00:00 Speaker A
I think it’s really important to think about the cost of the AI bill and the hyperscalers are paying this. And let’s go to the Wi-Fi Interactive. I have a great chart from B of A here, and this goes back to 2007. So basically your last 20 years, you’ve got semiconductor companies like Nvidia, Micron, applied materials, kind of a small basket there. That’s in white, and this is their free cash flow. You can see it is skyrocketing because they are getting paid a lot of money and some nice fat margins too for all of their chips. Meanwhile, somebody else has to pay for that. That is the hyperscalers. They are in green. That is Microsoft, that is Alphabet, that’s Oracle, a few others there. Their free cash flow is plummeting. So there’s a huge wealth transfer. In fact, B ofA is calling it a generational wealth wealth transfer. Now, the thing is what could go wrong here? Because uh the hyperscalers think they’re going to get paid back. But
00:41 Speaker A
Torsten Slock, uh Paulo chief economist, he has a really important chart. He’s showing that a Chinese AI models are benefiting more uh than the US. So there’s a there’s more usage of these Chinese models, which means people are not going to pay the hyperscalers uh as much. That’s just a theory. So if this if this continues, uh cash flows and earnings could disappoint. And we’re not talking about this quarter, we’re talking about over the next few years. We could have a Mag 7 sell off, balance sheets could get stretched, credit risk could rise. But that’s that’s the thing here. A lot of uh dominos have to fall or a lot of pieces have to fall in the right place in order for this trade to work out. So I’ll just put this chart on one more time. This is key. This is your K in the uh hyperscaler and the semiconductor trade.
