The AI Rally: Sorting out Heft from Hype

Our second podcast of this week and 2024 covers companies not priced for perfection, but that instead have struggled. We start with China stocks, and the question of whether China is uninvestible. We go into Akram's July 2023 Alibaba trade views and how that was also an investment thesis. We also talk about the connected nature of global economics now and in history. From there we jump to Boeing's travails and how much of those travails should be pinned on Boeing, and how much of them are part of doing business, and capitalism generally. Related posts: The Razor's Edge: China is Uninvestable?? The Razor's Edge: Boeing and Regulatory Capture in Capitalism The Long and Short of the Markets: Boeing's Bad Week, and Going Beyond the Headlines 2:05 minute mark – the stakes with the China trade 6:20 – Restarting with Baba’s position and Akram’s July 2023 thesis on Alibaba 13:00 – The Baba buy case 19:00 – China’s import beyond China-based companies, crypto and politics asides 24:00 – China’s lagging performance and frontier market experience 34:30 – The concept of too hard 37:30 – Getting into Boeing’s issues and past regulatory stories 48:00 – Boeing’s track record in context of other industries, and shared responsibilities 59:00 – Boeing too big to fail? 1:07:00 – The capitalism angle

The chip sector has been Hansel-level hot to start 2024. AMD and Nvidia have jumped 14% and 21% respectively in 2024, the SOXX ETF is up 8% in the last week, and the AI theme of 2023 is still driving things to start 2024. What does this say about the sector, and why is it like being a favorite to win the Super Bowl? We discuss the excitement, the build out of AI, the usage, and how that all converges into questions for chip stocks. This is the first of two episodes this week, with the second on a couple different topics, watch for that Thursday or Friday. Referenced article: https://the-razors-edge.ghost.io/razors-edge-nvidia-pide-piper-baidu-bumblings/ Referenced presentation/tweet: https://twitter.com/akramsrazor/status/1745029272140456325 Topics Covered 6:00 minute mark – Chip party 10:30- AMD’s spark 16:00 – The internet bubble comparison 21:00 – Feeling Peakish 24:30 – Hyperscalers data center build out and what could go wrong for Nvidia 34:00 – Apple’s Siri as an example of how AI will benefit us, vs. a new hardware assistant 45:30 – Are there any winners in a great AI software convergence 52:30 - Why it matters for chip stocks

Hey! We're back! It's been a while, but with 2023 finishing in such a one-direction flourish, we wanted to pick up the mic again. Akram and Daniel talk about what to make of the market's triumphal 2023. We cover the overall vibes in the market, but also get into the weeds on stocks like Nvidia, Micron, Docusign, Zoom, and even Alteryx and Roku, as well as a few older names. The plan is to publish more in the year ahead. Hold us to it, and enjoy this episode. Topics Covered 2:15 minute mark – A triumphal year for the market – justified? 9:00 – Financials as an example of shifting momentum and sentiment, as well as thematic trading and the speed of change 13:30 – End uses of AI – where are we at this point 20:00 - Nvidia as the locus of various tech hype cycles 28:00 – What does semiconductor cyclicality look like now? 34:15 – Are we in normal yet? For software or otherwise 51:00 – Speed of moves in the last quarter of 2023

It's been a while since we've posted a Razor's Edge episode, and a lot has happened! A whole banking crisis came and went and apparently is all resolved (?). More relevant to the sort of things we talk about, the Nasdaq has returned to full bull market mode, powered by the excitement around generative AI, as best embodied by Nvidia's smashing earnings report of late May 2023. There's a lot to be legitimately excited about with this trend, and at the same time, like every exciting new thing, there's a lot to be suspicious of. Is generative AI going to generate us right out of what was still a re-centering, declining tech market? Can generative AI be good for every publicly traded tech company except CHGG? When does chat GPT replace us as hosts? That's what we cover on this week's episode, more or less. Topics Covered 3:00 minute mark - The macro backdrop for this bifurcated rally 7:30 – What we learned from NVDA’s report 15:30 – How this AI compute trend plays out across the semiconductor sector 24:00 – AI uses and AI losers or trade-offs 34:00 – Bear market rally, death of permabears, and the many crosswinds 46:00 – How the cost-cutting rally collides with the AI investment rally 53:30 – How does anyone get an edge using AI

It’s been a funky start to the year, as a dash for trash rally has extended into a not as bad as expected earnings rally, and now it’s easy to be wrongfooted. We dive into this market, including how markets don't go straight to zero, no matter what December felt like; how recessions take a long time to play out; what we can learn from moves in Twilio and Meta; and why the rise of AI has complicated narratives.

On this week's The Razor's Edge, we talk about software as a service and how the market seems to repeat the same patterns over and over. Those patterns include: Taking the last three months and the next three months and extrapolating far into the future Ignoring valuation until it's too late to ignore valuation Searching for silver bullet explanations and one-size-fits-all theories This time around that means that some of the first Covid winners and first Covid hangover victims are starting to look like interesting post-hangover recoveries; that usage based business models are just business models with their pluses and minuses; and that profitability matters, whether its actual profitability or easy to see how a company cuts to get there.

All-star guest Compound248 joins us to follow up on a wild week in the markets. We talk Elon Musk’s high volume start as owner of Twitter and the SBF, FTX, crypto crisis. Akram's Razor and Compound go back and forth on the import for the cryptosphere, why Elon and team could have taken easier shots on goal, and break down what breaking the buck means, among other topics.  It's a story of the Hindenburg and the Titanic, and we see how things got to where they are and what might change. 5:00 minute mark – Twitter – the Twitter turmoil in the Musk era, and what Twitter could/should be doing now, the power of direct messages, Elon’s core thesis and the voices in his ear, the timing; Twitter’s data business and a SaaS digression 44:00 minute mark – FTX – the building blocks that lead to FTX’s and SBF’s rise; where things went wrong; the importance of staying silent as a levered brokerage business; the Lehman and other parallels; SBF’s use of Twitter; Binance’s checkmate move and whether it was proximate or definitive; breaking the buck; the final takeaways for crypto and for bitcoin – bull or bear?

Last week was a big week in tech, so we’re back with an episode on two of the biggest stories. First, (2:40 minute mark) we break down Meta Platforms’ bummer of an earnings result and why it shouldn’t have been so surprising. What choice does Zuck have and where is the business heading? We then (57:00) get into Amazon and AWS’s disappointing quarter, and the future of public cloud. That opens up some space for talking about the generals no longer leading and what a downturn in VC funding means for big tech. We wrap up with a few minutes on Twitter (1:30:00) now that the Elon Musk deal is done and dusted. Check out Akram’s post on these matters.  

Q2 earnings season has delivered many surprises on the one hand and continuations of trends on the other hand. For SaaS companies, that has meant continued drifting. Last week, Okta, MDB, and Veeva reported, and we break down each of those companies on this week's the Razor's Edge (you can also read Akram's take here). We get into the challenges each of those companies face, but also the broader difference between "legacy" SaaS companies like Salesforce and the newer all cloud products like Okta. Topics Covered 2:30 minute mark - Okta’s earnings – what went wrong and what differentiates the Oktas from the Salesforces 10:00 – The value of “the suits” and the challenge of building a microservice-based business model 23:00 – The presumption that software is a great model 28:00 – MDB’s earnings 40:00 – Cutting to profitability amidst the tech recession 52:00 – The consolidation calvary is not about to arrive, and what else to watch 58:00 – Notes on Veeva 1:04:00 – Docusign preview

Roku's dud of a quarter echoed both Snap's report from the week earlier and the start of the pandemic as the sudden advertising slowdown hit them as well. The issues with Roku go beyond the quarter, starting primarily with how much harder it is to understand the details of their business. Will this quarter force a change? And what else does the advertising slowdown mean for the market? We discuss on this week's The Razor's Edge. Topics Covered 3:30 minute mark – Breaking down Roku’s wipeout 11:30 – How important is the advertising wipeout in general 19:30 – Whisper numbers and the Roku black box 31:30 – Will this force Roku to be more transparent? The Twilio example 39:30 – What makes Roku more interesting? 55:00 – The death of never sell