Transcript
Kanaan: Hello everyone, this is Kanaan. I run the Tacket Alt team.
Kanaan: And I want to talk to you today about the AI bubble, as the market’s calling it lately. I guess we’re all seeing the headlines over the past few weeks. Are we in an AI bubble? Are we not? Is this deja vu? Are we seeing the Cisco situation from the 2000s happening all over again?
Kanaan: I’m gonna be answering that question today, and I have with me Avery. She helps me run the semi side of the business. She’s kind of really obsessed with the semis.
Avery: Yup, hey guys, thanks for having me on, K9.
Kanaan: Okay, so let’s just get right into it.
Kanaan: I want to also throw gold in the mix, because gold, as you know, Avery has been on a run, actually, lately. It crossed the 4,000 mark, and even though yesterday it took a little breather and a break.
Kanaan: It’s still kind of at an all-time high.
Kanaan: Everyone’s asking the question, are investors hedging themselves against the volatility of the AI trade at current levels?
Kanaan: and whatnot, and it actually all started with OpenAI.
Kanaan: the whole money loop that we’ve been seeing in the market lately with NVIDIA, AMD now even in the mix, which is something I want to ask you about, actually, because I know you’ve been watching and following that rather closely.
Avery: Yeah, I’m excited to give my two cents on AMD.
Kanaan: So, essentially, NVIDIA invests in OpenAI, OpenAI turns around and spends those funds buying NVIDIA chips, and then AMD is also playing the same game.
Kanaan: What do you think about that?
Avery: I think something smells fishy, for sure, if I’m being honest. Something doesn’t add up here, and…
Avery: personally, I’m just finding this exciting, but, you know, if you have money in the market, which I know the two of us do, and, you know, probably a lot of people listening to this as well, it’s pretty stressful, but, you know, you gotta say at the end of the day, these are exciting times. I think for AMD, and this whole entire money loop, it’s…
Avery: It’s really unprecedented, the amount of deals we’re seeing in the multi-billion dollar range.
Kanaan: At the time.
Avery: At the same time, you know, AI is new, it’s still in its early innings, maybe this is just part of that compute power build-out, you know? Let me play devil’s advocate to that whole AI bubble thing.
Avery: I’m not opposed to the AMD OpenAI deal. I feel like, you know, Lisa Su really, you know, she brought AMD up
Avery: From under the rubble when it comes to the AI story.
Avery: So, you know, no complaints from my end. I think people are freaking out, and it’s warranted, but like you said, it seems that they’re hedging themselves. That’s something that I learned from you. Looks like gold is at an all-time high, market’s at an all-time high, and that’s just proof that one, something’s gotta give. We’re either gonna see, you know, one kind of…
Avery: what do they say? One,
Avery: one shoe drop, the other shoe drops, so it’s gonna be gold or AI.
Avery: Yeah. And, you know, from where I’m standing, if AI drops, that’s just more attractive time to buy, so I’m actually hoping for some kind of a drop, because the way I’m looking at it, I’m going to be trimming heavily before the companies or the stocks I own report. I hate holding into earnings.
Kanaan: Agreed, yeah. And then, hopefully, we see… I don’t think we’re gonna be seeing another April dip anytime soon, honestly. I think that was the kind of Trump effect, when the markets really took what Trump said seriously at the beginning, and then now with the whole…
Kanaan: Taco Trump situation.
Avery: Yay.
Kanaan: Living up to the threats of, tariffs.
Kanaan: Even though we still have… we still have the conversation of tariffs at the end of the day in the market, it really isn’t kind of weighing on the market as it did.
Kanaan: Back in April, and then the months that followed.
Kanaan: But then, this whole OpenAI thing.
Kanaan: Like, let’s look at the numbers.
Kanaan: OpenAI now needs trillions, like, trillions with a T.
Kanaan: To build it out.
Avery: Financial Times headline that was, like.
Avery: OpenAI’s gonna top $1 trillion in spending with all these deals? Is that accurate, I think?
Kanaan: I mean, it’s generating about $5 billion a year in revenue, that’s kind of a $500 billion valuation at current levels. For a company that’s really never made any profit.
Kanaan: I don’t think the numbers are adding up.
Kanaan: Maybe it’s a smart thing, OpenAI never went public.
Avery: If you think…
Kanaan: about it, because God knows what would happen to the stock right now.
Avery: Right, like, if we saw… sorry to interrupt you, but just real quick, if we saw those numbers, the 700 million active weekly users, how much of those are paid, right? No one really tells us that.
Kanaan: Yeah.
Kanaan: We don’t really have the data right now, so… You can’t really tell.
Kanaan: And then… and then you have the…
Kanaan: that, I guess, the way that hyperscalers are spending, Amazon, Google, Microsoft, Meta, all these guys, they’re pouring billions and billions of dollars into AI, and…
Kanaan: You know, the market’s kind of wondering right now, is this really needed at current levels, this kind of spend? What do you think about that?
Avery: I mean, I think, at the end of the day, we’re all just so hungry for some kind of AI win, to see AI integrated more meaningfully into everyday life, plus everyone’s simultaneously excited to see more AI integration, simultaneously, they’re worried about losing their jobs and the impact that’s gonna have.
Avery: So, it kind of seems like we’re indecisive. Do we want AI to be all that it’s cut out to be, or do we really prefer to kind of take things slow and figure them out?
Avery: But from where I’m standing, I think this spend is… it’s just a… it’s a panic kind of spend, you know?
Kanaan: Yeah, they might get ahead of the curve, everyone wants to, like, be the first in this AI race that we’re seeing, everyone… they…
Kanaan: I guess the more you spend, the more…
Kanaan: kind of demand you have, the more… Capacity.
Avery: build out you.
Kanaan: Yeah, basically. Kind of makes more sense for your business.
Avery: Can I add to that last point? I think you mentioned this to me, I think it was last week, you told me you think that these hyperscalers are basically just spending because the other guy’s spending?
Avery: So it’s like, if you have two guys that go to the gym, and I, you know, I carry a 10 kilogram dumbbell, and the guy beside me carries a 15 one, and I’m like, okay, you know, screw that, I’m gonna carry that 20KG dumbbell, because I can do more than you. So that’s kind of… that’s how you described it in terms of the hyperscalers.
Avery: No one wants to feel like they’re gonna get caught without the compute power they need, even if they’re not sure they even need it.
Kanaan: Yeah, and then we saw that with Apple, with the stock really just…
Kanaan: taking a nosedive when investors thought, oh, AI… Apple’s not spending enough on AI. Apple’s not in the race, even, to begin with. So,
Kanaan: you know, just companies are going all out, it’s really interesting. And then… and then we have this comparison, which I mentioned before, between the Cisco 1998-2002 run, where valuations really just got ahead of fundamentals, and we never saw any return at the time, so…
Kanaan: I guess a way I differentiate that between the run we’re seeing now with Nvidia and the likes of it is we’re seeing real returns, we’re seeing money being…
Kanaan: Poured back into the business, investments that are actually making physical money, you know?
Kanaan: Like, the numbers, yeah, like, we’re seeing it reflect on the numbers,
Kanaan: And the profits, the revenue, the margins even, so…
Kanaan: I wouldn’t… I wouldn’t really… personally, honestly, I wouldn’t really draw the comparison between the Cisco situation that happened back then with now. I don’t really think these two kind of…
Kanaan: Can be compared, in a way.
Kanaan: But we’re definitely seeing this happen to some companies that are just slapping AI on everything, you know what I mean?
Kanaan: Like, you hear AI in an earnings call, and you’re like.
Kanaan: Yeah, that’s great, we’re bullish, you know? AI equals bullish at this point, which really doesn’t make sense to me, so I think really just pick and choose what you,
Kanaan: What you like.
Kanaan: and how AI might enhance that business, rather than just You know, just the… the…
Avery: A buzzword on an earnings call. Yeah, exactly, the buzzword.
Avery: And you know, sometimes I feel like what you’re saying is probably controversial to what most people are, like, saying at the moment, which is why I love talking to you, because at the end of the day, when I open my ex-feed, it’s just all of this…
Avery: the dot-com bubble, and the AI bubble, and how they are similar, and how we’re all headed for, like, a massive bubble pop, and we even had Sam Altman talk about it, so it feels like, you know, are we in one, are we not in one? But what you’re saying makes a lot more sense, that it doesn’t have to be as dramatic as being in a bubble completely or not. There’s some names that…
Avery: you know, you’re gonna justify that higher PE ratio, because they’re gonna actually…
Avery: execute on earnings growth. And then other guys that are just there for the show, you know, they’re just there for the party, they don’t want to miss out.
Kanaan: I want to ask you a question, actually. What do you think about the fact that Sam Altman talked about an AI bubble just
Kanaan: I guess, 2 weeks before he did this
Kanaan: deal with NVIDIA, AMD, a couple of other guys, actually. I have this really cool chart, I guess it’s going viral now, of,
Kanaan: of where OpenAI is putting money and where it’s receiving money from.
Kanaan: I wanna get your opinion about that. Like, is this a coincidence? Did he just… Wake up one day…
Avery: decide to say we’re in a bubble, and then just really feed into that bubble? I don’t know, it’s kinda…
Avery: That’s a great question, because I think, you know, you could call me a conspiracy theory over this, but I think the timeline on how things played out, that he had that commentary, and then bam, everything kind of sold off, everything AI sold off for, like, a good week, or two weeks even, and then…
Avery: Suddenly, you have, like, multi-billion dollar deals being closed every week, and you’re like, alright, how do we make sense of this?
Kanaan: Yeah.
Avery: You know, it seems like perhaps you wanted to give the market a little bit of room to deflate, so it can, like, do a proper run on all the news that was gonna come out, or build on from one deal to another.
Avery: at the end of the day, I think this is a game between the big tech, and the more we see it consolidated among a few players, the more
Avery: you know, conspiracy theory does get looped into the conversation, because all these big players are getting cozy with Trump in the White House, they’re getting cozy in the UK, at, like, you know, at that visit, that dinner that they held, that had Alex Karp, that had Jensen, that had Tim Cook, that had everyone.
Avery: So it feels like there must be some backdoor conversations that we don’t know about that are moving the markets, or kind of shaping the trajectory. But I think at the end of the day, what Sam Halton, and I know you follow this closer than I do, but what he said then was that, like, be careful to know what you’re buying, because some companies are in on the side that they shouldn’t be.
Avery: Which is essentially similar in line with what you’re saying, like, know what you’re buying, don’t just buy stuff that says AI, be kind of mindful about
Avery: do your homework, I guess, is the…
Avery: Is the, like, the brief way to put this.
Kanaan: And then, my favorite subject, which is Tesla. We talked about Tesla in our last podcast here on Tech It Alt, and I have a rather optimistic vision on Tesla, honestly, regardless of the…
Kanaan: the dive that it took earlier this year after Trump won the elections, and Elon’s,
Kanaan: politics, I guess, if I want to put it conservatively.
Avery: Yeah.
Kanaan: When we… when we talked about Tesla last time, even though I kind of saw a dip, because it had drawn up kind of…
Kanaan: too much at these levels. It was trading at around 346, if I’m not mistaken. Tesla’s now over 435.
Kanaan: Which is, I guess, over a 25% run since then, even though fundamentals haven’t changed.
Kanaan: We didn’t really see anything different with the business. I guess we saw the two cheaper models, Model 3 and Model Y.
Kanaan: Over the last two days, but that really didn’t move the market, though. The stock actually dipped around 4% after the announcement, which… Elon has been promising us this since 2016.
Kanaan: I mean, it’s a complicated timing for Tesla, only because the EV tax credit has kind of…
Kanaan: drawn out.
Avery: Put them over. Yeah.
Kanaan: Kind of, but then again, we saw deliveries come in way over expectations for Q3, which is understandable with the whole… just people really…
Kanaan: Going all out, wanting to buy the cars before they lose that tax credit.
Kanaan: But then again, if you look at the models now, for example, the Tesla Model 3,
Kanaan: Elon, back in March 2016, he promised a Tesla Model 3 that was at a starting price of $35,000. And then when you adjust that to inflation, the original target is now approximately around
Kanaan: $47,600-something dollars in today’s dollars.
Kanaan: And I guess the market looked at the models that we got now and thought, oh, this is way more expensive than what Elon said we were gonna get back then. But then again, if you look at the Model 3, the standard one.
Kanaan: It has a starting price of $36,900, which is actually 22% below that inflation-adjusted figure. So…
Kanaan: I guess Tesla really outperformed expectations this time, but the market took it
Kanaan: I guess, in another way, it didn’t look…
Kanaan: Between the lines, if you will.
Avery: I didn’t finer print.
Kanaan: Exactly, so it feels like the market kind of wants to discount Tesla yet again.
Kanaan: I’m really not mad at, if I’m being honest.
Avery: Do you think the reaction to the event was… was…
Avery: pretty flat, or even if I understood you correctly, downward. Yeah. Do you think that’s because of the run-up that we saw on the Trump… I’m sorry, not Trump, on the Musk,
Avery: package, a compensation package, and, like, everything that kind of pushed the stock past that 400 level, so people were kind of, like.
Avery: Taking a break, because already that positive was priced in, especially with that teaser they released before the event.
Kanaan: Yeah, I mean, that positive wasn’t really…
Kanaan: a positive that would drive the stock up that much, you know? So it kind of feels like there was momentum, and investors just kept buying.
Avery: Yeah.
Kanaan: So now… when…
Avery: this happens with Tesla every once in a while, you know? Like, the stock…
Kanaan: drones and drones and drones, and then it reaches this… this point where it just needs a breather and consolidation…
Kanaan: Kind of phase where it just either trades slightly down or really down, like what we saw back then.
Avery: Yeah.
Kanaan: Or just, you know, takes a breather,
Kanaan: It’s not the talk of town anymore, it’s not on the headlines.
Avery: Yes.
Kanaan: You know what I mean? So… so maybe this is… this is a good…
Kanaan: Good pullback, but the stock is still kind of expensive now, if you think about it.
Kanaan: I don’t like looking at Tesla in terms of just an EV business at this point. I don’t think anyone should, really, because if it were really just an EV business with
Kanaan: sales plunging in Europe, and losing market share in the US, with China, the Chinese guys like Free Auto, BYD, NIO, all these guys that really are doing well on the tech. They have the governmental backing, the subsidies, and all that.
Kanaan: And, they’re cheaper. They’re way cheaper. It’s… it’s kind of, it’s insane because they are just…
Kanaan: you know, they’re doing really well on being affordable, and Tesla was never really unaffordable
Kanaan: car, it was always a luxury car, but then again, you see these cheaper models now, Tesla’s kind of trying to get in on that, more…
Kanaan: I guess, cost-conscious consumers, because not everyone’s gonna buy Tesla now, especially if you have something else that you can buy that’s kind of very similar, maybe sometimes even more advanced tech. Tesla had the first Uber’s advantage back then, but it doesn’t anymore, you know, so…
Kanaan: I like the fact that they’re kind of working around that, working around what consumers want at this point. Even General Motors, I think I saw a few days ago, it’s launching… it’s relaunching its,
Kanaan: I don’t remember the name of the EV, but it’s under 30K, so…
Kanaan: you know what I… like, Tesla, Tesla has competitors at this point, It really needs to…
Kanaan: I guess, look at the market, what the market wants, and this move to finally release the cheaper models is a positive for Tesla, regardless of whether the market saw that or not.
Avery: Yeah, yeah, I mean, I think you’re really the expert when it comes to everything EVs, and I… I just checked up on what you… on you said to get that exact name. It’s the Chevrolet Bolt EV, which starts at…
Kanaan: That’s one.
Avery: I’m… $29, $29,990, which is pretty cheap for the US market in terms of EV.
Avery: And at the same time, it really does kind of show up more competition for Tesla. But, you know, from keeping up with your coverage, and you know, I know you had that great call on Tesla at the… it was in the $200 range.
Avery: And it’s really, really significantly up since then, if not doubled.
Avery: But then, you know, I have two questions, I guess. The first is, is now a time to buy a Tesla? Would you say, or is it fine to kind of wait it out and see if there’s more downside to be backed in? Because I know everyone’s thinking, alright, these delivery numbers were better than expected that they released. Well, the earnings call also
Avery: warrant a similar, like, positive market reaction. So that’s question number one. Question number two that maybe loops into that is, how big of a part is China and these Chinese competitors in this conversation, right? Because China’s… I think BYD is now the top.
Kanaan: Yeah, in Europe.
Avery: Yeah, it’s the top EV seller in Europe, and worldwide, too, as of last year, so, you know, how are you thinking about this? What do you think is gonna happen to this competitive environment? Would we ever see Chinese EVs in, in the US? Or do you think that’s completely out of the question?
Avery: maybe I’m putting a lot here into two questions.
Kanaan: Yeah.
Avery: Sorry about that.
Kanaan: I think… I mean, Tesla reports later this month, And…
Kanaan: I guess it has this pattern of kind of running after earnings on really not the fundamentals, because I don’t think the numbers are gonna be all that good, you know? Yeah, we’re gonna see the effect of 3Q deliveries show up in the numbers, maybe that’s gonna…
Kanaan: kind of excite investors, but we know for a fact, and Elon said it himself, even though he’s a man of many promises, he said it himself, he said, the next few quarters are gonna be really hard for Tesla, they’re not gonna be easy quarters.
Kanaan: So, when Elon says that, you really take it to heart, because he’s always the one pushing things into the positive direction more than the negative one.
Kanaan: we’re gonna be seeing pain for Tesla. I don’t know, I don’t think…
Kanaan: The negatives of the next few quarters are fully priced in, even though we saw
Kanaan: You know, that kind of plunge into the 220 range from over 400, but… in December.
Kanaan: So, you know, there’s no telling. You can’t really… you can’t really buy into earnings and be fully confident that
Kanaan: The stock is gonna trade higher, you know?
Avery: Might as well go to the casino.
Kanaan: Yeah, exactly. It’s kind of more like gambling. So I guess Tesla is on my watchlist right now. I don’t think it’s on my buy list, honestly. I guess a better buy really would have been in… not necessarily in the 200 range, maybe in the 300 range, when we saw that.
Avery: Kind of break out.
Kanaan: Around July, when it reached 125, and it just kept having higher highs, higher lows, and just really kept going up since then.
Avery: Yeah.
Kanaan: And then, can you remind me of your second quest?
Avery: Yeah.
Kanaan: It’s the Chinese, competitors.
Avery: I’m hammering you here like… like I hammer Trump at the press conferences.
Kanaan: I think when it comes to the Chinese, I don’t think we’re gonna be seeing them in the US anytime soon, especially with…
Kanaan: you know, US, China, they’re really not the best of friends right now.
Kanaan: Trump is meeting Gi in a few days, I think, or next week.
Kanaan: Which should tell us more about the trade situation there, but I don’t think… I don’t think we’re there yet.
Kanaan: You know? Yep.
Avery: Yeah. Like, at all. So, I guess when we’re watching…
Kanaan: Tesla, in response… in relation to the Chinese peers, we’re watching Europe, we’re watching… China.
Kanaan: And, I mean… They’re really eating Tesla out there. They’re eating market share left and right.
Kanaan: even though we saw Tesla registrations go up in some EU comp… in some EU countries.
Avery: I think the situation there is still.
Kanaan: Kind of, hazy, if you will.
Kanaan: And we’re taking it, like, step by step to see where that takes us, eventually.
Kanaan: really, the question is, is Tesla’s a buy? I think… I think not. I think maybe it’s… it’s not really a sell, in my opinion. Maybe…
Kanaan: next pullback could be a nice buying opportunity, but not a 4% pullback, that’s nothing when it comes to Tesla, you know?
Avery: Let’s talk clear.
Kanaan: moves a lot.
Kanaan: So… Yeah, that’s my one cent on Tesla.
Avery: I’m grateful for it, to be honest, because to me, Tesla just looks like a huge, like, meme stock, so it’s always good to get some clarity in terms of really what’s moving this stock, because you’re right, there are fundamentals there, it’s just a matter about
Avery: Catching things when they’re getting priced in and priced.
Avery: And the stock is getting priced accordingly, and it switches up really fast for Tesla, especially this year.
Avery: So, I think, in terms of Tesla, that’s a good note for me mentally to take, because, you know, I want to get in on Tesla.
Avery: And I know that you told me at the $200 range, you told me at the $300 range, but just to me, it’s… until they can do this transition that they want to, you know, change up in the robotics AI company, I feel like it’s too much uncertain, because we might see valuation get reset.
Avery: And I just… I’m not a fan of the headache. That’s… that’s why, primarily, I’m a fan of the summons, because the fundamentals are just there, you know, it’s…
Avery: It’s not about the vibes, it’s about…
Avery: literally the company and the product and the numbers, so numbers don’t lie.
Kanaan: Yeah, true, they… they… they do tell you something. But, I mean, Tesla’s… Tesla’s kind of skating on expectations now, right? Like, you have robo-taxis, how’s that gonna compare to Waimo? And then you have, Optimus, which we’re expecting, like, a big ramp-up of by the end of the year, so…
Kanaan: I guess time will tell with everything, but I agree with you on the point that you don’t want to buy a stock on its way down, you don’t want to buy a falling knife, so…
Kanaan: I mean, who would have known Tesla wouldn’t have bounced back from the $220? Like, consider you bought it at $300 and then it kept going down.
Kanaan: like, emotions come into play with investing. You can’t really…
Kanaan: just separate the two completely. You have the emotional buying, you have the emotional selling as well. So, I guess when it comes to investing, the way I look at it is, is you have to have really high conviction, because
Kanaan: even… even when I bought into Tesla back in the $220 range, I did have… I did have this… this voice in the back of my mind telling me, is this…
Kanaan: Is this a good buy, essentially? Am I just, you know, chasing the idea of what Tesla could become rather than what it is? And even now.
Kanaan: even now, if you buy into Tesla, you’re still gonna have the same kind of question and concern. But that’s… I guess that’s with everything. I mean, AMD kind of also took a deep nosedive in 2024,
Kanaan: From its high of 227.
Kanaan: But then, now it’s trading at…
Kanaan: I don’t know, I guess it crossed the 300… the 230 levels, so…
Kanaan: say you bought AMD back at the high, or even, I mean, close to $220, and then the stock went down to $85.
Avery: Yeah.
Kanaan: It’s highly unlikely a lot of people held the bag, even when it hit these levels, but I… I guess you saw, I guess, you saw a place to… to really jump in. I remember you telling me to get in AMD under 100, and then…
Kanaan: Same with Nvidia, and then these… these two stocks more than doubled since then. So,
Kanaan: So, I think you know more than I do, especially in the semis and the volatility we see there, and it being so…
Kanaan: tied to AI now, that
Kanaan: If you have conviction in a stock, and in a business, and the way they do things, and management, because management really does…
Kanaan: you know, play a big role. We saw Jensen really go all out with Trump and the administration to bring, expert… to remove the expert ban from China, and then
Kanaan: You know what I mean? So, you really need to have management that believes in the business, and believes in what they’re offering investors, and just the market in general, and then you’re good. And then the technical analysis would just come in and tell you when to buy a stock, not whether to buy it or not.
Kanaan: You know? So that’s why, to me, I guess, entry points are a flex. Like, you can flex with entry points, you can flex with your average and all that.
Kanaan: But eventually, all that matters is if you’re buying into a stock that… because I fell into that at some point, you know? I’ve bought into a company that, really, I did not have any conviction behind, and then I did sell on, like, on a loss, so… Yeah.
Kanaan: That really isn’t a good strategy to follow, I’ve noticed. So really just have high conviction in your place, and you’re good, you know?
Avery: Well said. Well, well, well said. I think, yeah, management is half the equation.
Avery: fundamentals, because of the comp…
Avery: If the CEO believes in the company as much as they should, then they’re gonna make it happen. Case in point is Lee Sisu.
Kanaan: Yeah?
Avery: And she’s making it happen with OpenAI.
Kanaan: Yeah. Yeah.
Kanaan: So, I guess I won’t take more of your time.
Kanaan: This was a really fun conversation, yeah, same here, and we’ll do this more often.
Avery: Yeah, I think you said you’re gonna be holding this podcast twice a month, so I’d love to be on whenever you’re ready to have me.
Kanaan: Yeah, for sure.
Kanaan: Okay, Avery, bye, for now.
Avery: Bye.
Avery: And if you guys have any questions for Kanaan, of course, any questions for me, feel free to drop it, I guess, in the comments section. That’s how K9 usually goes about this.
Avery: I mean, you… I’ve been following her advice for a while, and it’s… it’s paid off well, is all I’m gonna say.
Kanaan: Thanks.
