Up more than 200% in 2023, what does 2024 hold? – Nvidia | Summer Series

Bryce: [00:00:13] Welcome to the Equity Mates Summit series, proudly brought to you by CommSec, the home of investing over 12 episodes. We're deep diving into some of the most exciting, interesting and well-known companies from around the world. Each episode we'll be unpacking one company with one expert. We'll learn from their process and hear why they like the company. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you? 

Alec: [00:00:37] Bryce, I am very good. I am very excited for this summer series. It's always a great time of year for many reasons. A great time of year because who doesn't enjoy a hot Australian summer? Who doesn't enjoy taking some time off. Yeah, but most of all we get to do our Summer Series where we speak to some of Australia's best investors and with them we dive into some of the best companies from around the world really with the aim of unpicking how these investors approach their companies, how they build a thesis, all in the aim of, I guess, us learning from their techniques and their processes to become better investors ourselves. 

Bryce: [00:01:18] That's it. Investing is a lifelong journey and we have an awesome line up of 12 companies over the next six weeks, kicking off with probably one of the hottest stocks of 2023 today. 

Alec: [00:01:30] Top two. 

Bryce: [00:01:31] Yes, definitely. 

Alec: [00:01:32] Yeah. So the stock that we're not talking about today, just do not leave any loose threads is Novo Nordisk. Yeah, but the stock that we are talking about today, one of the top two hottest stocks of 2023. I'm going to make a bold prediction that will probably be one of the hot stocks of 2024. 

Bryce: [00:01:48] I would make a bold prediction. It won't be. 

Alec: [00:01:50] We will see what happens. But the stock you're talking about is Nvidia. 

Bryce: [00:01:54] That's right, Ren, Nvidia and the expert joining us today is Kieran Moore, a partner and portfolio manager at Munro Partners. 

Alec: [00:02:02] Can't wait. Love Munro. We've had Nick Griffin on the show. We've had Kieran on the show before. They always have some interesting companies. I'm sure this will be no different. We'll get to that though. First of all, Bryce, we have to thank CommSec for sponsoring this Equity Mate Summer Series. They make it easy to tap into the world's leading share markets. We're covering plenty of global stocks in this series, including NVIDIA today, which is listed over in the US. And if you get excited by the opportunity to invest globally, CommSec has 13 international markets available from the US to Norway, Germany and Japan. Can you name a Norwegian stock? 

Bryce: [00:02:38] I was just thinking that Norwegian Cruises.

Alec: [00:02:41] I think they're listed in the US. You don't have to jump on CommSec and have a look. If you want to have the access you need as a global investor and invest in shares on the US market from just $5 US brokerage download the CommSec app today or visit CommSec.com.au. CommSec terms and conditions and other fees and charges do apply. Investing in overseas markets exposes you to additional risk. 

Bryce: [00:03:05] Love it, Ren. And we should also say that while we're licensed, we're not aware of your personal circumstances. So any information on this show is for entertainment and educational purposes. Any advice is general.

Alec: [00:03:16] Alright, Bryce. Before we get to Kieran, let's talk about Nvidia, a company that really needs no introduction. 

Bryce: [00:03:22] No. Stock of the year potentially 2023. 

Alec: [00:03:26] Oh, in terms of best performer. 

Bryce: [00:03:28] Well, just like, it was hard not to miss. It was hard to me. 

Alec: [00:03:32] It was like in vibes. Yeah, yeah, yeah, yeah, definitely. All right. Well, for people who weren't paying attention, what is Nvidia? 

Bryce: [00:03:38] So Ren, it's a software and fabulous company which designs graphics processing units otherwise known as GPUs. Application programming interface, APIs for data science and high performance computing, as well as systems on a CHIP unit. S O C is the acronym there for mobile computing and automotive markets. Automotive market. 

Alec: [00:04:01] You did pretty well to get most of that out, just stumble. 

Bryce: [00:04:04] Story short.

Alec: [00:04:05] What does it actually do? 

Bryce: [00:04:06] So they designed the most cutting edge computer chips and then they sell that design to the likes of TSMC, who then go and make those computer chips. 

Alec: [00:04:17] Yeah I think they don't sell that design. But TSMC, Taiwan Semiconductor Manufacturing Company and Samsung and like some of the big actual chips makers have multibillion dollar fabrication plants but Nvidia AMD, a lot of the big tech companies will design chips that then get made and Nvidia design, the best chips. 

Bryce: [00:04:44] By far and away the best chips. 

Alec: [00:04:45] They're kind of like the Red rock deli of the chip market. No, not my best. So to give people a bit of history Nvidia was founded in 1993. One of the co-founders is now the quite high profile CEO Jensen Young. Not sure what his other co-founders are doing. Probably still involved. Just less famous.

Bryce: [00:05:09] Very much less famous. 

Alec: [00:05:10] You better not do that to me one day.

Bryce: [00:05:13] You better not doing it to me.

Alec: [00:05:15] But for a lot of people who we were born in, I was born in 92. You're born in 91. 

Bryce: [00:05:21] 91. 

Alec: [00:05:21] Nvidia was born in 93. And I think growing up, as computers sort of came of age, people probably came across Nvidia, in gaming, often credited in the most famous games because they had a real strength in computer graphics and the hardware to generate cutting edge graphics. And that was sort of how they came up. They had a massive contract to win in the nineties to make the hardware, the graphics cards for Microsoft's Xbox, and that was a big inflection point for the company. Then they became really synonymous with P.C. gaming. And I think around the time we started investing, they were the leaders in PC graphics, still are. But AI is the story of today. 

Bryce: [00:06:05] Absolutely. Now, if we're talking about history, do you know what Nvidia stands for? 

Alec: [00:06:12] Oh, this is great. No, I don't. Is it a full acronym like NV? 

Bryce: [00:06:18] No, it's not. 

Alec: [00:06:18] I was going to say that's a big. 

Bryce: [00:06:20] Yeah. It's not. The history of it is that initially the company had no name. And the co-founders who you've just spoken about named all their files NV as in the next version. But when they came to incorporate, they needed a name. And so it prompted them to think about NV and review that against, I guess, different languages. And it's come out that Nvidia in Latin means envy. So that's how INvidia came to be and now it's just Nvidia. I know. 

Alec: [00:06:56] Not the best.

Bryce: [00:06:57] Not as grand as you would think. 

Alec: [00:06:59] Yeah. Yeah. So I think to give people some context on the Nvidia story today and just how central it is to I guess this AI revolution we're going through. So Nvidia's most cutting edge computing GPU is the H100. There is a six month waiting list for an H 100 at least six months. These units sell for between 25 and 40,000 USD. And now here's the trivia question, which I've already asked you so 

Bryce: [00:07:36] I play dumb. 

Alec: [00:07:36] Yeah. How much do you think it costs them to produce an H 100 unit? 

Bryce: [00:07:42] Less than five grand. 

Alec: [00:07:43] Yes. $3,300 is the estimate. So they make it for a bit over 3000. They sell it for 40,000, and there's a six month waitlist to buy it. 

Bryce: [00:07:56] It's unbelievable. 

Alec: [00:07:56] It's a pretty good business. 

Bryce: [00:07:57] Yeah, because of how significant they are. There's a bit of geopolitics around all this, isn't there? 

Alec: [00:08:04] Yeah, there is more with the fab like the fabs, more with the TSMCs and the like. Yeah. 

Bryce: [00:08:09] Yeah. This is going off track a bit. But didn't the US try and ban exports to China. All these chips and China just tried to start buying them up in bulk. 

Alec: [00:08:20] So yeah, two separate geopolitical issues. One is Biden banned the cutting edge semiconductors going to China, which is NVIDIA and a few other companies. You're right. And then the second geopolitical issue is if you look at where the West gets the semiconductors from on a map, it's Taiwan and Samsung. Sorry. Taiwan and South Korea jumping ahead. Samsung based in South Korea, TSMC based in Taiwan, both on China's doorstep. Both rely on trade routes and waterways that go very close to China. And so because of that, there's now a big push in Europe and in America to build fabrication plants at home. So, yeah, a lot of geopolitics to give you a sense of how important semiconductors are. When COVID broke out in 2020. It originated in Wuhan. Wuhan is the centre of China's semiconductor industry. Every business was forced to shut down to contain the spread. Except the semiconductor. Yeah. 

Bryce: [00:09:27] Wow. 

Alec: [00:09:27] Because China has a lot of catching up to do, and it's critical to their national security to catch up.

Bryce: [00:09:33] Didn't the Saudis also put in an order for billions of dollars worth of these H100s?

Alec: [00:09:38] Yeah, yeah, yeah. So there's something you see a lot of AI companies raise big, big rounds of venture capital. The majority of it is to go into hardware.

Bryce: [00:09:48] Yeah. Yeah. Well, also the $10 million paycheques that we spoke about.

Alec: [00:09:52] Yes. Yeah, yeah, yeah, yeah. That's a bit different. There's this argument that Nvidia is funding a lot of start-ups, but it's really just like a pass through cost for them because you know, they'll put $100 million into a Start-Up, 90 million of that will come back in orders for H100.

Bryce: [00:10:10] Anyway, yes. Well let's look at how the stock has performed because it's been pretty phenomenal. So for 2023 year to date, it's up 240% at the time of recording, which you can't, can't complain about. It's up 1,000% in the past five years and up 10,000% since 2014. 

Alec: [00:10:32] Yeah. Wild fish. Yeah. 

Bryce: [00:10:36] That is unbelievable. Ten bagger in what, nine years. 

Alec: [00:10:39] Well it makes me think is in 2014, we were in the share house. 

Bryce: [00:10:44] We're in. 

Alec: [00:10:45] Yes you're in. Yeah. We then were together in 2015. Yeah. But 2014 we're both living in Canberra in share houses. Both would have been playing FIFA and the like on Xboxes, which would have been using Nvidia's graphics cards. 

Bryce: [00:11:00] Yep. 

Alec: [00:11:01] If we had spent less time playing the game and spent more time figuring out how the game was made, we could have had 100 bagger in less than ten years.

Bryce: [00:11:10] Yeah, we might not be here.

Alec: [00:11:12] True.

Bryce: [00:11:14] Probably somewhere else. Anyway, 

Alec: [00:11:15] Anyway, you. 

Bryce: [00:11:16] Can either overperform. 

Alec: [00:11:17] You can reminisce about that.

Bryce: [00:11:18] Same with bitcoin.

Alec: [00:11:19] Bitcoin. 

Bryce: [00:11:20] Yeah, yeah, yeah, yeah, yeah. Ren, it trades at a 120 price to earnings ratio. Pretty expensive. So the question becomes and we'll ask this to Kieran in the second half of this, can it grow into that valuation. 

Alec: [00:11:35] Yeah. The two big questions for me, can you justify the price and cannot keep it's competitive advantage because it's kind of pioneered this industry, but all eyes and all effort is really focussed on this AI industry at the moment. Can Nvidia maintain its lead? We're not going to be able to answer that question, but hopefully Kieran can. 

Bryce: [00:11:58] Now before we speak to Kieran, if you're interested in exploring more investment opportunities, check out CommSec and the thousands of Australian and global listed companies available on the platform. Additionally, if you're looking for daily market updates, subscribe to CommSec Market Update, their daily podcast, Invest in shares on the US market from just $5 US brokerage visit CommSec dot com dot at you for more. CommSec takes in sales and other facing charges apply. 

Alec: [00:12:23] We'll be back with Kieran right after this short break. 

Bryce: [00:12:35] We are here with Kieran Moore from Munro Partners. Kieran welcome to Equity Mates. 

Kieran: [00:12:38] Thanks Bryce. Thanks for having me. 

Bryce: [00:12:40] So to kick it off, a company that many people have heard of this year, Nvidia. Help us understand what NVIDIA do.

Kieran: [00:12:46] Look, Nvidia players super, super important role in the production of the world's most advanced semiconductors. So when we think about the world moving into what is going to be the AI phenomenon, so individuals, businesses all around the world using artificial intelligence day to day, a critical enabler to allow those applications to happen is Nvidia. So they make the most advanced chips in the world or they design the most advanced chips in the world to effectively power a lot of these A.I. applications that we're going to interact with in the future. So the way we think about it is that the semiconductor market is going through what we think is the start of the fourth era. So you've had effectively about 50 years worth of semiconductor market growth from effectively a nice an industry to about $500 Billion in value. So it's gone through what we've call the mainframe era to start with the PC era, the mobile era. And now we think the semiconductor market is going to go into the AI era and that's going to effectively double the size of the market, take it from half 1000000000000 to $1000000000000 industry. But the really exciting thing for investors is that it's going to take it from half 1000000000000 to $1000000000000 industry over the next ten years, not over the next 50. So that places a huge growth and huge demand on all that produces semiconductors. And NVIDIA is really at the forefront because they design what are the most technologically advanced semis in the world or GPUs in the world. 

Alec: [00:14:14] Yeah, so we'll get to the bull case and then the bear case in a little bit. But before we do, let's just talk about how you approach a company like this. You know, what are the metrics that matter and as an investor, how you approaching it and analysing it?

Kieran: [00:14:27] Yeah, So look, we take a really, really simple approach to our investment philosophy and we're always focussed on earnings growth. So we're big believers in earnings growth, driving stock prices. And if that earnings growth is backed by a structural tailwind, i.e. the shift to AI or that semiconductor market going from half 1000000000000 to $1000000000000 in value, that's going to underpin the earnings growth for NVIDIA for a long period of time. So let's get into it. I mean, maybe when we think about Nvidia's opportunity here, when we think about AI, it's all going to be powered at the moment, it's all powered at the data centre. So the data centre is the critical piece of infrastructure that's going to allow us to use those applications. What Nvidia do is they design chips to go into the data centre and so data centres all around the world effectively have to be retooled to get them ready for the AI era, if you like. And so NVIDIA reports its revenues in four segments, but ultimately that data centre revenue is what's most important and that is obviously going to translate into earnings growth over time. The way we like to value or the way we think about what potentially the long term opportunity is here is we always like to see the ability of our companies to at least double their earnings over a five year period, and that's what we think Nvidia can do. 

Bryce: [00:15:49] So it's obviously had a phenomenal year and as you said, is in an industry that is super important for the next phase of technology in AI. What's the bull case that underpins your investment thesis and how is NVIDIA, I guess, maintaining a competitive advantage over its competitors. 

Kieran: [00:16:09] That's the key. Yeah, that's the key. So this is where the data centre road map becomes critically important. So Jensen Wong, who's the CEO, co-founder of NVIDIA, he has told us on earnings calls that ultimately the key use or the key driver of the data centre in the future will be AI. And so what we need to do is, as I said, make sure the data centre is ready to, I guess, allow for the compute power that AI is going to demand. So when you know, we're watching Netflix and we're being recommended different shows or we're playing a video game and, and it's live and there's different scenarios and all sorts of different things are happening based on where we are and who we are and what we're interacting with. All that compute power is interacting with the data centre all the time, so it's going by the cloud back to the data set and back to you. And so ultimately what needs to happen here and where NVIDIA is critically important is that they provide a solution which is called accelerated computing. So what accelerated computing means is that instead of using what's called a CPU and GPU, sort of in isolation are a central processing unit and a graphics processing unit. Ultimately what video does is combine those two things together into effectively a total solution. So what used to happen, Bryce, is you would, you know, request a piece of information from your computer. And that computer would process that in a fairly linear, straightforward way. So you'd request information. It would process that information and sort of give you an answer or give you an outcome. With AI, if you think about, you know, that Netflix example or the video game example, there's thousands of different outcomes all the time. So the compute power required here is structurally different, if you like. And so we can't just continue to use that form of linear compute power at the data centre. Data centres around the world need to adopt this form of accelerated computing. And so in accelerated computing, which is combining those two pieces of technology together. Ultimately, NVIDIA has about a 70 to 80% market share in that. So they're by far the leader. And what the roadmap is here is that and this is what Jensen's talked about is that there's effectively been roughly about $1,000,000,000,000 worth of spend on data centres in the last four or five years. And the portion of data centres today that adopt this accelerated computing is only about 14%, 13, 14%. So in our view, the way we look at it is that we think that 14% clearly has to go higher because we know that the data centre is critical for A.I.. And so if that 14% goes to, say 30, 40, 45% over time, then that gives Nvidia a long runway for it to grow into its earnings. And so that will underpin those earnings for hopefully, you know, a number of years as this opportunity plays out. 

Bryce: [00:19:01] Is that not priced in at the moment, though?

Kieran: [00:19:04] Yeah. Tricky question. So what's happening at the moment is that there's been a massive acceleration in demand in AI, right. So if you think about ChatGPT, JB, it took five days to get to a million users versus Facebook that I think took ten months off the top of my head. So there's been a massive acceleration here. And so all these companies that are creating this compute power, providing the datacenter infrastructure, which is Microsoft and Amazon and Alphabet and Meta, they're accelerating their demand for Nvidia products natively. So what's happened is in this year in particular, a lot of that demand has been pulled forward and we've seen their revenues explode. The question the market is grappling with and to your point, it's the right question is that if you have all this demand pulled forward, then is there a year where that demand or that that revenue growth sort of slows down as you sort of absorb that demand into the market? We've got a lot of confidence in the five year runway, but over the next sort of 1 to 2 years, does the market need to absorb all that revenue that it's pulled forward? That's sort of the question at the moment that the stock is sort of grappling with, and that's what we're grappling with at the moment.

Alec: [00:20:14] Well, isn't isn't there like a natural limit on how much revenue it can pull forward given that there's a six month waiting list for it's key product? 

Kieran: [00:20:21] Yeah. So capacity becomes a really, really important question. And so what again, coming back to Jensen, what he's talked about on his most recent earnings call is that they're increasing their capacity to be able to deliver on this revenue all through next year. So all through their what is their fiscal 2025 year, which for us is calendar 2024. So they are investing in the ability to produce these GPUs and sell their product to their customers. But that capacity becomes a critical question. The other way to think about, you know, whether it's all in the stock at the moment. Coming back to your question, Bryce, is, you know, if we think about Nvidia today at, you know, a 500 roughly $500 stock, we think next year the company is able to produce $20 in earnings per share. So if you think about that $500 divided by the $20 in earnings, that implies a pay of roughly 25 times, which we don't think is super expensive for a company that has a 70 to 80% market share in this market and a long runway of growth over the medium term, despite the fact that we've seen all this pull forward in the stock this year in particular. So that's the alternative. 

Alec: [00:21:33] So Nvidia's earnings per share at the moment I'm just looking up, what, $4 in the last 12 months.

Kieran: [00:21:40] So in in their fiscal 2023. Which is effectively the calendar year that's finished. They reported 3.13 earnings per share. That is going to go up significantly this year, clearly, which we've all seen the revisions. And next year. So two years on from that report of 3.3, we think it could be $20. 

Alec: [00:22:01] Yeah, right. Well, that's

Kieran: [00:22:02] That's the acceleration. 

Alec: [00:22:03] Yeah, yeah, yeah. Okay. Yeah, Yeah. Right. I mean, if that happens, that's pretty phenomenal because you think about the share price, what is up 240% this year? We were pulling it earlier, up 1,000% in the past five years, up 10,000% since 2014. If you go back to stock in less than a decade, you've done very well. It's crazy to think if it then what? What from 3 to $20 it six X is its earnings in two years. The hype is going to be crazy. 

Kieran: [00:22:33] This is the the structural trend behind those earnings. That's what we love to see when we go and try and find these sorts of opportunities when there's a structural tailwind behind the earnings power of the company, then the market often mispriced is the the growth in that earnings. 

Alec: [00:22:46] So so I think the question for me, like there's no you don't have to convince anyone in this room or anyone listening that there's a massive AI tailwind at the moment. The question for me is around sustainable competitive advantage because NVIDIA, the market makers, they were first movers. They sort of ushered this era of compute in in many instances. And you said they've got, what, 70 or 80% market share at this point. But there are competitors and there's going to be more people looking. You know, AMD is always spoken about, but it seems to be rather a far, far behind second place. But, you know, all the big tech companies are looking at designing their own stuff as well. So how do you think about sustainable competitive advantage? 

Kieran: [00:23:30] Yeah. 

Alec: [00:23:31] And so they can capitalise on those tailwinds. 

Kieran: [00:23:33] Yeah, that that's really important. So at the moment, as you say, they've got a strong lead in, in what they do. We actually assume in our model where we forecast the earnings forward five years, we actually don't assume they hold that market share. We actually assume it comes down a little bit because your point there is naturally going to be more players that enter this space and AMD is working on their MAI 300, which they expect to ramp up next year. And I think as far as the report suggests, they've got a few billion dollars of orders next year. That's been the commentary around the market at the moment. So there is more product coming to this space. And I think it goes back to your earlier question, which is around capacity, right? So if capacity is so constrained at the moment, I think it makes sense. And what these hyperscale datacentre cloud providers need, the Microsofts and the Alphabet's and the Metas. They need more supply from other companies. So I think it's only natural that we will get some more competition in this industry for these products. And so we factor that into our long term forecast, that that market share does come down a little bit, but I don't think it derails the potential for Nvidia to really double that earnings over the five years. 

Alec: [00:24:43] Well. 

Bryce: [00:24:44] So when it comes to the bear case, when you're listening to the earnings calls. What are you watching out for? And I guess what do you have as red flags that could go wrong?

Kieran: [00:24:55] Yeah. So at the moment, I think it comes back to that question you asked earlier. So the market is grappling with. Yes, that earnings has gone from sort of 3.30 odd to about $20 next year we think. The question then is what happens after that? 20 Does it do $21 or $22 or does it go back towards sort of 15 to $18? That's what the market's grappling with at the moment because the demand has been pulled forward. We've got a lot of confidence that the long term power of the earnings is going to be more towards $40 over time, but then there might need to be that digestion year. And so we're really focussed on the commentary around potential digestion in the industry, the growth rate in the datacenter revenues for NVIDIA that we've seen explode this year is naturally going to sequentially decline a little bit next year or it's going to slow, it's going to decelerate. That's only natural as that $30, 40 billion business goes from 3040 billion up to 70, 80, 90 billion over time. So that's going to be a normal course of lower large numbers, if you like. The other thing we're watching really closely and this is a sort of more anecdotal data point, but it is really important at the end of the day is, are individuals and businesses actually using AI applications. Well, we don't think it's a fad, but are they willing to pay more? So are you willing to upgrade your Microsoft subscription to include co-pilot guy for and pay that extra monthly subscription or, you know, upgrade your Adobe to include Firefly and then things like that to get the benefit of the AI. But also you have to pay more as a customer. So we want to just track that usage and make sure that people and businesses are actually using it because Nvidia is really right at the start back here of the opportunity and it flows all the way through to obviously the end user. And so at the end users not getting any value and not willing to pay for it, then the demand profile that Nvidia ways, you know, might not be need to be as big as we think. So it's not a quantifiable measure, but it's something that's really important for the industry. 

Alec: [00:27:06] Yeah, I'm just trying to think we have one person in the team here who pays for ChatGPT a pro like the premium subscription, but I don't think she's getting a lot of use out of it. I dabble in ChatGPT, but I don't think it adds a lot of value at this point. Beyond the Google search. I know this is just a poll of one, but yeah. 

Bryce: [00:27:25] The integration into other apps is I think at this stage it just doesn't feel like it adds a whole.

Alec: [00:27:30] Lot. Yeah. Like Canva, we use Canva a lot, but the AI tools we don't really desire. Yeah, the question now, I think we really think. 

Kieran: [00:27:38] If you think about, you know, what we do is fund managers. We scour these company reports and we read the 10-K, the annual report, when they come out and look for bits and pieces of information. And so what we can in theory do is feed that annual report into a ChatGPT or into an Adobe product or potentially a Google Bar type product in the future and ask it to distil that annual report, which might be 100 or so pages down to four or five key issues. And so that sort of use case, I think, in an industry like mine is going to be pretty important. 

Alec: [00:28:13] Yeah, but then your edge gets arbitrage the way you know, Then punters like Bryce and I can do the same thing that you guys do. 

Kieran: [00:28:20] That's when we need to make the critical decisions. 

Alec: [00:28:22] Yeah, that's what I. So if I was able to do that. Yeah, yeah, yeah, yeah. It is fascinating. So I guess, you know, long term thinking about Nvidia, we've sort of spoken about, you know, where the industry is going, but for Nvidia in particular, if it can execute on what it's trying to do today, but also what it's trying to do over the next decade, what does it look like a decade from now? 

Kieran: [00:28:45] Yeah, so where we see this going is that Nvidia is again coming back to Jensen. He's a bit of a visionary, so I keep referring to him. He's talked about effectively Nvidia providing the total solution here to power the A.I. opportunity. So what that includes is, as I said, the accelerated compute, the GPU, CPU together and, and then ultimately that's going to progress into providing software solutions as well. And so where we see this going long term is hopefully that growth at the top line is going to be still really strong. But ultimately what we would expect to happen in the long run is that NVIDIA will involve what will become more relevant in the revenue base is a more software driven business and therefore you get that, you know, slightly higher recurring revenue portion in the business and the margins should go up as well. So that's where we see the business growing. I mean, it's obviously not going to probably do those, you know, $3 to $20 top years in the future. But we see a really sustainable path for them to develop more of a recurring revenue type model over time.

Alec: [00:29:50] You've mentioned Jensen a couple of times there, and I think most people now would be familiar with him if they're nothing more than photos of him wearing his leather jacket, that pop up on social media every now and then. How critical is he to the thesis at this point? Like he, I think he did an interview recently where he said if he had his time again, he wouldn't start Nvidia because of how hard it's been. Like if he decides, you know, I'd build a great business, I would build a close to trillion dollar company or trillion companies. I am a multi multibillionaire. I'm good. And if he passes it on, does the company survive him or is he still key to that investment thesis? 

Kieran: [00:30:30] So what we always look for when we look at any stock, whether it's Nvidia or a healthcare stock or an industrial or any anything that has that structural growth opportunity to it. We love to invest in businesses with founders. Yeah, I think having the founder still involved and still a big shareholder, so he's super, super aligned with the investors at the end of the day is critical. So a guy like Jensen or a lady like Jensen or whoever it is that found a seat in that founder role, can think much more long term about their business. So they don't just give you that sort of quarter to quarter. Let's beat, let's get expectations right. They think about their business over a 5 to 10 year view. And so having him there is really, really critical to us. And we, the way we think about having a founder involved is that we include that in the price we're happy to pay for the stock. So we include that as one of the characteristics we look for when we're setting a multiple that those earnings should trade on. So ultimately we set these price targets. Price targets are formed by earnings per share, and then you've got to put those earnings on a multiple. So if we have a business where there's a founder that's highly aligned and has, you know, a long term track record and has a good stock holding, then that for us leads to a slightly higher upgrade to the multiple. We're happy to pay for the stock versus a a CEO that might be, you know, your classic corporate finance sort of CEO. And so I think it's a great point. It's an underappreciated point with the company, but it is really important.

Alec: [00:32:07] Yeah. Yeah, I like that. That's just a neat way of you factored into the multiple. Yeah. Yeah. Great. Well Nvidia it's every company we spoke about here. We say we'll be watching it and say what happens, Nvidia it will be a company no one could avoid so everyone will be watching it. Hopefully you're right. 

Kieran: [00:32:25] They actually report earnings next week so hopefully we get some more positive commentary out of Jensen. And some more confirmation that this roadmap is really playing out. 

Bryce: [00:32:34] And for context, we're recording mid-November. 

Alec: [00:32:36] Yeah. So by the time people are listening, they'll be able to go and look at the commentary.

Kieran: [00:32:42] So in their models. 

Bryce: [00:32:43] Yeah. Well, Kieran, thank you so much and absolute pleasure. Always love getting you guys from Munro on the show. And we do appreciate your time. Thank you very much. 

Kieran: [00:32:52] Thanks, guys. Thanks for having me.