Pod Insights Prof G Markets Nvidia’s Blowout Can’t Calm AI Anxiety About this episode Ed Elson breaks down Nvidia and Salesforce earnings with Gil Luria. They examine what the two contrasting reports reveal about the market’s anxiety right now. Then he unpacks Trump’s State of the Union address with Ian Bremmer, and shares his thoughts on what Trump left out of the speech.
Gil Luria is the Head of Technology Research at D. A. Davidson. Ian Bremmer is the Founder and President of Eurasia Group.
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Transcript 5,602 words · 12 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:13 Ed Elson? Today's number two. That's how many affairs with Russian women Bill Gates admitted to have had after he apologized for his ties to Jeffrey Epstein. Microsoft founder says he, quote, "did nothing illicit and saw nothing illicit" and that he, quote, "never spent any time with the women around him." Today's other number is zero. That's how many people believe him.
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1:49 Ed Elson? Welcome to Frosty Markets. I'm Ed Elson. It is February 26th. Let's check in on yesterday's market vitals. The major indices climbed ahead of Nvidia's earnings. More on that in a moment. Bitcoin bounced from recent lows rallying back towards 70,000. The price of gold, silver and platinum increased. And finally Netflix rose 6% in its best day in more than a year. That rally followed reports that Paramount's new offer may be good enough to win the bidding war for Warner Brothers Discovery. Okay, what else is happening? The world's most valuable company, Nvidia, reported earnings yesterday that beat expectations on the top and bottom lines.
2:33 Ed Elson? That was largely driven by data center revenue, which rose 75% year over year in the quarter. Revenue projections for the current quarter also came in higher than investors had expected. Nvidia's stock rose as much as 5% after hours, but then moderated during the call. Salesforce also reported yesterday, but those earnings had a very different outcome. The company's revenue grew 12% in the fiscal fourth quarter, which was its fastest growth rate in two years. However, investors were disappointed with the company's revenue guidance for 2026. That sent the stock down nearly 6% after hours.
3:15 Ed Elson? Joining us to unpack these earnings, we are speaking with Gil Luria, Head of Technology Research at DA Davidson. Gil, good to see you. I want to start with Nvidia here. Another incredible monster quarter. This keeps on happening. Everyone thinks that we're going to see an issue and everyone gets very anxious and then just an unbelievable quarter. Your initial reactions?
3:40 Gil Luria? Well, not only is it, and it is unbelievable, the numbers are just getting staggering, especially for a company that's so profitable to be able to grow at these rates continuously. But beyond that, they just said they're going to grow sequentially for the rest of the year. They don't typically give more than one quarter out. So the fact that they have that visibility and talked about that going into calendar 2027 tells you that they have more visibility than ever. Their customers are making longer term commitments than ever. They can see the rollout of the data centers happening at such a rate and with such a backlog that they know that they'll be able to continue to grow from here on out, which is, again,
4:25 Gil Luria? very impressive, especially when the numbers are this big.
4:28 Ed Elson? What does this mean for the? I don't know if I could call it AI bubble story at this point. The AI anxiety story, maybe we have to call it. I mean, we saw the Citrini Research article that came out this week and got everyone very anxious about AI. We've seen just incredible drawdowns in the software sector, again, because of AI. What does this do to the AI story? How are investors thinking about this now that Nvidia continues to dominate?
4:59 Gil Luria? Well, there's two different types of anxiety and they're actually the polar opposite of each other. One level of anxiety is, oh my goodness, we're building so many data centers. This can't be sustainable. When it stops, the music's going to stop. The economy is going to decline and Nvidia is going to decline. The mega caps, the hyperscalers can't afford to do this. That's one level of anxiety that we've been living with for a few months. The other level of anxiety is the exact opposite. Oh my goodness, AI is so potent, it's going to run us over. It's going to go industry by industry and destroy it. And software stocks are worth nothing and at their terminal value. These are, those two things are opposite.
5:41 Gil Luria? Either you believe AI is great and it's going to transform the economy in two years. Or you believe that AI isn't that good and we're going to stop building data centers. Those two things are opposite types of anxiety. And we think that, you know, I've lived with a lot of anxiety in my life, but we can take a deep breath and say, both of those things are pretty extreme perspectives. What we do know is that AI is incredibly valuable. It's very potent technology that we are just starting to realize how useful it is to both business customers as well as consumers. Business customers are willing to make long-term commitments, which is why Microsoft, Amazon and Google are building these data centers.
6:25 Gil Luria? Cause they have these long-term commitments. And consumers are willing to pay more and more for these subscriptions and using these tools in an even more comprehensive way. We know that's happening. So the anxiety about AI isn't real and we don't need these data centers. Nvidia can help us put that aside by telling us, look, this data center construction is going to continue. On the anxiety of AI is happening too fast and everybody's going to be unemployed. We can also take a deep breath about that and say somewhere between software engineers that can that are very much impacted by AI and nurses that are probably not going to be impacted by AI for decades. We have all the other professions.
7:11 Gil Luria? And yes, AI is going to impact every single profession in that progression, but not all at once. Some professions are more susceptible than others. They will change. The hiring around those will change. People that no longer fit in that profession will move to the other professions. This is not going to happen in a two-year timeframe. Those types of essays are science fiction. They are doomer porn. We can we can put them aside and and just focus on what's in front of us, which is a very powerful technology that could drive productivity growth, which is a good thing. It'll help increase the value of our labor, which will get us paid more. It'll help our companies grow faster so they can hire more.
7:52 Gil Luria? That's the more likely scenario than those extreme concerning scenarios.
7:58 Ed Elson? I think that the Salesforce earnings is a good sort of foil to the Nvidia earnings, both coming out the same day, which is a reflection of those AI anxieties that you just brought up there, that AI is going to be so great that it's going to kill all of the legacy companies. I look at this, the Salesforce earnings, revenue grew 12%. That's very strong. I looked at remaining performance obligations, $35 billion, which is actually higher than expected. The only issue was the revenue guidance for the year, which everyone is saying was a miss, but to me it was a meet. I mean, they said 45.8 to 46.2 billion. Wall Street expected 46 billion.
8:39 Ed Elson? That to me, that that sounds like exactly what they said. But shares are tanking, down nearly 6% after hours. What does that earnings tell you about the AI anxiety story? And what do you think of these earnings? Do you think that they are as bad as everyone else seems to think they are?
9:00 Gil Luria? I think the least of Salesforce's issue is AI. I actually think the issue with Salesforce is that their business is just decelerating rapidly. The growth rate was higher this quarter because they acquired Informatica, which is contributing at least three or four percent to that growth rate. So they're already only growing high single digits. Just a couple of years ago, they were growing 15%. It's their business that's decelerating for reasons that have nothing to do with AI. They're losing share to HubSpot and Monday and ServiceNow and Braze and Klaviyo and a whole cottage industry of companies that are providing sales and marketing software that's just better than Salesforce. Having said that, what you're saying is spot on
9:44 Gil Luria? in that the market is going to gllop onto this and say, oh, my goodness, AI is killing software. It's not. Salesforce is just decelerating and their results are declining. There's been plenty of companies that have reported good results so far this quarter, but their stocks went down anyway because of this negative narrative about software. But in Salesforce's case, it's really about just their core business not doing well.
10:09 Ed Elson? Yeah. What do you think about the tension of this AI anxiety right now? You mentioned the AI is going to be less impactful than we thought it was going to be, which is why it's a bubble and so the valuations of everything are going to come down. And then there's the other argument, which is the AI is going to be so powerful that it's going to ruin all of the business models as we know it. Those two forces seem to be in real contention with one another. And I'm struggling to figure out which one is actually the dominant sentiment on Wall Street? Which one is actually the right sentiment? Which one is crazier than the other?
10:51 Ed Elson? And it's hard to sort of parse out what the price of these stocks are actually telling us at this point because those are two, as you say, completely opposite stories.
11:03 Gil Luria? I'd say that we've been living with that first type of anxiety. The data center build out isn't going to get a return for several months. The software anxiety is more recent, but I'd say both are playing out in the market right now and causing a lot of fear. But I would actually posit that maybe that's about something bigger. The fact that investors are so jittery right now is probably an indication that we've had a very long bull run, that there's concerns about the US government and its policies, the geopolitics of our global relationships, our geopolitics of our trade policy that has to change every week now.
11:44 Gil Luria? And so I think the market is jittery, it's looking for bad news, and now we have two opposing but compelling and scary stories that investors are telling themselves that are causing them to knock down stocks. I think that there is that layer of just overall jittery markets based on where we are from an overall macroeconomic and geopolitical perspective.
12:12 Ed Elson? My instinct when I see these massive sell offs is, I think, similar to yours, which is this seems to me an overreaction, this seems to me highly emotional and not nearly grounded in the reality that we're seeing on the ground and the data, not nearly enough. At the same time, I could also see someone saying, you're just sweeping these concerns under the rug. It's convenient for you, especially you, Gil Lurie, as someone who's in this industry, to say it's not a big deal, people are overreacting, things are going to be okay, look how productive the technology is. What would you say to those people?
12:57 Gil Luria? Then I'm really not trying to sweep anything under the rug. I'm talking about we all have to make weighted probability decisions about potential outcomes. I'm just saying the we're overbuilding data centers is a 10% outcome. The AI is going to run everything over in the next two years is a 10% outcome. And there's an 80% outcome that neither of those terrible things is going to happen. And if that's the case, we need to look at what the investable opportunities are. So one of them is Nvidia.
13:29 Ed Elson? Right.
13:29 Gil Luria? Trading at 25 times when AMD and Broadcom are trading at 32 times with not as good of a business. Software, which for years traded on revenue multiples, which was always ridiculous. What does it even mean to be six times revenue or eight times revenue? That means nothing. Shareholders only get cash flows. The value of a company is only the value of their future cash flows. All of a sudden, we're looking at this big universe of software companies on a cash flow base, on an earnings base. We have Microsoft at 20 times cash flow. We have ServiceNow and Dynatrace and Adobe trading at less than 20 times earnings or cash flow. And we have super hyper growth companies like Snowflake and Datadog and Shopify,
14:14 Gil Luria? trading at maybe 35 times cash flow. So those are actual real opportunities that the market has created because of the extreme scenarios. But I don't want to I don't want to sweep them under the rug. They are potential scenarios. I'm just taking the weight and probability and saying, I think there's 80% right up the middle that we're going to be fine, that AI enhances productivity in a way that makes software companies better, especially winners in software. Not every software company, there'll be plenty of software companies that fail. But the good ones will win and those are more attractively priced than they've ever been.
14:50 Ed Elson? All right, Gil Luria, Head of Technology Research at DA Davidson. Gil, thank you for taking us through this.
14:56 Gil Luria? Thank you.
14:59 Ed Elson? After the break, what you didn't hear in Trump's State of the Union. And for even more markets insights, you can subscribe to my weekly newsletter, simply put at edredelson.substack.com.
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16:35 Ed Elson? We're back with Prof G Markets. In the longest State of the Union address in history, President Trump said the nation has achieved, quote, "a turnaround for the ages." He celebrated the strength of the economy, claiming that inflation is, quote, "plummeting." It's not true. And incomes are rising fast. Trump also touched on new initiatives, including the Trump investment accounts and a pledge to make big tech cover its own electricity needs. While domestic issues dominated the speech, Trump did briefly touch on foreign policy as well. He claimed that he's ended eight wars and warned that Iran is rebuilding its nuclear weapons program. He also briefly acknowledged the, quote, "unfortunate ruling from the Supreme Court
17:19 Ed Elson? that deemed the tariffs illegal." Earlier that day, his new 10% Global tariff rate officially went into effect. So here to discuss the state of the Union, we're speaking with Ian Bremmer, founder and president of Eurasia Group. Ian, thank you for joining us on Prof G Markets.
17:39 Speaker 08 My pleasure.
17:40 Ed Elson? So this state of the Union, Trump spoke for a record 107 minutes. Lots to unpack here. Let's just start with your initial reactions. What stood out to you?
17:52 Speaker 08 I had 108 minutes, but I mean, you know, we might have started and stopped the timer. Is it different points? You never know. It was very long and there wasn't much new there. I mean, there was a surprise that a high level member of the Venezuelan opposition and someone that would be credible in a democratically elected government released and then surprised right there, introduced to his family on right there in the Capitol building. That was a pretty big deal, frankly. I mean, it wasn't just cinematic. It is an actual success of the Trump administration and it's a success for for an attack against an authoritarian regime. There's
18:36 Speaker 08 like forces of liberty and freedom. This is the kind of thing that any American president, if they had done, you would say, good on them. So and and yeah, I got to be excited about having the American hockey team win the gold. I remember being in Vancouver for the gold medal match back when the Americans and the Canadians liked each other. And it was one of the most exciting sporting events I've ever been to in my life. I don't even like hockey, but everyone was so excited to be there. And frankly, the Americans were pretty happy for the Canadians were there because they're pretty more excited. They're more excited about about hockey at the end of the day. But but it was great to see them come home after that extraordinary overtime win that could have easily gone the
19:21 Speaker 08 other way. And there they were and excited and they're athletes first and foremost and they're flying the flag and they're proud to be Americans and everyone was cheering them and that was great to see. But I mean, I'm obviously starting with the good moments, right? Because, you know, after that, there wasn't a lot. There wasn't a lot. The economy is not doing well. Trump cannot will it so. This is prof G markets. You know that. The average American is not happy about where the economy is. Trump is underwater on that. He didn't mention Epstein, even though it's been what we've been talking about for weeks now. Larry Summers is being forced out of Harvard. He clearly did not want to go. He was kicking and screaming.
20:03 Speaker 08 There are a lot of Democrats that are getting in trouble. So why is it that Trump is actually not saying a word about this? And it's because it's a two-tier judicial system and he's protecting himself. He's protecting his members of his cabinet, his friends. And that's clearly unpopular for him too. And there are only so many more months to go before midterm elections. And if those elections were today, the Republicans would get thumped pretty badly. And he knows it. He knows it. So this was not an easy speech to give. And, you know, for someone who's only going to have so many opportunities to be in front of the population and really explain to them why it is they need to turn out for him and for the people that are his proxies
20:49 Speaker 08 on the ballot in November, he didn't do much of that last night, in my view.
20:54 Ed Elson? It sounds like we might agree, or at least my initial reaction to this State of the Union address. I expected it to be, or at least was waiting and preparing for it, to be quite awful, or at least somewhat insane, kind of unhinged. That was kind of what I was expecting. What we saw was a speech that was relatively normal and relatively less unhinged, in my view at least, for Trump. And I think one of the things that you bring up there is there was a lot that he didn't say. And it seemed that he was actually weaving around all of the things that seemed to be going wrong for him. The economy would be an interesting one. There were some moments where he flat out lied about things,
21:39 Ed Elson? like when he said, you know, prices are coming down, which is just not true.
21:44 Speaker 08 Not true.
21:45 Ed Elson? The 18 trillion in foreign investment that didn't really seem to make any sense to me. I don't know where he pulled that number from.
21:52 Speaker 08 I mean, for me, the 65 million people that he personally saved in India and Pakistan, I mean, were that true? You know, he should...
22:02 Speaker 08 He should be president for life, that's pretty extraordinary. Uh, of course, it's utter bollocks. So, yeah. Uh, I mean, i- it is, to be fair, um, you're saying it's normal for Trump. And that's a, that's a significant caveat.
22:16 Ed Elson? Yes.
22:17 Speaker 08 Uh, I, I think that we should try to avoid that caveat.
22:22 Ed Elson? Yes.
22:22 Speaker 08 Because, uh, it is still a representative democracy. Look, I mean, the biggest thing he had to respond to was his signature policy for his first year was struck down by the Supreme Court. I've never seen that happen in the State of the Union before.
22:37 Ed Elson? Right.
22:37 Speaker 08 And there the Supreme Court justices are, and people that he appointed voted against this signature policy because it was clearly illegal. And he was told by members of his cabinet, "This is illegal, sir."
22:48 Ed Elson? Yes.
22:49 Speaker 08 "You don't need to do this. You can actually do these tariffs in other ways and you're not gonna get hit back." And he refuses to listen. That is uniquely batshit crazy. It's an own goal, um, and now he's gotta deal with the consequences of that. Makes him weaker.
23:06 Ed Elson? And he seemed quite sheepish about that as well. He seemed quite sheepish about the tariffs. He was mentioning things like the border over and over again. Didn't really seem to mention the tariffs at all, which is interesting because as you say, that is the centerpiece of the policy. And it's the biggest news of the week. I, I would also love to get your reactions to the tariff policies that we've seen, the decision from the Supreme Court. Now we've got the 10% tariffs. He says he's going to bump it up to 15%.
23:34 Speaker 08 Right.
23:34 Ed Elson? As the, the, the foreign policy expert, uh, what does this mean for other nations? What does this mean for foreign governments, if anything?
23:44 Speaker 08 Well, the reason he did not want to do it this way, um, aside from the fact that he's undisciplined and impatient, um, is that it gives him a maximal unchecked unilateral authority to, uh, place tariffs on anyone. Not only any country, but frankly, on pretty much any company, any sector, for whatever reason he chooses, which the president just doesn't have the right to do. Um, because now, he still has tariff authority. And that tariff authority will absolutely allow him to put these tariffs on most of these countries at pretty much the same level. But it is going through an investigative process, which allows those countries to then respond.
24:31 Speaker 08 In that process is precisely what Trump wanted to avoid. So it constrains him more.
24:38 Ed Elson? Yeah.
24:39 Speaker 08 It turns out that the American president is not Xi Jinping. He's not Vladimir Putin. And it's not only because he has midterm elections, though that is one pretty significant component. But it's also because there's an independent judiciary. And even if it's six, three conservative, and even if he appointed a bunch of them. It turns out that they actually follow the law as opposed to the president. Um, and he doesn't like that, but it is the reality. Um, and, and that is good for the corporations. It is good for the markets. And you'll note that when the Supreme Court, uh, did its ruling, even though it was an extraordinary and historic ruling, the markets didn't really move.
25:21 Speaker 08 And the reasons they didn't move is because this was well expected and anticipated by those of us that have been following this. You don't have to be brilliant, you just have to be reading to understand that it was never going to be allowed.
25:32 Ed Elson? Yes.
25:32 Speaker 08 In fact, the only surprise is whether it was going to be six, three or nine, zero. Six, three is not a surprise precisely because we've seen many instances where the law was equally clear against Biden, where it was six, three in the other direction, all of these, you know, major questions, issues, uh, that Biden was pushing up against illegally. And the Supreme Court whacked him down, but the most liberal appointees chose not to align with the majority. That's an unfortunate reality of a some degree of politicization of the Supreme Court justices, but ultimately doesn't undermine the institution in my view.
26:11 Ed Elson? Final question here. Um, we have to ask you, while we have you, we, we rarely get to speak with you on this program. He said he, he said he ended eight wars. That was the claim. And then he listed a bunch of countries. He said he ended wars in Israel and Iran. And then he said he's ended the war in Gaza, but then said it's slightly progressing. I forget his exact, uh, language. What do you make of that claim? Is it right? Is it wrong? If so, how wrong?
26:44 Speaker 08 It's, it's, you know, has elements of correctness. You know, Modi refused to give Trump credit for bringing about the ceasefire. In reality, he and his administration, particularly Marco Rubio, also J.D. Vance at the margins, played a significant role, not unilaterally, but played a significant role in helping to get those two sides to ceasefire. It is unfortunate that Modi gave him no credit. It is ludicrous that the Pakistani prime minister says he should get the peace prize, but the reality is somewhere in between. Armenian Azerbaijan, he has advanced the cause of peace, but the two sides were not actually fighting when he got engaged. It's a lot easier to end a war when they're not fighting.
27:29 Speaker 08 The case of Israel and Gaza, I give Trump a lot more credit in resolving that conflict to a degree than under Biden. We actually have a U.S.-led peace plan that got Security Council resolution approval. The Russians and Chinese abstained. Everyone else voted in favor. All of the Gulf states and the countries in the region favored it. Trump facilitated the release of all of the hostages, both living and remains, and has been able to move ahead a ceasefire that has not held perfectly, but has held more or less with humanitarian restrictions of aid now being largely ended. And so, we no longer have mass starvation in Gaza.
28:12 Speaker 08 So, I mean, frankly, I mean, he was lying a lot more dramatically on the economy
28:18 Ed Elson? Yeah.
28:19 Speaker 08 than he was on foreign policy, in my view. And in some of the places where he hasn't done that well, like Russia-Ukraine, he didn't really mention. I think he got 20 seconds, Russia-Ukraine, because he said he was going to end the war, and he's failed to end the war. And he's admitted repeatedly that he's failed to end the war. So, I mean, he's not completely untethered from reality. He just frequently chooses not to recognize it when it's inconvenient and uncomfortable.
28:45 Ed Elson? Okay. Ian Bremmer, founder and president of Eurasia Group. Ian, thank you. Appreciate your time.
28:51 Speaker 08 Good to talk to you. You're good.
28:57 Ed Elson? Okay, before we end here, just a quick review of the State of the Union address from me. There's been a lot of talk about the address, as you would expect. But I would like to just take a moment to focus on what was actually said in the address, and more importantly, what wasn't said. So let's just start with what was said. Interestingly, the issues that Trump talked about the most were actually the ones that he's kind of getting right. For example, the child investment accounts, unfortunately named the Trump accounts, which gives every American child a free stake in the stock market. We have discussed why we think this is a great thing in previous episodes, and
29:38 Ed Elson? it surprisingly made a very large appearance in the speech. I did not expect that. He also talked about the cost of healthcare, and the cost of pharmaceutical drugs, and the cost of energy, which will only go higher as we ramp up these data centers. And he actually offered solutions to those problems, and he did speak to them at length. That is surprisingly pretty good, especially for a guy who usually spends all of his time at the podium rambling from one usually racist talking point to the next. Now, that isn't to say that it was all good. He certainly did mix in his fair share of racism, calling Somalians, quote, pirates. He also had his fair share of lies. He claimed he's brought
30:23 Ed Elson? down prices. He hasn't. And he also said that he secured $18 trillion of investment, which was probably his dumbest and most egregious lie. But that is kind of par for the course with Trump at this point. What was most interesting to me about the speech was actually what he didn't say. And that is, he barely talked about tariffs. He also didn't talk at all about ICE. He also didn't talk about our relationship with Canada. He didn't talk about our relationship with China. He didn't talk about all of these great trade frameworks that he's been hashing out. And of course, he didn't talk about Epstein. Now, the Epstein omission, I kind of understand. But the rest of those issues, those have
31:08 Ed Elson? been central to his entire agenda. So there's an important question, why isn't he talking about them? Well, I think those omissions were really a tell. Specifically, I think he and his team know that he is actually losing on those issues. And perhaps even further that he is wrong on those issues, that he's wrong about the tariff policy, wrong about his handling of ICE, wrong about allowing his agents to gun down two American citizens in the middle of the street, wrong about all of this. And so instead of trying to fight these issues on the biggest stage of all, they took what
31:48 Ed Elson? is arguably the smarter route, and that is they chose to ignore them entirely. And so it appears that Trump's team is actually clocking what is happening here. The fact that 60% of Americans think he is doing a bad job on the economy, the fact that two thirds of us think his tariffs were a bad idea, the fact that his approval rating has fallen 12% in just one year. Trump is in trouble, and it appears, based on this address, that for the first time maybe ever, he actually knows it.
32:28 Ed Elson? Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our video editor is Brad Williams, our research team is Dan Shlon, Isabella Kinsel, Chris Nodonahue and Mia Silverio, and our social producer is Jake McPherson. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. Tune in tomorrow for our conversation with Tarek Mansour, the CEO of Kalshi.
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