🎙️ Oil, Yields & AI Spending Are All Rising: Can Tech Absorb the Shock?

We'll select three for the Q&A session. So quick disclaimer before we start, if you're here tonight, this market commentary and not financial advice. So first we place to welcome back Arman Alhamed, XDE Chief of Parade and Officer. Arman, hello, great to have you back. Could you briefly introduce yourself? I just presented Arman Alhamed and I think that Arman is getting back to the conversation. Arman, could you say hello? I see a higher one. Sorry for being late for like one minute, my apologies. And higher one, yeah. Oh, hello. Yeah, yeah, Arman, we hear you please continue. I think Arman is a bit of a problem. Okay, I think that we will be waiting for a bit when the guest will be back. So Arman, I think that you will be soon. So yeah, okay, let's go forward. Next is Dominic, critical content creator and advisor. Dominic is great to have you with us. Please tell our audience a little about yourself. Okay, nice to meet you guys. Thanks to you for the intro. I'm a small lad, a small brain lad, you know, just join in to share my insights and markets. How we have fed the crypto markets and stuff like that. So nice to have you guys, nice to be with you guys today. Thank you, thank you Dominic. So finally, we have a feature and alpha content creator. We shall welcome to the X-PACE. So please also give us a quick introduction. Yeah, good morning everyone. Pleasure to be here. I'm very excited to be here today. This is another space. We'll be sharing this with a different perspective. I hope we have one or two things to take home. Thank you very much for the intro too. Thank you, thank you. So before we get into individual companies and earnings, let's start with the bigger picture because if we understand the bigger picture, we will have more information or discussion. So my first question is about markets. So how markets are weighing all the prices because one of the part of the headlines and also treasuries in AI growth right now. So that's the first question. And I think that we can start with the Dominic. So Dominic, let's open the conversation with the overview. If you need to repeat the question, you just say, I understand, I understand like we're actually. I think we are in a state of, like say, FOMO or FRIFOR because nobody really knows what you're trading. Everybody is just reacting to the Fed. They don't know what the Fed's are going to high-creates, they're going to lower rates. And why everybody is in a state of FOMO is because of the prices of oil and I think the 10 year treasury yield. I think like some days back, Christopher Waller, he made some comments about lowering rates. Hello, you guys see me? Yeah, all good, wait. Okay, so what's up on me? There are some comments about lowering rates, some days back. And we saw like this crazy rally from Bitcoin, from stocks, from good, from silver. I mind you, like we hardly see a time whereby I was even confused because normally I trade good and Bitcoin. I was extremely confused because every time I see a seller from good, I see crazy buys from Bitcoin. Every time I see crazy sellers from Bitcoin, I see crazy buys from good. And like seeing everything, like just buy continuously, like not having me confused. Does that I need to, okay, the Fed's probably have some involvement in like the crazy price action. And why exactly like people like having the price action is because of the 10,000 treasury use and the prices of oil. And if we see the Fed's cutting rates, obviously it's going to be like widespread, formal, like buying, those continuous buying from the markets. I think yesterday we had about 119 billion added to the stock market all on just the news of they are gonna cut through it. They haven't even announced whether they're gonna cut through some of the just like speculated that they're gonna cut through it. And like that's what I feel like people are like are treating right now. They're just treating on just the slight possibility of the Fed's cutting rates. Dominic, so I think you finished your answer, right? Yeah, I finished, man. So I think it's a really, it's a space, Rogan. All right, all right, thank you. So Fisher, anything you'd like to expand on? So yeah, thank you very much everyone. It's a pleasure to be here again. Well, I don't know, a lot of people are experiencing issues with their networks, all of you are there. So, but I hope I'm loud and clear. So your question is, how are markets weighing oil prices, treasure eats, and AI grids right now? So I would say that I think the market is currently caught between two very powerful narratives. One side, we have the AI grids, the numbers coming of the AI ecosystem are still very, very strong. And on the other side, we have an oil and interest rate, which determine how expensive it is to finance that particular growth that is coming from the AI. And then how much investors are willing to be for the future's ending is also essential. And for me, the second part is very, very important. Brent, touching around 97.2 cents is an important factor, because this isn't just an oil demand story. The move has been heavily influenced by some geopolitical tensions and the concerns around middle east supply and the state of almost traffic. So if oil stays elevated, the markets need to have this question. Is this a temporary geopolitical premium, or is it going to be a persistent inflation? And that's a key question. That's my take on this. Thank you, Fisher. Thank you. So Arman, help us tie this together. What's your conclusion on this? I say, let me do a mic test. Do you hear me? Yeah, all is good. Cool, cool, cool. Okay. Yeah, let me build on what Dominican Fisher just laid out. I appreciate your sharing. The simple way I think about it is that the interest rate acts like a gravity for tech valuations. And like the higher the risk-free rate goes, the more heavily the market discounts profit that may still be three to five years away. No matter how exciting the growth story sounds, the key number here is the real yield, meaning the treasury yield after inflation expectations are taken out. It shows the true opportunity cost of owning equities instead of simply just holding tragedies. With oil near like $97 and a real yield still elevated, that opportunity cost is high. So investors are asking AI companies to show more than their potential, like more than something they already have. And they want margins, visible orders in cash flow. So I would also watch whether the rally starts to broaden. If the strength remains concentrated in two or three hardware names, the market is still relying on a very narrow group. If it spreads into software cloud and wider data centers stack, that would be a healthier sign that AI demand is becoming more durable. And for me, that's a real question. Whether or not the earnings can stay strong enough to carry these valuations in a high rate environment. And that's my take. Thank you, self. Thank you, Armand. So all answers of my guests, I think, are given us a good read on what's actual driving valuations right now. So let's zoom into the earnings, themselves, because the reactions have been pretty mixed. So just to clarify, earnings is the bottom line. It's like I'm just trying to explain for new ideas or familiar with this term. For companies, it's like a selling product for $100 that have to pay for materials and taxes. So they keep, for example, you keep $60. That's 60 is your earnings. So please apply this logic for the next topic that we'll be discussing now. So what's the here's my second question. So what recent AI earnings, I mean, companies first of all, earnings reactions telling us about investors' expectations. So Dominic, please set this stage for us. Sorry. I could understand the question you asked. Yeah, so let me repeat again. So what's a recent AI earnings reaction from the investors' evidence telling us about their expectations? So what investors are really expect from the AI as an industry? Oh, oh, OK, now I get the question. I think the companies, what they really expected from AI companies is not only to beat the expectations, but like raise up expectations for the next earnings. And I feel like that's why every time we see good earnings beats, we always see a minus sell off from the stock market. And I think from our last piece, one with discussion and the video, via stocks, we're always arguing on what are the videos going to beat its earnings or not and how the stock was going to react. Obviously, we knew that the video was going to beat its earnings. The question now was, by how much was it going to beat its earnings? And was it going to raise the targets for the next earnings? And that's what investors are always waiting to close a minus stock like that. And why we always see a kind of a sell off is because of the fact that people were investors. They already expect a good earnings report. It's just like a crypto preserve. If you have a preserve, people expect to have 100x, 200x. And people come short of 50x. Obviously, they see it as a sort of unrealized loss, even though they're not on loss per se. So that's what they try to take profits as soon as possible. So the wouldn't go beyond a certain loss limit or something like that or a surplus sort of that. So that's why I feel like investors, they always have in mind when it comes to companies and their earnings beats. Thank you, Dominic. Thank you. So, Fisher, what's your takeaway? So the same question. OK, thank you very much, Dominic. So I'm just going to talk more about what Dominic had the recent high-endings reaction telling us. So my take is going to be that the market has moved from rewarding AI growth to demanding AI execution. And this is a very, very, very major shift. Now, the company has saying that, oh, fine, we understood that AI demand is strong, but that's not a guy who knows for us. The investor now, they really want to know how much is the revenue, how much is the margin, how much free cash flow, how big is the backlog? How sustainable is this demand? How much capital is required? What is the next quarter going to look like? You know, these are questions that investors are really invested in. Let's take Broadcom as an example. Broadcom reported $29.6 billion revenue, because it is 6% YUI, 66.7 billion AI-Semic Conduct revenue, and very, very much. I had, if you look at this talk, still fail, around 2.7%. I feel like that should tell us something very important. Now, the market doesn't care only about whether you had the right to invest in the market.