Speaker 1: You're listening to AC N A podcast?
Speaker 2: Hey, it's Andrea. He on the Money Talks podcast. Quick question.
Speaker 2: Which of these apps do you use each week? Facebook,
Speaker 2: Amazon Google. If you're like me, the answer is almost
Speaker 2: every day. Yep. That's right. Don't judge me,
Speaker 2: but that's what we will be getting into this week.
Speaker 2: Why are they the biggest and currently best performing tech stocks?
Speaker 2: And should you be putting your money into them right now?
Speaker 2: I'm going to get into that in a few minutes.
Speaker 2: But first I have a favor to ask of you.
Speaker 2: If you haven't already followed us on Spotify Apple podcasts
Speaker 2: or youtube music, please do because that way you get
Speaker 2: an alert the moment a new episode drops. All right.
Speaker 2: Ok. So let's get started with some financial news that
Speaker 2: caught our attention this week. And of course, I will
Speaker 2: need to bring in the assistance of my editor Tiffany Tiffany. Hi. So,
Speaker 2: what are we discussing first? Ok. So first our favorite
Speaker 2: antihero pop star is in town. I'm not a swift,
Speaker 2: are you? I'm not a swifty, but you know what?
Speaker 2: I have to admire her business sense. Yeah, I must
Speaker 2: say so. Yeah. And already we're starting to see what's
Speaker 2: known as the Taylor Swift effect. Oh, yeah.
Speaker 2: So a bit of background in an interview, the Thai
Speaker 2: Prime Minister said that Singapore paid a handsome grant to
Speaker 2: Taylor Swift's team to woo her here for an exclusive
Speaker 2: Southeast Asia stop. So that got many people asking how
Speaker 2: much did we pay? And is it worth it? Yeah.
Speaker 2: You know, it may seem like a dig at Singapore,
Speaker 2: but it is a valid question, right? So the Singapore
Speaker 2: Tourism Board didn't really disclose how much they gave in grants, right?
Speaker 2: And never did. No, they didn't. But
Speaker 2: tells and airlines told CN that demand for flights and
Speaker 2: accommodation around the concert dates have gone up by 30%. Wow. Ok.
Speaker 2: That makes sense because Singapore is one of only two
Speaker 2: stops in Asia for Taylor Swift. The previous one being
Speaker 2: Japan and we have six shows here in Singapore. Completely
Speaker 2: sold out. Ok. So we're probably expecting lots of fans
Speaker 2: coming in from Malaysia, Indonesia, Philippines, Thailand and
Speaker 2: disappointed fans in Australia. Maybe we didn't get to catch
Speaker 2: her in the Australia tour. We might see them too. Yeah. Yeah.
Speaker 2: So back to the question, is it worth paying a
Speaker 2: grant to Taylor Swift's team? I mean, I suppose if
Speaker 2: you see that the concerts can be a big source
Speaker 2: of revenue for the country, then
Speaker 2: yes. So earlier on you mentioned Japan, right? Researchers estimated
Speaker 2: that her tour in Tokyo generated up to $227 million
Speaker 2: for Japan and they have fewer shows than we do. Exactly.
Speaker 2: And they are also predicting that the concerts here in
Speaker 2: Singapore will exceed the estimated $787 million in economic value
Speaker 2: from Taylor Swift's time in Melbourne. That is insane.
Speaker 2: You know what I'm thinking? I think it's time to
Speaker 2: look at stocks in the hospitality and travel sector perhaps
Speaker 2: because that's likely to go up. So if you happen
Speaker 2: to be able to have that flexibility to move around,
Speaker 2: this might be the time to do it. And don't
Speaker 2: forget we still have a lot of major concerts and
Speaker 2: events coming up in Singapore, not just Taylor Swift and
Speaker 2: speaking of up, you know what went up to Junior
Speaker 2: Bank staff bonuses. What,
Speaker 2: what am I doing in this job? That's what I
Speaker 2: ask myself every time I see headlines like this. But
Speaker 2: you know what? Congratulations to you. If you are working
Speaker 2: in a bank, it's a great bonus for you. Yeah.
Speaker 2: So specifically CD BS and you will be all announced
Speaker 2: a one off bonus for the junior staff, Junior, Junior Junior.
Speaker 2: So this is to help them cope with rising living costs.
Speaker 2: O CBC and D BS are giving their junior employees
Speaker 2: $1000 each
Speaker 2: Singapore dollars while you will be junior staff are getting
Speaker 2: an extra month of bonus. No guess is where all
Speaker 2: of that bonus is coming from. And I think banks
Speaker 2: had a fantastic year with all the interest rate income
Speaker 2: that they've been generating over the past couple of years.
Speaker 2: I think this is a good move. It's a bit
Speaker 2: of a thank you as well for people who stuck
Speaker 2: around and work behind the scenes and lots of work
Speaker 2: for banks that were kept busy for the last two
Speaker 2: years or so.
Speaker 2: Now, if you're listening to this and you would like
Speaker 2: a nice bonus too. Just like me, you can tag
Speaker 2: your boss just like I will not.
Speaker 2: I hope you get that bonus. Anyway. Good luck.
Speaker 2: Did you know that the number seven is considered a
Speaker 2: lucky number in Japan, perhaps that's why the biggest and
Speaker 2: currently best performing tech names in the stock market are
Speaker 2: dubbed the Magnificent Seven. But they won't always called that.
Speaker 2: You see tech stocks had their beginnings actually as Fang stocks, Facebook, Amazon, Netflix,
Speaker 2: Google Fang.
Speaker 2: Fang evolved into fam, not as cool because Apple and
Speaker 2: Microsoft joined the league. Netflix dropped out and then Tesla
Speaker 2: and NVIDIA joined to form what's now called the Magnificent
Speaker 2: Seven or if you're cool like me the Mac seven.
Speaker 2: And for that, we can thank Bank of America Analyst
Speaker 2: Michael Hartnett who
Speaker 2: coined the phrase in 2023. He was describing the seven
Speaker 2: tech companies dominating the stock markets, but you know what
Speaker 2: anything shiny is vulnerable to losing its luster and the
Speaker 2: Mac seven, they aren't immune to this. So while tech
Speaker 2: stocks are having a moment, we should also take our
Speaker 2: moment to consider the risks
Speaker 2: and rewards of investing in Mac Seven stocks. What your
Speaker 2: game plan should be if you're already there to help
Speaker 2: us with. That is Jonathan Wu, senior equity research analyst
Speaker 2: with Philip Capital. Hey, Jonathan, thanks for coming. Thanks for
Speaker 2: having me. So in just a span of about three years,
Speaker 2: so much has happened to big tech, most of them
Speaker 2: making up the Mac seven. What are the factors that
Speaker 2: are driving these Mac Seven stocks to their current strength?
Speaker 2: So first of all the revenue growth, right? I mean,
Speaker 2: obviously you've got a lot of demand from consumers for
Speaker 2: a lot of these big tech companies, you just think
Speaker 2: about a couple of them off the top of your head.
Speaker 2: You know, me and Google, everybody uses Google nowadays every
Speaker 2: day for countless hours, everybody's watching youtube people on Facebook.
Speaker 2: If they're not on Facebook, on Instagram, Netflix, everybody uses Netflix.
Speaker 2: Now they've kind of been taken out of the Mac seven,
Speaker 2: but
Speaker 2: you get the point, right? So a lot of consumer
Speaker 2: demand that's really driving a lot of the growth for
Speaker 2: a lot of these tech companies. So they've had quite
Speaker 2: the journey from the.com renaissance that we saw in the
Speaker 2: early two thousands, right?
Speaker 2: And then they had the COVID-19 pandemic surge, right? So
Speaker 2: they were pandemic darlings because everyone was stuck at home.
Speaker 2: They had to use Netflix, they had to use their phones,
Speaker 2: they had to use their Facebook to stay connected with
Speaker 2: their friends and family. But then we saw a painful
Speaker 2: tumble after those COVID-19 restrictions were eased. Now, there's a
Speaker 2: sustained out performance in
Speaker 2: the market. I'm most curious about this current stage we're
Speaker 2: seeing right now, the early months of 2024. How was
Speaker 2: it that they were able to make that stunning recovery
Speaker 2: from down in the dumps post pandemic, which was only what, 1.5,
Speaker 2: 2 years ago to where they are now. So I
Speaker 2: think it's a couple of things. Firstly, when the dip happened,
Speaker 2: you kind of saw growth slowing down a little bit
Speaker 2: and then they were still kind of expanding. So they're
Speaker 2: still spending a lot of money on head count on,
Speaker 2: on a lot of projects that were long shots, but
Speaker 2: at the time because growth was going so well, they
Speaker 2: had enough cash to do it, right. So that kind
Speaker 2: of sent them tumbling down a little bit. And as
Speaker 2: they focus towards efficiency throughout the most of 2023 and
Speaker 2: even now they cut a lot of their fat off
Speaker 2: the bone. They are much leaner. They've got a lot
Speaker 2: of operating leverage and demand has actually returned or remain
Speaker 2: consistent at least. Yeah. And so that's what fueled the
Speaker 2: rally a little bit.
Speaker 2: Plus you have this A I effect, everyone's really hyping
Speaker 2: about it personally. I think it's less of a game changer,
Speaker 2: more of a game improvement kind of tool. I don't
Speaker 2: really think it's that significant at this point in time.
Speaker 2: So it's not as revolutionary as people are making it
Speaker 2: out to be. That's what you're saying. Yeah. It's probably
Speaker 2: similar to, like office 365. It's good. It will make
Speaker 2: your life better. It will increase efficiency. Yeah. Change your
Speaker 2: life all that much. Yeah. Ok. But do you think
Speaker 2: though at the mild
Speaker 2: pace and position that A I is throwing itself into
Speaker 2: the tech names and the tech industry, how do you
Speaker 2: think that is going to shape the path forward for
Speaker 2: the Mac Seven in terms of their stock performance and
Speaker 2: their growth? I think it was in the near term.
Speaker 2: You still be a driver because they're still hype around it.
Speaker 2: Take a look at NVIDIA, for example, they feel the
Speaker 2: immediate benefits and immediate effects of increasing A I demand
Speaker 2: because they supply the chips, right? Yeah. And you can
Speaker 2: see backlog is still increasing quarter on quarter. Yeah,
Speaker 2: still so much demand. And so until this kind of
Speaker 2: dwindles down and enterprises stop spending on A I or
Speaker 2: at least stop increasing spending in A I, which is
Speaker 2: we're still kind of far away because right now you're
Speaker 2: seeing a lot of not just enterprises but a lot
Speaker 2: of sovereign nations. They're starting to build up A I infrastructure.
Speaker 2: Getting out their own A I models, everyone's kind of
Speaker 2: playing catch up now. So that backlog is where the
Speaker 2: money is at. Yeah. So that's really driving the demand
Speaker 2: for A I products. And so that helps NVIDIA, helps Google,
Speaker 2: helps Amazon because of a lot of cloud infrastructure that
Speaker 2: is needed.
Speaker 2: So that is really the main kind of revenue driver
Speaker 2: in the near term. I'm not sure when the demand
Speaker 2: will subside because it's getting a bit out of hand
Speaker 2: right now. I'm inclined to agree. I mean, this A
Speaker 2: I hype is really out there. It's really hard to ignore. Now,
Speaker 2: speaking of NVIDIA, I'm glad you brought it up because
Speaker 2: looking at the charts of the stock performance of the
Speaker 2: MAC seven over a three month period, one year period
Speaker 2: and five year period,
Speaker 2: the first whopping number that sticks out to me is
Speaker 2: Nvidia's stock. I mean, the three month percentage change shows
Speaker 2: 12.35 to the five year percentage change is 1094.64. What's
Speaker 2: causing this crazy spike? A big part of it is
Speaker 2: expanding valuations. People expect a lot more growth out of them. Ok.
Speaker 2: So that just drives the price up in
Speaker 2: yearly, right? You compound that with a lot of operating
Speaker 2: leverage that companies like NBA has. They don't have to
Speaker 2: spend a lot to drive revenue growth. They don't have
Speaker 2: to increase their operating expenses that much. They don't really
Speaker 2: have to invest that much in capital expenditure. So their
Speaker 2: cost base is relatively fixed, more or less. I see.
Speaker 2: So revenue just translates to earnings. Any additional revenue just
Speaker 2: translates to the bottom line and you see this big
Speaker 2: spike there.
Speaker 2: And that's what you see with a lot of tech
Speaker 2: companies and compared to maybe traditional businesses like consumer products,
Speaker 2: like maybe Coca Cola or mcdonald's, right, they don't really
Speaker 2: have this kind of leverage where one additional revenue dollar
Speaker 2: translates to 80 cents on the bottom line, right? So
Speaker 2: that's really the main kicker. If demand slows down naturally,
Speaker 2: you start to see it kind of slow down a
Speaker 2: little bit. OK. Is this what will spell volatility for
Speaker 2: the tech sector? Is that why they're so volatile
Speaker 2: initially? Yes, because at the same time, a lot of
Speaker 2: these companies are still in their growth stages, right? So
Speaker 2: exponential growth, exponential expansion, right? So they're kind of like
Speaker 2: adjusting not just to demand but also to what they
Speaker 2: need to do in order to expand. Yeah. OK. Yeah.
Speaker 2: So once this growth kind of slows down and we're
Speaker 2: actually seeing it a little bit with the more mature
Speaker 2: companies like me, Google Apple, especially Apple is very mature actually.
Speaker 2: So growth has kind of slowed down a little bit.
Speaker 2: I mean,
Speaker 2: they're still growing faster than the average company on the
Speaker 2: S and P 500 but it's no longer your 30 40%
Speaker 2: year on year. Ok. So you're starting to see these
Speaker 2: companies slow down a little bit and mature a little bit.
Speaker 2: Whereas on the back end of the magnificent seven Tesla, NVIDIA,
Speaker 2: they are still relatively new compared to Apple. Yeah. Yeah.
Speaker 2: And so they are a little bit earlier in their
Speaker 2: growth stages. So there is a little bit more room
Speaker 2: to run for that. I see. So it's not necessarily
Speaker 2: that NVIDIA and Tesla have better value growth.
Speaker 2: It's just that there are newer players in the game
Speaker 2: and that explains the exponential increases that we're seeing. It's
Speaker 2: just where they are in the business cycle and where
Speaker 2: they are in the consumer demand cycle. Ok. Well, that's
Speaker 2: a really good explanation. Now, I have a clearer idea
Speaker 2: of why certain names are just performing better than others.
Speaker 2: It's not necessarily an out performance per se. It's just
Speaker 2: where they are in their business lifespan, right? So one
Speaker 2: thing that I want to know is how much do
Speaker 2: these guys cost me
Speaker 2: if I want to buy alphabet, if I wanna buy
Speaker 2: apple shares, how much am I looking at? Because if
Speaker 2: they're so high,
Speaker 2: does it become unsustainable and too expensive to buy? Are
Speaker 2: they worth it? So price is just one element of it,
Speaker 2: I mean, it's all relative. So what you're really looking
Speaker 2: for when you talk about value, most of the times
Speaker 2: you look at ratios. So price to earnings ratios, price
Speaker 2: to sales ratios and you look at it as an
Speaker 2: industry whole and what this company is, is priced at
Speaker 2: versus that particular industry, right? What was something like price
Speaker 2: to earnings ratio, tell you as an investor?
Speaker 2: So it gives you basically an idea of whether a
Speaker 2: stock is overpriced compared to its peers or undervalued, right?
Speaker 2: So it's a relative valuation, let's say NBA right now
Speaker 2: is priced at about 40 times earnings forward price earnings.
Speaker 2: You can't compare it to a company
Speaker 2: that has much lower growth and maybe has a price
Speaker 2: earnings ratio of eight times if they are in a
Speaker 2: totally different industry and in a totally different part of
Speaker 2: their business cycle and growth stage, right? So it's all
Speaker 2: relative straightforward. Yeah, when you look at the stock price,
Speaker 2: it really doesn't tell you anything because
Speaker 2: it doesn't mean that because NVIDIA is 700 bucks versus apple,
Speaker 2: that's over 200 bucks, you know, it's more expensive. Yeah. Yeah,
Speaker 2: it's just a relative term. So what are the factors
Speaker 2: should an investor consider then when deciding which of the
Speaker 2: Mac seven stocks to buy? So I think firstly, you
Speaker 2: got to figure out where's the demand flowing to right now.
Speaker 2: So if you look at the seven of them,
Speaker 2: by far, the weakest one would probably be Apple actually
Speaker 2: because everybody kind of has an iphone. Yeah, the only
Speaker 2: way they grow their iphone revenue is when people upgrade
Speaker 2: their iphones, right? So usually you've got this 3 to
Speaker 2: 4 year cycle.
Speaker 2: And over the last few years, they haven't actually raised
Speaker 2: their prices on their pro models or any of the
Speaker 2: iphone models. Right. So the average selling prices hasn't really
Speaker 2: been increasing that much. And if your user base is
Speaker 2: growing maybe 3 4% every year and you don't really
Speaker 2: raise prices, then you have to look to other areas
Speaker 2: for growth. And right now they're seeing a little bit
Speaker 2: coming from their services. So if you think about Apple TV,
Speaker 2: subscriptions and so on, but
Speaker 2: because most of the revenue comes from selling iphones and
Speaker 2: that's kind of taken a back seat a little bit.
Speaker 2: They are in terms of revenue growth a little bit
Speaker 2: weaker compared to the rest on the flip side. I
Speaker 2: don't want to keep talking about NVIDIA. But if
Speaker 2: you know, if people keep wanting to invest in A
Speaker 2: I and there's no need for their A I GP
Speaker 2: U si mean one GP U that they're selling is
Speaker 2: like $30,000. So if you just calculate how many units
Speaker 2: are being sold, I don't need to, I think that
Speaker 2: number alone was mind blowing. Yeah, I mean, it's very
Speaker 2: different compared to a consumer and video GP U that
Speaker 2: we have in our computers. It's like 300 bucks bucks. Yeah,
Speaker 2: I mean when governments and private sector companies are buying
Speaker 2: them whole
Speaker 2: in big volumes that changes the whole game. Yeah, I mean,
Speaker 2: you're talking about like billions and billions of dollars. Wow. Yeah,
Speaker 2: I mean when you just look at earnings calls for matter,
Speaker 2: they mentioned that by the end of this year they
Speaker 2: want to have 600,000 GP us like worth of gps. Yeah.
Speaker 2: So I mean you just calculate how much you're spending
Speaker 2: 600,000 times 30,000, you know, roughly
Speaker 2: are laughing all the way to the bank for the
Speaker 2: next few years. So it's really the growth story that
Speaker 2: matters here because it's the mileage that it gives you
Speaker 2: as an investor. Yeah, yeah, it's really a growth story. Ok.
Speaker 2: So we talked about how sometimes the tech sector can
Speaker 2: be quite volatile but it's not as volatile as other
Speaker 2: kinds of stocks out there. Still, they've experienced pretty drastic
Speaker 2: movements in a relatively short period and we talked about
Speaker 2: this earlier. Some even believe that there's a performance dispersion
Speaker 2: that has led to a disproportionate increase in stock valuations
Speaker 2: relative to the rest of the markets. And I guess
Speaker 2: when they do that, they are comparing it to equities.
Speaker 2: Do you think that the mag seven are indeed overvalued, overweight?
Speaker 2: I don't think as a group they're overweight because the
Speaker 2: earnings potential is really strong. But if you nick, obviously,
Speaker 2: some of the companies probably a little bit more overvalued
Speaker 2: compared to others. So it's not fair to say as
Speaker 2: a whole, they are overvalued. If you're looking at other
Speaker 2: consumer equities or healthcare, you know, other defensive wise
Speaker 2: talks out there. So if you invest in them, you
Speaker 2: really need to have kind of the stomach to be
Speaker 2: down like 10 15% 1 day and be ok with
Speaker 2: it because you know that they can make it back
Speaker 2: in three days. I think it boils down to why
Speaker 2: you've chosen to invest in that particular company, right? Because
Speaker 2: like you said, the gross story matters, the value matters
Speaker 2: where they're spreading their revenue to where they're gaining the
Speaker 2: revenue and reinvesting the revenue as well, right? So the
Speaker 2: Mac 7 may have had its origins in Fang as
Speaker 2: I prefaced earlier. But there are still key differences that
Speaker 2: the thing that sticks out to me immediately would be
Speaker 2: Netflix because I don't necessarily see Netflix as a tech
Speaker 2: stock per se. It's a very consumer stock,
Speaker 2: but then the lines are blurred, right? Because a lot
Speaker 2: of tech companies are consumer driven. So tell us about
Speaker 2: the key differences here. How do I tell what a
Speaker 2: true mag seven versus a Fang stock? So actually the
Speaker 2: mag seven, I believe at the time it was coin
Speaker 2: is because they were the biggest seven companies, right? Tech company.
Speaker 2: So Netflix had, I think like 60% draw down in
Speaker 2: price. So they kind of fell out of it. I
Speaker 2: think at the time they were maybe only worth only
Speaker 2: worth $200 billion. Whereas the rest, you know, they're like
Speaker 2: closer to one trillion. I mean, it's a, yeah, so
Speaker 2: that's why they got dropped. And also because streaming companies
Speaker 2: in general if you take much as Netflix, but even
Speaker 2: to some extent, Disney or Spotify, the way they earn
Speaker 2: their revenue and the way it translates to earnings is,
Speaker 2: is a little bit more constrained because
Speaker 2: they really bank on just two things. One is user
Speaker 2: growth and two raising prices which just happened by and
Speaker 2: three to a small extent nowadays, it's starting to incorporate
Speaker 2: a little bit more digital advertising in their business model.
Speaker 2: But for the most part, right, it's how much dollars
Speaker 2: can I increase, right?
Speaker 2: Without losing all my customer. Yeah. Yeah. So there is
Speaker 2: that limitation then for companies like the streaming platforms. So
Speaker 2: economy driven volatility aside, tech stocks do face some risks
Speaker 2: including regulatory risk purely because of their size and their
Speaker 2: global reach. And as you rightfully pointed out early in
Speaker 2: the conversation because of how new they are in terms
Speaker 2: of market players, what are some of the
Speaker 2: regulatory risks and what's the impact of those regulatory risks
Speaker 2: on these tech stocks immediately? I'm thinking about me and
Speaker 2: the hearing in the US Senate, for example. So there
Speaker 2: are two main regulatory risks right now and it's been
Speaker 2: going on for the last few years. One would be
Speaker 2: data privacy because all of these companies, they take all
Speaker 2: your data whenever you use them. And so regulators are
Speaker 2: trying to draw clear boundaries between what you can and
Speaker 2: what you can't do. And this has been
Speaker 2: a relatively new phenomenon where they are using a lot
Speaker 2: of data churning, a lot of data to drive more insights. Obviously,
Speaker 2: with the event of higher computer technology, better computers, you've
Speaker 2: been able to do that. The second area which is
Speaker 2: also very important and it has a lot of scrutiny,
Speaker 2: especially in Europe is around monopolistic practices, right? And that
Speaker 2: actually has a bigger impact, I think because
Speaker 2: look at companies like Google that essentially a monopoly in
Speaker 2: multiple business, I mean, Google Maps. Yeah, Android. So they've
Speaker 2: gotten so big and the downside for this regulation is
Speaker 2: that you will have a lot of smaller players, maybe
Speaker 2: smaller news outlets, smaller advertisers claiming that, you know, Google
Speaker 2: is bullying them because they are so big. Yeah, which,
Speaker 2: which is a fair argument
Speaker 2: in Europe. They take it really seriously. They impose serious
Speaker 2: punishments up to I believe 10% of their revenue from
Speaker 2: the last year. And then on top of that, they're
Speaker 2: able to break up the company or at least try
Speaker 2: to break up your company into smaller bits. We've seen
Speaker 2: that actually done in China somewhat with Alibaba.
Speaker 2: What regulators have kind of done? China is a totally
Speaker 2: different animal. Oh yeah. But, but when you look at
Speaker 2: Europe and North America, that's kind of the biggest downside
Speaker 2: risk for a lot of these companies because if you
Speaker 2: break them up, then obviously they don't operate as efficiently
Speaker 2: because have to have separate teams.
Speaker 2: You got to spend a little bit more money. So
Speaker 2: you use a little bit of your operating leverage and
Speaker 2: a little bit of your synergies and investors just don't
Speaker 2: really want it because, you know, if I'm going to
Speaker 2: invest in a company that's so big, I don't want
Speaker 2: them to be broken up. Exactly. Yeah, you lose all
Speaker 2: their competitive advantages. Yeah. exactly. So those two will be
Speaker 2: the main risk in terms of regulatory oversight. Another risk
Speaker 2: that is actually quite important nowadays is your geopolitical risk.
Speaker 2: And what we're seeing with China and the US,
Speaker 2: you know, us banning a lot of technology, a lot
Speaker 2: of the high end chips. So that has really impacted
Speaker 2: NVIDIA a little bit. Fortunately for NVIDIA, a demand is
Speaker 2: so strong that for right now it doesn't really matter,
Speaker 2: but China makes up about 20% of Nvidia's revenue. So
Speaker 2: you kind of have that taken away if you did
Speaker 2: have strong demand and you are just a regular company,
Speaker 2: I mean, 20% of your revenue gone is a lot
Speaker 2: like in three weeks, essentially is huge. It's a big chunk. Yeah.
Speaker 2: Right. So these kind of ongoing tensions, you can't really
Speaker 2: control it. You just got to sit back and watch
Speaker 2: and hope that they can work it out as an investor.
Speaker 2: You have no idea what about key person risk. You're
Speaker 2: looking at the Elon Musk and Mark Zuckerberg's of the world.
Speaker 2: Is this a potential major risk or pretty minor? You think?
Speaker 2: I think for most of Mac Seven it's pretty minor
Speaker 2: because they have very strong teams around them. So you
Speaker 2: have to know when you're looking at a company like
Speaker 2: this on top of the financial performance.
Speaker 2: Who is the guy at the top? What kind of
Speaker 2: character is he? Is it true that some investors actually
Speaker 2: buy into the company because of that key person? Yeah,
Speaker 2: so I mean, this is huge in maybe not so
Speaker 2: much public equities, but when it comes to private equity
Speaker 2: venture capital, that's something they look at because you want
Speaker 2: to see what kind of leader your CEO is, right?
Speaker 2: So here's the other thing that made the news very
Speaker 2: recently meta announcing that they would
Speaker 2: be paying its first ever dividend to investors. And word
Speaker 2: is that Amazon and alphabet are also going to follow suit.
Speaker 2: Have they indeed reached that level of maturity in the
Speaker 2: market where they can pay back their investors and not
Speaker 2: just for the one year, I mean, once you start
Speaker 2: doing that, I'm sure investors are going to expect you
Speaker 2: to continue paying some form of dividend over the next
Speaker 2: at least five years. Yeah, so definitely it was big
Speaker 2: news for a matter, it really showed their maturity as
Speaker 2: a company especially, you know what happened over the last
Speaker 2: three years when they were just pushing growth and then
Speaker 2: I was like, oh no, we are going to focus
Speaker 2: on efficiency.
Speaker 2: But when it comes to returning value to shareholders, they've
Speaker 2: always done that through share buybacks, their dividends is not
Speaker 2: on top of the share buybacks that they are already doing. So,
Speaker 2: they just are splitting the capital allocation accordingly. For example,
Speaker 2: if they're buying back 100 billion worth of shares, now,
Speaker 2: maybe they're going to buy back 80 billion and then
Speaker 2: do 20 billion in dividends by making these kind of
Speaker 2: strategic moves. It shows what kind of company they are
Speaker 2: maturing into and it probably would appeal a little bit
Speaker 2: more to dividend investors, for example, or for people that
Speaker 2: would have stayed away in the past because
Speaker 2: they were unsure of what kind of trajectory this kind
Speaker 2: of company was heading towards. Right, right now, they've mentioned
Speaker 2: that they're going to be just doing quarterly dividends for
Speaker 2: the foreseeable future. So they've really laid out the lines,
Speaker 2: you know, we're going to do this. It's not a
Speaker 2: one time thing we're going to continue doing it. That's
Speaker 2: a huge commitment. Yeah, and I think that has given
Speaker 2: investors quite a lot of confidence. You can see that
Speaker 2: the stock price this year. Oh yes, it has surged
Speaker 2: tremendously and obviously it begs the question, have they become
Speaker 2: too big to fail?
Speaker 2: I don't think so. I think they still have to
Speaker 2: be quite focused, especially if they are doing a lot
Speaker 2: of investments in R and D and capital expenditure, right?
Speaker 2: When you grow your assets that much, you still have
Speaker 2: to be somewhat prudent in terms of how you're allocating money. Yeah,
Speaker 2: there will come a point where their user base is
Speaker 2: also going to be saturated right now. They are at
Speaker 2: 4 billion users. Yeah, I mean, that's like almost 60 70%
Speaker 2: of the world's population, right. So how much more can
Speaker 2: they actually grow in terms of user base? And then
Speaker 2: on the monetization side,
Speaker 2: yes, they're still in the early stages, but they will
Speaker 2: peter out a little bit in the next 5 to
Speaker 2: 10 years. It almost feels as if A I came
Speaker 2: at the right time. Like the timing is impeccable that
Speaker 2: they're able to leverage on this for then the next
Speaker 2: chapter of their growth story. I think the A I
Speaker 2: hype came at the right time because these companies have
Speaker 2: been doing it for the last 10 years. Yeah, exactly.
Speaker 2: It's nothing new to them. Yeah.
Speaker 2: So as an investor looking to add a tech stock
Speaker 2: to a portfolio, what do I need to be paying
Speaker 2: attention to particularly deciding on Mac Seven, I'm thinking about
Speaker 2: things like Time Horizon, you talked about tech stock investors
Speaker 2: being the kind that needs to have the stomach for it.
Speaker 2: So I'm not thinking long term here. This has to
Speaker 2: be a quick turnaround or a medium term outlook or
Speaker 2: can they still be long term stocks that we can
Speaker 2: invest in actually for more volatile stocks like tech stocks,
Speaker 2: you really want to have a longer time horizon because
Speaker 2: it kind of mitigates a lot of the volatility risk
Speaker 2: at the same time, if you have companies like the
Speaker 2: max seven, that fundamentally are very sound, if you look
Speaker 2: at their financial statements, you know, the flush of cash,
Speaker 2: you know that if anything
Speaker 2: inadvertently happens, they'll still be able to function, they will
Speaker 2: still be able to pay out their investors. And so
Speaker 2: actually these kind of companies, yes, you can do short
Speaker 2: term trading and stuff like that. But if you really
Speaker 2: want to look long term, that's probably where you're going
Speaker 2: to be able to maximize your returns.
Speaker 2: So then you really have to look at how much
Speaker 2: value can I get at this current price? If you
Speaker 2: think maybe I can get a little bit more, you
Speaker 2: wait for a pullback, right? Because inevitably it will happen. Yeah.
Speaker 2: And then you find that, ok, this is somewhere where
Speaker 2: it's a bit more value to me as a company.
Speaker 2: It doesn't diminish the performance or the capabilities of the company.
Speaker 2: It's just where you want to enter and then you
Speaker 2: just hold it for 10 years because I'm quite sure
Speaker 2: in 10 years all of these companies are still going
Speaker 2: to be. Oh, yeah, it's hard to imagine a world
Speaker 2: without them. Now their game changer, they are
Speaker 2: tech disruptors for the most part they all basically use
Speaker 2: every day. Yeah. It's almost as if we can't live
Speaker 2: without them. Yeah. So my final question to you is,
Speaker 2: do you think max seven will still be mag seven
Speaker 2: in 2025? Yeah, I think in 2025 there will still
Speaker 2: be mag seven. Right. The seven is still there. I'm
Speaker 2: quite confident that this will happen for at least the
Speaker 2: next 2 to 3 years. They'll still be up there.
Speaker 2: Do you think anyone will drop out the way net
Speaker 2: fix it?
Speaker 2: I think the only company that has the potential to
Speaker 2: do that would be Tesla, the rest of them, they
Speaker 2: are very solid. Even though we talked a little bit
Speaker 2: about Apple and slowing growth, there's still a huge company,
Speaker 2: very high value, very high value because they generate a
Speaker 2: lot of revenue earnings are also good and they're very stable.
Speaker 2: It's tough to find a better company than Apple if
Speaker 2: you're looking for something that's stable, right? It may not
Speaker 2: give you the 30 40% performance that you want,
Speaker 2: but right now, not right now, but they will still
Speaker 2: be pretty solid better than most other companies. You know,
Speaker 2: you just gave us a really detailed lay of the land, Jonathan.
Speaker 2: So thank you so much for helping us understand the
Speaker 2: Mac seven, the whole tech stock industry, especially as an
Speaker 2: investor as well. What to look out for. So, thank
Speaker 2: you very much. You're welcome it was fun. It's still
Speaker 2: a very exciting space to watch. However, the journey turns
Speaker 2: out just got to make sure that you know, you
Speaker 2: as an investor
Speaker 2: know what you can stomach as Jonathan painted. If you
Speaker 2: enjoyed this episode, please let us know by leaving us
Speaker 2: a comment or a rating on any of the platforms
Speaker 2: you are listening to us from, we're streaming on Apple
Speaker 2: podcasts and Spotify as well as youtube music. Let's not
Speaker 2: forget the team behind Money Talks, Joanne Chan Tiffany, Jaini, Johari,
Speaker 2: Christina Roberts win and I'm Andrea He catch you next time.