00:00Nancy, when I talk to you, you're always one of the people most bullish on AI.
00:04How have the weekend's events altered, maybe, your view?
00:07You wrote in your note, the three amigos writing.
00:10We have Mike Shepard earlier saying that they are in unison.
00:12Does this change anything for you?
00:15Well, I think, Isabel, thank you, first of all, for having me.
00:18And congratulations on stepping in for the team.
00:22I actually think that this is more likely to be a hiccup than it is to be an end to
00:28the AI trade.
00:29The AI genie is out of the bottle.
00:31We're hearing it across sectors in our earnings calls and theme development.
00:37My team puts together a list of themes based on what they're hearing from cross-industry, cross-sector companies that
00:45are employing AI and to what advantage.
00:48I do think this is, I don't want to say it's a PR move, but I think it is a
00:53timely pause, which can't hurt.
00:57I don't think a correction would hurt this market either.
01:00We've run pretty hard, pretty fast over the last few years.
01:04So I think if, as investors let the dust settle, and I think investors still believe in the trade, I
01:11think traders are the ones that are driving the short-term volatility.
01:14So let it settle and then step in and buy the high-quality names.
01:19The AI build-out backlog is in place, and these data centers are being built.
01:25That will continue to drive growth for some time.
01:29What the market is concerned about, obviously, is where are we two to three years out?
01:33I think we will still be in a build-out that's a once-in-a-generation technological revolution.
01:39Nancy, I want to hinge on what you said earlier, that this may be kind of like a PR move,
01:44because we do have Anthropic posting their first-court profits, and we also have them.
01:49I mean, of course, we know that they have their much-awaited IPO.
01:52I mean, if competitors also pay back releases, does that protect Anthropic's newly won margins, or do you think that
01:59slower iteration in general will risk losing the momentum that it got?
02:04Well, so I'm going to answer that backwards, Isabel.
02:07I think OpenAI was not going to do an IPO this year anyway, so this gives them some cover.
02:13I think Anthropic will move forward and will continue to be a leader in the space.
02:18And we know that Elon has always expressed concern, which is prudent.
02:22I'm not poo-pooing the potential problems or difficulties that AI will present, but I do think this gives the
02:30companies a chance to pull back, put in place some guardrails, which may or may not have much of an
02:36impact, but will soothe fears.
02:39And then I do think Anthropic continues to go forward and will continue to have one of the highest-margin
02:46businesses, because their mode or their flavor of AI is much more sophisticated.
02:53And then you're seeing the hyperscalers as potential winners today.
02:57Google will continue to be an AI leader.
03:01I'm less impressed with Meta, but this will cause them to have to spend less, potentially.
03:06So there is good news and the bad news.
03:08Yeah, definitely.
03:09And let's go to the, quote, bad news first.
03:12If this pacing actually holds, Nancy, who has more to lose?
03:15Is it the labs raising for frontier capability or are the hyperscalers, although you just noted that the hyperscalers may
03:20be having a good day soon?
03:22Yeah, I think it's always the emerging technology companies where investors are more likely to pause.
03:28But, again, I don't think that will be permanent.
03:31This feels a lot like Deep Seek, where we had the initial hysteria, and then people stepped back and said,
03:37OK, this is an opportunity to buy these names.
03:41There was lots of sighting of Jevon's paradox.
03:43And so I think that what will happen is this will force the naysayers, and most of the naysayers in
03:51Washington, these are people who also read the headlines,
03:54don't have a deep understanding of the technology, don't live in the same world that we live in.
04:00And this gives them a platform, opposing AI, that is.
04:04I think this will cause them to have to step back.
04:08AI leaders are saying, yeah, all right, we think there are some areas where we can improve.
04:13You've heard them all say it.
04:15This weekend was not the first time.
04:17And I think that will continue to benefit the big players.
04:21The little players will still get funding, but maybe not sort of massively across the board.
04:28And I actually think that's good for the development of AI and just general technological innovation.
04:36So, Nancy, if this pacing call turns into real legislation rather than some voluntary restraint,
04:41which part of your coverage universe do you think will be affected the most?
04:45Because it sounds like everything's modeling this, everyone's modeling this as maybe noise more than policy risks so far.
04:52Agreed.
04:53I think we would see the market down a lot more.
04:55Well, first of all, I don't think legislation is possible in this Congress.
04:59I don't think you'll get agreement on any meaty kind of legislation.
05:03You may get something where they can slap a label on it that we saved humanity from AI,
05:10but it won't be meaningful.
05:11I think that the obvious losers initially are the infrastructure names.
05:17And by that, I don't just mean the Qantas services or GE for Novus of the world,
05:21but I mean the chip makers and the memory providers.
05:24I actually think that's an opportunity.
05:27If weakness prevails, we'll be adding to some of those names where we don't have full positions.
05:32But I don't think there's any need to chase the downtrend, Isabella.
05:37I think you want to step back, let it settle, and then pick your way through as things kind of
05:43calm down a little.
05:44Let's go.
05:44Let's go.
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