AI and Data center trade

[Mocity31]

The 1 Trillion dollars in CAPEX spending this year and next by the Hyperscalers, MFST, AMZN, META, GOOG and others, is old news. Looking at the Mag7 ytd its down about 2%. The SP500 is up about 10%. The Russell 2000 Index is up more than twice that, 21%. Sure looks to me like the low hanging fruit has been picked. If you're throwing money at MegaCap growth Tech companies you may be late to the party.
The Russell tracks 2000 of the smallest publically traded companies, most you've probably never heard of.
Out of the dozen or so different parts of this buildout, Chips, Memory, Network and Fiber, Software, Cloud companies, Power companies, Construction and engineering, HVAC and so forth.
I don't believe the AI trade is over. At this point in the cycle its really a stock pickers game. Look at some of the big winners on the Russell 2000. Most are AI and Data center build out companies you've never heard of with $2.5 billion dollar market caps and a few hundred employees. Bloom, Credo, and Sterling are not the sexy names that perk up the ears when you tell your buddy you've more than doubled your money when he's sitting on NVDA he bought at $240 and its trading at $193 or he bought Oracle at $240 and its trading at $140

[98aggie77566]

Well in fairness....you thought the AI stocks were overbought back in 2024.....

https://www.dosfrios.com/ttmb/forum/...or-you-ai-guys

[98aggie77566]

I'm looking for 20% on my tech stocks.....and 6% on the overall market funds.....or some mix thereof that gets me to the same goal.

So far so good.

[Mocity31]

Watching this AI play out, it is funny that the 3 major players, Google, ChatGPT, and Grok have come to the point of publicizing "my AI is smarter than yours" or "more accurate than yours". The ROI is still the trillion dollar question. What I find interesting is out of that $1 trillion dollars, Google has spent about $200 billion developing Gemini.
Apple did not develop an AI chat. Apple pays Google an estimated $1 billion per year to "rent" or use Gemini. Sounds like a smart move to me. Maybe that's why Apple has hit an all time high this week. More free cash flow, less debt, no question about whether the capex dollars these hyperscalers have spent, will have a return on their hundreds of billions invested.
Reminds me of how Apple used ATT and Verizon to build out the cell phone infrastructure and Apple just made the gadgets with cheap labor and became the largest company on the planet for a long time and left ATT and VZ with billions in debt.
Just my observation. You're in the business and know a lot more than me

[98aggie77566]

Right now it's an arms race.....for the models and the hardware.....he who has the fastest hardware can create the best model.

But at what point is it "good enough"? For the LLM's that we use daily....it's good enough already for 99% of the world. Most people aren't even using the horsepower available today.

For enterprises, scientists, labs......speed matters. Accuracy matters. And the models are becoming very specific for existing and new industries.

Pharma is a good example - the drug pipeline is 2X what is was a year ago....and drugs are seeing a 2X improvement in their odds of making it to market. The ROI phase is just getting started. That's what is driving the hopes for significant improvement to GDP as the acceleration ramps.

If you have an iPhone, and have experienced Apple's AI......I wouldn't anchor my argument on that.

I'm a dummy working in a field of insanely smart people - I just listen and try to understand and plan accordingly.

[98aggie77566]

Well the newest LLM from China…Kimi…has topped the leaderboard. Beating OpenAI and Anthropic….on an open sourced/free code. Granted they typically hijack the latest US code and then build on top. But they did it with Chinese hardware or older US hardware. That’s a problem.

But either way…the best compare I have heard is: a barrel of tokens costs about 50 cents from China…and 50 bucks from the US.

So two theories on cheaper AI: it either craters the market, or it ignites insatiable demand.

If this were oil, and producers and the supply chain could be profitable at $20 with new technology,.would demand go up or down? It would go up…but not at the rate of AI.

Oil isn’t generating new markets and tech. Oil isn’t newly discovered with unknown benefits to come for decades . With Small Language Models (SMLs) soon to be on your smartphone with no WiFi/cell required….the pace of innovation is just getting started.

Curious - how many folks are using AI at work these days?
My guess…very few…the few that are using CoPilot?

[98aggie77566]

Google and Tesla earnings on deck tomorrow....buckle up.
And a handful of others....SNOW, AT&T, etc.

[98aggie77566]

Also worth reading up on “AI Distillation”….right up China’s alley.

Distillation is a method of using thousands upon thousands of low end GPUs/CPUs (something China has a plethora of)…and hammering US frontier open models with trillions of questions.

Ask enough questions… you can reverse engineer the weights and balances… And that’s the “magic math”.

If china isn’t the master at reverse engineering on the backs of geniuses. I don’t know who is?

[98aggie77566]

Well today was a doozy! AI financing is either a brilliant move from a company flush with cash and lending ability......or the beginning of the end
Depending on who you listen to.

$500B of backstopped financing was enough to panic the room.

Thankfully I'm the type that sets a reasonable long term plan....so still about 2% ahead for 2026 end already....hopefully this is the worst.

Versus the high point.....yeah.....what a turd in the punch bowl.

But the highs always give back at some point.....I just want to stay ahead of the curve.

[Mocity31]

I knew the rally at the open wouldn't hold. Sold some this morning before market went negative. MSFT, AMZN, META this week will tell alot. Once the majority of these data centers are built out....what then? Digital Realty CEO was on CNBC today. They are a REIT that manages data centers. He had some interesting things to say. Reminds me of when ATT and VZ built out the infrastructure for cell phones. American Tower, a REIT, bought and manages many of the towers. It was a $30 stock back in the day. Now $170ish and pays over 4% dividend. I wonder if that'll happen with Digital Realty?

[98aggie77566]

It's a matter of how you think the demand curve compares...is it like cell phone technology, or more like electricity?

The cell phone buildout was a race for dominance - with finite demand. There are only so many people and so many cell phones....granted we continue adding devices, etc.

AI is more like electricity - the demand never slows - it only grows. The cheaper it becomes, the more use cases become profitable. The cheaper it becomes, the more people (enterprises) will use it.

Two schools of thought - one will be right.

[Mocity31]

Correct me if wrong but aren't these data centers mainly a storage of data for people (individual data such as pictures videos) and business data, cloud storage etc. About 60% individual data and 40% business.
The other purpose they serve is an AI center as there are several AI chats in the USA.... Amazon Alexa, Anthropic Claude, Musk's Grok, OpenAI Chat GPT, META's whatsup, and Google Gemeni. What i don't understand is how will they make enough $$ to have a ROI.
I have an Android so when I ask my phone a question Gemeni answers for free. Love it. The war department (my wife) has an Apple phone. She asks her phone a question and Gemeni answers for free since Apple leases Gemeni from Google. We've compared and get same answer.
She was suckered into ChatGPT for $20 a month and we ask it a question and sometimes get something different than Gemeni in a much different format. Long lengthy answers sometimes vague. Not worth $20 to me when I can get gemini for free

[98aggie77566]

Like I have said before....you and your wife are not the target market. Using ChatGPT is not the AI of today. It's not even remotely close.

I would compare it to having ChatGPT as team of 5th graders...give them a month with parents help to come back with a report. But in seconds.

The new AI tools are like having a team of PHD students....in seconds. They build websites for you, presentations, heavy analytical work, etc.

I spend roughly $1000 a month. And I'm a business guy.....imagine the ones using it to code.

Coders was the first target - allow computers to talk to computers without the human. Enterprises are next.

[98aggie77566]

I hope no one is in that Korean market we were hearing about kicking the US's butt a while back.

SK Hynix posted some of the most impressive results you will see....and still getting hammered....thus my avoidance of memory stocks.

Others aren't doing much better...hard to find a safe spot to stay put and make a reasonable rate....but the S&P side is chugging along quite well.

[98aggie77566]

Inappropriate....I know.....my bad.
But on a week like this....seemed like a good idea. :-)
I dang sure needed the humor.

[DEXTER]

I actually bought a few stocks this week. Clorox and Microsoft

[98aggie77566]

My investor talked in to selling start moving enough tech to pay the bills with dividends someday down the road....slowly.

So I let him move a bit to NovoNordisk and Clorox....they are +15% and +10% respectively....kicking the crap out of everything else I have.

I know he feels like a genius.....but he's been trying to get me to do that through the tech runup as well. This market may as well be the Golden Nugget right now.