Chit Chat Stocks - Quantum Stock Mania; $NVDA Earnings Keep Climbing; Investing In Hungry Founders; No More Tariffs?

Episode Date: May 30, 2025

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (02:58) Costco's Earnings and Business Model Insights (05:53) Exploring Quantum Computing Stocks (12:09) The Taco Trade and Tariff Discussions (18:59) FICO's Regulatory Challenges and Market Impact (29:56) Luxury Market Dynamics: Hermes vs. LVMH (34:27) Emerging Companies and Market Trends (40:07) Nvidia's Earnings and Market Position (50:10) Disruption in the Remittance Space (55:51) Align Technology ***************************************************** JOIN OUR NEWSLETTER AND CHAT COMMUNITY: https://chitchatstocks.substack.com/  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 15% off any premium plan: ⁠https://finchat.io/chitchat  ********************************************************************* Bluechippers Club is a tight-knit community of stock focused investors. Members share ideas, participate in weekly calls, and compete in portfolio competitions. To join, go to ⁠Blue Chippers and apply! Link: ⁠https://bluechippersclub.com/ ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. welcome to chit chat stocks this is our weekly power hour episode i'm one of your hosts ryan henderson and i'm joined as always by the one and only brett schaefer we've got a lot on the docket for you today on these episodes we talk all things financial markets any news any earnings costco just reported as of this recording and there's also a little controversy going on with

FICO that I'm going to be discussing. Brett's got a couple of topics as well, as always around this time, it seems everyone's talking tariffs. Tariffs were recently blocked. So we can talk about that as well. And then we've got a whole bunch of other topics that we're going to get to. But Brett, how are you? Doing well, Ryan. Yeah, we're talking quantum stocks for one of my topics. And don't worry, we're going to be talking NVIDIA as well. How? Well, you're going to get to our sponsor first, but I want to know the Costco numbers. Because I haven't seen them. So I'm going to be getting the update right along with all the listeners.

Whatever you're imagining the Costco's numbers were, they're probably just about right, would be my guess. It was a pretty predictable quarter and the stock did not move at all after earnings. But we're going to get to all that. Still 60 times earnings. Yeah. We'll get to all that and more in a second. Before we do, I want to talk about Interactive Brokers. Interactive Brokers is the professional's gateway to the world's markets.

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When placing your money with a broker, go with a broker you can trust. Make sure your broker is secure and can endure through good and bad times. We use IBKR here at Chitchat Stocks because it is a phenomenal platform for international investing and you can use them too by heading on over to IBKR.com. Interactive Brokers is a member of SIPC. Brett, where do you want to start? Well, let's at least go over the Costco numbers quickly because I guess I don't want to leave the listeners out to dry. You had a good tweet from the FinChat account, I think, so maybe you have the numbers in front of you. How's the company doing?

Sure. Let me pull this up. Comp sales, total comp sales were up 8%. U.S. comp sales strong, Canada comp sales – and that's excluding gas and foreign exchange. Canada comp sales were both strong. International was slightly faster. Total cardholders grew 7% year-over-year. Membership fee revenue grew 10% year-over-year.

All these numbers are good. And operating income grew 15%, so solid. Nothing out of the ordinary. I think maybe the thing that I've gotten wrong about Costco is underappreciating the runway internationally. They generate really good comp sales and they actually have been able to add quite a few warehouses in the last few years, more so than I would have expected. So I think the reinvestment runway was something that I maybe underestimated. The businesses – I mean the whole cat's out of the bag. Costco is a good business.

It generates great returns and their warehouses have just incredible sales per store, which having the membership model ends up resulting in just the whole economies – scale economy shared where you can kind of just perpetually be the low-cost provider and continue to reap the benefits. I was running the numbers. Can you guess how much an individual Costco warehouse does in revenue on an annual basis? $250 million. It's nearing $300 million. So close. Pretty good. Yeah, it's just kind of astounding to think about.

But yeah, I mean the quarter was good. Nothing really – like no huge takeaways here. I think the stock was literally up 0.32% after hours, one of the most negligible after hours stocks around. Not much to talk about here. It's still way too expensive for me to get interested. And frankly, I don't see how investors make a whole lot of money here over the next 10 years, but a hell of a business. Yeah, not sure it deserves to trade at 60 times earnings, but maybe 40, 45 might be fair value. Trailing numbers, who knows? It's a rock solid business. But Ryan, yeah, we got a lot of other stuff to talk about. Have you heard of the quantum computing stocks? no well as a basket yes i i thought it was funny and telling that apparently

jensen huang the founder co-founder and ceo of nvidia one day he said we're like a ways away from quantum computing at some conference why does he know that and and a bunch of the quantum computing stocks dropped on that news and jensen they asked jensen huang about it and he was like oh i didn't know there was quantum computing stocks sorry he's like i didn't know there was anything out there that was a stock trading on that right right which maybe goes to show the state of those businesses yeah do you want to see some of the numbers all right there's four of them and i know people like these stocks because they're the most trending articles

on The Motley Fool and you're making me a little bit of money with those bonuses. IonQ, Rigetti Computing, D-Wave Quantum, and then my favorite one, Ryan, Simply Quantum Computing Incorporated. That sounds like the, what's the one from The Wolf of Wall Street,

I forget the guy's name, when he's pitching the shed and getting people to get 50% commissions on that. It also reminded me that I forgot about them for like a year now, because they report earning C3 AI, when you just want, you know, the tickers AI, the names AI, all we want is the most theme as possible. And these are some of those nature stocks generally out there. Now, in the last year, Quantum Computing Incorporated is up 1,680%. D-Wave Quantum is up 1,340%. Regetti Computing is up 1,200%. And IonQ is up 464%.

Kind of a big loser there. Their combined market caps, Ryan, $22.8 billion. Combined revenue, $73 million. so that's a price to sales i think in the 300s and combined free cash flow of negative 275 million dollars so very very negative margins uh you might be asking since quantum computers don't really exist commercially they're all just science projects yeah how do they do these companies have a business model no but what's the revenue like where they're selling uh like services to build quantum computers and they're working on it and they have say government

contracts to fund their research into quantum computing because it does have i guess so much promise and it has been five years away for multiple decades but they don't really have a business model selling to customers so are these just research houses like yeah these are essentially like a research division at a university or a company public it doesn't make much sense like let me if google's or alphabet spun out their quantum computing division would you buy it no i mean you have no idea when they're gonna get it to work i think these stocks are absolutely insane yeah it makes no sense the you're basically buying a research house that has no legitimate business model at the moment

other than getting paid for research which has a finite life and i'm guessing the government's one of their biggest customers yeah it's yeah it's not gonna be profitable and let's say it is Let's say they've got that – they've got those research grants or whatever as their revenue line. Like still, it's $70 million in total between those businesses. 300 times sales is nothing for – yeah. And look, you're competing against Alphabet, Amazon, Meta. You're competing against basically every big tech company, possibly not Apple. It seems like they don't really invest in a lot of these advanced tech things.

but alphabet can pour billions of dollars a year into this doesn't matter these companies are on the way to bankruptcy and they're just turning into these meme stocks it reminds me of 2021 there's a lot of that energy right now early 2021 even if it's not the general news cycle craziness of amc and gamestop i still think the price action is insane yeah would you rather if you're if you're buying these stocks here's my question to you would you rather own the startup which sure has all the potential in the world or let me let me phrase it this way who has better likelihood of success the company who can pay researchers five hundred thousand dollars a year just to do research and it's doesn't even make it's a rounding error and has infinite

resources and money for compute because my guess is this is really costly compute wise or do you want the research twice yeah i mean yeah or do you want the one where they're struggling for the resources and have to scrape together a pitch for the government to get grants every single time they want to uh keep the business alive like i would be betting on the divisions within google and amazon way more so than than these businesses but and who knows if this technology is ever going to work it reminds me of a stock called plug power which is a funny one that's just a classic in the pump and dump realm where they're like oh we're working on hydrogen tech i think that's what they are oh no no yeah we're keep we're working on hydrogen tech

don't worry i think within a year we'll get something going and then it just never happens this is the type of companies that are so dangerous to invest in we have some other questions here have you heard of the taco trade ryan i'm sure you have of course yeah uh it's a bit of a reverse psychology thing we have a question from tyler in the chat thoughts on how reporters making the taco trade which i think is trump always caves or chickens out no chickens out on tariffs uh so thoughts on how reporters making the taco trade known to the president will affect the taco trade it can't be positive because he seems to be a very uh he doesn't like i guess having his manliness called out and this is the exact wrong thing to

Yeah, this is definitely not the kind of person that you want operating with a bruised ego and saying that he doesn't really have the willpower, the strength, or even the ability to keep these tariffs in place and backing him into a corner in a sense. is it's a recipe kind of for disaster that he's probably going to try to do something outlandish to make his claims come to fruition but so far we haven't seen any unless i'm wrong because he's in the news every day so i'm gonna miss something we haven't seen any sort of outlandish reaction that's like trying to reignite the tariffs in a way yeah and that brings up a good point i guess we probably should talk about it since it's too much tariffs i don't want to spend too much time on it because i'm just sick of talking about it the i guess tariffs are blocked i only have a couple bullet points here for anyone that that wants clarification on what happened

a court has deemed that the president of the united states does not have the sweeping power to put tariffs on virtually every nation. The executive branch used an act from previous, I think it was in the 70s, to claim there was a national emergency so the president could delegate tariffs, but the court said there wasn't a national emergency in this case. However, it doesn't mean all of the tariffs are in flux or could be deemed not illegal, but like something that the president can't do would have had to be go through Congress. there are still room for sector-based tariffs for national security reasons or if a country uses unfair foreign trade practices which you could maybe argue for china that's what they

have done previously so i don't think this actually eliminates much right no sorry you got no if i think some tariffs will be put in place against specific countries you know maybe they say we made some deals with other countries but i think the countries that would be most impacted like okay let's say we get i remember madagascar being one of the ones that was like the most insane because it's like they have they hit everyone and they don't really trade Yeah, and they – let's say they – whatever the country is provides a good to America cheaply, but they don't have the income or spending power to buy anything from us. So I assume that a lot of the instances like that will just be said like we made a deal, and those will kind of just die down and nothing will happen. my guess or my instinct is that this is the the ones that are put on china are going to be there's

more to it than just economic policy like there's probably more national security uh yeah and they they could argue both of these i guess that are some different sort of loot rule i think it's something 232 it's a lot of jargon but you could still see semiconductors pharmaceuticals and these specific countries number one is china i was going to ask this question about does it change anything about how you invest i would say i was gonna say no but now that you talked about the specific uh tariff still maybe being on i think it maybe helps some of that reshoring narrative in the latin american country specifically mexico not getting targeted saves them from yeah yeah maybe i don't think it hurts those countries in any way to have the

narrative still be around or even if tariffs do i think those nearshoring is has been happening for a while and will probably continue so this maybe supercharges it a little bit if as as a shareholder of the mexican airport uh omap i hope so i think they benefit but yeah it doesn't change much for me i i've said this before i think on this podcast and i stand by it if you and this is the taco trade but if you invest and just operate your investments on the basis that no president trump specifically but no president wants to weather a major drawdown in the indices because nothing puts pressure on them like that it it seems like people whether it's right or not measure presidents by their stock market returns because they treat it like economic

like the economy overall so i think the bad headlines only last as long as the market lets it we'll see i'd say i'd just rather invest where tariffs are not going to affect it i'd still have the same there's only so many businesses that well if you just do sweeping global tariffs like every it's hard for a company not to be affected yeah but i i don't know my portfolio has done fine this year i think it's because that mindset the only answer is by philip morris is one that is yeah uh i'd also say companies that are entirely not attached to the united states chinese supply chain yeah i think nothing changes there but we can't i'm sick of talking tariffs it's just we don't know what's going to happen so

as investors you kind of put your hands up predicting what's going to happen i think it's impossible ryan you have some topics they've brought to the table this week what one do you want to do first let's talk fico because i think this is timely the stock is down it had basically its biggest drawdown in a like three-day span maybe ever i guess i didn't go back to oa to check but the over the last week the stock is down 32 actually that's less than a week and it's all been centered around this conference last week so um i'm not sure what the name of the conference was but at some industry conference the director of federal housing finance agency the federal housing finance agency bill pulte gave a speech about housing affordability yes that is the bill

pulte of pulte group uh one of the largest home builders in america i believe his dad actually founded the company uh which i kind of the incentives here are a little misaligned i'd say if you have like an economic tie to a big home builder of course you want generally affordability to be high because you want volume to be high anyway as part of that speech pulte said that there are a number of levers they are looking at to try and bring the cost of buying a home down as much as they can one of those levers he explicitly mentioned was the fico score he said that the fico score should be in quotes as economical as possible for who yeah he also mentioned that the fhfa which is the agency he runs is now reconsidering the buy merge transition

some of this is first time i'm hearing of these this lingo but basically it means conforming fanny and Freddie mortgages so that you would only need two credit reports instead of three, which could affect the amount of volumes for FICO scores if you don't need the FICO score potentially as much. So those comments sent FICO stock down 32% in less than a week. Now, how this ultimately impacts FICO really remains to be seen. But the big takeaway is that there is regulatory pressure on this business. I think there has been for a while, but to kind of give some context here, in 2018, FICO renegotiated their contract with the credit bureaus and it allowed them, quote, special pricing increases. This is a difficult industry to understand and

There's a ton of moving parts as well as regulation. But essentially this contract change allowed FICO to start pushing price increases at a rapid pace. And it's not like – like they are as discreet about price increases as they kind of can be because they don't want to like draw attention to themselves. But it's not just like one price increase across the board per se. The price increases go out in different levels to different cohort groups, that kind of thing. Anyways, ultimately, this has driven insane growth for FICO. The revenue was growing kind of at a stagnant rate up until 2018, and then it's just exploded. Brett, maybe you can share this chart.

There's the scores revenue and operating income. Shout out to FinChat. They track this segment specifically, Scores, which by the way, I learned today that the Scores business has 88% operating margins, which might be the most profitable segment of a business I've ever seen. Yeah, he's sharing it here. You can see that basically in 2018, it jumped from $330 million to more than a billion dollars in Scores revenue. but so they took up price really quickly kind of because they were playing catch-up apparently the old contract had them like limited in terms of how much price increases they could do and now they've just gone kind of insane mode with the price increases so this has drawn a whole bunch

of attention my knee-jerk reaction here is okay 90 operating margin business deeply embedded in the world of finance especially the mortgage world here in america and it dropped i think like 40 from highs in less than a month 30 in a week i kind of like and based off of like just talk and conversation at a conference i was thinking this could be you know a potential buying opportunity then i went to the valuation it is it at its peak this year had an ev to free cash flow of 100x now keep in mind operating income is growing fast because of these price increases it still has maybe i can quickly check this on fin chat i believe an ev of free cash flow above PE of 72. Do you want to guess what FICO stock is up in the last five

years? I don't think they've done any special dividends, excluding dividends. 700%. 318%, but I think long-term shareholders are probably not too concerned, although this story could get worse. I think the thesis was that right now home buying is velocity. What is it? Yeah. Just the amount of homes getting bought and sold right now are kind of getting frozen because of this mortgage rate spike and unaffordability that has happened for the last few years. And that's affected their volumes and they've taken price. And then when the volume eventually comes back, that'll help them grow their earnings again but maybe they were too aggressive here what's weird is that you look at the actual costs that home buyers and sellers have and this is a small part of it it

feels to me like the scapegoats uh in the situation it's almost like how they people blame housing on affordability on airbnb and they go we left the city okay nothing changed like if you got fico out of the whole equation the big issue is the brokerage commissions and i think they should go after that however we don't live in the world that we want to live in as we like to say we live in the world where they are attacking fico and this looks like a crazy risk for the business yeah it's such a the fico score itself is such a microscopic part of buying and selling a home and it just yeah it does feel like they're the scapegoat like you can point at one thing but i the fact that home prices are the least affordable that

they've ever been i believe i believe that still holds up if i'm not mistaken brett the And part of that is just the rapid expansion in mortgage rates. Home prices have not reflected the increase in rates. And I think we're starting to see that more and more at the moment we're seeing in transactions. People just simply cannot afford to buy the home at the same price, all else equal, when mortgage rates go from 2% to 8%, whatever. Not as many people can afford to buy the homes. We're seeing that. eventually i think that comes through in pricing probably has happened to some degree would be my

guess i'm really not looking at the macro data if not it'll continue to come but the idea that you have to pull some lever and point specifically at one company just feels wrong to me like that's the problem like this is a it's i it's such a small part of the transaction so small yeah yeah I agree. I agree. Someone says in the comments, you guys sleep on commercial segments and how powerful AI will be for FICO,

says Brett, you better buy FICO. All right, well, maybe I should research it then. I don't know much about this business except for the fact that they were attacked this week from the regulators, says Fabio from Capital Mindset. Maybe on a forward-looking basis, it's much cheaper than we think who knows it could be do you remember the stock bear sign right yeah they're like that's an interesting one i think it's in a similar spot where they

have negotiations over price hikes and then oh okay the coast is clear all right business as usual yeah yeah we'll we'll see if anything really comes to this my hope here was that like the news doesn't really mean anything and that this is insanely cheap because that's kind of – I like to buy – I think I've had a lot of success when there's some sort of regulatory concern with a stock and it creates this huge drawdown and the business is really high quality and intact and it doesn't really affect anything. In this case, you're still buying at 70 times trailing earnings which could be a lot different than forward but that's just not that appealing to me there are very very few businesses where i'm willing to just ignore the face multiple

unless there's like some blip on forward is what matters if their earnings are going to double maybe it's cheaper but i just don't know if we're going to double like are they going to double next year okay it's 36 times earnings it's still not crazy cheap i mean that would be fair that'd be a solid for a company with a lot of pricing power but who knows again that pricing power might be going away yeah there are definitely some risks here if if the big lever for them to pull is pricing for earnings growth which is what it seems like it is and has been over the last since 2018 if that's the big lever for them to pull that's also the lever that attracts regulators the most so i do think the regulatory pressure is probably legitimate here and playing catch-up

on price increases maybe wasn't the best strategy but we'll see i honestly don't know the industry well enough to really have a take i do a little stat for you brett i think you saw this i think might have posted about it as well. Hermes, the largest luxury company in the world, surpassed LVMH today. Thoughts? I did tweet about that. Yeah. It's a thing. LVMH seems to have diluted some of its brands from a luxury standpoint. And at the same time, I saw this actually in an article in the Wall Street Journal this morning, taking a lot more price. I forget the exact numbers, but over the last five or 10 years, the average price of, I think it was a Chanel, maybe Chanel is a different bag. That doesn't, is it not? I think it may have been

Dior. I don't know. I don't know these brands. They took like 70% price on the same, you know, type of bag where Hermes only took 30%. And as we talked about on our episode with, this was a while ago on Hermes specifically, and the one with Leandro from Best Anchor Stocks and Sleepwell capital covering the luxury business. I think that's aged phenomenally. And you can still go listen to that right now. Hermes only takes price upwards of their labor and supply costs. So they have bags that still cost $10,000, but their greatly limited supply means on the aftermarket, these bags are worth $20,000, $25,000, $30,000 for resellers. And that gap shows how much embedded pricing power there is left where an Hermes can just grow their price probably

3% a year for the next 30 years and never see an impact to their demand. Whereas LVMH brands, they were way aggressive with price and they don't have that brand quality. So it makes sense to me. It's a better business. on that note lvmh current enterprise value to last 12 month ebit 13 times any interest somewhat but it's a little big it's still apparel like it's still the merchandise business somewhat yeah some apparel retail some of their brands are not as some of their brands are not as good louis vuitton is still i think a great brand but i'm not knee deep in the industry yeah there's just something about it that doesn't interest me i still kind of feel like

it's sort of faux luxury like it's not it's not limit supply airmez level luxury which it's hard to get to it's hard to build a brand like that sure but when you push price on something that isn't that is sort of faux luxury i think you end up in sort of a uh difficult situation volume wise I put out this question this week looking for – basically, I said that I've kind of found myself moving more and more towards companies that are run by young, hungry founders with high insider ownership. And I actually got a lot of great response. I asked basically, what other ones should I be looking at? And I said the three that I own are – that I kind of would qualify as that basket of young, hungry founders is Coupang, Airbnb, and Remitly. And I got some great responses.

Meta won, even though I know that's like cats out of the bag on that one. But did you know Mark Zuckerberg is actually younger than Brian Chesky? Well, I didn't know until I saw your notes, but that is surprising. he founded it when he was a sophomore some sometime in college so i guess that makes sense when you think about that but he's been in the limelight for much longer and did you see today ryan that palmer lucky came home you know i did yeah i don't really follow that uh andrew is that what it's called andrew yeah they're like a startup uh defense contractor i guess for real world stuff similar to palantir but they do drones stuff i don't know

what their exact products are but he was fired from meta over some sort of political view back in that day when that was no go in silicon valley and now they they want him back to work on i guess ai ar vr for the military so interesting developments that's something you would not have predicted now uh five years ago maybe 10 years ago whenever he got fired now that's someone that i guess is a founder but he's not it's not public yet so that they could definitely be in the category although similar to palantir i think that stock will be wildly overvalued if it goes public yeah um what else do people name though robin hood which all that makes me cringe but the stock's up 700 from the lows and travis came on the show actually to yesterday for mason

investing in that one it's a good business it's not it's not a bad business no and to nev to his credit has done well these last couple years specifically he obviously i don't want to say i think there was some brand tarnishment that happened in 2020 2021 and part of that is probably he's responsible for maybe uh but he's he's improved i think the image of the company and his own personal image over the last two years new bank is another one and then two that i had not really looked at ever one of them i've never even heard of uh exometry have you ever no i have not either xom etry uh one of my favorite personal investors mario sabelli was actually the one that mentioned this it's an on-demand industrial parts marketplace

from bethesda maryland okay yeah i i mean it when when he recommends something to look at i i look at it sounds similar to fast and all but maybe it's different yeah i have no idea uh the last one i'll mention here teravest serial acquirer i think of industrial like niche industrial businesses in canada a lot of people love them and there's been some very successful Canadian cereal acquirers in recent years. TerraVest in particular has been a very successful one. There are some others as well, but I'm curious, what that has not been listed here comes to mind for you

when you think young, hungry founders? Spotify, Axon maybe. I don't know if that guy's that young anymore. I like TerraVest though. It seems like a lot of smart people are in it, I guess. So that's not a guarantee that's going to work, but one that, yeah, definitely could be a fun one to research for the show. I think there's the next stock I'm researching, which is the real brokerage, a little small cap, I think, potentially. Real estate disruptor, I haven't bought it, never owned it.

Don't know if I'll ever be buying it, but there's one that it may have the founder running it. Let's check it out. It shows I haven't done my research yet. besides that I don't know it's kind of hard to come up with the top of your head you can't really filter for it on a screener maybe if the FinChat AI

gets good enough eventually one day maybe it's possible let's see, governance executive management yeah, co-founder Tamir Polek real brokerage

real brokerage could be on there too any of the ones that were listed as replies to me that you would consider kind of as a next research project well new bank already researched terabest for certain geometry yeah meta probably not everyone you know is there any world where you would ramen hood everyone knows that company okay so i sometimes when a stock goes and three x's or four x's i find it just impossible to buy meta is kind of one of those off the lows it has jumped a ton it was trading at like six times trailing earnings on trough earnings and then numbers just exploded is there any world where you would own meta now maybe but it's just large you don't

don't at the right price sure but i i don't care for the giant companies fair all right yeah that's just it's a good business though nothing nothing wrong with holding it. Before we move on, I want to talk about our friends at the Blue Chippers Club. Blue Chippers Club was started by two friends of ours with the goal of building a tight-knit community of stock-focused investors. Inside the community, everyone gets to share, break down their portfolios, pitch stocks, receive feedback, and participate in weekly calls. I've really been enjoying the weekly calls myself. It's a great way to get new ideas out there, receive new ideas, hear feedback. And Brett and I, we talk all the time. So I think sometimes

our opinions just become the other person's opinions on certain companies. And this way, it's nice to get sort of a fresh perspective as well. Like if you don't have anyone that you sound ideas off of, this is really a nice place to do it. So it's bluechippersclub.com. If you're interested in joining, head on over and hit apply. The link will be in the description. One more time it's blue chippers club.com what topics do you want to go to next i want to talk remittances okay well what about uh what about nvidia earnings gotta hit some trendy stuff so people listen let's do it stock up about four percent today i think market cap 3.45 trillion dollars are they still in the lead ahead of microsoft no i guess microsoft well maybe it's to update

But Microsoft and NVIDIA, neck and neck in the market cap race, total revenue is up 69%. Gross margin kind of fell mainly because of the Chinese inventory write-down, I think. I guess they can't sell some products in China anymore, so they had to write that down. Operating income was up 28% year over year, so we see 69% revenue growth, but operating income, quote-unquote, only up 28%. That earnings margin is coming down a bit. Trailing PE from what I'm seeing is 48. And it seems like for the last five quarters, however many quarters, NVIDIA has been in that no man's land for myself.

Where you go, well, if they keep growing at this pace, yeah, this valuation makes sense. But it's like, all right, it's on such a roll. They're dominating this industry. But the PEs at 48, it's like, oh, is it a buy? I don't know. It feels like I'm just going to sit on the sidelines. But what were your thoughts, Ryan?

Yeah, I felt that way for a while. The part that has surprised me is I think sort of a year and a half ago, maybe it was two years ago when the data center business just really started to soar. I thought, okay, how predictable is this? can this actually last or is this sort of a temporary bump they have so far proven that this is more of a long-term tailwind than just a temporary blip and i would definitely say personally i found myself leaning probably more and more towards this is and i'm kind of talking about ai overall here the spend is maybe slightly ahead of itself but long term i'm optimistic that this will be much higher like if we look out five to ten years i think nvidia will have more revenue

which is to say that ai spending will continue to grow someone asked best guess on nvidia gross margin in five years, I'd say probably a little lower because someone like Taiwan Semiconductor has been saying they're going to hike some prices, especially for stuff made in the United States, which is going to be more and more and more. And whenever supply eventually meets demand, which I mean the supply from NVIDIA chips to the demand from the data center builders, I would think gross margin will also come down slightly but look it's still a very very high gross margin business today so it's not going to kill the business just seems like that's classic um dynamics of what happens during any

capital cycle yeah i wouldn't fret too much about gross margins would be my thought like overfine today at 48 times earnings yeah i'd fret yeah i think gross gross profit probably matters more as my thought they like yes obviously margins are a part of that but if you are directionally right and right in terms of like your growth rate assumptions that's going to matter i think more than purely just looking at the margins that the one question that i'd have and initially i think i went into this looking at nvidia if we go back and listen to our podcasts when things were going crazy at the start i would probably sound super naive and a lot of that was well all throughout history competition has come for

the leading semiconductor companies do you think it's possible that nvidia is so far out ahead especially in this vertical that nobody's going to catch them not sure possible but it seems like there's a lot of companies investing to reduce their dependence on nvidia and we'll see if they can get there that's another founder-led company that the head guy wong wong jensen i guess people just call him jensen he has a maniacal focus to win so they've been ahead seem to have people argue they have a wide moat i guess i would be slightly worried and i i still think that amazon and alphabet's the most ahead and microsoft's the most behind so maybe microsoft will never get there because they're

so far behind but amazon and alphabet have invested a lot in their own chips it hasn't affected demand so far i guess once i just don't once the again demand sorry supply catches up with demand i just that's when we'll know steady state of what's going to happen here and we see there's so many moving parts i i still don't trust sam haltman i still think he's crazy they're building a 500 billion dollar data center in texas and you got the gulf states well i think just the uae committing to huge chip spending for a i think absurdly big data center out there i don't know if we say that they're dominant we might look dumb in three years it still goes right into my too hard pile i have easier one for hurdles to go over yeah and if it's in the

too hard pile and it's the biggest company in the world right you kind of got to ask are is the mental effort worth it because even if it does 3x from here if you know you could i think exert that mental effort on maybe another company that's smaller that might have higher upside potential uh on that topic you're talking about some of the throughout this episode we've talked about different sort of businesses under google's hood and we talked about quantum computing we talked about them designing their own chips i was thinking about this the other day because i'm starting to get wary or a little bit of cautious i should say about my recent google position that i bought do you think if the search business measured by search revenue

is exactly where it is today in 10 years so it doesn't grow at all but it's it's flat do you think google can still be a good investment sure definitely it generates a lot of profit and you're going to see increasing profits from google cloud probably from waymo eventually yeah and then add on youtube what am i thinking what am i missing yeah it sounds about it oh and then gemini any sort of the ai stuff that seems to be fairly successful they're still trying to catch them on a usage basis versus chat gpt but the products they're putting out from what i've read are best in class yeah i'd like to think that as well that things can work out even if

it doesn't grow what if the search business were cut in half i don't know i i'd have to have the numbers in front of me i'm not exactly sure it's about 50 of google's revenue at the moment so someone says we're missing cloud i mentioned cloud i think i just said it weirdly Hey, guys, what's your views on the Elf acquisition? I saw just a headline that they acquired, I think, some celebrity's cosmetics brand. Justin Bieber's girlfriend. I think wife. Wife.

Yeah, yeah, because her last name is the same. Yeah, yeah, that's how I – for a billion bucks. and wow the stock's up today that doesn't make any sense uh when you have to buy a direct competitor because your sales are faltering yeah this is not elf isn't we did a full research episode on them and i would that is within my circle of competence i would say and i think our takes aged well we have no idea when revenue was going to slow down it did there's no moat here this is not a business i would touch in that same vein you know what business is doing pretty well ulta beauty really transactions

they're selling both yeah transactions average ticket both growing they're adding more stores comp sales are like three percent right now i think that thesis that that very simple thesis that people are always going to want to buy makeup regardless of economic conditions was a sound one and ulta has has and probably will continue to benefit from that let's unless you have any other thoughts on nvidia let's talk remittances all right yeah we this someone asked us this on twitter so we wanted to address it i guess we've talked we both own remittantly uh rhino's wise as well we're very interested in kind of the disruption within the remittances space and you know fintech in general so the new spending bill in the united states

I guess I've done a lot of politics for our international listeners. Hopefully you don't bore them, but it's related to these companies today. It has a new 3.5% tax on outbound remittances. So if you send money as a remittance to another country, you get a 3.5% tax that you're supposed to pay. According to this study done, and it's not guaranteed to be correct, but it says research by someone suggests that for every 1% increase in the cost of sending remittances, The amount sent falls by around 1.6%. So if the tax is 3.5%, that could lead to a 5.6% drop in remittances.

Now, that might sound bad, but I don't think it's a long-term concern for someone like Remitly and will actually inspire more individuals to think about their high-cost remittances from places like Western Union and search for more cheaper digital providers. The other downside might be crypto. Now, you know, you can evade these taxes altogether. I think some people might do that. Again, I'm pretty sure that's illegal if the bill passes. So I'm not recommending you do that, but I think some people might. But I don't think a large chunk will. I don't think people trust that, especially if you're sending money home to grandma. And the tax law is not guaranteed to happen either. So I think this is a lesson in you want to invest in the market share taker.

You want to invest in something that's cheap. You want to invest with a margin of safety. And you don't want to invest in what I think is a huge value trap in Western Union. I think this might, this could be another death knell. That's the right term for if this bill goes through for Western Union because of their precariousness of their position. More and more people around the world are using smartphones. more and more people are going to switch to remitly competitors wise all of them and i think

the market share takers again market share takers that's the biggest lesson we had from learning from peter lynch market share takers will survive because even if the industry growth takes a hit they can still grow by taking share from competitors yeah it sums it up right there i think you've got all the right takes here it it probably will have some impact on the amount of volume that the average person remits sends back home wherever they are or wherever home is for them but is it going to stop payments altogether like if you're sending money back to a family let's say you're an immigrant into the states you've got a high-paying job here and you're sending money back to your family in either mexico or india wherever it is those i

think those are some of the most common corridors are you just going to stop doing that because there's a three and a half percent tax i doubt it there's 20 maybe yeah if it was really high maybe this does accelerate the push to crypto i think that's kind of been one of the common critiques of digital remittance providers but it's yet to impact their business in any way from what i've seen really i think most people still don't trust crypto as i wouldn't if i was going to send something to think about all the money that gets stolen constantly yeah and and also you're often sending it to especially in remitley's case uh sometimes it's cash receivable right like people on the other end are not just taking it into their direct bank account whatever

Or sometimes there's different ways to receive it. So maybe some of the people on the receiving end aren't that digitally savvy. And I definitely don't think they're that inclined to get a crypto wallet and figure out how to transfer different cryptos to make this happen. Right. Someone said here Trump coin is going to be the remittance standard, I hear. Maybe that's the goal. That's the bear case. But I think you're right.

This does probably hurt Remitly a little bit in terms of volume, but it certainly hurts Western Union and some of the other legacy players more. And I would say this is actually a net benefit to Remitly if when things – when it becomes more costly to send money, then you start focusing on the lowest cost provider more so than you have been in the past. So, yeah, I agree with your take, and maybe that's because I own Remitly and it's a big position for me, so I want to think optimistically. It's not a big position for me as well, and I'm seeing it. I just looked it up. I didn't even check. Stock's back down to $21 a share. Yeah, it's definitely one I'll be adding to.

I think it's perhaps the top of my list of existing buys now that Coupang has got a nice 50% run in the past month. Yeah. I still think they're in a really good position to continue to earn more customers. And if you're a customer that's been splitting volume, you probably earn more volume from those customers as well. So yeah, I think maybe it hurts them this quarter. Maybe, probably not because the tax hasn't been in place, but maybe like short term, there's a slight impact of volumes, but I would think long term, this is a benefit for them. Okay. We can't forget your small cap of the week, Ryan.

And we actually didn't do it last week too. So let's hit it. And what is it? Why did you look at it? I think a listener suggested it as well. yeah this is just not a small cap so sorry that i have grouped this in as my small cap of the week i made it kind of in jest as ryan's future small cap of the week but it's a line technology the only reason i say future small cap is because the stock's down 75 it's not a take on the stock

a couple people i believe asked us to talk about this you sent me it over and thought it might be good for a little quick research report some people in our free chat over on substack having some great conversations on that so join that link in the show notes as well align technology and its namesake invisalign product that's like the biggest one have been the leader in the clear aligner category for nearly two decades the if you look at clear aligner shipments which is a kpi that FinChat tracks. Once again, FinChat is really nice for getting up to speed on a new company. You can use our link, finchat.io slash chitchat. Gets you 15% off. Anyways, clear aligner shipments have increased, I believe, sevenfold is what it comes out to.

I always get this mixed up, but basically 17% a year since 2012. There was a huge pull forward during COVID. So I guess a lot more people went out, purchased Invisalign and Clear Aligners. Maybe it was the fact that they're staying in. They felt more inclined to have work done or something that aren't as paranoid about it, having it publicly kind of thing. And when you saw volume go from 1.6 million Clear Aligner shipments in 2020 to 2.6 million in 2021 so just a huge pull forward and since then it's kind of it dropped in 2022 was still down in 2023 and we're just now getting back to the volumes that they saw in 2021 according to a write-up i found online a line has here's the quote it says a line has an actual

competitive advantage as its database of 17 million completed cases provides unmatched insight into how teeth more relative uh to align our construction i might have missed a word there anyways essentially they have a database to help with future teeth yes and it helps kind of inform the construction of other uh trays is what they call it a lot basically clear aligners and it says individual treatment programs are developed between the doctor and align clincheck technicians ends and when agreed upon trades are printed the issue the big issue that the stock has encountered because it is on that 75 drawdown is that a line kind of invested into that 2021 growth so when they saw that forms spotify style yeah yeah and when volumes dropped in 2022 all expenses still

grew so every single expense line r&d operating expenses gna gross uh cost of goods sold all of them continue to grow and they've actually still grown every single year since so it's kind of crushed margins so peak q4 2021 they were doing basically a billion dollars in operating income today they're doing 660 million today it's kind of grown i guess it's been stable i guess you could call it over the last four or five quarters but it if you believe that a line still has the same competitive advantage which seems to be a reasonable it seems like a wide note stock i think Yeah. I don't see why this is – what's prohibiting anyone from owning it here. If you have the belief that this is still competitively advantaged business, they trade at an EV to EBIT of 18 times. Clear aligners should continue to gain share from traditional braces. That's been happening for the last two decades. I don't see why that would stop. and they can continue to increase their average selling prices.

And it's kind of the known brand as well among consumers, Invisalign is. So I would think volume should grow over time. If you believe this is a wide-mode business, I think it's well worth the research. All right, yeah, I'm just looking at our chat now. We had a guy named Matt, MJF, don't know if that's his real name, or a pseudonym gave a nice one pager description moat management capital allocation and all the quantitative highlights so hey go check that out and use that as well yeah i like it i think it

could make a lot of sense you could have some earning margin expansion coming back they keep taking market share the product's clearly better than the historical one hey one thing we don't know i guess you haven't maybe didn't look at capital allocation are they buying back you know what's is that a positive or a negative for for the management team yeah i didn't look at it the uh i will also say pretty good morning star report on aligned technology worth checking out if you're doing your research which is included in all subscriptions for fin chat so another shout out there the uh let me pull up the buybacks see you speaking personally i had to get uh braces and then it didn't work so i had to get invisalign i got it for free

since the orthodontist screwed up and invisalign is much much better as i'm sure plenty of listeners know as well total shares outstanding let's go quarterly down six percent since uh the last three years so about two and a half percent decline annually that's all right better than up hey yeah you i mean two and a half percent decline that is helpful to earnings per share if uh if they can grow earnings at a market rate all else equal they can buy back two and a half percent of their stock every year that's helpful yep i agree and we had another fallen soldier in alexandria real estate equity someone recommended that we talk about that it is a we don't have time for today but for whoever whatever listener recommended that we'll try

to hit it next week that is another what used to be a well-performing business uh cheapest valuation ever in the stocks in like a line a 70 drawdown but we're running up on time right actually a couple minutes long this week so i guess you guys got some bonuses but ryan anything else before we get out of here no i think that's gonna do it we've got some awesome content scheduled on the podcast so if you're still listening i believe in three days of this being record or published to our podcast player we're going to have in five five five days sorry we changed up the schedule the uh we'll have an interview on a very hot stock controversial stock as well with two really sharp fund managers that i highly recommend let's uh i'll leave the t's there

I'm not going to name the company, but I think that's going to do it. Yeah, we have an investor overview on Joel Greenblatt. We're going to be reading his book. I don't think I've read it. Ryan, have you read it before? I'm reading it right now. All right, for the episode. Yeah, going to be, yep, yep, yep.

Right before recording the episode, that's what I'm doing too. Thank you to our sponsors, Interactive Brokers, FinChat, and Blue Chippers Club. Make sure to check out those links in the show note. as a disclosure, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan and I are already podcast guests, may hold securities discussed in this podcast, may have held them in the past and may buy, sell or hold them in the future. Thank you everyone for tuning in to the live podcast recording. See you next time. Thank you.