Good morning everybody. Welcome back to another episode of the market open. It is Tuesday, November 25th. The last 24 hours have been kind of crazy in regards to what has happened with two major companies on the planet. I'm sure you people know those two companies, Google and Nvidia. Google is going to open up at a $4 trillion valuation. It's quite incredible to see this happening given the stock was stuck at 140 not long ago around about April May. Stocks at 331 in the pre-market. It was, you know, kind of breaking 300 two weeks ago, getting above 310 one week ago. Yesterday breaking 318. Overnight it was at 320 and then there was a little deal announced that caused this bad boy to run up. And we're going to see when the market opens if people take advantage of that and they sell or if they buy into the hype. And the hype is very real which is why I think Google is getting the validation that it's getting right here in the premarket. 331.15 on Google. That's up 3.95%.

At the same time, Nvidia is down 5%. I think this is a dramatic overreaction to the deal that was announced yesterday. And for those that haven't heard about it, we will talk and discuss what's going on. And I think it's a knee-jerk reaction based on the headline for why Nvidia is getting sold off. But nonetheless, there are some potential implications of the deal from yesterday. And as a result of those implications, the market's obviously saying we're going to take one down and the other up. It would be kind of crazy if they flipped market caps. I mean, Nvidia right now is trading at 4.4. Google's going to open at four. It's not that. I mean, Nvidia went $400 billion down last week in a couple hours. So, it would not be that crazy to see Nvidia kind of come back to 4 trillion and Google maybe not get to 4.4, but stay at 4 trillion. I mean, that would be not hard to see. But, nonetheless, today when the market opens, we're going to find out how much the market actually cares about Nvidia's chip dominance being threatened.

Before we get into all that, obviously Google Nvidia is the big story. Let's get into data because we got a ton of market data this morning. First let's start off with the ADP private payrolls and then we'll get into everything else we got going on. Private payrolls fell by an average of 13,500 per week in the four weeks ending November 8th. The last time we got this data from ADP, it was negative 2500. So that's about a 500% increase in the amount of jobs that were being laid off per week. This is for private payrolls. And obviously that is only boosting the probabilities of a rate cut even though that's not good for the actual economy because people losing their job is not a good thing. The rate cut probabilities now are 84.7%.

Remember, this number was 30% last week. In fact, that number being 30% last week kind of made it very likely for us to start assuming that we're not going to get the rate cut. And that's kind of where the markets turned. Yesterday, you had a couple Fed presidents who were just as influential as Fed President John Williams of New York, come out and advocate for the rate cut. And then boom, the number immediately switched to about 75% yesterday. And then you get this job data. I can't imagine the Fed is looking at this thinking, yeah, it's fine to keep rates the way they are. They don't have to cut rates by 100 bips, but a 25 basis point cut would not be the worst thing. And so, that's why I think we're getting that probability to go higher.

Then you also had PPI data, which complicates the story, but I still think the Fed ends up leaning towards a rate cut. Uh, producer prices increased .3% month-over-month. The expectation was .3%. So, that came in line. 2.7% year-over-year came in line with 2.7%. Core PPI rose .1% month-over-month the estimate was .3%. And then core PPI rose in September's 2.6% estimate 2.7%. So we are still seeing inflation obviously in core PPI and the overall producer price index. It's just it's not necessarily as bad as maybe some of the street thought it was going to be. And as a result, you are seeing those rate cut probabilities go higher. I don't think this data is that horrible enough to be able to say we can't cut rates because inflation's just going crazy because it's not going crazy. I mean, it's up there, but it's rather tame. So, it complicates the story on the rate cut. I don't think it completely destroys the narrative, which is why that 84.7% probability is still real.

All right, Googles and Nvidia, let's get into it. What is going on? Google is up 4%. Nvidia is down 4.7%. This headline came out last night. So, remember what did Google have going for it yesterday? It had the NATO cloud contract. Um, it had Gemini 3 getting universal praise. And you know, when Birkshire when when Buffett praised Google with a when he co-signed it with a $5 billion investment. I think that was the sign to FOMO in now. You had a lot of things going for Google over the past couple weeks.

Last night, and I mean this was a big one. Meta is considering Google TPUs for their data centers in a deal that could be worth billions as per the information. That was the headline last night. Meta is in talks to spend billions on Google's AI chips known as tensor processing units aka their TPUs. An agreement would help establish TPUs as an alternative to Nvidia chips. We know that Anthropic is already using TPUs, a million TPUs, and Gemini 3 was internally trained on those TPUs, which are the gold standard for big tech firms and startups that need computing power. A deal with Meta would mark a win for Google, but much depends on whether the tensor chips can demonstrate the power efficiency and computing muscle necessary to become a viable option in the long run. If this were to happen, it would happen in 2027.

I think people selling off Nvidia here are I think it's kind of dumb. I really do. There's a lot of reasons I think this reaction is kind of ridiculous. Uh and a lot of it has to do with Nvidia's numbers. But nonetheless, let's just talk about the bare case of this for Nvidia before we get into kind of the defense of Nvidia right here. Um, perceptually this is basically making the argument that the chips that were needed that Nvidia has a 70% gross margin on and that essentially formed it as a monopoly might not be needed as much. And I think that's all you need. You don't really need much more other than that to get the stock to fall off. Same thing with AMD. The reason why AMD is down is because of this idea that the MI450, the GB200, these things might not be in as much demand if Google's CPUs become a core part of the stack when it comes to these custom async chips. And that's it. That's all you need for the stock to go down today.

The reasons why I don't think this is that logical in the moment, and maybe I'm wrong. Number one is Google still buys tens of billions of dollars of Nvidia GPUs and TPUs handle specific workloads, not everything, which means Google's AI models still run and train heavily on Nvidia hardware. Number two, the TPU news is not new. This was known since 2016. So, it's not like the market completely has this brand new piece of information. It's like no, they knew that Google was using their own in-house chips. Amazon has tranium. Meta and Microsoft have their own ideas as well. They've never the hyperscaleros have never been able to get off of the Nvidia bandwagon and pay the NVIDIA tax and maybe that happens eventually, but it hasn't been able to happen for a while because they haven't been able to match the architecture of those chips in a meaningful way.

Now again, Meta's considering this in 2027. That means in 2026 all their chip demand is going to go to AMD and Nvidia and a variety of other partners like Broadcom, etc. But it doesn't mean it's just going to if they're going to spend 30 billion on Nvidia chips, I don't think they're going to say, "Hey, Google, take our 30 billion." Like, I don't think that's happening. Number three, uh even if Google reduced orders, let's just make an argument that that Google's reducing orders, the GPUs would be instantly bought. Unless you believe the argument about rising inventories and fixed goods in Nvidia's um 8K that was disclosed, which shows that like their inventories are going up, which means they might have a demand problem. But if you think that's the case, Nvidia has plenty of demand. And whether it's Amazon, Oracle, Tesla, plenty of other startups, like if Google reduced their orders, I would imagine that Nvidia is still able to sell that. If you believe Jensen and what he says that Blackwell is sold out and we are making them as fast as we can sell them, then uh that would not necessarily be the number one thing that would cause an issue.

I think the market is more broadly worried that if Google is taking away uh their chip spend on Nvidia, then Google is going to get other people to take away their chip spend on Nvidia. And that's where you sort of have this uh this compounding effect that Nvidia now is losing multiple customers. if Google somehow gets Microsoft and Meta and all these other big hyperscalers to start buying their TPUs for whatever reason over Nvidia GPUs, which is a big question. I don't think you can easily just assume like, yeah, that's definitely going to happen just because there's a deal with Meta.

Now, I get the broader argument and and Chris made this argument yesterday on Steve stream, which is it's it's a very fair argument. Chris's argument is that at the end of the day, semiconductors are cyclical, and Nvidia is a cyclical business, and eventually that cycle is going to lead to the uh people that are paying the Nvidia tax not wanting to pay that Nvidia tax anymore. And as a result, it will lead to the inevitable decline not only of Nvidia in the future, but of their their sales cycle. I think that's a fair point, and inevitably that's going to happen. Like, we all can't deny. Inevitably, Nvidia is not going to be selling $300 billion worth of chips every quarter.

But given everything that I've digested from Nvidia's earnings, given everything that we've heard from Jensen, given the capex demand that we've seen going into the next at least four years going into 2030, that does not seem like it's happening in 2026 or 2027. like it it just doesn't it seems like the architecture for building I mean the fact that Amazon announced $65 billion worth of data center spend yesterday 50 billion in Virginia and 15 billion in uh northern Indiana a lot of those going to be filled not with tranium chips or TPUs but Nvidia GPUs and this is only increasing more and more as we see the other hyperscalers engage in this stuff.

Here's Jensen a month ago on a podcast speaking about Google's TPUs. >> given this seeming success of Google's TPUs, you know, how are you thinking about this evolving landscape today? >> Yeah. First of all, the the advantage that that Google had is foresight. Remember, they started TPU1 before everything started. You know, this is no different than a startup. You're supposed to build a startup. You're supposed to create a startup before the market grows. You're not supposed to come up as a startup when the market's a trillion dollars large. You know the this fallacy and and all VCs know this this fallacy that a large market if you could just take a few percent market share you could be a giant company. That's actually fundamentally wrong. You're supposed to take 100% of a tiny company, a tiny industry, which is what Nvidia did did, right? Which is what TPUs did. There were only the two of us. But you better hope that that industry gets really big. You're creating an industry.

That's the part of that clip that's really important is that Jensen is saying the overall kagger for where this industry is going in terms of data center buildout and chip buildout is massive. And again, Google's business is not selling chips. Google's business could potentially become selling these TPUs. That could become a part of their business. And maybe that does take away some market share from Nvidia. Does that mean Nvidia needs to go back to $100? I see this as bullish Google, not bearish Nvidia. And the market right now is going long Google, short Nvidia, which I don't think is going to be the trade.

>> Hey, what's going on, man? Good morning. >> Good morning to you, dude. Let's get right into it. Are you selling all your Nvidia as we as we're about to drop below 170? What's going on? >> That definitely not. I mean, I think obviously the optics looks scary with this Google and Meta news. Um, but I feel like every quarter, right, we kind of get some different type of bearish thesis for the AI market. I would just say it's just the bearish thesis is there and the optics are definitely there. Um so it kind of creates this bearish sentiment.

The first thing we hear is there's not enough compute. I mean meta platforms mentioned it directly on their earnings that they are still compute starved on their core products and their AI products and that's important to remember right Meta has two different businesses where they use form of compute they use it for their recommener system their AI solutions for their advertisement in their core business and that's where most of the money gets spent then they also have their own AI labs so the first question is where do these TPUs fall under is it going to go onto their core business or is it going to go into their AI labs.

what do we hear from Jensen? Jensen pretty much says that they're sold out. They have massive visibility. Okay, so I'm meta. I can't get any more chips from Nvidia. Am I just supposed to sit down and just wait for for Nvidia to make more chips? If that's not physically possible for my business to do well, I have to look for other players. It doesn't mean I'm going to buy less Nvidia chips. I just need more compute. And unfortunately, Nvidia, unfortunately, maybe AMD can't give it to me. So, I need to find that compute elsewhere.

>> Yeah, I think you did a good job explaining the overall kager of the industry and how much demand is out there. I think the deeper question and I'm curious if you've developed any thoughts on this. If Meta is successful with Google's TPUs for whatever their use case is and it costs let's say onetenth of the Nvidia tax that they have to pay and then Google says oh if Meta is getting value from it maybe Microsoft is getting maybe Amazon like is there a world in which this is the beginning of Nvidia's chip monopoly beginning to fall even with all the demand that's out there >> well I I mean, first the TPUs are mainly used for these AI workloads, right? So, it's not going to destroy any of the cloud capacity that is needed, right? Because that's the strength of GPUs. They're very flexible for a lot of things. Where do we see Google use their TPUs? It's used for their Gemini. It's used for their AI workloads overall. But if you're going to Google Cloud, what they sell to other players is what everybody wants to develop on Nvidia. So I would say I don't think it would end any of that depend because the overall developer ecosystem is on embedded on GPUs not TPUs.

Now the other thing that I would say is if I was Microsoft if I was Meta if I was Amazon would I want to trust NVIDI uh Google's TPUs? They are my competitors. Nvidia has is a neutral arm player in this race. What happens if Gemini 4, Gemini 5, Gemini 6 does so well that Google says, "Look, I can't sell you any more TPUs. I want them all to myself." Do you want to have that risk as Meta who is literally the direct competitor of Google with their advertisement models and with their AI players? So, I I don't unless Google changes its overall business model to become a chip company, I don't see these players going into them.

>> Chris Patel 750 in meta. What is going on, brother? >> I don't think people really understand the value that Meta actually gets from AI and how gamechanging it is for Meta. Okay, I think a couple of things just really really just to get it out the way. One of the main reasons why Meta took a giant dip post earnings was because of a one-time non-cash charge. because of that there's been like a cascade of panicking all the way down. But if you look at where Meta is fundamentally, nothing has changed for Meta, they're one of the biggest beneficiaries of AI. So a lot of other companies right now that are in the AI space, they're still trying to figure out how to monetize AI. Meta is already monetizing AI.

>> Let's let's get into the juice of it because I do disagree with you. I don't think Metaphel is the tax charge. I think that was an algorithmic knee-jerk reaction, but it stayed down because of the call, which you and I talked about before. Zucks basically said, "Trust me, and if if I think we're spending too much, I'll dial it back, but trust me, I'm going to figure this out." What is what is your response to the street not effectively knowing how Zucks will have his Gemini 3 moment? And yes, they have an ROI on ads, but obviously the street doesn't care about that. >> No, no. The the thing is we got hit by a perfect cascade of downward movement in all the AI names at the exact same time. So you had literally you had meta earnings things go down and then what happened for the last 3 weeks who's been up in the last two three weeks? Oh AI is a bubble. That entire narrative got pushed and because of that people were selling Meta off.

>> now what they're doing is they're unloading on Google and saying, "Wait a second, Meta's trading at what valuation right now?" So, they're all jumping into Meta right now. And so, Meta is catching a bit higher. So, I agree with that and I agree Meta is cheap and that's why I bought Meta and I like zero disagreement on the valuation. My broader question is if the street took it down from 750 to 585 because they don't see the ROI on capex. What is your response to that? Is it just advertising? Because I don't know if that's enough. >> Here's my question to you. How is it not enough? If you look at the kagger of Meta on it advertising.

All right, folks. 9:30 a.m. The stock market is now open. All right, wake your asses up. Let's get into it. Google up 2% on the day at 325. 3.92 trillion. 3.92 trillion on Mr. Google. Broadcom is up 1.94%. AMD is down 6.2%. Nvidia down 4.5 basically where it was in the pre-market. So far not too many buyers or sellers in this range. You're kind of seeing it stay stabilized and we'll see if that can get a reversal.

Nvidia looks like she wants to break 174. Let's see if she does. She does indeed. 173 she hits. We'll see if that further goes down. Where is Google? Google. Wow. Google giving up everything. My goodness. 332 to 321. Okay, so people are definitely taking their profits on Google. I mean, it's hard to deny. Maybe you get a reversal right here and people buy the dip at 321, but uh still green on the day. Lost a lot of its steam. Back down to a $3.87 trillion company.

Apple, are we moving alltime high on Apple? Okay, so they I guess they sold Google and Nvidia. They went to Apple. Look at that. 279 on Apple. Apple 4.12 trillion. Once again, a $4 trillion company. AMD is down 8%.

For those that missed the Nvidia news, the real news here today is that Google is in talks supposedly to sell their TPUs, their tensor processing units, which are an alternative to Nvidia's GPUs, uh essentially a custom ASIC to Meta. And the fear is from the street that this is a warning signal for Nvidia that their chip monopoly is over. That they're not going to be able to sustain the type of demand that they have that Google's going to encroach on their monopoly. Their gross margins are not going to be able to be sustained. Nvidia now 171. And uh if the hyperscalers start diversifying from Nvidia, because all of them, if we're going to be honest, want to diversify from Nvidia, then maybe they start propping up the TPUs. They start paying less than what they're paying for the GPUs. If anything, Nvidia has to give them better deals to get them to stay in their ecosystem, which means their margins have to compress. And the growth that Nvidia has been used to starts to fall off a cliff. That is the bare case in 30 seconds for why Nvidia is getting hit like this. Down 6% on the day.