NVIDIA Fallout and AI Trade Rotation

NVIDIA

Across the shows: 81 speakers in other episodes, 67 bullish and 37 bearish calls, past 30 days

• Joe Terranova · Virtus Investment PartnersBullish

  Nvidia is the center of AI innovation and worth owning despite its weak year-to-date performance.

  Joe gives his personal view that investors should own Nvidia because it sits at the center of AI innovation. He notes that his own strategy does not treat it as a momentum stock: it is down 5% year to date, 11% over twelve months and 19% over six months. Analysts are very bullish, with 78% buy ratings and a $323 price target. He also argues the November 17 earnings call will focus on Jensen Huang and succession rather than revenue growth.

  “My personal opinion, of course, you wanna own NVIDIA. They are at the center of the universe for the innovation surrounding AI.”at 2:23

• Bryn Talkington · Requisite Capital ManagementNeutral

  Nvidia shares likely to be dead money over coming months; jury still out on the probe.

  Brenda says the jury is still out on the fallout from the Huang affair and the investigation. She thinks the stock will go nowhere, or be dead money, for now. She is surprised the stock is only down 5%, which she reads as the market believing Jensen Huang. She says investors should wait and see what happens over the coming months, since this is still the AI ecosystem.

  “I think the jury's still out. I think it's gonna be dead money. I'm somewhat surprised because I think the market is saying, we believe Jensen. That's why it's only down 5%.”at 5:37

• Kari Firestone · Aureus Asset ManagementNeutral

  Nvidia's stock at 13 times forward earnings may plateau for months rather than rally immediately.

  Carrie notes the stock is trading at 13 times forward earnings and is down about 26% in a month. She says she is not telling people to buy it, and she expects that Huang will probably have to leave if the investigation finds the alleged spy relationship. Given valuation and oversold conditions, she thinks the shares may base at this level for a few months. She expects the process to be emotional and to take a while to unfold.

  “I think because there's a valuation, the stock might plateau. We might see a level here where it bases, where it goes for a few months at this level.”at 7:57

• Bryn Talkington · Requisite Capital ManagementUncertain

  Nvidia has no visible succession plan, so Huang's exit would force a reassessment of the company.

  Brenda argues that Nvidia lacks a clear succession plan because its board has no household names, unlike Apple, which had Tim Cook after Steve Jobs. She compares Huang to Elon Musk at Tesla and SpaceX, saying the company is defined by its founder. She argues that if Huang is pushed out, investors would have to reassess the company, because he holds an influential seat on chip policy and keeps key employees. She hopes that does not happen.

  “If Jensen's out, it's like if Elon was out... you would have to just reassess how you think about the company just because he is pushing that important.”at 8:17

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Nvidia depends on large teams, not one founder, so a Huang replacement should be manageable.

  Jenny rejects the Elon Musk comparison. She argues Nvidia's chip sophistication needs enormous teams of scientists, unlike SpaceX's rocket landing, which depended on one mind. She compares Nvidia to Berkshire Hathaway, where a large team sat behind Buffett. She thinks that if Huang is replaced, the company could recruit a top CEO who would want the job, and she points to Greg Abel's handling of Berkshire as evidence.

  “I do think a Warren Buffett at Berkshire is the better analogy. You simply can't make this level of sophisticated chip on one man.”at 9:04

Apple

Across the shows: 50 speakers in other episodes, 58 bullish and 34 bearish calls, past 30 days

• Kari Firestone · Aureus Asset ManagementNeutral

  Apple became the safe haven for investors leaving other hyperscalers, so Carrie trimmed at this price.

  Carrie says Apple has been the go-to stock for investors nervous about other hyperscalers. Money has moved out of Google and Meta into Apple as the AI trade has unfolded, and Apple has acted like a safe-harbor bank stock. Because the stock is up around 29% year to date and trades at 35 times earnings, her fund trimmed the position. It did not cut the holding by half, but it reduced it.

  “It's been the go to stock for people who are nervous about other hyperscalers. As this trade has unfolded, money has definitely gone from Google as an example or Meta and moved into Apple... And at this price, we thought it made sense to trim some.”at 24:52

• Jenny Harrington · Gilman Hill Asset ManagementBearish

  Apple at about 35 times earnings with 12% growth is paying for a safety trade.

  Jenny argues Apple is more expensive than its peers. Paying about 35 times earnings for a company growing earnings at about 12% means investors are paying a premium for safety rather than for growth. She describes it as selling a premium and taking profit. She says that if the stock was rich at the start of the year and still is, a fundamental analyst would call it rich, though an active manager might ride momentum while staying careful.

  “when you're paying 35 times for something that's growing earnings at 12%, like you're paying for the safety trade, you know, and all you're doing is basically selling the premium.”at 26:31

Chipotle Mexican Grill

Across the shows: 5 speakers in other episodes, 3 bullish and 3 bearish calls, past 30 days

• Kari Firestone · Aureus Asset ManagementBullish

  Chipotle is cheap at about 20 times earnings after a 60% fall, with new management improving same-store sales.

  Carrie says Chipotle is down 60% and trades at about 20 times earnings, against a typical multiple in the 40s. The former CEO has left, but new management is making changes, earning high returns and doing well. She expects same-store sales to improve next year. The stock has moved since her fund bought it ahead of earnings, and she says it is the time to buy a consumer stock that the market has lost faith in.

  “Stock is down 60%, trading in a multiple of around 20, where it's typically traded in the 40 multiples. ... Same store sales next year are going to be improving.”at 28:52

LVMH Moët Hennessy Louis Vuitton

Across the shows: 5 speakers in other episodes, 2 bullish and 3 bearish calls, past 30 days

• Kari Firestone · Aureus Asset ManagementBullish

  LVMH's cash pile lets it buy distressed luxury brands, a move Carrie expects again.

  Carrie says luxury stocks boomed during COVID as people shopped at home, then fell as spending moved back to restaurants and experiences. She argues LVMH has plenty of cash and a track record of buying brands in distress, and that it manages its brands well, moving them between divisions when they fail. She expects LVMH to buy more brands and says her fund bought the stock at a price it found attractive.

  “They've got a lot of cash. They can buy brands. The Arnolds are very smart about buying brands in distress. I think they'll do it again.”at 30:57

KKR & Co.

• Bryn Talkington · Requisite Capital ManagementBullish

  KKR's selloff is overdone: fee earnings rising 26% while private credit losses stay low, so sunnier skies ahead.

  KKR rose 8% over the month but is still down 23% year to date. Fee-related earnings are up 26% year over year, and the drop is driven by investor skittishness about private credit rather than fundamentals. Private credit keeps showing very low losses, so the selloff looks like panic. The stock is slightly above its 200-day moving average, and if it holds that level she expects sunnier skies.

  “Nothing to do with their fee related earnings, which are actually up 26% year over year because people skittishness around private credit, which continues not to manifest itself.”at 39:03

Sixth Street Specialty Lending

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Sixth Street Lending is a buying opportunity: the shares were sold off, but the supplemental dividend was restored.

  Sixth Street Lending was sold off hard alongside KKR, which she sees as a sentiment-driven overreaction that creates an entry point. Last week the company reinstated its supplemental dividend, which she says supports the argument that the business is fine underneath. She notes the stock yields about 10%. She holds it in her portfolio.

  “But sentiment can also go too far, which is I think your argument, and then you have these great entry points... In our portfolio, we have Sixth Street Lending. The ticker is TSLX... on 6th Street last week, they actually increased or put back in place their supplemental dividend, which is kinda adding to Bryn's argument that under the hood, things are still okay.”at 40:44

Deckers Outdoor

Across the shows: 5 speakers in other episodes, 7 bullish and 2 bearish calls, past 30 days

• Kari Firestone · Aureus Asset ManagementBullish

  Deckers is a buy: a strong consumer brand at 11x earnings, now back above its 1500-day moving average.

  Deckers is a consumer brand with popular sneakers. Its shares fell sharply today, but she says the stock is now coming back up through its 1500-day moving average. It trades at 11 times earnings. She pitches it as a final trade on that combination of a strong brand and a cheap valuation after the drop.

  “Another consumer brand. Right? Consumer brand, great sneakers. The socks way down. Coming up through its fifteen hundred day moving average 11 times earnings.”at 44:36

AI infrastructure & data centers

• Kari Firestone · Aureus Asset Management

  Market rallied Wednesday on hopes hyperscalers will spend less, via regulation or restraint.

  Carrie argues the market has a split personality. It rallied on Wednesday because hyperscalers might spend less, either because regulation limits new data centers or because they restrain themselves. Today's rebound reflects a view that spending will be more deliberate and rational. She also says part of the market is negatively biased toward the sector because investors do not want regulation driven by Elizabeth Warren.

  “It rallied on Wednesday because perhaps the hyperscales will spend less, either because they'll be forced to spend less, because... regulations will say no more data center here or because they'll have some restraint on their own.”at 15:33

• Bryn Talkington · Requisite Capital Management

  Slower data center buildout should lift hyperscaler free cash flow and value into 2027–2028.

  Brenda argues the slowdown in new data center builds after the midterms is good for hyperscalers with existing capacity, such as Meta with Hyperion, Google and Microsoft. She expects capex to slow, so these companies may look more like Microsoft and less like companies running negative free cash flow. She sees this as a net positive for the Magnificent Seven going into 2027 and 2028, though she thinks suppliers such as Vertiv and GE Vernova may see different winners and losers. Regulation is a headwind.

  “The slowing of the data centers of the new builds is gonna be better for Meta with Hyperion. It can be better for Google, better for Microsoft, better for those who've already stood up their own data centers.”at 17:58

US stock market outlook

• Joe Terranova · Virtus Investment Partners

  Investors should moderate earnings, return and concentration expectations; the market will not repeat 2023–2025.

  Joe argues the recent turbulence was a lesson in moderation. The S&P 500 closed at 75.68 on election day and sits at 75.47 now, so the drop was small, not extreme. He argues investors should moderate earnings expectations, which may need to fall from the 20% growth now in view for next year, and return and concentration expectations. He says the market will not look like 2023, 2024 and 2025.

  “I think the last several days has been the market giving investors a lesson about moderation. Moderate your earnings expectations, moderate your return expectations, moderate your concentration... It's not gonna look like '23, '24, and '25.”at 19:05

Cybersecurity

• Joe Terranova · Virtus Investment Partners

  Cybersecurity stocks face near-term negative momentum after weak Fortinet results; upcoming earnings must reverse it.

  Joe says Fortinet's October 28 report was bad, and his fund holds four cybersecurity names: Fortinet, Okta, CrowdStrike and Palo Alto. He argues that the cyber trade has had its sentiment reset and that the sector now has a little near-term negative momentum. Palo Alto reports on the 18th and CrowdStrike and Okta on December 1. He says those reports must reverse that negative momentum.

  “Most of us love the cybersecurity trade, for sure. I will tell you, we have broken the fever in the cybersecurity trade. ... They need to reverse what has been injected into the cyber theme, which is a little bit of near term negative momentum.”at 33:08