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Joining us now to take a closer look, Tiernan Ray, CEO and publisher of The Technology Letter. Tiernan, great to have you back on the show. Before we kick this off, I do want to give credit where credit is due. Last we spoke, it was in advance of some of the big software names, and you highlighted a couple companies that you said depending on their earnings, if they were positive and the reaction was positive, we'd have a lot less of these SAS-pocalypse conversations, and it played out exactly how you said it would.
So, I just wanted to give credit where credit was due there. Uh but today we're You're welcome. Of of course. Today, let's focus on the semis because uh we're having an interesting day seeing a pullback, really pulling down the broader market today in some of these semi names. I think so that overnight action in Korea sort of continuing on today into our trading day.
Uh and we're seeing pretty pressure across a lot of these AI-linked names today. Do you think this is healthy profit taking, Tiernan, or are we looking at people really starting to question some of the assumptions behind the AI trade itself? I think it's the former. I think you're exactly right, Marly.
Before today, a group of stocks, a basket of mostly AI-linked names that I follow at my newsletter called the TL20, was up over 80%. And if you noticed yesterday, when there were some sell-offs in some of the megacap names, actually Micron, SanDisk, uh for example, two large memory names were up for the day.
So, it was took until today that for people to dump these names. But yeah, these stocks that are AI-linked, especially Micron, SanDisk, Seagate, Vertiv, Bloom Energy, had gone parabolic, as they say, uh in the past, you know, 30-60 days, just gone straight up. And so, I think people are taking profits now.
And as we start to look at the AI trade overall, and we start to see some of this profit taking, do you think that people are are finally starting to become more selective in the names that they're holding here? Are we starting to actually separate the companies that are returning AI profits right now versus those that are still promising big returns in the future?
I think that people are continuing to try and find what is the next derivative. So, for example, Qualcomm hosts analyst day tomorrow in New York, and a lot of people are hoping that that stock, which has sat out a lot of the AI rally, will be the next thing to come along, sort of the way Intel at the beginning of this year suddenly became a hot AI trade, right?
So, people keep looking for the next thing. I think it's more looking for a name that's undiscovered, and they're not always scrutinizing as carefully what is the the actual cash flow because it's a bet on something will happen to profits way down the road. And let's talk about Qualcomm, too, and their investor day that they've got tomorrow.
Tomorrow's a big day. We've got a lot to cover happening tomorrow, but for Qualcomm specifically, what does the company need to say to prove that it actually could be a serious player in this AI ecosystem because I mean, I think people think Qualcomm, and they think smartphones. So, what does management need to say to convince investors that they can expand into AI data centers and enterprise successfully?
You're right, Marley. The majority of revenue is still from smartphones, which is an area that's under pressure because the cost of memory hitting the potential for smartphone sales this year. And so, what they need to do is what every other chip company has done. So, Nvidia, Broadcom, AMD, Intel, they're all talking about a number that is linked to what they will make at some point in the future from AI data center chip usage.
If Qualcomm can come out with a number tomorrow, a line item, and say, "Some point in the future, maybe it's 2029, maybe it's 2030, we will have such and such billions of annual revenue linked to AI chip data center-related sales, then I think a lot of people will take that as a good sign." They'll say, "Okay, so now we have something that we can sort of believe in is that if we wait 2 to 3 years, we'll get this kind of payoff and it'll be itemized and every quarter we'll get an update the way we've been getting from Broadcom and Nvidia and AMD and Intel."
All right, let's take through the other things happening tomorrow cuz Nvidia has a shareholder meeting which generally I don't know would be top of the radar for any of us, but this one coming at a particularly interesting time with Nvidia's recent performance. I mean, it's lost a lot of momentum. It's trading down over the last month here and there are some governance and and regulation things that are up for vote at the shareholder meeting that could draw some public attention.
So, how are you looking at this meeting? It's interesting, Marley, because every single one of the propositions in the proxy statement starts out with the statement that this is the rich, right? It's a $5 trillion company and so everyone is putting pressure on Nvidia to represent a whole bunch of different values and perspectives.
On the list are they want a a technical vote on reduce the requirement for a super majority vote on propositions to a simple majority vote, but more specifically, they want statements from the company about looking into the protection of employees freedom of faith. These are risks to people's religious beliefs in the employee base.
They also similarly want an investigation of is DEI diversity, equity, and inclusion holding back opportunity for employees. And third, they want some kind of disclosure further disclosure from the company about its greenhouse gas emissions. So, there you have three very big kinds of cultural values and perspectives that these proxy arguments are saying should be addressed by the largest company in the world.
And we don't have earnings coming out from Nvidia until the end of August. They'll be on the tail end and we may hear from Jensen Huang in the meantime there because he speaks when he wants to speak. But do you think that any of these have the potential to become a meaningful distraction for management or become a focus to the public?
I think Jensen Huang is so beloved and trusted by the shareholder base as a founder CEO. That's not true of every company, right? That's not true of AMD and Intel at the present. This is one of those legendary CEOs that the momentum is to go with the board recommendation, which is to vote against all four of these proposals and it's kind of in Jensen we trust since this is a company that keeps delivering for which estimates keep rising even if the stock is has been, you know, sort of lagging the broader AI trade.
It's in Jensen we trust. I mean it's certainly and the numbers speak for themselves whatever the reaction is or not. They've been growing at a rapid acceleration. Um, before we have to say goodbye, I want to talk about the third event, um, Micron. We're getting our earnings from Micron. I mean they've had good, arguably great, numbers in the last several quarters, but they've been met mostly with moves to the downside in the 24 hours post earnings report.
What are you looking for from Micron tomorrow? What does Micron have to do differently this quarter to get a positive reaction from the street because we've already seen that good numbers weren't good enough. Right. Every quarter there's for about three quarters in a row now, Marley, there's been a tease, which is that CEO Sanjay Mehrotra says, you know, this is a cyclical industry and we worry about everyone worries about the falloff in prices at some point.
But I have inked these special deals called long-term agreements, LTAs, with customers to lock in prices and demand for years into the future, but I can't tell you about them. I can't tell you what's in those agreements. And every quarter the analysts sort of dutifully write up their LTAs, but we don't know what's in them.
And there's sort of it's building and it's building and there's a lot of expectation now attached and it might be the case that Sanjay Mehrotra, the CEO, needs to finally sort of open the kimono and talk about what is actually in these agreements, what's the extent of the agreements, and can you peg it to something definite as far as maintaining prices in future and and ensuring demand.
Yeah, visibility could make a big difference here. We'll see how closely those cards are played to the vest tomorrow. Turn and always such a pleasure to talk to you. Love having your insight on the show. And next time we check in, we'll see how it stacks up against your software calls cuz those were spot on. Turn and Ray, CEO and publisher over at The Technology Letter.
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