TMTB EOD Wrap: The human imagination and the Citrini Sell off

Good afternoon. QQQs -1.22% on the “Citrini sell-off” hitting most of internet and software while semis outperformed again. Nothing new in Tech land that investors haven’t already been dealing with in 2026. But the Citrini article bought even more visibility to what’s already been happening in these circles.

Today was also more demonstration that Tech investors are no longer paying for juicy multiples in internet/software, regardless of how good the narrative or fundamentals are. Some of the biggest underperformers in internet and sw fell into this bucket: SHOP -7% (10x revs / 50x P/E); MDB -12% (9x Revs / 60x P/E); DDOG -11% (8x revs / 47x P/E); CRWD -10% (17x revs; 75x P/E); NET -10% (20x P/E; 130x P/E)…I could go on…And what’s not even taking into account SBC, which is heavy for many of these software companies. We saw this in a tweet last week, which had us laughing:

Do sw/internet investors go back to being comfortable buying nose-bleed valuations? My sense is they will be a lot less comfortable going forward. The cat is out of the bag. That doesn’t mean there will be periods where terminal value fog lifts or dissipates for a while, but I think the unknown and question in many investors minds right now is how much will these names get re-rated lower, with it easy to argue there is plenty of room left below.

Today’s Citrini-led price action had me going back to something I wrote a week ago in our weekly:

The first six weeks of the year were a unique case study in condensed AI acceleration. With Claude Code and OpenClaw ramping simultaneously, Tech investors were given license to dream the biggest dreams (good for AI semis investors), and also to dream the wildest nightmares (not so good for internet and sw investors). It wasn’t just the actual capability of CC and OpenClaw that caused imaginations to run wild; rather, it was the implication. After all, the only thing faster than a digital exponential is the human imagination.

Citrini’s piece tapped directly into the darker frequency that people are attracted to and served as the perfect catalyst for these fears. In this day and age, investors (and humans) tend to forget they can dream much better outcomes. Tech investors have been having similar conversations for a few weeks now, but when it comes from a high signal substack writer with a very large following who is also great at capturing the current zeitgeist, then you get a day like today. (Btw - we thought it was a very interesting piece - kudos to Citrini for writing it).

Back to our weekly from last week:

I mean how much bigger can the digital dreams get? In a matter of weeks, Claude Code brought us face-to-face with Digital AGI and what Dario has been out on his PR tour calling "closing the human loop" (AI recursively improving itself without us.) Simultaneously, OpenClaw allowed us to visualize agent swarms quietly conquering our entire digital existence.

Well, we were a week early because now we know it could get a lot bigger, with Citrini’s piece taking the nightmare to its logical macroeconomic extreme: suddenly, it morphs from a localized tech disruption into a structural crisis that risks disintermediating the foundational layers of global payments and consumer finance. Ok, now the nightmares can’t much worse. Right? Right?

Back to our weekly:

Things aren’t going back to the way they were and “Terminal Value fog” is here to stay, but things should stabilize a bit over the next few weeks. While the “emotional shock” and “confidence crisis” is significant and some of the vol is unlikely to subside immediately, I think we’ll begin to see increasing bifurcation in stocks within each sector and return to some stock picking.

In the dense “Terminal Value Fog,” it is impossible to make sense of anything. Things seem like they will stay like that forever. Is the era of very high multiple stocks in internet and software gone forever? Hard to know, but very possible.

However, in the space and time where the rate of change of how bad dreams can get slow, investors will remember that while thought, dreams and imagination move at the speed of light, the digital world operates in a realm between the physical and thought. In that world, enterprises, governments, organizational inertia and human habit still cause things to move a lot slower, even if they’re still likely to move much faster than ever before.

When I lived in SF, it was hard to imagine how the sun looked like in the middle of a fog-intense winter. But there would be weeks where the fog would inevitably retreat over the ocean, and the sun would come out. You always knew the fog was coming for you in SF - it was part of living there, but we think we might get some clearer and less intensely choppy skies over the next few weeks.

Let’s get to it…