00:00 Speaker A
Jed, it is great to see you. So let’s start right there because you know Jed, you see a lot of AI skepticism right now, but we see no justification for this. Walk me through that, Jed. No justification?
00:15 Jed
Yeah, you’re right. A lot of skepticism in markets today. Nvidia 15% off its highs. Um, Microsoft has been down lately. Meta’s been down quite a bit since it’s its earnings released. So, there’s skepticism, um, and a little bit of pessimism creeping into markets related to the big tech stocks. But the underlying demand trends remain exceptionally strong.
00:43 Jed
Just looking at earnings from this week, Marvell, really good outlook. Stock was up. Credo, a smaller, um, semiconductor component company, really strong earnings. Stock was up double digits. Uh, Nvidia’s earnings and guidance, you know, two weeks ago now, were outstanding. And I think we’re going to see really good results from Broadcom next Thursday afternoon as well.
01:07 Speaker A
What about this question I hear some folks ask, Jed? They say, their question is just about this historic data center build out, and their concern is, could we be overbuilding?
01:21 Jed
Yeah.
01:21 Speaker A
What do you say to that?
01:23 Jed
Yeah. I think the risk, the risky scenario for investors is um, comparing it to the cloud build out, for example. Um, we’ve been building out cloud services, you know, businesses moving from on-premises to the cloud for the last 20 years now. There have been five true cycles in that 20 years. Um, but we are now four years into this AI data center build out without a single downtick. And so investors are nervous about that. It’s unprecedented. Um, and I think the big difference is, um, consumers and businesses have been adopting AI tools faster than any other technology that’s been introduced before, faster than search, faster than social media, faster than the cloud. So, demand has just remained stubbornly ahead of supply, even though the hyperscalers are building data centers as fast as they can. Um, just to put numbers on that, Microsoft is building 150 data centers this year. Three or four years ago, they were only building 50. And the size of that 150 today is much bigger than the 50 of a few years ago. So, these companies are working hard to expand supply, but they have not yet been able to catch up to demand.
02:37 Speaker A
Is there a metric or a data point, Jed, you’d be listening for that would that would cause you concern?
02:44 Jed
Yeah. Yeah, I think the biggest one that would concern us is if the the utilization of America’s data centers as a group ticked down and started to decline. Right now it’s actually at historic highs in the upper 90% range. Um, but if that number starts to tick up, that would tell you that supply has caught up to demand, which means we don’t need to build nearly as much.
