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Buy Hold Rant - Stocks and Investing
Buy Hold Rant is a fast paced investing podcast that cuts through the noise of the markets. Each episode dives into stocks, company earnings, and the market moves that actually matter.
Hosted by Hamid Shojaee and Dustin Alper, the show breaks down their latest investments, the thinking behind every buy and sell, and the surprises that shake markets in real time. Insightful, opinionated, and refreshingly honest, Buy Hold Rant is where real investors talk markets without the fluff.
Buy Hold Rant - Stocks and Investing
Ep. 53: $NVDA Earnings Next Week, $META Lawsuit, $IREN Delivers for $MSFT
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Is the AI bubble finally bursting or is this just another round of AI panic? In Episode 53 of Buy Hold Rant, hosts Hamid Shojaee and Dustin Alper dig into the latest "AI bubble bursting" narrative sparked by leaked Anthropic and OpenAI revenue numbers. They also break down IREN's ($IREN) big Horizon 1 data center delivery to Microsoft ($MSFT). They also go deep on the $1.4 trillion Meta ($META) lawsuit over addictive app design and preview Nvidia's ($NVDA) earnings next week. Plus, they preview a new Savvy Trader feature for tracking your return history over time.
In this episode:
📉 Anthropic vs. OpenAI growth and what it means for the AI trade
💰 Nvidia's new lending program vs. circular financing fears
🖥️ IREN delivers Horizon 1 data center to Microsoft ($9.7B contract)
⚖️ Meta's $1.4T lawsuit over "addictive" features and minors' data
🎮 Meta lawsuit vs. Big Tobacco, video games, and past moral panics
🟢 NVIDIA earnings preview: $89–93B revenue guidance, $2.07 EPS est.
📊 New Savvy Trader return history chart (Micron & Rivian examples)
💊 Listener Q: Moderna ($MRNA) spikes 100%+ on cancer vaccine trial news
📱 Listener Q: AppLovin ($APP), falling token costs, and Apple's ($APPL) outlook
Do you think the AI bubble is finally bursting? Let us know in the comments!
⚠️ Note: This content is for informational and entertainment purposes only and not financial advice. Always do your own research.
Don't forget to check out:
The Best (and Free) Earnings Calendar: https://earningshub.com/
Hamid's Savvy Trader Portfolio: https://savvytrader.com/Hamid/my-actual-portfolio
Dustin's Savvy Trader Portfolio: https://savvytrader.com/dustin/rvr
#nvidia #nvidiastock #anthropic #openai #microsoft #meta #ai #aibubble #iren #apple #moderna #datacenters #buyholdrant #savvytrader #stockmarket #stocks #investing #techstocks
Hey, hey, Dustin.
SPEAKER_02Oh Hamid. Another week. Another week. What do we have on the docket today? So I guess there's some rumblings that the AI bubble is about to burst. We're going to talk about that. Some big news with Iron. They delivered their first data center to Microsoft. We're finally going to formally address uh the lawsuit against Meta. We've talked about it in uh listener questions a little bit, but this will be more of a deep dive. Uh and we have NVIDIA earnings next week. So we'll go over expectations there. And as always, we'll do listener questions at the end. So if you have any questions, feel free to put them in the chat. With that, Hamid, why don't you break down this AI bubble bursting uh narrative?
SPEAKER_01The AI bubble is about to burst. Well, I mean, first of all, let's let's just start with the fact that like we could be in a bubble and it could burst. So you you know, there is no definitives here. Um, you know, uh, it's much more clear after the fact than it is during uh the fact. Uh, right now we are in a sort of like an unprecedented, what I would consider an unprecedented level of growth in terms of uh both spend on AI as well as just the valuations of so many different companies uh reaching astronomical amounts, all of which sort of point to this direction of potential bubble. So there is this possibility that um we are in a bubble and it might be showing signs of cracking. Now, what are some of those signs of cracking? Um, yesterday there was some rumors that came out that um uh showed anthropic revenue for Q2 was roughly um 11.5 billion, which was up about 100% quarter over quarter. So anthropic is on this very fast pace uh growth. Uh their ARR at the end of July. Now, ARR is like annualized recurring run rate. Um that number was roughly 65 billion for anthropic, which is showing very good signs of potentially ending the year at $100 billion or more of ARR, um, which is uh amazing growth. But the one thing that kind of was um uh was a downer on it, uh on this one of the other rumors that came out is open AI revenue uh leak was uh for Q2 was 6.8 billion, up only 18% quarter over quarter. So um 18% quarter over quarter is roughly growing. Like if you grew 18% every quarter, you'd be growing at about 100% year over year, which is you know amazing growth for any typical company. But these are the pioneers of AI. So uh the expectations are much, much greater for these companies as opposed to any typical company. Um, so OpenAI in particular, uh their revenue numbers were unimpressive, as especially since they also are not yet profitable. Uh, their expenses are growing pretty fast. And uh, you know, then the question becomes how can they sustain um spending hundreds of billions of dollars on data center uh uh rentals and uh their commitments over the coming years if their revenue is only going to grow uh, let's say double from here over the next year. So there is some concern there that is legitimate. Um, but some other things to consider is that not all AI revenue is captured by these two companies. There's tons of AI revenue that are being captured within products at Microsoft, at uh Google, uh, at uh you know, Meta's using AI to sort of accelerate their existing products uh growth and usage and all of that. So there is other reasons for the data center spends as well. So, you know, that that is one angle of uh of uh perspective on it. Um, if you were sort of expecting anthropic revenues to be a trillion doll next year, I think that you know, like this might have burst your bubble a little bit, as well as like open AI revenues to be a half a trillion dollars or something like that. I've seen those kind of numbers be spoken about by by some. I am not in that camp. So from my perspective, these companies are doing great and their revenue numbers are very impressive. And um, you know, there there's good reason to be cautiously optimistic, you know, like but cautiously optimistic is the key word there. Like I don't want to be investing in things that uh are counting on 10xing from here over the course of the next year for revenues and profits. I I want to be counting on things that have relatively good uh earnings or profits today. And you know, they could get better from here, but I'm not counting on that sort of like 10x uh increase in spend. So uh my perspective on it is that yeah, there could be a crash. Um, I would like to be invested in things that are like um uh on the lower end of valuation scale as opposed to uh things that are extremely high on the valuation scale. And the hope is that they can they can grow astronomically from here. So uh you know, we've talked about companies like SpaceX, like Palantir, like um uh some of the others that are getting like hundred times revenues uh valuations types of perspective. And I think that that is way too rich for my taste in particular.
SPEAKER_02So this uh reminds me of a question I got. I think it was in my Savvy Trader community, if not my ex account, where uh someone was asking me about how Google during their last earnings printed their first negative cash flow like either ever or in a very long time. I for I forgot the exact statistic.
SPEAKER_01Um positive.
SPEAKER_02Yeah, well, yeah. Um and uh the they were pointing to this theory that someone point that someone wrote on X that you're going to have a lot of these companies take out loans to further their AI spend, which is only going to make this potential bubble even worse.
SPEAKER_01Um, if revenues don't don't don't materialize, but in in these cases, the revenue has been materializing so far, at least, right? So we can we can like look at you know Google's revenue growth so far and point to lots of places where revenue is growing as a direct result of AI. Uh, same with Microsoft, same with Amazon, same with Meta. Um now, in the case of Google, uh, Amazon, and Microsoft, they also have cloud spend growth that is rapidly growing, that could potentially go away if there was some sort of like slowdown in AI spend or could you know potentially reduce. But their in existing products are also increasing in revenue. For example, uh Google Workspace, which you know, like virtually every uh business in the world either uses Microsoft Office 365 or uh they use Google Workspace. These products have integrated AI capabilities into them at a higher price tier. And many businesses are paying those extra dollars for these existing products that were like already in place to get the AI features. Those revenues are pretty solid and they're probably not going away, right? Like that's not the same as data center spend. Now, you need data centers to be able to service those products as AI capabilities. And this is where like I think a lot of people assume all of the revenue in AI is coming from anthropic and open AI. And that's not the case. There's actually incremental revenue coming from existing products that are integrating AI capabilities into them that is uh that is not easy to decipher based on just like from an outsider's perspective. So um, so I think that that uh is a very important little caveat on on this uh AI revenue and spend perspective.
SPEAKER_02That's good color, but at the moment AI revenue or tangential revenue is not uh the the spend for data centers is currently outpacing revenue. Yes, right? Yes, so that that is at least a temporary problem. How temporary, I don't know. Um but to your point, they're charging higher uh costs or higher tiers for these enterprise clients. I think they could totally change the pricing model as as these AI models become uh more and more capable. Like I know we talked about GrocBot in the last episode, and I've spent you know this entire week with it, and it's absolutely incredible what it can do. Um and if anything, uh the they're not charging enough for it right now. I think we're paying like maybe 180 a month per through cursor. Um, like we are getting way more value uh out of it, which in theory, as the consumer, we always need to get more value than what we're putting in. But I think there's a lot of pricing power there. Um the other piece with in regards to the cash flow, and if if instead of taking out loans, they could always reduce expenses, which unfortunately means you do some more layoffs to fund the AI build out, but you still are able to do everything you need to do because you're powering your business through the more capable AI. So I'm not saying that's going to happen, but it's not like as straightforward as they're spending more than they're making, they're gonna have to take out loans, that this all this is gonna collapse. Like this is going to be a very windy road. Um, and it's hard to know exactly where it's going to go, but there's a lot of different ways it can go.
SPEAKER_01Yeah, and the narrative shifts all the time in terms of like, oh, everything is about to collapse. It's on the like yesterday, if you were on X, uh reading this the narratives that were starting to form around uh the open AI and anthropic leaks of their revenue uh rate, uh, everything was about to collapse. And it just coincided with like um uh Kathy Sachs saying, you know, like uh uh you know, engineers are gonna like uh engineer around memory, for example. So like memory got an extra hit because of the AI bubble collapsing, and then maybe we don't need memory again to, you know, sort of like these narratives form and quickly take shape. It's it's fascinating to sort of like watch the narratives take shape, but ultimately it comes down to earnings and you know, like uh the earnings reports start to uh paint the real picture. Uh and we're gonna get a glimpse of that next week with NVIDIA uh reporting. But um but yeah, and and since last week, by the way, I've also looked into what Nvidia has uh been doing, uh Jensen. Uh and basically what they're doing is trying to make capital more accessible to companies who are building data centers based on their uh revenue and profitability and cash flows, right? So uh the idea is that if you can build a business, um you know, and the idea is nothing new, it's just now targeted towards AI. But like if you, you know, there's always been business loans available to businesses that can uh generate revenue based on the capital that they put into their business, whether that's like to buy inventory to prepare for like the you know, like a Christmas uh huge influx of orders or whatever, or to build additional manufacturing capacity to uh pump out more products because there's so much demand for it. This is no different. Uh they're just providing something like $500 billion worth of capital available to um to various uh uh organizations that are trying to build out um AI data centers and invest in their future with AI, which benefits obviously everybody in the AI ecosystem. But uh they are there are legitimate lenders who are going to assess your business case and lend based on that. So it's not just blind money going going into like uh NVIDIA to buy more chips, it's gonna actually be evaluating the business cases. So, again, not exactly circular financing. I put something together that might help illustrate the the point of, you know, a lot of people have been sort of uh worried about circular financing. And um I put together a diagram to sort of like illustrate the difference between circular financing versus um, you know, what what I think the the way I view this to be. Um so on the left here we have circular financing, which uh basically is showing a diagram that uh company A is putting money into company B, uh, which is putting money into company A, which is putting also money into company C. And the three, there's these three companies in this illustration that like are basically giving each other money, uh, and maybe they're buying each other's products, and a lot of that capital is going in in a circle. Um, if that was in an isolated way, that would be circular financing and very, very worrisome. Now, some of that is happening in the AI world. Now, if we move over to the sort of like diagram on the right, uh, the core of the diagram is still the same company A, B, and C are investing money into each other and potentially buying each other's products. But the bulk of the demand is coming from outside, uh, both companies and investors that are, or not investors, users as well as businesses that are actually buying products and services from each of those companies. So the companies' investments in one another is to help accelerate and uh meet the demands of the outside group. And this is actually not something I would view as circular financing. More, more I would view it as uh just good investment, good business practices to try to make sure that everybody is got the capital that they need in order to grow as fast as they possibly can, especially in the early stages where you have to put in more money in order to build a business that is going to have uh long-term, uh great long-term cash flows, right? Uh, and we're already starting to see that. For example, Anthropic's numbers for Q2 actually have shown that Anthropic might be a profitable company already, right? Uh, and this is a very young company that's growing super fast. Typically, companies are not profitable at this stage, um, especially when they're growing as fast as they are, and they have to make huge investments in all kinds of infrastructure for that to sort of uh sustain that growth. So, you know, there there are some worrisome elements, but there are also a lot of great signs that, you know, this uh this is not exactly the type of financing that would normally be very, very worrisome, um, where there's not substance behind it. And there is definitely substance behind a lot of these investments, as well as the revenues that are uh coming out that that are very real. And of course, each one of us, with our exposure to AI, we're also seeing it in our own personal lives and work lives as to like how much we're relying on AI. So this sort of like AI thing is not exactly a fad that's going to go away. We fully all of us expect to uh rely even more on AI in the future. So there's also that that uh that helps go on uh that helps sort of like make the case that AI is not necessarily in a bubble.
SPEAKER_02I I think that was a great diagram. It almost feels like it's the market self-optimizing. Um that's actually a good way to fall around.
SPEAKER_01Yeah, that's a great way to put it. You know, it's uh I mean this would be no different than like, for example, um uh car manufacturers making it easier for their customers to get loans to buy cars, right? Like uh the demand for the car is still there, they're not buying cars for themselves, right? They're not taking out these huge loans and buying their own cars, but rather they're making it easier for their customers to buy their vehicles and finance their vehicles and pay them off over the course of five years. No one would consider that circular financing in the car world today, right? Like, uh, but maybe when it was first being introduced by GM or Ford or whoever, there may have been lots of eyebrows raised in the marketplace. Wait, wait a second, are they are they using their own capital to lend money to then buy their own cars? I mean, like that seems wrong, but ultimately it has turned out to be perfectly fine. And it's just common practice now. We don't even think about it.
SPEAKER_02That's a great point. We do have uh a listener question, Adrian, about this topic.
SPEAKER_01Let's hear it. Hey Adrian, we can't hear you if you are talking. There, there we go.
SPEAKER_00No, sorry. Um, I just wanted to bring this up. Um says, this is from a listener with OAI's growth disappointing. What would actually have to happen for you to turn more skeptic of the AI build-out trade? What key metrics are you monitoring most closely?
SPEAKER_01I think ultimately the the public companies are the ones that are providing us the most amount of uh uh information and data. And those public companies happen to be the Googles, Amazon, Microsoft, uh, Nvidia, you know, meta of the world. Um, and obviously there's several others. We're going to talk about iron today, for example. And I think they provide a much more detailed picture. Now, with Anthropic and OpenAI, because those guys have been the poster child of the AI movement in particular, especially with OpenAI being one of the uh the first creators of uh ChatGPT that um sort of like really put everything into motion back in 2022. Uh, the expectation has been that they're gonna continue to grow super rapidly, but they've also been plagued with all kinds of uh controversies with uh a CEO that got fired and rehired, a CEO, a nonprofit that was nonprofit and is trying to become for-profit or has become for-profit, a co-founder of the organization that is suing the organization with Elon Musk. Elon Musk was trying to destroy the organization. So OpenAI is probably not the right company to try to sort of like pin all of our hopes and dreams of uh AI growth, right? Like it's it's the company that has the most amount of controversy around it. Uh Anthropic, which is another company that is growing very rapidly, and these guys are actually super impressive, came out of almost nowhere a year ago to end July with a $65 billion annual run rate. Um, that actually speaks volumes for how great AI has been in terms of uh its capabilities and uh growth potential. But it too is not without its own set of controversies where these guys uh are trying to um uh change regulations and uh there there's a lot of like opaqueness with anthropic as well that doesn't give us a great glimpse inside of that company. But uh but Google uh you know and their uh uh CEOs and um Microsoft and its CEO and Amazon and so on, talking about uh where they're going with AI and their AI investments on their calls. And you know, even what Apple is doing, for example, putting uh making a much stronger version of Siri Siri that um is going to be AI-based, that Google is going to power. Well, how is that power going to happen? I mean, that part of the reason they haven't deployed it already might be because they need more data centers once all of a sudden a half a billion phones have this capability where you just push a button and you're talking to the uh smartest AI available, right? Like Google needs to prepare for that and and um and have the uh bandwidth and capacity and uh uh GPU power to be able to uh address all of those needs, which you know, Google and Apple are doing. That has nothing to do with anthropic or open AI. So the AI picture from my perspective is uh significantly bigger than open AI and anthropic. But sometimes that that uh nuance is sort of like forgotten in the market.
SPEAKER_02Let's move on to our next topic. Uh Iron had some big news. Uh, I think it was late last week. They officially delivered their first data center slash the first phase of their contract to Microsoft. So this they're calling it their Horizon One data center. Uh, it's a 50 megawatt data center. This is the first of four. So there's Horizon two, three, and four. The remaining three are supposed to be delivered uh later this year for a total of 200 megawatts for Microsoft. Um this, and again, we've talked about this contract before, but this is a five-year contract worth $9.7 billion for Iron. Um and investors, which makes sense, were very happy that not only they were able to deliver the data center, but Microsoft accepted it, meaning it passed all of their tests. Um, nice. So like it's officially in the clear here. And while as an investor, I'm absolutely happy about this news, I wouldn't say I am like exuberant. And the and I think the stock price also showed this because initially when the news was announced, I think the stock uh went up like 10% and then eventually went back down um to where it was prior. Um so it kind of like lost the the hype a little bit. And the reason why I don't think it's crazy exciting is it's simply Iron doing their job. Like this is as an investor, this is what I would expect.
unknownRight.
SPEAKER_02Right? Like the only strong emotion I would have is if they failed delivering Horizon One to Microsoft, I would be very upset because my expectation is they are going to do what they said they are going to do here.
SPEAKER_01Right, right. So it's in bounds of like what the expectation was, as opposed to either delivering twice as much or delivering half as much or something like that, where right that that would be exciting in one way or the other.
SPEAKER_02Right. And I think the over exuberance from a lot of iron investors on Twitter is uh a sign of I think a lot of investors being a little too skittish about their investments because maybe they they don't um it's not even that they don't do their own due diligence, but they just don't maybe have enough conviction um in what they're investing in. And I I I don't know, I there's some something here where some larger take or like it try not to be too skittish, try to have more conviction. If you don't have and none of this is investment advice, this is me talking to myself. If you don't have a certain level of conviction, maybe you shouldn't be investing um in these companies. But I just thought the reaction, the reaction was expected, but at the same time a little um surprising because it was just them doing their job. And you can make the argument that, like, when Rivian released the R2, that's them doing their job, right? I I do think it's a little bit uh less binary, and I'm not trying to simplify what Iron achieved because that was obviously building a 50 megawatt data center is extremely complicated. But with Rivian, it's you have to have such a positive user experience with so many different users, so many different people where where the this data center is does it work well? Is your is your one customer happy? Um, and again, I'm not trying to minimize the achievement, um, but it's just a bit more binary, at least to me. Um so I'm very happy.
SPEAKER_01Uh, but I'm not and open the exuberant. And maybe maybe some of that or most of that was already priced into the stock as well. Whereas uh you know, uh in some cases, the there's so much um uh freak, for example, Micron is a perfect example of a stock where uh what's priced in is actually their revenues and profits going down, not continuing to go up. So if there is a uh you know meat of expectations, if you will, which is like extremely high in a way that might even be viewed as in a positive sense, because like nobody expects them to continue to have this level of profitability and uh this level of revenue uh on an ongoing basis. So um so some of it has to do with like how the expectations for that company are already baked into the psyche of the investors as well. So maybe that's part of the reason why like a lot of people have been saying iron is you know like it's gonna go nowhere and it's like uh gonna be one of the first casualties of the AI bubble bursting or whatever, and then here they are actually delivering. So you know, a lot of investors might be extra, you know, uh excited because of that reason that they actually delivered on something that many people have been speculating there they're gonna be a casualty of the AI bubble burst, but um, but their stock price may have actually been more optimistic than than uh and like the what was going on on Twitter with uh social dynamics, right?
SPEAKER_02Right. Um, okay. Next topic. So, and again, I I said this at the beginning of the show. We talked about this in listener questions, I think a handful of times, but we never fully addressed it. The um meta lawsuit, they currently have a $1.4 trillion uh lawsuit against them, which if you're keeping track, that is the size of their market cap. Um, and this is four states coming together to sue Meta. Um I thought it was 28 states or something. So it's four states that are the current lawsuit that's underway is actively four states, and then there's 25 additional states that uh their trial is pending. So more more to come. Um, and I'll break it down and then I'll I'll I'll pass it to you for for thoughts. Uh so basically there's there's several levels to the lawsuit. A big piece of it is that these states are accusing Meta of designing addictive uh products specifically targeted toward children. So, what do they mean by these addictive features? So, some of the features, not all, is infinite scrolling, auto-playing videos, uh constant push notifications to bring you back into the application. And of course, everyone's very familiar with just the all-knowing algorithm that's gonna show you just whatever content you want to see um as you're scrolling your feed. So, and you might be thinking, none of this is necessarily specific to Meta. A lot of companies do this. Uh, obviously, TikTok, Google, Snapchat. These other companies are also getting um uh sued as well. Meta just happens to be the first that is going through uh their trial. Um, another big claim from this lawsuit is that Meta was knowingly harvesting data for children that were under 13 without parental consent, which is uh illegal. There is some act that is supposed to prevent this. Uh so I mean the the difficulty there is verifying age online for minors who don't have ID is a very is a big challenge, right? Like there's a big difference of verifying someone's age to buy alcohol where you have to be 21 versus verifying that someone is 13 and you have it's just like putting a birthday in an input, right? So, but I'll stop there. I have a bunch of thoughts, but I want to get your thoughts on on both of these and what do you think the outcome is going to be?
SPEAKER_01Okay, so uh a couple of uh additional clarifications on the uh lawsuit amount. The the $1.4 trillion is a number that Meta has estimated what this lawsuit could mean as a way to try to discredit it, like meaning like it's so ridiculously large that these guys are just like being very unreasonable. So that is a strategic move on Meta's part, to which the the states have said, no, no, no, no, we're not asking for 1.4 trillion, we're actually only asking for 200 billion, which is itself an incredibly large number. Only 200 billion. That's that's right. But but would be much more digestible even if they lost a 200 billion dollar uh lawsuit. But let's take a sort of step back and look at the merits of the the lawsuit in the first place, right? Because this sort of thing, you know, when you when you live long enough, you realize that um uh the the the there's people who are trying to blame all the problems on somebody, right? And and in the 80s, uh mtv was sort of like the uh uh the uh go-to for like MTV is causing all of our children's problems. Uh, then it was video games, uh, then it was heavy metal music, then it was rap, right? Like uh MM had lawsuits. He he's got a song about how he settled all his lawsuits because the government was coming after him, right? So we're constantly looking for a scapegoat for the problems that our children have. Uh, and some people sort of compare the meta um products and issues to big tobacco. There's only one major problem with that comparison, which is that when you smoke cigarettes, it's definitely not good for you in any way, shape, or form. And smoking enough of them will kill you. That is absolutely not true in the social media world. There's people who have connected with old friends, they've been reunited with family members. There's like so many positive stories, not to mention all of the uh, you know, money that has been raised for various different fundraisers and nonprofits and uh people in need and uh just awareness increases. I mean, not to like like just social media has also become a learning tool for for so many people, where uh if you want to learn how to uh uh you know tie your your tie, you could go on TikTok and or on Instagram and do that search and come up with a video. Oh no, it doesn't matter how many videos I watch. I I will never figure it out. Yeah, I just can't do it. Mental block. But but the point being that there is definitively positive value in uh in what these products have provided as opposed to you know big tobacco, which have basically uh created products that have been not not just addictive, but also um uh it kills people, right? Like it literally kills people, uh, not uh in a uh in a uh influential sort of way. Um but uh so the big tobacco comparison does not fly for me. The comparisons to MTB or you know, heavy metal music or video games that could potentially be, yeah, they're entertaining, but they could potentially be harmful. Okay, that might be uh an interesting comparison. And then, you know, uh at what point do you draw the line? It's a very slippery slope. Uh, does somebody who uh creates um uh TV shows that are addictive? Uh uh are they do they need to be like the cliffhangers?
SPEAKER_02They need to take out the cliffhangers.
SPEAKER_01Yeah, no more cliffhangers or Netflix autoplays the next episode for you. Is that convenience or is that addiction type of you know, malicious behavior on Netflix's part, right? Like it's a it's sort of like a win-win. It's good for Netflix because they get you know the viewers to stay longer, but it's also more convenient as a as a consumer of Netflix shows. I don't want to have to click to go see the next episode. Uh it's nice that it autoplays. So, like, are we gonna sue Netflix next? Are we gonna sue the writers for making their shows so entertaining that I'm addicted to them? And by the way, my kids they didn't have the social media problem uh at uh the age of six or 10 or 12. They were addicted to anime. Are we gonna like sue the anime makers for like creating cartoons that were addictive? I mean, it's it's hard to know like if this lawsuit has any actual merit. Now, are that is Meta gonna spend billions of dollars fighting this thing and is it gonna potentially lose billions of dollars or maybe tens of billions of dollars as a result of the lawsuit to make it go away? Probably. Uh, but as a um first of all, as a consumer, I am not overly concerned. Uh, but also as an investor, I feel like this is something that has gotten overblown. The $1.4 trillion number is what the media sort of like uh focused on heavily. And um, it might be an overhang for the stock for some period of time, but ultimately I suspect it's gonna go to the Supreme Court, even if they lose in the lower courts, and uh if they don't end up settling at some tens of billions of dollars number, but it'll probably end up costing them tens of billions, which you know might mean a couple of billion per year for the next 10 years, 20 billion dollars. I don't know. Something like that is definitely in the realm of possibilities. I just don't see it costing hundreds of billions. Um, and ultimately, I think that that uh it's much to do about nothing as opposed to any legitimate merit.
SPEAKER_02Okay, I think that was a fantastic rant. This this is why we called the show by halt grant. Um, I have a lot of thoughts as well. Bring it. Um, okay. So, first off, focusing on uh suing against addictive features. Some of them it's just how the app is designed, but a lot of them you can turn off. You can turn off the auto playing videos, um, you could turn off the notifications. So there is, and for the Netflix example, which I know Netflix isn't a part of this, but you can turn off autoplaying the next uh episode as well. So a lot of this the user does have control over. Now they don't have control necessarily of how the algorithm works. Like I wish it would go back to uh the time feed and it's just the people you follow. Uh like that would be nice. But I don't know if the government has the right to dictate how Meta um operates uh their their algorithm. Right. So that that's one piece. Uh the next piece is with the tobacco example the the reason why they got in trouble is they knew and they were actively trying to make their products addictive. Now, this is framing because in uh software design, everyone's trying to make their products addictive, but we don't call it that. And no one thinks of it like that. We try to improve for engagement, we try to improve daily active users. We want people to use our products, and it's not in no way, at least for us. I guess I can't really speak for Meta, but I would only assume it it is not malicious. Um, we're just trying to improve these methods.
SPEAKER_01I mean, the the the tobacco companies could also say it wasn't malicious, it was just trying to get people to come back and enjoy another cigarette, but but I mean that's the argument that I think the states are gonna be making.
SPEAKER_02Okay, so I'll do an I'll do another counter. The problem with the tobacco companies is it's directly tied to nicotine. If you take the nicotine out, it is no longer addictive. What are you going to take out of the app to not make it addictive? You can't articulate it. Yeah, right? Like they I listed off a handful of features.
SPEAKER_01You can make it less useful.
SPEAKER_02People will not come back. Right. It's kind of funny. But like I listed off a handful of features at the top of the segment. There was even more features on the list. So you it's not like you could have some sort of um law where you uh blacklist specific features because there's always going to be new features or new or new interactions um down the road that could be considered addictive, and addictive is maybe a little too subjective. Um to your point, which I loved, of we're always pointing a finger at something or someone, whether it's MTV, video games, rap, etc. And I think I think you're spot on. I also think the the issue here, not that there's really anything to do about it, but the issue here is not meta, it's that we all decided we are going to keep a little box that just lights up pretty colors in our pocket at all times. That that is the addictive part, is the just the fact that we have a phone. Because I know for me. I'll take out my phone, I'll open up any random app. Like uh it could be Facebook, it could be uh YouTube, but like I'll just see what's new. I'm not scrolling, I'm not doing anything. I literally just open the app and I close it. I just kind of go through apps and close them, and then I put my phone away. And it's just that over and over and over, right? So it's the just the human nature of having this little light box in our pocket, I think is more the problem. But again, I don't think there's anything the government can or should do about it, even though I don't like it about myself. Um, and I don't think it's great necessarily. To your point, there's a lot of positives of what's come out of this, but there are also a lot of negatives of, you know, you go out to a restaurant and everyone is face down on their phones. Um is that a negative though? I I don't know. That's not definitively a negative. It's it's different than what was before, and people don't like change, and therefore it's a negative. Um I'm saying that sarcastically. Yeah, yeah. And then the data harvesting violation, I think that is where a more realistic problem lies for them. Again, like I said at the top, the the what Meta is gonna fight is it what are they supposed to do? They can't verify it's it's virtually impossible to verify um these accounts unless if every account requires someone with an ID. Um, so like to you need to verify the parent, not the child. But that would mean you would have to verify kids that are over um 13 with their parents, which I mean, I guess Meta can do, but is not necessarily what what the law is saying they have to do. So that's that's unclear. Meta and um these other companies are lobbying for uh the age verification step to happen at the app store level as opposed to the app level. So it's the app store's responsibility to tell Meta if this person is 13 or not. Um I don't while it's a good idea, it still doesn't solve the full problem. One, and two, not everyone is interacting with these applications through the app store. They're still the website. So I don't know if that argument's gonna really hold up. But I the the last thing I'll say, going back to the uh product features, uh is I as a designer and product person, like there has never been, as far as I'm aware, an illegal component designed for a website, an illegal UI component. And I just can't imagine, because if if this were to um if the courts sided with the states and all of a sudden these UI interactions become illegal, that would not only change everything for Meta, it would change everything for all software. And it doesn't even have to be social media. Like at my last company, we had uh infinite scroll for a list of your um advertising reports. It was a B2B product, but it had infinite scroll because to your point it was convenience, but no one is just casually scrolling through um their ad reports on this product.
SPEAKER_01Um so I I just I think it was malicious intent. But I mean, yeah, it it just goes to show the ridiculousness of it. I mean, this might be uh I feel like this is a uh group of uh district attorneys that might be like a little bit power hungry, uh money hungry to go after um a company that has had a lot of negative publicity in the past, and they're like, hey, they have a lot of cash, let's go after these guys. Uh, you know, some sometimes that, you know, like I don't want to get into politics, but I feel like politicians view things in those terms as opposed to where can we go extract some uh it's kind of like a mob-like behavior of like where can we go extract some cash from um and make a name for themselves in the meantime, meantime as at the same time. So um, yeah, it it is pretty ridiculous for a feature of a product that might be used in many other products, by the way, as you just mentioned, to all of a sudden be illegal or used against a company for it it doesn't make a lot of sense. I feel the uh on the merits this lawsuit is lacking heavily so i guess to just sum it up from a investor perspective not concerned at all concerned a little bit what what are you what are you thinking as an investor well what's what's cool about where the stock price is today is that i feel like the lawsuit is um is having an oversized impact in a negative way on the stock price which means if the lawsuit ends up being a nothing burger and by the way a nothing burger can can still mean tens of billions of dollars of damages and fines and legal costs to meta but in the grand scheme of things tens of billions of dollars is not going to mean a lot for meta uh and it I would still consider that a nothing burger so if it ends up being a nothing burger the stock could easily pop pretty significantly as a result. Now the problem is the lawsuit might last years but uh what might change investor sentiment is as they hear the opening arguments and you know like as they hear the sort of like different parts of the uh argument and as different people start to make the case that wait a second, how is this different than you know an addictive TV show or um video games or whatever you know where video games were blamed on violent uh children um or causing beh violent behavior in children but eventually those lawsuits failed and you know like it didn't go anywhere and we now have plenty of uh you know like it just has a little tag that says you know for mature audiences only and guess what uh all the kids play all the video games that are for mature audiences only right so fundamentally it didn't change anything for the video game industry and I I I see this doing the same type of thing and then as investors get convinced that that's the direction that it's going to most likely go um then they'll start to re uh regain interest in the stock. So that's my perspective on it. I have not sold a share I've in fact been buying during this whole uh uh drama uh the drama got additionally emphasized this week just because the um the uh court case finally began so we'll start seeing more and more headlines around it as uh the court case unfolds okay what else do we have try to do the next two topics somewhat quick so we have a good amount of time for listener questions um okay so next topic Nvidia is reporting next week um so their guidance for the quarter was about 89 billion to 900 uh to 93 billion dollars in revenue the analyst estimate is on the higher end of that the 92 billion mark um i will note they've beat estimates for the last 16 out of the or for 16 out of the last 17 quarters so that doesn't necessarily mean they're going to beat again but that has been the pattern um analysts are also expecting uh EPS of $2.07 the and then just the last thing to note is the previous earnings move which really means nothing for this earnings move but we'll go into it anyway was fairly flat where before earnings they were up 1.3% and then after earnings they were down one point about 1.8% with all of that said what are your expectations for NVIDIA next week well one one of the cool things is hover around Q2 2026 on that chart um sorry uh before you go away q2 2026 so 91 billion is what's expected this so one year ago their revenue was 46 billion so this is what is absolutely mind blowing about nvidia is that they despite having had this incredible growth and run rate over the past four years which is nothing short of phenomenal for historic unprecedented but they're expected to go from 46 billion of revenue last last year for this quarter to 92 billion exactly double up 100% year over year and you know when you think about a company this size growing at 100% year over year it's it's just like like mind boggling. For me just even coming close to the estimates is an incredible accomplishment that uh that is uh in phenomenal a two dollar eps by the way if you uh annualize that that's like eight dollars of profits uh per share uh you know again if you put a uh a you know reasonable PE on that it easily justifies its current um uh current stock price so I think that um nvidia is continuing to crush it and I think they are probably going to meet those expectations but you I would keep I keep expecting them not to have this level of growth going forward you know how could they continue to grow at these rates can we get down to like 15 20 30% annualized growth for NVIDIA that would make me much more easy about the total AI demand as opposed to you know 100% year over year growth after having grown like 10x so it's uh it's kind of crazy.
SPEAKER_02Yeah and I I believe not next week but the following quarter analysts are expecting that they're gonna hit $100 billion in revenue for a quarter.
SPEAKER_01And that should put them on pace to be bigger than you know like Google and uh Apple which is insane. It's also incredible.
SPEAKER_02Okay, last topic then we'll get to listener questions. So we have a new view on your Savvy Trader portfolio and all savvy trader portfolios where before at any time you could see your current uh return for the day for a particular stock but you could also see your total return but you couldn't see what happened in between and I I don't know if you remember last week uh I think we had a listener question about Micron saying like how like when are forgot how he worded it but yeah how much patience are you going to have for for micron or whatever. Exactly and you were like what are you talking about patience? Like I'm up X percent in half a year. So now we have a chart that shows exactly that. So if you click on micron and scroll down here we have this return history chart where you can see right now you're up roughly 150%. You could see at your peak you're up around 250% um and it's really cool. I mean like a similar or not similar but a a cool view to feel like the patience maybe right would be Rivian is a better example where you could see how you've been kind of up and down um in your return history over time.
SPEAKER_01Look at how much patience I have that's January what 2023? Yeah 2023 and and right now it's basically zero or five percent gain uh as of uh uh yeah over three and a half years so yeah I mean like I think uh with with investing you have to go in with a mindset of patience um I've learned that from the greatest investors uh what whether that's been peter lynch or uh uh Warren Buffett but um but it has also I've also been personally rewarded for patience uh numerous times whether it's been through Tesla or Netflix multiple times Uber um Apple um Twitter my my various different investments with patients have really paid off um I'm hoping that Rivian is going to be one of those cases as well but you it's never guaranteed of course so right and the one thing that this chart doesn't show because it's just one angle is all the accumulation you've had over the past three years right and that's that's also affecting your average return.
SPEAKER_02So that's right um it's not that it's been flat for three years it's that you've been uh building your position for the past three years as well yeah um okay let's get to listener questions Adrian what do we have hello guys hello hello hello okay here's this one hi guys have you seen Moderna today crazy what are your thoughts on pharma stocks generally I have not seen Moderna have you not seen Moderna oh yeah okay yeah I've seen it so they were up a hundred percent today um wow because they there was a uh successful stage three trial of their uh cancer mRNA vaccine and you know all I'm gonna say is their their stock ticker is mRNA they've been foreshadowing this the whole time so if you if you weren't paying attention I don't is it up 176% today that is unbelievable I just saw it at around 100 holy macro yeah it's crazy that is unbelievable uh so thought thoughts on it um you know it's the market it's hard to know because the the it it this kind of feels like the start of potentially something big it could also be a nothing burger um until it's it's truly out and um you know helping real patients um i do i do think on a personal level it's very exciting and i i'm very excited to see all the different applications that we're gonna get from these rm mRNA vaccines um i'm not invested in Moderna I'm not invested in any pharmaceutical company it's my hesitation is it it's very capital intensive um and it's at least for me it's hard to know what's going to work and what's not going to work um and the the time frames are just so long um for all these trials so it's not it's not my cup of tea personally but I'm very excited for um again the technology and I'm very excited for Moderna shareholders today I mean it's very cool hopefully well I mean it's out out of my wheelhouse I I also don't invest in uh pharmaceuticals or any healthcare in general uh but it's also always fun to see a stock go up 170% especially a mature company it wasn't right it's not like it's a small stock right it was a you know 20 25 30 billion dollar company uh before and now it's like a $60 billion company is pretty incredible uh in terms of market cap but um and already has like a couple billion in revenue and the the thought uh hopefully is that the revenues could uh grow astronomically from here because of this uh uh achievement but yeah it's outside of my wheelhouse maybe we can go to the next question after okay what are your thoughts on app lovein after the 20% post-earnings drop SEC closed its inquiry net margin is 65% and forward PE is under 20x for 50% growth I've looked at appLovin a few times and I've never been like super excited about this company it just doesn't you know like I'm not excited about what they do um the valuation has never been like incredible uh stock has fluctuated between $400 and uh you know $700 or $300 I should say and $700 over the past year.
SPEAKER_01But it has also grown pretty astronomically if you go to the five year chart from a low of like 10 to you know where it's trading at over $300 today. So um it it does have an earnings hub score of an A. So that's kind of exciting but um it's the company itself is not super exciting to me. I don't know if you Dustin do you have any thoughts on it?
SPEAKER_02Yeah I don't follow them too closely they are uh very popular on Savvy Trader so I do see no their name often um I don't know I I like I hinted at before I was in the advertising space uh before I worked at Savvy Trader um and it's not the uh most fun space to be in so I've kind of left all of that behind um since moving over to uh the finance world so um I don't really have much thoughts to your point the the fundamentals seem fairly strong the stock price I mean if I was a believer in the stock this is not financial advice I I would love to see uh this type of drawdown it seems like a buying opportunity if if you um you like the stock again not financial advice but um yeah but fundamentally it's in the ad business too which is you know like again uh it or providing ads inside of the apps of others and that to me just seems like those are the worst kind of ads is also probably yeah exactly those are the ones that you want to skip as much as possible and you can't often because you know and kids might be the most susceptible to those ads because they're not paying for the apps.
SPEAKER_01So yeah if if meta loses that lawsuit you're not gonna want to be an app lover that's a very good point yeah they're gonna go after the ones the the the next but it's gonna be tiny minuscule in comparison to meta what else do we have next okay hi guys I heard that the token price has dropped drastically in week in recent weeks how might this affect Google Meta Iron etc so the the the um this question is referring to the cost per token that uh uh companies like Anthropic or OpenAI charge versus what Meta has uh introduced and is charging versus what groc has introduced and is charging which is significantly lower for similar or very close to uh to the same capabilities um and and I think that this is uh this is just something that plays out in every market where um the the first to market can charge a premium to some extent and also like for the best product they can also charge a premium but then um others have to sort of fight based on price to get some market share and ultimately it's good for consumers and businesses for the cost per token to drop drastically um the the good news here is that the amount of demand for intelligence and let's not call it tokens because it's really intelligence that everybody's going after the the demand for intelligence in all of our daily lives as well as in all of the apps that we use and as well as in uh just you know like I'm planning a trip I want AI to do all of it for me and like currently it's not there. I had to spend literally hours and hours and hours of my own time to to plan out my trip. That capability is and the demand for intelligence is going to continue to grow at an astronomical rate. And the cost per token has to come down in order for us to be able to use it use intelligence in all of the places that we want to use intelligence in. So I think that's a good thing. That's not a bad thing. Short term it might hurt one company, help another I don't know exactly which ones are going to benefit from it, which ones are going to get hurt by it. But you know for example Meta and Grok are in or uh SpaceX's uh grok solution is introducing things at a way lower cost per token anyway so they're only going to benefit from this whole whole whole sort of like lower cost per token because they're the ones who are causing it to be lower. Whereas you know Anthropic who's on the sort of leading edge and charging the most might get hurt by it a little bit maybe it'll slow down their growth but there's also so much demand for all of it in terms of uh uh demand for intelligence at both you know low levels of intelligence all the way to you know the smartest thing possible uh that uh I think that everybody can still benefit and there's a lot of growth left before we're saturated.
SPEAKER_02I think this is just capitalism doing its thing, right? Like the price of intelligence is just going to find wherever it's supposed to be. I think during this initial build out it was probably too high and in theory unsustainable. It's not necessarily going to be free, which would be the other extreme. So I think um we're just finding what the right price is.
SPEAKER_01Yeah. I mean just to sort of like uh it's not unpredicta it wasn't unpredictable either like even if in our own applications for example we decided to uh put the best intelligence possible in um in EarningsHub in all of its AI capabilities we put a very high cost model in there uh knowing that the cost is going to drop over time so we knew initially we're going to be upside down in terms of like where the uh our cost was going to be significantly higher than what we're recouping from uh revenues for what we're charging but that the cost per uh for the intelligence that we're asking these things to do is going to only come down and as that comes down and our revenue continues to grow then eventually these things will cross paths. So it's a very predictable thing it's like similar to cost of bandwidth or cost of CPUs on a per transistor basis.
SPEAKER_00If you were to measure by transistors on a CPU the cost has gone down uh you know many many orders of magnitude uh over the past 50 years or whatever so um all right okay I know we have um we're a little over time but I just wanted to do a couple more questions we'll just go fast. What are your long-term views on Apple?
SPEAKER_01Do you think now is a good entry point um yeah this is a great question because Apple has continued to do very well despite not having the the stock has done really really well despite not having any AI presence which is kind of crazy for for a company whose device everybody uses to interact with AI and uh every other application for that matter um just looking at the past five years Apple stock has gone up uh 113% it's hovering near all-time highs I think it's all time high is in the 330s uh it's at 316 uh it is a 4.6 trillion dollar company so one of the things that you know like one of my preferences for investments is you know like how much more room is there for growth for this company and I don't see their iPhone business growing in any significant way I don't see um I mean their Mac business could potentially grow pretty significantly so that could be kind of interesting but if the Mac business let's say doubles that only adds like 20% of revenue uh to their overall revenue so Apple is just such a massive company that the opportunity for it to 10x from here is like very unlikely over the course of the next year uh 10 years uh over the course of the next year the opportunity for it to 10x is incredibly small um and it's not investing in anything that could be earth shattering from that standpoint is just investing in continuing to build the same products but better versions of them so uh and and it has been relatively disappointing from an um innovation perspective and you can see that in its growth rate like if you look at Apple's growth rate uh revenue growth rate is slower than Google or Microsoft or Meta or uh any of its uh uh mag 7 peers so I'm not a huge uh proponent of Apple currently one thing that could change that is John Turnus the new CEO coming in and if he starts introducing new products and new product lines that could be and and gets Apple to be innovating again that could be super interesting. So um personally I'm not a fan of the stock here I'm a huge fan of the company and its products and I use them all but uh not a huge fan of the stock and haven't been for a long time.
SPEAKER_02Yeah I have similar thoughts um a fan of the company and brand and products I'm very optimistic about the new CEO John Turnus obviously it's too early to tell what's going to come out of that but I do think changes needed to be made uh especially in this post AI world. In regards to product growth the one uh direct Dark horse is it seems like we're on the precipice of a totally new product category that is AI first. Right? Like we're hearing open AI is working on a device, others are working on a device. There's been the you know devices that have failed, like the the AI pin or whatever that was. So there's there's going to be a new category. I'm sure Apple will take a stab at it. Who knows? Is that going to be like the next iPad for them? Is that going to be the next home pod for them, which wasn't nearly as successful or as big? Um, so it's hard to really know. Um, I don't own Apple. I own several other Mag 7 companies. Um, to Hamid's point, they're just not growing um at a fast enough rate for the size that they are for me to be uh interested personally.
SPEAKER_00Okay, this is the last one. Hi, Hamid and Dustin. How to you how do you evaluate high growth high PE stock? What financial or other indicator needs to do you need to evaluate evaluate this?
SPEAKER_01Yeah, so um a high growth company and maybe high PE or no no PE because or negative PE because they're not yet making profits. Um the the way to evaluate those companies is based on total addressable markets, so the market size that they're playing in, uh, the competition in that market, and then you know, whether you think that this company can outdo the competition. So a perfect example of this would be like um Rocket Lab, which uh which doesn't have any profits yet, but is like quarter after quarter uh growing at a very, very fast clip. It's uh growth rate has is even accelerated in recent quarters to over 60%. They're expected to grow 60 to 70 percent over the course of the next uh uh in next quarter, year over year. Um, Palantir is another example of a company that is growing extremely fast. Uh, that company is actually profitable, it's much more mature. Um, so trying to determine like what is the total addressable market in these for these companies, and then can they sustain this level of growth for some period of time to justify their valuations is the way to sort of look at it. And um in my in my perspective, both of these companies are extremely overvalued, by the way, in their current uh financial metrics by almost any measure, but I'm currently in one and I'm not in the other. So, my uh my valuation is that you know um Rocket Lab is playing in a space that the total adjustable market is enormous and they have uh been executing exceptionally well, and they're gonna uh continue to grow and certainly uh grow into not certainly, but this is my perspective, but uh that they're gonna grow into their valuation and then some. Um whereas Palantir, I think that uh uh I don't have a good visibility on that. I don't even understand fully what they do. Uh, and uh my uh assessment of the total addressable market is therefore flawed, and like I have I'm not touching that one, right? Like uh this despite the company having done exceptionally well uh from a stock perspective. So it's always hard to evaluate these things, and it's not uh it's not an exact science, it's sort of like a uh combination of a bunch of different factors, and oftentimes people are wrong, even the experts in in the area are wrong. So uh that's all I can tell you from my perspective. What about you, Dustin?
SPEAKER_02Yeah, it you know, it's obviously it's hard to evaluate stocks if it was easy. Um everyone would be making money. Um high PEs give me pause. It doesn't mean I won't invest in them. I I do like to sometimes look at the peg ratio, which basically combines the growth versus the PE into one metric, and then I compare that to other stocks that um I'm familiar with. Um you also need to be cautious when it comes to high growth. Like you could have a very small company with like a very small market cap, and that could easily be high growth, um, or easily have a high PE, but it could it's just kind of off because the market cap is so small. So that is a trap to that you could fall in. The the other piece is not everything is in the financials, right? Like there could be um I'll go back to Rivian, like all the R2 numbers and potential that that is just in the ether. That's not in uh their their finances right now. So um, you know, as an investor, you have to you have to take the current financials into account, but you also have to assess what's in the pipeline um and kind of go from there.
SPEAKER_01So yeah, that's what I look at. Good stuff. All right. Uh another episode down. Thank you very much, everybody, for watching and listening and doing your thing. Appreciate you guys being with us every week. And subscribing. Thanks for doing that. Bye, everyone.