The Most Obvious Buy in the Market Right Now

Hey everyone and welcome back to another video for today. In today's video we have a lot to discuss. AI stocks semiconductor names are all rebounding after Microsoft earnings call. Meta on the other hand well Meta is down close to 10% today not participating in this huge rebound. Also situational awareness Leopold right apparently there are reports saying that he has sold all of his book to one single buyer. all of his long and short positions and apparently 50% of his entropic exposure as well. I don't know if he sold it yesterday at the bottom or he blew up, but yeah, some people already said that he's a legendary investor. Yeah, legendary a butler. I would say if you give me $200 million to start and some insider information, I think I can turn that into a billion as well, but I won't blow it up. Anyways, looking at today's market, it's the exact opposite of what we've seen before. And by the way, Jose and myself's live stream yesterday, the therapy session, I guess it worked because you can clearly see semiconductor names rebounding. Microsoft is up 13% close to 14%, Oracle is up six, Amazon, Amazon reports later today, Amazon is up 4 and a.5% or so, Intel is up 13, Micron up close to 15, AMD is up 12.5. Then if you look at the Neoclouds, if we look at the Neoclouds, well, they're up 27% for Nebulus, 26% for Ian, 22% for Core Weave, we have 25 for White Fiber. So, a huge huge recovery here. I didn't even notice, but Nebus was down yesterday, over 40% over the past 5 days, which is which is insane. Did I buy more? No. I was planning on buying today. Didn't know that this was going to happen. It is what it is. I always have big exposure there. So I guess I'll keep cash as cash for now. Now, of course, we need to talk about the big tech company, the story there, right? It's very important to understand why a Microsoft is up, why a Meta is down and the message that both of these companies have sent to investors and the market. Now, of course, a Microsoft has been underperforming, but it was at $350. Actually, Microsoft stock, as you can see, bottomed right here. the same day SK Hindings, SanDisk, a Micron and all of these names topped like the exact same day. Of course, since then Microsoft is up. The other names are down a lot, but year to date Microsoft is still down 9.3%. It is of course over the past 12 months down 16.4% 4% because yes, Microsoft peaked in October of 2025 and since then it has come down quarter after quarter despite the business doing extremely well. Of course, the big number that we're looking at, the big number that the market is looking at and one of the reasons why the stock actually started to go down in the first place is this, right? Remember we're growing here Azure 39% 39% then one quarter was 38%. Ooh, the horror. Well, it was 38% of course lapping a quite easy comp, but since then 39% and this quarter 43% year-over-year growth, but that was not all of what Microsoft told us. Now before we go and dive a little bit deeper if we look at capex capex estimates for a Microsoft we can see that for fiscal 27 market is expecting $196.5 billion quarterly if you if you're interested in that quarterly $48 billion for next quarter this quarter $35.8 8 billion. The estimate was 36.1. Now for next quarter 48 I believe the number is not that far from it. But the big story here is is of course oh people are saying capex growth is coming down coming down quite hard. We don't see any growth. Let I mean those headlines don't make any sense. Those tweets don't make any sense. Google, Meta, Microsoft, they're still expecting to grow capex in 27. Although with Meta, we didn't get the confirmation or the guidance for 27, which people were shocked. But then again, we're only well, let's say we're in August, start of August, pretty soon. So why would they give us a number for 27? They just said it's going to increase. Now a meta, yeah, Meta is cheap. Meta right now is getting zero love. Meta is down 18.3% year to date. Over the past 12 months, it's down 23.6%. It is a very cheap company. It is a tremendous company and it is the fastest I think the biggest ad generating or revenue generating company right now on the planet. So let's let's dive a little bit deeper, shall we? And I'll explain why a neocloud like Nebus or IN etc. all exploded after both of these companies reported. Enjoy this type of videos, hit all the buttons. Really appreciate that. You want to support me even further, do check out the link down in the description and in the pin comment with the top 10 best stocks to buy now or go to full.com/cotchinvestor. Thank you very much. So for Microsoft, we've had here and they closed out their fiscal year. So they're now in a new fiscal year, which is fiscal year 27. $90 billion in revenue, $40.6 $6 billion operating income, that's up 18%, gapnet income is up 31%. Microsoft cloud revenue was up 27% year-over-year, $59.3 billion. Commercial remaining performance obligations was up 84% year-over-year. $678 billion is the number here. Now, on that they did add a bit more comments, which is very very important to understand. Productivity and business is up 14%. Intelligent cloud including Azure 32% Azure and other cloud services up 43% which is an acceleration and then more personal computing is down 4%. As for co-pilot right how do you monetize copilot AI etc. They told us the following thing. Over 30 million paid Microsoft 365 copilot seeds. Net ads more than double quarter over quarter. 80 million GitHub copilot users. Copilot revenue accelerated over 60% quarter over quarterarter on usage pricing. There are 235 million total GitHub users. Over 100,000 Foundry AI app Asian platform customers and revenue more than doubled year-over-year. 40 million agents registered on agent 365 just 2 months after launch and over a 100,000 models available in Microsoft foundry catalog openai entropic mistral xai etc. Then of course they said the same thing that Satcha has been saying on X in his blogs. He said the following thing. Keep the model swappable from the harness. So any enterprise can mix frontier models, lowcost MAI models or its own trained models while Azure captures the infrastructure spend regardless of which model wins. Reminds us a lot on what Palanteer has been saying for quite a while. This continued by saying such as considering the call we are advancing the frontier on the cost to outcome curve ensuring every customer can turn tokens into business results. This year Azure revenue surpassed hundred billion for the first time and Microsoft 365 copilot reached over 30 million paid seats. As for guidance for Q1 fiscal year 27, they expect revenue to grow between 16 to 17% year-over-year. Intelligent cloud 33 to 34% year-over-year. Azure 45% around 45% growth which means again accelerating growth. Capex more than 50 billion dollars. For the full year they're expecting another year of doubledigit revenue and operating income growth. Operating margin down less than 1% despite heavy AI investment. Capex expected to grow again year-over-year. Company still expects to stay free cash flow positive. That's very very important. Then data center and office use for life is going to be extended from 15 to 25 years. And that's not all because every time we talk about of course backlog then there is this question about concentration risk. They said the following thing with regards to the $678 billion of remaining performance obligation. All sequential commercial RPO growth was driven by commitments from customers outside of frontier model companies. An RPO increased 25% when excluding OpenAI. RPO including OpenAI has a weighted average duration of 2.3 years and roughly 30% will be recognized in revenue in the next 12 months up 37% year-over-year. The remaining portion recognized beyond the next 12 months increased 112%. Microsoft Cloud revenue was $59.3 billion, increased 27% year-over-year, reflecting strong demand across Azure and our firstparty AI applications and services. For the full year, our cloud revenue surpassed $214 billion with nearly 90% from customers outside of frontier model companies. I'll repeat it. For the full year, our cloud revenue surpassed $214 billion with nearly 90% from customers outside of frontier model companies. This of course is in my opinion one of the main reasons why we started to see candles stick up. Of course, the fact that capex is going to grow in fiscal 27 and they can still stay free cash flow positive also increased that green candle. But this last sentence here is extremely important which then moves me to Meta. Meta had a good quarter. Now revenue beat estimates tiny bit. Revenue was up 28% year-over-year but we had some issues here with profit. So 30.9% gap operating margin down from 43% year ago. $6.18 approximate gap EPS missed estimates by $14. Now, the miss here for profit was driven almost entirely by a $3.6 billion of a one-time legal and severance cost tied to the May layoffs. Strip those out and EBIT actually beat estimates by 4%. Now, family daily active people 3.6 billion up 3.4% year-over-year back to sequential growth cuz remember 3 months ago people were freaking out. Oh, it's down. Well, it's now back up and it's even higher than two quarters ago. Ad impression growth and price per ad growth. Ad impression up 14%, ad growth up 12%. Free cash flow was actually positive, but I do think that there there were some accounting things there that made it positive. It's just 1.3% margin. So, let's call it zero and we expect it to go to zero and under it actually. So this is basically why we are seeing profit look worse than what it is. Also there is an 83% increase growth in capex to $31.1 billion. Of course that was expected but with meta as I said before the core business is already doing much much better and this is why for them it makes sense to continue to invest more. They've seen over 60% daily user boost in MetaI after adding the new Muse Spark model. Advantage Plus, which is the AI ad campaign tool, annualized run rate, sits at $75 billion and that's up from $60 billion just 3 months ago. Higher ad conversions on Facebook from unified LLM ad ranking system. That's up 15.7%. There's a million weekly active customers on Meta's new WhatsApp Messenger business AI agents. Two billion Instagram daily active users. Engagement is up 10%. Threads is at half a billion. Monthly activives reached the milestone faster than any rival app. And they said that Meta at Stack, which is Latis, then GM, and then Andromeda, is now feeding a single family of models into both organic ranking and ad targeting. The company's framing is engagement and monetization are converging into one AI flywheel rather than two separate systems. They continued by saying over time all of everything that they're they're building right now for the business for advertisers for marketers for creators etc etc. this said this and over time we'd like to build this into a business in a box service that can help you start and run a whole business using Meta's platforms. In terms of how we will monetize these, we have a mix of subscriptions, volume based pricing, and I expect that we're going to continue to evolve more of these products to be like our ad systems where where businesses only pay us when we achieve results for them. I'm very optimistic about our work to integrate large language models into our recommendation systems. So again, I do think that the monetization side of the ecosystem that Meta has is still early days. Like WhatsApp for example, WhatsApp business is still early days. It's growing like crazy, but it is early days. Then everything else, the subscriptions, everything that they've talked about right now and over the past couple of months, I believe that they are keeping some things behind closed door because they want to announce it a bit later. It's all early days in the monetization cycle. So of course right now the only thing what we're seeing is oh spend spend spend but there will come a time where suddenly you're going to see everything accelerate and the spend would make a lot of sense. Then with regards to the cloud the buildout in terms of running the business obviously a common trade-off that we need to make is around how much do you monetize something today versus develop future assets for the future. And I think that it's always a portfolio. It's not like you only want to do long-term things and not prove out the market that exists in the near term. But I also think I would be foolish to basically just sell all of the compute and take a short-term profit because he said, "Look, we have so much demand, right? People are willing to pay a premium for our compute. But right now, if we do this, it's going to be a small part because we do think that the majority of the compute is going to be needed for our own business. But I do think it's just a question of when, not if they're going to say, "Oh, Entropic, we've reached a deal with them or we reach a deal with another big AI lab." A short term probably because a shortterm would make more sense, right? If Entropic needs for the next 3 months x amount of gigawatts, it would make sense. it would also make sense for them to pay a premium. Lastly, with regards to personal AI agents, Mark said, "These agents will be able to run 247 to help you achieve goals and improve your life, health, and whatever you want. It's still a matter of when, not if." And this is something that Meta has been focused on for quite a while. And it makes sense because of the ecosystem that they've built. If you look at also the benchmarks, right? If you want to look at benchmarks, they're always very very good with regards to agentic workloads. Then with regards to compute capex guidance comments that they gave us during the call. So they said the following thing. Q3 2026 revenue guidance came in 2.7% below street estimates. Fullear OPEX guidance raised about 1%. Fullear capex guidance raised about 2% both above expectations. structured one gigawatt data center deal with Black Rockck in El Paso. Meta operates the site while Black Rockck funds most of the capital. Of course, easing Meta's own cash burden. Now, for 2026, they said the following thing. Tight capacity for the foreseeable future. For 27, no formal guidance just yet, but the direction here is quite clear. They said spending will be notably higher than 2026 already elevated levels. As for 2028, Meta plans to secure land and permits for future sites, but will hold off on buying expensive chips until demand signals are clear. A more cautious posture, of course, than recent quarters. Now, they didn't tell us exactly that, oh, we're not going to buy from AMD or whatever or buy land here and there, but it's quite clear that right now the focus is on 26 and on 27. And so all in all when you compare a Microsoft and a meta it's quite clear that right now for a Microsoft things are looking better right they are growing they're still profitable etc etc for a meta it's still a we are investing very much in the business the business is still doing well yes as you can see from a profitability standpoint they took a hit from a free cash flow standpoint they are taking a hit right now as well which is as expected because if if it turns out to be the correct move. This will be forgotten in probably a year from now, right? This will look like, okay, happened for a quarter or two, just like a couple of years ago with the whole metaverse buildout. Although, with the metaverse buildout, they just threw the towel and said, you know what, we we did a bit too much. But then again, they did already buy quite a lot of GPUs, which I think did help them for the next couple of years. Right now, I do still feel that this is a tremendously undervalued business. Microsoft, same thing. Undervalued business, high quality names. Now, why why are all the other names up, right? Why are we suddenly seeing Nebus up 29%, Irene, Cororeweave, all of these names, semiconductor names, all of them are up. I mean, almost all of them are up double digits. Nvidia is up 1.5% right now. But it did flip. Something did flip. And I think it's the comments on it's not just capex because capex is still expected to grow. Although you could say, "Oh, but since they didn't tell us that they're going to increase it by a significant amount in percentage wise, then it should be bearish chip names and NeoClouds, etc., etc." But on the other hand, they told us that they're still expected to grow. Microsoft also told us that they still expect to be free cash flow positive for the whole year, which is very good. And so you might say, hm, maybe maybe this is a good business to have because they are spending a lot of money and they can still generate free cash flow. Meta, yeah, Meta, the stock's reaction right now, in my opinion, does not reflect reality. We're basically back to the bottom here of March of this year. It does not reflect reality because the core business of Meta is still doing extremely extremely well and it's just a matter of time. Remember, not that long ago, literally I think two weeks ago, the stock was close to $700. So things can move quite quickly and it happened because of that headline, right, of of the Meta Compute and also with new Spark. So things can move quite rapidly. But all in all, for those that thought that this whole AI story is over just because we've had a couple of red days, well, think again. Because as of right now, none of these companies none of these companies have shown us any weakness. Now, of course, later today, we do have Amazon. We have Apple. Although I'm not expecting anything crazy from Apple, but from Amazon, still the same story. Although with Amazon's capex, it is the biggest. It's $200 billion, but it's also because of the logistics network, etc., etc. But it would be great to hear what they tell us and good to know what AWS is doing right now. Still expecting acceleration in growth in AWS. They'll probably give us some more numbers here with regards to tranium, with regards to their own chip business. So, I do expect more good comments on this whole AI uh story. And so, all in all, ladies and gentlemen, that's about it for me in today's video. Share your thoughts down in the comment section below, and we shall see each other in the next one. Bye-bye.