00:01Hello everybody

00:02Welcome back to another episode of Basis Points

00:04>> All right, I'm gonna stop

00:06[laughter] This guy was almost asleep about 30 seconds ago

00:08I don't know if this is going to make the cut or not, but he was legitimately no energy, and then all of a sudden the lights [laughter] come on and this guy just goes, >> "Oh, we had a long day." >> Did we have a long day? >> We had a bit of a long day

00:23>> I mean, we may have walked 15 or 20,000 steps

00:26>> It might have been 25,000

00:29So, I'm back from Houston at the Hood Summit, and it was a nice weekend

00:31Michelle, Ray, Steph, Mike, Doug, Arthur, Hollis, Map Money

00:34It's a great time

00:36We got to see everybody, so that was really fun

00:39Um, today we had something scheduled, which was a tour in a..

00:46A variety of different locations in New York City, because as people know, I've said this already, we're getting a new studio next year

00:53I had a version of what I wanted when I came to New York City today

00:59I may have ruined it for the rest of his life

01:02At around 2 PM, first of all, Steve hooked me up with the broker

01:03I don't know anything about the real estate business, brokers, none of this stuff

01:08So, I asked the guy for a certain set of criteria

01:15He gave me some locations

01:22I said, "Steve, can you come with me to New York just to, you know, help me a little bit when it comes to understanding the real estate industry?" So, [laughter], Steve tags along, and basically after the first two locations, I realized I wanted..

01:29Something different, and let's just say Steve kind of hooked it up

01:33I may have made a few phone calls, and listen, first shout out to JLL

01:39Shout out to JLL

01:40They're awesome

01:42They always do the right thing by me

01:43If you're looking for space in the city, call Greg

01:47Absolutely incredible

01:49Ask for Greg

01:50Greg's the man

01:51I mean, Steve texted this guy who I don't know named Greg in a group chat

01:52I cannot lie, but 10 seconds later, Greg says, "Amit, what can we do for you?" And I'm like, okay

02:00Then Greg hooks me up with one of his brokers, Jeremy, who ends up giving us the tour

02:05He was pretty awesome today

02:07Dude, this kid's a killer

02:09This kid's a killer

02:11Fresh out of college, trying to close

02:12Deals

02:13I mean, incredible, dude

02:14But I was not ready for the process of someone who has purchased and leased millions of dollars, I think it's fair to say, of New York real estate over the past 20 years, because that was an experience

02:26I mean, that was an experience for me

02:28Like, when we get into the first location, and Steve asks five questions in the elevator with the real estate agent as we're going up to the location, on things that I didn't even know existed

02:38And it's one of those things where I was like, I would have never asked that, I would have never asked that, I would have never asked that

02:44And even the real estate agent's like, "Have you done this before?" And Steve's like, "Well, I might have negotiated some." Deals before in the past

02:49And so, you know, the tour went well for the first couple of locations, but it wasn't what I really wanted

02:54And then Steve said, "Well, I think I have something bigger." And he might have made a call to a company that I don't know if I want to mention the name of the company

03:03>> I mean, I feel like they deserve a plug

03:06That's up to you

03:11>> He called SL Green

03:16And SL Green, for those who don't know, why don't you describe what SL Green is to New York City? Now, some people that are OG watchers of you and me know SL Green because the stock fell to 19 in 2023 and Steve was literally banging the table saying this is a buy, >> and it went all the way up to 60

03:21So, >> how important is SL Green to New York real estate? >> They're the..

03:26Largest office space owner in New York City

03:32If you go to SL Green's website and look at their buildings, One Vanderbilt is creme de la crème; they own so much real estate in New York

03:42The number one company is Vornado, but they are above Vornado in my opinion

03:47I believe SL Green still has the most office space in the city

03:49The MetLife Building, I mean, they are top tier

03:52I called some of the building managers I know, and they were incredible

03:59I mean, Mary, incredible

04:01We were walking down the city, and Steve said, "Did you not like the first two spots?" I replied, "No, man, it's just not really what I thought it was going to be." He said, "I can make a phone call," and within two minutes, we had a tour

04:13Very premium building

04:16>> Yes

04:16>> In New York City

04:17>> In all seriousness, Mary's awesome

04:19So I called her

04:20She said, "Steve, I haven't heard from you in a while

04:23What can I do for you?" I'm like, "Listen, we need some office space

04:25Do you—I’m not going to say the exact location, but do you have any space in your building?" She looked at what's available, and she's like, "I have this, this, and this." And it was just too much space

04:35>> So she's like, "But," >> this other building, which I’m not going to mention the address yet

04:39>> Yeah

04:43She's like, "You know who's over there? Colette's over there." I'm like, "Oh." Like, "Who the [ __ ] is Colette?" I'm like, >> so she's like, "Let me text you her new number and call her." She got me over

04:47To the leasing area

04:52And a couple of hours later, we had the tour ready to go in an incredible building

04:59>> I mean, this was crazy

05:00>> And I think when I saw just the outside of the building and then looked in the corridor, your mind was blown

05:04>> I couldn't believe it

05:09Yeah, >> it was a different experience from what it would be like to actually be in the city

05:13And >> the perfect way to explain it is with malls—you got Class C, Class B, and Class A

05:19Yeah

05:21>> Okay

05:23Everybody can picture what Class C and Class B are compared to Class A

05:25Class A is Simon Property Group

05:28And then you have the rundown ones where there are no stores, >> right? >> Same thing with real estate

05:30You got Class C, Class B, and Class A buildings

05:34This is like a premier Class A building

05:36building

05:39Well, let me just say it's a Class A building and obviously, you know, I've said this on my channel as the show has grown

05:42We're trying to take it to the next level next year, which requires something that's a bit more high-level than my bedroom in my apartment

05:49And so, you know, when you're even talking to these brokers, the questions you have to ask, the things you're asking to include, the T&I—I don't even know what T&I stands for—Steve's just busting out all these different questions, and you can tell the broker starts taking you more seriously because, like, oh, these guys want to make a deal

06:06They're asking the questions that I know I need to have an answer for, and they're asking

06:11Questions, I mean, Steve was asking these questions that I could not have thought of in a million years, because I've just never done real estate before that needed to be asked

06:17I think that led to a very healthy, productive meeting today with those guys, because look, they want to make a deal, we want to make a deal, and you know, when you kind of like each other in that intersubjective exchange of dialogue, it's more likely than not that you find some way to meet in the middle when it comes to negotiating

06:32And I was just, I mean, I've seen Steve do a lot of things

06:37I have not seen him negotiate and navigate around renting a space in New York City, a commercial real estate space, like I saw today

06:44That was really impressive

06:46I wasn't I'm always a podcaster

06:50>> Yeah

06:53Well, [laughter], because this is my world, right? Like, you know, people are impressed that you talk for hours every day and all that stuff, and I'm like, well, this is just what I do

06:56And for Steve, it was obviously just another day in the office

07:00I genuinely was like, I mean, the stuff he was talking about—the water pressure for the coffee machine inside the space—and like, well, that's a good point, because if we have guests coming over, you want to have good coffee, and the pressure of the water actually does matter

07:14It's stuff I would never think of in a million years

07:17>> And the big thing is, in a different type of building, no, you got to talk about..

07:21Construction tenant improvements — how much is the landlord going to contribute, and if we give them a certain number of years, you know, what are they going to include? But then you go to Class A buildings

07:25 >> Yeah

07:29 And if you're not building from a fresh template, everything's already built

07:32I mean, it is perfect

07:35 >> Yeah

07:38 Now, maybe you gotta paint a wall or maybe you gotta potentially take a wall down, but you just put a door up

07:40Everything is perfect

07:42And I think that people are going to be very surprised when this project is over what it looks like

07:48I think 2027 is gonna be a big year

07:50 >> Yeah

07:51I think it's gonna be fun

07:53 >> Yeah

07:54 >> I think it's gonna be fun

07:57And the part that we're not going to talk about — let's just say there may be capacity for a lot of people, for a lot of..

08:01Things, and maybe, you know, the Basis Points meetup next year, we might be doing some fun stuff, and not at a restaurant or a bar

08:08Let's just say what I have in store in my mind—what Amit saw when we went to a quote-unquote conference center in the building—I think that blew you away, right? It was cool, dude

08:23Just the idea of really taking the show to the next level

08:28I thought it was very special

08:31And, you know, a big, big thank you to Steve because there's no way I could have done this myself

08:32Anytime

08:34It was exciting stuff

08:35Exciting stuff in New York City

08:38What's also very exciting is a company that's doing 54 billion in revenue

08:40Two letters

08:43Well, the market's at F.U

08:46to it today, but the two letters that we..

08:50What they should be caring about is Micron

08:52>> That's right

08:53I mean $54 billion versus $51 billion expected revenue, $33 versus $31 expected earnings

08:55Gross margins actually went up to 87% versus 86%

08:57The guidance beat by about $7 billion, $63 billion versus $57 billion, or $64 billion versus $57 billion

09:02Operating cash flow was $42 billion versus $33 billion expected

09:08Supply-demand conditions will be tighter in fiscal years 2027 and 2028 than they were in 2026

09:14Why is Micron not at $1,400 or $1,500 today? >> That's it

09:17This stock should be at a minimum $2,000

09:20Look, the market is scared of a boom-bust cycle

09:23The market remembers DRAM during a boom-bust cycle, and they don't believe the earnings are going to be able to grow for the next five to seven years

09:34They are legitimately calling BS on 2028, 2029, and 2030

09:35is the only thing that makes sense

09:37And for Micron to still trade in the single digits is disgusting after what they just posted

09:45You are valuing them lower than tobacco companies because they are scared about how long the AI revolution can keep this up

09:55They are worried about what maintenance looks like when the capital expenditures stop increasing year-over-year by a wide percentage

09:59And I don't understand it

10:01This is a company that just guided for $61.5 billion, plus or minus

10:09Did you see what the EPS guidance was for next quarter? >> It was insane

10:13>> It was like $40

10:17>> I think it was $39.5

10:19Yeah

10:20>> Insane

10:22Now, if we play that out with no growth, just flat, okay? You're around 155 next year, give or take

10:26>> 155 at A 10 multiple is 1,550

10:33>> You're telling me that this should trade at a 10 multiple? It doesn't even do it

10:40It trades at six and a half times right now, 6.6 times

10:41It's disgusting

10:42>> It trades at 20

10:44>> It's disgusting

10:45All because they don't believe the earnings power can last

10:47And what I have to say to that, people need to do some math

10:51Their free cash flow margin is, I believe, 39.77%

10:53I have it right here

10:58It is 39.77%

11:03They just did 52.98 billion in free cash flow on 133 billion in revenue for this year

11:08>> Next year, the average analyst consensus for revenue is 266 billion

11:12That's 105 billion in free cash flow at the same margin

11:19Do you all know what 2028 is expected to be? $311 billion for revenue at the same margin

11:26That's Another 123.5 billion in free cash flow

11:28And then we have thin coverage for the next two years, but they're expecting revenue to be 326 billion in 2029 and 530 billion in 2030

11:40Now, granted, there are only four analysts that put that out

11:42It's very thin coverage, that trillion dollars, but over the next four years, cumulative—if they maintain, and if the analyst community is right—we all know how the analyst community is, but let's just humor me and accept that this is somewhat reasonable

11:58You're talking about 570 billion dollars on 1.43 trillion dollars of revenue over the next four years

12:04What do you do with that type of money? Oh, you buy back shares

12:09And this is a company that’s valued at 1.25 trillion

12:13You can basically buy back shares if you deploy all that capital

12:15Buybacks, what, 47% of the company in four years if it doesn't move

12:20This company is going to be competing with Nvidia and Apple

12:22They're going to be stepping in, buying this stock every week and every month

12:27So the reason I think it didn't really have that big of a move today, it kind of went down 2%, then ended up about 1.5%, is two things

12:32One is the CAPEX increased a lot more than expected, so I think it was like $50 billion versus $37 billion expected or something

12:41Last quarter or last year, it was $26 billion, so it's almost a doubling of CAPEX, which is not that big of a deal because ultimately that's going to help them grow

12:50But I think that caught us straight off guard

12:53And then, number two, was these LTAs, which, from my perspective..

12:54It looks like it's going into 2031, 2032

12:55It seems like the long-term agreements are actually continuing to be long, but the lack of clarity on, or maybe the expansion of, like, 500 billion of revenue versus 100 billion of revenue that is actually long-term guaranteed is still keeping the street up

13:11However, they did say that the floor for the margins on those long-term agreements is set already, which I'm assuming is around that 65 to 75% range, which are incredible margins

13:22You're not going to have gross margins of 87% forever

13:24So, at that point, based on everything you said and based on a little bit of a capex scare, which is not something to justify the stock actually going down, >> your thoughts on that, too

13:33>> It's got to be the

13:36Boom and bust cycle

13:38And let's just say the earnings call was pretty boring

13:40We all listened to it

13:42During the call, it was not the best, but I guess the boom and bust cycle continues to be the narrative, which my perspective on this as someone who has not been the most enthusiastic about memory all year, simply because I didn't fully understand the thesis

13:53And now I've warmed up to it a lot because I'm like, look, on these numbers, even if you think there's a boom and a bust, the reason I'm so warm to it is because it shows better growth than a lot of these other cyclical companies

14:04But all these other companies that are getting higher multiples than Micron are cyclical too—Nvidia is cyclical, Dell is cyclical, AMD is cyclical

14:09Optoelectronics is cyclical

14:14All of these other parts of the semiconductor stack, if you look at their historical revenues, they go boom and they go bust

14:18Now, Micron in particular, because memory is not a commodity in this day and age, but it has historically been a commodity, has had the worst of the boom and bust cycles

14:25But that doesn't mean they need to be trading at a 70% discount from a PE multiple perspective compared to all these other companies that also are cyclical

14:33Like Dell will sell a ton of laptops if the AI boom is over, but the reason they're worth $400 billion is because server racks are in very high demand

14:42If the fact that AI is cyclical causes server racks to be cyclical as well, then memory will also be affected accordingly

14:44It has to be cyclical

14:47That means chips also have to be cyclical

14:50Now, yes, can Nvidia and AMD innovate to the point where they don't need as much HPM? Sure, that fear is there

14:55But given how much demand is out there and how Metaverse is going to create even more demand with all these different agents that are there, I don't get why Micron—I really don't understand the bear case here outside of cyclicality

15:02And even if that is a bear case, I can't imagine that is enough of a bear case to keep this stuck at seven times forward earnings

15:10>> Yeah

15:18And as I said, I have my own thoughts on the Capex, and I'm not gonna say who, but there was at least one phase that kind of soured when we were streaming live about the Capex when it was

15:21Talked about

15:24And I'm bullish on the capex

15:26I love the capex

15:28Spend it

15:29Here's why

15:31Oh, you're going to get worried about $55 billion of capex

15:32Why? Look at the free cash flow they're printing

15:36They are not borrowing money for this, at least to my knowledge

15:39Now, maybe they do

15:41Well, to push back, if they keep spending on capex and building more facilities, their pricing power potentially goes down, and the street, if they're already so afraid of the cyclicality thing, now your prices go down

15:46>> Let's play it out, though

15:52$55 billion of capex is dropping in the bucket compared to the free cash flow that they're going to generate

15:55>> That's fair

15:58>> Okay, >> $55 billion is less than what they will generate in cash from

16:01Operations

16:02They'll still be wildly free cash flow positive next year, but could it affect their future free cash flow? So, here's where I'm going with this

16:09You don't allocate $55 billion of your cash from operations as capital expenditures if you don't have true visibility that this is going to be absolutely profitable

16:19We're producing wafers for everyone on high-bandwidth memory because there is no board in America and no executive team in America that is going to sign off on a $55 billion expenditure if you're not going to make a significant profit from it

16:36I refuse to believe that the street and the bears are smarter than the executives at Micron in their business

16:41That's like me saying to you that, you know what, We should get rid of Mr

16:46Producer and let me sit over there

16:49>> Yeah, >> it just

16:52No, I don't know how to do anything that he's doing

16:55No, >> but the bears want, first, they want to say that AI is fake

16:58Well, obviously, we know AI is not fake, right? Why are we going to tell a company like Micron how to run their business? If they say that they're going to spend $55 billion on CapEx, why are we not going to believe that that's going to increase revenue for years to come? You have to give them the benefit of the doubt because they got to the dance right now, at what they're doing

17:17So, I, I'm not buying this BS that this isn't going to work out for them

17:20And I just don't think that any board of that caliber is going to sign off on this unless they truly

17:28I believe it's going to work

17:36And how about, what if it does work? What if they spend 55 billion, and the numbers that the analysts are saying now end up going up, up, up after the next couple of quarters because it looks like, as they bring it on, we just need more high-bandwidth memory

17:43>> So I agree with everything you said, and I think it makes a lot of sense

17:47I think the issue here is if all three of the memory makers, Micron, Samsung, etc., all raise capital expenditures sharply at once

17:51Um, and you've already got some flags from management that price, um, that price increases are moderating

18:00You've got some analysts at JP Morgan saying the opposite

18:07So, it's a little bit like no one fully knows exactly if the prices are

18:10Moderating or not, let's say they're conservatively moderating in terms of the price increases, because again, you can't have 90% margins forever

18:17If everyone increases CapEx and floods the market with supply, including CXMT and China, there's a peak to this memory cycle, right? If that peak is in 2028 or 2029 in terms of how aggressive the price increases will be and how aggressive the supply-demand imbalance will become, I feel like the street just doesn't want to get caught off guard

18:37>> We don't know when the peak is going to be

18:42At some point, there will be a peak

18:43Anyone >> but everyone's trying to figure that out, because that's a trillion-dollar question

18:47>> But while they're figuring it out, Micron's They're gonna be buying back a lot of stock, and that makes EPS easier to improve, preventing the numbers from going down because they're going to—realistically, they're probably going to be able to buy back 25% or more of the company over the next four years, and that's probably conservative

19:04So even if demand peaks around 2030, arbitrarily, in terms of how much memory is needed, if they buy back 20 or 30% of the shares from now until then, does it matter? Can they still make EPS go up because they have 20 or 30% fewer shares? Yes

19:21>> Yeah, the fear is, why would I buy a company that’s just going to eliminate their share count and give me greater ownership in the company if the fundamentals of what I’m investing in are..

19:33Deteriorating simply because of the fact that it is a commodity, and it eventually turns, like Apple still is innovating and they're putting out products, and there are two billion people who use the product

19:45>> I got an answer for you, trillion dollars, not the answer you want

19:48It's not the answer everybody wants to hear, but I do have an answer for you

19:50>> Every investment you are paying the current value for all the future free cash flow

19:53>> Sure

19:55>> And you are paying for the earnings power

19:57Growth is great, but at the same time, not every company grows gangbusters all the time

20:02And at some point, you have to look at profitability

20:06>> But the nuance here is Micron has gotten a $1.2 trillion market cap, even if the..

20:11The PE multiples are low because of this gangbuster growth

20:13So, if that growth declines due to this capex investing into supply, and then all they're doing is buying back shares as the basis for how they're going to grow EPS, like Apple buying back shares—I haven't gotten this argument all year

20:29Apple buying back shares is different because it's Apple, and they have so much excess cash because the products and services they put out are so valuable in perpetuity that they buy back their shares and give that to shareholders

20:39Micron's products are super valuable now, but in 2032, if Nvidia uses 50% less HBM because they've just innovated on the next ship, the buybacks are going to be impacted, yeah

20:51What else are you going to do? You're going to buy back your stock because that's all you can do

20:55>> Let me ask you this

20:56Right now, you have 17 analysts for this year and 22 analysts for next year giving targets

20:57Okay

20:59The average, okay, now, is 16.720 of EPS this year

21:01The low end is 13.95

21:03The high end is 23.29

21:06Let's just say they do 16.720

21:10Wait, is Micron supposed to trade at two times earnings? >> No

21:14So that's my point

21:15The stock should be up

21:16That's where I'm agreeing with you

21:18I'm trying to figure out why the Street's not giving it the multiple

21:21And it keeps coming back to, like, here's the nuance

21:22I don't know if you can say the Street is being stupid about this because the fear for the Street is very real

21:27Now, should Will the stock be higher? Yes

21:30But the stock being discounted to this level reflects a lot of fear around a peak in pricing or earnings for memory, and buybacks are the only answer to that

21:40>> The street is trying to figure out when the boom-bust cycle will end, and nobody knows

21:46But when we figure it out, there will be 20 or 30% fewer shares on the market

21:49>> Yeah, that's fair

21:52That's why the stock should be higher

21:58I agree

22:03>> The stock should be higher because, at the end of the day, even if this becomes a flatline company—even if flatlining—think about what I said about Apple, when everybody said I was wrong, and Apple went up because revenue went down but EPS went up

22:08Micron is going to be in that position

22:10>> Like this is..

22:12Crazy

22:15The multiple of trade

22:17I'm not saying it should trade 20 times, like I'm not saying that because we do know that, unlike microprocessors and GPUs, yeah, RAM is a little fickle and it's different

22:20Not saying 20 times

22:24Can we at least let it trade at 12 or 14 times? I think that's reasonable

22:30I think that's being 40-50% higher from where it should be, and I think that's very reasonable

22:33The fact that it didn't pop today either—look, maybe it just needs a couple of days or a couple of weeks

22:40It needs the midterms to be over, macro conditions, all that stuff, to relax, and then Micron goes back up to where it realistically should trade

22:44I'd rather own Micron or Altria Group

22:45Okay, I'd rather own Micron 1,000%

22:47Okay, but I could..

22:48I understand someone saying that in 20 years I can own Altria Group and be happy

22:54In 20 years, I don't know if I could own Micron

22:56Like, okay, if Micron was worth two trillion, what's your upside? Do you think it's going to be a five-trillion-dollar company? I mean, Meta is worth two trillion, dude

23:07Now, Micron's numbers are way better than Meta, if we're being honest

23:08Micron's having a moment

23:10All the memory companies are having a moment

23:11How long does that moment last? You could say Nvidia's having a moment, but Nvidia has a moat

23:17They have a pseudo-monopoly on their chips, and some of the best pricing power in the world

23:23Now, maybe the memory players have a better pricing power moment right now than Nvidia, but that's not going to It last forever

23:28Apple has pricing power because it's Apple that will last for a very long time

23:32They can charge 2,000 bucks for a Duo

23:34Like, I think the fundamental issue is people think this memory thing will bust eventually, and they just don't know when

23:40Okay, we got to figure out how to put some of this stuff on the screen, but I'm going to give you my computer

23:47I want you to read to everybody where Altria trades over the next three years and where Micron does

23:49These numbers right here

23:52You're telling me that there's a world where that makes sense

23:55Yeah, Altria trades at 12 times

23:57Micron's at six

23:58And that's forward

24:00Yeah

24:01And Altria is growing at 7%

24:03Micron's at 22%

24:04Look, the numbers don't make sense

24:06But the..

24:09The problem with this analysis is everyone knows Micron is cheap

24:11Like, there's no alpha in, you know, making this argument anymore, right? You know what I would do if I were their CEO? First, I have to get something off my chest

24:19And I've said it, but I haven't said it to you

24:20I am sick and tired of great companies having lackluster earnings calls

24:24I am sick and tired of it

24:26We need a petition

24:30Hire great communication people to run the earnings call

24:32Three companies that have a video earnings call: Palantir is the original, okay

24:36Robinhood, and then Grab

24:40[laughter] Forget that because yeah, I do think that should be a requirement

24:45It should be video

24:46I get it

24:47I'm all for it

24:49Nice to have Grab's video

24:53A video call goes a long way

24:58What I am saying is that it is very important to have the person delivering the address be charismatic, energetic, and able to keep people on the edge

25:02You don't have to sell me

25:06I've been saying this about Patrick Gelsinger (CEO of Intel) for years

25:09People have thought I was crazy because I like how Gelsinger speaks

25:10He gets people interested

25:11We need—there's two companies I'm going to call out right now

25:13Okay

25:14Broadcom—you make enough money

25:16First, update your slide deck

25:18Like, what are you doing? At least Micron, I can't give that critique

25:22But Broadcom and Micron are the two worst earnings calls I listen to all quarter because they're so boring

25:28It's like watching paint dry because they have no energy and they..

25:29Talk in circles

25:31Uh, their CEOs are brilliant

25:33I want them to keep doing what they're doing

25:36They should be on the conference call to answer questions if needed

25:40You need great communicators to deliver these calls

25:42It would go a long way

25:44And two, what I would do if I were Micron's CEO, I would not do 100% of free cash flow for buybacks

25:52I would say, you know what, you guys don't want to earn it from the earnings power

25:57You don't want to buy it for the potential growth

25:59Buy it for the dividend

26:01It's what PayPal should have done, and Micron should do it

26:05Turn this into a dividend—or I mean, just a powerhouse in addition to the buybacks

26:08>> Yeah

26:10>> Because you know what, you'll open up

26:12People will buy

26:14You give it a real yield

26:15People will

26:16Buy it, especially with growth

26:18And that signals, if they do that, that will indicate that they are not worried about EPS crashing because then they can't fund the dividend

26:24That is the ultimate signal, an FU to the street, that if they start a real dividend growth program, like a genuine dividend that matters

26:32Who's going to say that they're not going to actually be able to achieve the EPS? Because if they don't, then they have to cut the dividend

26:41That would be even worse

26:42So, do we think that in the next five years we're just going to need more and more memory? I think that's what it comes down to

26:47>> Absolutely

26:52>> So, then, okay, well, I'm going to ask you another question, and you're going to have a different answer, and you're going to..

26:57You have to resolve the contradiction in your answer

27:01>> Sure

27:06>> Why are you not liquidating a sizable amount of your portfolio and buying Micron? Because on every fundamental metric, if you believe we need this demand for the next five years, it should be the only stock you buy in the market

27:10Like, if we're talking about deep value investing and growth investing, there is no other company to buy besides Micron

27:14You're not only getting this growth but also the buybacks at six times earnings

27:18So, I don't think you're going to do that

27:22I don't think a lot of people are going to do that because the stock has already run up to a trillion dollars, and people are afraid that in these five years, something might happen

27:30That Nvidia is going to be okay, AMD is going to be okay, but the commodity that is memory and the company associated with that is not going to be able to justify a multiple

27:39I have an answer for you

27:40Okay? It's going to be several answers in one

27:45You're not wrong

27:49If I were in a situation where I did not have to worry about large taxable events from selling stock, it would be a little bit of an easier decision

27:53I also would not exit Nvidia for Micron; I just wouldn't

27:57I think Jensen Huang is going to do great

28:03I think Nvidia is going to be a printing press for dividends, and they're going to buy back so much stock that it just doesn't make sense to exit

28:11Meta, I don't think it makes sense to exit either

28:13Those are my two largest holdings

28:13Positions

28:14Those are just two

28:15Put them on the side

28:16Now, you talk about something like SoFi

28:17Okay

28:18>> Well, yeah, that's a hell of a question

28:19Why are you not getting rid of SoFi? >> And it's a good question because you've got, I gotta go with opportunity cost

28:25And even if I believe in the story and I believe SoFi can do well, >> it's never going to be able to do as well as Micron over the next several years

28:28>> Especially if we get rate hikes

28:31Micron will survive rate hikes

28:35>> The reality is that Micron probably has a better chance of doubling than SoFi

28:40That's just the reality

28:45Now, I don't want to get rid of SoFi for a stupid reason, okay? Because I believe in the company and I believe long-term it will be a top 10 financial institution

28:50I just don't want to exit it

28:53Now, I would rather put new capital to work in Micron than sell something and get out of it

29:02>> But here's the question, right? Like, whatever new capital you're thinking of putting to work, are you really going to dedicate all of it to Micron and build a position? Because there's, I know you like SpaceX right now

29:13I know you like Amazon

29:14>> No, because I'd rather, honestly, I think there's more upside in QQQ, and I've been buying that last week and this week

29:21>> But you know, Micron has a way better shot of doubling than QQQ

29:26If rates go up, QQQ is going to be screwed for another year

29:27>> Over a three to five year period, I think there's more alpha in QQQ

29:31>> Okay, let's assume you had a crystal ball and rates were..

29:32Going to be, which I don't

29:36Hey, let's say rates were going to be bad for the next three years

29:41I have a Teimu Eightball on my desk because my crystal ball got lost

29:42Okay, so your Eightball tells you rates will be high for the next three years or at least not low enough for the real estate opportunities to be amazing

29:46Micron's going to have an easier time

29:48So why wouldn't you buy Micron? Because I don't think that that's a story

29:53But based on your question, yeah, Micron—Micron's an easier play

29:55But it's—I’m not asking you about my question hypothetically

29:56I'm asking practically, would you put real money into Micron? And your hesitancy tells me the same thing

30:03It tells you that you're being like Wall Street right now

30:06>> Yeah

30:08>> Wall Street is also saying

30:11>> And look, I don't have a position in Micron

30:13Okay

30:15Do you have a position in Micron? >> I have DRAM that I bought at 53

30:18So, >> you have an indirect position

30:19>> Yeah, indirect

30:20And no, but I'm also asking myself this question

30:21I'm like, should I be buying Micron? >> Here's what I'm thinking

30:24TJ and I were talking about this today

30:25>> Oh, shout out to TJ

30:26He's got a big Micron position

30:28>> Yeah, TJ is awesome

30:29He came on today for a little bit

30:30We were talking about it, and I am considering, like, highly considering, doing what you told me I should have been doing the whole time

30:34And I'm really thinking about selling a lot of puts on Micron

30:37And here's why

30:40I am looking… I'm at this with a much different strategy where I don't advocate for margin

30:43I don't think margin is good for people

30:46I think it's horrible, okay, for many people

30:50>> Yeah

30:51>> What I am considering selling, I can back up and purchase

30:55>> Right

30:59You have the cash to secure your puts

31:03I am thinking about utilizing your strategy that you told me to do and the strategy TJ told me to do, and writing contracts on Micron

31:11>> Yeah

31:19>> Taking that premium and either buying naked options or leaps with it, and owning long-side exposure, probably with leaps on somebody else's dime, >> and being happy if you get assigned at 800 bucks, >> right? And if Micron goes down, well, hell, hey, I want to own it anyway

31:27I have the cash to back it up

31:29And if it It doesn't go down

31:30I have exposure through leaps that I never paid for with my own cash

31:32It was on somebody else's dime, on contracts that expire worthless

31:34And for me, I think that's how I would rather play Micron than put new capital to work in it

31:40>> But, but, I am curious

31:41Why not put new capital to work? >> Because there are so many things I want

31:44I'm crazy

31:46>> Forget all the other things

31:49Like, that's not an answer

31:51You can be >> I like other companies better, but not fundamentally, because none of them have the fun

31:53Believe it or not, I actually am thinking about averaging up on Nvidia

31:58>> Okay, but for, but no, forget Nvidia

32:00Forget Broadcom, forget SpaceX, forget Qorvo

32:03Like, >> yeah, >> all those you already have

32:04Positions in, same with Meta

32:06Like, fundamentally, there's no better company than Micron

32:07I give you that

32:08 Then why are we not buying them? It goes back to the debate we've been having all year, which is like, now look, when this goes to 2,000, if it goes to 2,000, you and I are going to be looking back on this conversation like, hey, everything made sense

32:23Why didn't we buy? And the reason I think we'll be able to sleep at night, even if it's at 2,000, and not have this like massive pain that we didn't buy, is because of that fear that was very real about cyclicality

32:33 I don't know if that's true because if we both do what I just said, it's not going to matter if we put new capital in because We're going to have long exposure on options from the risk to what you said is if Micron actually collapses

32:42Owning those shares at 800 is not going to be fun if it goes bust

32:47That's the risk too

32:48Okay, what has to happen for Micron to go to 800? Think about that for a sec

32:55Oh, it was at 800 a couple of weeks ago

32:56What do you mean? It would have after these earnings

32:57I mean, dude, the last

32:58What? What do you want to trade at four times earnings? No, but hold on

33:00The last earnings were the best earnings ever before this one, and it went to 700 from 1250

33:04And wait till next quarter

33:05I'm just saying if there is a bust, which is very possible, it's scary, which is why I don't

33:08Right

33:11But what does a bust even look like? 950 at this point

33:13It's at 1,000

33:14It can go back down to 800 very quickly

33:15But what is the problem? 10% down, 15% down

33:20I don't know what the probability is, but no one thought it was going from 1,250 to 700

33:24No one, including myself

33:28It happened

33:32I mean, we're going to get another earnings call in three months from now, and we're going to be saying, "What the hell did they just do?" And the most important thing about that call is they're going to announce buybacks

33:34Yeah

33:36Because the reason they couldn't is because they took money from the chip December 3rd

33:38And you may get that announcement before the next earnings call

33:40And on the earnings call, how much they just bought back, because you're able to do it

33:45Now, before they even enter the market with their capital, buying back shares

33:48So once again, how likely is it that it goes back down to 800? That's why I think the options strategy makes more sense than just buying shares at this point

33:56>> Yeah, look, I think that's fair

33:59It's a company I've struggled with all year because it's so obvious, but it's also like the best thing I didn't do this year, and you actually traded it

34:07You made 40%

34:13You went from 700 to 900

34:18I, at 1250, felt the FOMO just like anybody else, but I didn't buy because, in the back of my head, when I was in that Uber drive in Singapore and the driver said he's buying Micron, that told me this story has gotten a bit overheated

34:22The fundamentals probably..

34:25Justify the price, but there's way too much euphoria

34:28The euphoria has died down

34:30There's no more euphoria, I think, in the broader market

34:32There's not that much euphoria

34:34So Micron doesn't have that same type of leveraged-up situation

34:36But now the street's bored with it because, look, NVIDIA was really hot all year until it became kind of boring, and now it's just kind of stuck in the range

34:48If that happens to Micron for a while and then you look at the Kagle's 5 years, it's still probably 40%

34:53Even if it stays flat over the next 5 years because it just did this massive run this year, and over the past year, it's up, you know, 10x

35:00No one can be like, "Oh, Micron was a busted story." It's like, no, you just didn't get in at $100, $200 bucks

35:04But if you got in at 132,200 and your gain's like 10% a year, and you're underperforming the S&P, which I don't think is going to happen, but if it does, then it's just a story the street got bored of

35:14That’s why TJ’s option of just selling options on it is the best strategy, because if it just stays flat, I mean, his calls are going to print, and he still has ownership of the shares at a good price

35:23But put in the chat or put in the comments if you're buying Micron or not, and how you feel about this earnings, because—it’s a hard one to admit—this, like, the goal of an investor is to buy something when everyone hates it and realize that there's something so obvious that the market's not recognizing, and that will create shareholder value

35:40Returns and the market just doesn't get it

35:43You and me are saying the market doesn't get it, but then at the same time, we're also not willing to get it and buy the stock

35:51And what you just said could not be more true for QXO

35:52Fair

35:54Could not be more true

35:55And I'm going to say, we should do a dedicated episode one day

35:59I'm going to say it live right now

36:02I am not convinced Michael Burry did not read my article

36:06I'm not convinced, and you know what I'm talking about

36:09I'm not convinced

36:12I think Burry might have read your article before he went long

36:16I don't know how the hell he thought of QXO randomly

36:18Who the hell knows about QXO? [laughter] Not a single person knows what QXO is

36:20Like, you're telling me that out of the..

36:22Blue, he just came up with QX0? Dr

36:25Bur, please, if you truly did, I want to know

36:27I just need to know

36:30Did you read it or not? Because it's so obscure

36:32It's on nobody's radar

36:35It has no coverage

36:39>> Well, we should do an actual episode on it, or a real segment on next week's show, really going down through it

36:42But at the same time, you know, Micron's fundamentals are better than QX0

36:43>> Oh, absolutely

36:45>> Okay

36:46So then, but you're not buying it

36:48Like, it's something we really got to struggle with as investors to explain why

36:50But you're also getting QX0 under book value

36:51>> But I don't care

36:53Like, it's not that I don't like the stock

36:54It's because these fundamentals >> and you're betting on Brad Jacobs

36:57>> Yeah

36:59But you're talking about, like, I could say I love Grab betting on Anthony Tan, GDP growth in Singapore

37:03None of that, and everything you said about QX, none of that put together even touches an inch on the fundamentals of Micron in this moment in time

37:10But we're not buying it

37:12Which means I think the takeaway for us as investors, and if this was 2000, we're going to be annoyed

37:16So the takeaway is we're scared of the memory boom and bust

37:20As much as we love fundamentals, are we not buying it because we know that the market is just not excited about it? And if it's not getting excited about it from these earnings, what the hell does it take for the market to actually get excited? And I think that that's the holdup for me

37:34Because even how great it is

37:36Okay, if you can't get excited about Micron after the past couple of earnings, what is it going to take? It's just like Nvidia

37:43Like, what's it going to take for Nvidia to break out? I'm happy you brought that up

37:47I'm, I'm happy you brought that up

37:49Nvidia, I think the big argument this whole year about why it's not moved and it's done relatively okay this year, like 20%

37:54But it's too big, right? Too much of the S&P

37:55>> Yes

37:56>> Micron is not that big

37:58It's 2% of the S&P and it's 1.2 trillion

38:00So, the second-layer analysis on why the street is not happy with these numbers is not that—like, what is it going to take for the street to be happy? It's like, the street's like, no, we're happy

38:12We just know

38:14There's no light at the end of the tunnel

38:15>> Yeah, because this is going to crash

38:17Whereas Nvidia is like five times bigger

38:18It's like the street's asking, "Who's the next buyer?" There should be a lot of next buyers, and there should be people selling off tons of companies to buy Micron

38:23But if they aren't, the deeper question here is why

38:26And it's not that they're not excited about the numbers

38:28It's that the numbers are a moment in time that is not sustainable and not repeatable, even if it persists for the next couple of years

38:36Which is why, for the next couple of years, it should be $1,500, $2,000, because you have to give some respect to the name

38:43But once it reaches $2,000, guess what? Someone's got to buy it at $2,000

38:45When Nvidia got to..

38:472,000, someone had which is 200 per share

38:49Someone has to buy it at 200

38:50When it gets to 300, someone has to take a chance and say, "Hey, at 6.5 trillion, I think Nvidia can go to 8 trillion

38:57It has to buy it." Like, if you don't have that new buyer, I wonder if the market's just saying we’re not in that zone yet, where we can easily buy this

39:03Having said that, I also think when they announce the buybacks, this thing's going to pump, like, like, and that might be the catalyst

39:11And that's why I'm struggling because when they do buy, even if it's cyclical, if you buy back that much stock, at some point—I don't know, what you said 10 minutes ago—it’s going to trade at two and a half times earnings, like, you know, Micron is

39:24Responsible for a decent chunk of the S&P 500's year-to-date performance, and I looked up 20 ETFs that outperformed the S&P

39:28All of them had three names in their top 20 holdings: Micron, Dell, and AMD

39:36Like, if you were an AI ETF or a tech ETF, you did not beat the S&P this year unless you had those three names

39:42Exactly

39:47So, if Micron contributed that much to the gains for the entire market this year, it's likely to expand its multiple if these earnings continue, and maybe the buyback is the catalyst

39:52But the fact that we're not aggressively buying it right now means we're just as scared as everyone else around the boom-bust cycle

39:58I don't know if scared is the right word

39:59I think—no, it's scared

40:01Let's call spade a spade

40:02We're scared

40:03>> Can you don't use my lines on me? >> Let's call my lines

40:04We are shook babies on Micron

40:06>> We are concerned

40:07>> That is the name of this episode

40:08>> No, we are concerned

40:11[laughter] >> Okay

40:12We are concerned that the market is just not going to get excited

40:14>> You did not just say, "We are being shook babies on MU." >> You did not just replace that with concern

40:18Get out of me

40:22That was the most corporate thing I've heard

40:26>> I will circle back to your response

40:28Like, no, bro

40:30We're shook, and I'm embracing being shook because I sleep better at night holding Nvidia

40:32I just do

40:33I can't argue with that

40:35I would rather own Nvidia

40:36Obviously, my largest position is Nvidia

40:37Today's happy Nvidia dividend day, and I..

40:39Actually, I want to own more Nvidia because, for the same reasons that I said Micron's going to be in the market buying shares

40:49Jensen just did a $150 billion additional authorization

40:50Still has, what, $230 billion left in firepower

40:53And oh, what do you think they're going to do next year? >> Buy back more

40:59I mean, if I go on the same logic with Nvidia and I look at where they are in this cycle, which is probably a lot easier to stomach, the street has them at a—check this out—average revenue for Nvidia for this fiscal year, okay, 2027 is $409 billion

41:18Then we go to the next year, 2028, which is projected at $691 billion to $923 billion

41:24Keep in mind, $923 billion of revenue, according to 20 analysts

41:27That's the average

41:30And that fiscal year ends January 2029

41:33That's really 2028

41:36Yeah

41:38>> Now, think about this

41:40Their free cash flow margin is what, 52%, 50-something percent, like that

41:45I'll tell you right now

41:47So, they did this quarter 96 billion in revenue

41:48Okay

41:50So, free cash flow is a lot less

41:52I guess I have my margins mixed up

41:55Free cash flow is 21.4 billion

41:59So, they have roughly a 22% free cash flow margin

42:03This Nvidia is going to probably buy back four or 500 billion dollars worth of shares over the next four years

42:07Like, >> okay, >> these companies are happy

42:10I'm happy you bring that up

42:12That is why Nvidia is the buy that I've been doing all year, that you've been doing all year, and this is why I think >> they're going to generate more revenue than Walmart in two years from now

42:16>> Yeah

42:20Yeah

42:24And a lot of that is going to go back to buybacks, and Nvidia can do more than just buy back shares

42:28Nvidia can actually acquire companies—like Micron, which can't really take a stake in Hugging Face

42:31Nvidia can buy them, and grow it

42:35>> Oh, and grow it

42:39>> I'm glad you said that because, you know what? I want Jensen investing in these companies because, as a shareholder, what else do you do with this money? Well, increase the dividend, buy back shares, but also make investments throughout the cycle

42:43Become the Berkshire Hathaway of tech, like I wrote about probably a year ago at this point

42:47I titled an article and video "Becoming the Berkshire Hathaway of Tech." You're generating this type of free cash flow—just buying stakes in companies

42:54And if Nvidia, I tell you this, Micron, and… Micron, I said this to you earlier today, Micron should put a hundred billion dollars of free cash flow into 30-year T-bills

43:05I think a lot of companies are going to start putting more money into cash and treasuries

43:10Here's why: or if they could get, think about this, if they could get 200 billion dollars instead of doing buybacks over the next two or three years at 5.6%, you're talking about 11.2 billion dollars a year

43:21Oh, the problem is they're going to have to hold it for 30 years to maturity

43:30They're not holding

43:31So, put it in a 10-year

43:32Yeah, but still, 10 years of 200 billion dollars locked up

43:33I think they might find that buybacks are more effective on an earnings yield basis

43:35But if the street is worried about EPS..

43:39Going down and coming off a cliff, well, that solves your problem

43:42Well, no

43:44>> Now you’ve got 11 billion coming in every year in interest

43:46>> Yeah, but the hundred billion would be better used to buy back stock than to aim for 11 billion in yield, >> right? >> I mean, obviously that's horrible, but obviously the market knows they're going to do huge buybacks

43:56>> Yeah

43:57Well, the point is they can do a mixture of both

44:01>> Do a mixture of both, >> and hopefully keep the street happy

44:02>> Generate income off the cash, buy back shares, increase the dividend

44:05There are a lot of things you can do

44:08I was going to say something, but before I get to that, uh, what if these hyperscalers take some hundreds of billions, Including Nvidia, and put it into that tenure and resolve this interest rate? Like, wouldn't it be so funny if the hyperscalers who caused this problem in the first place? Because Trump and the Iran war — the Iran war caused the issue — but the 7% coupon that Oracle is giving is also making people sell off their bonds in the treasuries and buy Oracle's bonds

44:31What if Oracle takes some of their free cash flow, but the problem is they don't have any free cash flow? Nvidia is the only hyperscaler and Apple that have some free cash flow

44:40What if they give back to America by buying some bonds? I would not be mad at Nvidia if they said, you know what, 10% of the free cash flow, we're just going to buy the 10-year

44:46We're just going to hold on to the balance sheet and generate recurring income from it the way Berkshire Hathaway does, and we're going to build a gigantic war chest over the next decade that pays us in perpetuity

44:56I would not have a problem with that as a shareholder, as long as they keep increasing the dividend and keep doing buybacks

44:59>> Yep

45:02So, look, here's the issue with this conversation about Micron

45:05It comes down to two things that happened over the past week

45:09Cerebras is down 5% today

45:12IPOed at 180, it's at 169

45:13It got up to 240 at one point

45:14Nvidia just tweeted about being up to 8x faster, and now you know why OpenAI's GPT-6 Astra Ultra Fast runs on Nvidia

45:21Cerebras had a massive share unlock the other day

45:24Mhm

45:25>> The day before the share

45:27Unlocked

45:28Semi analysis put out a report that one of OpenAI's latest GPT-6 models is not being trained on Cerebras

45:32It's being trained on Nvidia chips

45:35And Nvidia commented with a looking eyes emoji underneath it

45:39The next day, Cerebras' stock drops 10%

45:41Okay, example one

45:43Example two, Okami, a CDN company, with a 15 billion market cap

45:45They get a 20 billion dollar deal with Entrópica over 11 years

45:47So, literally more than their market cap in one deal with Entrópica

45:53The stock goes up to 148

45:55It's now at 107

45:58It's lower than where it was before the deal was announced

46:00The problem with the picks and shovels play in Cerebras and Okami is that they are picks and shovels

46:05Cerebras is, I think, a bit more high quality because their margins are better, and they're..

46:10More in the chip space, whereas Okami CDN's are different

46:13But the point is, they're still picks and shovels

46:14They are not the cream of the crop like Broadcom, Nvidia, TSMC, etc

46:17This is also why they might have more alpha because they're smaller companies

46:18But the problem with the picks and shovels play, and this is what has taught me more about myself as an investor this year, is that buying the picks and shovels and getting it right is a very hard skill

46:26 Congratulations to everyone who got Photonix and memory right this year because these are bottlenecks at the end of the day

46:37These are not companies with the most massive moats

46:39And if you bought Okami at 130 the day after they got that Anthropic deal, why is it back down to..

46:44Maybe because the market says, "Okay, cool

46:47You got one deal

46:49You're probably going to dilute a little bit now that you have this deal

46:52You're probably going to spend more on CapEx now that you got this deal

46:55Where is the next deal? Where is the next Anthropic or the next OpenAI, the next Google deal?" And now, a shareholder, this is a company that went to $300 in the year 2000, then dropped to 75 cents, has done nothing for 25 years, and now is back to gaining some relevancy because of this AI buildout

47:07When that buildout stops or when it starts to slow down, or when Akamai doesn't get the next big CDN deal, what's the point of owning the stock? It's not a quality compounder like so many of the other companies that you could buy

47:20and hold for the next 20 years

47:22So I think the big thing that was relevant to me this year is that I’d rather buy a multi-trillion dollar company like Broadcom than a very small company, unless I am so convinced that the small company will get more deals

47:34Because if I'm not an expert in that field and I don't see where those deals are coming from, you're better off just picking Nvidia

47:41>> Look, I'm a very big fan of Jason

47:43Okay? I can't do what Jason does

47:44I think that it makes sense for somebody like Jason to own it because he's in there looking at the charts and he's not looking at it from a long-term perspective

47:56He's looking at it from technical analysis, which I don't do

48:00And if you're looking at it from that lens, sure

48:01It makes sense

48:03For me, I wouldn't touch it with a 10-foot pole because I know that I am not going to be staring at the charts

48:09I know that that is not my strong suit

48:11And I just also understand that I don't understand that business

48:14I'd rather own Nvidia because every single hyperscaler uses them

48:19It is so much thereby de-risked for me that I feel a lot better with Jensen Huang than with a company I just don't understand

48:26Well, Jason also understands fundamentals really well, and he likes the fundamentals on Okami, but he's also way smarter than you and me in realizing that if a chart's broken, he'll get the hell out

48:37I mean, unless he has like conviction, like a Robinhood-type of thesis where he'll hold for many years, he will get the hell out if

48:43The chart's broken and come back in when the chart's repaired

48:46You and me are >> I'm not even looking at the chart like that

48:49>> I'm definitely not good enough to do that

48:51>> Um, and then I, you know, he's worked with CDN's in the..

48:54He's worked with all these companies for years

48:55So, he..

48:56I haven't, and it's not just me

48:58A lot of people haven't, right? So, you can listen to Jason's thesis or someone else's thesis on these smaller companies that are picks and shovels, which are incredibly important companies in the AI trade, but if you don't really understand them or, let's be honest, you don't really need to understand Nvidia to own Nvidia, but you probably really need to understand Cerebras or other AI hardware companies to own these names

49:16If you don't really know how to read their charts, AKAM, and if you don't really understand their chart, then you're kind of just like, okay, I think it's important, and hopefully it works and it goes up

49:27And if it doesn't, then the opportunity cost of holding it, like Reddit, I can explain Reddit's business and understand it way better than Akamai

49:34And I think I can hold Reddit for the next five years

49:38Is Akamai going to outperform it in the short term? Probably, because it's way more relevant right now

49:42But it's relevant right now

49:44In the next five years, I think Reddit will be a much bigger company

49:46I don't know if Akamai gets another $20 billion CDN deal from Anthropic in five years

49:50Now, the way the AI buildout is going, the push back to ..

49:52Everything I'm saying is AI-driven, you're overemphasizing the necessity to care that much about the fundamentals of these picks and shovels because we're in such a big buildout that everything's going to get the bid

50:01And maybe that's going to happen

50:03But if it doesn't, if it doesn't, if the companies dilute, if the companies face competition with AMD, there's an "if," if all the value ultimately comes back to the Big Seven and the really big semiconductor companies, not the early alpha like an AMD core going from 17 to 50, which peaked at 95 and is now down to 50, that move is already over

50:25I mean, this was a stock that didn't do anything for 20 years

50:27Same thing with Intel

50:29Same thing with, like, if these now—Intel is a little bit..

50:31Different because the government is supporting it

50:34But if these companies have made their move over the past three years as the early steps of the AI buildout have happened, even if there's more to go in the AI buildout, is the alpha as easy on these names to expand their multiples? Micron barely has any multiple, so maybe it does

50:47But even Micron is barely getting a multiple because of the fear of cyclicality

50:52So, it's one of those things where I think MAG 7 and chill is not crazy, not at these multiples

50:57Sorry, but the MAG 7x Tesla, and let's put Apple on the side for a moment

51:03Trading it under 20 times forward earnings is not an expensive market

51:06It's not crazy for someone to be buying Meta, Amazon, Microsoft, and..

51:09Google

51:11Um, instead of these picture shelves, Amazon has underperformed the S&P at some point

51:14It's going to rerate higher

51:15And people felt like idiots all year buying the Mac 7 over these Pix and shovels

51:21And a lot of the Pix and shovels have massively outperformed the Mac 7, but think about if you bought the Pix and shovels at the worst time when the FOMO was the highest in June

51:25You would have been down 50%

51:29And that would have sucked more than being flat on Amazon

51:33A lot of people don't have the risk tolerance to own some of these picks and shovels nobody's ever heard of

51:40Well, I disagree because a lot of people started buying them this year, thinking that these are amazing companies

51:43And I think — no, but hold on

51:45People that listen to you and me every day, and people that are involved and paying attention

51:48Sure

51:50Because they're paying attention, for most people

51:52Right

51:53Right

51:55>> Most people are not buying companies they've never heard of

51:56>> No

51:58No one's buying Aquaman or Cerebras

52:00They're buying Nvidia

52:01They're buying Google

52:01>> Exactly

52:02It's much easier if somebody wants to put some capital, diversify away from a total index or an S&P fund, they're going with big names they know of

52:08Even if they're not going to read the financials or do anything, it's a lot easier for them to buy Meta because, okay, I'm on Instagram three hours a day, or my kids are on it three hours a day

52:18How much could I really lose? Versus an Okami that they've never heard of? It's just, it's not happening

52:23>> I agree

52:28And if that's the case, then maybe next year, the iPhone 15, gets a lot more of that momentum

52:30>> Yeah

52:32And how about this? You have an election cycle coming up

52:34Could we just for a second realize that midterms are around the corner, and then next year you're going to see jockeying because you start getting into primary season to see who the presidential nominee for both parties is going to be

52:46And unlike 2020 and unlike 2024, Trump is not running

52:52Okay, I know everybody thinks he's running for a third term

52:55He's not running for a third term

52:57You know what that means? You're going to have primaries on both sides, and you're going to have a ridiculous..

53:05The amount of money spent on ads, that is why I am very bullish

53:08Zeta, I'm very bullish

53:11Meta >> Zeta, 32 bucks

53:14By the way, an announcement: Steve and I will be live at Zeta Live

53:16Well, not live streaming, but we will be on the premises

53:19They built a nice little studio for us

53:21So, shout out to the Zeta team

53:24Obviously, we interviewed the founder, Steinberg, and the CEO a couple of months ago

53:28I think we interviewed him when the stock was around 15 dollars

53:31>> All we're going to say, >> the stock's at 32

53:36So, >> all we're going to say, >> it's nice to have a CEO come on the show when their stock is cheap, explain their vision, and for the market to agree with the growth of their vision

53:44And I mean, Zeta has made a lot of people a lot of money

53:46So, >> very

53:49Happy for their growth, and they deserved a multiple

53:52They were turning at three times sales

53:53They deserve a bigger multiple than where they are today

53:56But people should watch Zeta live

53:57I am expecting big announcements out of them

53:58So Steinberg said in my AAPCON interview that three of the biggest announcements in the history of the company will be announced

54:08I have no idea [clears throat] what the idea is

54:09I have an idea

54:11I I I don't want to I I I don't want to

54:12It’s not my idea

54:14That's why I don't want to say it

54:15So give credit to whose idea it is

54:16All right

54:17So Nick, okay, WealthMatica

54:18Yep

54:19Has done incredible due diligence on Zeta

54:20He and I really don't want to say it because I'm going to butcher it

54:26I'll give..

54:33My opinion on what I've learned is that I think he is correct, and from what I've put together, I believe they are going to make announcements that solidify them as an AI infrastructure software play

54:40So, marketing intelligence, over just, I mean, how do people think of Zeta advertising? I think that you're going to see the three big deals they did with Platinum, Snowflake, and OpenAI come full circle

54:52And I think you're going to see a Zeta OS, an operating system type system

54:58I mean, it's not just marketing anymore; it's an end-to-end understanding of your business at scale

55:02For the gap to leave an aspect of Salesforce to go to Zeta, I think that there's going to be a very big announcement about what..

55:10They are doing in the future, and I think they're going to make a splash

55:17And that's really important because Zeta is like picking up a lot of attention on Wall Street, like Wall Street

55:24They just got a big upgrade

55:26William Blair didn't put a price target, but they said, "We really like it," so they rated it a buy

55:30Then, you know, JPMorgan Chase does a study of all the stocks trending on social media

55:34They've been saying, "Look, Zeta is at the top of our list of names that are starting to perk up." I mean, the stock went from 15 to— I know some people who bought 80,000 shares of this at 15, and they're up a lot of money

55:44So the question now is, can we keep this going? Does the fundamentals..

55:47Steinberg's doing a lot more

55:50Interviews like, you don't get it often, where a CEO is so aligned with retail

55:52The company fundamentals are strong

55:54The company partners with our darling Palantir, and we know what happens when companies partner with Palantir

55:57Palantir gets things done

56:00They make the enterprise more valuable

56:03Having Zeta in that loop is very exciting to me

56:04And if that's the case, then if this thing were 50 dollars, it would still be relatively cheap

56:12I'm not saying it's going to 50 this year

56:14If it just stays at 30, I'll be happy

56:16I think a lot of people will be happy

56:17But it's nice to see the progression of the story here

56:19I am going to put out a long post about Zeta before Zeta Live, and for as somebody

56:25Who has put out articles about Zeta when it was trading under $20? Okay, everybody thought I was crazy when I was >> You got a lot of criticism for that

56:35You got a lot of pushback because the stock didn't move

56:39>> And then when the stock moves, like >> it looks like you shouldn't have gotten that much criticism

56:42But that always happens

56:44>> The reality of the situation is that they were trading at a multiple that did not make sense

56:49And even after this move, they are still not even a $10 billion company

56:52Okay, so, everybody wants to talk about, well, they've doubled because they were trading at a market cap of four and a half billion dollars, which didn't make sense, and now they're still under 10 billion

57:04Billion, and the free cash flow is going in the right direction

57:07The operating income has reached an inflection point

57:10The revenue continues to scale

57:12I think they achieved 48% last quarter, year-over-year, or something like that

57:14This is a company whose guidance—the deals with Palantir—are not even baked into the numbers, and they believe it's going to be a minimum of a hundred billion dollars in annual revenue, and that's not even included in the guidance because it would have skewed the figures too much

57:29That's exactly what they said

57:32I truly believe Zeta deserves, not today but over the next year, don't be surprised if Zeta is trading at 15 or 20 billion dollars

57:41If companies like Rocket Lab can get the most ridiculous valuations, Zeta is..

57:44Actually, they're doing real things

57:46They're making real money

57:49And I'm not saying that Rocket Lab isn't doing real things, but they don't make money with what they do

57:56And I don't give a shit about rockets going into space

57:58I care about making money

58:00And these companies make money

58:06Rocket Lab doesn't

58:12So, if you're going to give a $40 billion market cap to Rocket Lab, maybe we should think about where Zeta is trading today and how their profitability is likely going to continue to scale, while Rocket Lab still loses money next year and the year after

58:15>> Yeah

58:18Well, I mean, you know, companies with fundamentals need to be rewarded

58:21>> 100%

58:24>> We cannot just have >> and it's not just the fundamentals

58:27They actually have the top line

58:27Yeah

58:28Yeah

58:29And they're showing operating leverage

58:31Those are the names that deserve multiples

58:33And the founder, the CEO, is actually out there talking

58:34It's not always that you get a charismatic CEO, but the fact that Steinberg is engaging with the world shows he clearly realizes this is an opportunity for him to finally establish a stronghold on the brand

58:44It's a great company

58:53And you know what? If it weren't a good company, they would not be posting the kind of numbers they are, and they would not be able to back up their claims of delivering a 600% to 700% ROI on every dollar spent

58:57Yeah

59:00Because everybody would call BS

59:04They wouldn't have 51 out… Of the Fortune 100 companies utilizing their platform

59:08So, I'm expecting big things out of Zeta

59:11And we got to say thank you to somebody over there for really taking the time to set it up

59:14Shout out to Morgan

59:18Shout out, Morgan

59:21She's amazing

59:24Yeah, so, we'll just do some interviews kind of like what I do at AAPCON, and yeah, it should be fun

59:27You know, it's always cool when a podcast like Basis Points can show up at an event, interview the key people there, and put out that content for everyone to see

59:33And, you know, if you don't care about Zeta, you don't have to watch it

59:39If you're more interested in it, you can

59:41If you're already a shareholder, you can

59:44But the point is..

59:47If CNBC and Bloomberg are going to be on the ground, independent media creators that have a bit of distribution into the retail shareholder base, we've seen how big retail is a force in the market

59:51That, to me, is not a red flag at all

59:55That is the greenest of green flags

59:57You want companies engaging with people, that are ordinary citizens, and they're not the elite ivory tower media people, because that actually creates really good content

01:00:05And let's think about this

01:00:13I'm trying to choose my words very carefully, but I'm probably just going to throw caution to the wind, and if we have to cut this out, we cut it out

01:00:20But does it even matter how much Vanguard or others own? Nobody

01:00:22Nobody cares

01:00:23Like, if this isn't a mutual fund, nobody cares

01:00:25Nobody cares

01:00:27Bro, look, the aura of the trade comes from the person making the trade

01:00:29There are two parts to the trade: the person who's making it and how the trade goes

01:00:36When Chris Camilillo says he likes Reddit, which is what he said over the past week, Chris Camilillo has a lot of credibility

01:00:41And then I think there's a lot of fundamentals behind Reddit

01:00:44That's what makes the trade

01:00:46So, you know, Vanguard saying we like Reddit is not as big of a deal as Chris Camilillo saying it

01:00:51 I'm not, no, what I'm saying, and I agree with you 100%, but what I'm saying is, if it's in Vanguard or State Street or BlackRock's ETFs, does anybody really care? No

01:00:58No, because it's a huge powerhouse that just has thousands of ETFs and mutual funds, and it's just going into whatever the sector fund is or whatever the market cap fund is, and there's nothing about it

01:01:14It just went in without a specific reason

01:01:15Yeah

01:01:17But if Bill Ackman bought it, people would care

01:01:18It's a much different story because he's running a closed-end fund

01:01:20He's a very influential investor

01:01:22That matters

01:01:24You don't have figureheads at those companies that get the attention

01:01:25Right? Um, DJ, we got like 10 minutes left

01:01:29Do we have until 10? Yeah

01:01:30Okay

01:01:32Okay

01:01:34Do you want to transition to Nike or not? Dude, do we even talk? I was going to talk

01:01:41No, we don't have to

01:01:42Okay

01:01:44Nike, all the growth metrics were..

01:01:44Bad

01:01:45Stocks down 8%

01:01:46I haven't even looked at it yet, but hey, no problem

01:01:47How about that? Yeah, they cut out Foot Locker

01:01:49They want to go direct to consumer

01:01:51They got a bit more political

01:01:53Look, I can deal with that, and we're only going to spend 30 seconds on it

01:01:56I can deal with cutting out Foot Locker

01:02:00Okay, you made a bad business decision

01:02:01Nike is not a person

01:02:03Don't let your executive team's personal views sway the business and do stupid stuff

01:02:05When you alienate, and I don't care what side of the spectrum it is, when you alienate half of the country, nobody wants to buy your products

01:02:10Republicans buy sneakers too

01:02:16Michael Jordan is one of the greatest businessmen ever

01:02:21I am so tired of the world feeling like pop culture

01:02:23Superstars need to take political stances

01:02:28Agreed

01:02:32There's a reason I don't take political stances on a show that sometimes intersects a lot with politics, because no one gives a [ __ ] about my political opinion, and they don't need to

01:02:36My opinion, I care for the next rest of my life

01:02:39I want to be respected about the markets, not about politics

01:02:42We need to say thank you, Michael Jordan, for taking a stance by saying nothing

01:02:45Anyway, um, Google, why the hell is this stock going down every day? Hey, Sindhar, can we just talk about the compliment that he got from the commander-in-chief? Oh, we didn't even talk about the AI supper

01:02:58I mean, that's how we're going to end it

01:03:02I mean, DJ, we may need an extra five

01:03:04How did he get $2 trillion of net worth in one room? That is not something that happens often

01:03:08Okay, and I'm going to push back a little

01:03:10Hold on

01:03:11Hold on

01:03:13I'm going to push back a little

01:03:16I agree, it's incredible, and there are some people saying only Trump could pull this off

01:03:21Okay, I'm not buying that

01:03:23I'm going to say it was incredibly amazing what he did

01:03:24I'm going to give him his flowers, you know what, this is one of the most important issues of our time, and he did the right thing with assembling this and understanding it

01:03:33I think he is taking the correct approach

01:03:34But where I'm going to push back is if this was the prior administration—if Joe Biden, President Biden, made the phone calls

01:03:43I think every one of them would show up

01:03:45>> That's fair

01:03:49And I think that they would have still had the roundtable

01:03:54Now it may not have had the effect that this one had

01:03:55It may not have been the same way

01:03:57It may have been a little different, but if you are running an American company and the sitting United States president calls you, are you not picking up the phone? Are you not going? >> Elon really wanted to be at that EV event that Biden had >> if he didn't get invited

01:04:10>> That was sad, bro

01:04:12That was so sad

01:04:13>> And look, that’s a mistake that happened, but whatever

01:04:15Are you telling me that the—what is the likelihood that if a company gets invited to the White House for a summit in their industry, what’s the likelihood? That CEO says no? >> Yeah

01:04:20Zero

01:04:24Exactly

01:04:29Whether it happened or not, >> it could have been Kamala Harris

01:04:31People respect the office of the presidency

01:04:34>> Yes

01:04:36And it doesn't matter who it was

01:04:38If Kamala Harris had won the presidency, if she had called and made the phone calls, I would like to think that every single one of these CEOs would have shown up

01:04:43I agree

01:04:48>> So, I'm not going to sit here and say that only Trump could have pulled it off because I just don't believe that

01:04:54I believe that any sitting US president could have pulled it off

01:04:55Now, the question is, would they have done it? >> Yes, that's the better question to ask

01:04:57>> That's fair

01:05:00>> And I don't believe they would have

01:05:02>> That's my own personal opinion

01:05:04No, I agree with you

01:05:06I mean, look, there's a lot to critique Trump for, but I critique him all the time about the crypto and stock stuff

01:05:10I think that's BS

01:05:12Yeah, and I think it's incredibly weird that if you critique Trump, people say you have TDS because I don't have TDS

01:05:18You could say Trump launching a meme coin is not that being horrendous for the country optically is not TDS

01:05:23Look, why am I not allowed to agree with some things he does but hate other things he does? I think that's being objective

01:05:30I, I think that's being very objective

01:05:32And Trump objectively knows how to charm a lot of these big guys

01:05:33He's been in the world of tech and business

01:05:36People like talking to him

01:05:39He didn't get..

01:05:42He's not stupid at all

01:05:46Like, come on

01:05:49He has made questionable choices in his life, but has he had businesses that failed? Yes

01:05:53But he didn't get to where he is by being stupid, right? I think having all those CEOs there and agreeing—here’s the thing

01:05:59So, Daario is involved in this AI safety initiative

01:06:00He was standing next to Jensen when Trump asked him about AI safety, and he had to give a little cookie-cutter answer, and Jensen also had to give a cookie-cutter answer

01:06:08They had to meet in the middle, so they signed some AI executive order on this

01:06:15And by the way, can we just say that Jensen is just a..

01:06:17Grandmaster chess player

01:06:18This guy may be better than Tim Cook at managing relationships

01:06:21I would agree

01:06:24And while Jensen was standing next to Daario, it looked like it was going to be awkward

01:06:27It wasn't awkward because they signed some AI executive accord, which I don't even know if it's that relevant, but the point is they all came together and said, "We care about safety, but we're also not slowing this [expletive] down." And we're taking GDB higher

01:06:40What does it tell you when President Trump says this guy Synindar is a monster? And that was fun

01:06:44That was awesome

01:06:47Synindar is like, I don't know if you take that as a compliment or not

01:06:51It's like, yo, from Trump, that's a compliment

01:06:51And that makes me think, what the hell? Did they say for Trump to be like, "This guy's a monster with Gemini 4, which I don't have access to

01:06:58I want access

01:06:59I want to play with it

01:07:01The metrics look crazy"? Yesterday was weird

01:07:02The day before Micron earnings, information came out with a headline saying, um, Google employees are upset about Gemini

01:07:08 And you saw the post, right, that Sundar did? Yeah

01:07:11And then Sundar came out right after, around 4 p.m

01:07:16market close, and said, "We released Gemini 4." The stock went up to 360 from 330, then came right back down to 338 today

01:07:19 My theory on Google is that after the equity raise, most of the street was like, "Okay, this is a $4 trillion company

01:07:25The alpha is not here anymore." So, and they just diluted by like..

01:07:29Hundred billion, so we're going to hold off on Google

01:07:30Number two, if a genetic inference is going to take away searches on Google, which I don't know if that's actually going to happen, but I think that's definitely enough of a risk for the street to be a little worried

01:07:43Like, why isn't Gemini putting out their own agent? Why is MetaMuse doing this? Maybe Gemini doesn't want to cannibalize their search business, and maybe their search business eventually is going to start to feel some of the pain

01:07:52Now, Google's still impressive, but eventually, >> I still don't have access

01:07:56By the way, >> if Reddit's getting sold off because of search traffic, referrals going down, why don't we think Google's going to get sold off too? A little bit because of search in general being handled by agents

01:08:04Now, maybe the agents will be monetized in a way that makes it not such a big concern, but stocks have been flat for seven months, and it's actually quite incredible that if you owned it in 2025, you've really benefited

01:08:15If you owned it in 2026, nothing has happened

01:08:17And I think 2027 should be a good year for Google if they can fix a couple of things and really get that narrative back

01:08:23But it's got an Nvidia problem here

01:08:25Four and a half, 4.15 trillion

01:08:29Like, how does this get to five, six trillion? What's the catalyst? GCP is going to keep growing

01:08:31Search should keep growing

01:08:34Like Wimo and their other bets are not going to materialize for a while

01:08:38So what's the… Bull case on Google at this valuation right now? It's not as obvious as like exactly what you just said

01:08:45I think it's just a value play; there's nothing that the street's going to get or there's no new catalyst that can get the street excited because everybody knows everything about it

01:08:48>> GCP grows secrets

01:08:52[Clears throat] There's nothing that people are overlooking

01:08:55I'm actually kind of interested in the earnings call for big tech this cycle because I think Amazon and Meta should have the most alpha here

01:09:04Google, like, what are they going to do? >> I would say Amazon is the one that, if we're going to look at things from a forward perspective, Amazon's the one that should double the first in my opinion, even though— Nvidia is so dramatically undervalued

01:09:14I think Nvidia has a hard time doubling from here compared to Amazon, only because in 2028 you're going to have Amazon at one trillion

01:09:22And I just think that if they can just get the margin up a couple of percentage points, you're talking about them doing 150, 160 billion in operating income

01:09:31And based on where companies trade today, that should put Amazon at a four trillion dollar market cap, four and a half trillion dollar market cap

01:09:40I don't think that's out of the realm of reality

01:09:43And that's double in the next two and a half years

01:09:44>> I picked one Meta in 2023 outside of Nvidia to buy

01:09:46That was Meta Platforms

01:09:48>> Yeah

01:09:49And it was a relatively new position for me because I really haven't meaningfully owned Meta

01:09:51I love Meta

01:09:53You've owned it forever

01:09:55Yeah

01:09:58If I have to pick, which I will have to pick one to really build a position in next year, yeah

01:10:00For me, it's between Meta and Amazon

01:10:01I think the easy answer should be both, but at some point, I should say, okay, Amazon's going to have its moment

01:10:04Yeah

01:10:07They're going to have their moment

01:10:10350 for Amazon, that's going to happen

01:10:13And if we have to go through 2027 where it doesn't happen, it's like, can you really fault someone for building a position in Amazon at 250 next year? And look, Nvidia may have a breakout year

01:10:23In fact, Nvidia could get to 350 next year

01:10:25I really do believe that

01:10:27But at the same time, Amazon has— Been held down

01:10:29It's underperformed the S&P 500 for the past five years, and I just think that at some point, something's got to give with Amazon because the numbers are too good

01:10:37>> And if oil goes down, that actually should get us back to 280

01:10:42I think, I think >> we didn't get a lot of time to talk about macro today, but obviously the 10-year and 30-year Treasury yields are spiking like crazy

01:10:49>> There are PCE reports—I mean >> PCE was better than expected

01:10:52So the market kind of chilled off today

01:10:54The S&P 500 has not gone down 1% in 45 trading sessions

01:10:57Every time we go down, there's an Iran headline or some oil headline that takes it back up

01:10:59So, markets are being very resilient

01:11:02October is supposed to be the best month in midterm election years

01:11:04Maybe there's a world where we actually..

01:11:06Get a breakout to like 780, 790

01:11:08Bitcoin back up to 90,000 this month, and then if we get through midterms and the Fed doesn't go crazy with the hikes, I think we end out the year okay

01:11:16>> Yeah, I'm not too worried about the year

01:11:19Now, I also think that we are in a position where the Fed may actually hold now

01:11:24>> Yeah, given PCE was better than expected

01:11:25>> If you have PCE falling, or not falling, but if you have PCE coming in better than expected at a point where GDP growth was 2.2%, that's not exactly a recipe for the Fed to hike

01:11:34>> Right? >> So, I think maybe we get a hold

01:11:36If we get a hold, I think we see the S&P at 8,000

01:11:41>> Right? >> So, we'll see

01:11:42>> All right

01:11:43Thank you all for joining another episode of Basis Points

01:11:44Um, I don't think we'll have

01:11:46An episode next week because we're going to be at Zeta Live, so we'll have a lot of content

01:11:53Maybe the episode will feature Zeta content

01:11:55Maybe we'll turn the Zeta content into an episode and have a bunch of short-form clips

01:11:58Maybe we'll see

01:12:00Yeah, we'll figure it out on Thursday

01:12:03Well, we did get a really good opportunity

01:12:05So, two things: I'm going to be interviewing the Uber COO, Andrew McDonald

01:12:08They reached out, so we're going to do a virtual interview with him, and that'll be out after their earnings, likely in November

01:12:15So, for everyone thinking about Uber, Steve and I are bullish on Uber

01:12:17I own it

01:12:19I don't think you own it

01:12:21I don't own it anymore, but I'm bullish on Uber

01:12:22I own it

01:12:24So, we're going to..

01:12:25Get that up and running

01:12:27And then, uh, Neil Dada of Renaissance Macro is going to join the show in October

01:12:28>> Super excited about that

01:12:29He's a smart guy

01:12:32>> Oh, he's great

01:12:36>> And he's been very doom and gloom about the macro, but he's been right, given what's happening in the bond market

01:12:39I am not sure what he thinks about the stock market, but he's been right about the fact that, you know, the credit markets are going to have an issue

01:12:44Um, so very excited to talk to him, and he'll be on the show in a couple of weeks

01:12:47>> Yeah

01:12:48If you haven't listened to his last interview on Compound and Friends, go listen to it

01:12:50Neil does a great job

01:12:51>> All right

01:12:53Thank you all for joining

01:12:53Thank you, everyone.