Executive Summary
Steven Cress's quantum system delivered 46.6% returns versus the S&P 500's 17.6% in 2025, despite massive mid-year volatility from trade war fears. The portfolio's AI infrastructure holdings—Credo Technology (CRDO) up 116% and Celestica (CLS) up 240%—captured the hyperscaler CapEx explosion that most investors missed during the February-May sentiment-driven selloff. Credo's 272% revenue growth from AI connectivity solutions and Celestica's 52% year-over-year EPS climb from manufacturing complex hardware platforms for hyperscalers represent a structural shift in data center economics. The critical insight: while the Magnificent Seven trades at 31x earnings, the S&P 493 trades at 22x, creating a valuation arbitrage for AI infrastructure suppliers with superior growth metrics. Credo maintains a 78% forward EPS growth rate with zero analyst downgrades in 90 days, while Celestica holds $552 million in operating cash with 14 consecutive analyst upgrades. The quantum methodology's strength emerged during the April-May sentiment crash when fundamentally sound companies sold off 20-30% on tariff fears, then surged when markets returned to fundamentals post-China truce. This pattern—sentiment-driven volatility followed by fundamental reversion—has repeated annually since 2022, creating systematic alpha opportunities. Urban Outfitters (URBN) exemplifies this dynamic, initially drifting down before rallying 49% year-to-date as consumer discretionary fundamentals reasserted. The portfolio's defensive rotation into consumer staples and healthcare in recent weeks signals market uncertainty heading into 2026, but the underlying AI infrastructure thesis remains intact with hyperscaler CapEx commitments continuing to surge.
Key Insights
what Steven Cress said“Hyperscalers are committing enormous cap X. It is absolutely going through the roof in terms of their cap X spend now versus what it was a decade ago.”
what Steven Cress said“Companies with good fundamentals will sell off. And this is a perfect textbook case example of what happened. The fundamentals for these companies really did not change. It was just the market perception and fear.”
what Steven Cress said“In the last 90 days. We have had 10 upward revisions and zero downward revisions by adults [for CRDO].”
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