BNN Bloomberg Sep 18, 2026
With Connor Browne, founder, CEO and portfolio manager at City Different Investments
Talen Energy has already sold about a gigawatt of the more than two gigawatts its Susquehanna nuclear plant produces to an Amazon data center, Connor Browne, founder and CEO of City Different Investments, said on BNN Bloomberg's hot picks segment.
The usual way to own the artificial-intelligence buildout is the hyperscalers and the chip makers. Browne's three picks are the power that runs the data centers, the equipment supplier spinning off the division that serves them, and a Japanese distributor that barely touches them at all.
"Yeah, I think investing in the midst of what could be a bubble in AI-related stocks is hard."
Browne founded City Different Investments and manages money there. Each of the three names came from a different desk inside the firm: Talen from the global team led by Van Walden, Flex from the small and mid-cap strategy led by Rob McDonald, and Monotaro from the international strategies run by Ralph Kelly.
The full segment is covered here so you can skip it.
Here are the 4 arguments that matter.
Key Takeaways
His answer to an AI bubble is index exposure plus concentrated funds that own none of the same companies
Talen has sold about 1 of the 2-plus gigawatts from its Susquehanna nuclear plant to an Amazon data center, and he thinks the price sets a marker for the rest
Flex spins off its data center supplier, Axiom, early next year — and he thinks the remaining half of revenues is being valued at a discount
Monotaro has 3 to 4% of the Japanese MRO market, a net cash balance sheet and a return on equity above 30%, on a business Grainger already half owns
1. Beyond the Hyperscalers
The host's framing was that Browne is looking behind the curtain, at the power that runs data centers and the equipment that keeps them working, rather than at the companies everyone else owns. Browne's reason starts with the difficulty of the trade.
Owning a possible bubble is the hard part
Yeah, I think investing in the midst of what could be a bubble in AI-related stocks is hard.
Connor Browne
His solution is a division of labor between the passive and the active parts of a portfolio, and it is the reason his own funds look nothing like the index.
Take the AI exposure from the index, not from the manager
And we think actually the path for allocators can be made sort of easy by investing in some passive indices that have tons of AI exposure these days, and then pairing it with highly active, very concentrated active strategies that are not investing in the same companies.
Connor Browne
Looking across market capitalizations and into places the indices do not reach has been part of the firm since it was founded, he said.
2. Talen's Susquehanna Deal
The first pick is Talen Energy, an independent power producer whose most valuable asset is a nuclear plant in Susquehanna, Pennsylvania.
A gigawatt is already contracted
They've already sold about a gigawatt of the two-plus gigawatts of power production out of that facility to an Amazon data center.
Connor Browne
The deal matters twice over for Browne: there is more power left to sell, and the price of the first tranche shows what that power fetches. The second part of the case is the kind of power it is.
Carbon-free and always on
And nuclear in particular is carbon-free and provides that 24-hour-on power that data centers are going to need moving forward.
Connor Browne
3. The Flex Spin
Flex, which trades on the Nasdaq, is the position his firm has held longest — since before City Different existed, at the team's prior firm.
The business moved up the value chain
They've done a really good job of moving up the value chain for a diversified set of customers, and on top of that, they've had awesome capital allocation over the years.
Connor Browne
Electronic manufacturing services used to mean building computers for Dell, he said, a very low-margin business selling into a handful of very large clients. The near-term event is a separation: Flex splits off the business that supplies data centers early next year, under the name Axiom.
The spin-off is the part the market wants
So that business is growing really fast, is in high demand — we think it's going to garner a big multiple in the marketplace.
Connor Browne
This is the second spin-off since his firm bought the stock. The first involved a solar-supported business, and Browne said that going into it, the value implied for the spin-off was high enough that the underlying company came close to being free. He sees the same setup now.
What stays behind looks cheap to him
What's left, which is about half of Flex's revenues, look to us like they're trading at a big discount today.
Connor Browne
4. Monotaro's 3-4% Share
The third pick is Japan's leading online distributor of maintenance, repair and operating supplies, and Browne volunteered that it does not really fit the theme. Monotaro supplies Japan's industrial manufacturing base and is not yet doing much data center work.
The American template is already public
It's really early stages of the Grainger story in the US — in fact, Grainger owns 51% of Monotaro.
Connor Browne
What makes MRO distribution work, he said, is proximity and scale: a plant needs commodity supplies immediately to keep running, so the supplier has to be close by and has to carry everything. That is what produces the returns.
Japan is barely penetrated
And this has been a beautiful business, really high return business in the United States, and we're way, way less penetrated in Japan so far — only 3 to 4% of the market is what Monotaro currently holds.
Connor Browne
The balance sheet and the returns today
So, lots of room to run, a net cash balance sheet, 30%-plus return on equity business today.
Connor Browne
The company is spending heavily on capital projects at the moment, he said, which holds cash flow down. Past that spending, he expects a free cash flow yield he called good on a business he rates as very high quality.
Bonus Insights
Browne joined from Santa Fe, New Mexico, and opened by noting it was raining there. The host replied that it was sunny in Toronto.
The three names came from three different investment teams inside one firm, which Browne named in each case rather than presenting the picks as his own research.
Browne's bottom line is that the profitable way to own the AI buildout, if it is a bubble, is to leave the crowded names to an index fund and put active money into the power, the equipment and the distribution that the buildout has to pay for.
Products, Companies & Tools Mentioned
Talen Energy (An independent power producer whose Susquehanna nuclear plant has sold about a gigawatt of its two-plus gigawatts to an Amazon data center, with more to sell)
Flex (Held since before the firm existed; splits off its data center supplier, Axiom, early next year, leaving about half of revenues that he says trade at a big discount)
Monotaro (Japan's leading online MRO distributor, on 3 to 4% of its market, with net cash and a return on equity above 30% while it spends on capital projects)
Grainger (Owns 51% of Monotaro, and is the US precedent Browne says the Japanese business is at an early stage of repeating)
City Different Investments (Browne's firm; the three picks came from its global, small/mid-cap and international strategies)
Amazon (The data center counterparty for the Susquehanna power, and the reason the contract price is a marker for the rest of the plant)
Dell (His example of what electronic manufacturing services used to be: a very low-margin business serving very large clients)
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