Transcript of Hightower's Chief Investment Strategist on the Case to Buy SpaceX, the AI "Food Chain," and Whether It's Too Late to Buy NVIDIA New

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I truly believe we are seeing things that we've never seen before, and it's gonna change our lives.

Stephanie Link is the chief investment strategist and head of investment solutions at Hightower Advisors, a national wealth management firm. The investment solutions team at Hightower currently has $8.2 billion in assets under management, and Stephanie's insights are sought after by every single big financial show on air. Today, she gives us a vibe check on the market.

We care because if the economy is growing 3%, earnings can grow 20 to 25%, which— I've been doing this a long time. I know you have too. I've never seen 25% earnings growth like we saw last quarter, and we're on pace to do another 20% for the full year.

What opportunities she's seeing right now.

Cybersecurity is going to be bigger than AI.

And whether AI investments are still worth the hype.

We're in the third inning of AI revolution. We're in the second inning of cybersecurity. We're in the first inning in robotics.

I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for Some Money Right Now.

Money Rehab.

Stephanie Link, welcome to Money Rehab.

It's so great to be here, Nicole. Thank you.

It's so great to have you. I have had an intellectual crush on you for many, many years, and I'm so happy to finally see you in person.

This is going to be so much fun. I'm honored.

And honestly, you spend most of your day talking to old rich white men about money. And so now it's time to take all of your brain and amazing information and give it to everybody else.

I'm looking forward to it.

So what's going on with the markets right now?

Yeah, it has been a wild year. If I had told you in the beginning of the year that we would've had Venezuela, we would've had SCOTUS overturning the tariffs, we would've had AI and the software— tariffs in general, tariffs in general, unknown, the apocalypse in software because of AI, private credit, and, and, and now this war that we still have going on, going, not really going, we're not sure. If I were to tell you that, I would have thought that the market would be down double digits, but in fact, the markets are up about 8% and the NASDAQ's up about 11% year to date. And why is that? It's because the economy has an enormous amount of momentum behind it. There's a lot of tailwinds, and I have been bullish on the economy for the last couple of years. And I was thinking we could grow maybe 2, 2.5% this year. We're on track, on pace to grow 3.5%, give or take. But that is much more, that is much stronger than even I thought. And a lot of that has a lot to do with two things. The consumer is consuming, even though the press would have you believe else— otherwise.

And you have this AI revolution and we can get into all the details, but That is the main reasons why we have so much in terms of the tailwinds to the economy. And why do we even care? We care because if the economy is growing 3%, earnings can grow 20 to 25%, which I've been doing this a, a long time. I know you have too. I've never seen 25% earnings growth like we saw last quarter, and we're on pace to do another 20% for the full year. And again, it has a lot to do with these two really big parts of our economy, the, The consumer's consuming because they have jobs and they have wage growth. And we can talk about inflation. I'm sure we'll talk about it, but it is going to be coming down. It is coming down. And then it's the, not only the AI revolution, it's the food chain. So it's AI and all this CapEx that we're hearing from all these big technology companies. But the beneficiaries of that CapEx, the industries that are seeing all this money being spent, is widespread. So it's data centers and the buildout. It, it is the grid and upgrading the grid, because we haven't upgraded the grid in over 50 years.

And then it's power, and we don't have enough power. So you add all of this up, and that's why we're growing better than expected.

Well, so in English, CapEx, capital expenditures, just means like companies are spending a bunch of money, and when they spend a bunch of money, they have to hire people to do whatever those projects that they're spending the money on.

Yes. And it's It's just, it's the big 4 technology companies and more than just 4, but the, but the big numbers, we're gonna have $800 billion being spent this year, this year, which is up 75% from last year on these companies like Amazon, Alphabet, Meta, Microsoft, those kind of big names. They're the ones that are spending all of this money to build out AI, but you need the infrastructure. You need kind of like the picks and the shovels. And you're right, you need the people, and we don't have enough people.

Well, it's so crazy that you say that because colloquially people are like, in this economy, you know, and they— there's a vibe session. People don't feel like the economy is strong, but you're saying that the numbers show otherwise.

Yes. And it's so many different sectors. So it's not just— for the last couple of years, everyone was talking about MAG-7, you know, the big, the names I was just talking about, and they were driving a lot of the growth. Now it's spread to all these other industries. And so you talk to some of these really— I don't wanna be offensive, but like these boring industrial companies, they're seeing—

Caterpillar.

Yes. I was gonna say that they're seeing like 35% backlog growth, 70% order growth. I've, I've never seen numbers like this before. And it's because of all this spend that's happening and It's not going to end. I think next year you're gonna see $1.1 trillion of this spend from the same companies. Now, it's not gonna be 75% year-over-year growth. It'll be more like 40 or 50%, but it's going to be, they're gonna spend it. And if I can just suggest anyone listening and watching, take a look at the CEO of Amazon. We all know Amazon CEO, Amazon. His name is Andy Jassy. He writes a shareholder letter every year in English so that we can all understand it, like just really very plain and simple. And he went through this year's shareholder letter explaining exactly why they're spending so much in detail because, and in his words, we've never seen anything like this in our lifetime. That's why I call it the AI revolution because I truly believe We are seeing things that we've never seen before and it's going to change our lives. And that's why they're spending so much.

So if somebody is listening or watching and they're like, but Andy is a very rich dude, and what about regular people who are struggling and they're feeling inflation? So that's another economic marker. It's kind of a mixed bag. We're seeing so much hiring and the rest of it, but doesn't— why does it not feel that way?

Because it's K-shaped. And we've, we've heard about K-shaped, K-shaped, meaning it's the high end. Of the consumer that is doing the bulk of the spending. And why are they doing the bulk of the spending? Because they have the money, they have interest in homes. So their home prices have appreciated. So they have the wealth effect and they also own stocks. And the market, the S&P 500 over the last 3 years on average is up 18%. By the way, that's not normal. Normal is about 7%.

7 to 10, right?

Yeah. So, so if you think about it, It's, it's the high end that is spending, but it usually is the case. I hate to say it. I want everyone to be spending. I want everyone to feel good, but that's not normal. That's not normally what happens. I don't think the middle, the middle end consumer is, is feeling as badly as the lower end and the lower end. Unfortunately, they are the ones that get, feel the brunt of inflation. Now I will say on inflation, just because we, we should go there for half a minute. It's, it peaked at 9% in 2022. Yeah, that was crazy. Right? That was COVID.

And all of our listeners bought I bonds then.

Right, right. I got questions on that too. And so we peaked at 9%, we got down to about 2.5%, we're now at about 3.5% because of the war. I strongly believe one way or the other, we're, we're gonna have to end this war, whether it achieves what the administration wanted or not. I'm not gonna go down that path. However, The midterms are coming up, and I can't imagine that this administration wants gasoline prices of where they are. That all being said, believe it or not, since we've kind of started talking about ceasefire, not ceasefire, or whatnot, oil prices have peaked in April at $112. That's crude, crude prices, and they're now at $69. So we've corrected in oil prices 39% from the highs. It's still high. But we've corrected and I think that's going to lead to lower gasoline prices at the pump. We're already seeing it. It's never as fast as we want it to be, but I think you're going to continue to see it come down. That will help the inflation piece. I don't think we're going to get to 2%, which is what our Federal Reserve, the target team wants. I think you're going to be around 2.5%. And I think that's the case.

Again, circling back to AI and the food chain. Because there's so much demand, there's so much money that wants all this stuff to be built out. We're short everything. We're short memory, we're short compute, we're short copper, we're short aluminum, we're short a lot of things, short people. We're short a lot of things. That by definition is inflationary. Eventually we'll get past this, the inflationary piece, 'cause we'll fix the bottlenecks in the supply chains and it will be a productivity enhancement. That's really positive for the long term, but we've gotta get through this inflationary piece. So to answer your question, unfortunately we're not out of the woods. Some people don't feel well, they don't, they're, they're feeling pressured for sure. But the consumer, the bulk of the consumer that has the money is spending and they continue to spend a couple of different pla— like mainly on services, goods too, but services and services is 75% of consumption. So we root, we root for the consumer and then we root for them to spend on services for our economy. And we're, we're seeing it.

So does inflation get worse before it gets better? Where are we at, like 4%?

I think we're 3.5, 4, depending, depending on what numbers you're, you look at. But I, and I, I do think we're gonna, I think we've seen peak. I really do. And I think so because we're not gonna have the oil piece of it that is really dragging us higher. Because if we— now, this is a big if— if we can get resolution on this, on this war, and it does seem like it's headed that direction. And again, this administration can't afford to have oil prices where they are, gasoline prices where they are into the midterms. And so I do think you've seen peak, but I don't think we're going to get to 2%.

I see. So you're like inflation is high when you're including oil. If you— yes, if you take out oil, we're actually doing okay. And so when the war resolves, it's going to come down.

Yes. And, and oil prices already have come down. But the problem, it's not just oil prices. See, if oil prices go high, then all of the feedstocks, all of the food chain of commodities go higher as well. Agriculture, all kinds of— soybeans. Soybeans, every— so if you have oil come down, I think you will see these other commodities come down. Again, not, not, not to where we really want them to go, just because this is a boom that we're seeing in this whole AI revolution.

Well, you're saying the boom, the go-go days of the S&P up 18%, typically 7 to 10%, you know, accounting for inflation. Is it the S&P 500 or is it the S&P 493, which is stripping out the Mag Seven?

Yeah.

Of those tech stocks that you mentioned.

Last 3 years, it was the Mag Seven. It drove 90% of the returns on average. This year, which it's kind of interesting that now last couple of days it's— we've seen a little bit of— there's a funky stuff that goes on around the quarter end, so I don't really pay too much attention to it. But this year we've actually seen the S&P Equal Weight do better than the S&P Market Weight, which means exactly what you just said. The 493 are now starting to catch up to the Mag 7. And the reason— and that's like financials and materials, energy, healthcare, other sectors are doing really well. And tech has taken a breather other than semiconductors, 'cause they're on fire. But Mag Sevens have taken a breather because as an investor, you make money when you see better earnings growth, right? We, I mean, sure. Our friends at, you know, back in the day taught us this a long time ago. Stocks follow profits on the way up and on the way down. So if earnings are going higher, stocks usually follow.. And then if they're going lower, they, they usually follow. And what happened with the Mag Seven is that they're spending all this money, they're eating into their cash, into their free cash flow.

And you don't necessarily make a lot of money when companies are heavily investing. We want them to invest for the long term. However, you don't get that positive operating leverage. So you have revenue growth, but you don't get margins. Margins become depressed and compressed because you're spending so much. And so you don't have as aggressive earnings growth. And that's what's happening with the Mag Seven. At the same time, you're just seeing earnings growth at these other sectors. It's just kind of as simple as that. And the valuations are pretty attractive in these other sectors.

So when you say looking at the equal weight S&P 500 for a new investor and they're hearing, okay, get in and, and low-cost S&P 500 index fund, Warren Buffett said it, Nicole says it, Stephanie says it. Which tickers should we be looking at considering that 7 of the stocks are— have been driving so much of the growth?

Yeah, I mean, I honestly believe strongly and I was very lucky. My father was in the business and he still is in the business. He's 89 and he taught me right out of college, you have to start investing. The sooner you do it, the better it is, right? Because you have that compounding thing happening. And of course, we have 7 to 10% average growth in the markets. I think it's as simple as buying the Vanguard S&P 500 because, and you could pick any of the ETFs because they're, you know, just the low cost. You want the low cost provider because it's the most diversified and you dollar cost average. That just means you buy, you put a little bit of money away. Is it once a month, once a quarter, every 6 months? But you just routinely put money in. And dollar cost average means you don't have to time it. Yeah, I mean, we do this for a living and it's hard to do, right? Totally.

Time in the market beats timing the market. Yes, I love that.

I love that.

And so if you're looking at like the Vanguard VOO, for instance, which is low cost, would you still suggest looking at the, the total S&P index funds like the VOO or the SPY or the IVV compared to like some other kind of weighted version of it?

I think you just want to as diversified as you possibly can and as low cost as you possibly can. There's no reason to spend money on, on a passive tool, passive investment tool.

I look at the expense ratio.

Yeah, I just like the diversification because you just don't know. Some years Mag Seven are going to be leaders and some years they're not. Again, you can't time that when it is. All I can tell you is that right now the Mag Seven, they're going through a massive, massive, massive spending cycle. And that's going to lead to great growth in 2, 3, 4, 5 years. Is it going to give you great growth in the next 2, 3, 4 months? Probably not. It's not going to be bad. But I just think that in the meantime, since the economy is doing so well, that's why these other sectors are doing well, because these other sectors are doing well because their earnings growth is going higher.

We've gotten some questions, you know, because QQQ, the, the ETF that tracks the Nasdaq, has been off—

I don't even know—

off the charts, off the hook, off the chain, off, off the whatever. And so we've gotten some questions about leveraged versions of that. What are your thoughts? No, because if you— if it's going up higher and if it's leveraged, then it can go up even more, right?

But that also means it could do the absolute opposite. So leverage is like wanting momentum. Momentum is just chasing something that keeps going higher and higher. And if you're short, it's going lower and lower. But momentum is wonderful on the way up. Everybody feels like a genius, myself included. However, it rarely has anything to do with valuation. And that's always very important because when things reverse, you can't— you have no support. It's hard to, to, to, to really understand, okay, well, how far can these stocks go? Because if it's not based on valuation and it's based on sentiment and everyone's chasing, well, my goodness, everybody could just go run for the hills if it goes the other way. So I just feel like I'm a conservative investor myself personally with my husband, and I just think leverage is, is just, it's to me fine if you want to have a little piece of it in your portfolio and fun with it, but please don't make it the majority of your portfolio. I just don't think it's really investing.

What are you buying?

So I am a big thematic investor. So the way I think of it in my portfolio is I love to talk big picture. I could talk with you all day long, Nicole, on the big picture. I'll bore you to tears.

No, never.

But bore your audience to tears. But I think big picture, because I just like to know what's happening in the world, the global markets, what's happening with inflation, with growth, with the Fed, all that stuff. And then I think about themes and where I wanna invest for the long term. So I think about themes that have like a total addressable market. That's what they call TAM.

TAM and TAMs.

I know, but it, but for the long term, for like a decade or two. And then I find stocks and try to find stocks on those themes.

Like if you find a thesis.

Mm-hmm. So, I'll give you one.

Okay.

Let's, let's go cybersecurity.

Okay.

Okay. Because we just talked about AI and the food chain. You absolutely positively wanna have exposure to the AI food chain, and we'll get to that in more detail on, that's cuz that's a big theme too.

But okay.

Cybersecurity is going to be bigger than AI because of AI. AI is not secure. When you have companies that are using 50% of AI agents doing your coding, that by very definition is not secure. And so you have 4,000 companies, cybersecurity companies in the world, public and private, that I think you're going to see massive consolidation because the big 5 are going to get bigger because they don't offer a one-stop shop for their customers. So let me give you an example, because I'll tell you from Hightower, I talked to my chief technology officer He budgets all this stuff for that his technology needs for the year. And he has said to me, Stephanie, CTOs right now are spending on two things. One is AI because we have no idea what that means for our business. And two, cybersecurity because we can't afford to wake up and lose our business. And he has 20 vendors. This is Hightower. We have 20 vendors because not every company offers everything. But the problem is these 20 vendors don't talk to each other, which is why we have cyberattacks all the time. So I think you're gonna see massive consolidation in this sector.

The big 5 get bigger and bigger, you know, CrowdStrike and Palo Alto and Cisco and Zscaler, so many different— IBM, lot of companies out there that are going to get bigger, offer more, to their customers because there's the demand, there's the need, and we're going to see this for the next decade.

So what's the best cybersecurity stock to buy?

So for me, Palo Alto Networks is my favorite. Here's the interesting thing. These stocks got clobbered in the AI is going to kill software apocalypse that happened in January and February of this year.

SaaSpocalypse.

It was crazy. But cyber got hit as well because they are software companies. But they're also hardware too. They got hit really hard. And so in March when they hit their lows and they were like down double digits on the year, the two CEOs actually bought stock. Palo Alto CEO bought $10 million worth of stock in March at almost at the lows. And same with CrowdStrike. Those are the two best in my opinion. But you could own, you could own, you can own a whole package. You could own a bundle of the names I just mentioned, throwing Fortinet in there. So CrowdStrike, Palo Alto, Zscaler, Cisco, Fortinet— you could put them all together and have a bundle. You can own HACK, which is the ETF, if you don't want as much volatility. Yeah, I have ETFs for every— all of my themes. No, what—

that's a good name for, for what it is, right?

I know.

I mean, my husband bought CrowdStrike. I was was flying that day of the big debacle that they had.

Yeah.

And so all the airline's infrastructure went down because of it, and CrowdStrike was to blame.

Oh yeah.

And the stock got hit. And my husband's like, I'm buying CrowdStrike. 100%.

That's the best advice to give anyone is if you can find the number 1 or number 2 player in any given industry that goes through a crisis but that, you know, the management team is top notch, which CrowdStrike is, that's when you want to be buying. You want to buy on sale, right? We buy low, sell high. People say they do, but they don't.

It's the hardest thing to do. It's the only adage on Wall Street, and it's the hardest thing to actually do because of human emotion.

But I want to buy my shoes on sale. You do too, right? I mean, it's— and then when it happens, it's, it's just such an emotionally tough industry.

But high quality, to be clear. Like sometimes when they're on sale, it means they're in the pooper for a reason.

Oh, absolutely. And by the way, CrowdStrike was in the pooper for a couple months, maybe even quarters.

Yeah, they're in the penalty box.

But it's so rare to get the number one company down 50% in a matter of months because everyone was just attacking. But you know, the CEO— why I knew it, and funny, your husband was buying it. I, I've never owned it and I Bought it on the, on the collapse too. Cuz I said this, this CEO, his reaction mechanism was something textbook.

Yes.

He went to see all of his customers one-on-one, 500 different customers. He went everywhere and he was on TV all the time. He looked horrible by the way, didn't he?

I mean, he had some stuff going on, but he had some stuff going on, but it showed that like this was a winner and this was, this was the dude to bet on.

Yes. Yes.

This is, this is, yes. He, it put a, that whole crisis, like it felt like it put a fire.

100%. In his belly. And that is like under his ass. Number one thing I look at, I look at a lot of fundamentals when I'm looking at stocks, but the number one thing that's really important is to get to know the leadership team. You can, and, and it, I mean, I'm lucky I'm on TV and, and they reach out and we get to meet them, but you can listen to conference calls. They do them all the time. You could read some of the transcripts if you like, watch these great leaders. What makes them such great leaders? Because they can, they can actually fix the problems when they do have problems. They can actually grow and they have great strategy and they have great execution. That's really important. But in the bad times, it's how do they react and how do they respond? And history is a guide on that.

So if you were to buy one cybersecurity stock, would it be Palo Alto Networks?

Yes, absolutely. 100%. Because they— well, first and foremost, it's half the price, half the multiple of CrowdStrike. CrowdStrike trades at a premium valuation for a good reason. It's number one, the best everything. But, but Palo Alto, it's a little bit more attractive in terms of the valuation. But I like what they're doing from a strategy point of view. In the last 6 months, they've made $30 billion worth of acquisitions. And so what he and team are trying to do is have more stuff that they can offer to their customers. Remember I said not every— no, no one company is a one-stop shop in offering all the cyber needs for their customers. So they're getting bigger and bigger and bigger. And so not only do you have the secular total addressable market there, you also— I think it's, by the way, over $2 trillion easily in the next 4 years. Not only have that, but now you have something that the company is doing that you can watch to see how the synergies evolve over time, which I think is really a lot of fun.

I love that you're doing the Undercover Boss thing. I mean, a lot of investors will say they also talk to their kids to see what's cool and what's coming up next.

To see what to buy. Oh yes.

But you're like talking to the CTO and, and figuring out what's the needs there.

And it's, it's, it's a lot. You do a little bit of, a little bit of everything. I, I love what you just mentioned because I am a firm, firm believer in investing the way Peter Lynch, the great Peter Lynch, invested, right? Peter Lynch was the CEO, I know you know, from Fidelity Magellan Fund. He actually, his returns, if— did you know that His annualized returns up 29.5% from 1977 to 1990 when he was a PM beat Warren Buffett. Okay, Peter, who's there, right? He's a rockstar. But he used to say, invest in what you know, invest in what you see, invest in what you experience, but absolutely invest in what your kiddos are doing 'cause they are super smart and you learn a lot. But keep it simple.

Now, what's your daughter buying these days? Oh, so what does she think is cool?

So she started investing. We gave her some money, small money when she was 5. And job.

Yes.

5. 5. And cuz I was always working nonstop. My laptop was always open. Bloomberg was always on. It was always red and green. And she'd be like, what's all that going on? So we taught her. She didn't really understand, but I said, but what do you like? Well, I like, I like, I like Estée Lauder cuz I like ma— I like MAC. I like MAC makeup. I'm like, cuz when she was 5 years old, she was wearing my, my MAC makeup. So it's that it was, she liked Nike. She liked Google, she liked to search, and so she liked Microsoft. There's a lot of things like it's just common sense. And so I think what's also very interesting, and she's a Gen Z, so she's 19. I think what's really interesting is how influential the influencers are. And I will tell you that they really listen and watch and buy and react to the influencers. Some are good, some are not so good. Some you agree with, some you don't. But it is, it's a big thing. And I'll tell you what her friends are buying, and I won't, I won't let her— they're buying crypto.

They would rather own crypto than stocks. And when she told that to me, I told her to stay at college because she wasn't allowed to come home. I mean, that's like, no, you can't. I mean, you can own a little bit of crypto, 1%, 1 or 2. And you know what, I would rather own the exchange or exchanges because I don't know—

Coinbase.

Yeah, Coinbase. I don't know what price of Bitcoin is going to do on a day-to-day basis. I don't think anybody does. But I, I know an exchange needs a buyer and a seller, and I know I have that. And they're also broadening out into other currencies and other products as well. So that's the way, my chicken way of, of playing that. But that, that generation, they're, they're all in.

How's her portfolio?

She's doing better than me. She is super growth and just quality. And I'm a little bit more growth at a reasonable price. So I do own like the financials and the industrials, and I love that stuff, but you know, it's really paid to be the growth investor over the last decade.

No doubt, waste management for the win. So what are you not buying, or what are you staying away from? Crypto.

So crypto, yeah, yeah, crypto. I would say, I think Bitcoin's way down though.

Are you buying?

It is. I'm holding, I'm holding. It's— we'll talk, we can talk SpaceX in a little bit. It's like SpaceX and Coinbase, I'm holding for like putting a— setting it and forgetting it, putting it away for forever because I think they will accumulate over time. They'll be volatile. But yeah, it is way down. It is very tempting. The only thing about Coinbase is it's just so volatile. At any given day, it could be up 5, 10%, and I don't want that to be ruling my portfolio and being in my head. So it's a small position. I kind of keep it there. And yeah, I mean, if it were to get— continue to pull back, I might add a little bit, but I don't want to trade that. I want to— I just want to be like more of a, more of an investor.

Well, I like your thesis that Coinbase is the infrastructure, it's the platform that all the coins have to use. So I'm assuming that you don't have individual coins?

No, I don't have individual.

No Bitcoin?

No Bitcoins. I know, no, I just have enough exposure with Coinbase because guess what, it's going to trade with Bitcoin, it's going to trade with any kind of crypto, and it's It's a risk-on asset. I mean, I know people say it's a diversification. It is, but it's also risk-on. And in fact, there's a high correlation between nonprofitable tech and Bitcoin in terms of you look at a chart.

You love ETFs. What about Bitcoin ETF?

Absolutely. 100%. I mean, is it— you can own any one of them. I think like BlackRock, you can own JP Morgan, you can own whatever one you want to own. And I almost prefer an ETF for this, the view, the viewers here, because it's a little less volatile. It won't go up 5% and 10% in a day like a Coinbase kind of thing. But by the way, I think the reason why crypto has done well in the past several years is because of the innovation with ETFs and people embracing it.

Yeah, more institutional money coming in versus retail. Yes. Investors.

But you also asked me what else I wouldn't— what I would— I not own. I think consumer staples are super expensive given the, the the limited growth that you get. I know that everybody knows Pepsi and Coke and McDonald's, like P&G. Yeah, those kind of names. They're expensive for what you get. You need to own one or two of them in a portfolio for diversification purposes. But I just think that there are better values elsewhere. And I do think I might be wrong on this energy thing, but energy stocks trade with the commodity. And if you believe my story of commodity prices coming down and oil prices coming down and likely to come down further, it's going to be hard, I think, for them to outperform, especially after they've had such a nice run. Could you own Exxon, Chevron? I own SLB, Schlumberger. Sure. But like, right-size it. It's, it's a lot. It's very— it's— talk about momentum. It just follows the commodity, even if you want to do the fundamentals.

Yeah, but what about alternative energy? Or what about nuclear? If you're thinking about like a thesis around AI, you know, my husband and I think a lot about what is lower in that stack.

100%.

So you need alternative nuclear types of energy. I know there are two types. You need uranium to power that.

And 100%, that's part of the— but not the traditional energy companies. They'll benefit too. But we're talking about in terms of power, we have— it's nuclear, it's coal, it's natural gas. You're right. It's renewables. I think over the long haul, it's going to be natural gas that wins. Because we have a ton of it, we just don't have enough pipelines. So part, back to my food chain of, okay, AI and the companies that are spending, all those companies are spending that $800 billion. They're spending it on building out data centers, putting stuff inside of data centers, upgrading the grid. 75% of our grid, electric grid in this country is over 25 years old. It has to get upgraded. And that's also companies that are going to be building that out.

Who, and who's behind that? Like who can we buy?

Quantum Services. Is one, is a, is a big, it's a great company. And oh, let me tell you about Quanta Services. They had an analyst meeting a month ago and they're such a conservative company. 70% of their customers are utility companies, right? So they're building with the grid and they're doing all the infrastructure with the utility companies. They said at their analyst day that their total addressable market between now and 2030 was $960 billion. They raised it to $2.4 trillion. This is between now and 2030. This is the most conservative. I'm telling you, I've known this company for years and years and years. When I heard that, I almost fell off my chair. Happens to be a very big position for me, but they are involved in all, all the aspects in the data center, in the grid, and then also on the power side. What's the ticker? PWR. It's great, great story.

But listen, sister, Give me a boring stock every single day, all day, every day, twice on Sunday.

This is, I mean, this whole sector, so this whole theme, it's quata services, GE Vernova. GE Vernova actually is sold out in their power until 2028. Sold out. And they supply 30% of the global electricity in the world. So they are a big, big player, the top 3 player. So that's GE Vernova. Vertiv. Vertiv is a company that puts— they're inside the data center. They make the cooling systems front and center from— so you need— I don't know if you all know this, but the data center gets super hot and the chips won't work if it's hot. So you need these air conditioners and that's what Vertiv does. It's like the end-to-end solution. And they also have services. No one really quite does it. And talk about management teams. The executive chair is a gentleman by the name of Dave Cody. Dave, you probably know, was the CEO of Honeywell for 15 years. When he was the CEO of Honeywell for 15 years, the stock was up 450%. He is a rock star.

He's a winner.

When he went to Vertiv, I'm like, I gotta, I have to own that somehow, some way. So to put it into context though, I mean, the cooling systems and the stuff that goes inside the data centers, because again, this is a huge, this is a huge theme too. It's, You, if you bought, if you wanna build a 1 gigawatt data center, you need 500 acres of land by law and you need the box. Okay. That costs $3 billion. You have to put stuff inside that box, meaning the cooling system.

I love that you're explaining to me like I'm 5.

Because I can only understand it that way. But like you have to, you need the, so you need the cooling systems, you need the transformers, you need the wiring, You need the semiconductor chips, you need software. All of that costs $40 billion. So you're talking about one data center to build out costing over $40 billion. So this is, goes right back to where we started with these big tech companies. Why are they spending $800 billion? Because it costs so much for just one data center. And we have only 11,400 data centers in the world and we need 30,000 by the end of 2030. We're not going to get there. It takes 3 years to build a data center too.

So your thesis is the downstream beneficiaries of AI are going to be the real picks and shovels, the winners of the AI boom.

Yes.

So what else?

So cybersecurity, we have all the data center stuff and AC and yeah, the food chain, just say the food chain, you know, you know, and the CEO of NVIDIA calls it the 5-layer cake. It's the same thing, right? It's You know, it's the modeling, it's the, the, the energy, it's, it's the chips, it's the coating, it's all of that. And he, so he calls it the 5-layer cake. I call it the food chain. I don't know, whatever you wanna call it, it's a big theme and it's a big deal and it's not going away anytime soon.

Well, cake is my favorite part of a food chain, so I love it. Thank Jensen.

I think, I think robotics is another, a theme that is just in early innings.

I feel like it's far out.

It, it is early innings.

Yeah.

But I'll tell you, companies are investing now for robotics. I mean, Amazon has a million robots and they believe over the next 10 years they're not gonna have to hire 400,000 people because they're gonna continue to build out robots and humanoids. You're right, we are not there yet, but I own this company, Rockwell Automation, and the amount of progress that they're making because of the technology It's every year I see it. It's, you know, it's an enormous change, an incremental change. And I think you need 3 parts of robotics. You need the brains, bronze, and you need batteries. You need the brains 'cause you need the intellect. You need to build that stuff. The bronze, you have to build the motion and that stuff. And then you need the batteries. Shoot, we don't have enough power. Here we come again, right? So we have no power. Or we're short power. So all of these things are all tied up together. And I think as we get through some of these bottlenecks, we will continue to see a dramatic change in, in, in this part, in this theme. Not a lot of people are talking about that.

Quantum computing is another theme that's far out. That's 2029, 2030. But I would also encourage your folks here today to listen to the CEO of IBM. He— that's the largest quantum computing company in the world. They have 75 quantum computers. That's more than any of their competition combined. And he basically, I didn't say this, but he says on these videos, he said it's AI on steroids. HSBC used quantum computing on their trading, their equity trading desk, and their algorithms actually saw a 34% increase in productivity and in output. An increase, 34%. It's kind of, it's kind of wild.

That's insane. So I, if you want exposure to quantum, AI on steroids, quantum, so it would be IBM. What else?

I mean, Honeywell just spun out their quantum company that I think is interesting. The reason I like IBM is because these other companies, they're not even earning anything right now. And so they're very volatile. You can own a package or a bundle if you want. I just, I think IBM is doing a great job in not only in quantum computing but also in software and really fixing the company. They're not a mainframe company anymore, and that's the CEO who's done a really great job. So I think you could pick and choose a couple of the smaller players, but I don't even think it's really— I don't think it's worth it because it's just so volatile.

So don't expect anything. Yeah, next 5 years. Have some, have some patience. So just to be clear, when you're mentioning these tickers and these names, you— and I've known you do so much research— can you just like clarify, when you suggest something, how much are you understanding and digging in and researching, and your entire team?

Oh, it's, it's, it's a 24/7 thing. It's the reason I do it though, because it's so much fun and I learn so much every day. It's like And I'm not gonna be right on everything. I mean, if I get a 500 batting average, that's a home run in my mind, but I just love to learn. But most of the names that I talk about, I own, and I don't own any stock in my portfolio, which is only 30 names in my portfolio. It's very concentrated, but I don't own any stock that I don't know the CEO and the, and the bench. Mm-hmm. So it goes back to that whole process of I can do all the fundamental digging in all, all kinds of homework, but I have to feel comfortable with who's leading these companies. And that's why I get to know them. And I don't get to know them like personally. Some of them I do, but others I just read about and others I just observe what they're— what they've done historically. And that's really important.

Yeah, but it's just so ubiquitous. You mentioned your daughter and her friends are listening to Crypto Bros on TikTok and it's just not as regulated. And there are so many people who can just jump on social media and suggest something.

Oh yeah. No, I mean, I think it's dangerous. I think you're 100% right. I would not recommend something that I wouldn't own or I don't own. Pretty much every name I just talked about I own. And if I don't own, it's either I'm watching it and wanting— it's on my shortlist or it's— I've owned it in the past or want to. I just— yeah, I think you have to be very careful on social media to, to listen to to random people. There are a lot of smart people on social media, and so you just make your list. I follow you.

Thank you so much. I mean, another darling of social media, and you said you were avoiding some consumer staples because they're really expensive. Individual Bitcoin, um, MicroStrategy is— oh, talk about— it's worse than in the pooper. But you know, when you look at something like that and you hear us talk about like buy low, sell high, that's low.

I don't know, but I don't understand his strategy. Do you?

I personally don't. But when somebody is like, oh, well, it's on sale. Oh, can you explain the difference between on sale for a company like Palo Alto versus a company like MicroStrategy?

MicroStrategy is— I've learned early on, if I can't understand a stock or I can't explain it simplistically, I can't own it because that's that. Just, I don't have any confidence in myself. Maybe I'm just slow at understanding it, but I don't, I don't quite get the strategy of him leveraging and him borrowing. And every day on it go, you know, Bitcoin goes down or crypto goes down and they're buying and they don't earn anything. That's a problem. See, I wanna own companies that have earnings. The earnings are the most important thing when investing. When you think about investing in general, What is the growth rate of earnings? Why is it growing? Why is it important? It's important because that's companies making profits, and we will pay multiples of that if we think it's a sustainable profit generator, a profit grower. Why I think it brings me back to total addressable market, because not only do I think Palo Alto, it's doing a great job on its own because they're making all these acquisitions and they're in a very strong position market share-wise, and they do have a good financial balance sheet, and they do have earnings.

They're also part of this whole total addressable market. That's an additional tailwind on top of this very strong company that's operating quite well. And so that's different than MicroStrategy's— I don't even really know what the strategy is. It just seems complicated to me, and it's expensive, and I can't justify the valuation. And that's important too, to be careful what you're, you know, what you're buying at what price. Price is always important.

So if you're a new investor or you're in your early innings of investing, stick to the FAANGs, which is now turning into— have you heard this— MANGOs?

No, I haven't heard that.

FAANG, that's great. Facebook, Meta, it was, it was dubbed FAANG before it became Meta. So fine, Facebook, Amazon, Apple, Netflix, Google, and now MANGOs.

Mangoes.

Meta, Anthropic, NVIDIA, Google, OpenAI, SpaceX. Obviously OpenAI and Anthropic not public yet, but in anticipation.

Oh, that is so fun. I have not heard of Mangoes. That is hilarious. Very clever. I mean, I like— look, I like all of them. Some are going to win. Some are not going to win. I happen to own SpaceX, new position in the last couple of weeks because we know they just went public a couple of weeks ago. And this is the way I'm viewing it. Like I said, on Coinbase, I am buying a small position. It's 2%. It's a set it and forget it. Do you know how much Tesla was up when Elon Musk actually went to, to the company in 2010?

So if you invested $10,000 in Tesla at the IPO, you would have—

so you—

$2.62 million. Yes, right now, 20—

25,000%. And you may think he's a little nutty.

We— oh, he is.

I think he is a little nutty.

Nutty.

He is brilliant and he will make you money over the long term. Over the short term, he doesn't manage to a quarter's earnings. And so that's why his, the stocks that he is involved in, SolarCity is another one. They, they are very volatile. And that's why I say put a position that you're comfortable with. If it goes up 10% one day, down 10% another day, You don't stress about it. So 2% is what I'm comfortable with. That's what I do. I'm putting it away and saying forget it because I think there's 3 ways they win. They win as a hyperscaler, right? I mean, they're on the AI side. They are renting out compute to Google and Anthropic, $2 billion each. Sorry, $2 billion a month from both of them a month go— is they're paying SpaceX to use their compute and It's who knows how long these contracts are going to go, but it tells you that it's sophisticated enough and it's good enough and it's accessible. So they, they can win there. Not sure if they will, but they could. Starlink, of course, is— they have 10 million customers that could get to 250 million customers by 2030.

I mean, the momentum is there as well in Starlink. Anytime you go on an airplane and you have Starlink, it's like a game changer. And then, of course, you have space. And they have a very low-cost advantage over their competitors because they have renewable rockets. So their cost per launch is expected to go from $14 million to something like $3 to $5 million per launch. That is going to be so such an advantage and so much lower than their peers. And they have first mover advantage. I don't know that if they hit on one of these things, I think, I think they can hit on all three, but if they hit on one of them, I think the stock will be much higher. What I don't believe just to be the case is that you're gonna build data centers in the, in the sky, in the, in, you know, in the universe. I just don't, I think we're not there yet. I think it's possible and anything's possible with Elon Musk, but I think that's 10, 15 years away. That's my personal opinion. I could be totally wrong, but because people ask me, well, you're so bullish on the data center makers on, on Earth, how do you not get scared about SpaceX?

And I just think it's a —time. It's a time thing.

Yeah, but we got to get the party started. We need compute. So like, go to the sea, go to the air, go to the land, go everywhere at this point because it's going to take a while. So what did you buy SpaceX at?

So I bought SpaceX at, I think it was $175, $180. It was not, it was not at the most recent low, and it certainly wasn't at the super high. What happens when I talk about a stock on TV, I get restricted. And so I was restricted on the day of the IPO because I happened to be on TV talking about it. So I had to wait a couple of days. I think this is like, if this is going to be so much higher in so many years that I'm like, okay, forget it. I know I'm going to be up and down on the position or whatnot, but I don't do many of these kind of investments. I will say, Nicole, though, because I prefer like just traditional Investing 101, you know, look at the, look at the fundamentals, look market share, look at balance sheet, look at valuation. This one's hard to tell you. It's hard for me to tell you it's cheap. It's not. It's hard to even give you a valuation. But I do believe sometimes you want to go with, you know, just the Peter Lynch thought process of, yeah, what do I see?

What am I watching? What am I experiencing right here and now? And I think it's something that, like the AI revolution, I think it's going to be something that we look back on and say there was a lot of money to be made.

Well, you mentioned a lot of the bull cases for SpaceX. The other one is this government contract idea, that there's huge space infrastructure that's becoming increasingly more important to national security. And so they have so many government contracts already in the pipe too.

They do. And wouldn't it be interesting if the government actually took an interest in SpaceX at some point?

Do you think they will? It could.

Well, they're— they— what did they do with Intel? That was like the buy of a lifetime, right? I mean, I don't know, I wouldn't be surprised.

Do you think it's going to combine with Tesla?

It's a good possibility, but, but I don't, I don't, I don't see it near term, but I think it's— there's a good possibility. I think a lot of people are speculating that to be the case. I mean, a lot of people are going to own SpaceX anyway through—

right, if they are in the indexes, right? Not S&P, but yeah, QQQ, right?

And Russell, I think, also did it. Yeah. And I think, look, they have to be profitable to be in the S&P 500. I'm really glad the S&P didn't change their rules. I hate it when companies or organizations change the goalposts during the game. So I'm glad that they didn't change their rules. Um, but look, in a year's time, you never know if they make money. Um, like I say, I mean, this, this whole renting out compute, if they sign up a couple of more customers, I mean, that, that gap in their balance sheet goes, gets, gets narrowed down pretty quickly.

But what do you say to people that are pissed that they bent the rules? For SpaceX, the, the indexes that did. I was—

I'm furious about it. I don't think you should change the rules. I can like wait and see. Um, but that all being said, it's small weighting, right? It's like, is it like 40 basis points, 20 basis points in terms of the weighting in these indexes? It's not big as compared to Apple, which is 7% of the weighting in the S&P 500. So what about the bear cases for SpaceX?

People are obviously— they have so many feelings about Elon. Yeah, they have a lot of feelings about the way this IPO was orchestrated and choreographed. But what about this idea that it could go to zero? Is that a possibility?

It's a possibility. I mean, but you never know what, what is, what does he wind up doing in terms of, um, what partnerships does he, does he collaborate with? Um, what does he himself do in terms of his own his own wealth. I mean, you know, he— remember, he sold a whole bunch of Tesla to take it on himself and then invest, reinvest in different parts of the business. So by the way, talk about a robotics company, that's Tesla 101 right there. Um, so you just don't know what he is going to do. I think he's too brilliant to have this thing go to zero. But by the way, wasn't he on record saying, I wasn't sure even a couple of years ago if this would be a zero. So We'll have to see.

But also, 20% of the stock comes up in the next couple months around the lockup. And we saw Rivian stock when this happened, when their lockup expired and a lot of insiders were selling, the stock fell like 20%. Do you anticipate some short-term volatility when that happens, when insiders are going to start selling?

I think it will definitely be volatile for sure. Um, and maybe that's when You know, the, the, the, these, your, your, your viewers, maybe that's when you take a look when it, you know, when once this starts, go once it starts and see what the volatility is and use it as an opportunity. I just kind of, I just feel like we're not gonna be, the first year of any IPO is always kind of a little rocky, right? And so you gotta find the, what is, what is the price equilibrium? And right outta the gate, you just don't know. But I, I just think like ignore it. Um, that's— this is one I'm telling you, I only have like 2 stocks in my 30-portfolio stock base that I would do this with. I would not have a whole portfolio of all these kinds of things because I could be really wrong. But if I lose 2%, I lose 2%. It's not the end of the world. If it was a bigger position— I had someone come up to me the other day who said, I want to have 20% of my portfolio in SpaceX. I said, what are you, nuts?

I mean, you could be the most brilliant person in the world in 10 years, but I I couldn't do it. I couldn't. I couldn't on a day-to-day basis feel comfortable.

Well, you're so good at explaining the concepts in simple, plain English. And what came up a lot as SpaceX was going public was this idea that the multiple was insane. I know. So for somebody who's listening and saying like, okay, it's a multiple of sales or it's a multiple of revenue or whatever, and it's so, so high, can you give the comparison of how to think about that and, and what the multiple Why do Wall Street people talk about the multiple? What should it be?

Well, because they don't have earnings, you can't use PE, price to earnings, right? Which is my preferred way of looking at any company because that's what it is. You know, it's, it's real. So we do price to sales because sales are growing so rapidly. What are you willing to pay for that rapid growth? And it's projected that this company is going to have 70% sales growth between now and 2030. Not only that, but they're expected to see double their margins, which goes back to the point of what I was saying earlier, that their space business has such a cost advantage, and it's— the costs are going to come down, margins go up, and then eventually, hopefully, we're going to see some earnings. I don't know when, but so price-to-sales is the way people are looking at it. Also, I've seen some of the parts valuations. So you break out the AI piece and you break out Starlink and you break out space. Any way you look at it, this thing is expensive. The best case scenario I can come up with was that it was at 40 times, including Anthropic and Google and the compute, 40 times price to sales.

Like that's crazy. Just by comparison.

I thought it was 100 times.

If you include the new deals, the 2 new deals. Okay. But you're right. You're 100% right. It was 100 times. And then if they— that's why these 2 deals are really pretty important in my mind. Just by, just by comparison, and by, by no means is this cheap, Palo Alto going back is at 22 times, 22 times sales. That's not, that's not cheap, by the way. Should it be? It, I think it should be. I think, I think Palo Alto is priced right. It's not a screaming buy. It's up 86% year to date. You don't want to chase it up here. You wait for a pullback. I was buying it at 14 times price to sales is 40 times cheap for SpaceX? I, I don't know. I can't tell you. I don't wanna sit here and tell you I know everything. I don't think anybody really knows, but I just think that the growth, they're going to grow into the multiple as that's what, you know, they say when you're growing at 70%, that's a big, that's a nice number. What people are willing to pay, we're just gonna have to deal with the volatility and see again what the price discovery is.

We don't have it yet. There's no question, but I don't wanna worry about it. I just wanna set it set it, forget it, kind of ignore it, have fun with it, and then deal with my other 28 boring names that I can value and feel comfortable with.

So you're gonna set it, forget it, look back in what, 5 years, 10 years? Yeah, I mean— Put your blinders on, or are you gonna be buying more?

I might buy more. I mean, the more we learn, the more their strategy evolves. By the way, this is not just Elon Musk. This is, that whole team is, Brilliant. They really are very, very sharp if you listen to them. Let's see how they execute too, right? And let's see, there might be new businesses. We were valuing Tesla as a car company. We're now valuing it on a robotics technology company, and we may do the same for SpaceX.

So when we compare the multiple idea, basically like decoded, it just means it's very expensive compared to the fundamentals of what the company company is doing. So we often use NVIDIA as an analog, or, you know, a lot of media has talked about that. Do you think that's correct, where it should be closer to that 20 times?

Or— I mean, well, the problem with NVIDIA is a couple things. Number one, there's no question about their growth. Not at all. Not at all. I mean, they are growing at leaps and bounds. I mean, more than 70%. It's incredible what they've done.

So it's not too late to buy Nvidia.

Nvidia actually has done nothing in the past 6 months, believe it or not, when semiconductors, other semiconductors have done amazingly well. We mentioned Intel. I own Marvell, Broadcom, AMD. There's so many other companies that have done so well. And there's a couple of things with Nvidia. It is a great company because it hasn't done anything in the last 6 months. It's actually trading at about 14 times forward estimates for a company that's going to grow 50% plus. It's crazy cheap for what you're getting, but you have more competition now today than you did even 6 months ago, particularly Amazon, particularly Alphabet in terms of the chip space. There's also the question of these custom chips that Broadcom and Marvell are making, which are cheaper to make. They don't have as much power, but they're a lot cheaper so that the companies that are spending money on all this stuff, They have, they have options. That's not to say that NVIDIA is a bad company or that their product is inferior. I just think there's a little more competition. And then the last point is everyone owns NVIDIA and you rarely make money when everyone owns and everyone's on the same side of the boat.

I like as an investor to be a little contrarian. I don't need to be all by myself on the other side of the boat, but the middle part of the boat is kind of like my sweet spot. And that's how I made a lot of money with Broadcom because I was buying this 5 years ago when it, 14 times earnings, 4% dividend yield. It was nuts. Today it's a heck of a lot more expensive, but they have delivered in spades. And you try to find different ways of playing it. This whole AI food chain, you could buy Nvidia on the whole food chain and forget the food chain. But guess what? You've made more money in the food chain because they were less popular and people didn't understand them as much and less owned. So it is too late to buy NVIDIA. You can buy NVIDIA if you have a long-term time horizon and you can get away with the valuation. You should feel comfortable. Valuation is always certainly supportive if you have the growth and the story is not over. We're not even— we're in the third or fourth inning. I, I think you could buy NVIDIA.

I don't own NVIDIA 'cause I own all these other things, but I think you could. I just think you have to temper your expectations 'cause it has been a phenomenal stock. Over the last 5 years.

So if somebody is like, dang it, I missed out, you could buy it.

I think that's— I have no problem with that. Um, again, the valuation, the growth, seeing where we are in the, in the, in the revolution. I think we're in the third inning.

How many innings? I'm not a baseball person.

8 innings? How many innings? 9 innings. 9 innings. We might even go even overtime. We might even go overtime. Okay, great.

Okay, so we're, so we're in the, the first third. Of this, of this game.

We're in the, we're in the third. All right, let's just say this. We're in the third inning of AI revolution. We're in the second inning of cybersecurity. We're in the first inning in robotics. How's that? I love you.

A little bit of a, let's say, in my mind, you'll be the, the chief sports officer of Manhattan.

You know, my very first, I, what I really wanted to do is be on TV. I wanted to be on ESPN.

You'd be great at it.

I kill it. And I kind of took a detour and got into the financial part of TV, but it's fun.

Never as young as you are today. I'm gonna start a petition. Stephanie for ESPN. You'd be incredible. So what other hot stocks that people are like, damn, I should have got this, I should have, would have, could have— Micron, you know, whatever else is really buzzy. SanDisk. Are these real talk?

I know.

Is it too late to buy these?

Uh, I, I don't, I don't think so. I think I'd be careful as to what days I'm buying these things, you get, you get looks all the time. This market, especially semiconductors, semi-cap equipment. I, one of my biggest regrets, I owned Lam Research. They're a semi-cap equipment company and I made a ton of money on it. And then it went up another 200% on me, right? Because, because if you, you could pick and choose the semiconductor company you want, there's a lot of them, but the semiconductor capital equipment companies, They have all the— that's who their customers are, are all of these semiconductor companies, cuz the equipment companies make the stuff, right? And so Lam Research, Applied Materials, KLA, those are names that are up, I mean, enormous amount of money, but they are winners over the long term cuz it doesn't matter who wins.

Even more like they've already run so much. I know. Is there more to run?

I think there's more to run because they have, because they have all of these, all of these All of these players are NVIDIA, Broadcom, Marvell. All of these companies need the, the cap equipment companies, and they are not— believe it or not, they're not that expensive because the earnings continue to go up. So that does not mean that you run out and buy these names today. You wait for a pullback. We're going to have one or two or three. Put them on your shopping list 20% below these levels. If, if, if these stocks fall, That's where I think you wanna start a position. Same thing with Micron. We are short memory in this world. And if, if you believe that we're in the third inning and we're short, the pricing power of these companies is enormous. So do you know that last quarter Micron, they make two kinds of memories, DRAM and NAND. DRAM, their ASPs, average selling price to their customers was up 60% year over year. And in NAND, pricing was up 80%. Pricing power is king. I mean, that is, they are minting money at Queen. And they signed 16 license agreements this past quarter valued at $100 billion.

Which, what does that mean? That just means that they are contracted to get $100 billion between now and 2028.

$22 billion of it in cash. This is for Micron. Yeah.

I mean, these are numbers that we just haven't seen. So I do not own Micron 'cause I feel like I missed it for sure, but it's absolutely on my radar screen. And I happen to own other names that are, that are fine too. That are good and they've done really, really well as well. But that is certainly a name that they're a leader in the industry and we don't have enough of what they have.

What do you say to people who say, Stephanie, there's an AI bubble, it's gonna burst, it's all gonna be 1999 again.

Well, with the internet, we were building out the internet without knowing what the demand was. We were laying dark fiber. We had, we didn't have contracts, we didn't have backlog or, or any of that. We had interest, we had indications of interest, but we had a lot of double, triple, quadruple ordering going on. And so there were winners and there were losers. We happened to create a whole bunch of, by the way, jobs that didn't exist back then, 'cause everyone asks me about AI taking over the world in terms of jobs. I would say for the bubble talk on AI, there is real demand. That's why I care about the cap, goes back to the CapEx. How much are these companies spending? They're spending, and that number continues to go higher and higher and higher. What I'm not happy about are these companies going to the debt markets, to going to the equity markets to raise all this cash. So that they can fund all of this. But the numbers continue to go higher and it goes back to what the CEO of Amazon said. We're not going to see the returns this year, but we've never seen anything like this.

So we're going to continue to spend so that eventually we do see returns that are double, triple, quadruple of what we would have done if we didn't spend. Okay.

But here's the deal. What about the circular spending idea? So what about the fact that they're just all fueling each other? It's like a big incestuous— it's very uncouth to say circle jerk, but it feels like it's just like they're all spending on each other and so they're propping each other up fictitiously.

I think that the numbers— if, if where I'm going to be wrong is if they start to cut back on the CapEx and we're seeing just the opposite, even last quarter. Almost all of them raised, either raised money to, to, to increase the CapEx, or they had the free cash flow to actually increase the CapEx. They're spending on all different parts though. That's why it's so important of, of listening to the picks and shovels companies, the food chain, because what they're saying is, yes, their orders are enormous. I mean, absolutely enormous. But the backlogs are even bigger. Backlogs really hard to cancel. Orders, really easy to cancel. So we pay attention to backlogs. And those, those names that I mentioned are the picks and shovels companies that I mentioned: Vertiv, GE, Vernova, Quanta Services, Eaton. I didn't mention Eaton. Rockwell, Vistra. Didn't mention Vistra. All of these companies, on average, they saw 34% backlog growth year over year from these companies. Backlog is stickier stuff. It's contracts in hand. And if I can just give you perspective, 'cause I've been covering industrials for 35 years, on average backlogs grow 5%. We're at 35% on average.

Backlog versus orders just means what?

Yeah, so orders you can cancel. Backlog is contracted stuff. So orders, some, in some instances like Vertiv, they do have their firm, their orders are firm and he, has insisted on that. And the companies that need this stuff are now also insisting on— they want guaranteed stuff. Backlog is guaranteed. And, you know, unless you have all— I mean, unless you have tremendous amount of double and triple ordering, but the backlog is different than orders. Orders, you can just say, "Forgot it. You know, I didn't get it and didn't get filled." You have— you're committed. Backlog, think about it that way. You're committed to be buying that stuff.

So you're not worried that Nvidia is getting money from Microsoft and then giving and then buying from Microsoft and then it's all sort of incestuous and propping each other?

I mean, it's, it's complicated for sure, but they wouldn't— I just don't think that we'd be— these are— we're talking about billions of dollars, you know, I mean, billions of dollars. I don't think that they'd be spending this amount of money if they didn't see this insatiable demand. And I think we are seeing it. Again, where I'm wrong is if, if we go from $800 billion and next year is $500 billion, then I think not necessarily wrong, but this whole kind of one, we want to call it a frenzy, fine, whatever. Then this whole thing kind of starts to unravel because it has, it impacts so many different companies. But I, I go back and I listen to what really these smart CEOs are saying and, and then what other industries are saying too. It's just, it's not just one like the internet was just the internet. This is like the entire, like, economy almost, you know, absent a couple of sectors. So I worry about it. There's no question. That's— but that is the biggest worry that I have is we got to continue to see this spend. And, you know, if we, if we don't, I'm going to be wrong and you'll never have me back.

But if I'm right, I think I will be right to a certain degree. And look, the stocks may not work, They may get over-owned and maybe they get expensive and maybe they take a pause and we see a rotation into some of these other sectors like we talked about. But I think that this is something we haven't seen. I don't wanna say it's different this time cuz I hate that phrase, but I do think it's something that it's, it's remarkable. Just think about what it's meant in your life, right? And my life. And, and sure, there's gonna be disruptions from AI in certain industries, but we're gonna, have certain industries we don't even know exist and jobs that we don't even exist that are created?

Well, I think it's going to be the latter for sure. And I cannot wait to have you back. It's so weird. Like, I miss you already. I want you to come back and have more of a conversation because I could listen to you talk forever. But we have to let you go so you can research more stocks to tell us next time. We end our episodes, as you know, by asking all of our guests for a final tip that listeners can take straight to the bank. So if somebody is listening today and they're like, oh my God, that was so much alphabet soup. You mentioned so many different ticker symbols and companies. If there was one ETF for them to buy, what would it be?

Well, based on the themes, I would do, I would do HACK for sure. But I would more importantly want more, more diversification. I really do strongly believe in, in the S&P 500 in the ETF. And Vanguard is what we used when I was 22 years old and please start as soon as you can and it's never too late. And the reason I say the S&P 500 is 'cause such a diverse set of companies, you're gonna get so much exposure. By the way, 40% of this S&P 500 is technology. So you're gonna get the growth aspect there, but you're also gonna get other sectors too to help keep you sleeping at night. And hopefully 7.7% on average total return is, is gonna continue. I think it will. It might even grow a little bit more, but you're never— you will never be sorry in 5, 10, 15 years for putting money into the market today.

Never. No, you never— you never regret a workout. You never regret an investment in the S&P 500. So not like semiconductors— you're the semiconductor queen— so not like SOXX, S-O-X-X, or SMH?

No, because they're up 85% year to date. And I would hate for your viewers to, you know, it's so volatile. Volatile, you get a lot of semiconductor— you get, you get a lot of semiconductor exposure in the S&P 500. You really do. I have more confidence in HAC longer term, like 10 years out. I have no question in my mind that those stocks are going to be much, much higher, and you're going to see much more consolidation. And that's the industry that I think doesn't get enough respect. Everybody thinks, well, you know, they, they're going to get hit by, you know, AI, and they're not going to get hit by AI. We need cybersecurity companies because of AI. That's really important.