WEBVTT - Peloton and Nvidia Share Earnings Spotlight 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:21.400 --> 0:00:25.320 Man, take a look at what was once a pandemic, Darling. 0:00:25.800 --> 0:00:29.720 We're talking about Peloton right now, down almost twenty four 0:00:29.720 --> 0:00:33.000 percent at its lows today, almost down twenty eight percent, 0:00:33.479 --> 0:00:35.720 the mostion in about two years, and it's on track 0:00:35.800 --> 0:00:39.600 Tim for a record low closed Sava se Bernstein, saying 0:00:40.840 --> 0:00:44.000 this was after a messy fourth quarter, Yeah, where they 0:00:44.040 --> 0:00:46.040 gave a week revenue forecast for the current quarter and 0:00:46.040 --> 0:00:48.879 all said costs for a product recall, we're significantly more 0:00:48.920 --> 0:00:52.120 expensive than it anticipated. It just can't seem to do 0:00:52.320 --> 0:00:53.279 anything right. 0:00:53.520 --> 0:00:55.560 Like, if you haven't been living in under a rock, 0:00:55.600 --> 0:00:58.320 you'll know that Peloton has been mired in a two 0:00:58.360 --> 0:01:01.920 year tail spin. It was an pandemic, Darling. The company's 0:01:01.920 --> 0:01:05.200 bikes and more were a hot commodity during COVID nineteen lockdowns. 0:01:05.240 --> 0:01:07.160 Carol, I have one, you got one, bought it before 0:01:07.200 --> 0:01:08.920 the pandemic, early on. 0:01:08.880 --> 0:01:12.399 The Peloton train. Yeah, demand those slumped after people began 0:01:12.440 --> 0:01:14.679 heading back to offices, going back to gyms. And also 0:01:14.840 --> 0:01:17.000 you got to remember when it comes to working out, 0:01:17.600 --> 0:01:20.560 there there are cycles. There are fads like totally remember 0:01:20.640 --> 0:01:23.679 jazzer size, the thigh master, Nordic track like these are 0:01:23.720 --> 0:01:25.119 all things from my childhood that like. 0:01:25.240 --> 0:01:27.120 Oh, come on, you have a thigh master at home? 0:01:28.200 --> 0:01:32.440 Yeah, definitely did at one point, we absolutely did in 0:01:32.440 --> 0:01:32.760 my house. 0:01:33.480 --> 0:01:35.640 Oh my god. Well, the stock we're talking about, Peloton 0:01:35.680 --> 0:01:37.600 now down around ninety seven percent from its all time 0:01:37.640 --> 0:01:39.600 high back in January of twenty twenty one. That was 0:01:39.640 --> 0:01:42.600 the peak. So where does Peloton go from here? We 0:01:42.640 --> 0:01:44.679 have great voice on this. David Trainer is a CEO 0:01:44.720 --> 0:01:47.840 at New Constructs, an independent investment research firm. He's been 0:01:47.880 --> 0:01:51.280 advising investors to sell. He joins us on Zoom from Nashville. David, 0:01:51.440 --> 0:01:53.960 So nice to have you back with us. Where does 0:01:54.160 --> 0:01:55.520 Peloton go from here? 0:01:56.880 --> 0:01:58.800 I think it goes to zero. You know, Peloton was 0:01:58.840 --> 0:02:02.680 one of our original zoneombie stocks, and the key divining 0:02:02.680 --> 0:02:05.160 feature of a zombie stock is burning cash but not 0:02:05.280 --> 0:02:08.560 having a lot of cash to support that burn. So 0:02:09.080 --> 0:02:11.440 at some point it just runs out of money. And 0:02:11.480 --> 0:02:14.440 when we first first put Peloton on the Zombie stock list. 0:02:14.520 --> 0:02:16.600 The CEO announced that they were going to have to 0:02:17.040 --> 0:02:21.000 engage in major cost cuttings in order to extend their 0:02:21.000 --> 0:02:25.000 cash burn runway beyond just six months. And what happens, 0:02:25.560 --> 0:02:27.360 you know, in that situation, is you just stand up 0:02:27.400 --> 0:02:29.800 in a death spiral to all the points you guys 0:02:29.800 --> 0:02:32.280 were just making. It was never really a good business. 0:02:32.760 --> 0:02:35.360 And so you know, now you've got a good business 0:02:35.360 --> 0:02:38.639 slashing costs, and it's never going to really going to 0:02:38.680 --> 0:02:40.120 be able to get out of its own way and 0:02:40.160 --> 0:02:42.840 become a successful business. It was a bad concept to 0:02:42.880 --> 0:02:44.600 the from the beginning of my opinion. 0:02:44.280 --> 0:02:47.600 Why why do you believe that? I mean, think about it, 0:02:47.600 --> 0:02:48.959 because I don't think there's a but hold on it 0:02:49.080 --> 0:02:50.880 before I before I let you answer, I'm just gonna, 0:02:51.080 --> 0:02:53.280 you know, remind people that this is a company that 0:02:53.320 --> 0:02:55.680 wanted to be sort of the the Netflix or like 0:02:55.720 --> 0:02:59.280 Amazon kindle of working out. You buy one expensive piece 0:02:59.280 --> 0:03:02.680 of hardware and then you pay a monthly fee which 0:03:02.720 --> 0:03:06.239 is high margin to the company, and you just keep 0:03:06.240 --> 0:03:07.520 paying it every month and you don't need to buy 0:03:07.520 --> 0:03:08.200 a new hardware. 0:03:10.320 --> 0:03:12.720 If the problem is that anybody can do that, right 0:03:12.919 --> 0:03:14.960 I'm not saying people don't want to do, you know, 0:03:15.200 --> 0:03:17.480 or have what they're selling, but to make a profit 0:03:17.560 --> 0:03:18.800 at it, you're gonna have to do that in a 0:03:18.800 --> 0:03:21.320 way that no other business can. And that's what I 0:03:21.320 --> 0:03:23.799 think a lot of investors often miss. There's a difference 0:03:23.840 --> 0:03:26.400 between a good product and a good stock. There's a 0:03:26.400 --> 0:03:29.839 difference between a good company and a good stock. And look, 0:03:29.919 --> 0:03:34.920 for Peloton to ever be successful, they would have needed 0:03:34.960 --> 0:03:39.040 to have provided an exercise bike and set of entertainment 0:03:39.080 --> 0:03:42.040 that goes with it that was meaningfully differentiated and better 0:03:42.080 --> 0:03:44.560 than what anyone else could do. They couldn't do it, 0:03:45.360 --> 0:03:47.400 you know. I think being born into this sort of 0:03:48.080 --> 0:03:51.240 super hype IPO environment meant that they had a lot 0:03:51.240 --> 0:03:53.880 of money and really weak corporate governance, which meant that 0:03:53.960 --> 0:03:57.840 spending was terrible and crazy. But yeah, look, the bottom 0:03:57.840 --> 0:04:00.200 line is I'm not going to tell you people don't 0:04:00.200 --> 0:04:03.000 want to ride their bikes and be able to watch videos, right, 0:04:03.280 --> 0:04:05.240 but they can do that in a lot of other ways. 0:04:05.560 --> 0:04:07.520 And the number of copycat products that had been out 0:04:07.560 --> 0:04:11.680 there ever since, you know, soon after Peloton launched immediately 0:04:11.720 --> 0:04:14.560 proved our point, which we wrote, by the way before 0:04:14.600 --> 0:04:16.440 the IPO. We warned people to stay away from this 0:04:16.480 --> 0:04:19.760 IPO from the beginning because again, there's no moat around 0:04:19.760 --> 0:04:23.560 this business. There's no competitive differentiation to create profit margins. 0:04:23.640 --> 0:04:25.560 Who's your favorite instructor, Carol, I. 0:04:25.600 --> 0:04:27.719 Can't even remember. It used to be Robin. Robin was 0:04:27.720 --> 0:04:29.480 really cool, but this was another one. 0:04:29.680 --> 0:04:31.479 This was what I thought was the mode. I thought 0:04:31.480 --> 0:04:33.359 this was the mode. Were these instructors that they were 0:04:33.400 --> 0:04:35.599 paying half a million dollars a year Carol? Yeah, and 0:04:35.760 --> 0:04:37.600 you know you couldn't find anywhere else. They had exclusive 0:04:37.640 --> 0:04:39.960 contracts with the company, and that's what drew people, right. 0:04:40.400 --> 0:04:42.839 Yeah, And I will say it did create a community, 0:04:42.839 --> 0:04:44.880 and I like the you could be a live aspect, 0:04:44.920 --> 0:04:46.919 or you could pop into the library. I liked it. 0:04:47.000 --> 0:04:50.320 My daughter, who's much younger than me, obviously she liked it. 0:04:50.400 --> 0:04:52.720 But I do wonder, David. I mean, it's interesting, as 0:04:52.760 --> 0:04:54.719 you say, you know, you've got to be either a 0:04:54.720 --> 0:04:56.440 good company, good business, or good stock. I hope I 0:04:56.440 --> 0:04:59.039 didn't miss anything. Are you saying that Peloton is none 0:04:59.080 --> 0:04:59.440 of those? 0:05:02.080 --> 0:05:02.800 Not necessarily? 0:05:02.839 --> 0:05:04.880 I mean, look, people like the product, but you know, 0:05:05.120 --> 0:05:06.760 I don't know that it's been a good company and 0:05:06.800 --> 0:05:09.119 that it's just been losing lots of lots of cash, 0:05:09.160 --> 0:05:13.359 been a big cash burner forever. And I'm not saying 0:05:13.360 --> 0:05:15.280 that like you know, you might not like an instructor 0:05:15.320 --> 0:05:17.440 here or there, but look, the bottom line is that 0:05:17.800 --> 0:05:20.760 it has been a great product for consumers because they've 0:05:20.800 --> 0:05:24.200 been able to buy it at below cost. Right, Peloton 0:05:24.240 --> 0:05:26.720 has never made any money. Everything they're selling is selling 0:05:26.720 --> 0:05:28.719 it a loss, which means they're selling it to you 0:05:28.839 --> 0:05:33.080 effectively below a proper cost. So that's the distinction. And 0:05:33.360 --> 0:05:35.680 when I say like a good company and a good stock, 0:05:36.040 --> 0:05:39.719 one of one of the classic examples has been Walmart 0:05:39.760 --> 0:05:43.360 for years. Right, makes a lot of money, super cash 0:05:43.400 --> 0:05:47.480 flow generator, but the valuation is too expensive. Right, the 0:05:47.560 --> 0:05:51.080 valuation implies, and this is today and more in the past. 0:05:51.440 --> 0:05:55.120 Nvidia another great example, good company, bad stock, right doing 0:05:55.160 --> 0:05:57.880 a lot of great things, but when the valuation improved 0:05:58.000 --> 0:06:00.440 implies you're going to be over two point two trion 0:06:00.480 --> 0:06:02.920 and revenue and have a thousand percent return on invested 0:06:03.000 --> 0:06:06.320 capital while growing revenue at twenty five percent compounded annually 0:06:06.360 --> 0:06:09.920 for twenty years. The valuation is too much. So the 0:06:10.040 --> 0:06:13.040 key to investing is to buy good businesses at good prices. 0:06:13.600 --> 0:06:15.120 And so you can be a good business and a 0:06:15.120 --> 0:06:17.039 good company but not be selling at a good price. 0:06:17.200 --> 0:06:18.960 So where do we go from here with Peloton? 0:06:20.839 --> 0:06:22.599 I recommend if you haven't already sold it, I would 0:06:22.640 --> 0:06:24.279 take it out of the portfolio because I think it 0:06:24.279 --> 0:06:26.680 can go to zero. And part of the trap here 0:06:26.760 --> 0:06:29.679 is that it's only been able to survive this long 0:06:30.000 --> 0:06:33.520 on the good graces of unsuspecting investors believing that there 0:06:33.560 --> 0:06:34.680 was more there than there is. 0:06:35.360 --> 0:06:37.360 Because it's interesting what you said about sell you know, 0:06:37.839 --> 0:06:39.440 a loss on the bikes, and I get it, but 0:06:39.520 --> 0:06:42.440 you pay I'm still paying a monthly fee even if 0:06:42.480 --> 0:06:45.520 I don't use it like that is commitments you make, 0:06:45.640 --> 0:06:50.719 set it and forget it you can. But that's not enough, correct. 0:06:51.400 --> 0:06:53.680 It hasn't been. I mean they're still burning cash and 0:06:53.720 --> 0:06:54.960 there's just not a lot of people that are going 0:06:55.000 --> 0:06:57.000 to do that either, I mean, let's let's face it, 0:06:57.440 --> 0:06:59.400 or they can do it, you know, at their gym 0:06:59.480 --> 0:07:02.159 where they can with a group of people. But I 0:07:02.200 --> 0:07:03.800 think you know what you guys led with on the 0:07:03.839 --> 0:07:06.240 beginning about how this being a being a COVID darling 0:07:06.279 --> 0:07:08.320 because everyone was trapped in their house and now they 0:07:08.320 --> 0:07:10.600 had a way to com you know, connect with other people. 0:07:11.080 --> 0:07:14.160 That was good for a while, you know, And I 0:07:14.160 --> 0:07:16.240 think there was a small maybe a quarter or two 0:07:16.280 --> 0:07:19.160 where Peloton maybe had a positive profit margin. 0:07:19.600 --> 0:07:24.400 But never since does it make sense for a big 0:07:24.440 --> 0:07:26.800 company to come in and buy Peloton. In the past, 0:07:27.320 --> 0:07:28.960 a couple of years ago, in the last couple of years, 0:07:28.960 --> 0:07:31.080 we've talked about, oh, would this be a good fit 0:07:31.120 --> 0:07:33.600 for Apple, would this be a good fit for Amazon? 0:07:35.920 --> 0:07:36.160 Yeah. 0:07:36.200 --> 0:07:38.320 I mean, look, that's what we call stupid money risk 0:07:38.480 --> 0:07:41.080 for these business like these these danger zone stocks or 0:07:41.160 --> 0:07:43.480 zombie stocks that you know you never know, Like for example, 0:07:43.720 --> 0:07:46.080 Mattress Firm was one of the most heavily shorted stocks 0:07:46.080 --> 0:07:48.160 in the market. It was a terrible business, it was 0:07:48.200 --> 0:07:50.800 about to go bankrupt, and then some South American company 0:07:50.840 --> 0:07:53.440 came and paid a thirty forty percent premium to the 0:07:53.480 --> 0:07:56.360 stock price. Crazy stuff happens in the stock market. So 0:07:56.400 --> 0:07:59.080 I'm never here to give any kind of advice in general, 0:07:59.400 --> 0:08:02.480 but not to ever say, hey, shorting is a good idea, 0:08:02.520 --> 0:08:04.800 because it's dangerous nvidio. 0:08:05.040 --> 0:08:06.120 Oh wait, go ahead, go ahead. 0:08:06.160 --> 0:08:09.560 Final thought, don't I don't see any white Night coming 0:08:09.600 --> 0:08:12.200 out and saving Peloton again. There's too many like Amazon's 0:08:12.240 --> 0:08:15.400 got its own knockoffs. Yeah, right, got Nautilus and a 0:08:15.440 --> 0:08:18.920 lot of other exercise companies. They have knockoffs on a peloton. 0:08:19.080 --> 0:08:22.880 There's nothing innately special, so special about a pet about 0:08:22.880 --> 0:08:24.960 a peloton that I think somebody wants to buy it. 0:08:25.680 --> 0:08:27.560 Thirty seconds? Can you give me thirty seconds on an 0:08:27.600 --> 0:08:29.240 end Vidia? As we wait for those earnings? 0:08:30.240 --> 0:08:34.200 Yeah, good company, bad stock, but extremely expensive valuation. I 0:08:34.200 --> 0:08:37.680 mean they've got to improve margins by like a thousand 0:08:37.760 --> 0:08:41.480 basis points and grow revenue at twenty percent compound and 0:08:41.520 --> 0:08:46.440 annually for twenty five years to justify the current stock price. 0:08:46.480 --> 0:08:48.400 I think around four hundred and fifty five hundred and 0:08:48.400 --> 0:08:48.880 sixty bucks. 0:08:49.000 --> 0:08:50.520 Yeah, I'm sixty nine right now. 0:08:50.520 --> 0:08:52.800 I want you to repeat that, David, you said good company, 0:08:52.840 --> 0:08:53.360 bad stock. 0:08:53.600 --> 0:08:56.319 Yeah, good company, bad stock. Right, they make a lot 0:08:56.360 --> 0:08:58.800 of money, but the stock price is implying they're going 0:08:58.840 --> 0:09:02.280 to make a huge, huge amount more. And keep in mind, 0:09:02.400 --> 0:09:06.439 in order for you to expect to outperform as an investor, 0:09:06.840 --> 0:09:08.520 you've got to believe the company is going to do 0:09:08.600 --> 0:09:11.960 even better than the twenty percent compound and annual profit 0:09:12.000 --> 0:09:13.440 growth for twenty five years. 0:09:13.480 --> 0:09:16.120 Got you know what I mean, yeah, hey, listen forgive 0:09:16.320 --> 0:09:18.840 thank you though so much. You did what we wanted 0:09:18.880 --> 0:09:21.720 to do, especially on Peloton, and appreciate the Nvidia thoughts. 0:09:21.800 --> 0:09:25.720 David trainor CEO at New Constructs on zoom from Nashville, Tennessee. 0:09:26.080 --> 0:09:29.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:29.679 --> 0:09:33.040 live weekday afternoons from three to six Eastern Listen on 0:09:33.080 --> 0:09:37.120 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:09:37.400 --> 0:09:39.679 or watch us live on YouTube. 0:09:40.480 --> 0:09:43.680 The race is on to adopt generative AI. That is 0:09:43.720 --> 0:09:46.880 in the press release from the founder and CEO of Nvidia, 0:09:47.040 --> 0:09:50.720 Jensen Wang. He also is saying a new computing era 0:09:50.880 --> 0:09:54.960 has begun. Companies worldwide are transitioning from general purpose to 0:09:55.080 --> 0:09:59.360 accelerateed computing and generative AI. That's stock, as Charlie just mentioned, 0:09:59.720 --> 0:10:02.240 Can continuing to build momentum to the upside in the 0:10:02.280 --> 0:10:05.680 after hours, up seven point six percent that buyback news 0:10:06.160 --> 0:10:10.200 and third quarter revenue outlook beating the forecast, I mean, 0:10:10.400 --> 0:10:11.880 growing into that valuation. 0:10:12.080 --> 0:10:15.480 Perhaps, Yeah, this is a blowout quarter for the company. 0:10:15.559 --> 0:10:17.959 Shares up seven point eight percent after third quarter revenue 0:10:18.360 --> 0:10:21.560 outlook beat, the company approving an additional twenty five billion 0:10:21.640 --> 0:10:24.880 dollars in share repurchases with a look at the quarter 0:10:25.000 --> 0:10:26.920 in the outlook, we got back with us. Dan Morgan, 0:10:27.040 --> 0:10:29.880 senior portfolio manager at Sonovus Trust, joins us on the 0:10:29.880 --> 0:10:32.560 phone from Atlanta this afternoon. Dan, You've had three minutes 0:10:32.559 --> 0:10:36.400 to look at this initial reaction, Carol, I. 0:10:36.320 --> 0:10:40.160 Mean, again, this is just a huge quarter total blowout number. 0:10:40.960 --> 0:10:44.920 What gets me is that third quarter guidance, the sixteen 0:10:44.960 --> 0:10:47.880 billion in the street was about twelve and a half billion, 0:10:48.040 --> 0:10:50.560 and then there was a whisper number out on Data 0:10:50.559 --> 0:10:53.160 Center that said that they got to do better than 0:10:53.200 --> 0:10:55.600 ten billion, even though the street was around eight billion, 0:10:56.000 --> 0:10:59.600 and they did ten point three billion. So again, Tim 0:10:59.600 --> 0:11:03.320 and Carroll, this just gives further evidence that, you know, 0:11:03.400 --> 0:11:07.760 AI gener of AI chip demand continues to be extremely strong. 0:11:07.840 --> 0:11:11.160 And again and Vidia has been the poster child right 0:11:12.240 --> 0:11:13.480 for substantiating AI. 0:11:13.840 --> 0:11:15.360 You know, it's so funny. I'm going through the press 0:11:15.360 --> 0:11:18.199 release and I'm like, oh yeah, they do chips for gaming, 0:11:18.400 --> 0:11:19.080 Oh yeah, they. 0:11:19.000 --> 0:11:21.559 Do automotive for years. 0:11:21.600 --> 0:11:24.880 But our focus is so much AI. Help us break 0:11:24.920 --> 0:11:27.160 down the business of what it is and where the 0:11:27.200 --> 0:11:29.040 growth is. Is it all the AI growth? 0:11:30.120 --> 0:11:32.480 Yeah? I mean Tim and Carroll. If you look at 0:11:32.520 --> 0:11:35.760 their data center group, it's projected at about sixty five 0:11:35.800 --> 0:11:41.040 percent of the overall demand come from generative AI. So 0:11:41.440 --> 0:11:44.199 that's what's really pushing that number. And you know, Carol, 0:11:44.240 --> 0:11:47.319 you even mentioned earlier. I mean, we used to talk about 0:11:47.440 --> 0:11:51.199 Nvidia as a gaming company, right their GPUs and all 0:11:51.240 --> 0:11:53.760 the great gaming chips they had, and then they just 0:11:54.040 --> 0:11:57.640 started working into the same sandbox with AMD and Intel 0:11:58.240 --> 0:12:02.199 in the data center area for for cloud. And now 0:12:02.240 --> 0:12:05.400 they've just gone and done a fabulous job in terms 0:12:05.400 --> 0:12:08.160 of the chip portfolio that they're offering in that space, 0:12:08.160 --> 0:12:10.880 and obviously the demand is extremely high because they blew 0:12:10.880 --> 0:12:11.560 these numbers away. 0:12:11.600 --> 0:12:14.400 Again, Hey, I want to be smart here though, because 0:12:14.400 --> 0:12:16.360 we all get heady when it's like, oh my god, 0:12:16.400 --> 0:12:18.360 look at what they're doing and how much they're big beat. 0:12:18.559 --> 0:12:21.200 Should we be heady here? You know? One of the 0:12:21.200 --> 0:12:24.120 things that we keep questioning is we had on a 0:12:24.160 --> 0:12:28.920 guest earlier who said great company, badstock, meaning it's overvalued. 0:12:29.559 --> 0:12:32.360 What is it in this release an outlook that says, well, 0:12:32.360 --> 0:12:33.840 maybe it's not overvalued. 0:12:35.000 --> 0:12:37.440 I think Carol, everyone that talks about the stock being 0:12:37.440 --> 0:12:42.000 overvalued is basically looking at trailing pe multiples, right, or 0:12:42.080 --> 0:12:44.439 they're looking at price the sales, which is about forty times. 0:12:44.679 --> 0:12:47.400 But you look at the forward estimates for let's say 0:12:47.440 --> 0:12:50.040 Physical Year twenty twenty five, which are going to go 0:12:50.160 --> 0:12:52.560 up after this release, they were around ten and a half. 0:12:53.040 --> 0:12:55.200 You're straining at thirty eight times earnings. I mean, that's 0:12:55.280 --> 0:12:58.480 not excessive. You got to remember already halfway through Physical 0:12:58.600 --> 0:13:00.480 year twenty four for them, right, we're going into the 0:13:00.480 --> 0:13:03.040 third quarter, so we've got to always look ahead. So 0:13:03.400 --> 0:13:05.480 I think if you look at the stock as on 0:13:05.520 --> 0:13:08.800 a forward multiple basis, and you factor in the tremendous 0:13:08.840 --> 0:13:12.040 year over year growth that they're getting right now and 0:13:12.080 --> 0:13:15.320 the momentum that they're getting on this quarter to quarter basis, 0:13:15.800 --> 0:13:19.000 the stock to me doesn't seem that excessive when you 0:13:19.000 --> 0:13:21.000 compare the growth rates to the multiples. 0:13:21.160 --> 0:13:23.160 Why the heck are they doing a buy back twenty 0:13:23.160 --> 0:13:26.720 five billion dollars in share repurchases because they can? Because 0:13:26.720 --> 0:13:27.440 it makes sense? 0:13:28.280 --> 0:13:30.480 Yeah, I saw that, Carol. It's kind of funny because 0:13:30.520 --> 0:13:32.240 you know, usually when you've got enough free cash flow 0:13:32.320 --> 0:13:35.880 for a buyback, you might go out and buy somebody, right, 0:13:35.920 --> 0:13:37.760 you know, And why do you need to buy shares 0:13:37.800 --> 0:13:40.520 back if you're not a value stock, right, a company 0:13:40.520 --> 0:13:43.280 trying to generate higher earnings per share by lowing the 0:13:43.320 --> 0:13:47.840 denominator in the number of shares. So they're basically saying, hey, 0:13:47.880 --> 0:13:49.760 we're bullish on our own stock. We're going out and 0:13:49.760 --> 0:13:51.400 buy it. So we're going to do a buyback, So 0:13:51.679 --> 0:13:54.040 we don't care about what you say about the trailing multiples. 0:13:54.200 --> 0:13:55.760 I mean, I'm just I can't get over this quarter. 0:13:55.840 --> 0:13:59.160 Expectations were high, and then they come out and they say, 0:13:59.360 --> 0:14:04.040 seeing third quarter revenue sixteen billion dollars plus or minus 0:14:04.080 --> 0:14:07.600 two percent. Estimates were for twelve point five percent. Data 0:14:07.600 --> 0:14:09.720 revenue in the second quarter coming in at a record 0:14:10.559 --> 0:14:13.480 ten point three two billion carrol versus estimates of eight billion. 0:14:13.640 --> 0:14:15.959 It makes me wonder, like, all right, help me out here. 0:14:16.000 --> 0:14:18.520 What didn analyst get wrong? Exactly my question. 0:14:18.600 --> 0:14:21.400 They have a hard time figuring out this one. Why 0:14:21.520 --> 0:14:21.800 is it? 0:14:23.280 --> 0:14:25.120 I just think the fact that they are one of 0:14:25.120 --> 0:14:28.240 the sole companies at this point that have really shown 0:14:28.400 --> 0:14:31.800 a tremendous amount of growth related to AI, and I 0:14:31.800 --> 0:14:34.640 think that everybody wants to doubt the company. I'll be 0:14:34.680 --> 0:14:37.560 honest with you, Tim mc carroll. This you and I Carol, 0:14:37.600 --> 0:14:40.680 we've been doing interviews on video for years. Yeah, and 0:14:40.720 --> 0:14:43.400 it's almost like this earning to report to me kind 0:14:43.400 --> 0:14:46.680 of felt like a carnival atmosphere. It's like everybody knows 0:14:46.680 --> 0:14:48.600 about it, you know. So it's just kind of interesting 0:14:49.360 --> 0:14:52.080 the spotlight coming on them. But as Tim was saying, 0:14:52.200 --> 0:14:54.560 they blew out on all the matrix everybody was looking for. 0:14:54.720 --> 0:14:57.360 So I try to find someone who can, you know, 0:14:57.560 --> 0:14:58.640 throw a dart at this one. 0:14:58.760 --> 0:15:00.800 I think I still think about our conversation to him 0:15:00.800 --> 0:15:04.040 with Iri Jersey. Was it yesterday or the day before? 0:15:04.120 --> 0:15:04.760 Yeah, day before. 0:15:04.840 --> 0:15:06.920 We were talking about he's our interest rates strategist here 0:15:06.920 --> 0:15:09.280 at our Bloomberg Intelligence team, and we're talking about fed 0:15:09.320 --> 0:15:11.480 and Jackson holl and blah blah blah, moves and yields 0:15:11.480 --> 0:15:13.240 and so on and so forth, and he's like he 0:15:13.320 --> 0:15:15.200 had a conversation was it on one of our blogs 0:15:15.320 --> 0:15:17.800 or one of the blogs that was about interest rates? 0:15:17.880 --> 0:15:18.120 Right? 0:15:18.240 --> 0:15:18.480 Right? 0:15:18.640 --> 0:15:19.440 And what came up? 0:15:19.720 --> 0:15:22.320 Well, I'm also talking about the idea that you know, 0:15:22.600 --> 0:15:24.720 it's a macro story, and Ben Emmon's coming out and 0:15:24.760 --> 0:15:27.480 saying that in Vidia is you know, this is like 0:15:27.880 --> 0:15:30.160 a macro company. This is more important than Jackson Hall. 0:15:30.240 --> 0:15:33.040 But here I'm saying, right, our interest rate guy saying 0:15:33.040 --> 0:15:37.400 that in the conversation about interest rates comes up in video. 0:15:37.240 --> 0:15:38.480 Like everybody's talking about it. 0:15:38.600 --> 0:15:40.560 So that's why I want to be smart here, Dan, 0:15:40.680 --> 0:15:43.800 So what is the smart question to ask the CEO 0:15:43.920 --> 0:15:47.520 and team on the call to make sure we're not 0:15:47.640 --> 0:15:50.520 missing something or getting too irrationally exuberant? 0:15:51.640 --> 0:15:53.920 I think, Carol, the biggest question coming in this quarter 0:15:54.000 --> 0:15:57.320 that everyone was worried about, and we've talked about this before, 0:15:57.400 --> 0:16:00.680 in terms of constraints related to their supplier, right TSMC. 0:16:01.400 --> 0:16:03.520 There were worries that they wouldn't be able to make 0:16:03.640 --> 0:16:07.520 enough chips fast enough to meet consumer demand from Nvidia. 0:16:08.160 --> 0:16:10.200 So again that's probably going to come up on the 0:16:10.200 --> 0:16:13.000 conference call, that is there any doubt in your mind, 0:16:13.120 --> 0:16:16.200 mister CEO that you will not achieve the sixteen billion 0:16:16.240 --> 0:16:20.920 target in the third quarter because of potential constraints related 0:16:20.960 --> 0:16:24.600 to tsm MC. I think that's probably what's going to 0:16:24.680 --> 0:16:27.360 come up as being a worry point if we can 0:16:27.360 --> 0:16:28.720 find one here, Carol, is. 0:16:28.680 --> 0:16:30.800 There any are there any worry points about supply? 0:16:32.240 --> 0:16:34.600 Well, I mean there were concerns I've heard people talking 0:16:34.640 --> 0:16:37.080 about packaging issues that might hurt. 0:16:36.840 --> 0:16:38.800 Them, and so far the packaging issue what you mean. 0:16:38.800 --> 0:16:40.760 Yeah, I mean that sounds very strange right after what 0:16:40.800 --> 0:16:42.720 we went through the last two years about you know, 0:16:42.760 --> 0:16:46.480 supply constraints in the chip industry. You just hear different things, 0:16:46.480 --> 0:16:49.360 but that's been the vocal point Tim has been on TSMC. 0:16:49.920 --> 0:16:52.800 Can they build the chips fast enough? Can they fill 0:16:52.840 --> 0:16:56.200 the demand and meet that target? And I think that'll 0:16:56.200 --> 0:16:56.840 probably come up. 0:16:56.880 --> 0:16:59.160 So this also shows that maybe people who initially did 0:16:59.280 --> 0:17:01.880 went through a buying cycle and maybe they've gotten them, 0:17:02.080 --> 0:17:04.480 but we're still continuing to see people one up and 0:17:04.840 --> 0:17:08.600 continue to buy correct based on these results in this outlook. 0:17:08.960 --> 0:17:11.119 Yeah, it looks like that's the fact, Carol. I mean, 0:17:11.160 --> 0:17:14.119 it's the demand was better than what they had projected 0:17:14.560 --> 0:17:16.720 a quarter ago, right, because we're they came out and 0:17:16.760 --> 0:17:19.880 gave that lofty number at eleven billion in terms of sales. 0:17:20.080 --> 0:17:22.840 The on this quarter, of course, they crushed that and 0:17:22.880 --> 0:17:26.480 then they upped it again, so obviously they're feeling extremely 0:17:26.520 --> 0:17:27.640 strong about their business. 0:17:28.440 --> 0:17:32.720 One quick last question, do you buy here because people 0:17:32.760 --> 0:17:35.639 are buying in the aftermarket? Would you be buying because 0:17:35.680 --> 0:17:37.639 you think it's going to go even higher or no. 0:17:38.560 --> 0:17:40.359 Well, Carol, as you know, we've been in a Vidia 0:17:40.400 --> 0:17:42.119 for a very long period of time. It's kind of 0:17:42.160 --> 0:17:45.000 like Apple, and it is on our buy list. It 0:17:45.080 --> 0:17:47.800 is a stock that we would buy for clients that 0:17:47.920 --> 0:17:51.560 had the proper you know, risk tolerance and objective. So 0:17:51.800 --> 0:17:55.639 it's obviously based on individuals, but pretty much most of 0:17:55.680 --> 0:17:57.960 our clients already owning, so you know, it's kind of 0:17:58.320 --> 0:17:58.959 you know future. 0:17:59.320 --> 0:18:02.439 We're there, all right, Dan Morgan, you are, Jem. We 0:18:02.480 --> 0:18:04.560 know it's a busy afternoon for you, so thanks for 0:18:04.720 --> 0:18:07.160 always finding time for us. Dan Morgan, he is senior 0:18:07.160 --> 0:18:09.960 portfolio manager at so Nova's Trust, really a go to 0:18:10.080 --> 0:18:12.879 for us on names like Nvidia and others. Joining us 0:18:12.880 --> 0:18:15.080 on the phone from Atlanta. We really appreciate his input. 0:18:15.240 --> 0:18:18.320 Yeah, let's recap the numbers here, Carol, certainly worth repeating 0:18:18.320 --> 0:18:21.560 and Vidia forecasting third quarter revenue of sixteen billion dollars 0:18:21.800 --> 0:18:24.399 plus reminus two percent. The average on of this estimate 0:18:24.480 --> 0:18:27.200 was for twelve point five billion. She just us adjusted 0:18:27.240 --> 0:18:30.760 gross margin seventy two percent to seventy three percent, again 0:18:30.840 --> 0:18:34.040 beating estimates those were at seventy point five percent. She's 0:18:34.040 --> 0:18:36.919 adjusted operating expenses at about two billion dollars. Estimates were 0:18:36.960 --> 0:18:40.159 for two point oh five billion dollars. In the second quarter, 0:18:40.800 --> 0:18:44.760 revenue came in at thirteen point five to one billion dollars. 0:18:44.960 --> 0:18:47.480 The estimate was for eleven point oh four And that's up, Carol, 0:18:47.480 --> 0:18:50.080 from a year ago of six point seven billion. Yeah, 0:18:50.119 --> 0:18:51.560