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Yes, we've re-worked our models and we have never said Nvidia is going to be a bad stock. What we have said is we think that the big bigger AI plays, now that let's say back 6 months ago when it was near its zenith, um we were saying back then, you know, there are companies out there people don't even understand are the most important AI plays and and share gainers in the software space and in the embodied AI space, the physical space thing.
Tesla, which is robots, energy storage, AI. Uh so we were very much focused on who Nvidia was enabling. Um now we're taking a closer look after this after this drop. What we are seeing is the hyperscalers themselves are all trying to build out their own chips. Nvidia still has the lion's share. Even in our model, we battle tested it dropping it from 80% share in GPUs down to 40% in the next 5 years uh and taking its margin structure back down into the 60s, the gross margins from the 70s, we still get a north of 20% compound annual rate of return now.
Um but I think many investors are just asking that question, like wait a minute, are they going to lose share whether it's to AMD or to their their largest customers Not Intel. No, not Intel. But Amazon has Graviton and and Tranium. Uh Google has the TPU. Microsoft, Meta, they're dev- you know, they are evolving their own chips.
So this market won't be Nvidia's alone, but all praise to Nvidia for the incredible opportunities it has created. It really got the AI revolution going and we think it's still going to play a mighty role. We do own it in many of our funds. So Nvidia to you is still a growth stock. Yes. Still growth stock.
Lastly, before I let you go, Tesla. I remember talking to you about Tesla 3 years ago out of my kitchen during the pandemic. So I'll let me reconnect with you on Tesla. Now sales have come under pressure overseas namely. Some would say it's because Elon Musk has gotten close to the president. Are you still bullish on Tesla given what we have seen with Tesla sales this year?
So uh obviously the economy, I think one of the biggest things going on is the global economy is extremely weak. And sure, there are these political considerations, you know, but we're split right down the middle. For every hater you have someone on the other side. So I have no idea about that. But the two things that are going to happen this year so this is not 5 years out, mañana, this year.
They're going to in the first half of the year release their low-cost vehicle. Uh could be $25,000. Uh no one except in China. And the Chinese companies are not being allowed in here, but no one in the EV market in the US is going to come close to that. We think that's going to drive demand. The Model Y refresh, I went to go buy exchange my Model Y, which is on hardware 3, to a new hardware a new Model Y with hardware 4 for full self-driving perfection.
And you know, what I love about Tesla, I go to the showroom he said, "Oh no, no, no, you don't buy that now. We're putting out a whole new refresh line." Which by the way I knew and I don't know what I was thinking, but and but this is what they're telling customers. That's the right thing to do. So first thing is that low-cost car, I think there's a lot of pent-up demand.
The second thing is autonomous. They're launching in Austin in June. The robo-taxi. The robo-taxi. Uh yes, robo-taxi um in the vernacular. So yes, uh they're launching in June in Austin. They just announced yesterday they'd like to start a ride-hail service in California. The regulators are tougher there.
Um so I now think they're going to start seeding every state. And their FSD according to our calculations will be their robo-taxis will be safer in the fourth quarter than human drivers are. Get ready to dive into the captivating world of stock market news with a twist. The buzz around Nvidia Corp is sending shockwaves through the financial realm.
In an investor letter, Cathie Wood, the visionary CEO of Ark Invest, shed light on how Nvidia's undeniably pivotal role has been shaping the company's trajectory. She remains hopeful, along with other investors, for Nvidia's performance in the upcoming months. Let's unravel the intrigue surrounding this tech giant and explore the insights that could redefine the future of AI investments.
Welcome back everyone to Investocracy. The notion that a US and Chinese tech bull market cannot coexist parallel and simultaneous. Do you also have any thoughts on that? Well, I would disagree with the latter altogether. I think techno- innovation is is is thriving in both countries. It's going to be great.
The competition will be great. We're going to both be better because of competition. And in terms of spoiling the AI model for for Western companies, there we are studying does the does the model in China where you bundle the software into the hardware and the hardware is lower cost and it is all lower margin.
Uh is that going to disturb some models? Possibly. But if you look at closed-source models uh in terms of performance versus open-source models even with our one, the closed-source models are still better if if and and we have this up on our website. Uh what's interesting about open-source. So while the closed-source performance has been increasing consistently.
Yep. And we've seen some breakthroughs recently. What you see from open-source performance as we're able to measure it is the slope of the performance is actually steeper of the performance improvements. So we we're very interested to see if open-source is going to break into the performance territory that closed-source has now, right?
So um I think still out. Yeah, the jury's still out, but AI we think is an enormous opportunity for both countries. Uh quick final question for you. I can't let you go without a macro question. Outlook for the S&P 500 the next two quarters. Is it going to remain volatile? Are we going to retest the top for example?
First of all, I think in the United States uh we are in a much weaker economy than most investors, maybe even the Fed, understand. And that's because of what I described earlier, this seizing up by consumers saying, "I don't know if I'm going to keep my job." So we think that the economy is going to be weaker, inflation's going to be much lower than many people expect.
And that the administration and the Fed are going to have more degrees of freedom in the next two quarters than most investors think. And we think that's a recipe. We think the market's discounted all of the uncertainty. I shouldn't say all, you never say that. You never know. Uh but a great deal of the uncertainty.
And we think that the next move, and it may have just started, is understanding that this administration from a deregulation, tax cut, and interest rate point of view has a lot more freedom uh than many people now understand. Right. Well, the the bull case is not so much regulation and Deregulation is very and the taxes, right?
The issue for consumers is the tariff part of the conversation. And do you think you know, they will be pragmatic in the event of course they pull back. We do think they will be These are negotiating This is a negotiation. On on AI I'll just end by saying Right. autonomous mobility, biggest AI project in the world, most profound application of AI, health care.
As the curtains rise on this financial saga, we find Cathie Wood highlighting Nvidia as the cornerstone of Ark's success story. With a witty touch, she dubbed Nvidia as the go-to picks and shovels play in the AI field, setting the stage for an enlightening take on stock market dynamics. In analyzing the layers of data, Wood's strategic moves amidst market turmoil showcase the resilience of Ark's stance on cutting-edge tech.
The interplay between OpenAI's breakthroughs and market ripples unveils a tapestry of opportunities for investors eyeing the AI revolutiopple might be making a foray into the AI data center race. That's according to a new note from Loop after the tech giant's troubles rolling out those promised AI Siri features.
Our Deirdre Bosa has more on today's TechCheck on how this might move that narrative forward, Deirdre. And by the way, Carl, this, if it expands into something bigger, would be bullish for Nvidia. But Apple's playbook, it's really been about being first, but about being right. And so, that has earned them a good amount of patience over the last few years as its mega cap peers were full steam ahead on AI in terms of data centers, their own model building applications.
This latest Siri mess, though, it has made clear the cost of waiting. So, this new Loop Capital note says Apple is finally making a move in the data center race. A development that could have implications for the AI race at large. Now, the report says Apple's starting relatively small, spending about a billion dollars in Nvidia systems, equivalent to about 250 servers capable of being a much larger LLM cluster.
But, its entry means that there could be another trillion-dollar player competing for the same high-end chips, energy, and real estate, potentially intensifying GPU shortages and raising AI infrastructure costs at a time when Wall Street, by the way, is growing skeptical of all of the spend without substantial return on investment.
Now, this could also signal a shift in Apple's strategy and how it approaches partnerships. Until now, Apple has focused on on-device or edge AI. A move into data centers that would mean more server-side AI processing, suggesting it may be preparing to build its own large language models rather than relying on third parties as it has so far, like OpenAI or Google maybe in the future.
Now, in short, this would mark a shake-up in competitive dynamics and AI partnerships right across the industry. That said, guys, this is one report. Doesn't necessarily signal that Apple is going to start shelling out tens of billions of dollars on data centers like Microsoft or Amazon or Meta or Google.
The spending has been much, much lower compared to those. What we do know, though, is that the pressure's certainly on. There's no question Apple needs to make a move in AI. Siri is seen, widely seen, as one of the biggest opportunity in AI applications. How to get that ROI? It's already native on over 2 billion devices, pushes AI into a new phase of accessibility, and engagement could bring it more to the masses, more features.
And guys, we know that there's reportedly someone else now in charge of Siri, Mike Rockwell. It would be plausible to think that we could see a change in strategy. Coming data centers would be a very interesting development. It would be interesting to see uh Cook sort of evolve his strategy this late into his tenure.
The other thing today that I would mention is your uh bit from Google about quantum uh made the wires repeatedly uh overnight and today. Uh and I do wonder, you know, there's a nice chart out of Melius looking at how young people are choosing to go right to AI search rather than just straight Google search and what that might mean for ad dollars down the road.
Right, adding more urgency, right, for these consumer-facing companies like Apple and Google to really get this right, to put the right AI in front of users before a challenger like an OpenAI, which we know obviously is making a ton of progress, kind of eats their lunch. So, just all around raising the stakes.
And for Google, certainly, has a similar opportunity to Apple and, you know, further along in the technology side, kind of deliver, execute on it. That's the big question for both. Analyzing the subtle dance of market forces, Wood's long-term vision for AI investments emerges as a beacon of hope amid macro uncertainties.
Despite the ups and downs of market sentiments, the narrative around Nvidia remains resilient, underlining the enduring allure of disruptive technologies. Another analyst, Dan Ives, has expressed his thoughts regarding Nvidia products, calling them off the charts and exploding. . Dan, this is failing to impress investors.
What do you think the market signal is sending you? I mean, I think it's the wrong sort of take because I think if you look at the underlying demand, I mean, we've talked about it's 15 to 1. And all, you know, we have a team that's there and you're seeing demands accelerating. And I think when you look at laying out physical AI, Reuben, autonomous robotics, I mean, this is essentially Jensen saying you know, outlook.
scarring e chip i sort of AI revolution thesis. But but I think you're seeing CapE thesis. And I do I I think it's actually the opposite. Dan, let's zoom out. We've been talking today, and and John raises earlier, that something else is going on. When you look beneath the surface of the S&P 500 or the Nasdaq, it really is the high flyers of last year that are leading the way lower and haven't been able to recover even when there's been positive news.
We talk about Nvidia and yesterday's surprising reaction to the conference, but also Tesla and how those shares have absolutely been pummeled. Can you understand what's behind some of the shift away from big tech and in particular, why certain names have gotten so disproportionately beaten up? Yeah, I just I think this there's three things.
I think first, it's a perfect storm. I think it starts off one, you don't know the rules of the game, right, in terms of geopolitical tariffs, especially on the export controls. You're seeing a risk-off, I think, globally on US stocks. And and I think that's something that we're seeing play out because investors are just worried that you're going to see some sort of cracks when it comes to export controls and tariffs related to chips.
Two, I think you are seeing more play like the Babas. You're seeing that China tech trade. You're starting to see more diversification, worrying about sort of the growth concerns in terms of the macro. And the third is you say, like, look, you're not going to have true valuation support here. You need to show the actual growth.
And I and I think as we get into next few quarters, that's the aha moment. I think similar as we've seen with Nvidia and Palantir and others. But we're in this sort of gap here where every news is sort of going to be viewed negatively and you just see such jitters. I I think it's probably as nervous I've seen tech investors, probably going back to some of the COVID days.
As we draw the curtains on this gripping narrative, the spotlight now shines on Nvidia's trajectory, poised for further increase in the financial skyline. The forecast, although currently low, hints at a promising future for Nvidia. With growth prospects painting a compelling picture for potential investors, many are ready to ride the wave of innovation and a soon-to-be bullish market with Nvidia.
The stakes are definitely high, but multiple analysts remain hopeful during this AI revolution. So, what's your take on Cathie Wood's dedication to the tech company? .
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