00:00Overall we were expecting this earnings season to be tough and it hasn't. Does it come from lower expectations or are companies just finding a way around all these uncertainties. What is really interesting is that actually expectation for U.S. earnings has been increasing. So for the whole calendar year of 2025 the expectation was going to be 9 percent and now it's 11 percent. So it's actually increasing. But U.S. earnings strength is starting to broaden out. It's not just the tech sector that is expected to deliver.
00:3014 percent year on year in Q3 earning. The rest of the market outside of the magnificent seven is expected to deliver shy of 8 percent in this upcoming quarter. So you see a bit of a broadening out momentum perhaps helped by cutting cycle and just generally resilience in U.S. economy. And that is why we support we favor U.S. equities over likes of European equities were actually for the whole calendar year of 2025.
00:59The expectation is for them to not grow earning much at all. So being selective in European equities like the industrials financials is important. Are you surprised that A.I. keeps on exceeding expectations. We keep on saying it's price to perfection.
01:13The earnings report comes in and they're pretty good. Yeah they are. I think A.I. is entering a very interesting phase right now where the build out becomes more capital intensive.
01:22Because up until now it's basically this hyperscalers funding their capex from their huge piles of cash free cash flow. And there has been no problem. But now the new entrants in A.I. build out are having to tap into private credit, tap into credit markets using joint ventures.
01:41And this is why there are increasing questions around return on invested capital as the expansion becomes more capital intensive.
01:50But I think the jury is still out there in terms of if there's trillions of capex estimated in the coming years are going to be justified.
01:59But in the meanwhile it's just very costly to stay out of this trade. Right. If you think about we're still early in the adoption phase.
02:08So you get a sense of race against time. Well you know profits outrun depreciation. And this is the tension that we have right now.
02:17But we still like this theme. We're still early in the adoption phase. And I think a big question remains who are going to be the ultimate winners versus losers.
02:26Is it going to be the builders of A.I. or if we're talking about potentially excessive build out turning GPU and compute into commodity maybe the application layer.
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