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She Manages $8.2 Billion — Here's What She's Buying (and Refusing to Touch) — Transcript

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0:00I truly believe we are seeing things
0:02that we've never seen before and it's
0:04going to change our lives. Stephanie
0:05Link is the chief investment strategist
0:07and head of investment solutions at High
0:09Totower Adviserss, a national wealth
0:11management firm. The investment
0:12solutions team at High Totower currently
0:14has $8.2 billion in assets under
0:17management. And Stephanie's insights are
0:19sought after by every single big
0:21financial show on air today. She gives
0:23us a vibe check on the market. We care
0:25because if the economy is growing 3%,
0:27earnings can grow 20 to 25%. Which I've
0:30been doing this a long time. I know you
0:31have too. I've never seen 25% earnings
0:34growth like we saw last quarter. And
0:36we're on pace to do another 20% for the
0:39full year. What opportunities she's
0:41seeing right now. Cyber security is
0:43going to be bigger than AI and whether
0:45AI investments are still worth the hype.
0:46We're in the third inning of AI
0:48revolution. We're in the second inning
0:50of cyber security. We're in the first
0:52inning in robotics.
0:55I'm Nicole Lapen, the only financial
0:57expert you don't need a dictionary to
0:59understand.
1:01It's time for some money rehab.
1:12>> Stephanie Link, welcome to Money Rehab.
1:14>> It's so great to be here, Nicole. Thank
1:15you.
1:16>> It's so great to have you. I have had a
1:19intellectual crush on you for many, many
1:23years. And I'm so happy to finally see
1:25you in person.
1:26>> This is going to be so much fun. I'm
1:27honored.
1:28>> And honestly, you spend most of your day
1:30talking to old rich white men about
1:32money. And so now it's time to take all
1:34of your brain and amazing information
1:37and give it to everybody else.
1:38>> I'm looking forward to it.
1:39>> So what's going on with the markets
1:41right now?
1:41>> Yeah, it has been a wild year. If I had
1:45told you in the beginning of the year
1:47that we would have had Venezuela, we
1:49would have had Scotas overturning the
1:52tariffs, we would have had AI and the
1:55software
1:56>> tariffs in general.
1:57>> Tariffs in general unknown. The
1:59apocalypse in software because of AI,
2:01private credit,
2:03>> and and and now this war that we still
2:05have going on going, not really going.
2:07We're not sure. If I were to tell you
2:09that, I would have thought that the
2:11market would be down double digits. But
2:13in fact, the markets are up about 8% and
2:16the NASDAQ's up about 11% year-to- date.
2:18And why is that? It's because the
2:21economy has an enormous amount of
2:23momentum behind it. There's a lot of
2:25tailwinds. And I have been bullish on
2:27the economy for the last couple of
2:29years. And I was thinking we could grow
2:30maybe two two and a half% this year.
2:32We're on track on pace to grow 3 and a
2:34half% give or take. But that is much
2:38more that is much stronger than even I
2:40thought. And a lot of that has a lot to
2:43do with two things. The consumer is
2:46consuming even though the press would
2:49have you believe else otherwise. And we
2:52have this AI revolution. And we can get
2:54into all the details, but that is the
2:58main reasons why we have so much in
3:00terms of the tailwinds to the economy.
3:02And why do we even care? We care because
3:04if the economy is growing 3%, earnings
3:07can grow 20 to 25%. which I've been
3:09doing this a long time. I know you have
3:11too. I've never seen 25% earnings growth
3:15like we saw last quarter. And we're on
3:17pace to do another 20% for the full
3:20year. And again, it has a lot to do with
3:22these two really big parts of our
3:24economy. The the consumer is consuming
3:26because they have jobs and they have
3:30wage growth. And we can talk about
3:32inflation. I'm sure we'll talk about it,
3:33but it is going to be coming down. It is
3:35coming down. And then it's the not only
3:37the AI revolution, it's the food chain.
3:41So it's AI and all this capex that we're
3:43hearing from all these big technology
3:45companies, but the beneficiaries of that
3:48capex, the industries that are seeing
3:50all this money being spent is
3:53widespread. So it's data centers and the
3:55buildout. It it is the grid and
3:58upgrading the grid because we haven't
4:00upgraded the grid in over 50 years. And
4:02then it's power and we don't have enough
4:03power. So you add all of this up and
4:06that's why we're growing better than
4:07expected.
4:07>> Well, so in English, capex, capital
4:09expenditures, just means like companies
4:11are spending a bunch of money and when
4:13they spend a bunch of money, they have
4:14to hire people to do whatever those
4:16projects that they're spending the money
4:17on.
4:18>> Yes. And it's it's just it's the big
4:20four technology companies and more than
4:22just four, but the but the big numbers.
4:24We're going to have $800 billion being
4:26spent this year. this year, which is up
4:3075% from last year on these companies
4:33like Amazon, Alphabet, Meta, Microsoft,
4:37those kind of big names. They're the
4:39ones that are spending all of this money
4:41to build out AI, but you need the
4:45infrastructure. You need kind of like
4:46the picks and the shovels.
4:48>> And you're right, you need the people.
4:50And we don't have enough people. Well,
4:52it's so crazy that you say that because
4:54colloquially people are like in this
4:56economy, you know, and they there's a
4:59vibe session people don't feel like the
5:02economy is strong, but you're saying
5:03that the numbers show otherwise.
5:06>> Yes. And it's so many different sectors.
5:08So, it's not just for the last couple of
5:10years, everyone was talking about mag 7,
5:12you know, the big the names I was just
5:13talking about, and they were driving a
5:16lot of the growth. Now, it's spread to
5:18all these other industries. And so you
5:21talk to some of these really I don't
5:23want to be offensive, but like these
5:25boring industrial companies, they're
5:27seeing
5:27>> Caterpillar. Yes, I was going to say
5:29that they're seeing like 35% backlog
5:33growth, 70% order growth. I' I've never
5:37seen numbers like this before. And it's
5:39because of all this spend that's
5:41happening. And it's not going to end. I
5:44think next year you're going to see $1.1
5:46trillion dollars of this spend from the
5:49same companies. Now, it's not going to
5:51be 75% year-over-year growth. It'll be
5:53more like 40 or 50%. But it's going to
5:56be they're going to spend it. And if I
5:58can just suggest anyone listening and
6:01watching, take a look at the CEO of
6:04Amazon. We all know Amazon. CEO of
6:06Amazon. His name is Andy Jasse. He
6:08writes a shareholder letter every year
6:12in English so that we can all understand
6:14it like just really very plain and
6:17simple. And he went through this year's
6:20shareholder letter explaining exactly
6:22why they're spending so much in detail
6:25because and in his words we've never
6:28seen anything like this in our lifetime.
6:30That's why I call it the AI revolution
6:33because I truly believe we are seeing
6:35things that we've never seen before and
6:37it's going to change our lives and
6:39that's why they're spending so much.
6:40>> So if somebody is listening or watching
6:42and they're like but Andy is a very rich
6:44dude and what about regular people who
6:47are struggling and they're feeling
6:49inflation. So that's another economic
6:51marker. It's kind of a mixed bag. We're
6:53seeing so much hiring and the rest of
6:55it. But doesn't why does it not feel
6:57that way? because it's K-shaped. And
7:00we've we've heard about K-shaped.
7:01K-shaped meaning it's the high end of
7:03the consumer that is doing the bulk of
7:06the spending. And why are they doing the
7:08bulk of the spending? Because they have
7:09the money, they have interest in homes,
7:13so their home prices have appreciated,
7:14so they have the wealth of effect. And
7:16they also own stocks. And the market,
7:18the S&P 500 over the last three years on
7:21average is up 18%. By the way, that's
7:23not normal. Normal is about 7%.
7:26>> 7 to 10, right?
7:27>> Yeah. So, so if you think about it, it's
7:30it's the high end that is spending, but
7:32it usually is the case. I hate to say
7:34it. I want everyone to be spending. I
7:36want everyone to feel good, but that's
7:38not normal. That's not normally what
7:40happens. I don't think the middle the
7:42middle end consumer is is feeling as
7:45badly as the lower end. And the lower
7:47end, unfortunately, they are the ones
7:49that get feel the brunt of inflation.
7:51Now I will say on inflation just because
7:54we we should go there for half a minute.
7:56It's it peaked at 9%.
7:59>> In 2022, right? That was co and
8:01>> and all of our listeners bought ibonds
8:03then.
8:04>> Right. Right. I got a questions on that
8:06too. And so we peaked at nine. We got
8:10down to about two and a half. We're now
8:12at about three and a half because of the
8:13war.
8:15I strongly believe one way or the other
8:17we're we're going to have to end this
8:19war. Whether it achieves what the
8:21administration wanted or not, I'm not
8:23going to go down that path. However, the
8:25midterms are coming up and I can't
8:27imagine that this administration wants
8:30gasoline prices of where they are. That
8:33all being said, believe it or not, since
8:36we've kind of started talking about
8:37ceasefire, not ceasefire or whatnot, oil
8:40prices have peaked in April at $112.
8:44That's crude crude prices. And they're
8:46now at 69. So, we've corrected in oil
8:50prices 39% from the highs. It's still
8:53high, but we've corrected. And I think
8:55that's going to lead to lower gasoline
8:58prices at the pump. We're already seeing
9:00it. It's never as fast as we want it to
9:02be, but I think you're going to continue
9:04to see it come down. That will help the
9:06inflation piece.
9:08>> I don't think we're going to get to 2%,
9:11which is what our Federal Reserve the
9:13the team wants.
9:15>> I think you're going to be around two
9:17and a half. And I think that's the case
9:19again circling back to AI and the food
9:21chain because there's so much demand.
9:24There's so much money that wants all
9:25this stuff to be built out. We're short
9:28everything. We're short memory. We're
9:30short compute. We're short copper. We're
9:32short aluminum. We're short a lot of
9:34short people. We're short a lot of
9:36things. That by definition is
9:38inflationary.
9:40eventually we'll get past this the
9:43inflationary piece because we'll fix the
9:45bottlenecks in the supply chains and it
9:47will be a productivity enhancement
9:49that's really positive for the long term
9:51but we've got to get through this
9:53inflationary piece. So to answer your
9:55question unfortunately we're not out of
9:57the woods. Some people don't feel well.
10:00They don't they're they're feeling
10:01pressured for sure, but the consumer the
10:04bulk of the consumer that has the money
10:06is spending and they continue to spend a
10:08couple of different pl like mainly on
10:09services goods too, but services and
10:13services is 75% of consumption. So we
10:16root we root for the consumer and then
10:18we root for them to spend on services
10:19for our economy and we're we're seeing
10:22it.
10:22>> So does inflation get worse before it
10:24gets better? Where are we at like 4%. I
10:26think we're three and a half, four
10:27depend depending on what numbers you
10:29look at. But I and I I do think we're
10:31going to I think we've seen peak. I
10:32really do. And I think so because we're
10:35not going to have the oil piece of it
10:38that is really dragging us higher
10:41because if we now this is a big if if we
10:44can get get resolution on this on this
10:46war and it does seem like it's headed
10:49that direction and again this
10:51administration can't afford to to have
10:54oil prices where they are gasoline
10:56prices where they are into the midterms.
10:58And so I I do think you've seen peak but
11:00I don't think we're going to get to two.
11:01>> I see. So you're like inflation is high
11:04when you're including oil. If you if you
11:06take out oil, we're actually doing okay.
11:08And so when the war resolves, it's going
11:10to come down.
11:11>> Yes. And and oil prices already have
11:12come down. But the problem is not just
11:14oil prices. See, if oil prices go high,
11:17then all of the feed stocks, all of the
11:20food chain of commodities go higher as
11:22well. agriculture all kinds
11:25soybeans every so if you have oil come
11:28down I think you will see these other
11:30commodities come down again not not not
11:34to where we really want them to go
11:36>> just because this is a boom that we're
11:39seeing in in this whole AI revolution
11:41>> well you're saying the boom the go- go
11:43days of the S&P up 18% typically 7 to
11:4710% you know accounting for inflation
11:50is it the S&P 500 or is it the S&P 493
11:54which is stripping out the MAG7 of those
11:57tech stocks that you
11:58>> last three years it was the MAG 7 it
12:00drove 90% of the returns on average this
12:03year which it's kind of interesting that
12:06now last couple of days it's we've seen
12:08a little bit of a funky stuff that goes
12:10on around the quarter end so I don't
12:12really pay too much attention to it but
12:13this year we've actually seen the S&P
12:16equal weight do better than the S&P
12:19market weight which means exactly what
12:21you just the 493 are now starting to
12:24catch up to the MAG 7 and the reason and
12:28that's like financials and materials,
12:31energy, healthc care, other sectors are
12:34doing really well and tech has taken a
12:37breather other than semiconductors
12:38because they're on fire but mag sevens
12:41have taken a breather because as an
12:43investor
12:45you you make money when you see better
12:48earnings growth right we I mean our
12:49friends at you know back back in the day
12:51taught us this a long time ago. Stocks
12:53follow profits on the way up and on the
12:55way down. So if earnings are going
12:56higher, stocks usually follow and then
12:58if they're going lower, they they
12:59usually follow. And what happened with
13:03the Mag 7 is that they're spending all
13:05this money. They're eating into their
13:07cash into their free cash flow. And you
13:11don't necessarily make a lot of money
13:13when companies are heavily investing. We
13:16want them to invest for the long term.
13:18However, you don't get that positive
13:20operating leverage. So, you have revenue
13:22growth, but you don't get margins.
13:24Margins become depressed and compressed
13:26because you're spending so much. And so,
13:28you don't have as aggressive earnings
13:30growth. And that's what's happening with
13:32the MAG7. At the same time, you're just
13:34seeing earnings growth at these other
13:36sectors. It's just kind of as simple as
13:38that. And the valuations are pretty
13:39attractive in these other sectors. So
13:41when you say looking at the equal weight
13:44S&P 500 for a new investor and they're
13:47hearing okay get an an an lowcost S&P
13:50500 index fund. Warren Buffett said it
13:52Nicole says it Stephanie says it. Which
13:54tickers should we be looking at
13:56considering that seven of the stocks are
13:59have been driving so much of the growth.
14:01>> Yeah. I mean I honestly believe strongly
14:03and I I was very lucky. My my father was
14:05in the business and he still is in the
14:06business 89 and he taught me right out
14:09of college you have to start investing
14:12the sooner you do it the better it is
14:14right because you have that compounding
14:16thing happening and of course we have 7
14:18to 10% average growth in in in the
14:20markets I think it's as simple as buying
14:22the Vanguard S&P 500 because and you
14:26could pick any of the ETFs because
14:29they're you know just the low cost you
14:30want the lowc cost provider because it's
14:32the most diversified
14:34and you dollar cost average.
14:37That just means you buy you put a little
14:39bit of money away. Is it once a month,
14:41once a quarter, every six months? But
14:44you just routinely put money in. And
14:48dollar cost average means you don't have
14:49to time it. Yeah. I mean, we do this for
14:51a living and it's hard to do, right?
14:52>> Totally. Time in the market beats timing
14:55the market.
14:55>> Yes. I love that.
14:57>> Love that. Uh, and so if you're looking
14:59at like the Vanguard
15:01VO for instance, which is low cost,
15:03would you still suggest looking at the
15:05the total S&P index funds like the VO or
15:08the SPY or the IVV compared to like some
15:12other kind of weighted version of it.
15:14>> I think you just want to as diversified
15:16as you possibly can and as low cost as
15:18you possibly can. There's no reason to
15:19spend money on on a passive tool,
15:22passive investment tool. I
15:24>> look at the expense ratio.
15:25>> Yeah. And I just like the
15:26diversification because you just don't
15:28know. Some years Mag 7 are going to be
15:30leaders and some years they're not.
15:33Again, you can't time that when it is.
15:35All I can tell you is that right now the
15:37Mag 7, they're going through a massive,
15:39massive, massive spending cycle. And
15:42that's going to lead to great growth in
15:442, three, four, five years. Is it going
15:46to give you great growth in the next 2,
15:47three, four months? Probably not. It's
15:49not going to be bad. But I just think
15:52that in the meantime since the economy
15:54is doing so well, that's why these other
15:56sectors are doing well because these
15:57other sectors are doing well because
15:58their earnings growth are going higher.
16:00We've gotten some questions, you know,
16:02because QQQ, the the ETF that tracks the
16:05NASDAQ has been
16:09>> off I don't even know off the charts,
16:11off the hook, off the chain, off off the
16:14whatever.
16:15>> And so we've gotten some questions about
16:17leveraged versions of that. What are
16:19your thoughts?
16:21>> No,
16:22>> because if you if it's going up higher
16:24and if it's leverage, then it can go up
16:26even more,
16:27>> right?
16:27>> But that also means
16:28>> it could do the absolute opposite. So
16:32leverage is like wanting momentum.
16:35Momentum is just chasing something that
16:37keeps going higher and higher. And if
16:39you're short, it's going lower and
16:41lower. But momentum is wonderful on the
16:44way up. Everybody feels like a genius,
16:46myself included. However, it rarely has
16:50anything to do with valuation. And
16:52that's always very important because
16:55when things reverse,
16:57you can't you have no support. It's hard
16:59to to to to really understand, okay,
17:01well, how far can these stocks go?
17:04Because if it's not based on valuation
17:07and it's based on sentiment and
17:09everyone's chasing, well, my goodness,
17:12everybody could just go run for the
17:13hills if it goes the other way. So, I
17:15just feel like I'm a conservative
17:17investor myself personally with my
17:19husband and I just think leverage is is
17:22just it's to me fine if you want to have
17:25a little piece of it in your portfolio
17:27and have fun with it, but please don't
17:29make it the majority of your portfolio.
17:30I just don't think it's really
17:31investing.
17:32>> What are you buying?
17:34>> So, I am a big thematic investor. So,
17:38the way I think of it in my portfolio is
17:39I love to talk big picture. I could talk
17:41with you all day long to call on the big
17:43picture. I'll bore you to tears but bore
17:46your audience to tears. But I think big
17:48picture because I I just like to know
17:49what's happening in the world, the
17:51global markets, what's happening with
17:53inflation, with growth, with the Fed,
17:55all of that stuff. And then I think
17:57about themes and where I want to invest
18:01for the long term. So I think about
18:04themes that have like a total
18:06addressable market. That's what they
18:08call TAM.
18:09>> Sam and TAM.
18:11>> I know. But it but for the long term for
18:13like a decade or two and then I find
18:16stocks and try to find stocks on those
18:18themes
18:19>> like if you find a thesis.
18:21>> So
18:22>> I'll give you one.
18:23>> Okay.
18:23>> Let's let's go cyber security. Okay.
18:25>> Okay. Because we just talked about AI
18:27and the food chain. You absolutely
18:29positively want to have exposure to the
18:31AI food chain and we'll get to that in
18:33more detail on that's because that's a
18:34big theme too. Okay,
18:36>> cyber security is going to be bigger
18:38than AI because of AI. AI is not secure.
18:43When you have companies that are using
18:4650% of AI agents doing your coding, that
18:51by very definition is not secure. And so
18:56you have 4,000 companies, cyber security
18:59companies in the world, public and
19:01private, that I think you're going to
19:03see massive consolidation because the
19:06big five are going to get bigger because
19:08they don't offer a one-stop shop for
19:11their customers. So let me give you an
19:13example because I'll tell you from High
19:14Totower, I talked to my chief technology
19:16officer. He budgets all this stuff for
19:19his technology needs for the year. And
19:21he has said to me, Stephanie, CTO's
19:25right now are spending on two things.
19:28One is AI because we have no idea what
19:31that means for our business. And two,
19:34cyber security because we can't afford
19:35to wake up and lose our business. And he
19:39has 20 vendors. This is High Tower. We
19:41have 20 vendors because not every
19:43company offers everything. But the
19:47problem is these 20 vendors don't talk
19:48to each other, which is why we have
19:50cyber attacks all the time. So I think
19:52you're going to see massive
19:53consolidation in this sector. The big
19:56five get bigger and bigger. you know,
19:58Crowdstrike and PaloAlto and Cisco and
20:01Zcaler, so many different IBM, a lot of
20:04companies out there that are going to
20:08get bigger, offer more to their
20:10customers because there's the demand,
20:13there's the need, and we're going to see
20:14this for the next decade.
20:16>> So, what's the best cyber security stock
20:19to buy?
20:20>> So, for me, PaloAlto is my favorite.
20:22Here's the interesting thing. These
20:24stocks got clobbered in the AI is going
20:27to kill software apocalypse that
20:28happened in January and February of this
20:30year.
20:30>> Fast apocalypse.
20:31>> It was crazy. But cyber got hit as well
20:34because they are software companies but
20:36they're also hardware too. They got hit
20:38really hard. And so in March when they
20:41hit their lows and they were like down
20:43double digits on the year, the CE two
20:46CEOs actually bought stock. PaloAlto CEO
20:49bought $10 million worth of stock in
20:52March at almost at the lows and same
20:55with Crowdstrike. Those are the two best
20:58in my opinion. But you could own you
21:00could own you could own a whole package.
21:02You could own a bundle of the names I
21:04just mentioned. Throw in Forinet in
21:06there. So Crowdstrike, Palo Alto,
21:08Zcaler, Cisco, Fordinet. You could put
21:11them all together and have a bundle. You
21:14can own hack, which is the ETF if you
21:16don't want as much volatility.
21:19>> Yeah, I have ETFs for every all of my
21:21things.
21:22>> No, what that's a good name for for what
21:24it is,
21:24>> right? I know.
21:25>> I mean, my husband bought Crowd Strike.
21:27I was flying that day of the big debacle
21:30that they had. And so all the airlines
21:33infrastructure went down because of it.
21:35And CrowdStrike was to blame and the
21:37stock got hit. And my husband's like,
21:40I'm buying Crowd Strike 100%ale. That's
21:43the best advice to give anyone is you if
21:47you can find the number one or number
21:49two player in any given industry that
21:52goes through a crisis but that you know
21:54the management team is topnotch which
21:58crowd strike is
22:00>> that's when you want to be buying you
22:01want to buy on sale right we buy low
22:04sell high people say they do but
22:06>> they don't buy the hardest thing to do
22:07it's the only outage on Wall Street and
22:09it's the hardest thing to actually do
22:11because of human emotion But I want to
22:12buy my shoes on sale. You do too, right?
22:15I mean, it's And then when it happens,
22:17it's it's just such an emotionally tough
22:19industry.
22:20>> But high quality, to be clear, like
22:22sometimes when they're on sale, it means
22:24they're in the pooper for a reason.
22:26>> Oh, absolutely. And by the way, Crowd
22:28Strike was in the pooper for a couple
22:30months, maybe even quarters. They're in
22:32the penalty book.
22:33>> But it's so rare to get the number one
22:35company down 50% in a matter of months
22:39because everyone was just attacking. But
22:41you know the CEO why I knew it and funny
22:44your husband was buying it. I I never
22:46owned it and I bought it on the on the
22:48collapse too because I said this this
22:51CEO his reaction mechanism was something
22:55it textbook.
22:57>> Yes.
22:57>> He went to see all of his customers
22:59oneon-one 500 different customers and he
23:02went everywhere and he was on TV all the
23:05time. He looked horrible by the way,
23:06didn't he?
23:08He had some stuff going on, but he had
23:09some stuff going on.
23:10>> But it showed that like this was a
23:12winner and this was this was a dude to
23:14bet on.
23:16>> It put a that whole crisis like it felt
23:18like it put a fire 100% in his belly.
23:21>> That is like
23:22>> under his ass. Number one thing I look
23:25at I look at a lot of fundamentals when
23:26I'm looking at stocks, but the number
23:28one thing that's really important is to
23:30get to know the leadership team. You can
23:34and and it I'm lucky I'm on TV and and
23:37they reach out and we get to meet them.
23:38But you can listen to conference calls.
23:41They do them all the time. You could
23:43read some of the transcripts if you like
23:46watch these great leaders. What makes
23:48them such great leaders? Because they
23:50can they can actually fix the problems
23:53when they do have problems. They can
23:55actually grow and they have great
23:56strategy and they have great execution.
23:58That's really important. But in the bad
24:00times, it's how do they react and how do
24:02they respond? And history is a guide on
24:06that.
24:07>> So if you were to buy one cyber security
24:11stock, would it be Palo Alto Networks?
24:13>> Yes, absolutely. 100%. Because they
24:17Well, first and foremost, it's half the
24:19price, half the multiple of Crowdstrike.
24:21Crowd Strike trades at a premium
24:22valuation for a good reason. It's number
24:25one, the best, everything. But but
24:27PaloAlto, it's a little bit more
24:30attractive in terms of the valuation,
24:32but I like what they're doing from a
24:34strategy point of view. In the last six
24:36months, they've made $30 billion worth
24:38of acquisitions. And so what he's and
24:40team are trying to do is have more stuff
24:44that they can offer to their customers.
24:46Remember I said not every no one company
24:49is a one-stop shop in offering all the
24:52cyber needs for their customers. So
24:55they're getting bigger and bigger and
24:57bigger. And so not only do you have the
24:59secular total addressable market there,
25:03you als I think it's by the way over $2
25:05trillion easily in the next four years.
25:07Not only have that, but now you have
25:09something that the company is doing that
25:11you can watch to see how the synergies
25:13evolve over time, which I think is
25:15really a lot of fun.
25:16>> I love that you're doing the undercover
25:18boss thing. I mean, a lot of investors
25:20will say they also talk to their kids to
25:22see what's cool and what's coming up
25:24next to see what to buy, but you're like
25:27talking to the CETO and and figuring out
25:29what's the needs there. And
25:32>> it's it's it's a lot you do a little bit
25:34of a little bit of everything. I I love
25:36what you just mentioned because I am a
25:38firm firm believer in investing the way
25:40Peter Lynch, the great Peter Lynch
25:42invested, right? Peter Lynch was the CEO
25:45I know you know from Fidelity Mellan
25:47Fund. He actually his returns if did you
25:49know that his annualized returns up
25:5229.5% from 1977 to 1990 when he was a PM
25:57beat Warren Buffett.
25:58>> Okay. Peter is there right? He's a rock
26:00star. But he used to say invest in what
26:03you know, invest in what you see. Invest
26:05in what you experience. Absolutely
26:07invest in what your kiddos are doing cuz
26:09they are super smart and you learn a
26:12lot. But keep it simple.
26:13>> Yeah. What's your daughter buying these
26:16days? What does she think is cool? So
26:17she started investing. We gave her some
26:19money, small money when she was five
26:22>> and job five. Five. And because I was
26:25always working non-stop. My laptop was
26:27always open. Bloomberg was always on. It
26:29was always red and green. And she'd be
26:30like, "What's all that going on?" So we
26:31taught her. She didn't really
26:33understand. But I said, "Well, what do
26:34you like?" "Well, I like I like I like
26:37Estee Lauder cuz I like I like MAC. I
26:40like MAC makeup." I'm like cuz when she
26:42was 5 years old, she was wearing my my
26:44MAC makeup. So, it's that it was she
26:46liked Nike, she liked Google, she liked
26:49to search, and so she liked Microsoft.
26:51And there's a lot of things like it's
26:53just common sense. And so, I think
26:55what's also very interesting, and she's
26:57a Gen Z, so she's 19. I think what's
27:00really interesting is how influential
27:03the influencers are. And I will tell you
27:06that they really listen and watch and
27:10buy and react to the influencers. Some
27:13are good, some are not so good, some you
27:15agree with, some you don't. But it is
27:17it's a big thing. And I'll tell you what
27:19her friends are buying, and I won't I
27:20won't let her. They're buying crypto.
27:23>> They would rather own crypto than
27:25stocks. And when she told that to me, I
27:26told her to stay at college because she
27:28wasn't allowed to come home. I mean,
27:29that's like, no, you can't. I mean, you
27:32can own a little bit of crypto.
27:33>> 1%.
27:34>> Yeah. One or two. And you know what? I
27:36would rather own the exchange or
27:38exchanges because I don't know.
27:40>> Coinbase.
27:40>> Yeah. Coinbase. I don't know what the
27:43price of Bitcoin is going to do on a
27:45day-to-day basis. I don't think anybody
27:46does, but I I know an exchange needs a
27:49buyer and a seller and I know I have
27:50that and they're also broadening out
27:52into other currencies and other products
27:54as well. So, that's the way my chicken
27:56way of of playing that. But that that
27:59generation, they're they're all in.
28:01How's her portfolio?
28:02>> She's doing better than me.
28:04>> She is super growth and just quality.
28:08And I'm a little bit more growth at a
28:10reasonable price. So, I do own like the
28:12financials and the industrials and I
28:13love that stuff, but you know, it's
28:15really paid to be the growth investor
28:16over the last decade.
28:18>> No doubt. Waste management for the win.
28:23>> So, what are you not buying or what are
28:24you staying away from? Crypto.
28:26>> So, crypto. Yeah. Yeah. Crypto. I would
28:30say I think
28:31>> Bitcoin's way down though. Are you
28:32buying?
28:33>> It is. I'm holding. I'm holding. It's
28:36We'll talk We can talk SpaceX in a
28:37little bit. It's like SpaceX and
28:39Coinbase. holding for like putting it
28:41set setting it and forgetting it putting
28:43it away for forever because I think they
28:45will accumulate over time. They'll be
28:47volatile but yeah it is way down and it
28:49is very tempting. The only thing about
28:50Coinbase is it's just so volatile at any
28:52given day it could be up 5 10%. And I
28:54don't want that to be ruling my
28:56portfolio and being in my head. So it's
28:58a small position I kind of keep it there
29:00and yeah I mean if it were to get
29:02continue to pull back I might add a
29:04little bit but I don't want to trade
29:05that. I want to necess I just want to be
29:07like more of a more of an investor.
29:08Well, I like your thesis that Coinbase
29:11is the infrastructure. It's the platform
29:13that all the coins have to use. So, I'm
29:17assuming that you don't have individual
29:18coins.
29:19>> No, I don't have individual coins.
29:20>> No Bitcoin.
29:21>> No Bitcoins. I know. No, I just have
29:23enough exposure with Coinbase because
29:25guess what? It's going to trade with
29:26Bitcoin. It's going to trade with any
29:28kind of crypto.
29:29>> And it's a it's a risk-on asset. I mean,
29:32I know people say it's a
29:33diversification. It is, but it's also
29:35risk. And in fact, there's a high
29:36correlation between nonprofitable tech
29:39and Bitcoin in terms of you look at a
29:41chart. You love ETFs. What about Bitcoin
29:44ETF? Absolutely 100%. I mean, is it you
29:47can own any one of them. I think like
29:50Black Rockck, you can own you JP Morgan.
29:52You can own whatever one you want to
29:54own. And I almost prefer an ETF for this
29:57the view the viewers here because it's a
29:59little less volatile. It won't go up 5
30:01and 10% in a day like a Coinbase kind of
30:04thing. But by the way, I think the
30:05reason why crypto has done well in the
30:08past several years is because of the
30:10innovation with ETFs and people
30:13embracing it.
30:14>> Yeah. More institutional money coming in
30:16versus a retail
30:18>> Yes.
30:18>> investors, which I you also asked me
30:20what else I wouldn't what I would I not
30:22own.
30:22>> I think consumer staples are super
30:25expensive given the the the limited
30:29growth that you get. I know that
30:30everybody knows Pepsi and Coke and
30:32McDonald's
30:33>> like PNG.
30:34>> Yeah. And those kind of names. They're
30:36expensive for for what you get. You need
30:38to own one or two of them in a portfolio
30:40for diversification purposes, but I just
30:41think that there are better values
30:43elsewhere. And I do think I might be
30:45wrong on this energy thing, but energy
30:48stocks trade with the commodity. And if
30:50you believe my story of commodity prices
30:53coming down and oil prices coming down
30:55and likely to come down further, it's
30:58going to be hard, I think, for them to
31:00outperform, especially after they've had
31:02such a nice run. Could you own Exxon,
31:04Chevron, I own SLB, slumber? Sure. But
31:08like rightsize it. It's it's a lot. It's
31:11very it's talk about momentum. It just
31:13follows the commodity even if you want
31:15to do the fundamentals.
31:17>> Yeah. But what about alternative energy
31:19or what about nuclear? If you're
31:20thinking about like a thesis around AI,
31:23you know, my husband and I think a lot
31:25about what is lower in that stack. So
31:28you need alternative nuclear types of
31:30energy. I know there are two types. You
31:32need uranium to power that and 100%.
31:36That's part of the but not the
31:38traditional energy companies. they'll
31:39benefit too. But we're talking about in
31:42terms of power we have it's it's
31:44nuclear. It's it's coal. It's natural
31:47gas. You're right. It's renewables.
31:49>> I think over the long haul it's going to
31:51be natural gas that wins because we have
31:54a ton of it. We just don't have enough
31:56pipelines. So part back to my food chain
31:59of okay AI and the companies that are
32:02spending all those companies that are
32:03spending that $800 billion they're
32:05spending it on building out data centers
32:07putting stuff inside of data centers
32:09upgrading the grid 75% of our grid
32:12electric grid in this country is over 25
32:15years old has to get upgraded and that's
32:18also companies that are going to be
32:20building that out and who's behind that
32:21like who can we buy
32:22>> services is one is a is a big it's a
32:25great company and oh let me tell about
32:27Quantum Services. They had an analyst
32:29meeting a month ago and they're such a
32:33conservative company. 70% of their
32:35customers are utility companies, right?
32:37So they're building with the grid and
32:39they're doing all the infrastructure
32:40with the utility companies. They said at
32:43their analyst day that their total
32:45addressable market between now and 2030
32:49was $960 billion. They raised it to$2.4
32:53trillion. This is between now and 2030.
32:57This is the most conservative. I'm
32:58telling you, I've known this company for
33:00years and years and years. When I heard
33:01that almost fell off my chair, happens
33:02to be a very big position for me. But
33:05they are involved in all all the aspects
33:07in the data center, in the grid, and
33:09then also on the power side.
33:10>> Ticker PWR. It's great, great story, but
33:14>> listen, give me a boring stock every
33:17single day, all day, every day, twice on
33:19Sunday. This is I mean this whole sector
33:22so this whole theme it's quat services
33:25GE Vernova
33:27GE VNOVA actually is sold out in their
33:30power until 2028 sold out and they
33:35supply 30% of the global electricity in
33:38the world. So they are a big big player
33:40the top three player. So that's Giver
33:42Nova Verdive. Verdive is a company that
33:45puts they're inside the data center.
33:47They make the cooling systems front and
33:50center from so you need you I don't know
33:52if you all know this but the data center
33:54gets super hot and the chips won't work
33:56if it's hot. So you need these air
33:58conditioners and that's what Verdive
34:00does. It's like the endto-end solution
34:02and they also have services. No one
34:04really quite does it. And talk about
34:06management teams. The executive chair is
34:09a gentleman by the name of Dave Cody.
34:11Dave, you probably know, was the CEO of
34:14Honeywell for 15 years. When he was the
34:17CEO of Honeywell for 15 years, the stock
34:20was up 450%.
34:23He is a rock star. When he went to
34:25Verdive, I'm like, I got to I have to
34:26own that somehow some way. So, to put it
34:29into context though, the cooling systems
34:31and the stuff that goes inside the data
34:33centers because again, this is a hu this
34:34is a huge theme, too. It's
34:37you if you b if you want to build a 1
34:39gawatt data center um you need 500 acres
34:44of land by law and you need the box.
34:48Okay, that costs $3 billion. You have to
34:51put stuff inside that box, meaning the
34:54cooling systems.
34:55>> You're explaining to me like I'm five
34:57>> cuz I can only understand it that way.
34:59But like you have to you need so you
35:01need the cooling systems, you need the
35:03transformers, you need the wiring, you
35:04need the semiconductor chips, you need
35:06software. All of that costs $40 billion.
35:10So you're talking about one data center
35:12to build out costing over $40 billion.
35:15So this is goes right back to where we
35:17started with these big tech companies.
35:19Why are they spending $800 billion?
35:21Because it costs so much for just one
35:22data center. And we have only 11,400
35:25data centers in the world. and we need
35:2830,000 by the end of 2030. We're not
35:30going to get there. It takes three years
35:32to build a data center, too.
35:33>> So, your thesis is the downstream
35:36beneficiaries of AI are going to be the
35:39real picks and shovels, the winners of
35:42the AI boom. So, what else? So, cyber
35:44security, we have all the data center
35:47stuff and AC and
35:49>> yeah, the food chain. Just say the food
35:51chain, you know, and the CEO of of
35:54Nvidia calls it the five layer cake.
35:55It's the same thing, right? It's, you
35:57know, it's the modeling, it's the the
36:00the energy, it's it's the chips, it's
36:03the coating, it's all of that. And he
36:05So, he calls it the five layer cake. I
36:07call it the food chain. I don't know.
36:08Whatever you want to call it, it's a big
36:10theme and it's a big deal and it's not
36:11going away anytime soon.
36:12>> Well, cake is my favorite part of a food
36:14chain. So,
36:15>> I love it Jensen.
36:17>> I think I think robotics is another
36:20theme that is just in early innings.
36:23>> I feel like it's far out. It it is early
36:26innings, but I'll tell you, companies
36:28are investing now for robotics. I mean,
36:32Amazon has a million robots, and they
36:35believe over the next 10 years, they're
36:36not going to have to hire 400,000 people
36:39because they're going to continue to
36:40build out robots and humanoids. You're
36:43right. We are not there yet. But I own
36:45this company, Rockwell Automation, and
36:48the amount of progress that they're
36:50making because of the technology. It's
36:53every year I see it. It's it's an
36:56enormous change, an incremental change.
36:58And I think you need three parts of
37:01robotics. You need the brains, bronze,
37:04and you need batteries. You need the
37:06brains because you need the intellect.
37:07You need to build that stuff. The
37:09bronze, you have to build the motion and
37:11that stuff. And then you need the
37:13batteries. Shoot, we don't have enough
37:15power. Here we come again, right? So, we
37:17have no power or we're short power. So,
37:19all of these things are all tied up
37:21together. And I think as we get through
37:24some of these bottlenecks, we will
37:26continue to see a dramatic change in in
37:28in this part in this theme. Not a lot of
37:30people are talking about that. Quantum
37:32computing is another theme. That's far
37:34out. That's 2029 2030. But I would also
37:37encourage your folks here today to
37:40listen to the CEO of IBM. He that's the
37:43largest quantum computing company in the
37:45world. They have 75 quantum computers.
37:48That's more than any of their com their
37:50competition combined. And he basically,
37:53I didn't say this, but he says on on
37:55these videos, he said it's a it's AI on
37:57steroids. HSBC used quantum computing on
38:01their trading, their equity trading
38:03desk, and their algorithms actually saw
38:07a 34% increase in productivity and in
38:12output, an increase. 34%. It's kind of
38:16it's kind of wild.
38:17>> That's insane. So I if you want exposure
38:19to
38:21>> AI on steroids quantum so it would be
38:24IBM what else?
38:26>> I mean I Honeywell just spun out their
38:29quantum company that I think is
38:31interesting. The reason I like IBM is
38:34because these other companies they're
38:35not even earning anything right now and
38:38so they're very volatile. You could own
38:40a package or a bundle if you want. I
38:43just I think IBM is doing a great job in
38:45not only in in in quantum computing but
38:48also in software and really fixing the
38:51company. They're not a mainframe company
38:52anymore and that's this CEO who's done a
38:55really great job. So I think
38:57>> you could pick and choose a couple of
38:58the smaller players but I don't even
39:00think it's really I don't think it's
39:01worth it because it's just so val so
39:03>> don't expect anything in the next five
39:06years. Have some have some patience. So,
39:07just to be clear, when you're mentioning
39:09these tickers and these names, you and
39:12I've known you do so much research. Can
39:14you just like clarify when you suggest
39:16something, how much are you
39:18understanding and digging in and
39:20researching and your entire team?
39:23>> It's it's a 247 thing. It's the reason I
39:26do it though because it's so much fun
39:27and I learn so much every day. It's like
39:30and I'm not going to be right on
39:31everything. I mean, if I get a 500
39:33batting average, that's a home run in my
39:35mind. But I just love to learn. But most
39:38of the names that I talk about, I own.
39:40And I don't own any stock in my
39:42portfolio, which is only 30 names in my
39:45portfolio. It's very concentrated, but I
39:46don't own any stock that I don't know
39:48the CEO and the and the bench. So, it
39:50goes back to that whole process of I can
39:52do all the fundamental digging in all
39:55all kinds of homework,
39:56>> but I have to feel comfortable with
39:58who's leading these companies. And
39:59that's why I get to know them. And I
40:01don't get to know them like personally.
40:04Some of them I do, but others I just
40:05read about and others I just observe
40:07what they're what they've done
40:09historically and that's really
40:10important.
40:11>> Yeah. But it's just so ubiquitous. You
40:14mentioned your daughter and her friends
40:16are listening to crypto bros on TikTok
40:18and it's just not as regulated and there
40:20are so many people who can just jump on
40:22social media and suggest something.
40:24>> Oh yeah. No, I mean
40:26>> I think it's dangerous.
40:27>> I think you're 100% right. I would not
40:30recommend something that I wouldn't own
40:33or I don't own. Pretty much every name I
40:35just talked about I own. And if I don't
40:37own, it's either I'm wa watching it and
40:40wanting it's on my short list or it's
40:41I've owned it in the past or want to I I
40:43just Yeah, I think you have to be very
40:45careful on on social media to to listen
40:49to to random people. There are a lot of
40:52smart people on social media and so you
40:53just make your list and follow you.
40:56>> Thank you so much. I mean, another
40:59darling of social media, and you said
41:01you were avoiding some consumer staples
41:04because they're really expensive
41:05individual Bitcoin. Um, Micro Strategy
41:08is talk, it's worse than in the pooper.
41:10But, you know, when you look at
41:12something like that and you hear us talk
41:14about like buy low, sell high, that's
41:16low.
41:18>> I don't I don't understand his strategy.
41:20Do you?
41:21>> I I personally don't. But when
41:24somebody's like, "Oh, well, it's on
41:26sale." Oh,
41:26>> can you explain the difference between
41:28on sale for a company like Palo Alto
41:31versus a company like Micro Strategies?
41:34>> Micro Strategies I if I I've learned
41:36early on if I can't understand a a stock
41:38or I can't explain it simplistically.
41:42I I can't own it because that that just
41:44I don't have any confidence in myself.
41:46Maybe I'm just slow at understanding it,
41:49but I don't I don't quite get the
41:51strategy of him leveraging and him
41:54borrowing and every day on it go, you
41:56know, Bitcoin goes down or crypto goes
41:58down and they're buying and they don't
42:00earn anything. That's a problem. See, I
42:02want to own companies that have
42:04earnings. The earnings are the most
42:06important thing when investing. When you
42:09think about investing in general, what
42:11is the growth rate of earnings? Why is
42:13it growing? Why is it important? It's
42:16important because that's companies
42:18making profits and we will pay multiples
42:21of that if we think it's a sustainable
42:24profit generator, a profit grower. Why I
42:27think it brings me back to total
42:29addressable market because not only do I
42:32think PaloAlto, it's doing a great job
42:34on its own because they're making all
42:36these acquisitions and they're in a very
42:39strong position market share wise and
42:41they do have a good financial balance
42:42sheet and they do have earnings. They're
42:44also part of this whole total
42:46addressable market that's an additional
42:48tailwind on top of this very strong
42:50company that's operating quite well. And
42:52so that's different than micro
42:54strategies. I don't even really know
42:56what the strategy is. It just seems
42:58complicated to me and it's expensive and
43:00I can't justify the valuation. And
43:02that's important too to be careful what
43:04you're, you know, what you're buying at
43:05what price. Price is always important.
43:08So, if you're new investor or you're in
43:11your early innings of investing, stick
43:13to the fangs, which is now turning into,
43:16have you heard this?
43:18>> Mangoes.
43:19>> No, I haven't heard that.
43:21>> Fang, Facebook, Meta. It was, it was
43:25>> dubbed Fang before it became Meta. So,
43:28find Facebook, Amazon, Apple, Netflix,
43:30Google, and now Mangoes. Mangoes,
43:34>> Meta, Meta, Anthropic, Nvidia, Google,
43:36OpenAI, SpaceX, obviously OpenAI and
43:39Anthropic. Not public yet, but in
43:41anticipation.
43:42>> Oh, that is so I have not heard of
43:44Mangoes. That is hilarious. Very clever.
43:47I mean, I like Look, I like all of them.
43:49Some are going to win, some are not
43:50going to win. I happen to own SpaceX new
43:54position in the last couple of weeks
43:56because we know they just went public a
43:58couple weeks ago. And this is the way
44:00I'm viewing it. Like I said on Coinbase,
44:02I am buying a small position. It's 2%.
44:05It's a set it and forget it. Do you know
44:08how much Tesla was up when Elon Musk
44:12actually went to to the company in 2010?
44:16>> So if you invested $10,000 in Tesla at
44:19the IPO, you would have
44:21>> so you
44:22>> 2.62 million right now.
44:24>> 20 25,000%.
44:27And you may think he's a little nutty.
44:29>> We I think he is a little nutty. He is
44:32brilliant and he will make you money
44:33over the long term.
44:35>> Over the short term, he doesn't manage
44:37to a quarter's earnings. And so that's
44:40why his the stocks that he is involved
44:42in, Solar City is another one. They they
44:45are very volatile. And that's why I say
44:48put a position that you're comfortable
44:50with. If it goes up 10% one day, down
44:5210% another day, you don't stress about
44:54it. So 2% is what I'm comfortable with.
44:57That's what I do. I'm putting it away
44:59and saying forget it because I think
45:00there's three ways they win. They win as
45:02a hyperscaler, right? I mean they're on
45:05the AI side. They are renting out
45:07compute to Google and Anthropic $2
45:09billion each. Sorry, $2 billion a month
45:12from both of them a month. Go is they're
45:15paying SpaceX to use their compute. And
45:19it who knows how long these contracts
45:21are going to go, but it tells you that
45:22it's sophisticated enough and it's good
45:24enough and it's accessible. So they they
45:27can win there. Not sure if they will,
45:28but they could. SPA uh Starlink of
45:31course is they have 10 million customers
45:33that could get to 250 million customers
45:35by 2030. I mean the momentum is there as
45:38well in Star in Starlink. Anytime you go
45:41on an airplane and you have Starlink,
45:42it's like a gamecher. And then of course
45:45you have space and they have a very low
45:47cost advantage over their competitors
45:49because they have renew renewable
45:51rockets. So their cost per launch is
45:55expected to go from 14 million to
45:57something like 3 to 5 million per launch
46:00that is going to be so such an advantage
46:02and so much lower than their peers and
46:05they have first mover advantage. I don't
46:07know that if they hit on one of these
46:09things, I think I think they can hit on
46:11all three, but if they hit on one of
46:12them, I think the stock will be much
46:14higher. What I don't believe just to be
46:17the case is that you're going to build
46:18data centers in the in the sky in the
46:20in, you know, in the universe. I just
46:21don't I think we're not there yet. I
46:23think it's possible and anything's
46:25possible with Elon Musk, but I think
46:27that's 10 15 years away. That's my
46:30personal opinion. And I could be totally
46:32wrong, but because people ask me, well,
46:34you're so bullish on the data center
46:35makers on on Earth. How do you not get
46:38scared about SpaceX? And I just think
46:39it's a time it's a time thing.
46:41>> Yeah. But we got to get the party
46:42started. We need compute. So like, go to
46:44the sea, go to the
46:46>> air, go to the land, like go everywhere
46:48at this point because it's going to take
46:50a while. So what did you buy SpaceX at?
46:52>> So I bought SpaceX at I think it was 175
46:56180. It was not it was not at the low
46:58most recent low and it certainly wasn't
47:01at the super high. What happens when I
47:03talk about a stock on TV? I get
47:05restricted and so I was restricted on
47:07the day of the IPO because I happened to
47:08be on TV talking about it. So I had to
47:10wait a couple of days. I think this is
47:12like this is going to be so much higher
47:15in so many years that I'm like, "Okay,
47:17forget it. I know I'm going to be up and
47:19down on the position or whatnot, but I
47:21don't do many of these kind of
47:22investments." I will say Nicole though
47:24because I prefer like just traditional
47:27investing 101. You know, look at the
47:29look at the fundamentals, look at market
47:31share, look at balance sheet, look at
47:33valuation. This one's hard to tell you.
47:35It's hard for me to tell you it's cheap.
47:36It's not. It's hard to even give you a
47:38valuation. But I do believe sometimes
47:41you want to go with, you know, just the
47:43Peter Lynch thought process of, yeah,
47:46what do I see? What am I watching? What
47:49am I experiencing right here and now?
47:50And I think it's something that like the
47:53AI revolution, I think it's going to be
47:54something that we look back on and say
47:56there was a lot of money to be made.
47:57Well, you mentioned a lot of the bull
47:59cases for SpaceX. The other one is this
48:04government contract idea that there's
48:06huge space infrastructure that's
48:09becoming increasingly more important to
48:13national security. And so they have so
48:15many government contracts already in the
48:16pipe, too.
48:17>> They do. And wouldn't it be interesting
48:19if the government actually took an
48:20interest in SpaceX at some point?
48:22>> Do you think they will?
48:23>> It could.
48:24>> Well, there they What did they do with
48:25Intel? That was like the buy of a
48:27lifetime, right? I mean,
48:29>> I don't know. I wouldn't be surprised.
48:31>> Do you think it's going to combine with
48:32Tesla?
48:33>> It's good possibility, but
48:35>> but I don't I don't I don't see it near
48:37term, but I think it's there's a good
48:39possib I think a lot of people are
48:40speculating that to be the case. I mean
48:42a lot of people are going to own SpaceX
48:44anyway through
48:45>> right
48:46>> if they are in the indexes right not S&P
48:49but
48:49>> QQQ right and Russell I think also did
48:52it yeah and I think look they have to be
48:55profitable to be in the S&P 500 and I'm
48:56really glad the S&P didn't change their
48:58rules I hate it when companies or
49:00organizations change the goalposts
49:02during the game so I'm glad that they
49:04didn't change their rules um but look in
49:07a year's time you never know if they
49:09make money um like I say I this this
49:12whole renting out compute if they sign
49:14up a couple of more customers. I mean
49:17that that that gap in their balance
49:19sheet goes gets gets narrowed down
49:21pretty quickly.
49:22>> What do you say to people that are
49:23pissed that they bent the rules for
49:26SpaceX the the indexes that did?
49:28>> I was fur I'm furious about it. I don't
49:30think you should change the rules. I
49:32like wait and see. Um but that all being
49:36said it's small waiting, right? It's
49:38like it's is it like 40 basis points 20
49:41basis points in terms of the waiting in
49:44these indexes. It's not big as compared
49:46to Apple which is 7% of the waiting in
49:49the S&P 500.
49:50>> So what about the bare cases for SpaceX?
49:53People are obviously they have so many
49:56feelings about Elon. They have a lot of
49:58feelings about the way this IPO was
50:00orchestrated and choreographed. But what
50:04about this idea that it could go to
50:06zero? Is that a possibility?
50:08>> It's a possibility. I mean, I But you
50:10never know what what is what does he
50:12wind up doing in terms of um what
50:15partnerships does he does he collaborate
50:17with? Um what does he himself do in
50:21terms of his own his own wealth? I mean,
50:24you know, he remember he sold a whole
50:26bunch of Tesla to take it on himself and
50:29then invest reinvest in different parts
50:31of the business. So, by the way, talk
50:33about a robotics company. That's Tesla
50:35101 right there. Um, so you just don't
50:38know what he is going to do. I think
50:40he's too brilliant to have this thing go
50:42to zero. But by the way, wasn't he on
50:43record saying I wasn't sure even a
50:45couple of years ago if this would be a
50:47zero. So we'll have to see. But also 20%
50:51of the stock comes up in the next couple
50:53months around the lockup. And we saw
50:56Rivian stock when this happened when
50:58their lockup expired and a lot of
51:00insiders were selling the stock fell
51:02like 20%. Do you anticipate some
51:05short-term volatility when that happens?
51:07When insiders are going to start
51:08selling?
51:09>> I think it will definitely be volatile
51:11for sure. Um, and maybe that's when you
51:14know the the the your viewers maybe
51:17that's when you take a look when it you
51:19know when once this starts go once it
51:21starts and see what the volatility is
51:23and use it as an opportunity. I just
51:25kind of I just feel like we're not going
51:28to be the first year of any IPO is
51:29always kind of a little rocky, right?
51:31And so you got to find the what is what
51:34what is the price equilibrium and right
51:37out of the gate you just don't know. Um
51:39but I I just think like ignore it. Um
51:42that's this is one I'm telling you I
51:44only have like two stocks in my 30
51:45portfolio stock base that I would do
51:48this with. I would not have a whole
51:49portfolio of all these kinds of things
51:51because I could be really wrong. But if
51:53I lose 2% I lose 2%. It's not the end of
51:55the world. if it was a bigger position.
51:57I had someone come up to me the other
51:58day who said, "I want to have 20% of my
52:00portfolio in SpaceX." I said, "What are
52:02you nuts? I mean, you could be mo the
52:05most brilliant person in the world in 10
52:07years, but I I couldn't do it. I
52:09couldn't I couldn't on a day-to-day
52:11basis feel comfortable with that."
52:12>> Well, you're so good at explaining the
52:14concepts in in simple plain English. And
52:17what came up a lot as SpaceX was going
52:20public was this idea that the multiple
52:22was insane. I know. So for somebody
52:25who's listening and saying like, okay,
52:26it's a multiple of sales or it's a
52:28multiple of revenue or whatever and it's
52:30so so high. Can you give the comparison
52:33of how to think about that and and what
52:35the multiple? Why do Wall Street people
52:37talk about the multiple? What should it
52:39be?
52:40>> Well, because they don't have earnings,
52:41you can't use PE, price to earnings,
52:43right? Which is my preferred way of
52:45looking at any company because that's
52:47what it is, you know? It's it's real. So
52:49we do price to sales because sales are
52:52growing so rapidly. What are you willing
52:54to pay for that rapid growth and it's
52:57projected that this company is going to
52:59have 70% sales growth between now and
53:032030. Not only that, but they're
53:06expected to see double their margins,
53:08which goes back to the point of what I
53:10was saying ear earlier that their space
53:12business has such a cost advantage and
53:15it's the costs are going to come down,
53:17margins go up, and then eventually
53:20hopefully we're going to see some
53:21earnings. I don't know when, but so
53:23price to sales is the way people are
53:26looking at it. Also, I've seen some of
53:27the parts valuations. So you break out
53:30the AI piece and you break out Starlink
53:32and you break out space. Any way you
53:34look at it, this thing is expensive. The
53:36best case scenario I can come up with
53:38was that it was at 40 40 time including
53:40Anthropic and Google and and the compute
53:4440 times price of sales. Like that's a
53:46that's crazy just by comparison.
53:48>> I thought it was 100 times
53:50>> if you include if you include the new
53:52deals, the two new deals. Okay, but
53:54you're right. You're 100% right. It was
53:55a 100 times. And then if they that's why
53:57these two deals are really pretty pretty
53:59important in my mind just by just by
54:01comparison. And by by no means is this
54:04cheap. Palo Alto going back is at 22
54:06times 22 times sales. That's not that's
54:09not cheap by the way.
54:10>> Should it be?
54:11>> It I think it should be. I think I think
54:15PaloAlto is priced right. It's not a
54:17screaming buy. It's up 86% year to date.
54:19You don't want to chase it up here. You
54:20wait for a pullback. I was buying it at
54:2314 times price to sales. is 40 times
54:26cheap for SpaceX. I I don't know. I
54:29can't tell you. I don't want to sit here
54:31and tell you I know everything. I don't
54:32think anybody really knows, but I just
54:35think that the growth they're going to
54:36grow into the multiple as that's what
54:40you know they say when you growing at
54:4170%. That's a big that's a nice number.
54:44What people are willing to pay, we're
54:46just going to have to deal with the
54:48volatility and see again what the price
54:50discovery is. We don't have it yet.
54:51There's no question. But I don't want to
54:53worry about it. I just want to set it,
54:55forget it, kind of ignore it, have fun
54:57with it, and then deal with my other 28
55:01boring names that I can value and feel
55:04comfortable with.
55:05>> So, you're going to set it, forget it,
55:07look back in what, 5 years, 10 years,
55:10>> put your blinders on, or are you going
55:11to be buying more?
55:12>> I might buy more. I mean, the more we
55:14learn, the more their strategy evolves.
55:17By the way, this is not just Elon Musk.
55:19This is that whole team is they're
55:21brilliant. They really are very very
55:22sharp if you listen to them. Let's see
55:24how they execute too, right? And let's
55:27see. There might be new businesses. We
55:29were valuing Tesla as a car company.
55:32We're now valuing it on a robotics
55:35technology company. And we may do the
55:38same for SpaceX.
55:40>> So when we compare them multiple ideas
55:42basically like decoded, it just means
55:44it's very expensive compared to the
55:46fundamentals of what the company is
55:48doing. So we often use Nvidia as an
55:52analog or you know a lot of media has
55:53talked about that. Do you think that's
55:54correct where
55:56>> it should be closer to that 20 times or
56:00>> I mean well the problem with Nvidia is
56:04is a couple things. Number one there's
56:07no question about their growth. Not at
56:09all. Not at all. I mean they are growing
56:11at leaps and bounds. I mean more than
56:1370%. They're it's it's incredible what
56:15they've done. So it's not too late to
56:17buy Nvidia. Nvidia actually has done
56:19nothing in the past six months, believe
56:20it or not. When semiconductors, other
56:22semiconductors have done amazingly well.
56:25We mentioned Intel. I own Marll,
56:27Broadcom, AMD. There's so many other
56:31companies that have done so well. And
56:32there's a couple things with Nvidia.
56:34Vidia is a great company because it
56:36hasn't done anything in the last 6
56:37months. It's actually trading at about
56:3914 times forward estimates for a company
56:41that's going to grow 50% plus. It's
56:43crazy cheap for what you're getting, but
56:46you have more competition now today than
56:48you did even six months ago.
56:51Particularly Amazon, particularly
56:52Alphabet in terms of the chip space.
56:55There's also the question of these
56:57custom chips that Broadcom and Marll are
57:00making which are cheaper to make. They
57:03don't have as much power, but they're a
57:04lot cheaper. So that the companies that
57:07are spending money on all this stuff,
57:09they have they have options. That's not
57:11to say that Nvidia is a bad company or
57:13that their product is inferior. I just
57:15think there's a little more competition.
57:17And then the last point is everyone owns
57:19Nvidia and you'd rarely make money when
57:22everyone owns and everyone's on the same
57:24side of the boat. I like as an investor
57:27to be a little contrarian. I don't need
57:29to be all by myself on the other side of
57:30the boat, but the middle part of the
57:32boat is kind of like my sweet spot. And
57:35that's how I made a lot of money with
57:36Broadcom because I was buying this five
57:39years ago when it 14 times earnings, 4%
57:43dividend yield. It was nuts. Today it's
57:45a heck of a lot more expensive, but they
57:46have delivered in spades. And you try to
57:49find different ways of playing it. This
57:51whole AI food chain, you could buy
57:54Nvidia on the whole food chain and
57:56forget the food chain. But guess what?
57:57You've made more money in the food chain
57:59because they were less popular and
58:01people didn't understand them as much
58:02and less owned. So it is too late to buy
58:06Nvidia.
58:07>> You can buy Nvidia if you have a
58:08long-term time horizon and you can get
58:11away with the valuation. You should feel
58:12comfortable. Valuation is always
58:14certainly supportive if you have the
58:16growth and the story is not over. We're
58:18not even we're in the third or fourth
58:20inning. I I think you could buy Nvidia.
58:23I don't own Nvidia because I own all
58:24these other things, but I think you
58:26could. I just think you have to temper
58:29your expectations because it has been a
58:32phenomenal stock over the last five
58:34years. So if somebody is like, "Dang it,
58:36I missed out."
58:37>> You could buy it. I have no problem with
58:39that. I have no problem with that. Um
58:41again, the valuation, the growth, seeing
58:44where we are in the in the in the
58:46revolution. I think we're in the third
58:48inning.
58:49>> How many innings are there? I'm not a
58:51baseball person. Eight innings. How many
58:53innings?
58:53>> Nine innings. Nine innings. We might
58:56even go even overtime. We might even go
58:58overtime.
58:58>> Great. Okay. So, we're So, we're in the
59:01the first third of of this of this game.
59:03>> We're in the We're in the third. All
59:05right. Let's just say this. We're in the
59:06third inning of AI Revolution. We're in
59:09the second inning of cyber security.
59:11We're in the first inning in robotics.
59:13How's that?
59:14>> That'll give you a little bit of a in my
59:16mind.
59:16>> You'll be the the chief sports officer
59:18of Eminem.
59:20>> You know, I my very first I what I
59:22really wanted to do is be on TV. I
59:23wanted to be on ESPN.
59:24>> You would be great at it.
59:26>> I kind of took a detour and got into the
59:29financial part of TV, but it's fun.
59:31>> You're never as young as you are today.
59:32I I'm going to start a petition
59:34Stephanie for ESPN. You'd be incredible.
59:37So, what other hot stocks that people
59:41are like, damn, I should have got this.
59:43I should have, would have, could have.
59:44Micron, you know, whatever else is
59:46really buzzy. SanDisk. Are these real
59:49talk?
59:50>> I know.
59:50>> Is it too late to buy these? Uh
59:53I I I don't I don't think so. I think
59:56I'd be careful as to what days I'm
59:58buying these things. You get you get
1:00:00looks all the time. This especially
1:00:02semiconductors, semicap equipment.
1:00:06I one of my biggest regrets. I owned
1:00:08Lamb Research. They're a semicap
1:00:10equipment company and I made a ton of
1:00:12money on it and then it went up another
1:00:13200% on me. Right? Because because if
1:00:16you you can pick and choose the
1:00:18semiconductor company you want. There's
1:00:20a lot of them. But the semiconductor
1:00:22capital equipment companies, they have
1:00:24all the that's who their customers are
1:00:26are all of these semiconductor companies
1:00:28because the equipment companies make the
1:00:30stuff, right? And so Lamb Research,
1:00:33Applied Materials, KLA, those are names
1:00:36that are up on me an enormous amount of
1:00:38money, but they are winners over the
1:00:40long term because it doesn't matter who
1:00:41wins
1:00:41>> even more. Like they've already run so
1:00:43much. Is there more to run?
1:00:44>> I know. I think there's more to run
1:00:46because they have because they have all
1:00:48of these c all of these all of these
1:00:50players are Nvidia, Broadcom, Marll, all
1:00:53of these companies need the the cap
1:00:56equipment companies and they are not,
1:00:59believe it or not, they're not that
1:01:01expensive because the earnings continue
1:01:02to go up. So that does not mean that you
1:01:05run out and buy these names today. You
1:01:07wait for a pullback. We're going to have
1:01:08one or two or three. Put them on your
1:01:11shopping list 20% below these levels. If
1:01:13if if these stocks fall, that's where I
1:01:16think you want to start a position. Same
1:01:18thing with Micron. We are short memory
1:01:21in this world. And if if you believe
1:01:23that we're in the third inning
1:01:25and we're short, the pricing power of
1:01:28these companies is enormous. So, do you
1:01:30know that last quarter Micron, they make
1:01:33two kinds of memories, DRAM and NAND?
1:01:35DRAM, their ASP's average selling price
1:01:38to their customers was up 60%
1:01:40year-over-year. And in NAND pricing was
1:01:43up 80%.
1:01:45>> Pricing power is king. I mean that is
1:01:47they are minting money at queen and they
1:01:50signed 16 license agreements la this
1:01:54past quarter valued at hundred billion
1:01:57which what does that mean? It just means
1:01:58that they are contracted to get a
1:02:00hundred billion between now and 2028.
1:02:0422 billion of it in cash.
1:02:06>> This is for micron.
1:02:07>> Yeah. I mean these are numbers that we
1:02:09just haven't seen. So, I do not own
1:02:11Micron because I feel like I missed it
1:02:13for sure, but it's absolutely on my
1:02:15radar screen and I happen to own other
1:02:17names that are that are fine, too, that
1:02:19are good and they've done really really
1:02:20well as well. But that is certainly a
1:02:22name that they're a leader in the
1:02:23industry and we don't have enough of
1:02:25what they have.
1:02:27>> What do you say to people who say,
1:02:29"Stephanie, there's an AI bubble. It's
1:02:31going to burst. It's all going to be
1:02:331999 again." Well, with the internet, we
1:02:37were building out the internet without
1:02:39knowing what the demand was. We were
1:02:41laying dark fiber. We had we didn't have
1:02:43contracts. We didn't have backlog or or
1:02:45any of that. We had interest. We had
1:02:47indications of interest, but we had a
1:02:49lot of double, triple, quadruple
1:02:51ordering going on. And so, there were
1:02:54winners and there were losers. We
1:02:57happened to create a whole bunch of by
1:02:59the way jobs that didn't exist back then
1:03:01because everyone asks me about AI taking
1:03:03over the world in terms of jobs. I would
1:03:05say for the bubble talk on AI there is
1:03:09real demand. That's why I care about the
1:03:12cap goes back to the capex. How much are
1:03:14these companies spending? They're
1:03:16spending and that number continues to go
1:03:19higher and higher and higher. What I'm
1:03:21not happy about are these companies
1:03:22going to the debt markets to going to
1:03:24the equity markets to raise all this
1:03:26cash so that they can fund all this. But
1:03:30the numbers continue to go higher. And
1:03:32it goes back to what the CEO of Amazon
1:03:35said. We're not going to see the returns
1:03:36this year, but we've never seen anything
1:03:38like this. So, we're going to continue
1:03:39to spend so that eventually we do see
1:03:42returns that are double, triple,
1:03:44quadruple of what we would have done if
1:03:46we didn't spend. Okay. But here's the
1:03:49deal. What about the circular spending
1:03:52idea? So, what about the fact that
1:03:55they're just all fueling each other?
1:03:57It's like a big incestuous It's very
1:04:00uncou to say circle jerk, but it feels
1:04:02like it's just like they're all spending
1:04:04on each other and so they're propping
1:04:06each other up fictitiously.
1:04:08>> I think that the numbers if if where I'm
1:04:11going to be wrong is if they start to
1:04:13cut back on the capex and we're seeing
1:04:15just the opposite. Even last quarter,
1:04:18almost all of them raised either raised
1:04:20money to to to increase the capex or
1:04:22they had the free cash flow to actually
1:04:24increase the capex. They're spending on
1:04:26all different parts though. That's why
1:04:28it's so important of of listening to the
1:04:31picks and shovels companies, the food
1:04:33chain, because what they're saying is
1:04:35yes, their orders are enormous. I mean,
1:04:38absolutely enormous, but the backlogs
1:04:41are even bigger. backlogs really hard to
1:04:44cancel orders really easy to cancel. So
1:04:48we pay attention to backlogs and those
1:04:50num those names that I mentioned are the
1:04:52picks and shovel companies that I
1:04:54mentioned. Verdive, GE, Vernova, Quantis
1:04:56Services, Eaton, I didn't mention Eaton,
1:04:59Rockwell, Vistra, didn't mention Vistra.
1:05:02All of these companies on average, they
1:05:04saw 34% backlog growth year-over-year
1:05:07from these companies. Backlog is
1:05:09stickier stuff. It's contracts in hand.
1:05:12And if I can just give you perspective
1:05:14because I've been covering industrials
1:05:16for 35 years on average backlogs grow
1:05:195%.
1:05:20What 35% on average?
1:05:23>> Backlog versus orders just means what?
1:05:25>> Yeah. So orders you can cancel backlog
1:05:27is contracted stuff. So orders some in
1:05:30some instances
1:05:32like Verdive they do have their firm
1:05:34their orders are firm and he has
1:05:37insisted on that and the companies that
1:05:40need this stuff are now also insisting
1:05:43on they want guaranteed stuff backlog is
1:05:46guaranteed
1:05:48you know unless you have all I mean
1:05:49unless you have tremendous amount of of
1:05:51double and triple ordering but the
1:05:52backlog is different than orders orders
1:05:54you can just say I forget it you know I
1:05:55didn't get it and it didn't get filled
1:05:57you have you're committ
1:05:58backlog. Think about think about it that
1:06:00way. You're committed to be buying that
1:06:02stuff.
1:06:02>> So, you're not worried that Nvidia is
1:06:04getting money from Microsoft and then
1:06:05giving and then buying from Microsoft
1:06:08and then it's all sort of incestuish and
1:06:11propping each other.
1:06:12>> I mean, it's it's complicated for sure,
1:06:15but they wouldn't I just don't think
1:06:17that we've been these we're talking
1:06:18about billions of dollars, you know? I
1:06:20mean, billions of dollars. I don't think
1:06:22that they would be spending this amount
1:06:23of money if they didn't see this
1:06:25insatiable demand. And I think we are
1:06:27seeing it again where I'm wrong is if if
1:06:30we go from 800 billion and next year
1:06:32it's 500 billion then I think not
1:06:35necessarily wrong but this whole kind of
1:06:38one we want to call it a frenzy fine
1:06:40whatever then this whole thing kind of
1:06:42starts to unravel because it has it
1:06:44impacts so many different companies but
1:06:46I I go back and I listen to what really
1:06:49these smart CEOs are saying and and then
1:06:52what other industries are saying too
1:06:55it's just it's not just one like the
1:06:57internet was just the internet this is
1:06:59like the entire like economy almost you
1:07:02know absent a couple of sectors so I
1:07:05worry about it there's no question
1:07:07that's but that is the biggest worry
1:07:08that I have is we got to continue to see
1:07:10this spend and you know if we if we
1:07:13don't I'm going to be wrong and I'll
1:07:15you'll never have me back but if I'm
1:07:17right I think I will be right to a
1:07:19certain degree and look the stocks may
1:07:21not work they may get overowned and
1:07:23maybe they get expensive and maybe they
1:07:25take a pause and we see a rotation into
1:07:27some of these other sectors like we
1:07:29talked about. But I think that this is
1:07:32something we haven't seen. I don't want
1:07:34to say it's different this time cuz I
1:07:36hate that phrase, but I do think it's
1:07:38something that it's it's remarkable.
1:07:39Just think about what it's meant in your
1:07:41life, right, and my life. And and sure,
1:07:44there's going to be disruptions from AI
1:07:46in certain industries, but we're going
1:07:48to have certain industries we don't even
1:07:50know exist and jobs that we don't even
1:07:52exist that are created.
1:07:55Well, I think it's going to be the
1:07:56latter for sure. And I cannot wait to
1:07:58have you back. It's so weird. Like, I
1:07:59miss you already. I want you to come
1:08:01back and have more of a conversation
1:08:02because I could listen to you talk
1:08:04forever, but we have to let you go so
1:08:05you can research more stocks to tell us
1:08:07next time. We end our episodes, as you
1:08:09know, by asking all of our guests for a
1:08:10final tip that listeners can take
1:08:12straight to the bank. So, if somebody's
1:08:13listening today and they're like, "Oh my
1:08:14god, that was so much alphabet soup. You
1:08:16mentioned so many different ticker
1:08:18symbols and companies." If there was one
1:08:20ETF for them to buy, what would it be?
1:08:23Well, based on the themes, I would do I
1:08:25would do hack for sure, but I would more
1:08:28importantly want more diver more
1:08:30diversification. I really do strongly
1:08:32believe in in the S&P 500 in the ETF and
1:08:36Vanguard is what we used when I was 22
1:08:38years old. And please start as soon as
1:08:41you can. And it's never too late. And
1:08:44the reason I say the S&P 500 is such a
1:08:46diverse set of companies. You're going
1:08:48to get so much exposure. By the way, 40%
1:08:51of this S&P 500 is technology. So,
1:08:53you're going to get the growth aspect
1:08:55there, but you're also going to get
1:08:56other sectors, too, to help keep you
1:08:59sleeping at night. And hopefully 7.7% on
1:09:02average total return is is going to
1:09:04continue. I think it will. It might even
1:09:06grow a little bit more. But you're never
1:09:08you will never be sorry in 5 10 15 years
1:09:11for putting money into the market today.
1:09:14>> Never.
1:09:14>> No.
1:09:15>> You never you never regret a workout.
1:09:17You never regret an investment in in the
1:09:19S&P 500. So not like semiconductors.
1:09:22You're the semiconductor queen. So not
1:09:23like socks, SOXX or SMH.
1:09:26>> No, because they're up 85% year to date.
1:09:29And I would hate for your viewers to you
1:09:30and it's so volatile. You get a lot of
1:09:34semiconductor. You get you get a lot of
1:09:35semiconductor exposure in the S&P 500.
1:09:38You really do. I have more confidence in
1:09:40hack longer term, like 10 years out. I
1:09:43have no question in my mind that those
1:09:44stocks are going to be much much higher
1:09:45and you're going to see much more
1:09:47consolidation and that's the the
1:09:48industry that I think doesn't get enough
1:09:50respect. Everybody thinks well you know
1:09:52they they're going to get hit by you
1:09:54know AI and they're not going to get hit
1:09:56by AI. We need cyber security companies
1:09:59because of AI. That's really important.

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