00:00Brooke I'm so happy to have you here because there is fragility. There is also potential start buying some beaten
00:05up stocks. Yeah. What do you make of today's news. So first thanks for having me on. It's great to
00:08be here today. So you know our perspective is that investors need to be focused on the size and the
00:15magnitude of the shift that we're seeing. And our baseline forecast when we do our bottoms up work continue to
00:21point to acceleration and capex spending and it being durable for much longer. So we feel like investors need to
00:27have exposure to the companies that are directly benefiting from that.
00:29I don't think there's any question in anyone's mind right now as you're seeing these latest models come out about
00:34how impactful they're going to be how much they're going to change how much they're going to be able to
00:37do. And so while there's uncertainty about how you know which sectors get impacted in which ways and how it
00:42all plays out. Fundamentally right now we're in the start of what's going to be a multi year capex build
00:47out and investors need exposure to that. And so our baseline is you know you want to still be involved
00:53in the semiconductor names the networking names right like that that are the direct beneficiaries of the spending.
00:59Brooke the corners of the technology market that are rallying the hardest in this moment are memory logic storage. I'm
01:07talking right now in response to the ceasefire.
01:10But that would indicate if you look at some of the names that return to the prices they were at
01:14prior to the start of the war in Iran that this conflict has done nothing to divert the trajectory that
01:23you believe capital expenditures are on when it comes to the AI build out.
01:27Yeah and our fundamental belief is is that there's been nothing that's changed in that backdrop that the plans and
01:33expectations that we had from these companies in terms of their levels of spending where they were putting the capacity
01:38how tight compute is right now none of that has changed.
01:42And yes the world is more uncertain today than it was four months ago and risk premium have probably moved
01:49higher structurally because of that it doesn't change the direction and the magnitude of what we're seeing.
01:55You know remember that in this cycle right now compute and all the associated parts around compute are the most
02:01restricted and hardest to get thing in the marketplace.
02:03And if you want these models to perform better and to keep you know doing more and more the key
02:09ingredient is compute and power and memory and all of the things that get pulled on by that.
02:13So you know there's there's nothing that would change the outlook.
02:17You know we're very close to the big spenders around this area.
02:20So when you think of the mag seven companies we spend a lot of time meeting with those management teams
02:24and understanding what their plans look like.
02:26None of them are wavering in their commitment and their belief in the opportunity in front of them behind this.
02:33Brook just just very quickly did supply chains for chip and chip manufacturing prove to be more resilient in this
02:40moment than they were in the early days of the pandemic.
02:44Yes but I still think that those supply chains are an area where there's a tremendous amount of focus in
02:50building more resiliency creating more chip capacity doing it in more geographies.
02:55And that build out is likely to persist.
02:57But as of today and what we've seen through this you know latest geopolitical crisis there hasn't been any material
03:04impact on supply chains there.
03:05What's been really interesting is when we think about the semis NVIDIA, Marvell, Broadcom, names that you're in you like
03:12exposure to.
03:13Is there any hit longer term to the margin or any viewpoint on how you get into the picks and
03:20shovels still?
03:20Because when we think about the energy prices for example that does inflate a little bit.
03:24Yeah so our perspective is just like you said like we need you investors need exposure to the picks and
03:30shovels and this build out because it's still early and still happening.
03:33You know the margin structures right now are high relative to history.
03:37But we think durable because of the fact that you know this relationship between your ability to put compute in
03:42the ground and generate revenue for the model companies and for the cloud vendors is still very tight.
03:47So you know there isn't a big discontinuity event happening from either a supplier or a demand side that would
03:53upset margin structures.
03:54So you know you mentioned a couple of the names.
03:56One of them that we think you know right now the market hasn't fully gotten its arms around is what's
04:01happening with Marvell.
04:02And last year there was a lot of controversy around Marvell and their ability to you know hold share at
04:07Amazon and and some of the other big vendors.
04:10What we think the market's missing is around all of the ASIC business Marvell has this great opportunity to you
04:17know attach XPU attach products and grow substantially.
04:20So we think that's a specific company where there's a real opportunity around the upside.
04:24I mean I love the fundamental analysis and cutting through the noise of the moment from a macro perspective.
04:29Go go to the anthropic news then.
04:31We started this conversation by saying like look at the changes and the in step changes are seeing in models.
04:36You like the likes of Palo Alto Networks.
04:39They're one of the key 40 companies that's helping stress test and understand what the cyber risk is from that.
04:45Yeah. So I describe myself a little bit as a reformed software investor.
04:48I grew up following the entire software suite and obviously software has some headwinds right now that we can talk
04:53about.
04:54But within that whole industry set we think that companies that are involved in cyber security have a massive opportunity
05:00in front of them.
05:01Some of the companies that are helping with data problems have really big opportunities in front of them.
05:04So you know the news from anthropic last night is you know the power of those models is incredible.
05:11And it is exposing a whole bunch of vulnerabilities out there that people didn't know existed.
05:16That is really good for the cyber companies you know just from a business standpoint.
05:22Like there's going to be more vulnerabilities exposed.
05:24Bad actors are going to try and take advantage of that.
05:26Enterprises are going to need to be defended in the right ways.
05:29And so owning leading edge next gen security providers is a really good place for investors to be in.
05:36So, Brooke, I want to end this by going back to the ceasefire and the war in Iran.
05:41You are an investor in some of the biggest hyperscalers and the deployers of capital expenditure, right?
05:47And this president's central policy was to deregulate, expedite permits and hold those names accountable to energy spending.
05:56Then we had the war in Iran.
05:58And so just from the technology investor's perspective, how your desk analysts and you are modeling for the wild card
06:06that is a president who on the one hand has an AI policy grounded in deregulation and letting them move
06:13quickly and then move to an escalated conflict in Iran.
06:18Yeah.
06:18So with every investment we're making, we're running lots of scenarios on different parts of the business and what can
06:25happen and what can change.
06:26So if you're talking about, like, changes in the fundamental input costs of creating compute to run these models and
06:32to do things, as we project out where we think, you know, P&Ls and cash flows can look like,
06:37that's one of the factors that we're stress testing.
06:39And we're saying, look, if power, you know, goes up by X factor, what does it do to the ultimate
06:44return on a dollar of GPU investment and how does that get priced in?
06:48Similarly, on other things like, you know, on memory supply and if we can't get enough memory to fund these
06:54things, you know, what happens there and how does that impact stuff?
06:56So all of this comes into the fundamental frameworks and the risk reward that we're managing and we're looking through
07:02with every investment we make.
07:04And what I would just tell you is a guy that's been investing in the sector for a long time,
07:07I am skeptical of my ability to be precise, but I'm really good about my ability to understand ranges of
07:15outcome.
07:16And so we're always looking for when those ranges favor us and favor us putting capital to work.
07:21And so, you know, to sort of end where I started with, we still think this build out of CapEx,
07:26that we're very early in it, that we're not late cycle, we're early cycle to mid cycle in this and
07:32that there's plenty of opportunity to continue to compound wealth and growth in, you know, the fundamental chip picks and
07:38shovels, chip ecosystems of AI.
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