00:00 Speaker A
In terms of risks, though, all right, history suggests positive milestones.
00:02 Speaker B
Yes.
00:02 Speaker A
What would be on Kevin’s wall of worry there?
00:05 Speaker B
I think there’s multiple walls of worry. And I don’t subscribe to the AI bubble is about to burst camp. In fact, I think those investors who are fearful of an imminent bursting of the AI bubble, that fear is either misplaced, premature, or potentially even both. And if you’re waiting for that bubble to burst, you’re likely to miss out on the most significant returns that the AI revolution may have to offer.
00:27 Speaker B
But the risks to me are, what does the Federal Reserve do or not do with respect to interest rates? Ultimately, what happens with US China trade policy, and of course, valuations. Valuations remain stretched right now, and the money keeps going into the areas of the market that are the most stretched in terms of valuations.
00:46 Speaker B
So I look beyond that. I look to areas like industrials, utilities, maybe some communication services name as well, because they’re all part of the AI revolution and they’re not as stretched in some places in terms of valuations as some of the semiconductors and chip plays.
01:00 Speaker A
On AI, Kevin, I know you you’re in the camp that says, okay, this looks to you like early innings. Yes. I know other strategists say to, you know, forget early innings, we’re still we’re not even at the plate yet.
01:06 Speaker B
Batting practice, that’s me.
01:07 Speaker A
Okay, let me ask you though, what to that point though, my friend, what are as an investor, what are the signals that you looked at that tell you this is early, not peaking.
01:21 Speaker B
Sure. So, what I look to is Jensen Huang. The godfather of AI, the CEO of Nvidia. What he told us is that he believes there’ll be somewhere between three to four trillion dollars with the T spent on AI infrastructure investment by the end of this decade.
01:34 Speaker B
So, if we’re at about 700 billion right now, to get to 3 to 4 trillion in the next four years, that’s a lot of spending that’s coming down the road. And where’s that spending going to go? In the batting practice, the infrastructure builder, the data centers, the power solutions, the cooling solutions.
01:45 Speaker B
Not necessarily the AI algorithms and the hardware and the software plays, that’s going to come when we start playing the games. And that ROI, Josh, won’t be reached for years to come.
01:54 Speaker B
So investors are going to have to be patient on that front and try to identify more winners than losers and building a diversified portfolio. But for now, the infrastructure play continues.