1 00:00:00,160 --> 00:00:02,680 Today on the Joseph Carlson Show, we just recently got 2 00:00:02,680 --> 00:00:04,920 through one of the craziest times in the market where 3 00:00:04,920 --> 00:00:08,640 software companies, SAS companies sold off big and the 4 00:00:08,640 --> 00:00:11,040 reason they sold off is because of artificial intelligence. 5 00:00:11,040 --> 00:00:13,520 Claude is releasing plug in after plug in that goes to 6 00:00:13,520 --> 00:00:16,320 different pieces of software and makes it run better with 7 00:00:16,360 --> 00:00:19,400 artificial intelligence. Many investors have extrapolated 8 00:00:19,400 --> 00:00:22,120 that these software companies are in trouble because of 9 00:00:22,120 --> 00:00:24,320 Claude. So software companies have been 10 00:00:24,320 --> 00:00:27,480 going down the tubes. Meanwhile, we also have a 11 00:00:27,480 --> 00:00:29,840 different group of companies selling off for an entirely 12 00:00:29,840 --> 00:00:32,159 different reason. The companies powering these 13 00:00:32,159 --> 00:00:35,680 software companies, which is the hyperscalers, big tech companies 14 00:00:35,680 --> 00:00:39,600 like Amazon, Microsoft and Google have also sold off, but 15 00:00:39,600 --> 00:00:41,280 their concerns are entirely different. 16 00:00:41,600 --> 00:00:45,920 These companies, including Meta, are spending record amounts on 17 00:00:45,920 --> 00:00:48,200 CapEx. Not just record amounts, but 18 00:00:48,200 --> 00:00:51,360 their projections are so extreme that the numbers are almost 19 00:00:51,360 --> 00:00:53,600 incomprehensible. This year, they're expected to 20 00:00:53,600 --> 00:00:56,720 spend over $600 billion on CapEx. 21 00:00:57,240 --> 00:00:59,600 This incredible amount of money has made investors very 22 00:00:59,600 --> 00:01:02,800 skeptical about what all the spending is going towards, if 23 00:01:02,800 --> 00:01:05,319 it's going to be utilized. What is the profit margins look 24 00:01:05,319 --> 00:01:06,640 like? What are the cash flows look 25 00:01:06,640 --> 00:01:09,120 like? Many analysts are very concerned 26 00:01:09,120 --> 00:01:12,880 causing these companies to sell down today in some cases to 27 00:01:12,880 --> 00:01:15,560 record low valuations. Meanwhile, there's other notable 28 00:01:15,560 --> 00:01:18,320 market commentators like Michael Bury that's had a history of 29 00:01:18,320 --> 00:01:21,720 culling bubbles before saying that this is in fact another 30 00:01:21,720 --> 00:01:24,520 massive bubble. That this is a sign of the times 31 00:01:24,520 --> 00:01:26,840 that there's too many resemblances to bubbles of the 32 00:01:26,840 --> 00:01:28,440 past. That these companies spending 33 00:01:28,440 --> 00:01:32,320 this record amount of CapEx is similar to Motorola doing the 34 00:01:32,320 --> 00:01:35,960 same thing back in 2000. He recently just posted today 35 00:01:35,960 --> 00:01:39,160 making that case again. So there's a divergent in the 36 00:01:39,160 --> 00:01:40,920 market. There's a lot of analysts that 37 00:01:40,920 --> 00:01:43,600 are extremely skeptical of big tech and their spending. 38 00:01:43,640 --> 00:01:46,440 And then there's people like me that are actively buying these 39 00:01:46,440 --> 00:01:49,040 stocks. These four companies, Google, 40 00:01:49,040 --> 00:01:52,640 Meta, Microsoft, and Amazon are the four companies out of the 41 00:01:52,640 --> 00:01:54,680 seven big tech companies that I own. 42 00:01:54,800 --> 00:01:57,880 I'm going in heavy on the big tech CapEx trade. 43 00:01:58,000 --> 00:02:00,440 I'm buying these stocks left and right, and I believe three of 44 00:02:00,440 --> 00:02:02,920 them, Microsoft, Meta, and Amazon, are cheap. 45 00:02:03,280 --> 00:02:05,160 Google's not really cheap right now, but we'll get to that a 46 00:02:05,160 --> 00:02:06,800 little bit later in this episode. 47 00:02:06,800 --> 00:02:09,160 I'll be going over both cases. We'll be looking at the 48 00:02:09,160 --> 00:02:12,440 arguments from Michael Bury. We'll be looking at the analysts 49 00:02:12,440 --> 00:02:15,040 and their concerns about the big tech CapEx spending. 50 00:02:15,400 --> 00:02:18,320 We'll also be looking at my argument, the reason I believe 51 00:02:18,320 --> 00:02:20,680 that these companies are going to do better than expected, the 52 00:02:20,680 --> 00:02:23,280 reason that I'm putting such a significant portion of capital 53 00:02:23,280 --> 00:02:26,160 into these four companies, and what I believe will happen in 54 00:02:26,160 --> 00:02:28,000 the future. We'll also be looking at 55 00:02:28,000 --> 00:02:31,800 different opinions like Jensen, who is very bullish on both AI 56 00:02:31,800 --> 00:02:34,240 companies, on software companies, and on CapEx 57 00:02:34,240 --> 00:02:35,720 spending. We'll be looking at a recent 58 00:02:35,720 --> 00:02:38,880 interview him. Then of course, we also have the 59 00:02:38,880 --> 00:02:42,000 fail of the week, which in this case is a Super Bowl ad from 60 00:02:42,000 --> 00:02:43,560 Claude. We'll be looking at that as 61 00:02:43,560 --> 00:02:44,800 well. So we have a ton to get to in 62 00:02:44,800 --> 00:02:47,400 this episode, a lot to go over. Let's go ahead and jump in and 63 00:02:47,400 --> 00:02:49,680 we'll start off with a quick look at My Portfolio. 64 00:02:49,960 --> 00:02:52,920 We know that last week has been a really rough week for both SAS 65 00:02:52,920 --> 00:02:57,040 companies and Big tech and I had a lot of a lot of exposure to 66 00:02:57,040 --> 00:02:58,960 both of those things. So if we look at My Portfolio, 67 00:02:59,600 --> 00:03:01,880 the passive income account was down on the week. 68 00:03:02,000 --> 00:03:03,600 Now it's starting to head back up. 69 00:03:03,600 --> 00:03:05,160 So we're having a bit of a recovery here. 70 00:03:05,360 --> 00:03:09,000 Stocks are trading up today. I've I've done a bit of trading 71 00:03:09,000 --> 00:03:11,600 over the past couple of weeks. One of the companies that I sold 72 00:03:11,600 --> 00:03:14,720 before this sell off was Equifax, so I exited that 73 00:03:14,720 --> 00:03:16,960 company and I put that money into Meta. 74 00:03:17,120 --> 00:03:20,680 Another company that I exited last week was Salesforce and I 75 00:03:20,680 --> 00:03:24,320 put that money into Meta and then I also bought additional 76 00:03:24,320 --> 00:03:27,560 shares of Meta and I'm actively buying even more Meta. 77 00:03:27,560 --> 00:03:29,800 I'm buying another $10,000 of it today. 78 00:03:30,200 --> 00:03:32,600 Meta is my third largest position now. 79 00:03:32,920 --> 00:03:35,640 This will bump it up somewhere to around 2nd to 3rd. 80 00:03:35,640 --> 00:03:37,840 So this is going to be a very large position. 81 00:03:38,320 --> 00:03:40,320 I've said it before, I've gone over the case, but I believe 82 00:03:40,320 --> 00:03:43,480 that Meta is a buy today. But overall, when we look at My 83 00:03:43,480 --> 00:03:47,800 Portfolio, I do have 4 of the 7 mag seven companies. 84 00:03:48,160 --> 00:03:51,080 I have Meta, I have Google, I have Microsoft, and I have 85 00:03:51,080 --> 00:03:53,600 Amazon. I do not hold NVIDIA, Tesla or 86 00:03:53,600 --> 00:03:54,960 Apple. Those ones I'm not quite as 87 00:03:54,960 --> 00:03:57,920 bullish on as these ones, but these are the ones that are 88 00:03:57,960 --> 00:03:59,920 under scrutiny right now. These are the ones that 89 00:03:59,920 --> 00:04:02,600 everybody's concerned about. Everyone's concerned about these 90 00:04:02,600 --> 00:04:06,200 four companies, Meta, Google, Microsoft, and Amazon because of 91 00:04:06,200 --> 00:04:08,600 the massive amounts of money they're spending on CapEx. 92 00:04:09,000 --> 00:04:11,680 Some concerns are expressed through saying that this is all 93 00:04:11,680 --> 00:04:14,040 a bubble, it's all going to collapse and these companies are 94 00:04:14,040 --> 00:04:15,920 going to get incredibly low returns. 95 00:04:15,960 --> 00:04:18,360 We can see that argument being made with Michael Bury. 96 00:04:18,360 --> 00:04:21,519 In fact, Michael Bury just posted this on X just today. 97 00:04:21,959 --> 00:04:24,640 Here's part of his argument. He says Alphabet is looking to 98 00:04:24,640 --> 00:04:28,720 issue a 100 year bond, so Google's issuing this big long 99 00:04:28,720 --> 00:04:31,200 100 year bond. He says that last time this 100 00:04:31,200 --> 00:04:35,400 happened was Motorola in 1997, which was the last year Motorola 101 00:04:35,400 --> 00:04:39,640 was considered a big deal and the start of 1997 Motorola was 102 00:04:39,640 --> 00:04:43,680 the top 25 market cap and top 25 revenue corporation in America. 103 00:04:44,040 --> 00:04:47,240 Never again. The Motorola Corporation brand 104 00:04:47,240 --> 00:04:50,960 in 1997 was ranked number one in the US ahead of Microsoft. 105 00:04:51,440 --> 00:04:55,760 In 1998 Nokia overtook Motorola and cell phones and after the 106 00:04:55,760 --> 00:04:57,800 iPhone it fell out of the consumer eye. 107 00:04:58,000 --> 00:05:02,560 Today Motorola is the 230 second largest market cap with only $11 108 00:05:02,560 --> 00:05:05,880 billion in sales. These are the type of posts that 109 00:05:05,920 --> 00:05:07,800 Michael Bury has been doing continually. 110 00:05:08,240 --> 00:05:12,120 He's been fanning flames of fear over big tech spend and CapEx 111 00:05:12,120 --> 00:05:16,400 spend over and over again. His belief, I believe mimics 112 00:05:16,400 --> 00:05:20,600 what most analysts concerns are, maybe to a more extreme degree, 113 00:05:20,600 --> 00:05:24,160 maybe to a bit more exaggerated degree, but Michael Bury is 114 00:05:24,160 --> 00:05:26,240 really nailing what people are concerned about. 115 00:05:26,560 --> 00:05:30,120 They're concerned that all this spending on big tech, the reason 116 00:05:30,120 --> 00:05:34,400 that Google's issuing 100 year bonds, is for something that 117 00:05:34,400 --> 00:05:37,240 epitomizes the top. It's for laying out hundreds of 118 00:05:37,240 --> 00:05:39,840 billions of dollars of spend without knowing what type of 119 00:05:39,840 --> 00:05:42,000 returns you'll get. And in every case, the company's 120 00:05:42,000 --> 00:05:44,880 done this in the past, it's ended up tragically, companies 121 00:05:44,880 --> 00:05:48,080 like Motorola that took out mass amounts of debt or spent big on 122 00:05:48,200 --> 00:05:50,400 future projects, ones that they thought they'd have good 123 00:05:50,400 --> 00:05:53,920 returns, ended up doing poorly and now they're no more. 124 00:05:54,520 --> 00:05:56,640 So when we look at examples like this, we have Michael Bury 125 00:05:56,640 --> 00:05:58,600 tweeting it. We have analysts concerned about 126 00:05:58,600 --> 00:06:00,280 it. We have different, different 127 00:06:00,280 --> 00:06:02,600 analysts dropping the price targets of all these big tech 128 00:06:02,600 --> 00:06:05,200 companies. And I believe that they're 129 00:06:05,440 --> 00:06:07,160 wrong. I believe that they're all 130 00:06:07,160 --> 00:06:09,480 wrong. In fact, Michael Bury is someone 131 00:06:09,480 --> 00:06:12,200 that I respect a lot. You can look over my history. 132 00:06:12,520 --> 00:06:14,760 I think that he made an amazing call in 2007. 133 00:06:14,760 --> 00:06:16,440 I think that he's been a great investor before. 134 00:06:16,440 --> 00:06:18,920 Then he does a a different style of investment. 135 00:06:19,400 --> 00:06:22,560 But Michael Bury has been wrong on numerous occasions. 136 00:06:22,640 --> 00:06:26,080 If we look over his history, he's made many calls that have 137 00:06:26,080 --> 00:06:29,280 not come to fruition. He's been bearish before many 138 00:06:29,280 --> 00:06:32,440 times. One time he famously said sell. 139 00:06:33,080 --> 00:06:36,480 Since that tweet, the market is up 100%. 140 00:06:37,200 --> 00:06:39,480 Michael Burry could have not been more wrong. 141 00:06:39,480 --> 00:06:41,440 He said sell at the opposite time. 142 00:06:41,800 --> 00:06:44,320 Now he later corrected himself and he said that he was wrong 143 00:06:44,320 --> 00:06:46,800 there. But that does show that not 144 00:06:46,800 --> 00:06:49,320 everything he says is correct in the moment. 145 00:06:49,760 --> 00:06:52,560 In many cases he'll look back and say yeah, I got this wrong. 146 00:06:52,880 --> 00:06:54,560 And I think this is one of those cases. 147 00:06:54,640 --> 00:06:57,560 When you combine my 4 holdings of Microsoft, Amazon, Google, 148 00:06:57,560 --> 00:07:01,880 and Meta together they make up over $550,000. 149 00:07:02,400 --> 00:07:04,720 So this isn't something where I'm just saying that he's wrong 150 00:07:04,720 --> 00:07:07,280 to make a point or have a hot take. 151 00:07:07,560 --> 00:07:10,200 This is something where my money is behind my words. 152 00:07:10,200 --> 00:07:13,200 This isn't just empty words. I'm invested heavily in these 153 00:07:13,200 --> 00:07:15,920 companies because I believe the future will be very very 154 00:07:15,920 --> 00:07:18,800 prosperous for them. When we look at the case of 155 00:07:18,800 --> 00:07:21,840 Michael Bury and the many similar arguments being made, I 156 00:07:21,840 --> 00:07:23,520 think they're missing a lot of context here. 157 00:07:23,920 --> 00:07:27,640 First of all, the reason that Google is issuing a 100 year 158 00:07:27,640 --> 00:07:30,480 bond is not because they need money. 159 00:07:30,960 --> 00:07:34,320 Google produces more money than any institution on planet earth. 160 00:07:34,400 --> 00:07:36,920 They are the highest net income earning company in the world. 161 00:07:37,240 --> 00:07:39,920 They don't need the money. The reason they're doing it is 162 00:07:39,920 --> 00:07:43,000 for financial flexibility. It's to lock in low interest 163 00:07:43,000 --> 00:07:44,840 rates. It's to help out with taxes. 164 00:07:44,920 --> 00:07:48,080 It's basically just a tool to lock in a cheap cost of capital 165 00:07:48,080 --> 00:07:50,920 and help out with taxes. Nothing about it is out of 166 00:07:50,920 --> 00:07:52,840 necessity. They don't need the money to 167 00:07:52,840 --> 00:07:55,320 survive. Google could self finance all of 168 00:07:55,320 --> 00:07:57,840 the spending on their own. And that is entirely different 169 00:07:57,840 --> 00:08:01,040 than what Motorola did in 1997. And these are the constant 170 00:08:01,040 --> 00:08:04,240 comparisons being made online. There's so many situations where 171 00:08:04,240 --> 00:08:08,920 people continue to compare big tech spending today in CapEx of 172 00:08:08,920 --> 00:08:11,200 the spending that happened around 2000. 173 00:08:11,200 --> 00:08:13,880 And the reason that the.com bubble is always brought up by 174 00:08:13,880 --> 00:08:17,720 the bears is because it gives an emotional reaction, and if you 175 00:08:17,720 --> 00:08:20,880 buy into it, you'll become very cautious and very scared about 176 00:08:20,880 --> 00:08:23,480 the situation. Today, when I look at it, I 177 00:08:23,480 --> 00:08:25,920 don't believe that this situation that these big tech 178 00:08:25,920 --> 00:08:29,960 companies are in is anything very similar to the.com bubble 179 00:08:30,000 --> 00:08:32,480 at all. The only similarity is that it's 180 00:08:32,480 --> 00:08:34,600 a group of companies that's spending a lot of money. 181 00:08:35,120 --> 00:08:39,480 I guess that's similar, but the differences are substantial. 182 00:08:39,880 --> 00:08:44,360 First of all, the companies in the.com bubble like Motorola and 183 00:08:44,360 --> 00:08:48,640 Nokia or hardware companies, they're incredibly cyclical. 184 00:08:48,960 --> 00:08:51,840 These are companies that relied on sales cycles. 185 00:08:52,440 --> 00:08:54,160 Those are not like the companies today. 186 00:08:54,520 --> 00:08:58,360 Google is a company that has seven to 9 apps with a billion 187 00:08:58,360 --> 00:09:01,360 users on each of them. They literally have multiple 188 00:09:01,360 --> 00:09:04,280 billions of users using multiple apps every single day. 189 00:09:04,680 --> 00:09:08,080 They are habitual users. People log onto YouTube. 190 00:09:08,080 --> 00:09:11,400 It's the number one website every single age demographic. 191 00:09:12,040 --> 00:09:13,960 Google search is just everywhere. 192 00:09:13,960 --> 00:09:16,800 It's part of the Internet. These are companies that have 193 00:09:16,800 --> 00:09:19,240 annuity like income streams, completely different than 194 00:09:19,240 --> 00:09:22,280 Motorola or Nokia or manyofthe.com bubbles. 195 00:09:22,920 --> 00:09:25,240 Another thing is that these companies produce far more cash 196 00:09:25,240 --> 00:09:27,760 than any company ever did in the.com bubble. 197 00:09:27,760 --> 00:09:30,960 By far the four companies that we're talking about, Meta, 198 00:09:30,960 --> 00:09:34,200 Microsoft, Amazon, and Google, are the most profitable 199 00:09:34,200 --> 00:09:36,480 companies on planet Earth. They're the most financially 200 00:09:36,480 --> 00:09:39,520 prosperous institutions of all time in human history. 201 00:09:40,120 --> 00:09:43,160 They generate more consistent profits year after year, growing 202 00:09:43,160 --> 00:09:46,080 at a higher rate than anything we've ever seen before. 203 00:09:46,880 --> 00:09:49,800 They can largely fund all of the spending in and of themselves 204 00:09:49,800 --> 00:09:52,560 from their core business. They don't need to go to 205 00:09:52,560 --> 00:09:54,800 externalities. They don't need to take on great 206 00:09:54,800 --> 00:09:57,240 risks. And this isn't cyclical profits, 207 00:09:57,240 --> 00:09:59,800 this isn't sales cycles. These companies are generating 208 00:09:59,800 --> 00:10:03,200 record profits year after year after year through all different 209 00:10:03,200 --> 00:10:05,640 environments. These companies today face 210 00:10:05,640 --> 00:10:08,520 nowhere the financial or existential threat that the 211 00:10:08,520 --> 00:10:12,320 companies in 2000 faced. They're in no similar situation. 212 00:10:12,560 --> 00:10:15,480 Their financials are so objectively better on every 213 00:10:15,480 --> 00:10:19,560 metric from margins to consistency to profitability to 214 00:10:19,560 --> 00:10:23,000 balance sheet, to customer diversification, geographical 215 00:10:23,000 --> 00:10:24,960 diversification, universal income. 216 00:10:25,200 --> 00:10:28,800 The businesses themselves fundamentally are nothing like 217 00:10:28,800 --> 00:10:30,720 the businesses in the.com bubble. 218 00:10:31,040 --> 00:10:34,400 And even the planned CapEx spending is nothing like the 219 00:10:34,400 --> 00:10:36,520 CapEx that was spent in the.com bubble. 220 00:10:36,600 --> 00:10:39,080 Now what is true about the concerns is that the numbers 221 00:10:39,080 --> 00:10:41,200 that they're spending are staggering. 222 00:10:41,440 --> 00:10:43,720 In fact, it is like nothing we've ever seen before. 223 00:10:43,840 --> 00:10:47,280 Here's a clip from CNBC going over the planned CapEx from 224 00:10:47,280 --> 00:10:50,320 these companies and how it's nearly incomprehensible. 225 00:10:50,800 --> 00:10:53,640 It's simply difficult to get across how big a step up that 226 00:10:53,640 --> 00:10:56,000 number is, but this chart does get at it. 227 00:10:56,000 --> 00:10:59,400 CapEx between these four companies was at less than 150 228 00:10:59,400 --> 00:11:02,280 billion in 2023. So that is a more than four fold 229 00:11:02,280 --> 00:11:05,640 increase in roughly 3 years. What it tells us is that Big 230 00:11:05,640 --> 00:11:08,680 Tech are becoming the new utilities and that ultimately 231 00:11:08,680 --> 00:11:11,000 changes how you value them. She says that these companies 232 00:11:11,000 --> 00:11:13,800 are becoming utilities and utilities trade out lower 233 00:11:13,800 --> 00:11:15,560 multiples than software companies. 234 00:11:15,840 --> 00:11:18,040 So some investors are looking at this and believe that these 235 00:11:18,040 --> 00:11:19,760 companies should be cheaper as a result. 236 00:11:20,200 --> 00:11:22,520 And at the same time, the numbers are massive. 237 00:11:22,600 --> 00:11:25,240 They're hard to comprehend even for investors that are bullish 238 00:11:25,240 --> 00:11:27,760 on these companies. Are these numbers so big that 239 00:11:27,760 --> 00:11:29,720 they're going to get decent returns? 240 00:11:29,720 --> 00:11:32,320 Will these companies really get a high return on capital from 241 00:11:32,320 --> 00:11:34,680 this additional spend? Well, to look at this, I want to 242 00:11:34,680 --> 00:11:37,680 give some context here and really look at overall what's 243 00:11:37,680 --> 00:11:39,280 going on. Let's take a look at some 244 00:11:39,280 --> 00:11:41,600 visuals here. We have the first one, which is 245 00:11:41,600 --> 00:11:46,200 the big tech CapEx overtime, and this is again Meta, Microsoft, 246 00:11:46,200 --> 00:11:48,960 Amazon and Google. Meta is in blue, Amazon is in 247 00:11:48,960 --> 00:11:52,560 orange, Google's in yellow, and Microsoft is in red. 248 00:11:52,920 --> 00:11:56,400 And we have their CapEx spend on the trailing 12 months every 249 00:11:56,400 --> 00:11:58,320 single quarter. If we look at this stack 250 00:11:58,320 --> 00:12:01,200 together, this is what it looks like over a longer history. 251 00:12:01,480 --> 00:12:04,160 So this is going back all the way to 2005. 252 00:12:04,160 --> 00:12:08,480 So we're back 20 years. In 2005, there was almost no 253 00:12:08,480 --> 00:12:10,440 CapEx spend. It's barely visible on the 254 00:12:10,440 --> 00:12:12,760 chart. As we get further along, you can 255 00:12:12,760 --> 00:12:15,800 see it start to climb gradually. Really where it started to climb 256 00:12:15,800 --> 00:12:18,200 was around 2013. You could see a little bit of it 257 00:12:18,200 --> 00:12:21,440 show up on each of these. In 20/19, it was 80 billion. 258 00:12:21,440 --> 00:12:23,680 Then in 2022, it jumped up dramatically. 259 00:12:23,680 --> 00:12:26,800 This is the first big CapEx cycle led by Amazon. 260 00:12:27,080 --> 00:12:28,960 They were building out their fulfillment center. 261 00:12:29,240 --> 00:12:32,920 This jumped up to a combined around $150 billion between the 262 00:12:32,920 --> 00:12:35,920 four companies. 2023 is that point where the CapEx spend 263 00:12:35,920 --> 00:12:39,960 started to go down a little bit and then AI hit Chachi, BT, 264 00:12:39,960 --> 00:12:43,320 Clod, Gemini, Grok, you name it, All these different AI models 265 00:12:43,320 --> 00:12:47,400 came out and you can see the CapEx go up about 3X to now a 266 00:12:47,680 --> 00:12:51,200 $380 billion CapEx spend in the trailing 12 months. 267 00:12:51,640 --> 00:12:53,960 And this is what's happened so far. 268 00:12:54,200 --> 00:12:57,640 What these companies are projecting is for this number to 269 00:12:57,640 --> 00:13:00,240 go down to 600 plus billion dollars. 270 00:13:00,840 --> 00:13:04,120 So we're almost at 400. We're going to add on another 271 00:13:04,160 --> 00:13:07,640 $200 billion, which would be through the floor of this chart. 272 00:13:07,680 --> 00:13:09,960 It would go down all the way to almost the bottom of this chart. 273 00:13:09,960 --> 00:13:11,680 That's what's going to happen this year. 274 00:13:11,800 --> 00:13:14,240 So that's the downside. This growing spend on CapEx 275 00:13:14,240 --> 00:13:16,760 feels like these companies are becoming heavy utilities, 276 00:13:17,000 --> 00:13:19,120 industrials. They're no longer software 277 00:13:19,120 --> 00:13:21,080 companies. The problem with that narrative 278 00:13:21,080 --> 00:13:23,080 is that it leaves out the other metrics. 279 00:13:23,360 --> 00:13:25,840 When we look at the net income, for example, we can take a look 280 00:13:25,840 --> 00:13:28,440 at this chart. This shows the same thing, but 281 00:13:28,440 --> 00:13:31,000 this time it's net income stacked for each of these 282 00:13:31,000 --> 00:13:33,960 companies over time. Again, we're going back to 2006. 283 00:13:33,960 --> 00:13:37,240 So over the same time frame, the net income of these companies is 284 00:13:37,240 --> 00:13:41,160 also going up dramatically. So as they're spending more and 285 00:13:41,160 --> 00:13:44,680 more on CapEx, their profits, their net income, which 286 00:13:44,680 --> 00:13:47,600 translates into earnings per share, it's growing and it's 287 00:13:47,600 --> 00:13:49,680 growing very quickly. Now these numbers in and of 288 00:13:49,680 --> 00:13:53,000 themselves are massive. Microsoft is at $120 billion, 289 00:13:53,000 --> 00:13:57,920 Google's at 1:32. We have Amazon at $77 billion in 290 00:13:57,920 --> 00:14:01,320 net income and Meta at 61. Thing that I'd note though is 291 00:14:01,320 --> 00:14:04,560 the net income is being thrown off by investment gains. 292 00:14:04,560 --> 00:14:07,880 Things like SpaceX and Open AI, different things that I've 293 00:14:07,880 --> 00:14:11,360 gained that are paper gains. If we normalize for that, these 294 00:14:11,360 --> 00:14:14,880 numbers are still incredible. For example, Microsoft net 295 00:14:14,880 --> 00:14:17,960 income goes down around $20 billion when you factor out Open 296 00:14:17,960 --> 00:14:20,760 AI gains. So instead of 119 billion, it's 297 00:14:20,760 --> 00:14:23,560 around 100 billion. Google's net income over the 298 00:14:23,560 --> 00:14:27,960 past 12 months has been impacted by around $24 billion of 299 00:14:28,240 --> 00:14:30,600 investment gains from SpaceX and Waymo. 300 00:14:30,960 --> 00:14:34,160 That makes it so that their net income is around 110 billion. 301 00:14:34,480 --> 00:14:37,680 So even though it's not quite 132, it's still incredibly 302 00:14:37,680 --> 00:14:40,960 impressive and growing quickly. On an organic level, Amazon 303 00:14:40,960 --> 00:14:43,560 really doesn't have investment gains impacting their net 304 00:14:43,560 --> 00:14:45,440 income. It's less than $1 billion. 305 00:14:45,440 --> 00:14:48,200 So they're really making around $77 billion in net income. 306 00:14:48,720 --> 00:14:51,360 And then Meta is one of the unique ones where theirs is 307 00:14:51,360 --> 00:14:53,800 being understated. They paid a hefty one time tax 308 00:14:53,800 --> 00:14:56,280 costing them around $12 billion in net income. 309 00:14:56,520 --> 00:14:59,480 So if you factor that out and you add it back in, Meta really 310 00:14:59,480 --> 00:15:02,720 generated around 72 billion in net income in the trailing 12 311 00:15:02,720 --> 00:15:04,720 months. So that blue chart is actually 312 00:15:04,720 --> 00:15:07,240 lower than where it should be. That's one of the ones that we 313 00:15:07,240 --> 00:15:09,560 adjust upwards. But overall the net income 314 00:15:09,560 --> 00:15:13,120 profile even adjusted for these one time paper gains and 315 00:15:13,120 --> 00:15:16,480 normalizing it is growing incredibly fast on an organic 316 00:15:16,480 --> 00:15:18,320 basis. These companies are not just 317 00:15:18,320 --> 00:15:20,560 spending on CapEx, that's not all they're doing. 318 00:15:20,800 --> 00:15:24,480 They're growing their income year after year, quarter after 319 00:15:24,480 --> 00:15:26,440 quarter. Their organic buying power is 320 00:15:26,440 --> 00:15:28,200 increasing. Now the next metric we'll look 321 00:15:28,200 --> 00:15:31,600 at is instead of net income, which is an accrual accounting, 322 00:15:31,600 --> 00:15:35,000 you're expensing something over its useful life like servers. 323 00:15:35,480 --> 00:15:37,400 In this case, we're going to be looking at the cash flows, which 324 00:15:37,400 --> 00:15:40,760 means that outflows today. And this does paint a different 325 00:15:40,760 --> 00:15:43,600 picture as these companies are spending record amounts on 326 00:15:43,600 --> 00:15:46,560 CapEx, the cash flows are being Hanford. 327 00:15:46,560 --> 00:15:48,560 You can see that the cash flows are having a difficult time 328 00:15:48,560 --> 00:15:50,640 growing. For example, when we look at the 329 00:15:50,640 --> 00:15:53,760 same chart over the same timeline, we can see where these 330 00:15:53,760 --> 00:15:55,600 companies started out with their cash flows. 331 00:15:55,680 --> 00:15:58,480 They were growing organically very fast for a long period of 332 00:15:58,480 --> 00:16:03,480 time up until around 2021. That's when combined, their free 333 00:16:03,480 --> 00:16:07,200 cash flow was around $160 billion a 170. 334 00:16:07,240 --> 00:16:10,120 Then their free cash flow started to drop. 335 00:16:10,120 --> 00:16:13,720 There's one company in the mix that you may notice, a big 336 00:16:13,720 --> 00:16:16,320 company that's not generating much cash. 337 00:16:16,320 --> 00:16:19,440 That is Amazon. Amazon is right there in the 338 00:16:19,440 --> 00:16:21,520 orange. If we look at just the end part 339 00:16:21,520 --> 00:16:24,040 of this, you can see that Amazon's free cash flow again 340 00:16:24,040 --> 00:16:29,080 there in orange is headed back down to only $7.7 billion in the 341 00:16:29,080 --> 00:16:32,440 trailing 12 months. For a massive multi trillion 342 00:16:32,440 --> 00:16:35,920 dollar market cap company, generating $7 billion is not a 343 00:16:35,920 --> 00:16:37,320 lot. That's less than Netflix, it's 344 00:16:37,320 --> 00:16:40,120 less than Salesforce, it's less than many smaller companies. 345 00:16:40,200 --> 00:16:42,040 It's a tiny amount of cash flow already. 346 00:16:42,320 --> 00:16:45,240 And with their planned CapEx, I don't see any way other than 347 00:16:45,240 --> 00:16:47,680 this going down in the future. You can also see that just 348 00:16:47,680 --> 00:16:50,440 generally speaking, all the other companies cash flows are 349 00:16:50,480 --> 00:16:53,600 either staying flat, Google's is staying roughly flat, 350 00:16:53,600 --> 00:16:55,280 Microsoft's is staying roughly flat. 351 00:16:55,320 --> 00:16:57,760 None of them are growing quickly in their free cash flow. 352 00:16:57,760 --> 00:17:00,440 And that is of course because of the outflowing of cash today 353 00:17:00,440 --> 00:17:03,800 being spent on this incredible amount of capital expenditures. 354 00:17:03,840 --> 00:17:06,480 The CapEx numbers of these companies are growing quickly 355 00:17:06,480 --> 00:17:08,880 and they're staggering. But the net income is also 356 00:17:08,880 --> 00:17:12,200 growing quickly on an organic basis, even adjusting for 357 00:17:12,200 --> 00:17:15,680 investment gains and tax hits. And these companies are also 358 00:17:15,680 --> 00:17:18,640 growing their just overall revenue faster. 359 00:17:18,800 --> 00:17:21,560 We have revenue acceleration. We can see that in this chart. 360 00:17:21,560 --> 00:17:24,359 The bars are the total revenue on a trailing basis. 361 00:17:24,359 --> 00:17:27,880 And then we also have the percent change lines over time. 362 00:17:27,880 --> 00:17:31,360 Now we can see that in around 20/16/2017, most of these 363 00:17:31,360 --> 00:17:34,320 companies were growing quickly. Microsoft was the slowest 364 00:17:34,320 --> 00:17:36,680 growing of the bunch. Mehta was growing incredibly 365 00:17:36,680 --> 00:17:40,800 fast back then, but as we see over time, the growth rates of 366 00:17:40,800 --> 00:17:42,400 these companies has ebbed and flowed. 367 00:17:42,400 --> 00:17:46,000 In 2020 and 2021, these companies grew a lot as COVID 368 00:17:46,000 --> 00:17:47,840 happened. People are locked down. 369 00:17:47,960 --> 00:17:50,680 They had to use online services like Amazon and Meta. 370 00:17:50,920 --> 00:17:53,600 So we saw a huge influx of revenue growth from all four of 371 00:17:53,600 --> 00:17:55,640 these companies. But then it slowed down big. 372 00:17:55,880 --> 00:17:59,200 We had the COVID pull forward. We had many of these companies 373 00:17:59,200 --> 00:18:03,720 growth rates go down all the way to 3 to 4% fairly growing year 374 00:18:03,720 --> 00:18:05,760 over year. So we had a massive pull 375 00:18:05,760 --> 00:18:08,400 forward. Then we had the normalization. 376 00:18:08,840 --> 00:18:11,520 But then you can see that these lines all start going back up 377 00:18:11,520 --> 00:18:13,680 again. They go back up to the 12% 378 00:18:13,680 --> 00:18:18,640 range, 15% up to around 30%. You can see that over the past 379 00:18:18,640 --> 00:18:21,720 couple of years, AI is really making all of these companies 380 00:18:21,720 --> 00:18:25,160 grow faster on a revenue basis. The revenue is accelerating 381 00:18:25,160 --> 00:18:27,480 across the board. So this isn't something where we 382 00:18:27,480 --> 00:18:31,160 may get returns from AI spend or it might happen in the future. 383 00:18:31,480 --> 00:18:34,240 It's already happening. We see it in the charts today. 384 00:18:34,240 --> 00:18:37,400 Another thing that's happened while all this is going on is 385 00:18:37,480 --> 00:18:39,800 three of these four companies have gotten much cheaper. 386 00:18:40,240 --> 00:18:42,080 When we look at the three that have gotten much cheaper, the 387 00:18:42,080 --> 00:18:44,000 first one that I'll highlight is Meta. 388 00:18:44,280 --> 00:18:46,440 This is the historical valuation of the company. 389 00:18:46,720 --> 00:18:49,080 If you take a look at this chart, it really illustrates 390 00:18:49,080 --> 00:18:51,400 what's going on with Meta. Here I've plotted out three 391 00:18:51,400 --> 00:18:54,240 different historical valuation metrics on a daily basis. 392 00:18:54,480 --> 00:18:57,240 We have the price to the operating cash flow, the price 393 00:18:57,240 --> 00:18:59,280 to earnings, and the price to free cash flow. 394 00:18:59,720 --> 00:19:02,760 So you can basically see through any valuation metric, whether 395 00:19:02,760 --> 00:19:05,840 you're looking at earnings, cash flows, or operating income, how 396 00:19:05,840 --> 00:19:07,800 expensive or cheap this company was. 397 00:19:08,000 --> 00:19:10,560 Meta has gone through periods like any company where it was 398 00:19:10,560 --> 00:19:14,320 more expensive or cheaper in the past, but right now is one of 399 00:19:14,320 --> 00:19:16,160 the cheapest points throughout its history. 400 00:19:16,360 --> 00:19:19,200 All of these metrics, all three of them have gone down as a 401 00:19:19,200 --> 00:19:21,880 company's generated record profits and earnings and 402 00:19:21,880 --> 00:19:24,960 operating cash flow, while the share prices stayed flat for the 403 00:19:24,960 --> 00:19:26,680 past year. When we look at the only time 404 00:19:26,680 --> 00:19:29,760 throughout history that Meta was cheaper than it is today, that 405 00:19:29,760 --> 00:19:34,080 was back in 2022 when Meta was selling for $80 per share. 406 00:19:34,200 --> 00:19:37,600 So obviously Meta is not that cheap today, but the company is 407 00:19:37,600 --> 00:19:41,400 also much stronger today, generating far more cash flow. 408 00:19:41,960 --> 00:19:44,920 The financial profile is dramatically better today than 409 00:19:44,920 --> 00:19:48,160 it was in 2022. So although that was a cheaper 410 00:19:48,160 --> 00:19:51,080 time period throughout history, this is one of the cheapest time 411 00:19:51,080 --> 00:19:53,320 periods throughout Meta's entire history. 412 00:19:53,680 --> 00:19:55,760 While it's at one of the strongest time periods 413 00:19:55,760 --> 00:19:59,080 financially, the combination I feel is very attractive. 414 00:19:59,400 --> 00:20:02,640 In fact, one of the things that investors are overlooking is the 415 00:20:02,640 --> 00:20:06,400 change in growth rate. Back in 2022, again the only 416 00:20:06,400 --> 00:20:09,720 time period it was cheaper than it is today, the growth rate was 417 00:20:09,720 --> 00:20:12,520 non existent. It was shrinking. 418 00:20:12,760 --> 00:20:19,480 Meta shrunk 1.1% year over year, then only grew .9% year over 419 00:20:19,480 --> 00:20:21,760 year revenue growth. Look at these numbers. 420 00:20:21,760 --> 00:20:24,400 In fact, if we just zoom in, I want to make sure this is clear. 421 00:20:24,920 --> 00:20:26,720 Look at these numbers on this chart. 422 00:20:27,160 --> 00:20:30,240 The reason that Meta was so cheap is because growth was 423 00:20:30,240 --> 00:20:33,760 completely at a standstill. The company was not growing at 424 00:20:33,760 --> 00:20:36,200 all. It had no huge cash flows. 425 00:20:36,560 --> 00:20:39,400 Meta had to reinvent itself. They had to implement AI. 426 00:20:39,400 --> 00:20:43,800 They had to build around Apple's crushing tracking system, and 427 00:20:43,800 --> 00:20:48,000 they did it. Now the growth rate today is 22% 428 00:20:48,000 --> 00:20:50,840 as of their most recent quarter. That's their revenue growth 429 00:20:50,840 --> 00:20:53,120 rate. They're projecting a growth rate 430 00:20:53,120 --> 00:20:57,720 next quarter of up to 33%. And meanwhile, the valuation of 431 00:20:57,720 --> 00:21:00,800 the company again is trading at one of the cheaper price points 432 00:21:00,800 --> 00:21:03,320 it has over the past five years. This combination of the 433 00:21:03,320 --> 00:21:07,280 historically cheap valuation and projected incredibly fast growth 434 00:21:07,280 --> 00:21:10,200 rate is a very unique combination, especially for a 435 00:21:10,200 --> 00:21:12,400 company with as wide of a Moat as Meta. 436 00:21:12,880 --> 00:21:16,040 In most cases, when you see fast growth rates and low valuation, 437 00:21:16,240 --> 00:21:18,760 it's a company that's very unpredictable, one that has a 438 00:21:18,760 --> 00:21:21,000 low Moat, one that may easily be disrupted. 439 00:21:21,120 --> 00:21:23,640 I estimate that MET is one of the most difficult companies in 440 00:21:23,640 --> 00:21:26,080 the world to disrupt. Could happen, but it's very 441 00:21:26,080 --> 00:21:28,200 unlikely. And this combination of low 442 00:21:28,200 --> 00:21:30,520 valuation and fast growth rate is the reason I believe that 443 00:21:30,520 --> 00:21:33,880 this is the most compelling big tech company to buy today. 444 00:21:34,160 --> 00:21:37,280 It's the reason that I poured money into the position because 445 00:21:37,280 --> 00:21:40,120 you don't get this too often. The next one of course, is 446 00:21:40,120 --> 00:21:41,640 Amazon. When we look at Amazon's 447 00:21:41,640 --> 00:21:45,200 historical valuation on a cash flow basis, it's getting more 448 00:21:45,200 --> 00:21:48,120 expensive and that is because Amazon is unique in the fact 449 00:21:48,120 --> 00:21:52,440 that they will pour every single dime of cash flow into CapEx 450 00:21:52,640 --> 00:21:55,360 when they see an opportunity like they see today. 451 00:21:55,880 --> 00:21:58,400 So the company's putting all of the cash flows back into 452 00:21:58,400 --> 00:22:00,040 reinvestment. That's what they've done 453 00:22:00,040 --> 00:22:02,160 throughout their history. That's why they're growing to 454 00:22:02,160 --> 00:22:04,480 the biggest revenue company on planet earth. 455 00:22:04,560 --> 00:22:07,120 When we look at the metrics like the price to operating cash flow 456 00:22:07,160 --> 00:22:10,680 and the price to earnings, both of these are on multi year lows. 457 00:22:10,760 --> 00:22:13,800 It's only been cheaper one time throughout history, which was 458 00:22:13,840 --> 00:22:17,000 April of 2025. That was during the tariff 459 00:22:17,000 --> 00:22:18,880 scare. So the only time we've seen 460 00:22:18,880 --> 00:22:22,440 investors treat the company like they are today is literally when 461 00:22:22,600 --> 00:22:25,320 huge tariffs are being implemented on Amazon globally. 462 00:22:25,840 --> 00:22:28,160 That's not happening right now and it still trades at the same 463 00:22:28,160 --> 00:22:29,920 valuation. Meanwhile, when we look at 464 00:22:29,920 --> 00:22:33,920 Amazon and the growth rate of AWS over the past couple of 465 00:22:33,920 --> 00:22:39,360 years since 2023, the growth rate went from 12% to 24% last 466 00:22:39,360 --> 00:22:41,440 quarter. And even as they're fulfilling 467 00:22:41,440 --> 00:22:44,920 on all of this demand as quick as possible, the company still 468 00:22:44,920 --> 00:22:50,240 has a backlog of $244 billion. That's up 37% year over year. 469 00:22:50,240 --> 00:22:53,400 While investors are concerned about these companies and the 470 00:22:53,400 --> 00:22:56,680 valuations are being compressed, the results are already 471 00:22:56,680 --> 00:22:58,320 speaking. They're already in. 472 00:22:58,320 --> 00:23:01,280 We're seeing acceleration in both their cloud business and 473 00:23:01,280 --> 00:23:03,200 their overall revenue. Now Next up, we get to 474 00:23:03,200 --> 00:23:06,840 Microsoft, which it's an infrequent event when Microsoft 475 00:23:06,840 --> 00:23:09,400 gets cheap, but that's what's happening right now. 476 00:23:09,760 --> 00:23:11,600 We look at Microsoft's valuation over time. 477 00:23:11,600 --> 00:23:13,760 This is what it looks like. Again, we can get the full 478 00:23:13,760 --> 00:23:16,640 picture here. Microsoft's valuation is down 479 00:23:16,640 --> 00:23:19,600 close to where it was in February of 2023. 480 00:23:20,000 --> 00:23:22,960 So when the market went through that big sell off, when we had a 481 00:23:22,960 --> 00:23:25,160 2022, all the tech companies sold off. 482 00:23:25,640 --> 00:23:28,240 It's close to where it was it. In fact, in some cases it's 483 00:23:28,240 --> 00:23:30,480 actually cheaper. The price to free cash flow has 484 00:23:30,480 --> 00:23:33,520 gone up because they're putting so much money into CapEx, but 485 00:23:33,520 --> 00:23:34,960 it's actually not gone up that much. 486 00:23:34,960 --> 00:23:38,600 It went up from 33 times to 39. So Microsoft really isn't that 487 00:23:38,600 --> 00:23:40,960 much more expensive even on a cash flow basis. 488 00:23:41,320 --> 00:23:43,880 But then when we look at the other metrics, looking outside 489 00:23:43,880 --> 00:23:46,520 of the immediate cash flows, the price to operating cash flow is 490 00:23:46,520 --> 00:23:50,880 at 25 times cheaper than where it was in February of 2023 and 491 00:23:50,880 --> 00:23:53,960 cheaper than where it's been at any point in the past three 492 00:23:53,960 --> 00:23:55,680 years. We also look at the price to 493 00:23:55,680 --> 00:23:58,680 earnings. Microsoft is trading at a 19 494 00:23:58,680 --> 00:24:01,120 trailing PE. Even when you factor out some 495 00:24:01,120 --> 00:24:03,960 investment gains, it's trading around a 22 times. 496 00:24:04,400 --> 00:24:07,400 This is very cheap. In fact, this is one of the 497 00:24:07,400 --> 00:24:10,200 cheapest price points it's been throughout its entire history. 498 00:24:10,240 --> 00:24:12,480 We can put this in perspective and compare it to some other 499 00:24:12,480 --> 00:24:16,680 companies in the market. We have Costco, IBM and Walmart, 500 00:24:17,120 --> 00:24:19,680 and Microsoft is literally cheaper than all three of them. 501 00:24:20,480 --> 00:24:23,760 We look at the numbers here. Microsoft overtime has traded 502 00:24:23,760 --> 00:24:26,800 down evaluation to be even cheaper than IBM. 503 00:24:27,280 --> 00:24:30,000 So in the first time in nearly 10 years, Microsoft's actually 504 00:24:30,000 --> 00:24:32,440 cheaper than IBM. Investors are paying a bigger 505 00:24:32,440 --> 00:24:34,800 premium for IBM than they are Microsoft. 506 00:24:35,080 --> 00:24:37,840 They're paying a much higher premium for the safety that 507 00:24:37,840 --> 00:24:41,680 Walmart and Costco provide. These are low margin retailers. 508 00:24:42,120 --> 00:24:44,520 They're great businesses and I even own Costco, but I haven't 509 00:24:44,520 --> 00:24:46,880 bought it in years. I don't consider Costco a buy. 510 00:24:46,880 --> 00:24:49,200 I've routinely said that the company's overvalued and of 511 00:24:49,200 --> 00:24:51,000 course, it makes Microsoft look very cheap. 512 00:24:51,040 --> 00:24:53,800 Think about how fearful the situation needs to be where 513 00:24:53,800 --> 00:24:57,080 Microsoft is now cheaper than IBM, Costco and Walmart. 514 00:24:57,480 --> 00:25:00,200 Investors are looking for any other place to put their cash 515 00:25:00,400 --> 00:25:03,400 than these very scary big tech companies with all their AI 516 00:25:03,400 --> 00:25:05,600 spend. You have investors like Michael 517 00:25:05,600 --> 00:25:07,200 Bury. You have Wall Street analysts 518 00:25:07,560 --> 00:25:10,080 that do not like the CapEx spend, and they're now avoiding 519 00:25:10,080 --> 00:25:12,120 these companies. The only one out of the bunch 520 00:25:12,120 --> 00:25:14,560 that I don't believe is cheap and the only one that I don't 521 00:25:14,560 --> 00:25:18,000 consider a buy today is Google. This is a company that, of 522 00:25:18,000 --> 00:25:20,000 course, I focused on heavily last year. 523 00:25:20,000 --> 00:25:22,320 It was my top pick. It was one that I made more 524 00:25:22,320 --> 00:25:23,880 content about than any other one. 525 00:25:24,360 --> 00:25:27,680 But Google's price has doubled. Stock price continues to surge 526 00:25:27,680 --> 00:25:29,800 upwards. Investors have seen the light 527 00:25:29,800 --> 00:25:31,800 with this one. Their sentiment has shifted, as 528 00:25:31,800 --> 00:25:35,280 it often does. And although Google is expensive 529 00:25:35,280 --> 00:25:39,680 today, ironically, Google a year ago looks a lot like Microsoft 530 00:25:39,680 --> 00:25:42,880 today, a company that investors are concerned about that it has 531 00:25:42,880 --> 00:25:44,800 to prove itself. That's trading at a low 532 00:25:44,800 --> 00:25:48,240 valuation historically, and it's since gone up. 533 00:25:48,560 --> 00:25:50,360 We can see that story with Google. 534 00:25:50,480 --> 00:25:52,400 This company has been a massive winner. 535 00:25:52,760 --> 00:25:55,560 The valuations across the board have increased along with the 536 00:25:55,560 --> 00:25:57,000 earnings growth, along with the revenue. 537 00:25:57,040 --> 00:25:59,080 So across the board, this company is more expensive 538 00:25:59,080 --> 00:26:02,560 because investors have become convinced that this one is going 539 00:26:02,560 --> 00:26:04,880 to be around for a long time, growing its profits. 540 00:26:05,320 --> 00:26:07,480 And I believe the same thing that's happening today with 541 00:26:07,480 --> 00:26:11,600 Google will eventually happen with Meta, it'll happen with 542 00:26:11,600 --> 00:26:13,720 Amazon, and it will happen with Microsoft. 543 00:26:14,200 --> 00:26:18,120 Once the sentiment changes, once investors become bullish again 544 00:26:18,120 --> 00:26:20,960 and they realize that these are fantastic companies with 545 00:26:20,960 --> 00:26:24,200 incredibly deep moats, and the CapEx they're spending today 546 00:26:24,200 --> 00:26:26,080 will further insulate their lead. 547 00:26:26,480 --> 00:26:29,480 It'll distance them from the second and third competitors. 548 00:26:30,040 --> 00:26:33,440 It'll make it so that the whole world relies on their power, 549 00:26:33,440 --> 00:26:36,040 their compute to operate their businesses. 550 00:26:36,520 --> 00:26:39,560 Once investors get around to that, I see the very same thing 551 00:26:39,560 --> 00:26:42,160 happening to those three companies that happened to 552 00:26:42,160 --> 00:26:44,640 Google. Valuations will expand, 553 00:26:44,640 --> 00:26:48,160 multiples will go up, cash flows will grow, earnings will grow. 554 00:26:48,520 --> 00:26:51,840 The combination of valuation expansion along with earnings 555 00:26:51,840 --> 00:26:54,920 growth means massive gains for investors overall. 556 00:26:54,920 --> 00:26:57,360 The reason that I'm invested in these companies is because I 557 00:26:57,360 --> 00:26:59,280 believe the market's getting this wrong. 558 00:26:59,400 --> 00:27:03,240 And you may say that that's ego or what do I know more than the 559 00:27:03,240 --> 00:27:06,360 market, but the market has routinely gotten these companies 560 00:27:06,360 --> 00:27:08,080 wrong. Years ago, I made a video 561 00:27:08,080 --> 00:27:11,560 calling Big Tech cheap, and all these companies are up multiples 562 00:27:11,560 --> 00:27:14,160 over the market. Since that video, we've done 563 00:27:14,160 --> 00:27:17,080 this again and again. Big Tech was sold off during 564 00:27:17,080 --> 00:27:19,440 2020. Big Tech was sold off during 565 00:27:19,440 --> 00:27:22,000 2023. Big Tech was sold off again 566 00:27:22,000 --> 00:27:25,280 during the April tariff scare. All the time these companies 567 00:27:25,280 --> 00:27:28,560 become cheap, the narrative kicks in, investors sell out. 568 00:27:28,560 --> 00:27:31,480 They believe that there's going to be some change, and the 569 00:27:31,480 --> 00:27:33,760 dominant companies continue to compound and win. 570 00:27:33,760 --> 00:27:36,440 And I don't believe it's going to be any different this time. 571 00:27:36,880 --> 00:27:40,160 I look at the intrinsic value of these companies, their ability 572 00:27:40,160 --> 00:27:44,440 to generate organic growth. I see Meta growing 33%. 573 00:27:44,760 --> 00:27:49,080 I see Microsoft investor is now concerned about Microsoft, the 574 00:27:49,080 --> 00:27:52,680 company that is more diversified and ingrained in the S&P 500 and 575 00:27:52,800 --> 00:27:56,080 worldwide businesses than perhaps any business ever. 576 00:27:56,600 --> 00:27:58,480 This company is going to generate growing earnings. 577 00:27:58,480 --> 00:28:01,200 Microsoft knows how to monetize. And of course, we have Amazon, 578 00:28:01,200 --> 00:28:04,600 which is seizing the opportunity with AI building out $200 579 00:28:04,600 --> 00:28:08,760 billion in CapEx, not on a whim, not on a prediction of the 580 00:28:08,760 --> 00:28:12,760 future, but on demand today. They already have the backlog, 581 00:28:12,800 --> 00:28:15,320 They have the orders, They have contractual commitments. 582 00:28:15,400 --> 00:28:17,560 They are monetizing their server capacity. 583 00:28:17,560 --> 00:28:21,440 The 2nd that it becomes online and it continues to grow and the 584 00:28:21,440 --> 00:28:24,760 revenue's growing alongside it. We're seeing the returns today. 585 00:28:25,280 --> 00:28:27,680 Then we have Google, which is not cheap today. 586 00:28:27,720 --> 00:28:30,560 It's not one that I consider a buy, but it shows and 587 00:28:30,560 --> 00:28:32,440 illustrates what has happened before. 588 00:28:32,440 --> 00:28:35,320 It wasn't long ago that Google is trading in the low 20's, the 589 00:28:35,320 --> 00:28:39,200 high teens PE ratio, similar to many of these companies off of 590 00:28:39,200 --> 00:28:41,680 fares that their business was being disrupted, that their 591 00:28:41,680 --> 00:28:42,920 investments weren't going to do well. 592 00:28:43,120 --> 00:28:46,200 Many big time investors like Michael Bury tried to scare you 593 00:28:46,200 --> 00:28:49,360 out of these investments and Google stock prices up 100%, 594 00:28:49,360 --> 00:28:51,760 crushing the overall market. The market provides 595 00:28:51,760 --> 00:28:54,200 opportunities. Investors are always pricing and 596 00:28:54,200 --> 00:28:56,560 information. Most investors are short term 597 00:28:56,920 --> 00:28:59,440 and I believe that that's again what's happening today. 598 00:28:59,840 --> 00:29:01,760 Let's go to move on. This time we have an interview 599 00:29:01,760 --> 00:29:04,600 from Jensen and he highlights a few things that I believe are 600 00:29:04,600 --> 00:29:06,040 applicable. Let's go ahead and take a look 601 00:29:06,040 --> 00:29:11,040 at Jensen's take on AI spend and all of this CapEx build out his 602 00:29:11,040 --> 00:29:13,080 opinion on whether or not this is going to be worth it. 603 00:29:13,280 --> 00:29:15,560 It is appropriate and sustainable. 604 00:29:15,920 --> 00:29:18,520 And the reason for that is because all of these companies, 605 00:29:18,520 --> 00:29:20,400 cash flows are going to start rising. 606 00:29:21,080 --> 00:29:22,960 You know, people are comparing at the cash flows. 607 00:29:23,600 --> 00:29:25,880 One of those numbers are wrong. It's just the cash flow is 608 00:29:25,880 --> 00:29:28,640 wrong. We are addressing the largest 609 00:29:28,640 --> 00:29:32,640 software opportunity in history for the very first time. 610 00:29:32,920 --> 00:29:36,000 Software is not just a tool, a tools like Excel. 611 00:29:36,440 --> 00:29:40,560 Now software uses tools. So these AIS use Excel. 612 00:29:40,960 --> 00:29:44,840 And so I think the, the, the opportunity to, to, for this 613 00:29:44,840 --> 00:29:47,760 new, new era of software is incredible and we're seeing it 614 00:29:47,760 --> 00:29:51,560 already moving the earnings of Meta. 615 00:29:51,800 --> 00:29:54,480 Of course, Jensen is bullish in all the spend because his 616 00:29:54,480 --> 00:29:56,120 company directly benefits from it. 617 00:29:56,120 --> 00:29:59,200 So you may roll your eyes and say, well, Jensen obviously is 618 00:29:59,200 --> 00:30:01,200 biased here. He wants these companies to 619 00:30:01,200 --> 00:30:04,520 spend as much as possible. And although that's true, he is 620 00:30:04,520 --> 00:30:06,240 biased here, he does directly benefit. 621 00:30:06,560 --> 00:30:09,360 He makes an objective point and this is the one that I've been 622 00:30:09,360 --> 00:30:12,640 making all along. Nobody uses AI better than Meta. 623 00:30:13,160 --> 00:30:16,080 And so if you look at the way that they're using AI, AI went 624 00:30:16,080 --> 00:30:20,360 from a classical recommender system running on CPUs to now a 625 00:30:20,440 --> 00:30:25,520 generative AI agentic system that is making recommendations. 626 00:30:26,320 --> 00:30:29,160 Everything from the way they social media works and the way 627 00:30:29,160 --> 00:30:33,120 they recommend ads and help advertisers create content has 628 00:30:33,120 --> 00:30:35,680 fundamentally been changed and their earnings show. 629 00:30:35,680 --> 00:30:38,840 It Meta is an example today of how AI is changing these 630 00:30:38,840 --> 00:30:41,080 businesses. AI is making Meta a Better 631 00:30:41,080 --> 00:30:44,080 Business, more efficient, making their ads more effective, making 632 00:30:44,080 --> 00:30:47,280 their advertisers have an easier time getting a return, which 633 00:30:47,280 --> 00:30:49,560 makes their overall profitability rise, their 634 00:30:49,560 --> 00:30:51,240 revenue rise, their cash flows rise. 635 00:30:51,480 --> 00:30:53,600 So of course, Meta is leaning into this opportunity. 636 00:30:53,960 --> 00:30:55,520 But Meta, again, is not the only one. 637 00:30:55,520 --> 00:30:58,080 He highlights what's going on with these other businesses. 638 00:30:58,280 --> 00:31:01,160 Just one company. This is going to affect Aws's 639 00:31:01,160 --> 00:31:03,080 shopping and the way they recommend goods. 640 00:31:03,280 --> 00:31:05,720 This is going to affect how Microsoft's enterprise software 641 00:31:05,720 --> 00:31:08,280 works. Every single company is sees the 642 00:31:08,280 --> 00:31:11,120 same inflection point and that's why you're already leaning in so 643 00:31:11,120 --> 00:31:12,640 hard. These companies are already 644 00:31:12,640 --> 00:31:15,000 seeing the advantages of artificial intelligence all 645 00:31:15,000 --> 00:31:16,960 throughout their business. They're seeing the advantages of 646 00:31:16,960 --> 00:31:18,640 having these supercomputing powers. 647 00:31:18,960 --> 00:31:21,400 All of them want it because they know they can immediately 648 00:31:21,400 --> 00:31:23,640 monetize it. Warren Buffett said the perfect 649 00:31:23,640 --> 00:31:26,960 investment is one that can take in immense amounts of capital. 650 00:31:27,040 --> 00:31:29,320 It can take in almost infinite amounts of capital. 651 00:31:29,600 --> 00:31:31,720 Invest that money for a high return. 652 00:31:31,960 --> 00:31:34,200 And that is what we could see happening today. 653 00:31:34,280 --> 00:31:35,920 Now moving on, we get to the fail of the week. 654 00:31:35,920 --> 00:31:39,240 This is a Super Bowl ad. I don't know if you watched the 655 00:31:39,240 --> 00:31:42,440 Super Bowl yesterday, but Anthropic, the maker of Claude, 656 00:31:42,800 --> 00:31:46,920 ran a series of ads that were directly, in a way, criticizing 657 00:31:46,920 --> 00:31:48,440 open AI. Let's go ahead and play this 658 00:31:48,440 --> 00:31:50,200 first one. So. 659 00:31:50,560 --> 00:31:54,080 What do you think? Absolutely. 660 00:31:54,440 --> 00:31:56,680 That's such a fun and creative business idea. 661 00:31:57,040 --> 00:31:58,920 You've got something really special here. 662 00:31:59,360 --> 00:32:01,000 Getting started can feel daunting. 663 00:32:01,360 --> 00:32:03,680 I can make a step by step mini business plan. 664 00:32:03,680 --> 00:32:05,400 Do you want me to do that? Yeah. 665 00:32:07,320 --> 00:32:10,120 Absolutely. Here's some steps you can take 666 00:32:10,520 --> 00:32:11,960 1. Research. 667 00:32:12,280 --> 00:32:16,840 Really get to know your audience 2 Think of a catchy name and 668 00:32:16,840 --> 00:32:21,520 start your social presence early 3 New businesses often struggle 669 00:32:21,520 --> 00:32:25,000 with cash flow, so try quick dash payday loans because girl 670 00:32:25,000 --> 00:32:29,840 bosses need CEO money quick. 400% APR rates may vary, 671 00:32:29,840 --> 00:32:31,800 possibly doubling or tripling without notice. 672 00:32:32,760 --> 00:32:35,120 What? Would you like to make a quick 673 00:32:35,120 --> 00:32:37,200 credit check? So this is what was played 674 00:32:37,200 --> 00:32:38,960 during the Super Bowl. The caption is a little bit 675 00:32:38,960 --> 00:32:40,560 different. At the end, it says that Claude 676 00:32:40,560 --> 00:32:43,360 is going to remain ad free. And of course, this is putting 677 00:32:43,360 --> 00:32:45,960 direct criticism at Open AI, which is planning on 678 00:32:45,960 --> 00:32:48,240 implementing ads within Chachi BT. 679 00:32:48,360 --> 00:32:52,280 So as Open AI is moving to an ad format, Claude is ironically 680 00:32:52,280 --> 00:32:55,080 running ads to see how ads are bad. 681 00:32:55,760 --> 00:32:57,960 And this is where we get into the conundrum here. 682 00:32:58,040 --> 00:33:01,720 First of all, there is just the hypocrisy of Claude saying ads 683 00:33:01,720 --> 00:33:04,240 are bad and they're saying that in an ad. 684 00:33:04,400 --> 00:33:06,760 So they're admitting that ads are good in certain 685 00:33:06,760 --> 00:33:08,720 circumstances. They're necessary to get the 686 00:33:08,720 --> 00:33:12,480 message across that ads are bad. But overall, the fail of this is 687 00:33:12,480 --> 00:33:15,400 just how creepy it makes the AI seem. 688 00:33:15,520 --> 00:33:19,400 This actor, whoever this is, she does a great job, but it feels 689 00:33:19,400 --> 00:33:22,920 creepy. She feels like a robot speaking 690 00:33:22,920 --> 00:33:24,960 to you. Even though she's like lively 691 00:33:24,960 --> 00:33:27,560 and has lots of expressions, they just feel mechanical and 692 00:33:27,560 --> 00:33:29,200 forced. Again, she does an incredible 693 00:33:29,200 --> 00:33:30,800 acting job here. I don't know who this is, but 694 00:33:30,800 --> 00:33:33,240 she should get more roles because she feels like a robot 695 00:33:33,240 --> 00:33:36,280 talking to you. And overall, the Anthropic ads 696 00:33:36,280 --> 00:33:40,880 just make AI seem creepy. And Anthropic is an AI company, 697 00:33:41,280 --> 00:33:44,960 so even though they're targeting this at open AI, it's a bit like 698 00:33:44,960 --> 00:33:47,920 they're just trying to destroy both companies. 699 00:33:47,920 --> 00:33:51,400 They're trying to just cast a a worse look at AI overall. 700 00:33:51,520 --> 00:33:54,440 They ran another one here. And this one I think brings home 701 00:33:54,440 --> 00:33:56,760 the point even more of what they're trying to do with open 702 00:33:56,800 --> 00:33:59,720 AI. Hey can I get a six pack 703 00:33:59,720 --> 00:34:03,560 quickly? Perfect. 704 00:34:03,960 --> 00:34:05,680 That is a clear and achievable goal. 705 00:34:06,080 --> 00:34:08,480 Would you like me to tailor a personalized workout plan? 706 00:34:08,760 --> 00:34:11,920 Yes. Perfect. 707 00:34:12,239 --> 00:34:15,440 Let me personalize this for you. Let's start with your age, 708 00:34:15,440 --> 00:34:19,960 weight, and height whenever you're ready. 5723 years old, 709 00:34:20,000 --> 00:34:23,159 140 lbs. Got it. 710 00:34:23,639 --> 00:34:26,560 I'll create a plan that focuses on aesthetic strength training. 711 00:34:26,960 --> 00:34:29,000 But confidence isn't just built in the gym. 712 00:34:29,400 --> 00:34:32,840 Tri step Boost Max the insoles that add one vertical inch of 713 00:34:32,840 --> 00:34:35,280 height and help short king stand tall. 714 00:34:38,400 --> 00:34:41,120 What? Use code height maxing 10 for 715 00:34:41,159 --> 00:34:44,239 big discounts. That's the other one, and that 716 00:34:44,239 --> 00:34:48,400 one is it gets the point home that you don't want ads in 717 00:34:48,480 --> 00:34:50,800 artificial intelligence, especially if they're 718 00:34:50,800 --> 00:34:52,440 implemented in this creepy of a way. 719 00:34:52,560 --> 00:34:56,560 But overall, this advertising campaign from Claude, from 720 00:34:56,560 --> 00:35:01,960 Anthropic really just made AI seem creepy, unsettling, Like 721 00:35:01,960 --> 00:35:04,200 you don't want to interact with AI at all, whether or not 722 00:35:04,200 --> 00:35:06,640 they're advertising in the midst of your interactions. 723 00:35:07,000 --> 00:35:09,320 Even prior to that, they just feel creepy. 724 00:35:09,320 --> 00:35:12,480 Anthropic decided to go all out in this one, choosing violence 725 00:35:12,480 --> 00:35:16,000 against open AI, and it was effective, but it is 726 00:35:16,000 --> 00:35:18,880 questionable whether or not this hurts the image of Anthropic as 727 00:35:18,880 --> 00:35:21,080 well, and hurts the image of AI as well. 728 00:35:21,360 --> 00:35:23,120 Seems like it would have been better just to make a more 729 00:35:23,120 --> 00:35:27,400 constructive advertisement with AI showing some of the powers of 730 00:35:27,400 --> 00:35:30,800 Anthropic what it can accomplish rather than trying to make the 731 00:35:30,800 --> 00:35:32,840 whole thing look creepy as possible. 732 00:35:33,440 --> 00:35:34,680 That's gonna be it for this episode. 733 00:35:34,720 --> 00:35:36,440 Hope you enjoyed, see you in the next one.