Transcription
For me, look, um, covering tech stocks since the late '90s, you know, I've seen a lot of trends in my career, you know, front and center. And some have ultimately, there's been hype and and and and maybe didn't meet that. I think we saw some of that in the dot-com bubble. Now, obviously, the burst, and in my opinion, starting in like 2021, [Music] 2022, you know, we're starting with a lot of the developers and engineers talking around the world. There was a view that we are almost at on a breakthrough point when it came to what I'll call true AI.
And if you go back to 2022, there was, it was actually a brutal year for the market, you know, because, because interest rates fed, the market was down huge. But yet, underneath the covers, there was, especially when when it came to Nvidia, obviously a company we follow so closely, really a potential breakthrough when it came to GPU. And then obviously when it comes to chips. But then on the other side, it was really what was happening with all of OpenAI. And you're really starting to see the formation, obviously, of ChatGPT and a lot of the models, LLMs that were starting to get built. And to me, it all kind of converged when, you know, early 2023, Microsoft kicked off the huge stink in OpenAI. And I think at that moment, we talked about it like, okay, the revolution's kicked off, this is it. Now, I think at first, the market, it's taken time for the market to react, especially when you go back to those first few months of 2023. But now, as the power of AI has all started to form, you realize on the enterprise side, it's, it's not just transformational, it's really, it's building a new economy. And it started with Nvidia and Microsoft, but, but our view is that this is, this is a fourth industrial revolution that we're living in. And it's the second, third, fourth derivatives as it plays out across chips, software, consumer, and what I ultimately view is the holy grail, which is physical AI when it comes to autonomous and robotics. Because look, my view is one in every 10, 12 households is going to have a robot. 20% of transportation is going to be autonomous when we look out the next three, four years. And that's why we're so bullish because I think there's a tech bull market that rages on at least for another two or three years.
I think the biggest questions I get asked are like, use cases on the enterprise. When are they going to continue to almost expand and multiply? And I think we actually have started to see that in the last few months. Obviously, Palantir being front and center. Um, you know, is this a bubble? H, how does this compare to like my experience in the late '90s? I think it's dramatically different because, you know, back then it was all about the business models and the future and what could happen. Here, it's the computing power is there. I mean, 60% of data is untapped, and you're seeing it play out in front of your eyes, not just on enterprise, but it's being funded by $350 billion capbacks from big tech. But that's just the start. Only 4% of enterprise in the United States have gone down the AI path. And my view is like, okay, it's about global Europe, zero, Asia, ex-China, basically zero, middle, starting sovereigns haven't even started. So I think there's a lot of questions about like, what are the next drivers, capbacks, like, can it sustain? Is there a point? And I think that's why maybe some trepidation this week, like Altman, bubble, Zuckerberg and Meta kind of like freezing hiring, like, you know, maybe tweaking things in terms on their AI I unit. So there is, there is, there's so much excitement, but also, I think there's nervousness too, right? Because investors snake-bitten still, if you go back, you know, 25 years, is this another bubble? And I think those are the biggest questions that I get from from how it's going to revolutionize everything. To me, and again, I'm the layperson when it comes to this, it seems like healthcare, like finding cures for diseases and things like, to me, that's where it's going to be most transformational. Is, is that fair, or how would you agree or disagree with that?
I think healthcare is going to be one of those verticals that's, it's, it's going to look completely different five, seven years from now based on the data, the robotics, the way AI is going to play a role in terms of surgeries, data, doctors, medicine, insurance. I think the financial field is going to be dramatically different in terms of what we see in terms of transactions, understanding customer data. So demand is high. Do we have the supply though to meet that demand? Because that seems to be probably the biggest risk. Even after Nvidia, which they missed on data center revenue, but then all the commentary basically was saying, but look, look at these gains. It's still so significant. Yet the supply side, there's still that question mark of whether we can fill all that demand. Yeah.
So I think China wants more supply. We can't give that to them yet on the chip side, but I think the bigger supply issue is on power, right? If you're thinking about it, it's not, it's not dissimilar to the commodity markets where you can't just flip a switch on and off to provide more oil. You have to set up and explore for new wells and drill it out of the ground. Well, same thing is true here. To get that power supply to the data centers, you need transmission lines. You need guaranteed power that's actually available. The power, you know, capacity, the production of that. And in the United States, we've been woefully behind on that. China's been anticipating this need for power, and we've just kind of been sitting around not realizing how big it's going to be. And to put it in context, we're stuck at about 4,600 uh terawatt hours of electricity generation right now in the US. China's at over 10,000. So they've been building power plants faster than you can snap your fingers, and the US has been very slow and decommissioning other power plants that were coal-fired, perhaps u being slow to adopt nuclear. China's got 22 nuclear power plants coming online. We have maybe one to two in the plan. So, uh, so the supply issue is a huge one here. I think that's the only thing that can slow this trend down. But I think we're seeing the the pivot from Bitcoin mining to provide that that bridge to get to where we can bring on more power capacity.
And is that how you find those opportunities? Maybe those offshoots of AI, not the Mag Seven players, but what are those opportunities where maybe can get in early and we could see some of that significant run? Yeah, maybe some individual stocks or sectors. How so? I always look at like pick and shovel plays are a great way to play a new trend. Nvidia was the ultimate pick and shovel play. But now you have to think of first derivatives, right? Who else is doing something that's essential? So that brings in names um on the power side. These, I mentioned the Bitcoin miners that are pivoting to providing the the compute. It brings in names like Core Scientific, which was acquired by CoreWeave. So CoreWeave is the household name in the space, but they also have a ton of leverage on their balance sheet. So maybe not so attractive from an individual investment standpoint, but in that same class, you have Terawolf WF, uh, and I own all these. So, full disclaimer because this I see as the next leg of this trend. Uh, IN, uh, which is another Bitcoin miner that's pivoting, and then Cipher Mining. So, those are three opportunities that you can play this power supply struggle, and you're seeing the likes of Alphabet and Google do deals with Terawolf to secure power. So I think you're going to see more and those deal types of deals unfold as the year goes on. And that's really rerating these stocks because they've been pinned based upon Bitcoin prices, right? How much Bitcoin can they mine? What's their hash rate? What's? And then you got the halving. The rewards kind of decrease over time. So that Exactly. So now you're changing the model, almost like we changed the model for Apple. Remember, it always traded at a lower forward multiple because it was just a hardware company. And then when services revenue breached and hit an inflection point, it jumped and now it trades at 27, 28 times forward earnings. So you're seeing that same rerating and applying a new valuation model to these Bitcoin miners that are pivoting to HPC. So I think that's one of the best opportunities in the market right now. I'm personally overlevered there, uh, overexposed. So either I'm wrong and sorry, or right and happy, and I, I think ultimately this trend plays out favorably for that.
What about the traditional AI play? Uh, we've seen the hyperscalers. They've still done well. I, I mean, Google's in the news because recently they've had these antitrust troubles, and that's totally unrelated to what we're talking about here. But in a way, you know, the AI trade was Nvidia plus the other, other mega caps. So maybe the Mag Seven has expanded, and maybe it's not the uh, it's not the block, the juggernaut it was once was. But do you still see opportunities within those bigger names?
Yeah. And the bigger names. So I own a small position in Nvidia because I think you have to. It's one of the household names. I also like Microsoft um because I think they're a solution provider with AI. And I think that's how you have to think about this as well. The chips come first, and then the real solutions that provide and generate revenue and profits uh will come second. I think Microsoft is uniquely positioned to win there. And then Alphabet, I've been a contrarian there ever since the, you know, liberation day selloff and the fears of regulatory breakup. Uh, and now that's panning out. You know, uh, AI was supposed to get rid of the need for search, and we're seeing that it's not the case. Uh, so I think among those, I, I think I've used it with you when we appeared that Mag Seven's like a boy band. They broke up, right? And you got to pick out the individual winners. I think Microsoft and Alphabet continue to be those winners out of the.