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You can already see signs that this third quarter could spread to other areas. My main hope is that the benefits of AI that we hear so much about and that we're already using will reach the average company, which can implement them and say, "Look, I can improve profitability too." I think it is this hope that supports the stock market.
I'm not pessimistic about this. I'm trying to find some balance between the fact that wages aren't keeping up with inflation. We'll get this data in 2 days, and yet the stock market feels great, AI is around, so how do we reconcile all these things with each other? Partly it's just a matter of timing, and as I said , I see glimmers of hope that the third quarter could rebalance these two factors.
Doug Clinton of Intelligent Alpha. So, nice to see you. I mean, this is obviously the main event of the day. I'm curious what you think about this, even if your firm doesn't own shares in this company. Scott, we at Intelligent Alpha don't own Apple stock, but we do in Deepwater, my other firm. We believe in Apple, and my view is that this is somewhat of a misinterpretation of what really matters for the stock in the long term.
I think ultimately it's not so much about upgrading hardware or justifying the higher prices we'll see due to higher component prices. They'll justify it with software, and I think Apple Intelligence and the new Siri are what really matter. So far, in the early beta where the new Siri is available, we've seen it live up to expectations, which is probably a good thing considering how disappointing Siri was before.
But I think when it becomes available to a wider range of users, it will become major news, because people will want to upgrade their phones to really use this AI technology in Siri. So what do you think about this comeback of the tech sector, if you can even call it that? It's more of an awakening.
Not that he really needed to come back , but he certainly seemed to be napping a bit, at least from a mega-cap perspective, until recently. That's right. You know, it seems like the last few times we've talked, we've been talking about the market needing a break. The AI sector especially needed a break.
That's exactly what we got during July. And now, I think, it's time to get back to trading AI stocks. I think now is a great time to take a more constructive stance towards these companies. We added some positions in Intelligent Alpha and Deepwater. We traded them today. And we also started from some positions that, in our opinion, have already exhausted their momentum in the field of AI.
But if you think about the period until the end of the year, now is the time when people will start to reassess the situation. Regarding the development of AI. So how can investors determine whether the additional demand is independent, or whether it is increasingly supported by Nvidia's own funding?
Hi, nice to see you, Jenny. Absolutely correct. They are the most important company for the AI sector, right? They not only produce chips, but also provide financing. They help build data centers, infrastructure, and really support their customers. So I think investors today want to understand how this network of deals and transactions—how Nvidia generates growth by supporting many customers—can sustain this pace over the next few years.
We know the profits will be huge. We know they will double. And, frankly, they will generate almost $200 billion in free cash flow. So, the numbers are astronomical, but investors are almost ungrateful and still looking for what comes next. That's what we're trying to find out. Hi Tem, glad you're back and today is a great day to discuss the state of the market and stock reaction.
Stocks have been falling for the past four quarters, but what struck me most was that seven out of eight times they fell the month after the report. Is this a sign that institutional investors like you are exiting positions during these periods of high liquidity, or is it just a question of how long this can last, since they have been so successful and we are seeing the principle of " buy on rumors, sell on facts"?
We have been working with Nvidia since 2016, and we are definitely not going to sell our position. I guess the reality is that you're just dealing with the law of large numbers. This is a company with a capitalization of 5 trillion dollars. The numbers they've been showing for the last three or four years are just crazy, and investors almost don't believe they can continue to grow like this, right?
So I think there is some restraint, and of course their stocks are in everyone's portfolio, right? This is one of the key assets in most indices. The semiconductor index has risen nearly 150% this year. So I think they're everywhere, right? But I think people should look beyond the next two to three quarters and evaluate what Nvidia is doing in the long term.
Some of their venture investments and Jensen's leadership have really shown how powerful he is in the AI space. Being a leader means you have to see where the “ bottlenecks” arise. You should invest in those companies that will actually become future leaders. And that's exactly what Nvidia is doing now.
If you look at their venture portfolio, their external investments, it's amazing how many companies they're backing, trying to build the next economy. And they would be Nvidia has just accomplished something that sounds almost unreal. In one trading session, the company added approximately $442 billion to its market value.
This was the second largest one-day capitalization increase ever recorded for this stock. But here's an interesting point. The market wasn't just reacting to another strong quarter from Nvidia. He was reacting to what Nvidia said about the future. The company reported quarterly revenue of about $96.2 billion , with data center revenue of about $89 billion.
Both figures beat expectations, and the revenue forecast for the next quarter rose to about $108 billion. But the number that really changed the conversation was the long-term forecast. Nvidia has forecast revenue growth of about 17% for fiscal year 2028. This is important because Nvidia is increasingly being asked one question.
When will AI spending finally slow down? Nvidia's answer, at least for now, is no. Jensen Huang says that the demand for AI is growing as these systems become economically useful. More AI applications mean more tokens, more inferences, and ultimately, higher demand for computing. And this is where Nvidia still has a huge advantage.
But there is another part of the story that deserves attention. Nvidia's growth is starting to extend beyond traditional hyperscalers. So, new AI ventures, cloud providers, and companies like SpaceX are becoming an increasingly important part of overall demand. This is important because it could reduce Nvidia's dependence on a handful of giant companies.
At the same time, Nvidia is expanding its ecosystem strategy . It's no longer just about selling GPUs. It is building a broader AI platform that encompasses hardware, networks, software, and a growing number of models and developers who use them. And this becomes especially important as companies like Google, Amazon, and OpenAI develop their own specialized chips.
After all, Nvidia doesn't necessarily have to win every single chip battle if it continues to control a significant portion of the overall AI computing stack. But there is one significant risk that investors should not ignore. This is memory. Nvidia has warned that rising memory costs are putting pressure on margins, and gross margins are expected to decline from current levels.
So the AI boom creates an unusual situation. Demand is incredibly high, but the infrastructure needed to meet it is becoming increasingly expensive. That's why the next stage for Nvidia may be less about proving that there is a demand for AI than about demonstrating Nvidia's ability to turn that demand into huge profits.
The market has already seen the main figures. Now investors are watching something else . How long can this growth machine run? Because if Nvidia's long-term predictions are even close to reality, the AI trend may still have much more potential than investors expected.
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