00:00 Speaker A
Adam, good to see you. Let me start with you here on Nvidia. Set the scene for us. What do you want to see from Nvidia, especially if one is bullish this market?
00:10 Adam
Yeah, I mean, it definitely right now, uh meeting expectations, uh unfortunately is a fail. So I think we’re going to have to see something that uh beats expectations, kind of uh sets the story straight that hey, uh this is not a deteriorating uh narrative right now and that there is still growth and and that’s obviously the case. We do see tremendous earnings growth across the entire industry and expect that to come out in Nvidia. So I think we, you know, for the stock uh to go up, it’s going to have to be a steady beat with with at least, you know, maintaining uh the overall guidance and hopefully getting uh some improvement in guidance. I think that’s really what the market needs right now.
01:03 Speaker A
Adam, I if if Nvidia reports a a strong quarter, and I expect they will, and they come out and offer reasonable reasonably strong guidance, which I think they will, is that bad for the software space? Because I the way I would read it in the moments after that report is, uh Nvidia’s selling more chips than people expected. AI’s moving at a faster pace, bad news for software stocks.
01:29 Adam
Could be. I think, you know, we’ve seen this story before where investors are just trying to digest a story. And I think the the markets are very healthy right now. I think Oracle, uh in this example, shows just how healthy markets are that they’re not just, you know, dumping into every stock. Um so I think that, you know, Nvidia is just one player now. They’re obviously the the the main highlight from the hardware side. Uh but, you know, when it comes to the software, it’s going to definitely be a stock picker’s market this year. Uh you’re going to have to pick the right ones. You’re going to have to really dig in deep. Uh we still like Google just because they’re so vertically integrated. uh it kind of is a safety net in the in the space. Uh but you you’re going to see some big winners and some big losers this year.
02:22 Speaker A
And as I put out uh, I put out four charts on my X account uh this morning from B of A, calling attention to how cheap software stocks were. and the market could care less if these stocks are cheap. The market says these stocks could probably get cheaper. What say you?
02:45 Ines
Yeah, look, um there are some strategists that are saying that they could get cheaper, certainly. The valuations have come down. But there’s also the sense that we may be seeing uh some type of bottoming, that that that this is very much overblown, that the s- software sell off is overblown. And what the Street wants to see is that software companies are utilizing AI in order to accelerate adoption. I mean, you spoke to Figma’s CFO yesterday, and this is what they were basically telegraphing to the street. And with Salesforce is going to be reporting their earnings and they will want the street wants to see that. Uh I I will mention that we did see some um price target downgrades uh for Salesforce with uh City, also UBS, that was also lowering their price targets. But they want to see this acceleration uh of adoption by utilizing AI.
03:57 Speaker A
Brooke, true true story. Uh Walmart earnings crossed yesterday. I’m reading this, reading this, scroll down. They spent $26 billion in CAPEX last last year, up $3 billion year over year. My first thought was, this company’s investing a lot in AI. I talked to John David Rainey, CFO of Walmart. He said, yep, a lot of a lot of investments in AI. What I’m trying to get to is, how could this Nvidia report be anything but really strong?
04:22 Brooke
Yeah, I certainly think that it’s interesting to hear that this broadening out of AI being mentioned in companies beyond just say the deck players and the software companies, but also how retailers are certainly playing into this. And I think what needs to happen within this report is not only Nvidia needs to point to a guidance that goes to show how exactly AI is playing into the future. We’re hearing from many on the street that this is sort of now the phase. We’re now in phase two, phase three of this AI arms race, exactly understanding how what we’ve been hearing those murmurs are now playing into everyday life. And I think that investors are really focusing in on that. And and just to go back on something that you said, right now, investors are sort of baking in the worst-case scenario, the the largest disruption that could possibly happen because of number one players, first first round players like Nvidia and the impact that it could have, the ripple effect. Once this sort of plays out, as Adam had mentioned, yes, we’ll see the winners and the losers, but many on the street, including JP Morgan, sort of saying, give this the next three to six months to sort of see how this materializes and who exactly maybe those winners and losers will be.
05:41 Speaker A
Adam, let me get back to what you said on Google, that you like Google. Why do you like Google who is now, I mean the stock has been on a tremendous run. It’s been deserved to given what they’ve come out here with Gemini. I mean the all parts of their business are rocking. And why Google over something like Oracle that has been just absolutely crushed?
06:02 Adam
Well, you know, Oracle I would argue is cheap for a reason. And uh, you know, the debt story around Oracle, uh, does give me some concern. It it’s it’s been growing even before this and now it’s it’s really expanding and it’s levered to, you know, kind of what’s obviously been thrown around as this kind of circular uh, nature of contracts and whatnot. And that’s why we like Google. They’re kind of immune from that because, like I said, they are the one entity that’s vertically integrated. You know, they’re doing their own chips, uh the software, and then they at the end of the day, they’re also the user of it and that, you know, they’re not just producing the AI, they’re doing it so that they can improve a product that’s been proven over the last two decades, where everyone else is trying to kind of reinvent themselves. Uh you know, you look at Meta and how they’ve gone back and forth with really who they want to be when they grow up. Google hasn’t had to do that. They’ve just stayed the course and I think that’s why this is a stock that’s just steadily gone up and up and up because, you know, it’s backed by real earnings, real revenue growth, really strong margins. So it’s just hard to see a case uh in the entire kind of ecosystem here, uh where they kind of fall down. Obviously, if it gets too rich, that my story may change there, but right now it still is relatively inexpensive when you’re talking about a tech stock that’s growing at the pace that it is.
07:44 Speaker A
And Ines, if I had to put any red flag onto the field ahead of Nvidia earnings, it’s a news I think the FT was reporting it this morning. So Nvidia was going to invest $100 billion in in Open AI. Now it is down to $30 billion. So, is it that Jensen is seeing something negative on the horizon with AI? Is that the read through here or maybe I’m just losing my mind because it’s been a long week.
08:14 Ines
No, I mean
08:14 Speaker A
This could be true. I could be losing my mind.
08:15 Ines
Look, it it was very much in the news uh when that uh $100 billion letter of intention uh had come out and that and then it was sort of it was said that, okay, it’s not going to be 100 billion, now it’s 30 billion. So that is something that the street has been paying attention to because why would they not invest that $100 billion? That would be something that he may be asked during the earnings call. Uh I would also say that anything that has to do with rising competition. I mean, you were just talking about uh Google and their custom chips as well. So, uh if there’s any comments about that, I think that this will be something that the street is going to be paying attention to. Their relationship to OpenAI and any rising competition. And I also think that what they’re also going to be wanting to see is anything that has to do with China.