Transcript for:
Lecture on Fed Commentary and Nvidia's Momentum

before I get to Tech you did point out a few weeks ago that you thought our we broke our addiction to Fed commentary uh and speculation you thought that was healthy although it doesn't sound like you think that's going to last I you know I think for the last few years it's not just the last year I think this fixation on what the FED will or will not do has distracted us from the fundamentals so from that perspective I think the less talk there is about the fed the healthier the market becomes um that's unlikely I guess is that a function of the volume of fed commentary or is the is the market just primed for that no matter what it's the delusion that the FED sets interest rates that drives me crazy I mean the FED in a sense influences rates but it doesn't set rates and I think as long as we believe the FED can do whatever it wants our investing is going to be we're not going to invest based on what really matters all right so that brings us to Tech and what Nvidia told us this week uh and I guess the degree to which some argue they either sucked oxygen out of the room or fed the room oxygen what's your general take on the space I think it's a testimonial to the power of momentum I mean right now the momentum is clearly within video they can do nothing wrong everything they touch turns to gold and we've seen this with other stocks before we saw the with Tesla in 2020 we saw it with Facebook and Google in the middle of the last decade when the momentum is with you nothing can stop you right now the momentum is with Invidia and it's carrying it forward but if you look at the numbers themselves the question you got to ask is what are people measuring these actual numbers against what are those expectations because right now those expectations seem to be whatever we do Nvidia will beat it well I mean when you talk about the momentum when it comes to Nvidia the momentum is actually in its business right in addition to it being in its stock and so it seems as if you know the the the the market has been sort of dragged higher in terms of how much they can expect in revenue and and earnings growth going into next year based on the order book and based on what they say about demand over Supply to me the interesting question is at $2.5 trillion do of market cap what is the stock discounting at this point in terms of longer term growth rates that that's really the question all momentum has its source in something solid in this case Invidia earnings and revenues have blasted through the roof that said though at a $2.5 trillion doll market cap you're you're building in an expectation that either the AI chip Market is going to be a trillion dollars which it's not going to be there's no way that the chip Market alone the AI Market might be 2 or three trillion but the chip Market cannot be that big or you're building in the expectation that Ned is going to find a couple of other really big markets to conquer over the next decade either way I mean it's it's clearly a possibility but is it plausible I don't think so outside of AI uh osat how do you perceive the valuation Gap um in the private markets versus the public markets we're hopeful and and waiting the potential for some uh IPOs this summer hopeful from the standpoint of activity down here at the NC perhaps but uh we keep hearing instances that there's this gap between the valuations that the companies looking to go public uh are looking to get versus what the buy sight is willing to pay um how are you kind of observing this Dynamic I think there is a gap between not so much public versus private but money-making big tech companies and money losing small tech companies while Tech has gone up a lot over the last year and a half much of it has been at the top of the at the top of the ladder the large market cap money-making tech companies and part of the reason I think we're not seeing the IPOs that you'd expect to see when Tech is doing well is because of that disconnect that disconnect might disappear if the market keeps doing well but for the moment I think that's what's separating the two and I guess I I just want to drill into to the the Nvidia point just one more thing CU people keep saying uh that you know the stock is cheaper today than it was two years ago uh because earnings estimates have come up so much it's a company with like 80% market share 75% gross margins and one of the skeptical takes is that that just both are maxing out right now in other words uh returns that high will inevitably draw a lot of better competition so I guess the question is how we handicap that Dynamic I think Nidia is going to beat expectations in the short term because every everything is based on onee revenues one year earnings the question is is there enough boost enough size in this market to keep it going as long as it has to to justify the market Gap that's where I'm holding back because I think it it will continue to beat expectations in the next quarter maybe the next couple of quarters but I think that's you know there's a long-term game and a short-term game and it depends on which one you're playing playing with Nvidia