00:00We're underweight. The Magnificent Seven, the hyperscalers, those are the companies that are
00:03spending a trillion dollars over the next 12 months on AI data centers. And we own the companies
00:09they're giving the money to. So the market's pricing the hyperscalers as if they're all going
00:14to win. And if they all win, they lose. Because if everyone wins, you don't have a monopolistic
00:19position, you don't have an oligopolistic position where you have pricing power. So
00:22if someone wins, that's going to be incredible for them. But if everyone wins, there's no pricing
00:27power and you're not going to get a return on that investment. But the Microns, the Samsungs,
00:32NVIDIA's, electricity, that's where all the money is going. And those are the stocks that
00:36are driving markets. And they're not expensive, in my opinion.
00:40So at this stage, are you betting on the fact that we don't know who wins? So you bet on
00:44them all?
00:45No. So I'm doing the opposite. I'm not betting on them because I don't know who's going to
00:48win in the scenarios where they don't win. I want to own the Microns, the Samsungs, where
00:52the hyperscalers are spending the trillion dollars. And Micron reports next week.
00:57This time last year, it reported $1.90 a share earnings. It's going to report $20 earnings
01:02a share this week. So the stock is flying, but it's cheaper on a forward-looking earnings
01:06basis today than it was a year ago.
01:08And not cyclical this time?
01:10Well, is the data center spend, until that decelerates or slows, this isn't a cyclical
01:17story. It's a structural story.
01:18So chip stocks are no longer cyclical?
01:21Well, for right now, they're not. They've got a structural tailwind behind them. And the hyperscalers
01:25can't slow. Because as soon as you slow your spend, everything you've spent is obsolete
01:30because your competitors overtake you. So no one can slow. They've got the sunk cost mentality.
01:35They can't slow down, even if they don't see a great return on investment, because failure
01:40is wiping out the trillions they've spent already.
01:43At some point, that has to end.
01:44Oh, of course.
01:45It will end, definitely. Markets will force it because CEOs and CFOs, they can't change
01:54their minds. So as soon as the market punishes share issuances, debt issuances, there's no
02:00free cash flow in Amazon, in Meta. Those companies used to buy back shares. They're issuing shares
02:05now. So free cash flow from those companies has completely disappeared. And all of that cash
02:10flows going to the memory stocks and the processing stocks.
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