Travis Hoyam (3:23)

Sounds like the final answer is we're probably in a bubble somewhere, we just don't know exactly where it is. I want to get to one of the companies that's involved in potentially inflating bubbles. That is Google and their latest AI news. We'll do that after a quick break.

Ryan Reynolds (3:39)

Speaking of this episode is brought to you by Indeed. When your computer breaks, you don't wait for it to magically start working again. You fix the problem. So why wait to hire the people your company desperately needs? Use Indeed. Sponsored Jobs to hire top talent fast and even better. You only pay for results. There's no need to wait. Speed up your hiring with a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply.

Travis Hoyam (4:09)

Potential bubbles. Let's turn to artificial intelligence and Google announced $25 billion in data center and energy deals in the PJM which manages electricity across 13 straits from New Jersey to CAR to North Carolina all the way over to Chicago. This comes on the heels of energy's biggest inflation numbers in quite a while. 5.8% increase in electric electricity prices over the past 12 months. That was reported just yesterday. AI is an energy hog. We know that. Rachel. Utilities have been a boring way to make money for decades. 1 2, 3% growth. But does the recent change in artificial intelligence and the energy needs there, does that change anything? Does that change the way that you look at the utility space in any way?

Rachel Warren (4:56)

I mean for Me personally, I wouldn't say that this changes the trajectory of my personal investing interest in the energy space. I will say say it's not a space I've personally gravitated towards. There are plenty of fellow fools who do. But if anything, as an Alphabet investor, this makes me more excited about the investments this company is making that I think can really help cement its continued leadership and strides in the AI space. In addition to that $25 billion data center and AI infrastructure investment, Google's also spending about $3 billion to modernize two hydropower plants in Pennsylvania. And that's designed to facilitate the power demand from AI and data centers in the area. And, you know, one thing to bear in mind, PJM is the biggest electric grid in the nation. Its coverage area includes the world's largest data center market that's located in Northern Virginia. And we're at a time where PJM and other providers are really struggling to keep up with rising electricity demand amidst the AI boom. You know, AI training, particularly for large language models and generative AI, it's incredibly energy intensive. A single generative AI query can require almost 10 times more electricity. A traditional Internet search and data centers are already consuming a notable percentage of the nation's electricity. And unlike some other energy demands that can fluctuate, AI really requires continuous operation. That means you need a constant power supply that really strains existing grid capacity. You know, there was a meeting that just happened yesterday at Carnegie Mellon in Pittsburgh. We have the president, his cabinet, executives from a range of companies, including Alphabet, were there. There was a report that the companies there, including of course, Alphabet's, Google, and announced a combined total of $90 billion investments in data centers, energy and power infrastructure. From my perspective, that's the cost of doing business for these major AI providers. But if you are interested in the energy space, I think it creates some nice tailwinds there.

Travis Hoyam (6:45)

Lou, of course, Rachel mentioned the hydroelectric plants, and of course, Brookfield Asset Management was involved. They are the company that's behind a lot of electricity generation, not only in the US but around the world. A lot of renewable energy is the investing takeaway here, as simple as AI is a tide that is lifting all of these utility boats. And maybe we're going to lose the consumer overboard or what are you taking away from this?

Lou Whiteman (7:13)

So, no, my investing takeaway is not by the utilities. I'm not there yet. But the investor takeaway for me is. You said it, Travis. It's Brookfield. It's always Brookfield or something like that. Look, I think demand for energy that trend is real. It's a long term tailwind. But I don't want to invest in individual utilities. I don't like to pick winners among geographies or projects. My way to take advantage of this trend is to buy into a company making investments all over the sector, giving me broad exposure instead of just an individual company. I look at Brookfield Renewable Partners Case, that's the actual entity that Google's partnering with here. Brookfield Renewable is going to bring on 8,000 megawatts of capacity in 2025 alone. Personally, I'm going to take my chances getting that broad exposure instead of focusing on any one individual company and hoping that they're kind of ride the wave as well.

Travis Hoyam (8:05)

I think that's probably a smart way to look at it. And you get a nice dividend yield with a lot of those asset owners as well. Next up, we're going to talk about two of the big earnings reports of the day. We'll do that after this break.

Unknown (8:20)

Hey, it's Ryan Reynolds here for Mint Mobile. Now I was looking for fun ways to tell you that Mint's offer of unlimited Premium Wireless for $15 a month is back. So I thought it would be fun if we made $15 bills. But it turns out that's very illegal. So there goes my big idea for the commercial. Give it a try@mintmobile.com Switch upfront payment.

Rachel Warren (8:43)

Of $45 for 3 month plan equivalent to $15 per month required new customer offer for first 3 months only. Speed slow after 35 gigabytes of networks busy taxes and fees extra.

Travis Hoyam (8:49)

See mintmobile.com ASML which makes critical equipment for making chips, all the artificial intelligence chips, the chips that's probably in your smartphone today and this equipment cost as much as $400 million for a single piece of equipment. They reported earnings overnight, beat on the top and bottom line with 7.7 billion euros in revenue and 590 euros per share in earnings. But the Stock is down 10% today because they were a little cautious about 2026, saying they couldn't confirm it was going to be a growth year. Lou, what are you taking away from this earnings report?

Lou Whiteman (9:21)

So worth saying that like you say, these are really, really expensive machines. Even in the best of times. This is a company that's tough to judge one delivery and it can throw up the quarter. So you're going to have lumpy, you throw in tariffs, trade wars, chip restrictions to China. And I understand the caution. But I'm going to note here, CFO Roger Dasen attributed to this Beat this last quarter's beat to tariffs having a quote, less negative impact than they anticipated. I think there's a real chance this trend can continue where the uncertainty is there. But it turns out not as bad as they thought because there's just so much demand out there. And if so, I think growth in 2026 can eventually be put back on the table whether it comes or not. For long term individual investors, the underlying growth story here, the need for more and more advanced chips and therefore the need for more of the machines that can make them, that's unchanged. I think Wall street is overreacting today. I think this is still a great company with a great future up ahead.

Rachel Warren (10:25)

What's interesting about this, as you noted, Travis, asml, they beat on both the top and bottom line expectations. And this was for their fiscal second quarter now guidance for the current quarter that missed expectations. And they warned that there might be the possibility of no growth in 2026. But it's not maybe quite as bad as it appears at first glance. So they, they forecast Q3 revenue of between 7.4 billion euros and 7.9 billion euros at the upper end of that tier. That was really just shy of market expectations of about 8.3 billion euros for Q3. But you know, taking a broader, more holistic look here, there are a lot of companies in the semiconductor industry that are facing, facing similar headwinds as ASML is right now. There's a lot of uncertainty that's been created by US Tariff policy. That remains the case. It's worth noting management still expects their full year 2025 net sales to grow 15%. And they said that their AI customers fundamentals are still looking really strong. If anything, management emphasized the continued uncertainty that's driven by macro headwinds. And that's a dynamic the competitors are contending with too. They're preparing for growth in 2026, but the reality that they and other adjacent players are facing right now are many ways. It goes back to external factors that they can't control. In my opinion, you've still got a quality business here. I think investors might need to moderate expectations if macro headwinds shift in the short term. But I think the company is well positioned to ride those out.

Travis Hoyam (11:48)

Johnson to Johnson was the other big earnings report this morning. The stock's up 6% as we're recording. Rachel, this was another double beat. They said they don't need to do deals out of desperation despite a patent cliff. What were your takeaways from the report?

Rachel Warren (12:02)

Yeah, you know, it was really A fantastic quarter for the business and as you noted, a beat on both the top and bottom lines. You know, they reported $23.7 billion in revenue. That beat estimates of 22.8 billion. Adjusted earnings per share of $2.77. That was compared to analyst estimates of $2.70. And that came with raised guidance for the year as well, up 5.4%. At the middle point, you know, we had the chairman and CEO of the company say that their portfolio and pipeline is really positioning them for elevated growth in the second half of the year with game changing approvals and submissions in key disease verticals, including oncology, psoriasis, surgery and cardiovascular. And they're looking to extend that as the year progresses. You know, broken down by segment. Their innovative medicine segment, which is essentially their pharmaceutical business, grew 4.5% year over year. Their medical device business saw sales climb more than 7%. Those are fantastic figures for a company of this level of maturity. And this is a business that I will note has been acquisitive in recent years. And that goes back to everything from their acquisition of Abiomed several years ago where they acquired the world's smallest heart pump. From that acquisition, they recently closed the purchase of intracellular therapies. That really solidified their neuroscience portfolio. And one important thing to note, and this was something that CFO Joe Woke addressed in a recent interview, they are facing patent pressures, particularly on some of their key older blockbuster drugs like Stelara, that's been a $10 billion plus drug annually in recent years. But management thinks that really the expected gap in revenue from the generic competition is not going to have a noticeable impact on the company and that they're really well positioned to ride that out. Broadly speaking, going back to these recent acquisitions and their continued internal development pipeline, I will also say that management noted a revision in the impact of tariffs to 200 million was versus the 400 million that they were previously projecting. Now there's still a lot of uncertainty about drug tariffs that is lingering. And something that their CFO said is we're still really waiting to see what the administration shares in that regard. And we're in an environment, of course, where there's a ton of uncertainty regarding tariffs and other cost pressures for businesses like this one. I will say this is one of the most well bolstered companies in the pharma industry. From a cash perspective. They're well positioned to handle any headwinds that might come. They have a extensive domestic manufacturing presence that they also are looking to expand. This is also A company that has been paying and raising their dividend every single year for over six decades. It's, it's a great company in my opinion.

Travis Hoyam (14:33)

To end the show. I do want to get bold with some predictions here. Now we are long term investors, so a one day drop in a stock is maybe not that big a deal. It might even be an opportunity. So ASML is one of these companies wide moat down after earnings. Maybe an opportunity for those long term investors. Now I'm thinking about opportunities like Netflix in the quickster days, Meta's drop when it was getting fit in 2022. What are the stocks that you're looking for as potential buy the dip stocks as we go through earnings seasons and maybe we have some short term turbulence. Lou, let's start with you.

Lou Whiteman (15:10)

So the first name that comes to my mind is Mercado Libre in part because look, given the markets, given the South American exposure, the wide range of business businesses, there does tend to be volatility, there does tend to be dips. And so I think there could be opportunities. And look for all of the growth that this company has delivered. Crazy to think about. It's what, maybe 1 20th the size of Amazon. It's a current position for me and it's constantly on my radar.

Rachel Warren (15:34)

One business I've really been looking at recently is toast. This has been a really intriguing company to follow, particularly for me over the last 12 to 18 months. They really continue to expand the cohort of the clients that they're onboarding to their platform. They just booked Applebee's, which was their largest deal in company history. They added over 6,000 net new locations just in Q1 of 2025 alone. And they reached an annual recurring run rate that grew 31% year over year to about 1.7 billion as of the end of March. It's a really, really sticky business. It resonates with a lot of small, medium sized restaurant chains, but also some of these larger companies that are starting to see the value in Toast platform and they're looking outside the restaurant space too. Convenience stores, companies like topgolf are more recent partners for them. I think there's a lot to like about this business. I am also quite impressed by their more recent profitability. It's one that I'd be curious to take a closer look at. They happen to go down.

Travis Hoyam (16:28)

Thank you to Lou and Rachel for joining me today. As always, people on the program may have interest in the stocks that they talk about in the motley pool and may have formal recommendations, recommendations for or against so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial guidelines and is not approved by advertisers. Our sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check our show notes. For Lou Whiteman and Rachel Warren and the entire Motley fool team, I'm Travis Hoyam. We'll see you tomorrow.