Magnificent 7 report

Rob Armstrong (0:06)

Pushkin. Just in the last week or so, four of the largest companies in the world have reported quarterly earnings. Alphabet, Meta, Microsoft, Tesla. Today, we're thinking about the Magnificent 7 Those four and three more. We're rethinking the whole category. This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. I am Rob Armstrong, coming to you from Unhedged World Headquarters in beautiful and unseasonably warm New York City. I'm joined today by a new colleague, John Foley, who is the new Lex writer here in New York, covering technology. He's a man of deep wisdom and wide experience. Welcome to the show, John.

John Foley (0:57)

Thank you for having me, Rob.

Rob Armstrong (0:58)

So, I propose that we take these in descending order of size, and I talked about the ones that just reported, but let's talk about the big daddies first. NVIDIA and Apple are both $3.5 trillion, numbers so large I can't even conceptualize them. Where are we at on those two?

John Foley (1:21)

Those two are the easy ones to start with. This story is all about AI. It's all about who's spending what and who's making money. And Apple and NVIDIA are the two that probably it's easiest to say that they're making money out of real stuff. Like these are the two that sell objects, which distinguishes them from the others that we're going to talk about.

Rob Armstrong (1:39)

And the object within NVIDIA we talk about is they're selling the shovel in the gold rush, to use everyone's favorite metaphor. Everybody wants to be in AI, and to be in AI, you've got to buy bits of kit.

John Foley (1:51)

You have to buy silicon. You need datacenters with chips, and the chips are made by NVIDIA, and all of the other companies that we're talking about, basically, to varying degrees, are buying stuff from NVIDIA today to build these enormous datacenters.

Rob Armstrong (2:05)

I find NVIDIA the scariest stock for a number of reasons. It's run up, in the last five years, something like 2,600 percent. It's like, when does the gold rush end with them? You're kind of guessing, either when do people stop trying to super invest in AI, or when does somebody else have a chip that's almost as good as an NVIDIA chip, so their monopoly is broken?

John Foley (2:29)

That is a great question. And there are companies that are trying to build chips that are decent rivals to NVIDIA. They're just not doing very well at the moment, because chips is one of those businesses, the more you do, the better you are, obviously. And NVIDIA, which kind of got where it is by accident, it used to make these chips that were used for graphics, basically.

Rob Armstrong (2:47)

Yes.

John Foley (2:48)

It was a video game chip company. And then they didn't even discover, other folks discovered that these chips were perfect for the kind of repetitive calculations that you need to do AI. And NVIDIA is now, as you say, a $3.5 trillion company. But there are companies that are trying to nibble away at the edges. They're just not making much of an impact.

Rob Armstrong (3:07)

It's weird that the two biggest of the Magnificent 7, NVIDIA is by far the fastest growing.

You know, it's just like sales over the last three years are like plus 60% a year, 70% a year. The other biggest company, Apple, same market cap is by far the slowest growing. So it's going along at single digit growth levels and it's worth $3.5 trillion. It's sort of an interesting contrast.

John Foley (3:33)

And if you think that NVIDIA is the purest play investment in AI right now, Apple is kind of, in very broad terms, it's like the opposite of that. I mean, it's obviously deeply connected to the fortunes of AI through its handsets, through its smartphones, which will all be AI enabled. But at the same time, it's not investing quite as much in these kind of very speculative, large language models like meta, alphabet, Microsoft are kind of tossing tens of billions of dollars into this pot, hoping that something will come back in future, but not really knowing for sure how much that's going to be. Apple at least is, like we said, selling objects admittedly at a slower rate than NVIDIA.

Rob Armstrong (4:08)

And you can kind of see a world where this turns out to be a brilliant strategy for Apple in that they're like, we'll let you guys cut each other's throats for a few years, and whoever comes out on top, we'll let you put our AI onto our handsets, which everybody uses, so you're going to have to deal with us.