01:43:29 · Stacy Rasgon, John Coogan, Healey Cypher
[01:43:29] S6: You know, you're kind of at the tip of the spear. Right? It's it's it's it's it's boom or bust. Right? Yeah. I mean, but that's that's part of their business model, I think. [01:43:36] S0: What about what if you go further on the tip of the spear? Yeah. Is there a company like organization like BlueOwl or some of the Yeah. On financing. Yeah. On the financing side? So Because BlueOwl is another example where, you know, like, Google's doing very well. Microsoft's doing very well. The the hyperscalers are doing well very well. Even OpenAI is doing very well, growing a ton. But then you have some some froth in the neo clouds and some more froth in the private credit markets. Yeah. What what's your take on what's going on [01:44:05] S6: in cloud? Those are probably frothier parts anyways. But I mean, the financing question is interesting Sure. Because I'd I'd say some of the these debt deals Yeah. Again, if you're looking at, you know, parallels to prior bubbles, that is one thing that there's a few things that people worry about [01:44:19] S3: Yeah. [01:44:20] S6: Raising a lot of debt to do to fund this stuff, and then they also worry about what they call kind of circular revenues. Right? There's a lot of, like, crosstalk. [01:44:27] S0: Yeah. We do a lot
01:44:27 · John Coogan, Stacy Rasgon, Luca Ferrari
[01:44:27] S0: Yeah. We do a lot [01:44:27] S6: of the companies around here, maybe to address both of those. I'd say on the debt side, most of this capex is still being funded off of income statements. Yeah, that cash is one difference now versus, say, 2,001 is the companies that are driving the spending, by and large, are the largest, most profitable, best businesses that humanity has ever devised. [01:44:48] S0: I'm sure you remember what the actually largest business was in 2000. It was ExxonMobil and Chevron. [01:44:56] S6: It was different world. [01:44:57] S0: It was big big oil. And big oil was not driving and they were not funding the telecom build out. [01:45:02] S6: I mean, they were a lot of cash flows. Companies, they were mean, they were raising money. They weren't profitable. That does not run [01:45:06] S0: with the different thing. It wasn't like an immediate beneficiary Yeah. That was that was just the oh, the biggest companies are just getting bigger. So is a very good [01:45:13] S6: And so in this case, we are seeing starting to see some debt deals to fund this. But I'd say the by and large, the vast majority is still being funded off of operating cash flow. So that's why I don't feel too bad about it. [01:45:23] S0: The 2,400,000,000,000.0 that The Wall Street Journal estimated, the number that was funded by cash flows was 1,400,000,000,000.0, and then there was 800,000,000,000 in, in private credit. [01:45:32] S5: Yeah. [01:45:32] S6: So it it's it's
01:45:32 · Stacy Rasgon, John Coogan, Luca Ferrari
[01:45:32] S6: So it it's it's [01:45:33] S0: It's still a pretty reasonable debt to equity ratio, in my opinion, if you think about that way or debt to cash flow. [01:45:37] S6: For now. Yeah. For now. Yeah. So that's right. And then in terms of, like, the the call the circularity. So I mean Sure. NVIDIA's behind us. They're investing a lot. Yep. They have deals in opening eye. But I mean Jensen's got his fingers pretty much in every [01:45:49] S0: Oh, yeah. [01:45:49] S6: He's he's in every startup. Right? [01:45:50] S0: He's been doing it for a long time [01:45:51] S5: too. [01:45:51] S6: But think about, like, what else can he do with the cash? And and so I'm I'm hard pressed to think of a better usage. And if you we'll see where the numbers go. But if you believe the numbers Mhmm. They're gonna be generating hundreds and hundreds and hundreds of billions of dollars of free cash flow over the next, like, five years. Mhmm. So what can he do with it? He can't do big m and a. Nobody will let him. [01:46:09] S0: Mhmm. [01:46:09] S6: Right? You just nothing's gonna get through any trust. They have a buyback and a dividend, but relative to their market cap, it's it's gonna be de minimis. There's no choice. And so is there anything better than he does except invest and help to grow the AI?
01:46:09 · Stacy Rasgon, John Coogan, Jordi Hays
[01:46:09] S6: Right? You just nothing's gonna get through any trust. They have a buyback and a dividend, but relative to their market cap, it's it's gonna be de minimis. There's no choice. And so is there anything better than he does except invest and help to grow the AI? [01:46:21] S0: Also have a lot of different business That's fine. In terms of m and a. Like, with Microsoft, they buy LinkedIn. That makes a lot of sense in the Microsoft ecosystem. You know, Teams, they grow Azure. Like, there's always different places where they can plug other businesses in. Like, if NVIDIA bought LinkedIn, we'd just be like, what is [01:46:38] S6: But but he tried to buy other stuff. Right? He tried [01:46:40] S0: to buy ARM. You know? Certainly certainly other pieces of this [01:46:43] S6: Could you imagine if he'd been able to buy ARM, [01:46:45] S0: by the way? He'd [01:46:46] S6: be unstoppable. [01:46:46] S0: He'd be unstoppable. [01:46:47] S6: Nobody's gonna let him do anything. [01:46:49] S0: Nobody's gonna let him. Yeah. [01:46:50] S1: How, how important do you think the Chinese market is to NVIDIA? Because we we debate this [01:46:56] S6: quite a lot. And it isn't. In the near at least it's not important to the numbers right now because it's out of the numbers. Yeah. So and and and NVIDIA with even AMD, they they took it out. So that was smart because it's still questionable whether or not they will be allowed to sell. And so from a number standpoint, it's okay. From a strategic standpoint, I I think it is important. And Jensen hasn't hidden it.
01:46:56 · Stacy Rasgon, Jordi Hays
[01:46:56] S6: quite a lot. And it isn't. In the near at least it's not important to the numbers right now because it's out of the numbers. Yeah. So and and and NVIDIA with even AMD, they they took it out. So that was smart because it's still questionable whether or not they will be allowed to sell. And so from a number standpoint, it's okay. From a strategic standpoint, I I think it is important. And Jensen hasn't hidden it. [01:47:16] S1: Second largest computing market.
01:47:17 · Stacy Rasgon
[01:47:17] S6: It's it's more than that, though. So it it is the second largest, and he's talking about $50,000,000,000 of lost opportunity. And over the long term, it's probably bigger than that. Right? I mean, China China's big, but I think it's more strategic. You have to remember the the Chinese developers want to use NVIDIA. They have better products. Right? They do. However, you're not gonna stop China. So China has has, like, companies like like Huawei, for example, that's basically state owned enterprise. And they already have parts in China that have higher performance than what NVIDIA is allowed to sell there. They they do. They burn a lot more power. Chinese don't care. They just throw another plant. But the thing is they're much harder to use. They don't use NVIDIA's ecosystem. It's called CUDA. The Chinese developers want to use NVIDIA's ecosystem. If you don't allow him to sell there, what you do is you potentially encourage those local developers of whom there are a lot to coalesce potentially around a local alternative, like a Huawei, for example, and start to build up potentially over time a more robust eco system in in China. Then then you're shut out. And then the longer term word would be is once it's it's robust in China, does it move out of China? Now do you have a more robust global competitor? Yeah. And so that's why I think strategic is what and he said almost exactly that. He hasn't tried to sugarcoat it. Where I think he gets a little bit of a benefit is, at least with Huawei, the parts because of some of the other US sanctions, they have to make their chips at local companies like SMIC on deficient process technology so the chips don't work as well. They're not as power efficient. I do not think those chips will really be competitive outside of China, where they will be competing on a global basis with much better products from NVIDIA or AMD or or whoever. So I think that helps. Yeah. But ideally, you you and and, you know, Lutnick said this. He what did he say? He said, we wanna get them addicted to our technology. And and Yeah. To your I wouldn't have said it that way, but he's got a lot of things right. Right? We'd like him using it and to have some control over it. And and and if and we're letting that slip away.