The Exchanges

Q have a lot of experimental spend that's going with the cloud companies to try to figure out this AI thing. All of a sudden, every input that you have in your business goes up. Maybe 25, maybe 40%. You are scrambling just to make the numbers work. Doesn't that AI, which AI spend, which is discretionary, if it's not a hundred percent going to, um, production, doesn't that get cut?

A For sure. Look, the one thing that you know for sure is semis are a cyclical business. Okay. And so what you're, there's a combination of the cause of the cyclicality. One is you spend capex, you put the depreciation burden on your, on your cost of goods sold, and then revenue slows and your margins get creamed, right? And then we've seen that for 40 years. What you're saying is in an intercession or, you know, kind of a growth, um, pullback, will the revenue side be disappointing? It easily could be, and all I'm saying to you is, like, some of that has to be in the price given, um, you know, the, the, the, I mean, it's just, kind of, open it up the terminal here, and, you know, NVIDIA is down Massively from the peak. So I guess, you know, we peaked at one 49 on January sixth or at, you know, uh, 94 last. So like, that's, You know, kind of a garden variety, semiconductor peak to trough stock correction already. If this gets really nefarious, could it go in half? Sure. So I'm looking at, if I'm looking at this thing, I'm thinking, all right, maybe it has 15 to 20% downside and 80 to a hundred percent upside and a two to three year view for the best company with like a genius CEO and a product area that grows above GDP. So like it's, you definitely have to like it now more than you did three months ago.

AI assessment note: “For sure. Look, the one thing that you know for sure is semis are a cyclical”

Q So do you think that they're gonna try to just replace people with AI more than ever now?

A Yeah, for sure. Um, absolutely. Um, I think if you get better at predicting your employee behavior and your customer behavior, there's a lot of businesses that have lots of employees, low margins, and lots of revenue dollars, right? Think about the whole healthcare sector, right? McKesson, which has been a great stock, Cardinals, Sincora, a bunch of healthcare stuff that, you know, but the whole healthcare services sector, hospital, like these, these companies are super inefficient. Where they can use technology and get much better, right? Like, have you been to a doctor lately? You look young and healthy, so you probably haven't, but like, what do they do? They hand you a clipboard and a pen, and you like, circle stuff. Just think about how stupid that is. Like, in terms of just, like, the ability to improve on, on their efficiency. So like, I, I think you will see, uh, cyber, of course, nobody cuts that, but then after that, I think you're gonna constantly think like, how can I replace employees with technology? How can I, Um, position myself to benefit from better analytics, et cetera, et cetera. So I, I'm bullish on the long-term kind of compute trade, and I'm bullish on semis, and NVIDIA has still got the best product with the best company in this kind of positioning and in, in this area, and it's, stock's been reset a lot from the recent high.

AI assessment note: “Yeah, for sure. Um, absolutely.”

Q know, needs to, um, buy software and cloud hosting. They have a very large digital, uh, presence. Um, if Nike's margins go down and Nike's business is hit by tariffs, then all of a sudden, are they going to do that optional AI program from Azure? Are they going to do that, you know, new build out, uh, and, and move to cloud? Like all of that starts to slow.

A It's not, maybe it's not essential. CapEx now, but the way I'm thinking about that, Alex, is like, look, semis grew about two percent above GDP for 30 years. I think they're gonna grow something like five to seven to eight percent above GDP, you know, if you look at the last two years, say, through the next eight. So that, there'll be a 10 year window, they're gonna grow way more, and so they're gonna gain share of the global spending pie because they do things that aren't easy to replicate in a big chunk of it. Um, And, you know, not all semis are the same as you well know. There's industrial and auto semis and other things that are, you know, maybe the average selling prices are low, but I don't think every company has to do their own build out to participate. Look, at Trivariate, we have an NVIDIA chip. It's out on EQIX. We use it to search every year. It's called transcript for certain words and tag stocks and do all the analysis we do. I, I have the, um, Mercedes C-Class or whatever, the Metris. I don't have this. I don't have the Blackwell, but like, It was still 10 grand for the chip, and it's massively efficient. So I think companies will find in a lot of cases that access to NVIDIA products could really help them predict their employee behavior better, predict their customer behavior better, and, and maybe not have to do any net hiring. And so as your revenue grows thr…

AI assessment note: “maybe it's not essential. CapEx now, but the way I'm thinking about that”

Q is within the EU, gets a 20% tariff. Apple produces some iMacs there. Indonesia, where Apple is gonna start making AirTags, and AirPods Max, 32% tariff. We also know China, where it has a lot of production. I think it's a total of like a 54% tariff. Um, What is going to happen to Apple? Yeah, well, let's, let's start, let's start there. What is going to happen to Apple?

A Well, you know, again, um, I think Apple is more impaired than some of the other business models are. I certainly think it's more impaired than Nvidia. Um, you know, with what I know now, the stock is also down, you know, what, two 60 to one 70. So it's also kind of in that one third correction. Look, Apple doesn't really grow its net income a ton. I mean, if you look back the last 1015 years, its net income dollars have grown less than around 10% per annum. So it's, Almost barely been a growth company. It's, it's, it's, you know, value's gone up because they've converted from hardware to software and bought back a ton of stock and other stuff. So, you know, I, I don't, you know, it's really hard to have a differential view on a company like this versus consensus, but, um, you know, but I think they, they appear more impaired. I could see the logic that look like it all comes down to like your Apple care and you're going to keep your phone a little bit longer. So maybe it just delays the phone, um, You know, replacement cycle a little bit, uh, particularly because people weren't super excited about the Siri AI enhancements or other things that would have stimulated. Um, I think you and I were on the air once where you were being somewhat critical of those enhancements originally like a few.

AI assessment note: “I think Apple is more impaired than some of the other business models”