Deepwater's Doug Clinton: AI trade still intact, 'has a few more years to go'

December 31, 2025 • 4m 23s
Mike Santoli (Senior Markets Correspondent) 00:00.000
All right, thank you so much. Joining me now is Doug Clinton, Intelligent Alpha founder and CEO. Uh Doug, how do you think about this? I mean on the one hand, you know, the consensus estimates for NVIDIA reflect pretty much rock solid confidence in how the next few quarters are
Mike Santoli (Senior Markets Correspondent) 00:14.840
shaping up in terms of the capacity constrained build out of the infrastructure. But what about the market's reaction to kind of who's in and who's out along the way?
Doug Clinton (Founder & CEO) 00:24.440
And Mike, NVIDIA is a name we continue to own at Intelligent Alpha. And as a reminder, at Intelligent Alpha, we use the modern large language models to do our stock portfolio analysis, our stock picking. So our models still like Nvidia and I think to Christina's earlier point,
Doug Clinton (Founder & CEO) 00:41.280
right now this whole China thing has gone back and forth for so many months. I remember six months ago we started thinking about this. I think we were very early to the game thinking that look eventually these chips, the higher end H200s and probably Black Wells eventually will
Doug Clinton (Founder & CEO) 00:57.160
be sold into China. And here we are today still talking about it, hasn't happened yet. And so I think once we maybe start to see some actual revenue, some actual dollars flow through to the P&L from Nvidia, maybe that's when the stock finally gets credit for it. But I think
Doug Clinton (Founder & CEO) 01:11.240
heading into 2026, the AI trade is still on, it's still intact in my opinion and I think we still have a few more years to go in it.
Mike Santoli (Senior Markets Correspondent) 01:19.600
You know, when it comes to, Nvidia, of course, as I say, the sell side's there, the stock, you've seen valuation compression, you know, pretty much along the way. It's at like 26 times forward earnings. This is going to be, you know, 160 billion in free cash flow in the coming
Mike Santoli (Senior Markets Correspondent) 01:34.760
fiscal year. Um, so do you think that's just kind of temporary or is the market looking ahead to when, of course, uh inevitably it slows growth off a big base?
Doug Clinton (Founder & CEO) 01:44.720
The market's probably looking ahead to some extent, but I think I think there is a challenge of where is the big incremental buyer, right? I mean, indexes obviously are probably helping all of the MAG7 because they're so overweight those stocks, but who's the big in uh
Doug Clinton (Founder & CEO) 02:00.040
idiosyncratic sort of incremental buyer for NVIDIA, do they need to see some of these numbers from China to adjust? Do they need to get a better sense maybe for what the demand is heading into 2027? Because if you think about 2026, what I think is really interesting is from an
Doug Clinton (Founder & CEO) 02:16.160
AI infrastructure standpoint, demand is off the charts. Micron, just a couple weeks ago, was talking about being sold out for the entirety of 2026 for HBM. Black balls, the demand is huge. You look at the power segment, GE or Nova they're sold out in turbines for a couple of
Doug Clinton (Founder & CEO) 02:32.520
years. And so I think we need to start to get a sense of what does the demand look like maybe into '27 to get investors to feel a little bit better about that to be Yeah. incremental
Mike Santoli (Senior Markets Correspondent) 02:42.480
bitter We can say the AI trade is a lot of I mean there's so many iterations of it or it goes in these waves so we had early in the year the deep seek scare and then later in the year the market just decided it wanted the kind of alphabet broadcom ecosystem over the open AI
Mike Santoli (Senior Markets Correspondent) 02:59.560
Microsoft soft side of things. Um, is that's going to continue to be a little bit of a push pull or are we going to be able to get some clarity into how the winners shape up from here?
Doug Clinton (Founder & CEO) 03:10.240
I think next year the big story in AI will be about distribution. So, 25 to your point, beginning of the year, I think Open AI was sort of crowned the undisputed leader. About mid-year, Google released Gemini 2.5 and I think that's where the tables turned a little bit because we
Doug Clinton (Founder & CEO) 03:28.880
finally saw from Google Google. With all of the tools, all the resources that they have, they finally put out a great model and now Jim and I 3 is also great. Now it's neck and neck. I think those two companies are really the two that are vying for Frontier model sort of winner.
Doug Clinton (Founder & CEO) 03:44.200
In 26, I think it's more about how do these models get distributed and actually into users sort of daily workflows, daily lives. Google does have a good advantage there, so they've got obviously several billion user per day platforms like YouTube, Maps, Gmail email search, of
Doug Clinton (Founder & CEO) 04:00.920
course. And I think Open AI, the question will be, can they find other good distribution partnerships? Can they maybe broaden the way they work with Apple? Might they do a deal with Amazon? There's been rumors about an Amazon investment. I think that will be kind of what shapes
Doug Clinton (Founder & CEO) 04:14.360
up in the first half. If Open AI can find some good distribution and really challenge Google, I think that could tell the story between those two sets of stocks that you talked about.