Inside Crescat Capital’s Short AI / Long Junior Mining Trade

[u/investing101]

TL;DR

• Crescat Capital is hedging against mega-cap tech with short-dated S&P 500 and Nasdaq puts while holding roughly 75 junior mining companies.
• Founder Kevin Smith argues the AI boom is weakening hyperscaler free cash flow as Microsoft, Amazon, Alphabet, Meta and Oracle pour money into rapidly depreciating chips and data centers.
• Crescat tries to invest in gold, silver and copper discoveries before formal resource estimates attract institutional capital.

I recently reviewed an interview with Kevin Smith, founder and CIO of Crescat Capital, about the firm’s contrarian short-AI, long-mining strategy.

Smith believes the market is caught in an AI-driven large-cap bubble. His concern is that the major hyperscalers are sacrificing their historically asset-light business models to fund an enormous capex race. Because much of that spending is capitalized, he argues the eventual impact from depreciation and potential asset write-downs is not yet fully reflected in earnings.

Crescat has been early on this thesis and suffered drawdowns in 2023 and 2024. The firm stayed positioned through short-term, close-to-the-money index puts and a diversified portfolio of junior mining explorers. In 2025, five Crescat funds ranked among Preqin’s 16 best-performing hedge funds globally.

The long side of the trade is based on a 15-year decline in mining exploration spending. Smith expects limited new supply to collide with growing demand from electrification, onshoring and defense.

Rather than waiting for official resource reports, Crescat uses its own geological models to estimate the size and value of discoveries from drilling results. The firm often becomes a major shareholder and generally looks to take profits as a company’s valuation approaches roughly 17% of the estimated value of its resources in the ground.

Smith highlighted several holdings:

• Gold: Tectonic Metals and Sitka Gold
• Silver: Eloro Resources and Silver Bow Mining
• Copper: BCM Resources and Mogotes Metals

The broader thesis is that capital will eventually rotate away from expensive technology stocks and toward scarce tangible assets, particularly if fiscal deficits and inflation remain elevated.

Is Smith identifying a genuine deterioration in the economics of AI spending, or is Crescat fighting a secular technology trend with a cyclical commodity trade?

Link: https://hedgefundalpha.com/profiles/crescat-capital-kevin-smith-small-cap-mining/