MW Small costs, big profits: Why investors should stop doubting their Big Tech investments.

By Barbara Kollmeyer

John Tinsman is betting on low marginal cost companies

Portfolio manager John Tinsman says there's one reason to invest in the biggest tech companies: they can invest for pennies.

A third-straight losing session is on the line for stocks on Thursday, as fretting over AI has been nipping at investor confidence in the biggest tech names.

Our call of the day from the portfolio manager of the AOT Growth and Innovation ETF AOTG, John Tinsman, says investors are overthinking investing in some of the most profitable companies in the world, and offers a simple strategy to ease those worries.

The youthful Tinsman, who got his start as a commodities trader in 2016, recently discussed his strategy for the ETF that launched in 2022 with the Excess Returns podcast. He started investing in high school around 2008, with Apple one of his biggest positions, also buying such companies as Boeing $(BA)$ and a Vanguard real-estate fund VGSLX.

Over time it became clear to him that tech companies consistently did better. "The theory I kept coming back to was low marginal cost, that these companies had low marginal cost qualities," he said, referring to how much a company spends to make one additional product.

"What does it cost Visa when you swipe your credit card for them? Nothing, they make a 2% fee. What does it cost Microsoft when you download one additional Microsoft Office? It costs them nothing. It's 100% profit margin, and so is it any surprise that they can grow without any debt, without having to build new factories?" he said.

Tinsman, who launched the fund with $20 million of assets and is currently up to $75 million, said these companies are less risky because they don't have debt. With demand they can "grow with 100% profit margins on new sales, so they reach higher levels of profitability. "

The AOT Growth fund, up 32% on a three-year annualized basis, invests with this process in mind. It holds Microsoft $(MSFT)$ and Visa (V), with Nvidia (NVDA) at the top, followed by Toast $(TOST)$, Advanced Micro Devices $(AMD)$, Alphabet $(GOOGL)$ and Robinhood (HOOD).

He argues these companies grow faster because their biggest product already exists, such as Microsoft that can just improve its products with minimal investment. Boeing (BA), on the other hand, can't innovate as quickly and must keep buying the steel to build its next airplane.

"So these companies, not only are they more profitable and grow faster, but they also innovate at 100 times the rate. At the end of the day, when you're investing for a multiyear period, mathematically that is impossible to argue with," Tinsman said.

Touching on AI bubble worries, Tinsman said he looks back only as far as 2022, when so many unprofitable IPOs floundered.

"The difference now is that the big [tech] companies have GAAP earnings per share growth of 20% plus annualized, which is really high historically, and you're saying oh maybe we shouldn't invest in them, but Proctor and Gamble have no GAAP earnings per share growth and a higher P/E [price/earnings] ratio," he said.

His bottom line: investors will always pay more for growth and unprofitable companies just aren't worth the trouble. "There's a sector of companies doing incredibly well and that is that low marginal cost sector of companies," he said.

High concentration is also not a worry, he said, as the big tech companies are providing what the world needs right now: more hardware and automation to help individuals do more with less. "The demand for this is very high and these companies can innovate faster than anyone else. They can spend a lot on innovation and they can do it very profitability just like they're continuing to do right now with AI."

That's why his advice is for investors to stick to large-cap growth - he finds stock-based compensation for executives of small-cap tech "outrageous" - that has proven its worth.

Also, he invokes the principles of one of the world's most respected investors: "I think you want to, like Warren Buffett, to focus on companies that can continue to grow their earnings at 20% annualized in the long run. Why take the risk in a company that's going down the hill when you already have companies that are going strongly up the hill?"

Read: Fed's Powell says stocks are 'fairly highly valued.' These 3 charts show he's right.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are modestly lower, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD30Y BX:TMUBMUSD02Y easing and gold (GC00) climbing. Bitcoin (BTCUSD) and other crypto assets are falling.

   Key asset performance                                                Last       5d     1m     YTD      1y 
   S&P 500                                                              6637.97    0.57%  2.42%  12.86%   16.00% 
   Nasdaq Composite                                                     22,497.86  1.06%  4.20%  16.50%   24.42% 
   10-year Treasury                                                     4.147      3.90   -6.20  -42.90   34.70 
   Gold                                                                 3768       2.44%  8.37%  42.77%   39.81% 
   Oil                                                                  64.63      2.08%  0.48%  -10.07%  -4.20% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Intel shares $(INTC)$ continue to rise after a report the struggling chip group may get an investment from Apple $(AAPL)$.

CarMax $(KMX)$ is reporting early, with Costco $(COST)$ due after the close (see preview).

HSBC $(HSBC)$ has just claimed a major trading breakthrough using quantum-computing technology.

Weekly jobless claims are coming at 8:30 a.m., along with an update to second-quarter GDP, and durable-goods orders. Existing-home sales will follow at 10 a.m.

We'll hear from seven Federal Reserve officials, including New York Fed Pres. John Williams and Fed Vice Chair for Supervision Michelle Bowman, at 9 a.m. and 10 a.m., respectively and Fed gov. Michael Barr at 1 p.m.

Jimmy Kimmel's first show back after Disney $(DIS)$ suspended it for a week delivered his highest ratings in 10 years.

The White House has told agencies to brace for large-scale layoffs of federal workers if next week sees a government shut down.

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The chart

The chart from UBS's Chief Investment Office GWM finds Miami at the biggest risk of a house-price bubble. "Cities with elevated or high bubble risk continued to decouple from fundamentals: over the last five years,inflation-adjusted home prices increased nearly 25% on average, while rents rose about 10% and incomes about 5%," says UBS. Over history, worsening affordability and wider gaps between prices and rents have been "forerunners of housing crisis."

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   OPEN    Opendoor Technologies 
   GME     GameStop 
   LAC     Lithium Americas 
   INTC    Intel 
   PLTR    Palantir Technologies 
   BABA    Alibaba 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 

Random reads

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-Barbara Kollmeyer

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September 25, 2025 06:59 ET (10:59 GMT)

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