Coda Global Opportunities, an opportunistic long/short equity fund, seeks to identify winners and losers around major investment themes, or what the team calls ‘profit pools.” One area where the team has been particularly skeptical is the economics of the artificial intelligence capital expenditure boom. Peter Andersland and Knut Børsheim had built a basket of short positions in companies exposed to AI infrastructure spending, including data-center operators and related businesses such as CoreWeave and Caterpillar. Following substantial share price declines in the sector, they have taken profits on some positions and shifted their focus towards other industries, without abandoning their underlying concerns. “Our skepticism regarding the economics of the AI capital expenditure boom has not disappeared.”
October saw a meaningful repositioning of both the long and short portfolios at Coda Global Opportunities, with the more significant strategic changes taking place on the short side. “We shifted the emphasis of the short portfolio slightly away from AI infrastructure towards businesses more directly exposed to the consequences of higher energy prices and interest rates,” the team writes. “Several of these investments have declined substantially, bringing share prices closer to our assessment of fundamental value and reducing the potential return from remaining short,” they explain.
“We shifted the emphasis of the short portfolio slightly away from AI infrastructure towards businesses more directly exposed to the consequences of higher energy prices and interest rates.”
The adjustment was not a change in the team’s fundamental view of the sector, but rather a reassessment of the risk-reward profile at prevailing share prices. “Our skepticism regarding the economics of the AI capital expenditure boom has not disappeared, and we retain multiple positions in this area. However, investment opportunities must be assessed against the expectations reflected in current prices rather than those prevailing when positions were initiated.”
“Our skepticism regarding the economics of the AI capital expenditure boom has not disappeared, and we retain multiple positions in this area.”
The timing of the reduction may prove significant. A subsequent rally in CoreWeave’s shares illustrated the importance of reassessing short positions as valuations change. CoreWeave reported quarterly revenue above Wall Street expectations and raised its 2026 sales guidance, triggering a sharp rally in its stock. The company leases data-center capacity to major technology businesses such as Microsoft and is closely watched and is closely watched as a barometer of investor sentiment towards AI infrastructure.
Shorting the Capital Cycle, Not AI
Andersland and Børsheim are keen to distinguish their investment thesis from a bearish view of artificial intelligence as a technology. “We are not short AI as a technology thesis. We are short the capital cycle developing around it,” they explain.
“We are not short AI as a technology thesis. We are short the capital cycle developing around it.”
While demand for computing capacity remains exceptionally strong, the team questions whether the enormous investment required to meet that demand will ultimately generate adequate returns. “Demand remains extraordinary, but so does the amount of capital being committed to satisfy it. As financing shifts from internally generated cash flow towards debt, private credit and equity issuance, the economics become increasingly sensitive to the long bond,” they elaborate. “The higher the hurdle rate, the fewer projects can earn an adequate return.” Their concern is therefore not the pace of AI adoption, but whether the returns on the capital being deployed will justify the cost of financing the expansion.
Looking for Earnings Disappointments Beyond AI
The rotation also reflects a broader shift in where the team sees attractive short opportunities. Andersland and Børsheim increasingly see opportunities in conventional businesses where the effects of higher energy prices and interest rates may not yet be reflected in earnings expectations. “While those opportunities remain, we now see a growing prospect of earnings disappointments among more conventional businesses whose current valuations do not, in our view, adequately reflect the economic consequences of energy and interest rate shocks,” they explain.
“We now see a growing prospect of earnings disappointments among more conventional businesses whose current valuations do not, in our view, adequately reflect the economic consequences of energy and interest rate shocks.”
Positions in airlines and other travel-related businesses reflect concerns about the combination of higher fuel costs, limited pricing flexibility and the potential weakening of discretionary demand. Coda has also increased exposure to selected industrial, building products and consumer durables businesses. In these sectors, higher input costs and financing expenses could coincide with slowing end-market demand, making it more difficult for companies to protect profitability.
The distinction is important for the team’s approach to short selling. Rather than simply targeting companies it considers expensive, Andersland and Børsheim are increasingly looking for situations where deteriorating business fundamentals could translate into earnings disappointments. As they put it: “The distinction is that the investment case increasingly depends on deteriorating earnings rather than simply reconsidering an expensive valuation.”
