☕ Follow the kilowatts – AI doesn’t matter if the lights go out

Howdy! 👋 

Markets were red in early going as all three indices retreated ahead of the Fed. 

Then went green. 

And red again. 

Yeesh. 🤦‍ 

We’ve seen this movie so many times we know the lines. 

The US 10YR hit 4.09% this morning so the go-fast crowd sold “down” enough to get under what’s called VaR limits – Value at Risk. Then did a little house cleaning and the obligatory head-fake to separate the weak hands from their money. 

No doubt in my mind they’ll be back on the gas shortly. 

That’s how the game is played. 

Repeat after me. 

This kind of up and down around the mulberry bush kinda market action has NOTHING to do with the business case for owning the world’s best companies which, btw, is getting stronger by the day.  

Rates are for traders, but profits are for investors. 

History shows very clearly that it’s better to play offense, even if you have to think defensively to do it. 

Oh, and buy the best, ignore the rest while you’re at it. 

Here’s my playbook. 

1 — AI doesn’t matter if the lights go out 

Team Karp just lobbed another grenade into the AI arms race. 

This time it’s a new platform called Chain Reaction and it’s aimed squarely at the one bottleneck Silicon Valley still pretends doesn’t exist. (Read) 

Everybody’s yapping about models, chips, and benchmarks. 

The valuation gang is, of course, out in force. 

Naysayers and nervous Nellies too. 

Meanwhile, the real constraint (and the real opportunity) is old-school and utterly unavoidable. 

Something that we have talked about many times and with which the OBA Family is intimately familiar with because of the profit potential. 

Power, grid stability, and the physical infrastructure needed to keep the AI firehose running. 

Chain Reaction launches with CenterPoint Energy and NVIDIA — a trifecta you don’t assemble unless you’re dead serious — to modernize crusty power systems, harden the grid, and fast-track hyperscale data centers. 

This isn’t rocket science, at least to me anyway. 

AI is leaving the “look what my model can do!” stage and entering the industrial buildout phase where fortunes aren’t made in code but in schtuff like concrete, copper, kilowatts, and capacity. 

Burry and his b-----t brigade can crow all they want. The code squad, too. 

Team Karp will conquer what matters. 

Investors who latch on stand to make out like proverbial bandits (again). 

Keith’s Investing Tip: I see a lot of folks trying to be “right” when the world’s best investors constantly focus on being “profitable.” There’s a big difference. 😎 

2 — This just in from GM’s nice try department 

General Motors has a new tech sheriff in town — Sterling Anderson, the ex-Tesla and Aurora exec now running product, software, batteries, manufacturing engineering. Basically, everything short of sweeping the floors. (Read) 

He says he views GM as a “canvas” for innovation while CEO Mary Barra is hailing him as the visionary who will finally unify software and hardware into one seamless, modern operation. 

Now let’s talk about reality. 

GM has burned through a parade of Silicon Valley hotshots — Tesla veterans, Apple folks, Google alumni — most of whom lasted about as long as a Michigan summer. Three more top software and AI leaders just quit, in fact. 

Every time GM unveils another bold pivot into EVs, autonomy, or “the future of mobility,” it usually ends with a restructuring, a write-down, or a quiet backpedal. 

Anderson is undoubtedly brilliant but even he admits he worried GM would treat him like an outsider.  

I think that is probably inevitable. 

Legacy car makers seem to have an unwritten slogan… “100 years of tradition unimpeded by progress.” 

GM desperately wants Wall Street to believe it’s having a tech renaissance, but no amount of window-dressing swagger will fix decades of whiplash strategy, cultural inertia, and leadership churn imho. 

Putskies. 

And continue to buy the “other” car maker that’s actually cut a very real path forward and which has already produced millions of cars capable of running circles around GM’s best products… with no driver needed! 😎 

3 — I biffed Salesforce, should you buy it? 

This is a very tough business and while I am fortunate to get a lot right, stepping up to the plate regularly means I’ll occasionally foul one out, too. 

Case in point, I said Monday that I wasn’t enthusiastic about Salesforce and would sit out this earnings call. 

Time to eat some crow as the old expression goes. 

Salesforce beat on earnings and even raised its revenue guidance for Q4. (Read) 

• EPS hit $3.25 vs. $2.86 expected 

• Revenue landed at $10.26B, +8.6% YoY 

• Free cash flow jumped 22%, +22% YoY 

• Agentforce was the real highlight: over $500 million in annualised revenue, up 330% year-over-year, with 9,500 paid deals now in the bag.  

Should you buy it? 

I’m still not inclined to buy. 

Salesforce is growing in single digits while true AI platform leaders including Microsoft, Nvidia, and Palantir are well into the double digits.  

This quarter reminds me a lot of Adobe during its infamous “transition years.”  

Solid fundamentals, plenty of optimism, lots of promise — but the market wasn’t convinced until years later when proof finally caught up with the pitch.  

I don’t think the bottom’s in yet. 

Putskies – a bet that the stock declines – short or avoid. 🤷🏻‍ 

Keith’s Investing Tip: Long-term investing success revolves around constantly weighing alternatives. I’d rather invest in choices without the baggage. 

4 — Oh no, now “Nvidia has a cash problem” – seriously!?!?! 

CNBC is reporting that Nvidia has a “cash problem.” (Read) 

This kind of stuff makes me nuts. 

The media is paid to garner eyeballs which means what you read is intended to help ‘em do that… NOT help you make money.  

God forbid they spin stories positively. 🤦 

Nvidia is doing exactly what Nvidia does best… using its war chest — now $60.6 billion – to build an unassailable AI empire that doesn’t depend on regulators, politics or disapproving journalists who have never run a company at scale. 

Nvidia will generate nearly $100B in free cash flow this year and is projected to rake in $576B over the next three years. And if that’s a “problem”, so be it. 

Sign me up. 

5 — The “tough” part about “easier” fuel efficiency standards 

Yesterday I said (See #5) that the President was rolling out “tougher” fuel standards and made the case for investing where electrons were cheapest. Several of you wrote in saying that I must be mistaken because he’s rolling back Biden-era policies.” 

Thank you! 

And forgive me for not explaining my thinking in more detail – my coffee had not yet kicked in at 0430 when my brain cramped and I penned that. 

Yes, the rollback makes compliance easier for car makers by slashing compliance costs and the stringency associated with ‘em. 

MyPOV is that’s actually “tougher” because doing so will likely result in worsening real-world efficiency, higher long-term pump costs for consumers and a significant strategic disadvantage versus China over time. 

I don’t do politics so let’s keep that off the table – I do money. 

Here’s the rub from an investing perspective. 

While President Trump tells GM, Ford etc that they needn’t make gas-saving cars by reducing the pressure to catch up via what are widely considered by many to be flawed electrification policies, China is telling its carmakers to go ahead and grab the world’s burgeoning clean car market because they know the move also potentially guts US competitiveness and innovation. 

Definitely a “tough” spot. 

And an investable opening if you know what to look for like the OBA Family does (which btw already has this covered). Click here if you’d like to learn more or could find some help… well, helpful! 😄 

Bottom Line   

Your job as an investor or trader isn't to figure out where the markets go next.   

It's to recognize that they're in motion, then act on the signals created when that happens. 

You got this – I promise! 💯 

As always, let’s MAKE it a great day. 

Keith 😀