The Ultimate AI Debate

George Noble (0:00)

If I keep lending you the money to buy chips from me, I can make up whatever number I want. All this vendor financing, Ponzi financing, the Bank of AI, also known as Nvidia, would not have to be going through all these machinations. The market would freely give the money to these companies, but they're not.

Gene Munster (0:16)

They will put in 250 billion, they will take out 420 billion. What is a Ponzi scheme about that? That is just smart business.

I think this is a buy opportunity in the market for AI.

Jack (0:37)

We've got an incredibly important conversation today. It's going to be a debate about AI, the future of this investment cycle. Is it a bubble? Is it a tremendous opportunity? Have wonderful assets been sold at far too cheap a price with the drawdown in semiconductors from June? Is it getting quite significant? We've got a bull and we've got a bear. We've got Gene Munster, Managing Director at Deepwater Asset Management, and George Noble of the Noble Update Substack. Gentlemen, great to have you here. I think that not only is this an incredibly important conversation, there's two people who got very opposing views. So even though, of course, this will be respectful, you know, don't hold back.

Let's have this be full of lots of sparks. And of course, this is a very important time with the semiconductor stocks and the AI infrastructure stocks more broadly, having had a very rough day after the blue tsunami of election day yesterday.

Gene, let's start with you. So let's go to opening statements. Gene, what is your secular view of AI and the associated stocks with it? Where are we in the cycle? And your views on the current drawdown? And then George, you'll get your open statement.

Gene Munster (2:01)

Thank you, Jack. The highest level, we are nowhere near the top of a bubble.

I think we are in the third inning of wealth creation. You probably want to own the trade from the third to the seventh inning. You don't want to stay to the end.

I think in terms of the actual adoption, we are at the first pitch of AI. So, yes, we've had some headwinds here more recently, but I think the ultimately, this is the most important part. Everyone would agree that AI is going to be impactful. The question is, will the substance exceed the hype? And I think that will in fact happen.

Jack (2:42)

George, what's your opening statement? Where are we right here?

George Noble (2:45)

I agree with much of what Gene said. I'm actually quite bullish on AI. AI is a technology.

But as my former boss Peter Lynch used to say, the product is not the stock and the stock is not the product. You can have a wonderful product and have it be a lousy stock, vice versa.

I was discussing this day with my producer, and I think this is a graphic example of why I think it's a bad business.

We're using Anthropic. I think we're spending 200 bucks a month on tokens or something like that. And if I'm not mistaken, we're getting the order of like something like $10,000 worth of stuff for it. So I don't know if I'm single-handedly bankrupting Anthropic or not. So the problem really is, it's the product versus the business model. And in my view, in my opinion, it's a commodity. The Chinese are doing it for 95% less. I think the open models are going to dominate the industry. And just like was in the case, just as example, you know, in .com, yeah, the Internet changed the world. It's certain the bulls were correct. But if you own Global Crossing or Lucent or Nortel, you lost everything.

Jack (4:00)

Thank you. Gene, what do you make of that? And in particular, the criticism not of AI as a technology, or that it's going to change the world, which, you know, very likely is.

But that of criticism of the AI business model, the business model of serving tokens.

Gene Munster (4:18)

So at the core, the most basic, the fundamental principle around AI is taking energy and converting it into intelligence. And I understand that we're drawing an important distinction here between the use of AI and how impactful it will be and separately the investment case.

But when it comes to the investment case, my view is that taking that energy and moving into intelligence, we have an opportunity to solve some very big problems. It could be for a more successful grid, it could be for a curing disease, it could be for potentially solving for world peace. And at the most basic level, if you have a belief like I do, that it will help solve some of the biggest challenges. How do you put an economic value on that? That's the question.