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Hello everybody. Welcome to another live show from the Mly Fool here on YouTube. If you're not already subscribed, uh be sure to subscribe here because we'll be going live more especially during earning season. But today we're going to be talking about the market crashing. So Neil, let's start there.
I will pull up what the heat map looks like for today. But this has been a pretty shocking move, especially after yesterday. We talked a lot about what was going on yesterday. It seemed like, you know, you had initial negative reaction because of the election late on Tuesday. Then the market went, "Ah, you know what?
This isn't going to be be too bad." And then today, complete reversal of yesterday's positive news. Yes, it seems like uh yesterday was a dead cat bounce as they as they say because today is we do see some some greenish names here and there but over the past couple of weeks we've had these types of days where okay semiconductor trade AI trade was red but you've seen a lot more green seems like today you you you do see that even the names that were maybe usually a bit greenish even financials or things like that are red or barely green.
So, I'll dig I'll dig into Yeah, I'll dig into a few of these because healthcare was actually up a little bit more earlier today. Uh yeah, energy is another one. Uh but yeah. Yeah, you're totally right. So, see it seems like the the market today is definitely not not happy, but but not happy at all with the with the AI trade.
Now there are maybe a couple of reasons that we might look at that there is the okay post midterm elections Democrats want the house in the senate that means data centers will not be built anymore that's the the extreme the extreme scenario or or way of thinking about this by the way this was not the reaction yesterday so I just I just want to flag that because I find that is very interesting because you know you could make that type but you could have made that exact yesterday and that wasn't what the market did.
And you you can make the the I mean we can use the explanation of okay the market was already pricing a democratic sweep and that's why all of these names are down quite a lot over the last couple of weeks. Okay, but then why the overreaction or why did the very bigger reaction today? It just sounds very strange.
We've already also we discussed this a little bit yesterday. Greg Abbott from Texas already talked about a data center moratorum in September. So all of this isn't new, right? So and and I I've seen already some estimates that say that maybe 10% or 15% of data centers might be delayed or or might be cancelled.
And we're like, okay, if that's the case, fine. That was the case six months ago, wasn't it? Yes. Plus, that that doesn't mean that the data centers are not going. First of all, I think Meta's president today said that they think it's going to be easier to expand what you already have than to ask for new permits to build newer data centers.
So, there is that. Yeah, because you already have the kind of local relationship. Yeah. Uh yeah, that makes sense. Um and then maybe we might just see more data center being built out outside of United States. That's also a possibility. Uh we also had uh C3 Research come out with a piece yesterday. They are uh well actually right now I don't even know how well what we can call them because I think they've they were acquired by Semi analysis not that long ago
and semi analysis is very bullish the the AI trade but it seems like the newsletter that they acquired is now not that bullish anymore. So they came out with a couple of points and the couple of points are are again are the same points that we could have made a couple of weeks ago, couple of months ago about capex spending.
We I mean both of us and Jose have been talking about the capex growth and I think we've all concluded that the capex growth rate is probably peaking. Yes. But the capex growth number is is is still going to go up at least in 2027. Yes. Yes. At least in 27. And they they're that's I think one of their first point.
They're trying to make that case which okay that's not surprising. I mean of course when you go to a trillion dollars and then you're not going to go from 1 trillion to two trillion. Okay if you go from one to 1.4 or 1.5 still 500 extra billion dollars that gets added to to the whole spend. They talk about the the the risk or the the lag that we have right now in the spending and the amount of revenue that gets generated.
Although from what I've seen is they are using open AAI and entropics specifically here to make their case but they could add Azure they could add AWS they could add GCP and suddenly that number becomes much much bigger. So on the one hand I get the points on the other hand I'm like these are the same points that we've been talking about for the past couple of weeks maybe even the past couple of months.
It's just that right now yes all of these stocks are under pressure. All of these names are down. I think all of the NeoClouds are down over 50% from their 52- week highs. And so it is quite strange um the timing of of this piece. It is very strange because I think 15 or 16 hours before they released their newsletter, they made two post on X basically saying what we're going to see from the midterm elections, the reaction from the stock market is maybe going to be an overreaction and will be forgotten a week from today.
And then literally the next day they come out with the with the piece that they came out with yesterday. So, I don't know. I I I just found this very very strange. I I want to maybe try to put some logic to it. I want to bring a couple of things uh to to bear from a news standpoint because I think this kind of um it's a continuation of something that we've been talking about for a while.
So the AI trade is built is predicated on the idea that all these capex investments are going to pay off, right? if they don't um and the market's been questioning that that's why the cost of debt has been going up for particularly the Neoclouds but you know even the hyperscalers uh it's why you know credit spreads are up all that kind of stuff okay but from a revenue side we've also got some questions because if you look at anthropics numbers in I believe it started in earlier or midepptember the revenue kind of flattened off that's a real challenge when that's your biggest counterparty they got something like almost a trillion dollars worth of worth of spending in the future and then you have companies like Apple this came out today But this is you could you could look at a dozen of these from all kinds of different companies said that they were lowering their spend limit uh for for engineers from $300 per day.
By the way, it's still still a pretty darn big number, $300 a day down to 200 with plans to get that down to $100 per day. Uh so we're going to see continued pressure on the revenue side of the AI trade that eventually trickles its way down to how much is being spent. Okay, couple other things. Micron paused uh work on a $4.5 billion plan in Taiwan because of a labor dispute.
Now, my inclination would be this is probably going to go forward. You're just using your leverage, but this is also the kind of thing where the market is going, hey, wait a second. We have priced this in that you're going to have this expansion in capacity. If you're saying, you know what, paying more, paying our workers a little bit more is not worth it, then how much are you really are you really making on this?
So, just it just brings in questions whether you're bullish or you're bearish, it kind of it probably kind of confirms your thesis. The other thing um that maybe we touched on yesterday, but that I thought was fascinating is because the conversation in the market has been like the AI trade has been from one thing to another, right?
AI coding uh phenomenal growth early in 2026 led by uh led by Anthropic you know open AI kind of comes in middle of the year and like catches up a little bit but what's next right and I've seen a lot more discussion about this uh discourse on Twitter you know what comes after coding as a use case for AI and agents was kind of the story right that we're going to be using Muse and and stuff like This was from Uber in their conference call.
So we did just around 320 million trips on Uber and Uber Eats. The volumes coming from AI agents from two Uber Eats was around 500 orders total and our and on our rides business it was a grand total of four trips that were fulfilled by agents. One of those four trips I don't know if you saw this was Brad Freeman uh who who we know on Twitter.
a lot of people probably follow him on Twitter and he said it was a terrible experience. He was like it was it would just be easier to just open up the app and and get a ride on the app. And so when you think about the current growth has been driven by coding, some of the companies that are doing coding are now saying let's let's at least think about our spending, right?
Like like maybe not maybe we're not going to cut it back, but we're we're not going to grow 100% quarter over quarter. we're going to start thinking about our spending and then you have to fill that gap because all these companies have exponential growth on their you know on their models where's that growth come from and it's not if it's not coming from agents because people don't I I have used myself as the use case here I downloaded the first day I don't use it anymore because I it it started doing stuff I don't want it to do I have uh I have whatever the Google one is spark I think is what it's called uh I don't use any of them anymore just don't do anything for me that is more useful than like I I think Spark still like flags emails for me.
It's pretty nice nice at that. Like that's a pretty stupid use case for $20 a month. So that's what the market is thinking about. I'm just I'm not saying this is right or wrong. I'm saying this is what this is a continuation of the questions the market has been asking for the last three months is wait what's the payoff?
Sure, the the compute prices are high right now, but what do they look like in 2027? If you're in the spot market, I've seen, you know, emails and reports of saying like companies with GPUs are a little more desperate to to sell them to companies when some of the current contracts come off. All of this brings in questions that the market is going, hey, if I priced you for 100% growth in 2027 and you're only going to grow 50%.
That's a huge haircut on the value of your stock. And that's what we're seeing today. Yeah. But on the agent side, I I honestly I would not be surprised if we see a year from now a a 5x increase, 5 to 10x increase in orders and maybe rides that Uber will will experience. So 5,000 rides in a quarter.
Probably. It's probably going to be more. But if I want to play the the super conservative game here, I don't I just compared to 320 million, that's still like nothing. Yeah. No, I wouldn't be surprised if it's more, but I I I'll put it at the 10x of what they've seen today, which again shouldn't really be that difficult to to to 10x the uh the orders and rides.
But okay, but going back to the other point, when an AWS is expected to grow over 40% for the next two consecutive years, I mean, that means that they are seeing the growth ahead of them. if if they're giving us at least 40% of a business that's already at a what's run rate of $184 billion or something like that.
So, so clearly the revenue is coming from somewhere now. Well, most of that is anthropic though, right? And that's them signing contracts for future obligations that again they're signing the contract, but if the demand and their revenue doesn't show up, then that contract is worthless. Yeah. Does a company like Amazon, I mean AWS risk it all on just the entropic contract happening or not happening when they gave us that guidance?
I would assume no. I would assume they have way more demand from companies outside an entropic. Um but yeah, maybe maybe smaller companies will have a harder time. But if you look at GCP, if you look at Azure, if you look at AWS, those are giants in the industry where the numbers are just getting bigger and bigger.
So clearly the usage is going up, spending is going up and revenue gets gets generated more, more and more. Mhm. So it seems like there are way more questions today than there are any answers. It's like every other week we have way more questions, no answers, which I think is why we we said yesterday and maybe last week.
Next week new I mean I think today iron reports but it's it's a bit irrelevant to this whole thing because they're quite small but there is core rich that's going to report there's Nebulus that's going to report and Oracle then Nvidia. Mhm. I think that's that's when we might see way more actual facts coming from the companies in question the big neoclouds let's say than an Oracle.
It's not a neocloud but it's it's the same game that they're playing right now. same spending, same growth, horrible debt profile as of right now. And then the last one is basically the the king maker, which is which is Nvidia that we report in the next couple of weeks. And if it seems like they know how to answer the questions, then I think maybe sentiment does flip because as of right now, it does seem like it it's only going to get worse.
There's no way something gets gets better, which when we get to that side of of Detroit, it's maybe when things get really interesting. I want to I want to go through why and we can maybe kind of end on this overall uh thought on the AI trade before we move on. Um because I think one of the things that if you look at this overall decline, one of the things I want investors to just think about is over the last four years, I think we're almost at four years for uh since since Chachi PT came out.
Yeah, everything has been up and to the right and so everything has been we don't have enough supply. So Nvidia wins, Broadcom wins, Micron wins, AMD wins, Intel even wins. And if we are heading to a world where you have exponential growth on demand, now you're having there's a lag between that and an exponential growth coming on the supply side.
So we're getting to that point where there's more supply. So it's not just Nvidia anymore. Now you've got TPUs, you got tranium, you got AMD. If the C, let's say that the capex number um for let's take Alphabet as the example. I think we talked about this on a show recently. Their capex number for the fourth quarter of 2026, so the current quarter that we're in, if you just flatline that for the next year for 2027, you're almost at $300 billion worth of capex.
And when you have the bubble popping, if you go back to the to the telecom bubble, it was not that spending declined. It was just that spending growth stopped. So you have telecom spending go exponential through 2001 and then it just goes flat for like 20 years. And that was the popping because the the leg that Micron uh plant that we talked about earlier, that's still going to come online probably in 2028.
They're going to figure out the labor thing, but they put too much money, too much time, effort into like it's a it's a sunk cost at this point. So that supply is going to still come online. So if you don't have that exponential demand meeting that exponential supply that's coming online, that's where you run into problems.
So the challenge for all those chip companies, and I'll pull that back up. The challenge for the chip companies is what if you're able to expand supply 100% but demand only goes up 50%. Now you have more people fighting over a smaller pie. And if you look at companies like Nvidia, you know, people like to talk about Nvidia, oh my gosh, it's so cheap at 23 times earnings, but they also have a 65% operating margin.
And historically, their operating margin is more like 15 to 20%. So if you if we get to a more competitive market where supply and demand are not in balance the way out of balance the way that they currently are and their margins go from 65% to 20% which is still historically at the high end of their typical range.
Now suddenly that stock isn't trading for 23 times earnings it's trading for 65 70 75 times earnings and you're slowing growth. So this is again this is what the market is thinking about is if there is a slowdown and the market is going market is forward-looking the market is going to react before we see it in the numbers.
So the market is thinking about what does Q2 of 2026 look like? What does Q4 of 2026 look like? And if you have companies like let's you know we'll we'll eventually get the capex numbers for 2027. But if those capex numbers if you're starting to see slowing growth that's your sign that uh you know a lot of the growth that's priced into these stocks you know maybe shouldn't be and that's that's I think a huge reason that we're down today.
But it it it should be bullish for these big names though because that means that free cash flow comes back. But that look at what is happening to the big names to your point. Um if you you have Apple doing fine, right? They're they're out of the trade. They're out of the uh Google though, Alphabet only that's down less than the market significantly less than the than the NASDAQ 100.
you know, Amazon also down less than the NASDAQ 100. So, I do think you're seeing a little bit on a relative basis uh of strength for the hyperscalers who have a core business to fall back on. Um, you know, and that's why you're seeing the leverage players like the Neoclouds decline significantly because they don't have another business to fall back on.
I it seems like right now because technically speaking I mean if we go to the scenario where okay Nvidia dominates but then suddenly we have Nvidia that still dominates but we have a lot of other companies that come out with their own chips TPUs you have AMD etc etc then they should have also been rewarded we've seen Google with TPUs huge success Amazon with trrenium huge success they're all working with the same player which is Broadcom But Broadcom was down.
So it seems like no matter what happens right now, whether it's bullish AI trade, less bullish, a specific name in this growth story, you you'll get punished no matter what. I think the market is really looking for a a well, it's it's looking for reasons just to pull things down. But there could be a point in 27, I think we've discussed this for a long time now, where these big companies, they spend a lot, but we we get to a point where suddenly the core business is just so big and so strong where they get to generate free cash flow again while in this spending cycle.
And we we've agreed on the fact that capex growth, percentage growth is coming down. I mean, it's getting smaller and smaller, but the dollar amount gets bigger. Even if it's $300 billion for Google next year, it's still almost hundred billion dollar more than what they're going to spend this year. So that that money is just getting on top of an AMD, which an AMD said they're going to grow at least 80% next year.
I don't think that number changed over the last couple of hours. Nvidia said at least 70%. And they told us we can grow more if we have more supply that comes online on time. So I don't think that will change especially not for 27. 28 is maybe another another question. But even for 28 are we going to go from 70% growth to just 10%.
Probably not. So even if we go from 70 to then maybe 30 40%. To me that's still fine because the number the dollar amount itself is just getting so big that all of these companies will still benefit from it. And yes, if you have a very profitable core business, you you'll get out of 27 as as a much much stronger company because suddenly your core business is generating a lot of cash flow.
Flips your free cash flow profile into positive territory and you get to spend you'll probably outspend the your competitors as well. So these companies are definitely positioning themselves for for a good couple of years ahead. But as always, you will have bad companies that will just not perform and maybe might be scooped up.
Yeah, I think that's one of the things today is uh looking at when the market goes down like this. Uh you're going to see the weaker companies are going to do much more poorly. That happens on the way up too, right? They're more leverage typically. So they're the ones that are going to be up, you know, 600 700%, but they're also the ones that may not may not survive the market crash.
Uh so if you're looking for opportunities in the market, I think I think a good place to start looking is those companies that you know are going to be around 5 10 15 years from now. Alphabet, Amazon, you know, these are Apple maybe maybe isn't the best AI play, but you know, really solid company. Uh so well, let's if you aren't already, be sure to uh subscribe here on the channel.
Uh and Neil and I will be back with more content. Let's move on to some of the comments and questions that we have uh here on the live stream and I'll I'll pop some of these up if I can find them. There was a question about uh how we are feeling today. How painful does today feel? Uh I will I will go first here.
I have been investing since 1995. I am numb to the world when it comes to the day-to-day moves of the market. But, you know, just for perspective, my portfolio uh is down less than the than the NASDAQ 100, but a little bit more than the than the S&P 500. And that's just because of a couple of volatile names, Hims and Hers and uh and Robin Hood, which, you know, they they go up and down temp.
I think Hims and Hers was up 13% yesterday. Uh but, you know, I've I've got Portillos is my best performer, up 22% today after earnings. Um, so there's there's I think a big difference between the market is selling off the AI trade, which is which is clearly kind of the trend in the market today if you look at the big numbers that are down, and then just the correlated names.
And the smaller the company, the more you're just going to get sold off just because you're just because you're a smaller company. Like nobody's thinking about, hey, is this good for him and hers or Zeta Global? they're just going sell beta and that is what that's what uh it gets more nuanced the bigger you get on these kind of big move days.
Uh but typically you go into those smaller companies that are more in the you know 500 million to maybe $5 billion valuation range you're just going to get a selloff just because it's a sell-off. So yeah, I mean from a short-term perspective, if I was looking to buy today, that's where I would be digging around in my own portfolio is going like, okay, what am I what do I look at and go like, hey, there's some really really good deals here and nothing changed.
If the a if AI spending stops tomorrow, that doesn't do anything to him and hers, for example. So that the thesis hasn't changed. The stock has just gotten significantly cheaper. Uh, and healthc care's up. We we talked about that earlier. A lot of healthcare stocks are up. That one's down. So, it's a little bit of like, you know, the market just doing kind of wonky things.
Um, so, but what are you what are you thinking and feeling on days like today? Well, I'd be lying if I said I feel great about days like days like today, but especially when you have to answer to me about companies like NeAs on days like today. No, but it's I was born in 94, so I was born a year before you started investing.
Um, but no, it's I I get it. People say, "Oh, Red Day, it's a buy the Deep moment, etc., etc." Which again, for some companies, maybe in hindsight, it will be a great buy the deep moment. I've seen a couple of questions. So, Nebus under $200 is a gift. Last time I checked, Nebus is under $200 today.
Um, but my average is anyways, it's $60. So, I I'm still up on on the name and year to date, the portfolio is still up, although less than less than a couple of days ago. That's for sure. But, do I feel great? No. I don't like to see my portfolio being down a lot on on days like today, but I don't control that.
I just control what I have in my portfolio. And I do think for me personally, I still own quality businesses. I know Travis doesn't agree with with my neb, but that's that's but hey, that argument is that that's what this is all about. That I mean that that's completely fine. That that's why it's in my portfolio.
It's not in his portfolio. Um that's why there are certain positions in his portfolio that I don't own. Maybe just because I'm not that interested, but that's that's fine. That's why I invest for me, invest for him, hims and hers. Um, but uh but yeah, I I don't like all the red. I I still have a lot of questions about why this is happening, why the overreaction because again, it's not like a lot of these names are coming from 50 times earnings now down to to 20.
They were already, not all of them, but the big ones. Some, yeah, I mean, the big ones we've discussed today have already been trading at at quite okay valuations for for a while. But, okay. Yeah, it's not the first time. It's definitely not the last time that we're going to see an overreaction or such a big reaction in the market.
We've had one earlier this year. We've had last year a very big one twice the April uh crash. We've had the deepseek moment. People forget, but the Deepseek day was way worse than today. Deepseek brought Nvidia down, I think, 20%. I think Nebus was down close to 40% in just one day. So, when you go after high beta names, don't don't be surprised about what's what's been happening today and over the last couple of weeks.
I I'll end by saying this earnings report has shown that good companies perform very well again and that that hasn't changed. So, I'm not shaken. I'm not going to be shaken out of positions that I have purely because they're down. It's not it's not great, but I still like what I own. The other thing is this is a this is a good reminder of two things to me.
Um, you know, if you are a stock investor, you probably don't pay much attention to the bond market. Neil doesn't like when I talk about the bond market, but the bond market is is going to tell you where there's risk in the market. So, you know, one of the reasons that I've been covering uh debt yields for quite a while, especially with the NeilCloud names, but you could go to to a, you know, even yields overall, um, is it matters.
It matters because debt investors, as an equity investor, debt investors are that's where the smart people go. Uh, and the debt market is 10 times bigger than the stock market. There's less speculation. There's more rigorous qu questions about are you going to be able to pay me back? What sort of yield do I do I need?
So that alarm has been set off was set off months ago in the debt markets. We're just seeing that come into equity markets. That leads me to the other thing that I think people need to focus on more, especially at moments like this, and that is balance sheets. There are plenty of companies out there who are not only going to be just fine, they are going to thrive because they have a phenomenal balance sheet.
We talked about Dualingo yesterday, right? And one of my frustrations that was that management was not buying back stock at a lower stock price despite the fact they had $1.4 billion worth of cash on the balance sheet. There are other companies like that. I mean Uber I think still has a little bit of debt, but they got, you know, a ton of cash on the balance sheet and $10 billion or so a year coming into the business.
I don't think people are not going to get rides or not order food because something happens with the AI trade. So going through your portfolio and looking at where is there a ton of debt that is a risk that maybe I believe in the company but if the market doesn't believe in the company and if that debt becomes you know something that is going to be a huge detriment to them that's a huge thing to think about at this at moments like this and it was actually a huge thing to think about over the past few months I've been you know even I'm even a little bit disappointed that a company like Alphabet is taking on as much leverage as they are to build out this AI buildout.
I understand they have a ton of cash coming in from their business, but uh and they have a ton of cash on the balance sheet at this point because they've kind of done their work ahead of time. Um but you know, Amazon Amazon has net debt at this point and they have negative free cash flow. That's a that's a sort of weird position to be in when they should be one of the strongest companies in the world today.
Um but there are plenty of opportunities out there, companies that have phenomenal balance sheets. I'm even digging around at a comp a few companies that have net cash that's like 30 40% of their entire market cap that I'm starting to go, you know, if if if we're talking about who survives and who thrives, you got to survive first before you can thrive.
So, some of those opportunities are starting to come up. It's not everywhere. It's not probably in the names that make get the most attention, but those those kind of under the radar companies are getting a little more interesting. Yeah. No, I agree. I agree. I mean, for Amazon specifically, I think it's just a matter of time until we get that moment that happened a couple of years ago where they flip a switch and suddenly you see cash just explode.
Um, with with Alphaba, I think most of them have talked about the fact that they see the return on invested capital still being much higher than the cost of capital and that's why they're doing what they're doing. And as long as that's that remains the case for them, then it makes sense. Um, yields wise, although the 10 year did come down a bit over the last couple of days.
I think we're now uh back below 4.9, I think. Um, has to be the worst day since April 25 pro. Yeah, probably. Probably. Yeah, definitely the worst week. Yeah, even with yesterday. Yeah, I haven't looked at the uh at the one week the one. Yeah, the thing that happened yesterday got deleted in the first 30 minutes of today.
I think it was kind of wild too that things weren't all that crazy pre-market and then it was like the second the regular market opened, it was just steadily down and down and to the right. It's it could be the same scenario as what we've seen in June with the Leopold uh story. It wouldn't I mean surely somebody blew up uh that doesn't
or a couple of uh a couple of somebodyodies because yeah so I guess people don't learn but so I wouldn't be surprised if in the next couple of maybe hours maybe days we're going to hear about a couple of small funds that have been leveraged AI that that completely blew up maybe blew up again. Yeah. He backed Wasn't he back with a leveraged long trade?
Yeah, but didn't he also maybe take a buy some puts or something? I don't know. But uh it it would explain the v the the the very harsh reaction today if if certain funds that are that have a lot of exposure to these names that might have blown up today or yesterday. Yeah. Um all right. Do we want to talk about uh do you want to talk about specific earnings over the past 24 hours?
Marcato Libre was kind of the biggest name. Um yeah yeah yeah yeah yeah yeah pull up the numbers if you want to give some general thoughts. General thoughts were CAD liberate 30 consecutive quarters of over 30% growth. Uh this time was 45% but that doesn't matter right now because they're still in their investment cycle which means margins have come down again and and the explan we we follow Marcado Libra for quite a while.
We we know management's track record so we're not that surprised with what they're doing. the market still, I guess, doesn't believe what what they're saying, which is astonishing because their track record is is a very very good one. So, they're investing, they're expanding um they're investing their credit portfolio, they're expanding the the the shipping network.
Of course, when you offer free shipping, when you expand your logistics network and all of that, when you increase your inventory in preparation for the holiday season, all of these things are upfront cash that will just make the business in the future much better. Um I would have been very worried if all of these investment did not translate in acceleration in growth in more buyers in more items sold per buyer.
Um I would have been worried if that didn't happen but it is happening. It it is all going according to their plan. It's going up and to the right and so I'm I'm not worried as long as the business does what it should be doing and and clearly clearly it's doing it's doing very well. Now at one point at one point yes the investment cycle will come to an end for them.
Of course it's not the same investment cycle as with the hyperscalers but at one point the investment cycle for Macad Libra does come to a a slowdown and then yes and then you'll see in just one or two quarters the margin profile jump but by then the stock would probably already reflect that uh that recovery.
So, I like what I heard. Advertising business has also grown what again over 50% I think year-over-year. So, I'm happy. I'm I'm a happy it's it's actually my largest position, my retirement account, but today. Oh, interesting. Uh yeah, that's one that I need to need to add to when I can. Uh do you want to cover app?
I don't know if you look at looked at Apploven yet. A little bit stocks up about 30% on the day. So, you want to have a little bit of good news. Apploven is providing that. I can't get over this is just a terrible name for a company. Um so good good ticker. Uh terrible name for a company. But the the numbers keep you know like you talked about with Marcato Libre moving up and to the right.
Uh what I got here is their uh trailing 12-month revenue in blue. Orange is their operating profit and then purple the purple line is their operating profit margin. That operating profit margin is what is just so impressive to me. They're turning like almost 80 cents in every dollar into an operating profit and ultimately cash, which is just phenomenal.
Yeah, I I mean I listened a little bit to the earnings score yesterday on on another stream, but I don't follow the company that closely. I know the stock has been under extreme pressure because people thought this was another uh the trade desk type of uh type of scenario. As of right now, the growth is excellent.
And so until that changes, I I don't see why uh investors should be worried. But I don't again I don't follow the company that closely. It is a company worthund and maybe 1020 billion already today. So yeah, on a price to sales multiple, it's very expensive. But as we've seen, it's a very profitable business as well.
So um so there's that. I think FICO Yeah, FICO also reported yesterday they the stock went down 10% and rebounded to being up 4% at the open and now I think it's maybe down again a percent or two or maybe flat. I I I can't remember. But FICO despite the stock being down 50% this year having a lot of political pressure going against the business this year.
It was one of their best quarters ever again. Well, I mean for short term like you start gouging your customers. Of course, you're going to have some good numbers shortterm. Yeah. The questions are more long term, I think, for that company. Yeah. So, the the reason why the stock was down for is because they didn't provide 2027 guidance because of a new pricing model change and so they didn't want to give guidance as of right now.
they're also going to be a bit less transparent with the pricing because of what's been happening on on the political side against the company and and so that's that's maybe why we've seen the the overreaction but over the last 12 months shares outstanding dropped by 10%. So it as of right now it still is a very good business high margin business very profitable business uh but the the no extra inform guidance as of today is is probably why the stock was a bit under pressure uh pre-market but clearly I don't think that they see any pressure from uh Vantage scores uh as of as of right now.
Uh, I wanted to quickly bring up I did not listen to the conference call for AMC, but they did report earnings. Stocks down 9%. This is one of those companies that I it's it's just so interesting to follow. Uh, people are starting to go back to the movies again. They're starting to make a little bit of a profit.
Uh, I think their member program is AMC Plus. I I'm I'm a member of that. I don't I don't even know what it's called. uh but is making you know making it at least maybe a little more more attractive on a incremental basis to go to an AMC theater instead of a different theater. Uh and that you know back to operating profit is a positive for a company that lost a lot of money.
I don't know that this is necessarily a phenomenal stock long term but it does have a let's see market cap is $2.8 billion enterprise value is almost 10 billion. you know, if things keep improving, that could that could work out. That's a lot of ifs. I'm not I'm not one to invest in the movie business uh like that.
I would much rather own the studios who ultimately, especially as studios consolidate, they've just got a lot more power. Um but yeah, that one was uh at least they are living up to some of the expectations and it it's also good to see people going back to theaters. That's going to be good for Disney.
It's going to be good for, you know, all of the streaming services. At the end of the day, I think they've all learned that you still have to have that waterfall business model. You can't just give up on theaters, which is kind of dumb to begin with, but um but yeah, moving in the right direction at least.
If you make good movies, people will go watch watch it in the in the movie theaters. It's it's really simple, actually. It's it's it's that simple, actually. All right, we have a question that just came in. Uh that's probably a good one to talk a little bit about. Would you buy Micron and AMD on days like today?
So, I've had this conversation for over an hour yesterday with two with two other investors and my answer hasn't changed since yesterday. I at today's prices again, it's all about what I already own and the the riskreward plus not the the added headaches, right? The memory names, they can remain cheap.
And I've made this this statement before. They can remain cheap for quite a while and then suddenly become expensive because the growth rates are slowing down, margin slows down, etc., etc. But if let's say only Micron and AMD dropped over the past month and everything else stayed flat, then I would say yeah probably yes.
But since all the others, a Meta, a Google, I mean, Sofi did go up a little bit or since the earnings, but a Nebus or or even an Nvidia or whatever or Axon also recovered a bit. But if all of these names have also come down and these names don't offer the same headaches as as an AMD or or a Micron, then I would go I would go with them.
I still own AMD. I still own Micron and actually AMD today is yes it's getting cheaper and cheaper because the stock keeps dropping while the company keeps accelerating. So maybe at one point that will that name will become okay if we stay at 400 the company continues to accelerate from here. Maybe the other names go up faster and that's why their profile gets a little bit less attractive.
Then I could pivot back to adding to my AMD position. So it's currently on hold. I own it. I like what they're doing. They're growing. They're accelerating. So, I'm happy. But when I look at adding, especially in today's environment, it's it's changing cuz maybe two weeks ago a name was trading at I don't know higher multiples and today it's trading at way attractive multiples because the market did bring the stock down more more and more.
But yeah, I'm trending towards just going for for a meta Google these these types of big companies going into 27. Yeah, I mean I guess I generally agree. Alphabet's the only company I own in that kind of space. Uh generally if you look at AMD, you know, enterprise value to sales is 15. Sure, they've got a phenomenal growth rate.
That's still a lot to pay for a stock, especially if we do go through some sort of slowdown in the AI spending cycle. You know, going from an 80% growth rate to a 20% growth rate means you don't deserve a 15 price enterprise value to sales multiple. deserve a three enterprise value to sales multiple.
So that's that's one of the challenges I think for a company like that. Micron I just don't at this point I I talked with Jose about uh and you know being interested in Micron early in 2025 when it was trading for like eight times earnings and there was potential tailwinds for the thing this thing called high bandwidth memory.
Uh we have now seen what that looks like. We are now at the point where they're investing more in capex that supply is going to continue to go up. customers who are the source of demand are going to figure out ways to use less high bandwidth memory or less memory overall. We're now in the commodity part of the commodity cycle and I don't want to own a commodity supplier.
Uh so yes, low priced earnings multiple I have played that game before and lost and learned my lessons. You know, then this is one of those things I think we sometimes you just have to to I can say things like this. I can say that, you know, debt yields matter. Uh, until you actually experience it yourself, it's it's sometimes really hard to see.
So, that's why I'm just staying out of it. Maybe it's a great buy today, maybe it's not. Um, same thing with AMD. I just don't see the great valuation. You know, I've I've written about that with this AI trade in general, and somebody put this uh in the comments just a bit ago that we're in the third inning of this sell-off.
Um, I tend to think that's right. You typically go through this Gartner hype cycle where everything's hyped. Oh my gosh, the future is going to be so different. Blah blah blah blah blah. And then you go through a crash and you go through what's called the trough of disillusionment. That's when you get the headlines that like, oh, AI, see AI was complete BS like this was never going to be anything.
That's when I want to be the buyer and I want to buy the companies that you know the companies that hopefully end up turn turning into Amazon and Alphabet and Meta companies like I know Meta was started in 2004 but the companies like that and I don't think we're anywhere near that point. We're we're nowhere near that capitulation point with the market where you know like AMD trading for 15 times sales is is not that capitulation.
We talked yesterday I think you know in 2015 they were trading for what point4 times sales. No, different story because they were they were on the brink of of not making it. But that's that's where I want to be an aggressive buyer. Not not because we have one one bad day or one bad week. You know, we've had a few bad weeks, but um but I don't think we're anywhere near, you know, some sort of trough of disillusionment.
I've been through I've been through these things. They last a lot longer than you think. But I mean to AMD's point and the micron's point to AMD's point if we look at what's expected for next year. So next year based on their own growth rates we're looking at around 90 95 billion in revenue. So the sales multiple
on a forward basis at today's prices gets basically slashed in half because they're if the stock stays of course flat for for a foreseeable future then the the multiple just comes down by 50% purely because the company is just growing that quickly with micron some someone said it a couple of weeks ago or maybe a couple of days ago and I think it's it's spot on.
I think micron is a case where it either doubles or triples from here or it gets slashed in half over the next the next couple of quarters. I don't think there's a middle point for for micron because it it is so cheap because it it is going to generate an insane amount of of free cash flow over the next couple of of years.
So it's either this or or that. I don't think a micron stays stays where it is for for the next couple of next couple of years. And and that's the reason why I'm like do I need this headache? Like yes, on the one hand I it could double, but on the other hand it could also come down by 50%. And maybe maybe I'm okay with a meta growing 20%.
Every year or or something like it. I mean that's fine by me. So yeah, like I said earlier, days like today is this is a good time to focus on quality and look at those balance sheets. You know, are is there a company that you own that has an existential risk? you know, what if the bearish thesis, what if Michael Bur, heaven forbid, is right?
And uh and some of these, you know, we do throw go through some sort of of bust of the AI bubble. And I think a lot of really smart people have admitted like, hey, this is a bubble. We just don't know exactly where the bubble is or what it what it looks like or what it's going to pop. You know, the the saying is history doesn't repeat, but it rhymes.
we're going to look back in some way, shape, or form and go, see, it was it was it was the same as 2000 or 2008 in these ways. It was different in that way. Um, but you know, I I think it's pretty clear when you're spending several trillion dollars on a piece of technology that does not have a proven business model yet.
Uh, and you know, AI coding, great. Uh, but you know, what's next? Like we talked about earlier, maybe it's not agents. I don't know if we know what it is. Uh, okay. What we're We're coming up on uh close to the top of the hour. Anything else you want to hit on before we we let everybody go here? Do I want to hit on something specific?
Probably probably not because again, whatever we're going to hit on right now, we just we don't have answers. And I think the topic of of today and the next couple of days is purely going to be what happens with this AI trade. And who knows, maybe a month from now, things look much better in the market.
We've had all of our answers, all of our questions answered because Nvidia reported, etc., etc., and sentiment is is a bit better. Maybe some conflicts also get resolved and suddenly inflation comes down over the next couple of months. Gas prices, oil prices all come down and and we are in a better scenario to start 27.
Could happen. Could also be the exact opposite. These stocks remain under pressure. Maybe we get some bad news with regards to the buildout. So it's just it's open question uh it's open question season as of right now. But to to me I think it's important for investors crashes have happened. I think the example that people give is 2018.
2018 we had the first trade war. So back half of the year market also uh I mean the the trade war with China back in 2018. So we had that happening at the end of 2018. There was a big pullback in in stock prices across the board. The fact that people don't even remember this today means that okay these crashes happen.
Can I can I push back on that? 2018 we didn't even hit 20%. We didn't even hit a 20% draw down. That's not even a crash. I'm not talking about no the market. No, but certain names I think an Amazon was down quite a lot. I mean I I don't think I I know because I bought Amazon back then for the first time.
Yeah, it was down uh 30%. It's not bad. No, for a for an Amazon. But fact of the matter is crashes happen. Crashes have happened over over the like this bull market has gone on for almost four years. Bull market's gone on for essentially 16 years. Uh I I would argue that even 2020 doesn't doesn't really 2018 was a blip.
2020 is because we didn't even hit um hit hit uh recession territory. 2020 lasted for like seven days, you know, it was it was it's barely a memory. Um so look, I've been investing for a long time. Uh none of those felt like 2008, 2009, of course. So and or or 2000. I mean, I was relatively young then.
Uh, but I do remember just like the confusion of like, what the heck? Uh, I thought that fiber was going to be, you know, JDS unif they were growing like crazy. What's going on? What does the market not understand? And they were, you know, sold for pennies on the dollar a couple years later. You know, I said four years because 2022 markets were were down, I think, overall close to 20%.
So I I chose that as a reset point of the of the cycle and since at the end of 2022 we got the Chad GPT moment I chose the last four years but over the last four years we did have some moment I think the first three months of 2025 markets were down close to 20%. If I'm not mistaken, uh, spy I think the S&P 500 like NASDAQ Yeah, NASDAQ probably crossed 20% for like a day or two and I think S&P 500 like almost touched or maybe intraday touched that 20% number.
U, but then it bounced back pretty quick. Yeah. That the April either April 1st or March 31st. Yeah. Yeah. So it's true we had four we still have four four great years but in those four great years we did have some flash crashes I would say let's call them flash crashes but also some flash recoveries this time it's been a slow bleed over the last couple of weeks and months for that specific part of the market
for the AI trade. Yeah. Yes. Because again the S&P or the S&P is still quite close to to alltime highs but yes for that part of the market it has been a I I would say a correction. I mean, if you look at the semiconductor names, you have a lot of them down over 40% from their highs. Neo clouds over 50%, so it's getting there.
And Nvidia, that's worth over $5 trillion being down 15% or probably more since the 52- week highs. It's quite a lot of value that just gets um deleted. But I mean, you know this better than me. We we've seen these moments before. probably going to happen again in the future, but good companies survive, bad companies don't.
It's nothing new. Yeah, I think that's the the takeaway today. You know, make sure that you understand those business models. Uh have a 5 10 year time horizon because like you know, we don't know what's going to happen tomorrow or next week, next quarter. I just, you know, as individual investors, we don't we don't have any advantage over the market over that time frame.
What we do have an advantage over the market is thinking out 10 years because funds structurally can't do that. If you're running a hedge fund, you can't underperform next quarter. Uh it doesn't matter if you have a great stock over the next five years. So, there's a lot more short-term uh thinking as a result.
And so, having that long-term view, today's a good day to look at those balance sheets, look at the, you know, rethink that business model. Where can you poke holes in it because I think there's a lot more holes out there than a lot of investors think. Just because something was good in 2025 and 2026 doesn't necessarily mean it's going to be the case in 2027.
take people who have an opposite view of you seriously. You know the you you have to be able to make the argument on the other side. If you can't, you shouldn't own any stock. If you think that there is no chance that you are wrong, you are most likely wrong. We're seeing that with, you know, the election this week and people who got destroyed because they thought they knew what was going to happen.
Um there's a lot of uncertainty out there. Uh so we will see. We will see what happens. Uh Neil and I have another live show uh on the MLY Full tomorrow. We'll see if we can get him back uh here in the next week or so. Uh so keep an eye on the channel. Uh subscribe here and you'll let you we'll let you know when we're going to have another live show, but probably not tomorrow.
Probably be sometime middle of next week. Got a lot of earnings reports next week. So I'm excited about that. A lot of companies that I follow uh could have big moves either positive or negative next week. So thanks everybody for watching. Uh, let us know what you want to hear about next time and we'll see you next time. Thanks, Neil.
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