Nvidia has MORE demand than supply: Landsberg Bennett Private Wealth Management CIO

Key Concepts

• NVIDIA: A key player in the AI ecosystem, positioned as a “picks and shovels” provider for the AI gold rush.
• AI Ecosystem: Beyond semiconductors, encompassing data centers, power generation, and HVAC infrastructure.
• Hyperscalers: Large-scale cloud providers driving demand for AI infrastructure.
• Comfort Systems: A company specializing in HVAC services, benefiting from the increased demand from data centers.
• Investor Concentration: The risk associated with a large portion of investment capital being concentrated in a few key stocks.
• Energy Sector (Natural Gas): The US as a leading producer of natural gas and its role in energy control.
• Fast Retailing (Uniqlo): A Japanese retailer experiencing rapid global growth, offering diversification for US-centric investors.
• Citizens Financial Group: A financial institution with a focus on consumer banking.

NVIDIA and the AI “Picks and Shovels” Play

The discussion centered heavily on NVIDIA (NVDA), currently the largest holding in Lance Burg’s portfolio. Despite concerns about the circular flow of capital within the AI ecosystem – with NVIDIA funding CoreWeave, which in turn invests in Intel and Oracle, while OpenAI continues to raise capital – Burg remains bullish. He frames NVIDIA as a “picks and shovels” provider, analogous to the California Gold Rush, arguing that demand will continue as long as hyperscalers (large cloud providers) need more computing power. He stated, “Every time you see hyperscalers say I’d to buy more, I’d buy more, I think we’re still in that environment.” Burg acknowledges that NVIDIA’s earnings growth is decelerating but believes the stock will continue to rise as more companies demonstrate profitability within the AI space. He employs a “work until it doesn’t work” strategy, rebalancing the portfolio by adding during downturns (like 2022) and trimming during rallies.

Expanding Beyond Semiconductors: The AI Ecosystem

The conversation broadened to the broader AI ecosystem, emphasizing that investment shouldn’t be limited to chip manufacturers. Burg highlighted the significant capital expenditure required for data centers, power generation, and HVAC systems. He specifically recommended Comfort Systems (FIX) as a key play in the HVAC space, noting its strong performance and continued potential. He cautioned against equating utility companies solely focused on AI with broader utility exposure, stating, “Don’t own utilities that are only A.I. utilities and call that utility exposure. It’s just a different A.I. exposure.” He stressed the importance of a holistic view of the AI theme, encompassing the entire supporting infrastructure.

Macroeconomic Considerations and Market Risks

Several macroeconomic factors were discussed, including tariff confusion stemming from recent Supreme Court rulings, geopolitical tensions (specifically Iran), and investor concentration. Burg downplayed the impact of these issues, stating that tariff confusion is a recurring issue and that the price of oil is likely to increase due to the situation in Russia. He acknowledged the risk of investor concentration – a large amount of capital being held in a few key stocks – but didn’t indicate it was a deterrent to investment. He believes the tariff issues will likely return to the Supreme Court within 150 days.

Investment Picks and Rationales

Three specific investment picks were discussed:

• Citizens Financial Group (CFG): While acknowledging a personal frustration with the company due to mortgage-related communications, Burg didn’t offer a detailed rationale for its inclusion in the portfolio. Charles Schwab jokingly expressed his dislike for the company.
• Fast Retailing (FRCOY) (Uniqlo): Burg highlighted the company’s 30% global growth rate and its appeal as a diversification play for US-centric investors. He emphasized Japan as a favorable investment destination.
• EQT Corporation (EQT): Burg positioned EQT as a leading producer of natural gas in the United States, emphasizing the country’s position as the world’s largest producer for 17 consecutive years. He argued that natural gas is a cheaper and more readily available energy source than oil, providing greater control over energy costs. He stated, “We’re the best place in the world to have natural gas.”

Logical Connections and Data Points

The discussion flowed logically from a focus on NVIDIA as a core AI holding to a broader examination of the AI ecosystem and the supporting infrastructure required for its growth. The emphasis on diversification, particularly with Fast Retailing, was presented as a way to mitigate risk associated with US-centric portfolios. The discussion of energy (EQT) tied into the broader theme of infrastructure needed to power the AI revolution.

Specific data points included:

• NVIDIA as the largest holding in Lance Burg’s portfolio since 2019.
• Fast Retailing’s 30% global growth rate.
• The US producing more natural gas than any other country for 17 consecutive years.

Synthesis and Main Takeaways

The key takeaway is that the AI revolution presents significant investment opportunities, but a successful strategy requires looking beyond just the semiconductor companies. NVIDIA remains a strong conviction holding, viewed as a foundational “picks and shovels” provider. However, investors should also consider the broader ecosystem – including infrastructure like HVAC (Comfort Systems) and energy (EQT) – and diversify geographically (Fast Retailing). While macroeconomic risks exist, Burg believes they are manageable and shouldn’t deter investment. A flexible, rebalancing approach, adapting to market conditions, is crucial for long-term success. The overall sentiment was optimistic, with a belief that the AI theme has significant runway for growth.