00:00It's been an incredible earnings season, particularly in the U.S., but also in Europe.
00:03A lot of it is being driven by top-line growth that's allowing margin expansion as well.
00:08And so this is just a pretty unprecedented growth era.
00:11And in fact, it's not even necessarily grind higher.
00:13Parts of the market like the Nasdaq, which are not yet at highs,
00:16are actually looking outright cheap considering the scale of sales growth that they are generating.
00:21It's really astonishing.
00:22An unprecedented growth era.
00:24Yeah.
00:25You mentioned the Nasdaq.
00:27Do you want to lean into that?
00:28Matt, what's being overlooked?
00:31Well, sure.
00:31So certainly the technology names in the Nasdaq were very well held alongside things in Korea, the AI trade.
00:38But really what we saw for a month or so was de-risking into summer and a lot of volatility
00:42in single stocks,
00:43both of which caused further de-risking.
00:46And so winners got sold and losers got bought.
00:49That appears to now be over.
00:52And as people come back from holiday, I just expect they're going to take advantage of that and lean back
00:55into the same trades,
00:56particularly because if you look at the average of single stock volatility, it was north of 50%,
01:01like really unprecedented highs, not just outright, but also relative to the index.
01:06And since earnings season has sort of given everyone a bit of reassurance that the AI trade is still growing
01:10very strongly,
01:11that volatility has dropped down into the mid-30s.
01:14So all of the VAR calculations in any fund using leverage is basically saying you can add a lot more
01:18leverage if you like.
01:19So it feels like this is just the tide going in and the tide going out just in terms of
01:24the leverage that's being added at the moment.
01:26Certainly in the last month or so, yeah.
01:27That's what this market feels like at the moment.
01:30But you suggest the fundamentals are there.
01:33The fundamentals are more than there.
01:34So the concern that I think was an ex-post narrative as to why the market was falling was that
01:40there was too much spending, too much CapEx.
01:43That's, in our view, not remotely true.
01:45Keith Parker has rejoined UBS.
01:46He's published his big launch piece.
01:48And one of the key focuses on that was that CapEx has grown to $650 billion.
01:52That's up from about $300-odd billion a year ago.
01:55The backlog of cloud revenue that is going to be generated based on data center growth is up $1 trillion
02:01over the same period to $2.4 trillion.
02:04So you've got $2.4 trillion, which is 100% of existing cloud revenue that's going to get booked into
02:10realized revenue over the next two, three, four years.
02:13Google said that they think they're going to monetize about half of their cloud backlog within two years.
02:17So the revenue growth within cloud businesses, growing because everybody wants to get their data onto platforms to make use
02:23of AI, is absolutely astonishing.
02:26And it's causing massive sales growth, which has not been priced more cheaply since 2011.
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