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Let's check in with our next guest here, Steve Iiceman, senior portfolio manager at newburg Or Berman. All right, I'm looking at I guess Steve, you're on the Odd Lots podcast recently and you said that you are bullish on stocks that gain from artificial intelligence power needs. What does that mean?
Well, good question, thank you.
I'm front running Alex because Alex is our energy.
The current the current GPUs use about three times more electricity than your typical CPU. So the grid in the United States has been under pressure now for years. You know, utilities keep increasing their CAPBAX budgets, and now you've put an entire new pressure on the on the grid. So whatever money is being spent on the grid is going to keep going up, probably for the next ten years.
So just to give you just one stock for example, you know, when utilities announce that they're increasing their CAPEX budgets, utilities don't actually do anything. You know. What they do is they send you electricity and send you a build. But in terms of construction, that's sun by a company called Quanta, which is the largest engineering construction company for utilities. So The only thing I would tell you is that every time the CEO gets on the quarterly conference call, he just looks happier.
That's fair. Yes, if you demand's going to.
Grow up by it has no to do with himself. He can't satisfy all of the demands. So that's just just one example. But there are other companies that benefit as well. But that I look, I think there are three major themes of our time, AI, infrastructure, and crypto, and I believe in the first two and I don't believe in the third.
So just for framing here, I mean, you really made your name through the housing crisis and betting against housing debt back in two thousand and eight. You're portrayed in the Big short film by Steve Carell.
Had to bring that up, but okay.
I did, But just just to give context.
If our viewers or listeners don't know, like you have a history of betting, having contrarian bets that pay off big time. Yes, what would be that contrarian bet out of the three things you just said, what's that big contrarian bet.
I don't have a contrarian bet here. I mean I don't like crypto.
I like in crypto feels contrarian.
Well, it's contrarian, and that says that I don't believe in it. I think the whole thesis behind it is wrong. But you know, shortening a cult when there's no when there's no data to prove that it's wrong, because a death wish, you know, So what do I mean by that? So when you when I bet again subprime mortgages. Every month securitizations produce data. They give every single credit quality data possible, so every month you could check it.
You could look at it.
Every month you looked at the fact and that and that fact. Credit quality was the major determinant of the value of subprime mortgage paper. So you had a data point every month, a massive data dump. Crypto trades on ether. You know, what is a trade The thesis that crypto of crypto is that it's a hedge against fear currency, so it's like digital gold. But it doesn't trade like that. It trades in perfect correlation with NASDAC, so it trades against its own thesis. So what data point is there
to show that crypto is wrong? I mean, if the deficit came down, it's not relevant because that's not how it trades anyway, so there's nothing to do. What's your macro call here?
I mean, there's a lot of folks in the marketplace saying, you know, this Federal Reserve is going to cut rates in twenty twenty four, maybe not as many times as we originally thought, maybe not as much as we originally thought, but that this economy is in good shape, but still there might be some rate cuts here. Is that kind of the backdrop that's for you? Or how do you think about it?
I mean, the way I think about it is that Powell is a dove. He has always been a dove. Raising rates was completely against his nature. He's wants to cut rates because he always wants to cut rates. The data is not completely in his favor. So maybe they cut once. Do I think they should cut it at all? I would personally I would wait, but trust me, nobody consults me.
No one consults us either. It's very stair.
So I think they'll probably cut once. It's my guess.
So does that affect so the thesis that you have, like at the infrastructure, the power demand and AI and AI in.
General, does what the Fed does? It's irrelevant, irrelevant. Does it change.
How you play those themes or of timing.
Okay, I mean this is how what I think credit quality in the United States is fine other than office real estate, and office real estate is not big enough to sink the economy. It's a problem. It's a regional problem. It's a regional bank problem. It's some investors problem. If consumer is not over levered, the housing market is not in fuego, there's a shortage of housing. So all the and the and the financial system of the United States
has never been this healthy in anyone's lifetime period. So all the things that existed prior to two thousand and eight don't exist today. You have a very dynamic economy with some very very powerful themes. The FED cutting or not cutting rate makes headlines for a couple of days, But when you think about it, if the FED cuts rates once or twice or no no times, I mean the end of the day, who cares. It's it's it's the minimis it's not I mean the FED raising rates
five hundred bases points. Yep, that got that got everybody's attention. The FED cutting rates twenty five basis points or fifty basis points and then stopping like like everybody get a life, right, all right?
In terms of getting a life on AI, a lot of well, I'll just speak for myself. I'm trying to figure out how much of this AI stuff and I'm putting in air quotes here for our listeners. Is incremental all tech spending or is it just taking some money from IT or other tech budgets and putting it to it depends on.
Which subsector you're talking. Okay, So if you're talking about the semiconductor sector, where it's in video or a m D, it's it's massively incremental. You know. If you're talking about overall tech spending at this point, not clear. What's what is pretty clear is that companies like some of the IT consulting companies have no revenue growth because it's taking Peter to PayPal, so and software unclear. So it's it's only very clear in hardware.
Let's overlay the presidential election with these thesis thesis. Thesis is plural and okay, it's important. I took Latin from the.
CS, but this is a THESSCS.
Okay, So what is your prediction for the election and how does that impact Because a lot of what you're talking about is driven by fiscal policy.
Okay, so let's backtrack for a second. So, first of all, caveat whatever I'm about to say. I am not speaking for New Burger Bartment. I'm speaking just for myself because I don't want to get into trouble. So it's May seventh. We're how many months? Five months? Six months from the election? Very far, and as far as I'm concerned, the election is baked. It's done, which is and Trump's gonna win, and I think he'll win every single swing state, and
this is how it's going to play. So at this point, the protesters and what I'm about to say has nothing to do with who I'm going to vote for, what
my predilections are. This is just pure analysis. The protesters on the college campuses have rapidly become the face of the Democratic Party, not completely, but that will be solidified because I am one hundred percent sure that in August at the Democratic Convention in Chicago, Irony, when you think about nineteen sixty eight, they will all be protesting there and they'll be screaming and yelling, and they'll be screaming and yelling a lot of things that are anti American
and the country is going to be appolled, and at that point it'll be very very clear that Trump will win. But as far as I'm concerned, it just reminds me a little bit of August two thousand and seven. If you look back at the financial crisis, the crisis took place in the fall of eight, but in August of seven, starprime paper had collapsed. The crisis was baked in August of seven. The rest was just an inevitable play. So I kind of feel about like that about the presidential
lecture right now. It's baked, but the only people who don't know the voters.
All right, We'll see how that plays out. In the Mark by Steve Iisman, Thank you so much for joining. Steve Heisman is a senior portfolio manager at Newburger Berman. Joining us live here in our Bloomberg Interactive Brokers studio