AI markets BOOM as potential ban on Chinese data center components looms

CHARLES: ALL RIGHT, SO IN ADDITION TO THE USUAL GUESSING GAME ABOUT RETURNS ON INVESTMENT, DEBASE OVER VALUATION, INVESTORS BETTING ON A.I. LIVING UP TO THE HYPE AND NOW STARTING TO GRAPPLE WITH THE INCREASING ROLE OF GEOPOLITICS. THIS WEEK REPORTS THE ADMINISTRATION'S WORKING TO BAN CHINESE DATA CENTER COMPONENTS HAS SENT EVERYONE BACK TO THE DRAWING BOARD. MY NEXT GUEST IS ALWAYS AT THE DRAWING BOARD, ENGINEER TURN THED STOCK PICKER, JOINING ME NOW, ANNIE SIN. I WANT TO START OFF WITH THE, WITH, YOU KNOW, THESE DATA CENTER NEWS, OBVIOUSLY, THESE OPTICAL NAMES HERE TOOK OFF. THE QUESTIONON THOUGH IS BECAUSE THE CHINESE NAMES HAVE SUCH LARGE SHARE ALREADY, IS IT EVEN POSSIBLE TO PULL OFF? DO WE HAVE THE CAPACITY TO TAKE UP ANY -- IT'S ALREADY A BOTTLENECK. WOULD IT GET WORSE OR COULD IT, ULTIMATELY, BE THE RIGHT THING? >> I ABSOLUTELY THINK THAT IN SOMETHING CRITICAL AS DATA CENTERS WHICH MORGAN STANLEY CAME OUT WITH A NOTE HOW CRITICAL IT IS, WE NEED TO TO SOURCE MORE SUPPLY JUST LIKE WE NEED TO SOURCE MORE SUPPLY OF MEMORY. AMERICAN-MADE MEMORY. SO CORE SITS AT THIS IMPORTANT, KIND OF THE CENTER MAKING INP, AND WHAT IT DOES IS ACTUALLY MAKES ELECTRONS CONVERT BACK INTO LIGHT. THIS IS VERY IMPORTANT BECAUSE MOST OF THE SUPPLY WAS COMING FROM CHINA. BUT COHERENT HAS ABOUT 20 PRODUCTION FACILITIES ACROSS MULTIPLE STATES, AND THIS IS PROBABLY THE ONLY AMERICAN COMPANY THAT CAN SUPPLY IF A TARIFF BAN CAME OUT. CHARLES: ALL RIGHT. YOU MADE A GREAT POINT BECAUSE CHINA AND JAPAN RIGHT NOW ARE AT MAJOR ODDS WITH EACH OTHER, AND CHINA CUT OFF THIS INP FROM JAPAN EARLIER THIS YEAR, AND THEY CAN ALWAYS DO THAT WITH US. THEY'VE DONE IT WITH RARE EARTH. SO ULTIMATELY, I THINK IT MAKES SENSE FOR US TO SORT OF, OBVIOUSLY, BE ABLE TO CONTROL THAT BECAUSE THAT IS A KEY PART OF THE ENTIRE A.I. BUILD OW. I WAS -- BUILDOUT. I WAS READING THAT MORGAN STANLEY REPORT AS WELL, THEY MENTIONED APPLIED ELECTRONIC, FABBERFETE. ARE YOU LOOKING AT -- FABBER NET. >> I OWN APPLIED OP TUNNEL ELECTRONICS, AND I THINK THIS WHOLE BASSETT DEBT I CLIEWPPEDDING COHERENT SHOULD BE OWNED IN CASE THERE WAS A BAN COMING IN. CHARLES: OKAY. >> SAME AS, LIKE I SAY, MEMORY. AND EARLIER IN THE YEAR I TALKED ABOUT CRITICAL MATERIALS. I THINK AS WE BECOME MORE GEOPOLITICALLY SENSITIVE, THESE CRITICAL MATERIALS COMPANIES THAT ARE USED IN DATA CENTERS, USED IN OPTICAL INFRASTRUCTURE BECOME MORE AND MORE -- THEY GO UP MORE AND MORE IN THE VALUE CHAIN. CHARLES: ANOTHER ISSUE, , THE CHINESE CHIP MARKET. IT'S SMALL. THE CMXT, WE'RE GOING TO BRING IT UP JUST TO SHOW FOLKS THE MARKET SHARE, THE MEMORY PART HERE. IT'S SMALL BUT IT'S GROWING FAST RIGHT? I MEAN, THEY DID A HOT IPO. THEY'RE BREAKING GROUND. HERE'S THE CHART I WAS LOOKING FOR. SO THEY'RE BREAKING GROUND. AND, YOU KNOW, THE THING FOR ME THAT I'M CONCERNED ABOUT IS THAT YOU SEE THE SLIVER HERE, FOLKS? WE KNOW HOW QUICKLY THE CHINESE COMPANIES CAN TAKE MARKET SHARE NOW. I TRACE ALL THIS A.I. WEAKNESS, I TRACE IT BACK TO TIM COOK THREATENING TO ALMOST USE THEIR CHIPS WHEN HE COULDN'T GET THE DEAL HE WANTED FROM MICRON. NOW ALL OF A SUDDEN THEY'RE TELLING TIM COOK, LISTEN, WE'RE NOT GOING TO GIVE YOU A CHEAP PRICE. SO THAT'S SORT OF A SIGH OF RELIEF. FOR NOW CMXT IS NOT A MAJOR THREAT. >> I SAID THAT BEFORE LAST WEEK AND I'M SAYING THIS AGAIN, BECAUSE CMXT'S OWN INTERNAL DEMAND FROM -- AND HUAWEI, THEY CAN'T EVEN FILL THAT. CHARLES: RIGHT. >> THEIR COST OF PRODUCTION IS 30% HIGHER. AND THEY'RE NOT A THREAT DIRECTLY TO SK HYNIX AND MICRON BECAUSE OF THEIR HVM COMPONENT IS ONLY 2% OF THEIR ENTIRE -- CHARLES: THE HIGH BANDWIDTH MEMORY. THAT'S THE NEXT BIG MONEY DRIVER IN THE MEMORY SPACE. >> YES, A HIGHER MIX PAUSE THAT'S WHERE THE ASPs ARE, THE LONG-TERM AGREEMENTS ARE BEING SIGNED. SO CXMT IS NOT A THREAT NOW. WHERE THEY'RE A THREAT AND THAT IS LEGIT IS IN THE COMMODITY D-RAM SPACE. THEY ARE GOING TO INCRCREASE THR CAPACITY TO 350,000 WAFERS A MONTH AT THE END OF THIS YEAR WHICH IS VERY CLOSE TO MICRON'S 375,000. AND OVER TIME THEY'RE PROJECTING 600,000 -- CHARLES: ANNIE, LET ME JUMP MANY HERE BECAUSE WE HAVE A LITTLE BIT OF TIME LEFT, AND I'VE GOT TO GET YOUR THOUGHTS ON SanDISK. HAY REPORT AFTER THE CLOSE. WHAT ARE OR YOU ANTICIPATING? >> THEIR REVENUES ARE GOING TO BE JUST MIND-BLOWING. WHAT WE HAVE TO LOOK FOR IS THEY'RE DEFINITELY GOING TO GET HIGHER PRICING. HOW MUCH HIGHER PRICING, AND WHAT I'M LOOKING FOR IS LONG-TERM AGREEMENTS, AND SC IS JUST LIKE MICRON IS SIGNING. FOR THAT TO BE THE NEXT LEG OF GROWTH. THERE'S NO QUESTION ON DEMAND -- CHARLES: RIGHT. AND I KNOW YOU'VE SAID BEFORE, YOU STILL SAY D-RAM, IT'S MAKING A SERIES OF LOWER LOW, LOWER HIGHS. YOU WANT WEAKNESS BECACAUSE YOU WANT TO OWN THAT. ALSO I'M GOING TO FLASH UP HERE REAL QUICK YOUR MUST-OWN WATCH LIST BECAUSE THESE ARE SOME NAMES, INTEL IN THE 60-70 RANGE. TAIWAN SEMI, MID 300. THOSE ARE THE NAMES YOU WANT TO TAKE ADVANTAGE OF THIS WEAKNESS, THAT'S THE BOTTOM LINE. >> ABSOLUTELY. I THINK WE HAVE DATA CENTER GROWTH, MUSK SAID YESTERDAY HE'S GOING FROM 2 GIGAWATTS TO 10 GIGAWATTS NEXT YEAR. THAT IS AN INCREDIBLE AMOUNT OF COMPUTE AND MEMORY, AND THESE ARE AT THE FOUNDATION OF THIS NEXT PHASE OF GROWTH. YOU WANT TO OWN THEN. CHARLES: WHAT DOES ONE GIGAWATT RELATE TO? I READ SOMEWHERE LIKE 30 BILLION. IS THAT AN EXAGGERATION? >> A GIGAWATT, THINK OF IT, A GIGAWATT IS LIKE POWERING A MILLION HOMES. CHARLES: WOW. >> SO IT'S INCREDIBLE. IT'S JUST ONE NUMBER IS INCREDIBLE. AND ELON GAVE A NUMBER, $30-50 PER WATT IS THE COST. CHARLES: RIGHT. >> REMEMBER, TO MONETIZE IT, YOU HAVE TO SELL IT FOR EVEN HIGHER THAN THAT. SO THE PRICE TO PRODUCE THAT ONE WATT IS GOING UP MORE AND MORE. WHY? BECAUSE COMPUTE IS MORE EXPENSIVE. THE MEMORY'S EXPENSIVE