SPEAKER_02 0:00

Hey Dustin. Hello, Hamid. No babies yesterday. Yeah. No, no. So uh basically, for for those who don't follow Hamid on Twitter, which I'm sure is a minority of you, um, we had to delay the podcast because there was a chance my wife was going to give birth yesterday. Turns out that was not the case. Basically, um, my future daughter has the same sense of humor as me, and it was a big April Fool's joke. Uh but she she will come uh when the time is right, hopefully and probably more towards the end of the month as opposed to the beginning, but we'll see.

SPEAKER_01 0:44

All right, all right. Well, God help you if she had the same uh personality. I'll skip. Um what do what are we what are we talking about? Well, you you know, this week has been an interesting week because uh I felt like an idiot on Monday. I felt like uh, you know, a little vindicated on Tuesday, felt like a genius yesterday, which is when we were supposed to have the podcast, and then today it's back down to you know like normal status.

SPEAKER_02 1:10

Yeah, it's been a crazy, crazy, crazy week. Um, so we both went on a shopping spree towards the beginning of the week uh as the market was going down. Um we're we're gonna talk about the SpaceX IPO, we're gonna talk about AI CapEx spending, we're gonna do a little zoom out, a Q1 review of your portfolio. So let's start with uh the purchases. What did you buy this week?

SPEAKER_01 1:39

Uh since last Wednesday? Okay, I think I I have bought both Micron. I could tell you, by the way. Yeah, yeah. Go ahead and tell me. Tell me because I know I bought Micron twice, right? You bought Micron and you bought Meta. Uh and Meta, yeah. And Micron I either bought twice or maybe even three times. I don't remember. But um that I don't know. But yeah, both both of these stocks have gotten hammered heavily. Um meta for uh some lawsuit losses uh where uh they they were sort of being held responsible for um for some cases where they're accusing them of uh targeting children, making the product more addictive. Um and Micron has been getting hit because of you know, pick your flavor of the latest reason as to why Micron is not going to have uh you know meet its revenue expectations and uh profitability into 2026 and 2027, or rest of 2026 and 2027. So um in both cases, I feel like the naysayers or the the bear cases are very, very weak, in my opinion. And I've been taking that opportunity to buy more shares. And I had my tax bill finally, which was very, very painful about that. But uh I've uh now adjusted my cash holding in my portfolio so uh I now know how much cash I have. This is literally the lowest cash I've been uh I've had in in years, which tells you about my confidence level in the uh in the purchases that I'm making, because I feel like these are uh extremely low prices where I cannot pass up on on buying them. So uh that's that's been sort of like the the story for the past week or so for me.

SPEAKER_02 3:33

And your cash, to be specific, is 2.23% of your portfolio right now. So do you do you feel good about that size of cash right now?

SPEAKER_01 3:44

Like not really. I mean, I have to say that this is like an uncomfortable level of cash for me. Uh typically I'm well over 10%. In a lot of cases, I'm over 20. In some cases, I've been over 30% cash uh in my portfolio, so that I can take advantage of um opportunities. But you know, you know, this is the type of opportunity I would want to take advantage of when you know that's the reason why I have cash reserves. Um, so it it kind of you know uh talks to my conviction level as to how strongly I believe you know Micron and Meta, in particular, the two companies I've been using up a lot of my cash on uh in the past several weeks, um, are undervalued. Uh based on my assessment of how things are going, uh, it seems like Micron is going to just knock it out of the park. I think in the low$300 uh uh level, which is what it was trading at earlier this week, um, Micron is trading at four times price earnings ratio, like uh next 12 months price earnings ratio, which is insanity, in my opinion, uh, at$320 uh a share. You know, they're expected to make$80 a share of profits in the next 12 months. And and that's assuming they don't even grow from next quarter's um expectations numbers. And there's a good chance they'll grow from that, actually. So um, so yeah, it just seems like a no-brainer. You know, a company that's going to generate$80 of cash over the next 12 months um is a is a company worth taking some risk on.

SPEAKER_02 5:24

I agree. And that's why I also bought Micron for the first time. Uh and I've You waited long enough, by the way. I waited, I'm very happy with it, and I'll I'll break that down.

SPEAKER_01 5:36

Well, yeah, I can see why you bought it for uh a pretty low price relative to where it's been trading at recently.

SPEAKER_02 5:42

Yeah. Yeah, I'm I'm feeling pretty good. Um, I also bought Iron. And by the way, I would not be surprised if all of these uh investments go down from here. Um you just never knew. I'm not saying in the short term, anyway. In the short term, yeah, yeah, yeah, yeah. Um, I'm not saying I like caught any sort of bottom by any means. Uh okay, so let's break it down. So, first, iron, I increased my position by roughly 25%. Uh I bought in at around$35. Right now, it's trading at$34. So I'm down on that right now. Um and Iron currently makes up what was the 1.75% of my portfolio.

SPEAKER_01 6:28

Yeah. What was the reason you increased your iron position?

SPEAKER_02 6:33

So if you remember, after their earnings call, the stock tanked for no reason, no real reason, uh, to around$33. And I said, if I I don't know if I said on the podcast, but I said on Twitter, like I would definitely buy if the price stays here. And then sure enough, before the market even opened, it shot back up because it was just like so ridiculous. Um and because I'm stubborn, I didn't buy, even though the price was still better than what I've my my average cost for Iron. So um I've been waiting for it to come down. It also, if you remember, they do have um a Bitcoin mining business. So it's not as correlated as Robinhood is, but it is correlated with Bitcoin. So I figured as Bitcoin goes down, the price will also go down. So I'll just wait for it to cool off a little bit. So at around$35, I felt better about jumping in. So it was just like a better late than ever uh guide velocity. Uh for then the next thing I bought was Meta. And by the way, if anyone's thinking I'm just copying you, I'm pretty sure I bought Meta an hour before you did.

SPEAKER_01 7:52

So I think that's true, actually. I think I saw the notification from uh from you and and uh yeah, and I was actually like in the process of buying it anyway when I saw the notification. Right. So I mean the price, the yeah, I'm sure we both had the idea the price was just great. I I think I I think viewers of the show know that we're like we think independently and we of one another. We're I'm not sure how much we influence one another, but but I would say you definitely more than I influence you, but no, there's definitely some both directions, I would say, but but uh we're we're pretty independent thinkers.

SPEAKER_02 8:27

Totally. Um, so with Meta, I bought roughly 40% more or increased my position by roughly 40%. I bought in at uh$523. Um, and it's currently roughly four and a half percent of my portfolio. The fun fact with this is a year and a half ago, I sold half of my meta position for$564. So I'm buying in a year and a half later cheaper than what I sold it for. And I need and I I sold it a year and a half ago because I was trying to raise cash. I was selling all of my Mag 7 positions, and now I have more cash than I technically need and just ready to execute with risk right.

SPEAKER_01 9:16

What's crazy about that is that in those year and a half, as the stock price has basically now gone back to being flat from a year and a half ago, Meta's actual revenue and profitability has increased substantially. In fact, their revenues has has have increased roughly 30% in the past year and a half, and their profits have even gone up more than that, more than the 30%. So it's the cheapest it's been in quite some time. It has a PE now. Um, what is this PE now? Like look real quick. Uh 19. 19 points. So it has a PE that's below 20, which still blows me away. And uh and yeah, I think it's uh it's a it's a company that still has so much potential, especially in the world of AI, with where uh Mark Zuckerberg hasn't even released their AI products yet. And they're still, you know, they still have a pretty um high-level team that's working on AI products that they hope to release later this year. So all of that is potential upside for them. I'm still kind of excited about this company. Um but but the real story has been Micron, right? The um the Micron story just keeps getting better, and then the price also gets better, which I which is ironic. Uh it it seems like the bears on Micron have a new thing to be concerned about every single day. Uh so in the past week I've been starting to see helium as a potential concern because I saw you post about that, and I did I didn't hear about that rumor, and I just got a good laugh out of it. But did you did you see did you see post uh uh or after that? Did you go look to see like how much um people have been talking about helium?

SPEAKER_02 11:06

I didn't dig into it. I saw your post, I laughed, uh and then I I just you know kept scrolling.

SPEAKER_01 11:12

So you you know, the helium shortage, apparently there's uh some ships that are sort of stuck in the strait of hormones that have helium on them, and therefore there's a helium shortage worldwide. Helium prices have gone up 25%, as much as 50%, right? So this is the major concern uh with respect to helium because helium is used in the creation of some of these chips. I don't even know what helium is used for, but whatever the case might be, micron is probably going to be completely unaffected because of the helium shortage. Now, uh, what a shortage of something means is just that the prices of that thing go up. That's it. There's like always this equilibrium that occurs between shortages and prices, where prices go up when there's a shortage, and therefore that sort of like fixes the shortage problem because as prices go up, then people are like, well, maybe I don't need balloons, helium balloons that cost$18 a piece or whatever the price might be, right? So uh so just taking that helium sort of example for Micron, which was kind of funny, is that okay, Micron is currently operating with 80% margin. So for every dollar of sales uh that Micron has in these in their chips, they have 80 cents of profits. So that means the cost of materials, including labor, including the manufacturing facilities depreciation, which they take over time, that's the capex that they put in. Um, all of that is encapsulated in this 20 cent per uh dollar or 20% cost of goods sold number. Helium is included in that 20 cents. And how much of that 20 cents is helium? Who knows? Maybe let's assume worst case scenario, it's like 10% of the cost of making these chips is helium. Highly improbable, but let's just say 10%. So you're talking about two cents out of the 20 cents is helium. And let's say the prices have gone up uh 50%, just for sake of argument. I in my post I said 25% because that's the more realistic number of how much helium has gone up. But say 50%, that means one cent is how much it would be affected for every dollar of sale. This is in the worst case scenario type of uh uh outcome. And people are using that as a bare single sell signal for micron. This this penny per dollar of sale potential extra cost in the worst case scenario, which is highly improbable, uh, is uh is what they're using to uh try to be like, ah, you know, they're gonna have a uh they're not gonna be able to make these products, they're not gonna be able to make these memory chips because there's a helium shortage because of this rate of hormones being closed. So I thought it was just kind of funny. Every day there's something new with respect to Micron and why it's not gonna hit its numbers. But um It seems like that narrative did not stick at all. Well, yes. So that uh uh that along with other things being of concern on Monday has had caused Micron to be in the low 300s. I mean, trading at a forward PE of four is kind of unprecedented for any stock, much less one that is growing revenues at over 100% year over year, meaning they're more than doubling their revenues compared to last year. Um, as far as their profits are concerned, they're more than quadrupling or five, six Xing them because uh for every extra dollar of revenue, the the profits are significantly greater. They're 80 cents per uh per dollar of extra revenue. So uh yeah, it's it's pretty uh fascinating to sort of like watch the market react.

SPEAKER_02 14:59

Right. Um okay, I do want to break down my micron purchase before we uh move on. So I bought this is my initial purchase. I bought uh uh$330. It's let's see, two roughly two and a half percent of my portfolio. Um and I want to break down a little bit of my thought process behind this. So when you initially started talking about Micron and invested late into last year, I thought it was a great investment, but I just did not like that it was hitting all-time highs. Um, that is like I think you probably biased towards like uh being a stricter investor and not buying or it's harder to for you to be convinced to buy a stock. For me, it is very easy to be convinced to buy a stock. So I set rules where I just it I can't I can't buy a stock. It's it doesn't meet my my criteria. So like, and I've talked about several of them. I don't buy IPOs, I don't buy when a stock's hitting all-time highs, just to make it harder for me. Plus, there's just so much opportunity out there, I don't feel like I need to jump on every single stock, you know.

SPEAKER_01 16:19

Okay, so so you're trying to uh put restrictions on yourself because you're enthusiastic about too many things, too many.

SPEAKER_02 16:26

Yeah, I'm overly enthusiastic. Okay, that makes sense. Yeah, I just need to make it hard. Checks and balances. I gotcha. Um so as you know, Micron has dipped uh fairly significantly. I think it hit a high of 450 dollars-ish around there, somewhere in that neighborhood, and now we're back to 300 or it was at$330, uh, roughly a 30% drawdown. Where at this point it's no longer at all-time highs, right? Felt felt better about it. Um, but the price was still higher than when you initially bought the price uh when you initially started buying was around$290. Yeah. But even if the price is higher, for me, the perceived risk of the investment was lower because not only did it have this correction, but it also had a killer earnings report in between.

SPEAKER_01 17:26

100%. Yeah, I I totally agree with that, by the way. That the risk now is lower than than when I was buying it.

SPEAKER_02 17:34

I was gonna ask you to confirm or deny my suspension because I know that maybe it's lower, but yeah. Yeah, 100%. I agree with that. And and you know, it's hard to quantify risk, but I always try to focus more on the risk of the investment as opposed to the price of the investment. Um and then the other point that I I posted on Savvy Trader and X is if you look at like in terms of like the drawdowns maybe scaring people into like, is Micron like is this it for Micron? Is the cycle over? During since Chat GPT was released, Nvidia has had five major drawdowns. Um they had a two 22% drawdowns, 35% drawdown, a 43% drawdown, and then when I did my post the other day, a 21% drawdown currently. Right. But in that same time, Nvidia is up like around 1300%. So these large drawdowns happen in these larger moves, and that's not to say that Micron is going to be like Nvidia where it's going to have this crazy move. Yeah. But there's very much precedent for there to be these corrections um when these when stocks are moving like this.

SPEAKER_01 18:55

Yeah. I want to touch on one of the points, which is the uh quarterly report. Are you done with your uh micron assessment? Or I I am done with yes, I am done with my micron assessment. Okay, because before before we go on to something else, because this is what I wanted to uh touch on, which is that before they released their quarter, and like uh if you if you can see my screen here, this is sort of an important factor here. So last quarter, they had this$13.6 billion revenue for the quarter, which was a record quarter. Their previous record was the previous quarter at$11.3 billion. So they had reached their previous quarter's record revenue by 20% and had$13.6 billion. And then they had this expectation for Q2 2026 of roughly$18 billion in expected revenue. This is what management had set out to. And I wasn't sure they were going to be able to, you know, go from$13 billion to$18 billion just quarter after quarter, right? So when they actually released, they didn't just release$18 billion of revenue. They went to$23 billion, which just blew my expectations away. Like I had no idea this would even be possible for a company to go from 13 to 23. And what's what else is interesting about that is that uh they also blew away their uh EPS number, which was in the$8 uh EPS range, and they came in at over 12. But then they went to uh they ex set the expectation for the next quarter. This is Q3 now, 2026, where they weren't they had set the expectation that they weren't even gonna grow once they like hit this Q2 number of the$18 to$19 billion revenue expectation. They were probably gonna stay there uh flat. But it turns out that they raised next quarter's revenue expectation to$33 billion, another 10 billion. I I don't know if you see this graph. This graph is almost like comically uh you know uh exponential, which is mind-blowingly good. So you look at this 33.4 billion number and you're like, wow, the growth here is um is beyond anything I've ever seen before, including NVIDIA, by the way. Like NVIDIA was not growing at these levels uh three years ago or two years ago when they had their ridiculous growth curve. Um and then the profits for next quarter, they set the expectation at over$19 a share, which that puts them on profitability of you know, making roughly$80 for the next 12 months of uh earnings per share. And at$80 of uh earnings per share, uh, when they're trading at$360, you're talking about a price earnings ratio of like four and a half uh under four. Right. At five, that would be a$400 stock. At$10, it would be a uh$800 stock at a PE of 10 over the course of the next 12 months. So once they released earnings, I actually ended up buying some more in the$440 price price point. Um, just because even over$400, even at$500, I would think it's undervalued. Yeah. Right. Um, so that's that's the uh perspective I've had on it. But of course, the market is like looking at it as these are peak, uh peak cycle numbers. They're never going to be able to maintain these numbers, and all of that is speculative, in my opinion. Like what is real and in front of us is these absolutely crazy uh revenue and growth numbers with huge demand, continued sustained demand that um does not seem to be slowing down.

SPEAKER_02 22:57

So um and yeah, and an important detail talking about the estimates is of the last 17 corridors, micron beat revenue estimates uh 13 times and EPS estimates 14 times. So um that's a it it is a good indicator for Micron. Um Adrian mentioned that we have a listener question about Micron. Yeah. Hi, Adrian.

SPEAKER_00 23:24

We're trying something new.

SPEAKER_01 23:26

Yeah, let's let's do it.

SPEAKER_00 23:28

Um, so we have a listener, and I think we were kind of covering this, but I want to make sure we get his answer. What would be the price of Micron stock by next earnings and by the end of the year as per year prediction?

SPEAKER_01 23:41

Write this down. It's going to be exactly six. No, just kidding. Uh no, there's no one who can predict these things, right? There's no way for me to have predicted that the stock would tank after a stellar quarter. Like I'm looking at it with one lens, and the market in its infinite wisdom is looking at it at with a different lens, obviously, because the market decided that Micron's stellar quarter, what I considered a stellar quarter, was not good enough. And um, the stock tanked from roughly$450 to the low 300s, uh, and you know, down roughly 30%, as uh Dustin had already mentioned. So there is nobody who can like predict these things um for for sure. But again, my uh way of investing is not from this uh from this uh perspective of uh I'm gonna predict what the price is going to be next month or in six months or whatever. Is my way of investing is investing in companies that I think are great companies at a good price and then holding on to them long term, or at least having that mindset of holding on to them long term and reevaluating whether or not they're still a great company and whether it's a it's still a great price, and then adjusting accordingly. And if they're still a great company and it's still a good price, then um then I hold on to it or buy more, as I did in Mike Ron's case, uh as it as it went down, because the price became even better. The company after the results, in my opinion, was an even better company, and the price became an even better price. So, would I want a better company at an even better price than I had previously been willing to pay for it? Uh, then the answer is yes. Obviously, I want more of it. So um, so that's the reason I bought more. But I have no idea where the price is going to be. Um, the market will determine that. But usually, usually, this uh I'll add this, and this is the reason why in which my investment strategy has worked for me in the past, historically. Uh, the market comes to its senses over time. In the short term, the market is bipolar and will buy into every fear, uncertainty, and doubt. Uh, but in the long term, eventually, the market will actually act very rationally uh for brief moments while it's having its bipolar, uh, long-term uh momentary reactions as well. But uh yeah, so hopefully that puts things in perspective.

SPEAKER_00 26:16

Do we have to move on? Yeah, go ahead and go on.

SPEAKER_02 26:20

Okay, okay. Okay, so um Jordan, who is an avid listener and fan of the podcast, and I think of generally you, Ameed, um commented in your Savvy Trader portfolio, which if you're not subscribed to our Savvy Trader portfolios, they're totally free. It's in the description below. Um he wanted to he wanted you to kind of go over your portfolio and your investments. They're down, I think, 11% year to date. My portfolio is down 18% year to date, and just kind of review the current status of your portfolios and your portfolio and your positions.

SPEAKER_01 27:05

Yeah. So I remember Jordan's uh thanks for bringing them up, by the way. Uh I remember Jordan's uh comment on the um community or post on the community, which was that he was considering or is considering exiting his entire stock portfolio because he's down 14% your year to date. Um, and you know, like let me start by saying that like that might be the right thing for you to do. So you, you know, like this is again not investment advice. This is more along the lines of how I think about investing. Um and the uh the thing is that you know, you would never consider it being a bad thing if you were up 14% year to date. Like, in fact, you would think, oh, this is normal, right? Like if you were up 30% year to date, you would think, oh, this is great, you know, like this is normal. But the reality is that both directions are pretty normal. And once you internalize that, or once I internalized that, I should say, uh, it allowed me to be a much more um patient and better investor in the long term. So I remember, for example, I I don't remember if it was 2008 or 2009. My drawdown at one point in that year was as much as 50 to 60 percent. And I think that for the entire year, I was down as much as 35, 40% uh once the year ended. And if I had decided to exit the market at that point, I would have completely missed on the following year, which was one of my best years ever. It went up like 75%. And um the following year after that, it went up another 50%. So, you know, exiting at some of these times when it seems kind of harsh is uh would have been terrible for me historically. Uh so I just view it as this is like part of the um long-term mentality of investing, is that sometimes I might be down 15, 20, 30, 40%. And in fact, I have been last year during the tariff uh issues, I was down as much as 30, 30 to 40% somewhere in that neighborhood. Uh, but then like again, if if instead of buying, I was selling shares as a as a concern. The next month when it recovered, I wouldn't have hit all-time highs on my portfolio. So um, so I basically have this long-term mentality of buy great companies at good prices and just ride the waves, uh, ride the ups and downs out, um, and then sell when the prices seem to be way higher than you know you thought that they would go, uh, or I thought that they would go. And uh that's that's worked out really well for me. So hopefully that that helps uh Jordan with uh putting a little perspective on it.

SPEAKER_02 29:53

I think the two actions that I like to take uh during drawdowns is to buy and to learn. Right. It's to these are typically the best learning opportunities um of what to do and what and what not to do.

SPEAKER_01 30:09

Uh so but by the way, a few things that uh these drawdowns, long-term drawdowns, have taught me is that options are freaking risky as hell, and they're much more like gambling. And uh sometimes you think, oh, you know, I should buy options now, and then you lose 100% of that money. And that's like uh been pretty crystal clear to me that that's not a good long-term strategy. Options are not a good long-term strategy. Um, I uh very sporadically use options as a way to uh like if I want to buy even more shares, but I don't necessarily want to commit 100% of the money today. I might buy some options uh so that I can, you know, like wait it out and decide later whether or not I want to buy. But generally it's less than 1% of my portfolio. Um so I avoid options in general as a as because the market can be irrational longer than you can be solvent when it comes to options and margin, uh use of margin. So I don't use margin either. But another thing that is helpful when you have this long-term perspective, you have to have that perspective with money that you don't need tomorrow. Meaning, if you're using money that you need for your day-to-day lifestyle or for your expenses, uh, then it becomes much more difficult to be patient because you have a bill coming up, you have rent coming up, you have a car payment coming up, and you cannot be using money for that uh as investment money because um because then now you're under a time crunch that that investment has to go up to a certain amount in order for you to be able to use it to pay for your bills. And that's not something I uh I ever do. So um, you know, those additional things make it easier to be patient for for um long-term investing.

SPEAKER_02 31:57

We have a question from a different Jordan uh in regards to options. What about selling for premium on stocks that you own a good amount of?

SPEAKER_01 32:08

Yeah, so I think options in general are better for the writers than for the buyers, uh, because they're designed to expire worthless, uh, which means if you're the one writing the option uh secured against shares that you own, that is a better position to take. However, uh I've also learned lessons where if I'm very enthusiastic about a stock, like let's say, for example, Micron, um, and I hold a bunch of Micron, well, would it be smart for me to sell some uh you know higher priced call options or something like that because the premiums are so so high on them? And the the problem is it's kind of unpredictable when the market corrects for something that you kind of see that you're bullish about because you hold the stock. So selling call options on it is kind of like the reverse, right? You're you're kind of like bullish, but like not too bullish. And what ends up happening is if when you're right and you you know the market should have been bullish, when it corrects, it overcorrects. And you know, Micron could go from a$300 stock today to a$1,000 stock uh in in a month. We don't know whether or not it's gonna do that. But what would really suck is if I had$500 options on it, and now instead of being able to take advantage of that$1,000 move, I am forced to sell my shares for$500 a share. And um and therefore, and that happened to me actually with Tesla in 2020. I actually wrote some uh higher priced Tesla calls uh thinking that there's no way that Tesla is gonna go to$700 a share from when it was trading at like$400 or$500. And sure enough, it did. Then I was like, no way it's gonna go to$900. I'll write some, you know, I had a ton of Tesla shares. And sure enough, it went beyond that. So, you know, I kind of learned a hard lesson watching the stock that I owned, but it was forced to sell at a lower price than I would have sold, sold at um, because I had written some options. So I don't do options either either way. I now only strictly use options as a um as a means of giving myself time, the option to buy a stock that I'm still very optimistic about. Generally, uh call options is what I buy. Um, and usually I'm buying it on stocks that I already own, but because I want to own more of it and I just give myself a little bit more time to buy it.

SPEAKER_02 34:40

So okay. Uh another question that came from your savvy trader community was, and this was in regards to Micron. Do you think the current AI CapEx is unsustainable? And is that a potential reason why Micron is getting hit?

SPEAKER_01 35:00

So there's two ways to look at that. The the the current CapEx that the um megacaps are spending, uh, these are the Microsoft's Amazon, Google, um who else? Who Meta. So those four companies in particular. Not well, Apple has uh lowered their capex. There's there's this kid who's like wandering around. Like, what is happening? Um but but uh those four are spending basically uh the the their current levels of profitability they're using as capex. Um so it's affecting their short-term uh cash flows. However, when you fast forward one year or two years from now, it already like their cash flows already makes up for their current levels of capex and and then some a lot more actually, just based on the rate of growth that they're having. So you take a look at, like, for example, Meta, uh Meta at a$200 billion annual run rate, revenue run rate, it's growing at 20%. So next year is going to be$240 billion. So that additional$40 billion, it's like 90% profit. So uh, and that means 90% of that will turn into cash flow, essentially. So they can actually sustain current levels of capex and even increase it from here, but not at the same rate that they have been increasing it historically. So the answer is that yes, they can definitely sustain this level of cash flow, or excuse me, capex um based on their cash flows and growth rates. However, they won't be able to sustain the same level of growth, meaning they have doubled their capex spending over the past couple of years, and they're now gonna be able to double it again from here, you know, like next year or the next next year after that. So um, but I think it is sustainable for quite some time.

SPEAKER_02 36:58

Okay, let's talk about the SpaceX IPO. Uh, it seems like it is happening. Um, and I know we've talked about in the past, but any new thoughts or updates?

SPEAKER_01 37:13

Uh so the the numbers that are being thrown around uh is 1.75 to$2 trillion market cap. Uh and there's rule changes that NASDAQ just put into place for SpaceX IPO so that uh it can be included in the NASDAQ QQQ index, for example, the the NASDAQ 100. Um and it's kind of fascinating because normally the the rules were that like you have to be public for 90 days and they lowered that number to 15 days, and they they made some other changes to the rules so that uh it it could potentially benefit um uh SpaceX. I am a huge fan of SpaceX. I'm not enthusiastic about this IPO at the uh current market cap, and I'm also not enthusiastic about the uh merger that they did with XAI right before this IPO. From all indications, XAI is not making the kind of progress against you know, OpenAI and Anthropic and Google Gemini. So these are the sort of like other three big AI players. Uh Elon talked a big game when he launched XAI, and he's still talking a big game, but he has not been able to deliver. And a lot of people view the SpaceX merger with XAI as using SpaceX, which is this amazingly successful company, to save one of his other companies, which has really struggled. So um I would set it out. I think it's it's quite overpriced. And I think like I'm personally going to set it out, um, despite being a fan of SpaceX, I like I want I want to invest in SpaceX and Starlink. I don't want to invest in uh XAI and X. So, you know, it doesn't even make sense for SpaceX to own Twitter, for example, right? But it does. It's just such a fascinating story, right? Like, why does SpaceX if you you know, if before Elon bought Twitter, someone would have speculated that someday Twitter is going to be part of SpaceX because it makes sense, that would have been just like a fascinatingly crazy idea. But yeah, I'm I'm not enthusiastic about it.

SPEAKER_02 39:36

So yeah, uh two two thoughts. The first, and I saw this on Twitter, which I thought was interesting, is if uh you currently invest in Tesla more so to invest in Elon than to invest in Tesla, what do you do when you have the SpaceX IPO? Like do you sell your Tesla shares and buy SpaceX? Do you stick with Tesla? Like there's a world where this could have some negative effect on Tesla potentially.

SPEAKER_01 40:09

Um I have no idea. Right. The the what's funny is that uh at least Tesla has close to$100 billion of revenue not growing, unfortunately. Uh and SpaceX is probably going to be in the$20 something billion dollar of revenue uh growing, but now it because of XAI, it might be losing money. And it's gonna, it's about to raise potentially$75 billion. This is the rumored numbers,$75 billion of cash, which it's going to burn through because of XAI again, uh, and not because of Starship, which is the exciting part, right? Like this is the thing that you know space enthusiasts are very excited about. It's Starship. Um so uh the$1.7 trillion valuation on a$20-something billion dollar revenue company that is still not profitable just feels extremely high, extremely high. Uh whereas, as we talked about last week, Anthropic and OpenAI, these companies that uh are growing revenues so fast, two, three hundred percent year over year, and they might end the year this year with like$40,$50,$60 billion of annualized revenue. They seem to be much lower valuations at uh$800. You know, I think OpenAI just raised$120 billion at an$800 billion valuation. And you know, Elon's making fun of them, despite you know, Grock and XAI falling significantly short of OpenAI. And open AI is now on pace to have more revenues than SpaceX and XAI combined, right? So with a lower valuation. So, you know, if you were like uh investing in private companies right now, OpenAI seems like a much better valuation than SpaceX with faster revenue growth uh and a path to profitability with much more progress on the AI front than XAI and SpaceX combined. So it, you know, it's it's kind of an interesting story there.

SPEAKER_02 42:27

My other thought on the SpaceX IPO is I'm going to assume, which could be a terrible assumption, that SpaceX and Rocket Lab are going to be fairly correlated in their moves, um, not in how much they move, but the direction of their movement. You know, corrects or goes down, maybe because of the amount of AI spending, um, it could pull down Rocket Lab as well for no reason.

SPEAKER_01 43:02

That's a possibility. I mean, it it may have been pulling it up also because of its IPO. So um, like I said, Rocket Lab is one of these companies that's not uh inexpensive anymore, right? Like there was a time when it was like trading at two and a half billion and then or even four billion or five billion or eight billion, it was like very inexpensive. Today it's at over 40 billion. So it's not inexpensive, but it is a great company that's executing very, very well. So uh I feel pretty confident that even if it pulled it down in the short term, like five years from now, I'm confident Rocket Lab will have pulled it, pulled out of it and the stock price will reflect appropriately. I can't be confident that five years from now, SpaceX will will still be like will be more than a$2 trillion company, right? It may have grown into a$2 trillion valuation at that point in time, but I can't. Be confident that you know, five years from now, even if it has been fantastic growth, that uh it's going to be greater than a two trillion dollar company because it is two trillion is just such a high number. Like no other company is valued at 2 trillion that has you know less than uh what 200 billion dollars of revenue. There's like no other company that is valued at that. So it's hard for me to sort of justify SpaceX's valuation.

SPEAKER_02 44:30

Um, okay. So we have some listener questions about SpaceX. We also are just gonna go into the listener question segment of the pod. So we've got eight.

SPEAKER_01 44:40

Let's start with the SpaceX ones first, taken away. Yeah.

SPEAKER_00 44:44

Okay, you ready?

SPEAKER_01 44:46

Let's go.

SPEAKER_00 44:47

Um, this is kind of a little train of um comments. So I'll just do that. As an investor who wants to get in SpaceX IPO with little opportunity, there is a couple of funds who buys private companies. One is XOVR and the other is DXYZ. Curious if either Dustin or Hamid knows. Now let me move on to he says XOVR and DXYZ both have an interest in SpaceX FYI.

SPEAKER_01 45:17

Yeah. So um the the problem is that their uh their pricing of these other companies, first of all, it's going to be uh second order removed, meaning like at most, you know, five to ten percent of these companies' funds is going to be invested in SpaceX. They probably have like nine or ten or fifteen other investments as well. I haven't looked at either one of them in particular, but this is how these these things work. So uh there are very few funds that are invested in just one thing, right? So these funds are most likely invested in at least 10 things. So let's just assume that 10% of their holding is SpaceX. Their current price probably reflects the uh expected$1.7 trillion valuations of uh of SpaceX, meaning like people are already expecting that. So if SpaceX IPOs at$1.7 trillion, it's unlikely that these funds would all of a sudden have this enormous up upside, that they would go up in any significant way. Uh unlikely, in my opinion, just to be clear. But uh but if it goes down, like if uh SpaceX IPOs at 1.7 trillion, and then two weeks later it's uh it's trading down 10 or 15%, which is not uncommon for IPOs, by the way. Um it's quite possible that these companies will also get hit. Uh these funds will also get hit. So um I would say be cautious. Uh that's my take. I'm I'm I'm not gonna be investing in any fund that is a step removed from a direct investment, as a matter of fact. So I would have loved a direct investment in SpaceX when it was a two or three hundred billion dollar company, but um yeah, this feels like quite high for me.

SPEAKER_02 47:13

For for me, if if I were interested in the SpaceX IPO, I would just tell myself it's okay to miss out because I wouldn't want to do like what you said, I wouldn't want to be buying these second degree um investments. I'd want to own the the direct stock um at the right price.

SPEAKER_01 47:37

Um what was the high flying IPO that just happened uh a few months ago? Uh we've talked about that stock a few times. It's the design company. Figma. Figma. What is that at now? Uh I'm looking up their stock. It's$21. And that stock went up to$125 at IPO or post-IPO. I think it IPO'd at um what did IPO at? Um I want to say$33 or maybe$40, somewhere in that neighborhood, went all the way to$125. So it felt like people missed out on this IPO that you know came out at you know, sub$40. And today you can buy it for$21 a share, right? Um there's a lot of there's a lot of that kind of story. Like when Robinhood IPO'd, it IPO'd at$40, went all the way up to$80,$87 at its high, and then came crashing down. And uh I started buying at$15, went all the way down to$7 a share post-IPO. So some of these companies, even when they're extremely there's a lot of extreme excitement for them, sometimes they do still crash post-IPO. Not always. It it does happen sometimes where they stay up. But um, and this is an Elon Musk company, so there's a lot of enthusiasm for Elon. But but also Elon has uh been much more promises than deliveries lately. So it's you know, I would I would exercise a little bit of caution. I'm I'm a fan of Elon, I'm a fan of SpaceX, but uh I'm gonna stay away from it.

SPEAKER_02 49:27

And what those what those types of charts show to me is you have the market that cannot control its FOMO, its fear of missing out. So if you can control your own FOMO, you have an advantage.

SPEAKER_01 49:42

Right. Well, you know, one of the things that uh one of the greatest lines, and and I love that Warren Buffett has a line for everything, and you just touched on this just a second ago, which is that I don't need to make money on everything. I'm perfectly comfortable missing out on all the other things that I'm not interested in and make money in the five things I'm interested in. So uh yeah, you don't have to make money on everything. All right, what else do we have?

SPEAKER_00 50:10

Okay, this is uh going back to kind of staying in space, let's put it that way. What price would you add Rocket Lab? That seems to be the one you've trimmed a good amount on. You have been dip buying micron hood. Do you view Rocket Lab overvalued right now or fair value? I'm assuming if Rocket Lab goes closer to 100 on Spaceback SpaceX momentum, you will be trimming.

SPEAKER_01 50:35

Yeah, that's a great question. Um, because Rocket Lab is one of these companies where I want to own more of it, but I just can't justify owning more of it at the um price sales ratios that it has, which is that you know, it it's trading at a 40, roughly 40 billion dollar valuation with a sub uh you know, somewhere around six to seven hundred million dollar revenue run rate. So uh its price sales ratio is at what is the exact number? It's at around 50, if I'm not mistaken, but it could have changed recently. Let's let's look at look at it live. Oh, 64. So it has a price sales ratio of 64, which is really, really high. So this is no longer a good price for a great company. It's a it's still a great company and it's executing perfectly. One thing about great companies is that even if you overpay for them, you can, if they remain a great company, you can just wait it out, right? Like uh if I bought Rocket Lab today at$70 a share just for sake of argument, I can just wait. And five years from now, 10 years from now, at Rocket Lab, if it continues to be a great company, it's going to be uh significantly higher than$70 a share, in my speculation, in my opinion. But um but in my case, I already own a bunch of Rocket Lab. In fact, it's my number one holding. So I have been trimming the uh the position at uh at prices that I consider to be a little bit much, right? Um would I add if Rocket Lab went to$40 a share? Possibly. I would probably have to have a much stronger cash position in order for me to add, but um, but not when I'm down to 2% cash and I can buy Micron, which has a price earnings ratio of like four going forward. So um, you know, that's that's the way I'm looking at it. In fact, when there's other opportunities like Micron or Meta, which seem like much more concrete with with respect to their price earnings ratios and price sales ratios, uh I'm putting my money in those things as opposed to something like Rocket Lab.

SPEAKER_02 52:50

For me, it's not necessarily like what price would I be interested in buying Rocket Lab. It's when or if Rocket Lab uh becomes a smaller uh percentage of my portfolio because it's my top uh stock position. So even if the price went down to$40, but if the entire market was going down, it's still the loose position. Yeah, that's a big position point. Yeah, I I need Rocket Lab to go down faster than the rest of my portfolio, and it's impossible to know at what price and at what time that would that would happen.

SPEAKER_01 53:24

Right. Or if the rest of your portfolio was going up. Sure. And and now like something feels overpriced, and then Rocket Lab feels okay, I could own more Rocket Lab at$40 if I've exited some of my micron at a thousand, right? Like, then it's like, okay, I could switch switch it up in that way. But uh, but yeah.

SPEAKER_00 53:44

You ready to move on?

SPEAKER_01 53:45

Let's do it.

SPEAKER_00 53:47

Okay. This also is about Rocket Lab, but we we went over that. So he says, I think about buying hood and Rocket Lab, when do you think is the best time to buy?

SPEAKER_01 53:58

I like I can't answer those type like best time to buy is all relative, right? Like uh, first of all, nobody can predict the market in the short term. So um my perspective on it is that Robinhood, the reason I've been buying most recently is because I feel like it's now underpriced what where it belongs. Um at uh my last purchases of Robinhood have been in the 90s, 80s, and 70s. And I thought that it was uh I thought it was too cheap in the 90s because the growth rate of this company is such that uh if you were to again fast forward three, four, five years from now, this type of growth rate is going to be making Robinhood in a put them putting them in an exceptional position in the financial world. And I want to own more of them. Um Rocket Lab is not yet a profitable company, so it's a little bit harder to say that that is very uh like priced very well. But again, even in Rocket Lab's case, if you go past five years, it would be hard for me to imagine that it wouldn't be significantly above its current prices. But in terms of when is it a grip good time to buy? I mean, if the question implies that can they go down any further, like I have no idea. Like, sure, they can always go down further. Um one of them will definitely go down further. Not investment advice. Well, well, what we'll go down. I just I just had one of them. Well, I'm not sure. Oh, one of them. Uh it's high high probability, but uh, but you can't even be certain of that, right? Like, this could be today's closing price could be the lowest they will ever get going forward. Oh no, I have a bet on one of them, and pretty sure it's going lower. On Monday, I thought you were gonna win that bet, by the way.

SPEAKER_02 55:51

$60 for I didn't I didn't think it was happening on Monday. But I thought for sure by Tuesday it was gonna happen. Well, that's why I wanted the bet to be until the end of the year because you just you can't time it, it's impossible. Right.

SPEAKER_01 56:04

So just for those who don't know, uh Dustin and I have a bet that uh Robin Hood in my view will not hit$60 a share. In Dustin's view, it will hit below$60 a share. So um, and the and the bet is gonna give the time frame up to the end of this year. So yeah, we'll see what happens there. But let's go on to any other questions. We we'll take one more and then we'll wrap it up there.

SPEAKER_00 56:28

Okay. Um, we have a couple people asking this one.

SPEAKER_01 56:32

Okay.

SPEAKER_00 56:33

Any thoughts on SK SK Hinux? I don't know how to say that, IPO and the competition to Micron ones in the US market.

SPEAKER_01 56:43

Yeah, so SKHinks is a one of three memory uh makers. One is Micron, one is SK Hinks, the other is Samsung. Both SK Hinks and Samsung are Korean-based companies. Um, obviously, I'm invested in the American-based Micron. And um three of them report that they are supply constrained and they are completely sold out for the next year. So I'm sure that SK Hinks is in a fantastic position to grow revenues and their profits. I have no idea what the valuation of SK Hanks is. Um, and generally speaking, I stick to American-based companies because the transparency and visibility and oversight of American companies is a lot greater for me personally than uh companies that are operating primarily in other markets.

SPEAKER_02 57:40

So okay, I think with that we have episode 33 in the books. And next week we should be back on schedule uh for for Wednesdays. So apologies for the uh one day delay, but appreciate you guys sticking through it with us. Yes. Thank you, everyone. Appreciate you guys.