Emperors Without Clothes

I listened to a call with several JPM analysts on the AI / data center trend. At the risk of continuing to state the obvious, this will be the most important growth investing trend of the next decade. The focus was really on how to play the AI trend beyond obvious names like Nvidia $NVDA (which I own in size) and Super Micro $SMCI (which I completely missed, despite meeting with management late last year). A few highlights... Bullish on the durability / long tail of spend around the AI infrastructure build out (continued hyperscale / CSP demand + sovereign AI mentioned several times). Benefits the entire ecosystem, particularly the industrial players given power needs (growing power / electricity demand is a tangential theme / trend that will play out over the next decade). No clear sign of slowing demand - as I've said, these stocks probably take a breather as supply / demand dynamics normalize. Bullish for ASIC (application specific integrated circuit) players like Broadcom $AVGO (makes Google’s $GOOGL TPU) and Marvell $MRVL (Amazon $AMZN and some Google) as hyper scalers continue to build their own silicon. Although clear that AMD $AMD and ASICs are still behind Nvidia in terms of performance. Interested to see how ASICs play as inference takes up a larger % of the pie - my guess is favorably. Will be challenging for power infrastructure to keep up with demand. AI data centers consume 4-5x as much power as traditional data centers. Also increasing infrastructure needed for renewables, EV adoption and reshoring of domestic manufacturing capacity. Moving from low to no load growth (power demand has been flat for the last 20 years and this is about to change) to how we prepare infrastructure for what’s coming over next decade when pace is moving faster than utility infrastructure tends to be developed. Bullish for Vertiv $VRT (which I own in size), Johnson Controls $JCI, Eaton $ETN, Quanta $PWR, Trane $TT etc. $JPM likes NextEra Energy $NEE and $AES on utilities side – focus on renewables. Dominion $D – services old school data center alley in NOVA – less attractive but good read through to the space. Copper. JPM sees ~4mm deficit by 2030 on conservative power demand estimates. AI infrastructure rollout needs more copper to be successful. Miners aren't brining on much capacity after 2026 (ESG, political risk and a history of poor capital allocation decisions by mining companies. We've seen 3 somewhat recent mega trends that have triggered demand shocks: 1) Rise of China since 2000 2) Rise of battery electric vehicles since 2016 3) rise of renewables since 2018...AI will be the next demand shock in copper. Bullish on Teck Resources $TECK and Anglo American $AAL (listed in London). Freeport $FCX has already moved higher. Tough to buy a miner up materially. If any of my cyclical investor friends disagree, I'd love to hear it. Risk to power consumption? Chips continue to get more power efficient (I get this question a lot), but compute needs / complexity growing exponentially. This is why power demand has continued to grow, despite chips getting more “power efficient.”

Tesla Cybertruck takes a baseball