AI-only data center firms face the clearest downside risk

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 47:16

   think it'll happen the people who are going to get screwed are the are the companies whose only business is data centers and ai i.e the neoclouds and i think we're already starting to see that like if there's an ai bubble it's already popping for core weave for iron for nebius for all of these random data center names that people only started to to hear about over the past one two or three years. And we're already seeing that in the credit default swaps, which are skyrocketing, the stock prices, which are plummeting. So, I mean, I think those names are going to get caught.

2. 47:53

   especially as they become more and more reliant on sentiment in the capital markets because of their need to raise more capital. But it's a really interesting time to be a tech company. If you try to distinguish between the winners and the losers in the markets right now or how the market is behaving in terms of parsing winners from losers, it's the D word. It's discipline. We referenced Apple. They're like, fine, have at it, guys. Kill each other. We'll come in and we'll be the second mouse or a license. We'll pick a preferred AI provider and we'll do what we did with search, just get 98% gross margin licensing fee or whatever.

3. 48:29

   The other company that's been rewarded lately is Microsoft. Of the five hyperscalers, Microsoft is the only one that has remained cashflow positive. They're doing it right, I think. Yeah. Well, they've thread the needle, right? Whereas Google or Alphabet appears to be on the wrong side of the needle. But basically, the markets have already priced in except an expectation of exceptional growth from these businesses. And they're all delivering against that exceptional growth. But where it's parsing the winners from the losers is, does there appear to be an adult with both hands on the CapEx wheel here? Or not driving down this highway at all. But the two companies right now that the market likes the most are the one that's not playing in traffic, has said, I'm out. And two, the other one that appears to, it's the only one that's CapEx was

4. 49:21

   lower than projected, right? The markets seem to like that right now. The markets need to say, we need to see the R on the I here. And part of that is not only about top line growth, but managing cost discipline. And I think on this one, the markets are right. Like, you know, I always love when I think the markets are wrong, because it means I can have a very hot contrarian take on things. But I think that they're, I mean, I don't think they're right about Apple personally, but with Microsoft and the way that the things that they're prioritizing about CapEx and about discipline, I think is the right thing to be caring about. And I think Microsoft is a good example of that. I think Microsoft has done a good job here in terms of managing, playing in the game, but also not betting the farm on this game. And I think

5. 50:08

   investors are rewarding them for that and i think that's what should be happening um i mean what will be interesting to see is how they respond to anthropic because jury's still out on that one i want to put some numbers the research team put together a great