Prof G Markets
00:48:30 · Josh Brown
[00:48:30] S4: Factoring in growth skepticism every single day the market is opened. It is an anti bubble. The only thing that you can credibly say is that it's an earnings bubble and that the profitability our tech giants are enjoying today is not sustainable. You could say that. You cannot say it's a valuation bubble. The semiconductor industry is the largest contributor to tech earnings growth. And there's a lot of tech earnings growth and the semis are by far the biggest contributors. The year over year estimate for tech earnings growth is 65.6% for the quarter that we're in now. Just think about that number for a second, okay? Sector wide, it's not one company. 65% for the tech sector, if you exclude semis and semi equipment, it falls to only 24.9%. So the entire tech sector is growing 25%. And within that, the semis are almost triple that. We're getting tech reports now that are continuing to crush. We had Western Digital print $4.64 in earnings versus $4.11 expected. Oracle, dollars 1.92 versus $1.74 big earnings per share surprises. And yet we are seeing a contraction in the number of fifty two week highs within the SMH, the semiconductor ETF. There has not been an above average reading, which I would say is like 70% or higher names making new highs. Since July, there are zero percent fifty two week highs for the semis. Explain to me how that's a... Why is it a bubble? How is it a bubble? Here are the three cheapest stocks in the market right now. SanDisk has a price to earnings growth or peg ratio of 0.08. 0.08. In a bubble, it's like five. Micron, point one o. Western Digital, point one three. Micron is selling at five times earnings. So if this is a bubble, it is the worst bubble ever. I want my money back.
00:50:42 · Scott Galloway, Josh Brown, Ed Elson
[00:50:42] S0: I pity the fool that thinks this is a bubble. Another rocky quote. [00:50:46] S4: NVIDIA's forward PE is 15 times earnings. This is the lowest valuation, I think, in history on a forward earnings basis, you have ever had the opportunity to buy Nvidia. Now, I'm not saying it should be 30 times, should it be 15? And if it is 15, the only bubble must be therefore in this year's earnings. It's not in the valuation. [00:51:14] S3: Scott, I agree with Josh and keep talking about it. Do you have any follow ups? [00:51:19] S0: I'm looking up Rocky quotes right now. So [00:51:24] S4: my wings outside is the great... This is the greatest Rocky quote quote. They say, he's he's he's on the street or he's he's inside. The guy wants to fight. He says, my ring's outside. I didn't hear no bell is another good one. Get up, you son of a bitch. [00:51:42] S0: Because nobody owes nobody nothing. You owe yourselves.
00:51:42 · Scott Galloway, Ed Elson
[00:51:42] S0: Because nobody owes nobody nothing. You owe yourselves. [00:51:46] S3: Yeah. Yeah. Yeah. Josh, I'll I'll I'll put forward a thesis. So I I agree with you. Like, when we look at the multiples on, like, the the the hardest AI names, they have come down. NVIDIA's multiple has fallen almost 50% since last year. Micron's has fallen, but it's gotten cut in half. Broadcoms, SKRN. You know? So I'm totally with you, which is like, if this is a bubble... And I think you could make a claim that it is, as you say, like, there's... You know? I guess it depends on your definition of bubble. It's it's a very, very small one where it seems as though all of the risks of things going wrong are being priced in. And to me, I'm kind of like, oh, that's that's good. It's almost like we've seen the big short so many times. All of the stories are so resonant and so real in our minds that Wall Street is go... Going, yeah. We're not gonna make that mistake again. We're gonna predict, and we're gonna front run the possibility that there are boom and bust cycles. We've gone through the boom, and now the bust is probably going to happen, which I honestly think that they're right about. And so my expectation is that we're gonna see some sort of correction. We're gonna see some sort of drawback. There'll be some problem. We're beginning to see it with the neo clouds, which everyone was very excited about last year. And now people are pointing out that they have some precarious debt obligations, and will the money run out? And I think for a lot of them, will.
00:51:46 · Ed Elson, Josh Brown
[00:51:46] S3: Yeah. Yeah. Yeah. Josh, I'll I'll I'll put forward a thesis. So I I agree with you. Like, when we look at the multiples on, like, the the the hardest AI names, they have come down. NVIDIA's multiple has fallen almost 50% since last year. Micron's has fallen, but it's gotten cut in half. Broadcoms, SKRN. You know? So I'm totally with you, which is like, if this is a bubble... And I think you could make a claim that it is, as you say, like, there's... You know? I guess it depends on your definition of bubble. It's it's a very, very small one where it seems as though all of the risks of things going wrong are being priced in. And to me, I'm kind of like, oh, that's that's good. It's almost like we've seen the big short so many times. All of the stories are so resonant and so real in our minds that Wall Street is go... Going, yeah. We're not gonna make that mistake again. We're gonna predict, and we're gonna front run the possibility that there are boom and bust cycles. We've gone through the boom, and now the bust is probably going to happen, which I honestly think that they're right about. And so my expectation is that we're gonna see some sort of correction. We're gonna see some sort of drawback. There'll be some problem. We're beginning to see it with the neo clouds, which everyone was very excited about last year. And now people are pointing out that they have some precarious debt obligations, and will the money run out? And I think for a lot of them, will. [00:53:13] S4: I think that's bullish.
00:53:13 · Josh Brown, Ed Elson
[00:53:13] S4: I think that's bullish. [00:53:14] S3: I was gonna say if we see a crash, it'll it'll look like nothing compared to the the real crashes that we've seen in the past, and it'll be fine.
00:53:22 · Josh Brown
[00:53:22] S4: We're taping Tuesday. Tomorrow night is Wednesday. We're gonna get Microsoft and and Alphabet, And then on Thursday, we're gonna get Amazon. So, and then this episode will come out. So I won't say... What I will say is, if you think there's gonna be a shakeout in the neo clouds that are spinning up all this compute and are doing it with debt capital, and you think that that debt capital will be less available or unavailable, and that is a worst case scenario for that part of the market, who is it good for? Well, if you're AWS, which Amazon Web Services hit 28% growth in the April quarter, 37% growth in the July quarter. They reported $496,000,000,000 in backlog for AWS the last time they reported. To put that into perspective, three quarters prior, it was 200,000,000,000. So if your AWS and four or five Neo Clouds somewhere in the world fold, that's pretty cool because you are ready to serve that demand. Your backlog will only grow. If you are SpaceX, that's pretty cool. We are the best builders of compute on the planet. We got this. Don't fucking worry about Nebius. We got this. If you are Microsoft Azure, if you are the Google Cloud, how is it bad if the neo clouds can't raise money at less than 15%? It sounds great to me. What does the stock market care more about? Nebius and CoreWeave or Microsoft and Alphabet? And then lastly, we really only have two examples in the publicly traded market of a company that has a premier model and its own source of compute to run that model. We have obviously Alphabet and Google Gemini, and now we have Meta and Muse. Something tells me that's gonna become important. At some point, investors might actually care about a company that's got AI end to end. We face the consumer with our own proprietary product and we supply the compute to that product. I don't know when, but when we talk about what could be the largest company in the world, unfortunately for Anthropic, they're gonna spend $900,000,000,000 on compute. They're not gonna supply any of it unless they spend a lot of money to build it, as we talked about. Microsoft had a partnership with OpenAI that seems to have not gone well. Now they're bring your own model like everybody else. Okay, fine. But the Alphabet, Google, Gemini thing could become really strategically important and the MetaMuse thing too.