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Welcome back today on the Joseph
Carlson Show. 

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The major indices have performed
well this year with the S&P 500 

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and the QQQ making major gains. 
But these gains are being led by

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a handful of companies. 
We can see the overall map here 

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of the S&P 500 year to date. 
We have some of the bigger names

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like Microsoft, Apple, Google, 
Meta, Amazon, Costco, Eli Lilly,

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Broadcom, all making huge gains 
year to date. 

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But there's one company that 
really stands out that's already

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a large company. 
That is NVIDIA, which is up 160%

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year to date. 
That is an astronomical return 

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for a company the size of 
NVIDIA. 

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NVIDIA alone has accounted for 
roughly 1/3 of the S&P 500 gains

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year to date, meaning that if 
you took away this company from 

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the S&P 500, the S&P 500 would 
have returned around 11% instead

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of 17%. 
That's how big of an impact 

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NVIDIA alone has had. 
It's really been breathtaking. 

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It's been astronomical. 
Anytime a company has this large

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of an influence, this much 
attention and this much 

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momentum, I think it's important
to look at it from a value 

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investor perspective and that's 
what I plan to do in this video.

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I'm going to go out on a limb a 
bit. 

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I'll be giving the bear case for
NVIDIA and why I personally 

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believe this is an incredibly 
risky company to invest in 

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today. 
Now we also, of course, have 

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some other news to get to. 
Ed Yardini from Yardini Research

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gives his opinion on the market 
melt up. 

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Boeing just agreed to plead 
guilty to the 737 Max criminal 

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case. 
We'll be observing more of the 

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downfall of Boeing and the 
collapse of their company's 

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culture. 
And Paramount Global and 

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Skydance finally formally agreed
to a merger. 

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We'll be looking at how that 
impacts Paramount stock. 

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Now, I first want to start off 
by giving my bear case on 

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NVIDIA. 
And I want to start off by first

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prefacing this bear case. 
Anytime I give a bear case on 

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any popular stock, one like 
NVIDIA, there's a lot of risk to

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it. 
The risk of course is that the 

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stock races up after you release
your bear case. 

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Now, I don't have any position 
in NVIDIA. 

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I'm not short NVIDIA. 
I have no options or no position

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whatsoever on NVIDIA, so there's
no financial risk with being 

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bearish on NVIDIA for me. 
In fact, if NVIDIA stock races 

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upwards tomorrow after releasing
this video, I'm not out 

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anything. 
I haven't really lost anything. 

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I own a high quality portfolio 
full of companies that are doing

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fantastic. 
My performance has been great 

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over the past couple of years, 
so I don't have any issue if 

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NVIDIA continues to do well. 
And that's not my motivation 

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behind making this video. 
The reason that I come out with 

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bear cases on popular stocks is 
because I see a lot of retail 

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investors investing in the 
market and they throw their 

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money into whatever is doing 
best at the moment. 

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There's a post on Reddit just 
today saying my dad invested 

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$200,000 into NVIDIA last week 
and he's saying he could hold it

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for the next three years. 
What are your thoughts? 

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Good investment. 
These are the type of posts 

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we're seeing now with NVIDIA. 
People's dads throwing $200,000 

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into the stock just to hold it 
for a couple years and see how 

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things go. 
And this type of thing is to be 

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expected. 
Nvidia's phenomenal performance 

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this year brings a lot of 
attention to the stock, which 

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increases the chance of retail 
investors pouring money into 

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this company, for better or 
worse. 

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A lot of this is due to recency 
bias. 

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Recency bias is a normal thing. 
Most of us have this. 

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It just means that we give more 
attention to recent events over 

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historical events, and recently 
the best stock in the market is 

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NVIDIA by far. 
This also seems to follow 

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another pattern. 
Investors clamor into stocks 

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that have recently had 
incredible outperformance and 

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then they go on for years having
underperformance. 

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One of the best examples of this
is Tesla, a stock that has been 

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flat for over 3 1/2 years to 
this day. 

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Even after this recent rally, 
Tesla stocks still trades below 

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where it was in 2020 and well 
below where it was at the price 

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point in early 20/21. 
I made similar videos on Tesla 

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at the time calling out the 
insanity of Arc Invest $3000 

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price target for Tesla. 
In that video, I argued that 

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Apple is a much better 
opportunity than Tesla given the

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valuation and the fundamentals. 
Since that video, Tesla is still

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under the price point that it 
traded at 3 1/2 years ago. 

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When I released that video, 
Apple has increased by over 80%.

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Now I didn't come out with that 
video because I hate Tesla and 

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want it to fail. 
I came out with a video to 

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highlight a stock that was 
incredibly popular, being 

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promoted by many popular 
figures, saying that the demand 

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for Tesla's was unlimited, it 
would go on forever. 

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Saying that they were selling 
every vehicle they made and 

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their margins were going to 
March higher and higher and 

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higher, and they weren't going 
to run into any problems with 

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their Moat or competition. 
All of these things being said 

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about Tesla, how the company 
could not fail, and how the 

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stock justified the extreme 
valuations made me increasingly 

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nervous about the company. 
Another very popular retail 

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stock that I've given a bear 
case on is Palantir. 

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Three years ago, during peak 
bullishness for Palantir, at a 

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time point where Palantir was 
doing incredibly well, I had a 

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poor cold water on the 
situation. 

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I released a video called Why 
I'm Not Buying Palantir. 

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I went over the business 
fundamentals, the growth 

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prospects, and the valuation, 
expressing my concern that 

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Palantir traded at an incredibly
high valuation. 

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That video was released February
19th, 2021. 

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The stock price at the time was 
$29.00 per share and even 3 1/2 

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years later, Palantir still does
not to this day trade above that

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price. 
Now again, Tesla and Palantir 

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are both great companies. 
I'm not against what they're 

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doing or the companies 
themselves. 

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In fact, I could see myself 
investing in them with the right

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situation. 
But both of these stocks got 

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into situations where good 
companies made poor investments.

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So the purpose of making these 
bear case videos is not to bet 

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against these companies or 
profit from their demise. 

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It's to give a different 
perspective for retail investors

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that see these as fantastic 
investments. 

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In many cases, great companies 
can make poor investments if you

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invest in the company at the 
wrong time. 

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And with NVIDIA, I think it's 
very questionable. 

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In fact, I think it's very risky
to invest in it at this time. 

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The first thing that we can 
point to is how NVIDIA makes 

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money. 
Simply put, where do they get 

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their revenue from? 
As I've gone over previously on 

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this channel, they get their 
revenue from data centers. 

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That is where the majority of 
their revenue and growth is 

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coming from. 
It's not coming from gaming, 

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professional visualization, or 
automotive. 

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These are nice parts of the 
company. 

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I guess they're meaningful to 
some degree, but as you can see,

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all three of these combined are 
still less in revenue than they 

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were in 2021. 
O The growth is not coming from 

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these three segments. 
It's all coming from data 

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centers. 
NVIDIA is in the business of 

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providing chips for data 
centers. 

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These chips are massive. 
In fact, they're more like 

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entire server racks instead of 
chips. 

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And these chips are expensive, 
some of them being $30,000 and 

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upwards for a single chip. 
NVIDIA has dominated the data 

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center chip business, growing it
exponentially over the past year

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from $4 billion in revenue up to
above $20 billion in revenue, 

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and it's still growing. 
And while the revenue has grown 

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and the margins have expanded, 
the free Cash Cash flow has also

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exponentially expanded. 
Here's the free cash flow of 

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NVIDIA since 1999. 
You can barely see the amount of

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free cash flow made-up until 
2021. 

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You see a little bit right here.
It was doing good in 2021. 

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And then you have the explosive 
growth, earning $15 billion in 

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free cash flow in a single 
quarter. 

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This puts it on track to earn 
$60 billion in free cash flow 

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this year. 
The returns on capital employed,

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a measurement of how effectively
a company can reinvest its cash 

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that it earns, is also 
increasing exponentially. 

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This is a metric that was not 
reliable historically for 

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NVIDIA. 
It had it in the 5% range, which

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is on par with companies like 
Ford or GM, and then it went up 

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into the 15% range, which that's
getting closer to companies like

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Costco. 
Very reliable and predictable 

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companies. 
But then it ebbed and flowed 

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over time. 
Now over the past year, the 

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returns on capital employed have
surged upwards of 27%. 

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This is a 5X of their returns on
capital employed. 

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Gross margins are expanding, but
more importantly, operating 

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margins have doubled their 
historical average over the past

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five years, racing up to 65%. 
Profit margins are now around 

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57%. 
Whatever metric you look at, you

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can tell that business is good 
for NVIDIA and specifically the 

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data centers. 
But that raises the question of 

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duration. 
How long can NVIDIA sustain 

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these type of metrics and this 
type of growth? 

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Sequoia Capital released 
research looking into this 

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question. 
They call it AI $200 billion 

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question. 
The generative AI wave which 

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began last summer has gone into 
hyper speed. 

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The cattles for this double 
acceleration was NVIDIA Q2 

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earnings guide and and 
subsequent beat the signal to 

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the market the insatiable level 
of demand for GPU's and AI 

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training. 
Before Nvidia's announcement, 

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consumer launches like ChatGPT, 
Mid Journey and Stable Diffusion

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had raised AI into the public 
consciousness. 

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With Nvidia's results, founders 
and investors were delivered 

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empirical evidence that AI can 
generate billions of dollars in 

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net new revenue. 
This has shifted the category 

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into its highest gear yet. 
We've seen all of this over the 

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past two years. 
ChatGPT and Nvidia's quarters 

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leading to incredible gains by 
the company, the stock price 

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going up 10X over the past 
couple of years. 

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While investors have 
extrapolated much of Nvidia's 

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results and AI investments are 
now happening at a torrid pace 

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and at record valuations. 
A big open question remains. 

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What are all these GPUs being 
used for? 

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Who is the customer's customer? 
How much value needs to be 

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generated for this rapid rate of
investment to pay off? 

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How is all of this spending 
being justified? 

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Consider the following. 
For every $1.00 spent on GPUs, 

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roughly $1.00 needs to be spent 
on energy cost to run the GPU in

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a data centre. 
So if NVIDIA sells $50 billion 

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in run rate GPU revenue by the 
end of the year, a conservative 

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estimate based on analyst 
forecast, that implies 

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approximately $100 billion in 
data centre expenditures. 

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The end user of the GPU, for 
example, Starbucks X, Tesla, 

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GitHub Copilot and other new 
start-ups need to earn a margin 

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too. 
Let's assume that they need to 

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earn 50% margins. 
This implies that for each year 

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of current GPU CapEx, $200 
billion of lifetime revenue 

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would need to be generated by 
the GPUs to pay back the upfront

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capital investment. 
This does not include any margin

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for cloud vendors. 
For them to earn a positive 

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return, the total revenue 
requirement would be even 

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higher. 
So the argument that Sequoia is 

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making here is basically for 
NVIDIA to be selling $22 billion

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worth of data center chips and 
GPUs, someone needs to be making

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money on those sales. 
It can't just be the cloud 

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companies buying these chips 
that need to make money. 

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The cloud company's customers 
also need to make money in the 

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process. 
Based on public filings, much of

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the incremental data center 
build out is coming from big 

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tech companies. 
Google, Microsoft and Meta, for 

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example, have reported an 
increase in data center CapEx. 

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Reports indicate that Bident, 
Tencent, Alibaba are big NVIDIA 

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customers as well. 
On a go forward basis, companies

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like Amazon, Oracle, Apple, 
Tesla should also be important 

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contributors. 
The important question to be 

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asking is how much of this CapEx
build out is linked to true end 

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customer demand and how much of 
it is being built out in 

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anticipation of end customer 
demand. 

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This is a $200 billion question.
If you add up the different 

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companies and how much they're 
expecting to generate in AI 

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revenue, you have open AI 
generating $1 billion in 

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revenue. 
You have Microsoft saying that 

229
00:11:29,000 --> 00:11:32,120
they're going to generate around
$10 billion with Microsoft 

230
00:11:32,120 --> 00:11:34,000
Copilot. 
We can assume that Google will 

231
00:11:34,000 --> 00:11:36,560
generate around similar amounts 
of revenue from their AI 

232
00:11:36,560 --> 00:11:38,800
products. 
Met and Apple each generate $10 

233
00:11:38,800 --> 00:11:42,240
billion in revenues from AI. 
And let's use $5 billion as a 

234
00:11:42,240 --> 00:11:46,320
placeholder from Oracle by 
Dance, Alibaba, Tencent X, and 

235
00:11:46,320 --> 00:11:48,640
Tesla. 
These are all dummy assumptions,

236
00:11:48,920 --> 00:11:51,680
but the point is that even if 
you assume these extremely 

237
00:11:51,680 --> 00:11:57,000
generous gains from AI, there's 
still a $125 billion hole that 

238
00:11:57,000 --> 00:12:00,680
needs to be filled for each year
of CapEx at today's level. 

239
00:12:00,680 --> 00:12:03,600
Sequoia goes on to argue that 
this leaves a huge gap to be 

240
00:12:03,600 --> 00:12:06,440
filled, and that gap will be 
filled by start up companies. 

241
00:12:06,720 --> 00:12:10,840
Start up companies will benefit 
from the overbuilt ecosystem of 

242
00:12:11,000 --> 00:12:13,320
AI. 
They'll leverage cloud companies

243
00:12:13,320 --> 00:12:17,040
and their huge infrastructure to
be able to offer AI products to 

244
00:12:17,040 --> 00:12:19,320
their customers at very low 
expense. 

245
00:12:19,560 --> 00:12:23,120
They note that during historical
technology cycles, overbuilding 

246
00:12:23,120 --> 00:12:26,120
of infrastructure has often 
incinerated capital. 

247
00:12:26,160 --> 00:12:29,000
Bringing down the marginal cost 
of AI is good for start up 

248
00:12:29,000 --> 00:12:30,680
companies. 
But where does that leave 

249
00:12:30,680 --> 00:12:33,200
NVIDIA? 
NVIDIA is benefiting directly 

250
00:12:33,200 --> 00:12:35,840
from being the leader in AI 
chips during a time where 

251
00:12:35,840 --> 00:12:38,680
there's this insatiable demand 
for AI chips. 

252
00:12:39,040 --> 00:12:42,480
But as we've seen and as they 
note, in many cases, that leads 

253
00:12:42,480 --> 00:12:46,280
to it being overbuilt, meaning 
that too many companies race to 

254
00:12:46,280 --> 00:12:49,640
become the AI leaders. 
They buy too many chips and then

255
00:12:49,640 --> 00:12:51,920
they're left over building their
infrastructure. 

256
00:12:52,000 --> 00:12:55,960
In this case, the estimates are 
somewhere around $125 billion, 

257
00:12:56,080 --> 00:12:58,920
even from optimistic assumptions
from their biggest customers. 

258
00:12:59,040 --> 00:13:02,120
If smaller startup companies are
not able to fill in those gaps, 

259
00:13:02,120 --> 00:13:04,600
then NVIDIA could be left with a
glut and demand. 

260
00:13:04,640 --> 00:13:07,240
A glut and demand would affect 
every meaningful fundamental of 

261
00:13:07,240 --> 00:13:09,800
the company. 
So my first major concern with 

262
00:13:09,800 --> 00:13:13,560
NVIDIA right now is the 
possibility of an overbuilt AI 

263
00:13:13,560 --> 00:13:16,240
infrastructure. 
If that takes place and they 

264
00:13:16,240 --> 00:13:19,280
eventually have a glut and 
demand, that glut and demand 

265
00:13:19,280 --> 00:13:21,880
will lead to declining or 
decelerating fundamental 

266
00:13:21,880 --> 00:13:24,720
metrics. 
And that leads us to concern #2 

267
00:13:24,760 --> 00:13:27,480
there's two different setups to 
a stock, one that I consider to 

268
00:13:27,480 --> 00:13:31,040
be the perfect situation and one
that I consider to be the worst 

269
00:13:31,040 --> 00:13:33,680
situation. 
I always try to find companies 

270
00:13:33,680 --> 00:13:36,680
that lean more to this left 
side, more to the perfect 

271
00:13:36,680 --> 00:13:39,640
situation, because it leads to 
outperformance. 

272
00:13:39,920 --> 00:13:43,120
Of course, the worst situation 
often leads to underperformance.

273
00:13:43,480 --> 00:13:46,520
So let's go ahead and go through
this under the perfect ideal 

274
00:13:46,520 --> 00:13:48,400
situation for the setup of a 
stock. 

275
00:13:48,760 --> 00:13:51,880
You want a company that has 
accelerating revenue growth. 

276
00:13:52,480 --> 00:13:55,080
Now, accelerating revenue growth
does not mean a company that's 

277
00:13:55,080 --> 00:13:58,600
growing revenue. 
A company may grow revenue 10% 

278
00:13:58,640 --> 00:14:01,280
year over year over year. 
That company does not have 

279
00:14:01,280 --> 00:14:05,080
accelerating revenue growth. 
A company that has accelerating 

280
00:14:05,080 --> 00:14:09,200
revenue growth means the rate of
growth is increasing year over 

281
00:14:09,200 --> 00:14:12,400
year. 
So one year it's growing 5% and 

282
00:14:12,400 --> 00:14:16,440
then suddenly it's growing 10% 
or 15% or 20%. 

283
00:14:16,560 --> 00:14:19,440
It's great for companies to have
continually growing revenue, but

284
00:14:19,440 --> 00:14:22,080
it's incredible if a company can
have accelerating revenue 

285
00:14:22,080 --> 00:14:24,520
growth, especially when it's 
unexpected. 

286
00:14:24,640 --> 00:14:27,240
Now, we also have the same thing
here with earnings growth. 

287
00:14:27,960 --> 00:14:30,040
We have accelerating earnings 
growth. 

288
00:14:30,440 --> 00:14:32,920
Again, this doesn't mean that 
they're earning the same amount 

289
00:14:32,920 --> 00:14:34,800
every year. 
It means that they're earning at

290
00:14:34,800 --> 00:14:38,040
an increased rate every year. 
These type of companies 

291
00:14:38,040 --> 00:14:39,960
typically lead to 
outperformance. 

292
00:14:39,960 --> 00:14:43,080
We also have expanding margins. 
If the company has accelerating 

293
00:14:43,080 --> 00:14:46,240
revenue growth, accelerating 
earnings per share growth and 

294
00:14:46,240 --> 00:14:50,320
expanding margins at the same 
time, that is a win, win, win. 

295
00:14:50,520 --> 00:14:54,160
That is a situation where your 
stock is going to go up almost 

296
00:14:54,160 --> 00:14:56,640
definitely. 
In fact, every situation that 

297
00:14:56,640 --> 00:14:59,520
I've seen this with the stock, 
the stock price goes up. 

298
00:14:59,960 --> 00:15:03,520
And then finally, to cap this 
off, the perfect situation in my

299
00:15:03,520 --> 00:15:06,360
opinion is when you get 
accelerating revenue growth, 

300
00:15:06,440 --> 00:15:10,400
earnings growth and margin 
expansion tied together with a 

301
00:15:10,400 --> 00:15:14,560
low starting valuation, an 
undemanding valuation to start 

302
00:15:14,560 --> 00:15:18,000
things off, leading to multiple 
expansion over time. 

303
00:15:18,520 --> 00:15:22,280
A company that fit this 
situation was Netflix two years 

304
00:15:22,280 --> 00:15:24,280
ago. 
At one point, investors were so 

305
00:15:24,280 --> 00:15:26,840
bearish on Netflix that they 
traded the stock down to around 

306
00:15:26,840 --> 00:15:31,360
$170 per share, right below 
$200.00 per share for a couple 

307
00:15:31,360 --> 00:15:33,800
of months. 
During this time period, Netflix

308
00:15:33,800 --> 00:15:38,560
had a 15 Forward PE ratio. 
It was a lower multiple than the

309
00:15:38,560 --> 00:15:40,640
market. 
Netflix had a low starting 

310
00:15:40,640 --> 00:15:43,240
valuation leading to multiple 
expansion. 

311
00:15:43,240 --> 00:15:47,840
Netflix went from a 15 Ford PE 
ratio now back up to a 36 Ford 

312
00:15:47,840 --> 00:15:49,760
PE ratio during this time 
period. 

313
00:15:49,760 --> 00:15:52,880
Two years ago, Netflix had 
accelerating revenue growth. 

314
00:15:53,000 --> 00:15:57,480
Netflix's flat revenue in 2021 
is what caused the 70% sell off 

315
00:15:57,480 --> 00:15:59,440
in the stock. 
Many investors thought the 

316
00:15:59,440 --> 00:16:03,040
company was done for because the
revenue was going down, but then

317
00:16:03,040 --> 00:16:06,680
we had a re acceleration in 
revenue that reignited investors

318
00:16:06,680 --> 00:16:10,120
bullishness on the stock. 
Accelerating revenue caused the 

319
00:16:10,120 --> 00:16:12,480
multiple to expand. 
All of these factors of 

320
00:16:12,480 --> 00:16:16,040
accelerating revenue growth, 
earnings margin expansion, and a

321
00:16:16,040 --> 00:16:19,320
low starting multiple led to an 
incredible return for this 

322
00:16:19,320 --> 00:16:21,200
stock. 
From this point, Netflix is up 

323
00:16:21,200 --> 00:16:24,000
267%. 
This incredible return is a 

324
00:16:24,000 --> 00:16:26,120
result of this perfect 
situation. 

325
00:16:26,640 --> 00:16:28,520
But then we move on to the worst
situation. 

326
00:16:28,520 --> 00:16:30,040
We have decelerating revenue 
growth. 

327
00:16:30,080 --> 00:16:32,160
We have decelerating earnings 
per share growth. 

328
00:16:32,480 --> 00:16:35,280
We have margin compression with 
margins going down. 

329
00:16:35,680 --> 00:16:38,280
We have a high starting 
valuation with very high 

330
00:16:38,280 --> 00:16:41,960
expectations from investors 
leading to multiple compression 

331
00:16:41,960 --> 00:16:44,520
over time. 
The worst situation is the exact

332
00:16:44,520 --> 00:16:46,400
opposite of the perfect 
situation. 

333
00:16:46,400 --> 00:16:50,040
And if we ask the important 
question here, which situation 

334
00:16:50,040 --> 00:16:53,640
does NVIDIA stock appropriately 
fit into right now? 

335
00:16:54,000 --> 00:16:55,360
I think we can take a look at 
that. 

336
00:16:55,640 --> 00:16:57,120
The first question is regarding 
revenue. 

337
00:16:57,120 --> 00:17:00,280
NVIDIA has benefited 
dramatically from accelerating 

338
00:17:00,280 --> 00:17:02,800
revenue growth. 
We've seen that over the past 

339
00:17:02,800 --> 00:17:05,520
year, but that is not going to 
happen over the next year. 

340
00:17:05,760 --> 00:17:09,280
Nvidia's revenue growth is going
to decelerate quickly. 

341
00:17:09,400 --> 00:17:13,960
Nvidia's revenue growth is going
from rates of 97% down to 30% 

342
00:17:14,280 --> 00:17:16,680
and from 30%. 
It's only going to decelerate 

343
00:17:16,720 --> 00:17:18,920
more and more. 
So we have decelerating revenue 

344
00:17:18,920 --> 00:17:20,160
growth. 
What about their earnings 

345
00:17:20,160 --> 00:17:21,680
growth? 
The earnings per share has gone 

346
00:17:21,680 --> 00:17:26,520
up 631% over the past year. 
It is impossible for NVIDIA to 

347
00:17:26,520 --> 00:17:28,200
keep these earnings growth rates
up. 

348
00:17:28,400 --> 00:17:31,640
It is going to decelerate 
dramatically over the next year.

349
00:17:31,720 --> 00:17:34,440
Margins is another big question 
and there's a lot of debate 

350
00:17:34,440 --> 00:17:37,400
about margins with NVIDIA. 
We know that NVIDIA stock has 

351
00:17:37,400 --> 00:17:39,880
dramatically benefited from 
rising margins over the past 

352
00:17:39,880 --> 00:17:42,800
year, but the question now is 
whether or not those margins are

353
00:17:42,800 --> 00:17:46,400
likely to continue going up or 
more likely to go down. 

354
00:17:46,880 --> 00:17:50,640
If I have to take a guess here, 
with margins at 65% for 

355
00:17:50,640 --> 00:17:53,600
something that every company is 
now trying to build out because 

356
00:17:53,600 --> 00:17:57,360
of how profitable it is, I think
the margins are more likely to 

357
00:17:57,360 --> 00:17:59,880
go down over the next three 
years than up. 

358
00:18:00,360 --> 00:18:01,720
There is a chance they could go 
up. 

359
00:18:01,720 --> 00:18:05,160
Maybe NVIDIA can protect their 
Moat completely, but I have to 

360
00:18:05,160 --> 00:18:08,320
believe there's more of a chance
of margins going down than up. 

361
00:18:08,360 --> 00:18:11,320
And then finally, the current 
valuation of the stock, is it a 

362
00:18:11,320 --> 00:18:14,880
low valuation that will lead to 
multiple expansion or high 

363
00:18:14,880 --> 00:18:17,400
starting valuation leading to 
multiple compression? 

364
00:18:17,400 --> 00:18:21,640
NVIDIA currently has a 54 PE 
ratio and a 40 price to sales. 

365
00:18:21,960 --> 00:18:24,960
This is a pretty high valuation.
And if I'm looking at this stock

366
00:18:24,960 --> 00:18:28,360
right now, I think there's far 
more chance that it's going to 

367
00:18:28,360 --> 00:18:31,360
have multiple compression over 
the next five years than 

368
00:18:31,360 --> 00:18:34,080
multiple expansion. 
Maybe the PE ratio could go to 

369
00:18:34,080 --> 00:18:36,640
60 or 70. 
Maybe the price to sales could 

370
00:18:36,640 --> 00:18:40,440
go to 50, but overall I see far 
more downside with their 

371
00:18:40,440 --> 00:18:43,280
multiples than upside. 
So it's priced at a price right 

372
00:18:43,280 --> 00:18:45,800
now with a high starting 
valuation and very high 

373
00:18:45,800 --> 00:18:48,880
expectations from investors. 
When I look over the situation 

374
00:18:48,880 --> 00:18:51,920
overall, I see a company that is
likely to have decelerating 

375
00:18:51,920 --> 00:18:54,800
revenue growth, decelerating 
earnings growth, margin 

376
00:18:54,800 --> 00:18:57,560
compression, and it's at a 
pretty high valuation. 

377
00:18:57,680 --> 00:19:00,240
Now, that doesn't mean that the 
stock is doomed and video could 

378
00:19:00,240 --> 00:19:03,960
do just fine, but it has a lot 
of factors working against it. 

379
00:19:04,400 --> 00:19:06,960
It has a far more uphill battle 
than when it was in the 

380
00:19:06,960 --> 00:19:10,400
situation two years ago where 
everything was accelerating, 

381
00:19:10,560 --> 00:19:13,760
everything was expanding, and 
the valuation was lower again. 

382
00:19:13,760 --> 00:19:15,280
It's impossible to see the 
future. 

383
00:19:15,280 --> 00:19:18,080
Maybe NVIDIA will continue to 
trade upwards with incredible 

384
00:19:18,080 --> 00:19:20,280
demand, especially in the short 
term. 

385
00:19:20,600 --> 00:19:23,240
But over the next three to five 
years, I have to look at this 

386
00:19:23,240 --> 00:19:26,720
from the perspective of a value 
investor with the fundamentals, 

387
00:19:26,720 --> 00:19:30,040
the valuation and the future 
growth prospects of the company.

388
00:19:30,440 --> 00:19:32,760
And right now, I see a lot of 
reasons to be a little bit 

389
00:19:32,760 --> 00:19:35,960
concerned about this company 
more than to be extremely 

390
00:19:35,960 --> 00:19:38,480
bullish on it. 
I consider it right now an 

391
00:19:38,480 --> 00:19:41,720
incredibly risky proposition to 
invest in NVIDIA. 

392
00:19:41,920 --> 00:19:44,000
The final point I'll make is 
something that I think is 

393
00:19:44,000 --> 00:19:47,480
interesting to look at and that 
is that overall insiders are 

394
00:19:47,480 --> 00:19:51,080
selling shares of their stock, 
not just their compensation 

395
00:19:51,080 --> 00:19:53,840
through their stock based comp, 
but they're actually unloading 

396
00:19:53,840 --> 00:19:56,760
some of their position. 
Especially over the past month. 

397
00:19:57,240 --> 00:20:00,080
NVIDIA insiders have been 
selling around 1% of their stake

398
00:20:00,080 --> 00:20:03,960
in the company just in the past 
month alone, which is not a huge

399
00:20:03,960 --> 00:20:06,000
deal. 
In fact, I don't consider this 

400
00:20:06,320 --> 00:20:09,800
overall that big of a deal in 
and of itself and I'd never make

401
00:20:09,800 --> 00:20:13,160
a bear case on a company 
centered around insiders taking 

402
00:20:13,160 --> 00:20:15,520
some gains. 
So in and of itself, I don't 

403
00:20:15,520 --> 00:20:17,320
think that this is too big of a 
problem. 

404
00:20:17,760 --> 00:20:20,480
When I'm looking overall at the 
stock in the situation right 

405
00:20:20,480 --> 00:20:23,520
now, I think it's just another 
thing to throw in, another thing

406
00:20:23,520 --> 00:20:26,040
to mention. 
Because we do see insiders 

407
00:20:26,120 --> 00:20:28,560
overall taking a bit of the 
gains here. 

408
00:20:28,800 --> 00:20:31,720
I don't see any buys coming 
through with insiders. 

409
00:20:31,760 --> 00:20:34,280
So there's my overall concerns 
about NVIDIA and a different 

410
00:20:34,280 --> 00:20:37,160
perspective on a stock that has 
been incredibly popular. 

411
00:20:37,160 --> 00:20:39,000
Now let's go ahead and move on 
to some news here. 

412
00:20:39,080 --> 00:20:41,760
We know the market has been 
going up over the past couple of

413
00:20:41,760 --> 00:20:45,240
weeks, seemingly every day, 
inching up inch by inch. 

414
00:20:45,640 --> 00:20:49,800
And Ed Yardeni, who has a lot of
information on the market, he 

415
00:20:49,800 --> 00:20:52,920
publishes a lot of charts, says 
that this is a slow motion 

416
00:20:52,960 --> 00:20:55,280
market melt up. 
I think the way I would describe

417
00:20:55,280 --> 00:20:59,400
things as we're in a slow motion
melt up the market just for the 

418
00:20:59,400 --> 00:21:02,880
past few weeks has just 
continued to March higher to new

419
00:21:02,880 --> 00:21:05,440
record highs. 
And it's done it on 

420
00:21:05,680 --> 00:21:07,960
disappointing economic 
indicators. 

421
00:21:07,960 --> 00:21:11,560
Because I think investors have 
concluded that let's not worry 

422
00:21:11,560 --> 00:21:15,680
too much about the the economy 
slowing or even a recession, 

423
00:21:16,000 --> 00:21:21,040
because if that were to even 
become a significant risk, the 

424
00:21:21,040 --> 00:21:23,200
Fed will move pretty quickly to 
lower interest rates. 

425
00:21:23,200 --> 00:21:25,680
I don't think the Fed needs to 
lower interest rates, but the 

426
00:21:26,160 --> 00:21:28,760
the Fed looks like they're ready
to lower them if necessary. 

427
00:21:28,960 --> 00:21:31,840
Ed argues that the reason the 
market continues to go upwards 

428
00:21:31,840 --> 00:21:35,560
despite weak economic data is 
because investors realize that 

429
00:21:35,560 --> 00:21:39,600
the Fed is on their side and the
Fed will lower interest rates if

430
00:21:39,600 --> 00:21:41,440
the economy ever runs into 
trouble. 

431
00:21:41,640 --> 00:21:43,840
I don't agree with him here. 
I don't think that's the reason 

432
00:21:43,840 --> 00:21:45,840
that most investors continue to 
buy. 

433
00:21:46,240 --> 00:21:49,160
I believe most investors buy 
stocks repeatedly and 

434
00:21:49,160 --> 00:21:52,880
continually and put money into 
their four O 1 KS and retirement

435
00:21:52,880 --> 00:21:55,920
accounts because they're long 
term investors, because they've 

436
00:21:55,920 --> 00:21:59,320
been told their entire life to 
buy the stock market and not 

437
00:21:59,320 --> 00:22:02,920
worry if there's a recession, 
eventually it will recover. 

438
00:22:03,200 --> 00:22:05,600
Most investors understand 
throughout history that we've 

439
00:22:05,600 --> 00:22:08,280
gone through recessions. 
Most investors in America 

440
00:22:08,280 --> 00:22:11,240
investing into the retirement 
accounts aren't trying to time 

441
00:22:11,240 --> 00:22:12,760
the ebbs and flows of the 
market. 

442
00:22:13,240 --> 00:22:15,760
So I think overall, the reason 
the market continues to go up, 

443
00:22:15,800 --> 00:22:18,280
the reason that investors 
continue to buy, is because 

444
00:22:18,280 --> 00:22:21,480
these companies are doing well. 
Investors want to own them, and 

445
00:22:21,480 --> 00:22:24,160
they're not concerned about the 
temporary question of a 

446
00:22:24,160 --> 00:22:26,400
recession. 
Now moving on, Ed gets to his 

447
00:22:26,400 --> 00:22:29,240
projections of what he thinks 
the earnings per share will be 

448
00:22:29,240 --> 00:22:33,080
for the S&P 500 in 2024. 
Yeah, I, I think we're going to 

449
00:22:33,080 --> 00:22:37,520
do $250 a share this year. 
That's up from $225.00 a share 

450
00:22:37,520 --> 00:22:40,560
last year. 
I think next year we're going to

451
00:22:40,560 --> 00:22:43,760
do 270 dollars a share than 
$300.00 a share. 

452
00:22:44,360 --> 00:22:46,400
By the end of the decade, I 
think we could be looking at 

453
00:22:46,400 --> 00:22:50,400
$400.00 a share. 
Ed's forecast is for the SP500 

454
00:22:50,400 --> 00:22:52,000
to earn 250 by the end of the 
year. 

455
00:22:52,240 --> 00:22:55,760
Tom Lee's was 285. 
So he's not quite as bullish as 

456
00:22:55,760 --> 00:22:58,000
Tom Lee, but he still thinks 
that the earnings are going to 

457
00:22:58,000 --> 00:22:59,480
be higher than the previous 
year's. 

458
00:22:59,760 --> 00:23:02,520
Now moving on, we have news that
Boeing agrees to plead guilty in

459
00:23:02,520 --> 00:23:07,040
the 737 Max criminal case. 
Boeing will formally acknowledge

460
00:23:07,040 --> 00:23:10,040
the guilt and accept fresh 
punishment over its dealings 

461
00:23:10,040 --> 00:23:14,000
with the Federal Aviation 
Administration before 2737 Max 

462
00:23:14,000 --> 00:23:18,320
crashes that killed 346 people. 
As part of the plea to one count

463
00:23:18,320 --> 00:23:22,480
of conspiracy to defraud the US,
prosecutors asked the company to

464
00:23:22,480 --> 00:23:27,760
pay a second $244 million 
criminal fine and spend $455 

465
00:23:27,760 --> 00:23:30,920
million over the next three 
years to improve its compliance 

466
00:23:30,920 --> 00:23:33,760
and safety programs. 
Boeing also must hire 

467
00:23:33,840 --> 00:23:36,840
independent monitors for three 
years to oversee these 

468
00:23:36,840 --> 00:23:38,960
improvements. 
Pleading guilty creates business

469
00:23:38,960 --> 00:23:40,840
challenges for Boeing. 
Companies with felony 

470
00:23:40,840 --> 00:23:44,720
convictions can be suspended or 
barred as defense contractors. 

471
00:23:45,000 --> 00:23:48,360
Boeing is expected to seek a 
waiver for that consequence. 

472
00:23:48,480 --> 00:23:51,200
The company was awarded Defense 
Department contracts last year 

473
00:23:51,200 --> 00:23:54,280
valued at 22.8 billion. 
Also, as part of this plea 

474
00:23:54,280 --> 00:23:56,720
agreement, Boeing board of 
directors agreed to meet with 

475
00:23:56,720 --> 00:23:59,800
victims families. 
Now when I look over this 

476
00:23:59,920 --> 00:24:04,040
consequence for what Boeing did,
I think they got a slap on the 

477
00:24:04,040 --> 00:24:06,520
wrist. 
I think this is way below what 

478
00:24:06,520 --> 00:24:07,800
their punishment should have 
been. 

479
00:24:08,280 --> 00:24:11,240
Boeing didn't just get things 
wrong, they didn't just make an 

480
00:24:11,240 --> 00:24:14,400
honest mistake. 
They intentionally and willfully

481
00:24:14,400 --> 00:24:18,320
put dangerous planes on the 
tarmac with passengers in it. 

482
00:24:18,320 --> 00:24:22,200
They didn't do any proper checks
before the 2nd crash after they 

483
00:24:22,200 --> 00:24:24,600
knew that something was 
dramatically wrong with the 

484
00:24:24,600 --> 00:24:28,040
first one. 
This is what led to 346 people 

485
00:24:28,040 --> 00:24:30,280
dying. 
Around half of those people 

486
00:24:30,360 --> 00:24:33,600
still could be alive if they 
properly identified the problem 

487
00:24:33,800 --> 00:24:36,640
after the first plane crash. 
And not only did they not do the

488
00:24:36,640 --> 00:24:39,120
checks, but they also blame the 
pilots. 

489
00:24:39,320 --> 00:24:42,320
After the crash. 
The CEO of the company went in a

490
00:24:42,320 --> 00:24:45,600
press conference and said that 
it was pilot error and that as 

491
00:24:45,600 --> 00:24:48,040
far as they could tell, Boeing 
did nothing wrong. 

492
00:24:48,520 --> 00:24:51,320
So they were victim blaming 
after this crash which killed 

493
00:24:51,320 --> 00:24:55,160
346 people when their planes and
the faulty design of the M cast 

494
00:24:55,160 --> 00:24:57,440
system was the reason for the 
crash. 

495
00:24:57,600 --> 00:25:02,000
The fact that Boeing is having 
to pay less than $1 billion, you

496
00:25:02,000 --> 00:25:06,360
have 244 million and then 
455,000,000 over the next three 

497
00:25:06,360 --> 00:25:09,640
years is a complete miscarriage 
of justice here. 

498
00:25:09,880 --> 00:25:12,840
That is a slap on the wrist for 
a company that made huge 

499
00:25:12,840 --> 00:25:15,680
mistakes. 
Last year, Boeing made $4.4 

500
00:25:15,680 --> 00:25:19,880
billion in free cash flow. 
So that's not even 1/4 of one 

501
00:25:19,880 --> 00:25:22,680
year free cash flow over the 
next three years. 

502
00:25:22,880 --> 00:25:25,080
And this is the big penalty that
Boeing's given. 

503
00:25:25,120 --> 00:25:28,000
The plea deal falls short of 
what families of the Max crash 

504
00:25:28,000 --> 00:25:30,640
victims had wanted. 
They asked federal prosecutors 

505
00:25:30,640 --> 00:25:33,680
to seek fines as high as around 
25 billion. 

506
00:25:34,200 --> 00:25:37,280
Now $25 billion I think is a is 
a lot of money. 

507
00:25:37,560 --> 00:25:39,840
I could see them coming down 
from that number. 

508
00:25:40,160 --> 00:25:43,240
But even having around $5 
billion of fines would be a nice

509
00:25:43,240 --> 00:25:46,320
hefty punishment for Boeing. 
The fact that they brought it 

510
00:25:46,320 --> 00:25:50,680
down all the way to around 
600,000,600 seven 100,000,000 / 

511
00:25:50,680 --> 00:25:54,320
3 years doesn't really send the 
message that I think the victims

512
00:25:54,320 --> 00:25:57,360
once sent, the companies are 
being held accountable and 

513
00:25:57,360 --> 00:26:00,400
they're given real fines and 
penalties for this type of 

514
00:26:00,400 --> 00:26:03,120
damage. 
What Boeing did was cause an 

515
00:26:03,120 --> 00:26:06,960
incredible amount of 
destruction, killing 346 people,

516
00:26:07,200 --> 00:26:10,480
damaging the reputation of a 
great company and making it so 

517
00:26:10,480 --> 00:26:12,560
that people don't have 
confidence flying in their 

518
00:26:12,560 --> 00:26:14,880
planes. 
That is an incredible amount of 

519
00:26:14,880 --> 00:26:18,400
both immediate damage to the 
families involved and the brand 

520
00:26:18,400 --> 00:26:20,840
damage of the company. 
And I think the penalty for this

521
00:26:20,840 --> 00:26:23,360
should have been much bigger. 
Now, finally, we also got news 

522
00:26:23,360 --> 00:26:26,240
that the rumors are true. 
Paramount Global and Skydance 

523
00:26:26,240 --> 00:26:28,560
agreed to the merger. 
It's finally official. 

524
00:26:28,960 --> 00:26:31,960
The rumors were fairly accurate.
Skydance and its investors have 

525
00:26:31,960 --> 00:26:35,080
agreed to spend more than $8 
billion to acquire National 

526
00:26:35,080 --> 00:26:37,320
Amusements. 
That is the family parent 

527
00:26:37,320 --> 00:26:40,600
company that controls Paramount.
Paramount stock is down 4% on 

528
00:26:40,600 --> 00:26:42,560
the day. 
Not much has changed here. 

529
00:26:42,560 --> 00:26:45,480
I believe the thesis for 
investing in Paramount has not 

530
00:26:45,480 --> 00:26:48,440
changed since this acquisition. 
Now that's it for this episode. 

531
00:26:48,440 --> 00:26:50,640
If you like this type of content
and you want to see additional 

532
00:26:50,640 --> 00:26:53,440
content, you can check out the 
Patreon membership that also 

533
00:26:53,440 --> 00:26:56,720
includes access to qualtrum.com.
Other than that, I'll see you 

534
00:26:56,720 --> 00:26:57,240
next time.