Big tech stocks taking a hit as investors worry about
huge spending plans on artificial intelligence.
Is the AI trade a thing of the past?
Here to help us understanding what's happening is Barron's deputy
editor, Alex Yule.
Alex, thanks for coming by.
Hey, Jack, so investors for a while there just couldn't
get enough of AI stocks.
Why are they suddenly having second thoughts?
All right, I'm going to borrow a phrase from Gartner's
hype cycle.
And no, we've come through this so-called peak of expectations
and begun to enter the dreaded through of disillusionment, the
through of disillusionment.
So I think part of this is people having used
chat bots for the better part of two years now
they're getting a little weary of it.
You know, there are only so many times you can
ask Chachi BT to write you a poem.
So I think that's that's one issue.
And then you have this once red hot AI plane,
Super Micro, which is having these terrible accounting issues, may
get delisted in the coming days.
And we've seen that stock just fall apart.
I think that's been a combination of of two events
right there.
Yeah.
And I think people think back on the last time
we had a technology like this, whichisthe.com boom and bust.
And it wasn't just the fact that it was like
pets.com that went bad.
You just slappedthe.com in there and the stock went up.
But it was at other companies, good companies like a
Corning, they went ahead and built too much fiber cable
and it took them years and years and years to
recover from that.
And I it's a super important lesson.
You know, I do think we need to think about
the overbuild of fiber optics when we think about the
spending on AI right now.
But I do think this time is different.
You know, there is a lot still happening.
Again, like it is not just about chat bots.
This is about businesses using AI to find data that
they've never been able to find inside their warehouses, you
know, virtual warehouses before.
And it's about improving productivity.
You know, in one of our stories this week, we
talked about Bristol-Myers and how they are already discovering new
drugs using the AI chips that they've bought and improving
the efficiency of their clinical trials.
You know, there really are real use cases for this
stuff.
And I think companies are only on the cusp of
figuring out how to monetize it.
So we're not going to stay in the through of
what's it called irritable about.
Oh, dissolution.
Good.
Good to know.
It's a scary place.
So, Alex, yeah, NVIDIA had a lousy week, but it's
up 7 1/2 percent on the month.
It's nearly doubled this year.
So investors still have a lot of confidence.
They do have a lot of confidence.
You know, I mean, they they do have this incredible
competitive mode.
They are so far ahead of AMD and Intel.
They're going to be reporting this week, this coming week
on Wednesday.
We'll learn a lot more than although I will note,
I think people should temper their expectations a little bit.
Could be a noisy quarter.
They're in the midst of transitioning from their first AI
chip to their second AI chip called Blackwell, The company
said.
They're already sold out for the next 12 months.
So I don't think this is really, you know, question
of business and demand right now.
Really will be wondering what their ability to ramp up
the supply is.
It's it's amazing when you hear from Jensen Wong about
this company, you know, history as a video game company.
He basically said he wanted to make a supercomputing company
all along.
It just happened to be that back then the only
market they could really sell into was video games because
this highly parallel processing that's good at drawing lots of
pixels on the screen.
It just happens to be good for the job of
crypto mining and now artificial intelligence processing.
Well, I mean it's really kind of fun because obviously
we do have our colleague take him putting out the
book the Bible on the video.
So certainly, you know, lots to talk about here.
It sort of feels like it's becoming a bit more
than just a stock, but maybe a cultural phenomenon.
I you I think they would love that.
I mean, he he wrote the book on NVIDIA.
As you said, it's coming out next week.
We have an excerpt in this weekends Barons, and it's
something everyone should read because it's really about how to
succeed in business.
And you know, as Tay turns out, as Tay reports,
it's it's more than the technical brilliance of NVIDIA.
It's more about their their cultural that they've created their
employees, he says, are empowered and expected to constantly come
up with new ideas.
There's a whiteboard in every single conference room and Tay
talks about how employees are expected to get up there,
show their ideas in real time in front of a
real audience.
And so the whiteboard really is an example of of
what this company tries to do.
Culture eats strategy for breakfast.
Jack, you have an interesting stock pick in the AI
world that I've never heard of.
And it's just have to explain to people why this
what this company isn't why it's suddenly worth $100 billion
app lovin and a lot of people still haven't heard
of it.
There was an analyst early last year when the stock
was 11, he said sell, it's going down to seven.
It's it's over.
It was over $280 this past week.
Basically, the company does online and marketing.
It's geared toward publishers of of casual video games on
phone.
It it'll help you find new people to download and
pay for your games.
And AI has made the product better, which has gotten
the company more customers and made the company more money.
And now the company says it wants to do the
same thing in ecommerce, and investors are going bananas over
it.
I think we're out of time.
But give us two more names, Alex.
People can read about them in Baron.
All right, They don't have quite the cool names, but
one is Vertive Holdings.
They make cooling systems for these literally red hot AI
data centers.
And then there's Oracle.
Everyone's known about Oracle for their databases for years, but
they're actually becoming a big player in the cloud.
And the AI models are increasingly being run in Oracle's
cloud.
OK, thanks very much, everybody.
Look for Tay's book.