1 00:00:00,000 --> 00:00:02,080 Speaker 1: Now let's deal with the AI bubble. We have talked 2 00:00:02,120 --> 00:00:03,880 Speaker 1: a lot about the AI bubble on the show, and 3 00:00:03,920 --> 00:00:06,560 Speaker 1: in October we talked about the emerging warning signs around 4 00:00:06,559 --> 00:00:09,040 Speaker 1: the investments and the fears of the bubble. And now 5 00:00:09,039 --> 00:00:10,879 Speaker 1: analysts are saying we're seeing some of that risk come 6 00:00:10,880 --> 00:00:13,119 Speaker 1: home to re. Sam Dickey from Fisher fundss with me 7 00:00:13,160 --> 00:00:13,640 Speaker 1: on this Hi. 8 00:00:13,600 --> 00:00:15,360 Speaker 2: Sam, good evening here. 9 00:00:15,400 --> 00:00:17,599 Speaker 1: Okay, Now, Sam remind us of the specific risks so 10 00:00:17,640 --> 00:00:18,919 Speaker 1: that we were worried about here. 11 00:00:20,320 --> 00:00:22,360 Speaker 2: Yes, there was a few there. So we were talking 12 00:00:22,480 --> 00:00:26,040 Speaker 2: last month about three things. So the vendor financing, so 13 00:00:26,840 --> 00:00:30,680 Speaker 2: sellers of goods leaning money to customers, so supplies like 14 00:00:30,800 --> 00:00:35,080 Speaker 2: Nvidia AMD leaning billions to customers so they can buy 15 00:00:35,120 --> 00:00:39,280 Speaker 2: their own products is arguably artificial demand and sort of 16 00:00:39,280 --> 00:00:42,400 Speaker 2: reminded you and I either of Nortel and Lucent in 17 00:00:42,440 --> 00:00:45,080 Speaker 2: the late nineties learning money to telcos to buy their equipment. 18 00:00:45,080 --> 00:00:47,320 Speaker 2: That was number one. Two was just the sheer size 19 00:00:47,320 --> 00:00:50,559 Speaker 2: of the deal. So we talked about the eye popping 20 00:00:50,640 --> 00:00:55,320 Speaker 2: deal that Oracle did with open Ai, whereby open Ai 21 00:00:55,440 --> 00:00:58,320 Speaker 2: signed a contract to pay Oracle three hundred billion dollars 22 00:00:58,320 --> 00:01:01,000 Speaker 2: over five years to train in for it's AI models, 23 00:01:01,520 --> 00:01:04,800 Speaker 2: but bearing in mind open Ai only had fifteen billion 24 00:01:04,800 --> 00:01:07,400 Speaker 2: a revenue. And then there was companies like call Weave, 25 00:01:07,440 --> 00:01:10,480 Speaker 2: a company that buys accelerated compute chips, sticks them in 26 00:01:10,560 --> 00:01:12,600 Speaker 2: data centers, and re rents them at massive scale. What 27 00:01:12,720 --> 00:01:15,080 Speaker 2: was loss making. And the final thing we talked about 28 00:01:15,120 --> 00:01:18,440 Speaker 2: was the yawning gap between the valuations of these companies 29 00:01:18,440 --> 00:01:21,200 Speaker 2: were trading at and the on the ground reality of 30 00:01:21,240 --> 00:01:23,120 Speaker 2: AI use cases. So there was sort of four or 31 00:01:23,160 --> 00:01:24,479 Speaker 2: five risks we were discussing. 32 00:01:25,040 --> 00:01:26,400 Speaker 1: And where are we at today? 33 00:01:26,440 --> 00:01:29,119 Speaker 2: Do you think, well, I think of there's good news 34 00:01:29,120 --> 00:01:32,360 Speaker 2: that we've had a healthy dose of reality in the 35 00:01:32,480 --> 00:01:35,039 Speaker 2: last sort of two or three weeks. And give you 36 00:01:35,040 --> 00:01:38,319 Speaker 2: a few numbers there the basket of AI winners, So 37 00:01:38,319 --> 00:01:40,800 Speaker 2: that's a couple of handfuls of AI winners in the 38 00:01:40,920 --> 00:01:44,119 Speaker 2: US that we track. They've already fallen sort of fifteen 39 00:01:44,120 --> 00:01:47,640 Speaker 2: to twenty percent. But the riskier stuff like Oracle, like 40 00:01:47,760 --> 00:01:50,720 Speaker 2: core Weave is already down sort of forty to fifty 41 00:01:50,720 --> 00:01:52,800 Speaker 2: percent since you and I last spoke about this. Either 42 00:01:52,920 --> 00:01:57,040 Speaker 2: and the in particular around those two companies, investors that 43 00:01:57,080 --> 00:01:59,320 Speaker 2: are buying the debt of these companies because it's not 44 00:01:59,360 --> 00:02:01,440 Speaker 2: all equity under these companies in a lot of debt 45 00:02:01,920 --> 00:02:04,640 Speaker 2: to fund this, they started requiring a higher return on 46 00:02:04,680 --> 00:02:07,400 Speaker 2: their money given the risk that's building, given those risks 47 00:02:07,440 --> 00:02:09,840 Speaker 2: we talked about, so it's more expensive for those companies 48 00:02:10,000 --> 00:02:12,760 Speaker 2: to raise money. So generally speaking, people are still excited 49 00:02:12,760 --> 00:02:15,119 Speaker 2: about AI, but they're becoming a little bit more discerning. 50 00:02:15,639 --> 00:02:17,280 Speaker 1: And so where do you think we go to from here? 51 00:02:18,440 --> 00:02:20,720 Speaker 2: I think the technology still has years to run. Hard 52 00:02:20,800 --> 00:02:23,000 Speaker 2: to not be quite bullish on the ability of AI 53 00:02:23,120 --> 00:02:26,640 Speaker 2: to drive productivity growth. But every time we see this 54 00:02:26,720 --> 00:02:30,120 Speaker 2: with a game changing technology, it does attract these pockets 55 00:02:30,120 --> 00:02:32,640 Speaker 2: of animal spirits and hype. So I think we'll go 56 00:02:32,720 --> 00:02:34,640 Speaker 2: through this sort of hype cycle a few more times. 57 00:02:34,680 --> 00:02:38,639 Speaker 1: Yet, what do you reckon this means for investors, Sam. 58 00:02:38,800 --> 00:02:41,120 Speaker 2: I think it's really good to see these healthy corrections. 59 00:02:41,120 --> 00:02:43,320 Speaker 2: I think it means that people are becoming more discerning. 60 00:02:43,680 --> 00:02:46,200 Speaker 2: It's not just anything with AI and the title you 61 00:02:46,280 --> 00:02:49,480 Speaker 2: buy it. I think debt investors in particular in particular 62 00:02:49,560 --> 00:02:52,679 Speaker 2: always keep equity investors on us. So I think we've 63 00:02:52,720 --> 00:02:55,400 Speaker 2: got some good risk pricing stepping into the sector. So 64 00:02:55,400 --> 00:02:58,600 Speaker 2: that's really good news for longer term discerning investors. 65 00:02:58,919 --> 00:03:00,639 Speaker 1: Sam good to talk to you as a mate. Talk 66 00:03:00,680 --> 00:03:03,000 Speaker 1: to you soon, Sam Dicky Fisher funds. 67 00:03:02,840 --> 00:03:06,000 Speaker 2: For more from Hither Duplessy Allen Drive. Listen live to 68 00:03:06,080 --> 00:03:09,120 Speaker 2: news talks. It'd be from four pm weekdays, or follow 69 00:03:09,160 --> 00:03:10,880 Speaker 2: the podcast on iHeartRadio