What's The Big Deal?
Get the view from the inside. Every week, Graham Smith (ex-Ares) and Deborah Taylor (ex-Barclays) take a look at Wall Street’s headline-grabbing deals.
From mega-mergers and hostile takeovers to complex private credit transactions, they break down the why, the how, and the who behind the numbers.
What's The Big Deal?
Nvidia Under Pressure: Is the AI Chip Monopoly Finally Cracking?
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Every AI product you use runs on semiconductors. And for the last several years, the narrative has been almost entirely about Nvidia.
But Q1 2025 results are painting a more nuanced picture and for the first time, the question of whether Nvidia's dominance is structural or temporary feels like a live debate rather than a hypothetical.
In this episode, Debs and Graham go inside the semiconductor industry from first principles, mapping out who does what across the AI chip ecosystem before turning to the latest results and what they mean for valuations.
Graham explains how GPUs, CPUs and memory chips work together to power AI, covering why the parallel computational demands of AI models require so much chip capacity, why that has driven up the price of consumer memory, and why Nvidia's software ecosystem creates a lock-in that competitors are only now beginning to challenge seriously.
Debs then walks through the competitive landscape in detail: Broadcom winning custom chip mandates from Google and Meta on energy efficiency grounds, AMD posting 57% data centre revenue growth, TSMC delivering 41% revenue growth with 66% margins, Samsung flagging memory supply constraints into 2027, and Intel up 150% year to date on the back of a foundry pivot and reported talks with Apple.
The valuation discussion unpacks why chip designers like AMD trade at a premium to manufacturers like TSMC despite TSMC's superior margins, the role of CapEx intensity and cash conversion in driving that gap, and the Taiwan geopolitical risk discount embedded in TSMC's 18x multiple.
The episode closes with Debs and Graham weighing whether semiconductor valuations reflect genuine AI demand or a market that has run ahead of itself, and flags Nvidia's own results on 20 May as the next major test.
Key Discussion Points:
Semiconductor ecosystem: GPUs, CPUs, memory and custom chips, who makes what and how they work together.
Nvidia's competitive position: software lock-in, hardware leadership and the first real signs of competitive pressure.
Q1 results: AMD, Broadcom, TSMC, Samsung and Intel, what the numbers say about demand, market share and supply constraints.
Valuation framework: why growth and cash conversion drive the premium for chip designers over foundries, and what geopolitical risk does to TSMC's multiple.
Nvidia's S&P 500 weighting: how index inclusion and passive fund flows affect valuation independent of fundamentals.
Outlook: memory supply constraints into 2027, the Intel/Apple story and Nvidia's results on 20 May as the next major market catalyst.
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What is the big deal this week?
SPEAKER_00Is NVIDIA's reign finally over?
SPEAKER_01Is NVIDIA under pressure?
SPEAKER_00We talk a lot about GPUs, but it's certainly not the only thing that AI requires.
SPEAKER_01TSMC basically does most of the actual manufacturing.
SPEAKER_00Then you've got companies like Broadcom. Google has their own chips. I feel like Amazon's developing their own chips. A lot of these companies are working with Broadcom to actually get these chips manufactured.
SPEAKER_01So what is it that Broadcom kind of brings to the party, as it were?
SPEAKER_00I'm totally tied to one company. I'm locked in their software ecosystem. And what can I start to do about it?
SPEAKER_01Energy costs are now a big concern, aren't they, for those running the data centers.
SPEAKER_00A ton of growth in this space, and that I think explains a lot of why we're seeing these multiples just so high across the board.
SPEAKER_01Hello to all of our listeners and welcome to this week's episode of What's the Big Deal, where we take a look under the hood of major deals in the public and private markets and explore finance industry developments. My name is Deborah Taylor, and I'm going to use my background from my career in investment banking to bring a public markets perspective.
SPEAKER_00And I'm Graeme Smith. I'll use my background in private credit to bring the private market perspective here.
SPEAKER_01And Graham, what is the big deal this week?
SPEAKER_00So the big deal is a big question this week. And is it is Nvidia's reign finally over? I feel like this is a company that just has felt unstoppable for the last, I don't know how many years as AI has just gained more and more momentum. But we're seeing some interesting results and some changing dynamics in the whole semiconductor space, which I think are making people question is there is their unstoppable market position finally up for grabs a little bit?
SPEAKER_01Absolutely. And I think it's worth remembering that every single AI product, that's ChatGPT, Claude, Co-Pilot Gemini, is underpinned by the semiconductor industry. And absolutely, NVIDIA's being kind of the narrative that everyone's focused on. So we do need to explore how the industry operates and whether NVIDIA's reign is coming to an end. We have quite a few players in the industry, which I think we need to explore. We've got NVIDIA, obviously, they're the chip, the global leader in chip production. We've got AMD who are trying to compete with NVIDIA. We've got Broadcom, previously a communications company, that are now moving into custom chips, RAI. We've got TSMC who manufactures chips. We've got Samsung, who produces memory and also does manufacturing. And then we've got Intel, which is trying to reinvent itself. So we've got a lot of companies, and we're going to try and understand how the jigsaw fits together. We'll talk about their business models, we'll talk about the Q1 results and what was surprising. And then we'll talk a little bit about their valuations. So, Graham, kick us off with a little bit of an explainer on the semiconductor industry. And also, is NVIDIA under pressure?
SPEAKER_00Okay. A short answer, I think, I think they are. I mean, how could how could they not be? This is we've been talking about AI a lot. This is such a such a hot space. There's so much CapEx being invested in this space right now. So how could how could competitors not want a share of the pie for NVIDIA? So I think I'm not necessarily saying, we'll talk about it in a second. I'm not necessarily saying that I think they're they're going to be gone tomorrow. That's certainly not the case. But there are a bunch of people saying, hey, I want, I want some of that and some of that really interesting AI growth too. So where do we, I guess, where do we where do we start? Let's talk. I guess semiconductors come in a few different flavors, and we talk a lot about GPUs now because this is the type, I guess, of chip of semiconductor that is so relevant for AI. But it's not the only one. You have you have GPUs, you have the traditional CPUs, which are still very much, very much a part of the market and very much required. And then you've got, I guess let's call it some of the other stuff, like the memory in particular, the high bandwidth memory that AI uses. Uh you've got just everyone, everyone in this whole ecosystem. So it's it's kind of interesting when you, even when you you know, you go to buy a new iPhone as an example, right? You've got different, different levels of storage in that iPhone. I don't know if anyone's noticed when you've gone to buy a phone or computer, you know, whatever the case may be. Uh that that type of memory is just insanely expensive right now. And it's actually AI that's been driving the price of all that up. So we talk a lot about GPUs, but it's certainly not the only thing that AI requires. So let's see, it just in terms of, I guess, just high-level kind of semi-technical background on why you need all this stuff. I guess if you think about the difference between a CPU, it's kind of the chip that goes inside the server that tells everything what to do. It like orchestrates everything. The GPU is the thing that does all the all the AI math. Now, I'm I am not a mathematician. I mean, Debs, we do finance math, which is like barely dividing and multiplying. Like I think people love to love to pretend finance is really complicated. And parts of it, parts of it are, but like the math in finance is not complicated at all. It's like high school math at the at the highest, I feel like. So the AI math is complicated. Like you need a you need a PhD in mathematics in order to understand what's going on. But the way I basically understand it is it's basically just a bunch of really complicated probabilities. So if you everyone's used GPT, Claude, whatnot, you kind of see how it builds its response as you as you go down the page or as it as it responds back to you. Basically, the way it works is it's kind of on the fly. Like all these models really do is basically say, okay, for any given word or letter or series of letters, people have heard of a token in AI before. That's kind of what this refers to. What's the probability that something comes next? So it just it's kind of building, it's building its response based on, all right, if you're asking me to explain what is AI, and it starts saying AI is, what's the next word and phrase that comes after is? So in order to do this, you need just insane amounts of what's called parallel computational power. So the the GPUs, or as now a lot of them are being started called TPUs or tensor processing units. It's really just this massive chip that is designed to do the same calculation, not over and over again or in sequence like a CPU does, but at the same time. Because you just need an insane amount of mathematical computational power to generate these responses. And that's why, that's why these chips require so much power as an example. It's just the math behind this stuff is so is so complicated. Um, it's also it's also why it takes so much power and time to to train all these models as well. So you have you have those chips that are really good at that stuff. When you type a question into GPT or Claude, that's that's what's going on. But it's not just that inside this whole ecosystem. So all that happens in a data center, that all happens inside of a computer server, and in that you need the CPU, the central processing unit, to instruct that GPU and the other stuff inside that machine, like what to do. So you got to feed the GPU instructions, then you got to report it back to another server to then report it back to you, the user. All this happens from your perspective almost instantaneously. So there's a lot of coordination going on between all these different components. And that's kind of what the CPUs do. So even though even though I feel like we're just talking about GPUs right now, the CPU is still, is still pretty important. And you've got different companies that focus on on different different parts of this ecosystem. So you've got NVIDIA, which is historically, historically GPUs. I mean, GPUs, it's it's graphics processing unit. That's what they're that's what they're designed for historically. Like NVIDIA used to make graphics cards for computer gamers. That was kind of like that was kind of like the main, the main business. Uh and then you've got AMD has been in this business for for quite a while as well. I think that that explains a lot of, and we'll talk about their their market valuation, their movement recently. I think it explains a lot of why they're doing so well, just because they've kind of had they've had their hands in both of these pies for for such a long time. And then you've got then you've got other companies like Samsung who are in the in the memory, the memory space. So if you buy a just a little thumb drive you plug into your computer, one of those external hard drives, computer RAM, you know, this is this is something Samsung is really, really big in. Um and then and then you've got a few other players a lot of people haven't really come across or heard of. Well, sorry, I uh it would be I I need to stop and talk about Intel for a second because they have historically been in the CPU space. And obviously there's a lot of history there, right? They're kind of like really the the main player in that space for what decades, I feel like, you know, kind of forever. And then as these other technologies have gained so much more momentum, I feel like they kind of got pushed to the side. They've obviously had a big investment from the U.S. government. There's been a push to bring more chip manufacturing capacity back in the US, and they're certainly benefiting from that. We'll talk about the manufacturing thing in a second, because that's actually kind of kind of interesting. Uh then you've got companies like Broadcom that are actually really benefiting from the AI wave right now. They're more of a, let's call it, specialist chip designer. So NVIDIA is the company we hear about all the time for GPUs. There's a lot of, there are a lot of new competitor products kind of coming to market. Google has their own chips. I feel like Amazon's developing their own chips. A lot of these companies are working with Broadcom to actually get these chips manufactured. And then you have, it's kind of like you remember when Saudi Ramco went public and it was kind of like the biggest company that no one had ever heard of. You also have this company called TSMC, it's which is Taiwan's semiconductor manufacturing company, I think is the acronym. And they manufacture, they make the actual chips for basically all of these guys. So you think about or you hear about Nvidia and their chips, you hear about uh Apple and their chips, you hear about Google, the chips they're designing. Like literally all of these guys use TSMC to do the actual manufacturing. So it's kind of not a household name, but it's just this absolutely gigantic company that does so much of the manufacturing. And that's really why you've got so much support for companies like Intel building chip foundries, bringing some of this more, bringing more of this back to back to the US just to have just to have more chip building capacity, because so much of it is done abroad by one company. Um so that's that's the kind of whistle stop tour anyway. I mean, Debs, is that does that kind of make sense? Like what what questions do you have?
SPEAKER_01So I guess um, so to be clear, so Nvidia, AMD, and Broadcom, they're the big chip makers, but you're saying TSMC basically does most of the actual manufacturing. So these other companies are just really designing and actually selling the chips. They're not actually manufacturing. Exactly.
SPEAKER_00And we we get we gotta we gotta talk, we gotta, we can't leave intel out of that, out of that discussion either. Because and I mean they they are they are still they're still big, they're still relevant, not as relevant maybe as they were, say, 15 years ago. Uh but they're not, you know, they're they haven't they certainly haven't gone away. And when it comes to the to the manufacturing capacity that you talk about, they also they're they're one of the players that does both the design and some of the manufacturing of their own chips. Whereas most of these companies, yes, to your point, are manufacturing using TSMC.
SPEAKER_01Okay. Um and then in terms of Broadcom, um, you said that they're kind of working with Google and um Amazon on sort of their own sort of custom chips. What's the advantage? Because so far NVIDIA's had a bit of a stranglehold of the GPU market. So what is it that Broadcom kind of brings to the party, as it were?
SPEAKER_00Well, they bring some chip design experience. They have been in the custom chip manufacturing business for quite a while. So if you are you're looking to develop your own chip, they they're kind of a natural party to to work with. And I think this is one of the reasons why we're seeing we're seeing some headwinds finally, I suppose, for for NVIDIA or at least some sign that they might not just be this unbeatable behemoth forever. They still have a lot of insane competitive advantage, there's a huge software advantage they have. A lot of the stuff, a lot of the a lot of the software that uh that is used to do all this all this AI calculation is really tied into NVIDIA's software and hardware ecosystem. So it's kind of hard to rip out. But you gotta, you gotta think. If you're if you're literally any of these AI hyperscalers, and you're like, all right, my single biggest expense right now is GPUs. I'm totally tied to one company, I'm locked in their software ecosystem, and what can I start to do about it? So I think you're finally, we're finally seeing some other companies. It feels like start to start to catch up. I mean, maybe NVIDIA still has the absolute latest and greatest and best chips, but some stuff seems like it's pretty, it's pretty not gonna say it's there yet, but it's getting close.
SPEAKER_01I think I'd read that actually there are energy advantages to some of Brawlcom's custom chips. Um, maybe they are less energy intensive, which I mean energy costs are now a big concern, aren't they, for those running the data centers. So I guess if there's an energy saving as well, and you're reducing your dependency on NVIDIA, then it actually makes sense to kind of welcome another party into the market, as it were.
SPEAKER_00Exactly. Exactly. I mean, it is the kind of thing you have to, you literally have to save energy wherever you can because your energy bill is just so insanely high.
SPEAKER_01Yeah. Okay. And then I guess my other question is on the manufacturing side. Uh, you mentioned TSMC, that effectively has at the moment a monopoly on the manufacturing, but as we know, Intel's kind of moving into that market. Um what are the big sort of risks or concerns around TSMC? Because if they're doing a good job of manufacturing and supplying, you know, the capacity that's needed, what's the concern there?
SPEAKER_00I think there are there are a few, right? I mean, one one is you have a capacity constraint in this market right now. Again, to that point of this isn't just impacting the price of GPUs for AI. You go to buy a new iPhone, you're like, why is it so much more expensive? You buy a new computer, you want to add hard drive space to it. Why is that so much more expensive? It is literally AI that is making that so much more expensive. So there are there are supply constraints in in production for really all these chips. So I think it's kind of just kind of good practice to have to have some some alternative supply. And then also, I mean, let's not let like let's let's just remember the reality of the world that we're living in. We're living in a world that is unpredictable and stuff can happen. So when you have the basically single source of manufacturing capacity for everything that is driving so much of the like overall economic growth right now that's both offshore and like could be attacked by someone, then it just seems like a good idea to start to build some more production capacity.
SPEAKER_01Aaron Powell Yeah. I think I read that the US government's actually taken a stake in Intel to help sort of support that kind of direction change for them, that that kind of move into manufacturing.
SPEAKER_00Yeah, and it's it's kind of a it's kind of a weird move for a government to make. I feel like government is not really supposed to do stuff like this just fundamentally, but but I I don't know, we're living we're living kind of a weird world anyway. And I guess you can make the argument that actually having having some alternate supply is is a good thing here. So I'm just looking at the just looking at the the kind of high-level press release. I think they invested invested about nine billion dollars for for 10%. You know what's what's interesting to think about though? I mean, I don't know, I don't know what Intel's cash position was like and you know what their what their production build plans were, but based on based on some of these crazy CapEx numbers we talked about even last week, what like six, seven hundred billion? You're like, nine billion's like chump change. Yeah, documentation. What can you what can you what can you build for nine only nine billion dollars? Um but I like that's it's obviously there's obviously more going on than than just the the US government investment there.
SPEAKER_01Yeah. Interesting. And uh yeah, I mean uh there's so much that's been happening in the world, and you're saying as you say, that's affecting demand for chips, uh the manufacturing process, the location, and and clearly that is having an effect on the results of the companies and their valuations. So let's touch a little bit on that.
SPEAKER_00Yeah, as I say, let's let's talk about where the financials are here.
SPEAKER_01Yeah. I mean, I'll just give you a kind of summary of what's been happening because we have started to get Q1 results coming in just over the last week. Um, I think it's a first quarter where the narrative isn't just about how amazing NVIDIA is, because as you said right at the opening of this episode, it's just been such an amazing narrative so far. Um, but it is definitely coming under a bit of pressure. And it's the only one whose share price has actually fallen since Q1 results started. And now NVIDIA themselves haven't yet reported, but they are guiding to 77% year-on-year revenue growth, which sounds amazing. So why on earth would share price fall? Yeah, totally. Well, to be fair, the market, you know, reacts when there's new information. And you know, ultimately the question is what has been revealed in the results of others. Um, and I think there's been a few bits of news flow. So, first of all, AMD, they reported a huge beat. Um, their Q1 earnings were up 36% year on year, but actually a real nugget of information there was that their data center revenues were up to 57% year on year. So it's now viewed as a much more credible rival for NVIDIA. And although it's still only generating a fraction of NVIDIA's revenues, it's effectively now starting to take some market share, which from the market's perspective is huge. Market share is so important for share prices. You know, market share gains is someone else's loss. So there is definitely a bit of a correction there. Um and then on top of that, we've had Broadcoms results. Their revenues are up 29% year on year. And as we mentioned earlier, they produce custom AI chips, but that's stealing headlines because we've got Google and Meta spending billions on their chips, specifically not buying NVIDIA's GPUs, because as we mentioned earlier, they're more energy efficient and reduces NVIDIA dependency. Meanwhile, we've had TSNC also reporting their results. Um, remember, they're the manufacturing company, their revenues were up 41% year on year, and it really just provides really bullish read across around demand for chips. So that was viewed very positively across the industry. But Samsung also reported really strong results, up 70% year on year for revenues, which reinforces what we see for TSNC, but they did flag memory shortages running into 207. So this is the first bit of negative we've seen about capacity because so far we've been concerned about capacity for GPU, but now Samsung is saying, well, maybe there's going to be supply chain constraints for memory. And without memory, the GPU has become effectively redundant. So you need the two hand in hand to meet demand. So a little bit of a headwind.
SPEAKER_00I'm surprised it's taken that long for them to even kind of come out and say that. Because it's it's kind of felt like that's been the case for a while, just given given the the crazy, the crazy price increases of all this stuff. So it really does feel like we just need more capacity overall.
SPEAKER_01Absolutely. And it's funny because we were talking about prices of some of these chips. They are really expensive. Like when we hear the numbers about committed spend, so much of that goes on the chips, and then life is so short. They're like, what, eight years long? So yeah, I mean, this is the license to print money here.
SPEAKER_00This whole this whole world is a little bit crazy if you think about it sometimes, right? Because you have you have that whole dynamic, right? This just insanely expensive chip doesn't last that long. And then you know, you ask ChatGPT some something, and then you know, someone's someone's lights dim if they live near a data center or they run out of water and they're tap, and then you're just like, what's going on?
SPEAKER_01Yeah, absolutely.
SPEAKER_00Like are we are we living are we living in in the upside down right now? I I don't know.
SPEAKER_01Yeah. Today. And then on top of all of that, we've got Intel. I mean, oh my goodness, their share price has absolutely rocketed this year. I think it's up 150% year to date. And, you know, for them, it's really a big comeback story. Because as you say, they've kind of been languishing. They got that boost from the US government investment. But I think what also gave them sort of an extra tailwind, as it were, is that they're now reportedly in talks with Apple for using some of their processors and maybe even their manufacturing for Apple devices. So that would be a huge issue to them.
SPEAKER_00Yeah. Yeah.
SPEAKER_01So much interesting news flow in the results. Clearly there's strong demand for chips, but the sort of I think underlying story is first of all, more pressure on NVIDIA, definitely. And maybe also the comeback story for Intel, the fact that they're now moving into the manufacturing space, um, that kind of changes the dynamic of the industry slightly. So that's kind of my take on the Q1 results.
SPEAKER_00I'm not a public equity guy. I don't I actually don't do a lot in the public stock market because we I think we've had this discussion before. You just like, for me, how do you how do you value something when some news comes out and things are up 50% and then they're down 30%, and especially in a in a space like this? Like, how do you how do you make money as an investor in this space right now? Like, what do you what are you supposed to do?
SPEAKER_01Yeah, I think it's really interesting because I think part of the problem is that everybody wants to be invested in the AI theme, and everybody's trying to work out where the safe bet is. So we've kind of talked a bit about the hyperscalers, we've talked about the AI companies, and now, you know, the chips. And so I think part of the problem is trying to kind of peer through the noise and work out what is uh linked to fundamentals and what is just people shifting their view or kind of almost rotating between the different points at which you can invest in the theme. And I think as we've seen kind of concerns around, you know, maybe uh the cost of energy for the hyperscalers, then people think, oh, maybe we should be moving towards more focusing on the semiconductors. So I think that the problem is actually the noise from all of that. Um I think in terms of in terms of the actual fundamentals, as I mentioned earlier, kind of the big the big metric that's watched is market share. Any kind of moving of the needle there will have a massive impact on the share price because you know that effectively becomes a trend that you then extrapolate. You know, oh what they've gained market share, that's likely to continue, you know, if all else is equal. So I think that's why we've seen such a positive response by the market for AMD and maybe a slight pullback for NVIDIA. I think what's also interesting is that the valuation world for semiconductors has moved on. When I was an analyst, the valuation of these companies was really closely tied to the end market of the different types of chips. So you had chips for telecoms, consumer electronics, autos, industrials. And when we had results in a particular industry, that would then feed into the valuation chip manufacturer that led that end market. But now everything is linked to AI. So I think that makes the analysis of valuation a little bit more tricky. Um, and I think it's important to kind of you know understand the way that the different businesses are set up. You know, we talked about some of them actually doing manufacturing, some doing the design and the selling of the chips and the different types of chips, the geopolitical risk, and how that might weigh on TSMC. Um, so I think those are the kind of the interesting areas to explore with the valuation. Okay, so let's talk about the valuation uh of some of these companies. Uh, we've got I've got some stats in front of me in terms of multiples. We've got NVIDIA, actually only on an EV to eBit dive 22 times, which I think is surprisingly low, but as we've seen, the the share shares have pulled back slightly in recent days. AMD on EV to EBITDA 30 times and Borcom on 26 times. Meanwhile, TSMC, they've got amazing margins. Their margins are 66%. I mean, that's huge. Um their multiple EV to e-bit dive is only 18 times. So why do you think the market favors the chip makers over the chip manufacturer? And so why do you think AMD is at such a premium at the moment?
SPEAKER_00I mean, first of all, compared to uh, because I always look at things through the lens of the type of investing that that I've done in my in my finance career. And if I ever saw an Ebuton multiple of 22 times purchase price on the way in, I'd say, like, what is this? So to hear, oh, it's only it's only 22 times. It's oh, it's only $10 billion. Only 22, like what? It's just this is just nuts. Uh but yeah, actually it's interesting. One thing, one thing I talk a lot about when I'm in the classroom trying to explain valuation to people, particularly, particularly EV to eBit DA valuation, valuation multiples, which is kind of like I feel certainly, certainly in private market investing, the multiple we look to more than more than anything else. I kind of think about there are two real fundamental things that drive valuation. One is, of course, growth prospects, and we're in this insanely high growth industry. So you know, all these multiples are high because people expect a lot of growth. And the other is cash conversion, right? So it kind of makes sense to me that you've got the the capex light businesses in this space, like Nvidia, AMD, on a premium multiple basis compared to the foundries, because you're you just kind of think about what's what must be involved in running a foundry, and that's got to require a ton of cash, a ton of maintenance capex. Uh so you know, if you were to really look at these on some kind of multiple cash flow, do you start to see a multiple that looks a little bit more similar? Like probably, probably. I have to actually spread the comps and do the math. Um, but my my guess is it has a lot to do with the the capex requirement and cash conversion.
SPEAKER_01Yeah. I think I think that's true. And I think I read somewhere that the yeah, these the companies which provide the foundries, that kind of capex drag does weigh on their valuations typically. Um so yeah, completely, I completely agree. I think the only thing to flag though is that TSMC, we mentioned the political risk, that probably also weighs on their multiple. In fact, if you compare TSMC 18 times multiple to Intel's 24 times, maybe that gives you a better, a truer comparison with Intel doing more now, moving more into the foundry side of things. So that almost certainly weighs down on the multiple for TSMC, doesn't it? That geopolitical risk.
SPEAKER_00100%. So it's just still, I'm just you know, kind of laughing to myself, still wild in the sense that a a company with a high capex bill geopolitical risk is lowly valued at 18 times EV to evita. Like, okay.
SPEAKER_01Yeah, but then it's got year-on-year revenue growth of 40% or something.
SPEAKER_00I know, I know, I know, of course, right? It's just it's just kind of it's just kind of funny. Yeah. Uh because yeah, you compare it, you compare it to you know any kind of other capital-intensive, like straight-up manufacturing business where you're manufacturing like just stuff. Yeah. It's like so wildly different. Yeah. Um, but yeah, obviously a ton of a ton of growth in this space. And that I explains a lot of why we're seeing these multiples just so high across the board.
SPEAKER_01Absolutely. I think the only other thing to flag, uh, NVIDIA, the fact that NVIDIA's market cap is five trillion dollars, it's now about 7% of the SP 500. So you've got all of those passive funds kind of having to hold NVIDIA. I mean, I think it's the most held stock in the world. So there is that, that is going to have an influence over their valuation as well. That kind of what we refer to as technical factors that drive a share price. It's not just about a company. Inclusion in an index or being a very material part of an index can make, you know, make the valuation a little bit more sort of um buoyant, shall we say, as a result of that.
SPEAKER_00You know, I actually think we should do a whole episode on some of this stuff at some point because this is not something that I know a ton about and we've talked about it a little bit. I actually just find it I find it interesting just because it's something I don't I don't know that much about. And uh I'm sure there are other people in the same in the same kind of boat. So let's let's pencil that in for a future episode.
SPEAKER_01Definitely. Excellent. So I think we've kind of talked through quite a bit there. We've talked about the semiconductor industry, we've talked a little bit about uh Q1 results, we've talked about the valuation of these companies. So I think the next question is what are your key takeaways, Graham?
SPEAKER_00All right, key takeaway for me. I mean, personally, I still I don't have money invested in in this market just because I don't I don't have a view yet on if we're in if we're in just sort of like hyper almost bubble bubble territory right now. Like it feels like feels like we have been, especially in the context of the news we talked about last week with some of these CapEx numbers being pulled back, revenue targets being missed. Are we just in this world where everything is just uber, uber frothy? I don't I don't necessarily know if I have a view on whether we're in the 90s dot com bubble territory here or not. Feels like there's a bit more there's a bit more substance going on here in the sense that you have all this infrastructure build. There is there is quite a bit of demand for all these services. So it does feel does feel different. It's not like the 90s where like I was in like I was like a kid, right? So like I had no idea what was going on, but I remember friends being like, oh, you know, uh like the the P multiple, like a higher negative P multiple is great because it means the company is like, it's it's like it's just growing, it's growing so fast because they're losing money. And you know, you're in high school and you're like, yeah, yeah, that makes sense. And then you you grow up and you're like, what the hell is this? So I don't think we're I don't think we're there where companies are getting valued on, you know, clicks per clicks on the site, you know, that that kind of thing. Um but I would be I would be, you know, sort of cautious around how to put the money to how to how to put money to work in this in this space. Just because I I I don't really I don't really have a view, to be honest. Um and you know, I'm I'm not gonna say I'm bearish on NVIDIA, but it does feel like the does feel like the music is finally slowing down for them a little bit, not not necessarily stopping. But I think everyone, again, you've got a market that's just this big, has got this much growth. You can't you can't just have one player supplying everything forever. That just doesn't work. Yeah, so I'm kind of I'm kind of not surprised that we're finally we're finally in this in this phase now. So I'm gonna be watching AMD, watching Broadcom, actually watching Intel more than I have been before, just given given all the the manufacturing constraints here and see what they do in terms of building around foundries. I still think it's gonna be a really interesting space to watch. Um I just I don't I don't know about you. I don't like I don't know I don't know what to make of it right now.
SPEAKER_01I think we should be watching the NVIDIA results. Their results come out on the 20th of May. That will be a huge catalyst for the market if there is kind of if if it confirms that they are losing market share to A and D, let's say. Um so I think that for me is a really important data point. Um and yeah, I think the foundry side of things, the manufacturing is becoming more interesting. What's happening with Intel, um, the discussions with Apple, that could be a really interesting story arc, if you like, over the next few months. So definitely one to watch there. It's interesting because then you're talking about the um dot com boom. Guess what I was actually doing in the in at that point in time.
SPEAKER_00Oh, I'm gonna guess. You you told me you were you were like studying semiconductors, right?
SPEAKER_01I was I was yeah, from a very sort of scientific perspective. I was in a clean room for about eight weeks trying to produce a new type of semiconductor. Uh no kidding.
SPEAKER_00Yeah, all right.
SPEAKER_01So I was trying to produce something called semiconductor quantum dots, which is where you have like nanoparticles on the surface of a silicon wafer. And it was about the most boring eight weeks of my life because you were having to do this in complete isolation in clinically isolated conditions, like a clean room that literally is completely sterile. And I was in there for long periods of time, and actually, that was the point where I decided to move into finance. I also thought it was a completely pointless activity. I thought initially it was quite interesting, and then I thought this is not going to work. It didn't work.
SPEAKER_00It sounds interesting when you're like, I was in this science lab working on quantum dots. I'm like, that's cool. That sounds awesome. I got absolutely no results.
SPEAKER_01I had to file a thesis that basically said, yeah, zero results. And then the worst thing was in 2023, the Nobel Prize for Chemistry was successfully doing that. So well I put someone else succeeded and won a Nobel Prize.
SPEAKER_00Quantum dot is this like is this like an early precursor to quantum computing, this kind of thing, or something totally different? I know it's slightly different.
SPEAKER_01It's just producing quantum dots for sort of semiconductor surfaces because they have interesting electrical electrical properties. So it's I mean, I think yeah, it's it's slight slightly separate, but um, but yeah, there we go.
SPEAKER_00Well, maybe all right, well, the tides are turning. Maybe maybe you need to open up a quantum dot foundry. Now now's the time.
SPEAKER_01In my train room. Yeah, we definitely would not be.
SPEAKER_00It's not just a lab coat.
SPEAKER_01You literally have a whole suit that entire everything is covered. It was the summer. I was not happy. Anyway.
SPEAKER_00Oh, amazing.
SPEAKER_01Right. Um, so back to uh back to our discussion on the semiconductors. So key results coming out on the 20th of May for NVIDIA. Lots to watch in terms of uh the semiconductor story, I think. I'm sure we will revisit it. Um so thanks very much for those of you that have tuned in and I hope you enjoyed our deep dive into the semiconductor industry. Don't forget to like and subscribe and leave us a comment on YouTube. Um, and that's it from me. And over to Graham.
SPEAKER_00Thanks everyone. It's been fun as always. I'm sure we'll there's so much more to keep talking about here. So we'll be back for more next week. Uh but until then, take care.