Scott Wapner (3:22)

believe that the earnings momentum is going to continue. That. That's what you do. To Joe's question on, on the other side, by the way, according to Goldman, only 5% of companies have missed estimates. It's the smallest share in over 25 years of the history of the data outside of COVID what earnings growth was like 28% relative to 14 back in April. Now I get it that it's the mega caps that are accounting for the greatest share of that and they just continue to blow away estimates. And I mean, I don't know. If you tell me.

Jim Lebenthal (3:57)

I'm going to give you three reasons why I'm worried about people hanging their hat on earnings revisions. First, it's narrow, as you just said.

Scott Wapner (4:03)

Right.

Jim Lebenthal (4:04)

But second, what we're seeing is a lot of AI spending which is counted as revenue for the recipients of that spending, but it's being capitalized for over a longer period of time for the spenders. So you're having a disproportionate increase in revenue versus expense that will catch up with you at some point. But the most important reason why I'm worried about earnings revisions is people using that to say I like equities now is that they're a lagging indicator. Stocks move before earnings, not vice versa. So to, to. If you want to know where stocks are going, you shouldn't be looking at earnings revisions. There are other things that you can look at in the leading indicators and the leading indicator index is actually falling. So it's not that it's. I don't want, I don't want to use earnings revisions as the reason why a bullish going forward because historically that just. It makes sense intuitively. But historically that hasn't been how it's acted.

Scott Wapner (4:56)

Yeah, Jimmy, how do you see this here now?

Amy Raskin (4:58)

Well, I want to answer Joe's rhetorical question and maybe this is addressing some of your concerns as I hear them, which is what comes after earnings. We've got an economy that's actually slowly picking up speed here. And I would really actually focus on the labor markets for a second here because for quarter the last several quarters we've been talking about weakening in the labor market. If you look at initial weekly jobless claims, if you look at the weekly ADP reports, these are showing some increasing strengths. Strengthen the labor market. Now I don't want to get ahead of our skis here, but a really big tell will be this Friday's labor report to see if these early signs of some strengthening are accurate. I would also just remark that the AI spending. Absolutely. That's where the growth in earnings has come from. We're starting to see that trickle down to other sectors as well. If you look at for instance Caterpillar's earnings and its guidance, I mean clearly they're showing a lot of data center impact.

Jim Lebenthal (5:47)

There another thing where Caterpillar is recognizing the revenue but whoever is buying that equipment is going to be expanding. Dispensing that capex over a long it's going to depreciation.

Amy Raskin (5:56)

Depreciation will absolutely be an expense on these hyperscalers going forward. No question. But my point generally is that there is some good earnings growth. Not as good as technology, but good earnings growth outside of technology. Certainly financials, you know, just above 10 earnings growth, that's not bad. And, and look at energy. And I think with what we see the, the ongoing stalemate in the Strait of Hormuz, I don't think there's any chance we go back to pre conflict levels of energy prices or even close before the end of the year. So areas outside of technology that are doing well for good reason, I mean

Scott Wapner (6:27)

Brin, it's Nasdaq is up 14% in one month. Tech just posted the best month since October of 2002. And then if you want to layer on that, according to Goldman, Mega Cap Tech no longer trades at a significant premium to the market, just 13% over the S and P. Why? Because of their very earnings growth that we continue to talk about and where estimates and expectations continue to go. So to some these stocks have just gotten even more attractive.

Bryn Talkington (6:57)

I mean Tech was down but never counted out. I think to sum up what everyone's saying but just to kind of lean in a little bit on what Amy was talking about. The earnings from tech have been amazing. And we talked about this Scott on closing bell on Friday about earnings year over year were up 20 have been up 25%, which is historic. But actually about half of that was from these tech companies marking out their anthropic, their SpaceX, their Databricks. And so you had the largest markup in their private companies that you've had in over a decade. So Goldman did a good job of stripping that out. And so if you strip that out, you still have earnings for Q1 up 16% year over year. So to me that's just really strong. So I continue to obviously be very exposed into the tech sector and I think these companies, especially the Googles, the Microsofts, the Amazons, I think there's green fields ahead because these companies I think ultimately will monetize. And to your point, they're not expensive relative to where they've traded historically.

Scott Wapner (8:03)

The perfect example of the newfound momentum in this space comes right here, this guy to my left because he just did the rebalance of the Joe T. Yes. Which is about quality and momentum. No one doubts the quality of their balance sheets obviously, or their businesses. But now they've got momentum, which is why you had no choice but to add back Amazon, Apple and Meta into the Jyoti. You've owned Apple and been adding to it personally, but now you get it officially into the ETF again.

Joe Terranova (8:32)

Yeah, without question. And happy to get to this rebalance because we were able to significantly reduce exposure to the financial sector, which has really hurt our performance in the last quarter. Now we get to where we are today. We acknowledge exactly what you're seeing right now, Scott, and it is the resurgence once again in the Mag seven names. The strategy now holds positions in six of the seven names. We do not maintain a position in Tesla. I think that you're actually seeing the monetization of this capital spending in AI in the earnings reports for companies like Alphabet and Amazon as they trade towards 52 week highs. I believe that Apple will be the next one to get to that level and I think one of the reasons why is I'm not sure we are putting a premium on what is very quietly. There's a stealth catalyst going on currently and I believe, number one, it's represented in what you're talking about, Jiminy, the productivity contribution from AI. But it's also the usage, the embracement of these tools which I believe is growing exponentially right now in the moment and it's very difficult to measure. I think more people, consumers and enterprise are using these products and I think that's going to benefit not only these Max 7 companies, but also the entirety of the AI Halo rather as we see the Revenue growth coming over coming quarters.

Scott Wapner (9:57)

You need to, I mean, I think you need to go into a little more detail about whatever momentum you, you see in Meta, which scored to whatever level it had to score to be added. Because I feel like just as you're adding it, questions abound yet again about what is going on with how much money they're spending and then where it's being spent and how they're going to realize that investment.

Joe Terranova (10:23)

So you and I, baseball fans, we go back to the Mendoza line. Remember that the batting average level that you looked at back in the 70s as being good or bad, Meta basically is sitting right at that line, right at that level where it barely gets in. If you look at 12 month momentum, meta is up a little bit more than 1%. That's just good enough to see the strong reflection that Meta has on the quality side, which is the balance sheet, which is the revenue growth, which is still strong. I said the other day, I have issues with their capital spending. I'm not sure why they're even spending the amount that they are because internally they have such a stranglehold on social media and ad spending. That's really the strength of what their business is. But they came in slightly above that line and allowed them to qualify from a momentum perspective.

Scott Wapner (11:11)

I just wonder also. So you know, when you, when you use the word quality, when now we're debating how much of what percentage of free cash flow these companies are using to spend, whether that changes the whole paradigm of how you would traditionally judge the quote unquote quality of any of these names.

Joe Terranova (11:29)

So it's an excellent question and the obvious answer to that is if you see the deceleration in revenue growth over the coming quarters and the free cash flow generation thereafter begins to contract. I think that's a real possibility, but I don't see it right now.

Scott Wapner (11:43)

So you don't care how much of the free cash flow they're spending as long as they continue to generate a

Joe Terranova (11:49)

high where we're looking at the revenue growth, most importantly.

Scott Wapner (11:53)

Okay, so there's another move that's relevant to this conversation too, Brent, and that's from you. You, you bought more of what I think is without question the most suspect. If you want to use that word of any of these names, it's Microsoft. Tell me why.

Bryn Talkington (12:10)

I think Meta is actually more, way more suspect than Microsoft. So I love to listen to these earnings calls and you listen to Amy and Satya Nadella and azure was up 40%. Copilot went from 15 million to 20 million now listen, I have been very critical of Microsoft's execution and I likened it like nobody likes teams, everyone likes Zoom. And is Copilot going be the new teams? And what you're seeing though is it's actually starting to work. Copilot, cowork, you can now go in and say create this new Excel. And it actually creates a new Excel, a brand new Excel, the Word document works. Brad Smith came out on X talking about they now have a legal agent probably to compete against Harvey. And so you know, Joe hit on it earlier about the word usage. I think this usage is in its very, very early days and Microsoft owns the Enterprise. So if it's a big if they can execute, the stock will not be at $414 a year from now. I think it's important on the call, I think it was Amy Hood that talked about it. They actually are starting to pivot from purely seat based to seat plus usage. And if you use GitHub, Copilot, they've already switched to a usage base. And I think that is going to be how these companies ultimately monetize because there's going to be different users spending different amounts. So you can't just have a per seat. So it's going to take a couple of quarters. The market's going to see it. But when I look at a company to say what's not priced in, if they execute, the stock will be well above 414 a year from now.

Scott Wapner (13:48)

I think, Amy. I mean, I use the word suspect only thinking about how the market's been judging it. I'm not sure the market's fully sold on what's happening or where it's all going relative to how powerfully the story seemed to begin. As you continue to turn many of the pages and get later in the book, I think now the jury's out as to what's happening.

Jim Lebenthal (14:10)

It gets a little schizophrenic on it. They like it, then they don't like it, then, you know, they, they like it again. And now we're in a, we're in a period where people are, are optimistic again. I wouldn't be surprised though if we then turn in a couple of weeks or months and people are like, where is all this money going to and, and what is the actual revenue dollars, I'm always suspect when companies talk about growth rates without giving us actual dollars. And I think that's what we're seeing a lot within. With respect to AI right now, I have no doubt that this will, that AI will be A huge revolution. The question is profitability and I just, we just don't have the answers and we're not going to have them for, for years quarters if not years. And so I think you are going to see the market go up and down and I think we're in an up phase right now in terms of optimism.

Joe Terranova (14:55)

You know, my feeling that Anthropic has taken a significant leap ahead of OpenAI and the products that they're delivering. I'm pretty sure OpenAI is going to make a little bit of a comeback here and that's going to benefit Microsoft. I think overall software you can get rewarded if you are showing good earnings. If we could show a chart of Twilio, it's a name I talk about quite frequently. They reported spectacular earnings. The stock is up significantly. I believe we have Palantir coming tonight after the bell.

Scott Wapner (15:23)

We do.

Joe Terranova (15:23)

That is going to be an incredibly important report seeing if they can deliver both on the commercial segment close to 90% revenue growth and for government revenue close to 60%. So there's a possibility that Palantir could join Twilio in that case of it's not universally all of self software rather is going to be in that apocalypse scenario.

Jim Lebenthal (15:45)

But a couple of quarters we were talking about Gemini just being, you know, blowing everyone away which they were talking which they were and now we're talking about Anthropic blowing everyone away. This is going to be could be a roller coaster for a little while

Scott Wapner (15:56)

depending on but it's also not, it's also not one necessarily replacing Just because Anthropic is doing great doesn't all of a sudden mean that Gemini 3 isn't because it continues to do. And on that note, let's welcome in our headliner for our annual conversation from the Milken Conference out in Beverly Hills, Brad Gerstner, the founder and CEO of Altimeter Capital. It's always great to catch up with you. This is especially timely given it comes on the heels of those mega cap earnings reports. We'll also discuss Anthropic versus OpenAI during our conversation today because you are an investor in both. So that's a really interesting position to be in. But let me your thought if I could to start things off, Brad, where we are in the market first and foremost and and whether you like many, are as surprised at the speed in which we rebounded from those March lows and hit these new highs as we have this conversation today. Minor pullback of course in the moment notwithstanding.

Brad Gerstner (16:55)

Yeah, well it's great to be Here, Scott, not only on my 55th birthday, we're usually out there in the round with all these people walking around us. I think this is our sixth or seventh house milking together. So it's great to be here. What I would say is, I mean, listen, the conversation here has been terrific. We came into this year and there was a huge question overhanging the market. Would AI revenue show up to justify these legendary spending levels by the MAG5 this year we're going to have 800 billion in total capex by the MAG5. And the question was, would there be revenues to justify that? And what we saw over the course of the last month were two things. Number one, the market got comfortable that we were going to get past the geopolitical concerns in Iran and the strait. And number two, they saw the revenue showing up from the hyperscalers. 28% revenue growth out of Amazon at tremendous scale. 39% for Google or 39% for Azure. 63% for Google. Extraordinary. And of course, Anthropic is adding revenues at rates we've never seen before, by the way. And so is OpenAI. And so the question as to whether or not the revenues would show up to justify this level of spending has been answered, answered very loudly, at least for the moment. But listen, part of the reason we're still hanging out at market multiples, or in the case of Nvidia, way below market multiples, is there's a wall of worry. Will the revenues continue? Are they durable? Are the margins going to be high enough to justify, you know, the return on investment? Those questions have to be answered. I certainly feel strongly that they will be answered in the affirmative. But that's the reason we don't have a bubble and we're not running away with super high, you know, multiples in excess of the market.

Scott Wapner (18:36)

Now, I just read the stat before you joined us according to Goldman, that the mega caps now trade at a smaller premium than they had before to the S and p, like 13% for the simple reason of what you. And you know, we here at the desk have, have talked about. The, the growth in the revenues and the earnings projections are, are astounding. So what does just figuring your positioning and knowing the stocks that you own, I don't know, the last month must have been just incredible for you guys. But what does your positioning look like?

Brad Gerstner (19:09)

Yeah, I mean, listen, last month was, I've been at this now for over 20 years professionally in the public markets. It was our best month in the history of altimeter and we were bouncing off, you know, a bottom that was a, you know, a tough month the month before, but we stayed the course. You can see what our exposures are to. We own compute, we own logic, we own memory, the substrate of AI. And I continue to believe that those things are going to perform incredibly well. Think about memory as an industry is only trading at five times earning, in the case of Nvidia, trading at 13 or 14 fully taxed GAAP earnings. And so we think these things are undervalued. We understand the concerns that are in the market. But listen, it comes down to this. If AI does what we think it's going to do and these companies supply the chips to AI, they're going to be much, much higher in the years ahead. I've said before, I think Nvidia will be the first $10 trillion company as I sit here in May of 26, I believe that to be true. And whether it comes all at once or whether it comes over the course of the next two to three years, we're patient. We're going to own this. It's one of our largest holdings.

Scott Wapner (20:18)

So as we sort of look at what we learned, so to speak, from these Mega Cap earnings reports, right after they all came out, we characterized them on this program as Alphabet. Looking like the clear winner from the reports, not in the biggest picture. And you can have a different opinion, of course, and we'll get that from you momentarily. The clear loser from earnings appeared to be Meta. Still suspect appeared to be Microsoft and humming along Amazon like you were just talking about. And the reason why it's one of your largest positions. Have we characterized those fairly, do you think?

Brad Gerstner (20:55)

I mean, listen, every, all of those companies are doing extraordinary things. Let me just give you a statistic. It's just eight quarters ago that collectively they were doing $150 billion in revenue. Now they're doing $350 billion in revenue. They are growing tremendously faster than what the consensus expectations were just a few quarters ago. I think all of those companies are going to do great. Certainly people are asking the question about Meta, you're spending all this money on Capex, what do we get for it? Right. So they're going to have to show continued acceleration. They're going to have to continue to do the things to maintain margin. You know, they, they've talked about how they're going to continue to get fit to tighten the belt to make sure that the margins pay for what the returns that we're getting. But I'll tell you this, if I know Mark Zuckerberg and team, they're going to deliver some great models and some great products. Productivity for the consumer, entertainment for the consumer later this year. I think it will continue to perform well. But listen, Amazon, Microsoft and Google have tangible returns. Their cloud revenues are accelerating at scale. We thought Amazon was best positioned for a lot of reasons, partly because it had underperformed, partly because of Trainium, but they're really just doing an incredible job. Now, major shareholders of Both Anthropic and OpenAI, OpenAI about ready to distribute all of their models across AWS, which we think will help accelerate OpenAI. But clearly Google with its TPUs, its Cloud, you know, services is benefiting tremendously from what's going on in AI. And most amazing, let me just say I was on here two years ago and I said, listen, Google is suspect because 10 blue links is going to get displaced by the answers of AI. They grew search revenues 19% in the quarter, way higher than we forecast a couple of years ago. I'm glad we had the mental flexibility to own Google along the way here. But the reality is this moment, because the rate of change is so high, Scott, you have to maintain your mental flexibility. But I don't think you, you're well served by trying to day trade this. You'll get whipsawed because the market was down a lot earlier in this year only to come roaring back. I mean, you look at the returns in the month of March or the month of March and month of April. If you sat out three weeks in April, you missed two or three years worth of return in many of these stocks. So that's the danger of trying to think that you can out trade this thing.

Scott Wapner (23:22)

So to borrow the phrase from Yogi Berra, it's like deja vu all over again. A little bit. It sounds around Meta specifically as you're just articulating all the money they're spending. Can they hold in margins? Can they this, that and the other? It almost feels like you want to draft another letter, but your position size today isn't what it was when you wrote the original. Time to get fit. But are we in a little bit of a moment in which investors are crafting their own sort of questions about this company?

Brad Gerstner (23:53)

Well, I'll tell you, Susan Lee is an extraordinary cfo. She's focused on free cash flow. Mark and the team are totally AI pilled and are focused on delivering the best products in the market. I think they're going to shock the world in the second half of this year with some of the products and the models that they're going to roll out, but they know they have to deliver. The nice thing is AI is bringing incredible efficiencies to their business and everybody else's business. I think you're going to see margin expansion. If you look at the S&P 500 earnings increase, a tremendous amount of that is coming from margin expansion. I think we're going to see that for the next three years. It's going to show up in the economy in the form of productivity gains. And Meta led the way in the fall of 22 and in the spring of 23. Remember, it was Mark Zuckerberg who wrote his own letter that said flatter is faster, leaner is better. He's lived up to it. He's led the way. I think he'll continue to do that with Susan, making sure that margins stay intact notwithstanding all of this investment.

Scott Wapner (24:52)

I'm hoping that you're not going to give me a I love all of my children equally kind of answer when I ask you about Anthropic versus OpenAI in which you invest, certainly in both, because I feel like, and Joe alluded to this a moment ago, that investors have started to try and pick a winner, at least now between the two of them, and that Anthropic seems to have stolen a lot of the buzz because of their positioning within the enterprise relative to the consumer. You've had some questions now being asked about who's on the best roadmap to an IPO. Is OpenAI missing some of their revenue targets and their user targets, all of these things that we gave them, at least at the beginning, the benefit of the doubt. Now, I don't feel like it's so much. How do you answer that?

Brad Gerstner (25:43)

Well, listen, the Kentucky Derby was this weekend, and the horse that started, you know, in last ended up winning the Derby. The fact of the matter is we have three or four horses in this race. They're jockeying, they're changing positions along the way. They're all great. And guess who's winning? Team America is winning. We have multiple models competing, whether it's Elon, whether it's Google, whether it's OpenAI, whether it's anthropic. They are keeping America on the frontier at the moment. Make no mistake about it. Anthropic has taken the lead in January, February, March and April by adding historic levels of new revenue. Right. Because they came out with Claude code and opus 4.6 in early December, and enterprises across the world are adopting it. But if you look at the growth in Codex over The course of the last four weeks or three weeks, it's pretty incredible if you look at what's being said on X and Twitter about Codex versus Claude code. Incredible. So here's the thing you have to know. I believe that the wave is the biggest wave in the history of technology, will be incredibly beneficial for America. I'm rooting for all of them because I'm rooting for America. I think you can own all of these. It's not that everyone is equal at a moment in time, Scott, but this idea that one of these is going to win it all, I think is misplaced on the enterprise side, just as we have with Amazon, Google, Microsoft, we have great competition. They split up the profits of the cloud business. I think you're going to see that in AI on the enterprise side, on the consumer side. Sure, they haven't got to a billion weekly actives yet, but they already are at over 900 weekly actives. It is the verb still in AI, but you can't count out Google or Claude and a lot of consumers are using it. So we have active competition. They're both doing great. Here's the deal. I would buy mo both of them today in the market if they were trading in the public market because I believe that the entire sector is early in its penetration of the largest tam, the total addressable market we have ever seen. We are still very early days. The two winners are going to be much, much bigger than they are today.

Joe Terranova (27:46)

Brad, great to see you. Happy birthday. And I agree completely with your assessment of OpenAI.

Scott Wapner (27:51)

This Joe Terranova, by the way, I can't see. Go ahead, Joe.

Joe Terranova (27:54)

Oh, Brad knows me well enough to know my voice. But I have to ask you, there is a general concern about ultimately, when OpenAI and Anthropic step into the public market, where does the capital come from? Is that a concern from your perspective? Walk us through how you see that unfolding.

Brad Gerstner (28:14)

Well, first, Joe, you've heard me say many times they've already IPO'd. They were just private IPOs. OpenAI raised 110 or $120 billion in the most recent round. Look at the cap table of the investors in that round. It looks, you know, first, it's bigger than any IPO we've had at 120 billion. And then, you know, the list of investors in that round, from the fidelities and the capital groups to the altimeters and the CO twos, it looks like a day one IPO gap table. So I think you got to understand that. Secondly, whether or not they'll be bought in the IPO in the public markets. All depends on how the company is doing relative to its price. You and I both know there are trillions and trillions and trillions of dollars on a global basis that look to find any opportunity for arbitrage, any opportunity for Alpha. So so long as they're priced fair to the future expectations of the company, of course there's going to be tremendous demand for the business. The same for Anthropic. Frankly, the demand for Anthropic shares today is some of the highest demand I've ever seen over the last 25 years in Silicon Valley. So, you know, I hope and you've heard me say I want these companies to come public. I think it's super important that retail investors in the United States have the opportunity to participate in the two most important companies to come along in technology in years. I'm thrilled. SpaceX and X AI are going public at the end of June. Right? Most people are talking a lot about anthropic and OpenAI. Elon is an N of 1. He's building incredible capability and capacity on the data center side. And so that one's going to be the first one out of the gates. I love the fact that they're all coming public and I would love to see each of them put some shares away for every kid in their, in their Invest America, their Trump accounts. Right? Could you imagine if every single One of these 40 or 50 million kids had a share of SpaceX or a share of OpenAI or a share of Anthropic in their accounts? That's the way you align all these kids with the upside of capitalism and the upside of AI.

Scott Wapner (30:11)

But I don't know if what I just heard from you is exactly a ringing endorsement for the retail community to go out and buy these IPOs in the open market when they eventually do come public, if you suggest that they've already in a sen IPO'd like, what level of growth is gonna be available to the retail community? What level of upside that's already been realized by the pros, not the average Joe's.

Brad Gerstner (30:39)

Well, listen, you know, buying a company at a trillion dollars in value or a trillion and a half dollars in value is not a get rich quick scheme. So I just want to be honest with folks watching at home for retail investors, right? You're hoping to compound these stocks at 20, 30% for a long period of time. That's how you make a lot of money, right? Long term compounding. If your hope is that you're going to trade the IPO and double or triple or quadruple your money on a trillion dollar valuation? It's just unlikely, right? You're right. Today companies are staying private longer. More of the value capture is occurring in the private markets. We have to address that right as a country and make this more accessible to retail investors early in that value creation cycle. I don't make the rules of the market. I'm just reporting what I observe. I think they'll have plenty of retail and institutional demand so long as the price of the IPO leaves enough meat on the bone that investors can underwrite to two or three years of compounding in that 20 to 30% range.

Scott Wapner (31:38)

No, I just think it's, it's, it's important and I think it's, it's critically important to, for them to hear, for that cohort to hear from somebody like you with a bit of what I suppose you could call a reality check on what may be. Let's do this. Let's squeeze a break in and we'll come back. We'll continue our conversation with Brad Gerstner on the other side right after this.

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Brad Gerstner (32:29)

See capitalone.com for details.

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Scott Wapner (32:51)

Hey, how's it going?

Brad Gerstner (32:53)

Yeah, good, thanks.

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Scott Wapner (33:32)

Back with Altimeter's Brad Gerstner, our annual visit, of course, from Milken. So what really jumps out to me, and I want to revisit this, is Microsoft and the fact that you do not own the stock as we have this conversation. Is that, is that correct? Because that's how I read it. And I want to know why? Because somebody like you who owns Amazon and Nvidia and Alphabet and Meta, choosing not to own Microsoft is a statement, whether you want it to be projected that way or not. To somebody like me, it is. Tell me more.

Brad Gerstner (34:06)

Well, listen Scott, first we, as you know, we've owned Microsoft a lot over the course of the last few years. I think Satya and Amy are doing a terrific job and we'll own Microsoft again. But you have to make choices in this market. We only have so much capital. 80% of our capital has been in memory and logic and computer, you know, companies like Nvidia, companies like SK Hynix, companies like Core, Weave, et cetera. And so that's consumed a lot of capital. The capital has to come from somewhere. And when we looked at Microsoft, right, we, we thought they were investing a little less aggressively in Capex to drive that future AI growth. And on the other side, a big part of the business is software and there's a lot of skepticism about software today. Now I happen to think that they're seeing tremendous activity on the software, the productivity side of the house. I think that business will accelerate in the future. But we were right in trading out of it a bit because the stock has come in and the stocks that we rotated those dollars to, like SK Hynix, has done incredibly well. So I wouldn't make too much of a statement out of it. I think it's an incredible business. They're going to do great. They're definitely going to be on the winning side of AI, but that's why we made the change.

Scott Wapner (35:11)

Speaking of memory, do you think those stocks have gone too parabolic, too crazy? What, what we've been seeing in certain parts of the chip area.

Brad Gerstner (35:22)

So first, you know, if you look at the, if you look at the multiples, the fully taxed GAAP earnings of those businesses, the multiples are actually flat to down, Scott. They're trading at 5x fully taxed earnings. Samsung's going to do more in profits this year than Google. And so the question has always been why the hell do these companies trade at five times earnings? Because people think it's a boom and a bust. There's no durability to the earnings. If you believe it's different this time, if you believe there's durability to Those earnings through 2028, through 2029, which we do and could be much further out then. These are ridiculous values in the public market. They mean we maintain them as some of our largest holdings. We think they will continue to compound and we think I'm going to do a pod on this in a couple of weeks with the CEO of Micron. I think there's some industry restructuring going on that will be good for the long term health of the business, more collaboration between them and the hyperscalers that perhaps will give people more confidence about the long term durability so that it's not so much of a boom and bust anymore.

Scott Wapner (36:25)

Well, when you look at some of the other chip names, I mean the gains in the last month are extraordinary. Doesn't even begin to tell the story of an AMD, for example, which is up 57% or a Broadcom which is up 31 and so on and so on and so forth. Does that, what level of pause, if any, does that give you about where these, these stocks have gone?

Brad Gerstner (36:54)

I mean, listen, you got to make choices. Some of these stocks understandably have been memed because people have gotten really excited about the CPU super cycle or the GPU super cycle. We just had this conversation. Obviously token consumption is exploding. I think that will continue. But look at Nvidia. At 195 bucks, Nvidia is trading lower than it was six months ago. So it's hard to say. At 13 or 14 times fully taxed earnings on a business that's giving you guidance of a trillion dollars of future orders, it's hard to say that that's in bubble territory. I look forward to hearing from them in a couple weeks when they report. But I think Nvidia is terribly under owned. I think it's terribly undervalued today. And so we're happy to sit in that and to own it. But I agree with you. If you look at arm, which is another one of our big holdings, it's doubled in the last month. Clearly Lisa's doing a great job. Look at what Lipboo is doing at intel because of the shortage in CPUs. And so I think you have to listen when anything goes up a hundred percent in a month, Scott, for retail investors, they shouldn't feel bad about taking a little profitability, right? This game is either like hold it forever and let it compound or pull a little profitability off when you think the market is getting ahead of itself. I'm just telling you when you look at altimeter's net exposures month over month. When the market pulled back on fears about Iran, we didn't run away from the market because we saw fundamentals accelerating. We pushed more onto the table. We've continued to make sure that we have our dollars in the things that we think are best valued. But our aggregate exposure is very long the market, we believe the market goes higher from here. Hopefully we get the situation in Iran solved sooner rather than later. $120 oil will take its toll on the market if we don't solve that over the course of the next three to four months.

Scott Wapner (38:48)

Jim Lebenthal's got something for you on Nvidia.

Joe Terranova (38:50)

Hey.

Amy Raskin (38:50)

Hey Brad. Good to talk to you. Always agree with you on Nvidia. Agree with you by the way that we all have to be long term investors. If you could just dig a little deeper on maybe what the most recent six months malaise, I'm going to call it that in the stock price has been. Do you think it's competition that has cropped up maybe from the hyperscalers like Alphabet, like Amazon or maybe even competition for capital? I know you've got Cerebras and they're going to go public here, you know, really quite soon. You mentioned intel. So you know, maybe this is just short term competition either for capital or for the actual chip demand. I'd love to hear your thoughts on that. Either way, both of these should pass, right

Brad Gerstner (39:29)

Joe? It's, it's the exact right question and 100% the reason it is traded off is because people believe I, I think incorrectly that all the share is moving to trainium or to TPUs or to Cerebras. I'll be in New York next week for the Cerebras IPO where I was on the board and, and, and a major shareholder. But here's the thing to keep your eye on. Token per watt per dollar. Nvidia is one of the most efficient in the world. Where do you think that chat GPT 5.5 was trained on new Blackwell chips. We got Vera Rubin rolling out later this year. Notwithstanding all of the noise in the market, the pie is growing so much that it's a much bigger slice of the pie for Nvidia even if they're giving up a few share points to trainium or to TPUs which are also good products. But on a token per watt basis Nvidia is still the best in the business when they roll out the the Vera Rubin LPX clusters later this year. Remember, LPX came from the GROK acquisition that they announced at the end of last year. That's going to be another huge step forward for these models. So I think Nvidia is in an incredible position. Like I said, I think you'll hear from them on earnings, but that is definitely what the market is worried about. But I think if you just look at the numbers, a trillion dollars over the course of the next six to eight quarters I think speaks for itself.

Scott Wapner (40:51)

You'll be on a panel in less than 20 out there with Senator Cruz and Kevin Hassett, the topic being investing in economic mobility. So I think we all know the kinds of things that you're going to be talking about something Brad, frankly, that you've been talking about on this program for the last five years. Let's go down memory lane for a minute. Watch this.

Brad Gerstner (41:15)

Everybody in this country should be able to participate in the future of America. I would love to see the Biden administration take the equivalent of a SOFI account or a Robinhood account. And rather than focusing on Social Security at the end of people's lives, how about we give a $2,000 stipend at birth, right? That people can't withdraw that compounds on the future of America in an account that they can see their savings grow. They can see a snowball grow, right? To me there's an opportunity. New Zealand, Australia already do it. I would love to see a national savings account in this country where everybody gets to participate in the value creation.

Scott Wapner (41:58)

Well, who knew that some five years later we would be talking about this coming to reality, July 4th it all launches and the take up thus far has been pretty good, I suppose. I don't know what sort of expectations you had, but 5 million children thereabout have signed up for these accounts according to the Treasury Secretary on April 15. So what were your expectations and where do we go from here? How big do you really think this can be?

Brad Gerstner (42:29)

Well, first, Scott, let me start off with a thank you because I first talked about it on air with you. We've talked about it at least 10 times over the course of the last five years. It's an unbelievable dream that became law last July 4th. Starting on July 4th, just 60 days from today, every child forevermore born in America will start off with an investment account at birth, automatic stapled to their Social Security with a thousand dollars in the S&P 500. If you start with a thousand dollars and you save just $50 a month. It's $50,000 at age 18 for your kid, it's $200,000 at age 30, and it's a million dollars at age 55. 60 to 70% of the people in this country, they just don't participate in compounding. Now we're going to change all that. It's an evolution of our social contract that will be bigger and even more important than Social Security. We're going to shift trillions of dollars in wealth from the compounding of the market to every family in America. I think it's a necessary transformation in the age of AI. Kudos to the President signing it into law last July 4th. We'll launch it like you said, this July 4th, every child's going to have on their phone, they're going to own a little bit of Nvidia, a little bit of Microsoft, of caterpillar, of Walmart, etc. They're in the game. They can add 10 to 20 bucks a month. As you know, incredible philanthropists, my partner Michael Dell and Susan have, have donated 6.25 billion. You know, this is what the phone app, all the families are going to receive on, on July 4th. So a super important initiative you mentioned. The Treasury Secretary said a couple weeks ago we're at 5 million. I think we're already at 6 million. We'll be over 10 million by July 4th. There are 40 million kids in this country eligible today to go sign up@TrumpAccounts.gov they get at least $250. And if they're under the age of two, they get a thousand dollars to seed that account. We have thousands of employers, right? We've talked about them here. Large to small, from Uber to Nvidia, from Salesforce to amd, who've all said they'll add money to the accounts of their kids. This is going to be a 401k like benefit by all corporations in America adding to those accounts. So again, we expect that this is, I mean, if we get to 10 million accounts by July 4th, it's the single largest transformation of the social contract since Social Security and the Industrial Revolution. We're just getting started. And if I can get some of my friends to donate shares of SpaceX or OpenAI or Anthropic to these accounts, it will quickly move us to 40 or 50 million accounts. And importantly, starting in 2027, you don't have to sign up. It's going to be Automatic at birth. 3.7 million kids born a year. 3.7 million kids are going to start life off as a shareholder in the upside of America. It's a great transformation, great moment for the country.

Scott Wapner (45:17)

All right, you go tell that story on stage, moderated by Mr. Milken himself. I don't want to keep him waiting, so I'll let you go. Appreciate the time. Congratulations and we'll talk to again soon. It's Brad Gerstner, as always from Milken with us. We'll see you coming up next. We have more committee moves to tell you about right when we get back.

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Brad Gerstner (46:05)

Terms of lie see capitalone.com for details.

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Scott Wapner (46:21)

Hey, what's your pin?

Bryn Talkington (46:23)

2538.

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Scott Wapner (46:38)

we had ATT Business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn, an influencer even live stream the whole thing. Not good for business. Now with AT&T business wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.

Brad Gerstner (47:02)

AT&T business Wireless connecting changes everything.

Scott Wapner (47:08)

Let's get back to subcommittee moves. Brent, I'm coming to you because we have a debate now because you sold GE Vernova, Joe just bought it in the rebalance. But you tell me why you sold it and then I suppose we'll have the rebuttal from Joe.

Bryn Talkington (47:23)

Yeah, I mean well, this is in the epicenter of the picks and shovels. AI build out. The earnings that they reported were incredible for every $1 of revenue, I think they have $2 in bookings. But I bought the stock in February around low seven hundreds. I sold it around 1100. So it was close to a, close to a 50% gain in three months. And so I just thought it was time to ring the register. It's a great company, it's not cheap, but I do feel like the chart was looking a little bit parabolic. So if it comes back down to maybe the 50 day around 900, I may get back in. But I think sometimes you need to say, is this a trade or a long term holding? And when you can make 50% in three months plus I decided to ring the register.

Scott Wapner (48:09)

I guess you're just playing the momentum.

Joe Terranova (48:10)

Yeah, I mean, obviously playing the momentum. It's from a fundamental inequality standpoint, this is a reasonably valued company and they deliver the earnings growth to Brin's point. The last quarter's earnings were remarkably strong. So analyst community, they look at this stock, they see it trading at 1080, 12 month price target is 1212. Yes, we are chasing the momentum, but I think we're doing it rightfully so. I have no problem though with Brin ringing the register on what sounds like a really good trade.

Scott Wapner (48:37)

Yeah, I mean, well, really good trade. Both can obviously be right there.

Joe Terranova (48:41)

Absolutely.

Scott Wapner (48:41)

Brin's not calling the end of momentum by any stretch. It's just okay if you got a 50% gain. Exactly what Brad Gerstner was talking about. Not going to fault people for taking a little bit off the table. We do have some breaking headlines from New York Fed President John Williams. Our Steve Liesman has those for us. What's he saying?

Steve Liesman (48:59)

Yeah, Scott. John Williams, the New York Fed president, expressing, I would say an elevated level of concerned about the Mideast conflict, saying it's introduced significant and unpredictable predictable risks to the outlook. He said the conflict could create a bigger supply shock with more severe adverse consequences. And he says the risk to both sides of the Fed's mandate, the employment and the inflation side, have increased. There are several plausible scenarios, Williams says, that entail more severe dislocations, including an emergency supply chain issues, emerging supply chain issues that will have wide ranging implications. He sees pass throughs into airfare, groceries, fertilizers and consumer products from higher energy prices. He does say, though, the current stance of monetary policy is well positioned to balance these economic risks. So he's not weighing in on the fight at the Fed right now over the forward guidance that was the subject of dissents. He says uncertainty is already high from Trade and other government policies and the energy crisis just adds to that. But the US Economies remain resilient and consumer spending has held up. You got the business investment from the robust AI investment that's going on, and the labor market's not adding to inflationary pressures. Guys, I'll just skip down and give you his outlook on the economy, which does show 3% inflation for this year. That's a little bit higher than maybe his priors, but he does have gdp still around 2% or two and two and a quarter. And the unemployment rate, not much change, but definitely in his words there, Scott, an elevated level of concern of how this conflict ripples through the U.S. economy and the global economy.

Scott Wapner (50:30)

SCOTTISH yeah, it's going to be real interesting moving forward with a new Fed chair coming in and all that. Steve, thank you. That's Steve Liesman, our senior economics correspondent. Let's get another move here. And Joe, Wow. So Berkshire's just off the annual meeting and you sold it in the rebalance.

Joe Terranova (50:48)

Stock hasn't done anything over the last 12 months and they're sitting on too much cash. If you think about that cash, they probably would have been better served to put that cash into an S and P index fund to get a better return. So I, I think that's one of the challenges for this company right now is that cash is just sitting there in a market that moves higher.

Amy Raskin (51:05)

You know, if you wanted in an S and P fund, why don't they just buy back shares? That's what I'd like to see them

Jim Lebenthal (51:09)

do that in March.

Amy Raskin (51:11)

Oh, by, by a tiny, tiny amount. I think it was 300 million. I'm not arguing with you. They've got 400 billion.

Jim Lebenthal (51:16)

And after two years of not buying

Brad Gerstner (51:17)

anything and that exercise was wrong and

Amy Raskin (51:20)

I think optically, Amy, he has to wait a second because clearly Warren didn't want to buy back shares. So for him to come charging in buying back shares like let' give a month or two or maybe a quarter or two before they really buy back,

Jim Lebenthal (51:32)

you could see that coming soon. I mean, you could see that accelerating from here. I mean, the stock's underperformed to your point, by 40% over the past year, just in terms of versus the market. So it's certainly the valuation has come

Joe Terranova (51:44)

down a lot and not invested in technology enough.

Scott Wapner (51:47)

All right, so let, let me ask, I want to ask you, Jimmy, I want to get to ebay. Take a look at ebay, because you got this GameStop offer and, and Ryan Cohen, obviously, who was on Squawk this morning I want to you tell me how you judge this offer.

Amy Raskin (52:03)

Well, I, I think that actually not just gamestop, but the bankers TD are scrappy upstarts here. And I think, you know, there's this parallel being drawn to Paramount Skydance taking on a much bigger acquisition with Warner Brothers. And I think that it may be the same thing here. Now one key difference here is obviously GameStop doesn't have Larry Ellison and that, you know, several hundred billion dollars of Oracle stock back. Nonetheless, I think they might come through. But here's the thing. $125 to me is way too cheap. Joe and I are both in this. We both like the fundamentals of the story. I just got in it in the mid-90s, not that long ago. I think $125 is too cheap. Let's see if they're forced to actually raise that in order to consummate.

Scott Wapner (52:47)

So you think this is a credible.

Amy Raskin (52:49)

I think it's credible idea. I think it's credible. First off, there's 9 billion of cash on GameStop. I obviously don't, I mean, you know me, you know, I don't care about GameStop. But there's 9 billion of cash on their balance sheet. TD says they've lined up 20 billion of debt financing and half of this is supposedly going to be financed in GameStop stock, which regardless of what I think about it, there's a whole community of investors out there that loves that stock.

Joe Terranova (53:13)

Okay, I'm not so sure I agree with that. You're not buying the stock here because you believe there's going to be some acquisition. Jim, you're going to agree with this. I'm sure you're buying the stock for the significant fundamental improvement in the business over the last 18 months. The acceleration in revenue growth, the cleaning up of the balance sheet, the potential opportunity as we move forward. That's why you're buying the stock. I almost wish this news didn't come out today because very quietly, underneath the surface, this stock continues to appreciate deliver on each quarterly earnings.

Scott Wapner (53:46)

Josh had it on his best stocks

Joe Terranova (53:48)

in the marketplace and absolutely it deserves to be there. But now I don't want people coming in chasing the potential for there to be $125.

Amy Raskin (53:57)

You don't like the quality of your gains. Okay, I. Look, I'm with you.

Joe Terranova (54:00)

I don't like the quality of the shareholder that's coming in now because their intention of owning it is much different.

Amy Raskin (54:05)

All I'm really saying here is that I think the deal is credible, which

Scott Wapner (54:08)

is the question you think you can have a viable, if you want to use that word, competitor to Amazon on a much greater scale?

Amy Raskin (54:15)

No, no, but that's not. That wasn't the question. The question is.

Scott Wapner (54:18)

No, but that's my question.

Joe Terranova (54:19)

That's the thesis, though.

Amy Raskin (54:20)

I mean, I don't look, one step at a time. Let's just see if the deal actually

Scott Wapner (54:26)

you're giving more credibility to. You're giving more credibility to the deal going through than you are to the plan itself.

Amy Raskin (54:33)

Sure. I mean, he has reasons, Cohen has reasons for doing this. Whether his reasons are right or not. I'm not opining on. I'm opining on whether this actually could happen. I think it actually could happen. Now, if I end up. Scott, I think this is the question you're asking me or, you know, if I wake up and I've got GameStop shares, I'm going to be a little hard pressed to hold on to those games. GameStop shares.

Scott Wapner (54:54)

All right. We'll do finals after this break. Have another big interview coming up. Three o' clock today on the closing bell from Milken, Robert Smith, Vista Equity Partners, the founder, the chairman and the CEO. He's going to talk a lot about software, I can guarantee you that. And you need to hear what he has to say given what those stocks have done, especially lately. So we'll look forward to that. Tony Pescarello, Goldman Sachs will join us as well. Stephanie Link, Jordan Jackson, Chris Farrell, Bryn Final Trade Uber.

Bryn Talkington (55:23)

I had sold it at 94. I'm getting back in. It needs a small sentiment shift and it can get to $85 easily.

Amy Raskin (55:29)

Farmer Jim ExxonMobil Consolidation is over.

Scott Wapner (55:31)

Okay.

Jim Lebenthal (55:32)

Amy Alumina, I talked about this last time I was on I Good reaction to the quarter. Still like it a lot.

Joe Terranova (55:37)

Joe Diamondback, Energy.

Scott Wapner (55:39)

All right, I'll see you at 3. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.

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Scott Wapner (56:47)

Hey, how's it going?

Brad Gerstner (56:48)

Yeah, good. Thanks.

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