Semiconductor names are down a lot, but not oversold, says tech investor Dan Niles

MORE AGGRESSIVE STANCE TO TRY TO COMBAT INFLATION. MIKE. MELISSA BACK TO YOU RICK. >> THANKS RICK SANTELLI. LET'S GET BACK TO TECH. CHINESE AI FEARS ARE BECOMING SILICON VALLEY'S TOP CONCERN. SHARES OF ALIBABA UP 5% TODAY AFTER LAUNCHING A NEW QUINN MODEL THAT IS SET TO BE SECOND ONLY TO ANTHROPIC'S FABLE FIVE. LAST WEEK, CHINESE STARTUP MOONSHOT AI FUELED A MARKET SELLOFF AFTER UNVEILING A NEW MODEL CLAIMING TO CLOSE THE GAP WITH ANTHROPIC'S BEST VERSION. AND WHILE THE CHIP STOCKS ARE REBOUNDING TODAY, THE SECTOR IS STILL DOWN MORE THAN 14% IN A MONTH. JOINING US NOW IS NILES INVESTMENT MANAGER, FOUNDER AND PORTFOLIO MANAGER DAN NILES. DAN, ALWAYS GREAT TO SPEAK WITH YOU. >> GOOD TO SPEAK TO YOU TOO, MELISSA. >> HOW SHOULD WE THINK ABOUT THESE CHINESE MODELS IN THAT, YOU KNOW, WITH DEEP SEA, THEY SHOW THAT THEY CAN DO IT ON, ON A LOW COST BASIS WITH THESE OTHER MODELS. THEY SHOULD, THEY CAN THEY CAN COMPETE WITH THE BEST FRONTIER MODELS THE U.S. HAS TO OFFER. AND YET ALL OF THIS IS BEING DONE NOT ON THE LATEST, GREATEST AI CHIPS. THEY'RE BEING DONE ON, YOU KNOW, LAST GENERATION OR SOME OTHER SUBSTITUTE. >> YEAH. AND I REMEMBER WHEN DEEP SEA FIRST CAME OUT, MY THOUGHT WAS PEOPLE JUST ARE UNDERESTIMATING THE CHINESE. BECAUSE, YOU KNOW, THERE'S THE SAYING THAT NECESSITY IS THE MOTHER OF INVENTION. AND SO FOR THEM, THEY'RE NOT GETTING THE LATEST AND GREATEST CHIPS. SO THEY'RE GOING, OKAY, WHAT INNOVATIONS CAN WE DO TO GET AROUND THAT VERSUS JUST THROWING MORE HARDWARE AT THE PROBLEM? AND SO THAT'S WHY DEEP SEA CAME UP WITH THESE THINGS LIKE MIXTURE OF EXPERTS. AND AS YOU RIGHTLY POINTING OUT, PEOPLE THEN WERE LIKE, OKAY, THEY CAN KIND OF DO THIS IN THE LOW END, BUT THEY CAN'T REALLY COMPETE WITH ANTHROPIC AND OPEN AI. THIS SHOWS THEY CAN COMPETE. AND SO THERE'S THREE VECTORS THAT YOU CAN SAY ALONG THE AI TRADE. ONE IS, WELL, YOU GOT THE TOP 1% OF COMPANIES TRYING TO CUT BACK ON THEIR AI BILLS LIKE COINBASE. RIGHT. AND THAT'S GOING TO CAUSE AN ISSUE. YOU'VE GOT TOKEN THOUGH, PRODUCTION SKYROCKETING BECAUSE OF A GENETIC AI. BUT THE FINAL PIECE, WHICH IS WHERE THIS FITS IN, IS, WELL, OKAY, THE TOKEN PRODUCTION IS GOING UP A LOT, BUT HOW MUCH DO I HAVE TO PAY PER TOKEN? AND WHAT THINGS LIKE MOONSHOT KIMMY K THAT CAME OUT LAST WEEK AND THEN YOU'VE GOT QUINN SHOW IS THAT, HEY, I CAN MAYBE SPEND A LOT LESS PER TOKEN THAN I THOUGHT. AND SO IT'S REALLY THE INTERPLAY OF THOSE THREE DIFFERENT FACTORS ON THE TRADE. AND, YOU KNOW, I'VE BEEN THINKING, MY THOUGHTS CONTINUE TO EVOLVE THAT I THINK ALL THESE FRONTIER MODELS EVENTUALLY BECOME COMMODITIZED. AND SO THE PLAY IS BETTER ON THE INFRASTRUCTURE SIDE VERSUS THE MODEL SIDE, WHERE EVERY WEEK A NEW MODEL COMES OUT AND ALL OF A SUDDEN JUMPS TO THE TOP OF THE RANKS. >> SO, DAN, IT REMAINS POSITIVE FOR THE INFRASTRUCTURE. IF THAT'S THE DYNAMIC WE'RE HEADED FOR, IF ALL OF THESE COMPETITORS BUILDING THE MODELS, TRYING TO PROVIDE THE INTERFACE FOR AI, JUST WANT TO KEEP SPENDING IN AN OPEN HANDED WAY. AND I GUESS THAT'S BEEN THE BIG QUESTION, RIGHT? YOU'VE SEEN SEMIS, AS YOU KIND OF INDICATED, MIGHT HAPPEN A MONTH AGO. THEY'VE HAD THIS NASTY GUT CHECK, ESPECIALLY THE MEMORY SIDE. THE WHOLE FOOD CHAIN IS NOW UNDER PRESSURE BEING QUESTIONED. IT LOOKS SUPER CHEAP IF YOU BELIEVE THE NUMBERS MULTI YEARS OUT. BUT WHERE DOES THAT LEAVE THIS TRADE. >> YEAH. I MEAN LOOKING MULTI YEARS OUT IS A FOOL'S ERRAND BECAUSE YOU CAN GO BACK TO 2000. THE PREDICTIONS WERE REALLY ROSY FOR 2002. AND NASDAQ WENT DOWN 78% FROM PEAK TO TROUGH. SO WHEN I HEAR PEOPLE SAYING WELL MEMORY IS NOT CYCLICAL ANYMORE, IT JUST MAKES ME ITCH BECAUSE I REMEMBER PEOPLE SAYING THE SAME THING BACK IN 2000 AND IT'S JUST NOT TRUE. SO I DON'T LOOK THAT FAR OUT. WHAT I'M TRYING TO LOOK IS VERY NEAR TERM AND SAY, OKAY, I'VE GOT AN ISSUE HERE. WHEN YOU'VE GOT PEOPLE LIKE COINBASE, YOU KNOW, THE CEO PUT OUT THAT POST ON JUNE 26TH SAYING, HEY, WE'RE USING THESE OPEN SOURCE MODELS, AMONGST OTHER THINGS WE'RE DOING TO HELP CUT OUR AI BILL. SO OUR TOKEN USAGE IS GOING UP, BUT WE CUT OUR AI BILL BY 50, ALMOST 50%, FIVE ZERO. AND THEN THAT FALLS ON UBER SAYING WE BLEW THROUGH OUR ENTIRE TOKEN BUDGET FOR THE YEAR IN FOUR MONTHS. AND SO THOSE ARE THE THINGS NEAR TERM, WHEN YOU'VE GOT THE TOP 1% OF COMPANIES ACCOUNTING FOR PROBABLY MORE THAN 50% OF THE AI SPEND, IF THEY'RE TRYING TO CUT BACK, CAN THE OTHER 99% MAKE UP FOR IT? I'M NOT SURE THAT'S THE CASE NEAR TERM. AND SO THAT'S WHY I SORT OF WAS SAYING BACK ON JUNE 20TH, WHEN I PUT THAT POST OUT, YOU'RE REFERRING TO THAT. I THINK YOU'RE GOING TO SEE A SPEED BUMP. AND THE PROBLEM RIGHT NOW IS THINGS ARE NOT OVERSOLD. THEY'RE DOWN A LOT, BUT THEY'RE NOT OVERSOLD YET. BUT I'M STARTING TO WADE INTO SOME OF THE INFRASTRUCTURE NAMES AND GOING, OKAY, MAYBE IT'S TIME TO START PUTTING MY TOE BACK IN THE WATER HERE AND