Demand for AI intelligence is insatiable, but where’s the ROI?

Laffer Tengler Investments CEO and CIO Nancy Tengler and her panel of experts weigh in on the major movement in tech stocks after the latest earnings reports left investors with strong operating results but open questions about capital spending and valuations. Today's panel includes Futurum CEO Daniel Newman, SHAKTI Partner Liz Harrow, and Kelly Intelligence founder, CEO, and CCO Kevin Kelly. Video Transcript 00:00 Speaker A obviously we can't paint all of the earnings with the same brush, but across the board there's a lot of green flags on operations. I think where there is more uncertainty is around the capital spending and some of the valuations. a lot of these companies have had a run-up. And especially with, you know, Google for example, their operating business did quite well and their uh search and queries did quite quite well and at multi-year highs. I think just the uncertainty is waiting for a bunch of the uh AI and ad spending capabilities to catch up. But I think Google's always had a history of first focusing on customer engagement and excitement and then the ad revenue will follow. 00:53 Speaker B Google's ad business grew 12%. So it's not like this is like the end of days, but it missed the number. But I don't think we can reiterate enough uh about the difference between this and the internet bubble. That comparison is is a complete false flag. Like we are talking about multi-year compute constrain. The problem like I said is no longer about constrained and it's not a demand question. 01:20 Speaker B The Anthropic S1 told the story. Look, their run to 100 billion and their ability to sell even with free and open source at their back and people still paying premium for their tokens. The the demand for intelligence I think is insatiable. 01:34 Speaker B But having said that, nobody wants, nobody knows who's going to feel all this risk between when demand turns into economic growth that funnels beyond. So I just say right now the silicon to SAS supply chain, everyone knows how we make money. We make money on... 01:54 Speaker C Wait, define that then. What do you mean? 01:56 Speaker B Yeah, we make money on on the sand, the on the wafer uh fabrication equipment, we make money on the chips themselves, we make money on the servers, we sell the servers to the software companies. and everybody in that chain all make money. 02:11 Speaker B But then what's happening now is the question is is like, well, if Eli Lily makes massive investments in AI, where's it showing up in their earnings? If uh, you know, Walmart invests big in in in in in AI and in infrastructure to support pricing optimization, customer flows and and supply chain, is that showing up in their earnings? 02:35 Speaker B And we haven't heard anything about that, yeah, really in in earnings calls. And so I'm starting to think that the the pushback I get on AI ROI. Everybody wants ROI. The ROI beyond the tech companies, memory and all those companies, is not evident enough to investors where they're looking at the inflated risk, higher rates, longer cycles to return, negative free cash flows that could last multiple years and they're saying, who's going to make money from this stuff? And do I want to wait two years or should I rotate into another investment for now where, by the way, 6% risk-free returns that you can get in a in a bond right now. 03:22 Speaker C Yeah. No, I mean, I I'm going to push back just a little. I think we have it is showing up in earnings. We, you know, Walmart was our poster child of an old economy company that was pivoting to all the new technologies and you saw much stronger comps over the last two years. Now, the stock has has flatlined since it went to the Nasdaq. a note to GM, you may want to reconsider. But, um, we're seeing it across uh industries because we sit on all the calls. It's it's cost cutting, it's new product development, it's uh faster sales cycle, it's it's managing um the the supply chain better. That's what we're hearing. And so maybe it's maybe it's part of why, you know, margins are at all-time highs. But I also think it's hard to manage produc- I mean, how measure productivity, um particularly the way the government does. So you you may be 100% right. I think you're certainly right that's what the market's View Comments