Episode 46 | May 2025 in Focus: Improving Trade Relations and AI’s Impact on Big Tech

In Episode 46 of “Market News with Rodney Lake,” Professor Lake, Director of the GW Investment Institute, highlights key macroeconomic updates, including softer-than-expected inflation data, improving trade relations between the U.S. and China, and Nvidia’s expanded market access in Saudi Arabia. Professor Lake also discusses the impact of artificial intelligence and large language models on the business models of major technology companies, such as Tesla, Google, Meta, Amazon, and Apple. He emphasizes the rapid evolution of AI and its wide-ranging applications—from research and advertising to robotics and video generation—and urges analysts and investors to stay engaged with the technology’s developments.

Transcript

Thank you for joining “Market News with Rodney Lake.” This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the Director of the GW Investment Institute. Let's get started. Welcome back to “Market News with Rodney Lake.” I'm your host, Rodney Lake. Welcome from the Duquès Studio right here in Duquès Hall in the heart of Washington, D.C., on campus at George Washington University School of Business.
Welcome to Foggy Bottom. Welcome to those people that are new to the show. And welcome back to everybody else. So today's episode, we're going to cover a variety of things. The real market news that we covered in class. That's the setup for today. So we're going to talk about not just one company, but we're going to talk about a variety of different things.
The general sense, though, of today's episode is things that I'm paying attention to, especially around artificial intelligence and things that I think you should be paying attention to as a business person, as an investor, you know, and as somebody that's paying attention to the markets. And so you should absolutely be paying attention to these things. Also as an analyst, of course.
And so a couple of things. So this is you know, to date the episode a little bit, and news is flying fast and furious. And so you have to pay close attention to what's happening. So it is almost mid-May here. And this is after you had the big weekend for the tariff pause, effectively for China and the US and the negotiations with the Treasury secretary, Scott Bessent in Switzerland.
And so things, obviously went from, you know, over that weekend, we're in the next week now, you know, to trade war, to trade, you know, love fest. And so that seems to be the case. And so we'll see what happens. The markets have ripped, and you're close to getting back to where we are were for the beginning of the year.
And so you're kind of flat almost year to date right now. And so that's obviously a big move back up and a big move to regain all that territory that was lost. And, you know, certainly since Liberation Day, people had big concerns about what's this all going to mean? We're going to slow down business. Another factor that just came out today, which is the 13th of May, is the CPI numbers, which are softer than expected.
So people are obviously concerned about inflation. But then you have these softer than expected inflation numbers. So the US inflation rose less than forecast in April. The consumer price index increasing 0.2%. Now that was driven by tame prices for clothing and new cars as, as examples here. And so certainly here the numbers are painting a picture that inflation is a little bit softer than expected.
So maybe, the Fed can take, you know, some of the, you know, room to, to lower rates from here. We'll have to see how that turns out. So obviously Trump has been asking for that, for quite some time already. But that's good news overall for the economy. Better than expected inflation data. And then what's happening on the trade side.
Certainly they got a deal done. The administration being they the Trump administration got a deal done with the UK now working on feverishly at this point, 90 day pause to work on this negotiation between the US and China, obviously, the two biggest economies in the world. Very important that this does get resolved as a business person. And I think it will, and it looks like it will.
And certainly the rhetoric coming out of both the Trump administration and the Xi administration in, in China seems to be much more conciliatory, much more pragmatic, much more how do we, get something done? And so that is obviously a different tone that was taken when these things got escalated. And there was a tit for tat, back and forth to get those, you know, tariffs so high, over 100%.
So that is a very different story now obviously just like we got here that can change overnight. And so we'll be paying close attention to those things. But again CPI better than expected. Trade better, the progress rather on the tariffs probably better than expected to this point. It seems that the Trump administration is moving fairly quickly, as quickly as they put these things on.
They're trying to resolve these. And their move has really been to negotiate these bilateral deals. And so I think they kicked off with the UK to set the example that they're going to get these things done one by one. And to their credit, they are working on those things. And the Trump administration does seem to be working away.
That's good news for the market. Stability and certainty is what the market likes. And so when these things get announced that they're at least working on these things and the tone that both administrations they're taking from the respective countries is much more pragmatic and constructive and willingness to get something done. The so-called art of the deal comes into play here.
So we'll have to see how this all works out. We have to continue to pay attention, close attention as analysts, as an investor, as a business person. But it's super important to have these breakthroughs and to have this rhetoric toned down. And certainly, that is excellent news. And the markets pricing that so you've seen the market rip here.
And certainly some of the Mag 7 that we've talked about before, the Magnificent 7 names have ripped along with that. One of the things that that I want to talk about, in addition to just covering the general market news, is some of the things around artificial intelligence. As an analyst, as a business person, as an investor, I think you should be paying attention to.
And obviously I'll talk about some particular companies here, but we're not going to do the deep dive that we typically do company by company on this episode. Again, general market news one of the things that's happening today is there's a conference in in Saudi Arabia between the US and Saudi. And this a lot of it has to do with what's happening in artificial intelligence.
And on that news, you're seeing Nvidia up today significantly on the news because the, the ban or that say the restrictions around Nvidia, selling chips in the Kingdom is at least being modified or lifted or relaxed or whatever exception is they need seems to be what is happening. The press releases they're announcing, you know, the very big, you know, deal with Saudi Arabia and, and they would be now likely considered a hyperscaler on their own, for the number of chips they're they're buying.
And Jensen Huang was on stage, the CEO of Nvidia talking about selling Blackwell chips there and the data centers that they're building. And they're quite significant. So up over 5% so far on the day. The day is early here when we're recording this. But in any case, you can see that the market is reacting very positively to this news that Nvidia has another big market to sell into that possibly, you know, was restricted or at least very hard to navigate before this.
And certainly the trade seems open, from here. And that is good news for Nvidia. That's good news for its investors. And now we'll have to continue to monitor this and pay really close attention to what is happening with Nvidia. But Nvidia has had a big run. But for example it was down big. But the year to date number even on the Nvidia now again through May 13th now is -3.5%.
So you've had a huge run back. From where they were. They sold off super hard. And it certainly started with the DeepSeek news, when people were really concerned and you had the tariffs and Liberation Day. And so it's been a pretty wild ride. As long term investors for the GW Investment Institute, again not investment advice here.
Nvidia is our largest holding. We didn't do anything right. We sat and said you know do we believe that this is a good company? We, I wouldn't say we didn't do anything. We continue to do our work on underwriting the investment thesis for all of our companies, including Nvidia and the idea is that Nvidia remains strong. It remains competitive.
If you look through the BMPB, it continues to be a fantastic business, very hard to replicate high barriers to entry, at least in the short and medium term. Jensen Huang fantastic management. The valuation obviously got cheaper. So when it's selling off, you have the prospect of should we be selling into this weakness with a lower valuation?
Meanwhile, the business remains the fundamentals remain quite strong. And we believe that, okay, the fundamentals haven't changed dramatically from one day to the next. The barriers to entry haven't changed dramatically that they've built up over the last 20 years changed. The valuation has changed. And the balance sheet by the way, didn't change their strong balance sheet.
No concerns. They're net cash for Nvidia. So why should we sell? Right. If the if other parts of that thesis, changed significantly, if we thought the business as a result of the tariffs as a result of some other shock in the system, including DeepSeek had fundamentally changed. Obviously that is a different story. We have to make different decisions.
And as businesspeople, as analysts, as an investor, you have to continue to monitor those things and make sure that you're on top of that. Now, for us, we said, okay, we did the Charlie Munger, the best thing we can do is sit on our hands, and watch most of our positions. We just, we just did our trades for the end of the semester.
Congratulations to all of our students from this past semester for monitoring the portfolio, for making changes in the portfolio. But that didn't involve selling any Nvidia right now. And so kudos to them. I think they did an excellent job. Good work. They made good decisions. And and as a group, they make those decisions. So bravo to all of our students from the spring 2025 semester.
Excellent work. Very proud of the hard work that you put in. And a lot of them are brand new to this analyst game. And so they're trying to figure out how to make this work. But they bring to bear the hard work and the fresh set of eyes. And really analyst, to say, you know, what's the what's the fresh look at this company?
What can we do about understanding this company? And that's super helpful. Sometimes somebody that's a novice is going to ask questions that somebody takes, you know, for granted that's been in the business much longer. So I think that's always helpful. And it gives us that fresh insight. But great job to them. So that's obviously just one example.
In the AI world you also have Elon Musk talking and they're talking about Optimus. They're talking about autonomous driving that's all powered by AI. And so some of the things that I think you should be paying close attention to, obviously, Tesla, the company specifically, and we own that's a modest position for the investments. Nvidia is our largest position.
We do have positions in, in Elon Musk's Tesla company, but we don't have a significant position, certainly relative to Nvidia or other big positions, like Microsoft for Costco or Amazon, or Google. So those are other large positions in our portfolios. But, and Apple being the second largest position as an example. But what they're doing is important.
The idea that this autonomous driving Waymo, I even saw one here in DC not that long ago, you know, certainly they're making progress. They're using a different technology platform. They're using LiDAR. Musk has criticized that Tesla is using cameras. Certainly the setup is different. Obviously this will play out over time. The regulatory framework has to continue to catch up.
It seems like that's, you know, being worked on, in the US and in other parts of the world, but that certainly takes a vehicle that let's say you own a vehicle and it has the autonomous driving features in it. It turns that vehicle from a cash, you know, you know, stock or cash, you know, something that you have to pay, to use to something that will likely produce cash.
So you can think about it like, okay, well, I'm not an Uber driver, but now that I'm not in it, instead of parking my car and then going into the office or wherever you happen to go, I can put my car on their fleet. Now, it's a cash flow positive asset instead of a cash flow negative asset. And that's a very different prospect.
So that relates the valuation for Tesla considerably. When you start rerating the value of all those cars, including all the cars that they can produce themselves and keep in their own fleet and have cash producing vehicles. And and obviously, if you look around, people are doing, calculations for that. So you can find stuff on the internet about what's the value of that.
That's all driven by artificial intelligence. And so the, the quick and rapid deployment of artificial intelligence across a variety of different use cases in the last several years has been pretty significant. And I think, you know, phenomenal, really, if you think about how quickly it has moved. So people didn't really even know about ChatGPT until a couple of years ago, and now people use it possibly every day.
I certainly use many of the large language models, including ChatGPT, Grok, Claud, Gemini 2.5 almost every single day for a variety of different reasons. A lot of it has to do with research. And so essentially now I feel very, you know, blessed in the sense they have these models to do the work around analysis. And so you can have these models and say, I, you know, here are the parameters.
And I want you to look at Nvidia. I want you to look at Tesla. I want you to look at Google's a little bit Meta there. Right. Not the company that the self evaluation of the company. Meta is another one building these large language models, Llama, and I think that's something that you should be paying attention to as well.
And so the reason that I'm focusing in on the artificial intelligence for, for us in our audience is really to keep everybody focused on how quickly these things are changing and how quickly they're changing what could be the parameters for this, these business models. And I think it's really interesting. And you saw Google, for example, and we did an episode on Google, the parent company Alphabet, of course, but Google's search business is near monopoly or it has been.
And now you're you're getting these large language models and you're getting searches done by Grok. You're getting searches done by ChatGPT. You know, Gemini is their business, but if you're going into ChatGPT or you're going into Grok, obviously that gets you off of Google's, you know, ecosystem and into theirs. And so if you're saying instead of running search, in Google, you're running search in ChatGPT or you're running search in Grok, well, that's a very different use case already just for search.
That doesn't include many of the other use cases that you have, to produce things, that, that you can then sell, whether that's copy or anything else. There's many business that are impacted by this. And the economics around those businesses are likely to change, too. I haven't even talked about image generation and graphic design and all these other things that you can do with it.
And now video and so you're now getting small video clips out of, out of these large language models. And so this is just a probably tiny piece of what is to come. And one of the reasons that you can say it's a tiny piece is because how rapidly things are changing and again, why on this episode, I'm choosing to spend time focused on this and try to encourage everyone, just like me, to focus around what are the use cases for these models?
How quickly are these businesses changing? How quickly is the AI changing the business model? Well, around Tesla it changes the business model, if we use that as an example, it changes the business model pretty radically from a company that produces and sell cars, to a company that produces and sell cars, but also keeps a fleet of their own, to drive on their own network and to collect the fees, associated with that.
Okay. That's already a different business. And then you throw in Optimus and say, well, these autonomous robots are going to be helpers for everyone, and produce lots of things, work in factories, you know, help at home, cook food, you know, do laundry, all the things that, many people don't like to do. And it's going to be super helpful.
And if you get the economics cheap enough, almost everyone that can afford one, what, at some price point is going to buy 1 or 2 or whatever it happens to be, maybe becomes so ubiquitous, just like mobile phones, to have these helpers and it makes everybody more productive. So again, those things are already in the works.
And China has their own set of humanoid robotic companies as well. I think right now, the two leaders for AI by country are the US and China. And you should be absolutely focused on what's happening in China, too. We're not going to spend a ton of time here. But China is is rapidly, producing AI and AI related companies and projects.
You know, DeepSeek would be an example of that. So you should be, paying attention to what's happening in China. Not that there's not anything happening in other parts of the world. There absolutely is. But as an analyst, business person, investor, you should be paying attention to what's happening in the US, what's happening in China, first and foremost.
And don't lose track of that. So some of the other companies I mentioned, Meta, the company should definitely look out to what they're doing. You know, they're making we've done an episode on them that's, one of our holdings, not not super large, but a larger holding for us is Meta, and they have their Llama model. They're trying to turn that now, or they are rather turning that into a dedicated application that you can use.
And so we'll have to pay attention to that. And I encourage everyone when that comes out to use that and see how it, that's an open weight model they call it. And so, pay attention to how that's all working when it comes out, but certainly another competitor, in that space. And they make most of their money or virtually all their money from advertising.
And so it's important to pay attention to how that can impact them and how that's impacting others. And so another company that you would see that's being impacted in the advertising business is Amazon actually, many people don't think of Amazon and advertising, but certainly they've been growing that part of their business. And that's an important part of their business and their ecosystem.
And AI is going to continue to impact that. And they're building their own models and they're, invested in Anthropic, which is Claud. And so you have to pay attention to the landscape. You got to pay attention to all these different companies and the different applications and use cases that they're doing. And whenever possible, I encourage everyone sort of the Peter Lynch what's in your refrigerator to use these things.
You get out there, use them for the things that you need to do. You know, in my case, I want to do research for companies. How do we look at this portfolio? The Ramsay Student Investment Fund, the Philips Student Investment Fund, certainly the quant fund. We're using it, all the time. And the real estate fund as well.
So those things, I think are our use cases and how we can use it. But everyone's going to have different use cases, and you really can ask it to do many different things code, write, write, copy, whatever it happens to be. So try to use it yourself and see you know, how functional it is, how impressive it is.
What are the limitations. And then as an investor, you can better evaluate. Okay, well, what kind of progress is Gemini 2.5 making against Grok? And so you can ask the same types of questions as an example. And I think, you know, my personal experience Gemini 2.5 has made some, some progress there. So it is interesting to see, you know, the the movement between the companies and how each, one are competing against the other.
So but to, you know, it's best if you use them and you figure that out. All that said, the landscape's changing. So quickly that you got to pay attention, I would say nearly on a daily basis. But, as an investor, you certainly have to pay attention on a regular basis. And again, using the models, making sure that you have some understanding about what the valuable use cases might be, and trying to understand and interpret how this might change the business models of these tech giants that are publicly traded companies.
Obviously, you have access to in our portfolio. Again, if you companies like Nvidia, companies like Meta, Google, you know, Tesla obviously, and Apple and we're going to talk about that for just a little bit before we close. It's important to pay attention to how this working. One of the things that came out about Apple and this is we're going to wrap up, but we're going to talk about Apple first.
So we'll wrap on Apple here. Apple has been behind on all of this. And if anybody's used Siri you know okay. Well Siri hasn't made a lot of progress and certainly it seems quite limited, versus, you know, just using the voice function in ChatGPT or Grok as an example, they have now said that, you know, maybe they're thinking about changing the search business and Safari being AI enabled.
Alphabet slash Google sold off on that news. And so I think it's important to also be paying close attention. You know Apple has done this before. So what Apple's doing relative to the AI game. Now in the past we've talked about it. They're not always first the things, but many times they figure out how to do a great job.
They didn't create the smartphone, but the iPhone became the standard, right? So that is something that they have done before and the services and the platform and iTunes and all these things that they built around that ecosystem. A lot of times they weren't first to do those things, but they certainly became one of the best companies to do it and deliver it in such a way that it created a really substantial customer base and a loyal customer base and a great brand around that.
Because the exchange value people perceived was very high. And so I think it's also now important to pay attention to what Apple is doing. They seem late to the game. But maybe that's the play. They're trying to sort out where exactly where they want to be and how they want to do it. So I think it's important to pay attention to Apple.
And, you know, they made the announcement around how they're going to reconfigure Safari and try to make it AI first on search. So we'll see how that all plays out. I think it's again important to understand and evaluate all of these companies on a go-forward basis. I think the AI game is here to stay. Certainly, there are other fads in the market that you have heard about in the past.
I think AI is different from those in the case that you can see for yourself, use cases that that individuals can use might not, to say the least about companies and writing code and all the, you know, production that you can get out of this and all the efficiencies that you can get out of, using just the large language models, not to mention all the other applications.
So pay attention as a business person, as an analyst, as an investor, I think it's going to continue to be even more important, not less important, over time. So pay attention to AI, keep a close eye on all these big companies and all the emerging companies that you can find out there. That's a wrap for this episode.
Thank you for watching Market News with Rodney Lake. We'll see you on the next episode.
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