Zuckerberg is aggressively investing in his new vision of the metaverse, as evidenced by the top talent hire of Apple's head of design, Alan Dye. Back in 2021, when Facebook changed its name to Meta, the company defined the metaverse as an immersive digital world you would step into, with Horizon Worlds and Quest headsets at the center. At Meta Connect in September, Zuckerberg revised that definition. The metaverse is now a blend of AI glasses and virtual reality, with the real world as the canvas and an assistant in your line of sight. That’s bad news for VR and good news for the new canvas Dye will now paint.

For the past month the market has been nervous that the AI bull market may be approaching an end. The latest pulse on that topic came this week from AWS re:Invent 2025. Amazon's message was clear, they are accelerating its AI buildout and agents will have a profound impact on the future of work. Unfortunately the market is not buying it, with shares of AMZN, GOOG, NVDA, MSFT, and META down an average of 0.5% in the day following the bullish comments from Amazon, while the Nasdaq is flat.

At Deepwater, we own shares of META, and we believe the company is well-positioned to leverage AI at scale to drive ad-revenue growth. That said, I’m disappointed in one of the company’s most recent AI products. We tested Meta AI running on the new Meta Display in a side-by-side comparison against ChatGPT’s video conversation tool running on an iPhone. Meta AI understood about 90% of prompts and delivered satisfactory answers roughly half the time, while ChatGPT understood 100% of prompts and provided satisfactory responses 98% of the time.

The market appears to be looking past the facts about how quickly AI is advancing, evidenced by NVDA shares being down 3% following better than expected earnings and guidance and the Nasdaq falling 2% over the past five trading days.…

The 2% decline in NVDA shares following October results and January guidance, both of which were above whisper expectations, reflects investor concerns that, when it comes to AI, it can’t get any better. While the concern is understandable, most signs suggest that growth for Nvidia and the broader AI infrastructure buildout is still in its infancy.

It's becoming more clear that demand for the new iPhone Air is soft. Recent third party estimates suggest the new form factor accounts for around 5% of iPhone sales. Before it went on sale, I and the Street had estimated it would account for 15% of sales. Despite that headwind, the iPhone is growing at its fastest rate in four years, largely thanks to a massive upgrade pool showing up, albeit nine months late.

Meta is putting a lot of effort into wearables, but based on our recent testing of the new Meta Display, they have a long way to go before they get the right formula. We ordered our Meta Display as soon as it was announced and got it 26 days later. Our bottom line is that while the tech is impressive, we find it hard to recommend the product based on its limited use cases. However, we continue to believe Meta is making the right move by investing around $18B annually into Reality Labs, but the return on that investment will take years.