Transcription:
Hello all. Welcome back to Tech Tune up. Check out my background. I live and work in Charleston, South Carolina, but not today. I am at the headquarters of Benzinga down down Detroit, Michigan.
Isn't that cool? And Benzinga is one of the companies that's really helped turn the boat around in Detroit. So you got to thank them for that as well. I'm originally from Midland, Michigan, different part of the state back here doing it live. So anyway, today is July 9, 2024.
Got some interesting data for you. Take a look at our stock and stock tell. So what I try to do here is not just regurgitate the news, but highlight the critical news, what it means to those companies, and also more broadly, because there's always a broader tell. So, first of all, let's start with Apple. Frankly, I have missed the recent upside in Apple, even though I've been right on the stock for years.
I mean, here's a company, as you've heard me say before, hasn't grown for about a year and a half. And right now the stock is trading at 228, an all time high, egregiously expensive, priced well over the highest price targets by Wall street analysts. And it's a bet the ranch scenario on when they put AI on board on their iPhone, you will immediately upgrade your phone and we will know, because this is the ultimate test, not just for Apple, but for AI features. We will know at Christmas because they will announce the iPhone 16 with a lot of fanfare, and then they will actually do that in the fall, and then they'll ship at Christmas. And if you and a ton of other people do not immediately go out and upgrade your iPhone to the latest and greatest iPhone 16, or at least the iPhone 15 Pro, this super cycle of all iPhone upgrades won't happen and the stock will get hit because besides that, there are any growth going on here.
So anyway, I think it's egregiously expensive. I'm waiting for this ultimate AI driver tell or nothing this Christmas. In the meantime, I take off my fundamental analyst hat and I put on a technical trader's hat and I own the stock. I'm just going with the flow. I'm going with the momentum, and I'll stick with it as long as the momentum lasts.
But I think the street has it all wrong on the potential of AI to fundamentally turn around a company which really hasn't grown for several years. The next thing I think is very interesting is CDK Global. Now, this is a private company you may have never heard of, and why would you? But what they do is they offer software support for car dealers. And what has happened is they were a victim of a hack.
And here is a real time example of what can happen. So their cyberattack cost auto dealers about 50,000 cars and sales, because when the system was down, they had to go out in the car lots and sell cars, you know, with salesmen walking around with paper and powder. So anyway, another reason why you have to have cybersecurity software plays in your portfolio, and we have done very well in this program with two. My favorite is CrowdStrike, CR, WD, and then in the number two position, but I also own it. The portfolio is Palo Alto networks, P a n w.
Next up, paramount Global. I have Pooh poohed this company for a while. On again, off again. Finally, it was on again. And they are going to be acquired by Skydance.
And as I've told you before, as soon as this happens, whatever publicly traded vehicle this company is disguised under, I would short this stock. Paramount is a dog with fleas. And I think over time, Paramount and Warner Brothers discovery are toast. They're not going to be able to compete with Nvidia and video streamers one on one. So if you have an opportunity, short the old media stocks.
So next, my favorite stock pick. It's done very well for you. I wanted to give you an update because last time I appeared, it actually had a little bit of a dip. I said it was a buying opportunity. It's bounced back since then.
But when micron ticker symbol mu, which is one of the leaders in the world in memory chips, and of course, artificial intelligence has a voracious demand for memory chips. When they announced their quarter a couple weeks ago, everything was kosher except their revenue guidance for the next quarter, which is the quarter we're in now, ended August, was only in line with the street instead of better than the street. So the expectations has gotten high. And the disappointment was Micron is only going to grow its sales this quarter by 90 plus percent. I think that's pretty good.
Good enough for government work. So I continue to like Micron. The stock held up very nicely at 50 day moving average support, which is about $129. Stock is bouncing, not much still buyable. Dollar 132 a share today.
And I think over the next couple of years, this stock goes to $200 a share. So not only is it my favorite AI infrastructure build out, bet my favorite tech idea, so I'm glad we're sticking with it. They are a triopoly in memory chips with two south korean companies. One is Sk Hynix and the other one is Samsung. And I feel even better about the industry and the micron story because Samsung, who had actually been in a pretty poor number three position of this triopoly, reported their own quarter a few days ago and their memory chip business was very strong, better than expected.
And then also SK Hynex. Things are looking so bright for high bandwidth memory HBM, which is the key memory chip that goes in AI servers and other systems, that SK Hynex is planning to spend $60 billion between now and 2028, which isn't so far away, on adding capacity. Now, of course, when you have commodity chip companies and these three companies are commodity chip companies and things are going too well and they add too much capacity, then they crater prices, I actually don't think it's going to happen. Demand very, very strong. Micron talks about being booked for high bandwidth memory for two fiscal years.
I've covered this company since the eighties. They have never given guidance where any part of their product line booked solid for two years. Unprecedented. So next, I think this is interesting. Our friends at Alphabet, always in the news, right?
So Alphabet has kind of a problem. They told everybody and their brother years ago when it was in vogue that they were going to cut and even eliminate and go net zero with carbon emissions. The problem is we have this mammoth growth driver that really is propelling the shares of Alphabet AI. And the problem is you build an AI data center, it is a energy pig. And so the problem is Alphabet promised all these ESG investors, environmental, social, governance investors, that they were going to cut admissions, but then here comes AI.
Now their AI related emissions are up 50% from the baseline. So anyway, they are desperate to find some clean, clean energy sources and they've actually reached to Taiwan and they are going to get involved in a solar project with private equity backing from the United States. In Taiwan. Very interesting. Alphabet investing solar, not on our shores, but in Taiwan.
The next of the big tech. Here comes meta platforms. Now, I've told you that the european union is very aggressively regulating my tech stocks, whether it's antitrust violations and meta has just been accused of another one, or it is privacy violations under the 2022 Digital Markets act. And they are coming after big tech and essentially all the who's who of us tech and probably one other company, TikTok, which is based in China, as you may know. But this is tough and we're going to continue to see tightening of the regulations.
And the thing that's very sad to me and I've mentioned this before on this program is that we operate in the United States under Internet governance from laws that were created in 1996, before the Internet really started blossoming. And so our laws are byzantine, our laws are totally out of date. And so, sadly, we are being guided by the European Union because we haven't provided leadership to regulate our own industry. Anyway, it could be really bad for TikTok and the us big tech, because if you are a violator of these codes in Europe, you can pay mammoth fines. If you violate the Digital Markets act, they can fine you 10% of your worldwide revenues.
So for a company like Apple, which is always in the crosshairs, they're going to do about $300 billion in revenue, a fine for them, 10% of worldwide revenue, 30% billion dollar fine. That hurts even somebody like Apple. So next. No surprise, because everybody always wants to knock the star off the perch. But Nvidia, this is kind of interesting, is under investigation, of all places, France, for essentially cornering the AiGPU, or chip market.
When you see this happen, it tells you that the king has been crowned. You'll probably see some more pushback to Nvidia. But the truth of the matter is, there are a lot of people that are announcing me too products, but Nvidia has a technology lead that's not unsurmountable, but it is very wide, and I don't think it's narrowing at all. And the secret sauce of Nvidia is not only their graphics process units, chips for AI acceleration, but also their software and data networking that all seamlessly combines. And it's very popular for customers because it becomes, frankly, within AI, a one stop shop.
And so it's not just the semiconductor greatness, it's the rest of their ecosystem. Next, you're going to hear a lot about a company called Coreweave. Corweave is a private company that has just done a funding round with a $19 billion valuation. I cannot believe it. I haven't seen anything like that in a while.
Now, this is a company that is, of course, riding the AI wave, but they have cloud capabilities. So if your organization wanted to jump on the AI wave, you wanted to introduce some cool AI apps. You may go to the cloud for your AI support through core weave. So it's a little bit of different model where you're not going with the other folks who are building, or even if you have to build very expensive big data centers. We'll see what happens next in the news.
Salesforce.com, which is a company that I've pooh poohed for a long time. It's been an absolute dog this year. Technology stocks on average or up about 20%. My portfolio was up 60% in the first half of 2024. So I overweighted obviously the right tech stocks, all those AI infrastructure build out plays.
But one of the things you'll see in my portfolio is no software companies. I believe in the AI infrastructure build out. I don't believe in the software companies because their apps are so far down the road and we don't even know if they're going to a stick, if they're going to be profitable, if they're going to be cash flow generative. So anyway, here's an example. Salesforce.com ticker symbol CRM.
Here's a stock that was all the rage during the advent of software as a service and subscription software revenues. Remember that was a big theme a while ago and they rose to the top and they're so large today that they're even one of the few tech stocks in the Dow Jones industrial average. But this year they're down 4% year to date and they've missed a couple of quarters in a row. And I thought this was really interesting. They recently had an annual shareholders meeting and at the meeting shareholders voted against even though the board of directors was for the executives compensation package.
You don't really see a pushback from shareholders like that. And the CEO that was under the crosshairs is Mark Benioff. And you know, a couple years ago this guy walked on water. Now they're rejecting his pay package. I don't think the future is so bright for salesforce.com ticker CRM.
So next up, I thought this was interesting. Amazon is going to build and they're going to spend over a billion dollars of investment to build a cloud infrastructure for the australian government. So yes, one of the things that's happening you might hear this is sovereign AI country AI. Can you imagine if all the countries in this AI nuclear arms race are now going to take it upon themselves and build? Because sometimes it's in their national interest and it's also in the interest of the country's security to have their own AI capability at a federal level.
So Amazon's going to lead off billion dollar project in Australia. This will be very interesting to see how this plays out because if we have a sovereign AI market, the AI market is going to be bigger than you and I thought, and we were optimists going into this thing. The next thing is a stock that I have criticized on this program Rivian. And if you own a Rivian, I do think they're pretty cool vehicles. The problem is, every time Rivian sells a vehicle, they lose 40 grand on it, and that's just their cost of goods sold.
That's before you get it to any other overall corporate expenses. This company last year burned $5 billion in cash. Burned it, torched it. And they recently got a bailout from Volkswagen. And frankly, I don't know if it has much to do with anything that you expect those two companies to do together as far as creating new products, selling new products.
If Rivian did not get that Volkswagen handout, they probably would have been finished. So as that stock rises, I look more closely at shorting it. And here is something that's interesting beneath the covers. Just this week, Rivian's chief accounting officer. So not the chief financial officer, but the chief accounting officer, this is the person that is responsible for putting together the financial statements, abruptly quit.
If the stock is now on a big boom, and I'm sure the chief accounting officer had a lot of shares, either through restricted stock or stock options, why would you leave when the investment is starting to hum and your chief accounting officer is in charge of financial compliance? So I don't know. I'm not saying that they're fraudsters, but that is a red flag that makes me look at their financial statements much more carefully. So the last I have here is it looks like this dude's going to be the next president states after Biden's poor performance in the debate, than that follow on interview on ABC with George Stephanopoulos. But I've told you before, don't mix the man, Donald J.
Trump, with the ticker DJ tache of Trump media. This is very interesting. Last quarter, the company only did $700,000 in sales and they lost several hundred million dollars. When you only do $700,000 in sales in a entire quarter, you should not be a publicly traded company that is a small, modestly successful mom and pop shop. It's not a real company.
And here's what's happened as DJT has soared on the expectation that he'll be our next president. What they're doing is they're taking their very expensive stock and they're buying other companies. But what happens is you are diluting your existing shareholders and you're using your overvalued stock as a currency. And I think these other companies will be happy to get that stock as long as it's up. But I do think the stock, over time, is going to be worthless.
And so this will end very badly for existing shareholders and the companies that are the targets of these acquisitions that are taking that stock as their compensation to do a merger. So anyway, those are my stocks and stock tells. Some are obvious and some are not so obvious, but they always lead to some really important insights. So next, let's get to the tech picks.
Here you go. I always show you my lineup, totally transparent. I own all these stocks myself and I do exactly what I tell you to do. So the green ones are ones that are still on the fresh money buy list. The yellow ones are still under consideration, but I need to see more and I'll kind of explain that.
But I told you what happened with the auto dealerships and the cybersecurity hack with CDK Global. So you got to have cybersecurity software in your portfolio. I lead with Crowdstrike CRWD, but I also have Palo Alto networks, P A and W. I talked about the story of Micron, my favorite tech idea. Already been a huge, huge winner for everybody at Benzynga so far this year.
T mobile, Microsoft. Okay, meta. Yeah, meta. I'm just a little bit worried about its valuation here. I think it's a little bit extended.
I have no fundamental problems with the story. Amazon synopsis Nvidia yes, the stock tripled last year and now it's working on a triple this year. Still like it? Here's the deal. People are starting to transition away from the AI infrastructure plays and say, okay, all the large language model building is done.
Let's move on to what's going to come out of that AI pipe. It's going to be some cool apps. Let's start buying those companies. Well, first of all, I don't know if those apps will ever be interesting. I don't know if they're going to move the financial needle.
In the meantime, the AI infrastructure building, and we have the capital expenditure plans of all of the big tech hyperscalers to prove that they're spending. It's going to continue far longer than I think people expect. So some people think that this will be peak spending this year for large language model building. I actually think we're going to have another robust year in 25 and then in 26 maybe things slow down. So that tells me I'm two years away from the end of this cycle, not one.
So if I'm two years away, I'm going to continue to milk Nvidia as much as I can. And then, hey, at some point I'm in actively manager of portfolios and so what I have to do is make sure you get out the top. But the problem is some people think the top is here. I don't think so. So I'm sticking with Nvidia.
Here is broadcom ticker symbol Avgo Dell is one of my AI server plays along with, as you see down the list, Hewlett Packard Enterprise. I like Taiwan semi. They make all of Nvidia chips. I do like Alphabet, I do like booking.com in OTa, online travel agencies. Here's two stocks that first of all Arista networks is my data networking play in AI, but stocks a little expensive.
So I put it back into yellow, which is weight. Same thing with Qualcomm. I'm just not there yet on Qualcomm. Super micro stock was up like six, seven, 8% again yesterday. Just ridiculous.
And I do think there's upside because it is the leading AI data server play. And they have liquid cooled technology that other folks don't have. And so the folks buying servers to populate their data centers, even though super micro is the highest cost option with the liquid cooling, they still go to super micro. Next is my play, Coterra energy, my play on natural gas. Because at the end of the day we're not going to be able to build all these AI data centers with our current sources.
We are going to have to get deep, deep, deep into nat gas and nuclear. So Coterra is a good nat gas play. I would say constellation energy group. CEG is probably the best nuclear utility play. I like applovin.
I also like HPE, as I told you, another data center play. And first solar. I'm watching. I'm intrigued because the stock has come down a lot recently, but they have a quarterly conference call on the 31st of this month. I need to hear more.
So anyway, I got it in the holding pattern, colored here in yellow until I get that data. That quarterly data dump again coming in just a couple of weeks. So those are the tech picks. And now let's talk about some of the broader trends in the market.
I continue to be in tune with the Federal Reserve Board and the next move on rates. So just about every day the feds release some economic data. It could be jobs, it could be unemployment rate, it could be consumer sentiment figures, it could be inflation figures. Now there's a big inflation figure this week on Thursday, consumer price index, CPI for last month, and the Federal Reserve, our central bank, who's in charge of monetary policy and lowering rates, which we are in desperate need of. They're going to be looking at that number very carefully.
But in the meantime, America's risk free rate, which is typically the yield today on the ten year treasury note, is 4.28%. It has come down from 5% last fall, and no surprise, as it went from five to 4.28%, it unleashed a nice bull market. And not just tech, but other aggressive growth stocks. So what I'm telling you is this. You have to watch this stuff.
I always report on it every time I appear. Because interest rates go lower, tech stocks go higher. It is probably the most important variable, even more important than all this talk about AIh. Here's an interesting trend. We are desperate to build these AI data centers, and we are desperate for energy to fuel them, and we just don't get it from what we have.
It's kind of interesting to note that all of the nuclear utilities, particularly the big ones like constellation energy ticker symbol CEG, are in talks with big tech. They want to put their nuclear power plant right next to the AI data center. And whether you're for or against nuclear power right now, for the foreseeable future, we really need it and we need Nat gas. And so look for, and I always do derivative plays for tech in nuclear based utilities like constellation group, Cegde. This is really kind of interesting.
I obviously was around. I ran the biggest tech fund on the planet Earth back in the Internet era, late nineties, early two thousands. But it's really hard to find a market. I'm talking about the broader market, the S and P 500, that is so concentrated and so few, and it just happens to be tech stocks in this place. The concentration is even more concentrated now than it was during the Internet bubble, that when it popped, the Nasdaq Composite dropped about 80% over the next two years.
So the mag seven, right? We talk about the mag seven. I own all the mag seven except for two. I don't own Apple. You know why?
I don't own Tesla. You know why? But the mag seven drove 60% of the return of the S and P 507 stocks out of 500 in the first half of this year. The other way to think about it is the S and P 500 in the first half of 2024 was up about 15%. If you strip out the kingpins, the average stock in the S and P 500 was up only 4%.
So 4% is the average company with the concentration of the MaG seven. You actually pulled up the entire index because it's a cap weighted index up to 15%. So some people say we have a bull market and a bear market at the same time, a bull market in tech and aggressive growth stocks and a bear market and everything else. It's kind of interesting. Next, the US Supreme Court, no surprise.
You know, it's conservative dominated. They did reach an interesting conclusion the other day that going forward they are going to rein in the ability of federal agencies like the Federal Trade Commission that governs tech and even the Department of Justice to be able to interpret laws as they see Fitzhe. So they're going to take that interpretation power, which has been very powerful, particularly as they prosecute tech companies and turn it over. So it's kind of a pushback against the anti taxers. And this is really interesting because the Federal Trade commission has a bullseye on Amazon's back.
It's going to be huge. The suit that they file and the FTC is now with this Supreme Court decision, going to probably be neutered a bit. So we'll see what happens. Maybe we don't get to even the courts with the Amazon deal. So this is kind of interesting.
Next. I remember years ago, all the rage was Fintech. Right? Fintech. And there were analysts that kind of left their jobs to become fintech analysts.
Well, yeah, I mean, we can all do mobile pay and stuff on our smartphones, but the glory of fintech never really materialized. And so be careful of what you wish for and know that sometimes the hype is so strong and at the end of the day, when you look back, you say, geez, that was a nothing burger. It's kind of interesting, the collapse of fintech. One thing I would say about my stocks that I am a little bit worried about is there has been some insider selling on the AI food chain. Like, for example, Jensen Wong, who is the CEO of Nvidia.
He sold $169 million of Nvidia shares in the month of June. Jeff Bezos, who's now the executive chairman of Amazon, obviously he founded the company number one shareholder. He sold a shit ton last month. And then even my favorite tech stock, the CEO of Metrotra of Micron, also sold in June. So I got a minute, you know, call it as I see it, even though I still think that these stocks can do very well, we have seen some insider selling.
And when insiders sell their stock, they are telling you, no matter what they say is an excuse for doing it, that their stock is fully valued or maybe overvalued. So I'm watching this very carefully. Insider selling at the executive level of your favorite companies. Next. As I mentioned before, it's becoming increasingly clear that we're just not going to be able to cope and that AI is a real energy pig and we are going to be desperate to come up with nuclear sources, as I said.
And also Nat gas going north of the border is an interesting story. The canadian government is fighting with some of the video streamers a la Netflix, because if you want to participate in the markets, you have to pay 5% of your canadian revenues into a kitty to help support legacy media in Canada. So it goes to show you that they're so desperate to lend a hand to legacy media, even though nobody should just let them die, that they are charging kind of a 5% participation surcharge in Canada for the video streamers. This is kind of interesting. And this could maybe poke a hole in my AI infrastructure build out thesis, because Microsoft has a product called Phy Phi, and it is not a large language model, or LLM, which has been all the rage recently, but it is a small language model.
It's supposed to have pretty close to the capability of a very expensive large language model. But it uses one 100th of the parameters to drive that model. One 100th of the parameters that's used in a model like chat, GPT, for example. So if there comes a day when we can get by with less. Yeah, that'll probably punch a hole in my thesis, right?
Because I'm expecting large language model building to continue for a couple years, and tens and tens and tens of billions of dollars more spent. So we'll see. The next is the AI comparison. So I would tell you that this is interesting. Maybe it's a positive indicator.
So I've covered tech forever, right? I got out of school in 85. I started covering tech essentially 24 7365 in 1992. But I will tell you this, maybe this market is pretty large for GPU's because the CPU market, right? The CPU market, that's the brain center inside your laptop or your desktop PC.
So essentially intel, you know, pioneer back in the 1980s, over then, over all that time, there's been 100 trillion. That's not billion trillion with a t spent on CPU's. And what happens if we go from a cpu dominated tech world to a GPU dominated tech world? And over time, over the next couple of decades, $100 trillion, just like in CPU's, is spent on GPU's. And of course that's the purview of Nvidia anyway.
I mean, that's kind of a monster amount to be spent, to put this in perspective. That would be, over time, about four times the size of the entire us gross domestic product. But anyway, just think about as GPU's essentially substituting for and replacing CPU's. This is interesting and I guess kind of scary. As we stay on the AI theme, we are in desperate need in the United States for engineers, right?
One thing is to spend ten billions of dollars to build a semiconductor fab where they make chips. And we're doing that ever since the 2022 chips act in the United States. And then how about spending billions of dollars more on stocking data centers with high powered AI servers? But the problem is that is hardware spend. We don't have and we don't graduate enough STEM students, you know, science, technology, math here in the United States to be able to populate those facilities.
So one of the drags, one of the impediments to AI's development over the next couple years won't be money, right? Because there's money to be had. It's going to be the fact that we're going to need to hire 115,000 semiconductor employees here in this country by 2030. And we don't even graduate a fraction of that. So this will be very interesting.
Can you imagine? You have all this great technology, but at the end of the day you needed some humans to implement it. We're going to have a real problem. It's already held back the completion and future production of chips in Phoenix, Arizona, at Taiwan semiconductors plant because they just can't get enough people to man the plant in not just the Phoenix area, but all over the United States. Last thing I want to mention here, AI budgets.
I think this is pretty interesting. JP Morgan, the investment bank just surveyed, and it was probably a pretty meaningful survey because they surveyed several hundred chief information officers, you know, the people that are in charge of the tech budget, and they say that their spending as a group is going to grow 40% each of the next three years on getting their company's AI ready. So, yeah, if it's a 40% compound annual growth rate, if that ends up being legit, yeah, Nvidia is not cheap here, but it's fairly priced here and it's going to go a lot higher. So we'll see. As all these things say, and I report to you, like, sometimes there's some negatives, sometimes there's positives, but the way I see the AI infrastructure build out and the way I'm sticking with my stocks, I see much more evidence of further acceleration or at least executing current spending plans than I do signs of folks reining that spending in.
So you guys, thanks for joining me today from the Motor city, Detroit, Michigan. Big treat for me to be here. Thanks to Benzinga, thanks to harvest portfolio management, which is my investment firm. If you're interested in my tech portfolio, up 60% in the first half of 2024, reach out to me on my site. But next time, I'll see you.
I'll be back down south in Charleston, South Carolina, at my local studio. We'll say goodbye to Detroit, and I'm going to say goodbye to you. Until next time, thanks.