Daniel Creech 00:00

It’s Thursday, August 13, and you’re listening to the Wall Street Unplugged podcast. Normally where the one and only Frank Curzio breaks down and tells you what’s really moving these markets, but Mr. Curzio remains out of the office. Don’t worry, he’s fine living it up in upstate New York, fighting all the commies, I would assume. He’ll be back soon. That leaves me, Daniel Creech—hello and welcome—behind the mic to run the show, less than an hour, don’t worry, and we’re going to talk about whatever the flying Florida I want to talk about. Let’s kick some things off with fun. Now, President Trump wears many hats, and whether you like the guy or hate the guy—try not to have hate in your heart—he does wear many hats, and “illusionist” was not one on my bingo card. However, the media is going crazy over last month’s trip when he was in Turkey and evidently snuck on—not snuck on, he paraded on to Air Force One, or the Air Force plane—and waved to the cameras and all this, and then evidently was thrown into a catering truck that was lifted up to transfer supplies and such.

Daniel Creech 01:14

Now, I say this as a compliment, because everybody’s got an ego, including this guy talking—doing a podcast, of course. Can you imagine the biggest ego-maniac in the world getting fitted into a container or sneaking into this truck and having to not wave and glamor and yell? And then the media—of course the media—is upset because they feel like they were decoys. And I’m not trying to make light of if they were scared or whatever; evidently they didn’t know what was going on. But then leave it to Mr. Trump to talk to reporters afterwards, in the aftermath—this is last month at some point—and they basically ask him, “Hey, you know, how do you feel about making everybody your decoys, and what if they could have been put in harm’s way?” And he says, “Well, you know, I was—I was in a much more—I was on a dangerous flight, you know.” “What? Then why are you sneaking around?” Anyway.

Daniel Creech 02:12

I—again, I’m not laughing at the threat, I’m laughing at the reaction. Now, as I did yesterday, I had a couple different items. I want to know which one you like best: either Trump the illusionist—you can have some fun with AI and make up some images of that, I would assume—or how about this one: “Quickly.” We are a podcast about finances. We want to make above-average returns. We want to do it quickly, like everybody. You know, you buy something, you want to watch it go up every day, make a ton of money quickly, and all that kind of stuff. 20% return in a year, give or take. Pretty good. Now, recently, markets have basically gone up 20% for the last couple years in a row. However, you probably don’t think about a quick 20% return with an NBA franchise. Well, you’d be wrong, and so would I. The Los Angeles Lakers are evidently being sold for $12 billion, my friends. $12 billion. In a record-breaking deal.

Daniel Creech 03:12

Okay? Now, the people behind this—Josh Kushner, the brother of Jared that most people know or recognize—Josh is the founder of Thrive Capital, and get this: he’s partnering with the old CEO of Frank’s favorite company, Disney. Yes, Bob Iger and Josh Kushner are the front men of this record-breaking $12 billion. The funniest thing here—I’m, you know, I’m not going to comment on the price tag, that’s fine, you can pay whatever you think it’s worth—what I love here is they do out different articles. You have quotes from the incoming owners and the outgoing owners and such. And Mark Walter, who is TWG’s global CEO, he purchased control of the Lakers from the Bus Family last year at a valuation of about $10 billion. He also owns stakes in other sports teams: Los Angeles Dodgers, Los Angeles Sparks—commented on those yesterday, I think—Chelsea Football Team, etc., etc.

Daniel Creech 04:18

Here’s the thing—I love this—last year he bought this controlling interest, around $10 billion, okay? “Owning the Los Angeles Lakers has been one of the great honors of my life. An extraordinary investment, and I will carry with me—” “But what I will carry with me is the community, the fans, and the city that treats me like family.” The guy was there as owner less than a year. Now, I guess that Los Angeles is a friendly place, because if you make this guy feel that welcome, why in the world would he sell—oh, I know why he’d sell it. $12 billion valuation, that’s why he would sell it. If I had a hat on, I would tip it to him. The only thing I will set this up for when Frank gets back, if I remember: if Bob Iger comes out and says the Lakers are going to be streaming on a Disney platform—whoa. Ugh, Frank is going to have fun with that one. We’ll get his thoughts when he returns. But I thought that was interesting on old Bob Iger and such. Let’s turn to markets. Stocks up, oil down.

Daniel Creech 05:21

Yesterday the CPI—I kind of covered a little bit, I’m not going to go into more detail, I teased it yesterday, I got other things to talk about and get off my chest. The big takeaway was: it was in line with expectations. Expectations are what matters right now. Today’s PPI number—same thing, we’re just staying in the lane of suggestion. Or expected, excuse me. Now, bigger picture: this helps calm the fears of a rate hike in September, the next meeting by the Fed. Now, today, stocks up, oil down. Oil down about 3% as I record this, to just under $81 a barrel for WTI. Brent crude still a little higher, obviously at 86.50. What’s going on here? Well, a couple things. Trump has talked—shifted gears yet again on this Iran thing. You know, we’ve blown them out of smithereens, we’ve—we’ve ruined everything they have, but yet they are still able to disrupt the Strait of Hormuz, which is still critical for our global energy and logistics.

Daniel Creech 06:25

Now, I have been on this thesis, and I’ve had this idea that—and I could be totally wrong here, but I think I’m correct, I think I’m going to stay on this path, because this pivot kind of gives me more tailwinds to this than headwinds. Midterms are coming up, and midterms are important to point out the obvious. And I have long been in the camp that you need time before the midterms to have whatever—whatever it is you want to sell to the people. And I’m not talking Republican Democrat here, I’m talking—or Communist or Democratic Socialists of America and all those crazies. What I’m talking about is: whatever you’re trying to pitch and sell and get the voters to vote on, to give you—to elect you, you need time for that to work through its system, and people, you’re going to be shouting and telling them and talking to them anyway. But it sure as heck is going to help if people can feel the message or see the results of your message that you’re preaching to them.

Daniel Creech 07:31

And when I’ve been on this thesis on this—how we’re going to handle markets and oil volatility and all that kind of thing—and I’ve been in the camp to where I think, hey, you need three solid months, a quarter, you need three solid months leading up to the election to where you have this kind of—I don’t want to say no volatility, but you want to just stick to your plan and point to it’s working and be able to show results. And I say all that because now we are in—and to wrap that up, I essentially thought July, if I had to guess, Trump was thinking, “Hey, I can do whatever I want in July. I can bomb them like crazy, I can threaten them, I can do all this.” But now you got August, September, and October, and we’re already halfway through August. That is a key three months before we go to the midterm elections in November. And I think that it’s not a coincidence that Mr. Trump is now pivoting from the threatening and bombing and power plants and taking out all their bridges and stuff to really more economic pressure.

Daniel Creech 08:36

Now, economic pressure, I’m not saying is a bad idea. I think it’s a great idea in general. It’s going to take time, obviously, if you take somebody’s assets or you limit their ability to move money around, or trading partners, or if you sanction other people and all that kind of thing, that’s going to take longer time to influence or get any results you’re hoping for rather than bombing the hell out of everybody, okay? All right. But Mr. Trump tweeted out on his Truth Social, “The U.S. has total control over the Strait of Hormuz.” Well, traffic’s nowhere near where it was pre-war, so take that with a pound of salt. “I think we will keep it.” Again, whatever that means. “Our naval blockade is being called by everyone a wall of steel.” That means Trump’s calling it that. “And there’s nothing Iran can do about it.” That’s probably so. If they didn’t want them there, they would already have tried to move them out. So got to give him credit there. “No navy, no air force,” and all that kind of stuff.

Daniel Creech 09:30

Listen to this: “The IRGC is decimated and fleeing. Their leadership is uncertain at best. They have no money. Their country is shot. They have—all they have is fake news and 300% inflation.” I don’t know if that number is correct. However, they have to be having a significant amount of inflation. Their currency is absolutely collapsing. No doubt they are in a lot of shambles there. Which means: can they pay their people? How are the communities doing? Is there any uprising and all that kind of stuff? It’s a horrible situation. I’m not trying to make light of that. I’m simply saying the pivot from bombing and bridges and power plants and all that kind of stuff to more economic sanctions, I don’t think is a coincidence, and I think it has everything to do with the upcoming midterm elections. 300% inflation, and it’s getting worse. They’re all talking no action, and he says, you know, he basically claims victory again. Now, there’s a great article to parlay that, and I think Mr. Market is taking this kind of stance and these comments by President Trump and thinking, “Hey, maybe we’ll have less volatility or less—excuse me—less conflict, and it’ll just be more of an economic sanction-type deal.” That’s good for oil prices, which is good for everything on the consumer side.

Daniel Creech 10:50

And just to top this off, there’s an excellent piece in here at MISES. So mises.org, M-I-S-E-S dot org, the Mises Institute, Austrian Economics, Freedom and Peace. And they have—yesterday, on the 12th of August, they put out an article, “The Return of Economic Gaslighting.” And when you go through that, I think it highlights a great picture of the mistakes that both parties have made in the past and now are making—potentially making right now. So the Biden administration was constantly telling you how great the economy was and how cheap things were and how you should just be happy and, you know, stand in line and get your porridge, okay? Now, I’m exaggerating a little bit there. However, it didn’t work. And I have been in the camp of saying, “Listen, they passed legislation too late, and they didn’t give themselves enough time before the next coming elections to point to the results that I just said I think Trump is trying to do.” However, now you have the same mistake—looks like it’s getting repeated—where Donald Trump is going to continue to tell everybody how great everything is.

Daniel Creech 11:58

And that is not going—well, I don’t want to say matter-of-factly. I don’t think that’s going to resonate very well with the average consumer because of the cost and affordability. So the affordability issue—the irony here, in my opinion—is the affordability issue got Trump, or was a big piece that got Trump elected his second term, and now it could cause him to lose the midterms, depending on what happens between now and then. And in one way, it’s comforting that some people just aren’t going to take the politicians’ words for it. But when you look at the CPI and PPI we’ve talked about, yes, they come in in line with expectations. Yes, rate hike odds are going down or are significantly lower than what they have been in the short past because of these economic numbers coming in. But make no mistake, the cost of living is still crazy high. The average person is still swimming upstream. And, you know, you still have volatile gas prices, you have volatile grocery prices, you have electricity prices, and all kinds of things.

Daniel Creech 13:01

And so none of that is going away. And my whole point here is: I do think that this pivot is good for oil prices and such as we’re seeing today. We’ll see if it’s a trend or a one-off. We’ll see what happens on that. But I just think that this is all done because of the midterms, or a big portion of it is done because of the midterms, because, as we like to joke—tongue in cheek here—politicians on both sides, every single one of them, including the new upcomers, the DSA, they care about one thing, and that is getting elected, and that is power, and that is stepping over you and me. Ooh, tough. All right. Let’s take a couple of questions here. We try to do more questions on the Thursday podcast, keep it loose. Send your questions to Ask Curzio. That’s Ask Curzio. And maybe we’ll grab one from you. Give us a shout-out. You can complain, you can yell at me and all that, I’ll even give you a shout-out for that. I enjoy to be entertained, people. All right, let’s see here.

Daniel Creech 14:03

Our first question—that’s our second question. Our first question comes from Frank, not the Frank that’s out of town right now, another Frank. And he was talking about humanoid robots. And he was reading up and doing some research, and he threw a few tickers out there. And I’ll share a couple with you here. The first one that he threw out is… Umbrella. We’ll switch over to Fenvis here. Now, I believe these guys are just getting—yeah, that was at the end of July—rumored in buyout talks here. And shout-out to Fenvis. I know I’ve said this in the past, but this new website they have is Florida Fantastic. Big fan of this. I know they have a lot of ads and stuff that—but hey, whatever. Showing the gap, earnings per share, sales, and shares outstanding over time. Just good, solid macro stuff.

Daniel Creech 15:04

So Umbrella, and then OUST was another one. Ouster. Let’s see here. Now, I want to talk for a moment about Ouster. And looking through this, so these guys have been around since 2015. It’s out of San Francisco, and they make high-performance digital LiDAR sensors, cameras, AI compute, sensor fusion, perception software, AI models, all kinds of things. Their segments are industrial, so think warehouse automation, such like that. Smart infrastructure, smart cities, traffic operations, the flow they talked about on their previous conference call. They talked about how the FIFA World Cup in North America was a big deal for them, got a lot of business from helping with traffic flow and such in and out of the games. They have robotics, delivery robotics, drones. Drones is key because it’s a dangerous world, and it’s only going to get more volatile, in my opinion, and therefore you want a new, smarter, efficient offense and defense.

Daniel Creech 16:12

I think drones are huge in that. And then they have an automotive sector—sectum?—automotive sector segment, for crying out loud, Daniel. And now, a couple of big, big jumping-out-of-a-plane macro stuff here. This company is not profitable yet, all right? So let’s put it on that side. Not profitable. They did recently just raise money at $55 and change per share. And if we go back over here to Fenvis. So companies spiked up real good here. You can see, man, it rocketed from 45 to—let’s call it 62—made the announcement of a capital raise, and now we’re still under that a little bit. Now, recently, they just came out and reported earnings. And the earnings, like I said, they’re not profitable yet. But what I appreciated going through this conference call was—and this is a theme that I need to elaborate on more—and I’ve touched on it in the past and had some success.

Daniel Creech 17:17

And I know that this sounds almost so simple that it’s silly, but stick with me on this. What I liked about this, just going through it, and I—until Frank emailed us, I had not heard of this company. So pulled up the most recent conference call transcript, started reading through it, and immediately I was impressed by the management, okay? I could be fooled, I’m simply saying. I was impressed by the management on the way I felt like they were communicating with investors and kind of giving a timeline or mapping it out. And here’s what I mean by that. They have this new Rev8 product, and they announced that in May of 2026. And it’s the latest family of digital LiDAR sensors. And they talk about it’s essentially a better mousetrap. So it’s got up to two times rains in resolution. They got higher performance. It’s built for more affordability. And they go on and on and on and explain this. And I’ll be honest, a lot of this is over my head, and I’m not even going to try to fool you that I’m an expert in everything.

Daniel Creech 18:20

If you want to listen to people that are experts on everything, you know what channel to tune into and who to listen to. That’s not this guy. The analysts were talking about Rev8 product and when can they expect that to kind of really ramp up. And this is where I have to give management some credit. And they said, “Listen, we are well-capitalized. We’re rolling this product out. We think it’s going to be great. We’re happy with the communications we’ve had back and forth.” But they said, “Listen, it’s going to take, you know, 12 to 18 months for this to really show up on the books,” okay? And I just have to say, that reminds me of Calyx, Calyx Communications, who does broadband connectivity and all kinds of things. Their management team is excellent. I remember recommending that back when we had the Curzio Research Advisory product because I was just going through conference calls, and this management literally told you, “Hey, don’t buy our stock for a while.

Daniel Creech 19:22

We’re still going through this. There was a lot of stuff going on with the Biden administration and money being sloshed around, and companies were waiting on to see how that all panned out before they were doing bookings.” And Calyx, to management credits, essentially—again, I’m paraphrasing—but they’re simply saying, “Hey, you know, we’re still in a waiting moment. Nothing’s going to happen.” Then it turned, and they said, “Hey, orders are going to pick up. We think the bottom is in.” And again, I’m not an expert on broadband communication, far from it. But guess what? We made a great return in that stock, and we sold it for a profit, and life was good, we moved on. This is very similar because while I’m not ready to start a position here, if I did, I would start with a quarter or half and look to scale in over this. But follow management on this and see how they update, communicate, and execute on rolling out this Rev8 product. And, you know, daniel@curzioresearch.com, if this sounds so simple, then I apologize.

Daniel Creech 20:21

However, do not miss this. Most management teams are not good communicators, in my opinion. Most management teams do not lay this out. It’s all about just—there are a lot of President Trumps out there. Everything’s great all the time. “Hey, CPI is going through the roof. I don’t worry about it. It’s fantastic.” No. Not every quarter is a great quarter. Not all good seasons are—not all seasons are good seasons, okay? But I really liked their exposure. Automotive, eh, okay. But the robotics, the automation and warehousing, and then the drone component. And the CEO talked about how he’s been in communication with a lot of drone companies. Again, he threw out the Rev8 product again. But I wouldn’t be pulling the trigger and buying this just yet on a drone play. But over the next few quarters, you know, nine months, six months, just look for updates on how this product is rolling out. And I—this is going to be on the watchlist. Appreciate Frank. He emails. He’s a fun—he’s a great subscriber.

Daniel Creech 21:20

And the other company, and I’ll admit I haven’t thrown into this yet, but this is just a sexy-as-hell chart. AME is the ticker. Amatech. Breaking out to highs. I mean, look at this. Daily, weekly charts, and monthly charts are just—man, if finance was sexy, this thing would be on the cover or the centerfold. Look at that. You bought this thing, you can basically just sleep well at night. This is a chart going from the lower left to the upper right. Now, it almost makes me want to buy some of this to get interested in it and more look at the valuations and such. And if you just scroll down here, gap earnings per share climbing very nicely. Sales doing the same thing. And shares outstanding hanging out, okay? That’s a solid management team from a macro standpoint. Again, I’m not acting like I’m an expert on this, haven’t dug into this one very much at all, just pulled up the three tickers here and thought, “Man, that’s a good chart.” So we’ll check in on them in the future and throw that on your watchlist, or buy some now and see what happens.

Daniel Creech 22:33

Okay. Next question is on—I like this. Scott. Scott says, “Hey fellas, hey guys. Happy Alpha member.” Thank you, sir. Want more information on being an Alpha member? Go to curzioresearch.com or email Frank. Frank loves it when you get emails about questions like that. Happy Alpha member here. Loving the new product. And he says, “Given the depletion we are hearing about in our missile stockpiles, is there any opportunity among the small players involved in rearming America?” I touched a little bit on this yesterday, just about the massive money that’s going to flow into the space, led by JP Morgan and others. I would stick—I know we hear a lot about the missiles and stockpiles. If you want to look at your big defense contractors, that’s okay, Lockheed and such. But I would look at more drone plays. So AV/AV, AeroVironment was a huge winner for us. You have Kratos is another one that you can look at.

Daniel Creech 23:36

UWA, I forget the ticker on that one. RTX, that’s a bigger one. I’m waiting on the Fenvis to load here, I apologize. And I know I’ve gone over this in the past here, but again, shout-out to Fenvis. So I just threw AV/AV, AeroVironment in. And if you scroll down and you look at its peers on the top left here, if you can’t see my circle, it’s got peers and it names a handful of tickers, and then it’s also got who it’s held by. But if you click on peers, it’s going to pull up and you see this BWX Technologies, General Dynamics. You can arrange these by smallest or to largest or largest to smallest by clicking the market cap button here. We’ll see if Fenvis wants to play along. And then what I like is you just hit your charts button above this, and it’s going to rerank this from largest to smallest market cap, and then hit charts.

Daniel Creech 24:43

So it’s just going to pull these up. I think this is a great little tool to look at. And again, this is just if you—and Fenvis isn’t going to pull up every single one of them. And so when I mentioned Kratos, K-T-O-S is the symbol here, Kratos Defense and Security Solutions. And I apologize, we’re having a little bit of slowness on everything loading. But you can get some more drones and ideas that way if you’re looking at it. And you can look at their peers. There you see AV/AV, General Dynamics on there, a couple of the other—there’s a lot of overlap, but you get my point there. Now, there’s his question. What I like—so I would play on the drone side, not as much as the missile stockpiling, or you can look at systems. But I do think drones are something to look at there.

Daniel Creech 25:45

Now, the second part of his question is what I want to focus a little bit more on. Now, he says, “There’s a lot of pushback on data centers. Will environmentally friendlier cooling processes and energy companies benefit from the softer-minded voters?” In a word, yes. Next question. This is solid here, Scott, because you’re correct on the pushback in data centers, political football, we’ve covered some of that. The cooling process and energy companies, more environmentally friendly. That is what I want to talk about for a moment. And here is one of the biggest reasons why data centers and this whole AI build-out is a political football. And this is looking at the consumer price index for all urban consumers, electricity in US cities, the average. Now, if you click on a 10-year here, okay? So the bottom here is, what, July 2016. Now, July 2016 to essentially July 2021 or January 2021, it did rise a little bit here, you know, 2017, 2006, 2007 to 2017 on this chart.

Daniel Creech 26:58

But then in 2021, we really started to see an acceleration in electricity cost and such. Now, what was the big key factor there? Well, obviously AI. And just to point out quickly here, we’re seeing this massive ramp-up in demand and electricity and the CapEx that is going into it. Now, the reason—why wasn’t electricity demand growing until just recently? Well, it’s because the Clintons and Bushes administrations and most everybody else was selling out America, shipping everything overseas manufacturing-wise. And so there wasn’t a lot of stress added to the grid. Now, yes, we’ve been growing population, but that kind of power demand is nothing like what we’re seeing here. And so now you essentially had horrible politicians and horrible management teams that were not incentivized to do anything and keep up with the grid and such.

Daniel Creech 28:05

So now we’re in a position where now we have all this demand and we’re having to fix—we’re trying to do everything as fast as possible. We must and need to be focusing on safety and reliability, and now we have to do upgrades and all this kind of stuff. Well, one of the silver linings here in this, as this political football kicks off and will continue, is do not bet against capitalism, innovation, and incentives. And what I mean by that in more detail is here’s a company, Johnson Controls International, JCI, and near its 52-week high. And I’ve talked about this company a little bit because I was explaining how I just mentioned quickly in a previous podcast how these guys have come out with new products that essentially save energy on data systems and make them cheaper, better, faster, stronger.

Daniel Creech 29:05

Now, VRT, Vertiv was a big winner for us. These guys make cooling systems. VRT, Vertiv Holdings, a great Ohio company. You can see that sold off hard. It’s bounced back a little bit. What I want to say is that just like technology, just like computer chips and stuff, and this chart shows—I mean, yes, you had the horrible AI sell-off. It was not immune to that. But it does look like it’s building a base. It’s got its 200-day moving average. If you pull out to the weekly, it looks even better with its moving averages and such. We’ll get back to the daily. But anyway, the technology and the products that VRT and others are going to continue to come out with are only going to be better, okay? So right now, you have this massive data center, and whatever percentage of energy is required to cool that or to run it is going to go down.

Daniel Creech 30:11

They are going to get more efficient. Now, it’s not going to happen overnight. These products don’t just pop up overnight. I understand that. However, and I’m going to parlay this with talking about a specific company next on how this can be better. As this technology continues to get better, these companies, politicians, whoever is pushing and building out the data centers, and whatever you’re justifying it as—so it’s economic security, it’s energy security, it’s technological security, it’s the race in AI, whatever—they need to do a better job, everybody. And I love the Southern Company, SO, the power company, CEO talking about this weeks ago on CNBC. They all need to do a better job of explaining and sharing the story of why this is needed, why it’s good, and the benefits that are going to be seen by everybody. So in the short term, yes, electricity prices are rising. Is it only because of AI? No. I just told you it’s a combination of a lot of silly things over the past years. However, they need to pound the table on why prices are rising now.

Daniel Creech 31:16

Yes, it’s a combination of supply and demand. Yes, it’s a combination of upgrading the grid. But they also need to explain the benefits and what’s coming, and then they need to execute. I’m not saying that’s an easy sell. I’m simply saying they need to do a lot better job about that. Or if they don’t, they’re going to get voted out, politicians and stuff, or you’re going to have these legislation passed that are going to deter the growth in these data centers and AI and etc. And that’s going to be a negative overall because all this CapEx flowing into the grid, power, etc. right now is going to benefit, in my opinion, all consumers going forward. And so nothing happens as fast as we all want it to. I understand that. So Johnson Controls has released new products that talk about how it saves power, energy, and money. It makes data centers more efficient. VRT is going to be in that same boat. And I think that is fantastic.

Daniel Creech 32:17

Now, I love the softer-minded voters. Recently, Texas, because it’s midterms coming up, recently Texas even got on this bandwagon of pumping the brakes on data centers and power generation and all that kind of stuff. But they just came out—Governor Abbott, I believe, made a comment that I saw on Briefing.com about how Oracle, who has gotten beat up, one of the favorite whipping child’s of AI on spending and CapEx and debt and all that kind of thing, they’ve agreed to all these terms that whatever Governor Abbott is talking about. Now, this should not be a complicated conversation, in my opinion. And it kind of drives me nuts.

Daniel Creech 33:07

Why? Well, your Meta’s, Google’s, Amazon’s, all these big guys, okay, they can afford to invest in the power generation, into the grid, into the electricity that they’re going to benefit from. And they, in my opinion, should do a better job about that. Now, at the same time, you can’t fault them for playing the system that is built, that is in motion, okay? So you’re asking for tax breaks, you’re asking for all these incentives and everything. Again, you show me the incentives, I’ll point you really closely to the results. And there’s a lot of improvement that could be made on all parties. And hopefully we start to see that. And my—not goal, but what I would like to see is we just go in that direction. And you don’t have to scare everybody about everything. But again, it’s the political season and that’s the way the game is played.

Daniel Creech 34:04

On the soft-minded voters, softer-minded voters, if there’s one thing you can’t believe, it’s polling. Because if you look at the recent elections in Wisconsin and Michigan, I don’t know, but the polls were crazy wrong. One had the one woman, Even Cauchy had like an 80 or 90 percent plus odds in favor of a certain candidate winning, and they didn’t. Now, okay, that’s an upset. But just be cautious on polls and think for yourselves. Use the brain God gave you when He created you, okay? And do you really think—and again, I’m not saying data centers belong in everybody’s backyard. I’m just saying I’m interested in the softer-minded voters because I don’t think that everybody looks at that and thinks like it’s the end of the world and it’s going to use up all the water and all the air and it’s going to ruin everything.

Daniel Creech 35:07

Maybe that’s where the average person is. I don’t know. I’m not saying I’m correct on that. But that’s got me thinking more and more. And again, be cautious on all the polls. I know that we’ve cited some polls here and it is a political football on just, hey, everybody, it’s the scary thing to point to right now in the room. So take that with some caution. But I love the component plays. Johnson Controls should be on your watch list, as well as VRT, and then look at some of their competitors. At the very least, let me say it this way to be short and to wrap this up and kind of have some fun, dry humor. It doesn’t matter what the voters want. Yes, in a small community, or you can deter—AOC likes to brag about kicking Amazon out of her area and all that kind of stuff. Okay, you can get some of those victories. You’re not going to stop this train. It’s going to flow where it’s treated best, and those closest to that are going to get the biggest and largest benefits.

Daniel Creech 36:09

And so you got to give this some time. You can agree to disagree. That’s fine. But even like the data centers being built out in Louisiana, unless those get stopped, unless they are flat-out lying, okay, that’s a possibility, but what’s the odds of that? Well, I would think they’re a little bit lower. If this Meta data center and campus gets built in Louisiana and then it’s up and running, if you don’t see the cash flow flowing into it, if you don’t see the community get better, then you can raise hell and do whatever you want, get your pitchforks out. But just to say, oh, they’re going to put all this in and then do all this wrong stuff and nobody’s going to see the benefit of it, don’t fall for that. That is lazy thinking and we’re better than that. You’re better than that. Okay. So a couple of questions. Now, I want to try to explain on this efficiency. So kind of continuing with the question here, Cerebrus, CBRS.

Daniel Creech 37:13

Let’s see what that stock’s doing today. It was down 15, 16 percent. Now it’s down about 13 percent. This hasn’t been public for very long, so this chart, this daily chart is not the nicest thing in the world. It was a hot IPO. It really spiked to, what, 380, 400 even maybe. Then it really sold off down to the 160s. It popped and then reported earnings and was down. Like I said, it’s down 14 percent now, rounding. So what’s going on? Well, they reported second quarter. Now, here’s some headlines numbers. So here’s some reaction stuff. Q2 earnings per share was a loss of $2.98. Not a profitable company. All right, what’s the big deal there? It was $2.81 worse than expectations. Okay? The streets over there thinking, sipping on coffee, it’s going, “Hey, all right, earnings per share is going to come in about negative 17 cents.” And then boom, the headline hits and it’s 2.98. Got coffee all over you. Now you’re upset.

Daniel Creech 38:14

What’s going on? Revenue rose 74 percent year over year. That’s positive to 180. However, it was a little lower than the 190.58 million that the street was expecting. Gross margin, 41 percent, improved 940 basis points from Q2 of last year in 2025. That goes on the positive side of our T chart. Here’s the kicker, though. Even though gross margins grew significantly year over year, they are going to be a little bit lower into Q3, its next quarter, before rebounding. And to stay on this management commentary and kind of vision, communication with its investors, I went through the conference call on Cerebras Systems, and I have to say I was impressed. And I would buy Cerebras right now. I’d buy enough to get your attention if you were going to play it this way.

Daniel Creech 39:17

And I would look to scale into this. It’s obviously going to be extremely volatile. And I haven’t done all my homework here, so that’s why I’m kind of easing into this. But here’s what I really like about management. They explained that margins got hit a little bit because to meet the demand that they’re seeing, and I’m sorry, Cerebras makes these computer chips for AI inference. And these guys are the ones that make chips the size of a dinner plate. And it was so cool when they were on CNBC when they were going IPO and the guy had one. I mean, it was hilarious. It looked like a prop. Anyway, management communicated and said, “Listen, we’re seeing such demand. We’re growing like crazy.” However, they had to rent some systems in order to meet some demand. Well, when they were renting other equipment, that cut into their margins. And good on management saying, “Listen, we are going to see the bottoming of margins into Q3.” And so they guided margins to go down a little bit.

Daniel Creech 40:25

But then overall, for the year, they have margins going back higher above that 41 to 43 percent. In addition to that, they are setting crazy records on their sales. They also have remaining performance obligations. They think of a backlog. They have over $25 billion in RPO, and it’s expanding like crazy. More than once on the conference call, management talks about growing revenue. Management’s expectation for more than three times core revenue growth in 2027. That’s next year. Now, they are still massively unprofitable. I’m not saying they’re going to be profitable next year at all. However, a couple of things with Cerebras. So they talk about efficiency and how their chips, their newest ones, and the ones that they’ll be rolling out as they increase revenue three times next year.

Daniel Creech 41:28

And as they get through this trough of margins and through this in next quarter, and then they rebound and will go higher in Q4 and following. They talk about how efficient their chips are. And I’m going to dumb this down to my level here and explain this. But this is where I’m trying to tie it in with the last question on the environmentally friendly systems. During the conference call, management talks about how their technology, their chips, can use less power and get faster speeds and better results for their customers. Now, why do I say all this? I say all this because Frank’s been dead on. We’ve hit this power theme dead on, in my opinion. But you have a lot of scare worries over can we generate and add the power that we actually need?

Daniel Creech 42:35

And we’ve talked about the shortfall in gigawatts, depending on what year you’re looking at for this year or even going out into next year. And there’s different reports. But the main thesis there is we are going to be short adding gigawatts that we need. The demand is still outplacing supply. The silver lining again here is these guys are telling you, “Hey, our efficiency is getting better. So maybe you don’t need as much energy because as your technology gets better, you can still do you can get better results and you can use less energy. And these data centers are more efficient. Everything from the data centers, the cooling systems, the water usage systems, the closed-in, blah, blah, blah, to the technology inside the data center. That, I think, is being overlooked, and I think it’s being overlooked a little too much. And that’s what I want to draw your attention to and give you this perspective. Again, the value that I try to provide here is to get you to think about things. And so when you look at the efficiencies getting better in all this, that’s a net positive if we don’t need as much power as soon as maybe we thought we did.

Daniel Creech 43:45

I think that this is a long-term trend. I still think we need all of the power. I think we ought to try to add as many gigawatts for energy security and safety and all that, but it’s not going to happen overnight. But don’t get just caught up. Don’t stop the conversation at something fearful of, “Oh, well, we’re going to have this big shortfall and that just means prices are going to continue to rise and who knows what’s going to happen.” No, just keep going down that rabbit trail, okay? Efficiency is going to happen. Maybe you don’t need as much power as quickly. We’ll see how this plays out. What I really liked about on so getting back to Cerebras, a couple of headwinds that I think are also helped pushing this stock. First of all, Daniel Krieger’s crystal ball says, “Hey, margins are the big story there.” So take that with consideration. But I love the communication and how management’s telling you about that. The other thing is, essentially, OpenAI is the big dog for all this revenue for Cerebras.

Daniel Creech 44:47

However, they talked about on the conference call how they just got partnerships and deals with AMD and AWS from Amazon. And they talk about being in communication and conversations with hyperscalers. So the 25 billion in RPO, think backlog, does not count an AWS or any other hyperscaler deals. Now, again, I’m pounding the table on communication because don’t buy the stock right now thinking, “Oh, they’re going to start getting hyperscalers in next quarter. You’re going to see the bottoming in margins and they’re going to have this huge deal and more revenue growth from AWS.” Nope. They said on their conference call, “Hey, it’d be mid-2027 before we start seeing that from hyperscalers.” We’re in mid-2026, so that’s about a year. I just love the fact that they’re growing like crazy. They gave metrics. Now, they have to execute. Frank Curzio is spot on, just like the deals that we do consulting and marketing with. Yes, everybody’s usually got a great story, but you need to execute.

Daniel Creech 45:50

That is key. And you got to hold them accountable. And we’ll do that, but I got to tip my hat to this management team saying what they’re going to do. Three times revenue next year, that’s easy to follow and track. But I just like how they broke down some of the stuff. And with the AMD and the AWS and other potential from hyperscalers, that is extremely impressive to me. Now, right now, it’s basically an OpenAI bet on the revenue side, so they can diversify that. Their backlog is a positive. However, they have to turn that into revenue. You can’t just have a backlog forever. You got to execute and turn that into. But I like the optionality here, and I really like the continuing efficiencies that they’re finding. And on their conference call, they give a lot of great stats, like they get five times faster, cheaper tokens, and less power. I mean, as Frank likes to say, that’s the holy grail. AI is the holy grail because you can be more productive and it’s cost less. Well, that’s great. Well, extrapolate that out to this kind of thing and you have the same thing.

Daniel Creech 46:52

Hey, we can go to a data center. We can use less energy, less power, cheaper on the token side, and give you better results. Where do I sign? Exactly. So I think the initial reaction is okay. Again, I’m not calling the bottom here, but I do like this company and what it’s doing and its management team and how it’s communicating through its conference calls. All right. So a couple of questions. Got that answered. Ranted a little bit. Tried to educate you a little bit, entertain you. Daniel@curzioresearch.com. Love me, hate me, don’t ignore me. Daniel@curzioresearch.com. One last thing before I go. It is August 13th. Happy, happy birthday to my faja, as Austin Powers would say. It is my dad’s birthday, Chuck. I love you. Hopefully, you have a Miller light to celebrate. We’ll celebrate when I’m back in town. All right, everybody. I will see you guys. I’ll see you Alpha members tomorrow. We have an Alpha update tomorrow.

Daniel Creech 47:53

Handful of companies reported earnings, so I will update you about that. And anything else that’s bugging me or keeping me up. And for everybody else, we will see you next week. Have a wonderful, safe weekend. Cheers. 

Announcer 48:02

Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money, and your responsibility.