Why Bubble Talk is Totally Wrong | TCAF 238
Speakers
Ankur Crawford
— Head of Digital Assets, VanEck
Summary
Dr. Ankur Crawford discusses the AI investment landscape, arguing that the compute shortage is real and exponential AI growth justifies massive capex. She picks several stocks poised to benefit from AI, including Nvidia, Micron, Western Digital, Amazon, Nebius, QXO, AppLovin, and Palantir, while expressing caution on Apple and software point solutions. The conversation also covers bubble talk, token economics, and the consolidation in semiconductor and data storage industries.
- AI compute shortage is driving demand for semiconductors and data storage.
- Bubble talk is misguided because AI growth is exponential and capex is justified by quick ROI.
- Specific stock picks include Nvidia, Micron, Western Digital, Amazon, Nebius, QXO, AppLovin, and Palantir.
- Apple is at risk due to slow AI adoption and potential disruption from new form factors.
- Software point solutions are threatened by AI and internal development, leading to multiple compression.
- The memory and hard disk drive industries are consolidated and benefiting from AI-driven demand.
- Private AI companies like Anthropic are staying private longer, creating value not accessible in public markets.
- Management quality and execution are key factors in stock selection, especially for turnarounds.
Trade Ideas
Nvidia benefits from AI compute shortage.
Nvidia is the key enabler of AI compute, and the exponential growth in AI demand justifies the massive capex spend by hyperscalers. The company's chips are in shortage, and the ROI for hyperscalers is quick (18 months), supporting continued demand.
AI-driven DRAM shortage benefits Micron.
Micron is a key DRAM supplier benefiting from the AI-driven memory shortage. The DRAM market has consolidated to three players, and pricing has increased significantly (100% year-over-year). The demand for memory in AI applications is exponential, and Micron's stock has risen from $85 to $450.
AI data demand boosts Western Digital's earnings.
Western Digital is one of only two hard disk drive manufacturers (with Seagate) and is benefiting from the AI-driven demand for data storage. The company has seen earnings estimates jump from $10 to $25, and the industry is not adding capacity quickly, leading to a supply-demand imbalance.
Amazon is cheap with strong AWS growth.
Amazon is undervalued with a PE in the teens, compared to other retailers like Costco and Walmart. AWS is growing in the mid-to-high 30s, driven by AI and the partnership with Anthropic. The company's own tranium chip, while behind Google's TPU, will help lower compute costs and provide more supply in a constrained market.
Nebius is the next AI native hyperscaler.
Nebius, formed by ex-Yandex engineers who left Russia, is building AI data centers and has the potential to become the next AI-native hyperscaler. The company has a strong engineering team and is focused on building efficient AI data centers.
QXO consolidating building products with great leadership.
QXO, led by serial entrepreneur Brad Jacobs, is consolidating the fragmented building products market. Jacobs plans to increase EBITDA from $1 billion to $5 billion by 2029-30 by adding efficiency, technology, and taking pricing in the industry.
AppLovin's e-commerce shift improves monetization.
AppLovin is transitioning from a mobile game advertising company to an e-commerce advertising company, which will allow it to monetize its inventory better. The CEO is keeping headcount flat while growing the topline, leading to cash flow generation.
Palantir shepherds enterprises in AI adoption.
Palantir is helping enterprises adopt AI and is acting as a shepherd to cross the chasm. The company is well-positioned as a platform for AI adoption in the enterprise.
Apple's slow AI move risks its model.
Apple is at risk because it is not moving quickly on AI and has not released an AI agent (like an improved Siri). If Apple doesn't act, it could lose its competitive edge as AI enables new, screenless form factors that could replace the iPhone.
