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AI Revolution in Early Stages · THE DAILY BRIEF

• 0:00
  Speaker 1: We're looking at maybe a little bit of M and
• 0:01
  Speaker 1: A coming to bear. We're seeing phenomenal valuations on the
• 0:04
  Speaker 1: public market with a new four trillion dollar company if
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  Speaker 1: we can retain it back for Nvidio and that four
• 0:10
  Speaker 1: hundred billion dollar private valuation for SpaceX. Can we sustain
• 0:14
  Speaker 1: these sorts of valuations.
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  Speaker 2: Scott, Hey, Caroline, and you know, like long as you're short, yes,
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  Speaker 2: I think we can. And the reason why we probably
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  Speaker 2: can is because these companies are growing into the valuations
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  Speaker 2: that the market is placing upon them. This is not like,
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  Speaker 2: you know, kind of not not like the nineties where
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  Speaker 2: where those companies really sort of got ahead of themselves.
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  Speaker 2: There we're making enough money to justify the valuations ultimately.
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  Speaker 2: But these you know this, this you know this generations
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  Speaker 2: in this generation's tech companies you have have ros in
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  Speaker 2: the thirties and that you know, that is a very
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  Speaker 2: sustainable kind of valuation metric that we that we can
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  Speaker 2: use to say, yeah, this is this is pretty sustainable
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  Speaker 2: right now, like this is this is We're not boltenatory
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  Speaker 2: anywhere close to it.
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  Speaker 1: I mean, return on equity looking still healthy and not
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  Speaker 1: too ee watering, Scott, Will that be vindicated in the
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  Speaker 1: earning season that we're about to get. Will Microsoft, will
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  Speaker 1: some of these particular the hyperscalers, be able to commit
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  Speaker 1: to the spending that drives in video yet further higher?
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  Speaker 2: Yeah, that is obviously the trillion dollar question. Do we
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  Speaker 2: get continued growth and continued upward pressure on those RO
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  Speaker 2: kind of kind of metrics. You get the RO expansion
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  Speaker 2: by by having additional profitability, additional mar additional margin expansion
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  Speaker 2: and just and just overall is just better excution on
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  Speaker 2: the business side. And if these companies can continue to
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  Speaker 2: do that, then there's there's no reason why we can't
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  Speaker 2: be substantially higher in a year from now in many
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  Speaker 2: of these companies than we are right now. Our expectation
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  Speaker 2: is that that's going to continue. There's no reason why
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  Speaker 2: it really shouldn't. At this point. We are still early
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  Speaker 2: stages at the AI revolution, and that is our expectation currently.
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  Speaker 1: I mean, I guess the extraordinary matter of all of
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  Speaker 1: this is, of course, we saw the biggest sell off
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  Speaker 1: ever in a market capitalization of video just in February
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  Speaker 1: because of the worry of deep sea But we also
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  Speaker 1: have the tariff anxiety that just doesn't seem to impede
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  Speaker 1: its valuation. Is that something that could knock off valuations
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  Speaker 1: or do you think we're getting numbed to tariffs?
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  Speaker 2: We're definitely getting numb. I mean, look that the market
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  Speaker 2: is not trading like it used to in April based
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  Speaker 2: on the tariff head lines. You see, that's just sort
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  Speaker 2: of a diminishing return towards towards the shock. Then Mark
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  Speaker 2: is able to absorb with these because now we sort
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  Speaker 2: of get we think we understand what what the playbook
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  Speaker 2: looks like. Playbook looks like, you know, you know, talk
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  Speaker 2: tough and then eventually find some way to get a
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  Speaker 2: deal that's acceptable to everybody, and that if that that
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  Speaker 2: continues to pace, then that there's no reason why, you know,
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  Speaker 2: why the market can't sort of sustain these types of levels.
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  Speaker 2: But you know that that you know that getting getting
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  Speaker 2: comfortable with the way that that the terrorists are going
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  Speaker 2: to end up going and figuring out the market frankly
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  Speaker 2: is starting to figure out that there's not really an
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  Speaker 2: alternative still to to Nvidia and some of those ships
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  Speaker 2: despite this just wite some of the deep seak stuff
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  Speaker 2: and that's why we we've recaptured you know, these all
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  Speaker 2: time highs and valuations.
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  Speaker 1: It does seem to be a story of AI winners
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  Speaker 1: and then the laggards, and we're talking tough. Has really
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  Speaker 1: got hard today is on Apple once again, Peter Navarro
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  Speaker 1: calling it out saying they think they're too big to tariff.
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  Speaker 1: Are we just going to see more money pile into
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  Speaker 1: the infrastructure air or at what point are we going
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  Speaker 1: to start to see companies winning out with the application
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  Speaker 1: of AI, which thus far Apple doesn't seem to be
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  Speaker 1: on top of.
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  Speaker 2: Yeah, we think that's probably a twenty twenty like late
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  Speaker 2: twenty twenty five to early twenty twenty sixth story, you know,
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  Speaker 2: as we move from the you know, the makers of
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  Speaker 2: the stuff to the users of the stuff and that
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  Speaker 2: and that's probably gonna be the most important investment call
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  Speaker 2: to make as we as we come into next year,
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  Speaker 2: is like figuring out which companies and which sectors are
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  Speaker 2: actually able to use the AI technology which is amazing
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  Speaker 2: to increase profit margins, to increase productivity and and that
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  Speaker 2: you know, that's we're spending quite a lot of time
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  Speaker 2: on that on that here at Horizon, and it's it's
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  Speaker 2: something that we're actually pretty excited about. But you know,
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  Speaker 2: the the focus on the intense focus we've had on
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  Speaker 2: the infrastructure side. It's try I can't go away. It's
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  Speaker 2: you know, it's not be diminished, but it's going to
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  Speaker 2: of broughten out towards towards more more towards those users
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  Speaker 2: and in some of the ultimate winners in the space,
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  Speaker 2: which which are always the users of the technology rather
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  Speaker 2: than the makers of the technology.
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  Speaker 1: I mean, I know you say it's still early days,
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  Speaker 1: but can you give us an inkling of where you're
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  Speaker 1: getting most excited about. Is it a healthcare space, is
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  Speaker 1: it elsewhere?
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  Speaker 2: Healthcare is definitely one of the top of the mind
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  Speaker 2: in terms of the people that can use this to
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  Speaker 2: just really speed up the drug development is like an
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  Speaker 2: obvious application for some of these things. I mean. The
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  Speaker 2: exciting thing, Caroline, though, I think, is we don't really
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  Speaker 2: know what that's what's around the corner. I'm not smart
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  Speaker 2: to figure out like what the next shoe drop is,
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  Speaker 2: and like which which companies and sectors are you're really
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  Speaker 2: going to take, especially like the agenic AI and into
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  Speaker 2: the ends of the next level. And so you know,
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  Speaker 2: we are spending a fair amount time kind of figure
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  Speaker 2: that stuff out right now. But I don't know what
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  Speaker 2: I don't know. And that's actually one of some of
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  Speaker 2: the most exciting parts about this is you know, really
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  Speaker 2: have to stay front footed and do and do the
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  Speaker 2: research and just listen to what you're what you're seeing
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  Speaker 2: a Scott.
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  Speaker 1: Therefore, do you take money out of prior winners to
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  Speaker 1: allocate to the future ones or are you taking out
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  Speaker 1: of just lagging industry groups that you just don't want
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  Speaker 1: to be allocated to At the moment, I.
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  Speaker 2: Think it's more. It's more, you know, you probably do
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  Speaker 2: take some out of the infrastructure places you play, You
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  Speaker 2: take some out of the prior winners, you know, some
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  Speaker 2: out of the end videos of the world. And but
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  Speaker 2: but like as I said earlier, Caroline, it's more of
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  Speaker 2: a broadening play. So you know, I think you actually
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  Speaker 2: increase the overall allocation towards AI in your portfolio. But
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  Speaker 2: and you're taking out some of you know, some of
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  Speaker 2: like in the the nvities of the world. You're also
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  Speaker 2: taking out of like industrial as, you're taking out of
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  Speaker 2: you know, like utilities, and you're gonna take it out
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  Speaker 2: of some of the more borings like staples types of things.
• 5:01
  Speaker 2: You know, you probably just go want to allocate out
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  Speaker 2: of those types of sectors, and just overall increase your
• 5:07
  Speaker 2: breadth of your AI in your portfolio.