The Biggest IPO In History Isn’t What You Think It Is

“Now we're talking about a 125 times sales. And, you know, it's worth noting as well that that SpaceX is. It it is an exciting company. It is growing, but it's not grow you know, analysts expect it to grow 25% next year. That's not good enough. Like, Google went public, I forget how long ago, but it they were growing at 240% a year, and they went public at 10 times sales once again. And so the the price the it's not really the the question isn't whether it's a good or a bad company. A bad company can be a good investment if you get in at a low enough price, and an amazing company can be a terrible investment if you overpay for the stock.”

“Well, the the thing that's quite questionable about the way this IPO is being done is just the way that it is being forced into the Nasdaq 100 index almost instantly. I think there's gonna be a fifteen day delay. And also the waiting that it'll be given is much higher than you would expect for a company with a very low float. So in a funny way, the company goes public at a very high valuation. People will probably buy in. Firstly, there's a lot of people are just very excited about Elon Musk and his companies. They'll they'll put money in, but then the, the expectation is that the indexes will be buying fifteen days later. You know, at the current valuation they're talking about, it would have a four and a half percent weight in the in the Nasdaq 100.”

“Well, the real question is there's there's an awful lot of stuff in there that you would consider sort of lottery tickets. Right? Like, where it's stuff that it seems a little bit unlikely, this whole data centers in space thing. It's been tried. There's a company, I can't think of their name now, but they they launched one NVIDIA chip into space in a little satellite, to run an AI program where I think it was meant to, you know, learn the works of Shakespeare constantly had to be shut down because it overheats, because it's very difficult. You know, everyone says, well, space is cold, but it's also a vacuum, and you need air blowing over something or water or whatever to cool it, via convection. If it has to cool radiatively, you need these massive massive cooling fins on it.”

“What's interesting with the the current composition of the emerging market index is that it's really not a reflection on the underlying emerging market economies. It's basically become a bet on the AI CapEx build out you're seeing. So the big drivers of the emerging markets for the last better part of last two, three years now have been the semiconductor plays, specifically in Taiwan, TSMC being the big one, and South Korea, the memory companies SK Hynix and and Samsung. And in one stat that's pretty mind blowing is that if you look at it on a year to date basis, those three semiconductor companies, TSMC, Samsung, SK Hynix, are driving almost 70% of the entire index's earnings growth. Wow. So this has basically become a one way bet on the CapEx build out that you're seeing.”

“Ten years ago, these economies were in a funk. Morgan Stanley called had a term called a fragile five for a lot of these countries. But as these cycles go, they've turned around, and growth is finally coming back up for a long time. So I I I would say you do have to look at it from a country by country basis, because, again, the index is so misleading given how lopsided it is on AI. If the AI topic story slows down or, god forget, turns negative ever, then the index will be in a world of pain. However, outside of that, there's a lot of attractive bottom up stories.”

“Our view is that the straits are still very much closed. Oil Brent oil is close to a $110 per barrel. And if you look at the refined products of gasoline, diesel, jet fuel, they're closer to $200 per barrel. And you're already seeing an economic slowdown across most Asian countries, and that our view is that the next leg will be in Europe. So so we actually think the markets are being very complacent about the risk of an oil shock or a higher for longer oil environment.”

“Microsoft and OpenAI have had a contractual relationship for many years, but recently that situation became contentious. Part of the agreement was that in exchange for its compute, Microsoft would be the only cloud provider that could sell OpenAI's products. In other words, the relationship between Microsoft and OpenAI has long been exclusive. But now they're changing that. OpenAI will be allowed to partner with other companies, which means they can now sell ChatGPT through other platforms such as say AWS which is Amazon's cloud unit which effectively means that the relationship with Microsoft is now an open relationship.”

“Microsoft is trading at 22 times forward earnings. Alphabet's trading at 30. Amazon's trading at 32. So we land where we landed last week. And that is that Microsoft stock still looks pretty attractive. As I mentioned a couple weeks ago, I bought it when the stock hit $400 and I bought again when it hit $380. It's now up to $425. We will find out more when the company reports earnings later this week. But as of today, it still seems relatively cheap.”