The Compound and Friends
00:08:49 · Michael Batnick, Josh Brown
[00:08:49] S1: All right. That's enough comments. We'll do some shit on Thursday. [00:08:52] S0: Our guest on The Compound and Friends last week, put out a note today, and I'll sum it up with what he said. He looked at the NDX relative performance based on whether or not the Democrat or the Republican was surging in any particular contest, especially Texas. There's nothing there. The outcome in the midterms unlikely to have a profound implication on the AI CapEx story. And if you watch the show, you know he thinks that's really the only story that matters and so do I. And this is Alex's quote. This is the Barclays Equity Tactical Strategy Group. So as we all stay up late digesting the state by state outcomes, keep in mind the current drivers of equity risk largely sit outside the realm of tonight's events and Iran for that matter, in my view. Narratives around the core equity thematics of AI revenue versus AI financing are not exclusively conditional on whether the chambers of Congress flip blue unless we are staring at extreme outcomes of aggressive blue sweeps, reflective of a dramatic shift in voter sentiment. So that's, I don't think, what's going to happen. And I think that's why you and I are not doing a whole segment on the implications of the midterms. [00:10:15] S1: Well, I would be out of things to say in two seconds if we were. Alright. We have so much to get to. Can we get to more shit? [00:10:19] S0: Alright. [00:10:20] S1: So more importantly, in the after hours, we heard from AMD, and we got good numbers. Yep. Thank god it's Stock
00:10:20 · Michael Batnick, Josh Brown
[00:10:20] S1: So more importantly, in the after hours, we heard from AMD, and we got good numbers. Yep. Thank god it's Stock [00:10:29] S0: traded up Stock traded up into the the number today too. [00:10:32] S1: It was up 9% in the after hours. I don't know what's doing right this second, but third quarter earnings grew revenue revenue grew 45% year over year. Look at look at this data center revenue number, which is basically the business at this point. It's the only only thing anybody cares about. Yeah. That's pretty good. That's pretty good. A So point 5,000,000,000 [00:10:54] S0: in the data center segment versus four. Okay. [00:10:58] S1: So everybody watching knows, sees it on their screen in their brokerage accounts that the AI trade has been under pressure. We'll take it. We'll take it. [00:11:08] S0: Semis specifically within the AI trade. The DRAM ETF was in a 40% drawdown from its high as recently as today. The SMH is in a 4% drawdown from a tie. John, can [00:11:27] S1: you find the chart of SMH above the two hundred day moving average? It's a little bit later in the show. It had a... It's for the attaboy. Fourth longest streak of the last decade plus above the two hundred day moving average. It's over for now. Well, not for now. It is over. It closed below average. So this this welcome news is happening at a opportune time. What did you think of Apple's earnings call? I
00:11:27 · Michael Batnick, Josh Brown
[00:11:27] S1: you find the chart of SMH above the two hundred day moving average? It's a little bit later in the show. It had a... It's for the attaboy. Fourth longest streak of the last decade plus above the two hundred day moving average. It's over for now. Well, not for now. It is over. It closed below average. So this this welcome news is happening at a opportune time. What did you think of Apple's earnings call? I [00:11:56] S0: thought they were good, not great. And I thought the stock's reaction was an adult reaction. I don't know that the people who were buying Apple this quarter were playing the earnings of this quarter. I think the people that have been buying Apple have a different motivation. They're looking for the stability of earnings, not any one particular quarter's growth. And I think they're willing to make the bet that Apple is going to maintain its recent momentum and product under John Ternus. And I don't think they heard anything last night that would have changed their minds. And that's why you didn't see the stock have a horrible reaction ala Alphabet or Meta or some of the other max seven casualties of this earnings season. Let's do let's do the numbers. [00:12:48] S1: So I think Apple stock gap down 5% or something like that for and if closed down only 2%, it's had a great run. I mean, stock... The market's reaction is literally who cares? [00:12:56] S0: Dude, this thing was this thing was 300 a few months ago. [00:12:59] S1: Yeah. No. [00:13:00] S0: It has not given much back, and I think that was an adult reaction.
00:13:00 · Josh Brown, Michael Batnick
[00:13:00] S0: It has not given much back, and I think that was an adult reaction. [00:13:04] S1: So two things weighing on it. Again, weighing whatever down 2%, but services revenue growth is slowing down. Now again, it's a it's a humongous number, but nevertheless, the market generally does not like this, and it definitely definitely doesn't like the next chart. Gross margin coming down and their estimates coming down. They spoke a lot a lot on the call about demand for memory and how they're managing that because the prices are going up and they're staying up. [00:13:34] S0: Okay. Here's the good news. By the time they're reporting Q4 and then Q1 in the first half of next year, they're already lapping these obscenely high costs for memory. And while that's not necessarily still a good thing, the comps are not quite as severe in terms of their cost. The problem that, to your point, at what point does this hold them back from being able to sell as many units as they ordinarily would have absent the shock? They announced the new MacBook with a touchscreen. [00:14:16] S1: That's like [00:14:17] S0: a $900 increase over the prior... Who the fuck is buying that? I don't know that people want to buy that. [00:14:24] S1: So they had a record quarter for iPhones. They've been able to absorb, but consumers have been able to absorb these higher prices. But how much more can they push it? [00:14:34] S0: Right. And I think that's the thing that's holding Apple. Look, we have been on the right side of Apple. Did a [00:14:41] S1: show No, have not. You have been.
00:14:41 · Michael Batnick, Josh Brown
[00:14:41] S1: show No, have not. You have been. [00:14:43] S0: All right. On this show, we did a whole episode where the title is Why Apple's Going to $400 and the stock was $3.10 $3.12 while we were talking. And I went back and watched the segment. And all the things we said were the things. It was like the transition to new management, more of a product focus, back to hardware innovation, being in a better position to weather the higher cost of components than a lot of people think they are, and just this idea of it serving as a data center hedge within the XLK. Pretty much everything else in the XLK is live or die on today's data center euphoria or panic. It really stands outside of that. [00:15:33] S1: If you're a large growth manager and you don't want to be involved in Google anymore or Meta, but you need to replace it with a market cap equivalent. [00:15:42] S0: Else? Buy. [00:15:43] S1: Where else are you going? [00:15:44] S0: You got... Video is [00:15:45] S1: not being tested. [00:15:47] S0: No. No. I wish you would. [00:15:51] S1: Let's do Palantir. I was I was surprised that Palantir's got did it again. He's... He executed. Unbelievable. This... What's that? He executed. [00:16:01] S0: One Yeah. I did I did I did not
00:16:01 · Josh Brown, Michael Batnick
[00:16:01] S0: One Yeah. I did I did I did not [00:16:03] S1: listen to the call, but we do have some charts. Their rule of 40 keeps accelerating. ChartKit broke it down. The combined... That we're looking at revenue growth as well as operating margin, and it's nothing short of remarkable. And the question the... Well, maybe the question has been answered, but the questions maybe a year or so ago was, well, it's just like a government contractor. I'm... Not anymore. Next chart. Look at the... Look at q three twenty twenty five on the left hand side to today. So obviously, yes, US government has grown dramatically. But US commercial, so nongovernment, has now surpassed And look at the next chart. Look at look at this growth. I mean, holy shit. Like, hold... This is really a holy shitter.