YouTube transcript (oX4DHLUOFUE) — Transcript

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1. 0:00Every financial creator and Wall Street
2. 0:02analyst is screaming that the next
3. 0:04massive phase of AI has begun. If you
4. 0:07own Nvidia, AMD, or Palunteer, you're
5. 0:10being told to hold, buy the dip, load up
6. 0:14because a multi- trillion dollar wave is
7. 0:16coming. And you're probably sitting
8. 0:17there thinking, "If I don't act now, I'm
9. 0:20going to miss out." Typical FOMO. I
10. 0:23don't agree with any of the analysts. I
11. 0:24don't care what the consensus is.
12. 0:26Because while everyone's getting
13. 0:28emotional about the AI story, nobody's
14. 0:30looking at the actual math. A great
15. 0:33technological phase does not guarantee a
16. 0:36great stock return if you pay a terrible
17. 0:39garbage price. So, let's get into the
18. 0:41numbers right now. And we're starting
19. 0:43with the one that might be the most
20. 0:45controversial of all three, Palunteer.
21. 0:48This stock has become the poster child
22. 0:50of the AI trade. So, let's see if the
23. 0:52numbers actually back it up. We're going
24. 0:55to lay out the bull case, then the bear
25. 0:57case, and then I'm going to tell you
26. 0:58what I personally believe. Bull case
27. 1:00number one. For years, Palanteer was
28. 1:02just a government contractor. That story
29. 1:05is over. Their US commercial revenue
30. 1:08surged
31. 1:09149% year-over-year, and it is on pace
32. 1:13to overtake the government side as their
33. 1:15biggest segment before 2027. Bull case
34. 1:19number two, Google, Meta, Microsoft,
35. 1:22they are all building AI chat tools.
36. 1:24Palanteer is building the layer that
37. 1:27lets companies and governments actually
38. 1:29use AI on their own private data without
39. 1:32exposing it. Bulls say that gives
40. 1:35Palunteer a monopoly on enterprise data
41. 1:37integration that the big cloud players
42. 1:40can't just copy. And bullcase number
43. 1:42three, Palanteer has raised its free
44. 1:44cash flow guidance to 4 and a.5 or 4.7
45. 1:48billion with an operating margin of 47%.
46. 1:52With fewer employees than they actually
47. 1:54had 2 years ago. So every new dollar of
48. 1:57revenue is almost pure profit because
49. 1:59the platform is already built. Okay, so
50. 2:01those are the bull cases. Now let's flip
51. 2:03it. Bare case number one, the price is
52. 2:06insane. Palanteer trades at roughly 154
53. 2:09times earnings and 75 times sales. To
54. 2:12put that into perspective, even if this
55. 2:15company had zero costs, zero salary,
56. 2:18zero taxes, and handed you every single
57. 2:20dollar of revenue as profit, it would
58. 2:23still take 75 years just to get your
59. 2:25money back at today's prices. Guys,
60. 2:28there is zero margin of safety here. How
61. 2:31does that compare with other companies?
62. 2:33Great like Microsoft and Google, they're
63. 2:35selling for eight to 10 times revenue
64. 2:37versus 75 on Palunteer's side. Barecase
65. 2:40number two, they are printing shares to
66. 2:43pay employees. Palunteer reported $315
67. 2:47million in stockbased compensation in
68. 2:50one single quarter. That means while
69. 2:53they're showing you record profits,
70. 2:54they're also quietly printing new shares
71. 2:57to cover payroll, which is diluting you
72. 2:59as an owner. And if you run a real
73. 3:02discounted cash flow model using fully
74. 3:04diluted shares instead of the basic
75. 3:06count, the intrinsic value per share
76. 3:08drops off a cliff. Fair case number
77. 3:10three, the insiders are selling. Now,
78. 3:13while retail investors are piling in on
79. 3:15the AI story, corporate insiders,
80. 3:17including the CEO, Alex Karp, have been
81. 3:19systematically unloading shares into
82. 3:21this rally. The analysts are saying that
83. 3:24if the people running this company truly
84. 3:25believe the stock was worth the price or
85. 3:27headed much higher, why the heck are
86. 3:29they cashing out? Now guys, I don't
87. 3:31necessarily agree with that one at all.
88. 3:33And the reason being is I believe that
89. 3:35many people including CEOs being
90. 3:38responsible financially are going to
91. 3:40sell for a thousand different reasons.
92. 3:42If they were buying, I would be much
93. 3:44much more interested in that. And that's
94. 3:46the stat that actually makes me very
95. 3:48interested. If you look at the history
96. 3:50of Palunteer's CEOs and their execs
97. 3:52buying, it practically does not exist
98. 3:55even when the stock was a lot lower.
99. 3:57That's what kind of raises a red flag to
100. 3:58me. All right, guys. So, here is
101. 4:00Palanteer. The actual price of the
102. 4:02company is not the price of the stock.
103. 4:04It is 465 billion. That's the number of
104. 4:06shares outstanding multiplied by the
105. 4:08current share price. This is if you
106. 4:10wanted to buy every single share
107. 4:12outstanding. The next thing I look at is
108. 4:14enterprise value. Guys, the vast vast
109. 4:16vast vast vast majority of companies
110. 4:18enterprise value is greater than the
111. 4:20market cap. And the reason being is
112. 4:22enterprise value is the market cap plus
113. 4:24their debt minus their cash. So it's a
114. 4:26basically by buying the company and
115. 4:28getting rid of all the debt and emptying
116. 4:31the bank account. Guys, it's 457
117. 4:33billion. It's lower than the market cap.
118. 4:36This is rare. This means they have more
119. 4:38cash than debt. This is awesome. I love
120. 4:41this about Palunteer. This is probably
121. 4:43one of the best stats on Palunteer out
122. 4:45there. Now, where it gets a little ugly.
123. 4:48Yes, free cash flow is up a lot, almost
124. 4:50triple over the last five years, but
125. 4:52it's still 140 times free cash flow, 150
126. 4:55times earnings. Yes, the company is
127. 4:57growing like crazy, and that can
128. 4:59definitely make the metric a lot easier
129. 5:00to swallow. But if it's just growing
130. 5:02like crazy, all it matters, then why
131. 5:04don't you pay
132. 5:061380 times free cash flow? at some point
133. 5:09it's just too much even with all the
134. 5:11growth involved. Now another great stat
135. 5:14look at this. Their five-year return on
136. 5:16capital is only 8% but last year 33%.
137. 5:20They're really coming into stride here
138. 5:22which is awesome. 85% gross margin.
139. 5:25Incredible. Look at this profit margin.
140. 5:2822 and a.5% a year for the last five,
141. 5:3149% in the last year. and their revenue
142. 5:34growth is 44% a year. Phil, I mean guys,
143. 5:37this company is hitting on all
144. 5:38cylinders. There's no other way around
145. 5:40apart from fraud, which I'm not trying
146. 5:42to say they are fraudulent, but there
147. 5:44were some accounting questions we had a
148. 5:46year and a half ago
149. 5:48that I sit there and go, why did they do
150. 5:49that? It was kind of weird, but in terms
151. 5:52of overall fraud, it's probably pretty
152. 5:53hard to do here. Let's go check out
153. 5:55their eight pillars. Okay,
154. 5:59that's the bad one. That's we talked
155. 6:01about stockbased compensation increasing
156. 6:03their shares outstanding a ton. Yes, the
157. 6:05company has grown far more in the last
158. 6:07five years to outweigh that, but it's
159. 6:09still annoying. Return on capital, not
160. 6:11worried about because it's so much
161. 6:12better now, but these big metrics here,
162. 6:15guys. Yes, their free cash flow and
163. 6:17earnings are up a lot in the last 5
164. 6:19years, but it's still a big number. Now,
165. 6:22guys, I went through a lot there. If you
166. 6:24felt overwhelmed, guess what? You're not
167. 6:27alone. every great investor of all time
168. 6:29was confused and overwhelmed at some
169. 6:31point. I'm here and the reason I have
170. 6:33this channel is to teach it in a much
171. 6:36simpler way. So, I'm asking you to do me
172. 6:38a quick favor. First off, if there's
173. 6:39something you don't understand
174. 6:40consistently in the video, put it in the
175. 6:42comments below because when we see those
176. 6:44comments popping up over and over, we
177. 6:46will address those in videos.
178. 6:48Next guys, I have an absolutely free PDF
179. 6:51that'll explain all these key metrics to
180. 6:53you, what they mean, how they're
181. 6:55calculated, absolutely free. Click in
182. 6:57the description below and you'll be able
183. 6:59to download that PDF in a matter of
184. 7:01seconds. And shortly, I will go over the
185. 7:04price that I'm willing to pay for this
186. 7:05company. But before we get there, let's
187. 7:08check out the analyst estimates.
188. 7:11So analysts have the company growing
189. 7:13from a $146 to 1327 in profit over the
190. 7:18next four years. That's basically 10x at
191. 7:211327. Let's say you applied a 25 PE to
192. 7:24the company, which is a lot. You're at
193. 7:26what? $300 a share. Is that right? Am I
194. 7:29estimating here? So that's a lot of
195. 7:31potential there if they're right here
196. 7:33with revenue growing from 7.7 billion to
197. 7:3768 billion.
198. 7:41What the This is insane. This is
199. 7:44absolutely insane for a company. So
200. 7:45guys, we have a little bit of story,
201. 7:48little bit of numbers, and our job now
202. 7:50is to put them together. But before I
203. 7:52want to I want to remind everybody, we
204. 7:54have our AI tool right here. And if you
205. 7:56just click on that AI tool and click see
206. 7:58bull and bear cases, let it work while
207. 8:00you're doing other research and it'll
208. 8:02pop up the top three bull and bear cases
209. 8:04for this company, which I'll show you in
210. 8:06just a few seconds on how it pops up. We
211. 8:08make this software and this community so
212. 8:11easy for you to do research. That way
213. 8:13you save yourself hours and hours of
214. 8:15time. So guys, here are my assumptions
215. 8:18for the next 10 years on Palunteer. I
216. 8:22did 15, 25, and 35% revenue growth.
217. 8:26Profit margin and free cash flow. I did
218. 8:2740, 47, and 55. Might be a little low
219. 8:31based on what they've been doing lately,
220. 8:32but I'm still comfortable with this. PE
221. 8:35and price of free cash flow. What would
222. 8:36I assign to this company 10 years from
223. 8:38now? Not today, not an average for the
224. 8:41last next 10 years. What about 10 years
225. 8:44from now? Well, they have increasing
226. 8:46returns on capital, which means it's a
227. 8:48quality business. And they're pretty
228. 8:49dominant their industry. So, it
229. 8:51definitely deserves a premium versus
230. 8:53historical average of 15 or 16 on the
231. 8:56S&P. So, I put in 20, 24, and 28. And
232. 9:00finally, guys, I'm doing my nine and a
233. 9:02half percent intrinsic value return.
234. 9:06Remember, this is no margin of safety.
235. 9:08This is not the price I want to pay.
236. 9:09It's what I think the company is worth
237. 9:11based on these assumptions that I've
238. 9:13made. Now, before the analyze button,
239. 9:16check this out, guys. Here are all your
240. 9:18bull and bear cases. This all happened
241. 9:19in less than a minute. It gave you all
242. 9:21of this. So, you can sit there and start
243. 9:23doing your research. So guys, I hit the
244. 9:25analyze button and I have a low price of
245. 9:2942, high price of 340, middle price of
246. 9:32123. Based on my middle assumptions, if
247. 9:35I pay today's price, I'm looking at a 5%
248. 9:37return. Now guys, you might be
249. 9:40disagreeing with my assumptions above.
250. 9:41That's what's wonderful about investing.
251. 9:43We can think similar but disagree on the
252. 9:46assumptions we made. That's the beauty
253. 9:47of having your own stock analyzer tool
254. 9:50to run the numbers on it. Another thing
255. 9:52I want to address that people have asked
256. 9:53about such a big range between low and
257. 9:56high. That's very typical in fast
258. 9:58growing companies because you don't know
259. 10:00where the growth will end up being and
260. 10:02their margins keep getting better. So
261. 10:03it's not only it's new to profitability.
262. 10:05It's still fast growing. This isn't like
263. 10:07a Microsoft. It's been around forever
264. 10:08and you can probably see do a much
265. 10:11tighter range of revenue growth. So
266. 10:13remember that as you're doing your stock
267. 10:14analyzer tool. Now guys, before we dive
268. 10:16into our next stock, I want to remind
269. 10:18you never take our title and thumbnails
270. 10:20literally. We are never here to give a
271. 10:22stock tip. We're here to teach a process
272. 10:24so that one day you sleep better at
273. 10:27night because you know how to apply that
274. 10:28process to value a stock. Make good
275. 10:31assumptions about its future and
276. 10:32understand that the price you're paying
277. 10:34is different than the value you're
278. 10:36getting. I assure you, if you stick with
279. 10:39us, years down the road, you're going to
280. 10:40be thanking us after you learned a
281. 10:42disciplined process for valuing stocks.
282. 10:44All right, guys. Next up, Nvidia. And
283. 10:46unlike Palunteer, this isn't a debate
284. 10:48about whether the business is real or
285. 10:50not. Everybody knows the business is
286. 10:52real. The question is, what are you
287. 10:55paying for it? Ble case number one, they
288. 10:57have monopolistic pricing power as we
289. 10:59speak. Nvidia doesn't just sell GPUs
290. 11:02anymore. They sell the full stack that
291. 11:04everybody needs. CPUs, networking,
292. 11:07software, all of it. And their revenue
293. 11:10per gigawatt of data center power has
294. 11:13gone from $18 billion with Hopper to 25
295. 11:17billion with Blackwell to 40 billion
296. 11:19with Vera Rubin. So instead of prices
297. 11:22going down with competition, Nvidia is
298. 11:24actually charging more every single
299. 11:26cycle. Bull case number two, demand is
300. 11:29locked in. Nvidia did $96 billion in
301. 11:32revenue last quarter which was up 106%
302. 11:35year-over-year and they guided for $ 108
303. 11:38billion for next quarter. Management
304. 11:41said their supply constrained through
305. 11:432028. That means that demand is so high
306. 11:46they cannot make chips fast enough.
307. 11:49Their revenue pipeline is basically
308. 11:51locked in for the next 18 months. In
309. 11:54bullcase number three, and this is what
310. 11:55I love to hear, the cash flow machine.
311. 11:58Nvidia pulled in $21 billion in free
312. 12:01cash flow in one quarter. They bought
313. 12:03back $26 billion in stock and still have
314. 12:07a hundred billion left on their buyback
315. 12:09program. They are printing cash like a
316. 12:12software company and using it to shrink
317. 12:15the share count which drives earnings
318. 12:17per share up even if the stock price is
319. 12:19flat. Now guys remember as an investor I
320. 12:22don't want them buying back expensive
321. 12:24shares but we'll get to that later. And
322. 12:27one more thing on Nvidia before we get
323. 12:28to the bare cases. This literally just
324. 12:31came out. Nvidia is acquiring Hugging
325. 12:34Face for $13 billion. That name Hugging
326. 12:37Face sounds like the kind of name that
327. 12:39Bill Bich would make up for some social
328. 12:40media company. So if you don't know what
329. 12:42Hugging Face is, it is basically the
330. 12:44biggest open platform in AI. 3 million
331. 12:47AI models, 500,000 data sets, over 18
332. 12:51million developers use it. It's where
333. 12:53the open-source AI world lives. Now,
334. 12:56here's why that matters. Hugging Face
335. 12:58actually turned down a $500 million
336. 13:00investment from Nvidia just last year.
337. 13:03Because they didn't want one company
338. 13:05having that much control. Now, Nvidia is
339. 13:07buying the whole thing. Jensen Huang has
340. 13:10said that it's about spreading open AI
341. 13:12models to factories, hospitals, farms,
342. 13:15classrooms, everywhere we can go. But
343. 13:18let's be real about what this also does.
344. 13:20It gives Nvidia control over one of the
345. 13:22biggest distribution channels in AI.
346. 13:25More open models means more people need
347. 13:27chips to run them. And whose chips are
348. 13:29they going to run them on? This is
349. 13:30Nvidia's biggest acquisition ever.
350. 13:32Almost double what they paid for Melanox
351. 13:34back in 2020. Can I make a plea to these
352. 13:37CEOs of these tech businesses? Stop
353. 13:39trying to be so fancy with your names.
354. 13:41Just name something Joe. Just name it
355. 13:44Frank. These are the names of our
356. 13:45software. It's unbelievable to me.
357. 13:47>> Like Hugging Face.
358. 13:48>> I'd hugging face. What a stupid
359. 13:50name is Hugging Face. God, that deal is
360. 13:53what turned Nvidia from a chip company
361. 13:55into a data center company. This one
362. 13:58could just be just as big. All right, so
363. 13:59those are the bull cases. Now, let's
364. 14:01flip it. Bare case number one, hardware
365. 14:04is cyclical pretty much always. No
366. 14:07hardware company has ever escaped this.
367. 14:09Once Microsoft, Meta, Google, and Amazon
368. 14:12finish building out their AI data
369. 14:13centers, they shift from building mode
370. 14:16to maintenance mode. These chips last
371. 14:18for years. Once the world's big data
372. 14:21centers are full of Blackwell and Reuben
373. 14:22chips, Nvidia's revenue doesn't just
374. 14:25flatten, it could actually fall off a
375. 14:27cliff. Case number two, the circular
376. 14:29financing problem. Nvidia is using its
377. 14:32own balance sheet to fund startups, back
378. 14:35leases, and guarantee loans so those
379. 14:37companies can turn around and buy more
380. 14:39Nvidia chips. Think about that. Nvidia
381. 14:41is literally financing its own customers
382. 14:43to buy its own products. That shows up
383. 14:45as revenue on the income statement. But
384. 14:48if those startup never figure out how to
385. 14:50make money, the whole loop collapses.
386. 14:52That's manufactured demand. Bearcase
387. 14:54number three, the 5.4 trillion problem.
388. 14:58Nvidia is a $5.4 trillion company
389. 15:01trading at almost 40 times sales. To
390. 15:04justify that, they don't just need a
391. 15:07couple good years. They need a near
392. 15:09monopoly on global computing for the
393. 15:12next decade. And even if they hit every
394. 15:14number perfectly, but growth slows down
395. 15:17to 15%.
396. 15:18The market will rerate the stock much
397. 15:21lower, you can have growing earnings and
398. 15:23a falling stock price at the same time.
399. 15:25We see it all the time. Now guys, Tim
400. 15:27just asked a great question. Hey, what's
401. 15:29the difference between Nvidia doing this
402. 15:31versus a Kohl's credit card or a vendor
403. 15:33saying, "Hey, you can pay me on terms."
404. 15:35It's a great question and one I'm sure a
405. 15:37lot of people are asking. The difference
406. 15:38is this.
407. 15:40These a lot of these companies they're
408. 15:41selling chips to these startup companies
409. 15:44are either pre-revenue or they're not
410. 15:46even making money. If they don't make
411. 15:48that money, who's left holding the bag?
412. 15:50All of a sudden, Nvidia is going to have
413. 15:52to alter their financial statements to
414. 15:54say, "Hey, remember these this revenue
415. 15:55we booked back then? Instead of being 10
416. 15:58billion, it's now going to be three
417. 15:59billion because that's all we
418. 16:00collected." That's the issue at hand. So
419. 16:02guys, now you've seen both sides of
420. 16:03Nvidia, the bull case and the bare case.
421. 16:06And here's the honest question. Could
422. 16:08you do that on your own? Could you pull
423. 16:10up Nvidia right now, look at the actual
424. 16:12financials, and figure out whether
425. 16:13you're paying a fair price or a stupid
426. 16:15one? Could you take a $5.4 trillion
427. 16:19company that is trading at 40 times
428. 16:21sales and figure out whether that gives
429. 16:23you the return you need or whether
430. 16:26you're just hoping for it all? Because
431. 16:27that's the difference between investing
432. 16:29and guessing. And guys, most people and
433. 16:33every investor in their life at some
434. 16:34point was guessing. That's exactly why
435. 16:37we built our stock analyzer tool in our
436. 16:39entire software platform. You're going
437. 16:41to plug in your own assumptions, revenue
438. 16:43growth, margins, how long you plan to
439. 16:46hold the company, and it tells you the
440. 16:48price you need to pay to hit your target
441. 16:50return. Guys, these aren't my
442. 16:51assumptions. It's not some analyst
443. 16:53assumptions. It's your own assumption.
444. 16:55You do your own math, and you guide your
445. 16:57own future.
446. 16:59But the best part is you're not doing it
447. 17:01alone. Our whole community is in there
448. 17:03running the numbers every single day,
449. 17:05breaking down stocks together, going
450. 17:08live together, getting better at this
451. 17:10together. Guys, I did not become a
452. 17:12better investor by just sitting back and
453. 17:14reading book after book on my own. I
454. 17:16surrounded myself with the right people.
455. 17:18Guys, think about this. What's it going
456. 17:21to cost you to buy Nvidia at the wrong
457. 17:23price? To buy in Palanteer and overpay
458. 17:26for it because a headline got you
459. 17:27excited? Because everybody out there is
460. 17:29screaming, "These companies are growing
461. 17:30like crazy.
462. 17:31But guys, one bad decision on one stock
463. 17:34could cost you thousands and thousands
464. 17:35of dollars. But what's the solution cost
465. 17:38you? $7 for seven days, $1 per day. If
466. 17:42you want that solution, go to
467. 17:43everythingmoney.com. The link is right
468. 17:45below in this video. So guys, let's pull
469. 17:47up Nvidia here. Again, it is a $5.5
470. 17:51trillion business. That's the price.
471. 17:545.53 enterprise value. Not as good as
472. 17:57Palanteer, but still very low debt for a
473. 18:00company that's generating 127 billion in
474. 18:03free cash flow over the last year. And
475. 18:05guys, 193 billion in net income. This
476. 18:08company is absolutely printing money.
477. 18:11And as if it didn't, nothing in this
478. 18:12company is bad numbers wise in terms of
479. 18:15what they're generating. 73% returns on
480. 18:18capital, 55% for the last five years.
481. 18:21Here are the scary parts.
482. 18:23the price of free cash flow the PE is
483. 18:26only 28. So I know a lot of people look
484. 18:28at that and say that's awesome and I
485. 18:29think that is awesome but again we have
486. 18:32to ask the question is their revenue and
487. 18:35is their profit going to be permanent
488. 18:36from here or is this going to be like
489. 18:39the rest of the chip world and the rest
490. 18:40of the history of chips and it's going
491. 18:42to be cyclical and then end up falling
492. 18:44off. So let's check out the eight
493. 18:46pillars. Now this one's a lot cleaner
494. 18:48than Palunteer. Our only X's here are
495. 18:51the five-year price of free cash flow.
496. 18:52And in defense of them, their fiveyear
497. 18:54free cash flow is 52 billion. Their one
498. 18:56year is 127. So, it's up a ton. So, I'm
499. 18:59focused more on this one year. Same with
500. 19:02the net income from 70 billion for the
501. 19:04last 5 years to 193 billion. Guys, can I
502. 19:07just show you guys the growth of this
503. 19:08company because I think it's really
504. 19:09important to understand this. This is
505. 19:12annually revenue for the last 10 years.
506. 19:15They had 7 billion in revenue.
507. 19:18a 10 years 2017 for the entire year 7
508. 19:22billion. They're doing $300 billion in
509. 19:25the last year recently. What does that
510. 19:27mean, guys? They almost do in one week
511. 19:30now what they did the entire year of
512. 19:332017. They almost do that in one week.
513. 19:35Isn't that incredible? Net income wise,
514. 19:39they do more net income, 193 billion.
515. 19:43They did 1.67 billion. It's 150 times
516. 19:46higher than in 2017. Absolutely
517. 19:50incredible. And I asked the question
518. 19:51again, is this sustainable?
519. 19:54So, let's check out what analysts think.
520. 19:58Well, guys, analysts have profit going
521. 20:00from $4 per share to $20 per share. 5x
522. 20:03over the next four or five years. As for
523. 20:06revenue,
524. 20:08213 billion going to a trillion dollars.
525. 20:10Again, 5x for the next how many years?
526. 20:14Absolutely insane. Absolutely insane. So
527. 20:18guys, here we are to our stock analyzer
528. 20:21tool. What is the company worth based on
529. 20:23my assumptions? Now again, I want to
530. 20:26repeat that people have to remember that
531. 20:28I'm looking at this from a 10-year
532. 20:30perspective, including I perceive to be
533. 20:32a dip as a cycle passes through. I still
534. 20:35think it's aggressive, but I put 12, 20,
535. 20:38and 30% revenue growth for the next 10
536. 20:40years. I did 35, 45, and 55% profit
537. 20:44margin because as competition enters, as
538. 20:47the chips go into a certain cycle,
539. 20:49they're going to have to drop their
540. 20:50margins. This actually might be high. I
541. 20:52don't know. Next PE 10 years from now, I
542. 20:55put an 18, 23, and 28. And again, my 9
543. 20:5912% return. I hit the analyze button.
544. 21:02Boom. Guys, this is what's amazing. I
545. 21:05have a low price of 140, high price of
546. 21:071230, middle price of 400. Look at how
547. 21:10wide these ranges are. And then based on
548. 21:12my middle assumption, this looks like it
549. 21:14could be a buy here. The question is, do
550. 21:16you believe those middle assumptions to
551. 21:18be their averages for the next 10 years?
552. 21:21That's the question we have to ask about
553. 21:23any investment we make, even when
554. 21:25there's so much green like we see here.
555. 21:27All right, the last one. AMD, also known
556. 21:29by people who watch this channel as
557. 21:31AMD's nuts. And this is interesting
558. 21:33because AMD is kind of the odd one out.
559. 21:35It is not the hype stock like Palunteer
560. 21:38and it's not the king like Nvidia. It's
561. 21:40the alternative. So let's see if that
562. 21:42actually makes it a better buy. So bull
563. 21:45case number one, the price versus value
564. 21:47is actually reasonable. Unlike Nvidia
565. 21:50and Palanteer, AMD trades at a much more
566. 21:52reasonable forward multiple. If you
567. 21:55believe the AI buildout is real, but you
568. 21:57don't want to pay an insane premium to
569. 21:59participate, AMD might be the way that
570. 22:02value investors get into this AI trade.
571. 22:05Bullcase number two, everyone wants a
572. 22:08second option. It's kind of like you
573. 22:10want to be the less expensive house in
574. 22:12your neighborhood. Microsoft, Meta,
575. 22:14Oracle, these companies are desperate
576. 22:17for a second chip supplier so they're
577. 22:19not completely dependent on Nvidia.
578. 22:21AMD's Mi300 and MI325 chips are being
579. 22:25aggressively adopted as that
580. 22:27alternative. The demand for a not Nvidia
581. 22:30option is massive and AMD fits that
582. 22:33perfectly. Bullcase number three, it is
583. 22:35not just an AI story. AMD is also
584. 22:38stealing serious market share from Intel
585. 22:41in both PCs and data center servers.
586. 22:44That gives them a diversified cash flow
587. 22:46engine that doesn't depend entirely on
588. 22:48the AI hype cycle to survive. So that's
589. 22:52the bull case. Now let's go flip mode.
590. 22:54Fair bare case number one. The margins
591. 22:57are absolutely atrocious. Nvidia runs a
592. 23:0075% gross margin. That means that every
593. 23:02chip they sell after they pay all direct
594. 23:05costs associated with that chip, 75% of
595. 23:08it is profit for them to go pay their
596. 23:10overhead and taxes. AMD, they sit around
597. 23:1347 or 50%. That is not a small gap,
598. 23:16guys. That's a completely different
599. 23:19business model. Because AMD is
600. 23:20undercutting Nvidia on price to win
601. 23:22market share, they're eating higher
602. 23:24costs on every chip they sell. That
603. 23:27means way less free cash flow per dollar
604. 23:30of revenue. Bare case number two, it's
605. 23:33not actually cheap. Now, this is the one
606. 23:35that gets people. Everyone says AMD is
607. 23:38the value play, but it still trades at
608. 23:41over 100 times trailing earnings. That
609. 23:44means the actual profits the company is
610. 23:46generating right now are nowhere near
611. 23:48justifying the stock price. You're not
612. 23:51paying for what AMD is. You're paying
613. 23:53for what you hope it becomes. And
614. 23:55barecase numero trace, they're getting
615. 23:58squeezed from both sides. AMD is trying
616. 24:01to fight Nvidia at the top of the AI
617. 24:03market while also fending off Intel as
618. 24:06they claw back CPU market share from
619. 24:08below. And on top of that, their biggest
620. 24:11potential customers, Google, Amazon, and
621. 24:13Meta, they're building their own chips
622. 24:15inhouse. AMD is stuck in the middle. So,
623. 24:19let's pull up AMD and our software and
624. 24:21run through the eight pillars, the
625. 24:23analyst estimates, and then we will go
626. 24:25look at what my price is. So, AMD's
627. 24:29market cap, $760 billion. Is it even
628. 24:32possible that a reasonable company can
629. 24:34sell for a trillion dollars or less?
630. 24:36Look at this. 763 billion enterprise
631. 24:39value. That's $4 billion of debt and
632. 24:42they did 8.4 billion in free cash flow
633. 24:44last year. So essentially less than six
634. 24:46months of their free cash flow can pay
635. 24:48off their debt. Now here's what's
636. 24:50interesting. Very abysmal returns on
637. 24:52capital. I don't know why it's so low.
638. 24:55Clearly there's a reason for that, but
639. 24:57that's not a good sign for things. And
640. 24:59guys, in the last [snorts] five and 10
641. 25:01years, they had very consistent 10%
642. 25:03margin. It has suddenly jumped to 15.6%.
643. 25:06Got to ask the question of if that's
644. 25:08here to stay or will it mean revert back
645. 25:11to their margins of the past. Guys, very
646. 25:13few acquisitions but well into 20%
647. 25:17mid20s revenue growth over the last
648. 25:19three, five, and 10 years. Let's go to
649. 25:22the eight pillars. Four checks, 4x's. I
650. 25:25should start guessing these when we do a
651. 25:27video. I should start sitting there
652. 25:28saying, "Okay, before I go to the eight
653. 25:29pillars, I'm looking at things. I think
654. 25:31it's going to be around this." So, we've
655. 25:33got high PE and price of free cash flow.
656. 25:35We've got not great returns on capital.
657. 25:37Shares are slightly up, 1.65%. That's
658. 25:40nothing compared to other companies, but
659. 25:42low debt, cash flow growth, revenue
660. 25:44growth, and net income growth. All
661. 25:46right, so let's go to our analyst
662. 25:48estimates. Wow, this is where the future
663. 25:51is in the growth. $7.60 to $42 if you
664. 25:57believe analysts over the next four
665. 25:59years. and revenue skyrocketing from 51
666. 26:02billion to 240 billion over the same
667. 26:05four years. So that's where this growth
668. 26:07story is. People are saying it's
669. 26:09actually quite reasonable for that
670. 26:11growth story. So here we are. Let's run
671. 26:13our stock analyzer tool. All right,
672. 26:16guys. So here's our 10-year analysis on
673. 26:17AMD. Here are my assumptions for the
674. 26:20next 10 years. Guys, I'm not going to
675. 26:21lie to you. My revenue growth numbers
676. 26:23are abysmally lower than I I'm just You
677. 26:26know what? I'm gonna go higher because I
678. 26:28want to make sure I give you guys
679. 26:30let's go based on what people really
680. 26:32think is going to happen. 14 20 and this
681. 26:35might even be low still. I'm going to do
682. 26:3714 20 and 26% revenue growth. They're
683. 26:40factoring in way higher by analysts. Is
684. 26:42it the optimism? I don't know. Now guys,
685. 26:44remember profit margins lower than free
686. 26:46cash flow. And because free cash flow is
687. 26:47more important, I'm going to focus on
688. 26:49that 12, 16, and 20%. PE I'm putting 18,
689. 26:5422, and 26. Not going to lie, guys. I'm
690. 26:57actually going to go lower than this
691. 26:58because of their returns on capital
692. 27:00being so bad. I'm going to do 14, 18,
693. 27:03and 22.
694. 27:05And then finally, my no margin of
695. 27:07safety, 9.5% return. I hit the analyze
696. 27:09button.
697. 27:11Guys, I've got a low price of 70 to 95,
698. 27:14high price of 400 to 540, middle price
699. 27:17of 180 to 240. Anyway, I cut it, it's
700. 27:20probably not a buy for me, unless I'm
701. 27:23massively off on the revenue growth
702. 27:25numbers. That's the big unknown here.
703. 27:27The question is, are we in this
704. 27:29permanent level of just massive growth
705. 27:30on AI? Now, we just spent this whole
706. 27:34video looking at three of the hottest AI
707. 27:36stocks on the planet, the ones everybody
708. 27:38is telling you to buy. But what about
709. 27:39the other side? What about the stocks
710. 27:41the market has completely given up on?
711. 27:44In our next video, we took three of the
712. 27:46worst performing stocks in the entire
713. 27:48S&P 500 this year, companies that Wall
714. 27:51Street said are probably dead and or
715. 27:54dying, and we ran the numbers. What we
716. 27:56found was very surprising because the
717. 27:58math is telling a completely different
718. 28:00story than the headlines. There might
719. 28:02actually be real opportunity hiding in
720. 28:05the stocks that nobody wants to touch.
721. 28:07So, click the video right here on your
722. 28:08screen and check it out. Thank you for
723. 28:11your time.