00:00You've got this great take on sort of what the drivers are going forward.
00:03You call it tire, but we are still trying to digest trade.
00:06We are still trying to think about interest rates.
00:08I think you go into what's happening with inflation, but earnings.
00:11What are we hearing from earnings to vindicate the AI run-up that we've had of late?
00:15Hey, look, thus far, right, I think it's fair to say that earnings have been really, really good.
00:21If you look at the performance of the hyperscalers, in particular this most recent earnings season,
00:26you are seeing a growth and, dare I say, return on some of this CapEx.
00:32All you have to do is look at what's happening with Meta, right?
00:35When you look under the surface, you are seeing that the AI is enabling better ad effectiveness, right?
00:43And those are some of the early things that we want to start to see as investors to validate the spending.
00:48Well, what's been interesting is investors didn't give much of a longer reign to Meta.
00:52It was beaten up in this earnings season because they're taking a little more debt.
00:56They're thinking and committing to that capital expenditure.
00:59What do you want to hear from Zuckerberg?
01:00Do you want to hear that optimism, or do you want to sometimes hear that he's going to be sensible with the money spending, too?
01:05Hey, look, investors are doing exactly what we should be doing right now.
01:10We're asking questions.
01:11And why are we asking questions?
01:13Because, Caroline, even in a world with $100 billion is quaint, right?
01:18We're talking about really big numbers here.
01:22So investors are rightfully saying, hey, help me understand the pace of the spending.
01:28Help me understand how do I think about these returns flowing through.
01:33What's the time frame on that?
01:34And, Mark, do you really need to spend all of this money right now, or should you take your time?
01:40Now, Zuckerberg would say we absolutely have to move forward because this is going to matter for the future of the company.
01:46And if we don't do this spending, we're going to fall behind.
01:49But investors are going to ask questions, and that's precisely what we should be doing.
01:55Nick, it's great to have you on the program.
01:56Let me give you some really big numbers.
01:59$4.7 trillion market cap for NVIDIA.
02:03Top line growth overall, 56%, 57%.
02:06Data center, maybe even better.
02:09The E in your acronym, it cannot get any bigger than next Wednesday.
02:16How should the market brace for that NVIDIA print, either to the upside or to the downside in terms of disappointment?
02:23Look, I know that there is a focus, and we like to look at these earnings sort of on a real-time basis.
02:30But what the market is really going to care about, Ed, is how is NVIDIA talking about the future, right?
02:39Caroline was just pointing out that we've had lots and lots of CapEx commitments.
02:43And what investors want to hear is what is the pace of that CapEx coming through their revenues?
02:49And, look, I know we're going to focus on a backwards-looking view in terms of the quarter,
02:55but what we should be thinking about is, is the pace of their competitive positioning,
03:01are they going to be able to maintain that?
03:03Are they going to be able to maintain this revenue trajectory that they're on?
03:07And at least in the short term, I think they can.
03:11You are the head of North American equities, right?
03:14You probably take a much broader macro view.
03:17But when you do have a company like this who's not just technical weighting at the index level
03:23is an important consideration, but, like, the psychological weight that Jensen Wang puts on the market,
03:30how do you prepare for that?
03:32How do you translate that for your clients?
03:34I think what you have as an investor is focused on the things that you can do best, right?
03:40And what is our competitive advantage, if you will, from the perspective of Columbia Threat Deal?
03:46What we can do is study the market, understand the competitive dynamics,
03:51and be able to wade through who the winners and the losers are going to be.
03:55Now, is Jensen's commentary, is that going to matter for investor expectations?
04:01It will.
04:01But to the extent it creates noise, I think what we have to do is be ready to take advantage of that
04:06on behalf of our clients.
04:07And so, in this moment, if there is weakness, and we have seen some pockets of weakness.
04:13Look, quantum's come off.
04:15We've had some of the more sort of risk-prone, maybe the unprofitable side of the tech's been pulling back a little bit.
04:20Nuclear, maybe we've got less excited about that.
04:24Are they buying opportunities?
04:26Or are you thinking that you actually want a little bit of a healthy correction,
04:30as some of these CEOs of financial companies have been talking about?
04:32Hey, look, Caroline, I would segment out the market.
04:35I think there are places where there is fundamental strength.
04:40And to the extent you see weakness, it's probably a buying opportunity.
04:44And I would separate out the places of the market where really what we're talking about is speculative appetite, right?
04:50The quantum stocks have melted up thousands of percents.
04:54But for most of these companies, they don't even have any revenues for a few years running, right?
05:00So I would not necessarily describe that segment of the market as a buying opportunity.
05:05But for the healthier places, the places where you can model out real revenue growth,
05:11you can see where the cash flows are going,
05:13there's probably going to be opportunity as the market continues to be weak.
05:18Opportunity.
05:18And I mean, the opportunity we keep hearing about, the limiting factor we keep hearing about,
05:22is utilities and is energy.
05:25But also the key limiting factor for many is going to be the pace of interest rates and where they go.
05:28Yes. Yes. Let's go to interest rates.
05:31So in your acronym, we've done a lot on the E, right?
05:35What we always say on this program is that higher rates discount the present value of future cash flows.
05:41And we try and help the audience understand, like, why do we track the Fed on Bloomberg Tech?
05:45As an investor who's looking at this technology sector, why do you look at the Fed?
05:50Do you care? Help us understand.
05:53Hey, look, we absolutely care, right?
05:55And I'll take you back again to these really big numbers, trillions of dollars that we're talking about.
06:02So the Fed matters a lot from the perspective of, is there going to be liquidity in the marketplace?
06:08And obviously the Fed, in terms of the short-term interest rates, is going to dictate the pricing on that capital.
06:15So, yes, the Fed matters.
06:19I would point to the audience that there's been somewhat of a pivot.
06:23Four or five weeks ago, I think it was relatively consensus that interest rates were heading lower.
06:28We're now in somewhat of a data fog.
06:31But the little bit of data that we've seen suggests that we might be on hold.
06:35So in the short term, I think you're going to see some countervailing winds, if you will.
06:40In the long term, you would expect interest rates to start to come down, given what we're seeing in terms of economic performance.
06:48Let's end the conversation by you telling us what's going to happen in the balance of 2025 and 2026 for the technology sector.
06:56Your crystal ball, please.
06:57Look, I think for the next few weeks, it's going to be all about investors trying to figure out where are the returns going to come from.
07:06Let's look through the tea leaves.
07:08Let's see the early evidence that this CapEx is going to pay off.
07:14So I would expect that that's going to drive a lot of the conversation for the balance of the year.
07:20But I'll pull you forward into 2026.
07:23I think an important conversation and one that we haven't spent a lot of time on thus far is are these CapEx numbers one time in nature or are we about to get on a CapEx treadmill, which is akin to telecoms of the 1980s?
07:42If it's the former, I think the market will do well through that.
07:46If people start to believe the latter, I think you have the real possibility of seeing some nervousness from investors.
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