February 2026 Quo Vadis Capital Investing Letter
Should you sell Alphabet (Google) or others because of skyrocketing investment spending?
Some truly immense amounts of money are about to be spent. Alphabet (aka Google) surprised investors last week with a 2026 capex (investment spending) plan of $175B-$185B. Meta (aka Facebook) is at $115B to $135B. Microsoft (aka Microsoft) is on track for $145B. Amazon, looking for one ring to rule them all, is targeting $200B. I struggled to contextualize this amount of cash so I did what everyone does these days and asked ChatGPT. The response? The amount is so big it “kind of breaks the brain”. It broke ChatGPT’s brain! O.M.G. That said, after putting its artificial brain back together, it offered that a figure this gargantuan would cover buying every home in a major U.S. city or purchasing every NFL, NBA, MLB and NHL team in one fell swoop both will billions to spare.
As you might expect, this kind of outlay made investors nervous that spending on AI and whatnot had become unhinged. The stocks promptly sold off. I think the reaction makes sense as investors usually don’t like elevated capital cycles for the simple reason that it represents cash going out of a business and the potential return (pay-off) of the spending is uncertain. As I am a skeptic, my initial reaction was also to see these huge numbers as confirmation that even if we aren’t in an AI bubble, at least we are in an AI-spending bubble.
Then I took a step back and thought about Charlie Munger’s admonition to “invert, always invert”. Instead of seeing the spending as a big risk, what if the spending works out better than expected? After all, GOOGL, META, MSFT, AMZN are in aggregate generating outstanding returns on their collective capital and are still growing at robust rates. As investors we should want companies to reinvest capital in their own businesses. Again, my instinct is to look at the brain-breaking amounts and assume the returns will be incrementally lower. But what if the pay-off is incrementally higher, or even simply good?
One last item to consider on this topic. In addition to its capital spending plan, GOOGL reported its year-end backlog of future orders with its fourth quarter and full-year 2025 results. The company reported $240 billion of backlog, up 55% sequentially and more than 100% compared to a year-earlier. This is a staggering sum and growth. It suggests GOOGL’s recent spending is working. At the risk of sounding like a cheerleader, I am excited to see what 2026’s capex will produce.
Are software companies doomed?
Beyond freaking out about mega-tech capex spending, last week the market also decided that software as an industry no longer had a future. The problem is that investors believe AI will help to develop low-cost tools that can replace the lucrative software-as-a-service (SaaS) contracts which underly many companies’ hitherto now strong business models. Here I have to record the important caveat that I am a retail and restaurant sector specialist, and software is above my paygrade. That said, in early January, I attended The National Retail Federation (NRF)’s annual trade show in New York, where many vendors to retailers had fancy booths and sponsored various talks etc. Among these was Salesforce (CRM), perhaps the poster child for software companies the market believes will be disrupted by AI. Reflecting this, CRM shares are currently trading at a price-to-earnings multiple of less than 15x this year’s earnings. This compares to a historical average of 46x. This is a massive de-rating. Yet at the trade show, literally 100% of Salesforce’s pitch to its clients was AI-related.
I think the idea that AI will disrupt business models seems quite fair. Much harder to figure is which companies will be disrupted, and which will adapt. Case-in-point, a year ago the market believed traditional search and Google where doomed. Fast-forward, now the market thinks GOOGL is the winner in AI-enhanced search. What about CRM? I personally can’t judge but believe the current price represents an attractive price to bet on CEO Marc Benioff adapting his business. It’s not as if he doesn’t see AI coming.
If you are tempted to buy Bitcoin on this sell-off:
At the risk of upsetting a few readers, I just want to reiterate a few facts. A Bitcoin has no intrinsic value. It generates no cash. It has very limited real-world uses. Bitcoin’s price is 100% determined by the amount of real money (fiat currency) that some other person is willing to exchange for one. As there is no underlying fundamental value, this appears fairly arbitrary. Further, it’s wrong, in my opinion, to say that Bitcoins are special because they are finite in number. The explosion of crypto-tokens shows the opposite to be true. These things are infinite. In any case, being finite does not confer or imply value. The number of dog turds in the world is finite, but you’ll be fined by many cities, not rewarded, for leaving them around.
More seriously, I consider Bitcoins and other crypto-tokens to be pure trading vehicles with a faddish and ultimately fleeting appeal. I personally doubt they will exist in the future. Companies, on the other hand, will still be here. I’m afraid we’re stuck with dog turds as well.
Travel Update
I’m writing today from Klosters, Switzerland (next to Davos). Last week I attended ValueX Klosters, an investment conference that brought together professional and individual investors from Australia, Hong Kong and South Africa to Alaska. Honestly, I think we are giving the Davos World Economic Forum a run for the money in terms of who is more global. In contrast to Davos, however, ValueX is a collaborative event to share ideas and spend time making friends. Davos seemed to be more about bickering. I think one President of one country even tried to intimate the leader of another into selling off some of its territory. Clearly no friends were made.
At ValueX Klosters, I pitched an investment idea to the group on a company called Savers Value Village (SVV) which is the largest for-profit thrift retailer. Please email me if you’d like a copy of the deck. I also enjoyed moderating discussions and presentations of others. I’m looking forward to coming back next year.
*This is not a recommendation. Please consult your advisor for investment advice tailored to your risk tolerance and investment profile.
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John Zolidis
President & Founder
Quo Vadis Capital, Inc.
John.zolidis@quovadiscapital.com
Mr. Zolidis has more than 25 years’ experience as an equity analyst. In 2017 he founded Quo Vadis Capital, Inc., a Registered Investment Advisor (RIA) offering investment management for individuals and an idea service for professional investors. He is a frequent presenter at value investing conferences around the world and a guest lecturer at Columbia Business School. Prior to founding Quo Vadis, Mr. Zolidis was a sell-side analyst following the consumer sector. He also managed money in a buy-side role at a long-short equity fund over 2013-2014. He was named in the Wall Street Journal’s Best on the Street list in 2005. He was named a RETHINK retail Top Retail Expert for 2025. He started his career in finance in 1996 following degree studies in Philosophy at Kenyon College and the University of Oxford. Mr. Zolidis and works from New York, NY and Paris, France or wherever he has his laptop.
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Quo Vadis Capital, Inc. (“Quo Vadis”) is a Registered Investment Advisor (RIA) in the State of New York. THIS IS NOT AN ADVERTISEMENT. This is not a solicitation. Please consult your financial advisor for advice tailored to your financial and risk profile.
The author of this letter and accounts managed by Quo Vadis Capital have a long position in shares of CRM, GOOGL, META, MSFT, AMZN.
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