer campaigns, and blanket digital advertising to drive volume in saturated markets, MeridianBet builds brand recognition and customer trust organically by embedding itself in the communities it serves.

Through its deeply ingrained ESG/CSR philosophy, explicitly described by Zoran as “not a slogan, but how we operate at scale” the company has executed nearly 300 CSR initiatives across 25 markets in 2024 alone, focusing on sports, education, youth programs, healthcare, environmental projects, and responsible gaming. These efforts include customer-involved “Meridian Donate” campaigns, employee ambassadorship, partnerships with regional governments to promote safe and ethical regulations that actively help to reduce illegal and predatory black-market operators.

Complementing this grassroots strategy are its 740+ company and franchised retail “bet shops” across Europe, Africa, and Latin America, which provide tangible local presence and foster long-term loyalty at far lower acquisition costs than the big players’ promotional-heavy models. This culture-first philosophy, supporting both internal employees and external communities, not only differentiates MeridianBet but creates sustainable, trust-based growth that many larger operators simply cannot replicate.

12.) The Content Edge: Expanse Studios

Expanse Studios, Meridian Holdings content making company, lead by CEO Damian Stamenkovic is literally inking a new B2B partner every few days, topping 1,300 operators last year and shooting for 3000 this year. Now in over 20 countries with recent entrance into Romania, Peru, Africa, Sweden, Croatia, US, Brazil with Canada in the process. With 440% yoy growth they are doing it all: AI, Prediction Bets, Crash Games, Social Games, Casino Games, Sweepstakes Games, Mobil first, etc. In-house content creation as well as outsourcing possibilities will create new revenue streams and only expand margins.

13.) Subsidiaries: RKings, MexPlay, and CFAC

Meridian Holding’s subsidiary RKings Competitions in UK and now Ireland’s #1 competition, is led by founder Mark Weir and has doubled revenue since acquisition and is continuing to grow. Recent revenue came in at $35.1M and 25.2M ticket volume, up +137%.

Meridian Holding’s subsidiary MexPlay is its regulated online casino/sports-book in Mexico, exciting with huge growth room as it delivered 52% revenue growth in 2025 amid 85% more registrations in a fast-expanding market also with 15%+ CAGR, low competition, and expecting a 2026 FIFA World Cup boost.

Meridian Holdings CFAC or “Classics For A Cause”, their more recent and smaller accretive acquisition is continuing to scale and increase revenue contributing $8.7 mil full year growing to $2.3 mil in Q4 alone.

These acquisitions are “decentralized” acquisitions rather than “roll-up” acquisitions, meaning the CEO or Founder and team responsible for their success was left in place to do what they do best — continue to execute and grow.

14.) Proven Leadership with Integrity

Leadership is one of the most important factors determining MRDN Holdings success. Meridianbet, by far the largest of the 5 MRDN companies CEO is Zoran Milosevic. Zoran is a steady, deliberate leader defined by an “infrastructure-first” approach. Zoran is the definition of a fiscally responsible, no-hype “execution-based” CEO, emphasizing Meridianbet is not a promised based company but an execution-based company. Exactly what I look for in a CEO.

Zoran champions capital discipline and long-term value creation. Unlike many competitors that rely on high-burn capital raises, he focuses on organic profitability and finding niche markets where the company can maintain margins. He has mentioned several times how Meridianbet simply will not operate in an area at a loss, and emphasizes mitigating risk by owning and controlling their own technology stack.

Meridianbet is not a company that is going to compromise anything to fluff the next earnings numbers. They repeatedly state they are NOT looking at the next quarters earnings, they are looking at the next 100 years. They have no intention of selling their shares and that is a big concern considering the amount they own.

Zoran has a rare strong moral and ethical code explicitly aligned with his business ethics. With Zoran at the helm, there is no “grey” area. He believes Meridian Holdings can increase value for shareholders at the same time as they increase value for society at large by placing an emphasis on responsibility, community impact, and long-term thinking.

As we discussed in marketing earlier, aligning with Zoran’s philosophy, MRDN is second to none when it comes to making a community impact in the regions they operate. Meridianbet conducts nearly 300 CSR, ESG, community impact initiatives, and public service programs per year across 25 markets, delivering massive impact as well as via its Meridian Donate Platform that lets players directly fund healthcare, education, sports, and social projects, thereby building brand loyalty and trust in every community it serves. Unlike others, they don’t spend a large amount of money blanketing media with expensive celebrity ads. They support making authentic positive and needed changes in their regional communities.

15.) Risks

In my opinion, Meridian Holdings is a multi-decade story. A misunderstood, undiscovered asymmetric opportunity. Is there risk? Absolutely, but I try to minimize risk by investing in companies w/a long history of fiscally responsible execution, profitable or turning profitable, multiple revenue stream diversity, a large amount of insider skin-in-the-game, and a share valuation that has not yet run-up. With that said, let’s discuss and address some of the risks associated with Meridian Holdings.

AI Risk

Full disclosure, I am not an expert when it comes to AI disruption or technology threats, but from my research I can find no scenario where AI disruption poses any significant near term material risk to Meridianbet Holdings.

Meridian Holdings recently finished rolling out their most advanced 5th generation platform “Atlas”. They own and control their entire end-to-end tech stack. Real-time operations serving hundreds of thousands of simultaneous bettors demands highly specialized, deeply integrated AI systems far beyond generic tools. These systems must instantly calculate live odds, manage risk, personalize offers, and comply with diverse regulations.

AI programs are tightly coupled with enterprise-grade cybersecurity to protect against fraud, cyber attacks, and money laundering, something off-the-shelf solutions are not near replicating. Most critically, superior performance requires seamless integration of decades of proprietary regional and individual player data that only MeridianBet has accumulated through years of live operations. New entrants or competitors lack this data moat and cannot simply “train” equivalent models overnight. As a result, MeridianBet’s scale, vertical integration, and in-house AI capabilities actually turn the technology into a competitive advantage for personalization, retention, and efficiency, protecting margins and demand across every layer rather than exposing them to commoditization.

Regulatory Compliance Risk

Meridian Holdings CEO Milosevic’s “no grey area of operation” philosophy has gained Meridianbet an impeccable regulatory history with zero “red flags”. The last thing I want to see is media headlines with my investment involved in legal trouble. Meridian Holdings decreases legal and regulatory risks by being actively involved in their regions of operations governments regulatory efforts to decrease predatory black market operators and add credibility to the industry.

Complete Loss of Capital Risk

Personally, I can handle the inherent volatility of micro/smalls as well as waiting the long, sometimes 5+ year timeline for a smaller company to raise cap, execute, scale, pay down debt, disruptive tech to one adopted, and revenue to hit the bottom line, HOWEVER I do not want to lose my entire investment.

As far as a risk profile for complete capital loss (not uncommon in the micro/small cap arena) Meridian Holdings would need to stop growing after 25+ yrs of expansion into 20 countries right after they achieved Nasdaq listing and rolled out their 5th gen AI tech platform “Atlas” that will increase margins. Also, right before the two largest catalysts in their history: World Cup 2026 and being granted a coveted Federal Brazil igaming/sportsbetting license. Highly unlikely.

Expanse Studios, that is growing on steroids, pumping out new games, and on the way to doubling their partnerships would need to suddenly stop acquiring new partners. RKings, now Ireland’s #1 and is growing double digits, would need to come to an unexpected halt and MexPlay, Golden Matrix’s GM-AG, Fairbet and Australia’s CFAC would need to stop growing in their incipient stage.

Original Golden Matrix CEO Departure

It should be noted the original parent company Golden Matrix (Nasdaq GMGI), after an extended 60 - 70% share price drop, recently did a 12/1 split and rebranded from Golden Matrix Group to Meridian Holdings (MRDN) to remain Nasdaq compliant and better reflect their parent brand Meridianbet.

The original Golden Matrix CEO Brian Goodman stepped down but all remaining operational CEOs have been left in place to do what they do best. In the last 5 years Goodman was able to accomplish a number of milestones including a Nasdaq listing and the acquisition of a number of accretive and synergistic companies that brought revenue from approximately $2 million to $185 million however, just as a coach loses too many games, if the share price does not reflect the execution, the coach bears the responsibility and Goodman stepped down.

Recently Goodman has come under fire for selling a fraction of his shares. To put this is context, Goodman has sold around 84k of his nearly 16 million pre-split adjusted shares ( about 50% held in Luxor Capital ) while Meridianbet insiders; Founder Aleksandar Milovanovic, CEO Zoran Milosevic, COO Snezana Bozovic, and CFO Richard Christensen have all purchased open market or converted close to 9,850,000 pre-split adjusted shares. That is massive confidence by Meridian Holdings.

Insiders typically only buy shares for one reason but often sell for many reasons. Goodman has expressed he has full confidence in Meridian Holdings future and would not be surprised if his small sales have something to do with his departure, tax purposes, raising capital for his new venture, or most likely, trying to decrease his ownership stake to under 10% for regulatory purposes. At this point I simply do not know but there will always be speculation. If the amounts were much larger I would be more concerned.

Addressing The Share Price Drop

As far as Meridian Holdings share price drop, large micro/small-cap share price drops are not unique to MRDN in our current speculative and sentiment based trading environment that largely ignores fundamentals in favor of AI and hot sector stocks with social media buzz. I believe the prolonged drop was largely due to a combination of targeted shorting and traders walking SP down into bid. This behavior is inherent with low volume micro/smalls and effectively increases negative sentiment which in turn fuels downward momentum and sentiment based trading algos with gasoline.

This negative momentum cycle and a huge short order, coupled with a lack of US visibility, zero awareness, and no significant shares available for any meaningful institutional positions (leaving mainly emotional retail sellers) are all large negative factors.

Lastly, the dilution required for Golden Matrix to acquire Meridianbet, although non-operational dilution and a common practice with growth-by-acquisition companies, is an easy narrative for traders to spin as a net-negative event to fuel more bad sentiment and downward share price momentum.

16.) Disclosure

I am a long term investor and own shares of MRDN. I am not an advisor. I am not in marketing. I have no affiliation with Meridian Holdings. I do not trade. I do this for fun and consider myself somewhat of a small-cap sleuth as I have now invested for over 35 yrs. I have made large amounts of money and lost large amounts of money. High rewards come with high risk.

I do my best to decrease risk but micro/small-caps are inherently risky. They are often illiquid and their low volume makes them subject to manipulation and difficult to exit. Their long hold timelines require inordinate patience and a tolerance for extreme volatility- but they can at times create life changing wealth.

These are simply my personal opinions and not a recommendation to buy the stock. I do my best to be as accurate as possible but there are quite possibly errors in my article. I am not a professional and advise investors to seek professional guidance.

Feel free to reach out on X (@uboat159) or comment below.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own due diligence before making investment decisions.

It started on the Insteel Industries (IIIN) earnings call last week. The stock fell about ~30% after the print, and I actually ended up starting a small position on Friday, but that’s besides the point…

If you don’t know the company, they make steel wire products. Boring business, sleepy call. But the CEO spent close to four minutes on flatbed tender rejections and freight costs. Steel wire CEOs don’t usually volunteer four minutes on freight. That did grab my attention.

“Freight costs, whether inbound or outbound, have risen substantially following the conflict with Iran, and it happened extremely quickly. It coincided with other factors that reduced driver availability. The practical impact is much higher diesel costs and fewer drivers, which means our costs have gone up, and many of our loads have been rejected by carriers who can find loads that pay more...

I was reading that in the flatbed sector, more than 40% of loads tendered to carriers have been rejected across the economy. We are dealing with something out of our control, but it is our responsibility to manage it from a cost point of view. We debated surcharges versus price increases, and we have elected to increase our prices.” — H.O. Woltz

A few days later I was scrolling X when a post from (@SFarringtonBKC) made me pause.

He reposted a tweet from Craig Fuller showing flatbed tender rejections above ~54%, alongside a note about industrial demand ramping through data centers, power plants, transmission lines, and pipelines.

My mind went straight back to Woltz on the Insteel call. Same exact story, just coming from the other side of the freight transaction.

If you don’t spend much time thinking about freight, quick context on what “flatbed” means. Flatbeds are the open-deck trailers with no walls or roof. They haul the big, heavy, awkward stuff. Wind blades, steel coils, transformers, oil and gas equipment, construction gear, pre-fab modules. If it’s a pain to shove in a box, it usually goes on a flatbed.

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With that in mind, the domestic industrial buildout is clearly strong and it’s not hard to squint and see a mini industrial boom.

Data center capex is running hot. The grid needs enormous transmission and substation work just to catch up. Oil and gas equipment is moving to offset whatever barrels we aren’t importing. The Big Beautiful Bill pushed companies toward American sources for infrastructure construction, and whatever your politics, that policy is working at the margin.

American factories are firing up.

And all of it — the transformers, the turbines, the pipe, the steel — has to move on flatbeds. If the buildout is multi-year, so is the tightness.

It’s not just the rejection data either. Spot rates are ripping too. National flatbed went nowhere for most of 2025, and then late last year it started climbing and just hasn’t stopped. DAT has it at $2.65/mile by mid-May, up 47 cents from the same time last year. Call it ~22% YoY.

All of which got me sitting down and thinking about how to actually play it.

So how do you play it?

The annoying answer is there aren’t many clean ways in. Flatbed is a sliver of the trucking world, and Daseke, the name that used to be the obvious pure play, got taken private by TFI back in 2024. What’s left is a short list of names with varying degrees of exposure.

These are the four most obvious public-market ways to get exposure, at least in my view:

Universal Logistics (ULH)

Closest thing to a flatbed pure play on US exchanges. I’ve seen estimates that around 35% of revenue is flatbed, though the company doesn’t break it out cleanly.

Layer in wind-energy project cargo, heavy-haul, and a big owner-operator network, and you have a real industrial transportation franchise dressed up as a boring trucker. An asset-light model flows more of the rate upside to the company than a fleet of leased trucks that still have to be paid for whether they’re moving or not.

It’s trading around ~1x book vs ~2.5x (ish) historical range, and it’s a controlled company, with Chairman Matthew Moroun owning roughly 73% of the shares. His cost basis is around $25 against a stock price in the mid-$20s. That’s strong alignment, with some take-private tail risk.

Landstar (LSTR)

Asset-light model like ULH, which I think I’d prefer in a tightening cycle. Landstar runs on an owner-operator network (they call them BCOs) with real flatbed and heavy-haul exposure, not just dry van. Not a pure play, but a quality franchise that benefits directly when capacity tightens.

Also less single-name risk than ULH. It’s larger, more liquid, and doesn’t have a controlling shareholder. The trade-off is you pay for that quality in the multiple.

Heartland Express (HTLD)

Mostly dry van truckload rather than flatbed, but tight capacity is tight capacity and the whole sector tends to move together when rates turn. Historically a very well-run operator, until they took on real debt with the Smith Transport and CFI acquisitions in 2022.

The last couple years have been messier than the old HTLD crowd would’ve wanted. They’ve paid the debt down from ~$494M to ~$160M and management is targeting debt-free by 2027, but operating results are still ugly. It’s trading at what looks like cyclical trough numbers, and if the turn is real, pretty asymmetric.

Werner Enterprises (WERN)

One of the more out-of-favor names in the group, and a higher-torque way to express a freight-cycle turn. It’s truckload plus logistics, and results have been ugly through the downturn. CEO Derek Leathers recently called current rejection rates “COVID-like” in public remarks, which tells you where they think the cycle is.

If rates really rip, WERN should have upside. If they don’t, it can keep grinding. But I do think it’s a legitimate way to play the cycle if you’ve got conviction.

I definitely don’t think a broad transportation/trucking ETF gets you what you want here.

Too much dry van exposure that isn’t levered to this specific industrial tailwind, plus the big rails with their own issues. It’s a narrow trade and I think you have to pick names. For now, ULH looks like the cleanest pure-ish play.

While I keep doing my own work on ULH, already published Part I of a small-cap trucks series on the exact same name. Go read it.

Value Degen’s Substack

Small Stocks, Big Trucks Part I: Universal Logistics Holdings $ULH

In October of last year, I wrote about how trucking was in its longest recession in history. Not only was it digesting the Covid durable goods pull-forward, punitive interest rates, and a three year manufacturing recession, but it was also suffering under a wave of CDLs being issued to illegal immigrants who frequently drive in shifts. By driving in s…

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2 months ago · 29 likes · Unemployed Value Degen

He walks through the flatbed exposure, the valuation (ULH trading around ~1x book vs a ~2.5x historical range), the accounting quirks, the Moroun ownership piece, and his base and bull case targets. He also just dropped Part II on Forward Air.

If you aren’t already subscribed to his stack, fix that.

What I’m actually watching

At this point, I’m not really trying to figure out if something is happening in freight. I think that part is pretty clear. The real question is whether this is just a sharp squeeze that fades or the front end of a real turn.

The setup definitely looks a little too obvious to ignore. You’ve got three years of pain in trucking, fewer trucks in the system, tariff certainty, and now demand picking up into a backdrop where a lot of industrial stuff still needs to move.

What makes it interesting, and honestly a little annoying, is that there aren’t many clean public-market ways to express it. ULH is still the one I keep coming back to. Landstar makes sense too, and the others would probably work if trucking broadly turns, but ULH still feels like the cleanest way to play the idea.

A few things nagging at me

I could also be very wrong here… I’m still getting up the curve on trucking, and it’s easy to overread a couple loud data points. I mean I think it’s very unlikely but, it’s entirely possible this could just be an Iran-driven spike — diesel settles, capacity loosens, and the whole thing cools off.

But I also think there’s a real chance people are leaning too hard on the old playbook here. If this is being driven by a genuine domestic industrial buildout, and truck supply has already been beaten up for years, this may not be some quick little squeeze that disappears next month. It could be a better and more durable setup than the market is giving it credit for.

That doesn’t mean I’m smashing the buy button tomorrow morning.

But directionally, this has gone from something that caught my attention to something I feel like I should probably be acting on. The only real question now is what the best vehicle is.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own due diligence before making investment decisions.

If you read the deep dive I wrote with a few months back, you already know the story. I’m not going to rehash the whole thing here. But this is a company I’ve been watching and wanting to own for a while now and I finally freed up some capital to put behind it.

It really comes down to one thing for me with VNET: AI compute demand in China is growing at a massive pace and it’s not going to slow down anytime soon.

ByteDance, Alibaba, Tencent, and Baidu are all spending like crazy on AI infrastructure, and every one of those chips needs somewhere to live. VNET is basically the landlord. I don't need to know which model wins or which chip wins. I just need the rent to keep getting paid.

For those who haven’t read my original write up and are unfamiliar with the name, VNET is the third-largest carrier-neutral data center operator in China and they run 50+ facilities across the country. When ByteDance or Alibaba or Tencent needs somewhere to park all the AI compute they’re buying, VNET is one of the companies they call.

The wholesale side of the business, which is where all the growth is, was up ~77% for the full year.

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I wasn’t going to write about it, but after reading it I realized it’s basically a summary of everything I’ve been publishing since last year. So here we are…

Their conclusion: China tech is no longer a macro trade. It’s a stock-picker’s market now. Company execution matters. The AI capex cycle is real. Cloud is inflecting. Valuations don’t reflect any of it.

I mean… yeah. Welcome to the party.

It’s always nice when the big shops catch up. Not because I need the validation, but because when institutional money starts saying what you’ve been saying, people tend to pay a little more attention.

Anyway. There’s good stuff in the report and I want to walk through the parts worth paying attention to, add context where I think they were too conservative, and talk about what they missed entirely.

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The Capex Cycle

JPM’s big theme is that AI-related capital expenditure across China’s major tech companies is accelerating and the shift from training workloads to inference-driven demand is improving the economics of the whole thing. More utilization, better pricing power, and a path toward actual operating leverage in cloud.

I’ve been banging this drum for months…

Alibaba’s cloud revenue has re-accelerated into the mid-30% growth range. AI-related cloud products have posted triple-digit growth for ten consecutive quarters. They committed over $50 billion over three years to AI and cloud infrastructure and management keeps hinting the number is going up. And they just laid out a five-year target of $100 billion in annual cloud and AI revenue. That’s roughly a 5x from here. And they’re still rationing GPU access because they can’t deploy servers fast enough.

Tencent is spending aggressively too. They dropped RMB 18 billion on AI last year and the guidance suggests that could double in 2027. ByteDance is targeting nearly $25 billion in 2026 capex alone. Between the big four, China’s tech giants are on track to spend over RMB 380 billion a year on AI infrastructure.

JPM frames this as a reinvestment cycle that management teams are increasingly willing to lean into even at the expense of near-term margins. I agree, and I think that’s actually the right move.

I’ll also note that compared to US hyperscalers, China’s total AI capex is tiny. The US is on track to spend $800 billion+ by 2028. China’s big four combined won’t even crack $200 billion.

And yet the models keep getting better, the cloud revenue keeps accelerating, and they’re doing it at a fraction of the cost. Whether the US is overspending or China is just more efficient is a conversation worth having, but either way, I know which side I’d rather own at these multiples.

Margins

One of the more honest things in the JPM report is the acknowledgment that profitability is stabilizing, not expanding.

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Coughlin Cap

BYD (BYDDY): Investment Thesis

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5 months ago · 20 likes · 2 comments · Brian Coughlin

A big chunk of the argument centered on China’s energy security problem. China imports over 70% of its oil through seaborne chokepoints. Half goes to transportation.

I argued that Beijing treats electrification as a national security priority more than anything else, and that this creates a long-term tailwind for EVs and for BYD specifically.

“This isn’t a sentiment call. It’s a structural reality that will play out over years, and BYD is the best positioned company to benefit from it.”

Then the US went to war with Iran, oil blew past $100, and the Strait of Hormuz shut down…

The stock hasn’t done much since I wrote it up. It’s up about 8%, which is fine, but a lot has happened with the business and especially the macro picture since January that I don’t think the stock is reflecting yet.

Oil, Iran, and Why This Matters

I didn’t expect the energy security argument to get tested this fast…

On February 28th the US and Israel launched strikes against Iran. Within days, tanker traffic through the Strait of Hormuz ground to a halt and Oil surged past $100/barrel. The International Energy Agency called it the largest supply disruption in the history of the global oil market.

As of this week the strait is still effectively closed, Trump is promising to hit Iran “extremely hard” for the next two to three weeks, and oil is sitting above $109. It was around $70 when I wrote the original post…

I’m not going to pretend I saw a hot war with Iran coming. I didn’t. But the whole point of the energy security thesis was that oil dependency creates vulnerability, and vulnerabilities eventually get tested.

Beijing is/has been watching. They were already building strategic reserves and accelerating EV adoption before any of this. Now the urgency is on a completely different level. And the runway is still long.

“In China, EVs now make up about 50% of new car sales, which sounds like the transition is nearly complete. But only around 10% of the cars actually on the road are electric. The other 90% are still burning gasoline and diesel.”

Every one of those cars that gets replaced by an EV is one less barrel China needs shipped through a war zone. And BYD’s supply chain is built for this moment.

Bank of America put out a note calling China’s EV supply chain “relatively insulated” from the Middle East disruption. Makes sense when you think about it. BYD makes its own batteries, its own chips, and increasingly ships on its own cargo vessels. They don’t need anything coming through Hormuz.

Meanwhile a BYD salesman in Manila told Bloomberg he got a month’s worth of orders in two weeks. Showrooms in Hanoi had to hire extra staff after foot traffic quadrupled. Thailand’s new Prime Minister showed up to the Bangkok Motor Show in his own BYD.

The oil shock is turning tire-kickers into buyers all across Asia. One analyst compared it to how the 1970s oil crisis paved the way for Japanese fuel-efficient cars, except this time the technology eliminates the need for petroleum entirely.

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The stock got crushed after the YPF case went the wrong way in court. By the close, the market had basically written off the whole company, which honestly isn’t that surprising when YPF was the reason most investors I know owned it in the first place.

When your biggest catalyst disappears overnight, the stock is going to get hit hard. That part is pretty obvious.

What I’m less sure about is whether the selloff went too far.

I’m not saying YPF didn’t matter. You don’t lose half your market cap in a day over something that doesn’t matter. But Burford without YPF is still a real business.

Messy, yes. Hard to value, yes. Lumpy, absolutely. But still a real business.

I actually used to own this stock. I sold about a year ago, which in hindsight turned out to be one of the luckier exits I’ve had. But I’ve followed the company for a while and I think what happened on Friday is worth walking through for people who are either seeing this for the first time or trying to figure out what to do with their shares.

A lot of people know Burford through the YPF case, but the company itself is much broader than that.

At its core, Burford is a litigation finance business. A company has a legal claim that may be worth a lot someday, but it could take years to play out and cost a fortune to pursue. Burford provides the capital and takes a share of the outcome if things go their way.

Think of it like private equity for lawsuits.

Their clients are big. They’ve received financing inquiries from 94 of the 100 largest U.S. law firms. The economics have been genuinely strong. Concluded cases have delivered an average 83% return on invested capital with a 26% IRR.

Most cases settle rather than going to trial and case outcomes are generally uncorrelated with broader markets.

Christopher Bogart and Jonathan Molot, both attorneys, founded the company in 2009 and still run it. They collectively own about 10% of the stock. They’ve grown from a $130 million fund to a $7.5 billion portfolio.

The business generated over $500 million in cash receipts in 2025. Rolling three-year return on tangible common equity of 13%. There’s also an asset management arm managing about $2 billion of external capital and earning fees on top of all the direct investing.

It’s a real business. But the thing that made Burford a household name on fintwit, and the thing that drove most of the stock’s volatility over the past several years, was one single massive case.

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If you’ve been paying any attention to markets this week you’ve probably noticed that everybody just sort of decided the Trump Put is dead.

Barclays even put out a whole note on Friday making the case. It’s become one of those things where if you’re not bearish on the Trump Put you’re the idiot in the room.

The reasoning is basically that Trump keeps trying to talk markets up with de-escalation headlines on Iran, the headlines aren’t sticking, and so the put is dead or dying.

And I don’t know, maybe I am the idiot in the room, but I think that’s kind of a lazy read.

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It’s been an awful stretch. The S&P just posted its fifth straight weekly loss, which is the longest streak since 2022, and the Nasdaq and Dow both tipped into correction territory on Friday. Oil is pushing $95 with Brent above $110. The whole vibe is terrible. I’m not going to pretend otherwise.

And it’s not like the administration wasn’t trying this week. Trump was out there constantly. Monday morning, pre-market, he posts on Truth Social that he’s pausing all strikes on Iran’s power plants for five days, says they’ve been having “very good and productive conversations” toward a resolution.

Markets went nuts. Futures ripped. Oil dropped something like 15% in minutes. Stocks added about $1.7 trillion in value before most people had finished their commute.

And then Iran came out and said there were no talks, no negotiations, and that the whole thing was just Trump trying to manipulate oil prices. Which, I mean, yeah probably.

That was the only headline all week that actually caused a meaningful rally. And it didn’t even last a full 24 hours.

Not that it stopped him from trying. He was out there every day the rest of the week doing everything short of a PowerPoint presentation for the press pool to try to keep this thing together.

Tuesday he’s telling reporters “this war has been won.” Wednesday a 15-point ceasefire proposal leaks and Iran’s military literally mocks it. Thursday he’s saying Iran is “begging” to make a deal.

None of it moved the needle. Markets just didn’t care anymore.

Thursday was the worst single day for the S&P since the war started and Friday was another 1.7% down. By the end of the week that Monday morning sugar rush had been completely erased and then some.

So I totally get why people are writing the obituary for the Trump Put. He threw everything he had at this week and the market shrugged it off. It does look broken.

But I keep coming back to this: what exactly do people think the Trump Put is?

Because I think there’s a confusion happening between the market’s short-term reaction to any given headline and Trump’s underlying motivation to actually end this thing.

The put was never really about one Truth Social post making the S&P go up. The put is that you’ve got a president who treats the stock market like a personal approval rating, and who now finds himself staring down midterms in November with a 35% approval rating, gas prices that won’t stop climbing, and a war that was supposed to be a “short-term excursion” entering its fifth week.

The political incentive to find a resolution, or at least keep signaling that one is close, is about as high as it can possibly get right now.

And that’s kind of what I actually saw this week? Like yeah, none of it worked. The market didn’t buy any of it. But the guy was out there every single day trying. The pause on strikes, the ceasefire plan, the “begging for a deal” comments, all of it. Iran kept slapping it down and he kept swinging. That tells you everything about where the motivation sits.

Trump literally cannot afford to let this spiral. His party is already polling behind Democrats for the House. Cost of living is the number one issue. You think this guy is just going to shrug and let oil hit $120?

This is the same person who bragged about the Dow hitting 50,000 while it was actively selling off last week. He is not going to develop a sudden zen-like detachment from market performance. That’s just not how he’s wired. At all.

What Barclays and market participants are really picking up on, I think, is headline fatigue.

The market watched Trump try every trick in the book this week and none of it changed the actual situation on the ground, so now traders are just tuning it out. That’s fair. But the put was never about whether algos chase a Truth Social post. The put is about a president who will keep swinging until something actually connects because the alternative is politically catastrophic for him.

Now the bear case on my thinking is pretty obvious...

The Strait of Hormuz is still effectively closed. The Houthis have apparently decided this is a great time to get involved, which is just fantastic. Consumer sentiment is in the gutter and the Fed is trapped between an oil-driven inflation spike and an economy that’s clearly slowing.

If this war drags into the summer with no resolution, you’ve got a genuine stagflation problem and I honestly don’t know what the Fed does. None of that is good.

But I just keep landing in the same place. The people declaring the Trump Put dead are implicitly betting that Trump is going to accept a recession heading into November. That he’s going to watch gas prices blow through $5 and the market roll over and just… not try everything he can think of to stop it.

I don’t see that. I’ve been wrong before but I really don’t see it.

I’m not making any trades off this or anything. Just thinking out loud on a Sunday. Take it for what it’s worth.

Anyway. Go touch some grass.

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Disclaimer: I’m just one investor thinking out loud. This isn’t financial advice. Do your own work before buying or selling anything.

That’s what drawdowns do. They make you question everything. You start second-guessing yourself, and you start wondering if the guy on X/Twitter calling you a bagholder might actually have a point.

But I’ve been through enough of these to know that stock prices don’t tell you much about a business over short periods of time. They tell you about sentiment. And right now the sentiment and the fundamentals are living on different planets.

The broader thesis on China/China Tech hasn’t changed. I actually think it’s the strongest it’s ever been. Which I realize sounds like exactly what a bagholder would say…

But instead of getting emotional about it I’m going to do my best to zoom out and focus on what actually matters in terms of returns.

The tape looks awful. The underlying buildout doesn’t. That disconnect is the whole reason I’m still here.

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Fear + Volatility = Opportunity

It’s been a rough stretch. And not just for China names, but especially for China names.

Iran and the Strait of Hormuz have global risk appetite in the gutter. VAT tax rumors on internet companies sent everyone scrambling for the exits back in February. The Supreme Court struck down Trump’s IEEPA tariffs and threw the whole trade framework into question.

And mainland investors have been yanking billions out of Hong Kong-listed tech because they’re tired of watching these companies spend aggressively on AI without seeing it in the earnings yet.

Oh, and Alibaba’s Qwen AI team had some leadership departures. Three senior guys this year. Cue the hot takes about Alibaba abandoning open source and the whole AI strategy falling apart.

You stack all of that on top of each other and yeah, I get why people are running for the exits.

If you’re a sentiment-driven trader, this is a nightmare. Go sell. I’m not mad at you.

But the long-term tailwinds haven’t changed. There are 1.4 billion people moving online, and a government actively pushing domestic consumption while going all-in on AI. Nothing has actually gotten worse.

A big reason HSTECH in particular has been under so much pressure is the margin compression from the e-commerce price war. And that’s fair. It’s expensive and the near-term margins are getting destroyed.

But I think people are seriously underestimating what a company like Alibaba will actually earn in a normalized environment once the subsidy wars wind down. And regulators are already stepping in to cool things off, which basically locks in the gains for the companies that already won share.

More importantly, the story is shifting. Alibaba is becoming a cloud and AI-first company. That’s where the investment is going and that’s where the growth is. But they also have something none of the pure-play cloud or AI companies have, which is a massive existing user base, a mountain of commerce data, and an ecosystem that’s probably better positioned for agentic AI and AI-powered shopping than anyone else in the world.

When AI agents start actually buying things for people, who do you think has the infrastructure for that?

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The S&P is down four weeks in a row. The Russell 2000 just entered correction territory, down over 10% from its January peak. The VIX surged 11% on Friday. Oil is above $112 a barrel. Gas prices are climbing. And the whole thing is being driven by a conflict in the Middle East that, three weeks in, shows no real signs of stopping.

The Strait of Hormuz is effectively blockaded, the IEA has called it the worst oil supply disruption in history, and the knock-on effects are hitting everything from airline stocks to Asian equity markets. Even gold, which is supposed to be the safe haven in situations like this, just had its worst week in four decades.

Coughlin Capital has a partnership with Koyfin (the research platform I personally use), through which you can get 20% OFF any plan. Use this link to claim yours.

You’ll get institutional-quality charting, comps, screening, and financial data all in one platform.

I’m not going to sit here and tell you I know how this ends. If the war drags on, oil stays above $100, and inflation expectations re-accelerate, the selling probably continues. Maybe it gets worse before it gets better. That’s a real possibility and I’m not dismissing it.

But…

Some very good businesses are starting to trade at valuations where I think there’s genuine margin of safety, even if you assume things stay ugly for a while. The kind of prices where you look at the multiple, look at the earnings power, and the math starts working even in a bearish scenario.

So here are five names I think are worth paying attention to right now… I own all five and I've been adding to most of them this month.

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