Tech’s Laisez-Faire Era + Nvidia Earnings Preview with Gene Munster | Okay, Computer.
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Well, emini pick up in twenty twenty four. Well, this year marked the return of ipos. Listen to strategic alternative of podcast from R B C capital markets to get fresh insights on the transit market forces impacting deal flow across sectors and find out how companies and investors are preparing for pencil surge and deal activity in what signals to watch forward this year.

Listen and subscribe to strategic alternatives the R B C capital markets podcast today, wherever you get your podcast, I welcome to a special edition of okay computer. I'm dn and joined by gene monster. He is the managing partner at deep water asset management. Gene, welcome back to the pod.

Great to be here.

You are a fan favorite, by the way, you know that. And today is a so important pod because they think there's really a handful of drivers for the aztec right here, and they are basically very concentrated the way they have been for the latter part of this rally over the last teen months, two years or so. But I guess is becoming increasingly narrow.

Some other folks have joined the party. Tesla for one, and it's up about thirty five percent since the election, and we're going to go over some of the reasons there. Obviously, there's evy credit, there's terrorists, but there's also maybe regular ory overhangs as relates to full self driving and autonomy.

I think that's obviously one of the bigger drivers. The other one is just like some of these folks that have been appointed at least to be confirmed in different administrate rules. And what that might mean for the rest of big tech in the last one wednesday after the close, the bike hoona, the super bowl of earnings that be in video.

So we going to run through that big. I know you can't waight let's talk about tesla and again, you know every step of the way you have been a long term believer in this story for as long as i've known you for years. And obviously, there's been some fitts and starts says are related to this.

Elan doesn't not always make IT easy for a long term believer s like yourself. But you have been really pointed towards autonomy. This has been your north star. So let's talk a little bit about what has changed as a relates to the potential for them to get closer to their autonomy dreams. Jim.

I think the biggest this change was in july mosque all in on a trump presidency. And if we rewind a few quarters ago, he talked about the investment cases, all about autonomy for tesla, don't worry about letizia, all about tony y and then we fast to july all in. And that's a risky bet.

And it's a risky bet because he's going to alienate some of their buyers because a lot of people to left bioelectric vehicles. And but the bet, I think, was preamble tly based on a view that he wanted to start to loosen up the regulation and and the gears with IT to space acts and also autonomy and tesla. And so uh, we have this framework now that the trouble administration is going to but some task force and much of its nitzsch is related to that, but they're going to explore ways to make this go faster.

So that is some serious shot of sugar for tesla investors because as kind of what we had been hoping for as he has aligned himself more closely with the troubled administrations to get some movement on this. Now I caution that this commentary about somebody that's gona help advanced autonomy, you know, that language, there could be a light year, a gap between that language. And the time i'm talking about distance here, gap betwen, that when we actually see that. So answer question, and I think that it's what's changed is the government has been slow. I think the cracking autonomy is more about regulation than is about technology.

So that's why this is important. So my question to you and in uni talked about this a few weeks ago, no one thousand ago september, I took about party five or six way mo rise. Wayne is obviously owned by alphabet and they have announced partnerships with some of the ride hAiling folks like uber.

And it's interesting to me that that's already being deployed. It's being deployed in four cities. okay. And I love the idea that eland said stop focusing on electrification is basically we won that battle and really it's about autonomy. And so I guess if regulation was such a big overhang for tesla on your path to autonomy, why was IT less so with wee that's being deployed right now?

I think it's still is for way more. I think that there in four cities, as you said, and we think about just nationally, there's still a lot of attention that needs to be worked through. And separately, is that with way more these are in some pretty highly controlled areas and ratify small samples is a limit to the number of autonomous vehicles.

I think it's like two thousand and that you can have on the world. They have, I think, around seven hundred right now. IT has not impacted the fact that you ve gone from about fifty thousand rides per week.

I believe IT is up to one hundred, just one hundred and fifty over the past years. So that growth has happened but is still small. And they do have these limitations or on number vehicles and areas that they can Operate. And so IT has impacted them.

If we're going to go over under again, you know what do you think the thirty percent rise in stock over the last two weeks, which is party two hundred fifty billion dollars in market, the stock is once again over a trillion dollars not far away from those all time, has made in twenty one. And again, you know, that was about their path, the autonomy. But from the highs and twenty one to the lows in twenty two, the stocks hold up seventy percent.

It's been a lagger relative to, let's say, the rest of the max seven and the mazda. So at this point, you know, we had this situation, I guess, a few weeks ago where they had that autonomy event, a lot of folks came back very disappointed in the stock was down ten percent after that. What changes in your opinion over the next year or two if they get quicker? I guess, the full self driving and then they start moving their way towards this autonomous dream.

So give you a half of an answer here because this is something that we're working on and IT won't be publishing the coming days on this topic. Exactly what does that mean? But I can put some framework around IT is that there's the us.

And there's the rest the world. And take of the us right sharing market, it's about four billion rides per year. It's running about ten fifteen percent.

But think of that is probably thirty percent of the global opportunity. And when you think about the model, there are two different approaches. One, and it's unclear what unsure what tests is going to do.

One approaches that they take IT and they actually just have the the, the apple there, and they take a fifteen percent cut right now, lifting the way more, take about the twenty five percent cut, but they take a fifteen percent cut. Another is that they could actually own part of the fleet, which is more the way more model. And I can say, and doing this are the work that we are doing right now, IT is shocking.

What happens when you take the cost of a driver out of the equation that costs to the human. And so when I think about that thirty percent move that increase in value, I think a lot of that is based on this mean stock franzy that's going around test. So I think there is some of IT that's related to this autonomous peace. But I think that the numbers to get IT to work and for the start to continue to go up, you've got to get autonomy in the us.

And the rest of the world. I think it's a good differentiation between what the rest of the world is willing to ensure versus the us. And so the fleet stuff is entering.

So uber sold off about twenty percent. You IT really gapped up after the robot taxi event a few weeks ago. Ten percent to a new alter high since then is down about twenty percent. And I almost wonder if there's an a tremendous opportunity in uber down here relative to what likely to play out in the next year. So four tesla autonomy.

thinking all this through here. But I I can say is that you look at way s model and the relationship that they have with uber today, it's unclear what they're take rate is what we must take rate is from uber because essentially uber is like lead generation for way more right now. But my senses that they probably, over time, don't need brand around at some lead generation of they ultimately own the on the software.

And so my cautionary comment for uber and lift investors is like, what do they actually bring to the table long term? They they have a brand, but do people really care about switching brands when you can save a few box on you ride? I think there there's in a day y spot long term.

And I I guess the question I have is also from regular or point, if it's going to be that much easier in the next few years relative to last few years as relates to ma, why wouldn't tesla just buy lift? It's got a building to our market cap. And why wouldn't alphabet figure some way to can emerge with uber? Because then you're really kind of, you know killing two birds with one stones for both these folks.

And then I think the other thing that you would agree is that there's plenty of room for multiple players. I know that, right? Healing IT felt like, okay, there was room for multiple players.

And then IT just became uber and everyone else. And lift is this kind of little thing. And and I guess regulators like the fact that is just not a one way train. I mean, you think there's potential for M N A in the space under a Better regulatory environment for these sort deals. lift?

Yeah and treated by that. I like that idea. I think that probably what elon would say is that lifted into our brand and mean they about solar city, they kind of ditched the brand.

And my guess is that he probably say we're just going to the first principles and rebuild from the ground up. But I I can see, lift heaven home someplace else too. And so I think that far is like the rhetor envionmental king that happen.

We can talk more about them and in here, but I think they were a Better spot, foreseen e deals like that. And I think that live probably the brand will probably find a home with somebody. I would mention this using lift a lot.

Here is this work we were doing here. I've talk with people in the industry, and I think that the senses that this is kind of a winner take most market, that's what we've seen about seventy percent share in the U. S.

Courses, uber. And just the reason why it's a winner take most is the commodity like a ride and people just want to get from here. They are safe and as the cheapest Price. And so you really don't need like ten different players to to do that. And so I can see a situation where you can see a change out of who is in control of this, but that maintains kind of a winner take most type of a market longer term.

right? Let's stuck k about teraflops in january. Remember elan on his q four call talked about without trade barriers for chinese VS, I think use the terminal gna, demolish everyone.

So we've gone back and forth between does he like credits, does he like evs? IT seems to be every other month. There's a different take on this.

And let's just kind of talk about tabs. We could talk a broader you know, apple is obviously one that would be you in a trade war or a stepped up trade board with china. They have obviously a lot to lose.

How are you thinking about about this? Because I think most folks out there who have a brain about, you know, just kind of how economics work, they don't want to see a heightened trade war with increased terro sy and trump has kind of threaten sixty percent across the board for anything coming in from china. We know what that would do to the economies of the us, but also probably china in its still no one wins in that scenario. So thoughts here how you're thinking about you increase tariff s as a relates to this to say IT really is about tesla and apple. We don't have much of an issue as a related to google and amazon and meta and like .

definitely isn't. It's a rare topic because I think that there is consensus here. Ofs are are bad. And so near turn bad, long turn bad. He can provide debate around the edge to IT. But for the most part, how my thinking about this is, is something that i'm worried in the markets largely looking past right now. I'm surprised that it's so comfortable at doing what is doing that.

I have a theory about why is doing that, but it's looking past, I think, the risk of these terrifying and part of the reason why I think that even though there was terrors put in when trump was in the office before, I think that most investors don't believe that it's actually come to frush in the same level that he's talked about. That is going to be for sabor, atlin and for negotiation and leveraged and things like that. So I would say this is who knows what the answer is to the serious, not serious.

But if there's happen, these stocks are going down. And as far as like the impact to something like tesla, I think that you know the relationship in moscow with trump, the substance, that there is probably a whole another pod we could do just talk about the legality of that relationship and how that all plays through. But beyond that, I think that as far as text as concerned, I think that there would be probably some form of a spin.

And when IT comes to apple, of course, cooked in a master ful job of navigating that many years ago and my senses that trumps try to want to create some provisions for apple because apple's brand really is a global sign of innovation for the us. And I think that that's important for the trump ministration. I don't think that are gonna to damage that.

So you're correct that identify needs to with something that worries me, happens with that. My senses they are proud to figure out a waight IT to navigate IT. So there's not much damage.

at least those two companies. Again, I think you're one hundred percent spot on. I mean, I think elan mosque is obviously the cap bird sea. And I think that trump is the sort of guy who would override many of his other zer to go with the recommendations of a guy like mosque.

Then when do you think about mosque is as a relates to space sacks and starling can obviously tesla and twitter? I mean, he's got lots and lots of reasons to say very close to the trump administration. Know for the next few years or so when you think about tim cook and you just said that he had been pretty master ful about how he dealt t with a prior trump administration for terrorists, they had a lot of their products that were excluded from them.

Think about jeff basis. He's no longer the CEO of amazon, but the trick that he pulled with the washington post in the non endorse in the lead up to the election, he obviously owns washington post. You saw that on november six, the day after the election, IT seemed like almost every major CEO of a large tech company came out with what seemed like a pretty orchestrated sort of relations, as eric.

So you saw my sockery, you saw thunder, you saw saw ya and when you also think about just how quiet a lot of those companies were in the lead up to the election, IT seems like many of them we're hedging their bets. So you have jd vans who is the VP elect who's been very critical of mega 8 tech。 You see this new fcc nomination also very critical of mega 8 tech。 IT seems to be the White house might be in very different odds with some of the folks that are you know charged to Carrying out government policy, you know, as a relates to these companies. So thoughts there and .

I don't like get in the politics. I'm going to try to walk this the line here. I think that there seems be a lot of mixed message from one jd seen and what downtown p as seen in terms of I think don trump's view is that you know there should be less regulation.

What companies run or x is all that kind of view. And jd vane is a different view. And I i'd say that um there is a different device present in the president. And so I think that based on that present actually makes the call on and trump has has taken issues against big tech famously called facebook. This is, I think in twenty the enemy of enemy of the state or that was.

sorry.

enemy of the people the way was this year yeah .

he really I think that as recently .

as september yeah so I think that um again, kind of place into this, like what's the administration already going to stand for is going to stand for kind of letting these companies going to uh run and move forward. I would say this is that when you have something like elon mosque, who is in your ear and who is like is about as versed in A I as anyone in the world member, he was one the early founders of open eye.

Uh, have some you like e on there. I think this is risk of the the importance of A I for the us. The strength of the us, the strength of the western world is it's important.

And I think it's going to become increasingly important. And so there is another dynamic to all this way, peace. You don't want to put a too heavy that ends up kind of hurting some the innovation that ultimately keeping the U.

S. In a good spot. And so is a non answered. And sorry about that. I think the reality is, is that regulation will probably kind of soft in in and a trump era in part because I think importance of innovation yeah.

I don't think it's an an energy Y I mean, I think that those very you know kind of issues you mentioned like projecting some sort of dominance and lead in A I is going to be increasingly important as you think about this two horse race that we have with china. You think about some of the manufacturing, yes.

So in the know, the lead that we have in manufacturing that is actually very dependent on taiwan semi, I mean, there's a whole host of things. You know the by ministration has been very tough on many of these issues. So I think a lot of these folks, whether they will be in the executive branch or the legislative anch, they get this in going forward.

It's going to be increasingly important. So a sort of hands off approach to how these companies are companies are, are viewing these search issues, I think, is important. But by the same token, one of the reasons why the regulators have been all over this, and I think it's kind of a bike party an issue as a lot of these companies have become too powerful, right? And so you think about all the tennis that they have in different parts of our life.

So it's gonna a really interesting push in pull. We know that trump in the a personality is very important to him, and he's likely to kind of lean into some of these relationships, especially for those who bend the knee and and maybe that is jack bassos. Maybe he learned his lesson for the first time around.

Maybe IT is to cook you that sort thing. So I get IT when you think about though some of the kind of regulatory headwinds that have been you know amazon, apple, meta, google, they've all have like suits against them from whether to be the F T C D O. Which one of those or all of them I mean, you want to to think about IT, which one do you think stands to gain over some sort of more less affair, sort of regular ory environment? Just terms of .

what's going on, a little of Sally progression as far as what's going on, I think what's happened between apple and google related to the search deal. I mean, this could be A A huge win for google. I think that would be a measurable loss for talking about fifteen percent of apples.

Operating income comes from this relationship. And ultimately, google is going to maintain the share, they said, in the most recent earnings call. When asked about IT, he said this.

Avoided this deal between us, an apple there unintended consequences, and that's all you would say. Know what those unintended consequences are. Beyond that, google will lose a bill to share early than getting back. But I think if there's no changes, the regular environment and that dealings have been avoided, I want to put probabilities on IT. But that I think would be a loss for apple win for google as far as kind of in this new world.

Like who potentially could gain with something that is uh that's uh lusia let's take the the rattle piece, which are the mega cap companies need to do more emini related to a is kind of the center question. And I think it's amazon and apple to our amazon's ban largely apartment approach. Same with apple and uh, apple, there's a lot of deals.

They have thirty to fifty deals the year, most of are so small, all almost too small, even catch the news of typically higher. But I think that that's something where apple could uh, with that, they buy when to make a toner sense for anthropic given amazon's and investment with its amazon ban anthropic. But I think those to an elusive regulatory environment given what's at stake.

I mean, this is existent rist for all these major cap companies. That's why they're spent in video like they can get enough of them, uh, because they realized their customers on the stake. I think those stakes are high, and I think companies like amazon and apple and benefit with a regular or environment.

right? So when we think about the new regulation environ, what's ly to happen in your opinion? Because over the last three, four years, it's been widely known that there's no big deals can happen, especially as we've had all these lawsuits or against amazon, against google, against meta, against apple, are we likely to see some folks and you know obviously going to be in the around general vi, are we likely to see some deals? We know that some of these private companies, we've seen their valuations just skip s higher and higher in one of the ones that i've been saying since IT was a billion evaluation IT should have been this perplexity.

And if I was apple and I know you and I have about this, they don't own one of the large language models. They basically are what they call an answer engine. You can use anthropic clock. You can use open a ChatGPT. You can use a lama from meet.

And to me, if they are taking share versus a google, let's say, you know, why went microsoft, why wouldn't google or why went when these companies want to own that and then kind of really inject IT into their own consumer facing products? Again, IT is a consumer facing products that plenty of these models have enterprise applications that the route that microsoft is going down with copilot in the light here. Just curious, as you think about some of these private companies that have seen meaningful at least value appreciation over last year and a half, are there any people on the block, in your opinion.

definitely on the block in an environment where things loosen up and will see how that plays out terms? Who's calling the shots? But just briefly, how about perplex? Because we did talk about IT a few weeks ago, and my sense was you they're just essentially ride on top of these other large language miles and maybe what's the real value the more i've thought about, I think they actually do have a lot of value.

I think they're brand around getting the answer and kind of doing almost like a kac type of a approach with these other large language models. I think that there is some brand around that, and I think some companies could find IT appealing. I think some of the mag seven confined opening, but also when the conversation around M A and A I, it's not just the magnify in seven know they get the biggest baLance cheats and cash baLance, but there's a lot of other companies that are gonna to try to pursue this.

And even if you look back at how the what tech what happened with mobile over the last you know, fifteen years, there is ema that happened with at the time saying and then you you saw this kind of wave of ema from even like the Carriers going on. And so this is gonna across the board. We're still early unions scratching the surface, whatever the analogy is.

A I hasn't, in my opinion, really been started. And so I think that based on that, we're gonna see some ema who are the kind of the prizes out there, think perplexity. One of them, I think company is like Andrew.

There's A A company that, uh, we're invested in that is common visible, that helps train these models, do a lot of model training. It's it's not particular glam, but it's just critical to kind of advancing this. And so I think you're going to see some big deals when IT comes to m in.

in the next few years, too. Quick thoughts. I mean, my view always was in this before apple introduced apple intelligence, which to be very Frank, I don't think there's any there there.

You and i've talked about this a bit. I think it's going to be a second half twenty, twenty five story if we do see you then. But I always thought for apple, this would be a sort of layup to have this application built into the nest because IT is a consumer facing brand. And and again, it's probably it's right.

It's right up for A I agree. And by the way, today they just .

announce perplexity shopping. We know that they are going to be advertising. They're ready talked about that they're going to have some prize capabilities, is going to be all subscription based.

And I think a lot of folks when you know we had the CEO on the pot, I want to say back in february, urban and he's been on fast money, a lot of folks, just like I was talking to people and take there, yeah, this thing is a bit of a whatever. I think it's turned into anything. I think Andrew is really interesting too that you just mentioned because again, might dare big deals in the defense sector.

You know, palmer lucky, who is the founder this company, I think that he's at a seat at the table. He's been a big backer of trump too. So again, this is the conversation we go on and on and on with IT because I think there's going to be lots of match making that goes that, that we start hearing about. Let's just see when the rubber hits the road. If some of these big mega cap tech companies are willing to spend at these valuations.

We just take IT to the highest level is that we've got a trend that's just starting with A I and we've got an administration change. And that sounds like the administration wants to do things different for Better, worse. And when you put those two together, some things going to happen and think you're going to see some measurable change in how these comes .

are structure yeah and just put them on this. I mean, I think that end of the day, you know you have these two competing sides on this about regulation and deregulation. As IT relates to mega catered, you also have a justice department that's going to look very different than the last one. I suspect that the deregulation folks went out here um because again, if this is an american first sort of administration, I can't think about having a Better way than having six or seven companies that have what know fifteen trillion dollars in market cap and maybe a couple trillion dollars in sales kind of lead the way for that sort of. It's not an that i'll be using a whole heck of a lot, but I get.

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before we get out of here wednesday. After the close and video reports, nine percent implied move on thursday. I want to hear what you think expectations are because this is one where every quarter for like the last six or seven since this thing really took off in mid twenty twenty three, it's been a one way train.

We get IT. The stock has had plenty of consolidations that IT breaks out. Estimates continue to go higher. They continue to beat those estimates. There's been a lot to talk about black.

Well, so this is I don't need to tell you, but just for our listeners, the next evolution of this, Howard chip, and this is the thing that first, there was surprisedly some delays, and then one said shortly after that demand is insane. And then over the weekend, the information reporting that these servers that are using these chips are overheating and IT seems like a lot of stuff about black. Well, if there's ever any issue about bookings for this next generation like the stock gets hit pretty hard.

okay. I'm just like that's my two sense there. But again, this has been a few months in the making since we last heard from them on their last earner's call thoughts on expectations and thought on what you make of all this back .

in the on black. Well, in thack. Well, there are things that happen with chips, rax and liquid cool chip.

But think that this kind of works is so far, I think the bigger question is, what's demand look like in twenty five and twenty six? And those numbers have been coming up and just cook a check here the streets now again for twenty one percent counter twenty six for revenue growth. That was up from twenty percent three months ago.

But the funny thing is that the two thousand and twenty five numbers have gone from forty to forty eight percent. They've come up but two thousand and twenty six thousand. And so that's really what what orbits around the conversation with black well and was well down to one thing to focus on there is going to be allowed things going on with the guides, with the the print. The margins of that is i'm going to read a quote from last quarter from jenson and black world demand, he said, or at least the the supply demand equilibrium demand from black all platforms as well about supply. We expect this to continue into next year.

So most people think that kind of means mid next year, whatever comments he has around that, I think he's going to determine uh, how the stock if he says a kind of literates the same language into next year, it's probably a neutral of slight negative because I think there are people there, given the stock is higher today, that there was three months ago, the people out there who want to hear something the effective until mid late next year or something like that. So again, maybe this in the power thing is the impact in availability too. I don't think I will. But the bottom, and I think that's where this whole thing comes down to, is the earning call and what they say about how far out because that is a indicator to what the twenty five numbers also might look like and what the twenty six numbers are.

Yeah and what what would you take away over the last couple weeks? You know aimed again their guidance that they gave us. That was very disappointing.

Sml, a few weeks earlier than that. A lot of people are trying to kind of put together you some of the different threads here. We know that, you know, memory has not been that grade.

We heard from my grand a couple months ago. C A huge customer of invidia. Go in the way, the dodo. Lots of questions there about some accounting till probably picking up some share from super migros. So lots of cross current here.

And IT feels like the video is kind of like the last man standing as a relates to like the story in the narrative. And it's probably easily for the last six years, some of course, the best story, the best narrative. So how much longer do you think that can kind of last? Because as we think about microsoft azure, we think about google cloud. I know that A W S, you felt pretty good about. I mean, I just seems like the hyperscore e story is waning a little in the new term also.

So I think that there is the bottom line is I think this is going to continue longer. I think that if we look at twenty six the streets, twenty one percent growth right now, I bet it's biking to be above thirty. And so I think that there is still measurable upside to the members and parties.

I believe that there's still this risk that mega aps have about how much they're going to spend and they can't fall behind on this. We'd talked about that a little bit earlier. All these other topics to these negative data think they're really important that there's another topic that is kind of emerging, which is, are the scaling laws holding together.

So scaling laws are essentially the same concept of what we had with mos law back in the seventies, eighty nineties. And so essentially, you need to keep done more and more computer at this. And so there's been some talk that those and disappointing data points are a sign that scaling laws are not holding together.

And my sense is the scaling laws will hold together. I think that you do have to throw more compute at this. If scaling laws hold together, you have to throw essentially more, more gp s to get our fiscal intelligence to the spot.

Words provide more value if they hold together, and video gonna grow faster for longer. And so if they start to free on the edges of that topic starts to break down those stocks going to break down. One final piece is with the video.

I think it's important we on IT, we think that this ultimately is going to continue to grow faster for longer. This is a booming bus story. The quarter before there are general twenty three quarter, their business was down and there was twenty one percent in the in the quarter.

So this is booming bus. We're going to have a boss at some point. I don't think we're close .

to that being there. Yeah now and again, you know, the only problem I have is the concentration, the story, the universal bullish is the talks up nearly two hundred percent a year. Every other tick IT goes back and forth between apple as the largest market cap company in the us. And I just find very few stories with this sort of euphoria and the sort of consensus.

And you you've been very clear, you know, when you've on the stock, you know that you think there can be bus when stocks sold off from its hides in june to its laws and August, I think IT went from one hundred and forty dollars to maybe mid nineties or so. You can do the math on that. IT didn't last very long at some point though.

You know we might have a that's not just to similar from the higher twenty twenty one to lose in twenty twenty two and but just stocks of sixty, seventy percent of their value in video was one of them. Tesla was another g monster. I really appreciate you being here. G monster is the managing partner at water asset management. Gina, I hope you .

come back really soon. See you soon. Thank you. If you like what your herd.

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