00:00 Josh
Here’s the topic. I can’t think of two better guys to talk about this with. I want to get your take on the AI spending boom.
00:06 Josh
Cuz we do hear skeptics coming out. And these are not guys you can just dismiss. These are some very well-known, well-respected investors.
00:14 Josh
And you’re hearing them talk about maybe an AI bubble.
00:18 Josh
They’ll say, I’m hearing echoes of 1999. It’s kind of some spooky stuff.
00:23 Josh
I’ll start with you, Daniel Newman. You hear this talk, what do you make of it?
00:26 Daniel Newman
Yeah, I I think it’s a lot of hot air in that in that balloon. I I do think that there are little bubbles within the overall AI trade. Companies that have zero revenue that are getting 10 and 20 billion dollar valuations. You see it with some of the quantum names. You see it with some of the energy names that are just running really fast.
00:40 Daniel Newman
But you look at the operating leverage and the strength of the largest, the Mag 7s, the Broadcoms, TSMCs, ASML, these are sturdy companies with incredible balance sheets that are making very intelligent bets on what the next 5 to 10 years
00:51 Daniel Newman
are going to look like. And by the way, one thing on 1999, when in 99, the earnings were not even close to keeping up in terms of the companies and the prices of these stocks.
01:00 Daniel Newman
It’s not the same case. If you actually look at the line of how the earnings are matching with the revenue growth and the price appreciation, it is right in line. So, I think a lot of people want it to be a bubble. I call it the this is just the most hated rally of all time. But I actually think there is a really bright future and that AI is is really only in its beginnings, Josh.
01:15 Josh
So Patrick, let me I’m going to ask you the same question, but maybe I’ll just frame it a little differently.
01:18 Josh
How confident are you that on the other side of what’s literally going to be trillions spent here, that investors are going to see on the other side of that, they’re going to see, okay, we’re going to see material, meaningful revenue generation.
01:29 Patrick
Yeah, so I was working at a .com during the .com boom and the .com crash.
01:36 Patrick
Uh but I do want to buttress it on one end and just say, I’m confident for the next, let’s say two years, as long as the hyperscalers can be funding their CAPEX with cash
01:43 Patrick
before they have to be diving into debt or doing some equity financing. I feel really good about that. But to answer the the question, I feel a lot more confident than I did during .com. There were so many different bad business models that were out there. Literally, if you have access to a browser, you can get the benefit of AI. We have connectors now, we have APIs, we have ecosystems that quite frankly, uh didn’t didn’t exist. Am I going to Babe Ruth this? Absolutely not. We should be asking these questions, and what we should be looking at are milestones of that downstream.
