War With China?, Pot Stocks, Tesla’s Dojo, Semi Shift, Baby Mini Bull And More
Here’s the transcript from today’s live Q&A chat.
Q. Are you positioning or thinking about positioning for a war with China in the next 5 years? Obviously, we talk about onshoring, but any other investments right now that you can think of to be prepared for that?
A. I’m always concerned about a war with China and I have plenty of hedges on in the hedge fund at any given time partly because of that risk. If the US and China actually get into an all-out war, our markets will likely get hit 20-30% in a short period of time, and Apple (AAPL) and Tesla (TSLA) will be cut in half, I’d expect. I do think there’s a 20% chance that China invades Taiwan in the next five years and that there’s a 90% chance that the US gets into a de facto war with China if that happens.
Q. Thank you for “The Great Semi Shift.” You seem to be always ahead of other analysts, be it on Apple (AAPL), Google (GOOG), Tesla (TSLA) etc. This is how 10x to 100x are happening in TWC.
A. Thanks for the kind words. Bryce and I do think we are seeing an industry-changing shift happening in the semis and we’ve not seen anyone else tap into this logic (yet). Now the mission is to make sure we are in the winners and short the losers of this tectonic shift in the semiconductor world which means drilling down into the numbers so we can quantify who’s most at risk of losing the customers that will increasingly be designing their own custom chips.
Q. The DoJo computer is crunching the Data for AutoPilot. Check out this video.
A. Yes, if you recall, I first started writing about Tesla’s (TSLA) Dojo computers months ago and basically explained how important it can be to Tesla’s valuation and edge in the coming years. Adam Jonas from Morgan Stanley upgraded Tesla on Monday because of Dojo and sent out a 66-page report about Dojo/Tesla that had all the same points I’ve been making about it (though he did obviously lay out more details about the chips it uses and how it works). Back on December 1 last year, for example, I wrote: ” I think that TSLA looks cheap whenever it is below $180 or so, just based on probable car/semi/cyber truck sales in 2025. If the company’s Dojo supercomputer becomes a viable competitor to Amazon’s Web Services, Microsoft Azure, Google Cloud, etc., that could be a big unexpected new high-margin business in 2025. The Tesla Humanoid Robot would be the same kind of un-modeled upside generator. Same thing with full autonomy if they ever figure it out.”
Q. Curious on how your recalibration of Intel (INTC) is going. Seems that the write-up from Bryce is an optimistic/bullish view on Intel. Can you share some of your research/thoughts on Intel?
A. Intel’s got a lot of moving parts. The PC business is not good but it’s not collapsing anymore either. The data center business is okay. The AI-related inference business is probably pretty good. The fab business is what the CEO has bet the company on and it’s about to ramp up. If Intel can sign a contract to make chips for an Apple or Nvidia, the stock will probably run to $50. In the meantime, it’s probably the best-performing semiconductor stock on the planet over the last month or two. We trimmed some recently after having aggressively bought the stock and long-term calls as noted in months past when it was in the mid-$20s. Easy does it for now though it is still a large notional position for the hedge fund.
Q. Where does Nvidia (NVDA) fit in the Multi-trillion-Dollar shift in semis? Elon Musk recently said he’s buying as many NVDA chips as he can get his hands on. Are they insulated from this trend because they are so far ahead of the pack in IP? Near term nobody appears close to providing real competition. What would you rate NVDA as an investment 3-5 years out?
A. Nvidia is not immune from The Great Semiconductor Shift and indeed, it’s because Tesla couldn’t buy all the chips they want from Nvidia and because of the outrageous pricing of Nvidia’s most advanced AI chips that made Tesla design their own custom AI chip, the D1 for the Dojo supercomputer. Do you realize that you can buy a fully-loaded Tesla Model 3 car with FSD for just about the same price that it costs to buy 1 Nvidia H100 AI chip? That won’t last.
Q. I’ve recently built a 30-40% cash/Gold (GLD) position and looking for a safe(fish) place to get some income. With your purgatory thesis in mind, I stumbled across a few funds that sell covered calls on their portfolios or index holdings (S&P 500 (SPY), Nasdaq (QQQ)). JPMorgan Equity Premium Income ETF (JEPI) and JPMorgan Nasdaq Equity Premium Income (JEPQ) are a couple of the JP Morgan offerings and GlobalX has some too. The yields have been pretty good – any thoughts?
A. If the market continues to stumble along and/or fade lower from here, you will probably make some nice money on those kinds of funds, but I don’t know much about them specifically.
Q. You’ve said previously that the space marketplace is going to be a trillion-dollar economy. Rocket Lab (RKLB) hasn’t taken off yet while it seems that the SpaceX valuation continues to soar. Is SpaceX going to be the only winner in this space or is the market sleeping on RKLB? Do we need to just continue to be patient with RKLB as the company continues to execute well?
A. SpaceX is the gorilla, Rocket Lab (RKLB) is a baby chimp. Rocket Lab could grow up to be a big monkey someday but it’s got to execute and navigate and deliver on its bigger rockets, etc. The Space Revolution will indeed be a huge multi-trillion dollar economy in five, ten, and 20 years and there will be many winners along the way. Rocket Lab is not guaranteed to be one of them. Easy does it on this one too for now.
Q. 10+ year TWC follower so don’t take this the wrong way, but the DallasNews Corporation (DALN) write-up, specifically the “growth” section, seemed like it was written by a middle schooler who discovered ChatGPT for the first time. Is there new/younger management or did they mention leveraging AI in a recent earning report or is the “they could use ChatGPT to write articles on high school football games” purely conjecture, and something literally every paper in the world can do? Can see value in the financials / and the market cap/cash consideration and the similarities to the other trade from 2016 mentioned, similar to an argument of the subscriber decline finally bottoming as digital is increasing faster than paper declines, but the “growth” opportunities & focuses seemed obvious beyond the need to mention – its Texas of course they focus on high school football!
A. No other major newspaper is based in Dallas and it would be great to have DallasNews (DALN) generating AI-based content about, for example, each high school volleyball team in Texas and including easily-generated data/statistics/historical context for each team after every game. I haven’t seen anybody at DallasNews talk about AI-generated content like that but I do think it will create more traffic for them in coming years. Good feedback though and thank you.
Q. Is NuScale Energy (SMR) the Spacex of small modular reactors? I heard TerraPower’s fuel efficiency is 0.24x of large scale reactors while SMR is at 1.1x.
A. Fascinating way of framing the question. We had a call with NuScale’s (SMR) management again yesterday and at the end of the call, I told Bryce and the other money managers on the call that if NuScale works out it’s a likely 10-bagger but that it’s going to take a few years to be able to tell if it will work out.
Q. Is there a new nibble level for Solaredge (SEDG)? Thoughts on buying some SEDG here?
A. I can think of worse ideas than nibbling some SEDG at $145 but every solar stock was so wildly overvalued a few months ago as I’d noted repeatedly at the time, that they have been crushed but are still not terribly cheap.
Q. What would you consider terribly cheap for SEDG then currently?
A. It’s pretty close to getting cheap but earnings estimates have already come down quite a bit over the last few months. SEDG is trading at as low of a forward P/E as it ever has, including the 2020 Covid Crash lows but to really be considered “terribly cheap,” I’d want to see it maybe 20% lower than here.
Q. So is Netflix (NFLX) really crashing because they forgot to include the extra cost of paying actors based on Advertising revenue? Or is there a different reason?
A. Not sure but we did nibble a few call options on Netflix (NFLX) today in the hedge fund. Strike prices around $400-$410 and going out 2-3 weeks.
Q. Is there a particular reason why you went with in-the-money calls for Netflix (NFLX)?
A. The premiums on the out-of-the-money calls on Netflix (NFLX) just looked a little expensive to me and require the stock to rally pretty strongly near-term to make any money on them. The in-the-money calls had lesser premiums in them and could become profitable if NFLX rallied even 2-3% from these $410-ish levels.
Q. Nice call on the Walt Disney Co. (DIS) calls, sold some off the day-to-day pops, still holding some. Are you still in that position? Also, Carvana (CVNA) is hanging in there despite us hating it lol.
A. We have sold about 1/3 of our DIS calls for a nice profit. Holding onto the rest for now. And yes, Carvana is referred to around our office as “The stock with the name we shall not say out loud.”
Q. Thoughts on Instacart (CART) or Arm Holdings (ARM) IPO’s?
A. Instacart looks like it’s about fairly valued at the IPO price they’re talking about which is around 20x forward earnings for a company where the topline is growing 15%+. That said, I’m worried there are some cockroaches running around underneath the furniture at Instacart what with its valuation being down 80% from where it was valued in the private market last year. Arm is a great company but they are at risk of losing market share to RISC-V which is a competing open source platform for designing chips. Did you know that Tesla’s new D1 chip for their Dojo computer is designed using RISC-V instead of Arm, for example? I’m probably not a buyer of either IPO anytime soon.
Q. With some of the news going on about the marijuana industry and the possible passing of the SAFE Act, does Altria (MO) seem like something to consider?
A. I like that you asked about Altria, the giant tobacco conglomerate instead of asking me about some penny stock microcap pot stock. I can think of worse ideas but I’m not convinced anybody’s going to end up making a bunch of money in cannabis as it seems to be mostly commoditized at this point.
That’s it for now folks. leave you all with a picture of our new baby miniature bull that our mini Zebu bull (named Buckaroo Banzai) bred with our brown mini longhorn cow (named Becky’s Got A Big Ol’ Butt). We haven’t named her yet and I’m open to suggestions from you dear Trading With Cody subscribers.
