Nvidia Has Made Investors Rich

Doug McIntyre and Lee Jackson discuss the recent concerns raised by Jim Cabello about the AI trade potentially hitting a wall. They reflect on the struggles of NVIDIA (NASDAQ: NVDA) and the broader implications for the market indices dominated by the “magnificent seven” tech stocks. Doug highlights the unprecedented climb of NVIDIA without a correction and questions the sustainability of the market for AI products. Lee compares the current AI boom to the dot-com era, noting that many companies might not survive. They also discuss the regulatory scrutiny, ethical concerns, and the significant energy consumption associated with AI, all of which could impact the future of AI investments.

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Transcript:

You know, Doug, it’s interesting. One of the best minds on Wall Street, Jim Cabello, came out recently, and he feels that the AI trade may have hit a wall.

And I think when we’ve seen after their NVIDIA split, you know, the stock has had a tough time breaking out, and now it’s breaking down.

And some people think if it goes through that 118 level, it could be doomed.

The market indices as a result of the magnificent seven and their involvement at AI, are we about to hit the wall and, and could this be a huge sell-off coming?

Well, there’s two things.

The first one is, is I’ve been involved with wall street off and on for over four decades.

I’ve never seen a stock climb as much as NVIDIA did without a correction.

Maybe it doesn’t.

I’ve been there too.

Yeah.

You know, maybe it happened the next day, but, At some point, it cannot hold with the expectations.

So the first thing is, is that you’ve got to ask yourself, is there still going to be a huge market for their products?

Because I think businesses, it’s going to start to occur to people that AI is unbelievable.

It’s phenomenal.

It could be the wave of the future, but that doesn’t mean that we’re going to be minting money in nine months.

No.

And again, like we’ve discussed, this is real similar to the dot com boom.

And again, there were survivors from there and some are very well known.

But, you know, a lion’s share of those companies were are in the Wall Street graveyard.

And I think that there’s going to be a lot of the companies that have AI at the end of their name that won’t exist in five years.

Well, there’s several things I’d be concerned about if I were investing in an AI company.

Number one, regulators are now all over megatech everywhere, particularly in Europe.

And Europe can damage the company’s finances more than the United States can because the fines are so aggressive.

So if you get the regulators coming in and they’re starting to either worry about monopolies or they’re worried privacy or they’re worried about the fact that AI is going to take over Europe.

Whatever it is that concerns regulators always make me worried.

And AI has gotten to be a big thing.

There are ethical questions about it.

There’s people being laid off.

That’s going to start.

And that always hurts valuations.

Yeah.

And if you start getting the masses screaming, I lost my job because of AI and everything that I worked for is gone because of AI.

That’s not going to sit well.

No.

So that’s number one.

Number two is there is not a good solution to the energy problem that AI creates.

It eats up.

There was an analysis four weeks ago that said AI electricity usage will be approximately what Japan’s is by 2030.

So give that some thought.

Since there isn’t a solution to this, it may be that AI’s capacity is capped out because the one thing that it feeds on, which is electricity, because you have to remember, that electricity is, in the United States, the use of electricity has not risen much over the past few decades.

You’ve got a grid, parts of which are 70, 80 years old.

You’ve already got brownouts because of the environment.

You have heat waves that are never.

So all of a sudden you have this competition for electricity.

And that means that not everybody’s going to get exactly what they need.

So that worries me about AI.

The other thing that worries me about AI is, is that how many people expect this stuff to be given away for free?

Now I know business to business, if you go into a big company and say, we’ve got products and services that are going to, Drop your expenses by 12%.

People are going to write checks.

But if you think about you and me, we may never pay for AI products on the internet because the free stuff for somebody who needs my level of AI use.

I’m never going to, I’m not going to buy it.

To me, AI apps are like Google.

Yeah.

Yeah, exactly.

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