AI Sucking the Oxygen Out of Other Areas: Margie Patel

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00:00Your reaction to this company being the world's first $5 trillion market value company?

00:08Well, it really shows us this representation of this huge sea change in technology,

00:13which is artificial intelligence. And certainly it's the leader, it's way ahead. But honestly,

00:19it's like a tsunami. There's one big wave and then there's wave after wave after wave.

00:24And we really don't know if we're even near the peak of artificial intelligence really being

00:28incorporated in all the different industries. So this is a qualitative change that we've never

00:32seen in our investment careers. So, Margie, just to focus in on NVIDIA at this moment,

00:38do you add to that stake that you currently have? We've still got 73 buys out there from the

00:44analyst community, only one sell, even at a $5 trillion valuation. Yeah. Well, it's very hard

00:51to be negative on NVIDIA unless you see some negative development in the company. And just

00:56because the stock has gone up and actually looking at my portfolio, I actually have some stocks that

01:02have actually outperformed NVIDIA this year, gone up even more. So I would say that as long as the

01:07growth path looks pretty good for NVIDIA, that it would be a worthwhile ad.

01:11I mean, look at Micron, for example, up 150% so far this year. Some of the ulterior that have really

01:17managed to be swept up in what's needed in data centers and compute more broadly.

01:21Where hasn't the market seen enough value yet?

01:25Well, I think really all the oxygen is being sucked out of other areas of the market and going into

01:31artificial intelligence, data storage, data centers, all the rest of that. And I think we're still

01:37continuing on that trail. All those companies have high cash flow to fund these activities.

01:42There's no sign that they're losing their enthusiasm to make investments,

01:46to keep a leading edge in NVIDIA. And really, if you look at some of those stocks, like Micron's a

01:51great example. If the worst thing you can say about it is the price has gone up a lot, that doesn't

01:55mean you ought to sell it here. So I think we're still somewhere in the middle of this huge wave of

02:00changing the whole economy, changing technology. And it's really too soon to say stocks are too high,

02:05I'm going to bail out. On that note, Margie, I spoke to Jensen Wang yesterday afternoon,

02:12and I had to ask about his view on a market bubble. Let's listen to what he said.

02:17I don't believe we're in an AI bubble. And the reason for that is we're going through a natural

02:21transition from an old computing model based on general purpose computing to accelerated computing.

02:27We also know that AI has now become good enough because of reasoning capability, research capabilities,

02:34its ability to think. It's now generating tokens and now generating intelligence that's worth paying

02:40for. Jensen's argument is the same it has been for the last two years. We're in the early innings

02:47of a shift from general purpose computing to accelerated computing. But the different bit

02:53now is he's saying AI is worth paying for. I think that he's saying there's real revenues on the software

02:58side. Is that the evidence here? Is that the argument?

03:04Well, I think it's really not so much. We haven't actually seen revenue pour in. But I think it's a

03:10change that companies are making because they see that this is what they need for their future.

03:14And I think it's totally different, as he was making the point, from, say, the internet bubble that

03:18people often make a comparison with. The internet bubble was about deregulation of the telecom industry,

03:24and it was about moving data and voice faster through pipes. It wasn't a material change.

03:30This is artificial intelligence. All the new chips and so forth are really a fundamental change

03:35in how we perform all kinds of tasks related in our economy. And I think because it's happened so fast,

03:43it's really only been, say, one year, two years, it's hard to adjust to say we're looking on the verge

03:48of a whole new world and how we approach technology. So I think that's why people are a little

03:53discombobulated seeing how fast these stocks have taken off. But they all have the cash flow to

03:58finance this growth. So it isn't as if they're artificially borrowing money to make investments

04:03that look pie in the sky. This looks the beginning of something. Yes.

04:08Margie, you mentioned cash flows. What's your position on the circular financing concern about NVIDIA?

04:14Well, I think those partnerships where they've made equity acquisitions in some of these companies is

04:23just a business partnership. It seems perfectly reasonable when they're striking up a deal between

04:29two companies. And again, coming back to the companies like NVIDIA, they aren't borrowing money

04:35to finance this activity. They really have enormous cash flow that they're using and deciding how to best

04:41allocate that. So I think that companies, particularly the large companies, have an idea of where they can

04:47best get the long term returns on their cash flow. And that's what we're seeing.

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