3 AI Stocks To Buy On The Dip

Hello and welcome to Being Exponential. Uh thanks for tuning in. Uh we're going to start this week off with our stocks of the week. Uh Luke is a bit under the weather, so he's going to be off camera. Um so Luke, let's start with Google. That is the the kind of stock of the week. They just reported earnings. Uh some stellar numbers there, but it still has not affected the AI trade like we thought it would. Uh any insight there? >> Yeah, I mean I would be a big buyer of of Alphabet on the dip here. I really like Alphabet stock after what they reported. Um the big thing for me is the cloud business. So that cloud business used to be I mean postcoid it was a 25 to 35% growth business and last quarter they just put up 82% growth and they're doing about over 20 billion uh per quarter in revenue there. So we essentially have this hundred billion dollar annualized revenue run rate business that has accelerated 50 points uh on topline growth rates in about a year or a little over a year. That is unprecedented in the history of capitalism and it strongly tells me that all this spending is absolutely worth it. I mean, they they are spending hundreds of billions of dollars every year. I I get that their capex guy got hiked up to as high as $25 billion for this year and is expected to significantly increase in 2027. So, maybe we're talking 250 next year. So, yes, they're spending a bunch, but I mean, geez, man. That cloud business going to 82% growth and 20 what, 22 23 billion in revenue in a single quarter. The backlog's up at $514 billion. Operating margins in that business went to 35%. They were about 20% a year ago. Overall operating margins in the business record high right around I think 34%. Up from 32% a year ago. Google search is doing great. YouTube is doing great. I I just think this business is actually firing on all cylinders and the markets getting jitters because their free cash flow went negative and now they got to go to the debt markets. But you know what? They can handle debt. This is the this is one of the strongest companies. I might say the strongest company in the world. They are making all the right investments. They're building a massive infrastructure mode and they're monetizing that infrastructure mode arguably better than anybody else in the universe. So I really believe in what's going on. Uh the one bare argument I would say is not actually on free cash flow. It's on model commoditization. Everyone's worried about the the open- source stuff out of China commoditizing Gemini and all that stuff. But I liked what um Sundar Pachai had to say on the call which is that you know what the model's just one component here right like they're offering full stack solutions. It's it's the model and the integration and the data and the workflows. Like there is so much more than just the little chatbot. And I I believe in that full stack mode. I believe in what they're doing. I think the stock's pretty cheap. I think any weakness here is a really good buying opportunity. I like Google Alphabet for the long run. All right. So, uh, moving on to our next stock. We're definitely going to bring up Google a bit more later, but moving on to the next stock in question is Tesla. Uh, any insight there, Luke? >> Yeah, so I mean Tesla, they reported earnings, too, and the earnings report was like every other earnings report in the last several years. This tugof-war between the modern day sucks and the future day is going to rock, right? I mean, all the bears are like, look at the current operations. They're they're awful. And they are. deliveries were were great, but they're selling more cars, delivering more cars because they're cutting the prices on their cars dramatically. So, margins are getting absolutely eviscerated. Profits are falling. Cash flows look terrible. So, yeah, the the modern business, the current business looks, I I would use the word awful. I would say Tesla's car business looks awful right now. And the bears have been pounding on the table about that for several quarters because it's looked awful for several quarters. But the Bulls don't give a crap about the car business. They care about robo tax and they care about Optimus and they care about energy and they care about uh Terraab and all that great stuff that's going to happen. So, it's a very similar story to like I remember in the summer of 2019 uh late 2018 going to early 2019, summer 2019 when you know the Model S and the Model X were not doing so well. Popularity was waning and fading for those models. margins were getting hit hard. Uh the company was in a tough profitability position, tough cash flow position, but the bulls were like, "The Model 3 ramp is coming. The Model 3 ramp is coming. It's going to save the day. It's going to be the first mass market affordable EV and everything's going to be great." And you know what happened? Well, the bulls were right. Eventually, the Model 3 ramp did kick in. And the stock went absolutely ballistic. And you know, went up, you know, 10x, 20x, 30x from there over the course of about two or three years. So I think we find ourselves in a current in a very similar situation to what we had in summer 2019. The current operating business is quite frankly not doing well at all. But there are a lot of growth drivers on the horizon which could get going and really wake up the stock in a big way. This quarter did not give the bulls the ammunition they needed to say, "Hey, look, there it is." Just like, you know, in late 2019, bulls could pull, hey, look, look at that quarter. we just we're getting big Model 3 deliveries, profitability is improving, boom, boom, boom, boom, boom, we're off to the races. That wasn't this quarter. We didn't get that this quarter. Robo taxi stuff was like they kind of dodged questions about why there are so few rollouts so far. They just started uh touting safety stuff, which is great, but we need volume and we didn't get any volume answers on the call. Uh Robo Taxi, Elon's all of a sudden hedging his uh commentary on here. still like 10 million units, going to be big, going to be massive, but no real explicit timeline given on when that's all going to actually show up on the income statement, when those sales are going to start. Um, Terra Fab, I don't even think it was mentioned on the call. So, while there are all these growth drivers that Elon could tug on, he didn't really tug on them all that convincingly this quarter. And so for now, the stock's probably dead money because we didn't get those long-term drivers to kind of come in here and put the bears to sleep. Uh the bears are in control of this stock for the short term. But I do think eventually those drivers come into play and we get a repeat of that summer 2019 and the summer 2020 moment where the stock just goes absolutely parabolic as the future growth drivers do come into the current growth picture. >> Uh moving along here, just keeping this episode uh brief. Uh can we talk about Intel as well? another company that just uh recently released some uh information. >> Yeah. So, Intel just reported earnings and they were I mean fantastic like I mean the the the turnaround is definitely here. Just going to go through the numbers right now. Uh 16.1 billion in revenues for the quarter up 25% year-over-year almost two billion above their April guide. Non-GAAP gross margins 41.8% 8% that's up more than 12 points year-over-year and about three points above their guide. Non-Gap EPS was 42 cents loss of 10 cents a share a year ago. Best revenue growth over 15 years for the company. The AI business is the standout here. Data center AI revenue $6.3 billion, up 59% year-over-year. Margins in that segment 39.5% versus 16.1% a year ago. It's a 23 point margin swing in just four quarters. Purpose-built silicon, those ASIC's, those custom ASIC's nearly tripled year-over-year. So, the AI compute story is finally showing up in the actual model. And then the foundry losses are narrowing fast. They put up 5.8 billion revenue in this in the foundry business, up 31% year-over-year. And operating margins improved from a loss of 71.7% to a loss margin of 36.2% year-over-year. So still losing money there, but that's basically a having in the in the negative op margin department, which is fantastic news. So everything's going in the right direction for them. Um we got confirmation from Alpha and Tesla that the spenders are going to keep spending. And this this result from Intel tells me that a lot of that spending is now migrating towards Intel. They are now proving themselves as a formidable foundry player alongside TSMC. They're now proving themselves as a formidable accelerator player alongside AMD and Nvidia. And I just think this growth story is really I mean it it's just getting started. So this was a real big like you know the stock has rallied on a lot of hope and promise of a turnaround that hasn't quite happened yet. This quarter kind of said the turnaround is here. The turnaround has indeed arrived. These numbers are fantastic. I expect them to remain fantastic. I think the stock continues to work. It's one of my favorite AI stocks to be buying amidst the recent chop. >> Next up we have Nebus. Uh so this company just recently uh opened up uh to thirdparty data center operators uh to expand its business. So could you uh expand on Nebus and then also you know how uh the increase in Google's cloud kind of affects Nebius as well. >> Absolutely love the dip by setup on Nebia. So, um, the Google call was super bullish because, uh, Google said more or less we're going to start using more NeoClouds that like our, you know, we've de we've tripled, I think they said we tripled compute, uh, supply in the last what, two or three years and we're still way behind. Like, we're still demand is still outstripping supply by a wide margin. And so, we are going to go and we're going to just get more compute from other people. Like, we're going to continue to build our own compute, but we're also going to go and buy more comput from other people. So, that means they're going to buy more from NeoCloud. you're going to buy more from Nebus, buy more from Corewave, buy more from APL, I ren very bullish do for the whole Neocloud complex from the Google call. So that's a super bullish thing going on there. Second bullish thing going on with Nebius is Nvidia disclosed the 10% stake in Nebia. So if Nvidia who is at the heart of the AI compute story, they know the supply bottlenecks better than anybody. If that company is investing in Nebus, which is a supplier of additional marginal excess compute really, right? It's not core comput. Core comput is the hyperscalers. Neoclouds provide the excess compute really that sort of says hey you know what we we need a lot more compute and Nebius we think is the best supplier of that excess marginal initial compute. So I think it's a huge vote of confidence and we're really really intelligent and in the no player in the space. So you got the Google shout out you got the Nvidia investment and then the technical setup on this thing is just a beauty. We fell to the 100 day moving average. We bounced off of it. Nearly oversold RSI bounce. going to get a bullish crossover on the MACD way below the zero line. That's a textbook textbook short-term bounce or short-term selloff turning into a short-term bounce all within the constructs of a longerterm uptrend. So, love that setup. I think this is a great stock to be buying on the dip here. It looks like the rebound has begun. Excellent. Love to hear that. All right, so moving on to our last stock, we got SpaceX. So, SpaceX almost uh down 50% from its highs, but it is a very recent IPO. So, give us more insight there. Um, is SpaceX still looking like a buy in the next couple of months or do we do we still hold off on the stock? >> My two cents is punch long at 100. I think punch long at 100 is is the right motto on SpaceX that >> obviously the valuation is rich but I they built a once in a lifetime business that has a lot of potential for tripledigit growth over the next several years like per year over the next several years. The next two to three years is going to be about bringing terrestrial compute on board. So bringing on gigawatts, you know, on Earth and then the three to five years after that, it's going to be about bringing on gigawatts in in space. So I think that terrestrial compute can add hundreds of billions in revenue over the next three years. And then in the five years after that, orbital compute can add another hundreds of billions of revenue. So I mean, you could be getting to a trillion dollars in revenue here [snorts] within the next five to seven years. And that and a company like this, I mean, that's worthy of a 10x multiple, I would say. So you're talking $10 trillion uh valuation here that becomes pretty compelling if the stock drops down to about $100. I think the riskreward becomes asymmetric on the reward side if we get down to $100. So sentiment is washed. The stock just keeps on falling. I don't like buying falling knives, but at [snorts] some point it's got to put in a floor and I like the floor at 100. Just a big psychological level there. Um and I I think that's the floor the stock puts in. So punch along at 100 on SpaceX is my two cents. >> Love it. Okay. Yeah. So the the theme here of this week and the past couple of weeks has just been the fundamentals are strong but the sentiment is it's out there. Uh any any final notes? We are going to have some more information on Google earnings and the AI selloff in the next episode. >> Yeah, I think we'll cover it in the next podcast. Um I think I want to keep it short and sweet here. These are the five stocks that I'm really looking at this week. Obviously earnings has brought a lot of them front and center, but I think all five of these stocks, four of them you have a pretty good opportunity. three of them you have a pretty good opportunity in right now. Tesla for long-term thinkers maybe an opportunity for short-term people maybe want to avoid and then SpaceX another couple points lower I think you got a great opportunity but I think in Alphabet I think in Intel and I think in especially Nebius you have really good short-term and long-term opportunities here I'd be capitalizing on any weakness we are seeing and in the next podcast we'll kind of dive into the bigger themes at play as to why I believe uh this market's about to wake up in a big and positive way over the next few weeks. >> Excellent. All right, appreciate it, Luke. Uh, that we'll be coming out with that episode in the next couple of days. Please stay tuned. Uh, we've been traveling and, you know, there's been some ailments. We'll be back to our regularly scheduled program next week. [music] [music]