01:04:34 · Tae Kim, Jordi Hays, John Coogan
[01:04:34] S3: So every year we go through this cycle, the last three years during this whole upswing up, everyone says peak is here. Right? NVIDIA can't grow anymore. Mhmm. And NVIDIA keeps growing at some ridiculous growth rate. So the the skepticism the only reason why it's trading at below market multiple is that the AI skeptics believe that the peak year is near. Right? There there's gonna be a no growth [01:04:56] S1: AI is it AI skeptics or is it TPU and Trainium enjoyers? [01:05:02] S3: That too. They believe competition is coming and they're gonna gain market share. Yes. I I kinda laugh at that and the numbers that people, you know, put out there for the competition, it's it's like a rounding error. It's like a small single low single digit number compared to what NVIDIA's gonna grow the next few years. And what people keep forgetting is, like, if you actually look at the numbers [01:05:24] S0: Mhmm. [01:05:24] S3: I mean, NVIDIA has a trillion dollars in orders. Right? They're the ones that have locked down all the memory. Like, I I met someone guy guy at GTC. He he he's the optical startup, and NVIDIA locked up all the capacity for lasers and optical. Right? [01:05:39] S0: Mhmm.
01:05:39 · John Coogan, Tae Kim, Jordi Hays
[01:05:39] S0: Mhmm. [01:05:39] S3: So NVIDIA has the supply components with memory, wafers, optical. So they're pretty much the only game in town if you want to actually buy AI GPU capacity. Like, TPU gets headlines, but, I mean, $5,000,000,000, like, is nothing when you you look comparing it to a trillion dollars. Right? So they have the volume. They have the the great power, you know, power per watt numbers and metrics that basically if you're doing inference, NVIDIA GPUs, even they cost a lot more upfront, when you actually do the inference, performance per watt is excellent with these Dura Rubin $4,500 [01:06:18] S0: Yeah. Dollars How did you grapple with the question of whether or not NVIDIA is a car? There are competitors. You said low single digit percentage of the market, but AMD is getting its act together. Intel's maybe back in the game in a few years. You have Tranium and TPU. Competition is rarely a good thing. Is NVIDIA a car or not? [01:06:42] S3: Okay. Obviously, it's not a car. We're talking about how, you know [01:06:45] S1: I would've loved to I would've loved to be in the room with you while you saw that segment. You're just, like, taking your computer, smashing it.
01:06:45 · Jordi Hays, Tae Kim, John Coogan
[01:06:45] S1: I would've loved to I would've loved to be in the room with you while you saw that segment. You're just, like, taking your computer, smashing it. [01:06:53] S3: I I think I was tweeting about it. I think I wrote a piece on it. I I wrote, like, you know, four or 500 words about that Sure. Podcast. I don't know if we wanna go into that on that. They they you know, they're gonna be 90% of the market. Maybe they'll lose 10% of the market share in 02/03 Mhmm. But 90% of a market that is growing, you know, 70% a year and the hyperscale or CapEx numbers went up huge. There's like 780,000,000,000 going to a trillion dollars next year. Yep. Like, the market believes with NVIDIA's valuation that NVIDIA's going stop growing within the next year or two. Mhmm. But the overall market, I think, is going to keep growing at 50% at least. If it grows 50% in the next two or three years, NVIDIA's going to grow. Even if they like maintain market or, and I don't believe that's true. I think they're they're actually gonna maintain or even increase market share. But even if market share goes down 10%, I mean, the numbers are just insane. And I don't think Nvidia's gonna trade at, like, ten, twelve times earnings when they're growing at 50. I mean, that that doesn't make sense to me. So I think it's gonna be rate higher. And then the key thing here is the stock, stock buybacks. [01:07:57] S0: Yeah.
01:07:57 · John Coogan, Tae Kim
[01:07:57] S0: Yeah. [01:07:58] S3: Because that's like, if you guys remember during the whole iPhone, like, when when the iPhone five and six came out when they actually had the large screen iPhone, Apple was trading at PES seven. Wow. Like, x cash. Like Yeah. People thought Android was gonna almost look at the same thing. Like, Androids come in and destroy the iPhone market share when iPhone went on this generational run Mhmm. With the large screen iPhones. Right? Mhmm. But a big thing that Apple did was they started buying back stock, and that's when their multiple started going from single digits to 15 to 20 to 30 times. Mhmm. And I I think what and they already kind of hinted at it, but I think NVIDIA is gonna start buying stock buyback in size. They they said 50% of their free cash flow in the next twelve months. They're a little bit cryptic on if that was after or before prepaid the prepayments they have for the inventory and suppliers. I But think we're gonna get some more clarity tonight. And if they if they actually put numbers, maybe it's this quarter or next quarter. If they actually put the actual you know, we're gonna buy x hundreds of billions of stock, you know, in the next twelve months, I think the the the PE is gonna rerate much higher. Yeah. So, you know, as soon as we get visibility that next year is gonna keep growing at 50% or higher, I think it's gonna be higher. And the year after that, you know, stock that stock should go on top of the rerating from the capital returns.
01:09:17 · Jordi Hays
[01:09:17] S1: Gavin Baker was on our friend Patrick's show this morning. He was making the point that it's possible that t s m TSMC could prevent a bubble just given that they are not investing in in CapEx as aggressively as, let's say, Jensen might want them to. He said, you know, basically said what you're saying, which is NVIDIA could sell a trillion dollars of GPUs, you know, pretty much immediately if they if they had the supply. What what's your what's your read on that? Do you think that TSMC well, is
01:09:53 · Tae Kim
[01:09:53] S3: so I think I've been I mean, I've been following Chip, the industry for, you know, thirty, forty years. So, you know, I I I'm very good at reading I'm very good at reading the tea leaves, and I've noticed that Jensen and what TSMC, what the CEOs have been kind of hinting at, that their tone has changed in the last two, three months. Yeah. So TSMC just reported, their q one earnings. And, you know, if you read the transcript, there it's pretty obvious that they're just gonna raise CapEx on on a different order of magnitude for the next year and the year after. They said their CapEx is going to be much higher over the next three years than it was the last three years. And basically and all the stuff they're saying, you know, they're saying and Jensen's been going out there during these speeches and q and a's. He's he's confidently saying the supply issues in two, three years are going to be on a different level. Like, even with memory, he's he's saying all these component issues that we have now in two, three years I think he even sat down the podcast interview. Two, three years, this all will be, like, less of an issue. So I'm confident that TSMC memory might be a a little problematic, but TSMC wafer wise, you know, it's gonna be dramatically higher over the next two,