00:00I think you've seen some reports on Datadog and Snowflake on the consumption side,
00:05as well as MongoDB, that have actually blown out numbers.
00:08And I think we're now starting to see, instead of a Gentic software being in a test phase,
00:16it's actually being deployed.
00:18Bill Ackman bought Microsoft and made a splash, as Mr. Ackman is wont to do.
00:23Did he jumpstart this?
00:24No, I think Jensen from NVIDIA jumpstarted.
00:30At Computex, he basically said...
00:32Maybe Bill Ackman ought to wear a leather coat.
00:33Yeah, maybe he should, but both did.
00:37Software is a free cash flow machine.
00:40And in this cycle, infrastructure leads the AI build.
00:44Software is going to go along for the ride, but the new software is going to go along for the
00:48ride.
00:48So a lot of free cash flow coming to these names.
00:52Ted, what do you make of our good friends at Alphabet coming to the market for really the first time,
00:58I would say, since the IPO, with $80 billion of straight equity,
01:03converts to the whole nine yards, a private investment from Berkshire.
01:06What does that tell you?
01:07It's a big deal.
01:09And the reason why it's a big deal is this is going to extend the cycle.
01:12And if Google's doing it, I guarantee you all the other cloud types.
01:16The lemons off the cliff.
01:17Yes, that's right.
01:18The meetings.
01:18Good morning to all of you that are listening in your cars on your way to your one God saying
01:24to Google to me.
01:25That's right.
01:26So what this will do is it will extend the CapEx cycle infrastructure first into 27.
01:33This is a race to AGI or what we call human intelligence.
01:38And this is a cycle like no other.
01:40It's real.
01:40It's not 2000.
01:42Got the Philadelphia Stock Exchange Semiconductor Index up 80%.
01:46What is that about?
01:48I mean, we're talking semis here.
01:50Well, we're now, you know, I'm old.
01:51So I've lived through pretty much every single cycle.
01:56And you have to understand that we're now in animal spirits land.
02:00And animal spirits than 2000, this can go on for a long time.
02:06And valuation doesn't matter.
02:08And if you look at the HP print last night, you know, you're in a different hemisphere on where these
02:17models are coming out post earnings.
02:19So the Google deal was very interesting in that it was very conventional, like a 6% haircut on one
02:25tranche to Berkshire.
02:26And almost 8% haircut on another tranche to Berkshire, et cetera, et cetera.
02:31And then there's this newfangled thing where they're going to pay the tax obligations to the employees by an on
02:39-the-run offering, which I think Zero Edge is right on this, that retail shareholders are going to pay the
02:46taxes due at Google.
02:49How did this happen?
02:50Where did this come from?
02:51I think this is a war for talent.
02:54And if you really look at all these companies, it's all about engineers.
02:59I mean, at the end of the day, it's product innovation through brilliant engineers.
03:04And I think they're just stopgapping, you know, with the intensity of free cash flow on the CapEx builds.
03:12They're just finding another avenue to lock up employees.
03:17Are we re-rating the valuation for global tech here these days?
03:22It just, again, you mentioned we're in the world of animal spirits.
03:25Are we re-rating the valuation of technology?
03:29Absolutely.
03:30So if you look at memory, and that's, you know, SK, Hynek, Samsung, and Micron.
03:36Take Micron, for example.
03:40Traditionally, it's been trading on book value, a multiple book value.
03:43Now it's trading on a PE.
03:45And if you look at Micron, for example, I've never seen Micron or memory have 81% gross margin guides.
03:53So we're in a different world.
03:56And that's due to inference.
03:58Inference drives a tremendous amount of memory consumption.
04:01So, yes, we're re-rating.
04:03And I think you have to put the AI cycle in perspective.
04:08This is U.S. and China right now.
04:11If we didn't have the Iranian war, you would see the Middle East go basically straight up on AI.
04:18And they will go up on AI.
04:21Europe has to go along for the ride.
04:23And, unfortunately, the EU is very bureaucratic.
04:26And I think they'd rather fine U.S. companies versus innovate.
04:31And they really risk not getting on this AI cycle economically and defense related.
04:38I adore William Power.
04:40You have William Power.
04:42But can we make some news this morning that he's lifting his target on Microsoft?
04:47Would you like to make an announcement for us, Mr. Mortensen?
04:49No, I think Will is a fantastic analyst.
04:52And I think when you see the leverage of their free cash flow and how they're re-architecting the company
04:59real-time.
05:00Real-time.
05:01It's a real-time architecture.
05:03This is a company that dominates enterprise.
05:06Just dominates enterprise.
05:08They're a line item on budgets.
05:11That's a good point.
05:11That's a good way to phrase it.
05:13And they are a line item.
05:14I think what they have to do with the enterprise is innovate where they're actually benefiting enterprise productivity going forward.
05:22And they have that opportunity.
05:25The whole management team is A-rated.
05:27So they'll get there.
05:29Ted, you're not a hype kind of guy.
05:32You've been around a long term.
05:33You're a Navy guy.
05:34I mean, but what's going on out there?
05:36How do you think about AI?
05:39Because it's burst onto our lives in the last couple, three years like nothing else.
05:45I think the infrastructure build is historic.
05:48So for my clients, they have to make money.
05:52And right now, as you indicated, the semiconductor index is up 80%, 60% in the last two months.
06:01That's a good decade return, right?
06:03So I think from that standpoint, it is the most powerful cycle I've seen in my career.
06:11Now, with that said, there's a lot of existential risk that is not factored into this market, whether it be
06:19geopolitical, whether it be U.S. political, whether it be inflation.
06:23There is a tremendous amount of inflation going on in the tech market.
06:27There is a tremendous amount of inflation going on in the tech market.
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