Examining Nvidia’s Impact on AI and the Technological Revolution with Raphael Hanna – Ep 64

[INTERVIEW]

Matthew Peck: Welcome, everyone, to another edition of SHP Financial’s Retirement Road Map podcast. I’m your host, Matthew Peck. Today, we’re going to be discussing a company I believe we all now know, although might wonder what it is exactly that they do. Why are they so important? Why do they drive the markets today, like no other company that I have seen in my personal 25 years of following the market? Who am I talking about? Well, that would be Nvidia, of course.

If you ask me, as I said, 25 years ago, I would never have heard of them, as a young 20-year-old first entering this world, and I imagine a lot of our listeners didn’t really know who they were maybe even five years ago. But nowadays, they are one of the biggest market movers of all time. And I say that because they are now at the center of one of the most, biggest massive moves of our generation, which is the AI or artificial intelligence trend. And is that a trend or is it cyclical? Is this like the dot-com boom and bust of the late 1990s? And again, as I said, very simply, what does Nvidia do? Who are they? And how do they get as strong and as critical as they are currently?

Here to discuss all of these questions, I have a very curious member of SHP Financial. His name is Raphael Hanna. He joined us recently, only about more than a year ago, although he has spent a number of years in the industry. And I’m also very, very happy to announce that he’s also a member, a valuable member of Team Matt.

Raphael Hanna: That’s right.

Matthew Peck: So, without much further ado, I’d love to bring on Raphael Hanna to discuss a little Nvidia. How are you, my friend?

Raphael Hanna: Good, Matt. Thank you for having me. I think this, in radio, a first-time caller, longtime listener. So, I’m glad to finally be on the podcast.

Matthew Peck: Well, I appreciate that, the long time, first time.

Raphael Hanna: Yeah, right. Is that what they say? Yeah, long time, first time.

Matthew Peck: Good to have him here. Although clearly, he didn’t get the memo because when you’re on our podcast, you wear a shirt and tie, young man.

Raphael Hanna: I know. He’s putting me in my place early. I think this means setting the tone for how this is going to go today.

Matthew Peck: Exactly. It’s nice when we get to record this after a day of meeting to say, I’m all dressed up so I get to outclass the…

Raphael Hanna: That’s right. You’re putting me in my place.

Matthew Peck: Because first, I’m going to look better than I’m going to sound better.

Raphael Hanna: That’s right, yeah, yeah.

Matthew Peck: Everyone’s right.

Raphael Hanna: We’ll have to go at it today.

Matthew Peck: Well, to kind of kick us off, Raph, I want to talk about, I mean, we’re going to have a number of different stats and different numbers. And so, we’ll try our best honestly to talk more about the trends, but why they were so important. What exactly were they? And how come it has been and as astronomical of a rise as possible? I mean, I got this stat right here, and so, since 2023, so we’re literally talking over the past 18 months, Nvidia started in a market capitalization at 350 billion at the start of 2023. At the end, it got to 1 trillion, then 2 trillion, then 3 trillion.

So, this company, only over the past 18 months, forget about what they’ve done beforehand, have gone from 350 billion to as much as $3 trillion in a short 18-month period. And what kicked off this entire thing was that in August 28, a couple of weeks ago, they had a big earnings release and everyone was focused on. Everyone was focused on, oh, my goodness, are they going to– where their revenue is, where their projection is going to be? And literally, we’re kind of living in the world that Nvidia has created, and all of our expectations are now going to be focused just on this one company. So, if you don’t mind, take us a little bit through the history of them. Like, who are they? What did they do? How did they get to be so instrumental in the AI trade of 2024 and beyond?

Raphael Hanna: Yeah, I mean, it’s a good question. It’s something that a lot of our clients initially ask us about. It’s funny, if you look at where they are today versus where they were, you could almost say within the space of the chips and everything that they built, they’ve kind of made a 180 because initially, they were very focused on manufacturing chips for gaming and PCs and all these things, initially, when they first came onto the scene in the late 1990s, segueing into their early 2000s. But now if you take a look at them, with this whole AI revolution, what it’s really evolved into is, yes, they’re still making chips, but now it’s kind of segued into this AI infrastructure, artificial intelligence, over the last five years where we’ve seen really unprecedented growth in a segment of the economy and the market that we probably didn’t even know about a few years ago, right? This whole phrase of artificial intelligence really kind of burst onto the scene post-COVID. So, that’s a little bit about where they were. Like I said, initially, they were very big into manufacturing chips for PCs, gaming devices, etc., but really, in the last few years, before the market kind of took, kind of came around to this whole AI theme, they really kind of pivoted and were at the forefront.

Matthew Peck: But now, at the same time, okay, yes, so here they are, they’ve been manufacturing chips, but from what I understand, so does an AMD, so does an Intel. There are other chip makers out there. So, how did Nvidia– so we’ll get back to kind of how they were so critical to these trends. But what about their business model itself that made Nvidia stand out versus the Intels of the world or any of the other chip makers that our listeners might be aware of?

Raphael Hanna: Yeah, I mean, companies like Intel, Qualcomm, I mean, we talked about this off air beforehand. If you look at a company like Intel, early on, they were really just focused on delivering volume of the product, which is the chips. But if you look at Nvidia, you would say that they were really focused more about the quality, not the quantity. So, for example, their Blackwell chip, which is slated to come out beginning of next year, that’s the cutting edge of technology today, right, where Jensen Huang, the CEO, he’s come out and said publicly that they really focus on the quality of the chips, not the quantity.

And I think, if you look at the market movement and the market share that they obtained over the last few years, that’s the argument and the justification that can be made as to why Intel, 10 years ago, was one of the biggest semiconductor companies in the world. And if you compare that side by side to Nvidia, you’ve seen just a drastic movement in both companies, one to the upside, one to the downside, really because of what I just really talked about, where Intel just really focused on this idea of we’re just going to deliver a product to the consumer. Nvidia really focused on, yes, we’re going to develop high-quality chips, but it’s really the ecosystem today that they built it on which keeps their massive customer base like Apple, like Amazon, like Facebook, spending a ton of their– we call it CapEx, their annual capital spending back into Nvidia. So, for example, a company like Microsoft today, if you look at their annual spending rate, it’s my understanding, we looked it up offline that Microsoft is spending close to 45% at least for the last few years over their expenditures on chips to Nvidia, which equates to about 19% of Nvidia’s market revenue every year.

Matthew Peck: Right. So, just to pause for a second, I mean, to just kind of process that a little bit because think of all of us, I mean, this is obviously SHP included and much less, I’d say, pretty much every business out there, well, we are Microsoft’s clients. We have Microsoft Office. We use Microsoft Outlook. We use that as an email, PowerPoint, Excel, Microsoft Word. So, for all of those Microsoft Word clients or people out there, if you use Microsoft Word, if you use Microsoft Outlook, you are Microsoft’s client. Well, what you’re saying is that Microsoft is Nvidia’s client, right?

Raphael Hanna: Yes, correct.

Matthew Peck: So, imagine that inverse of this massive company that all of us use every single day, a majority of us use every single day in the business world, it’s the flip side where Microsoft is calling up Nvidia for business, saying like, “Hey, can I get some of these quality chips?”

Raphael Hanna: Yeah, exactly. And it’s interesting to look at, I mean, you can look this up on Google and see their breakdown of revenue by segment and who their biggest customers are. And if you look at their top five biggest clients, it’s Amazon, it’s Facebook, it’s Microsoft, and it’s even the government. The government spending is now investing in these chips in artificial intelligence because the infrastructure today and in the future requires these high-speed, high-quality chips to really build on the data centers, the AI that requires such high velocity of technology. And that’s really what they’re relying on.

Matthew Peck: It’s amazing. And I kind of also want to unpack a little bit other that you mentioned because you talked about how they got their start in the video gaming industry. And so, from what I understand, and then I’ll kind of tell a little story or my understanding of it, then you can kind of enlighten us all, but is that here they were kind of, at the early on, got into the video game trend and as a mid-45-year-old guy or mid-40s, I won’t tell you– oh, I just gave away my age, gosh. So, right smack in the middle. Not…

Raphael Hanna: You’re dating yourself a little bit.

Matthew Peck: I know. But in that sense, in my time, right, here we have Nintendo and Sega Genesis and all of the video game consoles, I mean, if you go back for our older listeners and wiser, our older, wiser listeners, they’ll remember Pong and Atari and those first games that came out. So, then the videos of the world were at the forefront of that. They were part of that. One of these earliest sort of customers was Sega and Sega Genesis. So, for anyone that’s in their mid-40s, they remember that. Obviously, people that are younger, they remember other things, as Nintendo continued to evolve, PlayStation, Xbox, etc.

And so, Nvidia was there. Nvidia was there in the gaming industry, and they first came across my sort of radar screen because of that because my little brother, who’s 10 years younger than I am, and he was playing video games all the time, his buddies were all gamers, etc., and the idea of looking into Nvidia as an investment is similar to the idea of, okay, do you want to invest in gold or do you want to invest in the pick and shovels that will help remove that gold or kind of the infrastructure behind it? In other words, if video gaming is the trend, well, how do I invest in video gaming without trying to pick the next big video game? I don’t know, Warcraft, Minecraft, all the other…

Raphael Hanna: Fortnite.

Matthew Peck: Fortnite, yeah, exactly, all these other video games out there, whereas, okay, if I can just look into the company that’s producing those chips, okay, then everything will be well. If this gaming industry and trends are going to continue, you can be there. And Nvidia was there. So, Nvidia was already at that trend and call it the mid-2000s to beyond. So, that was a pretty big deal.

And then here comes cloud computing. Cloud computing with Andrew Jassy over at Amazon with that kind of quirky idea of outsourcing all of their computing capabilities, the ability to stream requires this cloud computing, and everything was about the cloud, the cloud this, the cloud that, etc., and all of these hyperscalers were there. Microsoft was in the cloud business, obviously, still is, Google, Amazon, etc. And guess who also was there? Guess who also was providing the chips for that megatrend as that was unfolding? And then lastly, we get to what you just mentioned, which is now we’re part of the AI trend.

Raphael Hanna: Frenzy, yeah.

Matthew Peck: Yes, exactly. And so, guess again, who is there and who is at the forefront with producing these quality chips? And I hope everyone that they were getting the idea of how this all came to be, how this company became such a large market mover was because they’re at these major trends all along and they’ve been driving the market, they have been up. And I’m not sure if you– I don’t know if they have it in front of you, like how much they’ve been up, I mean, I gave you the market capitalization.

Raphael Hanna: Yeah, I think.

Matthew Peck: How much has the stock risen? I don’t know, pick a– I don’t know whatever date you have, but go ahead and pick a date and give me an idea how much stock has gone up.

Raphael Hanna: I mean, if you look at it just year to date, we’re up over 130%. So, the moves in such a short period of time when you see a stock move 130%, we call it unprecedented just because stocks aren’t supposed to double in eight months. But when you’re in the middle of, you know– I listen to Dan Ives all the time, he’s a very well-known analyst on the Street that covers technology. I mean, he calls this– we’re in the first that he says this is where he thinks we’re in the first inning of what he’s calling a technological revolution.

So, there will be companies like this that will go on certain runs, as we say in sports, like they’re going on a run. And it’s just a matter of if you’re investing in the company or if you’re investing it through ETFs, you just want to make sure that you’re managing risk. And that’s something that we talk to clients about all the time where I recently just talked to a colleague and he told me that one of his clients in Nvidia position grew to almost 25% of his liquid net worth just because of the movement that it’s made.

Matthew Peck: Yeah, because it went up so high.

Raphael Hanna: It went up so high. Exactly. So, that’s the type of things that we talk to clients about where it’s if you have, we call it investment risk in an individual stock, you want to make sure that you’re appropriately, obviously, within tech sensitivity reasons, diversifying either out of it just because there is that risk that exists where, as we’ve seen in the last few weeks, if Nvidia comes back 20% in a short period of time, you don’t want to get whipsawed by having such a big position, right? And just making sure you’re well diversified.

Matthew Peck: Well, and I think too, it’s actually, like you said that, because I would definitely say that a nice little report that we’re able to run for clients is what’s called a stock intersection report. And somewhat, obviously, on topic/off topic, and we’ll get back to Nvidia because I have another question for you, Raph, but back to the idea of diversification in the stock intersection report, I think, oftentimes, people get confused or they misunderstand their exposure to any individual stock. But obviously, we’re talking about Nvidia today, and I think what happens is they, oh, should I buy some, should I not buy some, or whatever that may be, well, it’s good to know that if you have something as simple as the S&P 500 fund, you have at least 6%.

So, Nvidia itself makes up 6% of the S&P 500, right? About 6%. Which means that, okay, if you have the S&P 500 fund, you have Nvidia exposure. If you have any type of growth fund, you’re going to have Nvidia exposure. If you have an all-stock index fund, you’re going to have Nvidia exposure. And then if you have that stock just by itself directly, obviously, you have exposure there. And the stock intersection report is really handy because it’s able to crack open all of the funds that you have added up with any individual stocks that you have, to then come up with a number to say, okay, your total Nvidia exposure or percentages of your portfolio is 5%, 10%, 15%, or as you mentioned in this case, was as high as 25%, which no matter how good the company is, that’s a bit high for any company.

Raphael Hanna: Correct, for any company. And I think, when we do talk to clients about this, the report that you mentioned is really important because oftentimes, clients don’t really get to see the underlying allocations within some of the funds, right? You just know what the percentage weightings are just by looking up Nvidia on Google. But within the broader portfolio, that report really paints a broader stroke as to what the underlying allocation is within those funds. And I think it’s important for clients to have that understanding.

Matthew Peck: And this is definitely a little bit off topic, but I mean, I always get a kick out of sometimes international funds. You think an international fund would just be, oh, I got international funds, well, some of those international funds have American companies because they’re multinational. I mean, Nvidia is definitely involved in Microsoft, Amazon. They’re selling all across the world. So, sometimes, you even have exposure in places you might not think that you would. Let’s get– oh, go ahead, sorry.

Raphael Hanna: Yeah, no, I was just going to say, I think, to your point, too, it’s interesting, I quickly mentioned a couple of minutes ago, you can take a look at the revenue by segment, specifically for Nvidia. But it’s interesting, over the last few years, their revenue in China actually has been going down. And the reason why that’s been is because, US, like regulatory reasons. For one reason or another, they’ve been prohibiting or limiting US chip manufacturing companies to export their chips to China, which you would think that would actually be a bad thing for Nvidia. But actually, again, their leadership management product, all these things are top class. They’ve been able to kind of pivot in a different direction.

And again, their biggest customers are the US government, those companies that you mentioned. So, it’s interesting to see how the shift in revenue has kind of been cut overseas, but increased domestically. So, I think that’s just an interesting antidote to take a look at when you do look at a company like Nvidia.

Matthew Peck: Yeah, where their best customers are, etc., their revenue is driven from.

Raphael Hanna: Correct.

Matthew Peck: Okay. So, then I talked a little bit earlier about the dot-com bubble busting and whatnot. And I think, obviously, when people see the AI trade and they see what’s driven the market since, say, call it the end of 2022, when ChatGPT, which is not Nvidia, although they might use Nvidia chips.

Raphael Hanna: Yes. I don’t know, we have to double check on that.

Matthew Peck: Yeah, definitely, in that space. But when the AI trade, even though just– and this is part of the conversations, but I mean machine learning and artificial intelligence, what’s amazing, has been around since like the 1950s. I mean, they’ve been trying to do this for a long period of time in the sense of the concept was there. And then if all of our listeners remember, Watson played human participants in jeopardy, and then…

Raphael Hanna: I remember Watson from big fantasy football guys. So, on ESPN, they would have like the IBM Watson. What’s it called? You called, like their AI, like analyzer for fantasy drafts.

Matthew Peck: Right, I mean…

Raphael Hanna: So, it takes me back, like, 10 years, but that’s what they called it.

Matthew Peck: Right. And that was IBM’s version.

Raphael Hanna: Correct.

Matthew Peck: So, I mean, the idea that artificial intelligence is new is incorrect. It’s been around and been studied. But that 2022 breakthrough was huge because of what we called LLMs or large language models, and it was always called generative AI. It was the ability to ask bots, ask apps like ChatGPT, ask anything. Like soon enough, Apple’s going to be coming out with their AI-powered iPhones and whatnot. But to ask these things to generate answers, to generate responses, to generate pictures, to generate images that were exactly like you asked with the concept that these large language models, which had just learned all these large languages, i.e., just a lot of words and all the data out there, could then generate a good response.

I went down that path because here it was, this massive move that’s been helping to drive the markets from late 2022 all the way till today, talking about how Nvidia becomes this bellwether for this trade. Are we in the first inning, like you mentioned with Dan, that Dan Ives was mentioning and as a lot of bulls do? Or are we on the precipice of what was called the dot-com, like that bubble bursting, where is this just another frenzy, like the early Internet frenzy? So, the Internet came around. I mean, the same idea, they’ve been around for a while time, but really got adopted in the late 90s.

And here comes everything that had a dot-com at the end. I always love how the biggest example of that was called a Pets.com. They always thought about Pets.com as the example of that, when just it was like the straw that broke the camel’s back and they just said, okay, nope. Voila. This is all just smoke and mirrors. And the Nasdaq plummets, and it takes close to a decade for the Nasdaq to recover.

So, long story short or long story question short, how is this different? Is this AI trade, is Nvidia trade, is it going to be like the dot? In your opinion, I know, we’re not trying to predict the future. I mean, what are analysts saying about that? Are they saying it’s going to be a lot like the dot-com days of the late 90s and we’re in for a winter before eventually, the productivity of AI kicks in? Kind of like the Internet went all hype and then it went down and then it did change the world a bit later. Or is it no, no, we are truly in the first couple of innings and we’re not going to see this and it’s not going to burst, it’s just going to continue to roll on?

Raphael Hanna: Yeah, I would tell you, I think the biggest thing, too, before I kind of answer that question is you got to look at what happened in 2000 at a moment in time, because if you look at it, this whole Internet thing was new to everybody. There was no ecosystem. There was no environment that was set up for these dot-com companies. So, I think Mark Cuban puts it actually pretty nicely where he talks about how everyone knew that the Internet was coming. They just didn’t know in what capacity it was going to look like.

So, all these companies that had dot-com at the end of their company were going public. And as the retail investor, we couldn’t fathom what the Internet was going to turn into. So, I think, that created a lot of frothiness in that market. The difference that people today are making the argument for AI is, it’s a well-established– again, even though we’re in the first inning, you can make the argument, it’s still a well-established industry with companies that have wide moats, companies that are over trillion dollars in market cap.

The companies back then in 2000, these were startup businesses that just because they had dot-com associated with them, people weren’t looking at the underlying fundamentals of the businesses, right? And they were just kind of caught up in the Internet frenzy itself, which really frothed up that market and melted it down in a short period of time. Here, it’s a little bit different because, like I said, these companies are with the biggest moats we’ve seen in 25, 30 years with the balance sheet and the cash flows to back it and the products that support what Nvidia and some of these other chip companies are requiring from them.

Matthew Peck: Yeah, and I could say that, no, it’s interesting. I mean, I think if anything, personally speaking, my opinion and trying to read tea leaves is that it’s all about profitability, right? If Microsoft, as an example, is able to make it profitable where people are doing their copilot or whatever that may be or a lot of the service companies are using the AI as sort of chat bots, so rather than calling or trying to deal with human, if this AI thing is as good as a human answer, that’s going to save all this time, or even in the financial industry, making us more productive because we have great answers at our fingertips. We’re spending much less time searching and researching, where the generative AI can just summarize our question, our complex tax question. If Microsoft then, if that’s got adoption, let’s say, for example, and they say, see profitability, then I think it will continue to run without any major hiccup.

Raphael Hanna: Absolutely.

Matthew Peck: If profitability starts to suffer a little bit, I think you’re right. I think they have enough cash flow to go through a dark time.

Raphael Hanna: Correct.

Matthew Peck: So, probably not a major bubble bursting like you’re saying in 2000s, I think investors are starting to get a little nervous of, okay, we do see a little bit greater adoption. We do see a little bit more profitability, specifically from other industries to say, yes, AI has made our workers more productive and AI is starting to save us money, right? If you start to see those types of statements in there, in the public companies, when they release their earnings, they talk about it, then you’re going to see truly first inning.

Raphael Hanna: Yeah, absolutely.

Matthew Peck: Back to Dan Ives’ comment. If not, obviously, there’s going to be some fallout, but I mean, and nothing, knocking on wood and obviously, neither Raph nor I can predict the future but to see– since it’s all back to your point, since it’s all backed by profitable companies that aren’t going anywhere, it really is tough to see any major correlation with the dot-com bubble burst.

Raphael Hanna: Correct. And I would also add to, if you look at, for example, a company like Cisco back in 2000, it was close to 500 billion in market cap in 2000. And over the years, you’ve seen a company like Cisco’s market cap dwindle because they haven’t been able to pivot. But a company like Nvidia, more of these bigger blue-chip companies, like you’ve seen Apple pivot from just an iPhone or an iPod or whatever they were initially, to this massive conglomerate of just hardware. And then a company like Amazon, you were talking about Andy Jassy and how initially, when they were exploring cloud services, they couldn’t find somebody in the market to really dominate what they were looking for from a cloud service, like solution.

So, what did they end up doing, they ended up taking what they were looking for and built it in-house, which in then turn, led to a lot of business from Nvidia because when you’re building these massive cloud storage solution systems, you need the chips to back it. But back to my initial point is, again, these companies have some of the widest moats you’ve seen. So, that’s the biggest difference, like I said, compared to 2000, where most of those companies were startups and very unprofitable businesses.

Matthew Peck: Well, I think the hard part, too, as advisors and probably listeners of this podcast, sometimes we get asked, what’s the next Nvidia? We don’t have any podcast or an answer for that. Oh, actually, I’m sorry, I was speaking for myself. So, Raph, yeah, what is the next Nvidia? Do you have anything?

Raphael Hanna: Yeah. I wish I had a good answer today. I might have to come back on the pod with a better answer next time.

Matthew Peck: Thank you. So, I mean, like, because, and I don’t know for sure is like, you get how unprecedented it is. I mean, I was in the beginning of my time, my 25 years of sort of truly following the market, I’ve never seen anything like this, especially, and that’s kind of why I want to do the podcast because August 28, when they released their earnings, I mean, it was one of the biggest days in the market in the sense of everyone was falling.

Raphael Hanna: Yeah. CNBC was hyping it up.

Matthew Peck: And this entire day, because I mean, obviously, any big earnings release is a big deal, but this was it. And I can’t imagine having that influence, but as you can see, that’s really what it is. I mean, it becomes this bellwether for this AI trend, and yet, by the way, they had another blowout quarter, but yet, it was disappointing.

Raphael Hanna: Yeah. I would tell you, if you looked at their earnings report, I think what the Street was expecting was, and I’m going to use a tennis analogy because US Open, as finals is this weekend, but the Street was kind of expecting like the equivalent of a Djokovic to win 6-0, 6-0, 6-0, but he won 6-2, 6-2, 6-2. You know what I mean? So, I think the market, and again, it’s justified because Nvidia has done so well, but I think we need to taper expectations for the next few months and the next few years as to what they’re projecting because at the same time, if you look at it, they reported very strong numbers. But if they slightly miss on revenue, the Street’s not going to like that.

Matthew Peck: Well, in all of that, too, I think the other thing that I think people need to understand, like I was mentioning about the profitability of the industry as AI gets adopted or AI adoption, I think, certainly, to Nvidia, I mean, I think during those earnings call, they were mentioning that– oh, you mentioned the chip earlier.

Raphael Hanna: The Blackwell chip.

Matthew Peck: Blackwell chip. I mean, it’s costing them a little bit more money to put the quality into it, and then maybe there’s some delays and whatnot. And I know that they have a relationship with Taiwan.

Raphael Hanna: Semiconductor.

Matthew Peck: Yes, exactly. I think their acronym is TSM, right? So, long story short, they might not have these blowout quarters every year. And profitability does suffer when you’re pouring money into research and development or you’re trying to produce these quality chips that stays on the cutting edge. I mean, I do get a kick out of that because that’s also a wonderful example, as there always is, of investors and how hard to impress than they are. And also, why just– obviously, I know it’s old hat, but just the idea of taking that long-term investing idea, that sometimes companies will go through difficult periods or just periods where their profits suffer because they have to reinvest in the business, they have to retrench a little bit, etc. So, as you’re saying, I think for everyone that’s all of our listeners, like having a measured expectation of where the stock itself may go in the short term, doesn’t take away from where the AI trend itself may be heading.

Raphael Hanna: Correct. And to your point, you’re talking about the AI trend not only today but over the next 10 years. I think we were looking at this offline, the AI industry now is at approximately 184 billion. They’re estimating it to be close to a trillion in 10 years. So, that’s the opportunity that’s there, whether that materializes or not. We’ll see. But again, that’s the opportunity that’s there for some of these companies to kind of sharpen their elbows and figure out who the winners are going to be. Today, again, Nvidia reported, to your point, strong numbers. But if it’s not picture perfect, these three might not necessarily respond to the retail investors liking. So, I think that’s, to your point, we just got to taper expectations when a company makes such aggressive moves in the market in such a short period of time.

Matthew Peck: Yeah. No, and I think that’s why, too, I mean, what’s great about our job in general is that as much as here we are talking about how Nvidia sort of symbolizes the AI and who they are and what they do, we don’t try, or SHP, we don’t try to depict that winner each and every time. We don’t try to find the next Nvidia or whatever because back to that diversification that we were talking about and doing that stock intersection report, etc., we don’t say you have to because the market will pick the winner.

Raphael Hanna: Correct.

Matthew Peck: I mean, that’s what I love about the S&P 500 as an entity. It’s what’s called market capitalization, which is the bigger the company, the bigger that the presence in the S&P. So, if that company is going gangbusters, it’s going to grow within the S&P. Now, there are people that will argue against passive investing versus active investing, that’s for another podcast. But it’s more the idea that I just love that old line from John Bogle, the old Vanguard guy, which was rather than trying to find a needle in the haystack, just buy the haystack.

Raphael Hanna: That’s one of my favorite quotes. I love that.

Matthew Peck: So, that kind of underpins what we talk about. So, it’s a lot of fun here at SHP and say, when Raph and I get to sort of chinwag about this type of stuff is because we can dive into one individual stock or one individual company or industry or whatever that may be and talk about it, almost like bellying up at a bar as compared to saying, like, my goodness, is this going to be a good investment for our clients or not? Because I don’t know, whether or not we like this individual stock or like this company or like this story, it’s like, no, no, when it comes to advice to the clients, we’re still going to make sure that a majority of their assets are in diversified portfolios, that are going to have exposure to these trends into these companies and everything we’re talking about because no matter how much we might dive into it, no one can predict the future. So, you want to make sure that your plan is in place, then you get to kind of have these types of fun conversations of looking at the long term, looking at the big picture, looking at, okay, let’s see what Nvidia does or doesn’t do. We’re still going to move up and down by the market because they are such a big, big player.

But at the same time, as long as our clients aren’t in those 25% exposure like we talked about, then we know that whether they are able to do it or unable to do it or maybe, they’re not the ball out of the ballpark again and again and again, it’s not going to come back to bite our clients in the long-term plan that they have and just the long-term trajectory of the American economy. So, thank you very much for coming on.

Raphael Hanna: Thank you, Matt. Appreciate you having me.

Matthew Peck: I think all of our listeners are going to be waiting for the next Nvidia. So, when it wraps on…

Raphael Hanna: Yeah, when I show up with my tie.

Matthew Peck: Yeah, right.

Raphael Hanna: When I show up with my tie.

Matthew Peck: And next time, you might not come into the front door because we’re not going to allow because I didn’t tell you come with a tie on, but I really appreciate it. Yeah, I hope that all of our listeners found the conversation engaging. Of course, we’ll have show notes and everything from our producer, Evan. But thank you again for joining us. And I wish everyone well.

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