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The Memory Selloff: Record Profits, Collapsing Stocks · In the Loop AI

0:00
Josh: The U.S. stock market just lost more money than we did in the 2008 financial
0:04
Josh: crisis over a matter of seemingly a couple of days. It's been the worst memory
0:09
Josh: crisis, the worst stock market crash in quite some time because the numbers have gotten so high.
0:14
Josh: Memory has run up to astronomical levels. But what's interesting here is this
0:18
Josh: is backed up against some counterfactual evidence.
0:20
Josh: SK Hynix, that Korean company that could seemingly do absolutely no wrong,
0:24
Josh: they recorded more profit than they did revenue this last quarter.
0:28
Josh: So the numbers are great, but the stock market is saying, wait a second,
0:32
Josh: something's not right here.
0:33
Josh: So we have some insight. In this episode, we're going to unpack this,
0:35
Josh: why the market is reacting the way it is, and evaluating whether or not it's
0:39
Josh: right or if it's a pretty serious overreaction.
0:42
Josh: I'm currently sitting in the middle of a hotel, in the middle of nowhere,
0:45
Josh: on some spotty Wi-Fi, trying to get this episode out to you guys.
0:48
Josh: Because, I mean, this is an incredibly important topic. This feels very timely
0:51
Josh: and important to navigate. So, Ejaz, let's unbundle what's happening here in
0:55
Josh: the market. I mean, worse than 2008 is crazy.
0:58
Ejaaz: Yes. So I'm seeing a lot of commentary in the markets right now,
1:00
Ejaaz: which is the AI bubble is finally popping. It's unwinding. It's been happening for four weeks.
1:06
Ejaaz: The Korean stock index itself is down over 30%, which is just the largest drawdown they've ever had.
1:12
Ejaaz: And so I want to explain what the damage is. And then let's get into whether
1:16
Ejaaz: this is right or wrong, because I honestly have some pretty strong opinions
1:19
Ejaaz: as to why this is completely wrong and why it's like one of the bigger opportunities right now.
1:22
Ejaaz: So what is the damage? What you're seeing on the screen right now is the Korean
1:27
Ejaaz: stock market. And the reason why I'm showing you the Korean stock market versus
1:29
Ejaaz: the American stock market is because they're influencing each other quite a bit.
1:33
Ejaaz: Now, Korea has three of the biggest, or rather two of the biggest memory manufacturers,
1:38
Ejaaz: SK Hynix, which is the number one, and Samsung.
1:41
Ejaaz: And they provide pretty much all the memory that is required for the GPU makers,
1:45
Ejaaz: the CPU makers, or whatever type of AI infrastructure you can dream of.
1:48
Ejaaz: So it's a very essential component.
1:50
Ejaaz: Now, the issue is, it's down 32%, and that is because there's a lot of memory
1:55
Ejaaz: providers that have been dumping completely. So if I pull up SK Hynix right
1:59
Ejaaz: over here, over the last month, it's down almost 25%.
2:04
Ejaaz: If I pull up SanDisk, right? SanDisk Corporation creates a different type of memory for AI.
2:08
Ejaaz: They're down 50%. This is the darling stock, by the way, which was up like-
2:13
Ejaaz: This is trending like a meme coin, man. Yeah, I know.
2:15
Ejaaz: But it also pumped like a meme coin.
2:18
Ejaaz: I think it was up like something ridiculous, like 4,000%.
2:21
Josh: And even though- Well, can we look at the year chart?
2:23
Ejaaz: Yes, let's look at the year chart.
2:24
Josh: Just to see what that- Yeah.
2:26
Ejaaz: The year chart is still up 2,200%. So even though it's down 50%, it's still up 2,200%.
2:33
Josh: Oh, this is so unbelievable.
2:34
Ejaaz: And so the question on everyone's mind is, why are these stocks,
2:40
Ejaaz: specifically AI stocks, specifically memory stocks, dumping
2:44
Ejaaz: on the back of some amazing news, which is these companies are still pulling
2:48
Ejaaz: in more revenue, more profit, as you mentioned earlier, than they've ever done in a single quarter.
2:53
Ejaaz: SK Hynix released their quarterly earnings literally yesterday.
2:57
Ejaaz: I was reading it last night before in preparation for this episode.
3:00
Ejaaz: And Josh, to your point, Their revenue increased by 354%, but their profit margins increased by 555%.
3:07
Ejaaz: They made more money in this quarter than they did in the entirety of 2025,
3:12
Ejaaz: last year. So the question on everyone's mind is,
3:15
Ejaaz: Do these stock price movements make sense at all?
3:19
Josh: The thing that like, well, first of all, the answer is no, because I read through
3:22
Josh: this earnings report too, and I was immediately confused because how on earth
3:26
Josh: do you have more net profit than revenue?
3:28
Josh: It's 118% net margins. It's like unbelievable profit margins.
3:32
Josh: It's an incredible business. It seems like it's doing remarkably well.
3:36
Josh: And yet the market seems to just be kind of done with this.
3:39
Josh: It's like the Toy Story meme where they just kind of throw the toy out like,
3:42
Josh: I'm done with this toy. But the numbers don't make any sense at all.
3:46
Ejaaz: Can I tell you why?
3:47
Josh: Yeah, please. Like, I'm trying to understand. I'm reading through these notes
3:51
Josh: here. I'm like, okay, what's wrong here?
3:53
Ejaaz: Okay, so there's two reasons why I think SK Hynix or memory stocks,
3:57
Ejaaz: AI stocks in general, are dumping.
3:58
Ejaaz: Number one, analysts at these different firms on Wall Street or wherever set
4:04
Ejaaz: targets, right? So expected revenue growth for a lot of these companies.
4:08
Ejaaz: Now, SK Hynix technically missed their revenue target by around $1.7 billion.
4:14
Ejaaz: You're seeing this on the screen right now.
4:16
Ejaaz: What I would like to draw your attention to, Josh, is this. You see that?
4:20
Ejaaz: That is 250% of revenue growth from the previous year.
4:25
Ejaaz: And that is almost 600% in operating profit from the previous year.
4:30
Ejaaz: So whilst they may have missed some random analysts' projections,
4:35
Ejaaz: They've still excelled and compounded at a much more rapid rate than any other
4:39
Ejaaz: company in the world. It is extremely impressive. These things are printing money.
4:43
Ejaaz: But the question should then be, why were the analysts even predicting this
4:47
Ejaaz: target in the first place, right?
4:49
Ejaaz: And I'll give you an answer for this. SK Hynix specializes in this thing called
4:54
Ejaaz: HBM, high bandwidth memory. We've spoken about this a lot on the show, right, Josh?
4:58
Ejaaz: Now, they are the number one provider of HBM. They only dedicate their chip
5:03
Ejaaz: fab capacity to create HBM.
5:06
Ejaaz: Now, if you look at the other competitors, Samsung, Micron, they do HBM,
5:10
Ejaaz: obviously, but they also do some other cheaper memory for like your mobile phone
5:14
Ejaaz: or for your computer. It's called DRAM, and you're basically able to use that
5:18
Ejaaz: for other different types of gadgets.
5:20
Ejaaz: Now, because SK Hynix is so focused on HBM, they have run out of supply,
5:26
Ejaaz: so they can't possibly sell anymore.
5:28
Ejaaz: So they're selling off on the best news ever, which is they've sold out all
5:32
Ejaaz: their entire supply for this quarter.
5:34
Ejaaz: And so they have to move on to the next quarter's supply in order to get higher profit margins.
5:39
Ejaaz: Now, if you look at Samsung, if you look at Micron, they have dumped,
5:42
Ejaaz: but they have dumped less because they're selling more DRAM.
5:45
Ejaaz: Have they made as much money as SK Hanex? No, because HBM is priced higher, uses more wafers.
5:51
Ejaaz: So the whole thing basically is ridiculous.
5:54
Ejaaz: SK Hynix has created a really good product. They have sold all of the product
5:57
Ejaaz: that they could potentially make in that single quarter.
6:00
Ejaaz: And because they've done that, they have now not been able to reach a specific
6:04
Ejaaz: target that this random Wall Street analyst has set for them because they've
6:08
Ejaaz: dedicated all their chip capacity to the specific thing.
6:10
Ejaaz: So let me know if that makes sense. But basically, it's crazy.
6:13
Josh: If I had to summarize it probably in three points, it's like,
6:15
Josh: okay, the first one is the stock market rating, like a lot of the analyst ratings,
6:20
Josh: where basically you could,
6:22
Josh: you could think of it like if you if you give your kid a hundred dollars for
6:25
Josh: straight a's and they bring home like
6:27
Josh: four a's and then an a minus and everyone like freaks out because they're like
6:31
Josh: oh my god no this isn't what you promised yes that's the first thing the second thing is the
6:35
Josh: record earning surprises like basically like you mentioned they've fully sold
6:40
Josh: out of their inventory for 2026 yes there is no more capability for them to sell more by the way,
6:45
Josh: And 27, there's no ability for them to sell more or sell it at a higher margin
6:49
Josh: because it's already pre-sold. So therefore, you eliminate a lot of the upside surprises.
6:54
Josh: And there really is only downside surprises possible in the case one of these
6:57
Josh: deals don't work out how they expect or things fall through.
7:00
Josh: So the upside is kind of capped in terms of surprises. Downside is not.
7:02
Josh: And the third is there is this two times leverage ETF that started trading just
7:07
Josh: a couple weeks ago, July 13th. So I mean, of course, being a Korean market,
7:11
Josh: a lot of people, it's funny, like there's this thing.
7:15
Josh: It's kind of known with the Korean stock market, where they are the most aggressive
7:19
Josh: gamblers per se. They like to take on the most risk.
7:21
Josh: And this two-time leverage fund, I'm sure, fed right into that.
7:24
Josh: So there was a lot of leverage baked into the price of these stocks.
7:27
Josh: And any sort of sell-off event creates this cascading liquidation event.
7:32
Josh: And I'm sure we saw a lot of that as well with a 2x leverage stock.
7:36
Josh: So the convergence of those three things...
7:37
Ejaaz: Actually, on that, Josh, there's some news from Chucan I saw this morning that
7:41
Ejaaz: JP Morgan... So you mentioned the leveraged ETFs and you're right.
7:44
Ejaaz: Like this has led to a lot of the dump because there's people like couldn't
7:47
Ejaaz: afford the stocks that they were buying. They were too leveraged up.
7:49
Ejaaz: And JP Morgan this morning reported that the leveraged ETF drawdown,
7:53
Ejaaz: the liquidation specifically is about 90% complete.
7:57
Ejaaz: So if you wanted to kind of like extrapolate, you'd probably see this bottoming sometime soon.
8:02
Ejaaz: So like this drawdown can't go on forever and we're probably nearish a point
8:07
Ejaaz: where it's gonna reach its bottom before like everything starts to like settle
8:11
Ejaaz: and maybe kind of like recoup.
8:13
Josh: Yeah, well, it seems like, I mean, we had this earlier in the year where there
8:15
Josh: was that big sell-off. I remember Bill Ackman famously saying like,
8:18
Josh: hey, this is oversold. The market is wrong.
8:21
Josh: You're overreacting. We are probably getting close to something like that now.
8:25
Josh: Again, not financial advice, who the hell knows?
8:27
Josh: But there are some signs that things are shifting.
8:30
Josh: And I want to shift our attention to China now to talk about what's shifting
8:35
Josh: over there because there is some, you could say that China played a fairly large
8:38
Josh: role in this and will continue to play a fairly large role going forward,
8:42
Josh: what you'll notice is that we're not really talking much about
8:45
Josh: the united states stocks like this is very much an international this is a global
8:49
Josh: marketplace now because everyone is so interdependent on these supply chains
8:53
Josh: and china has a very big one with memory and there's a company i'm going to
8:57
Josh: try to pronounce this right shangjin
8:59
Josh: memory technologies yes cxmt is a ticker basically.
9:02
Josh: And they had themselves a public ipo a public debut in which they traded up,
9:07
Josh: 466 percent in one day which is instantly the most valuable china listed company
9:14
Josh: ever, which is more than Alibaba or Tencent.
9:16
Josh: And they raised about $9 billion.
9:18
Josh: So you're thinking, who on earth is this company? I've never heard of CXMT.
9:23
Josh: Well, they're the world's number four DRAM maker.
9:27
Josh: Now you'll notice we normally talk about the top three DRAM makers.
9:30
Josh: A new entrant has entered the category.
9:32
Josh: And I have to ask, Ejaz, is this like a little concerning because there's more
9:36
Josh: distribution of people who are able to make this memory?
9:39
Josh: I mean, over the last four years, I believe. They've gone from a 1% market share
9:44
Josh: to a nearly 10% market share. And it seems like that number is going up only.
9:48
Josh: They have the backing of China behind them. You know the Chinese CCP is going
9:51
Josh: to be really pushing for them to win.
9:53
Josh: Is this playing a role into the memory problem as well? Yes.
9:57
Ejaaz: And it's not as much of a problem as people make it out to be.
10:01
Ejaaz: So let me actually ask you this question.
10:03
Ejaaz: Of the non-Chinese memory makers, so SK Hynix, Samsung, Micron.
10:09
Ejaaz: Who would you think is the biggest region that they're selling all their memory
10:13
Ejaaz: to? Is it the West or is it China?
10:15
Josh: I would assume it's the West because we have all of these GPUs.
10:19
Ejaaz: You'd be right. It's overwhelmingly the West. And the issue there is there's
10:23
Ejaaz: not enough supply to meet the West's demand, right?
10:25
Ejaaz: So guess who is starved of memory?
10:29
Ejaaz: It's China. China star.
10:30
Josh: Oh, those open source guys, huh?
10:32
Ejaaz: Yeah, those open source guys. So listen, they're not getting access to any of
10:35
Ejaaz: the American chips. NVIDIA has a trade restriction. They can't sell them frontier chips.
10:40
Ejaaz: And they don't get access to any of SK Hynix and Samsung's memory chips because
10:45
Ejaaz: they're selling it to the West. Micron is obviously selling it to the West as well.
10:48
Ejaaz: So they have to kind of do their own thing. That company is the number four
10:52
Ejaaz: memory provider now, CXMT, because of course, Chinese AI labs like Moonshark
10:56
Ejaaz: creating Kimi K3, GPU creating GLM.
10:59
Ejaaz: They also need memory for their GPUs to train their own AI models.
11:02
Ejaaz: So CXMT stepped up and basically IPO'd and went up 500% in a single day,
11:08
Ejaaz: making them the most valuable company in China.
11:12
Ejaaz: Their valuation, I think right now, is roughly around the price of Micron or
11:18
Ejaaz: the market cap of Micron.
11:19
Ejaaz: And they did that in like a single day, just like the craziest IPO ever.
11:23
Ejaaz: Now, the reason, again, for why this is the case is we are starved of memory
11:28
Ejaaz: in AI. It's just a very simple thesis.
11:31
Ejaaz: You need memory to remember everything that you type and talk to Claude and ChatGPT about.
11:35
Ejaaz: You need memory to keep your agents running 24-7. And that memory demand isn't
11:40
Ejaaz: just a linear line. I'm trying to figure out what this looks like in the camera,
11:43
Ejaaz: but it's not a linear line. It is a completely exponential line.
11:47
Ejaaz: And if you look at the demand growth for any of these memory supplies.
11:50
Ejaaz: It literally looks like this. And you know what else looks like this?
11:53
Ejaaz: The profit margins and the revenue that we're seeing. So whether it misses targets
11:57
Ejaaz: by like a billion dollars or not, it does not matter. So that's one thing.
12:01
Ejaaz: But there's two other news items why China is causing stocks to crash, Josh. The other one,
12:07
Ejaaz: Have you heard of this company called asml based in the netherlands
12:10
Josh: Yeah might have heard that like singular company that the entire world is.
12:13
Ejaaz: Built up yeah yeah do you remember they create these like 300 million dollar
12:17
Ejaaz: machines which are used by tsmc yeah exactly euv extreme ultraviolet lithography and they use
12:24
Josh: Where they shoot they shoot little pieces of of light at tin and then the tin
12:27
Josh: turns into light that doesn't exist anywhere else on the planet that was a banger this crazy scientific.
12:32
Ejaaz: Company yeah exactly that was a good episode by the way for the ogs who know we're referencing.
12:37
Josh: Go listen to that one because ASML is a crazy company.
12:39
Ejaaz: It's such an awesome company. Anyway, so this company, it's one of a kind.
12:43
Ejaaz: It's based in the Netherlands. They create these $300 million machines.
12:47
Ejaaz: And I think they pump out a couple hundred a year. They're so hard to make.
12:51
Ejaaz: They have teams and teams of people trying to create these things.
12:54
Ejaaz: It is incredibly difficult to do. And it's very secretive. They have not released
12:58
Ejaaz: any blueprints such that it has been super hard to replicate this.
13:01
Ejaaz: They've tried many times in the West. Elon Musk has tried.
13:04
Ejaaz: You just haven't been able to do it. And it is pinnacle to have these machines
13:07
Ejaaz: to create next generation AI chips. So NVIDIA, very close to ASML.
13:12
Ejaaz: China, a company in China, announced, very surprisingly, that they've been able
13:17
Ejaaz: to replicate a version of these $300 million machines.
13:21
Ejaaz: It's called DUV. It's called Deep Ultraviolet. So, it's not quite extreme,
13:24
Ejaaz: but it's Deep Ultraviolet. And I have to stress, it is a prototype machine.
13:29
Ejaaz: This hasn't been scaled. And let me ask you this, Josh. How many of these machines
13:33
Ejaaz: do you think they're creating for the rest of this year or in a year that they're
13:37
Ejaaz: targeting for a year? dude
13:37
Josh: Not many it's like low hundreds dude.
13:39
Ejaaz: No it's five
13:41
Josh: Five oh shit okay that's way less than.
13:43
Ejaaz: I'm aiming for 10 so like oh god it's a nothing burger but the market saw this
13:49
Ejaaz: news and were like oh crap china's about to flood the market with euv machines
13:54
Ejaaz: the the cost of all these gpus is gonna go down we're gonna have so many more
13:57
Ejaaz: gpus we should just dump nvidia we should dump amd we should dump all these
14:01
Ejaaz: memory stocks it makes no sense it has a massive overreaction
14:04
Josh: Yeah it seems like we have this baked in trauma. I mean, there's like the,
14:07
Josh: the bear thesis is kind of like the solar panel idea where China famously,
14:12
Josh: they subsidized and then flooded the market with solar panels,
14:15
Josh: completely collapsing prices everywhere.
14:17
Josh: And because China is able to manufacture things at scale, they're able to kind
14:21
Josh: of compete at a margin that other companies cannot. And the Chinese government
14:25
Josh: is willing to back these companies and subsidize those companies in order to
14:29
Josh: destroy the demand in other marketplaces.
14:32
Josh: It's how China has always won. They've used their manufacturing capability and
14:35
Josh: that connection with the government to subsidize these things to reach low prices
14:39
Josh: that other companies cannot compete with.
14:41
Josh: This is not the case for solar. This is just not really true. And it's, it's like,
14:47
Josh: solar is this static technology it is this commodified thing whereas memory
14:51
Josh: is very dynamic there's many different types of dynamic memory there's many
14:55
Josh: different ways of making it there's very
14:56
Josh: many different like custom architectures for it and that's just not really how
15:00
Josh: it works you can't build a memory company to subsidize the prices of
15:05
Josh: and and lower the cost relative to all the others because one the demand is
15:08
Josh: so high and two there's so many different types i mean dram is kind of like
15:12
Josh: tap water that's kind of what they're going for hbm is that premium bottled
15:15
Josh: stuff. That's like that blue glass bottle that you see all the time.
15:18
Josh: They're totally different things.
15:19
Josh: And yet the market is reacting to this news as if they are the same.
15:23
Josh: And I think that disconnect is probably where we feel a little optimistic and
15:27
Josh: feel like perhaps this is a little bit oversold.
15:30
Josh: Now, maybe from here, we get into the kind of unbundling of this thing and talking
15:35
Josh: about where the money is going, because it's not just leaving the system.
15:39
Josh: It is kind of shifting places.
15:41
Josh: There is this unbundling of the AI trade happening.
15:44
Josh: Maybe we could shed some light onto So kind of where that's headed to now.
15:47
Ejaaz: The relative way to think about where the money is going right now in AI is,
15:51
Ejaaz: it's going from the hyperscalers. It's going from the top AI labs,
15:55
Ejaaz: such as Anthropic, OpenAI, Google, Meta.
15:59
Ejaaz: They're spending copious amounts of money. I think the figure for this year
16:03
Ejaaz: is something crazy like, what was it, like $250 billion or something like this on AI CapEx alone.
16:10
Josh: Unbelievable amount.
16:11
Ejaaz: Well, Google just recently reported their quarterly earnings.
16:13
Josh: I think it's more than that.
16:14
Ejaaz: Yeah, I think it might be more than that. It feels low when I said it. But Google's
16:18
Ejaaz: Quarterly earnings reported that they've, for the first time since they IPO'd,
16:21
Ejaaz: so 21 years, I believe, they've gone negative cash flow, which means they're
16:26
Ejaaz: spending more money than they are taking in. The balances have been depleted, right?
16:30
Ejaaz: And the craziest part about this is they're doubling down even more because
16:34
Ejaaz: they see the opportunity. Now, think about it. Google's doing this.
16:37
Ejaaz: Amazon's doing this. Meta's doing this.
16:39
Ejaaz: These guys aren't stupid people. Like, they will only be doing this if they
16:43
Ejaaz: see that there's real revenue coming through.
16:45
Ejaaz: Amazon CEO, Andy Jassy, famously said this in his previous quarter.
16:49
Ejaaz: He said, we are investing all this money because we are literally getting revenue
16:53
Ejaaz: back from it almost immediately or six-month delay. So it makes sense for us
16:57
Ejaaz: to just keep compounding this, right?
16:58
Ejaaz: So the money is going from these companies into these semiconductor companies.
17:03
Ejaaz: And that's what we're seeing. That's why SK Hynix had a record quarter where
17:06
Ejaaz: they made the most money that they ever had, more than they did in 2025.
17:09
Ejaaz: So the unboggling is this free cash flow going from the hyperscalers to the
17:13
Ejaaz: semiconductor companies. So if you wanted to look at a layer to potentially
17:16
Ejaaz: consider investing in or being focused on, it still is, as boring as the answer
17:21
Ejaaz: is, semiconductors in general.
17:23
Ejaaz: The other thing that I think is playing into this, Josh, not to bring up China
17:26
Ejaaz: again, but like we have to because they've been so relevant this week, is open source.
17:30
Ejaaz: A big critique from people right now is, huh, if I have an open source model
17:34
Ejaaz: that I can run at home and is cheaper to run, why on earth would I need to be
17:38
Ejaaz: spending millions and millions of dollars a year on AI? Why do I need all these GPUs?
17:43
Ejaaz: Well, that is fundamentally wrong. And Gavin Baker actually did a really good
17:47
Ejaaz: job explaining this, where he basically said,
17:50
Ejaaz: Number one, these models, these open source models aren't cheap to run at home.
17:55
Ejaaz: If you look at Kimi K3, it costs like between 1.1 to 1.2 million dollars to
17:59
Ejaaz: run effectively at scale.
18:01
Ejaaz: So like it's not available to the average consumer.
18:03
Josh: Not getting that on your home PC. Not at all.
18:05
Ejaaz: Number two, and this is a really good point. He said the hyperscalers or the
18:08
Ejaaz: cloud service providers like Google, like Microsoft, like Meta,
18:12
Ejaaz: like Elon Musk's SpaceX now, which is lending compute to Anthropic at 1.2 billion dollars a month.
18:17
Ejaaz: They locked in really cheap contracts. those contracts expire at the end of the year.
18:23
Ejaaz: What do you think they're going to do after those contracts expire?
18:26
Ejaaz: They're going to re-rate it like 2x. And he makes the point here that like the
18:30
Ejaaz: spot prices for GPU rentals have not slowed down.
18:33
Ejaaz: They're 2x higher than the contracted rates that they were at the start of their contracts.
18:36
Ejaaz: So the point is, whether you have an old GPU, whether you have new GPUs,
18:39
Ejaaz: whether NVIDIA releases Vero Rubin in abundance, these GPUs are in such over-demand
18:45
Ejaaz: that the prices for these things still go up.
18:47
Ejaaz: So every fundamental building block for this unbundling, Josh,
18:50
Ejaaz: is just money going to semiconductor stocks and semiconductor companies.
18:54
Ejaaz: And I don't see any other way out of it right now. That's what it looks like.
18:57
Josh: Yeah. And as we talk about the GPUs, I mean, we just had that fun visual on
19:00
Josh: screen here, which shows you the anatomy of these chips and how nearly 50% of
19:05
Josh: the costs are associated with this high bandwidth memory and everything else takes up for 50%.
19:10
Josh: So the most important object in the world right now is the GPU.
19:14
Josh: The most critical component of the GPU, which accounts for about half of the cost, is this memory.
19:19
Josh: So it's like, okay, well, we have a seemingly infinite demand for GPUs,
19:23
Josh: therefore infinite demand for memory, therefore...
19:26
Josh: Infinite demand for all of the supply of all of these companies like when they
19:29
Josh: get re-rated it should go up,
19:32
Josh: right like that math just seems like it checks out so that's it feels like a
19:35
Josh: little confusing as to why this is happening again there's a lot of external
19:38
Josh: factors there's a lot of kind of overreactions baked in but it seems like
19:42
Josh: as we're just looking at this like kind of pragmatically all of these numbers
19:45
Josh: are checking out also it's insane as i'm looking at this that
19:48
Josh: nvidia sells these chips for forty thousand dollars at an 84 percent gross margin
19:53
Josh: like oh my god good for you man good for you
19:55
Josh: but there is this interesting like inverted capex thing happening where traditionally
20:00
Josh: in technology for the last two three decades all of the funds have gone from the bottom up
20:06
Josh: so it's been from the consumers from the enterprise paying into these huge margin
20:09
Josh: companies like nvidia to raise their profit margins and for the first time we're
20:13
Josh: having the reverse effect where all of the.
20:16
Josh: Companies that have collected all this money over time like google are now spending
20:19
Josh: it for the first time ever in its history faster than it has made it and the
20:23
Josh: downstream effects of that seem to be pretty huge and i mean we have lisa sue she's here
20:29
Josh: reading um yahoo finance actually who is just sharing the idea that ai adoption
20:34
Josh: is faster than any of us thought and there is no end in sight at least from
20:38
Josh: what we can see of where the demand for tokens is going to stop where the demand
20:42
Josh: for all this compute is going to stop.
20:44
Josh: And as of right now, there's still this like tremendous shortage.
20:47
Josh: If anyone was producing more memory, I think it would just get eaten up right
20:50
Josh: away. And I think that's kind of the conclusion of this episode,
20:52
Josh: generally speaking, is that like, hey, there's no end to the demand curve in sight.
20:56
Josh: And the more GPUs, the more memory, the more power we could apply to all this,
21:01
Josh: the better off everyone's going to be and the more hungry everyone's going to
21:03
Josh: be to generate more tokens. Yeah.
21:04
Ejaaz: And just to be clear, a point that Lisa Sue makes in this clip that we're showing
21:09
Ejaaz: on screen right now is it's not just general AI demand that is causing GPU prices
21:15
Ejaaz: and memory stock prices or memory demand to accelerate.
21:18
Ejaaz: It's also this thing called agentic AI. AI agents in general have exploded over
21:24
Ejaaz: the last couple of months.
21:25
Ejaaz: And guess what these AI agents need to be able to access tools,
21:28
Ejaaz: to do these tools, to orchestrate all the tasks, to run 24-7.
21:31
Ejaaz: You know, you see all these fun viral examples on Twitter where,
21:34
Ejaaz: you know, you set and forget a prompt and you come back and like you have a
21:37
Ejaaz: full triple A game like we saw this week with Cloud Opus 5, it all requires CPUs.
21:43
Ejaaz: CPUs require a lot of memory. So the point is, as AI agents scale,
21:48
Ejaaz: you're going to need more of these fundamental things.
21:51
Josh: That's funny you should say that because speaking of agents,
21:53
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21:57
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22:00
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22:04
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22:09
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22:13
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22:17
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22:21
Josh: Do it in the fewest swaps. It does the math, drafts the swaps,
22:24
Josh: and stops. The transaction lands on your Ledger signer and nothing moves until you approve it.
22:28
Josh: Agents propose, humans approve ledger signers enforce and i mean this is the
22:32
Josh: best part obviously it works with cloud code codex cursor all the places that
22:35
Josh: you are actively working um and it's open source ready today available on developers.ledger.com
22:41
Josh: also linked in the description and thank you so much to ledger for supporting
22:44
Josh: this episode now let's close this thing out you jazz we gotta let people know,
22:49
Josh: what do you do with all this information now like okay we've given you kind
22:52
Josh: of this like idea here's what's happening here's
22:54
Josh: the market demands here is the sell-off that's happening we are in a currently
23:00
Josh: in a spot that's worse than 2008 although it doesn't feel like it probably because
23:02
Josh: we speed ran it and because everyone's already up so much,
23:05
Josh: but like what do we do here? What do you do with this information?
23:09
Ejaaz: Okay so here's my grounded take and you know that's Rich coming from the show
23:13
Ejaaz: well we're quite optimistic but I'm going to try and be grounded.
23:16
Ejaaz: The AI hype
23:19
Ejaaz: Definitely drove markets to pretty insane valuations.
23:23
Ejaaz: And I'm not denying that. But what I will say is the future of AI and the economic
23:31
Ejaaz: value that it'll generate is just like the Wild West right now.
23:35
Ejaaz: It is incredibly hard to predict and even conceive. There are many theories
23:39
Ejaaz: out there, many skeptics out there.
23:41
Ejaaz: So the bet you need to make if you're listening to this is, do you believe that
23:47
Ejaaz: AI LLMs, Claude, ChatGPT, that AI agents, that GPUs are going to be in absurd demand going forward?
23:55
Ejaaz: Do you think the demand for AI products, are you using AI more over the last
23:58
Ejaaz: couple of months? Like, you know, answer that question.
24:00
Ejaaz: If you believe that scales out, remember, it's only like something upset,
24:04
Ejaaz: like 5% of the population that's even using AI LLMs beyond just a Google search.
24:08
Ejaaz: If you believe that scales, then you believe and bet that these semiconductor
24:13
Ejaaz: companies that are creating the fundamental materials.
24:16
Ejaaz: You know, we showed this on our screen earlier to build these chips that are
24:20
Ejaaz: required, whether you like it or not to run whatever types of AMLs,
24:23
Ejaaz: whether it's open source or closed source, then you're betting that these companies
24:25
Ejaaz: are going to be more in demand.
24:26
Ejaaz: And you're betting that these profit margins and revenue is going to increasingly growth.
24:31
Ejaaz: And guess what? Those are the fundamental drivers of whether a company's stock
24:34
Ejaaz: prices is going to go up. And I think that the market is completely unjustified right now.
24:38
Ejaaz: And I think we're going to look back on this in a year. I'm making my stake.
24:40
Ejaaz: I'm making my claim. I'm making my prediction.
24:42
Ejaaz: And we're going to think that these stock prices will add absurd valuations.
24:46
Josh: Yeah, well, here's kind of how I think about it too, is like on a personal note,
24:49
Josh: I'm more of an investor than a speculator.
24:52
Josh: And that is why it's very easy to feel constantly optimistic.
24:56
Josh: It's like, I very firmly believe in the idea that we are going to need a lot
25:00
Josh: more tokens, a lot more compute, a lot more energy over a long period of time.
25:03
Josh: How long it takes to get there is unknown, but that doesn't really matter.
25:07
Josh: If you have a low time preference where it doesn't matter if this takes six
25:11
Josh: months or six years or 60 years you just kind of directionally know where it's
25:15
Josh: going to go then making these bets and dealing with the volatility makes things much easier,
25:18
Josh: This directionally feels like a trading opportunity. This is people who are
25:22
Josh: selling off their profit. This is people who are positioning themselves to make a short buck.
25:26
Josh: That doesn't need to actually be the case if you believe in this long-term.
25:29
Josh: And I think that's probably where we can wrap up this episode today.
25:31
Josh: So with that, yeah, thank you all for watching. That's the state of memory.
25:36
Josh: It was crazy sad to find out that we lost more money recently than 2008.
25:40
Josh: And we don't feel like it because clearly we've been printing a lot more dollars
25:42
Josh: and those numbers need to go up a lot higher to feel the same thing.
25:45
Josh: But that is kind of where we stand. there is this discrepancy between memory
25:49
Josh: stock prices and the actual demand for these items and yeah i think that's pretty
25:54
Josh: much it so if you enjoyed the show please don't forget to share it with a friend
25:56
Josh: who might also enjoy rate us
25:58
Josh: on your favorite podcast player leave a comment if we are too optimistic or
26:02
Josh: if we need to dial things back a little bit or
26:04
Josh: or if you disagree in why and what stock you are investing in and choosing to
26:08
Josh: gamble on um each has any closing thoughts while we wrap this up.
26:11
Ejaaz: That is it thank you so much for listening and we will see you on the next one guys