Announcer 00:00

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Frank Curzio 00:11

How’s it going out there? It’s Wednesday, August 5. I’m Frank Curzio, this is the Wall Street Unplugged podcast, where we break down headlines and tell you what’s really moving these markets. This is Daniel Creech. How’s it going, buddy?

Daniel Creech 00:26

It’s going well, sir. Happy Wednesday.

Frank Curzio 00:28

Pretty crazy markets, right? The ups and downs, AI’s crashing, now AI’s back in favor again. The spending, all the hyping scales reported. We’re going through earnings season right now, but, uh, man, a lot of volatility in the markets, huh?

Daniel Creech 00:39

Yes. Yes, sir.

Frank Curzio 00:41

Huh. I gotta tell you—

Daniel Creech 00:43

Volatile is the new normal, Frank.

Frank Curzio 00:44

I know, right? It’s just all over the place. All over the place. Even these stocks that are reporting—I mean, you’ve seen these stocks that are reporting—where they’ll go whatever they’re up after the market. So they’ll report after the bell, or, you know, whatever, the morning before. Whatever they’re reporting, whatever they’re up, they’re going up double to triple that percentage. And whatever they’re down, they’re going down double or triple that percentage. Did you notice that? Like, Palantir as well. Palantir was up like 6, 7 percent, I think, after they reported earnings. You’re like, “Oh, it’s good earnings.” Next thing you know, you look, the stock’s up like 22 percent, right?

Daniel Creech 01:12

30.

Frank Curzio 01:13

Did it go up?

Daniel Creech 01:13

To make your point, yeah. Went up 29.

Frank Curzio 01:15

Yeah, I know you have the shorts and the short covering and stuff. It’s not all short covering. This is all the algorithms, all the programmed training. It’s why they were able to push—if you don’t think this is big—they were pushing trillion-dollar companies to levels that are insane. I mean, we saw 50 percent declines. I could probably name about 20 stocks from Core Weave to even Corning. I mean, these stocks have gone down 50 percent in like a month, right? When you saw this whole fund blowing up and all the—everyone knew they were blowing up, they were going to have to sell, and this forced selling. And all these Aggles get on the right side of it because, you know, they’re bankers at Goldman Sachs, JP Morgan, Wells Fargo. So everybody knows what’s going on. They’re like, “This fund’s going to blow up, let’s short.” It’s massive leverage taking place, but just to see the moves in companies that have, you know, anywhere from 100 billion to 300 billion market caps to even some of the bigger names, like pushing down, like Nvidia.

Frank Curzio 02:03

It’s incredible how much power you have and how much leverage is in this market. It’s really pretty crazy right now.

Daniel Creech 02:08

It is. I will say the whole situational awareness and Citadel deal, there’s a whole lot not being talked about here because I’m with you. Obviously, the word got out. So essentially, what had to happen was markets can turn for whatever reason. You have this great bull market, things are high and fly, flying high, doing well. And then—so the story that we’re told here, Frank, is a bunch of hedge fund and bookmakers get together and say, “Hey, this guy is really leveraged in these high-volatile names. If they go down, he’s going to get hurt.” This is as much BS as Anthropic and OpenAI going and crying to the White House and all that. I don’t have the answer yet. I’m looking into it. But the story we’re being told, in my opinion, is not the truth. And that’s typical. But to your point, there’s crazy volatility. But a $20 billion hedge fund manager leveraged four times is $100 billion, and yet you’re moving around multiple, multi-trillion-dollar market caps. That just doesn’t—that math don’t math to me, Frank.

Frank Curzio 03:09

I think it’s the forced selling behind it. I don’t know how much he was leveraged. What do you have some stats on it? Wasn’t the fund up like 80 percent year to date, but down over the past year?

Daniel Creech 03:18

No, it was over 200 percent year to date.

Frank Curzio 03:19

Okay, we’re talking about—

Daniel Creech 03:20

Down 67 percent in the month of July and still up 80 percent, according to the Wall Street Journal, post the sale to Citadel.

Frank Curzio 03:27

Which is crazy because you look at that and those are percentages. But then if you’re leveraging even more, you know, now you’re getting annihilated. And when you’re seeing how much leverage he has, which we don’t know. It’s 4x. It could have been 10x.

Daniel Creech 03:38

Yep. And you don’t know when it was put on and all that kind of stuff.

Frank Curzio 03:40

You don’t know. But you do know that the reason for this, because it’s pretty obvious, because what happened after Citadel came in, which Citadel did a great job, and Citadel came out and said, “Hey, you know what? I think the Fed’s going to raise rates and surprise rate cut,” which Citadel has a lot of influence in the market, and Ken Griffin. And, you know, a lot of these were tied to options that were very, very short-term in nature that had also swap components with interest rates on them. So interest rates being high, it was a surprise that we came out where the Fed came out and said, “Look, you know, yes, we’re worried,” or, you know, again, they didn’t provide a lot of information. But when they came out, even going into that meeting, it was very odd to see the market, you know, reacting where rates continue to go up. And then you have Citadel saying, “Well, we think they’re going to come out with a rate hike,” which is awesome, which hurt these positions. And then they go in and buy it.

Frank Curzio 04:31

Listen, this is Wall Street. This is what they do. Okay? You could say coincidence. You know, coincidences happen once. If they happen twice, it’s kind of real. If it happens more than that, it’s, you know, you’re getting effed, right? It’s, you know, there’s too many coincidences here. And just in such a short time period. Because I’ve never—Citadel’s never—I’ve never seen Citadel come out and make a prediction on rates ever. And the Fed hasn’t come out with a surprise rate cut or hike or any kind of surprise, I don’t think. I can’t even remember. Not even during COVID. They kind of told us what they were going to do. And that’s when Kramer went nuts. And now it’s the credit crisis, right? When they’re like, “They know nothing,” and then they had to reverse that decision and everything. He was right. They didn’t know nothing was going on. They were raising rates in the middle of the housing and total markets, everybody crashing. They really didn’t know anything. And they don’t know anything now. They really don’t. They don’t know anything now. No one knew what was going on. I mean, this happened well before anyone knew what situational awareness even was.

Frank Curzio 05:18

But it’s crazy. It’s creating this massive volatility. Now what? Now, the one thing you could look at, Daniel, that you can’t fudge and you can’t say whatever and, oh, you know, we compared this to past, you know, the AI bubble and people are like, “It’s a bubble,” and comparing it to .com. It’s nothing like .com, guys. It’s not even—it’s not even in the same ballpark as .com. Just because prices go up and stock prices go up doesn’t mean they’re in a bubble. What makes them in a bubble is they’re going high, this irrational exuberance, and they’re doing it with that with disregard to fundamentals. Have some AI companies done that? Absolutely. Some of them have gotten nailed. But when you see the earnings that are being reported right now, I’m going to throw out some stats for you guys. Okay, this is as of Monday. Okay? We had a company’s report, a couple more companies’ report, but this is as of Monday, right? Monday morning, when we open up this week. And this is all the hyperscalers, even Apple, Oracle, all these guys reporting.

Frank Curzio 06:05

SpaceX reported this week. But you’re looking at a 307 S&P 500 companies reported so far this earnings season. 86 percent have beaten analysts. Okay, you know, that could be hit or miss depending on the analysts’ expectations on it. 10 percent missed. That’s higher. I think it’s usually around 70, 73 percent or something. But they—this is, you know, on sale, 68 percent of the companies are positively surprised, 15 have missed, right? I really don’t pay too much attention to that. What I do pay attention to is the actual earnings growth. Because everything else is dependent on what the sell-side analysts are predicting. And you’re going to see with Disney, sell-side analysts had their estimates come much, much lower, and Disney easily beat by 20 cents because those estimates were lower. And some other companies, Palantir was very, very high. That bar was high, right? Everyone said, “Hey, this company’s growing,” and they still beat it and took off. And that’s why that stock took off. But when you’re looking at the actual earnings for S&P 500 Q2 earnings, they’re on pace to rise 47 percent year over year.

Frank Curzio 07:02

That’s going to be the highest growth rate we’ve seen since 2021, right? A lot of stuff going on with COVID then. We’ve never seen this type of earnings growth in the history of the market outside of, you know, post-recessionary stuff, of craziness with COVID. We’ve never seen just traditional earnings going. But like, usually you see this big hit in recession and everything gets crushed. And then, you know, a year later, you’re like, “Wow, earnings have grown tremendously off of a low-over base.” We’ve never seen this happen in history. Everyone’s saying, “Okay, we’re in a bubble.” The S&P 500 right now, just hit record highs again, trading at 19 times forward earnings. Now, how could they be trading at a record 19 times forward earnings? It’s because when you’re looking at the PE, the price and earnings, it’s not just the price of these going high. Earnings are growing faster. Because this was an index that was trading at 22, 23 times forward earnings. So now we’re seeing the S&P 500, the price of it, at records.

Frank Curzio 07:52

But why is the valuation going lower? Because earnings are exploding, right? So this is below the five-year average, about 20.5. We’re trading a little over 19 times forward earnings. So you can’t say that we’re expensive. And then you look at the profit margins, and everyone says that this is a big thing throughout the years. And we’ve heard this from some of the top value guys. And again, value has been out of favor pretty much since the credit crisis because the Fed just automatically pushes everything higher, higher, and higher, and it’s going to bail everyone out. But when you look at profit margins, they’re at 16.7 percent in Q2. It’s the highest level in history. And everyone says, the value guys say, “Hey, it’s going to revert back to the mean. It’s going to go.” They’ve been saying that for five years. And now, especially the last three years, it’s been going higher and higher with AI. I’ll get more into the numbers, but I want to get your thoughts on what you’ve seen in earnings season because this growth is unprecedented. It’s something that we haven’t seen outside of, you know, coming off recessions and stuff.

Frank Curzio 08:40

This growth is phenomenal and blowing away estimates of anyone that anybody had internally in the S&P 500. And that’s really what’s driving the market right now.

Daniel Creech 08:49

You’re fifth growing fast in five years and stuff gets me thinking, A, plead the fifth, or B, inflation has been over above.

Frank Curzio 08:58

Plead the fifth.

Daniel Creech 08:59

Inflation’s been above target for over five years, and now some of them want to find religion. That’s funny to me.

Frank Curzio 09:04

Keep that thought.

Daniel Creech 09:04

One?

Frank Curzio 09:05

Plead the fifth. Keep that thought right there.

Daniel Creech 09:06

Okay, one.

Frank Curzio 09:07

Because it’s interesting. When you say plead the fifth, I went to Walgreens to get my prescriptions, and they always ask me for my COVID shot. “Have you taken a COVID shot? Have you taken your flu shot?” They ask me every time. This is the first time they’ve asked me about COVID shot. Good. Plead the fifth. Sorry, I had to get that in there.

Daniel Creech 09:20

No. And then back to the earnings. Quickly, just a little bit of grain of salt, because I’m not taking away this. I’m just showing how numbers can be crazy. You’re right on the 47 percent, highest since 2021. However, you want to look at the big heavy hitters that are making those numbers possible. So Amazon.com. Frank, they were expected to report a $1.82. Remember what they earned?

Frank Curzio 09:42

No.

Daniel Creech 09:43

575. That’s 76 percent. They alone account for 76 percent of the net dollar level increase in earnings over the S&P. So yes, it’s impressive they’re hitting the 47, but it’s because you have guys blowing out numbers like that. And I’m not saying that’s not impressive, and I’m not taking that away. I’m just simply saying, don’t hear what we’re saying and then take that incorrectly and think, “Oh, well, everybody else is doing much better.” Earnings are fantastic in supporting this. I agree with you on that. Yeah, the earnings are—listen, the earnings are there. It’s the reaction that everybody—I think what we’re getting lost with, and I can be thrown in this group at times as well, is we’re talking about markets and valuations. They’ve changed a little bit, but earnings are getting more impressive. It’s the stock—it’s the price reaction, essentially, is what’s going on and getting everybody to talk about it, which is fine. That’s what we’re here for. But earnings are fantastic, and balance sheets are really strong.

Daniel Creech 10:38

So, you know, entertain, be entertained by the bubble talk and stuff. Does that mean markets can’t pull back? Of course not. But if you think that this is the same as an AI bubble or whatever, that I totally disagree.

Frank Curzio 10:49

Yeah. So you think it is kind of a bubble? Is that what you’re saying? Or it’s not like it’s different than that?

Daniel Creech 10:53

No, I don’t. I think we’re in a very choppy, scary period where markets can pull back. But no, I don’t think it’s the—I’m not ready to say we’re in a bubble like .com or anything else. No.

Frank Curzio 11:05

You know, one of the biggest fears, I think, what we’ve seen with AI companies, guys, is that, you know, what’s going on where they’re spending so much, right? They’re spending a lot of their free cash flow, and now their cash flow to some of these big companies are going negative. And hey, they can cut the software whenever they want. But when I saw Google report and they’re saying, “Hey, you know what? Demand is so great that we could see three, four years we’re getting these contracts, and we have no choice but to increase.” We’re going to get to AMD in a minute. This is why AMD couldn’t go higher. They just don’t have the capacity. They have more demand than they could ever see. But how do you fill that capacity? That’s what everyone wants to see. And I don’t know why when they’re talking about—and we’ll talk about AMD in a minute—but just massive growth later on, years from now, but yet you didn’t raise your guidance. And that’s why your stock’s getting hit. When I’m looking at these hyperscalers, because the biggest thing is, are they able to make money off of AI spend? I think the biggest surprise is earnings season. Huge, huge surprise, because I didn’t really hear too many people talking about this.

Frank Curzio 11:52

Okay, yes, we know the hyperscalers are on fire. Yes, we know that’s driving the S&P 500. The surprise, and looking at that AI and the spend on AI, did you see how fast cloud is growing? So when you look at cloud, Google Cloud grew over 80 percent year over year. It’s going to generate $100 billion in cloud revenue annually. And the stock got hit on spending. Why? Well, okay, there’s spending. Plus, this is a name that doubled, right? That almost doubled. We did very, very well in this company over the last 12, 18 months, significantly outperforming the rest of the hyperscalers, right? So I get it. Okay, you’re selling off a little bit. Microsoft, 43 percent growth in Azure. And I don’t know if I ever pronounced that right, but I say Azure. Annualized run rate is over $100 billion as well. So Google’s catching Microsoft in terms of cloud. And then you have AWS, which is Amazon. These were growing 20, 25 percent, 37 percent. They accelerated their growth. That’s why you saw Microsoft absolutely take off.

Frank Curzio 12:42

They increased spend. Amazon massively take off. They increased spend. Google sold off a little bit because it’s been just rocking and rolling and much, you know, these are Microsoft and Amazon lagged. But that’s what separated Microsoft and Amazon, I think, from the rest of the hyperscalers. They have an annualized run rate of $170 billion. Stay with me here. This is important because I always want to put this in perspective. That’s $370 billion in revenue just from the big three in cloud. Now, why is that important? Because we’re seeing that cloud is a byproduct of the massive growth they’re seeing in AI. So it’s not just AI and how you’re spending and people talking about tokens and stuff like that. Everyone requires much more storage. And these guys, for all the money they’re spending and all the contracts that they’re going on, they’re getting all these people to go on their cloud and pay a fortune. Now, why is that important? Because this is why they’re ramping up spend. They’re seeing the massive impact.

Frank Curzio 13:36

Now you have AI, which nobody’s really talking about in terms of AI filtering down to cloud, right? And the operating margin, this is so important because you’re like, “Wow, what’s $370 billion in a year mean?” Do you have any idea what the operating margins are on cloud, Daniel? I mean, that’s a tough question for anyone to answer. But I’m going to put this in perspective. Oil companies, Exxon, their operating margin is on average around 14 percent. Car companies, their operating margin is around 6 percent. Walmart, Costco, big retail, around 4 percent. For cloud, the operating margins are 40 percent. Around 40 percent.

Daniel Creech 14:12

God, I didn’t guess. I would have guessed higher.

Frank Curzio 14:14

I mean, that is insane. So when you’re looking at $370 billion in cloud revenue, it’s a lot different than you’re seeing oil companies generating $370 billion because their costs are so much. This is where the profits are coming from. Now we see it. Now we see it. Now we see the checkmark saying, “Okay, this is why these guys are spending so much of their free cash flow.” Because now you have cloud and you have AI. Now you saw what Google was able to do. And I think a big part of Google too is they’re in an industry where it’s all advertising. Same with Meta. Meta got hit. Well, there’s lots of ways to increase traffic where those two are the only game in town, basically. And, you know, again, social media platforms, you have YouTube platforms, you have everything, right? Where these guys all search everything with Google, where they dominated the digital marketing area. And now with AI, people are finding ways, even we are, to generate traffic at a much less spend than going on Meta and Google.

Frank Curzio 15:07

I think that’s going to separate these two from getting hit. You know, and why they’ve gotten hit, just being in the wrong industry where, you know, good for them with Google and cloud becoming, you know, a bigger part of the overall pie than just ad spending. But that’s why you’re seeing the difference where these companies aren’t rated the same. I’m not surprised Google sold off. I’m not surprised Meta sold off. I’m not surprised Apple sold off, which I should have had Apple. I mean, everything’s declining. You’re seeing their costs go through the roof with memory and everything else. You know, it should have been easy with that company at all-time highs that that thing was going to sell off. I should have saw that coming. Usually, we’re good with Apple. But it does make sense of why that company sold off and why I think it’s going to continue to sell off. It’s done amazing. Hit the $5 trillion mark, right? So before we go further, Savvy is a vacation rental disruptor. So you might remember my interview with CEO Eric Goldwire.

Frank Curzio 15:54

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Frank Curzio 16:46

That’s S-A-V-V-Y dot C-O-M backslash W-S-U, which stands for Wall Street Unplugged, which will get you an additional $50 in savings when you book. Think about it. What would you do with an extra $500 when you’re on vacation? When I’m looking at those operating margins and staying on that cloud theme, Daniel, look at SpaceX and they reported. Okay, so SpaceX, solid, almost $8 billion in revenue, growing over 90 percent year over year. The loss was a little bit bigger than expected. It was bigger than last year, but it beat consensus, right? That’s all that matters. And I think people worried about the lockup and a website of Float to be freed, you know, to be free to sell, people worried about. And again, that’s been a story. We’ve been highlighting that for about, you know, two months now and everyone’s talking about it now. I think it’s coming up in a couple of weeks. Higher CapEx spend.

Daniel Creech 17:35

Tomorrow there’s a lockup.

Frank Curzio 17:36

Is tomorrow? Yeah. I don’t know. Is that the full lockup at that 11 percent?

Daniel Creech 17:39

No, I mean, it goes in stages, but evidently tomorrow is one of the days.

Frank Curzio 17:43

And then you have the higher CapEx spend, which you’re not getting rewarded as you would with an Amazon or maybe a Microsoft. Not that they got rewarded, but those stocks went up because their cloud went up tremendously. But SpaceX loses money, right? So they need more money to spend on this. So the stock was down 11 percent. Let me see where it is right now. I don’t think it’s down nearly as much. So we have, it’s down 8 percent. I think it was down 6 percent. Now it’s down 8 percent. So it’s just been flopping back and forth, 8 percent. I’m actually going to say this. I think SpaceX is a buy at these levels. I really do. And I haven’t said that yet. I think it’s a buy at these levels, at, you know, 110 to 114. I think you could buy and start scaling in. Don’t buy a full position here. And, you know, go over that thesis. But I wanted to get your results on SpaceX because I’m going to go over the biggest takeaway, which was cloud for them as well. But you’re seeing the stock get hit. Again, it might be the lockup.

Frank Curzio 18:35

It might be just higher spending on AI, which you don’t really want to see, you know, this massive spend. You do want to see it, but these guys don’t have the free cash flow coming in as a hyperscaler. So that’s what, you know, hurt these companies. I’m surprised it’s down today. It was up like 6 percent yesterday. So, but it’s down 8 percent today. I’m just surprised because the expectations were lower that the stock coming down and the results weren’t too bad. But, you know, what are your biggest takeaways? And I’ll jump into the cloud with SpaceX.

Daniel Creech 18:59

Musk is being Musk. That’s my biggest takeaway. He is one of the best leaders and conference call generals, I would say. And you don’t have to go very far into the conference call transcript to hear him talk about the impact of Starship and what it will have on the future of civilization. Now, unless you’re in a college class, you typically don’t hear that kind of stuff.

Frank Curzio 19:23

You go on a Mars once they get this thing sold?

Daniel Creech 19:25

I’m not personally, but that’s not my bag, baby. So to all of you Mars travelers, I would tip my hat if I was wearing one. But I will have a cocktail while you’re flying up there. Frank, you’re an adventurous guy.

Frank Curzio 19:35

I’m into it, yeah.

Daniel Creech 19:36

And no, and I say this kind of tongue in cheek. I give Musk, excuse me, I say when I think he’s being ridiculous and I give him credit where credit is due. I will say I liked what he said on the conference call about the satellites. Because essentially how I view this, I’ve mentioned this, I wouldn’t touch this stock unless you just want to bet on Elon. And that’s not a bad bet. I would wait a little bit until this lockup period, at least see it tomorrow. From what I’ve read, it’s in stages. So that has me a little bit nervous. And the only reason the market, and Frank’s always spot on about this, if everybody’s talking about it, it’s usually priced in. Well, that doesn’t apply to lockups when you don’t have the ability to lock, to price it in until, well, I mean, I guess it could, but I’m waiting on the sidelines to see that. I was impressed with how he broke down, he being Musk, on the satellite. So they kept their average revenue per user about $66. That was for Q2. That was the same as Q1.

Daniel Creech 20:31

But they’re adding a lot of subscribers to their satellite business, Starlink, over a million during the quarter and stuff. But Frank, he talks about growth. That’s what Elon Musk is great at. And he said, even if they cut their, even if they dropped, let’s see, for monetization, and he’s talking about these satellites, if they drop by a factor of 10, it would still mean a 10 times increase in revenue because of how many satellites they can launch and how much better the new versions are from the previous versions. And so all that dumbs down to my level to say efficiency. And that, my friends, is impressive. And then he talks about all kinds of humanoid robots and robots on the moon building stuff. Did you hear they shot something into the moon, Frank? And evidently, like during COVID, you must be a scientist to ask common sense questions. You got to be a scientist to ask Frank, why aren’t we in Florida? Are we throwing stuff at the moon to monitor on how stuff falls off the moon? The moon, people.

Frank Curzio 21:31

Hey, got it.

Daniel Creech 21:32

Dark side of the moon, Frank. We need our DJ to play that dark side of the moon song. Anyway, back to Musk. I thought it was a great conference call on what he said. I won’t steal your thunder on compute, but I did think the Starlink value without stealing Frank’s thunder, essentially, I look at this as an Amazon. It’s a holding company with your rockets, satellites, compute, AI, and all that kind of stuff. But it’s bread and butter, just like Amazon and AWS, has to be its cloud, its computing power, et cetera. And we’ll get into those numbers that were absolutely incredible.

Frank Curzio 22:06

Yeah, I mean, the biggest takeaway is the cloud part, right, which you talked about. I mean, that’s the biggest thing with earnings season. That’s the biggest takeaway of all earnings season. And in the first few weeks, Elon Musk said, the first few weeks of Q3, right, which just started, just reported Q2, they already contracted an additional $6.7 billion of cloud services revenue. Amazon said it expects it to reach a $100 billion annualized revenue run rate, which puts it at the same stage as Google and Microsoft. Okay, this is why Microsoft absolutely surged. It was the massive amount that they said, “Holy cow, where we have our cloud services are going through the roof.” So now you’re seeing that benefit of AI. And I didn’t see any analysts. And I read a lot of these reports coming out. They’re all buy ratings, of course. They all got part of the deal. But analysts were predicting this kind of growth. You know, I saw the growth they were predicting for SpaceX. And they’re talking about xAI, and I get it, right?

Frank Curzio 22:56

Most of the spending is taking place. We know about Starlink, which you just talked about. We know about reusable rockets, deep space. I haven’t seen analysts write about the massive growth in cloud at all. And by the way, they had like the president or COO of Goldman Sachs on Squawk Box. And they were like, you know, what do you think about SpaceX? And he’s like, it was a great IPO.

Daniel Creech 23:12

Yeah, what a.

Frank Curzio 23:13

It was a great, just say, “Hey, it was so great that we made a fortune on it while fucking retail investors.” That’s what he should have said, but that’s okay. It was great for you. Yes, you came out, it was 135, it came out at 160. You guys generated absolute fortune. You dumped it on the retail investors, which now the stock is 110, 112, whatever it is. Okay, it was, that’s a successful IPO. Successful for who? Successful for you. You know what I mean? So it’s just funny when he came on, I’m like, geez, so bad. And of course, there were no follow-up questions, right? Because, you know, you never want to follow up questions and say anything negative about Goldman, especially on TV, you get in trouble. But when I look at this company now, and this is why I said I think it’s worth buying here, Musk is predicting that it’s going to reach a trillion annual revenue in 2030 instead of 2029, with the possibility of reaching it maybe a little bit sooner. So I think it was, instead of, it was, instead of 2031 was a forecast, they said now it’s 2030 and they said possibility of 2029.

Daniel Creech 24:07

Frank, he didn’t say that. It’s Musk. He said it’s a non-zero chance of being that in 2029.

Frank Curzio 24:13

Non-zero.

Daniel Creech 24:14

That’s how you got to learn to talk, man.

Frank Curzio 24:15

Listen, hey, it works for him.

Daniel Creech 24:17

It does. I’m not bashing it. I’m just pointing it out.

Frank Curzio 24:19

But if he’s right and they do a trillion annual revenue in 2030, you talk about a company right now at what, 1.5 times sales? And to put in perspective, the hyperscalers trade on average around 7.5 times sales. So you’re looking at a stock that could increase dramatically from here if they’re able to do a trillion annual revenue, if you believe him. And we’ve heard that we’re going to see all cars like self-driving cars. The whole market’s going to be self-driving. The whole market’s going to be electric. We’ve heard these forecasts six, seven years ago from him, right? Again, some of them come to fruition, some of them don’t even come close. But when you’re looking at those analysts, and speaking of analysts, you know, the stock opened, okay? So anyone who’s a retail investor doesn’t have an account in one of the companies who are basically on, you know, the investment banking side, if you don’t have an account there. If you got an account there, you can get it, you know, pretty much coming, I think, at 120, whatever it was, 130, but it opened at 160, right?

Frank Curzio 25:08

So that’s why everyone bought it. At that time, Goldman City, Morgan Stanley, Wells Doige, JP Morgan, UBS, and you have 23 out of 27 analysts I saw covering it. They have, you know, they came out obviously with their buy ratings because they got part of the deal. They all maintained their buy ratings after this quarter, right? So even though the stock’s down 30 percent from its open and over 50 percent from its highs of what, 45 days ago, they all maintained their buys. Good for them because you’re going to see this company likely raise money in the future. And they do have a lot of cash from the IPO, but they’re probably going to raise money in the future with the amount of money they’re spending on AI. So looking at the analysts, I wouldn’t be paying attention to them and what they’re saying. Again, this is all about, you know, how they get investment fees and money and stuff like that. That’s different. But, you know, I think right here, there’s not a risk that I know that nobody’s talking about, which means that I feel like we’re close to a bottom here in SpaceX and I could be wrong.

Frank Curzio 25:59

I’m probably going to buy it personally, not a lot, but I’ll probably buy a little bit here. If it comes down, I’ll buy a little bit more and look to scale into position. Hopefully, my cost basis could be around, you know, 105, 107, 108. I don’t think we’re going to fall below 100. Maybe we do. I don’t know. But what I do know is when everyone’s talking about the risk, okay, they have too much spend on AI. Okay, they have big losses, which we know that Elon Musk is great at turning that around. He did it with Tesla so many different times, right? Because he knows the risks. He knows what’s driving his stock down. And those are the things that he’s going to address on the call, which he’s able to turn. You’re looking at cloud revenue absolutely through the roof, right? So, you know, just these risks of, you know, the higher spend and, you know, all the shareholders coming out again, you know, 11 percent, you’re going to see that, right? More of the free floats coming out. To me, that’s why it’s down from 160 to 110.

Frank Curzio 26:45

So when you’re seeing those risks priced in, you don’t want to keep saying the same exact risk. Oh, this is going to, well, that’s why the stock’s down 30, 35 percent, right? Because of these risks. That’s what I’ve learned in the past doing this for 30 years is, you know, don’t keep pounding the same risk. You were right. Hey, we stayed away from this one. We stayed away. We didn’t buy it. We talked about the lockup period coming in the first round in August. We talked about that over two months ago. We talked about it now. But now you’ve seen the stock reflect that where it’s down a lot. So does that mean these guys are going to come out and automatically sell? I don’t know. Maybe they do, maybe they don’t, but there are big institutional buyers here. You have a company that’s based a lot about the future. You have a guy running it who is able to fulfill a lot of those promises much more than a lot of other CEOs who forecast past, you know, three years out. And right now, I think it’s definitely worth that bet to own it now, buy it now, because if that revenue is for real, I don’t know if it’s for real, but even if they miss that revenue by 30, 40 percent, it’s still a dirt cheap stock if that’s the kind of revenue that they think they’re going to generate three, four years from now.

Frank Curzio 27:41

And this company, Elon Musk’s company is always traded on the future. And that future is not that far away, three years. We’re usually talking about seven, eight years from now. But I think a lot of the risks are priced in here and buy, but you don’t know what your thoughts are on it, if you like it here or not, but I get a lot of questions from people. Should I buy it here? And I told them, no, no, I’m probably going to buy a little bit myself and put in a portfolio. Nothing big, but I just think it’s worth buying here. I think there’s a lot of catalysts coming up over the next year that that will push the stock much, much higher.

Daniel Creech 28:07

I like your comment on not a lot of risk that nobody’s talking about because that is important. And I totally agree with you on that. I’m still a little bit of a Freddy cat. I would like to see the volatility and see how this kind of trades tomorrow and a little bit of a lockup, but I agree with you on the future. And again, I think when I see this stock performing well, this allows me to take more risk-on idea in the market. And the last thing I want to say here is about their gigawatts and the power of compute. And I thought Elon Musk did a great job explaining how, you know, they, SpaceX, are choosing to build on Nvidia going forward. And I know we’ll cover that with AMD in a little bit, but essentially Musk was saying how no matter what, the need for more compute is growing exponentially. And SpaceX is reported to end this year with around two gigawatts of power or compute. And they want to scale that to over 10 or closer to 10 than 5. And then they want to do that over the next year, two years.

Daniel Creech 29:11

And then there was a follow-up question in the Q&A on the conference call for Musk to elaborate that. And he said, well, I’m actually trying to target 20 gigawatts of power and cooling, but we’re not going to achieve that. And again, this is just Musk being great Musk. And he goes back and forth about how, why 10 or 15, but closer to 10. And what I want to say to that is, Frank, how in the world are you going to do that? Because we’ve talked about what it, you know, you just can’t snap your fingers and have more compute power. You got to have infrastructure, generation, all that kind of stuff. And I have to give credit here with Musk as I was listening or reading through this, Frank, and I was laughing. And he says, listen, we’re taking all of our expertise and building rockets. And he literally was talking about the saying, hey, this isn’t rocket science. And that’s what they do every day. And they’re using that knowledge to transfer into generating compute and find more efficiencies and such.

Daniel Creech 29:59

And again, I’m not betting against him here. I’m just simply saying what stood out to me on this conference call was no matter what, and that’s why we’ve been pounding the table on this need for compute and looking at companies that can deliver this and make money off of this power generation play, long-term trend, is the need and the demand for compute is only going one direction, and that is higher. And kudos to them for kind of breaking that down. The other thing I want to say, Frank, is he also used alien-like technology. So we need to factor that into our updates.

Frank Curzio 30:31

Alien-like technology. I like it. I like it. Speaking of analysts, because the analysts have certainly got it wrong so far in SpaceX, and we want to take advantage of that. Disney just reported earnings. My favorite stock in the world.

Daniel Creech 30:42

Mouse House. Here we go.

Frank Curzio 30:43

Stock was up about 4, 5 percent. It’s only up like 1 percent now. I hate to be a dead horse. It’s not the right analogy because that horse was dead six years ago, and I keep beating it. So Disney failed to deliver. Okay, you’re going to see, I can’t tell you how many quarters that they reported. Probably the last 15, out of the last 15 quarters, maybe even 20 quarters, I would say out of the 20 quarters, about 17, you’re going to see a headline that they beat. And yet the stock has gone nowhere. And there’s a reason for that, because beating estimates is not necessarily the goal. Sometimes you’re going to see, you know, okay, you beat estimates. That’s a consensus estimate. So the analysts have been such dog shit on Disney for five straight years. You know, buy ratings, buy ratings.

Daniel Creech 31:22

It’s so great.

Frank Curzio 31:23

It’s just so great on this, right? Just raising the, they’re not even raising their targets. They basically, they’re reiterating their buy rating for the past five years while lowering their price target from 220, 180, 160, 140, 130, 120, right? That’s all they keep doing and keep doing and keep doing, right? They never really, you never see downgrades of Disney ever, even though the stock’s been dog shit. And when I look at these numbers and what they reported, you’re going to say, okay, well, they reported they beat by 20 cents. Okay, great. They beat them because those analysts’ estimates were lowered significantly, right? It was an easy beat. So when I look at this company, I’m like, okay, how are they growing in terms of what kind of growth are they seeing for me to buy Disney? Are they growing fast in the overall market because they’re trading at a discount to the overall S&P, a big discount because they haven’t done anything. But again, it doesn’t mean that it’s cheap. If you’re trading, I think it’s trading at 14 times forward earnings.

Frank Curzio 32:09

It doesn’t mean it’s cheap because the S&P is trading at 19 times forward earnings. It means that, you know, where’s the growth catalyst? And if you could find a growth catalyst within Disney, that’s when you go and buy it. And I can’t find it. I still can’t find it for five years. They’ve been talking about it. Streaming’s the greatest thing ever. I’m going to tell you some of the comments they made about streaming, exactly what we predicted, that they can’t compete in streaming. They can’t because all the great content comes out in the movies first. And they lowered their spend on streaming. So if you notice, if you’re on a Disney platform, they’re going to lose tons of subscribers. By the way, it’s easier to break into the Federal Reserve Bank than to cancel your Disney subscription. It’s almost impossible to cancel it, right? You got to go through like 10 checks. I still, you still can’t find it. But when you’re looking at Disney and streaming coming down so much and what they’re doing, where’s the catalyst? What’s the catalyst here? Because when I’m looking at these numbers, are they growing fast in S&P?

Frank Curzio 32:54

So yes, they beat by 20 cents. That’s what you’re going to see as a headline. But when you look under the hood, they’re only growing sales by 6 percent. Okay, we’re seeing the average company grow almost double digits in the S&P 500. Earnings by 12 percent. We’re seeing earnings grow by a lot more than that, 20 percent this quarter plus, right? And you see 47 percent growth year over year, but a lot of this is huge growth. And that 47 percent just kicked in because the hyperscalers. So they’re not growing as fast as the S&P 500. That’s why they have a discounted multiple. So you can’t say, I want to buy Disney because it’s really cheap. Cheap stocks are going to get cheaper unless you have some kind of growth catalyst. Now, where’s the growth catalyst? Because they’re growing slower than S&P 500. I want to see, you know, what’s going on with AI? Is there anything going on with AI? I didn’t hear anything, right? So streaming is an absolute disaster. They just said they’re switching from subscriber growth, right?

Frank Curzio 33:40

Subscriber growth. So all the bullshit sub-editions that they have under, you know, their previous CEO and international and everything, they’re getting rid of them. And again, when you don’t have good content coming out and you’re throwing commercials all over everything and raising prices higher, they raise prices higher than every other streaming company over the past five years with less content. So you’re providing a worse experience. So of course, you’re going to say, okay, we’re switching from subscriber growth because they’re not growing subscribers. You know, very, very slow. And we’re going to go to, you know, to monetization. We’re going to focus on monetization, which means, what does that mean? More ads, higher prices, less spend on new content, which translate into a much worse experience for its subscribers. And that’s why this is a business that’s a disaster. And we said it for years, years while everyone at CNBC was like, streaming, look how many subscribers, 200,000. We said the average revenue per user for that was like 350, 3,050 cents.

Frank Curzio 34:33

And while Netflix was like 16, other companies were 14, 12, because they were just signing so many people on. And that was a number Wall Street fell in love with. And Wall Street fell in love with it. And that stock went to 180. And it was like, this is great. They’re going to be the biggest streamer. They got into streaming. They were forced because every state got more impacted from COVID than anything. All the cruises were closed, Broadway was closed, their parks were closed. You couldn’t film movies. Every single division across the board, they had to come up with something. They said, okay, we got to get into streaming. They were forced, which is fine. But then when everything opened back up, you’re like, streaming is the greatest business ever. Streaming is the worst goddamn business you’ve ever seen in your life. It is the worst business ever. Okay? Even Netflix, look at their stock, but they were making it work. But it’s almost impossible to make streaming work unless you are going to provide a worse experience, which means more commercials and much higher prices and less new content.

Frank Curzio 35:20

And they cannot compete because the guys that they’re competing with are the biggest hyperscalers. When you have YouTube, TV, Google is massive. They spend so much money to build out the program. They just raised prices by $10 a month and they didn’t miss a beat. $10 a month for TV, which is basically Hulu has been the longest running streaming company. I’m pretty sure it still operates at a loss. If it doesn’t, it’s, again, Hulu. I mean, you know, it’s a brand that hasn’t made money almost in its existence, maybe the past couple of years, but it’s funny how they don’t break it out and tell you that, right? That’s something I’d like to know, but they make sure they hide that. But now you have YouTube TV, which is much better. You have Amazon Prime. Again, these are divisions these guys spend 10, 15, 20 billion on, Daniel, and they don’t even know what’s going on. They’re like, oh yeah, oh yeah, we did pretty good with that. They don’t even put that in their quarter. And this is Disney’s business.

Frank Curzio 36:07

This is who they’re competing with. And the biggest driver right now of streaming by far is sports. And the rights for sports have skyrocketed. And that’s why you have Disney getting out of a lot of things. They’re going to get the Super Bowl this year. They said Super Bowl sold out. Good for them. But they’re competing against massive dollars right now. So the streaming, to me, is a disaster. But they have a great library. I always said they should rent out their library, you know, make a ton of money doing that. But, you know, they want to compete against these guys. Experiences, that division has been solid. The stock would be 70 bucks right now instead of 100. If it wasn’t, park attendance is at a record. That’s what you hear. That’s great. It’s only up 3 percent, right? So you already have a record. How do you increase traffic further? You got to raise prices further. People are really, really bitching about the prices at Disney right now. Holy cow. It is an absolute fortune. So, you know, parks, okay, you know, bread and butter, I get it.

Frank Curzio 36:53

But they talked about AI, Daniel. They said they’re giving them, it’s starting to give them a major competitive advantage, although we’re not seeing it in any of their freaking divisions, but that’s what they said. ESPN, they said, better off of AI. Park planning, personalized guest experience, advertising, data, and robotics. They said robotics. They actually, so they’re trying to hit on all the buzzwords. Good for them. They’re learning. That should be happening already, right? And when I look at Disney, they don’t deserve the benefit of the doubt because for five years, they overpromise and under-deliver. That’s why this stock is dog shit. If you want to see how much dog shit it is, look at it. I mean, look at this. Look at this chart. This is from 2015. From 2015, if you bought Disney and held on today, you’re down 5 percent minus dividends and stuff like that that they probably paid. You’re down minus 5 percent, but I’m also not taking the dividends from the S&P 500. The S&P 500 over the same timeframe, Daniel, is up 274 percent.

Frank Curzio 37:44

Look at this chart. This is from 2015. In fact, if you look right here at 2016, if you could see it, there wasn’t a year where Disney outperformed the S&P 500 since 2016. Okay, we’re talking about 11 years. So through 2026 now. You know, so, and into 2026. So this is a stock, again, it’s falling. Where’s the growth coming from? I don’t see it. You know, I really don’t even know. I’m not, you know, beaten up here.

Daniel Creech 38:11

Yes, you are. You like to beat up the mouse.

Frank Curzio 38:13

I don’t like beating it up. I just think we’re talking about one of the greatest storytelling companies in the history on earth. And they just can’t get it right. Like you keep forcing streaming down your throat when you can’t compete. And that’s what’s crushing your stock because you put so much into it. We told you this, 5, 4, 3, 2, 1. How many years that you can’t compete in streaming? But yet you have this massive library. Everybody else wants to compete and just sit there and license out all your content to everybody. Focus on the movies. Focus on your parks. Open up as many parks as you can in every city if you can because you guys do great at that, right? There’s just so many aspects here that they can make money off of. And I just think streaming is not it. And they’re going to say, oh, we’re making money off of streaming. You are, but you’re going to continue to lose customers because you’re making money by forcing advertising down their throat, less new content, and you’re raising prices.

Frank Curzio 39:01

And now they’re talking about, what did they say? They said a free ad supported streaming. Again, free ad supported streaming, and that could help a top end of our funnel and get more people in. So basically, you’re talking about more commercials, higher prices, trying to get these people in. Free ad supporting. You’re going to give a couple of movies away for free and steal everybody’s data and then, you know, maybe sell off to the Googles and stuff like that and the Metas of the world. But I just, I don’t see it. It’s 14 times. It’s cheap. This company has to find a way to grow. They have to find a catalyst. They have the greatest, great, great library, great content. It’s just, it’s such a poorly run company. Why would you buy this instead of buying, listen, if you want exposure to streaming, buy Google on this pullback. Buy Amazon for Prime. You have Google, YouTube. And now you get the AI and the cloud growth that these guys are seeing, which is unprecedented growth, which is unbelievable.

Frank Curzio 39:49

You get those with those names. What are you getting out of Disney? So if you really like streaming, buy Google, buy Amazon, buy Apple, right? They all have streaming divisions that, I mean, the content that they’re pushing is incredible, but I just don’t see a reason. I still don’t see a reason to own Disney. It’s not personal. I just, it’s a very, very poorly run company. And I hate the fact that every headline is like, oh, they beat. They beat earnings. They said that for like five straight years, every single quarter. And look where the stock is. It’s just, it’s still at 100. It’s amazing.

Daniel Creech 40:19

Yeah, they got to say that. The only thing quickly on Disney, Frank, I was doing some boots on the ground research, so I stopped at a bar to talk to locals, asking about the economy and such. Did you realize, you’re an ESPN fan. I don’t watch ESPN much, but it was on at this bar. And what I noticed, and this bar is great because the TVs are set up in such a way that you can see whatever they’re broadcasting from anywhere in the area. Frank, there was a big event for WWE coming up. I think they just finished Summer Slam. This was last week when I stopped in. Disney, ESPN now, before major events on WWE, do interviews with the wrestlers and stuff. Now, I grew up watching that as a kid. That was never, as far as I can remember, that was never on any type of sports show or anything like that. And TKO, the company ticker TKO, owns WWE, UFC, and such. So obviously, there’s some kind of a deal, marketing deal between Disney and them because they’re literally broad showing all this.

Daniel Creech 41:22

Pat McAfee, he had some guys on his show. Obviously, he does both. He’s employed by Disney, but he also does appearances at wrestling and stuff. But quickly, I think that’s a good move. But did you, were you aware that ESPN was interviewing wrestlers and like helping advertise for the big events? Did you know that was going on?

Frank Curzio 41:40

Yes.

Daniel Creech 41:41

That’s just new to me.

Frank Curzio 41:41

Yeah, no, that’s.

Daniel Creech 41:42

Anyway, good for them. I enjoyed that.

Frank Curzio 41:45

Wrestling is just such a great brand. It really is a great brand. It’s just amazing entertainment. The kids, it’s a great brand. But, you know, the thing with ESPN is sports is the greatest thing in the world. It’s entertainment. You don’t know what’s going to happen. It’s the best form of entertainment. And we watch sports to forget about life, right? That’s what we do. Because it’s the one universal, other than music, that brings people together, right? It really does. When you’re at a stadium, I mean, look at the Knicks when they were winning and the parade. Everybody loves each other. It’s just, you see it in every city when they win. The last thing you want in ESPN, which this is where they went, is woke and politics. And when you go that route, this is what you’re going to see. You’re going to see this nonsense. And it’s just like, it’s just such a killer where it’s like, you know, do we really want this stuff? No, we want, we watch sports to get away from that. We hear it every place now.

Frank Curzio 42:36

You can’t even go to a store without seeing something there. You can’t watch a regular TV channel that news talks about it. I mean, my kids talk about politics now and, you know, they’re teenagers. They’re teenagers. Oh, did you see that with Trump? Or did you see this? I’m like, I don’t.

Daniel Creech 42:50

Hey, they’re paying attention, Frank. Good deal.

Frank Curzio 42:52

Paying attention. It’s being forced down their throat by teachers. And it’s like, holy cow, man. Just get away from this. You don’t, I didn’t focus on politics. Probably until I was like 25, 27. I, you know, it wasn’t a big deal. How are these kids, right? So, you know, then what does Disney do is you have these parks that are great. Then everyone, all these little kids want to see the princesses and they wait three, four hours. They go there and then you have Cinderella, Belle, Moana, and you see the princess and the princess has a mustache. Are you fucking kidding me? Don’t you know your market? Don’t you know your market is families? Don’t you know that? Like, why are you pushing something that it’s like the WNBA? Like, what happened to women’s rights? I mean, spending centuries to have equal rights and all of a sudden, you know, you’re breaking through that glass ceiling. And now it’s like, nope, we want men to play in this sport. We want men to play, right? And transgenders to play sports.

Frank Curzio 43:40

I mean, have a transgender league. Everybody wants them to play. It’s not that people hate transgenders or anything, but you really want them to play against in women’s sports. I mean, did you see the boxing event in Olympics? I mean, this girl got the shit kicked out of her by transgender. It’s, you know, what are you doing here? You know your target market. What are you doing? It’s like, you know, Budweiser, same thing. They corrected that right away. You know, you know your target market before you’re doing this. I mean, if you’re Nike, fine. You have a target market, sneakers, stuff like that. It’s different. If you have a target market and that’s your target market, market to it. But if your market is families and that’s what you see when you go there, what are you going to do? Universals right next to them in Florida. People are going to Universal. Universal’s like through the roof, raising prices. Business has never been better. They used to never be able to really compete with Disney. Now they’re competing because people like the hell with this. You know, I don’t want to deal with that. I don’t want to deal with the woke nonsense. Know your markets. Know your markets.

Frank Curzio 44:26

I mean, that’s how you get your share price up. That’s what I’m thinking about the share price. You’re not going to get your share price up. You keep talking about this shit.

Daniel Creech 44:31

Oh, I want to go on, but I’ll bite my tongue.

Frank Curzio 44:35

Holy cow. Anyway, all right, let’s move on from Disney. Let’s go to AMD. AMD beat strong. What’d they say? Q2 2026 revenue came in at 11.5 billion, a 50 percent year over year, 13 percent sequentially, which means that’s up 13 percent. Most companies are growing sales by 30 percent year over year. They’re doing it quarter over quarter. That’s sequentially. AMD now expects revenue to grow substantially above its prior long-term target of greater than 35 percent and to significantly exceed its $20 annual earning per share target within its strategic timeframe. However, now that you said that, you did not raise guidance. And that’s why you’re seeing the stock get hit. So I don’t know where it is today. Let’s see. And I’ve liked AMD for a while.

Frank Curzio 45:24

I don’t, I avoid it pretty much. Sold about 500 personally. This is a name that I think is unbelievably fantastic. But you are looking, if you look at the stock. So the stock today is down 6 percent. It’s getting hit. And if you look why it’s getting hit, you could say, okay, they have, you know, great numbers and everything. This stock has been on an absolute tear. You know, if you look at the chart, I mean, it’s been, you know, you look at a stock that was, you know, not too long ago, started the year around 200 and it went over 500, right? So, you know, you’re seeing, let’s see, even year to date and compare it really quick. This is a stock that is up 128 percent. Granted, though, in June, that’s when it topped out and it’s kind of been like level and now it’s pulling back. This is a company that’s trading. Do you have any idea whether it’s trading at a forward earnings? It’s like Disney 14 times. Now, you can have a high growth multiple as long as you’re growing fast. That’s fine. Do you know, do you know what the multiple is?

Daniel Creech 46:16

I have a guess.

Frank Curzio 46:18

It’s trading at 46 times forward earnings.

Daniel Creech 46:20

No, I saw less than that, but I believe you.

Frank Curzio 46:21

Okay, 46 times forward earnings. So what the problem with AMD is, I’m going to tell you why it’s down and why, you know, I don’t like it anymore, is the expectations. Every analyst has massive expectations, rightly so. AMD now has products and I said AMD’s falling behind. They can’t compete with Nvidia. And then about a year, a year and a half ago, I was like, they finally have products that can compete with Nvidia. It’s not that easy because Nvidia did a great job partnering and building the foundation. Meaning, if you want to use AMD, you have to knock down the foundation, which no one’s really going to do. But maybe for new data centers, they’re going to start using AMD going forward. And that’s what happened. Now, almost every sell side, which is institutional research covering the name, has a buy rating. Almost every single one of them. Even though it’s trading, you know, almost 50 times forward earnings. The average target on that price, the average target price on this stock is 550.

Frank Curzio 47:10

Before yesterday reporting the numbers, right, it’s down today, it was 515. So you have all these buy ratings. Everyone says it’s great. You have all these earnings expectations. They’re growing earnings very, very fast. That’s fine. But you’re trading at that level where a lot of this is priced in. And the average target is 550 when the stock was 515 yesterday. So, you know, where’s the upside in this name? Because in order for them to get upside, and I think Oracle is dealing with this and you’re looking at Micron dealing with this as well, they have so much demand, they don’t have the capacity. They don’t have the capacity to fill these orders. So they have to build, build, build, build, build. And that’s what they’re doing right now. It’s not that easy when it comes to chips, right? Especially when you see Taiwan Semis on fire. It’s another one that raised their estimates tremendously, but where they get the capacity, they’re building in the US, they’re building in other places. But until they’re able to build that and get out all their new chips, it’s a lot of this growth is already factored in at that multiple where you’re looking at, let me look at Nvidia really quick.

Frank Curzio 48:11

So this is AMD trading at, you know, 46 times forward earnings, right? And they’re growing earnings fast, right? We just showed that and how fast they’re growing. But they didn’t raise estimates, which is weird, which is why they’re getting, you know. Oh, the future’s great. We’re going to see even more growth, but we’re going to keep next year’s estimates the same because they don’t have the capacity to fulfill it. But when you look at Nvidia trading at 220, which one do you want? Do you want Nvidia trading at 220, right? And this is a company trading at just 22 times forward earnings, right? Half the valuation of AMD that’s growing faster in revenue and sales than AMD. They’re growing faster. So they’re growing faster. They’re half the price of it. Why would you own AMD right now instead of Nvidia until they get that capacity online? Then they could increase, then they could sell more chips. But until that capacity is online, that capacity they need, the demand is so high that they just don’t have, they can’t fill in the capacity.

Frank Curzio 49:05

So, you know, with AMD, it’s topped out here. It could go higher longer term, but they need more facilities. They need more chips. They need to manufacture more chips. And they’re not there yet, where Nvidia had this problem maybe two years ago. And now they really don’t have this problem as much no more. So Nvidia to me, I always want to look at why wouldn’t you buy like Disney? When I said don’t buy Disney because I like, buy the hyperscalers if you like streaming. When I’m looking at the chips, it’s, hey, I don’t like AMD because I think Nvidia is much better. So if AMD goes up 20 percent from here, I think Nvidia would go up even more. And buying Nvidia here is a much better buy. It’s approaching its all-time high again. It’s 220, it was 236. We’ve been telling people to buy this for a while now. And again, we’ve been going ups and downs. But I just think Nvidia is much better than AMD here, Daniel.

Daniel Creech 49:50

I like that. I’m not going to push back on that. I will opine, Frank, on why AMD is down. I’m not disagreeing with you, but I want to add, they didn’t raise estimates, you’re right. And estimates were high. There was a couple on the street, Edgewater and D.A. Davidson were expecting around 13.2 billion in guidance. AMD only came in at 13 billion. So, you know, 200 million is not nothing. What I will say, Frank, is that I think in addition to that, the market is choosing to reward and punish different players for different reasons on the CapEx spend. So if you look at capital expenditures, these estimates were supposed to come in around $300 million. And I’m rounding here, people. You could say 298, 295, whatever. I’m rounding to 300. You know what they came in at, Frank, for the quarter?

Frank Curzio 50:34

What?

Daniel Creech 50:35

808 million.

Frank Curzio 50:37

Yeah.

Daniel Creech 50:38

Now that is significant. Now when you look at their earnings release, so capital expenditures for the quarter ending in March was 389 million. That jumped to 808 million this quarter. Okay? That’s massive. And it’s also up significantly from the June quarter in 2025 was less than 300 million. Stay with me here on this number. They still produced a billion five in free cash flow, even with that massive jump in CapEx. And that billion five in cash flow at $800 million CapEx is still higher than the billion two free cash flow from 2025 when they only spent 282. So I would argue, hey, they are seeing improvements and significant improvements because of their products. However, to your point, Frank, they don’t have the capacity to continue doing that, which means you’re going to have to spend a lot upfront. And then you’re telling the street, hey, trust us, we’re going to make it on the back end. The difference, in my opinion, between them and an AWS or a, or excuse me, Amazon or somebody that’s not getting punished for upping CapEx is because at the same time, they can show you, as Frank just said, through cloud services and other business segments, they are growing exponentially or not exponentially, but they’re growing above market rates and above expectations.

Daniel Creech 51:55

And I think that’s a big deal. But kudos to AMD on this free cash flow positive and stuff. But when you come out with the street, and again, I’m not saying you have to run your business quarter to quarter. I’m not trying to bash the CEO here. However, I would say you need to learn communication with it because if you’re going to come out with the street, Frank, at two and a half to three times expectations on capital expenditures when that is the hottest rod in the fire right now.

Frank Curzio 52:19

Yes, good point.

Daniel Creech 52:20

And you don’t expect your company to take a little bit of a hit. And again, it’s only down about 6 percent. Frank said it’s near all-time high still. We’re not, you know, throwing the baby out with the bathwater here. But, you know, you’re not hearing that on CNBC as much as you should. The estimates are one thing, but you cannot come to the street and be like, hey, you expected us to spend 300 million. We only spent 800 million, Frank. We’re doing good. You got to have some results and that’s okay.

Frank Curzio 52:44

Yeah.

Daniel Creech 52:44

But good points other than that on it and the growth versus Nvidia.

Frank Curzio 52:47

Yeah. So one thing with that they said, which was an insane stat, that AMD expects a data center AI accelerator market to grow more than 45 percent annually.

Daniel Creech 52:57

To 2030.

Frank Curzio 52:58

To 2030. And did you mention how much that was?

Daniel Creech 53:01

1.4 trillion.

Frank Curzio 53:02

$1.4 trillion.

Daniel Creech 53:04

That’s in addition to data center revenue being up 107 percent year over year.

Frank Curzio 53:08

Yes.

Daniel Creech 53:08

But you know what? When you spend three times CapEx, Frank, nobody cares.

Frank Curzio 53:11

Nobody cares. And even that, they’re talking about the CPU server market being 220 billion, growing 50 percent annually on top of that. So AMD, not just a 1.4 trillion in AI accelerator market, but you look at the CPU market, they said as well, that’s going to grow more than 50 percent annually to approximately 220 billion by 2030. I mean, a lot of catalysts, they just think AMD is a little ahead of itself. I think Nvidia is a much better buy here. Again, it’s half the valuation, growing much faster. I think they’re going to outperform easily if you’re looking at the next six months, 12 months until AMD gets some capacity online. One more thing about Disney, Daniel, I wanted to mention, and sorry, I don’t want to part on here, but, you know, the cherry on top, which is again, something I don’t like. I think Disney, I’m pretty sure I listened to all the earnings so far, 300 plus companies that, you know, most of them that we listened to, Daniel, I haven’t seen any company done the same as P500 this quarter.

Frank Curzio 54:00

Disney did not provide revenue guidance. So they said they’re going to grow earnings double digits, which is like 10, 12 percent is below the average company SP500, growing whatever 20 percent. So again, growing slowly overall market and not providing guidance, not a good thing. So, Daniel, I wanted to cover one more thing here because, you know, we talked about, you know, data center growth and what’s going on in that market. There’s something else that’s bigger here because if you’re looking at the market, news came out, I think yesterday, where you have the White House invited OpenAI, Anthropic, Google, and Meta to the White House to basically voluntarily cybersecurity testing and to provide that on frontier models and new frontier models days after OpenAI and Anthropic agents, you know, obviously broke into other companies. So to me, that’s part of it of why they’re meeting at the White House. I think the much bigger deal is, is we have an election coming up. A pretty big deal. If you’re looking at the stats in the election, it shows that right now, you know, look, the Democrats have 86 percent, one in the House, that’s probably a guarantee.

Frank Curzio 54:56

And you have Republicans just at 56 percent for the Senate. And that’s really tight. And there’s one stat that’s being thrown around every place. And it’s a big deal because, you know, a lot of people are suggesting this. So seven out of 10 Americans do not want to see AI data centers built in their backyard. It’s turning out that, you know, when you have a list of bullets of what you want to focus on and what we need to address going into election, this has moved up the list tremendously. And now you’re seeing not just Democratic states, but, you know, California, New York, obviously, right? It’s saying, okay, we want to get more information before we start, you know, build further. But, you know, data centers. But now you’re looking also at red states. Texas, very red state, came out. Texas governor said, look, we’re holding data center approvals until audits are completed and whatever, and looking at environmental concerns, whatever. It’s the right thing to say heading into the election because that Senate race is so close, you just have to sway a small percent.

Frank Curzio 55:45

I don’t think the White House is more, I mean, you don’t really need that face-to-face to go over that stuff, to really cybersecurity in the White House and cybersecurity. I mean, you know, most people in the White House, they’ve never run a business before and know nothing about finance, so especially technology. But I don’t think you need to meet face-to-face for that. I think this is about, hey, you know what? We might see a pullback overall because if you look at the Hugging Face CEO, he came out and said, and I like this interview. He said, basically, you know, China is winning the AI race, dominating open models. And you’re seeing that because China doesn’t have the same process that we have, which is so bureaucratic, right? It’s just, you know, when something comes with changes, I mean, look at Warner Brothers, right? Getting taken over. You have California judges that weren’t even, you know, elected. They’re saying, all right, we’re going to block this deal. It’s such a pain in the ass to get things through with state, federal, local, all this stuff that you have to go through, where you have Xi just saying, hey, this is what we’re going to do.

Frank Curzio 56:36

And they do it, you know, like the next day they start it. So, and he mentioned this. So when I’m looking at, you know, what’s going on with AI data centers, massive demand I’m hearing from all my contacts. However, I think you’re going to see a lot of more red states say, we’re going to dial back and wait a little bit. You know, this is ahead of the election and saying, you know, wait on data centers a little bit. And then everything that’s been approved and everything’s in the works is still going to continue. So it’s going to be very busy. But I think you see even more red states come out and say, hey, you know what? You know, we just want to be careful here because of the election. That’s a big talking point. And you might see AA stocks get hit on this, right? So you’re increasing CapEx, but what are you spending CapEx from if you can’t really push it through? And even some of the deals that are going through, the new deals that are going to go through, if companies need power and capacity and stuff like that, you might see a little bit of a slowdown into the end of November after the elections.

Frank Curzio 57:22

And then I think 2027, you’re going to have this ramp up where a lot of these names are going to benefit tremendously. There’s just so much demand in that pipeline. You’re just waiting for more capacity to come on like AMD. I think 2027 is going to be a battery year, but you could see a little bit of a pushback in AI companies early on. I think that’s a lot what this meeting is about. Again, that’s just my thoughts. That’s what I think you don’t need to face-to-face to talk about. Oh, when you release your models and, you know, you just got to be careful and we want to, you know, test them. Do you want us to have cybersecurity measures at the White House? I mean, yes, you have Palantir and other companies that they’re dealing with, but still, these companies will go directly to Palantir if they want. So I think it’s more about, hey, just letting them know what’s going on, what’s going to happen, and what’s going to take place afterwards. Because it’s going to be pedal to the metal if we want to beat China in this race, AI race, which is incredibly important. And if you want that, we need to unleash these companies, not to the point where it’s craziness, like we saw these companies, you know, basically hacking other companies autonomously, which is crazy.

Frank Curzio 58:12

But, you know, we definitely want to be winning that race. And in order to do that, we got to unleash these guys and let them continue to spend what they’re spending and build these data centers at. And I think you’re going to see that in 2027. So a little bit of pullback we might see in AI for the next couple of months. And then I think if it is, it’s going to be a huge buying opportunity.

Daniel Creech 58:25

It’s better to whine, bitch, and moan, Frank, face-to-face than over FaceTime. So when you go hand in hand because you need protection, tariffs, all that kind of stuff to beat big scary China in this silly AI race that they’re drumming up, that’s pathetic. So that’s why you do it hand in hand. Trump likes to be sucked up to OpenAI and Anthropic will. Just like Anthropic’s CEO or founder guy, that weasel, just like the OpenAI guy, Frank, is complaining that people are only joining his firm for the money. What’s your answer to that, boss?

Frank Curzio 58:55

Only for the money, yeah, right.

Daniel Creech 58:56

No, what’d you say? Stop paying them.

Frank Curzio 58:58

Yeah, stop paying them. Don’t pay them that much if you think it’s for the money, right?

Daniel Creech 59:02

Anyway, I have comments, but I’ll hold them off till tomorrow. But this is why you pay attention to politics, people. And really what frustrates me and just is set up for tomorrow. And kudos to the CEO of Southern Company, SO, the ticker there, Utility, as well as JCI, Jacobs Engineering, and others on the conference calls that I’ve talked about. They need to do a better story of competing in the arena of ideas and debate and explaining why we’re not trying to ruin air, water, and all this kind of stuff, and the earth that God created. That pisses enough people off by itself, everybody. But my point is, is that they need to, they being the supporters of data centers, the build-out of the economy and such, need to get off their butts and use their spine and actually debate and explain their side of the argument. They’re not doing that, and they are deservingly getting their butts kicked in the arena of ideas. And the one thing about voters is us humans are very emotional, and we’re like a blade of grass blowing in the wind.

Daniel Creech 59:57

You can be persuaded, Frank, look who runs your old hometown.

Frank Curzio 01:00:02

Yeah. I would say, did Anthropic really say that? They’re worried that everyone’s just coming in for the money.

Daniel Creech 01:00:08

The founder said that. He’s a whiner. They’re both whiners. Look at them. They’re freaking cry babies.

Frank Curzio 01:00:14

Oh, Jesus. Give them more percentage of the company than some one. Anyway, all right, guys, that’s it for us. Covered a lot of stocks today. Questions, comments, you may be Frank@CurzioResearch.com. Daniel?

Daniel Creech 01:00:22

Daniel@CurzioResearch.com.

Frank Curzio 01:00:23

Okay, we’ll see you tomorrow. Now tape on Thursday. That’s a free podcast. And also that we want to focus on half of that being, you know, questions. We have a nice Q&A. We did it last week and the week before, covering the hot topics of the day, but also, you know, if you have questions, go into askkerzier.com and fill out your question. We get it. And then, you know, never know. You might hear us mention your name and the question and the answer and everything. So that’s for you Thursday. It’s really cool. The Q&As really work well. We got lots of cool questions. And again, askcurzio.com and we’ll see you guys tomorrow. Take care.

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