This week's interesting finds

This week in charts

The Big 5 vs. S&P Energy: CAPEX as a share of operating cash flow

Asset-light vs. asset-heavy companies

Market capitalization – asset-light vs. asset-heavy companies

S&P 500 index market capitalization by sector since 1980

Predictive power of valuation entry points over various holding periods

S&P 500 Index Real Estate sub-industry weights

Relative P/E of Health Care vs. S&P 500 Index at historic lows

Health Care mergers & acquisitions deal counts

Drug development time savings – with and without the use of A.I.

Share buybacks announced but not executed

Retail investors buying gold

Keeping cool: heat a key challenge for data centers and AI

The global boom in data centers as companies increasingly outsource information storage and ramp up use of energy-intensive artificial intelligence is creating a key challenge for the industry - how to keep cool.

An outage at the world's biggest exchange operator CME Group from late Thursday that halted trade on its popular currency platform and in futures spanning foreign exchange, commodities, Treasuries and stocks has put a spotlight on data centers overheating.

The problem was a cooling issue at data centers operated by Dallas-headquartered CyrusOne, which operates more than 55 centers in the U.S., Europe and Japan.

What causes the heat?

High-powered AI and cloud servers crunching data need huge amounts of power, which gives off intense heat that traditional air cooling systems are often unable to cool properly.

Data centers contain racks of servers stacked together which are constantly turned on, consuming power. As they heat up, they require constant cooling.

What can data center operators do about it?

More data centers are looking to use water or specialized coolants instead of air cooling, as liquid cooling can be 3,000 times more efficient than air at removing heat.

Liquid cooling however can create its own challenges, including potential leaks, corrosion and the need for specialized maintenance. It can also be water intensive.

Companies are looking to find ways to reduce outside coolants. Microsoft last year launched a new data center design that consumes zero water for cooling.

According to the company, its new technologies recycle water through a closed loop, circulating between the servers and chillers to dissipate heat without needing a fresh supply.

There are also systems to recover and reuse waste heat from data centers.

How common are outages linked to cooling issues?

Mewton said that in general data center outages were "extremely uncommon" because of contractual requirements for operators to keep them almost always online.

"You need to be up more than 99.99% of the time sometimes," he said.

While outages overall were fairly unusual, specific issues directly affecting cooling systems were "even rarer", Mewton said. "What I most often hear (about) is obviously power issues," he said.

A wave of deal-making for data center cooling

The global appetite for data centers has sparked a wave of deal-making across the industry as companies race to build capacity to meet the surge in power and cooling needs.

Law firm White and Case estimates that up to 40% of total energy consumption in data centers is spent on cooling them down, making it a big business.

This week’s fun finds

Last weekend our office transformed into a holiday playground for EdgePointers' kids. They bounced in an inflatable castle, had their faces painted and created their own art canvases. An afternoon packed with laughter and seasonal cheer!

How Your Brain Creates ‘Aha’ Moments and Why They Stick

Insights are not limited to geniuses: We have these cognitive experiences all the time when solving riddles or dealing with social or intellectual problems. They are distinct from analytical problem-solving, such as the process of doing formulaic algebra, in which you arrive at a solution slowly and gradually as if you’re getting warmer. Instead, insights often follow periods of confusion. You never feel as if you’re getting warmer; rather, you go from cold to hot, seemingly in an instant. Or, as the neuropsychologist Donald Hebb, known for his work building neurobiological models of learning, wrote in the 1940s, sometimes “learning occurs as a single jump, an all-or-none affair.”

An abrupt cognitive shift in how the mind understands information is known as a representational change. Although researchers have inferred sudden shifts in understanding from the behavior of subjects, they have not pinned down how the brain supports representational change.

During moments of insight, representational change typically occurs, said John Kounios, a cognitive neuroscientist at Drexel University and co-author of the book The Eureka Factor: Aha Moments, Creative Insight, and the Brain. “The question is: How is it occurring?”

This week's interesting finds

 Our holiday gift guide - 2025 edition

Snow already showed up this year, so we figured, "Why wait for Black Friday?". We’re unwrapping our favourite EdgePointer gift picks early because good ideas shouldn’t sit in storage.

 

This week in charts

Consumer spending gaps

Wage and salary growth

Content authors – Human vs. A.I.

Revenue and capital expenditure comparison – Generative A.I. vs. cloud

2024 stock-based compensation by sector

Japan inflation rate

Chinese overseas loans by income group

High-tech facility construction

Capital expenditure comparison

Auto insurance premiums

India gold ETF flows

Source of systemic credit events – BofA Global Fund Manager Survey

‘Uranium prices have skyrocketed’: Canada at core of uranium squeeze

A global rush to lock in nuclear fuel is putting fresh pressure on Canada, the world’s second largest producer of uranium.

Prices for the critical mineral are surging as utilities in the U.S., Europe, and Asia rush to secure long-term supply to fuel power plants, which is increasingly seen as a solution to climate change and power for data centres.

With sanctions on Russian uranium and the world’s top producer Kazakhstan facing its own mining challenges, Canada sits at the centre of the uranium squeeze with high grade deposits in Saskatchewan. But can it meet the world’s demand?

Actually, it’s in “great shape to step up to the ball,” Brooke Thackray, research analyst at Global X, told BNN Bloomberg. “There really are not a lot of places to get uranium.”

“The U.S. is extremely dependent on Canada, and it’s going to become more dependent on Canada,” said Thackray.

Canada produces 13 per cent of the world’s uranium according to Natural Resources Canada, and it knows it stands to benefit.

Is Canada ramping up?

Even with soaring demand, Cameco, a leading uranium producer, does not plan to ramp up its production aggressively unless it locks in more contracts.

The company said it is sitting on “tier-one uranium mining assets that are licensed, permitted, long-lived, and proven, with capacity to expand,” but stressed that it does “not produce speculative pounds of uranium based on demand estimates.”

In fact, Cameco announced it is reducing its forecasted output in its McArthur River/Key Lake operation from 18 million pounds of concentrate to approximately 15 million because of operational delays.

Canada has the mineral, the companies, and government support. But the reality is, scaling output is slow, expensive and constrained by labour and permitting, said Charlton.

A ‘funny, funny market’

Unlike oil or copper, uranium demand is mostly hard wired into long term reactor fleets.

“Uranium is a funny, funny market. It’s totally unique,” said Thackray.

He said while companies know what the supply and demand is, the price of the mineral still moves around and the industry is well aware of a looming uranium deficit in 2035.

“So there’s a game of chicken going on,” said Thackray “Because we know we’re going to go into the deficit, and we need more nuclear power.”

He said the AI industry’s biggest bottleneck right now is energy, which it is trying to fill with natural gas.

Another supercycle?

Thackray says today’s environment feels a lot like the period leading into the last supercycle in the 90s to the early 2000s, when tech dominated market attention until a shock revealed shortages in copper, uranium and oil.

He cautions the path won’t be smooth and uranium equities can drop sharply, but argues the long-term setup is strong because “we don’t have enough uranium.”

He also says large caps like Cameco tend to benefit first, but smaller players such as NexGen Energy tend to perform better later in the cycle.

Cameco’s $80 billion deal with the U.S. government to build nuclear reactors, and its refining capacity gives it an even stronger footing as demand grow, he said.

Utilities with “multi-billion dollar fixed cost” reactors must buy fuel regardless of price, while producers gain from selling more at higher levels."

“Ultimately, high uranium prices help the nuclear industry,” he said.

Small modular reactors and AI centres

Right now, Canada has five operating uranium mines in Northern Saskatchewan and three proposed mining projects.

“Prices were very depressed for most of the last decade. Everyone was expecting it to turn around. It took longer to turn around than people thought it would,” said Pierre Gratton, president and CEO of the Mining Association of Canada.

Gratton pointed to China’s nuclear build out as a key driver.

“Reactors take forever to build, but it’s now starting to kick in and uranium prices have skyrocketed,” said Gratton.

He said the next demand will be driven by small modular reactors, or SMRs, as provinces like Saskatchewan and Alberta look for non-emitting alternatives to coal and gas.

Both Thackray and Gratton point to a second wave behind that: data centres and artificial intelligence. 

By 2040, Thackray said, “they’re going to need double the amount of nuclear fuel for the reactors.”

 

This week’s fun finds 

The office is beginning to warm up for the holidays. There’s so much to celebrate working among such wonderful partners! 

62 Modern Tree Houses Climb to Architectural Heights

The arboreal designs featured in TASCHEN’s new book aren’t your dad’s Home Depot box variety. Uniquely stunning, all 62 structures in Modern Tree Houses respond to the surrounding environment, whether a tiny, winterized pod for escaping the snow or a split-level playground complete with climbing ropes and nests. Built by architects and amateurs alike, each dwelling is varied in material, layout, purpose, and aesthetic, although all thrive because of their proximity to nature’s beauty.

This week's interesting finds

17 years of unwavering commitment to our investors

When EdgePoint was launched in November 2008, we made a simple promise to put our investors first. 

Seventeen years later, that commitment remains at the heart of everything we do.

This week in charts

Corporates yielding less than government bonds

Spending on data center construction

Relative performance of Quality Stocks vs. the market

Residential electricity prices

S&P 500 Index – sector composition since 1970

U.S. high-yield bond and leveraged loan universe

Leveraged loan index and high-yield bond index sector breakdown

M&A volume - % of private equity

Small credit rating providers

Privately-rated securities

Ratings per analyst

S&P 500 Index Concentration concentration at record levels

S&P 500 Index – Momentum crowding at the 98.9th percentile

BlackRock Faces 100% Loss on Private Loan, Adding to Credit Market Pain

About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero.

The drastic revision comes as Dallas-based Renovo — a roll-up of regional kitchen and bathroom remodeling businesses created by private equity firm Audax Group in 2022 — abruptly filed for bankruptcy last week, indicating it plans to shut down.

BlackRock held the majority of Renovo’s roughly $150 million of private debt, while Apollo Global Management Inc.’s MidCap Financial and Oaktree Capital Management held smaller chunks, according to people with knowledge of the matter, who asked not to be identified discussing a private transaction.

It was no mystery Renovo was in a tough spot. In April, lenders had agreed to take losses and convert some of their loans into equity as part of a recapitalization that was supposed to give the company a chance to turn its business around, the people said. In the third quarter, they also allowed for deferred cash interest payments on its restructured debt, an arrangement known as payment-in-kind, regulatory filings show.

Yet at the end of September, funds managed by BlackRock and MidCap Financial were still marking the new Renovo debt at par, which typically indicates investors expect to be paid back in full.

It took only a few weeks for the situation to quickly unravel.

While the Renovo debt represents a sliver of total assets for the three lenders, its sudden collapse strikes at the heart of what critics see as a major vulnerability in the private credit market: the disconnect between the valuation of illiquid loans and the performance of the underlying companies. Zips Car Wash similarly enjoyed marks that were near par from its private credit lenders months before filing for bankruptcy earlier this year.

It also comes in the wake of the collapses of subprime auto lender Tricolor Holdings and car-parts manufacturer First Brands Group, which have caught investors off guard. They’ve stoked fears there could be more pain to come in credit markets and led Wall Street executives to trade shots as to who is to blame for poor underwriting standards.

Renovo’s main borrowing entity, HomeRenew Buyer Inc., filed for Chapter 7 bankruptcy last week, listing liabilities of between $100 million and $500 million and assets of under $50,000.

This week’s fun finds

With the weather turning colder, Jin (with an assist from Adam) brought the heat with a Hakka moai. Many of us broke into smiles at the spread (and a few broke into a sweat), but everyone went back to their desks full.

The Hidden Math of Ocean Waves Crashes Into View

The best perk of Alberto Maspero’s job, he says, is the view from his window. Situated on a hill above the ancient port city of Trieste, Italy, his office at the International School for Advanced Studies overlooks a broad bay at the northern tip of the Adriatic Sea. “It’s very inspiring,” the mathematician said. “For sure the most beautiful view I’ve ever had.”

Italians call Trieste la città della bora, after its famed “bora” wind, which blows erratically down off the Alps and over the city. When the bora is strong enough, it drives the waves into reverse. Instead of breaking against the docks, they stream away from the city, back toward the open sea.

But they never actually get there. Watching from his window on these gusty days, Maspero can see the retreating waves slowly disperse as they exit the port, eventually giving way to a calm, still surface.

The equations that mathematicians use to study the flow of water and other fluids — which Leonhard Euler first wrote down nearly 300 years ago — look simple enough. If you know the location and velocity of each droplet of water, and simplify the math by assuming there’s no internal friction, or viscosity, then solving Euler’s equations will allow you to predict how the water will evolve over any time period. The rich menagerie of phenomena we see in the world’s oceans — tsunamis, whirlpools, riptides — are all solutions to Euler’s equations.

But the equations are usually impossible to solve. Even one of the simplest and most common kinds of solutions — one that describes a steady train of gently rolling waves — is a mathematical nightmare to extract from Euler’s equations. Until about 30 years ago, the bulk of what we knew about these waves came only from a mix of real-world observations and guesswork. For the most part, proofs seemed like a fantasy.

This week's interesting finds

Dare to be different – 3rd quarter, 2025 podcast

Investment Team member Jeff Hyrich talks about his Q3 2025 commentary with relationship manager Sarah Ford. They cover a lot of things that couldn't make it into the commentary, such as expanding on our investment approach to, of course, some thoughts on A.I. 

This week in charts

Commercial real estate – Canada 

Tariff revenue

Passive vs. active

Russell 1000 and 2000 performance (with and without Tech)

AI deal activity

Cisco vs. Nvidia – market cap as a % of U.S. GDP

Magnificent 7 – market cap % of U.S. GDP

Top news mentions

European oil reserves

Retail single stock activity, by sector

Retail ETF activity – by theme

Retail brokerage volume – % of overall U.S. equity market 

Regional and sector performance

Canada’s Economy Starts to Buckle Under Trump’s Tariffs

The U.S.’s second-largest trading partner is flirting with recession, unemployment has risen to its worst non-pandemic levels in almost a decade, and business investment has stalled. A country that sends three-quarters of its exports to the U.S., Canada has proven uniquely vulnerable to Trump’s tariffs on automobiles, steel, aluminum and lumber.

Prime Minister Mark Carney has said the U.S. trade war will cause permanent damage to the Canadian economy, lowering growth over the long term.

Nowhere is the toll of Trump’s trade policies more apparent than in Canada’s manufacturing heartland, a 740-mile corridor that stretches from Quebec City to Windsor, Ontario, just across the border from Detroit. The provinces of Ontario and Quebec, home to more than 33,000 manufacturing businesses, have been reeling.

The unemployment rate in Ontario, Canada’s most populous province, was 7.9% in September, above the national rate of 7.1%. The rate in the auto-manufacturing hub of Windsor is higher than 11%. The province’s gross domestic product is projected to grow only 0.9% this year and 1.0% next year, according to a report by the Financial Accountability Office of Ontario.

Quebec, home to large steel and aluminum smelters and pulp-and-paper and forestry industries that employ more than 80,000 people, might grow only 0.6% this year and 0.9% next year, according to BMO Economics.

Canadian manufacturing exports, almost all of which go to the U.S., were 15.6% lower in August than in February, the last month before Trump imposed new tariffs, said Dennis Darby, president of the Canadian Manufacturers & Exporters industry group. The sector has lost 35,000 jobs since the end of February, while business investment has stalled. Few companies are willing to invest in existing factories or open new ones as long as trade uncertainty persists, he said. 

The malaise in Canadian industry has weighed on the whole economy. Canada’s projected growth rate of 1.1% in 2026 ranks 30 out of 38 in a recent OECD forecast, which projected an average growth rate of 1.5% for member countries.

Tiff Macklem, the governor of the Bank of Canada, last month said the tariff war had “destroyed some of the capacity in this country.” The central bank cut interest rates and issued a forecast of “very modest growth.” The economy shrank by 1.6% in the second quarter, and a rebound in the months since has been tepid. 

Adjusting the economy to account for a more protectionist U.S. won’t be easy. Ever since the free-trade era kicked off with a Canada-U.S. trade deal negotiated between former President Ronald Reagan and former Prime Minister Brian Mulroney in 1987, Canada’s industries have become progressively more intertwined with the U.S.

The Canadian government’s new spending plans will push Canada’s deficit to its highest levels since the financial crisis.

Such measures are needed to bolster companies that are too uncertain to move ahead with projects, said Jim Jarrell, president of Linamar, an auto-parts and industrial-equipment manufacturer based in Guelph, Ontario. The company employs 33,000 people in North America.

The Canadian government is trying to hold Stellantis accountable for what it argues is a breach of faith. Canada’s industry minister, Melanie Joly, said on Tuesday that she has begun a dispute-resolution process to recoup some of the tax dollars the government has given the automaker in recent years.

This week’s fun find

Self-piloting submarine set to begin historic mission to circle Earth’s oceans

Redwing—an acronym of the Research and Education Doug Webb Inter-National Glider—isn’t powered by propellers like other submersibles, but uses an energy-saving buoyancy system instead. The configuration allows it to sink to a depth as low as 3,280 feet before rising once again on the ocean currents. Redwing isn’t setting any speed records, however. On average it will travel at around 1 knot (1.15 mph) while maxing out at 2 knots (2.3 mph).

After crossing the Atlantic, the glider will turn south near Europe, before stopping at Gran Canaria off the coast of northwest Africa. It will then head down to Cape Town, South Africa, and turn east towards the Indian Ocean. Next up for Redwing will be Australia and New Zealand, before traversing Earth’s most powerful current, the Antarctic Circumpolar Current. The longest phase of its trip will eventually see it reach the Falkland Islands before a possible pitstop in Brazil and the Caribbean before finally sojourning back home to Massachusetts.

The bright yellow craft is equipped with a sensor designed to measure three data points during its thousands of miles of sailing—its depth, as well as the surrounding water’s salinity and warmth. The information will then relay its measurements to the mission team by satellite every 8 to 12 hours as it resurfaces. Redwing is also carrying a fish tracker that will flag any nearby tagged species during its travels.

All that information can provide oceanographers with a three-dimensional glimpse of portions of the planet human eyes have never seen. The discoveries could also aid in meteorological efforts like monitoring ocean heat waves, hurricane intensity, and the health of marine ecosystems.