00:32:33 · Tracy Alloway, Joe Weisenthal, Alex Altmann
[00:32:33] S0: You sorted out your entire weekend schedule using ChatGPT. [00:32:36] S2: No, in that time, we just got earnings from Alphabet and Microsoft. And it's very interesting. Alphabet down 7.9%, revenue X-TAC misses estimates. Microsoft jumped 6.4% after Q1 cloud revenue tops estimate. So you get two gigantic stocks. They both have very violent reactions. But if you're the indexed investor on net, looks like it all kind of washes out. [00:32:59] S0: Yeah, it does indeed. [00:33:00] S2: But man, some of these, like these numbers are incredible. Microsoft Q1 Azure Revenue X, Azure. This is their cloud platform. Azure. What's your guess? You're not looking at a terminal the way I am. What do you think it got? This is fun. [00:33:15] S1: The bokeh was, I think, 47% growth. [00:33:20] S2: Yeah, man, you're really good at your job. So the official estimate that we had collated at Bloomberg was 44.8%. They hit 48%. 48% growth for these gigantic companies. That's a good number. [00:33:29] S1: That's unbelievable. [00:33:35] S2: Cloud revenue at Google was $ 30 billion. I'm not seeing what the growth number was. [00:33:41] S0: But these are unreal.
00:33:41 · Tracy Alloway, Alex Altmann, Joe Weisenthal
[00:33:41] S0: But these are unreal. [00:33:42] S1: Yeah. I mean, they are. And this goes back to the point about kind of AI winners and losers. If you've got a fantastic legacy business and you're a cash volcano from your legacy operating business, then if you want to go and embark upon the largest CapEx experiment really in the history of America, total non sequitur, by the way, I was trying to work out because we're spending, if you believe the CapEx numbers and the terms of the forward, and I'm sure that they're going to change from what the consensus looks like now, but on face value, it's about 12% of. [00:34:16] S2: GDP, right? [00:34:18] S1: It's like two Netherlands, right? Um, and I was thinking you have not in modern history, like the Louisiana purchase, the railroads, it's blown all that out of the water. What have we done as a human society where we've spent that much money? Certainly in a short period of time. And I had to start getting really creative. I'm sure, Joe, you'll be awake at night thinking about this and trying to find some historical work on it. Pyramids, maybe? But they took hundreds of years, if not thousands. Great Wall of China, maybe? I can't think of a period where we've spent. [00:34:52] S2: All right, wait here. What do you think? How fast do you think Google Cloud revenue grew? Again, I'm turning my laptop away from me. I actually don't even... I can't even believe this number is real. I'm giving you a hint. 30-something percent? I don't really understand. I don't, I, I almost. [00:35:09] S0: Yeah.
00:35:09 · Tracy Alloway, Joe Weisenthal, Alex Altmann
[00:35:09] S0: Yeah. [00:35:09] S2: 103% Google cloud revenue grew 103%. It seems great. I don't know. All these numbers are insane. Anyway, that's what it says. [00:35:18] S1: I mean, these are impressive businesses and this is, this is why, you know, a lot of people say S and P undefeated. [00:35:24] S0: Right. [00:35:24] S1: I mean, by the way, funny, the concentration of the S and P it basically given Tracy, to your point, everything's kind of AI. Concentration of S & P, next year, 75% of your earnings growth in the S & P is going to come from memory, from semiconductors. [00:35:38] S2: What percent? [00:35:40] S1: Sorry, a bigger part. It's actually, it's about two-thirds from semiconductors, and then the broader AI ecosystem gets you to around about 75%. Wow. So you basically, S & P has become KOSPI. [00:35:53] S2: Oh, cospification. [00:35:57] S0: KOSPI-fication, yeah. All right, well, Alex, we're going to leave it there because we want to get this episode out pretty quickly. But thank you so much for coming back on Odd Lots. [00:36:04] S2: Really appreciate it. [00:36:05] S1: Thank you. [00:36:05] S2: See you next week. Thank you so much.
00:36:05 · Joe Weisenthal, Tracy Alloway, Alex Altmann
[00:36:05] S2: See you next week. Thank you so much. [00:36:21] S0: Joe, it was great catching up with Alex. I think he does a great job of sort of synthesizing a lot of different things going on in the market right now. But I do think the key thing that's emerging is this differentiation idea and the idea that we're moving from this sort of capital abundant environment into an area where people are perhaps a little bit more selective and what that means for the business models. [00:36:44] S2: I do think, completely agree. I also think, you know, every... The classic is different this time is, oh, interest rates don't matter anymore, right? And this is a classic thing. Oh, this is not going to be a rate-sensitive industry because the numbers are so unbelievably high. If you're growing 44% in a year, what do you care about when the rates are 5% or 5.25? It's completely irrelevant. You're just going to keep building, et cetera. But that is a lie that investors tell themselves. Rates, at least at the margin, at least at the tip of the sphere– sphere– at least for some of these leveraged companies like the Neoclouds or whatever, for one thing, it looks like a rates matter. [00:37:26] S0: Yeah. And also, I mean, just the costification idea of the market, it is really quite stunning because a lot of the earnings power of the tech companies, the hyperscalers, is predicated on the fact that, well, other companies are going to buy the services so that they can boost their own productivity and get the earnings up. [00:37:44] S1: But like.
00:37:44 · Alex Altmann, Tracy Alloway, Joe Weisenthal
[00:37:44] S1: But like. [00:37:45] S0: we're not actually seeing that materialize in their earnings numbers just yet. And in the meantime, everything, the whole index just becomes AI more and more on the expectation that eventually it won't just be about AI. [00:37:57] S2: This is the thing that like, you know, when you talked about the pod shops, for example, the whole premise of a pod shop is that like everyone is supposed to find their own undifferentiated alpha. [00:38:08] S0: Yeah. Where is that right now? [00:38:11] S2: So I think like, basically, if you're an investor, And you made money in the last year at scale. I mean, of course, like you might be able to like, oh, I opened, you know, a new like pasta restaurant in the East Village. That's a separate question. But if you're at scale and you made money in the last year, in some way it was connected to AI. You have all these different pods and some of them are chips and some of them are industrials, et cetera. But it's hard for me to believe that the ones who are making money aren't just in some way finding a way to belong to AI fans. [00:38:45] S0: Levered long. [00:38:45] S2: Yeah, levered long. [00:38:46] S0: The AI factor, I would imagine.
00:38:46 · Tracy Alloway, Joe Weisenthal
[00:38:46] S0: The AI factor, I would imagine. [00:38:47] S2: The AI factor. You know, I was talking to... It's so funny, you know, we try to... Alex has such a good read on the industry, but also it's great to talk to him because he talks to clients to get the Wall Street view and so forth. I was talking to this computer science student at Stanford recently, and they were like, oh, Wall Street is an AI pill. And I was like, what are you talking about, Wall Street is an AI pill? Look at all these stocks that are going to the moon. [00:39:10] S0: The numbers on my screen tell a different story. [00:39:12] S2: What are you talking about? [00:39:13] S0: But. [00:39:15] S2: That person's view was that if you're even having a discussion about the possibility of overabundance of GPUs, you just don't get it. like what do you well you're like oh you you don't you don't get ai sufficiently it's so funny it's. [00:39:32] S0: Um yeah definitely an interesting time in markets shall we leave it there. [00:39:36] S2: Alphabet they do 32 billion tokens per minute that was up 40 percent q of recovery i don't even know what these words mean let's leave. [00:39:43] S0: It there All right. This has been another episode of the Odd Lots. I'm Tracy Alloway. You can follow me at Tracy Alloway.