00:00 Speaker A
We have been trying to track the daily developments in this AI arms race. You know, uh, recently Open AI reportedly declared a code red because of Gemini’s growing market share. As an investor, how do you know where to focus and what to choose? Should you just invest in everything? What is your occupation?
00:29 Speaker B
I think we need to have core exposure in all of these companies because it’s an AI arms race and many of these companies have good business. But I feel like they’re looking pretty good at the moment. They are making deals based on expectations for the business they will be doing in five years. And we feel a market pullback is imminent, and we believe these are the companies that will be hit the hardest when the market pulls back. So we’ve been talking to clients about how market leaders are changing from AI winners to AI enablers.
01:14 Speaker A
Understood. I’ll get to that in a second, but I wanted to ask you about this latest headline about Microsoft. Information that Microsoft is reducing sales quotas for AI. And this leads to a question I was just discussing with my colleague Dan Halley. It’s not just where adoptions happen, it’s where the money goes. This is about the companies that make AI possible and who will bring it into the world. Where will this money go? Or are you looking into where it is currently being used?
01:54 Speaker B
Well, I think a lot of that money is going to be spent on AI-related data centers because it’s expected to triple by 2030. And globally, more than 7 trillion dollars will be spent on AI-related infrastructure. So companies and infrastructure companies that are involved in building and maintaining those types of data centers, that’s where we’re seeing more value now.
02:32 Speaker A
Yeah, but I guess my question is, do we know that that money is going to be spent on those data centers? Ultimately, we need to bring in more revenue to fund these data centers. Now, the hyperscalers that are out there now, you know, the Alphabets and the Microsofts of the world, they have a lot of cash to do this, and they’re starting to make revenue directly related to AI. of course. But stop, companies especially like Open AI have to make even more profits to keep funding that $7 trillion you’re talking about.
03:13 Speaker B
Yes, yes. And we think there’s a risk there, right? Because a lot of them are trading based on the expectation that they’re going to extract that profitability. But what we feel right now, and what we continue to see, is that a lot of companies are benefiting from bonus depreciation on the big beautiful bill, which front-loads large capital expenditures. So their balance sheet is looking very good right now. But when it comes time to do a show for me, like when I get revenue, I think these names might have some vulnerability.
03:52 Speaker A
Now, as you say, look at the infrastructure builders. And you’re not talking about, say, Nvidia, you’re talking about the actual physical stuff. So Nvidia makes chips, but the other thing is buildings.
04:09 Speaker B
Yes, absolutely. We’re talking about things like brick-and-mortar businesses. So if we believe that AI is real, and we do, then we need to invest in companies that build the infrastructure that enables AI to exist. So we’re talking about construction, equipment, utilities, and electricity. For AI to work well, we need these types of companies.
