Is Nvidia in Trouble? + Government Seeded Investment Accounts For Kids — ft. Brad Gerstner

26:17And if there's an air pocket here and people think maybe this is overhyped, couldn't you see a 50, 70, 80 % drawdown in some of these stocks, including NVIDIA? Well, I think if you're in this business, humility is absolutely required. And just when you say it's not possible, it becomes possible. I mean, look at 2020, right? We saw over 50 % drawdown in meta, you know, from the top. The stock was trading at 90 bucks a share. In fact, I think it went to$87 a share in the fall of 2022. So, of course, anything is possible. I can paint for you a picture where NVIDIA does five or six dollars in earnings next year.

26:53I can also paint you a picture where Blackwell gets delayed, you know, something, you know, We hit the scaling limits of AI and they do two to three bucks in 2025 or 2026. We don't think that's likely, but you have to plot a future distribution of potential outcomes. And that's got to be on the list. And so you need to apply a multiple to that and say, okay, what is that drawdown? So you solve for that in a couple of different ways. You can either solve for that through more diversification. You solve for it through doing like firms like ours do, which is trying to hedge out risk. In that podcast, Ed, that you listened to, I tried to break it down with Bill.

27:37And I talk about 10 units of risk. So 10 units out of 10 potential units. So that would be 100 % net long. I'm all in on the market. And in January of 23, when we were talking about hard landings, we're certainly going to have a recession. You had all these stocks, you know, NVIDIA was priced at$125 a share before it went to$1 ,400 a share, you know, and Meta at$90 a share before it went to$500 a share. I, you know, I did a variety of these shows and I said, we're all in, right? We got nine and a half units out of 10 units of risk on the table. And I said on that podcast earlier this summer, we were down to three units of risk out of 10 on the table.

28:21Now, you can do that by, in our case, shorting stocks, by selling some of your long positions, by putting on hedges. But that's what we're in the business of doing. We're active managers and we're looking at that risk reward. So, Scott, I think you're absolutely right. Anything is possible in the future. I'm just telling you, when you look at the fat part of the distribution curve, I don't think the comparison to Cisco is at all accurate. There may be a left wing on the distribution curve where that comparison, you know, where these things could have a 60, 70 percent drawdown. But I think it's just as likely like has been the case over the last 18 months.

28:58I mean, listen, we bought the stock at 125. When it went to 200, my good friend Bill Gurley said, sell the stock. 300, sell the stock. 400, sell the stock. You know what was happening? It was getting cheaper on a multiple of earnings basis at every one of those stops. the stock got cheaper. So unless you're actually, you know, I have people who work for us, that's all they do. This is all they do is to cover and to understand the stock. So that's why I have the conviction to invest in them the way that we do. But we also have to be humble that things can change very quickly. I get the sense, or I'll put forward the thesis, that ChatGPT is running away with it.

29:37And the analogy is the EV market where Tesla got to a certain scale and all the other guys, the Pulse stars, the Fiskars, the Rivians of the world, just never got to the same scale. Is ChatGPT literally running away with it? Well, their execution has really been extraordinary. The revenue growth is extraordinary. I think the pace of innovation going on within the organization is incredible, but no, I don't think they're running away with it. In fact, I think we have more competition at the head end of the technology curve than perhaps we've ever had. From who? Well, let me go through the list.

30:12Yeah, sorry. The fastest downloaded model in the world over the course of the last six months is Meta's Llama model, an open source model that is competing and is likely to catch up or pass OpenAI at the frontier when they release Llama 4 either later this year or early next year. Anthropic 3.5, if you talk to anybody in Silicon Valley, is now top of mind for every enterprise, right? It is clearly caught a zeitgeist, you know, in terms of enterprise closed models. Google, you can never count out, given their access to capital and data. And I think Larry Page said last week, or not Larry Page, but yeah, maybe it was Larry or Sundar said last week, that they would literally bankrupt the company before they would stop investing and lose the race around artificial intelligence.

31:06And so I think you have vibrant competition. I think open AI is, one might argue, too big to fail at this point in time. And you have all of these strategic investors in the business. I think that's a great thing. I think America's dominance in AI and leadership in AI from the chip stack all the way up through the application layer is hugely beneficial. So it's exciting to see, but I don't think one company's running away with it. What I will say this, and I said this a year ago on CNBC, I think it was a mortal sin that Google allowed ChatGPT to own the verb. They allowed them to go first. They allowed them to do what Google did to Yahoo, right?

31:52And given the distribution lead that Google had. It should have never happened. But I think due to just the political nature of the Google bureaucracy, of course, you got the challenger out there to take a little bit more risk. And now that's part of the public lexicon. You have 200 million weekly active users of Chat GPT, even though there are competing models that I think are really good. My kids use Chat GPT as a verb, right? They'll go and chat GPT something instead of Googling it. And in fact, I think if you talk to young kids today, the idea that we would go and search through 10 blue links, right?

32:36It's like, it's as foreign to them as us going to a card catalog today, right? They're like, why would you search through all those blue links and endless pages when you can just ask chat GPT and it gives you the answer? I just want to push back on the competition argument you just made, because, you know, I hear you on the one hand, there are a lot of names that are popular. I'd love to see some harder revenue numbers from a lot of these companies. From what I've seen, no one is coming close from a revenue perspective to ChatGPT. But the other side of this that I want to mention is, that I'd love to get your take on, is this idea of big tech corporate incest in AI.

33:19And that is, they're all sort of interconnected in a very weird way that I feel that we haven't really seen before. And when I look at what's happening in the AI space, it feels as if it's all kind of morphing into this one sort of superfluous, interconnected, giant megacorporation, where they all have a stake in each other's success. And the way that I read that is actually, you know, while I agree with you, the innovation for OpenAI has been extraordinary. If you look at the cap table and you look at the board, it doesn't seem that there's much competition going on at all. Well, first, just starting with the premise that it's weird for companies to make strategic investments.

34:01I mean, I've been Silicon Valley for 20 years and strategic investing by, you know, large platforms, whether it was back in the day by folks like IBM or Time Warner, et cetera. That's always been part of the game. But just to press pause there, Brad, this is different. Two-thirds of investments in AI is coming from a small number of companies. What I was going to say, Scott, is you're asking venture capitalists, of which we are, we simply do not have the firepower to invest at the scale of these required investments. I mean, this is nation-state level investing, right? And so there are only a few companies on the planet that can invest in those things.

34:45And I think it's a very efficient and prudent use of their capital. If I'm a shareholder in Apple, I want to see them investing in this. I'm a shareholder in NVIDIA. I want to see them investing in this. I'm a shareholder in Microsoft. But yes, there is a level of corporate strategic investment going on here that is unique. I think there are regulatory reasons for that. I think There's scale reasons for that, just the amount of capital. The other one that you haven't mentioned is there's more sovereign wealth investing going on here than you've ever seen before, right? Because a lot of these dollars that are coming by way of the private equity markets are coming from very large sovereigns, and you're seeing direct investing by very large sovereigns because they too have a stake in the game from Japan to Abu Dhabi.

35:31Stay with us.

35:36Thank you.

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38:33We're back with ProfG Markets. I thought we could talk about AI for hours. I do want to shift us to economic policy, though. Specifically, this initiative you started called Invest America, which we love. Could you give us just a quick explainer on what Invest America is? And I'd love to hear a little bit about how you arrived at this idea and why you started it? Well, let me first say thanks to you guys, Scott in particular, for drawing so much attention to I think the key problem the country faces, which is a growing gap between haves and have-nots. It's a crisis of hopelessness among kids because they don't see a way to have it as good as their parents had it.

39:15And when they feel that way, they start turning against the system. That's the greatest threat to this country. Capitalism and free markets and competition is what has created all of this prosperity. It is the path forward, but it's also the thing that's at greatest risk because there are too many people who feel left out and left behind. So Invest America is a very simple idea that's now being forged into legislation to start every child in America with an investment account from birth. You get your social security number, you get an investment account, seeded with$1 ,000 in the S &P 500. You can't trade it, but you can open it up and look at it on your phone.

39:52So rather than waiting until you're 25 years old at best to start to save from your first job, after you've already missed a third of your life, a third of the compounding, we get you into this magic game of compounding and learning about finances from the very start. And as Warren Buffett has said, those first 25 years changes everything, right? Start with that really small snowball, but what does he say? You need a really long hill. And almost every American misses the first 25 years of that hill. And part of it is because we have a huge cold start problem. It's super hard for a family to open up a custodial account, even for sophisticated families to open up a custodial account.

40:34So the government ought to do it for you. You get your social security number, you get an investment account, seed it with just a little bit. Doesn't even really matter how much they seed it with, and then get out of the way and let the private markets work their magic. So every kid can open up their phone when they get in the seventh grade. They see their individual account that they own with a small slice of Apple, of Berkshire Hathaway, of Eli Lilly, of Microsoft. And the amazing thing is if you start with a thousand bucks and 750 bucks gets added a year. Now this is maybe your folks give up their Starbucks every other day, right?

41:09Or the company they work for says, hey, we'll contribute to the account of your kids or philanthropically or birthdays or bar mitzvahs. But if they do that, by the time you're in seventh grade, you're going to have$14 ,000 in that account. Now you have my attention. Now you have my attention. You want to talk about financial literacy? Show me the incentives, right? That's the incentive. I'm in the game. At age 20, you're going to have close to 50 ,000 bucks. At age 30, 150 ,000 bucks. And at 50 or 55, a million bucks if you don't touch it, right? because we capture those first 25 years. This feels like a total no-brainer to me, and I'm wondering if anyone disagrees.

41:52Have you gotten any pushback? What is the argument to not do this? Well, you know, everything in Washington's a long putt. You asked me a little bit how I came up with this. I know a little something about feeling left out. I mean, I'm here in Silicon Valley today, which very much feels like at the center of the action. But I grew up in rural Indiana in the late 70s, early 80s. My dad, who's first generation college, lost his struggling parts, you know, auto parts manufacturer due to skyrocketing inflation and interest rates. You know, the auto industry was under assault by the Japanese. And, you know, I love this country and I look at what's happening today, I listen to Scott and your TED Talk.

42:39You're absolutely right. We have this emerging crisis that threatens all of this. And my young kids ask me all the time, what are you gonna do about it, right? So what concerned me here is that it seemed that people were moving away from the answer rather than to the answer, right? The answer here is more capitalism and free markets, not less, right? That's the anecdote, the power of compounding. How do we harness the markets? but we have to get everybody into that game. In Silicon Valley, we talk all the time about product market fit, right? You know, really early are the dogs eating the dog food, right?

43:16And, you know, if it's complicated to get people on board, then there's some probably wrong with the idea. This is the easiest idea I've ever talked to folks about from the far left to the far right, right? But I would say, you know, to the extent there's pushback on the far left, They may argue, well, why should rich kids get it? Or why should you invest in all the companies in the S &P 500? Why not just some of them? But I would say that's very remote pushback. On the right, there's a lot of skepticism about government. Why should the government even be involved in seeding something like this?

43:50But again, I would say what's brought them to the table is the idea of 3.7 million new individual investment accounts a year actually owned by the families, owned by the kids, not owned by the government. This isn't another big government entitlement program. There isn't a government account. The government simply acts as facilitator to set up the accounts when you open your Social Security account. So I would say this, at a moment in time where there's not a lot of bipartisan agreement on anything, we're highly encouraged and excited by the momentum that it has. Do you see this as a program? Let's talk about some round numbers.

44:29Start with 6 ,000 or 7 ,000. Do you see adding to it every year with some sort of tax-free status or matching status or branding it such that companies have an obligation or incentive to put in? Do you see it that we're going to totally – I'll use the word infantilize people and say you can't touch it until you're 65? Or do you want to do it until they're 30 and they can buy a house? Or is this something we're trying to set up such that – and this is the idea I like – eventually it replaces Social Security. That in 30 years, we're going to say, all right, in 35 years, Social Security goes away.

45:00you get a million dollars at least on your 65th birthday, and then it's kind of up to you what you do with it from there. Tell me about how the complexion of your specific program, how it differs from some of the other programs, and what you see the end state goal. Who gets this money when and for what purpose? Yeah, no, you have a lot of important questions embedded in there, so let me try to break them down one by one. First, I don't think you can start with$6 ,000 or$10 ,000 or$5 ,000. It costs too much money. There's not going to be political support for it, And you don't need to, right? I think the difference between what we're proposing or Invest America is shaping up is you get 90 % of the bang of your buck by just getting every kid in the game with an individual account from birth.

45:44So actually, I would lower the seed amount to the lowest cost possible to make it tolerable for the government to pass the legislation. and a thousand bucks, 3.7 million kids a year to put it in perspective, 3.7 billion. We're talking about a lot of increases to the child tax credit, right? As you know, the child tax credit, both sides support the child tax credit. Um, it's currently 2000 to $3 ,600 per child. Um, you know, uh, that's refundable back to the parents. The parents can spend that money on whatever they want to spend that money on. There's talk about, I think out of the Harris team raising that to 6 ,000.

46:24I think out of the Trump team raising it or a version of it to 5 ,000. Now, remember that applies to 74 million kids. So the cost of that is on the order of$150 billion a year, very big expense. For 3.7 billion a year, we can give$1 ,000 to every child born. And over a period of 20 years, you have almost every American household that is touched by this. So I think part of the magic here is we're lowering the bar to adoption, right? Because at$3.7 billion, you're talking about the cost of a single missile system that we're sending to Ukraine. Like this is a tiny rounding error in our federal budget.

47:10So number two, I think what we have demonstrated here is we brought together a group of companies that have all raised their hand, from Uber and Dara Khashrashahi to Michael Dell to Mark Benioff, who all say, we love this, we love this idea, and we would contribute to the accounts of the kids of our employees, right? So understanding that we can harness the power of the private markets like a 401k from birth. So it's not only philanthropic contributions, it's corporate contributions and it's family contributions to this account. We know in behavioral psychology, There's something called the wealth effect.

47:49Savers save more. And it turns out that even folks who are part of poor cohorts or socially, economically disadvantaged cohorts save more once they have an account. So get them rolling, harness the power of all of these private sector participants to contribute to those accounts. And then in terms of when they can take it out, Scott, again, the legislative process will ultimately determine where this comes out. But one version that I like is that at age 18, you can take up to 20 % out for a qualified expense, go to college, start a business, buy a home. At age 30, 30%, at age 40, 40%, and 50, it's all yours.

48:32One key point that I want to make, this will die on the vine if people think that it's a social security replacement. It's not. We have to deal with social security as social security, as a separate promise that we've made to investors. You and I both know that factually, there is probably a day of reckoning at some point in the future in terms of getting that fully funded. There are a lot of potential ways to solve that, but we've made an important distinction. That has to be independently solved. But getting kids in the game from birth dramatically increases financial literacy, increases the probability they'll graduate from high school and college, increases the likelihood they'll own a home, increases the likelihood they'll start a business.

49:20And so all of those things are social goods that make this NPV positive, net present value positive in a huge way and stands on its own merit as a program and doesn't need to be the solution to everything, but certainly creates a lot of optionality as we look forward. We're sold. What's the status of this? Is this to a bill yet? Are there sponsors? If somebody wants to be supportive of this, how could they be supportive? What's the state of play here? Check it out, InvestAmerica24 on X or investamerica24.org, where we provide a lot of updates. We started 501c3. We've raised millions of dollars.

50:06We've started the CEO Council, as I've outlined to you. There's legislative text. I don't want to say the names of the sponsors just yet, but you will be learning about those over the course of the next 60 to 90 days. But I would say the most prominent Republicans and Democrat senators and House members who are working through legislative language as we speak. We've been in touch with senior people on both presidential campaigns. And we think that when we get to the spring, here's our objective, Here's our goal, Scott. We want to have this all hammered out, the legislative language, by this fall.

50:43We know whoever's elected, whether it's Trump or whether it's Harris, in the spring, they're going to have a package. It's the honeymoon package that always comes out of the winning presidential contender. and they're both talking about a lot of things for kids, right? And it seems to me that the key component of both of their campaigns is a version of the child tax credit, earned income tax credit, you know, on the Republican side. It's fantastic, okay? But there's going to be a lot of wrestling, right? Because we're going to have an evenly divided Congress. There's going to be a lot of wrestling over what we can afford to do.

51:25and what I'm hopeful of, if we have this on the shelf, ready to go, right? If we're going to spend hundreds of billions of dollars to help kids, then shouldn't we have something that actually creates an account for the kid? The problem with the child tax credit, I love it, but the parents could spend it to buy a new iPhone, a new TV, a new car. They can spend it on whatever they want to spend it on, okay? Can we take a tiny fraction of the child tax credit, one one hundredth of what we're going to spend on the CTC and put it into an account for every child in America. You know, in 2026, it's the 250th anniversary of this country.

52:03OK, what better gift to every future generation than a commitment that we start them all with seed capital in the upside of America? Right. This is a bet on the future. The 500 best companies constantly rebalance the future of America. Sure, they can go up. Sure, they can go down. But you're betting on America. And we get everybody aligned, realigned around free markets and democratic capitalism in a way that they all win together. They should all be cheering. You know, in 2020, when the government comes in to support the markets, instead of only having the 30 percent of people who are participating in the markets cheering, 100 percent of people need to be cheering.

52:48This is the way to do it. So first off, Brad, we're rooting for you. There's different complexions and nuance and colors around this, but we think it's a fantastic idea. And we talk about this a lot and whatever we can do to be supportive, we'd like to be supportive. Before we let you go here, I want to kind of switch gears. It sounds like we're a similar age. I came a professional age in the Valley and raised a lot of money for my own companies. And the thing that always struck me with a zeitgeist was, while investors such as yourself were very competitive with one another, there was this kind of clubhouse rules that they were very polite to each other and they would never be critical of each other in the press.

53:31It just, I mean, these guys hated each other behind closed doors, but it was definitely behind closed doors. And now I can think of few industries where the icons of those industries are saying such vile, aggressive things about each other. I'm just curious, as someone who left San Francisco in 2000, I'd like to get your take on why do you think it's happening? I mean, we've had polarized politics for a while, but what's going on here? Because I got to be honest, I'm sort of enjoying it from the cheap seats. I think it's bad for society. But to see a venture, one venture capitalist calling another venture capitalist saying he's got fentanyl blood on his hands because of the support of a newspaper that's writing an article about his fam.

54:12I have never seen anything like this in any other sector. What do you think is going on here? First, like you said, I think these things have been going on behind closed doors for decades. This country has had vitriolic debate for its entire 250-year history, right? I mean, called everybody everything under the sun. In fact, we had duels, right? We went and shot each other on the other side of the river.

54:41over these misgivings. The All-In pod last week, where you well know, I was the fifth bestie for a long time and spent a lot of time with those guys. Last week, Reid Hoffman came on for two hours, I think, and talked with David Sachs. And if you looked at what they had just been tweeting about each other the week before, you would have said, those guys could never sit down and have a conversation. I thought it was an incredibly constructive conversation that they had. So for more downloads, we should have been shit posting you before you came on. Is that what you're saying, bro? I mean, listen, you watch the NBA.

55:14They talk shit about each other on the court and then they walk off the court and then they're best of friends. So that doesn't cause me concern. I will say this. I, you know, and people accuse me all the time of being too optimistic. You know, I'm optimistic we're gonna pass Invest America. I'm optimistic that we're going to improve our system of capitalism. I think it's the best system the world has ever known. And I think our national advantage has never been greater. And I think a key source of our national advantage is our innovative advantage. And this is the heart of it. I think people are really heated at this moment in time because the people at the top of the tickets are really heated.

55:56It's a unique moment in our politics. We're going to come out on the other side of this. Whoever gets elected, the country is going to survive. and we're going to continue, you know, we're going to continue to thrive. I would say there's as much partnering going on, you know, Scott, behind the scenes. All of us are having incredible conversations about ways we can partner. I've got a closing question for you, Brad. You mentioned you're the fifth bestie on the All In pod. You're a frequent guest. You're a good friend of them. I'm not sure if you know this, but one of Scott's biggest and loudest critics is the host of All In podcast, Jason Galacanis.

56:31As a friend of All In and now a great friend of the Prof G Markets podcast, would you be willing to broker a peace deal between Jason Calacanis, aka J-Cow, and Prof G, Professor Scott Galloway? No interest. No interest. Let me just cut this off. As FDR said, judge me by my enemies. Please encourage them to keep shitposting me. I think it only helps me. I want to see it happen. We need the connective tissue. Well, I will say this, that I think what you guys are doing, what they're doing, what Gurley and I are doing with our own podcast, you know, the federation, right? The demonopolization of all these conversations in media generally is, again, part of the strength of the system.

57:16Lots of conversations, lots of ideas that are percolating up. And, you know, I'm sure he would welcome the debate. But I really appreciate you guys having me on. I'm going to take you up on your offer to help continue to push on this. Yeah, please do. We do love this, Brad. The work you do, Scott, in highlighting the problem is amazing. Now it's time for a common sense, simple solution that both parties can get behind. I'm not interested in anything that doesn't bring everybody to the table. I will tell you this. My son, Lincoln, just turned 16, went to Washington this summer to intern with Invest America.

57:56And I saw him after a couple of weeks. I said, what's your biggest takeaway? He said, you know, everybody tells me this place is broken. They hate each other. He said, everybody I talk to, Democrats and Republicans, they're smart, they're hardworking, their teams are trying to come up with solutions to the idea. This idea that America is broken, right, is way too cynical, way too pessimistic. and I think we're going to be surprised when we look back over the next five years. Our national advantage will increase, not decrease, but we all have an obligation to do our part. Thank you so much, Brad.

58:30Brad Gersner is the founder and CEO of Altimeter, a leading technology investment firm based in Silicon Valley that manages public and VC investment portfolios. Brad has worked in technology for 25 years as a securities lawyer, a founding principal at the VC firm General Catalyst, and a three-time founder before starting Altimeter. Brad, this has been great. I've really loved this. Thank you for coming on. Thanks, Brad. It's been fun, guys. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producer is Catherine Dillon.

59:00Mia Silverio is our research lead. And Drew Burrows is our technical director. Thank you for listening to Prof. G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

59:15Lifetimes.

59:20You have me in kind reunion As the world turns And the dark flies In love, love, love, love

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