November 20, 2025 • 41 mins
In this week’s Market Maker from AmplifyME, Anthony and Piers unpack Nvidia’s blockbuster earnings and what they signal for markets heading into year-end. Is the company’s explosive growth sustainable, or are signs of overextension starting to show?
They explore concentration risks, energy bottlenecks, and the AI infrastructure race, while also connecting the dots between macro sentiment, crypto market stress, and Saudi-US investment flows.
A comprehensive take on one of the most pivotal moments in the market this quarter.
(00:00) Nvidia’s Record-Breaking Quarter
(06:16) Concentration Risk in Focus
(10:31) Is AI Overheating?
(17:14) Saudi’s $1 Trillion Move
(26:05) Sentiment Shift or Recovery?
(32:20) Crypto Cracks and Correlations
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello and welcome back to the Market Maker podcast.
It's towards the end of the week.
We're actually recording this prior to the non farm payrolls
report coming out. So I'll do my best to update
maybe in the comments how that came out.
But in this conversation, obviously it's the morning
after, Nvidia's earnings quite frankly are ridiculous in terms
(00:22):
of the growth, almost the law ofphysics in terms of how this
normally works in terms of corporate finance.
But at the same time, there's a couple of things to to flag some
concentration risk, which has always been there, but still a
bit of a talking point. And also we're going to discuss
whether the recent dip in the S&P 500 is a head fake or a
(00:43):
buying opportunity. There was a few banks, South
side banks, I think some bulge brackets coming out talking
about sniffing around, picking bottoms, which I know you're a
big fan of, Piers, in more ways than one.
And at the same time, more than a trillion dollars has been
wiped off the cryptocurrency market in the past six weeks.
(01:05):
That was getting quite a few headlines earlier in the week,
concerns about these lofty tech valuations.
Perhaps Nvidia's come out and save the day here.
Santa might still be coming for Christmas for any stock
investors, but also it's relationship to US interest
rates and the link that has to speculative assets.
And I know there's some quite interesting correlations here
(01:28):
on, I guess fundamentally where crypto started and where it's at
now in the fact that it's had quite large institutional
adoption and how and how it's kind of interlinked within the
system is quite interesting. And then finally, Washington has
turned into Wall Street's hottest deal room.
Trump and Mohammed bin Salman dropped a trillion dollar
(01:49):
bombshell that could reshape everything from AI to F30 fives
that they've agreed fighter jetsfrom the US to Saudi.
So let's kick it off. Let's talk about NVIDIA first.
I'll hit you with some numbers and then we can do a bit of a
deep dive into some things. You're looking at Piers, but Q3
revenue and just for for context, I think the market
(02:11):
market was heading South for pretty much every day this week
up until these earnings hit the tape on Wednesday night.
And there was a lot of the usual, you know, the AI bubble
is this the moment of which we get confirmation that it's all a
bit misplaced, bit lofty in valuation.
So a lot was teed up for this and Q3 revenues came in at 57
(02:36):
billion. The Street was looking for 54.9.
So clear beat. We'll probably circle back to
gross margins in a in a moment, I'm sure you'll want to dive
into that. But it was the guidance that was
just pure blowout. And I think that was the thing
that a lot of investors were a bit nervous about.
But they came out and they said they're expecting that at $65
(03:00):
billion ± 2%, the kind of range of guidance that they they had.
Wall Street was looking for just61.98 billion.
So absolutely, still ultra bullish over NVIDIA HQ.
And Jensen Huang, as ever, talking his book, saying
Blackwell demand off the charts he was saying.
(03:24):
So, yeah. What?
What was it within some of thesenumbers?
I know there's plenty more to look at here that really caught
your eye. Well, yeah.
I mean, look, the numbers are, as you said, just absolutely
extraordinary and actually it puts the kind of business, you
know, basically now almost in terms of our run rate, it's kind
(03:44):
of now above a $200 billion a year kind of business in terms
of revenue run rate. Meaning like you take the last
the latest quarter and then you just kind of multiply that by
four to give yourself that kind of run rate figure.
But yeah, I guess and, and, and actually Jensen talking in his
(04:05):
own book, he's predicting more than $500 billion worth of sales
over the next two years basically or sorry, no, that's
not true. He predicted 500 billion / 25
and 26. So we're kind of halfway through
and so that that's kind of implying that the ramp is still
there and that, you know, this revenue still still going to
(04:27):
going to shoot higher. But I guess, yeah, just some
numbers just to kind of get thisinto people's minds from us to
appreciate the kind of scale of this and the and the you you
mentioned defying the laws of ofof gravity here.
So it's revenue growth, right, was 73 billion, so year on year.
(04:51):
So, and to put that into perspective, that's just the
revenue growth, right? That is more than the entire
annual revenue of a company likeIBM, for example, or a company
like Morgan Stanley, you know, it's grown more than their
entire businesses in in just 12 months.
And then you think about the growth rate, right, 60%, because
(05:12):
normally, you know, that kind ofgrowth rate that's for
start-ups, you know, that's for,you know, young companies that
have got huge kind of market share to to go and win.
Remember NVIDIA already have allthe market share.
It's 90% of the of the AI chip market, right?
So 60% growth. To put that into context, the
(05:33):
last time a company like Google had a growth rate like that was
when they only had a market cap of 150 billion.
You know, here's here's a marketcap business, 4.5 trillion and
they're growing at 60%. It is absolutely like we've
never seen anything like it ever, ever, ever, ever. 90%
(05:57):
market share, 73% gross margin. I mean, this is just right now
at this moment in time, take a kind of snapshot.
It is absolutely unprecedented. And, and one of the things that
I saw we'll probably come back to gross margins was I, I was, I
was asking my, my agents, my agents about anything that they
(06:22):
could scour from the wider kind of commentary and the numbers
here. And one of the things that
popped out, I love the way that the, the agent framed it, it was
the four horsemen, the four horsemen idea being that of
concentration risk. So when we talk about that
revenue number, and this isn't, I don't think a new thing, but
(06:44):
it was interesting as in if you're an analyst or an
investor, what is it that you'relooking for as signals of
continuation of momentum and trend or signals of fragility in
terms of that demand acceleration, deceleration?
And one of the things there, I'mnot sure entirely if they
(07:04):
disclose this, but I'm assuming that they did in some shape or
form, but not disclosing the theclient name, but the fact that
there's four key customers, right, which I, I guess.
We do between the. Lines exactly.
Yeah. So, yeah, I know you've got
those numbers at hand. So what did that look like?
Concentration risk is often one of the sort of factors that
(07:25):
someone, you know, an analyst might point to as, you know, a
concern if you're looking ahead and trying to value this
business based on future growth potential, well, then
concentration risk is not a goodthing where you're kind of over
reliant on a really small numberof, of clients.
And so here, I mean, that concentration risk is actually,
(07:47):
it's really bad. It's 61% of their revenue comes
from just 4 customers, as you said, the four horsemen.
I mean, obviously it's the, it'sMicrosoft, Meta, Google and
Amazon. I'm not sure which order they're
in, but customer A, so one of those four makes up 22% of
(08:07):
Nvidia's revenue. Customer BS 15%, C is 13% and D
is 11%. So yeah, I mean, look, I said
take a snapshot like right now. And I said look right now like,
I don't know, I'm going to kind of give away my opinion here
early doors. But you know, I think this could
(08:28):
well be the moment where this isthe best it, it ever looks.
But I'll come on to it in a minute.
But yeah, like NVIDIA, like we've we've spoken about how
they've nailed Phase 1 of this boom, right?
It's picks and shovels. It's it's like building out the
infrastructure and, and obviously the CapEx spend of the
(08:51):
big 4 hyper scalers, as we call them.
So reminder, Microsoft, Meta, Google, Amazon, they're the ones
kind of with the monster checkbooks, with the ridiculous
cash flows that they are just pumping into data center build
outs. And roughly speaking, according
to Jensen, CEO of NVIDIA, he takes about about 2/3 of the the
(09:14):
cost of building a data center goes directly to NVIDIA.
Most of that's for their chips, right?
So look, they've definitely got concentration risk there.
There's there's a bear case thatI do want to talk about.
I do believe this story Chapter 1's done.
I think chapter 2 is now beginning and I think these
(09:35):
numbers are awesome. What's going to be really
telling is yeah, fine. The share price of Nvidia's up
5% in aftermarket trade. It was down 11% off its all time
high that it's set at the end ofOctober.
It hit about two, let's just call it 207 dollars.
OK? So in the last four weeks it's
(09:55):
just traded down to like 179 andnow it's bounced 5%.
So we're trading just below the two.
Well, when it opens, it'll be trading just below 200.
And so, you know, not not quite back to that all time high set 4
weeks ago around 180 bucks. SO179180.
That is a really, really important kind of technical
(10:17):
price point for NVIDIA. It was the high of the summer.
So in August it topped out at that 180 handle.
It's kind of been chopping around there.
And I think that 180 handle is really key now.
For now, it's held and we've bounced I think the next 48
hours. So Thursday's market trade and
(10:37):
Friday's market trade are absolutely pivotal to tell you
what's going to happen into the end of the year. 5% bounce for
NVIDIA in aftermarket. Does it hang on to those gains
in Thursday's today's session? Do that, does that 5% start to
get eroded or does it add to those gains?
Right. And I think that the next 48
(10:59):
hours are going to be very telling.
I I'm nervous. I'm a kind of buy, I'm a sell
the spike now rather than buy the dip.
And I'll tell you why. And then this is just my
opinion, right? And there's plenty of people on
the other side of the fence who are saying, look, thank, thank
God, right? NVIDIA strong numbers, right.
Let's go another big leg in thisrally.
(11:21):
I'm not so much a believer now. And I think it is down to this
what what we call that circular economy point where it's become
quite incestuous. And I think, I think when we
talk about is it an AI bubble and people referring to the.com
bubble, I mean, that was like a valuation bubble, right?
It's kind of a profit bubble. Where's the money?
(11:43):
I think here we might be in a revenue bubble where actually
the revenue that Nvidia's makingis coming from these hyper
scalers, OK, these hyper scalersare building out this compute
power. So, so who's renting the compute
power? So well, that's often obviously
smaller businesses and maybe startups.
(12:05):
And the startups are being funded by venture capital money,
right? And fine, these startups aren't
making much revenue. And that venture capital money,
it's finite and it runs out, right?
And how long can this venture capital money, you know, proper
and look, open AI is probably the best example.
(12:26):
We spoke about it a couple of weeks ago where they're, they're
talking about spending what, a trillion dollars?
They've got 13 billion revenue, right?
So obviously they're VC backed. Obviously there's a bit of
circular money coming in from the likes of NVIDIA, but it's
like, how long can this this kind of thing continue to be
(12:46):
juiced? And I think there might be a gap
between this kind of infrastructure build out phase
and then a genuine sort of return on investment from the
broader economy, you know, really benefiting from all of
this stuff. I'm talking about driverless
vehicles. I'm talking about robotics.
(13:08):
OK, that's not here yet. Yeah, I was going to say so that
that's his defense to your argument, right, is that once
that stuff starts kicking in thelonger term then it starts to
move. But on that infrastructure
point, so you're talking there about and I agree there's only
so much Microsoft, Amazon and the rest are going to going to
build out. Is there not also an another
(13:32):
infrastructure risk for NVIDIA, which is that on the energy and
electricity, the consumption side?
So the other in the other invisible hand within this is
that you can provide the hardware, the chips for the
processing power and you've got the demand coming from the
people who want these to create it to drive their models.
The end of the day you need power right in order to as the
(13:55):
key ingredient almost is the fuel for the fire.
But that in itself, you know hasa has a time constraint.
And we're on an exponential track there in terms of power
requirement because on the one hand, the user numbers are
increasing strongly, OK, But then on the other hand, you're
(14:17):
getting these, you know, the latest update.
What are we on ChatGPT 5.1 now, right?
5.2, when we get to ChatGPT 6 orwhatever, these models are
getting better and better and better, requiring more power per
user as well. So you get this exponential
energy growth requirement situation.
Now there is one other counter to say, well, science might help
(14:42):
because this is one of Nvidia's challenges.
Can it make chips that are more energy efficient?
And look, there is definitely gains to be had there and they
will become more efficient, but I'm just not so sure the
efficiency gains through scienceis really going to satisfy that
exponentiality of the sort of, you know, the energy
(15:03):
requirements. So I, yeah, I do think the
energy bottleneck is a key handbrake for, for getting a
genuine return on investment. And, and so I think we're just
going to have a gap where this is my, I just want to stress,
this is my personal opinion. I think we're going to have a
gap where the infrastructure build out has just gotten over
(15:28):
its skis a little bit. It's got a head of itself and
you're just going to get that little realisation and you know
what it's like, you know, marketsentiment, It kind of had turned
right over the last few weeks. And we'll talk about crypto in a
minute because bitcoins had a shocker, but sentiments shifted
and turned, you know, we're going into year end.
(15:50):
Maybe Powell's not going to cut interest rates.
Maybe the job market's deteriorating.
So there's a little bit of concern around the economic
scenario going into 2026 and, and just sentiments shifted.
Now, is this NVIDIA earnings report enough on its own to flip
the entire market sentiment backto positive?
(16:11):
Let's go boom time or not and I'm just feeling not because
people are just questioning the the revenue bubble now.
I think six months ago NVIDIA revenue growth was way awesome.
You know, everyone was on the same page.
Let's go. It's just got all very circular
(16:33):
with all of these deals that have gone on in the last six
months, which has just put a magnifying glass on.
Well, is this sustainable? And actually we do need genuine
return on investment from the wider economy and that just
doesn't look like it's quite there yet.
So, so two points then one beingmore to address that, that
(16:53):
question mark here about the Candace revenues momentum
sustained and also on the energyside.
And then a second one about your48 hour and that kind of analogy
and, and also something that I'mgoing to counter with that from
a market positioning point of view.
And so first of all, I know we don't want to go into the the
(17:15):
politics of it, but Saudi Arabiadid meet with Trump earlier this
week and they've pledged $1 trillion in U.S. investment
commitments this week. Six months ago that figure was
basically half that was, it was around 600 billion.
So out of thin air, your man MBSdrops another 400 bill just like
(17:36):
that on on the US. Now this is quite multifaceted.
There's kind of there's nuclear corporation, critical minerals,
AI, defense, sticking with what we're talking about AI though.
So when you talk about, well, it's interesting, isn't it?
People know a lot of these factors you've described about
NVIDIA. We know that Saudi requires
(18:00):
certain things like defense deals and so forth.
Now, what do we want in response?
Well, we want access to energy in order to fill that void, to
power these systems. And one of the things that Saudi
Arabia is doing is what's calledde facto the data hub ambition.
And this again fits under this 2030 vision umbrella.
(18:22):
And this is about making AI and the data hub of the Middle East.
And this is Saudi Arabia right at the centre of that.
And obviously all these big Elonwas there.
You know, it doesn't matter if Elon doesn't like Trump when
Saudi are involved, everyone's involved, including.
Well, Elon is Ronaldo. Yeah, yeah, Ronaldo.
(18:45):
Ronaldo was. Smoothing over.
Yeah, yeah, yeah, yeah. He's the ultimate broker here.
But yeah, I just thought it was quite interesting, you know, all
the other stuff of that whole thing about the Middle East
order and Eurasia supply chains and all that other stuff that we
could talk about. Just on that point about their
relationship, I thought it was quite interesting in the context
(19:05):
of the NVIDIA stuff. But this is the same thing.
This is a buyer of NVIDIA chips that doesn't yet have a full set
of end users with unlimited money to make a return on
investment. Look, they're going to build AI
think they they want to build a 500 GW data center in Saudi
(19:27):
Arabia, right? So, but, but OK, but who, who's
going to use it and how much arethey paying?
And does that maths add up? And like at the moment, the
maths doesn't add up like that. There's not enough use cases.
We're still, look, don't get me wrong, when Elon's selling a
million robots a year and you know, half the global population
(19:50):
are using driverless vehicles will obviously, OK, cool,
massive return on investment, huge revenue streams there, but
that's we're not there. So at the moment, I think
they've they're just building a rate because of the hyper
scalers who are in this race andthey don't want to lose it.
(20:10):
I think just the rate has got too far ahead.
Of that return on investment demand story, that's my personal
opinion. OK.
And just finally on NVIDIA maybeto close it out specifically on
NVIDIA and their valuation and what happens with their share
price. So the two things to mention
number one's their gross margins.
So it's their their margins for the quarter just in is 73.6%
(20:35):
which look on a stand alone figure is awesome, OK.
And look they've got 90% market share.
They've got pricing power. They can basically charge what
they want on a on a 73.6% margin.
Amazing. It's just the margins dropped.
So the direction of travel for margin is down.
It was 75%. Now look, Jensen said we're
(20:57):
going to get it back up to 75% in 2026.
But but will they, you know their Blackwell Ultra, which is
their latest chip, that's going to require a lot of investment
and that's why their margins dropped.
The Blackwell chip itself had some problems getting it up to
kind of scale production and so that cost more money.
So the margin got eroded a little bit.
(21:18):
So we're worried maybe that's going to happen again as these
chips get ever more complex and advanced.
You know, are they going to haveto, is the cost of manufacture
going to be on an uptrend, meaning margins on a downtrend.
So that's one one kind of thing.Just on that point, explain to
me this. The margin compression at Tesla
(21:38):
is far more severe and has been in NVIDIA.
But aren't they both to some extent built on similar
parallels of hype? But in fact Nvidia's is even
more realistic than Tesla's. But Tesla can get away with
quite severe margin compressionsand that doesn't seemingly you
factor in so much. Yeah.
(22:00):
I mean, well, I mean, firstly, you know, I don't know where
Tesla is in market cap now, but I think it's around about a
trillion. Is it so Nvidia's 4.5 trillion?
I mean, all right, their revenues are much, much, much
higher, growing much faster. Look, the the car business, you
know, which is what Tesla is today.
(22:22):
I know Musk is saying, well, don't value us as a car
business. We're a robotics and an AI
business, right? But yeah, fine, that's in the
future. But right now their margins are
like around than below 20% because making cars is really
expensive, right? So look 70, don't get me wrong,
73.6% is phenomenal. It's just that the direction of
(22:45):
travels the wrong way. And look, when you're valued at
4.5 trillion, I mean put it has to be perfect to justify it the
other. Point to make.
I feel, I feel like there's justhuman behaviour here, which is
like, it's going so well as humans do we we defeat ourselves
almost. It's like, let's just find any
(23:06):
reason to justify well. I said it's got to be perfect
because like when you're valuingthese businesses, you've got to
think about the future. You know, what are those future
cash flows? And I mean, the, the rate at
which this AI boom's going, it'sso difficult to predict six
months, never mind five years. But some of the big banks have
(23:28):
tried to do it. So, you know, and when you're
thinking about their market share, right, Nvidia's market
share is 90%. So when you're thinking like
over the next 10 years, I think Citigroup have estimated that
the spend on data centres over the next 10 years will be 7.8
trillion. So and they're, they're
(23:50):
predicting that there's going tobe some, they believe their
market share, they're not going to be able to defend 90% like
forever. So they're saying that NVIDIA
might generate and capture 4.6 trillion of that.
Oh, sorry, Actually, Citigroup'sestimate was 7.8 trillion.
But they, they make 2/3 of the data send build out revenue goes
(24:11):
to NVIDIA, right? And if they maintain 90%, that's
right, they get 4.6 trillion. So if they maintain their
absolute dominance and somehow 7.8 trillion gets spent, fine,
they'll get 4.6. But Citi, another BAT, McKinsey,
their analysis is that 5.2 trillion is going to get spent
(24:34):
in the next 10 years, OK? And let's just say they can't
hold on to 90% and it drops to 70% market share, right?
Then actually Nvidia's revenues have if you.
So we're talking about assumptions about the future,
which is a cornerstone of tryingto value a business, right?
So if you just make some small adjustments, instead of 90%,
(24:56):
it's going to get eroded to 70. I think that's probably more
likely. And if it's not 7.8 trillion,
it's 5.2 then their, their, their revenues have, right.
So I'm just saying it's really difficult to predict what's
going to happen here. And just small tweaks in, in
assumptions kind of lands with avery different kind of figure,
you know, at the bottom of your spreadsheet.
(25:18):
So look, I'm just just playing I'm just playing the bear here.
And I I personally, I think thisis a well, not a dead cat banks,
but I think this spike we're getting off these NVIDIA results
are great. I I just think it's not enough
to turn the sentiment story, which was negative and and
(25:42):
already in place. That's my view.
OK. Well, to bring in like a macro
wrap to this segment, let's say obviously the government in the
US is is reopened. So we're going to start getting
a a dated release data deluge oflike all of the stuff that we
should have seen. And one of those things is not
(26:02):
fun payrolls. Now, the S&P 500 prior to this
NVIDIA release had dropped over almost 3 1/2 percent, it's
longest decline since August. In fact, actually, because we,
you know, we continue to soldierto on to record highs.
Now, one of the things here is that yes, I totally agree NVIDIA
(26:26):
is absolutely crucial, not just for that AI Ted stocks, but
overall market sentiment for sure.
But there's other things as wellthat are influencing US rates,
expectations, which could come to the savior and perhaps
Nvidia's savior in, in the case of cushioning, let's say, any
(26:47):
repricing down that you might see.
So what do you think of this idea that if you look at the
context of the week, the S and PS had its biggest pull back in
a number of months and a lot of people are talking about this
idea of cleaner market positioning.
So A, what are they referring towhen they say cleaner market
(27:11):
positioning? And B, what do you think of that
just generally in terms of your opinion?
Because I did see that Deutsche Bank came out and they, you
know, there's Ways and Means of tracking this sort of stuff in
terms of market orders and so forth.
But they said that equity positioning is back to neutral
and that discretionary investorsare underweight, implying there
(27:34):
is room to buy into this market,which evidently is not at record
but close to record highs. Yeah, I mean, underweight, well,
fine. OK, I guess this is it, right.
If they've they've moved underweight, that's why the
market's gone down because there's been net sellers, right.
(27:54):
And by the way, you get people like some of the catalyst is
then on singular players in the market like SoftBank sold all of
their NVIDIA position. They banked 5.8 billion I think,
right. They're right.
When you get Michael Bury, famous for the Big Short, it's
just closed his hedge fund because he's like, this is
(28:17):
ridiculous. Now, look, I'm not saying All
I'm saying is it's these little catalysts that help to drive the
narrative and the sentiment. And that's one reason why things
are sold off now. Yeah, now they're underweight
because they've sold. But if you're underweight, yes,
you've got some ammunition to buy back.
But you only buy back if you think it's a low and it's going
(28:39):
to go back up, Right? So it just comes down to the
point. Do you believe this NVIDIA news?
And look, yes, it it might be added to right.
We're going to get payrolls datatoday.
We're going to get, you know, maybe the Fed do cut in a few
weeks time at their meeting. OK, if these things happen, well
then fine, that can add to that bull story and you should buy
(29:00):
the dip and there's money to do it on the sidelines.
It's just what's the sentiment and do people want to buy at
these levels or are they more like me where they think
actually the sentiment from is kind of shifted to a negative
footing and that's going to remain to be the case for a
couple of months. Do you take any warmth from the
(29:20):
market breadth of what we had inthe market movement on Tuesday,
which was not so much concentrated risk in just five
big tech names? More than half of the entire S&P
500 was up, rather than dragged by the tooth and nail by the big
tech firms. Yeah, I mean more than half.
(29:42):
I mean, yeah, that's, I mean, itdoesn't really matter about the
rest. If you're thinking about the
index, all that matters is the tech stocks.
So it doesn't matter what the other half are doing.
They're not big enough or powerful enough.
And it look, if these tech stocks do go through a, a larger
(30:04):
correction, I don't care who else is in that index, they're
going to sell off as well because the whole sentiment is
dependent on tech stock performance and the whole AI
narrative. And if that changes, you're
going to be in a very defensive kind of mood.
And fine, some of those defensive sectors might pick up
some, some of the inflows. But look, I think you'll get a
(30:25):
broader sell off anyway and thatI guess with your point about
clean positioning, I don't know is that just a, a more fancy way
of saying averaging in as in by buying at a lower price so that
looks more favourable in terms of your book cost on your
(30:45):
portfolio? I don't.
I think, I think they're lookingat it, yeah, short term is in
the market was a bit overstretched.
You've had your 11% pull back inNVIDIA, that's kind of that's
been your spring clean to get out some of these extreme longs
who've closed their positions like your SoftBank so.
(31:06):
Yeah. So, so that's about, yeah, I
understand that point. That's about some of the short
term money that's coming out bringing low prices lower,
allowing more longer term money to buy the dip.
Yeah. So that that can be a healthy
thing for a sustained rally. But that's why I say the next
(31:27):
48. That's why I say the next 48
hours is by the dip here. Does it work?
And it needs to work. If there's any, if we go back to
if NVIDIA lose this 5% bump, they've hap.
That's happened overnight. If that gets lost by Friday, I'm
telling you next week's going tobe red.
(31:49):
It might not get they, they might hang on to the 5%, in
which case, OK, it's just wrong the the firm.
'S saying buy the dip all the big household sell side names,
but you can imagine then if you kind of think about it, you know
of course you want to be saying you're going to buy the dip
because if I think about the breadth of my business well,
yeah, the more deals I can finance, the more M and as I
(32:11):
could well, yeah, I can do there's such benefit for the
gravy train to continue across all facets of of the market from
their perspective, but maybe just to close then how does this
translate then into the the crypto market?
Because yeah, everything we've talked about are what has been
some negative developments in, in general sentiment and also
(32:32):
potentially things that could under certain circumstances get
worse. So what what can we get from the
tea leaves of the crypto market in particular?
And then also this, this connection it now fundamentally
plays in terms of an asset class.
I know when, you know, you used to trade and we used to sit on
the floor, you know, you'd be watching, you'd be trading, I
(32:54):
don't know, the UST note or the short end of of of German fixed
income rates, but you'd still belooking at the NASDAQ, oil,
euro, all these other products. Would you now be looking at
Bitcoin in these sorts of cryptomarkets as another key signal?
Yeah. I mean, yes, it's it's kind.
Of it's a pure risk asset. I mean, I don't obviously
(33:16):
there's a portion of the crypto society that believe Bitcoin is
digital gold. It's not.
I mean, it might be in the future, but right now it's a
pure risk play. And we kind of saw that.
I mean, we've seen over the lastfew weeks, right, we've had this
general tilt to negative sentiment, which is why, fine,
(33:40):
NVIDIA down 11%, you know, NASDAQ, S&P, you know, coming
off the highs, Bitcoin has been down 28%.
I mean, it has and it's bounced actually sharply off this NVIDIA
news, right? But it's a classic risk asset.
A lot of the positioning in Bitcoin and crypto broadly is
leveraged. So that's where you're getting
(34:02):
players that are borrowing moneyin order to then invest in
crypto. Now the problem with that, if
you've got an outsized proportion of the market that's
leveraged, the problem comes if the market starts to go down,
because a lot of the arrangements around the leverage
is that, you know, as long as the, the, the, the coin that
(34:25):
you're buying stays above a certain price, well, fine, that
leverage loan agreement is in place.
But if the, if the price goes below a certain point, you're,
you're triggered out, you're forced out of the position,
right? So the market coming down often
triggers or forces other sellersbecause of this leverage.
This is what's happened. This is why Bitcoin's 28% down,
(34:48):
whereas Nvidia's 11% down, It's because of the outsized leverage
proportion of the market. And we saw this on October the
10th, we had a massive move lower.
And then that was the the beginning of what's been then a
sort of six week sell off. And on October the 10th, that's
when Trump threatened China withanother round of massive
(35:10):
tariffs, which I don't know, it's obviously we know that's
Trump's style, threaten tariffs and then back off.
So I don't know why the crypto market fell for that one
particularly, but they did. And this just meant that Bitcoin
dropped enough to start triggering people out of their
(35:30):
leveraged trades, which has meant that then the sell off
continue to look. It just means when you look
about look and look over the markets that the crypto markets
more generally, I mean, Bitcoin's now it's down on the
year, even with this rebound, it's down on the year now.
But you're you're looking at like some of the smaller ones
like Cardano and Solana, yeah, they're, they're like 4050% down
(35:54):
year year on year. So these these are big moves,
right? But yeah, when you're looking at
Bitcoin broadly, we peaked at 125 bucks and that was back at
the start of October, big sell off on that 10th of October.
Technically we dropped below a key $110 that took us now
through the floor and down below$100,000, right.
(36:17):
And so there there's a lot of technical sort of influences
here going on as well. But I'd say we're we're right at
a key technical point where we might be breaking the sort of
two year uptrend that we've seen.
We might be breaking that trend line.
And so look, it's still it, it all comes down to the same
point. What happens in the next 48
(36:39):
hours is NVIDIA, is that alone astory that's big enough to
switch sentiment, yes or no? And if it is great, great time
to buy Bitcoin. If it's not, not a good time.
Couple of other points. Of of jargon, so to speak.
(36:59):
One thing I was reading is aboutconviction buyers and this being
this idea that I guess this is coming from this, this continued
adoption that we've seen of digital assets through the last
1218 months. This was the idea that big
buyers from earlier in the year,because we've seen the likes of
BlackRock, these big asset managers, you know, inflows into
(37:22):
these sort of parts of their business, but these big buyers
from the year are now underwateron their positions.
And this idea then that when investors are sitting on losses,
you mentioned earlier something about dry powder.
Well, there's there's we're not buying dips at this point if our
positions are already underwater.
So again, that compounding of that negative effect when the
(37:45):
prices start to spiral lower. But one of the things here as
well is about corporate treasuries becoming then
unintended forced sellers. Yeah.
So what what are they talking about in that context when it
comes to publicly listed companies which were hoarding
some crypto holdings, you know, this year, which was actually a
(38:05):
good, a good thing until until more recently.
And look, this has been a politics.
Trade because Trump basically winning the election, that's
meant that the value of Bitcoin basically it doubled.
It was trading 60,000. When you look back around the
election times or just pre election times, obviously by the
time we got to mid-october, you know, it's odds on Trump's going
(38:29):
to going to win it. So from that point, it went from
60,000 to over 120,000 at the end of September, right?
So it's doubled. And that's because Trump's pro
crypto, OK, and it's meant that you've had corporate treasury
departments saying voila, now the the time of crypto is here
(38:50):
and it's become a more it's going to become a more
established currency. So let's have it as part of our
the make up of what we are doingwith our businesses cash flows,
right? So this when we say corporate
treasuries that they're, they'rein charge of the cash that
companies have on account. And how are you making use of
that cash? Where are you depositing it to
(39:12):
kind of generate income from thefirm for the firm, right?
Fine, you go out and buy treasuries if you want to play
it safe or now you go out and buy Bitcoin because ah, Trump's
come in and right now it's a valid thing to to add to our
mix. So I think that's happened and
that's been one of the things that's led to, you know,
BlackRock launching their ETF, one of the things that's led to
(39:34):
this whole upside story to 120,000 bucks plus, right?
It's just that when this thing shows its hand as being, this is
still mega volatile, 28% down ina few weeks.
That's not the type of asset that a treasury, corporate
treasury should be holding. And this is where the board
(39:57):
start to go hang on a second. This is, this isn't the kind of
stuff we want to be in. It's too risky.
Let's get out. It's too early.
And so of course that then just adds to the whole narrative on
the negative sentiment around itand and obviously accelerates
that downside. All right, cool.
Well, look, we've had. Lots of lots of words mentioned
(40:19):
here throughout the conversations from concentration
risk, margin compression, leveraged money, conviction
buyers. So hopefully listeners have
learned how that ties to some ofthe market moves at the moment.
You've heard it here, World exclusive.
The bear is out on NVIDIA. Here's Curran is pounding the
(40:40):
streets now. When when are you on CNBC in
Bloomberg talking about this? I mean, it's coming, isn't it?
Yeah. You've got now.
Bearish. Yeah, and.
They'll be all over it, but justa reminder.
As well, before we we wrap, we do have our Amplify Me Finance
boot camp happening in London inDecember, so I will put the link
to that in the show notes. Please do check that out if you
(41:00):
want to join us, both Piers and I and the rest of the team in
London in a few weeks time. Otherwise, thanks very much
Piers and have a great weekend everyone.
Yep, catch you later.
Hello and welcome back to the Market Maker podcast.
It's towards the end of the week.
We're actually recording this prior to the non farm payrolls
report coming out. So I'll do my best to update
maybe in the comments how that came out.
But in this conversation, obviously it's the morning
after, Nvidia's earnings quite frankly are ridiculous in terms
(00:22):
of the growth, almost the law ofphysics in terms of how this
normally works in terms of corporate finance.
But at the same time, there's a couple of things to to flag some
concentration risk, which has always been there, but still a
bit of a talking point. And also we're going to discuss
whether the recent dip in the S&P 500 is a head fake or a
(00:43):
buying opportunity. There was a few banks, South
side banks, I think some bulge brackets coming out talking
about sniffing around, picking bottoms, which I know you're a
big fan of, Piers, in more ways than one.
And at the same time, more than a trillion dollars has been
wiped off the cryptocurrency market in the past six weeks.
(01:05):
That was getting quite a few headlines earlier in the week,
concerns about these lofty tech valuations.
Perhaps Nvidia's come out and save the day here.
Santa might still be coming for Christmas for any stock
investors, but also it's relationship to US interest
rates and the link that has to speculative assets.
And I know there's some quite interesting correlations here
(01:28):
on, I guess fundamentally where crypto started and where it's at
now in the fact that it's had quite large institutional
adoption and how and how it's kind of interlinked within the
system is quite interesting. And then finally, Washington has
turned into Wall Street's hottest deal room.
Trump and Mohammed bin Salman dropped a trillion dollar
(01:49):
bombshell that could reshape everything from AI to F30 fives
that they've agreed fighter jetsfrom the US to Saudi.
So let's kick it off. Let's talk about NVIDIA first.
I'll hit you with some numbers and then we can do a bit of a
deep dive into some things. You're looking at Piers, but Q3
revenue and just for for context, I think the market
(02:11):
market was heading South for pretty much every day this week
up until these earnings hit the tape on Wednesday night.
And there was a lot of the usual, you know, the AI bubble
is this the moment of which we get confirmation that it's all a
bit misplaced, bit lofty in valuation.
So a lot was teed up for this and Q3 revenues came in at 57
(02:36):
billion. The Street was looking for 54.9.
So clear beat. We'll probably circle back to
gross margins in a in a moment, I'm sure you'll want to dive
into that. But it was the guidance that was
just pure blowout. And I think that was the thing
that a lot of investors were a bit nervous about.
But they came out and they said they're expecting that at $65
(03:00):
billion ± 2%, the kind of range of guidance that they they had.
Wall Street was looking for just61.98 billion.
So absolutely, still ultra bullish over NVIDIA HQ.
And Jensen Huang, as ever, talking his book, saying
Blackwell demand off the charts he was saying.
(03:24):
So, yeah. What?
What was it within some of thesenumbers?
I know there's plenty more to look at here that really caught
your eye. Well, yeah.
I mean, look, the numbers are, as you said, just absolutely
extraordinary and actually it puts the kind of business, you
know, basically now almost in terms of our run rate, it's kind
(03:44):
of now above a $200 billion a year kind of business in terms
of revenue run rate. Meaning like you take the last
the latest quarter and then you just kind of multiply that by
four to give yourself that kind of run rate figure.
But yeah, I guess and, and, and actually Jensen talking in his
(04:05):
own book, he's predicting more than $500 billion worth of sales
over the next two years basically or sorry, no, that's
not true. He predicted 500 billion / 25
and 26. So we're kind of halfway through
and so that that's kind of implying that the ramp is still
there and that, you know, this revenue still still going to
(04:27):
going to shoot higher. But I guess, yeah, just some
numbers just to kind of get thisinto people's minds from us to
appreciate the kind of scale of this and the and the you you
mentioned defying the laws of ofof gravity here.
So it's revenue growth, right, was 73 billion, so year on year.
(04:51):
So, and to put that into perspective, that's just the
revenue growth, right? That is more than the entire
annual revenue of a company likeIBM, for example, or a company
like Morgan Stanley, you know, it's grown more than their
entire businesses in in just 12 months.
And then you think about the growth rate, right, 60%, because
(05:12):
normally, you know, that kind ofgrowth rate that's for
start-ups, you know, that's for,you know, young companies that
have got huge kind of market share to to go and win.
Remember NVIDIA already have allthe market share.
It's 90% of the of the AI chip market, right?
So 60% growth. To put that into context, the
(05:33):
last time a company like Google had a growth rate like that was
when they only had a market cap of 150 billion.
You know, here's here's a marketcap business, 4.5 trillion and
they're growing at 60%. It is absolutely like we've
never seen anything like it ever, ever, ever, ever. 90%
(05:57):
market share, 73% gross margin. I mean, this is just right now
at this moment in time, take a kind of snapshot.
It is absolutely unprecedented. And, and one of the things that
I saw we'll probably come back to gross margins was I, I was, I
was asking my, my agents, my agents about anything that they
(06:22):
could scour from the wider kind of commentary and the numbers
here. And one of the things that
popped out, I love the way that the, the agent framed it, it was
the four horsemen, the four horsemen idea being that of
concentration risk. So when we talk about that
revenue number, and this isn't, I don't think a new thing, but
(06:44):
it was interesting as in if you're an analyst or an
investor, what is it that you'relooking for as signals of
continuation of momentum and trend or signals of fragility in
terms of that demand acceleration, deceleration?
And one of the things there, I'mnot sure entirely if they
(07:04):
disclose this, but I'm assuming that they did in some shape or
form, but not disclosing the theclient name, but the fact that
there's four key customers, right, which I, I guess.
We do between the. Lines exactly.
Yeah. So, yeah, I know you've got
those numbers at hand. So what did that look like?
Concentration risk is often one of the sort of factors that
(07:25):
someone, you know, an analyst might point to as, you know, a
concern if you're looking ahead and trying to value this
business based on future growth potential, well, then
concentration risk is not a goodthing where you're kind of over
reliant on a really small numberof, of clients.
And so here, I mean, that concentration risk is actually,
(07:47):
it's really bad. It's 61% of their revenue comes
from just 4 customers, as you said, the four horsemen.
I mean, obviously it's the, it'sMicrosoft, Meta, Google and
Amazon. I'm not sure which order they're
in, but customer A, so one of those four makes up 22% of
(08:07):
Nvidia's revenue. Customer BS 15%, C is 13% and D
is 11%. So yeah, I mean, look, I said
take a snapshot like right now. And I said look right now like,
I don't know, I'm going to kind of give away my opinion here
early doors. But you know, I think this could
(08:28):
well be the moment where this isthe best it, it ever looks.
But I'll come on to it in a minute.
But yeah, like NVIDIA, like we've we've spoken about how
they've nailed Phase 1 of this boom, right?
It's picks and shovels. It's it's like building out the
infrastructure and, and obviously the CapEx spend of the
(08:51):
big 4 hyper scalers, as we call them.
So reminder, Microsoft, Meta, Google, Amazon, they're the ones
kind of with the monster checkbooks, with the ridiculous
cash flows that they are just pumping into data center build
outs. And roughly speaking, according
to Jensen, CEO of NVIDIA, he takes about about 2/3 of the the
(09:14):
cost of building a data center goes directly to NVIDIA.
Most of that's for their chips, right?
So look, they've definitely got concentration risk there.
There's there's a bear case thatI do want to talk about.
I do believe this story Chapter 1's done.
I think chapter 2 is now beginning and I think these
(09:35):
numbers are awesome. What's going to be really
telling is yeah, fine. The share price of Nvidia's up
5% in aftermarket trade. It was down 11% off its all time
high that it's set at the end ofOctober.
It hit about two, let's just call it 207 dollars.
OK? So in the last four weeks it's
(09:55):
just traded down to like 179 andnow it's bounced 5%.
So we're trading just below the two.
Well, when it opens, it'll be trading just below 200.
And so, you know, not not quite back to that all time high set 4
weeks ago around 180 bucks. SO179180.
That is a really, really important kind of technical
(10:17):
price point for NVIDIA. It was the high of the summer.
So in August it topped out at that 180 handle.
It's kind of been chopping around there.
And I think that 180 handle is really key now.
For now, it's held and we've bounced I think the next 48
hours. So Thursday's market trade and
(10:37):
Friday's market trade are absolutely pivotal to tell you
what's going to happen into the end of the year. 5% bounce for
NVIDIA in aftermarket. Does it hang on to those gains
in Thursday's today's session? Do that, does that 5% start to
get eroded or does it add to those gains?
Right. And I think that the next 48
(10:59):
hours are going to be very telling.
I I'm nervous. I'm a kind of buy, I'm a sell
the spike now rather than buy the dip.
And I'll tell you why. And then this is just my
opinion, right? And there's plenty of people on
the other side of the fence who are saying, look, thank, thank
God, right? NVIDIA strong numbers, right.
Let's go another big leg in thisrally.
(11:21):
I'm not so much a believer now. And I think it is down to this
what what we call that circular economy point where it's become
quite incestuous. And I think, I think when we
talk about is it an AI bubble and people referring to the.com
bubble, I mean, that was like a valuation bubble, right?
It's kind of a profit bubble. Where's the money?
(11:43):
I think here we might be in a revenue bubble where actually
the revenue that Nvidia's makingis coming from these hyper
scalers, OK, these hyper scalersare building out this compute
power. So, so who's renting the compute
power? So well, that's often obviously
smaller businesses and maybe startups.
(12:05):
And the startups are being funded by venture capital money,
right? And fine, these startups aren't
making much revenue. And that venture capital money,
it's finite and it runs out, right?
And how long can this venture capital money, you know, proper
and look, open AI is probably the best example.
(12:26):
We spoke about it a couple of weeks ago where they're, they're
talking about spending what, a trillion dollars?
They've got 13 billion revenue, right?
So obviously they're VC backed. Obviously there's a bit of
circular money coming in from the likes of NVIDIA, but it's
like, how long can this this kind of thing continue to be
(12:46):
juiced? And I think there might be a gap
between this kind of infrastructure build out phase
and then a genuine sort of return on investment from the
broader economy, you know, really benefiting from all of
this stuff. I'm talking about driverless
vehicles. I'm talking about robotics.
(13:08):
OK, that's not here yet. Yeah, I was going to say so that
that's his defense to your argument, right, is that once
that stuff starts kicking in thelonger term then it starts to
move. But on that infrastructure
point, so you're talking there about and I agree there's only
so much Microsoft, Amazon and the rest are going to going to
build out. Is there not also an another
(13:32):
infrastructure risk for NVIDIA, which is that on the energy and
electricity, the consumption side?
So the other in the other invisible hand within this is
that you can provide the hardware, the chips for the
processing power and you've got the demand coming from the
people who want these to create it to drive their models.
The end of the day you need power right in order to as the
(13:55):
key ingredient almost is the fuel for the fire.
But that in itself, you know hasa has a time constraint.
And we're on an exponential track there in terms of power
requirement because on the one hand, the user numbers are
increasing strongly, OK, But then on the other hand, you're
(14:17):
getting these, you know, the latest update.
What are we on ChatGPT 5.1 now, right?
5.2, when we get to ChatGPT 6 orwhatever, these models are
getting better and better and better, requiring more power per
user as well. So you get this exponential
energy growth requirement situation.
Now there is one other counter to say, well, science might help
(14:42):
because this is one of Nvidia's challenges.
Can it make chips that are more energy efficient?
And look, there is definitely gains to be had there and they
will become more efficient, but I'm just not so sure the
efficiency gains through scienceis really going to satisfy that
exponentiality of the sort of, you know, the energy
(15:03):
requirements. So I, yeah, I do think the
energy bottleneck is a key handbrake for, for getting a
genuine return on investment. And, and so I think we're just
going to have a gap where this is my, I just want to stress,
this is my personal opinion. I think we're going to have a
gap where the infrastructure build out has just gotten over
(15:28):
its skis a little bit. It's got a head of itself and
you're just going to get that little realisation and you know
what it's like, you know, marketsentiment, It kind of had turned
right over the last few weeks. And we'll talk about crypto in a
minute because bitcoins had a shocker, but sentiments shifted
and turned, you know, we're going into year end.
(15:50):
Maybe Powell's not going to cut interest rates.
Maybe the job market's deteriorating.
So there's a little bit of concern around the economic
scenario going into 2026 and, and just sentiments shifted.
Now, is this NVIDIA earnings report enough on its own to flip
the entire market sentiment backto positive?
(16:11):
Let's go boom time or not and I'm just feeling not because
people are just questioning the the revenue bubble now.
I think six months ago NVIDIA revenue growth was way awesome.
You know, everyone was on the same page.
Let's go. It's just got all very circular
(16:33):
with all of these deals that have gone on in the last six
months, which has just put a magnifying glass on.
Well, is this sustainable? And actually we do need genuine
return on investment from the wider economy and that just
doesn't look like it's quite there yet.
So, so two points then one beingmore to address that, that
(16:53):
question mark here about the Candace revenues momentum
sustained and also on the energyside.
And then a second one about your48 hour and that kind of analogy
and, and also something that I'mgoing to counter with that from
a market positioning point of view.
And so first of all, I know we don't want to go into the the
(17:15):
politics of it, but Saudi Arabiadid meet with Trump earlier this
week and they've pledged $1 trillion in U.S. investment
commitments this week. Six months ago that figure was
basically half that was, it was around 600 billion.
So out of thin air, your man MBSdrops another 400 bill just like
(17:36):
that on on the US. Now this is quite multifaceted.
There's kind of there's nuclear corporation, critical minerals,
AI, defense, sticking with what we're talking about AI though.
So when you talk about, well, it's interesting, isn't it?
People know a lot of these factors you've described about
NVIDIA. We know that Saudi requires
(18:00):
certain things like defense deals and so forth.
Now, what do we want in response?
Well, we want access to energy in order to fill that void, to
power these systems. And one of the things that Saudi
Arabia is doing is what's calledde facto the data hub ambition.
And this again fits under this 2030 vision umbrella.
(18:22):
And this is about making AI and the data hub of the Middle East.
And this is Saudi Arabia right at the centre of that.
And obviously all these big Elonwas there.
You know, it doesn't matter if Elon doesn't like Trump when
Saudi are involved, everyone's involved, including.
Well, Elon is Ronaldo. Yeah, yeah, Ronaldo.
(18:45):
Ronaldo was. Smoothing over.
Yeah, yeah, yeah, yeah. He's the ultimate broker here.
But yeah, I just thought it was quite interesting, you know, all
the other stuff of that whole thing about the Middle East
order and Eurasia supply chains and all that other stuff that we
could talk about. Just on that point about their
relationship, I thought it was quite interesting in the context
(19:05):
of the NVIDIA stuff. But this is the same thing.
This is a buyer of NVIDIA chips that doesn't yet have a full set
of end users with unlimited money to make a return on
investment. Look, they're going to build AI
think they they want to build a 500 GW data center in Saudi
(19:27):
Arabia, right? So, but, but OK, but who, who's
going to use it and how much arethey paying?
And does that maths add up? And like at the moment, the
maths doesn't add up like that. There's not enough use cases.
We're still, look, don't get me wrong, when Elon's selling a
million robots a year and you know, half the global population
(19:50):
are using driverless vehicles will obviously, OK, cool,
massive return on investment, huge revenue streams there, but
that's we're not there. So at the moment, I think
they've they're just building a rate because of the hyper
scalers who are in this race andthey don't want to lose it.
(20:10):
I think just the rate has got too far ahead.
Of that return on investment demand story, that's my personal
opinion. OK.
And just finally on NVIDIA maybeto close it out specifically on
NVIDIA and their valuation and what happens with their share
price. So the two things to mention
number one's their gross margins.
So it's their their margins for the quarter just in is 73.6%
(20:35):
which look on a stand alone figure is awesome, OK.
And look they've got 90% market share.
They've got pricing power. They can basically charge what
they want on a on a 73.6% margin.
Amazing. It's just the margins dropped.
So the direction of travel for margin is down.
It was 75%. Now look, Jensen said we're
(20:57):
going to get it back up to 75% in 2026.
But but will they, you know their Blackwell Ultra, which is
their latest chip, that's going to require a lot of investment
and that's why their margins dropped.
The Blackwell chip itself had some problems getting it up to
kind of scale production and so that cost more money.
So the margin got eroded a little bit.
(21:18):
So we're worried maybe that's going to happen again as these
chips get ever more complex and advanced.
You know, are they going to haveto, is the cost of manufacture
going to be on an uptrend, meaning margins on a downtrend.
So that's one one kind of thing.Just on that point, explain to
me this. The margin compression at Tesla
(21:38):
is far more severe and has been in NVIDIA.
But aren't they both to some extent built on similar
parallels of hype? But in fact Nvidia's is even
more realistic than Tesla's. But Tesla can get away with
quite severe margin compressionsand that doesn't seemingly you
factor in so much. Yeah.
(22:00):
I mean, well, I mean, firstly, you know, I don't know where
Tesla is in market cap now, but I think it's around about a
trillion. Is it so Nvidia's 4.5 trillion?
I mean, all right, their revenues are much, much, much
higher, growing much faster. Look, the the car business, you
know, which is what Tesla is today.
(22:22):
I know Musk is saying, well, don't value us as a car
business. We're a robotics and an AI
business, right? But yeah, fine, that's in the
future. But right now their margins are
like around than below 20% because making cars is really
expensive, right? So look 70, don't get me wrong,
73.6% is phenomenal. It's just that the direction of
(22:45):
travels the wrong way. And look, when you're valued at
4.5 trillion, I mean put it has to be perfect to justify it the
other. Point to make.
I feel, I feel like there's justhuman behaviour here, which is
like, it's going so well as humans do we we defeat ourselves
almost. It's like, let's just find any
(23:06):
reason to justify well. I said it's got to be perfect
because like when you're valuingthese businesses, you've got to
think about the future. You know, what are those future
cash flows? And I mean, the, the rate at
which this AI boom's going, it'sso difficult to predict six
months, never mind five years. But some of the big banks have
(23:28):
tried to do it. So, you know, and when you're
thinking about their market share, right, Nvidia's market
share is 90%. So when you're thinking like
over the next 10 years, I think Citigroup have estimated that
the spend on data centres over the next 10 years will be 7.8
trillion. So and they're, they're
(23:50):
predicting that there's going tobe some, they believe their
market share, they're not going to be able to defend 90% like
forever. So they're saying that NVIDIA
might generate and capture 4.6 trillion of that.
Oh, sorry, Actually, Citigroup'sestimate was 7.8 trillion.
But they, they make 2/3 of the data send build out revenue goes
(24:11):
to NVIDIA, right? And if they maintain 90%, that's
right, they get 4.6 trillion. So if they maintain their
absolute dominance and somehow 7.8 trillion gets spent, fine,
they'll get 4.6. But Citi, another BAT, McKinsey,
their analysis is that 5.2 trillion is going to get spent
(24:34):
in the next 10 years, OK? And let's just say they can't
hold on to 90% and it drops to 70% market share, right?
Then actually Nvidia's revenues have if you.
So we're talking about assumptions about the future,
which is a cornerstone of tryingto value a business, right?
So if you just make some small adjustments, instead of 90%,
(24:56):
it's going to get eroded to 70. I think that's probably more
likely. And if it's not 7.8 trillion,
it's 5.2 then their, their, their revenues have, right.
So I'm just saying it's really difficult to predict what's
going to happen here. And just small tweaks in, in
assumptions kind of lands with avery different kind of figure,
you know, at the bottom of your spreadsheet.
(25:18):
So look, I'm just just playing I'm just playing the bear here.
And I I personally, I think thisis a well, not a dead cat banks,
but I think this spike we're getting off these NVIDIA results
are great. I I just think it's not enough
to turn the sentiment story, which was negative and and
(25:42):
already in place. That's my view.
OK. Well, to bring in like a macro
wrap to this segment, let's say obviously the government in the
US is is reopened. So we're going to start getting
a a dated release data deluge oflike all of the stuff that we
should have seen. And one of those things is not
(26:02):
fun payrolls. Now, the S&P 500 prior to this
NVIDIA release had dropped over almost 3 1/2 percent, it's
longest decline since August. In fact, actually, because we,
you know, we continue to soldierto on to record highs.
Now, one of the things here is that yes, I totally agree NVIDIA
(26:26):
is absolutely crucial, not just for that AI Ted stocks, but
overall market sentiment for sure.
But there's other things as wellthat are influencing US rates,
expectations, which could come to the savior and perhaps
Nvidia's savior in, in the case of cushioning, let's say, any
(26:47):
repricing down that you might see.
So what do you think of this idea that if you look at the
context of the week, the S and PS had its biggest pull back in
a number of months and a lot of people are talking about this
idea of cleaner market positioning.
So A, what are they referring towhen they say cleaner market
(27:11):
positioning? And B, what do you think of that
just generally in terms of your opinion?
Because I did see that Deutsche Bank came out and they, you
know, there's Ways and Means of tracking this sort of stuff in
terms of market orders and so forth.
But they said that equity positioning is back to neutral
and that discretionary investorsare underweight, implying there
(27:34):
is room to buy into this market,which evidently is not at record
but close to record highs. Yeah, I mean, underweight, well,
fine. OK, I guess this is it, right.
If they've they've moved underweight, that's why the
market's gone down because there's been net sellers, right.
(27:54):
And by the way, you get people like some of the catalyst is
then on singular players in the market like SoftBank sold all of
their NVIDIA position. They banked 5.8 billion I think,
right. They're right.
When you get Michael Bury, famous for the Big Short, it's
just closed his hedge fund because he's like, this is
(28:17):
ridiculous. Now, look, I'm not saying All
I'm saying is it's these little catalysts that help to drive the
narrative and the sentiment. And that's one reason why things
are sold off now. Yeah, now they're underweight
because they've sold. But if you're underweight, yes,
you've got some ammunition to buy back.
But you only buy back if you think it's a low and it's going
(28:39):
to go back up, Right? So it just comes down to the
point. Do you believe this NVIDIA news?
And look, yes, it it might be added to right.
We're going to get payrolls datatoday.
We're going to get, you know, maybe the Fed do cut in a few
weeks time at their meeting. OK, if these things happen, well
then fine, that can add to that bull story and you should buy
(29:00):
the dip and there's money to do it on the sidelines.
It's just what's the sentiment and do people want to buy at
these levels or are they more like me where they think
actually the sentiment from is kind of shifted to a negative
footing and that's going to remain to be the case for a
couple of months. Do you take any warmth from the
(29:20):
market breadth of what we had inthe market movement on Tuesday,
which was not so much concentrated risk in just five
big tech names? More than half of the entire S&P
500 was up, rather than dragged by the tooth and nail by the big
tech firms. Yeah, I mean more than half.
(29:42):
I mean, yeah, that's, I mean, itdoesn't really matter about the
rest. If you're thinking about the
index, all that matters is the tech stocks.
So it doesn't matter what the other half are doing.
They're not big enough or powerful enough.
And it look, if these tech stocks do go through a, a larger
(30:04):
correction, I don't care who else is in that index, they're
going to sell off as well because the whole sentiment is
dependent on tech stock performance and the whole AI
narrative. And if that changes, you're
going to be in a very defensive kind of mood.
And fine, some of those defensive sectors might pick up
some, some of the inflows. But look, I think you'll get a
(30:25):
broader sell off anyway and thatI guess with your point about
clean positioning, I don't know is that just a, a more fancy way
of saying averaging in as in by buying at a lower price so that
looks more favourable in terms of your book cost on your
(30:45):
portfolio? I don't.
I think, I think they're lookingat it, yeah, short term is in
the market was a bit overstretched.
You've had your 11% pull back inNVIDIA, that's kind of that's
been your spring clean to get out some of these extreme longs
who've closed their positions like your SoftBank so.
(31:06):
Yeah. So, so that's about, yeah, I
understand that point. That's about some of the short
term money that's coming out bringing low prices lower,
allowing more longer term money to buy the dip.
Yeah. So that that can be a healthy
thing for a sustained rally. But that's why I say the next
(31:27):
48. That's why I say the next 48
hours is by the dip here. Does it work?
And it needs to work. If there's any, if we go back to
if NVIDIA lose this 5% bump, they've hap.
That's happened overnight. If that gets lost by Friday, I'm
telling you next week's going tobe red.
(31:49):
It might not get they, they might hang on to the 5%, in
which case, OK, it's just wrong the the firm.
'S saying buy the dip all the big household sell side names,
but you can imagine then if you kind of think about it, you know
of course you want to be saying you're going to buy the dip
because if I think about the breadth of my business well,
yeah, the more deals I can finance, the more M and as I
(32:11):
could well, yeah, I can do there's such benefit for the
gravy train to continue across all facets of of the market from
their perspective, but maybe just to close then how does this
translate then into the the crypto market?
Because yeah, everything we've talked about are what has been
some negative developments in, in general sentiment and also
(32:32):
potentially things that could under certain circumstances get
worse. So what what can we get from the
tea leaves of the crypto market in particular?
And then also this, this connection it now fundamentally
plays in terms of an asset class.
I know when, you know, you used to trade and we used to sit on
the floor, you know, you'd be watching, you'd be trading, I
(32:54):
don't know, the UST note or the short end of of of German fixed
income rates, but you'd still belooking at the NASDAQ, oil,
euro, all these other products. Would you now be looking at
Bitcoin in these sorts of cryptomarkets as another key signal?
Yeah. I mean, yes, it's it's kind.
Of it's a pure risk asset. I mean, I don't obviously
(33:16):
there's a portion of the crypto society that believe Bitcoin is
digital gold. It's not.
I mean, it might be in the future, but right now it's a
pure risk play. And we kind of saw that.
I mean, we've seen over the lastfew weeks, right, we've had this
general tilt to negative sentiment, which is why, fine,
(33:40):
NVIDIA down 11%, you know, NASDAQ, S&P, you know, coming
off the highs, Bitcoin has been down 28%.
I mean, it has and it's bounced actually sharply off this NVIDIA
news, right? But it's a classic risk asset.
A lot of the positioning in Bitcoin and crypto broadly is
leveraged. So that's where you're getting
(34:02):
players that are borrowing moneyin order to then invest in
crypto. Now the problem with that, if
you've got an outsized proportion of the market that's
leveraged, the problem comes if the market starts to go down,
because a lot of the arrangements around the leverage
is that, you know, as long as the, the, the, the coin that
(34:25):
you're buying stays above a certain price, well, fine, that
leverage loan agreement is in place.
But if the, if the price goes below a certain point, you're,
you're triggered out, you're forced out of the position,
right? So the market coming down often
triggers or forces other sellersbecause of this leverage.
This is what's happened. This is why Bitcoin's 28% down,
(34:48):
whereas Nvidia's 11% down, It's because of the outsized leverage
proportion of the market. And we saw this on October the
10th, we had a massive move lower.
And then that was the the beginning of what's been then a
sort of six week sell off. And on October the 10th, that's
when Trump threatened China withanother round of massive
(35:10):
tariffs, which I don't know, it's obviously we know that's
Trump's style, threaten tariffs and then back off.
So I don't know why the crypto market fell for that one
particularly, but they did. And this just meant that Bitcoin
dropped enough to start triggering people out of their
(35:30):
leveraged trades, which has meant that then the sell off
continue to look. It just means when you look
about look and look over the markets that the crypto markets
more generally, I mean, Bitcoin's now it's down on the
year, even with this rebound, it's down on the year now.
But you're you're looking at like some of the smaller ones
like Cardano and Solana, yeah, they're, they're like 4050% down
(35:54):
year year on year. So these these are big moves,
right? But yeah, when you're looking at
Bitcoin broadly, we peaked at 125 bucks and that was back at
the start of October, big sell off on that 10th of October.
Technically we dropped below a key $110 that took us now
through the floor and down below$100,000, right.
(36:17):
And so there there's a lot of technical sort of influences
here going on as well. But I'd say we're we're right at
a key technical point where we might be breaking the sort of
two year uptrend that we've seen.
We might be breaking that trend line.
And so look, it's still it, it all comes down to the same
point. What happens in the next 48
(36:39):
hours is NVIDIA, is that alone astory that's big enough to
switch sentiment, yes or no? And if it is great, great time
to buy Bitcoin. If it's not, not a good time.
Couple of other points. Of of jargon, so to speak.
(36:59):
One thing I was reading is aboutconviction buyers and this being
this idea that I guess this is coming from this, this continued
adoption that we've seen of digital assets through the last
1218 months. This was the idea that big
buyers from earlier in the year,because we've seen the likes of
BlackRock, these big asset managers, you know, inflows into
(37:22):
these sort of parts of their business, but these big buyers
from the year are now underwateron their positions.
And this idea then that when investors are sitting on losses,
you mentioned earlier something about dry powder.
Well, there's there's we're not buying dips at this point if our
positions are already underwater.
So again, that compounding of that negative effect when the
(37:45):
prices start to spiral lower. But one of the things here as
well is about corporate treasuries becoming then
unintended forced sellers. Yeah.
So what what are they talking about in that context when it
comes to publicly listed companies which were hoarding
some crypto holdings, you know, this year, which was actually a
(38:05):
good, a good thing until until more recently.
And look, this has been a politics.
Trade because Trump basically winning the election, that's
meant that the value of Bitcoin basically it doubled.
It was trading 60,000. When you look back around the
election times or just pre election times, obviously by the
time we got to mid-october, you know, it's odds on Trump's going
(38:29):
to going to win it. So from that point, it went from
60,000 to over 120,000 at the end of September, right?
So it's doubled. And that's because Trump's pro
crypto, OK, and it's meant that you've had corporate treasury
departments saying voila, now the the time of crypto is here
(38:50):
and it's become a more it's going to become a more
established currency. So let's have it as part of our
the make up of what we are doingwith our businesses cash flows,
right? So this when we say corporate
treasuries that they're, they'rein charge of the cash that
companies have on account. And how are you making use of
that cash? Where are you depositing it to
(39:12):
kind of generate income from thefirm for the firm, right?
Fine, you go out and buy treasuries if you want to play
it safe or now you go out and buy Bitcoin because ah, Trump's
come in and right now it's a valid thing to to add to our
mix. So I think that's happened and
that's been one of the things that's led to, you know,
BlackRock launching their ETF, one of the things that's led to
(39:34):
this whole upside story to 120,000 bucks plus, right?
It's just that when this thing shows its hand as being, this is
still mega volatile, 28% down ina few weeks.
That's not the type of asset that a treasury, corporate
treasury should be holding. And this is where the board
(39:57):
start to go hang on a second. This is, this isn't the kind of
stuff we want to be in. It's too risky.
Let's get out. It's too early.
And so of course that then just adds to the whole narrative on
the negative sentiment around itand and obviously accelerates
that downside. All right, cool.
Well, look, we've had. Lots of lots of words mentioned
(40:19):
here throughout the conversations from concentration
risk, margin compression, leveraged money, conviction
buyers. So hopefully listeners have
learned how that ties to some ofthe market moves at the moment.
You've heard it here, World exclusive.
The bear is out on NVIDIA. Here's Curran is pounding the
(40:40):
streets now. When when are you on CNBC in
Bloomberg talking about this? I mean, it's coming, isn't it?
Yeah. You've got now.
Bearish. Yeah, and.
They'll be all over it, but justa reminder.
As well, before we we wrap, we do have our Amplify Me Finance
boot camp happening in London inDecember, so I will put the link
to that in the show notes. Please do check that out if you
(41:00):
want to join us, both Piers and I and the rest of the team in
London in a few weeks time. Otherwise, thanks very much
Piers and have a great weekend everyone.
Yep, catch you later.
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