Nvidia Q1 Earnings Preview with Gene Munster
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Welcome to the Risk Reversal Podcast. I'm Dan Nathan. I am joined by Gene Munster. He is the managing partner at Deepwater Asset Management. Gene, welcome back to the pod. Always great to be here. All right. This is dropping Wednesday morning. That would be May 28th.

And this is a big day. I mean, we've been talking about this quarter after quarter after quarter. It feels like for two and a half years or so, this is NVIDIA's earnings. Usually they come, what, close to a month after we've heard from most of their major customers. You know who they are, Microsoft, Apple, Google, Amazon.

Amazon, OpenAI, we don't get to hear from, but those are also a big one. So that result out tonight after the close. So we're going to preview that. We're going to talk a little bit about that ecosystem. I want to talk a little bit about OpenAI. It looks like they just made the most expensive acqui-hire in the history of acqui-hire.

or maybe of all M&A, right? And I also want to get your take from Google I.O. I know you've been talking about it a little bit on the socials and you were on Fast Money last week to talk about it. I just want to see if there's any kind of shifting thoughts. I know that you were a lot more constructive than most people out there into that event, so I want to hear your take on the way out. Okay, Gene.

NVIDIA, tomorrow after the close, 8% implied move in either direction. The stock has made up a lot of ground. I think it was an all-time high, at least intraday high, I want to say in late December, $153. Here we are at $135. It traded below $90 in the early April period. So we've come

A long way. How are you thinking about the name? Let's put price out of the equation here. Like I said, we've heard from some of their major customers. We saw how the market perceived those CapEx numbers and they seemed okay with it. So how are you thinking about things into the print? We own it. And I think the best way to understand an investor's thesis on a company is just to look at their portfolio. And so we do continue to own this.

My confidence in the AI hardware piece has strengthened since DeepSeek came out and even more strengthened since we've heard from the CapEx, from the hyperscalers a month ago, and even the past couple of weeks continue to hear positive feedback. And so the way I think about it, there's two orbits. One is what's going on with the broader spending around AI and how this tech is advancing. And the second orbit is where are they going to be spending their money? And I'm

on where they're going to be spending the money, I still believe that Nvidia has an advantage when it comes to cost of ownership, despite their $30,000, $40,000, $50,000 for a GPU. I still think it's relatively cost effective. And so, I mean, at the most basic level, I think that growth in 2000, calendar 26, because there's going to be a lot of noise over the next three quarters when it comes to growth rates, we can talk more about. But I think that the growth in calendar 26

is going to be measurably above where the street's at. And I think the street's at just under 25% growth right now. So feel great going into the quarter. I'm not suggesting that it's going to trade up or down on Thursday, but I think that

a month, two months, six months from now, the stock's gonna be higher. - Yeah, let's take a step back here, 'cause I think that's really important. You know who you are in the market. You take very long-term thesis about themes, and then also the sort of names that kind of fit within them. And on the day-to-day basis, I know you come on Fast Money, I know you do your own podcast. You've been very gracious coming on our podcast, I wanna say a couple times,

a month or so. And I think that's just a really important distinction. You know, like oftentimes, you know, Guy and myself, when we're on Fast Money, we're asked, you know, what happened today? What might happen tomorrow? What happens in the print? And I suspect you don't give a shit if it goes down 8%. You know what I mean? Especially if it's one of those situations where maybe you can't put your finger on something that's truly fundamental that would cause that and turning it into something else. And then the flip side of that is like,

from the highs in January to its lows in early April, the stock sold off intraday high to intraday low over that period, nearly 40%. Now, that's something, if you own it for the long term, is the sort of thing that could make your stomach churn a little bit. It tests your metal, if you will. So that's one of the things I think it's really important to differentiate. But how do you know, and this is more of a stylistic thing, okay? We'll get back to the fundamentals and everything like that. At what

point in a like a broad market sell-off where the sentiment shifted but you haven't seen much diverging as far as the fundamentals are concerned other than what investors are perceiving when do you start to like think twice about your thesis in like the throes of a sell-off like that and you can make the same argument because we saw it in nvidia for two years in 23 and 24 at what point do things look way overdone i'm just curious how you think about that sort of stuff

Well, the central question we ask is, what's the growth rate going to be in the out year? And so any sort of data points that we can pull together that give us confidence about that. And the market is screaming at you when the stock's down 10%, 20%, 30%, 40% that you're getting that wrong.

And just because it's rallied doesn't mean that we've got it right about what next year is going to look like either. But at the core, we really try to ignore the noise of the market. And I think one of the pieces that's been encouraging over the past-- let's kind of take it past spring of 2020-- is that the pace of these rips back, and the market has been faster than it has been over the last 15 years.

And typically, if we go back, let's go to the dot com period, it would typically take when you'd have these downdrafts in these stocks, it would typically take 53 trading days to get the stock back to where it was before the 15 percent correction. And now we're just seeing them kind of come back faster. So in other words, is that since we've.

been rewarded for waiting faster than what we had thought, that gives us a little bit more like psychological confidence to just kind of weather the storm because we know that things can quickly change. But it all comes down to like, what are we actually hearing and seeing in terms of like hardcore data points? So we can go through some of those that maybe aren't as well-traveled data points, but that's what we're focused on.

Yeah, and that's a really important point about the speed in which we're seeing these sort of V reversals. It's actually not giving you enough time to really test that long-term thesis because it's going down so quickly and bouncing back so fast. You know, sometimes those dislocations offer an opportunity. Before we get to some of those data points, let's just talk about some of that out-year growth that you're expecting. And let's be clear, this is fiscal Q1 for 2026. They're going to report 2026.

tomorrow night. And so, you know, expectations for this year are 46% EPS growth next year, a step down to about 30%, if I have that correctly. And then from a revenue perspective, and you've been correct on this, this is inched higher over the last few quarters as we've talked about it. So for current fiscal 2026, we're expecting, you know, or consensus expecting about 54% growth

revenue growth and then that decelerates to about 25% next year. You have been in the camp that you think the fiscal 2027 both earnings and revenue consensus is a little bit too low and so we're trading about 31 times this year and about 24 times next and that's on earnings. So

Thoughts there on how you think about that, because is this quarter going to be one of them that you think the street starts moving higher in their expectations for the current year and then possibly for 2027? I don't think the street moves higher on this quarter. I do want to just put a finer point on this. What's happened with estimates is that if we rewind to deep seek right when deep seek happened, you know, the day before expectations were for about 20% growth.

And then they kind of quickly dropped to about 18% growth and now we're back to 25. Just to give you some context in terms of what's happened over the past few months. As far as what happens to the numbers, it's a pretty unique setup with this, the outlook, at least the commentary for July. And part of it is because of Jensen's comments recently a few weeks ago where he talked about this hit for the H-20 being banned.

And he said that this is going to cost him 15 billion in sales. And so that starts in April is when those harder curbs got put into place. And so,

There's a disconnect between what the whisper numbers are for the July quarter, which is around $38, $39 billion in revenue, and what the imprint numbers are, which is almost $46 billion, $45.8 billion in revenue. And so if we take the case that over the next three quarters, they need to lose $15 billion of H-20, assuming there's no changes to the curbs.

but there's also going to be some upside in their other business because the fundamentals on this, we can talk about those data points, but is more positive. You're probably going to net out to something like a $10 billion downward revision. And that would essentially take calendar 25,

Counter 25 revenue growth from it's currently, as you said, about 54% to if you adjust that $10 billion out to the mid 40s. So for a stock, I mean, that should be like flashing red lights for a stock that has been on a tear for the last two years.

And we're talking about some material downward revenue revisions. And that's kind of why I started with, I don't know what the stock's going to do because my senses investors know that this is coming and

But maybe they're hoping that the upside from non-China offsets it or something. So hard to figure out how it's going to react. But essentially, all that pain, if in fact they do lose out revenue this year, all that is going to create an easier comp for next year. And so you get to an easier place. The absolute number may be the same for calendar 26 as is today, but the actual growth rates would be probably more like 30%. Yeah.

Yeah. You know, so what's interesting about this setup is they talked about that five and a half billion dollar charge. Right. And that's how you got to the ten billion dollar. Let me interrupt there real quick. There's some confusion, present company included, because he talks about a charge, Jensen. And then he also talks about this lost revenue going forward.

15 billion. That's where I was going. And so, you know, the guy has been speaking anywhere there's been an open mic over the last couple of weeks. So if folks don't actually have a good sense for those sorts of numbers when they kind of guide, I'd be super shocked because, again, at the end of the day, it's really the institutional community are the ones who are going to be driving the train on this. And yeah, I'm sure there's like plenty of retail participation, but

One of the things that's been really interesting over these last couple of months, it's like story after story, article after article about how retail was unfazed by this period over the last couple of months. If you're talking about inflows, if you're talking about interest in ETFs, that sort of thing. And so it's funny to me that it doesn't seem like...

there was too much of retail trepidation about a name that they've loved for the last couple of years, and they seem to be holding on. And so I think that's really interesting. And so I guess the next question I have is that as much as Jensen's been talking, what has he left?

for the conversation on the earnings call? Because, you know, it seems like there's been so much ink spilled over the last month or so. He's kind of like, you know, put it all out there. So I'm just curious as you think about from a commentary standpoint, any expectations there? On the negative side,

He's got a lot of air cover going into this, any sort of commentary, any sort of blemish, any sort of challenges with the business. He can easily kind of comb that over with a commentary about the curves.

And so what's potentially left open is actually a window for surprise where you have the commentary being, yes, we lost out on this because of these curbs. But the good news is everything else is going better than what we thought. And if we kind of normalize that out, we're seeing acceleration and growth. That level of detail hasn't been...

hasn't been framed in. And so that's probably the one upside. I don't think he would say if in fact the opposite is happening, that the curbs are impacting and they're seeing some other form of fractional slowdown. I don't think he would say that. I'd be shocked if that happened. So I think that from a commentary perspective, that's probably what's on the table is most likely don't expect anything outside of what has been framed in here, but the upside surprise would be

that piece about let's zero in on the non-China business. That thing is that piece is going really well.

So there's two things here that I think are really important as it relates to this trade war, right? So if you think about like, it was always my view, and you and I have been talking about this probably for the last year or so that Apple and Tesla were like right in the eye of the storm, right? Of any China, US sort of like protracted sort of trade war, and that those are two big bargaining chips. Well, Elon might have helped himself a great deal. You know, as I think about the proximity to Trump and the negotiations and the like, but Apple's

Apple, on the other hand, you know, and both of these CEOs, they apparently had been playing this new administration, you know, pretty well here for all intents and purposes. Both of them were up on the dais at inauguration. Let's take Elon out of it and his other participation and obviously all the stuff in the campaign and then afterwards with Doge and the like. But Tim Cook, you know, this is somebody who has navigated both President Xi and President Trump previously.

pretty well so far until a tweet last week, right? We thought by two things, right? Supporting the president, then announcing, you know, $500 billion in investments over the next four years here in America, reshoring some of their manufacturing for iPhone to India. You thought this would all be enough, right? At least in the near term. And then last Thursday, I think it was, Trump puts out a tweet saying that, you know, 25% tariff

on iPhones if they don't move that Indian production here to the U.S. Now, you and I know that that would take really years to do for all intents and purposes, right? So where does Apple kind of fall out in this situation? Because Trump, for some reason, he doesn't do like if if if

Tim Cook was down in Mar-a-Lago last weekend and he's saying all these pleasantries about him. He's not tweeting about it the next day. Do you know what I mean? Something in the background apparently is going on. Is that fair to say? Or I mean, I know you don't know and I don't know, but that came out of nowhere. I if just I want to dive into Apple a second, but just before we leave NVIDIA, I just want to make one comment. I was mentioning these other data points just quickly about like where my confidence comes from.

And Elon's comments last week about a million GPUs and the majority of those are going to be Nvidia. That could be 30 to 40 billion in revenue. Now, everyone's aware of this. Like there's this is not some inside comment that's being made publicly made. But to put that into perspective, I mean, that could add if that's over a two year period, that could add 15 percent growth to just that deal alone. So I want to leave there with some confidence that the fundamentals of Nvidia are in great shape.

Changing gears to Apple is somebody who's watched and invested in this company for a long time. This has been remarkable, the shifting gears. And it was pretty jarring for me on Friday morning seeing this because I know how much Tim has invested into the relationship with Cook. Yeah.

And I had an opportunity on Friday afternoon to have discussions with some of the former high level U.S. trade officials that are still orbit in the conversation, I think still have a voice in everything that's going on there. And there were two things that really stuck out to me that kind of the focus of the conversation is what's going on with Trump and Apple. A couple of things stood out. First is that

Trump does have this belief that the U.S. should essentially kind of go at it alone and therefore don't really rely on allies.

And if you take that approach, therefore, you need to worry about how you can keep things going on your own merits. And of course, we don't manufacture technology for the most part in the U.S. And the example that one of these former trade officials gave was imagine in the mid 70s being that the kind of the core of U.S. hardcore manufacturing was automotive. At the time, imagine all that was 100 percent of that manufacturing was done out of Moscow. Right.

Like there's no way when the U.S. Soviet Union in the Cold War, there's no way that that would happen. And therefore, Trump wants to bring some of this manufacturing back and he can't do it by himself. But one thing he can do is pull tariffs out and that's his lever. And so he's basically using Apple as an example to say, bring tariffs.

He's speaking to Cook. He's also speaking to the broader tech leadership, Jensen and Microsoft, to bring more into the U.S. So that was something that was informative for me. But the piece that surprised me is despite all that, what apparently is more important is keeping the economy together. Because even though it would be all good for if you do want an isolation type of an approach to running your country,

it would be good to bring this manufacturing of devices back. The reality is, is that you're not going to get reelected. The party will lose if the economy is in a bad place. And so what I left was with a sense that that's going to be the moderating factor here is this conversation about what's going on with Apple and the direct tariffs. I think that the administration is really trying to figure out how they're testing different

Negotiating was the word that they use with business leaders and the public about what they what they can get away with in terms of the size of the tariffs. But ultimately, they're not going to do anything that's really going to break the economy because that would be pretty bad. And so like that was like a whole different lens I left with of like.

It's more than just a headline of an Apple 25% tariff. One other piece that came out too was that on the tariff side, it's off of the cost when it comes into port. And so it's not really a 25% tariff. It's more like, based on my math, like a 14%. And Samsung would be tariffed equally as well. So, I mean, there was a lot I just gave you there. But I think that the core takeaway is that the economy is what matters most. And that's probably what

tech investors should be most focused on. Don't worry about the headlines. Look what's going on with the economy. So your point about like on the economy, right? Like I think that's really important. They don't want to break anything. But when I think of just kind of the back and forth, it's one of those things that even if you are one of these supporters of the president, at least optically, right? And you've made these commitments to this, that, whatever, and you're talking about investing here in America and

We shoring some sort of stuff. It's just like sooner or later being a bit of a punching bag is getting a bit annoying here. And, you know, so I just think the boy who cried wolf. I mean, we've seen this now like four times. You kind of put these reciprocal tariffs on China and then you dial them back and they don't have to say much to get that to happen.

This morning, we see it with the EU. We saw it with the UK. We're getting a lot of upward gaps on this. Guy and I have been going back and forth on this. It's like, okay, if the algos are picking up the headline and they're taking things higher, you can't just blame it on the machines because there's folks who are making qualitative investment decisions to keep it going. A lot of folks are saying these threats don't have a lot of teeth anymore, which actually weakens our

bargaining you know like I think there's a good chance that we get into you know 2027 and we have made no real progress you know what I mean from where we were at the end of last year is it you know thoughts on that is from a trade perspective and how we're being perceived around the world

So it was mentioning this call with these former trade officials, and one of them had this analogy that spoke to that. And essentially it was a story about a father who had a son and whenever he would basically make a mistake or do something where he had to be punished, he had to drive a nail into a workbench. And then each time he did something good, he got to remove the nail from it.

And at the end, what the father showed the son was that despite the fact that those nails had been removed, there was still unrepairable damage to the workbench. That wood had been damaged and that scar tissue essentially was still there. And this topic around what's the attitude you want to use, erratic behavior or kind of unpredictable behavior around these tariffs can have some lasting impact. And I think

at the end of the day is that that's not going to change. That's the style. And even if that does have some damage, I think that some of the advising that the president's getting is that be aware of this damage. I don't think that that really resonates. And I think from like, as we kind of fast forward two, four, 10 years from now, you know, leadership changes and maybe that would be the kind of point where there's some

If you're in the camp that feels that the U.S. has lost some credibility, then that's kind of when that gets rebuilt. But I would not expect any change with the current cadence. Essentially, he gets some wins, political wins. He's had them over the past few weeks. And then he pushes the boundaries. That's what he did with Apple on Friday. And then he's testing. He's putting these balloons out. There's damage with that.

but there's also him moving forward to try to get to this optimal tariff. And that's a great analogy, you know, the scar tissue, the damage to the wood and everything like that. And I totally get that. I guess my only point is that, you know, the idea that this is going to make an impactful change, you know what I mean, to global trade in the near term is not particularly great. And especially a lot of the stuff that you're

possibly you know kind of looking for the manufacturing reshoring it's going to take a while right and so i just say to myself if you come back to they don't want to mess with the economy well they're messing with the economy they're messing with the global hasn't happened because hasn't happened yet i mean the market and this is one of the other pieces is the president looks at the market and when he makes these adjustments and see the market coming back i think he's uh

feeling more empowered to push the envelope. Yeah. And that might be, you know, the sort of thing where all of our political adversaries, you know, overseas and our allies, for that matter, they know that. I mean, like, so this is a play out of the playbook. Like, they know that. And don't think for a second that they were not unhappy in April when our stock market was careening lower, far worse than all the other countries. And so there's no reason to believe, like, it's been my belief, when you start messing with

things like the economy first and foremost, right? And there is a lag, right? You can look at the markets and say that is a kind of, you know, a lens into what might be happening in the economy. I think this time around, if you just look where we are, we're unchanged on the S&P, we're unchanged on the NASDAQ. At the highs, we were only up four or five percent or so. You could say no harm, no foul. But under the surface, if companies here are slowing up capitalization,

and R&D and just the uncertainty that they may face from businesses if they're their customers or consumers, that sort of thing, that's going to be a lagging indicator. That's going to take a little while. And so I just don't think we're going to have any material sort of agreements on trade. And if we do anytime soon, it's not going to be the sort of thing that I think is a huge benefit to our economy. And

make no mistake about it. If we do have, you know, higher tariffs, even if it's 4%, 10%, whatever the hell it is, it will weigh on the economy. I'm not rooting for that. My only point is none of this really needed to happen this way. You know what I mean? So, and it's here nor there. I just think the longer it goes on,

you know, this second time around, I think the less teeth that it has. And I think it might end up hurting us more than some of our trading partners in the near term, for whatever that's worth. My general thoughts are the market wants visibility. The market's OK with, I think the market would be OK with lower GDP growth with a 10% tariff. I think that they just want to know it's at 10, not 30.

And, and, uh, so I'm kind of more focused on that piece. I also think we're going to get resolution the next couple of months. I think it's sooner than, in part because I'm buying into this view that there needs to be resolution to keep the economy in a good place. Starting this fall is kind of when the cycle starts around the next, um,

the midterm elections. And so a year out, like you got to get the economy kind of moving in the right direction right now to prevent hitting an air pocket in fall of 26. And so I think bottom line is I don't want to weigh in bad policy, good policy. I think the market just wants visibility.

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Betterment, they're building innovative technology all for anyone who's ever said, I think I can do better. So grow your RIA your way with Betterment Advisor Solutions. Learn more at betterment.com slash advisors. Investing involves risk, performance not guaranteed. Yeah, no doubt about that. All right, let's talk about OpenAI. I mentioned this

acquisition of Johnny Ives design company, six and a half billion dollars, all stock, obviously OpenAI is a private company. You know, my first response is that, you know, this is a pretty expensive acqui-hire. It takes me back to, I think, 2014 when Apple bought Beats. It was Jimmy Iovine and Dr. Dre. And they...

- One and a half billion or three billion, I forgot. - 3.2, $3.2 billion. And it was Beats streaming service and it was the kind of earphones and all that sort of stuff. It was a total zero. And it was so uncharacteristic of Apple. But I do remember that there was this really cheesy video

With like Tim Cook and Eddie Q and Dr. Dre and Jimmy Iovine, you remember, and they're all these grandiose sorts of things they were going to do together artistically, but also from a hardware standpoint. And then it brings me to this event here. So Johnny Ive was obviously, you know, you know, very important to Apple back then. And so,

Now, you know, he left in 2019. He really hasn't made anything meaningful from a design standpoint, but he was very important, whether it be iPod, iPhone, Macs, and Apple Watch was his last really big hit. And so you look at this video that Sam Altman, the CEO of OpenAI, put out with Johnny. It was the cheesiest nine-minute video I've ever seen where –

there was actually no detail about what these two guys are hope to do together. You know, they definitely talk about it. And I saw Ben Thompson on Stratechery had a really interesting thought is that, you know, Johnny Ive, you know, being reflective now is probably like unhappy with his contribution to what's gone on with smartphones. You know what I mean? And their impact on humanity. Sam Altman seems to be in that same mode, except he's building a technology that,

That could be far more devastating if you think about it. It could also be far more enlightening in many ways. And so what do you make of that? I mean, to me, my first sense is like, man, there's a lot of money sloshing around. If somebody can drop six and a half billion on something like that.

This is from my world. It's not your question, but from my world, this is like as fun as it gets, bringing all these new parts to the equation. And I think one piece that is undeniable is that money getting sloshed around is that if there's a question about like,

How far are we in AI? And what's the appetite for companies to continue to invest? I think this is an example. Now, granted, it was equity. He got equity. So they didn't write him a check for $6 billion. He got $6 billion in equity and open AI.

But I think that the bigger picture of this, like there's just a lot of money. But it was dilutive. I mean, so the thought of that, like this is a dilutive, you know what I mean? Like acquisition, all stock. And like some of the thoughts was that, okay, maybe they were trying to dilute like this one portion of the business that is not meant to be the business portion, the nonprofit aspect or whatever. So maybe there's some goofiness going on, but I get it. You're saying this is fun to see these sorts of combinations. And it's to your point, like just-

Don't even worry about the details of what the product's going to be. Just look at the big picture is that there are forces in play here that do give credibility to this view that we're still early in AI.

And so maybe starting there, as far as kind of what does it mean and what did we learn? And they also put out a letter, Altman and Johnny Ive put a letter out where they talked about it. We can learn more on that. And, you know, it's going to be this device that doesn't have a screen. As you said, I think Johnny Ive has some remorse about what's happened with people and their screen addiction. And so I'm going to try to fill in. They refer to it as a kind of a side device, a companion device.

And so they actually talked about iPhone and Mac by name to sit alongside that, but said that down the road, it can evolve into its own category. And so one of the pieces that we come back to is they're going to show it next year. They said, we'll learn more next year. They didn't say it'd be available. So we'd learn more, which probably means it becomes available in calendar 27. And he said his expectations are that this is going to be the fastest growing product to a hundred million units.

So, iPod, four years to 100 million. iPhone, three years. iPad, two and a half years because it kind of built on the iPhone. So, that's kind of the benchmark. So, we're looking at, I mean, if Sam Altman has anything, this is really a 2028. So, I think the big negative is just how do Apple investors kind of think about this? One of their, like, impact longer term. I think one of the other pieces is I've read more about it and kind of taken it all in is

Sam Altman wants to be Steve Jobs. And I think that this is, he views this as his opportunity to take on that role. Yeah. I mean, I just look at it in a different, slightly more cynical way. It's like, okay, he's your childhood hero. My childhood hero was Han Solo and I don't shoot first. You know what I mean? That sort of thing. It just seems...

It seems a little cheesy and let's be honest, Johnny Ive, his last hit was The Watch, which was 10 years ago and make no mistake about it, that was being conceived likely before Steve Jobs died. Steve Jobs in the Isaacism book said that for all intents and purposes, and I think Johnny Ive, the fact that he's using this, he's like, well, Steve Jobs once said I was his spiritual, I don't know, whatever the hell, something like that, almost his muse in a way,

It just feels like we're pushing on a string here. And the likelihood of this kind of being that important to ultimately displace the iPhone or some of the other wearables that are on a hundred million arms or, you know what I mean? That sort of thing is not particularly great. And it's certainly not going to happen on its first iteration, in my opinion, because if this thing is going to be successful, it's not going to be cheap and it's going to have to bump out

the watch or something else that lives in. Does that make some sense to you? I would agree that like we

It's not, it's Johnny Ive. He's brought his team with him, which is like a world-class team, but that doesn't mean that this is going to somehow be a success. And I went through that timeframe just to, to frame in, like, we're not talking, we're talking about 2028 as being the ramp year here. And so what we still have, there's a lot of time between now and then. And I think it really speaks to, you know, these transformative tech, you know, it took iPhone, uh,

2007 it came out, it really didn't start cooking until 2012. And so I think that there's a, it's just a good reminder in all this. Two more things. I want to hit Google really quickly. IO was last week. You know, first of all, the two days after, it's stocked probably 10%. Now it came back a little on Friday. And so that was one of these sorts of, you know, kind of underappreciated sort of stories. Sentiment got really all on one side, that sort of thing. And they didn't, you know, initially, I think you were on Fast Money that night.

you know, there was nothing that was said immediately. The stock was up a few percent, then it went down and, you know, there was a lot of chatter about what they were going to do and some of the products. And, you know, it wasn't that meaningful, was it? I know that you listened to most of what went on here, and I'm just curious where you

your head is at right here? Because I know you've had a lot of things to say about overviews over the last couple of months. Quick recap is positive on Google for a long time. A few months ago, we sold the stock because we felt like search is going to go through this transformation. And when you make a big move like that, psychologically as an investor, you want to always stand your toes and say like, that was the move we made. That doesn't mean that we have to continue on this

And so when I went into Google I.O., I kept telling myself, like, be open, be open to whatever they're going to show around search. And they spent about a quarter of the two hours talking about search, whatever they're going to show, just given the benefit of the doubt. And what they showed was AI mode, which is effectively a recreation of AI overviews, which is what they announced last year.

And so I think that it's a small change, even though they talked about this being this big radical change. There's still sponsored links. It still is kind of a multi-experienced search result. And I think that's still one of the fundamental challenges they did at the very first. So they kind of kicked it off. I forget the woman's name who started out the conversation on search. And she used the word that search has gone through a profound, that was the word, profound change over the last year.

And I think that is like, if at the core of like this question about what's going on at Google, they're acknowledging that

that there's a big change going on. They're also acknowledging that there's a big change going on because their answer a year ago was AI overviews, and now they're coming out with a whole new answer, AI mode. I think that that's good that they're innovating fast. I was encouraged by that. But I still, at the end of the day, even going into it with an open mind. Now, I haven't used it. I've been trying to use it. I still don't see it on my browser, my ability to use it.

but my sense is that it still isn't going to answer the question, which what people really want is just a simple answer. And so I think that this question about what happens with Google and search longer term is still unanswered. Yeah. And so for that main purpose, like the stock should continue to underperform unless you see something. Yeah. I think it has bumps. We went back and looked at a blockbuster when it was on its way down. It used to be a public company.

And they would have these quarters where the stock would go up 50% on a quarter. Yeah, it was the mid 2000s. And yeah, no, that's a great analogy. And obviously, a lot of folks like to apply that to a lot of dying TiVo. You could probably say some of the same stuff for...

Both of those are on the island of misfit old tech toys, if you will. Last thing, Tesla. I follow this guy, Troy Tesla. I subscribe to his blog. And he is... This is as it relates to, obviously, Tesla. And he's obviously...

He has been more accurate than most of the sell-side analysts on Wall Street as far as deliveries and the work that he does. And one thing really stuck out to me, he was talking about the yearly decline. So this year is going to be the third consecutive decline in Tesla deliveries. And so he made a point that if it comes in less than 1.6 million deliveries, that's down from 1.8 nearly last year. I think it was 1.765 or something like that. And so you say to yourself,

11.5% decline, that's his numbers. He says the situation is actually more concerning because Tesla has been sacrificing margin to boost sales by cutting prices, discounting new inventory cars, offering 0% financing, and preparing to launch a stripped down Model Y. And so that's all known.

But when I look at the news this morning that BYD, their major competitor in China, which just overtook them in deliveries in China, they're also shipping their cars, and they're fully electric or hybrid. Tesla does not have a hybrid vehicle. They overtook them in deliveries in China. And so I think about this story, and I say to myself, okay, if BYD, and the headline this morning, is that they are going to be cutting the price on 22 models,

in China by up to 34%.

This trade war or this price war, excuse me, is not abating anytime soon. And this has been something that's been weighing on Tesla now for three years. And so there's no evidence that there is any price elasticity in this market, right? And so I don't know. I've been in the camp that at least the auto portion, the best days are over. Like their auto gross margins are less than that of GM and Ford. And I don't know how this stripped down Model Y is going to help them other than keep market share.

I want to apologize to your listeners because often when we have this conversation, I'll say something like, I love this debate. They probably get tired of hearing that, but I do love this debate. And I love having the debate about specifically, does the car business matter to them? And I think it does matter. And I think, by the way, I would agree that Troy's data is awesome data. Agree that the street's still too high this year, that this is going to be a messy year. There is one little

There is that it was a tough March quarter, but their automotive gross margins were a little bit better than what people thought. So now that's not a 30% price battle with BYD. That's very different. That can change all the dynamics around it.

I think what the stock has told us is they actually don't care about the automotive business. It's razor and razor blade. And, and you know, this dynamic around the whole, we're an AI first company and it's about autonomy ultimately. And I think that that, that is the kind of the kind of one of the pieces that comes together. And when I think about Tesla, I,

One of the reasons why I'm optimistic, and as I look at what's happened with Apple and what's happened with Google, I think it comes from having peacetime CEOs. Both Sundar and Cook are just that. They do a great job. Wartime CEO Zuckerberg was peace, now he's war. I think Bezos has been both. But Elon only operates in a war mentality. And if anything is at status quo in a piece, he'll blow it up.

And so I actually think that, you know, I'm a big believer in physical AI and I think you probably need a wartime CEO to go up against BYD. And so with all of his flaws, I still think he's the right person and the right concept of focusing on autonomy. And I'm not trying to dismiss or say, don't look at all these blemishes, what's going on the automotive side. I do think, by the way, that's a great business longer term. I do think all cars should be electric.

It's not a political statement. I just think that it's a better way for to move around. And so I'm still in the camp that this year they can pretty much do whatever they want to on the fundamentals, on the on the EV business. And as long as they show progress and autonomy, I think investors are going to continue to reward the stock.

Yeah, the only problem with autonomy here is that if you're talking about full self-driving, like let's forget like RoboCab and taxi and autonomous fleets right there because that's years away. You know, BYD is giving away their full self-driving for free. You know what I mean? And that was going to be the thing that added the margin to this story. So I'm not sure the prices of these lower end cars ever go back up. And I think BYD is willing to kind of seed margin, right, to take market share. Right. And that's by the way, that's a

That's what Tesla is going to want to do, too, is get the vehicles out there. Yeah, but but they have been getting the vehicles out there and they're only going lower and people don't want them anymore in a lot of different locales. And I'm not sure how you, you know, fix that brand damage. But again, you and I can have this debate again and again. And I like it, too. Gene, you've been amazingly generous with your time, as always. I hope you'll come back really soon. I appreciate the conversation. For sure. Can't wait.