NVDA, GEV, JPM & Key Stocks Jeffrey Small Sees Weathering Macro Volatility

which I believen September 8th, thanks to Alex Coffey, our senior equities ribuo e in our next guest. I see Jeffrey Small waiting herer. Jeffrey, great to have you on. Interesting ere. I mean, we're waiting for some key data later in the week. We've got a mixed picture today. Net negative day yesterday. I mean, about to come into essentiallyel the kickoff of earnings seasonwe market is holding its breath on its earnings froon here. But to answer your question Molly you know we've gat growth in AI spendiere's lots of optimism. That's one side. The other side is 5% ten year Treasury oil hovering close to 191 103 in the Brant crude and really sticky inflation. So the markets aretre opposing forces today. And so my macro view, my macro view real that we're entering into a much more selective ph the bull market. think the market's going to become much less forgiving ofmph valuations without the earnings growth to support them. So I'm still constructn equities, but I want to own businesses tied to capital spending and realngs growth with strong cash flow and most importantly big back orders. Molly big back orders. And so Jeffrey, you mentioned w the yields sit. And obviously that comes into play heavily when we're starting to talkout u distinguishing the companies that are going to be able to weather these higher rates, especially looking lik we are going to be higher for longer in terms of the Fed's set up? That'sected here as well. How are you looking at them one by one? Is it an overall infrastructure play. Are you stock specific picking w the trade. Well I would say the three ient areas that look really good right now of course are AI infrastructure power, electrification and financials. That gives you a cohesive story despite the market fthat we're balancing here. And so the first area is AI infrastructure, semiconductors, companies like Nvidia Broadcom AMD,rista Networks, and the second area, my favorite pick in power generation of course,s GE Renova. You've got Constellation Energy, Vertiv and Eaton. And the third is financials. Someone's got a capital well capitalized institutions. Someoneo finance all of AI spend and companies like JP Morgan and Bank of America. So let's just say the best of the best. Marley. So the best of the best. So are you you're looking at Nvidia, AMD or these names that are on your radar here. When we're looking a top of the top in terms of the But nobody's going to buy backe. $150 billi their own stock like Nvidia is. And nobody's given us 12 month guidance like Nvid is. So we know they've go that backlog order filled. And we expect that growth to continue beyond next year. And so is the stock under priced today its cheapest ever in history. So yes it is underpriced. But the market has o Jeffrey as we're as we're looking atse large numbers the s going into all of this, knowing how early we are in terms of the innings in this AIinfrastruw these long term rates above 5%? I mean, how you? How are valuint now with these enormous, enormous growth expectations? But we also know we are potentially years away from really fully realizing any of the economic benefits. And then add intot the bubble conversation or the overbuild conversation thate still believe may or may not be on the table. Yeah, and that's a really great question, Marley. I think I wouldn't abandon growth because are high. We have energy prices are sticky inflation. I'd become much more selective about where that growth is coming from. So you want to own stocks today that have that solid growth trajectory of, you know, greater than 30, 40% a year either on our top and bottom nu, obviously that's in the chip space that's in the GEpace because they've got a 3 to 5 year backlog and the power space and the cap financing. The next phase of this economic build out is really going to be, you done by companies that have low valuations today like JP Morgan and Bank of Americ so these are things that you want to own going forwar it's not that hard to figure out based on where we are in the cycle. But again, those are the dynamics that we look at. All right. And when we look at the power bottleneck, the energy bottleneck is a conversation I keep coming back to you mentioned GE Nova. You mentioned constellation. I think you had Vertiv in there as well. I mean, how are how are you looking at this bottleneck trade right now? And are young it as a neck trade currently? I think it's more of a bottleneck on AI because it's just not about chip demand and chip supply,ht? It'sricity data centers, electrion, the reshoring of, you know, manufacturing and this inve cycle. And, you know, we added only 50MW of, o of power the two years where China has added 500. So we've goet our act together the power grid side of the equation are these things are to hit hit a problem and electricity rates are going to go way up. All right. An the last thing you mentioned a few of of the big banks there. And I want to touch on financials because I've had many conversations about with these elevated rates that ru a risk here for some of these financial names. But you like them because you say somebody has to finance these build outs here. And as I just talked to you about, we're nowhere near complete. So how are you looking at financials and how are you wei any concerns about what these higher rates might mean? Becau I've also been having a of conversations about whether or not their earnings have peake Sure. higher for longer rates, Marley, you know, really support len economics forthe stn could benefit from lending and capital markets and financing this infrastructure boom. And I think that we're going to have to we're going to have to become accustomed to the fact that rates are going to be much higher for longer than anybody realizes, as long as we go through this infrastructure sp And this is not just a domestic issue, this is a global issue. Rates are going up in every modern economy today because of the spending that's going on on federal debt. And so I think this trend is here to stay. And that means owning banks like big banks like JP Morgan is my favorite. And Bank of America are a good play. And as we look across the AI infrastructure thesis, that seems to sort of be at the core here of many of your choices. Jeffrey, what would be an early warning sign to you that it's An early warning sign would ben? some type of earnings guidance to the neg or lowering guidance. Underperformance in some capacity would be the first, you know, bell whistle that would go off by one of the major hyperscalers or some of the companies I've mentioned today. But going for I think you have to look at the three three themes, Marley, which is compute power and capital. And that's what we're looking at financing today.ffrea pleasure to talk to you. Really appreciate you taking the time to