Renowned hedge fund Gushong Capital CIO: The AI bubble will have to wait until OpenAI goes public. Instead of betting on the short term, think about the global landscape over the next 3-5 years.

Recently, David Craver, Co-Chief Investment Officer of the well-known hedge fund Lone Pine Capital, which manages over $19 billion in assets, shared his in-depth thoughts on current market structural changes, the progress of artificial intelligence (AI), and investment philosophy during an interview series with Goldman Sachs’ “Great Investors.”

Bidding Farewell to “Short-Sightedness”: Thinking About the World in 3-5 Years

As one of the representatives of the “Tiger Cub” funds, Lone Pine Capital has always adhered to a fundamental long-side strategy. Craver observed that market structure has undergone a fundamental change.

Compared to when he first entered the industry, the most notable changes in the current market are twofold: first, the volatility of individual stocks around events is at an all-time high and often decoupled from qualitative fundamental news; second, high valuations are rampant among the giants.

“I used to tell my partners that I could predict how a stock would move the next day after reading a press release, but that’s no longer the case,” Craver said. Due to the rise of passive investing and multi-strategy funds, the market’s reaction to short-term information tends to be excessive and irrational.

In this environment, Craver believes that the true “alpha” opportunities come from a neglected blank space—the time dimension.

"I don’t care whether a company will beat expectations next quarter; too many people are engaged in this short-term ‘night fight,’ trying to infer short-term stock movements based on a set of facts.

What I try to think about is, what will the world look like three or five years from now.

Considering the huge changes happening in the world today, this is a challenge, but it also offers tremendous opportunities for investors like us who are willing to do deep research and hold long-term views."

He emphasized that if you imagine the stock market closing tomorrow and reopening in three years, “the question of ‘what assets would you want to hold in this scenario?’” can filter out most noise.

Regarding the much-discussed “Mag 7,” Craver believes there is already significant divergence within this group:

“Among this group, there are a few companies I believe are undervalued fundamentally, but there are also some that are absurdly overvalued.”

On the AI Bubble: Maybe We Have to Wait for OpenAI to Go Public

Regarding the market’s hottest concern—whether AI is overheating—Craver gave a clear judgment: Now is not a bubble. Although capital expenditure is huge, we are still in the third or fourth inning of the build-out cycle.

He listed three core reasons supporting his bullish view on AI infrastructure:

2. Models continue to “get stronger and more scalable”: “Models keep improving and expanding… give them more computing power, and what they can do indeed gets better, use cases will continue to grow.”
3. Computing power/inference capacity remains in short supply: “From a capacity perspective, we are in a shortage… companies doing inference hosting today do not have enough capacity.”
4. Companies are already seeing ‘stunning value returns’: He said that whether in private equity portfolios or founder-led digital-native companies, the effects of adopting AI are “incredible.”

Craver stated:

“We’ve spoken with several CEOs who say: ‘I believe I can triple or more my business revenue, and I won’t need to hire any new employees.’ That’s the beginning of everything.”

On the “Bubble Theory,” Craver offered an counterintuitive view:

"When everyone thinks it’s a bubble, it’s not a bubble.

The bubble might only truly arrive when we pass this phase—probably when OpenAI and Anthropic become public companies, and AI use cases are ubiquitous in large enterprises. Until then, we have a long way to go."**

Next Phase Theme: “The Revenge of the Dinosaurs”

Craver believes AI is entering a “different stage”: early on, more like concentrated bets on infrastructure; later, it will diffuse into applications and traditional industries.

If the first phase of AI investment was infrastructure builders like Nvidia, Craver thinks the market is about to enter a broader phase, which he calls “Revenge of the Dinosaurs.”

This means that traditional large companies with deep moats will leverage AI technology to significantly reduce costs.

“Larger companies will use this technology to cut costs dramatically in the next two, three, or four years.”

“I think in the 2027 earnings calls, CFOs will say: ‘I just cut $500 million in annual expenses because we implemented this new technology.’”

Craver believes this will benefit not only tech stocks but also leading companies in logistics, industrials, and other traditional sectors. If these “dinosaurs” can use AI to do things previously impossible or to greatly improve efficiency, they will see astonishing profit growth. This is not just an infrastructure story but a dividend from technology spreading across industries.

Investment Secret: Be Willing to Change Your Mind and Trust Your Instincts

At the end of the interview, when asked about the greatest advantage as an investor, Craver did not mention specific models or data analysis skills but emphasized mental flexibility.

“My biggest advantage is being willing to change my mind.”

Craver recalled the teachings of his first boss, legendary investor Julian Robertson: “The rearview mirror is not the way to look at the world.” (The rearview mirror is not the way to look at the world.)

He acknowledged that when facts change, one must be willing to pivot, especially in an era of frequent disruptive transformations. It’s not just science but also an art.

Additionally, Craver shared the best advice from his partner Steve Mandel, with whom he has worked for 33 years: “Trust your instincts.”

“Steve always tells me: Trust your instincts. Sometimes I act slowly, but my instincts are usually right.”

Risk Control: The Most Effective Risk Management Is “Knowing Your Company”

Regarding position management, Craver said Lone Pine Capital still maintains a relatively concentrated portfolio. Despite significant market volatility, he does not rely on complex hedging tools (like pairs trading) because they often involve high leverage.

“The biggest risk mitigation is understanding your companies. When you know a company’s moat and what’s changing, you can stay disciplined when the market overreacts, or even see it as an opportunity.”

Craver concluded that in the current macro environment—moderate inflation, the Fed still room to ease—risk assets are well supported. Coupled with productivity gains from AI, he remains optimistic about the market over the next few years.

Full Interview Translation:

Tony Pasquale (Host): Welcome to another episode of Goldman Sachs Exchanges’ “Great Investors” series. I am Tony Pasquale, Head of Hedge Fund Coverage at Goldman Sachs Global Banking and Markets. Today, I am honored to have David Craver with us. David is Co-Chief Investment Officer of Lone Pine Capital, an asset management firm managing over $19 billion, focused on long-term fundamental investing. David, welcome to “Great Investors.”

David Craver: Thank you for having me. It’s an exciting time.

Tony Pasquale: You joined Lone Pine in 1998. I think the audience and market followers are familiar with the broad changes since then—such as the rise of passive investing, the growth of private markets, and increased bank regulation after the financial crisis. From your perspective, how have these changes impacted the market itself?

David Craver: Compared to when I first started, there are two obvious differences now.

First, the volatility of individual stocks around events is higher than ever, and this volatility often disconnects from what I consider qualitative fundamental news. This is a stark contrast to the past. I used to tell my partners that after reading a press release, I could predict the stock’s movement the next day, but that’s no longer the case. Moreover, the magnitude of event-driven volatility today is much larger than what fundamental investors would expect.

Second, valuations of some large-cap companies are extremely high. This is very different from my early days. I used to have a rule: any company with a market cap over $200 billion and a P/E ratio over 20 might have trouble. Today, dozens of such companies exist, which is a big change. There are reasons behind these phenomena, and we can explore them further.

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Tony Pasquale: Many people, whether through personal experience or hindsight, think of the late 1990s, especially 1998, 1999, and 2000—the peak period with huge volatility and severe overvaluation. To some extent, you now seem to suggest that today’s market is even crazier. Is that fair to say?

David Craver: Very fair. Interestingly, if we look at the “Mag 7” (seven largest market cap companies) as a subset, I think some of these companies are fundamentally undervalued, while others are absurdly overvalued.

I believe this is partly the result of years of passive fund flows. Yes, today’s market has many bubbles, but there are also many opportunities. As I said, it’s an exciting time.

Tony Pasquale: So, what does this mean for your work? How do these market structures affect your approach? Ultimately, does this create better or worse opportunities for long-term fundamental investors like us?

David Craver: I think it’s better for us. The number of investors who base their decisions on valuation fundamentals is decreasing. By definition, passive flows do not invest based on valuation perspectives. The rise of multi-strategy funds is more about relative value trading, often not focused solely on company valuation.

Therefore, we are aiming to find what I call the “white space”—areas where we have a duration mindset and actionability, viewing valuation through that lens. I believe this approach is different from many others today.

Tony Pasquale: To summarize, is this part of what makes Lone Pine different? Is this a key reason? How would you answer?

David Craver: Several points. First, my research team is very lean. I often say I have a small group focused on big questions. The world today is changing more than I’ve seen in my career, even during the internet bubble. With AI emerging and its potential to disrupt everything, there are huge questions about where we’re headed in the medium term. My team is very focused on answering those questions.

My team doesn’t focus on short-term issues. I don’t care if a company beats quarterly estimates; many are engaged in “night fights,” trying to predict short-term stock moves based on specific facts. I try to think about what the world will look like in three or five years. Given everything happening in the world, that’s a challenge.

But it also offers tremendous opportunities for long-term investors like us. We have extensive networks in private and public markets and are very good at deep fundamental research. That’s what we focus on.

Tony Pasquale: Based on everything you’ve just said, I assume you see this long-term orientation and persistence as a competitive advantage. How do you know when you’re wrong?

David Craver: Of course. The ability and willingness to act with a duration perspective is indeed a competitive advantage. When markets overreact to certain information flows, the volatility I mentioned earlier often creates opportunities.

The companies themselves are durable, reflected in our reputation and in the fact that a significant portion of the capital we manage is our own money. So, by definition, this is a long-term approach. Our limited partners understand that we think about the world over the time horizon I described. Therefore, when a quarter’s performance is not as good as smaller, more nimble players, I am not criticized; people evaluate my performance over a long period.

Tony Pasquale: Exactly. So, how do you know when you’re wrong?

David Craver: How do I know I’m wrong? That’s the art of this business, especially in a world of significant upheaval. We need to constantly perform counterfactual analyses on the companies we own and are investing in. I believe we will discuss AI later, and I can show you some of the key areas we are monitoring closely to assess whether this supercycle will continue.

Tony Pasquale: Going a level deeper, some consider themselves contrarian investors, while others are the opposite. Where do you see yourself on this spectrum?

David Craver: I am more of a “GARP” (Growth at a Reasonable Price) investor. I grew up with Steve Mandel, who was my partner at Tiger Management 33 years ago. Looking back, it’s incredible—back then, we had a handful of “category killers” in retail, operating in just seven states. You could map their locations, project where they’d expand, and analyze unit economics to infer they’d become much larger companies.

Given the prospects of these companies, many of their trading multiples were justified. I grew up watching many “acorns grow into oaks,” which largely shaped my worldview. We look for companies with moats and long-term tailwinds that we can hold for the long run.

I tell my team: imagine the stock market closes tomorrow and reopens in three years. What would you want to own? This perspective often filters out lower-quality targets—those where you think you have an advantage on a data point. From my experience, the most obvious outcomes are often visible five or ten years later, even if short-term factors don’t seem to change the market’s view. As long as you maintain a duration mindset and hold through the ups and downs, the long-term results tend to be very good.

Tony Pasquale: Let’s talk about AI. I remember a conversation we had last July. My recollection is that you said the scale of this build-out would be much larger than people imagine. If I’m not mistaken, where are we now?

David Craver: You’re right. What’s happening is quite incredible. I fully understand the concerns about a bubble due to the massive capital投入. But this is a generational platform shift. We might be in the third or fourth inning of actual infrastructure build-out. That’s a judgment call.

We are watching several key factors to understand how this infrastructure development will unfold.

First is the models themselves. They keep improving and expanding. As more compute power is投入, the productivity of these models and what they can do is definitely getting better, and use cases will continue to grow. The expansion is ongoing, and we are closely monitoring.

Second, capacity remains in short supply. When talking to hyperscalers and inference hosting providers—essentially the chip usage scenarios—they currently lack sufficient capacity. They are rapidly building more, which you know. But utilization rates are very high.

Third, and perhaps most importantly, the companies we trust—small and mid-sized digital-native firms—are seeing enormous value from implementing this technology. When we speak with private portfolio companies and founder-led digital companies, the results they’re achieving with this tech are astonishing.

The clear benefits in coding are well documented. Processes are shifting from humans to intelligent agents, greatly increasing efficiency. Many CEOs tell us: “I believe I can triple or more my revenue, and I won’t need to hire another person.” This is just the beginning of what’s to come.

These three points—models improving, use cases expanding, and market demand outstripping supply—are why we remain bullish on infrastructure. Another important aspect is that building these systems is difficult. It’s not as simple as snapping fingers to bring large capacity online. System bottlenecks cause delays, which could extend this cycle.

That’s my view on AI. At this moment, we remain quite optimistic about this overall trend. I have a saying internally: when everyone thinks it’s a bubble, it’s not a bubble. It only becomes a bubble when we reach the other side—probably when OpenAI and Anthropic go public, and we see more use cases proliferating in large companies. We still have a long way to go to get there.

Tony Pasquale: Final question. I think your view is very clear. If you were to act on this today, how would you think? I’d say that the first three years of AI—from ChatGPT’s launch to its third birthday—are incredibly simple: you only need to pick one or two stocks to generate most of the convexity. Are we now entering a different phase of the race?

David Craver: I do believe we are entering a different phase. But that doesn’t mean the early winners are out of the game; I think it’s still very early. We’ve seen memory chips surge in recent months. As build-out continues, some peripheral areas outside Nvidia and Broadcom are also becoming tight.

But what’s very interesting and exciting for Lone Pine is what I call the “Revenge of the Dinosaurs” theme—large companies adopting this technology and significantly reducing costs over the next two, three, or four years. I think in the 2027 earnings calls, CFOs will say: “I just cut $500 million in annual expenses because we implemented this new technology.” So, it will spread across various businesses.

In my view, this is very positive for the market. Infrastructure is clearly the first way to participate in this trend. The next big thing will be application of the technology. You can participate through hyperscalers, with obvious beneficiaries like Anthropic and OpenAI, but also logistics companies that can do things previously impossible or more efficiently. If they have a moat, they will retain these efficiencies and significantly boost profitability. All of this is in the realm of future expectations—I absolutely believe it will happen.

Tony Pasquale: Very interesting. I’d like to briefly revisit how you operate the fund. Clearly, you have core positions. Do you trade around them? Use pairs? Options? How do you think about building positions and managing subsequent risks?

David Craver: The biggest risk mitigation is understanding your companies. On the long side, we tend to hold a fairly concentrated portfolio. We are confident in a theme or a company, then build positions. Knowing the company and understanding what’s changing around it is the best risk mitigation.

We don’t do pairs trading. My view on pairs is that if you run a highly leveraged balance sheet, it works well. Our hedge fund operations typically don’t use high leverage, so we don’t focus on alpha from shorts; instead, we look to profit from shorting value-destroying industries and sectors.

On the long side, the mirror effect means you can’t run very high leverage because when factor rotations occur, short positions often move inversely to longs. So, our short positions are smaller than before. We used to do more pairs trades.

Today, our holdings are quite bullish for several reasons. First, our AI bets. From a macro perspective, inflation remains moderate. We get these views from conversations with companies and trusted contacts, so we believe the Fed still has room to remain accommodative, which is generally positive for risk assets. Accordingly, our positions are adjusted.

Tony Pasquale: I’d like to ask a question related to private equity, given the hedge fund context. As I mentioned earlier, after Lehman Brothers’ collapse, hedge fund assets under management were less than $2 trillion. Today, that number exceeds $5 trillion—significant growth. Meanwhile, private equity and the entire alternative investment space have grown much faster than that. How do you view the rise of private market investing and its relationship to your business?

David Craver: We are ourselves private market investors. I believe that to be a successful public market investor, active engagement in that space is essential. It also benefits another part of my business. The research cycle I’ve developed for private companies influences my public market holdings.

We trade regularly. We are active in late-stage and pre-IPO areas. The world today is enormous. I don’t think this will change soon because investors like the fact that their investments have low volatility. Entrepreneurs like the fact that they don’t need to hold quarterly conference calls or be accountable to the SEC. As a result, many private companies have become very large, and frankly, I think this trend will continue.

I believe many projects funded in 2020 and 2021 may not perform well. But before a company becomes a so-called “mature” company, the private market world is similar to the public market. We need eyes in that world to inform our public market operations.

Tony Pasquale: Final main question. To some extent, this circles back to the beginning of our conversation. Regarding the future of industry structure, how do you see it evolving?

David Craver: I do believe we are in an unusual period. Passive investing has been very successful. Some of the world’s largest companies have created enormous value, and passive investing has worked well for this.

But I think, with the platform shifts we’re seeing now, disruption is accelerating. You know the data on the largest companies by market cap over the past decade. If history repeats, when we look back in 2035, the list of top companies will be different from today.

I am an active manager. Given all the changes happening today, fundamental research is more valuable than ever. As I said at the start, this is an exciting time because so much is changing in the world.

Tony Pasquale: Okay, now for the rapid-fire questions. Let’s go. As an investor, what is your greatest advantage?

David Craver: My greatest advantage is being willing to change my mind. Julian Robertson, my first boss, taught me that the rearview mirror is not the way to look at the world. When I first started, I saw him pivot quickly when facts changed in a way that surprised me. When you asked how I execute my views, you must be willing to change. The world is changing, so this is more an art than a science, but I am willing to turn around and act when needed.

Tony Pasquale: What’s the best advice you’ve ever received?

David Craver: The best advice I received in investing is to trust my instincts. Overall, I have good market intuition. Over the past 25 years, if you ask Steve Mandel about my performance, he always says: Trust your instincts. Sometimes I act slowly, but my instincts are usually right.

Tony Pasquale: Which investor do you admire most?

David Craver: The answer is obvious to me. Steve Mandel has been my role model for 33 years. I respect his investment acumen, but I respect his character even more. He has been a great partner, and he’s the person I would point to as having the biggest influence on me.

Tony Pasquale: Final question—how do you spend your time outside the office?

David Craver: I read a lot. Everything—novels, nonfiction, voraciously.

Also, my wife and I spend a lot of time on charity work, helping nonprofits that aim to “empower children to become independent.” I didn’t come from wealth (a silver spoon), grew up in South Carolina, and attended public schools. Several people have bet on me along the way, and I am forever grateful. Helping others find opportunities brings me great joy. Whenever we find nonprofits that truly help people achieve independence, we try to support them as much as possible.

Tony Pasquale: That’s all for today. David, thank you for joining us.

David Craver: Thank you very much.

Tony Pasquale: Thank you all for listening. This episode of Goldman Sachs Exchanges’ “Great Investors” was recorded on January 27, 2026. I am Tony Pasquale.

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