AI capex just got a $10 billion Berkshire stamp.

Transcript

Tom Buddy, if you thought the AI trade was starting to look a little top-heavy, Warren Buffett just backed up the truck with a ten-billion-dollar reality check on Google.

Marie It is Tuesday, June second, and this is the London Edition of Investment Flash. I am Marie, joined by Tom and Gerald, and we are looking at a market that is suddenly realizing AI infrastructure isn't just a tech story—it's a Berkshire story.

Gerald Yeah look, it is a Berkshire story with a very heavy price tag, given Alphabet is asking shareholders to foot an eighty-billion-dollar bill for expansion. Honestly, only Tom could see a ten-billion-dollar investment and ignore the seventy billion dollars of dilution still sitting on the table.

Tom No way, Gerald! When the Oracle of Omaha buys into a company at a discount while they are raising that much cash, it is a massive signal that the AI equity offering is basically gold-plated. Alphabet is still trading at a price-to-earnings ratio of twenty-six, which is practically a bargain compared to the rest of the Mag Seven.

Marie Wait—wait a second, Tom. I am going to push back here because we have to look at the hardware side too. Nvidia just unveiled those massive supercomputing systems and that new AI PC chip with Microsoft—that is the real pressure point.

Gerald Exactly.

Marie One hundred percent.

Tom That's the whole story.

Gerald Right, and the hardware side is where the blood is. Nvidia was up over six percent in the last session, but look at Intel and AMD—they both fell more than Nvidia rose. It is a zero-sum game in processors right now, and Nvidia is just eating everyone's lunch.

Marie See, Gerald, this is what I mean—Intel is sitting on a price-to-earnings ratio of seventy. SEVENTY! For a company that is currently an AI laggard? That is not just a structural problem; it is a valuation disaster waiting to happen.

Tom For real? Intel is down eleven percent in a week, and I am still not sure it is cheap enough. But did you guys see Arm? It surged twenty-seven percent in a week because it is the primary beneficiary of Nvidia's new efforts. That is where the momentum is moving.

Gerald Fair enough, but twenty-seven percent in a week? That is the kind of move that makes me want to check my calendar to see if it is nineteen ninety-nine again. Analysts revising price targets after a stock has already doubled is basically a free retirement plan for them, isn't it?

Tom Hah—yeah, yeah, I know. I probably sounded the same way about the semiconductor exchange-traded fund back in Q2, but the numbers don't lie, buddy.

Marie Look, if we want to talk about numbers that don't lie, let's look at Schlumberger. They are the only energy company to score a perfect one hundred on the new AI adoption index. They are up thirty-six percent year to date, but they only have a price-to-earnings ratio of sixteen.

Gerald The thing is, Schlumberger is actually using the tech to find oil more efficiently rather than just talking about large language models in every press release. It is a much cleaner way to play the theme without paying the Nvidia premium, though I am sure Tom is already looking for a way to leverage it.

Tom Hey, if it works, it works! But Gerald, I know you've been watching the China angle. That OECD report on subsidies was pretty brutal.

Gerald Yeah look, it was. Chinese companies are getting up to eight times more subsidies than their peers in the West. That is exactly the kind of thing that gets the European Commission and the folks in Washington drafting new tariffs before breakfast.

Marie Not so fast, though. The Yuan just hit a four-year high against a basket of currencies. Even with the trade friction, there is a real haven appeal there because of the geopolitical tensions elsewhere. It is a massive policy tug-of-war.

Gerald Alright, but the People's Bank of China just drained liquidity to a record low. They are trying to cap the bond rally. You can't have a sustainable equity upside when the central bank is actively pulling the rug on liquidity.

Tom Wait—wait a second, Gerald. If the Yuan is strong, doesn't that attract foreign flows into those large-cap internet names? KWEB is down twenty-three percent year to date—that is a lot of bad news already baked in.

Marie Honestly, Tom, calling the bottom on Chinese internet stocks is becoming a professional hobby for some people. We have seen about six 'bottoms' this cycle already.

Gerald Ha—fair enough. It is like trying to catch a falling knife that is also on fire.

Marie Look, I want to pivot to something that actually worked in the last session—Colombia. Those dollar bonds rallied because a right-wing outsider, Abelardo de La Espriella, moved into the runoff. The market is absolutely loving the pro-business shift.

Tom No way, that Colombian exchange-traded fund, ticker G-X-G, is up nearly six percent in a week! It is only four percent below its fifty-two-week high. That is a massive momentum play.

Gerald Yeah look, it is a classic emerging market election play. But as always, none of this is investment advice. You have to be careful chasing a rally that is based on a first-round vote when the runoff is still ahead.

Marie Exactly. But it does show that there is an appetite for high-yield sovereigns if the political story makes sense. Speaking of stories that shouldn't make sense... Gerald, you have to talk about Kohl's.

Gerald Right, so Citi just upgraded Kohl's to a buy with a fifty-three percent upside. They are looking at a billion dollars in free cash flow against a market cap of only one point six billion. To be fair, a forward price-to-earnings ratio of under ten is exactly my kind of language.

Tom Buddy, it is a department store! They just had their best quarterly sales in four years, sure, but it is still forty-one percent below its fifty-two-week high. Is the turnaround actually real this time?

Marie Hold on, Tom. The free cash flow is the whole point. If they can generate that much cash while the stock is this cheap, it is basically a deep-value option on the American consumer. It is the polar opposite of the AI trade.

Gerald Totally.

Marie That's it.

Tom Nailed it.

Gerald It is also a reminder that not everything is about chips. Although, Pimco put out a note today that actually links the two. They are saying that the rise in Treasury yields isn't actually being driven by AI borrowing like everyone thinks.

Marie See, THIS is what I mean by the most original take of the day. Pimco is arguing that long-dated yields are moving because of Fed rate expectations, not because of some structural shift caused by AI capex.

Tom Wait, so if the Fed pivots, the long bond could actually rally even if AI spending stays through the roof? That would be a massive tailwind for tech.

Gerald Exactly, but it also means that the bond bears who are blaming AI for the yield curve are looking at the wrong variable. T-L-T is near a fifty-two-week low, which makes it a very high-leverage bet on any dovish shift from the central bank.

Marie I'm going to push back here, though. If the AI spend is genuinely transformational, it should be inflationary in the short term because of the massive demand for energy and labor. Pimco might be right about the borrowing, but they might be wrong about the macro impact.

Tom No, but that's exactly my point—if we have this much growth and the Fed still cuts, we are looking at a melt-up. Just look at the gold miners! Elliott Management just took a stake in Northern Star Resources in Australia.

Gerald Yeah look, Northern Star surged nearly thirteen percent in the last session. Elliott is pushing for a sale. It is a classic activist move to unlock value in a sector that has been largely ignored while everyone was busy buying Nvidia.

Marie Alright, but we have to mention the regulatory cloud over Freedom Holding. The CEO just got an S-E-C Wells Notice. That is a formal warning of enforcement action, and the stock is still up eight percent in a week. To me, that risk is not priced in yet.

Tom Pff, okay, but who is focused on Kazakh brokerages when we have Berkshire Hathaway essentially validating the AI capex cycle? The real takeaway today is that the trade is broadening out. It is not just about the chips anymore.

Gerald Is it broadening, or is it just getting more expensive? Nvidia is within five percent of its all-time high. Arm is ripping. Alphabet is trying to raise eighty billion. To me, this looks like a market that is pricing in perfection.

Marie Not so fast, Gerald. Look at Schlumberger again. It is the least crowded AI play out there. That is the real signal—finding the companies that are adopting the tech to improve their own margins, not just the ones selling the shovels.

Tom Right—and if you are just finding us, hit follow on Spotify or check out investment flash dot com for the full digest with all the charts and sources.

Gerald Fair enough. Just don't expect me to buy a department store just because Citi says so. I will stick to my boring bonds and wait for the Fed to actually do something.

Marie Oh come on, Gerald, live a little. A price-to-earnings ratio of nine is practically a gift in this market.

Tom Hah, maybe for you! But buddy, that Berkshire move is the real deal. It is a value investor's seal of approval on the most expensive tech trend in history.

Gerald Alright, alright. We have covered the spectrum from Warren Buffett to Kazakh brokers. I think that is enough damage for one morning.

Marie Look, the AI trade stopped being a monolith today. That is the real lesson. We are seeing dispersion, we are seeing new leaders, and we are seeing the bond market start to question the narrative.

Tom Exactly. And we will be right back here to see if the momentum holds.

Gerald We're back at nine a.m. New York time for the New York Edition. See you then.

Marie See you later today at nine a.m. New York time. Keep those stops tight.

Tom Catch you then, buddy!