Why Nvidia's $5 billion Intel investment makes so much sense

The Street

Steven Orr, CEO & founder of Quasar Markets, explains why Nvidia's new partnership with Intel is such a strategic play.

Transcript

00:00Joining me now, Stephen Orr, founder and CEO of Quasar Markets. Stephen, great to have you on.

00:05Thanks for having me, Carolyn.

00:07Let's start with the news flow today, Stephen. NVIDIA betting on Intel,

00:12taking that $5 billion stake, entering this collaboration with the chip maker.

00:16What are your thoughts on that?

00:18Yeah, I think obviously it's going to make the president very happy. I mean, we have now got

00:2210% invested now as a country into Intel, and I think it fits the narrative of bringing everything

00:29back home. And when you look at Intel itself, it has been a great chip maker over many,

00:35many decades, and it's faltered a little bit here. So I like the fact that NVIDIA is making a home play

00:41here and bringing everything back home. I love this play. This is great. And you know, as rates

00:46come down, that's making money cheap, making chips here. I think this is a great play, and I think

00:52it's going to play out in the stock too. I think you see it now. Yeah, jumping 30%. But Intel could

00:57make it even bigger play here as we start to see. And I remember the days was Intel inside,

01:02right? Where you couldn't even buy a computer without Intel in it. And I think this makes a big

01:07move when you're looking at the next level of technology. And NVIDIA is saying, look, I trust

01:12Intel. So I like this play. Intel, as you said, up big on this news. And Intel is actually up more

01:19than 50% year to date, very close to those 52-week highs. Would you be a buyer at these

01:25levels, Stephen? Ouch. That's a very harsh question,

01:30because quite frankly, you're right. It's up 50%. I think some of that euphoria is now in it. I think

01:36some of the pre-pricing of it. Look, it's, you know, when you look at the market cap of NVIDIA and

01:42look at the market cap of Intel, there's a big discrepancy, right? And Intel, $5 billion is really not a lot of

01:49money when you're looking at a $4 trillion company, right? So right now, no, I'm not. I don't think

01:54it's, the valuation is a little rich for my blood right now. Okay, but you're upbeat overall on the

02:00deal, upbeat on Intel. Not so upbeat on the economy, though. The Fed, of course, cut interest rates

02:05yesterday. I was taking a look at your notes, and you seem pretty downbeat. You said cutting rates

02:10doesn't solve the structural cracks in the economy. What are those cracks, Stephen?

02:15Yeah, you know, Carolyn, when I, about six months ago, I was calling for these cuts. I mean,

02:21I thought that the Fed was so far behind the curve, and it got worse and worse and worse. And I was

02:28like, I don't understand why we're not cutting. These cracks were coming. There was job losses

02:32coming in. And now we know the numbers were wrong. So all of a sudden, now another, you know, another

02:37crack in the economy. And when you saw the one thing that out of that Fed mean that really, I went,

02:43oh, my, was the risk management cut. When Powell called it a risk management cut, I had to

02:49understand what that actually meant. Does he mean there's more coming down the pipe? Does that mean

02:54that, well, we're doing this to protect ourselves against these problems? And when you look at the

02:59other cracks in the economy, when you see people losing jobs, well, in the past, there's been other

03:04jobs for them to go to. Now we're not seeing that anymore. There's not as many jobs. We're seeing AI

03:10also taking some of those jobs. We're also seeing cracks in the economy with inflation. And we're

03:15looking at something we have not seen. And I've been talking about it for over three months now

03:19is stagflation, where inflation is still up, jobs are losses. That's a very bad place to be. And we've

03:25not seen that in a very long time, if not ever, in the economy. And right now, this is not a good

03:30place to be. But yet, we are now seeing times where, you know, where we could find some good

03:35stocks out there with this great positioning. But right now, I'm not seeing that the economy is not

03:42as good as this hopium that we're seeing right now in the markets, markets making all time highs,

03:47and people are losing their jobs. It doesn't make any sense to me.

03:50Okay, so you're flagging stagflation. There are, of course, economic implications to that. But I want to

03:56know about the market implications to that. Because Wall Street is hitting all-time highs, the stock

04:02market is, while Main Street is feeling this squeeze. So how long can this disconnect last before reality

04:08catches up? And what does this mean for the market's direction?

04:13Yeah, I mean, the market can stay high like this for a long time. I mean, look, 1929, you can say 87,

04:20you can say dot-com, 2008, and then all of a sudden, things fall apart, right? COVID,

04:26another time. And then things fall apart, right? So it doesn't, I mean, you can't always have my

04:30crystal ball working all the time exactly when. But I can tell you that I feel like it's to show

04:36the price is right, where the mountaineer is climbing the hill, the mountain, and all of a

04:40sudden, it gets to the top, and then it falls over because people can't figure out where the price is.

04:44I don't want to be the person waiting to the very end. I want to be out of the markets long before

04:50the prices start to fall. You are seeing institutional selling now as they are profit

04:56taking, quadwitching is tomorrow. And I think the next level of all of this, I think you're going to

05:00start to see as going into some of the worst months, which we're already into September, but October,

05:05this is a normal month for down, right? So I don't like those combinations. It's a little too scary for

05:11me. Halloween's coming up. I don't want to be in the markets as heavy as I am. Now, am I selling

05:17everything that I own? Absolutely not. I never do that. But I am scaling out. And I think that's

05:22important to understand that this is not a market crash, but it is a market pullback. And we need

05:28healthy market pullbacks in order to go forward. But this might be a little bit bigger than just a

05:325% or 10%. And we're not seeing that pullback, of course, play out today, at least not right now.

05:39But when we do see it, how much of a pullback are we talking? Yeah, and I'll be back on the show

05:45talking about it. I mean, let's be honest about it. You know, the actual number, a good healthy

05:51pullback would be about 10%. I'm expecting some between 15 and 17% pullback. That would get back

05:57to the Fibonacci numbers if you're a technical trader. I also think some of these numbers are

06:01a little over the skis here. When you're looking at the Qs versus the SPY, you're also looking at

06:07margin debt at these banks at all-time highs. There's a lot of factors here that are saying,

06:13okay, if the banks were to pull back that margin debt from some of these traders, that would also

06:19give you about another 3% or 4%. So that's why I'm saying it's not 10%. It's probably somewhere

06:24around 15% to 17%. Okay. So tell me just quickly, what are you selling? What are you taking profits

06:32on? And then what would you buy in what you call a stagflationary environment?

06:37Yeah, that's a great question. Look, in the past, I've said tech, tech, tech. That's what's going to

06:43push us forward. Look, you're seeing Apple right now, just absolutely selling out of the iPhone

06:49Pro Max, right? You're seeing AirPods right now, trying to buy the new AirPods, and you're going

06:55into November now to get upset. That's really good. So I'm not selling Apple, but I am selling

07:02some of my AI stocks that I called back about a year ago. When I was looking at Palantir at 35 and

07:0740, I was like very excited. Here at 175, not so excited anymore. We might be a little higher than

07:13we did normal, right? I'm also looking at some of my biotech stocks that have made a nice run,

07:19like Eli Lilly and Novo Nordisk. I do still believe that that thesis of weight loss drugs now with the

07:25bill coming out, I think it's still there. But these stocks are starting to not fit the narrative

07:31perspective of their technical indicators. So I'm starting to pull out of that a little bit

07:36there. So I'm not a big fan there. Sorry, sorry. Stephen, hold on one second. Something just came

07:41up on your, sorry to interrupt you. I normally would not like to do that, but somebody's requesting

07:48to record this meeting. I don't have anybody coming in.

08:01Read AI meeting. I don't have that. Not sure what's going on here. Oh, Abby's coming in. Abby,

08:17sorry. We're on the air. Oh, sorry about that, guys. All right. I think we're good. Sorry about

08:31that. So we're going to have to redo that question, which is okay. Let's make it a bit more concise

08:37too, just so that we can include it all in. So we can talk what you're selling and then what

08:42you're buying. I'll cue you with that. All right, here we go. So Stephen, tell me,

08:50what are you selling right now? What are you taking profits on and what are you buying in

08:54what you call a stagflationary environment? Yeah, very simple. I'm not selling my Apple

09:00because quite frankly, Apple is still selling iPhones. Try to find the AirPod. You're now going

09:04into November. But I am selling stocks that I think I've been saying is tech, tech, tech,

09:09and biotech. Like Palantir back in 35, I was happy to buy it, but it goes all the way up to 175.

09:16That's a little over its skis right here. What am I buying? I am buying stocks that are still

09:20producing cash. I'm going to go back to the old Warren Buffett thought process, find companies

09:25that are undervalued, that are still kicking out cash and get that double whammy. Things like John

09:30Deere and Caterpillar, those stocks have been beaten up and it's starting to fit the narrative,

09:35have a lower interest rate. So I do like those kinds of stocks. I also like stocks that are not

09:41quite frankly in that inflationary area. And one of those that we've been talking about for a little

09:47while has been in the chip sector and that was Intel, but now Intel's up. So, you know, look,

09:55I'm not selling it, but I'm not buying it here either. All right, we'll leave it there.

10:00Stephen Orr, appreciate your picks and your insights. Thanks so much.

10:05Thanks, Carolyn.

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