Travis Hoyam (3:23)

Yeah, Lou, I think this is interesting because AMC is a good example of a company that became a meme and then it didn't go anywhere. I believe the Stock is down 99% from its all time high in 2021. But then you have a company that is actually building something. Well, you know, one of the ones that I own is Joby Aviation. Okay, that is much more of a story stock. There is no cash flow. You can't do a DCA DCF of, you know exactly what their financials are going to look like. But if they can have investor confidence over the next few years as they get their FAA approvals for their aircraft, as they build out their business model, they could benefit from having a higher stock price. It's almost, you know, the stock price leads to the business. This is actually something that Tesla did. I think we overlook this. Right. When Tesla went public, it was a couple billion dollar company. I believe they raised tens of billions of dollars and then that meme status really helped drive the business. So is that part of a new business model is you know, what get investors excited and then we kind of become the VC funders.

Lou Whiteman (4:29)

I don't think it's a new business model. I think it's a new application. But I think you're right. The first thing is, is that meme stocks is a terrible identifier because it contain, it doesn't really. There are some really crummy companies that have been memed and there have been some really good companies and yeah, the good ones will take advantage of it. As far as, you know, Dan mentioned that problem. If you know you get all your gains in three months, may we all have such problems. Right. But again, you know, at that point I think that's when kind of the, the question is that, you know, in one sense it could be a great company getting a real benefit and A real like just cash and fusion or it could be just. All right, time to sell. I can't believe it work. I gotta say, I have a soft spot in my heart for the whole meme crowd. I mean, I'm constantly looking to buy stocks where I think the market is wrong and I'm right and that I see something that they don't. That's value investing. And at the end of the day, that's kind of what kicked all this off that, you know, everybody short this, they don't see what I see and it can go up. I look, I'm not going to try and predict the next one. I'm not going to like join the crowd. But I like this crowd. I believe in this.

Travis Hoyam (5:43)

I want to put this to both of you. And I'll start with Lou first. How do you think about taking profits in this? When you have a stock that you built a thesis, you think that there's this potential in 3, 5, 10 years, and then suddenly the stock grows crazy. Do you take a little bit off the table? Do you ride the wave? This is something I struggle with, is when to sell. So I'm curious what you guys think when you get these short term gains.

Lou Whiteman (6:07)

So I think, yeah, like you say, it depends on the company. You mentioned Joby, and that's one I have too. And I will say that Joby is not worth what the market values it at today, period. But if all goes well, I think it could be. So at worst, I'm going to take some off the table. I haven't personally done that with Joby. I've done that with a few others that have just kind of gone crazy in my head. But look, I. I think you have to. I'm going in with a 5 to 10 year mindset and you have to keep that mindset. And you know, if you still see that potential, that should outweigh any kind of greed.

Dan Kaplinger (6:43)

For today, I think I look to management, Travis. I think that you really need to see how company management responds to their company becoming a focus of meme investor attention.

Travis Hoyam (6:57)

So would you want them to raise capital and say, hey, you know what? We got a stock price that's worth five times more than it was six months ago. Let's sell some stock. Let's do a convertible debt offering. Is that what you're looking for?

Dan Kaplinger (7:11)

Often, but not always. And it's the, it's the attitude that management takes with it. For instance, I mean, let's get out of the meme stock universe just for a second and go to pharmaceutical stocks, to biotech stocks. Oftentimes biotech stocks, they will report a favorable clinical trial outcome. Stock shoots up immediately. The company comes in and says, we're doing a secondary stock offering. Why? Because biotech companies constantly need money in order to finance their business and it's a great opportunity to do it. If, therefore, a particular meme stock is in a business where access to capital is going to be really valuable, then responding to a big jump from a meme stock craze by selling shares and raising capital for future use, it's going to validate the value of that company. It essentially issues shares. It improves book value, it improves the balance sheet, it gives them flexibility to do things later on. And then the question is, what are they going to do with it? And what I want to see management do is be consistent with whatever vision they had in the past, maybe augment it by this stroke of fortune, but not get full of themselves, not let their heads get too big, just treat it for what it is.

Lou Whiteman (8:34)

So the blueprint for me right now for this is Rocket Lab. And I don't know if Rocket Lab counts as meme stock, but it is up, what, 4 or 500%?

Travis Hoyam (8:41)

We'll put it in that category. Sure.

Lou Whiteman (8:43)

And Peter Beck, I think to his credit, the CEO, who is an engineer at heart, almost seems to not see the stock price he's on. His pace to build a company kind of, you know, look, it's overvalued today. It's valued based on the future. He's not adjusting, he's not saying, oh no, I need to get there faster because today's valuation. But they have also raised equity at a share price that's 10x what it was this time last year. So exactly to Dan's point, you don't ignore it, you don't mock it, but you also don't let that change your decision making in terms of how you build a business. You know, again, we'll see how Rocket Lab turns out. But I want to, that's what I want to see. That's sort of the template right now for me on how a company should deal with this.

Travis Hoyam (9:27)

Yeah. Another thing to think about is what is that cash burn? How do you get to the building, the vision that you have, you've built this, this meme on. If we're going to keep going with that word. One company that didn't do this well in the last cycle was Virgin Galactic. That was a stock that I owned. Look, if they would have used that high stock price to fund their operations to that so that they could get to launch, which is going to be next year. But they still need to raise capital and the stock's down what, 95, 99%? Something like that. And so it becomes harder if your stock value goes down. So sometimes taking advantage of these high prices is the right thing to do to be that long term business. When we come back, we are going to get to earnings season and see what Lou and Dan think about TSMC and asml. You're listening to Motley Fool Money.

Lou Whiteman (10:14)

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Travis Hoyam (10:48)

Welcome back to Motley Fool Money. AI picks and shovels have been doing extremely well recently. ASML said they expect long term growth. TSMC saw revenue jump, I think 40% in the most recent quarter. Lou, is, is this still kind of the easy button in investing in artificial intelligence today?

Lou Whiteman (11:09)

I'm not sure about that. Let's get to that in a second maybe. But look, I think at TSMC we should have seen them react more to the AI boom than asml. ASML is a great company. I own both of these companies. But ASML makes the big machines that makes the chips. These take years to build. They're half a billion dollars. You're not going to see quarter by quarter, blow by blow, demand surge. So I'm not surprised. Boring, slow and steady is their game. TSMC is going to directly see like if there's more demand for chips, they are going to see that quarter to quarter. I'll say here's my problem with the picks and shovels play in general, none of it's cheap. None of these companies are cheap. There aren't a lot of value.

Travis Hoyam (11:52)

TSMC was cheap three years ago. I think that's what you go back, you could have bought it for 12 times earnings, right Travis?

Lou Whiteman (11:59)

But I don't have a time machine. So I'm looking at it now. Whether it's these H Vac Energy, it all makes sense. But so many these things, there's only so much capacity to deploy and if you believe that it is temporary, even if it's an extended time temporary, you don't have the incentive to massively add Capacity because these things cost money. So you know, I'm kind of intrigued still by cabling. There's some companies there, Semtech, Astrolabs, they're still not cheap. But I do think that that is sort of if there is a underappreciated aspect but for the most part it feels like that this dance has been danced.

Travis Hoyam (12:38)

Dan, what were you thinking this week when you saw earnings from these two?

Dan Kaplinger (12:41)

So I was kind of surprised. You know the headlines were talking about asml, you know, talking about high growth and I was kind of like okay, where, where's the high growth? Because the backward looking.

Travis Hoyam (12:52)

I said the same thing because yeah, the I, I think revenue was down on a sequential basis anyways.

Dan Kaplinger (12:57)

Yeah, down sequentially up like low single digit percentage year over year. And even people were talking about positive outlook, but positive outlook. They released 2030 estimates for revenue implies growth rates as low as 6%. I think the high end of the range is like closer to 13% per year. And it's interesting, Lou's absolutely right. This is, that's as much as they're going to be able to do. Capacity is a constraint. They can't just like ramp up production of these highly sophisticated complicated machines. But that was what I thought with, with asml. Agree with Lou. You know, Taiwan, semi, I think in better shape, a more direct connection, a more, more easily ramped up. But there you get these rising geopolitical concerns. And so, you know, I just don't know how that's going to play out. And it has to be part of.

Travis Hoyam (13:52)

The, that's the reason that Buffett sold. He, he held, kind of did a short term trade on tsmc, bought a huge position and then kind of went, you know what, I'm rethinking this. Investing in a company that's dependent on being in Taiwan is tough.

Dan Kaplinger (14:05)

Yeah. And it's just one of those things. And yes, you are starting to see some foreign companies looking at building out manufacturing capacity to a greater extent in the US to try to address some of those concerns. But will it be enough? Not if AI demand is as strong as everybody makes it out to be.

Travis Hoyam (14:24)

Let's move over to banks. We got some big banks reporting. We got a couple of smaller banks reporting. The market reacted to this pretty negatively yesterday. Lou, so what is the bank landscape and where's the risk that we should be thinking about? Because banks are really risk businesses. This isn't memes upside. Are people going to pay back their loans?

Lou Whiteman (14:45)

Yeah. So back in the old days when I used to look at banks for a living. We used to talk about cockroaches. So I thought it was funny that Jamie Dimon actually brought up cockroaches. The old expression is there's never just one, right? If you see one, there's 30 behind the wall. That's how you tend to look at bad loans. If something comes out, the question is, how many more are there? So this week alone, earnings are strong. But JP Morgan was hit by Tricolor, which is a subprime auto lender that went bankrupt. First Brands has been in the news with a whole bunch of banks attached to that bankruptcy. The big blow midweek was Zions and Western alliance both announced issues with the same unnamed customer. The reaction we saw, it wasn't about any one of these individual loans. It's the question, this cockroach question, what else is out there? To me, to be honest, I mean, I think we know what's going on. I think it's probably a lot of tariff strain and individual. I don't think it's ready to say. I'm ready to say the sky is falling. To me, the reaction is the story. People we've known about debt buildups all summer. We've been talking about it all for a while. Wall street didn't care. Suddenly Wall street seems to care. All, all these stories, they don't matter until they do. I think it does speak to perhaps a change in mindset, maybe a little bit, a hint of risk off. But yeah, to me, the reaction is more interesting than any one of these loans. The banks are still pretty healthy, at least.

Travis Hoyam (16:12)

Dan, consumer credit is something that auto loans is something we were hearing about. There's potentially risk kind of hidden with the weaker consumer. Is that something we should be worried about? And then the other thing that keeps popping up and especially with this AI buildout, is these creative financing structures, variable interest entities. They're calling them different names because that one got a bad rap a decade or so ago. So what are you looking at as maybe red flags in those areas?

Dan Kaplinger (16:42)

So for consumer credit, I've been surprised, along with a whole bunch of economists that consumer credit has held up as well as it has in this relatively high interest rate environment. As interest rates have refused to go down. I think that that's out there. But I will admit that I've been wrong so far. I would have expected it to come sooner. And so maybe it is just the fact that consumers have managed to do it. And like Lou said, there'll be a breaking point at some point, but until it comes, it won't necessarily show up really well. With regard to variable interest entities and other creative financing deals, what I tend to look at is transparency. And my view is that the less transparent a particular business model or funding mechanism is, the more problematic it is likely to be. Because if there weren't problems, people would be totally comfortable just showing the terms. And so I don't really have a problem with creative financing. I think it's interesting to look into the structures. It's interesting to come up with different ways for different investors to benefit based on certain outcomes. But I need to be able to understand it. And once I stop being able to understand it, then it starts to feel more like somebody's trying to pull the wool over my eyes and and pull a fast one.

Lou Whiteman (18:02)

The question for me is why? Why do you do this? Meta Today just announced a $30 billion financing packages for its Louisiana data center. They're using a special purpose vehicle. Meta, I've joked, has all the cash in the world, thanks to their advertising business. This is a reminder that that is a joke. The simple answer, and they may push back at me at this, but the simple answer of why you do this is because you have to. The market says, we don't want this on your balance sheet. You have to find a different way. That's fine. Like Dan says, they're disclosing it. There's nothing scandalous here. The upside is, is it will greatly expand your borrowing capacity. It allows you to do more than you could do on your balance sheet. The downside is, is that everybody is getting a piece of this exposure. It creeps through and it becomes more of a systemic risk. It if any of these projects, or if AI in general, isn't what we hope it is. So you are broadening your risk, which is a good thing for Meta and arguably it's a less good thing for the entire economy if things don't go well, if that.

Dan Kaplinger (19:03)

One thing, one last thing I'll add is just that I think that the financial crisis, the housing bubble, taught analysts to look out for things like this. We're not going to get surprised again. It's just a matter of now everybody's on the lookout.

Lou Whiteman (19:18)

Might not get surprised. We could still get stun.

Travis Hoyam (19:22)

Very true. When we come back, I'm gonna see what Dan and Lou would rather own. Gonna give them a couple choices. Play a little game. You're listening to Motley Fulman. This episode is brought to you by White Claw Search. Great podcast pick, friend. No surprises there. After all, you're all about finding the tastiest flavors out there, just like White Claw Surge.

Lou Whiteman (19:51)

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Travis Hoyam (19:58)

Unleash the flavor. Unleash White Claw Surge. Please drink responsibly. Hard seltzer with flavors. 8% alcohol by volume. White cloth seltzer works Chicago, Illinois welcome back to Motley Fool Money. We're going to play would you rather now and I'm going to put a couple of options ahead for Lou and Dan and see would they rather own own one asset or another. We're going to start with gold and bitcoin. These are supposed to be stores of value. So, Dan Kaplinger, would you rather be a holder of bitcoin or gold today?

Dan Kaplinger (20:33)

I would rather be a polar of gold. I like the physical aspect of it. I like the chemical uses of it. I do own gold. I also own a smaller amount of bitcoin.

Lou Whiteman (20:47)

I'll take bitcoin here just on the optionality. I don't know if I really, really feel a need to flight to safety into either of them. But look, I mean both of them are up crazy. I think Bitcoin's up 800% over the last five years. Gold is only a double plus in five years. Gold's having a better year this year. End of the day gold. I know what I get and I think I mean that as a compliment, but I'll mean it as an insult and say with bitcoin I at least have optionality on something.

Travis Hoyam (21:12)

Gold has been going crazy. I believe it's beaten the market over a fairly long period of time. Is it since 2000? Something like that. But if you go back throughout history, there are actually kind of these boom and bust cycles, Lou, with gold in the what, late 1970s, early 1980s, gold went crazy as inflation was picking up. But then it didn't end up being a great inflation hedge when there was actually inflation. So are we, you know, is that sort of the risk there that it's again kind of a meme. You get ahead of the story and then when the actual thing happens, that's when it could crash and that could go for gold or bitcoin.

Lou Whiteman (21:46)

I love you said that because when we were talking memes I almost said that meme is just a new way to say conventional wisdom. And yeah, I think there's something to that. Yes.

Travis Hoyam (21:54)

All right, the second one I want to know. Would you rather own Google? Publicly traded company, well established business. Not quite the value it was when it was trading in the teens. Price to earnings multiple, but still a pretty good value. Or the up and coming disruptor. OpenAI. And let's put a $500 billion valuation on that. That's, I think, where they're raising money. The idea here is do you want to be the disruptor or potentially the disrupted? Lou, I'll have you go first. Which one would you rather own?

Lou Whiteman (22:22)

I got to take Google here. I'm going to use the same word, optionality. Just with Alphabet, you get so much more than just this AI thing that I'm honestly worried the core AI business is going to get commoditized. The other side of it is that I don't know what I think of Sam Altman. So I'm Alphabet in a big way here.

Dan Kaplinger (22:42)

Yeah, me too as well. I have a lot of Alphabet stock in my portfolio and I'm very comfortable with both its AI exposure and its non AI exposure. OpenAI. Boy, I don't even know what I'm investing in at this point because they still haven't resolved this hybrid nonprofit for profit structure.

Travis Hoyam (23:04)

Did they still need to do that by the end of the year? I thought there was a deadline with Microsoft. They needed to complete that transition by the end of the year. It's getting pretty close.

Dan Kaplinger (23:13)

I don't think that you can ask the California Attorney General to do anything on a deadline because it's complicated. It's incredibly complicated and it's dynamic. So once you think you have a solution, Suddenly everything changes. OpenAI does a new deal, they get a new investor. They then turn around and invest in a company themselves. It just gets more complicated and it makes the whole transition question more difficult to resolve. So, yeah, I'd be surprised if they make deadlines. And then as you point out, what's Microsoft going to do with that? Probably cave and give them more time, but I guess we'll see.

Travis Hoyam (23:52)

I guess I fall in the same category. I think I keep going back to is artificial intelligence. Are these things like chatbots going to be disruptive innovation or a sustaining innovation? And it's looking much more sustaining over a long period of time. That said, new consumer goods companies that can gather 800 million weekly active users don't come along very often to me. All right, let's go to the next one. A couple of relatively hot stocks maybe, maybe not the kind of stocks that you guys invest in, but Palantir or Coinbase. Lou, I'll have you go first here. You're. You're already smiling about this one. Which one Would you rather own.

Lou Whiteman (24:30)

Can't believe you're talking me into buying Palantir. I mean, the answer for me is, is neither. And I, I, I, Palantir, I love the business. I just think it's overpriced, but 124 times sales. Here's, but here's my Coinbase par. Okay, a lot has to happen with the adoption of crypto for Coinbase to really, really pay off. But if all of that happens, it has to be in a world where Coinbase still has sort of this first mover advantage or just kind of dominates the ecosystem. And I find it hard to believe that crypto matures in a way that really benefits Coinbase and everybody and their brother doesn't get involved to kind of bring down the profitability for Coinbase.

Travis Hoyam (25:18)

They could be like the IBM of the PC.

Lou Whiteman (25:21)

Yeah, yeah, yeah, yeah. I just think that's a very fine line for that to work out. Palantir looks overvalued to me, but they've got incredible software and they've got big dreams. To me, there's a better chance of that paying off than Coinbase. But I don't own either, and that's intentional.

Dan Kaplinger (25:39)

Dan, I go with Coinbase, oddly enough, and I'm going to make a strange metaphor here. I think that there's a large and growing group of people who are addicted to cryptocurrency. And in my investing career, I have not hesitated to invest in addiction stocks. I invested in tobacco stocks in the late 1990s, early 2000s as I was getting my start. I have invested in coffee stocks.

Travis Hoyam (26:09)

Did pretty well, by the way.

Dan Kaplinger (26:12)

On a total return basis, betcha for sure invested in Starbucks for the coffee addiction craze. And that has done quite well on a long term basis as well, despite some recent struggles. And I think Coinbase is going to find a way to do well. I think that Coinbase has done a good job of trying to diversify its business so that it is not simply exposed to the ups and downs of Bitcoin and other cryptocurrency prices. Whether that continues, yes, there is a competition question, but I like the way they're run. I like the approach that they are taking. By contrast, Palantir, like, I just, I can't get myself around that. I can't figure out that business. I can't figure out where it goes. It has that lack of transparency that just kind of pushes me away. Coinbase, I may not agree with the product, but I at least understand what they're trying to do with It.

Travis Hoyam (27:08)

Do you think that there's a possibility? Four or five years ago, Coinbase and other companies were talking about stablecoins as a way to disrupt the established payment infrastructure. Visa, MasterCard, American Express, all those companies, I think a lot of people push that off and those credit card companies moved higher. But, Dan, have you noticed the fees coming in? This is one of the things I think has changed. Just, even just over the past 12 months, I'm seeing a lot more of those 3% credit card fees. Guess what? It is actually more expensive to move money from point A to point B with a credit card than it is with a stablecoin. Now, that infrastructure isn't there yet. But if we get to the point where Stripe's fees to pay with stablecoins is half of what it is to pay with a credit card, business owners notice that, right? If you're a grocery store and you have a 2%, 3% gross or net margin, and you can double that by saying, you know what? We're not going to take credit cards anymore, we're going to add a credit card fee, that seems like a compelling point of disruption that potentially Coinbase is going to benefit from.

Dan Kaplinger (28:15)

And I think it also answers Lou's philosophical question, because I understood Lou's 100% right. It is a bizarre thing to think that a single centralized company would be able to take control of an industry that prides itself on decentralization. But if Coinbase can straddle the fence the other direction and start to get its technology and its insights into the traditional financial system, that I think is probably the way it's going to make as much money or more money bridging the gap as it is serving traditional dedicated cryptocurrency customers.

Travis Hoyam (28:56)

That one will be a very interesting battle to watch because, yeah, Coinbase could be disruptive. It could also go through another down cycle like we saw a few years ago. Let's go to some companies that people are very familiar with. If you're listening to an investing podcast, Nvidia and amd, you have the established company in artificial intelligence and the company that's gaining a lot of momentum. Dan, which one would you rather own today?

Dan Kaplinger (29:19)

Yeah, both have gotten so much hype that I'm not enthusiastic about either one. But I'm going to go with Nvidia because again, I know where it is coming from. I think that first Mover Advantage is going to have a pretty long Runway to help foster its growth and continue to get business. Amd, as always, seemingly throughout its history, still trying to prove itself as being worthy of the number one spot in an industry and I just don't think it gets there. And so Nvidia would be my pick here.

Lou Whiteman (29:53)

I'm going to take Nvidia too just because a they have experience before where like they rode a wave and then found something else. So I think there's more staying power there. I mean I remember when they were just a gaming company also on a valuation level it really doesn't look that bad. Even if we plateau from here for a while. I mean I don't think we can keep going up forever. But I do think there's a world with AI.

Travis Hoyam (30:16)

Do you think they can maintain their margins? That would be the risk for Nvidia.

Lou Whiteman (30:21)

I think they can hold on to enough of it that AMD is more I think of a cycle play and Nvidia I think has more staying power.

Travis Hoyam (30:30)

OpenAI may hold the keys to both of those companies future. So we'll see where that one goes. Let's do I think a fun one. Quick. We talked about Joby Aviation earlier. Would you rather own Joby Aviation or Delta Airlines, the much more established company? But airline stocks can be risky too. Lou, you go first.

Lou Whiteman (30:48)

So I think Delta along with United are the only two airline stocks worth considering and I do think the world of Delta, but this is just a terrible cyclical industry. Joby today is overvalued as I think as far as you're buying in for today. But Joby is the one of these two that I do own and it's the one I want to own. I do think that when they actually start making machines that we're going to have like some margin shock and maybe a valuation adjustment. But I do think there's a better long term growth story there than there is just a cyclical airline play.

Travis Hoyam (31:21)

Dan.

Dan Kaplinger (31:22)

It's interesting, Travis. I go the other direction. I'm investing in Delta. I actually own shares. Haven't learned my lesson even from Warren Buffett who went there twice but not three times. But valuations are compelling and I think that they are compelling even adjusting for cyclical stuff and I just don't. Delta stands so much head and shoulders above the rest of the US airline industry and I find that compelling as far as Joby's concerned. A little more speculative, too speculative for my taste. But I do have a resume in for them to see if I can be a test pilot for their, for their aircraft.

Lou Whiteman (32:02)

So we'll see how that goes.

Travis Hoyam (32:03)

If you need a passenger, I'm happy to. Happy to Fly anywhere to ride along with you.

Dan Kaplinger (32:08)

I'll put you on the list.

Travis Hoyam (32:10)

All right. When we come back, we're going to get to stocks on our radar. You're listening to Motley Fool Money.

Lou Whiteman (32:42)

Heading in Twilight.

Dan Kaplinger (32:49)

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Travis Hoyam (33:22)

As always, people on the program may have interest in the stocks they talk about. And the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. One topic I want to get to before Radar stocks is an announcement from Google that they are using Gemini that basically made a model that they're going to be able to understand the language of human cells. Lou, this seems like a maybe bigger use case than building a chatbot. You know, OpenAI is leaning into ChatGPT. This is the stuff that they said that they were going to be doing was changing the world by advancing medicine. Is this a big deal?

Lou Whiteman (34:18)

I'm here for it. I don't know if it's a big deal yet. I don't think any of us do. But look, healthcare drug discovery is really hard. 90% of drug candidates fail. I would expect that at least initially, Google's success rate will be similar. But importantly, it could be a lot less costly than doing a lot of experimentation, a lot of trials. Best case might be that what this does is use these models to improve the real world success rates. For those trials to get that 90% candidates fail down to say 50, which would be a big deal. It's going to take a lot of time. I don't think it's investable. I think it has a better chance inside Alphabet than it does. Like if a startup came to me said we're doing this, do you want to invest in me? Yeah, maybe in 10 years. But I love that they can just.

Travis Hoyam (35:03)

Burn money the next 10 years like they've been doing with Waymo and just come out with, oh, we solved, you know, we cured Cancer?

Lou Whiteman (35:10)

Yeah, no, no, it's a great idea. We all hope they succeed. But you know, the, the hype is going to overwhelm the actual usage for a long time here. If history is a guide.

Dan Kaplinger (35:24)

Yeah, I think that, I agree with that. I think that the entire premise relies on the assumption that the metaphor of language, large language models as respect to the language of cells, as the press release point put it, if that holds true. And I think the most important point in the paper that Google released was that its acknowledgement that its predictions are only valuable if they're going to be validated in clinical trials. And so you do the model and the model gives you a starting point for the lab. But the real test is in the lab and in the clinic and eventually in real patients. And that's going to take time. You just have to repeat trials enough from various models, get enough observations, then we will see if there's a statistically significant advantage to using an AI model versus traditional clinical research methods. But nobody's going to get to 100%. So I don't think that anyone should judge AI poorly just because it isn't perfect. Really all it needs is a statistically significant improvement in what Lou pointed out, the high failure rate of drug candidates. Now even a few percentage points could make the difference between something happening that's really good for patient bases across the world, or something not happening.

Travis Hoyam (36:51)

And improving that speed and lowering costs could potentially be a game changer.

Lou Whiteman (36:55)

So real quick, the fun thing to me about this is we talk about intelligence, AI, we talk about almost a superhuman being. It feels like that the use case here, and a great use case is almost the same use case that all industrial innovation has been. Back to the industrial revolution. Just the power of repetition, the power to just do things faster, quicker, over and over again, more so than the human being can alone. That was the story of the cotton mill, of the entire industrial revolution. That's sort of the application here. Here too.

Travis Hoyam (37:27)

That's a good analogy. Let's get to stocks on our radar. Lou, you're up first.

Lou Whiteman (37:32)

All right, Dan, I'm looking at booze. Allen Hamilton, Ticker Bah. One of these so called beltway bandits that provide it and other services for the government. Dan, it's been a tough year for these guys. We have inflation, we have doge, and now we have a government shutdown. And I don't think it's going to get better quickly. People I've spoken with, say the usual government end of fiscal year or spending spree that didn't Happen in September. Normally these guys get flush with cash into September quarter. If it didn't happen, that means bookings. Free cash flow is going to be down when they report in a couple weeks. Here's the thing. Long term story is still compelling. I think the headwinds will last a few quarters. This is A stock down 25% year to date. Booz Allen is starting to look interesting for long term. Focus investors. So it's on my radar.

Travis Hoyam (38:19)

Dan, what do you think of Booz Allen Hamilton?

Dan Kaplinger (38:21)

Gotta love a radar stock where all the news is bad. Travis.

Lou Whiteman (38:26)

I'm a value investor at heart, Dan.

Dan Kaplinger (38:29)

I don't know about this one, Lou.

Travis Hoyam (38:31)

Dan, what's on your radar this week?

Dan Kaplinger (38:33)

So, Dan Boyd, I am pitching to you a stock that is peripherally associated with the data center space. It is Sterling infrastructure. It is ticker strl. We talk all about data centers. We talk about Nvidia making chips and hardware to put in them. We talk about other companies putting in software, networking equipment, all the things that go into them. But Sterling infrastructure takes it from a different angle. They're the ones who actually build the places where these things are. Think about all the capacities that data centers need. Access to power, access to cooling, Access to a whole bunch of systems that are not. They're technological in nature, but they are not technological in the same way that the AI data center provides services to its clients. As AI appetite rises, so too is the need for companies like Sterling to build these data centers out.

Travis Hoyam (39:37)

Dan, what do you think about a picks and shovels for AI picks and shovels? Well, what I do like is that.

Dan Kaplinger (39:42)

Their stock price was about $105 in April and it's $354 now. So that's pretty.

Travis Hoyam (39:51)

All right. Dan, which stock is going on your watch list?

Dan Kaplinger (39:54)

I'm gonna go with Sterling. I think data centers are what's happening.

Lou Whiteman (39:59)

How do you say no to booze?

Travis Hoyam (40:03)

That may have been a better pitch for Lou Whiteman, Dan Kaplinger, Dan Boyd behind the glass, and the entire Motley fool team. I'm Travis Hoyam. Thanks for listening to Motley Little Money. We'll see you here tomorrow.