The NEXT AI 10x Stock Sector I'm BUYING

next frontier of artificial intelligence stocks that are big big winners, bigly winners, big PP winners, uh, might be right in front of us. And I personally not only have exposure to the stock we're about to talk about, but really think that the estimates that Wall Street has for this company right now are a joke compared to what they should be. That means on paper with Wall Street the company looks overvalued. I think based on where we're going with artificial intelligence the company looks undervalued. Now to understand this we have to understand first why artificial intelligence we already expect as the Wall Street Journal as the information and others suggest is becoming cheaper to deploy. That's great. That means we could use it more. But that also creates a problem. Take a look, for example, at some of the latest models. Quen from Alibaba runs at just $.41 per million output tokens. The cheapest American uh you know option or model here is Muse Spark. That's Metas at 69 per million output tokens. And then you've got Ox Alpha, which was just released by the same people who came out with GLM five. Uh, and that sits at about 50 cents per million output tokens. Compare that for a moment to the cost of the Frontier Edge, like the bleeding edge, uh, models. Those are sitting at 25 bucks for Claude Opus, 50 bucks for Fable 5. uh Kimmy K3 Moonshot which there was the talk about this them you know distilling basically Claude Fable or Claude Opus to get to the uh benchmarks that they have 15 bucks per million output tokens. All of these costs are coming down rapidly in part because of the openw weight releases that we're seeing not just from companies like Meta but specifically those Chinese companies especially Deepseek as Deepseek tries to get more fundraising and what these companies are doing is they are actually able to fund raise more money because of this chart right here. If you look AI adoption per ramp capital which is you know VC connected and therefore in my opinion a little biased towards the AI side but that's okay. They indicate that AI adoption is moving up by this orange line. Bloomberg then overlaid over this orange line the growth rate for pricing uh API pricing essentially at OpenAI and Anthropic. And what you're starting to see are literally perfect S-curves. You don't really have that long leadin over here on OpenAI, so it looks a little less than a perfect S-curve, but you can clearly see that token pricing maxing out. They've actually cut prices twice, once July 31st and once on August 20th. And then you can see anthropic. This looks much more like a clean scurve right here. You could see that curving out of pricing. Part of that is because those openweight models are making it cheaper to access artificial intelligence to run agents and to get to 90 to 95% of these frontier level benchmarks with openweight models. Now, of course, when I talk about the openweight models, sometimes it creates a little confusion. These are the prices that you could get when you run them on like an AWS or wherever you might be running them. You could obviously run these models on your own hardware and then the marginal cost is really just the engineer who's putting it together for you and the energy that goes into running the the compute whether it's your own CPU and GPU stack or whatever and you can really do a lot of damage with these models. So then what is the next front pier in artificial intelligence? Well, Crowd Strike does a really good job at telling us exactly what it is, and I think they put a really good sort of image to this. Uh they suggest that what we have to be worried about is a an arms race swarm of a gentic uh bots, basically AI that drives what they call an arms race dynamic where artificial intelligence drives more cyber attacks from companies or from countries like Iran, Russia or China. We've literally seen Iran hack our um healthcare companies in the past. China, Russian hacks. We've seen this all before getting worse because of artificial intelligence. It's actually creating this loop where more attacks like we just had one against uh oh, who was it? Boston Scientific just got hacked. Thousands of employees sent home because their networks are down and they got hacked. So what happens? AI drives cheaper and more frequent cyber attacks leading to more of an investment in cyber security to defend against that. But then as AI gets cheaper, you're actually again driving more cyber attacks, therefore ramping up more spending on artificial intelligence. Now, maybe I'm way too bullish on cyber security. So I just want to be clear about this but I do think cyber security is a next frontier investment for artificial intelligence where even if growth rates end up curving out for some of the cloud uh service providers for the hardware providers the neoclouds the Nvidia for memory whatever when and if that happens maybe it won't happen but when and if that happens doesn't matter cyber security in my opinion is just starting on this inflection point think it's the next frontier Now, the stocks aren't particularly cheap if you look at Wall Street pricing. And so, you kind of have to look at these with your own mindset of, well, what do we think growth is going to be at these companies? And we're going to go look at exactly some of those arguments when we go through their filings. In just a moment, I do want to just shout out that tomorrow we have an expiring coupon code J-hole. We bought Crowd Strike and some cyber security companies before this massive boom in Crowdstrike stock. Uh and we've seen a definitely nicely up on the crowd strike position right now. I mean right now the stock just on the day is up 19%. So if you want to be a part of uh what we do with fundamental analysis, I encourage you join us there. For example, we looked at CrowdStrike back in June. And when we looked at CrowdStrike back in June, here were some of the notes that we made. We saw total revenue increasing 25.6% 6% gross profit increasing even larger more rapidly calling saying it has a very nice larger PP operating expense growth only 148% and they're seeing substantial pricing power nice cash flow nice balance sheet and so how did things change yesterday when earnings came out like why all of a sudden are we seeing Crowd Strike up 19% in the day lifting something that we've been bullish on IGV as part of our Q3 Q4 software ware bottoming. IGV has heavy exposure to software and that expanded basically 102 stock ETF is up 7% today. For an ETF with 102 stocks to be up 7% in a day is pretty remarkable. It it sort of makes people wonder like, okay, is there really an inflection happening here? Maybe, who knows? Maybe it's just a trade. Maybe it'll all reverse soon. But I think there's more going on here than meets the eye. Specifically, Wall Street expects that annual recurring revenue for companies like Crowdstrike is going to expand at one level and the reality is it's expanding at a totally different level. That expansion is already happening. For example, we uh CrowdStrike beat expectations on net new annual recurring revenue by 16.4% 4% over expectations, which meant that their total annual recurring revenue is now on pace to grow at 34% per year. And Wall Street still only has this company's earnings per share growing at just under 20% per year. And the irony about that is I think the clawed moment that just happened that really took off at the end of Q1, beginning of Q2, I think the ramp up is just starting of cyber security spending mostly because I think people see a big moment like a mythos moment or whatever and then they go, "Oh, we should probably do something about that." And then there's a lag between when they actually do something about it. So I think Q2 isn't a full snapshot of what that growth rate inflection is going to look like yet. I think their ex uh their their growth rates uh for annual recurring revenue could end up exceeding 50 60 maybe even 70%. That's also what some of their Falcon Shield products or their Falcon Shields are growing at at over a doubling on an annualized basis. So let's go look at what Goldman says for a moment and then we'll get into some of the recent filings. Goldman here says importantly we believe AI security will and then it breaks up goes over here disproportionately acrue to crowd strike because of the strength of its technology stack lightweight agent threat graph human reinforcement feedback loops and its willingness to acquire uh nextgen assets basically acquire other companies this is also what happens rich companies end up acquiring good companies that have good products right uh what's interesting about crowdstrike is Because of their lightweight agent, they can actually deploy CrowdStrike on the Microsoft store, the AWS store for businesses to basically find the Falcon cyber security product where they're already using it, which is great for SMB, small to mediumsiz businesses. And then of course, if you're a larger contractor, they're going to send their forward deployment engineers much like a Palunteer does. You know, Palunteer is actually one of the integrators for Boston Scientific. Palanteer is dabbling in cyber security with its Apollo program, but you know how far along are we there yet? You know, TBD, and I'm not bearish Palunteer. I want to be clear. I actually think Palanteer has a much better valuation right now, at least even just based on Wall Street estimates than this company. Okay, this company is pricey right now. And you'll see, you kind of see what kind of expectations you have to have to go, oh yeah, okay, this is this is really justifiable. Uh but Crowdstrike's also worth noting partnering with another company that I think is in its bottoming process and that's Cerebrris. Part of that is because they see the power of imperceptible latency in artificial intelligence that you can get with SRAMM chips. They see the power of that partner with Cerebras to provide uh data uh AI detection and response for cyber threats and then responding to them much faster than let's say a threat actor or an enemy can actually respond to it. So if you have faster hardware, you can solve a cyber problem faster than a cyber criminal can with let's say an openweight model running on a slower product. So there's there's also you know potential opportunity between uh the Nvidia Grock platform and Cerebrus both competing in that SRAMM space but that's more tangential to really the cyber security discussion here. Uh Goldman Sachs argues the following. They argue that they see annual recurring revenue of 51%. They believe there's an inflection in security budgeting that's happening sooner than expected. I have to flag that that is kind of my confirmation bias. Again, you know, we sent an alert on cyber security companies. We're buying cyber security companies going in the platform that's in the meet Kevin membership. A lot of people signing up for that because we've got a coupon code expiring tomorrow. Another reason I think a lot of people are signing up is because lifetime access like the opportunity to lock in lifetime access for the meet reinvest product, the homes AI product goes away uh after the expiration tomorrow. So, a lot of people are emailing us going, "Hey, can we bundle the two together?" Existing course members are emailing us asking for a bundle code. You could do that as well at staff@meke.com. Say, "Hey, I'm a course member. I want to bundle up the homes AI." You can do that. But this is actually going to an annual recurring revenue or subscription model, which is exactly what Crowdstrike is. See, when Crowdstrike makes $6.6 billion a year, they start the very next year at $6.6 billion. any growth that they have net, you know, people cancelling is starting at that point. And so that actually gives a company like CrowdStrike a justification for a much higher valuation than something like an Apple, right? Apple is trading for a 3.7 peg right now on growth estimates of 10%. Those can be pretty low. In fairness, CrowdStrike is trading for an 8 peg on growth estimates of 20%. I think those growth estimates are too low. If I use a 50% growth estimate, I'm trading for closer to what Apple is trading for. And I think the growth opportunities here are even greater than that. We'll see. We'll talk more about the financials. But the point is those annual recurring revenue businesses, in my opinion, deserve higher multiples. Apple has some of that with its subscription services. Maybe that's why Apple sells for a little bit of a premium right now to where I think Apple should be valued at. That said, uh if we actually go into the recent financials, uh for Crowd Strike, we could see a little bit more after this Goldman piece. So, the Goldman piece right here, confirmation bias alert again though, warning on this part right here. We believe there's an inflection going on in budgeting. That's exactly what I think. So, there's a risk of that. Flex uh flex um revenue is up double. That's that 2.29 billion. I think that's going to grow way faster than Wall Street thinks. And when we actually look at the growth that Goldman gives them, they're throwing EPS growth somewhere down here on their financial statements, they're throwing in EPS growth for the forward two years at least at 39 and 33% coming out of some of the holes that there have been given that the company has been teetering between profitability and losses. We really had one profitable year. I think it was 2024. You went back to negative in 2025 and you were negative everything before that. I may be switching 24 and 25, but it doesn't really matter. The point is you're just now really coming into profitability. And that's another reason why the company can look expensive. And maybe it is expensive. Maybe you got to wait for a better opportunity to enter it, right? But look at the dock here. Annual revenue year-over-year growing at 25%. I think that's way too low. I think it's going to grow faster. this swarming of uh agentic problems, the agentic swarm right here. Agents are human and multiply risk with, you know, the access to data they have. Agents can go uh rogue and swarm and move beyond their guard rails to harm things. The multiplication of agentic AI with endpoints and cheap artificial openweight intelligence makes me really really bullish on cyber security. Again, sorry may maybe I'm too extreme here, but I think it's kind of worth looking at this trifecta that you have. So, you have this trifecta. So that's going to be token uh we'll just call them token costs coming down that could be due to the open weights or otherwise right then you've got uh agentic and then you also have more end points. So an endpoint is a thing like a phone, a computer, a Linux server, a laptop, uh an iPad, whatever, right? Every endpoint that somebody gives access to like claude agent or whatever access to is a risk and most people don't have endpoint management software. That's a big red flag and that's going to change. There are other endpoint management plays that are smaller. You know this is now already a you know multiundred billion dollar company. I mean what's CrowdStrike going for right now? Crowd Strike right now is going for $230 billion. There's another endpoint management play that is up 11% today that we're also invested in. They are only a $7.8 billion company. So there's a little bit of your spoiler hint if you don't want to join us yet in the meet Kevin courses. But that's another big endpoint manager. And so the whole cyerspace is getting lifted by this. But I think you actually have this trifecta going on here where lower token costs lead to more agentic usage which leads to uh more agentic usage on more end points which all uh correlates with an increase let's use a different color here all of it correlates with an increase in cyber risk right increase risk all three of these increase risk. And you can make the argument that more endpoints are therefore now using more token generators. And so you've got this kind of acceleration here where more people using uh endpoints, more people using Agentic, cheaper open weight costs like what we talked about at the beginning of the setup. All of that just increases cyber risk. Okay, cool. So now when we got all of that put together, what do we think here? What do we think? Well, let's go back to the sheet. So we got the Agentic Swarm talk. We've got talk from their earnings call right here about an exponential increase in vulnerabilities that are being found via Frontier AI. And the problem is the delay between finding a risk and then deploying it. And that's actually where CrowdStrike has another really cool opportunity because they get access to a lot of proprietary data. Kind of like the old days of Tesla FSD, full self-driving where it's like, "Oh yeah, everybody loves FSD, but they got the data. They're milking all the data early. They're going to be in the lead for a long time." In fairness, they have been. I love FSD. Okay. So the issue with data is and this is why crowd strike you know the big kind of keep winning is that when you have the data people come to you because you have the data. So people are going to come to you because you have the data. Because when you have the data you're going to be able to protect them from more threats. The more data you have the more protection you could provide. So people come because you have more data, but by more people coming, you actually then increase the amount of data you have because you now have more companies you have access to. So, it's this crazy flywheel that sort of goes on over here and Frontier AI, you know, sort of uh and and cheaper access to Frontier AI all uh compounds this uh net revenue retention revenue, they they kind of miscellaneously disclose this like some quarters they talk about it, some they don't, but their net revenue retention was about 112%. Keep in mind Palunteer is like at 150 something% on like 3% customer growth, which is really some delicious sex appeal for Palunteer. Sorry I keep mentioning Palanteer. They're very very They have massive PP. Okay, very very very massive PP. >> Big PP. >> And sometimes when I compare to these other companies, I do think there is a value in knowing that it doesn't have to be CrowdStrike. I'm not trying to uh you know pitch you and say, "Hey, you've got to do exactly what I do." uh you know because I could buy a stock and it could go down and you could lose money. Uh and you know hopefully it goes back up. That's always a risk, right? We could also buy a stock and it could go up. I I I'm not your financial adviser. My goal is to provide uh as much color as possible. And if we can make money on a win together, then great. But ultimately it's it's your buy, right? So, for example, we just had somebody uh somebody email us, you know, on particularly on a software trade uh and just emailed, hey, I'm up uh uh what they got here. I'm up $37,000 right now. Uh thanks to Kevin on uh on path. Oh, that's really nice. Well, shout shout out uh to you and thank you so much for uh for bringing that up. That's really cool. Uh that's another it's a different topic play that we've been analyzing for a while. We think it bottomed around nine bucks. it got pretty freaking cheap. But um but anyway, remember, join us over at meanke.com. You get lifetime access to the courses and that perspective. Um and you can see a lot of this analysis uh very early and and that perspective sharing. But what's really neat here is uh they're collecting data from their endpoints and they're sort of recycling that into their pricing power. And so there's some really big value here which is uh exciting. Then if we take a look at uh the this was really the claude boom right here at the end of Q1 there is a risk that some of the boom we're seeing in cloud usage 400% growth in claude usage 100% growth in custom agent usage on endpoints in recent months there's a potential risk that you know we went through sort of a boom cycle and that's going to end up tapering because of what we saw in Q1. So, to be determined, if we actually go look at the financials, cash flow is uh pretty good. We've got about uh $1.8 billion of cash flow uh cash flow per year. That does work out to a less than 1% cash flow yield. So, again, a little expensive compared to their market cap. So, who knows? Maybe this is the top, right? Still very excited about cyber security, but worth noting. Also, just now turning to profitability. If I look at their uh balance sheet, I've got $6 billion of cash, $1 billion of current bills. That's cash and receivables, 1 billion of bills, which means I've got net5 billion of free cash. If I come over and take off their long-term debt, I take off another maybe about $1 billion. So, I really have about $4 billion of free cash, which is good. I mean, in fairness, for a $200 billion company, it's, you know, maybe on the low side, but very good balance sheet. So balance sheet looks good. Revenue another 25.8% growth in revenue year-over-year. Their costs on subscriptions are actually going down. 22.1% in indicates an increasing pricing power between revenue and subscriptions. But also if you compare to last year their costs were 22.8% on subscription which uh subscriptions which also means we are getting uh greater pricing power. Their gross profit margins are at Nvidia levels at 75%. Which is really, really good. Now, in fairness, they have a lot of GNA and they're just coming into profitability, barely coming into profitability. So, there is some risk with that. That is going to be an asterisk for a lot of investors on Wall Street. Understandable. Uh, you can notice that their R&D spend is up right now by 29.8%. So that's a little higher than revenue right now. Uh but their overall GNA and sales spending is up only 17.5% with R&D. So if you merge that all together, their pricing power is growing. They're just investing more into R&D. For example, sales alone up 14% in expenses, but their revenue is almost double that at 25.8%. It's pretty good. Maybe I'm too bullish, so just mentioning it. uh data center exposure. They do also have a lot of data center equipment themselves. Uh you know, over a billion dollars of GPUs themselves. I think they lease their data centers, but they've got a lot of their own equipment. They also have uh most of their revenue that comes from the United States. It's about 65% revenue coming from the United States. So, it gives you a little bit more color in terms of where it's coming from. No country like no other country out there has more than um a 10% exposure to crowdstrike revenue. However, they have other regions like Europe or whatever that make up more than 10%. Okay, so that gives us a full breakdown of how I see um you know openweight models bringing costs down leading to potentially more cyber security attacks. how more endpoint models create more potential cyber security risk and more of a need for protection. How a company like Crowd Strike has the moat. And even though they're really pricey on Wall Street expectations, I think they're undervalued because people are not properly pricing in how important it is to have cyber security in your business. And the fact that they're able to deploy this on like Microsoft or AWS. Oh, great. Smoke alarm's going off. CHRIST, THE HOUSE IS ON FIRE. I got to go deal with this now. Anyway, thank you so much for being here. And um we'll see you after the fire. All right, folks. Goodbye and good luck. >> Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You have done so much. People love you. People look up to you. Kevin Papra there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.