00:00 josh
Tell me about this Air7 idea.
00:01 kevin
yes. Yes, it’s Air7.
00:02 josh
Tell me about that, Kevin.
00:04 kevin
Sure, put the Mag 7 aside and make way for the Air 7. And the way I’m thinking about this right now is, there’s a better way to deliver perhaps the most radical technological revolution of our lifetime, and that’s AI. And I’ve identified seven stocks from across the AI ecosystem that I believe are the best when it comes to the AI revolution. Two of those companies are also included in Mag 7: Nvidia and Alphabet. But there were also some new names there.
00:30 josh
What do you have?
00:31 kevin
So we got names like Micron Technology. The AI revolution begins and ends with memory.
00:38 josh
That was outrageous.
00:39 kevin
Ridiculous, and guess what? At the moment, forward P is still only trading at around 8.
00:43 josh
rocket ship. In fact, it’s surprising.
00:45 kevin
This is surprising considering how much their stock price has risen. Yeah.
00:48 josh
yes. Yeah.
00:48 kevin
I also like Taiwan Semiconductor, the world’s largest dedicated chip foundry with a 70% market share. Do you know who their biggest customer is? NVIDIA.
00:58 kevin
But remember, once you have these chips, you need to put them into your server farm. So where do they live? data center. So I added Digital Realty, an owner and operator of 300 data centers around the world, to the company. Data centers reach high temperatures and require cooling solutions. Introducing Vertiv and VRT into the equation.
01:15 jared
It can also be called a vertical type.
01:17 kevin
It can also be called a vertical type. yes.
01:18 jared
I mean, the charts are amazing.
01:21 kevin
And last but not least is power. Power and memory go hand in hand to sustain this AI revolution. Currently, data centers cannot produce their own electricity. That’s what they’re trying to do. Therefore, they must rely on the utilities of the states in which they operate within the country. I chose American Electric Power, AEP. The company currently supplies power to 5 million customers in 11 states, including Virginia. Why mention the highlight of Virginia?Currently the data center capital of the world. It has more data centers per square mile than anywhere else in the world.
01:53 josh
Jared, what do you think about this Air7 idea?
01:54 jared
I’m very interested. You know, I wanted to be able to look at it and graph it, so that’s exactly what I did. If you go to Wi-Fi Interactive, the first thing I’ll show you is a heat map with Kevin’s Air7 picks. And as you can see, there are some giants. Nvidia and Alphabet hold two-thirds of the Taiwan Semi real estate. But here we got these four interesting names. Micron, there is a memory play. The verticals, uh, we call them that now, are AEP for power and DLR for real estate. I then combined this into an equally weighted index and proceeded to work. This basically goes back to the end of 2018, and you can see how we’ve had a great recovery here after this little temporary disruption of the pandemic. A bear market has arrived in the stock market. What’s interesting to me is that this bottomed out around the same time the S&P 500 was rising for most of the day. Since, and this is a logarithmic scale, this is why it doesn’t become parabolic. If you used a standard scale, you would have to squint to see what the history would look like. But here are some big numbers. Since the October 12, 2022 low, VRT is up 3,000%, Nvidia is up 1,600%, and Micron is up 1,100% in this bull market. The index itself was up about 1,000, or 983%. So I would like to ask you, how do you use this? Because we probably didn’t create this three and a half years ago. Is this like an emotional indicator for you? What are you looking at?
03:03 kevin
For me, smart trust has two solutions. One is the AI Ecosystem Trust and the other is the Power Solutions Trust. Combined, I think this represents the overall investment opportunity within the AI ecosystem. These two portfolios contain approximately 85 names. I selected the top 7 stocks from these two portfolios. We will use this as a future benchmark to chart the AI revolution. We believe this presents a smoother path with more upside potential and less downside risk than simply concentrating on these seven hype stocks.
03:26 jared
Maybe it’s a canary? When you see that suddenly roll over, you think, whoa, AI trading might pause here.
03:32 kevin
right. But what makes Air7 so balanced is that there are only two companies that are actually paying the money, and the other five are receiving the money. Josh and Jared, a lot of the concern right now is that all the money is being spent. Because these companies likely won’t receive any ROI on their spending for years to come. But do you know who receives the ROI today? The company is receiving the money. Not chip designers or chip manufacturers, but data center companies, power companies, memory providers, chip manufacturers, and of course cool.
03:57 josh
Now, Kevin, what do you think is the big risk to this Air7 ecosystem? Is it valuation? Eh, AI demand cool? What do you think?
04:05 kevin
That’s a very good pun. So I think it’s really investor sentiment. People keep poking at this AI balloon, hoping it will pop. I think the biggest concern is when the spending will stop. Don’t companies currently have a real base case to show that this spending makes sense for them and is delivering results to the bottom line? But I still maintain that we are in batting practice for the AI revolution and there are doubleheaders ahead. Until the AI infrastructure is built, we won’t really know if AI has been as transformative as we think. So if you’re looking for investment opportunities right now, take a look at the Air7 name and its wider name in the infrastructure space and start nibbling at the edges of the people who are putting money into it.
04:40 josh
Okay. Kevin, Air7, hey. I like it. thank you. I’m glad to see you as always.
04:44 kevin
Best regards, Josh. thank you.
