Big Technology Podcast - Decoding The NVIDIA Trade — With Michael Batnick

Episode Date: June 26, 2024

Michael Batnick is managing partner at Ritholtz Wealth Management and co-host of The Compound and Friends Podcast. Batnick joins Big Technology Podcast for a conversation that asks all the questions about NVIDIA's historic run. We cover the valuation, volatility, competition, chances to keep going, and AI fatigue. We also ask whether NVIDIA could give up its gains just as fast as it built them, whether it will become an Apple-like fixture in portfolios, and how algorithmic trading might play a role in its massive growth. ---- You can subscribe to Big Technology Premium for 25% off at https://bit.ly/bigtechnology Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

Let's decode the invidia trade, examining why it became the world's most valuable company last week, and what comes next, with one of the world's most astute investors. That's coming up right after this. Welcome to Big Technology Podcast, a show for cool-headed, nuance conversation of the tech world and beyond. We're joined today by the great Michael Battenick. He's a managing partner in Ritt Holts' wealth management. He's the co-host of The Compound and Friends, which is one of my favorite shows and also the host of the Animal Spirits podcast. Michael Battenick, welcome to the show. Great to have you here for the first time.

What an introduction. World's most astute investors. I've definitely never been called that before. But thank you for having me. I'm excited to talk about it. It's the truth. It's the truth. Yeah, well,

you guys were in NVIDIA way, way early. And so I think it's well earned. I wasn't. Josh. Josh was. Okay. So Josh Brown. I mean, anyway, it's group credit here.

We'll give you guys. Listen, I followed Josh into enough things. All right, he got lucky on this one. Credit to him. Okay, sounds good. So let me read you a couple stats about NVIDIA. We're obviously like talking. It's been kind of an interesting week.

They were the world's most available company for a minute last week. They've fallen a little bit back to Earth this week, but still they are, they've done incredible this year. And they are really the story of this AI boom. So this is what we can say about Nvidia today. They are a $2.9 trillion company. They're up 145% year to date. They've added $1 trillion in market cap since February. And this is from Fortune. If Nvidia were to lose the gains it has made this year, overnight, the SMP 500 would have to come down approximately 4.5%. So they're really carrying the market. First question for you, is there any precedent here? Like, is this something we've seen before? No. It's a short answer.

And I'll just say in fairness to the comment I made about Josh, years ago, he was actually dead right on this. I remember he wrote a great blog post saying that semis were the new Dow transports. The way that information is disseminated, it's no longer on rail. It's on these little tiny chips and he absolutely nailed that trade. To answer your question, has anything like this ever happened? There have been lots of fabulous growth stocks over the years and decades, but there hasn't been, at least as far as I know, in fact, you know what? No, there hasn't been. There has never been a company of this size growing this quickly. In May, the company reported in the data center alone 400, this is obviously their main business, 430 percent,

year over year revenue growth overall revenue growth was 262% you've never seen a company in the trillions of dollars growing with their top line and bottom line uh this quickly right by the question is like how do you value the company because there were the right so there were two interesting headlines in bloomberg over the past couple days um like side by side one was like uh invidia's growing so fast wall street can't keep up and then the next one was invidia enters a massive correction. So let's go one by one on those. So the first one in terms of being able to value the company.

So this is from Bloomberg. In the age of artificial intelligence, no one can figure out what the chipmaker's revenues are actually going to be, not the Wall Street analysts covering Nvidia or Nvidia executives themselves. Analyst aren't making up numbers. They take their cues from management

like they do with every other company. However, even Nvidia's leadership is struggling to anticipate how much money the chipmaker will generate three months into the future. And this is the actual data. Since NVIDIA's sales began exploding in the fiscal quarter that ended in April 2023, revenue has exceeded the midpoint of the company's own forecast by an average of 13%. So basically, Nvidia is setting this bar for what it expects to earn and just blowing it out by double digits almost every quarter. And then the question is, okay, so how do you value it? Because it is somewhat expensive if you look at its valuation

according to this story, at least. It is somewhat expensive. I think the easiest historical analog that people are comparing Nvidia to is understandably the dot-com boom and bust in the late 90s. And Cisco was the poster trial for that. Cisco got as expensive as I think it was 130 forward times earnings. Right now, Nvidia is trading somewhere between 40, let's call it 40 times forward earnings. And the question, Alex, as you astutely asked, is like, well, what is what is the proper valuation? And this is what makes it so fun and so excited. is you don't know. We'll find, I'll tell you what the proper valuation is three years from that. We'll find that what it was. But what should a company trade at that is growing this quickly, that is defining a new category that can be world changing, that has margins like this, that has no competitors. I don't know what the right answer is, but it probably shouldn't be traded at a market multiple, call it 20 times or so. So it certainly has earned a premium that it's traded at. The question is, okay, Yeah, growth stocks deserve a premium, but how big is too big?

And can a company that's in the trillions, now three trillion dollars, and it just became the largest company briefly for a minute surpassing Apple and Microsoft, it's only the 12th or 13th company over the last 100 years to wear the crown of the number one company in the S&P 500. There's not been a lot of turnover at top. There's only 12 names. And Nvidia is one of them. And so I would argue, and I think there's a ton of arguments on the internet about, is this a bubble?

Does this make sense? And you've got the market people like myself talking about historical precedent and growth rates and assumptions. And then you've got sort of generalist business people talking about, well, doesn't competition have to come in? Their margins are unsustainably high. But I think what is missing from the conversation is like actual experts that might. have more insight on the business and how quick they can grow. Of course, we're all sort of estimating and guessing the best we can. So I don't know what the proper multiple should be for this company, but it is doing something no company has ever done. It continues to be the loftiest

of estimates. And as long as it does that, actually, I shouldn't even say that. I was going to say as long as it does that, it's going to be fine. Who knows? It might, there could be a point in time one of these quarters where it does beat and the stock drops 20%. You can't predict how the crowd is going to react. You just can't. And I'm going to get into some of the objections that people have on Nvidia and we can go through them, including the competition side in a bit. But let's talk a little bit about what happened this week with this kind of, I call it a massive

corrections, actually a mini correction, but it's just a lot of money. So this is, again, from Bloomberg like a day after Wall Street can't keep up. It says, NVIDIA enters correction territory as slump erases $430 billion in market. Like, you know, that's a, that's a lifetime of work for most companies, but it's a week of losses. There's, there's 14, there's 14 companies in the S&P 500 that are bigger than the market cap that was raised in three days. That's it. Only 14th companies are more than $430 billion. That's, that's as big as MasterCard.

And it did it in three days. So, yeah, the numbers are getting, like, alarming and startling. Right. And this is from the story. The, Nvidia entered correction territory on Monday, as the number. The ongoing sell-off erased a historic amount of value for the AI-focused chipmaker. Actually, I'll pick a bone with the chipmaker detail, but we'll go through that in a bit. It said the stock fell 6.7% and the three-day drop erased 430 billion of Nvidia's market cap,

the biggest three-day loss for any company in history. So is it just that with Nvidia, because it's growing and because there's so much volatility, or because there's like so much uncertainty, there's going to be. volatility is that just something that's going to be baked into it what happened over the last three days is abnormal in terms of the market cap losses but for a company that's doubled and doubled again and doubled again or whatever the performance has been for it to lose 13 percent in three days is completely normal i mean that is there's nothing abnormal about that except for the size and the magnitude of the drop and matter of fact it so it's

it had a 13% drop, give or take over the last three days. It did that back in April. Remember the correction back in April, which actually came and went. So the stock was in a 20% drawdown. And I think we sort of forgot about it because since that drawdown, it almost doubled. And again, that drawdown that I'm describing happened from April to May. And from then to here, the stock almost doubled. That's crazy. Yeah. And when you talk a little bit about valuations, talking about it shouldn't have a market valuation, but it could have a growth valuation. So can you explain a little bit about what you mean there in terms of like, all right, so it's making a certain amount of money. We're not going to value it as every other company in the stock market, but there's that

there's another range that it should be in. Yeah. So Nvidia has gotten cheaper over the course of the run because the fundamentals have outrun even the incredible share price. So over the last, last year, NVIDIA earned $1.9. That was her earnings per share. Over the last 12 months, it's done $6.12. So its earnings per share has sex tumbled over the last year, which is astronomical. So stocks like air quotes are a discounted cash flow, right? You discount all the future cash flows and you get to a current value. You use some sort of discount rate, whatever the appropriate may be, which of course nobody knows. We're all guessing. And so with a company like this where it is growing so quickly. It's not what did it earn last year or what did it earn this

year. It's what can it be expected to earn over the next 12 months, over the next 24 months. And you never really know how far out the cut, like we are going when we discount these things. But the fact is that valuation matters and it doesn't matter. It doesn't matter today because the buyers today are momentum buyers. And that's not disparaging. Momentum is a great strategy and momentum buyers of Nvidia have been rewarded heavily. And momentum buyers of all big tech have been heavily rewarded. But I don't think the marginal buyer today really gives a shit about what Nvidia might earn in 2026. They just don't. Now, it will matter because these are actually businesses that we're investing in. And in this respect, Cisco might or might not be a good

analog, but there is a potential lesson here to learn. Cisco, the business, compounded its earnings at something like 15% in the 15 to 20 years after the bubble burst. The stock got destroyed because it wasn't discounting 15 to 20% earnings per share growth. It ended up discounting like 40 to 50%. And so valuation matters eventually. But if Nvidia can continue to do what it's been doing, and that's beyond. you know, I have no idea.

But if it can, if it can do, I'm making this up, $8 next year, $10 of the year after, $14 in 2027, the stock can be at a, the stock can be $5 trillion. That's crazy. So, yeah, let's talk a little bit about the objections to like, you know, this is sort of the bull case. Here's the bear case, right? Or actually, maybe just some general questions about this run and whether it can keep going.

First question I have for you is, is this something that is kind of, like the next Tesla, right? Like, Tesla sort of became something of a meme stock like it had earnings, but it also became this like place where you put money if you believed in like the EV revolution and just wanted to, you know, park your money somewhere. And it was like worth, you know, multiple times of a Ford, even though it was selling less cars than a Ford. Is this something that could happen with Nvidia that like maybe some of the Tesla money has flown into Nvidia and it becomes something of like a, you know, almost a bigger game, maybe like a game stop with earnings? Yeah, it's an interesting question. Two things have happened

over the last couple of years in businesses that parallel each other that I think are really fascinating. One is Tesla. And you mentioned Ford and GM and everybody else chasing Tesla because they were taking a lot of market share, creating a new category, the electric vehicle, and it was growing rapidly. But then competition came in too heavily. They overproduced and now there's too many EVs and there's too much supply and these companies are not doing well. The same thing happened with Netflix and all of its competitors. Everybody saw what Netflix is doing with streaming and of course the competition didn't want to cannibalize itself understandable. They were late to do so, but then during the pandemic, everybody was watching Netflix and the stock price was being rewarded

because these SaaS businesses or the recurring revenue businesses were trading at a ridiculous premium. And so all of their competitors jumped into the deep end. And what they really did was they followed the roadrunner off the cliff. And I think the question is, is the similar trajectory going to happen with Nvidia? Are its competitors? I don't even know who their competitors are honestly. I don't even know who does what they do. I know some of the other names. But the question is, are they going to overbuild for an AI world that might not be quite as powerful as everybody is projecting. Another bear case, which I'm sure we're going to get to, is maybe this is bearish,

maybe it's actually bullish. The fact that so many of its revenues is concentrated in five customers is that is that a good thing because what happened with Cisco is that all of its customers basically went bust, right? But the flip side is like, okay, well, how much, how much is Amazon going to buy from invidia and the other players like how much is facebook going to spend did they already spend 80% of what they're going to spend in the next three years i don't know how how financially intensive these businesses are i mean obviously you know a lot better than i do but i think

that's that's the big question is what does this look like how much do their customers spend and where when this competition really come in right and like something like 45% of invidia's data center revenue is coming from the big cloud providers like those five customers right so So I'm curious, well, you brought it up. Do you think that it is a liability or a strength? I think you can make both, you can make good points on both sides. Yeah, talk us through the arguments. Yeah, I think the bulk case would be these are the biggest companies in the world.

Right. They're not going to go under like the Cisco buyers. Exactly. They have the best balance sheets. They're spending billions, billions of an R&D a year. I don't know what the number is for some of these companies. but I think is Apple spending $25 billion a year on R&D? Whatever the numbers are, they're immense.

And so they've got the pockets, and they are committed to funding the next big thing, this this AI thing, whatever it turns into. Then I guess the flip side would be, okay, but that's like baked into the pie. Like even if you assume that their prior spending is going to continue, where are the incremental buyers for these data centers? I don't know. Well, I mean, what's your take? Is that bullish or bearish?

Yeah, it's a good question. I mean, the whole thing is predicated on whether this AI, quote, unquote, revolution will continue to go apace. Because the technology is good enough right now that it's worth investing in for companies who want to build with it. But it's not mature enough to the point where, like, it's a definite game changer. It's almost like potential game changer. The good thing and the good news, and I think this is why, like, there's a floor here is because, and we talked about this a little bit on the compound. we spoke a couple weeks ago, these companies will continue to use Nvidia chips, even if generative AI sort of hits a wall, right? Like, those chips are very useful to do ranking on

reels or to help with the Metaverse. So Meta, which said this year, it's going to go from 350 to 650,000, Nvidia H100 GPUs or equivalent, which is an incredible increase, right? Like, they're going to continue to spend on it because it makes the entire product better and is used in the AI that sort of underpins everything. But you would need to see more progress in this generative AI move, talking about better chatbots, but also capabilities like agent-like behavior and reasoning that can sort of unpack a command and, like, go through a bunch of different steps. And we're not 100% there yet.

So it seems like they are going to be able to continue to sell and they are going to be able to sell to these customers. But there is still that big question mark of like, where does this all end up? And from everything that I hear, it's going to be the next day. 18 months that will basically decide, like, if they do 18 more months of development of these models within Open AI, within Anthropic, within Microsoft, and meta, and don't see sort of step change increase in results, then this thing is going to slow down. But if they continue to see the results they've seen through each generation of the models, then I mean,

Nvidia, you're right, could just keep selling like crazy. Because, and this is sort of like the thing I was pointing out when I poked out the chipmaker title is it's just not the chips. It's the chips. It's the software used to train and it's the networking that even the bands between servers that will allow the companies that are training on invidia models to be able to do more efficient and better training uh or sorry on invidia chips to be to do more efficient and better training because everything is just so connected where like you look at the competitors and they don't have it so like when you asked before like what's the competition to invidia my my perspective on this really is that the competition is the AI boom slowing down more than it is any other company

that's going to come in and take their lunch. So you mentioned, like, we'll know in the next 18 months or so whether or not businesses are getting an ROI on all the spending. Because right now, we know that they're not. I forget what the numbers are, but for every $10 billion spent, whatever it is, that's moving the revenue by like 3%. But do you think that they're going to get the ROI necessary to continue to spend? I think that's a great question.

I think that's, so I think within the next 18 months, we're going to know if the models get better. I think the ROI question might be even further pushed out. And so we haven't heard a lot of clamoring about ROI yet. Like there's this one like Sequoia capital number that's been thrown out that like 50 billion, for every 50 billion spent, maybe $3 billion has been returned. Right. Which is really, really bad.

But it's top of the first inning, no? Exactly. So is that number even relevant at this point? No, but it is a preview of what we're going to start to see as we sort of, as these timelines get extended further, right? because like right now there's this sort of move because the improvements are so close like the potential improvements are so apparent that people are willing to spend because they think they're coming but if they if they don't come then the ROI question becomes much more clear because you're not looking at like all right if we spend this this year we're going to get this you know in one or two years right is it it's like you know how how can companies basically say stick with us it's going to be a five year project or a 10 year project that's it's not really done often in software projects. Well, they're able to do,

semis have typically been a very cyclical industry. Right. And there's no real reason to expect this to be different. If the economy were to go into a recession, you would think that these companies would pull back, no? Yeah, exactly. So, and that's sort of another question that I had for you, which is, you know,

there are all these different things that could happen in this, in this moment, right? Is it a change in the AI story? Is it a move to, let's say, a drawback in the, the economy. And is it possible for the sort of the money to flow out of the stock as fast as it went in? That's a good question. Yeah, but listen, I mean, we just saw a 20% drawdown that happened in a couple of weeks. And like I said, it gained like 90% after that. So I'm talking about from, when to this peak, from March over, I don't know, a five-week period, it lost 20%.

But I guess what I would say is, can this thing get cut in half? Absolutely, it can get cut in half. But does that prove that the bears were right? I don't think so. Growth stocks get cut in half all the time. In video, I mean, this is obviously very different because the business was different. This is pre the gigantic data set of revenue growth. But Nvidia lost almost 70% of its market cap a couple of years ago.

Right. So can you see a spectacular crash in this thing? Sure you can. I sort of feel like too many people want that to happen for that to actually happen. Why do they want that to happen? There still seems to be, and it's, listen, I'm making this up. It's hard to like, it's hard to like, I quantify what I'm saying here. But there still seems to be a lot of doubt.

But listen, again, for every doubt, you can say, hey, asshole, it's $3.3.3 trillion. What are you talking about doubt? I guess what I would say is if I had to guess, and we're all just guessing here, these things, these things end in bubbles, usually. And as dumb as you think they might be, they always get dumber. And have we reached the level of sufficiently dumbness? That's like the $3 trillion question. Who knows?

Yeah. And we got to go to break. But before we do, I got to ask you one question. What did Kathy Wood see when she decided to sell so much Infinity before the whole run up? Yeah, this is, I was talking about this the other day. I don't like to kick people when they're down, but this is a tough one. This is a really tough one. She sold.

it before the run and listen she has a difficult job but to make matters worse like she never got back on and there was a lot of opportunity for her to do so and uh when you market yourself as the innovation fund and you miss the biggest innovation of the last uh i don't know how many decades since the internet potentially that's yeah that's got to hurt it must uh you know that that fund has really languished it hit a couple during the pandemic with the zoom and some others Tesla but yeah especially now Tesla is dragging it down I don't know how many predictions that Tesla is going to end up being a 15 trillion dollar company by 2030 will help we'll help that fund okay let's take a break and then talk about what what

envidia looks like looking ahead how sustainable this is going to be and does the stock transform and become basically part of people's portfolio maybe like an apple has to this point where it's held by institutions and not and not as volatile okay well We'll be back right after this. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending.

More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here on Big Technology Podcasts with Michael Battenick.

He's a managing partner at Ridhold's Wealth Management, the host of the compound and friends podcast and also the host of Animal Spirits. Michael, great having you here for the first time. Oh, I'm fine. Thank you. Yeah, yeah, definitely, definitely the right stock to be talking about. Before the break, I mentioned, like, does this thing become a stock in people's portfolios like an Apple? Right.

Where Apple is like, of course, it's an impressive company, but the stock has become effectively something that institutions hold almost, I don't know, almost like a standard part of their portfolio, no matter what the company does. You got to be equal weight Apple at least, right? Yes, exactly. So is this something that Nvidia can achieve? How hard is it to get there? No, no, it can't. I think the reason why Apple became so ubiquitous in portfolios across America is because the brand, the products became so ubiquitous across America. I don't know what the average American has in their house in terms of, of the iPhone, maybe an Apple TV, an iPad, an IMac, or what have you.

Invidia is just not the same. And it's never going to be the same. It's never going to be the household brand. And so I think it's just, it's not going to get there. No chance. Okay. So then also in terms of the split, right? The split seemed like something that people, that would encourage a lot of people to buy.

I remember, okay, I was at the bagel shop here in New York. And a woman walked up to me and she goes, hey, do I know you from MSNBC? I'm like, do you mean CNBC? She said, yeah. And she's like, yeah, I've been saving up to buy an Nvidia. Oh, no. Yes.

Did you think she meant to share a stock? Once here, yeah. Yeah. Or basically she was like, I'm in these stocks, but I can't afford Nvidia. Okay. So she was waiting. Yeah, listen, we know economically a split doesn't matter, but guess what? It matters.

It matters. Because exactly what you just said, people think a stock that's cheaper becomes more affordable, rightly, wrongly. And perception is reality in the stock market sometimes. And so, but it's interesting because it did split and now it's going through this correction. But maybe over time it will just make more money come into the stock. Yeah, counterpoint in like 15 sessions, it gained 40%. So again, this, this, this pullback, I don't know if this is, if this is it, if it goes lower or higher.

This is nothing. This is the most normal thing ever. If you chart any stock that's gained 150% in six months, it gives a little back. Nothing goes straight up. In fact, the price action over the last couple of weeks became alarming. If you look at Nvidia as a percentage of the S&P or the Qs or whatever, it had been going straight up. And that type of price action is concerning.

So you need this. If you're bullish on Nvidia long term or even like short to medium term, this should should not concern you, you should say, okay, good. Because the higher it goes vertical, then you've got like a really unstable potential situation. Why is that concerning? It just becomes, it just becomes delicate and fragile. I don't, I wish I had like better words to, to describe it. But when something goes straight up, it's just not, it's not healthy market behavior. You don't want to see a buying mania because buying manias inevitably lead to selling manias. Right. The other thing about this is that as so speaking of like the mania thing actually it's a perfect lead into this question so how

much of the trading is actually like algorithmic or like the algorithms see like AI they see other people getting into it and then just like institutions who have like turned their trading over to the algorithms just pile into a stock like this is that partially responsible for why invidia has run up this way so i'm not a master at market structure and volatility implied in actual and whatever whatever But I know this. There is a levered product. The ticker is NVDL, and it gives you twice the daily exposure to invidia. If Nvidia is up 1%, this will be up 2%.

And if it's down 2%, it'll be down 4%. That's on a daily basis. So it doesn't track it twice. It doesn't give you twice the exposure over a longer periods of the time. Coming into January 2024, this product, and Nvidia had already been on the run. this product had $225 million in assets under management. It has ballooned to $4.2 billion today. Now, I don't know who this $4.2 billion represents.

If it's degenerates, and I don't know is that term pejoratively, if it's institutional investors, if it's, who knows? I don't know who's holding this. But the underlying instruments that it uses to gain twice the exposure has to be having an impact, not just because this is $4 billion, but if you look at the options activity and the size of the options market, just the deal, and I don't want to get too far out of having riskies, but the dealers and the hedging and the Greeks and all that sort of stuff, I don't see how that's not having at least

a marginal impact on the price of the stock. And then this is just a basic question, but for listeners, does NVIDIA get the money that is pouring into the stock? Or is this just other shareholders being reimbursed for holding it for that long. Yeah. So the the answer is no. This is not going into Nvidia's balance sheet, but the stock is their currency. And this is how they attract the best talent. This is, this is their firepower to do acquisitions. And so even though, no, they are not getting the money directly, their employees are. And it absolutely has a monster impact on the company. Make no mistake about it. Yeah, I mean, I definitely saw a lot of smiles when I was out there a couple weeks ago.

People seemed happy. So, I mean, anyone who basically has come in within the past year has really just done very well in terms of comp. Yeah. Just sort of hard. I saw some stat floating out that if a junior engineer started five years ago or whatever, whatever, you know, their comp would be worth $10 million or something crazy. Yeah. And somehow it doesn't seem like they're retiring. Like there's been some stories about people from Nvidia retiring as like, uh, you know,

liability for the company. But a lot of people that I met when I was out there were like 10-year veterans of the company who just seemed pretty engaged still. There was, let me find this. Sherwood had a really neat chart showing that Nvidia's market cap is worth more than $100 million per employee. And for context, the next two biggest are Apple and meta at $19 million dollars per employee it's crazy it's crazy so listen i think this is why the game is so much fun because i'm i go back and forth on the one hand yeah this doesn't make sense i'm i'm normally on the side of the market is right most of the time or at the very least it's going to be right a lot more than you and the market is really hard to beat because it's all of us right like it's

almost arrogant to think that you know something that nobody else does, that you know better than all of us know. So I'm usually of the mind that the market is sober. And is the market getting a little tipsy, dare I say drunk? It's not quite blackout. I don't know. I don't know how drunk the market is on the stock. But I know that it's definitely having a good time. So I've heard from so many people that, oh, I wish I would have gotten in NVIDIA, but I missed it. It kind of sounds like the Bitcoin FOMO that we've heard. What do you guys tell clients who are like, I want to get in, but I think I'm too late. Yeah. You're in. You're in whether you know it or not. Unless you,

unless you are invested 100% in international stocks, which I know nobody is, you own the stock. It's 6% of the S&P 500. It just got added to XLK. It's a huge, I saw the number yesterday. It's a monster. So that's just a tech ETF. Let's let's see. There was some shakeups there. It is 20% of XLK. It's a huge weighting of the NASDAQ 100. So I understand the feeling of, oh my God, I missed it. Nobody likes missing gigantic winners. But you've got exposure. It's certainly having a halo effect on the market, right? The AI trade in my estimation, saved the market in 2023 from what could have been a very ugly year. So you're there. You're getting the benefit of Nvidia, even if you don't have the 100. 40% gain in the single stock.

Okay. And this is not an investment advice podcast, but if people want to buy more of the individual Nvidia stock, is that risky? Yeah. Same more. Yeah, of course it's risky. So what I would say is if you really can't help yourself, and if you really can't help yourself, shouldn't that give you pause?

If you want to buy the stock so badly, do you think that that feeling is unique to you? or do you think that a lot of other people are feeling that feeling and then potentially might feel the exact opposite if the stock were to fault, I don't know, 12% three days after you bought it. Right. So I would say if you have to, just position sizing. Listen, I have no problem with picking individual stocks. I do it.

I have fun with doing it. But keep it to a very small percentage of your portfolio. Right. And here's the last one because there are some people who are listening who've probably held for a long time. And when we were on the show, Josh, Josh Brown together on compound, Josh had said that when NVIDIA hits $3 trillion, he thinks he needs to trim. And it hit $3 trillion actually while we were recording.

When is the right time to take profits on this stock? Because obviously, like we talked about before the break with Kathy, sometimes you can go way too early. So how do you think about that philosophically? So I'm a terrible person to ask this question to because I do not have the ability to ride a 10-begger. I just don't. And this might sound like cocky or stupid or whatever, but I know too much. I've seen too much.

I know the data on how unlikely it is for stocks to do what Nvidia is doing. I know the data that for every Nvidia, there's 3,000 other companies that haven't done what it's done. I also know the data on the gigantic drawdowns that every mega winner has gone through. And so I don't have the stomach for that. I don't have the wrist tolerance for that. And so I'm the bad person to ask this question because I can't ride these winners. And if you asked me a year ago, I would probably give you the same answer, which would have been very wrong a year ago, which would have been now. Now is the time to trim.

Yeah. And so what I do know is that the stock went from a not so small, $300 billion. $3.3 trillion. I'm not calling the top. I don't know. Can it go to $5 trillion? I don't know. Why not? There's no, you know, there's no laws of gravity in the stock market. But it's not going to 10x like it did over the last couple of years. So I would say at this point, you're probably not thinking objectively. You're probably thinking with emotions and money. And so what I would do is have at least if you're thinking about when do I sell, whatever you decide to do this. Listen, it's not. science, right? It's just not. It's emotions. Write it down. Write it down and hold yourself to that. So if you say, okay, I'm up a ton. I don't want to give back too much. If it falls on making this up below 110, I'll sell a third of it. Whatever, whatever it is, write it down and then you have a chance of sticking with it. Right. Okay. Last thing. One of the things I love

about your and Josh's writing is that you'll talk about things that are financial but also non-financial related and you had a post recently about how to ask for help which i thought was so good do you want to share a couple pointers before we leave yeah so i feel i feel incredibly uh lucky and fortunate and blessed and all those good things to have people reach out to me young people reach out to me for advice because my career is a bit of a miracle i i could it could have gone much differently and in almost any other universe it would have josh saved my life and so i feel like i owe it to younger people to help them out if I can, even if it's just a phone call, even if I can't help, just to listen. So I'd love to do it. I got a phone call the other day. So whenever I get

emails from kids or people that maybe feel stuck in their career, I always give them my phone number and I say, hey, I'm happy to talk anytime, just call me. So I had a call and the kid goes, my first question is, how did you get into the stock market? And I'm like, huh, I'm like, I just, you know, I, somebody, send me an email, some self-side research. I loved it. I felt in love that. I started reading it. I don't know.

I just, I just, I love the game. I love the competition. And I, you know, a real quick answer. He's like, okay, my next question is, what do you do on a day to day? And I'm like, stop. I said, listen, John, I want to help you. I don't want to be interviewed. What's going on in your world and how can I be helpful and be as specific as possible?

And eventually, we, I think I gave him some great advice. We spoke, the, the, the, the TLDRs, he's getting taken advantage of, uh, I don't know, they might be too strong. He's not getting properly compensated for all of the work that he's doing. And he doesn't know how to ask for a race. I said, great. I can help you. Right.

Um, but I've been in his shoes. And I remember flailing at 23 years old. I got a job interview, not a job interview, excuse me, a meeting greet with somebody. And he said, do you want to be on the buy side and a cell side? And I said, any side. And I didn't know how to ask for help. And the way that you ask for help is you be as specific as possible. Not I like the market.

That doesn't mean anything. That's what I said. I like the market. That doesn't mean anything. Be specific because when you're asking people for help, I can't give it. I can't give advice through an email. I don't know the person. I don't know if they're more salesy, if they're more operations personality-based.

like so yeah you got you got to learn to ask for help the right way yeah the podcast is the compound and friends one of my favorite listens i listen every week and have also been lucky enough to be on a couple times with michael and josh brown so definitely recommend you check it out you could also check out michael's other podcast animal spirits thank you so much michael batnik for coming on and talking with us about invidia i think i understand the trade a little bit more now my pleasure alex i'm such a huge fan of the podcast as well so thank you for having me on awesome thanks so much for coming on. We'll be back on Friday with another news breakdown with Ron John Roy. Until then, have a good week, and we'll see you next time on Big Technology Podcast.