I’m Buying $10,000 Of This Stock, Here’s Why
These notes were generated by AI and may contain inaccuracies.
Today on the Joseph Carlson Show, buying $10,000 more of Google stock, already owned. Why buy at all-time highs after 40% surge? Primary reason relates to Oracle's spectacular earnings: revenue projections left analysts in shock, "We're all kind of in shock. Oracle's revenue projections leave analysts slack jaw." Larry Ellison gained $110 billion in one day from his Oracle stake. Wall Street Journal, Bloomberg, Financial Times report Oracle shares skyrocketing 43%, up $100, due to massive AI deals. Similar to Nvidia's recent move.
Explaining Oracle's surge: massive AI deals. Covering details and implications for Google and Amazon. Other news: Apple event with iPhone Air (thinner iPhone) and new AirPods with live language translation, potentially demise of Duolingo. Bank CEOs disagree: JP Morgan's CEO says economy weakening; Wells Fargo's Charlie Scharf says things look normal. Robo-taxi developments: Zuks (new Amazon caravan vehicle) fully autonomous, live in Vegas.
Placing buy order for at least $10,000 more Google today, increasing stake. In passive income portfolio, top holdings: 1. S&P Global, 2. Mastercard, 3. Costco, 4. Microsoft (larger than Google), 5. Google. These are wide-moat, durable companies keeping capital safe with steady compounding. Buys high-quality companies for long-term compounding, no dramatic risks.
Google recent addition, up 45% money-weighted, +$20,000. Many investors stop buying winners due to biases like anchoring bias (anchored to average share price of $176 in this portfolio). Current price ~$240, but still adding because:
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Valuation: Forward P/E 24x next 12 months earnings, reasonable/conservative. S&P 500 similar; lower than Meta, Microsoft, Apple, Amazon. Discounted cash flow shows market-beating returns with steady assumptions.
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Clearer Coast: Past 3-4 months, countered negative Google Search narrative (losing share to ChatGPT per Apple Safari testimony). Quarters show Search growing dominant. Judge ruled Chrome doesn't need breakup, removing major overhang explaining low prior valuation.
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Oracle Catalyst: Oracle up 41%/$100 to ~$350. Key metric RPO (remaining performance obligations, cloud backlog): 2019 $33B; 2021 $35-44B; 2022 $60B; 2023 $70-90B; earlier this year $130B; last quarter $138B to $455B (+360%, vs. strong 15-20% growth).
Never seen such backlog growth; reminiscent of Nvidia surprise. Barron's calls it Nvidia moment for Oracle.
"AI will change everything, but right now, AI is fundamentally transforming Oracle and the rest of the computer industry. Though not everyone fully grasps the magnitude of the tsunami that is approaching."
"Several world-class AI companies have chosen Oracle to build large-scale GPU-centric data centers to train their AI models. That's because Oracle builds gigawatt scale data centers that are faster and more cost-efficient at training AI models than anyone else in the world. Training AI models is a gigantic multi-billion dollar market."
World-class partners: OpenAI (major chunk; diversifying from Microsoft which owns 49%), xAI (Elon Musk), Meta Platforms (majority of incremental backlog). Oracle's claims partially true (unique scaling/integrations) but Google/Amazon also excel.
"It's hard to conceive of a technology market as large as that one. But if you look close, you can find one that's even larger. It's the market for AI inferencing... AI inferencing market will be much much larger than the AI training market."
Inferencing applications: robotic factories/cars/greenhouses, biomolecular simulations for drug design, medical diagnosis images/lab results, automating labs, financial markets bets, legal/financial/sales processes. AI generates AI agents automating sales/marketing/legal/factories etc. Best summary of AI impact.
Top cloud: Google, Amazon, Microsoft, Oracle (ex-China). Microsoft grew 32% last quarter; Oracle 360%. But Microsoft/Oracle rely on anchor tenants:
- Microsoft: OpenAI substantial portion.
- Oracle: OpenAI, xAI, Meta majority of growth (not millions of new SMBs).
Similar to Nvidia's data center growth from 3-4 companies, not gaming.
Amazon (AWS): ~4M+ customers, gradual growth, no massive anchor spikes. Tried Anthropic as OpenAI equivalent.
Google: Similar to AWS, smaller scale (~1M customers), driven by unicorns/new AI startups using TPUs/Gemini/safety tools/server clusters. No massive anchors.
Customer concentration: Oracle most (handful), Microsoft top-heavy, Google less, Amazon most diversified (4M+).
Investors favor concentrated (Oracle/Microsoft) now, but Google/Amazon better for continual compounding: gain thousands customers/day, tens of thousands/month. Accessible for startups to grow organically. 1M Google customers = many potential winners staying on platform.
No outlandish quarters (e.g., 40-50%), but steady predictable growth. AWS 4M+ customers = 4M+ call options; handful become next OpenAI under umbrella. Massive tailwind from Ellison's inferencing vision applies to millions of Google/Amazon customers too.
Google buy due to clearer coast, reduced risk, future-positioned cloud. Oracle at 48x forward P/E, ~0% FCF yield (all into infra). Google owns YouTube, Gmail, Android, Chrome (kept), Search, Gemini; full stack. Valuation ~half Oracle's, higher FCF yield. Asymmetric: low downside 5 years, substantial upside (e.g., $400/share not stretch). Huge beneficiary if Ellison's vision true.
So, I don't buy companies that often at all-time highs, but I'm making an exception here, and I think there's good reason. Now, the first bit of news is heavily related to the opening monologue here, which is Larry Ellison has now jumped. He's worth $110 billion more after yesterday's earnings. Overnight, he gained $110 billion in net worth. Larry Ellison is a rare combination of somebody that's 81 years old, but has a more active mind and a better understanding of technology than most people half his age. He literally understands the future of artificial intelligence, how inference, how training, how all this technology will develop in the future far better than most people literally half his age. That's been a result of him keeping active and involved in this company throughout his life. He has so much information to gauge his opinions on. Imagine running Oracle since the 1970s. How much knowledge you would know about where you stand, about where competitors stand, and about the future of technology. The reference of knowledge he has to work with is incredible. There are some estimates that he's wealthier than Elon Musk. Right now, the Forbes list has Elon Musk just above him, but Elon Musk's net worth is largely derived by a lot of private companies, which we don't truly know the value if they're in an open market. For example, we don't really know how much X would be worth. Larry Ellison's net worth is entirely from Oracle. He owns roughly 40% of the company. So, we can see actively what this trades at. And he's now close to $400 billion. Elon Musk is at 437. So, congratulations to Larry Ellison. $100 billion just overnight. $400 billion in total. And this money is deserved. Larry Ellison could be doing anything with this time. He could be off on islands, private jets. He could own whatever he wants. He could be consuming as much as he could possibly consume. But instead, he's on earnings calls on a quarterly basis, running a large company and doing it incredibly well, which shows that the type of people that earn this type of money and have this type of net worth do it simply because they love it.
Next up, we had Apple do their annual event where they revealed all their new stuff, all their new tech. They revealed a new iPhone. It comes in new colors. It has a more powerful camera. Has a slimmer body design, a little bit wider of a face. Apple still advertising their Apple intelligence, saying that Siri is more powerful now, and overall, it's what you expect from Apple. At this point, we're not going to see any dramatic changes from iPhone to iPhone. The changes are a bit smaller and more iterative. You have a slightly better camera. You have slightly better battery life. You have a more efficient chip that's a bit more powerful. You have a bit better resolution, and so on and so forth. They also introduced the iPhone Air, which is interesting because I've never heard someone say, "I love my iPhone. The only problem with it is it's just a bit too thick." I've literally never heard someone say that. But in this iPhone, the big feature is that it's thinner. Apparently, that's a big selling point for people. They want a thinner phone. Apple also refreshed their series of watches from the Watch SE to the Apple Watch to the Apple Watch Ultra. And like you'd expect, all of them are better. All of them are slightly better than their previous models.
One product that made a lot of headlines early on in the presentation had to do with the Apple AirPods. We know that Apple has been working on this technology for some time, but they finally revealed that the AirPods can do live language translation.
Now, when you are together with someone who speaks a different language, like exploring a market abroad, AirPods Pro will help you understand them in your preferred language using a new simple gesture. Live translation begins translating Spanish while ANC lowers the volume of the person speaking so it's easier to focus on the translation.
Hi.
Hello. Welcome. Today all the red carnations are 50% off. And it doesn't just translate individual words. The meaning of each phrase is translated for you. When you need to talk, just speak naturally. I'd love to take some of these to my sister for her birthday. I'll buy eight, please. Your iPhone displays your words in their language and can even read them out loud if needed.
Now, the AirPods do a lot more than that. They're just an upgrade overall, but that's one of the features that they announced in these latest Pro AirPods that are about $270.
A lot of people have suggested that this is going to be a Duolingo killer. These live language translations will make it so nobody wants to learn a language anymore. And this is where I think investors often get companies wrong with a misunderstanding of the reasons why people do things. Out of the tens of millions of people actively learning a new language, if you were to go up to 100 of them and ask them why are they learning a new language, you'd be hard pressed to find a single one that would say because there's not enough AI language translation tools. Because my AirPods can't actively translate for me. That's not really a reason why people learn a language. In fact, it doesn't even show up in any poll, any statistic, anything that has to do with learning a language. The reason people want to learn new languages is because they want to be able to speak a new language. It's not because of a lack of technology to be able to translate. There have been translation tools that have existed for decades. In fact, Google Translate has existed for a long period of time, and Duolingo's growth has never been impacted by it. Any type of poll where you ask someone why they're learning a new language, they typically cite career advancement as the number one reason. Like I've said before, English is the language of business. It's the language of mathematics, of science, of coding, of aviation, of maritime travel. It's the language that almost all research and PhDs are published in. English has a dominant network effect on languages. And most people want to learn English for career advancement. But I don't think people are going to walk around in offices with AirPods constantly holding up an iPhone whenever their boss asks them something. I don't think they're going to want to do that. And despite the fact again that these technologies have existed, it just hasn't impacted Duolingo's growth. Even while traveling, the number one cited reason that people want to learn languages is cultural enrichment, personal growth, improved communication skills, and many people do it simply for boosting their cognitive function. A lot of people simply do Duolingo because it's a much better form of being on their phone than browsing social media.
There's some people that have suggested, and this is a small minority, so I realize that there's not everyone saying this, but there's some people suggesting that my Duolingo investment has failed, that I've taken a loss, that this has been a failed investment, and that's because the stock price has gone down. Now, it is true that I invested in the company right here. So that is my average cost basis on Duolingo right around here and the stock has fallen from here to here. So I am in the red currently on the company. It's not uncommon for this stock to go up and down dramatically. That's called volatility. When I buy into a new position, it's rare to buy it at the very bottom. It's happened sometimes. Typically, I buy a company after a steep decline and it continues to decline for some time further and I continue to dollar cost average until it finally finds a bottom. In this case, I bought Duolingo after it has declined significantly from the highs of 550 and it's continued to decline down to 250. Although the bottom has not been timed perfectly, it's still incredibly early to call this a failed investment. This has been a stock that I've owned for 1 month. One month and people are already calling it, saying that I should throw in the towel, saying that I should give up on this investment.
Duolingo's Strong Fundamentals
What has actually changed since I initiated my position in Duolingo? Well, here's the most historical data on this company. The revenue is growing massively. When we look at the more important revenue, which is their subscription revenue, this is growing even faster. This is the most recent data we have on this company. The daily active users are growing dramatically. The monthly active users are growing dramatically. We have the paid subscribers. To me, this looks like a chart of a company that's growing in line and compounding over time. And looking past the KPIs, we can see the same thing with the basic financials. Here's the free cash flow, even on a per share basis, growing 43%. As of the most recent quarter, the earnings per share has nearly doubled over the past year as of the most recent quarter. Now, well in excess of a billion dollars in cash with zero debt. The operating margins have climbed to all-time highs, and the profit margins have climbed to all-time highs.
The way that I'll gauge whether or not Duolingo is a successful investment is at least over the next year. I'm not going to be determining the success of it based on short-term price changes. When we look at Duolingo today, I'm not concerned about the performance. It's down 22%. That's minus $4,000. That's a very small position to begin with, and I think there's a very high probability that this one could turn around. The portfolio that Duolingo is in currently year-to-date is up 22%. My strategy of buying companies that are compounding machines, ones with incredibly strong subscription business models, ones that have moats that are under question, there's no consensus on the moat of Duolingo is very similar to the same story of Google just 4 months ago. The moat was under question. It was the same story of Netflix 2 years ago. The moat was under question. The amount of times that I heard people saying that Netflix would fail, that that company was a terrible investment, that I've made a terrible mistake from buying it, it was completely endless. And all of those people were entirely totally wrong. And we see many of the exact same people saying the exact same thing about Duolingo. And while I could be wrong in the case of Duolingo, it's going to take at least a year's worth of quarterly reports and data to determine that, not short-term price fluctuations.
Now, moving on, we get to Jamie Dimon's latest remarks just a couple days ago. Jamie Dimon says here very frankly just very straightforward that the economy is weakening.
I think the economy is weakening. You know whether that is in on the way to recession or just weakening I don't know. And that just confirms what we already thought kind of.
And this is in regards to the big revisions in the jobs number that we had showing that there's more weakness in the economy than we may have thought. And Jamie Dimon goes on again throughout this interview to highlight once again that the economy is weakening. Uh you know hopefully things will be okay and but you do see that kind of weakening unfortunately.
Now he doesn't give a lot of details. In fact he doesn't go in at all to what's weakening what data they're seeing to determine that. This is just based purely off of that jobs revision number. Then we get to Charlie Scharf who is the Wells Fargo CEO asked the exact same question as Jamie Dimon just a couple days ago.
The economy is weakening. You know first I think it's complicated and I think sound bites are awfully difficult to take out of context. And I put into two categories. Number one is what we see in our own data. The second is what you see more broadly. Um, in our own data, things are remarkably stable. I mean, we look at, I know you guys have talked about it this morning and other times, consumer spend continues at the same year-over-year pace. Uh, across almost all wealth levels. Uh, consumer credit is as good um as it's been in the last 6 months. In fact, it's probably trending a touch better. uh companies are in really great shape. Uh we look at signs um for any kind of change and you just don't see it.
Now I think there's some truth to both of them but I believe that Charlie Scharf gets a better picture here. He says that there's not anything imminently wrong right now that based on the data they see the economy overall is strong the consumer is strong. Of course there's discrepancy between spending levels of very wealthy individuals and the lower income ones but that's something that's existed for a while. He doesn't see any trend changes between these different groups over time, but the jobs data gives him concern about the future. Now, while this could be an excuse to panic, to sell stocks, to change your strategy, one thing that I've learned investing for a long period of time is that basing your investing strategy off of the comments of CEOs of banks is not a great strategy. Bank CEOs like Charlie Scharf and especially Jamie Dimon, they're good at their job because they're constantly on guard. They're constantly paranoid. They are in charge of the world's largest banks. These banks have an enormous amount of responsibility and they always approach things with a huge level of caution. Even if there's a little bit of sprinkling of optimism, overwhelmingly what I see from the CEO of banks is cautions and warnings, especially Jamie Dimon. And I think that's what especially makes Jamie Dimon so good at his job.
Now, finally, we get to Amazon's Andy Jassy saying on X today that it's an exciting day for Zoox. A lot of people forget that Amazon owns this little company called Zoox, which is a robo taxi company. And he says that the robo taxis became available to riders in Las Vegas. Yes, it's an autonomous vehicle, but what's unique is instead of just getting from A to B, you actually enjoy the experience itself with carriage style seating. It's a beautiful, comfortable space where you can relax with friends, listen to your favorite music, and just enjoy being together. A very casual post here from Andy Jassy highlighting that they have officially entered into the robo taxi game. They're now doing paid rides. And from what it looks like, there's no employee in the vehicle. No safety monitor. There's no caveats. Amazon again is following the path of Waymo using lidar and getting real paid rides right from the start. Now, of course, the thing that makes the Zoox unique is that it's a symmetrical design. It's going to draw a lot of attention. People will download the app. I expect to see this all across social media as different people try this out and share their experience and so far we've already seen a couple people do so. There was very few complaints from the early users of Zoox. Right now on the KPI the only company that has been reporting their weekly paid rides without any type of safety assistant is Waymo. Now Tesla's trying to get to that point, so they should show up on the chart here at some point in the future, but it looks like Zoox might actually beat him to it. So, we'll get to see how this chart evolves over time. Now, that's going to be it for this episode. I hope you enjoyed.
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