Anti-Elon Sentiment, AMD FOMO, NVDA’s Backlog, And Much More
Here’s the transcript from yesterday’s live Q&A chat:
Q. With today’s pop, what are your favorite trims right now?
A. I love my longs and I am not trimming much today. I would consider trimming ProShares Bitcoin Strategy ETF (BITO)/bitcoin if you haven’t yet. I almost would consider trimming a little Cloudflare (NET), Snowflake (SNOW), Uber (UBER), Netflix (NFLX), and Robinhood Markets (HOOD) if you haven’t yet. I definitely bought us some more puts on this post-Fed spike today, mostly near/in-the-money puts dated out to January or February on Upstart Holdings (UPST), Sunrun Inc (RUN), C3.ai (AI), Blackstone (BX) and Global X Cloud Computing ETF (CLOU), HIVE Digital Technologies Ltd (HIVE), Hut 8 Corp (HUT), Bit Digital Inc (BTBT), and Bitfarms Ltd (BITF) etc.
Q. Do you have any favorite technicals (RSI, etc) that you loosely pay attention to to help guide when to trim vs buy or is it more just fundamentals and gut feel on timing?
A. I look at charts and sometimes I look at sentiment indicators but mostly I use fundamental analysis and Revolution Investing frameworks and then I try to trust my analysis. I don’t think you can get much edge using the same technical analysis tools that everybody else does. For example, is there a worse chart in the market than Pfizer’s (PFE) right now? Autodesk’s (ADSK) chart and technical indicators were awful when we stepped in and starting buying it a few weeks ago before it rallied nearly 15%.
Q. I’ve been seeing some bad press lately about self-driving, car crashes, etc. on social media and in WaPo. Add in all the negative Elon press, and Iʻm wondering how this might play out longer term with regard to anti-Elon sentiment driving away customers, liability from crashes and ultimately regulation from government agencies.
A. Anti-Elon sentiment isn’t helpful. The endless negativity around Full Self Driving almost always come from people who don’t actually own a Tesla with FSD. Tesla said today that they see a little over 1 crash per 5 million miles of FSD-assisted driving while people tend to have 20+ crashes per 5 million miles of driving. While I wish Elon would stop tweeting and quit commenting on politics, it’s actually somewhat refreshing to see a CEO speaking his mind all the time. The fact is that if Tesla’s (TSLA) cars and eventually if their Dojo supercomputer and their robots are great products, none of the anti-Elon stuff will matter over time.
Q. Yeah, with respect to FSD and it’s dangers, it is helpful to go back and read about similar sentiment when the automobile first came around and also airplane travel. And look where we are today with those…
A. Very good point, thank you!
Q. Thoughts on the cybertruck?
A. Looks amazing, I think it will be the best-selling vehicle of all time in 10-15 years, every police force and celebrity and cartel and military will be using them in five to ten years and I can hardly wait to get mine!
Q. I have read that NVIDIA’s (NVDA) backlog is huge — as in I read customers placing new orders are being told delivery is close to a year out. Again, your point about claim validation still stands, but if AMD’s new chip is at all comparable to NVDA, it sounds like AMD is seeing an opportunity to fill demand while NVDA tries to address backlog. Have you come across anything to this effect?
A. If if if AMD’s new AI chip meets the specs that the hyperscalers and other NVIDIA AI chip customers are needing, it will benefit at least a little bit from that. That said, nobody has gotten to actually put the AMD chips to the test yet and AMD is pretty far behind Nvidia on the software / ease-of-use side of things with their new chips, no matter how good those new chips are. I’ve been wrong in being bearish on AMD and Broadcom (AVGO) for a while now, but my analysis still points to each of those stocks being very risky and potentially in trouble in coming years.
Q. Any concern about the ruling in the Epic Games vs. Google (GOOG) lawsuit?
A. Not really, but as a citizen of the world who uses a smartphone, I would prefer not to pay a 30% tax on everything I do on it to Google or Apple. It’s not good for Google and I do wonder if they might have to take app store revenue estimates down when the suits are all settled.
Q. Would this impact Apple (AAPL) too? Thanks.
A. Yes, the ruling isn’t good for Apple either.
Q. Do you think Pfizer (PFE) is a buy after this drop? What’s your rating on it?
A. Yes, nothing much has changed except that Pfizer now has put Wall Street’s expectations in a spot where Pfizer might actually be able to do better than estimates in 2024. We nibbled a few more PFE calls for the hedge fund today, buying a small bit of April $29 calls and September $30 calls for next year.
Q. What’s your rating on Pfizer (PFE)?
A. Probably about a 7.5/10 right now.
Q. Since you met with DallasNews Corporation (DALN), I currently have a small position, were you encouraged from your meeting to make this a larger position with the price about where it was when recommended?
A. I was encouraged at the meeting and I expect the company has some potential to grow and get cash flow positive again. The fact is that I like the numbers at Dallas News even though there will be challenges to turn this business around. Look at these numbers: Revenues of about $150 million. Cash balance of $25 million and no debt. A few other assets, including their printing press are worth a few million more. And a market cap of $21 million.
Q. What would you rate DALN after meeting with the team? Thanks.
A. Also about a 7.5 out of ten right now.
Q. I think we missed out on Advanced Micro Devices (AMD).
A. We are not fans of AMD. The company is losing server and PC share to Intel (INTC) for CPUs and to NVIDIA (NVDA) for GPUs. AMD’s latest MI300 chip (intended to compete with NVIDIA H100 GPUs) looks decent on paper but no independent third party has verified AMD’s claims. Moreover, NVIDIA is already rolling out its next-generation chip, the H200, so AMD is way behind the 8-ball when it comes to AI chips. The valuation is rich and they don’t own their own fabs so we see AMD struggling for a while. Also, here’s the AMD analysis from our book, The Great Semiconductor Shift: “Background.
AMD was founded in 1969 and is headquartered in Santa Clara, California after eight employees led by Jerry Sanders left Fairchild Semiconductor to start their own company. Historically, AMD was Intel’s main competitor in the CPU market, especially in the desktop and server segments. In the graphics arena, AMD, through its acquisition of ATI Technologies in 2006, competes primarily with NVIDIA. Despite founder Jerry Sanders famously saying that “Real men have fabs,” AMD spun out its fabs in 2009 creating GlobalFoundries. Since then, the company has been entirely fabless and relies primarily on TSMC to produce its most advanced processors. AMD struggled to keep up with Intel for many years and was on the brink of bankruptcy before the current CEO, Dr. Lisa Su, took over in 2014. Su pushed AMD to diversify away from the PC market and was also able to lead the company to technology leadership by utilizing TSMC and its advanced process nodes. Su made the decision to have AMD focus on high-performance computing because she believed it was more in line with AMD’s core competencies, and chose not to focus on less- advanced processors in the IoT and mobile markets, even though those markets were growing rapidly. Su’s bets paid off. AMD’s share of the CPU market has risen to about 35% from a low of 17.5% in 2016. Su also led AMD back into the data center market in 2017, and the company now controls about 20% of the data center CPU market. Under Su’s leadership, AMD’s stock has risen about 4100%.
AMD recently completed the largest chip acquisition in history with its $49 billion purchase of Xilinx, a company that primarily supplied FPGAs (field programmable gate arrays). This further put AMD in competition with Intel which also has a sizable FPGA segment. However, in October 2023, Intel announced its intent to spin off its FPGA group in the next two to three years.
Business Model.AMD has five strategic pillars that it expects will drive its future growth: “compute technology leadership, expanding data center leadership, enabling pervasive artificial intelligence(AI), providing software platforms and developer enablement, and designing custom silicon and solutions.” AMD spends heavily on research and development and has a good track record under Su’s leadership of developing innovative technology. The company is currently playing catch up with NVIDIA in the GPU market and currently does not have a chip that can compete with NVIDIA’s A100 and H100s in terms of performance, nor does AMD have a software platform like NVIDIA’s CUDA to help design applications using AMD’s chips. Additionally, sites like Tom’s Hardware have reported that Intel’s latest chips produced using its 7nm node achieve better performance than AMD’s latest Ryzen CPUs. Our Outlook. AMD has a good grip on the gaming market (which is its largest revenue driver) as it currently supplies the CPUs for Microsoft’s Xbox and Sony’s Playstation, but is seemingly falling behind Intel’s CPUs and NVIDIA’s GPUs. Additionally, AMD supplies the chips for Tesla’s (one of our favorite longs) infotainment system, and AMD’s products were used in some of SpaceX’s (another one of our favorites) spacecraft. However, the company has been struggling, and in the most recent quarter, every operating segment other than gaming saw significant declines year over year. Notably, AMD’s PC business was down 54% Y/Y, and the data center business was down 11% Y/Y. We think AMD may struggle to catch up to Intel and NVIDIA in the near term and the stock is priced to perfection. Trading at 38x 2023 estimates, we are currently long puts on AMD. What Could Go Wrong With The Stock: (1) AMD fails to keep up with Intel and NVIDIA and loses market share; (2) Microsoft and Sony take silicon design in-house (or switch to a competitor) for the Xbox and Playstation, respectively; (3) AMD’s stock is priced to perfection and the valuation could return to historical levels.”
Q. Are you still short Microsoft (MSFT)? Do you see Google (GOOG), Amazon (AMZN) and Meta (META) continuing to climb from here?
A. Not short Microsoft (MSFT) but we do own a few in-the-money puts in the hedge fund on MSFT. I think the megacap stocks are a bit overextended, mostly fully valued, probably a bit crowded, but are great companies and the fundamentals for most of them will be good next year. Not sure they keep climbing, but I’ll hold onto my megacap longs.
Q. Are you still in the crypto shorts? Bit Digital Inc (BTBT), HIVE Digital Technologies Ltd (HIVE), and Marathon Digital Holdings Inc (MARA)?
A. Yes, We trimmed some of the puts when those stocks were down 20% or so on Monday but I bought a few of those puts back today. Just mostly hedging our big BITO/bitcoin winners with them.
I leave you all with a picture of Amaris celebrating Christmas with Santa and Lori a little bit early.
