FFM Fund Newsletter - Dec 2025

December 2025

Dear Friends, Dear Investors,

“OpenAI Chief Executive Sam Altman told employees Monday that the company was declaring a “code red” effort to improve the quality of ChatGPT and delaying other products as a result, according to an internal memo viewed by The Wall Street Journal.”

Wall Street Journal, December 2, 2025

It only took this announcement to remind investors just how sensitive the topic of artificial intelligence remains. As the year draws to a close, markets once again lost momentum, further illustrating that AI continues to be a central and powerful theme, but also a source of heightened nervousness. Even marginal news, whether positive or negative, still triggers outsized market reactions, a clear sign that we are operating in an environment far from being fully normalized. This volatility merely confirms what we have been observing for several quarters now: artificial intelligence has become one of the main drivers of financial markets, but also one of their key risk factors. It is therefore only natural that we return to this topic today.

Let us be clear: AI is already in a bubble. The hundreds of billions of dollars invested in the race to develop ever more advanced models are having a tangible impact on U.S. economic growth. Some observers even argue that these investments are currently the primary factor preventing U.S. GDP growth from converging toward more European-like levels, closer to 1%.

Unsurprisingly, we continue to receive many questions from concerned clients: Should we remain invested in the sector? Or should we sell everything? Investing in the midst of a bubble is always a delicate exercise. That said, it is important to recall that most of our technology investments, Nvidia aside, were made well before the launch of ChatGPT and the subsequent AI frenzy. We invested in these companies because they were high-quality businesses with attractive long-term characteristics. ASML, Amphenol, BWX Technologies and Taiwan Semiconductor are good examples: we have held them for many years, even though they are now widely grouped by the market under the AI theme.

As for what comes next, our ability to forecast is no better than anyone else’s. We do not claim to predict the future; interpreting the present is already challenging enough. What does seem clear, however, is that AI leadership is far from settled. Alphabet, which many considered to be lagging only a few months ago, now appears to be in a strong position with its Gemini 3.0 model, hence the “code red” alert at OpenAI. But once again, this situation could change very quickly.

The same applies to the timing of the bubble’s eventual burst, because it will burst, inevitably. The chart below is particularly striking: when comparing the evolution of the Nasdaq Composite Index following the Netscape IPO in 1995 with its trajectory since the launch of ChatGPT in 2022, the similarities are remarkable.

Correlation is not prediction, and history never repeats itself exactly, even if it often rhymes. That said, experience shows that most gains in a bubble tend to occur during its final phase, when excesses become truly evident, which, at this stage, does not yet appear to be the case.

Our conviction therefore remains unchanged: maintaining exposure to AI still makes sense at this point, provided it is done with discipline and selectivity. More than ever, we reiterate our investment philosophy, one that continues to make full sense today, namely to remain invested in companies whose earnings growth remains aligned with their valuation, even when those valuations are sometimes very high, while prioritizing discipline, selectivity and long-term value creation.

We wish you a Merry Christmas and a happy new year!

Best regards,

Your CaridaB Group Team