Episode summary
Why Nvidia is Going to 10 Trillion Dollars | TCAF 239
Ask The Compound
· · Hosts: Michael Batnick, Josh Brown · Guests: Adam Parker, Rob Sechan
Summary
The guests argued that software is still under pressure, but the move is less about today’s revenue and more about how AI changes pricing power, margin assumptions, and the long-run distribution of outcomes. One guest said the group is oversold and value is being created, but he is not ready to call a bottom. Another said analysts have been too slow to revise 80% gross-margin and steady net-margin assumptions, and that the market is starting to price in weaker earnings and eventually weaker sales for the median software company.
They were more constructive on semiconductors, even while acknowledging the rally has been relentless. The guests said the semis’ rise is justified by the speed of earnings revisions, with Nvidia and Micron doing an outsized share of the S&P 500’s growth. They also argued that AI productivity gains are beginning to show up in corporate results, even if the benefits are still early and uneven.
A big theme was how investors should think about volatility, concentration, and where to still find alpha. The guests favored higher-quality software over cheap software, argued that stock-based compensation is really a beta factor, and said spin-offs can be attractive because management teams often unlock value and estimates are usually achievable after separation. They also pointed to private credit and asset managers like Blackstone and KKR as places where the market narrative can obscure the underlying opportunity.
Key takeaways
- The guests think software is still vulnerable because AI adoption may pressure pricing before it boosts margins, and the median company could miss earnings first and sales later.
- One guest argued that expensive software names can be better buys than cheap ones because low valuations often reflect higher disruption risk.
- They said the semiconductor rally looks extreme, but the earnings revisions behind Nvidia and Micron justify much of the move.
- The guests expect AI productivity to support future profitability, even if the market is still early in translating that into reported numbers.
- They like spin-offs because separation can unlock value, and the spun company often outperforms the parent over time.
- They see private credit headlines as more alarming than the underlying economics, and prefer the equities of firms like Blackstone over the products themselves.
Notable quotes
“I mean, I'm not ready to call a bottom in the group, but certainly there's a lot of value being created”
“And the reason I think these companies are going to miss on earnings is because the analysts have 80% gross margin and the same net margin every year going forward”
“the ones you want to buy are the expensive ones. You don't want to buy cheap software”
“It's about the distribution of outcome of 2030 fundamentals. So, some will work and some won't, but the median software company's going to be bad”
“I think the stock will go up and go up a lot”
How the episode opens
You guys are actual friends. Like really? — Yes. Yeah. — Tell us tell us about it. — They go tip to tip these guys when they hug it out. They do. — There's a storyual That's a mutual friend of ours. But yeah.
How long How long do you guys go back? — He told me. — Wait. You have a friend named Tip to Tip. He told me he told me. — That's a great nickname. — We're not going to say who it is. — We cannot say who it is.
No, no, no, no, no. — You tell the story if you want. — Yeah. You You tell the story. Don't say Don't say the name. Don't say the name. — So, we are going to say the name. But it's it's honestly hysterical. It's really I I I met Adam. We have a lot of mutual friends. He came to meet me in Fort Lauderdale. We're having lunch. Uh we're a client of his firm. And he goes, "This guy, you know, I know him well. We're mutual friends. This, that, and the other thing." And he goes, "He's a real he's a real tiptotip guy." And I said,
"What does that mean? — What what does that mean?" And he goes, he goes, "You know how when some people hug you and shake your hand, they kind of lean the shoulder to the side?" He comes in straight and hugs you. And he said, "It is full frontal." I could not stop laughing.
I respect that the entire lunch. — No, we both, — To be clear, we both really love this guy. Like, it's not so. And he's like the only person I would say that he can get away with it.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai margins and earnings power
- software stocks
- semiconductor rally overcrowded
- spinoffs as alpha
- nvidia valuation
Companies and tickers mentioned
- NVDA
- AVGO
- LRCX
- NRG
- APA
- GILD
- Nvidia
- Broadcom
- Lam Research
- NRG Energy
- APA Corporation
- Gilead Sciences
- Trivariate Research
- NewEdge Wealth
Watch the episode
Watch “Why Nvidia is Going to 10 Trillion Dollars | TCAF 239” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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