NVIDIA's 5% Crash: What Wall Street Is Getting Wrong

We have to talk about Nvidia this week. It just torched 5% off its stock and dragged the entire chip sector down with it. Why circular deals? We've been talking about this for quite a bit. >> The narrative that Nvidia is creating its own sales by these circular deals, which means they'll help companies finance the payments, is false. All Nvidia is doing is asserting as market dominance. Period. They have pricing power. They have all the the flexibility. They have the best GPUs and when they announced the open AI deal, it hurt advanced micro devices because they had an open AI deal. And the truth of the matter is we are starting to hit a wall on the ability to process AI. And we're attaching a video from the Stanford Business School. It's called the economics of the AI super cycle with two expert speakers. one is from the video that discusses that the open AIS, the anthropics, the GROs, they can't further develop their programs until all the AI gets built out. And so it basically says we're in the early innings of this and uh it's going to last a long time. One cautionary word, once you watch that video, you're going to want to put all your money in the video. I don't recommend that even though it's by far my largest holding. Now, the other thing that's going on is there is a narrative emanating from Asia and the UK that China is taking over the AI world that the US will soon be irrelevant and the memory socks from Korea, the new uh chip company that just went public in China that they're going to take over. This is a false narrative. What happens on Wall Street? They like to recycle false news. Okay, remember we had deepseek a long time ago that deepseek was better than chat GPT. That wasn't true. Okay, but uh this is a summertime. People are traveling. People are creating articles for hits on the internet. And unfortunately, a lot of them are false. That's why I want that Stanford video up there so people can thoroughly understand where we are at this time and where we're headed. And by the way, it does talk about the tokens that we've been discussing the last couple episodes. So I think it's very timely. >> Did that same worry drag AMD down too or is AMD's data center story holding up on its own? >> It's holding up on its own. But the truth of the matter is what we found is the AI super cycle where now it's broadening out and it's finally encompassing advanced micro devices. Are their chips as good as Nvidia? No. But they're not bad. Okay. Does every AI application need machine learning that Nvidia basic promotes the you know regenerative machine learning? No. You can have uh what we call dumb AI just uh optimize correlated things look at relevant things instead of everything. So uh you know I'm not anti AMD. I recommend the stock. I was late to it because I wanted to make sure its earnings and surprises and everything were bulletproof. So once they hit that eight factor fundamental model I'm all over them. But uh you know AMD is going to prosper, but Nvidia remains the industry leader >> with all this noise around chips. I've noticed Google's been strong lately. Is it still safe to buy? >> Yeah, cuz it didn't go up last week after announced 294% earnings growth. That was a 28% surprise. It didn't go up because this they they said they were going to spend an extra 20 billion or so on AI infrastructure. And uh it just shows the markets oscillating. Okay, so Google rebounded impressively on Monday and uh that's why we like to wait for dips to buy these stocks. You got great dips now in semiconductors and memory, but Google is definitely going to be an AI leader. >> Staying on what's strong right now, AT&T just expanded its computing deal with D-Wave. Does that bode well for quantum computing stocks more broadly or is this a D-Wave specific story? >> It definitely helps D-Wave. It helps ONQ. Regetti is more encryption, but uh no, D-Wave won the Nvidia quantum computing programming contest. So, and they won it overwhelmingly. So, it looks like all the quantum computing will be led largely by D-Wave and it'll be packaged by the OQ quidbits and if you got to encrypt it, Regetti has an encryption system. But yeah, the fact that D-Wave's landing contracts with a is a big deal. So just to reiterate what the quantum computing story is, Nvidia only has one more chip after this Ver Rubin. It comes out in 2028 and then we'll have that whole upgrade cycle. We're in the midst of an upgrade cycle now with the Vera Rubin. So when we hit late 2029 2030, quantum computing is going to become more important and that will be the next wave of speeding things up. And what quantum computing does it uses a one and a zero instead of one or a zero. So, with that said, yeah, it's uh pretty exciting, but I still don't buy things till they earn money, but I'm happy for D-Wave. I've written a lot of research reports on it. Quantum computing. We had Brian Hunt on at Investor Place. He pointed out that they were early on quantum computing and the stocks they recommended went up 1,800% as a group. So, uh yeah, I'm happy to see it, for lack of a better word, get its mojo back. Well, while everyone's still chasing tech, you've actually been selling some gold stocks as the volatility's picked up, but I know that you still have some gold miners that you trust. Which ones are they? >> Yeah. Well, first of all, just so everybody understands, we are selling good stocks by better stocks. Everything we are selling has strong sales and earnings, but some of them just got a little bit too volatile. So, the most solid ones right now are Beric, ticker symbols B, and Kinross, KGC. I own more gold stocks than that, but I have lightened up on my gold holding just because of volatility. What's helping gold in recent weeks is the reports that China's central bank is buying more gold. >> And volatility is about to get a real test. Citadel thinks that the Fed hikes rates on Wednesday. Are they right? >> Well, the prediction markets are at 40%, that the Fed will hike rates. So, I think Citadel's wrong. You know, if you read foreign media, they said they have to raise rates because energy prices are up. Well, last I looked, energy prices are falling dramatically. Uh, furthermore, the Fed and other central banks can't control energy prices. Uh, it's inelastic. Okay, so this is the problem with the foreign media. They're dumb. Okay, I guess they never took an economics class. The Fed cannot control food and energy inflation. So, if you look at the core rates, everything's coming down. Also, bond yields are managing lower. So, no, I don't think the Fed should raise rates tomorrow, which is Wednesday, of course, when this video comes out. And I think the FOMC statement is going to be lacking the detail everybody wants. But Kevin Walsh, our new Fed chairman, made it crystal clear. He's going to let market forces and market rates tell the Fed what to do. >> So if the Feds potentially shake things up domestically, what about overseas? Do you think the fighting between Iran and the US is actually over? >> Well, apparently it is. It was 13 days. It was unbelievably intense and there are reports that yeah, we were running low on munitions, although the Trump administration is going to deny that. They were trying to definitely obliterate the IRGC's ability to transport missiles and drones to the coast. Uh, Sentcom, the US government, released lots of videos of just them blowing up wave after wave of rockets on trucks. The funny thing is Iran basically said no more. And so the negotiations have restarted, but they go through an arbitrator so that we're not one-on-one. We're going through an arbitrator cuz they're so mad at us, I guess. And we'll see if we get any progress. But there's reports that the Ayatollah has fled the country. Obviously, the IRGC is in charge, but the IRGC is severely wounded and I'm sure they won't be able to pay their troops much longer. So, we'll see if there's going to be an uprising in Iran. >> So, we have the rate decision, Iran, and on top of all of that, earning season. What are you most excited to watch this week? >> Well, Seagate announces Tuesday after the close, you know, sales rep supposed to be up 42.6%. Uh, earnings supposed to be up, I think, 96.7%. Seagate should surprise that Stanford video we're referring to talks about the the bottleneck in memory. So, I'm expecting at least five more quarters, 15 months of, you know, window here where the memory stocks will just have windfall results. We already saw with HF Sinclair, one of our our refiners, announced this morning as I'm talking to you, it gapped up. So, the refiners are making windfall profits. We do have Apple on Wednesday and we don't own Apple yet. Your mom does for disclosure and some clients have asked me to hold it, but I'm really curious about that. You know, Apple has passed Nvidian market cap, so it's the largest company in the world. And all their forecasted sales and earnings aren't as strong as, you know, the semiconductors and things. I think we're all just getting excited. Are they going to have the iPhone Ultra the folding phone? Now, Apple is kind of like a CIA. They don't like to talk. And I keep trying to document whether that phone is coming out or not. And I have not succeeded yet. But I guarantee you if they come out with that folding phone that they'll probably sell for $2,500 to $3,000. I will be buying Apple, okay? Because that's going to be a big hit. >> As always, we love going through all your questions and we got a lot this week. So, let's get into them. First off, Dad, do you have any thoughts on Oracle? Is it still worth buying? Well, I never recommended Oracle. You know, Larry Ellison lives less than a mile away. And the only criticism of Oracle, they're building out these data centers, but they'll be running them out, too. So, they may not have the pricing power of other data centers. That's been a narrative out there. I have absolutely no idea if that's true or not, but it's unfortunate that narrative has weighed on Oracle stock. And uh you can see that Oracle has not done well in recent months. >> Now, let's talk about Bloom. What's been happening to them recently? Well, they just got caught up in the correction, but their order backlog is ridiculous. So, I'm obsessed with order backlogs. I may be the only one, but uh Bloom Energy makes the fuel cells that Oracle uses in their data centers. So, does Brookfield and some other people. So, instead of having a natural gas turbine, you'd have a Bloom Energy natural gas fuel cell. They have to more than double their production and build new facilities and all. Uh they're in the process of doing that. So, don't worry about Bloom. It's far as I'm concerned, it's lock and load on that stock. Now, with everything that's going on with Nvidia this week, is SNDK better than MU at this point? >> Absolutely not. If you want the fastest uh memory chips, it's made by Micron, period. Are the other memory chips important? Of course they are. Uh Korea has been very good at making memory, okay? And you know, so whether it's Samsung or SKHEX, it doesn't matter. Okay? It's there's a shortage out there, so everybody's going to profit from this. But if you want the fastest memory chips, they come from Micron. Speaking of that, what are your thoughts on Michael Bur's short on Micron? >> It's four times forecasted earnings. I think that would be stupid. I have no evidence he's short in Micron. Okay. The media loves to glorify Michael Bur. They usually get off the 13F filings. Again, we have a lot of anti-American media out there. It emanates from Europe. They just cannot believe that one of their colonies is more successful than Britain is right now. But I don't know. We we do things differently. We're more entrepreneurial. We use our energy. Britain doesn't tap its own energy in Scotland anymore. Uh they're going to propose a 10-year plan to revitalize manufacturing. It won't work until they get cheaper energy prices. So, you know, Prime Minister Burnham wants to suck up to Scotland and use their oil and natural gas. Yeah, they could become a powerhouse. But right now, they're not. I feel bad for them that their empire is not what it once was. So, I think we need to ignore the British media. By the way, Elon Musk gave an interview with the economist the other day and oh my god was that scathing. I'm surprised the the the gal interviewing Elon didn't cry and just leave, you know. I mean, he let her have it. >> Do you see a memory rallying happening anytime soon? >> Yeah, because that's where the earnings are. Uh that's even more powerful than Nvidia right now. It's an acute memory shortage. She'll she'll bounce whenever earnings are running the market. They're running it for the oil refining stocks now. So, but we're just fighting vicious, nasty, autonomous shortellers that are promoting false narratives again earlier. The false narrative is China's taking over. They're going to win the AI race. Everybody in America is a loser. That's the narrative that's being propagated right now. And that's not true. >> Now, we got an interesting question from another subscriber. Once the data centers are built out and go midstream, which sectors or industries do you see as the early beneficiaries from AI? >> Well, it's whatever makes you more productive. Okay. You know, it was interesting in that Stanford video, they said, "If you go work for us and you don't use these tools, we don't want you to work for us." So, it makes us all more productive. At every board meeting, there's going to be an analyst opinion, a report, and there'll be an AI narrative, and it's going to get better and better over time as AI gets more powerful. It all goes back to the tokens that we were discussing. Here's the first pass. Here's the second pass, the third pass. Every reiteration, it should get better and better. >> We got a couple people asking about Sienna. What is your opinion on them right now? >> Phenomenal. It's optical stock. you know, Ubiquiti, another networking stock that has optical connections, is firming up, too. So, let's just see who has the best earnings. I think it's going to be Sienna, but you know, they both have good forecast sales and earnings. We'll see. I don't buy the narrative that the data centers in space will replace the terrestrial data centers. I just don't buy that. I realized the Starship rockets had its 13th flight the other day. By the time they launch everything in the space to have data centers in space, I'm sure that'll be 100,000 launches. Okay, [laughter] if they're all going to be heavier because the all the electronics has to be hardened for the gamma rays and I just don't see that happening. Okay, can we put some data center? Sure, we can try. But I'm sure the data centers on Terrairma are going to be much more dominant. >> Let's end on one more subscriber question. Any thoughts on precious metal mining stocks like USR, AG or FCX? >> Well, those stocks that you just mentioned are some of them are rare earth, especially US and Idaho resources did announce successful core testing of their rare earth field. They haven't monetized it yet. As you may know, MP Materials USA, they're a little disappointing on the ramp up, but you know, at least MP Materials is making money. Not as much as they hoped at one time. So, you know, we we are trying to, you know, replace China in the rare earth supplier sector, but we haven't yet, but we're trying. And we'll see how long it takes to get there. >> And just to be clear, I know that you're not anticipating a Fed rate hike. So, no one should be closing or trimming AI and tech positions right now. >> Well, first of all, AI is not even sensitive to interest rates. So, interest rates affect, you know, the automotive industry. They affect anything that's interest rates sensitive, like the housing industry. The tech industry is oblivious to rates. Now, some of our big tech companies borrow to expand. And the reason they borrow to expand is because finance 101 in college teaches you that if you have a high return on equity, like 20% and you can borrow at 6%. Borrow. But let's say your return on equity is 4% and you got to borrow at six. Well, they would tell you to issue stock. So, there's these lines the kids in financing. We finance with debt or equity. So a lot of the companies are financing with debt because their return on equity is so high and that shouldn't alarm anyone. That is how you, you know, increase your earnings per share. >> So it sounds like there has been a lot of chaos this week. But if you're still locked and loaded on Google, still holding your favorite gold miners and genuinely excited for earnings this week, that's the real takeaway. There's always room for opportunity if you know where to look. >> Absolutely. There's a critical path silver lining to follow. Okay. And what's going on now with the mean reversion trading is they are hitting winners and the money's not leaving the market. It's just rotating somewhere else. But when all the dust settles, the best earnings are going to be in all our data center and AI related stocks. Energy is doing great this quarter though as HF Sinclair just proved. So you know uh earnings drive the bus, okay? And we have three more weeks of just incredible results wave after wave. So we should hang on, enjoy it. We should not get shook out because of false narratives that are being propagated out there. >> Well, with that being said, drop in the comments which stocks you're most excited about heading into earnings this week and next week. Thank you all so much for all your wonderful questions. Thank you, Dad, as always. But that's it for this week's video. Please give this video a like and subscribe if you haven't already.