Where We’re Putting Money for the Next Phase of the AI Boom

What's up guys? You're listening to Milk Road and I want to tell you that today's video has actually aired before on our channel, but we thought that this conversation was so good that we should air it twice. So, this is a little excerpt from a past conversation. And just a reminder that if you want to see what our analysts are calling next across AI stocks and crypto, all of that is in Milk Road Pro at the link below. Enjoy the video. >> So, why don't we start with what you purchased this month? What what what are some changes you made? I think you you made a pivot from one major stock into another Korean stock. So, tell me what you've been doing this month. >> Yeah, so I sold $1,000 of my my composition to buy Samsung. And I'm going to a lot of I'm going to condense a lot of my pieces on Samsung here. You can find the you know my write-up on the platform. I posted that last night. Basically, Samsung is I think still one of the most interesting places in the market. I think I actually bought this during our last payday as well. So, I'm just going to keep on adding to my adding to my positions here. I I think most people still look at Samsung as like a grow slower growing memory and a you know consumer electronics company. But Samsung, as I said before, owns a several like important layers of the AI supply chain. It manufacture DRAM, NAND, HBM. They also make chips like or manufacture chip chips like TSMC through their foundry business. And they also have, you know, advanced technology packaging. And we all know they sell smartphones, TVs, displays, name it. They they have their hands in all the all the electronic business. And what's interesting is Samsung, there's news that came out that Samsung committed 70% 70% of their memory supply production through 2031 under these LTAs, long-term contracts, set through like with customers like Nvidia, Google, and Microsoft. This is going to allow Samsung to have like better visibility and uh could make the memory, you know, business, you know, less cyclical than it historically been, which I don't think it it's cyclical anymore, which I think I feel like I talk about this all the time. Um, and then other reason is um they had a presentation yesterday and they came out with something called ZHPM, uh which is basically like, you know, if you look at your traditional HPM, the there it's all layered the DRAM is stacked on top of it. Uh but memory, like memory still sits by the processor. What H or ZHPM does is they put it right underneath the memory. So that means like it's shortening the distance time between the memory and the processor, so which is going to improve like latency and power efficiency and there's a whole bunch of presentation that they went through yesterday. I mean, this is like a later down the story, but like it's good to see that, you know, these these companies like Samsung are getting ahead and coming out with the next, you know, next product, which is nice. And yeah, I I think I mean, there's a there's a thousand other reasons I can tell you why I am buying Samsung, but I think that's a good overview of on why I I like Samsung compared to like SK Hynix and Micron. Um, they're they're still amazing companies, but I think the value is a little bit under Samsung is just a little bit undervalued at the moment. >> Well, Melvin, those are a lot of thoughts there. If anybody wants to read his complete thoughts, like he said, make sure you check out his update on the Pro platform. Martin, any reaction on that analysis between Micron and SK Hynix versus Samsung before we go to what you're buying this month? >> I'm not buying anything, as I said. >> right. You said you're just holding cash. >> Yeah, yeah. >> Any reaction to Melvin's take on that SK Hynix versus Samsung? Because I know you've been bullish on SK Hynix, right? >> Yeah, yeah, yeah. But I mean, like you know, Micron, SK Hynix, Samsung, they're all trading at very similar levels and I think their business is also quite similar and it's probably converge to the very same, you know, solution. So, like again, I am more skewed to Korean stock like SK Hynix or Micron because I think, you know, all the leverage that has been there like for for months is now gone. So, it it it created that mechanical selling that gives me those prices which are quite attractive, I think. Again, like most of these memory companies, Samsung and SK Hynix, they trade at 5x their earnings, I think 26, 27 earnings. So, this is like um insane valuation. And I don't know like market keeps valuing them and saying those are still cyclical businesses. I don't know when the pricing is going to happen because as Marvin just said, 70% of their production is locked in until 2031. So, it's okay, when is the cycle ending then? So, it's Yeah, I think eventually they they they will be repriced because I think uh Samsung and as well as SK Hynix, they they both talked about, you know, um returning um the gains to the to the market through shareholders. So, at some point, if we keep um if they stay on these levels, I think they are going to start like pretty big um repurchase programs that's going to pump the stocks. And so, yeah, I think it's just about patience and these memory stocks are still quite interesting play, I think. >> Just going to pause there for a second to point out that the market is showing signs of something kind of different happening. And our analysts at Milkroad Pro are all over it. They spent the last couple weeks making a lot of trades, getting out of some positions, and then into a lot of new ones, getting ready for the next wave of robotics, space, or even kind of picking some different AI winners. If you want to see what they have in their portfolios, what positions they're opening, it's just a dollar in Milk Road Pro at the link below. >> You know, I usually don't pay a whole lot of attention to macro because I think it's just a lot of like, especially the war stuff and like, everything is just like overblown at times. But this is one of the one of the times where I am watching closely cuz it really will determine this Fed meeting will determine if we go higher from here. If there is the potential rate hike, I think this AI trade is kind of it's going to go, you know, a little bit further back. Um so, I'm really I'm really watching for the this the data on this. Um and also I'm watching my earnings. I think I have Oracle earnings coming up middle of September. Um I want to see like how enormous like if if their enormous backlog is actually converting um into cloud revenue. So, I'm really watching for that. And then there's MU earnings, I believe, on the end of September, like September 30th or 29th. So, I will be um watching that as well. Um so, I'm just going to be watching how if they're able to cuz Micron has signed 16 long-term contract. I would ideally would love to see Micron get up to 70% or 80% or even longer uh for just like Samsung, you know, that would that would be great great catalyst for them. And I'm just going to also watch for DRAM pricing, HBM pricing, and all that. So, um I think I think the September for me will be about two questions. Is inflation hot enough to keep rates moving higher? And are AI companies um you know, spending fast enough to justify current valuation? If like in uh if inflation cools down while like AI valuation remains strong, that would be like the best setup for the stocks, you know, that I'm personally in. So, those are those are the few things I'm watching right now. >> And then there are companies that are trading at pretty huge valuations that deserve, you know, the perfect execution and you know, maybe the growth story is like more further down the line. So, it's not a you you're not going to see big earnings in in the next year or so, but maybe rather in like 3 years or something. So, I think those companies are might have some hard time going forward. Um but I think at some point the market will start to rotate back to hyperscalers. I think those are those haven't been the biggest picks this year and, you know, markets are still like, okay, they are spending a lot of money, but they are not making that much. So, they don't see the returns yet. But, those are the like, you know, the seed investments and like eventually once those revenues will start to start will become online, you will see a huge jumps in their profit earnings and that's when like everyone will want to own hyperscalers, I feel like. So, I think at some point I'll probably rotate and like move a bigger position of my portfolio into those hyperscalers because I feel like the downside risk is quite limited, but the upside is we all know that the upside is coming. We just don't want to play let's call it momentum game until, you know, we see those numbers on their profit income statement. We want to use our money elsewhere, but I think that at some point market is going to reprice them and I I want to be in these, you know, big hyperscalers at that point. >> Could you just define what a hyperscaler is? What companies you're talking about when you say hyperscalers? >> Yeah. Those are the companies like um Amazon, Google. Those are, you know, the giants who are buying GPUs and they provide like access to the GPUs. So, so companies like Open AI or Anthropic, they can rent out the computation. So, you know, you can go to ChatGPT and ask a question because it runs on on those servers um in the back end. So, the the cloud business the the this uh GPU compute business is becoming probably one of the biggest markets in the world. And like I can see a a future where all these hyperscalers that own that computation layer are going to become, you know, 10 trillion plus companies because they have access to that compute. And like everything else might be much more spread across smaller players than today. Um but we are quite far from that future, I think. But I can I can imagine that it's going to happen. >> You know, one thing we've talked about a lot on this show is that crypto is quickly becoming a huge part of the global payments infrastructure and nowhere is that more obvious than in Asia. But if you're actually running a remittance company or a payment business, you know that the hard part isn't moving the stable coins, it's dealing with local banking partners, compliance, liquidity, and all of the operational headaches that come with sending money into places like India and Southeast Asia. That's why today's partner is Sabre. They give payment companies stablecoin-powered infrastructure to collect and make payouts across Asia without having to build all of that complexity themselves. They've already processed more than $3 billion in transactions across 40 different countries. So, this isn't just a concept, these guys are actually doing this for real. If you're building payment infrastructure or expanding into Asia, make sure you check out sabre.money. Can someone >> speak about Neoclouds? Um this is not a question [laughter] with anything else to it, but Melvin, can someone speak about Neoclouds? >> Yeah, what would you like to know? I'm just kidding. Uh well, I I I I still think, you know, let's talk about the earnings. You know, we had great earnings in the Neoclouds. We have CoreWeave. We had um earnings like about a month ago. We had um Nebius earnings, massive massive earnings. We have We see that Nebius is signing deals, short-term deals worth 30 40 to 50 million mega [snorts] megawatt per megawatt revenue per megawatt, sorry. And Coreweave, you know, their A100 chips, they're they're signing a 10-year deal to like 2029. So, I I think like there's a there's a bit of a like a lot of fud going on with Nvidia specifically because of their Vinland project that they're building and there's like a lot of allegations against them that saying that they didn't get approval from the government and blah blah blah. It's all just big fud. People have, you know, disproved that on Twitter. I think a lot of it a lot of the weakness we see is because of like especially Nvidia's it was because of Citadel selling their major positions. And I I think we just need like I think maybe like we have to wait till the next earnings to see the stock even go higher because we saw the stock even go as high as 270s about 2 3 weeks ago. Then I think the Citadel happened now it's around 200. It's like hovering around there. I think we need more catalysts which I think like will come in like as earnings come out or when they sign very like these short-term deals with for like 40 to 50 million dollar megawatt. And I think there's a lot of speculation especially Nvidia's that they're going to sign a massive deal with Google Google because of because of Arkady's relationship with Google they go way back back in the day. So, I think we just have to wait stay patient and I think that if you do that I think the market will reward you. So, I am staying staying, you know, bullish on the Neo Cloud. Neo Cloud specifically only Nvidia's and Coreweave. I think especially with the Fed rate hikes if there's something like that happen majority of Neo Clouds will be messed up because they they're their whole business model you know, is dependent on financing cheap financing specifically. So, if you don't get that, they're going to have massive debt on their balance sheet and they they will get wiped out or bought or whatever else. So, I'm bullish on new clouds. >> Bullish on new clouds. Martin, anything to add? >> No, no. I'm also bullish on new clouds. Um I think that Nvidia consortium worth 500 billion is pretty huge tailwind that because Nvidia wants more companies to succeed in this, you know, computation race. And so, they are now providing kind of support and backing for all these new clouds. So, I think that's that's pretty huge tailwind on top of the fact that I think it was Nvidia who announced that they were able to rent out, you know, the chips from 2020 all the way until 2029 or something. So, the biggest kind of risk was that GPUs will just have zero value after the first 5 to 6 years. But, Nvidia just say, "No, they're still worth a lot and we are able to rent them out." So, yeah, I think all these new clouds, not not all of them as as Mo said, but some of them will do really, really well here. >> Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. [music] And if you're struggling to find winners in the market, that's exactly what Milk Road Pro is built for. [music] Our analysts have called some of the biggest winners early and Pro lets you see what they're buying next, every trade they make, and the research [music] behind every position. Check out Milk Road Pro at the link below. Everything you hear on Milk Road is for informational purposes only. [music] These are our personal opinions, not financial advice, and we may own some of the investments we talk about. Always do your own research and make the decisions that are right for you. See you next time.