Portfolio Shifts and Silicon Valley Inclinations

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Mr. Peter Thiel, a gentleman whose fortunes are well-known within the circles of Silicon Valley, continues to demonstrate a most discerning eye for investment. His continued stake in Palantir Technologies – exceeding 3% of the Class A shares, and a considerably larger proportion of the B and F classes – suggests a confidence in the company’s prospects that is, if not entirely surprising, certainly noteworthy. One observes, with a degree of amusement, the lengths to which certain individuals will cling to ventures over which they exert considerable influence.

Mr. Thiel’s management of the Thiel Macro fund, amounting to some $74 million, has recently undergone adjustments which, whilst not dramatic, are worthy of consideration. A divestment of holdings in both Nvidia and Tesla – the latter reduced, rather than entirely abandoned – suggests a reassessment of their relative merits. It is a truth universally acknowledged, that a fund manager in possession of a good fortune, must be in want of judicious repositioning. The acquisition of shares in Apple and Microsoft, however, indicates a preference for establishments of a more… established character.

These two latter companies now comprise a full 61% of the fund’s assets – Apple claiming 27% and Microsoft a still more substantial 34%. While such a concentration might appear, to some, a degree reckless, it speaks to a conviction in their underlying strength. Indeed, though the sum represents but a small fraction of Mr. Thiel’s personal wealth – a most comfortable $26 billion, by all accounts – the scale of the investment cannot be dismissed lightly. It suggests a belief that these are not merely profitable concerns, but rather, companies of enduring consequence.

Apple: A Portfolio Staple

Apple, as every observer of the modern world must acknowledge, has cultivated a reputation for elegance and refinement in its consumer devices. This is not merely a matter of aesthetic preference, but of a deliberate expertise in the design of both hardware and software, a combination rarely encountered with such success. Their ability to craft bespoke semiconductors – improving performance and efficiency – is particularly commendable, and speaks to a desire for control that is, in this age of outsourcing, increasingly rare.

Recent financial reports – for the first quarter of fiscal 2026, ending December 27th – reveal a healthy increase in revenue, reaching $143.7 billion despite the prevailing tariffs. Growth in both the iPhone and services segments has been particularly strong, and sales in China – after a temporary decline – have rebounded impressively. Net income has also experienced a pleasing increase, reaching $2.84 per diluted share. Such figures are, of course, always gratifying.

It has been reported that Apple intends to employ Alphabet’s Gemini models to enhance its Siri voice assistant, abandoning its previous ambition to develop such technology in-house. While this may be interpreted as a limitation in their own innovative capacity, it is, perhaps, a prudent acknowledgement of the complexities involved. To outsource a task, rather than attempt it imperfectly, is often a mark of good sense. It may, furthermore, allow Apple to more effectively monetize its services, and drive growth in that segment.

The introduction of generative AI features for new iPhones and Macs in late 2024 – collectively known as Apple Intelligence – is a promising development. While currently offered without charge, a premium version is planned for the coming years. The partnership with Alphabet may prove instrumental in expanding these capabilities, and further refining the Siri experience. However, the current valuation – 33 times earnings – is, one suspects, rather optimistic. A more reasonable price would be, undeniably, preferable.

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Microsoft: A Steadfast Foundation

Microsoft, possessing the enviable position of the largest enterprise software provider, is adept at monetizing generative AI copilots. These conversational assistants – integrated into applications for office productivity, enterprise resource planning, and business intelligence – are proving remarkably popular. A 160% increase in copilot seats, and a tenfold increase in daily active users, are figures that cannot be ignored. It is a truth universally acknowledged, that a company in possession of a good product, must be in want of widespread adoption.

The recent launch of Agent 365 – a tool allowing clients to manage generative AI agents – further solidifies Microsoft’s position as the central nervous system of corporate IT. The claim to be the first provider offering such control across multiple clouds is, naturally, presented with a degree of self-satisfaction, but is, nonetheless, a claim that appears to be well-founded.

Beyond software, Microsoft Azure continues to capitalize on its status as the second largest public cloud provider. The consolidation of AI services and models into a single platform – known as Foundry – allows developers to build, customize, and manage their applications with greater efficiency. An 80% increase in customers spending over $1 million per quarter on Foundry is a testament to its success.

Furthermore, Microsoft’s 27% equity stake in OpenAI, and exclusive rights to its most advanced models, provides a distinct advantage. Developers wishing to incorporate these models into their applications must either utilize Azure, or work directly with OpenAI. Microsoft, therefore, benefits in either scenario. It is reported that OpenAI shares 20% of its revenue with Microsoft, a circumstance that is, undoubtedly, most agreeable.

The recent financial results for the December quarter – revealing a decline in stock price following their release – appear, upon closer examination, to be unduly harsh. While capital expenditures related to AI infrastructure exceeded expectations, and Azure revenue grew more slowly than anticipated, the overall picture remains positive. Adjusted earnings increased by a respectable 24%, making the current valuation of 27 times earnings appear quite reasonable. Prudent investors might, therefore, consider acquiring a small position.

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2026-02-02 12:55