Chip Stocks Are Crashing! Here’s the Truth About the AI Trade — Transcript

Full transcript

1. 0:00I texted one of my friends who works at
2. 0:01a large-cap semiconductor company. He's
3. 0:04the same friend who made seven figures
4. 0:05off Micron calls this year.
5. 0:08And I said, "What are you thinking?"
6. 0:10He says, quote, "I don't know, man. I
7. 0:11feel the problem is everything is too
8. 0:13bullish and semi stocks are still not
9. 0:15going up."
10. 0:17I said, "I agree. It's a weird spot." He
11. 0:18said, "It literally can't get more
12. 0:20bullish than this."
13. 0:22So, his argument is
14. 0:24if the stocks aren't reacting to what
15. 0:27are the most bullish CapEx prints,
16. 0:29earnings prints, free cash flow, EPS,
17. 0:31buybacks, etc.
18. 0:32and we're still depressed, is it a
19. 0:35function of these companies genuinely
20. 0:37have topped? And you're just not seeing
21. 0:39so you're not going to see the semi
22. 0:40names. And when I mean companies, I mean
23. 0:42semis. Obviously, Google, Microsoft
24. 0:43names, right? These are long, long,
25. 0:45long-term investments, but these picks
26. 0:47and shovels bottleneck trades, have they
27. 0:49legit topped to the point where AAY is
28. 0:50not going to see 250 again like it did
29. 0:52in June? Or
30. 0:54is this once again sentiment,
31. 0:57geopolitics, bond yields, Iran war,
32. 1:00everything's red, so everything's red,
33. 1:01and
34. 1:03there will be a chance for these names
35. 1:04to meaningfully recover. And and and if
36. 1:05it's the the the the
37. 1:07the former over the latter, that's an
38. 1:09issue. Because you're not buying a
39. 1:11bottleneck trade for the long term. I
40. 1:13will say this again and again and again.
41. 1:14No one here, I think, is really buying
42. 1:16Micron for the next decade.
43. 1:18Everyone's buying it for the next 20%
44. 1:20up, 30%up.
45. 1:21And if everyone thinks that the
46. 1:23bottlenecks are now not going to be
47. 1:25something they can rely on for even the
48. 1:27next 20, 30%
49. 1:29then what's the point of buying the
50. 1:29bottom? What you like I'd rather buy
51. 1:31Amazon or Google. I mean, I'd rather buy
52. 1:33Meta down 30%from earnings than take a
53. 1:36chance on a photonics play. Even though
54. 1:38I know photonics and optics are so
55. 1:39important for data centers, but how can
56. 1:40I trust the sustainability, cyclicality,
57. 1:43and ultimately the sentiment around
58. 1:45these types of companies when
59. 1:47effectively their entire livelihood will
60. 1:49be destroyed once the CapEx does come to
61. 1:51an end?
62. 1:52So so I mean, how are people thinking
63. 1:53about that? Is it sentiment or is it
64. 1:54genuinely we have the most bullish news
65. 1:56on semis and them not pumping means that
66. 1:59they might have topped out in the short
67. 2:00term.
68. 2:01>> Yes and no.
69. 2:02We have bullish reports.
70. 2:06I don't think anyone can make the case
71. 2:08that we've seen bullish sentiment
72. 2:10towards these names. Like none doesn't
73. 2:13seem very bullish to me when when you
74. 2:15have this semi sector that is trading at
75. 2:17a low 20 times
76. 2:19low 20 times earnings maybe even lower
77. 2:21than that right now.
78. 2:22Forward earnings. So I don't know how
79. 2:24much bullish sentiment there is. There
80. 2:26are definitely bullish comments from a
81. 2:28lot of these companies which again
82. 2:29business wise that's very good. That
83. 2:31means you're buying an undervalued
84. 2:32company. Not everything's undervalued
85. 2:34but on average across the board this
86. 2:36semi trade seems to be much cheaper
87. 2:38today than than a couple of months ago.
88. 2:41As for the bottleneck trade you you
89. 2:43talked about one specific the AI AAOI
90. 2:48doesn't need to go to 250. No, it's at
91. 2:5180 or 70 something. So even if it goes
92. 2:53to 150 you've doubled.
93. 2:56And like you said you take the
94. 2:57bottleneck names because there is a lot
95. 3:00of growth ahead in the short run
96. 3:02you make that trade and you're done.
97. 3:05>> So it doesn't need to go back to all
98. 3:06time highs.
99. 3:07>> So you're admitting these are all
100. 3:08trades. These are not investments.
101. 3:10>> Bottleneck
102. 3:11the bottleneck ones I've said it time
103. 3:12and time again. You're not investing in
104. 3:14bottlenecks for the long run. You're
105. 3:15investing bottlenecks for oh this is
106. 3:18going to go up substantially because the
107. 3:19business is exploding. Once it does
108. 3:21you're done. Goodbye. Thank you very
109. 3:23much and you move to something that's
110. 3:25way more stable for the long run which
111. 3:28I've started to notice that maybe meta
112. 3:30is the best business around.
113. 3:32>> So I'm happy you said that because that
114. 3:34means
115. 3:36Okay.
116. 3:37If you're saying the bottlenecks are
117. 3:39trades which I would put Micron in that
118. 3:40category right?
119. 3:42>> I mean Micron and and
120. 3:44up to whatever AAOI is not the same.
121. 3:48Like one is a billion dollar company.
122. 3:52>> No but still is is
123. 3:53But still is Micron an investment to you
124. 3:55or is it a trade?
125. 3:56>> For me it was an it wasn't it still is
126. 3:59an investment. Buying it today would
127. 4:01still be an investment for Micron.
128. 4:04It's a company that's going to generate
129. 4:05hundreds of billions of dollars in
130. 4:07revenue and probably free cash flow the
131. 4:10next couple of years as well.
132. 4:12The small bottlenecks play are not
133. 4:14coming close to that at all. No, not I
134. 4:17mean not even close.
135. 4:20>> So, the reason I'm asking is because
136. 4:22if these are trades, that means people
137. 4:24have to be good at timing. That's my
138. 4:25point. And most people including myself
139. 4:27suck at timing. That that like a lot of
140. 4:29what we all preach is you find good
141. 4:31companies fundamentally undervalued, you
142. 4:33buy them, hold on for the long term
143. 4:35because
144. 4:36you know, they they will appreciate over
145. 4:37if you have enough years in this game,
146. 4:39you end up winning.
147. 4:41Most people suck at trading including
148. 4:42myself. Whether it's swing trading, day
149. 4:43trading, like I've been trying to learn
150. 4:45to day trade this year. Some wins, some
151. 4:46losses, but it's not easy, right? So, I
152. 4:49I think it's important to highlight that
153. 4:50if the if the bottlenecks are trades,
154. 4:53and I still think the memory stocks are
155. 4:54not investments. I really do think
156. 4:55they're trades because eventually they
157. 4:56cannot keep putting up these numbers.
158. 4:58And the numbers, at least on Micron, has
159. 5:00been amazing three quarters in a row and
160. 5:02the stock has not been able to make a
161. 5:04move higher.
162. 5:05Maybe there is something deeper than
163. 5:07sentiment cuz you're right. We did
164. 5:08haven't had bullish sentiment even
165. 5:10though we've had bullish results. But if
166. 5:11bullish results can't lead to bullish
167. 5:13sentiment,
168. 5:15maybe it's the Iran war we could blame
169. 5:16that. But if it's not, then
170. 5:18it's something about; it's something
171. 5:19else about where the Street's wanting to
172. 5:20rotate their funds right now.
173. 5:21>> It's one of those things like in terms
174. 5:23of the trade for Micron, it's like
175. 5:26I I I was thinking as you guys were
176. 5:27answering and I'm glad you didn't bring
177. 5:28it to me cuz I didn't know
178. 5:31if it is a trade or an investment.
179. 5:34But the more I think about it, you you
180. 5:36have to consider how much cash that
181. 5:38these companies are generating, and
182. 5:40there should be some sort of rule of
183. 5:41thumb: like, if you can generate your
184. 5:42market cap in terms of net income over
185. 5:45the next 5 years, or in free cash flow
186. 5:47over the next, uh, 5 to 7 years.
187. 5:51At what point do you even say, okay,
188. 5:53well, even though it's a bottleneck,
189. 5:54this is still an investment cuz the
190. 5:56buybacks are going to be so egregious?
191. 5:59They're they're going to be so large.
192. 6:01>> Yeah, and I think this comment also is
193. 6:03uh Jen says, "I'm bag holding AAOI at
194. 6:06158. It was supposed to be for a quick
195. 6:07trade. And I don't even blame you for
196. 6:09buying it cuz you it was down from 250,
197. 6:11right? So, you were like, okay, I'll get
198. 6:12a Now it's at 80. So, to your point,
199. 6:14Neil, if it goes to 160, it doubles. But
200. 6:16like
201. 6:17once again, you're timing something that
202. 6:20has so many external factors here.
203. 6:22And if it never was meant to be at that
204. 6:24initial level,
205. 6:26you know, it brings up a lot of
206. 6:27questions on where funds are going to go
207. 6:28in 2027. Cuz once again, when the high
208. 6:31beta trades go up, like Bloom could be
209. 6:32up 15%tomorrow once sentiment changes
210. 6:34and everyone Nebia, same thing.
211. 6:37But is that sustainable?
212. 6:40Like I think that's the biggest
213. 6:40question. And for the first 6 months of
214. 6:42this year, it was every other day these
215. 6:44names were up 2 to 3%and they were at
216. 6:45much cheaper valuations given the
217. 6:46companies were smaller.
218. 6:48But now I feel like it's a different
219. 6:49question.
220. 6:50>> Yeah, but eventually they go up because
221. 6:52the business has gone up. Like AMD is up
222. 6:54substantially this year because we are
223. 6:56expecting to see an acceleration in
224. 6:58growth.
225. 6:59So, bottleneck name, they went up a lot
226. 7:03based on what could happen.
227. 7:05Then the market noticed, oh, actually we
228. 7:08just
229. 7:09made these companies worth a hell of a
230. 7:11lot more money than what they should be
231. 7:12worth. So, we're going to pull them down
232. 7:15until the growth gets realized. Like a
233. 7:17lot of these bottleneck names are still
234. 7:19going to experience a lot of growth
235. 7:21ahead because the bottleneck it it
236. 7:23didn't get solved over the last 2 weeks.
237. 7:25The the the business
238. 7:27everything we still need all of it for
239. 7:29next year and for the year after that.
240. 7:31They're all expanding so they can have
241. 7:33more supply so they can sell more.
242. 7:36So, that's not going away. It's just the
243. 7:37valuation didn't make sense maybe in
244. 7:39June, July.
245. 7:41Got a correction now. And now we're
246. 7:43we're back at square one. We have an
247. 7:46earning season. All of these companies
248. 7:47have to now show, look, maybe we deserve
249. 7:49to trade at a little premium
250. 7:51or maybe we deserve to trade at at a
251. 7:53lower valuation because we we cannot
252. 7:56execute.
253. 7:57>> But uh but but the the last thing you
254. 7:58said is the point. Like maybe we deserve
255. 8:00to trade at a little bit of a premium
256. 8:01from here. No one's buying the
257. 8:03bottleneck trades for a little bit of
258. 8:05growth in terms of their stock price.
259. 8:07They're buying it for this explosive
260. 8:09like 3x, 4x, 5x, at least a double.
261. 8:12I mean,
262. 8:13do these names deserve to be up 100%
263. 8:15from these levels? Does Marvell deserve
264. 8:17to be a $400 stock?
265. 8:18I mean, I mean, you got a lot of people
266. 8:20saying Marvell should barely be in the
267. 8:22200s, 220s, even though they have
268. 8:23massive growth, but the valuation's kind
269. 8:25of crazy.
270. 8:27So, like
271. 8:28do you buy Marvell here as an optics
272. 8:29bottleneck? You know what I'm saying?
273. 8:30Like it like and Marvell's just one
274. 8:32example of many names that on the green
275. 8:34days are super green,
276. 8:36but they've not been able to hold their
277. 8:38green. And I are we reading too much
278. 8:40into the fact that it's been 5 months
279. 8:42and these names have not been able to
280. 8:43hold any of their green since the
281. 8:45Leopold liquidation? Or
282. 8:47is there is the street saying we're
283. 8:49shifting our strategy for 2027?
284. 8:52And we can smell that the market sent,
285. 8:54you know, sentiment around these
286. 8:55bottleneck trades has changed and we're
287. 8:56going to health care.
288. 8:57We're going to financials. We're going
289. 8:58to something else.
290. 8:59>> I I I do think that
291. 9:02uh
292. 9:03you know, people's sentiment is being
293. 9:06uh decided via the price right now.
294. 9:09Like I I saw a comment that was passing
295. 9:12by and it said if Nvidia falls below
296. 9:13200, the party's over. And I'm like,
297. 9:16what
298. 9:16what does that even mean? Like if we we
299. 9:20we just saw uh Nvidia continue to fall
300. 9:23on
301. 9:25Amazon, Google,
302. 9:27Microsoft all claim that CapEx is going
303. 9:30to significantly increase in 2027.
304. 9:34And that the stock price is going to
305. 9:36dictate how much sales that Nvidia is
306. 9:39going to make. Now,
307. 9:41stocks are not like uh
308. 9:43baseball cards or something like this
309. 9:45that go up based on how much nostalgia
310. 9:48people have for Nvidia. They go up based
311. 9:50on how much cash flow that Nvidia can
312. 9:52generate because if we don't buy it,
313. 9:54they will give out uh returns to
314. 9:56shareholders via buybacks and dividends
315. 9:58and special dividends.
316. 10:00Fundamentally speaking,
317. 10:02these companies should be trading on a
318. 10:04multiple. Now, that multiple we can
319. 10:06decide on, uh
320. 10:07you know, how much we want to pay for
321. 10:09for the future of of how much cash that
322. 10:11they're going to generate, but who is
323. 10:14actually bringing down their targets for
324. 10:15earnings on Nvidia?
325. 10:18And if no one is,
326. 10:20and we're more bullish on Nvidia's
327. 10:21earnings over time, then
328. 10:24my belief is:
329. 10:26how much of this sell-off is actually
330. 10:28being more towards jaded things like
331. 10:32midterm volatility,
332. 10:34uh, people getting worried about uh what
333. 10:37the Fed is going to do, more, more macro
334. 10:39decisions, but not actually changing how
335. 10:41much sales or or free cash flow that
336. 10:44Nvidia is going to generate over time.
337. 10:46There's certain bottlenecks that we can
338. 10:47decide whether or not, you know,
339. 10:49Micron's going to do well, or or, like
340. 10:51even Neil said, being a little bit more
341. 10:53choosy around AAOI or, um, you know,
342. 10:57very, very high beta names. But,
343. 10:59um,
344. 11:01at the end of the day, like you said,
345. 11:03go ahead.
346. 11:04>> I was going to you're saying a fair
347. 11:06point, and this is why I think the
348. 11:07Nvidia conversation is a bit more tilted
349. 11:09to this being an investment.
350. 11:10Nvidia
351. 11:12has IP and the ability to have 75%gross
352. 11:15margins that most companies can't
353. 11:17replicate. Now, every company is trying
354. 11:18to compete with them. I'm trying to say
355. 11:20Nvidia has a moat.
356. 11:21>> Now, Google and Amazon are selling off,
357. 11:23too, and they've got moats.
358. 11:24>> Well,
359. 11:25well, no, but but that's my point. I
360. 11:27don't think Nvidia's as much of a trade
361. 11:28as the bottlenecks because Nvidia
362. 11:30controls effectively the entire
363. 11:32ecosystem of bottlenecks. Um and Nvidia
364. 11:35they have a moat that can't be
365. 11:37replicated easily, even though they've
366. 11:39got competitors. Micron's moat is just
367. 11:41like timing. If Micron built 10x more
368. 11:43fabs 3 years ago, they wouldn't they
369. 11:45wouldn't have this pricing power.
370. 11:47Even Sam Altman on the cheeky pint today
371. 11:48said,"We think Micron can"he literally
372. 11:50said,"We think the memory names can
373. 11:52build more capacity, but they're so
374. 11:53scared of the previous cycles where they
375. 11:55overbuilt and then their stocks got
376. 11:56destroyed that they're being a lot more
377. 11:58cautious."
378. 11:59In Nvidia, it's not about capacity.
379. 12:00Nvidia's about like the
380. 12:03>> It's it's that's He can say this, but
381. 12:05this is exactly what TSMC does, and I
382. 12:07don't think anybody's blaming TSMC of
383. 12:09not overbuilding. Like it's it's about
384. 12:11managing your business. Like TSMC knows
385. 12:14there is a lot of demand. It's not why
386. 12:16they're going to build like 10 fabs and
387. 12:18then suddenly nine out of the 10 are
388. 12:19going to be
389. 12:21>> TSMC is different. There's a lot of
390. 12:22memory makers. There's not that many
391. 12:24TSMC compared
392. 12:25>> there are not a lot of HBM makers
393. 12:27at all.
394. 12:29>> That's fair. But there's more than one,
395. 12:31right? Like you do have products.
396. 12:34Yeah, there's three that control most of
397. 12:36the pricing power. I mean, if they
398. 12:37wanted to build more
399. 12:39they could. I mean, I don't I don't
400. 12:40think he's saying anything wrong. Like
401. 12:41yeah, there Micron and San and and and
402. 12:44Samsung and SK Hynix are doing what they
403. 12:45need to do for the interest of their
404. 12:46shareholders.
405. 12:47And for years they've gotten screwed
406. 12:48from Big Tech. So, they should be doing
407. 12:50this. But they know that at the end of
408. 12:51the day if they overbuilt, they're done.
409. 12:53They're cooked. There's no there's no
410. 12:55thesis anymore.
411. 12:57There's no price they are building. No,
412. 12:58I agree. So, the the and the long-term
413. 13:01agreements are super bullish. But that
414. 13:02goes back to the same conversation. If
415. 13:05their stocks are still stuck and it's
416. 13:07been five months now, then is there a
417. 13:09deep is it just a run worse, Tanner
418. 13:11said, which I think there's a world in
419. 13:12which that's the case or is it
420. 13:15the market knows these memory names are
421. 13:17going to top out at some point in
422. 13:18regards to the ability for them to grow
423. 13:21earnings? And that's being discounted a
424. 13:22year a year in advance.
425. 13:24>> It's a I guess it's a mix of of
426. 13:27all of it, but let me just go back to
427. 13:28the Marvell example. Marvell is still up
428. 13:31144%year to date. Applied
429. 13:34Optoelectronics is up 127%year to date.
430. 13:38So, these names have more than doubled
431. 13:40year to date. So, it's completely fine
432. 13:42if for the last four five months they
433. 13:44are doing absolutely nothing.
434. 13:47Nvidia did absolutely nothing for seven
435. 13:49months until it went up by 15%20%and
436. 13:53then got back down. So,
437. 13:55stocks go up a lot in the short run and
438. 13:58then they do nothing and people freak
439. 14:00out. Oh, it's completely over. But no,
440. 14:01it's just the business just needs to
441. 14:03catch up to the stock.
442. 14:06We are lucky that the stock run ran
443. 14:08ahead of the business, but
444. 14:11logically the business needs to to ahead
445. 14:13and then the stock is just
446. 14:14>> that's missing the point
447. 14:16>> of what most investors are freaking out
448. 14:18about. Most people did not buy before
449. 14:20they 4x their 3x for the year. Everyone
450. 14:22bought closer to the top.
451. 14:24You know? So, that's why everyone's
452. 14:25asking, can they get back to the top?
453. 14:27And if they don't, then there's food,
454. 14:29right? That Like Amazon will get back to
455. 14:31being a $280 stock one day. I think we
456. 14:32can agree. Will uh
457. 14:34will these other bottlenecks actually
458. 14:36get back to those June highs?
459. 14:37>> I'm still invested in Micron, so my
460. 14:39belief is yes, they will break new
461. 14:41highs, but
462. 14:42I think that this idea that every day
463. 14:44needs to be a slow gradual green day
464. 14:47and you know, if they're expecting
465. 14:49growth into the future, then that's just
466. 14:51going to be linear.
467. 14:52There this has happened multiple times
468. 14:54where they've sat in that sort of 350
469. 14:56450 range for a long time. Now
470. 14:59uh
471. 15:00you know, now everyone wants to claim
472. 15:02like there's not been an opportunity to
473. 15:03buy in at those prices now that we've 3x
474. 15:06and now we're sitting around this 1,000
475. 15:08to $900 range or 850 range and it's
476. 15:10hovering here.
477. 15:12And
478. 15:13it's like there's been plenty of
479. 15:15opportunities
480. 15:16to to buy in. Maybe everyone did buy up
481. 15:18at the $1,200 range, and now we're
482. 15:20sitting much lower than that right now.
483. 15:22But if you do believe that the they're
484. 15:25signing deals all the way up to 2035,
485. 15:27they should be able to generate enough
486. 15:29cash to buy back, like I said, huge
487. 15:31percentages of their outstanding shares.
488. 15:34And if that happens, the market cap
489. 15:35doesn't even need to go up for the share
490. 15:36price to go up and, and investors will
491. 15:38be handsomely rewarded.
492. 15:40>> I agree. I just I I don't think anyone's
493. 15:42asking for slow green days. I think
494. 15:43people are
495. 15:45>> Everyone's asking for for the market to
496. 15:47We We went into this year We went into
497. 15:50this year going,"Okay, if we look back
498. 15:52in in history,
499. 15:53midterm election years have been brutal
500. 15:57every time."And then everyone is ripping
501. 16:00their hair out. Looks like I've been
502. 16:01ripping my hair out. Someone pointed out
503. 16:02that I'm going bald. I'm looking at
504. 16:04this. I'm
505. 16:05unreal.
506. 16:07But um
507. 16:08I think like this is exactly what you
508. 16:11would expect from a midterm year and now
509. 16:14that it's happening, people are going,
510. 16:15"Why is this happening?"This must be
511. 16:16something around the AI trade.
512. 16:19And it's like
513. 16:20maybe that's not true.
514. 16:22Maybe the amount of spending that's
515. 16:24happening in memory and
516. 16:27for the chip layer, for for optics, for
517. 16:29all of the component layers are going
518. 16:32as well or better than expected across
519. 16:34all Wall Street expectations.
520. 16:37Right? Who who forecasted up memory
521. 16:40long-term agreements going to 2035? Tell
522. 16:42me who forecasted longer than that and
523. 16:43then they're disappointed by these
524. 16:45contracts. Not one person. Like so
525. 16:48>> you might you might it might be that
526. 16:50simple, right? The point of this
527. 16:51discussion is not to have a definitive
528. 16:53you know, black or white. I think that
529. 16:54that's why we do this analysis. The
530. 16:56point is it might be as simple as the
531. 16:57midterms. You get through the midterms
532. 16:58and you know, we we 2018 was ugly
533. 17:01midterms, 2022 was ugly midterms, 2019
534. 17:04and 2023 were massive up years. And if
535. 17:06we do have a massive green year at Bloom
536. 17:07and SanDisk and AAOI and like the most
537. 17:10Rocket Lab high high beta names are
538. 17:13going to go up in that environment. And
539. 17:15so usually buying the dip on that makes
540. 17:17sense.
541. 17:18Uh I think the broader question here is
542. 17:20if the large caps are getting destroyed
543. 17:23and the semis are not benefiting from
544. 17:25them getting destroyed, which is what
545. 17:26happened for majority of the year, what
546. 17:27does that look like into it? Like do we
547. 17:28think there's a world where Micron can
548. 17:30get to two three trillion and Amazon and
549. 17:32Google are barely holding above three
550. 17:34trillion?
551. 17:35>> No.
552. 17:35>> that make Okay, so then Amazon and
553. 17:37Google have to do something, which means
554. 17:39this dip has to get bought on them for
555. 17:40the dip to get bought on Micron.
556. 17:42And if we're in that stagnation phase,
557. 17:43the semis continue to stagnate as well.
558. 17:44Even though all the money is going from
559. 17:46Amazon and Google to the semis.
560. 17:47Which is the irony of this.
561. 17:48>> The the GPU companies will end up
562. 17:50pricing based on the profit that they
563. 17:53can make after paying for for the
564. 17:54expensive chips and the expensive
565. 17:56memory. So they are GPU prices are going
566. 17:58up, you know, SpaceX is now charging
567. 18:00like $50 per megawatt. But Anthropic is
568. 18:04making like $100 per megawatt and then
569. 18:06the customers who are buying from
570. 18:08Anthropic are making like two three four
571. 18:11five hundred dollars per megawatt. So
572. 18:14I I don't think that there's going to be
573. 18:16one specific company. Maybe that's
574. 18:17memory right now just because the huge
575. 18:19margin, but
576. 18:20that won't last forever.
577. 18:22Um margins will come down and margins
578. 18:24can come down healthily while they still
579. 18:26have a business. I I think people are
580. 18:29pricing too much of either
581. 18:31memory becomes the biggest part of the
582. 18:33chain or they go to zero.
583. 18:35Uh I I don't think enough people are
584. 18:37maybe suggesting that their gross margin
585. 18:39falls to 50%or something like this. And
586. 18:43the suppliers are very happy to or the
587. 18:46chip names are very happy to purchase at
588. 18:48those levels and they still have a
589. 18:50business.
590. 18:51Uh rather than the the tight constraints
591. 18:53that we have right now. But because we
592. 18:55looked back and they they went to
593. 18:56negative gross margin, that's what
594. 18:57everyone expects them to do. Uh just a a
595. 19:00super cycle of what's happened
596. 19:01previously.
597. 19:02>> Yeah, and look, I mean, if these amazing
598. 19:05amazing companies like Amazon and Google
599. 19:07are going to give discounts going into
600. 19:0927, which theoretically could get bought
601. 19:11after the midterms if that's when we
602. 19:12bought them.
603. 19:13Um
604. 19:14market sentiment can change very
605. 19:16quickly. That's one thing
606. 19:17you're 1,000%correct on. Sentiment can
607. 19:20flip so quick. I mean, sentiment Bloom
608. 19:21was at 190 after earnings. And it was at
609. 19:23230 I know it was down 5%after it, but
610. 19:25it got to 230 in like 2 days after
611. 19:26earnings. Like, the sentiment flipped on
612. 19:28Bloom by $40 within seconds. Now, the
613. 19:31choppiness is probably annoying to a lot
614. 19:33of people who bought into the strength
615. 19:35for Bloom, but like the point is when
616. 19:37sentiment switches, it switches
617. 19:38aggressively. And every time we've had a
618. 19:40hint of sentiment switching over the
619. 19:41past 2 weeks, it's been denied, whether
620. 19:43it's cuz of Meta or SpaceX or yesterday
621. 19:45Google, today Amazon.
622. 19:47And I think everyone's waiting for when
623. 19:49that sentiment actually flips to like
624. 19:51be in a trend and maybe we just really
625. 19:53need to get through a bunch of clearing
626. 19:55events like midterms and the Iran war
627. 19:57before we get there. Like, for example,
628. 19:58sentiment right now in the chat, who
629. 20:00thinks AMD goes up after earnings? Like,
630. 20:02seeing the Intel 20%drop, who would be
631. 20:05comfortable buying AMD here
632. 20:08at 530? E-even my I've never had, you
633. 20:11know, the most bullish commentary about
634. 20:13AMD.
635. 20:14I've had worse commentary about Intel.
636. 20:16So,
637. 20:16>> Would you buy Would you buy it at 530
638. 20:18before earnings?
639. 20:19>> No, I would I I'm an Nvidia guy through
640. 20:21and through, but
641. 20:23um I wouldn't
642. 20:25>> the reason I'm asking is
643. 20:26The reason I'm asking Tanner is because
644. 20:27it's down from 680. So, it's already
645. 20:29taken a very big beating and you're
646. 20:31still saying no. And I know you don't
647. 20:33love AMD, but the point is
648. 20:35you know, the sentiment there is
649. 20:36obviously a bit more negative even after
650. 20:38it's taken a massive dip.
651. 20:40>> Yeah, but
652. 20:41just because the stock went to
653. 20:44650 or whatever and now it's back down
654. 20:48to 530. And I own AMD, I've taken
655. 20:50profits at higher prices, but still I
656. 20:52own it.
657. 20:53It it doesn't mean that oh, suddenly
658. 20:55it's
659. 20:56it's cheap. Like I'll say something that
660. 20:58might be crazy, but when you overpay for
661. 21:01a stock don't be surprised when it goes
662. 21:03down. It's uh
663. 21:05I know it's it's new for for some, but
664. 21:08if you overpay for a name doesn't mean
665. 21:09that the name needs to go way back up.
666. 21:11If a name goes to 250
667. 21:13and now it's at 100
668. 21:15doesn't mean the stock needs to go to
669. 21:17250. It means that maybe the stock
670. 21:18should have never been at 250.
671. 21:20>> But that goes back to my point around
672. 21:21sentiment. I'm not saying AMD is cheap.
673. 21:23Obviously, Nvidia, Broadcom are
674. 21:25incredibly cheaper compared to AMD.
675. 21:27But
676. 21:28if it went that high and it never
677. 21:30deserved to get there, that was
678. 21:31euphoric.
679. 21:33Which means who knows if it deserves to
680. 21:34be here. So, the euphoric sentiment got
681. 21:36crashed. Obviously, Intel 147 down to
682. 21:3997, then down to 79 after hours. Meaning
683. 21:43a lot of that price action on the way up
684. 21:45wasn't real. It was just people gambling
685. 21:47at that point thinking it would go
686. 21:47higher. It wasn't supported by anything
687. 21:49fundamental. And people hate to hear
688. 21:50that if you're long Intel or long AMD or
689. 21:52anything.
690. 21:52But the point is if the numbers are the
691. 21:55numbers and it's showing that it wasn't
692. 21:56real and then the sentiment on top of
693. 21:58that sentiment gets even worse, that
694. 22:00means there's there's not a floor to
695. 22:01these prices is what I'm trying to say.
696. 22:02They need to find where buyers actually
697. 22:05are. And maybe that's lower on a bunch
698. 22:07of the bottlenecks.
699. 22:08>> Yeah, but AMD
700. 22:09Intel is I I just I just looked a bit at
701. 22:11the transcript. They say that free cash
702. 22:13of 27 there's probably not going to
703. 22:16they're not going to generate any free
704. 22:17cash flow. It's a bit different with
705. 22:19AMD. AMD does generate free cash flow.
706. 22:21AMD is also growing much faster etc.
707. 22:23etc. So
708. 22:24Plus they also gave us some meter meter
709. 22:27term targets for AMD. So, you can say,
710. 22:29"Oh, it's trading at X times forward
711. 22:31earnings for other can't remember what
712. 22:33fiscal year they were using."So, we can
713. 22:35then start to play around with or is it
714. 22:37now getting cheaper or or not? So, so
715. 22:40it it's I guess it it really depends on
716. 22:42what businesses we're we're talking
717. 22:44about cuz AMD's is going to experience
718. 22:46an acceleration in growth.
719. 22:48So, they're going to grow into the
720. 22:49valuation that is yes higher than a
721. 22:51Broadcom, that is higher than an Nvidia.
722. 22:55An Intel yes, an Intel went up quite a
723. 22:57lot purely because of one political
724. 22:58stuff.
725. 23:00Investments, it can still jump quite a
726. 23:02lot purely because foundry might
727. 23:04announce a huge customer maybe at the
728. 23:06end of this year, maybe starting next
729. 23:08year because capex is going to go up,
730. 23:10and
731. 23:11uh, Liputan did say that the only way
732. 23:13that they are going to increase capex is
733. 23:14if they are, if they have concrete
734. 23:16demand.
735. 23:17And it seems like if you're reading
736. 23:19between the lines, the reason why
737. 23:20they're increasing it is probably
738. 23:22because there is concrete demand and for
739. 23:24for Intel foundry. So,
740. 23:26maybe eventually this as well stays
741. 23:28around 70 80 bucks for quite a while
742. 23:31until the business actually catches up
743. 23:33to to reality and then yes, and then
744. 23:35once the business did catch up, then it
745. 23:38can continue to go up and maybe go back
746. 23:40to
747. 23:40to all-time highs and things like that.
748. 23:42But businesses that do not execute, they
749. 23:44do not grow into valuations, then yes,
750. 23:46they will never see all-time highs
751. 23:48again.