Market Call: Nicholas Mersch's outlook on Technology Stocks (May 13, 2026)

Añadido: 2026-05-14

[00:00:09]Thanks for joining us today on Market Call. I'm Mela Fernandez. Nick Mur on the show with us today, portfolio manager from Purpose Investments. He'll take your questions on technology stocks. Here is how to reach us.

[00:00:21]1855-326-6266.

[00:00:24]You can send an email as well, market callnoomberg.ca.

[00:00:29]CA, thanks for coming in.

[00:00:34]>> Good day to have you in. Uh, chip stocks of course have been soaring uh through the roof lately. We know there isn't enough supply, but how long do you think this supply shortage could last? And how long do you think some of these companies will benefit from that?

[00:00:47]>> Yeah, look, I think this market here is just absolutely on fire in the semiconductor space. I think the socks index is up around 75% year-to- date. Uh but I think still think we are structurally underbuilt on AI infrastructure. Uh and this is just really showing up in a big way in that certain pocket of the market of semiconductors and a lot of fuel is really added to the fire if you look at the earnings period. So two things were true here. Um we were too low on the capex numbers and the second is that hardware it really has all the pricing power and we're starting to see it show up in a big way when it comes to margins. And there's a very interesting thing going on here in the supply chain but I think you have to zoom out before you zoom in. uh and what we're seeing is this massive demand and supply imbalance and a lot of this is really due to the massive spike in terms of increase that we're seeing from the demand around artificial intelligence and what we have here is each evolution of artificial intelligence is really driving uh the usage higher and higher. So we've at first we had kind of this generative AI then we had reasoning AI now we've got agentic AI where it's going in and really disrupting a lot of these different workflows and each stage is really uh growing exponentially in terms of just how many tokens we use use and all that tokens all come down to compute >> okay you say invest in the companies that are cashing the checks not the ones that are writing the checks and I think most people think they should invest in the ones that are writing the checks they're doing the buildout explain that a little bit more >> yeah so everybody's been investing in the hyperscalers for so And why not? For the past two decades, they've been absolutely dominant when it comes to performance, earnings, all these different factors. But what we're seeing right now is a move on the free cash flow from these hyperscalers to the semiconductor and infrastructure layer.

[00:02:22]So when I say invest in these companies that are cashing the checks, it's the semi and infra players that are cashing the checks while the hyperscalers write them. And what we have here is a very important figure. So at the beginning of last year, we thought the entire capex spend for 2026 was going to be around $350 billion. Now if you fast forward to this year, we're spending a trillion dollars. So that's over half a trillion dollars that the market missed in terms of how much capex is being spent. All of that is flowing to the semiconductor and infrastructure space.

[00:02:49]>> Okay. Let me ask you uh quickly about software because I'm sure we're going to get some questions about software today.

[00:02:55]A lot of people who have not enjoyed the slide down and are looking for recovery.

[00:02:59]What is your take on software in a more general way right now?

[00:03:03]>> Yeah, so software is definitely in the penalty box and to me there's no silver bullet here. Uh because you look at all these workflows, they're being very much disrupted and software is now abundant whereas the hardware components are now all now very scarce and I would say invest in scarcity and avoid abundance.

[00:03:19]So the way that I kind of look at the market right now is stay stay. So stay long semiconductors, stay long infrastructure players and stay away from software >> energy. We talked about uh sometime last year about the need and demand for energy to build out and just the data centers when they're built sucking up the energy. Where are you for that?

[00:03:37]>> Yeah, big time. And we saw a lot of these players come to the market and say, "Look, we need to power these data centers." So that's when things like com combined cycle gas turbines really took off. Uh we needed a lot of time to connect these grids. So the interconnect cues were very very long to connect power to the grid. We also saw players like Nebius and Cororeweave uh and all these other players that used to be on the crypto mining side convert their facilities to these AI high performance compute data centers in terms of just how much power we needed connected to the actual grid. Uh and what we're seeing now is that not only do you need to power these um data centers on the grid basis, you also need to worry about how the power is distributed within uh the data center itself. So there are certain components that are optimizing the power delivery on a chip-by-chip basis. And it's also very much a geopolitical issue because if you think about the arms battle in the AI race, China energy is plentiful, very, very cheap. Whereas in the US, much more expensive. So you have to optimize this much more effectively.

[00:04:31]>> Okay, let's take a quick break. We'll line up the first phone calls for Nick Mish, Purpose Investments. Again, taking your questions on technology stocks today. Here's how to reach us back a moment.

[00:04:56]Welcome back to Market Call. We're going to start with an email right now from Ellen. She says, "May I ask the guest thoughts on ARM Holdings? Nick and I were just talking about that at the break. This is a company out of the UK and you say they own the blueprint for the chip, not necessarily the manufacturing operation."

[00:05:12]>> Yeah, that's exactly right. Right. So, ARM does not manufacture chips. They don't sell chips. Uh they don't own a single semiconductor factory. And what it owns is that blueprint behind it. And almost every smartphone on the planet uh runs on a chip that was designed using ARM's instruction set. So, every iPhone, every Samsung Galaxy, every Pixel, they all run on ARM. And the company gets paid a small royalty every time one of those chips is sold. And it gets paid an upfront license fee when the customer signs up to use a new generation of his designs. But the story for investors now has pivoted, right? This is this big transition to data centers. So for 30 years, ARM is really this mobile phone business. And in the past few years, the largest cloud companies began designing their own AI server chips really to reduce their independence on Nvidia um and Intel as well. And almost all of them chose ARMs architecture as the foundation. So they're in Amazon's Gravitron, Microsoft's Cobalt, uh Google's Axion. They're all ARMbased infrastructure. And data center royalty revenue here uh has more than doubled uh over the past two years and management expects it to double again. Now this is a company also in another wave of reinvention because they're going to from just collecting the licensing revenue uh to also building their own CPU. And we've seen over the last earnings period AMD and Intel rip because a lot of people are starting to pay attention to the CPU part of the equation. So the way that you think about these two things is that the CPU is kind of the orchestrator whereas the GPU is the workhorse. So as soon as you have these agentic AI workflows where a lot of it is being directed in between and orchestrated across all these different nodes, the CPU is kind of the conductor on that train. Now there was a big report out um where people were saying, hey, there's going to be a flip in the ratio of GPUs to CPUs favoring CPUs. So the dominant players in the space right now are Intel uh and AMD.

[00:06:54]AMD has been stealing market share from Intel, but here comes ARM. So it's going to be interesting to see what they can do.

[00:06:58]>> And how easy will it be for ARM to do this? Yeah. So, I mean, look, this is a a massive hurdle, right? Because when you're talking about building these CPUs and and these infrastructures overall, um you really need to build out these complex facilities. So, they've got about two billion in terms of customer demand um that's booked across fiscal 2027 and a longerterm target of 15 billion, but when you think about the processes behind this that how technically difficult it is, there's still quite a long road ahead.

[00:07:23]>> Okay. Uh let's get to our first phone call then. Julie's on the line in Missaga. Julie, go ahead.

[00:07:29]>> Yes. Hi. Uh I'd like to ask about open text.

[00:07:33]>> Uh can you give me your opinion on that and uh would you buy this stock for a long term?

[00:07:40]>> Okay, >> thank you.

[00:07:41]>> Thank you for the question. We talked a little bit about uh the software space and then of course there are companies who are essentially software sort of bring software companies in.

[00:07:53]>> Um what do you think of this space?

[00:07:54]Clearly investors are uh concerned about the stock that has moved off the way it has.

[00:08:00]>> Yeah, for sure. And I mean look at that chart, right? Pretty big sell-off there.

[00:08:03]And Canadian uh Openext, right? Canadian enterprise software company uh selling information management systems uh to large organizations. So think content services, document management, um business process automation cycles. And what they're really at here is the exact center that's getting disrupted by a lot of this AI ecosystem. Now, the early debate in software was saying, "Hey, these are all systems of record that are deeply integrated into workflows and are very hard to rip and replace." But what we're finding now is you can almost spin up some of these systems in the course of the weekend. I uh remember when some of these uh models came out on a Friday morning at uh I booted it up and started my regular workflow at about 6:00 a.m.

[00:08:41]And uh I I opened um my kind of coding model and built a lot of these different apps and then I kind of looked at the clock and it was 5:00 p.m. I forgot to eat lunch because you can kind of get sucked into it. but just how much fun it is building this stuff. And really what that is saying is that look, a lot of these software um uh pricing models are going to change because you have an alternative. Now, I'm not saying they're going to be ripped and replaced overnight because these these things are integrated into workflows. But when contracts come up for renewal, what we're seeing is that a lot more people are doing much shorter term contracts.

[00:09:12]So about one-year licenses or two-year agreements. Um and what we're starting to see now is a lot of that churn is going to start to happen at the end of this year. So, this is one of those areas um where it's still very much a prove me story. They've got a change in their leadership um from a longtime leader. So, we'll see how they can navigate that. Um but yeah, I mean it's in that camp of a pretty difficult name right now.

[00:09:33]>> Okay. So, you wouldn't necessarily invest right now. You would kind of wait till things shake out before you reconsidered going in.

[00:09:39]>> Yeah. And I think people kind of get wrapped up in these stocks that are starting to look more and more like value stocks. But you have to think at what point are these things cheap for a reason? You have to look at organic revenue growth. You have to look at net revenue retention. So that metric bakes in the additional upsells they're getting from additional modules on top of their existing. And it also bakes in churn. And I don't think we've seen the churn cycle accelerate yet. But if they can hold in and if they can have those metrics um really prevail, then it might be one of those names you could do some bottom fishing on. But look, right now I put it in the too hard bucket.

[00:10:11]>> All right, that was uh for Julie. Let's go on to Pat in Hamilton, Ontario. Pat, uh what's your question today? Well, my question is u before you answer my question which is which do you prefer coreweave or ne nebas?

[00:10:25]>> I do want to comment that you pack so much information into your appearances on market call and your explanations are understandable. you kind of boil it down to common sense things that you know people um so many of us people especially older people like myself it's a whole new area this article >> and it makes your head spin right you need you need you need some of that explanation to kind of go let me get it >> exactly and anyway and and I play your I I tape the market call every day it's a great show and I and your um segments I I listen to and it took me like three hours to get through one of them so much to learn there. Now, this is my so I want to know from that. Do you have an online column? Do you have a podcast? Do you have a newsletter because you have so much information that would be so helpful and then then we can get back to my question of Corwe versus Nebia.

[00:11:19]>> Okay, we'll put the contact information uh on the website for you. We'll find a way to do that. Let's get to the question.

[00:11:24]>> Yeah, thanks a lot for for the kind words and a lot of this makes my head spin too. So I'm in that camp and trying to keep up with this stuff these days and the acceleration and pace of innovation um is really just um absolutely exciting and and and really tough to kind of work through a lot of these systems. Now core even Nebius really great picks and I and and these are stocks that are really much a sign of the times and Nebus reported this morning the stock was uh up 15% uh the last time I checked it um when it opened this morning because they printed before it opened. uh and what these companies do is they go on and they say okay we're going to build the data centers and we're uh they're called what is called neoclouds. So you have the core hyperscaler um providers like uh AWS, GCP and Azure are the key are the big hyperscalers in terms of the cloud u uh revenue that they're selling out but what these guys do is they say hey look I've got a whole bunch of GPUs and think of them as kind of intelligence farms and data centers. So what they are are alternative sources outside of those key C cloud players. Now Corey was a very contentious name when it came out in the market because people said hey look how much debt is on the balance sheet.

[00:12:28]They're piling on a lot of debt so that they can buy these GPUs. Uh but then they're reselling them. And what it was is a race against that interest expense versus the revenue that they could generate from renting out the uh compute. And what happened here is something really fascinating because if you look at the price of H100s, which is um the one off the unit of of Nvidia GPUs, so the unit that was um T-minus one we'll call it. So we're on the Blackwell now and the Hopper was before.

[00:12:55]So the H100's the spot price for this, you can see it like a commodity. And when it came out, the rental price was around uh just north of around $25 per hour to rent this GPU. Now, one of the big kind of thesis here was that look, these are rapidly depreciating assets.

[00:13:10]So when you're buying all these assets, they're going to lose value pretty quickly. But the H100 spot price is now higher than it was two years ago. So what does that tell you? These assets don't depreciate as quickly as people thought. And you can get a lot more money from renting these than people previously thought. So I like these companies now. And and when you look at it in the early days, the Michael Barry came out and had the same thesis. Too much of a depreciating asset, too much debt on the balance sheet. Uh, but what I would say is look at the spot price because there's so much demand. There's so much demand for all these different AI systems and it's really flooding into these companies. Now, when it comes to Nebius versus Core Reef, really good question. I like both of them, but I prefer Nebus. Um, and when you look at it, it's really um starting to roll up a lot of these different contracts with Meta. I think this morning they had extended it to around I think it was 27 billion or something. Um, but what Nebius is is it's got a little bit more responsibility when it comes to their balance sheet. So, both great companies.

[00:14:05]Out of the two, I would pick Nebulas.

[00:14:07]>> Okay, there we go. Let's take a quick break. Uh getting back to your phone calls and your emails for Nick when we come back. Stay tuned.

[00:14:21]Welcome back. Bob's on the line. He's in Toronto with his question. Bob, go ahead.

[00:14:25]>> Yeah. Hi, Mela. Hi, Nick. Um, I would sort of concur with what the previous lady said before. I love your explanations, Nick. Um, I have a question on Microsoft and I have a about a 3% holding on on uh on Microsoft on my portfolio and um I am really not making much money. I'm making a little bit and I'm wondering if you think I should hold on to it or go to another one that's uh perhaps a better uh stock in these times and I'm wondering if you can give me a recommendation on that. Thank you.

[00:14:57]>> Okay. So under the software banner, would you put Microsoft in the same category as the others where that business could be lost?

[00:15:04]>> Yeah, because they've got such an awesome cloud business at the same time that's growing very very quickly. So that's what the market is really just trying to decide. It's do we sort this as a software company? Is this a cloud player? Is it an AI company? And the way that I would describe Microsoft is they're stuck between a rock and a hard place. So a rock is uh being the kind of uh classification that it has as a software company. And the hard place is open AI. So they have um a very strong relationship with OpenAI who is a leader in terms of the large language models um and a lot of the kind of like the heavy brains of the operation in AI and they invested about $10 billion in them before this whole chat GPT phenomena came out. So very closely related to them. Now there's been a lot of back and forth in terms of what exactly their partnership look like look looks like.

[00:15:48]So there was revenue share agreements that were there now there aren't. There was exclusivity agreements that were there now there aren't. So people are trying to figure out who is really the bene the beneficiary of the renegotiated terms between OpenAI and Microsoft. And what we saw here was that OpenAI now can go to other cloud platforms like AWS and GCP and they can go out and they can sell um their product through those distribution networks. So really widening their distribution umbrella.

[00:16:14]But at the same time, Microsoft still owns the IP to distribute those licenses uh and and sell that OpenAI's um their intelligence products. So at the end of the day, look, Microsoft is the king of distribution and distribution still matters. Um, but what you have to kind of square away here is that they don't have a lot of these mo models themselves. They have that partnership with OpenAI which is very, very good, but they're also seen in that software division because they sell a lot of these subscriptions on a per head basis and they are adding AI capabilities which are starting to gain traction, but they did have a little bit of a misstep at the beginning.

[00:16:47]>> Co-pilot, you mean?

[00:16:48]>> That's exactly right. Because I don't know if you tried co-pilot in the early days, but it was terrible. it was almost like creating more work trying to make it work. Um, but now they're integrating they're bringing anthropic into their platform. So the another one of these AI providers as well as open AI and it's starting to be much more effective and much more efficient. So the way that I would look at this stock is look they are in a little bit of a gray area in the AI space. They might figure it out.

[00:17:13]Whereas if you look at a company like Google who is completely vertically integrated, they own the silicon. They own the best models. They own an awesome distribution platform. People thought they were uh uh kind of uh dead in the water when it came to the search, but their search revenue is actually growing. So, a name like that where they fully own all the components of the vertical stack, I would be more comfortable owning.

[00:17:34]>> Okay. So, maybe move some money over uh for that or at least give that some thought. Let's go to Sue in Pentictton, BC with a question. Sue, go ahead.

[00:17:42]>> Hi there. I'm calling about digital realy. Uh, it's had a pretty good run and I'm curious if you think this stock has um gone up based on momentum or fundamentals and if you owned it, would you uh sell it or would you hold on to it? Thanks.

[00:17:57]>> Okay. Can you talk to me a little bit about what they do?

[00:18:00]>> Yeah, for sure. Uh, so they're in the REIT space. Um, so they're a global data center REIT. They own and operate around 300 data centers um across 25 different countries and they lease the space, the power and the interconnection all to the hyperscalers as well. So the AWS, Azure, um Google Meta and Oracle um and they provide kind of these two main products.

[00:18:21]So wholesale um and hypers scale which is the large megawatt deployments and then they also offer collocation and interconnection uh via their platform uh digital platform and recurring revenue is really built in terms of renting under these long-term leases um and the AI buildout is really the growth narrative here and they attach to that pretty quickly but when you have some of these companies they're building their own data centers you have the neoclouds that are saying hey you can come here and we'll also optimize and accelerate the workload on top of that. So the other uh players in the market that came with the Neocloud kind of angle, they really tacked on this acceleration and improvement and efficiency metric, whereas these guys are more of the landlords of it. So it's going to be a less volatile name, a little bit more kind of predictive recurring cash flow streams and it's been an okay stock.

[00:19:09]It's been an okay compounder here, but I think there are just better ways to play it when it comes to some of the core nebuses of the world. And then even um when you look at some of the hyperscalers as well, they're also building their own.

[00:19:20]>> Let's go back to the phone lines and Allan's on the line in Toronto. Allan, go ahead.

[00:19:24]>> Hi there. Could you give me your opinion on X and Anadu Qualcomm technology, please?

[00:19:30]>> Okay, so uh Xanadu technology we know spiked uh recently come back back down.

[00:19:36]Remind us what led to the spike.

[00:19:38]>> Yeah, big time. This is a really cool one. And Xanadoo is actually local here in Toronto, which is awesome. They've got their clean room actually uh that I went to a couple months ago uh in a tower on Bay Street. Uh and I was like, "Wait, shouldn't this be in sort of like a bunker somewhere?" But it was really cool. You go into the basement, you see the clean room. Really smart guys. And um yeah, local Toronto kind of story.

[00:19:58]And what happened here um is they went public through uh what's called a Dspack. So the Spack um kind of went public at this point. And then what happened almost like a couple days later was was super interesting. Nvidia came out and said they were making a lot of advances in terms of AI models that were leveraging quantum technology. And now quantum technology is I can't really wrap my head around this thing sometimes. Um but it's a very exciting area because it's saying okay h how exactly can we optimize compute? Now, another tailwind in terms of why this stock um really popped was because it also uses a different method of quantum called photonix, which is the movement of light um in order to try to find a solution to this problem. And what quantum is trying to do is really kind of uh drastically increase processing power um which the all the GPUs are doing right now. So people are saying hey well if quantum takes off and it really works and it and it proves commercially viable will that not kind of um disrupt the GPU and the sort of data center um world but quantum has a very specific use cases that can be sort of beside these two things and when you talk about quantum I say I ask kind of the experts in the area I say okay we we're seeing artificial intelligence and there's this term artificial general intelligence that we and then super intelligence and whatever uh it's more of a sliding scale in terms of how good we're getting but But when quantum kind of happens, there's going to be uh before quantum and after quantum. So it's sort of a binary event. So right now it's still in a lot of kind of production and research and development, but once we find commercial applications for this, it could take off. So I think the way that you look at this stock is it's a binary event that's a call option on quantum working overall. Not something that will have predictable uh free cash flow over the short term. A little bit more speculative, but nonetheless very interesting.

[00:21:44]>> Okay, let's take a quick break right now. Now, we'll take a look at past picks from Nick when we come back.

[00:22:00]Time to go through some past picks from Nick from January 19th of this year. A Taiwan semiconductor was the first pick at 34240 at the time US to 3962 today. 16% upside, 16% total return. Uh to be honest, I thought it would be higher than that. 16% is great, but but right now with the way things are going, uh obviously this is something you've held on to.

[00:22:24]>> Yeah. And this is one that's performed quite well and still one of those wonderful bottleneck monopoly companies, right? And TSMC is that um really uh the the foundational layer that makes the fab of the overall equipment. So they make that kind of base layer and then everybody else puts a bunch of stuff on top of it. and they're the the probably the easiest and clearest monopoly in the overall space. And when it comes to their quarter, um the last quarter revenue is around 40 billion, growing 40% year-over-year. Uh they've got gross margins of around 67% uh operating margins of 58%. So, you kind of like walking through these and you go, these are software margins for a hardware company. So, really great pricing power there. And what they also management did over this last quarter is they raised their fullear um revenue growth to above 30% in USD. And they're also steering capex towards the upper end of 52 to 56 billion range. And anytime you see this company increase capex, it's a very strong signal for the overall space because they don't commit to more capex unless they have that demand. Exactly.

[00:23:24]To to be able to fill it on the other end. So it's a really good kind of indicator in the overall space. Okay.

[00:23:29]And the thesis here, yeah, really writes itself. Nvidia, Ruben, AMD's MI400, Apple's M series, TPUs from Google, uh, Tranium, uh, Microsoft's chip as well, the Maya, all built on TSMC, and they're the, uh, most advanced and, uh, strongest monopoly, I would say.

[00:23:45]>> Are they building then more manufacturing capacity?

[00:23:48]>> Yeah, they're building more manufacturing capacity on the uh, capex front and they uh, sort of buy a lot of the kind of equipments and the machines that make um, the chips themselves too, right? So you've got like ASML and the semicap equipment guys on that too. So you can see that this um how interconnected a lot of this chain is overall. Um and TSMC just being that strong solid monopoly is one of those kind of I would say if you're doing a core satellite around some of these semiconductor names TSMC is the core.

[00:24:16]>> Okay, let's get to your next pass pick from January MCORE EME on the New York Stock Exchange at 6 9869 US at the time to 1985. a 32% upside, a 32% uh total return. They do mechanical electrical sort of servicing, would you say?

[00:24:33]>> Yeah. Yeah, that's right. And every AI data center has to be built by someone, right? Um so these chips, these servers, the networking equipment, they all flow into this physical building that needs concrete, it needs steel, it needs electrical wiring, plumbing, cooling. So all these things is exactly where MCOR operates. And so they're the electrical and mechanical uh contractors who turn really this empty patch of land into sort of Phoenix or Northern Virginia uh into these billion-doll data centers that are humming with all these NVIDIA GPUs. Uh and if you're someone in the trades, I I suggest you kind of move to data center alley because the salaries and the labor shortage there is a very real thing. People can go down there, they can make north of two or $300,000 uh because it's in such high demand in terms of building and constructing these. And the story here is very straightforward, right? we've got this AI triggering this massive capex wave.

[00:25:22]Everybody needs to be building these.

[00:25:23]It's still a massive shortage. And when you think about the revenue streams, it's also very attractive, very predictive because they have strong backlog and they just kind of keep tacking on backlog. You can look at it as recurring revenue uh in terms of how it's going forward. So really strong fundamentals from this company. Uh starting to see some margin improvement because they have that pricing power. Uh backlog's growing. Still a winner in the space.

[00:25:45]>> Okay, let's get to your third pick from January. Fluence LNC on the NASDAQ. At the time it was 2708 uh US now to 2219.

[00:25:55]So 18% drop in return. 18% drop for total return. They're an energy storage company. What has been happening with them?

[00:26:03]>> Yeah. And I can't wait to see the chart because this is a this is a fun one. Um so this stock's been on a pretty wild ride since I picked it, right? Um and I've sold the position since and I'll get into why. So this is a company that does battery storage system integration at data centers. And the thesis here makes sense, but it's a case where you kind of have to pick a dominant player in this space. I also owned a stock Bloom Energy as part of this thesis.

[00:26:25]That stock's up three times and this one's down 18%. Um, so you kind of have to go with those dominant players in the ecosystem. But what happened here was that they have printed two quarters uh since I last talked about it. The first quarter they had a little bit weak margins. Um at the same time there was concern for these Chinese supply uh expansion was really flooding the market. Stock fell down sharply. Uh last week on Wednesday they printed another quarter. Now the quarter was super weak on the revenue line but they said the magic words that the market loves is that they signed a deal to supply the hyperscalers. So the backlog jumped in terms of their order book. Stock ripped after that. Now for why I sold it. If we look at the holder base, Seammens AESQar Holdings LLC, they own 117 million shares, which is 64% of the shares outstanding. Back on February 9th, Seammens disclosed that they had moved 20 million shares from their corporate holdings to an entity called SPT Holdings Sorrow. And this is a wholly owned vehicle by by Seaman's pension trust. So, as soon as you move shares from the corporate to a pension trust, you know what's about to happen. and they're going to be selling those because these pensions have liquidity requirements and they want to cash in on that position. So yesterday, Fluence announced this secondary offering sale from an existing shareholder and and how much was it? It was the 20 million shares that were done in that filing. So anytime you see one of these companies and it's a little bit early in the stage, even though you believe in the buildout, you believe in um the overall area, you have to look at what's happening in terms of the stock that's coming available for sale. And when they sold this 20 million, they also filed a shelf that covers 117 million of those shares. So all these owners are now registered to sh sell those shares. Uh and you have still about 94 or 95 million that's going to be for future sale by the same stockholders that sold the stock down. So while the thesis here is very strong energy grid kind of behind the meter solutions, uh you still have to work through a supply of stock that might be coming available for sale.

[00:28:19]So I'd avoid this name for now.

[00:28:20]>> Okay, let's take a quick break. We'll get back to your phone calls for Nick Mur of Purpose Investment. Take your questions on technology stocks. Back in a moment.

[00:28:56]Welcome back. Let's go to Charlie. He's on the line in Calgary with a question.

[00:28:59]Charlie, go ahead.

[00:29:01]>> Good morning. Thanks for taking my call.

[00:29:03]Uh my call is about uh I've been a a holder of their doc for about two years.

[00:29:15]>> Okay. I think he has cut out. We may have lost our connection uh with Charlie. Uh I'm guessing he just wants to know if you see a turnaround with Adobe. Of course, software concerns uh eating up this uh stock as well and concerns about basically what they do, whether they can make money out of it in the future. What do you think uh for specifically for Adobe?

[00:29:36]>> Yeah, I mean that chart kind of says it all in terms of what the market thinks about it, right? And Adobe is one of those higher stake test cases whether incumbent software can really fend off the storm that we're seeing in generative AI. And essentially what they're doing is really um have a lot of kind of control over the creative process and marketing materials and creating a lot of these digital assets.

[00:29:57]But a lot of the early use cases when you look at a lot of this consumer AI platform, they really attacked that vertical of images because it's so digestible. You can touch it, you can feel it, it's real. So when OpenAI comes out and says we've got this awesome image generator, you say, "Okay, I can put an image together for free." And it used to be when you put these images together, they had six fingers or you couldn't change the text or anything like that, but all these models are getting better and better and better over each iteration. So they're really disrupting the entire kind of creative process behind this. So this is one of those companies where um you can kind of attack it. Uh so call centers were super vulnerable. digital asset creation in terms of the um uh the collateral that you use when you do marketing and the copy behind it. So, one of these um kind of verticals that's immediately attackable by AI. Look, you're going to have problems. They tried to fight back with Firefly. Not a stock I'd own right now.

[00:30:49]>> Okay. Uh that was for Charlie. Let's go to an email from Mason. Is it appropriate to invest in the Canadian tech stock Kraken Robotics at this time?

[00:30:58]from Kraken does sort of underwater surveillance uh drones, that kind of thing. Um what do you think about Kraken?

[00:31:05]>> Yeah, another Canadian headquarter company that is um really great chart to see. I like this company a lot. So they're um underwater technology company. Yeah. That develops these sonar systems, underwater robotics, uh and integrated sort of maritime defense solutions for a lot of these naval um and commercial customers globally. uh and it's really sitting at this um intersection where a lot of people are um paying a lot of attention to right now particularly on the defense side. So a lot more capital's got to allocated here and a lot more attention is getting uh uh paid to this space and the real thesis again sits at the kind of two spending cycles. So the first is that we're seeing NATO and a lot of these allied naval modernization waves um where mine counter measures sort of anti-ubmarine warfare and then also some underwater surveillance is re really being rebuilt around these unmanned platforms um after a generation of underinvestment. And it's really cool with these technologies because you have in the military and defense space what's called these kind of dual use technologies. And if you look at kind of back to the era of how internet was invented um it points back to DARPA. So a lot of kind of the military application tends to um surface a lot of these core technologies that you can use in other commercial applications. So they're also doing kind of underwater uh surveillance across different pipelines or different kind of sub cables and everything else. So you that dual use in terms of having and winning those contracts from a military basis and then also applying it commercially is really great. They've also had a really stellar acquisition that fits in a where a lot of the gaps were missing before. So definitely a company to keep on your radar. Okay, let's get to our next caller. Stan is in Niagara on the lake in Ontario. Stan, go ahead.

[00:32:45]>> Stan, are you there?

[00:32:47]>> Hello.

[00:32:48]>> Hi. Go ahead.

[00:32:50]>> Yeah, my question is on pollen free pollen. It's a PLTR.

[00:32:57]>> Anything specific about it or just an update on where the stock is?

[00:33:00]>> Just update. It's it's worth it to buy or stay away.

[00:33:05]>> Okay. Thank you. Bound here gets a lot of business from the US uh government.

[00:33:08]>> That's right.

[00:33:09]>> And is it something you've invested in before?

[00:33:11]>> Yeah. So, it's actually a name I own in my portfolio as well. It's the only software name essentially that I own in my portfolio. Um and I think that they're kind of getting the stock's getting beat down a lot here because it's being put in that software bucket and it still is relatively expensive to peers. But when you look at the quarter that they just came out with, they absolutely blew the numbers out of the water. This company's growing at 85% year-over-year. rule of 40 which incorporates a mix of earnings growth and profitability is around 140%. So this company is growing at a massive clip and very very uh profitably.

[00:33:43]Originally it was kind of this little black box technology where you didn't really know what it was doing and it had a whole bunch of these government contracts. But what they're doing now is really accelerating the commercial revenue on top of that. And Palanteer pioneered a model which called forward deployed engineers. And it's pretty much a fancy word for saying people that go into companies and figure out how they can use AI. So when you think about these AI solutions uh and implementing them into overall workflows, they have actual people that'll go and sit down at that company and say here's how we implement it. Exactly. So that go to market strategy we're now seeing copied by OpenAI and Anthropic and I think this morning Google just announced that they're converting some of their engineers to these FTEEs. So awesome in terms of go to market strategy. one of the underloved companies that I think can rally strongly from here.

[00:34:28]>> Valuation concerns.

[00:34:29]>> Valuation concerns because it does uh trade at a significant premium on a EV to revenue and a EV to EVA basis. But look, you got to pay up for some of these companies because it is a best-in-class asset.

[00:34:40]>> Okay, let's take a quick break. Back with Nick Mur of Purpose Investments taking your questions on technology stocks in just a moment.

[00:34:52]>> Let's get back to the phone lines.

[00:34:53]Bill's on the line. He's in Bowmanville, Ontario. Bill, go ahead.

[00:34:57]>> Yes. I'd like your guest's thoughts on Constellation Software. It came out uh yesterday with a very good earnings and did nothing today. Uh just tell me what you think about it. Thank you.

[00:35:07]>> Thank you for the question.

[00:35:08]Constellation Software under that same sort of software banner, but a different business type. What do you think about it?

[00:35:14]>> Yeah, and another kind of one of these software charts in decay, right? And I don't think I'd ever um be out here talking anything negative about consolation because for so long they've just been such an incredible capital allocator and Mark Leonard is one of the geniuses of the stock market and every time he put a newsletter out I would read it as if it was gospel. So it was very kind of um uh uh tough to kind of come out against this name did earlier and I mean the stock kind of reaction just shows you how how the market has reacted and this is being placed in again in that software back basket uh that's being disrupted by um AI and what you have to look for here is even though they come out with some of these headline beats um and some kind of revenue growth and some sort of profitability the most important metric for this company is organic revenue growth because they typically grow through acquisitions and I remember when you go into model this company was super easy. You kind of just tacked on a organic growth rate and then a little bit more for the M&A side. But now what's happening is their organic growth rate is continually in decay. And so when you have one of these companies where their uh growth rate is shrinking, that's when you're starting to fight against um a lot of these kind of pressures that we're seeing in the overall AI space. They were thought to be originally insulated because they were very deeply vertically integrated into a lot of these small companies which people didn't think could rip and replace. But look, there's alternatives out there in the market. We're going to see churn. We're going to see a loss in pricing power. So unless you see organic revenue finally tick up, I'd stay away from it for now.

[00:36:40]>> Okay, let's go to the next caller.

[00:36:41]Carrie is in Toronto. Carrie, go ahead.

[00:36:44]>> Thank you, Mela, for taking my call.

[00:36:46]Nick, I'm just wondering if you feel the same way about Shopify as you do about Constellation Software.

[00:36:53]>> Okay.

[00:36:53]>> I currently own the stock and uh I know it's in the penalty box and I'm just wondering for how long.

[00:36:59]>> Okay. Thank you for the question. I want to throw in with Shopify. As with some of the other companies, they're actually taking AI and using it in their own service pro provision for for businesses. Does that help them? Does that alleviate concerns for investors on on what the stock is doing? Yeah, I think he I think he nailed it in terms of I see Shopify not like a constellation because they were an early adopter into this overall. And uh Toby Luke, another one of these incredible Canadian founders, um is very AI hands-on and focused. He's an engineer by trade. Um and he's all over this AI movement. And when you get to what's going to happen in terms of commerce into the future, a lot more of this is going to be agentic. Now, it's got a little bit of a slow start because OpenAI came out and said, "Hey, we're shutting down our shopping on the back end because it's very hard to integrate these systems when you have a whole bunch of different SKs. You have to say, okay, where is my inventory? Where's the pricing? Does it match?" And AI is not very good at scraping and pulling in all these kind of raw data. So Shopify went out and they're actually joining with Google in what's called a universal commerce protocol in terms of connectors in the overall ecosystems that allows people's AI agents to talk to the back end of these stores. So Toby's sort of uh call to arms for the longest time was always arm the rebels and he's continuing to do that. Look, he's AI native um very first and he's starting to turn the company to much more AI focused and they've got a lot of their revenue right I think only 23% of it uh these days is subscription based. So he's going to be shifting his model uh revenue model to that as well. So Shopify is one I like in the space because it's still founder. Uh and this guy knows AI.

[00:38:36]>> Okay, let's take a quick break. On that note, we will have new picks from Nick when we come back.

[00:38:53]Join us tomorrow for market call. Stan Wong will be with us on the show.

[00:38:56]Portfolio manager at Scosia Wealth Management. He'll take your questions on North American Large Cap and ETFs.

[00:39:02]That's tomorrow. And if you miss market call, check out our daily podcast. Find it on iHeart Radio and other platforms.

[00:39:09]You can also watch full episodes on our YouTube channel.

[00:39:13]Let's get to some new top picks from Nick Murish. going to start with Micron MU on the NASDAQ. Micron is uh sort of like that solid choice. Uh but tell me a bit more about why you like it.

[00:39:24]>> Yeah, I wish I was on the show a month earlier when you look at that stock price. And a lot of these charts are going to be um pretty tough to to buy when you look at them, but I think they've all got a lot of more room to run. And all these picks really um are centered on this fact that when you think about the AI compute, it's not just the GPU anymore. We're getting all these optimizations across different parts that you have to roll into a data center. So Micron is really focused on this revolution of Agentic AI because it requires building a harness around your entire workflow. So it's no longer just this request and recall chatbot. You have to have it heavily integrated across different systems and it has to remember the different components as it's going through and and arriving at these solutions. So Micron is this scarcity trade inside the scarcity trade. what they do is called high bandwidth memory um which is effectively sold out through the 2026 period and I was reading a report this morning that they think the supplies are going to remain tight into 2028 and typically what this stock is is very cyclical uh commodity stock because when you had memory it was okay how many uh memory chips can I sell into a personal computer that one person is buying now what we have is this sort of infinite explosion of a of agents that are going out and you have to arm them with a lot of different memory. So the total addressable market has expanded. Now the question here is not on valuation because when you look at it the earnings are growing so much that it's actually cheaper than it was when it started the year despite that stock run. So the bull sorry the bare thesis is not hey uh the earn the valuation's too expensive. The bare thesis is how long can the earnings endure. So what you have to understand here is is this a cyclical company still or is it structural and we're going to need a lot more of this memory going forward. I think it's structural.

[00:41:09]>> Okay, let's get to your next uh pick. Uh here is Lummentum on the NASDAQ. It's LIIT.

[00:41:16]This has sort of visual components that you'd like, but it's also a pricey stock.

[00:41:20]>> Yeah, that's right. And it's again in that overall ecosystem. And it's really at the center of this idea that data centers need to scale. They need to scale up, so denser racks within um the rack. They need to scale out so the communication between the two racks and they need to scale across so communication between data centers and that's as these brains get bigger and bigger they can do a lot more thinking momentum focuses on scale out and they make the laser and optical components that move data between chips in uh inside of these AI data centers. So when you have tens of thousands of NVIDIA GPUs they need to communicate with each other. Copper wires cannot carry that much information that fast. So the signal travels over fiber optic cable using these tiny lasers that lummentum lum makes. Uh in the semiconductor space you can get super into the weeds and go down all these crazy rabbit holes with a whole bunch of acronyms or you can just listen to what the market's telling you.

[00:42:16]Nvidia is the kingmaker in this supply chain and you have to pay attention to whenever Jensen speaks. So Nvidia came out and they invested $2 billion in Lum.

[00:42:25]Then they followed it up with a multi-billion dollar order commitment to build new capacity. So because it this is such a critical component in the overall ecosystem, Nvidia is going out funding that company and then also saying here's a bunch of product orders going forward. So this is one of those rotating bottlenecks or golden screws that's up next in the ecosystem.

[00:42:44]>> Let's get to your third pick then which is Vicor Vicr on the NASDAQ. This is a power conversion play.

[00:42:50]>> That's right. Yeah. So this one's a little bit in the weeds as well. Um but what you have to understand here is that everybody talks about power. Everyone's optimizing for dollars per token per watt. That's the currency of AI. And because uh the US is so energy constraint, China has a lot. We need to talk about power but not only on a grid update level, not only on a grid interconnection level, uh and not only on from a nuclear facility level, but also down to the chip itself. Uh and what Vicor does is they make these small power uh conversion modules that sit on top of the circuit board and feeds them energy and electricity through it. And when you look at modern AI chips, they draw enormous amounts of power. So 1,000 watts per processor. Uh and the larger the chip, uh the harder it becomes to deliver that current without wasting power. So again, it's one of those optimizations in the overall ecosystem when you're thinking about making these more efficient. And just quickly, there's this company going public tomorrow called Cerebrris. And this is why I think it's a very exciting catalyst. They make chips the size of dinner plates that are focused on inference. Uh it's been a pretty open secret that Vicor has been a supplier to Cerebras. Uh then back on April 22nd, the CEO of Vicor, he came out and he said that they see a steep production ramp of its wafer scale engine with best-in-class AI inference performance.

[00:44:05]There's exactly one company in the world building these wafer scale engines and that's Cerebrris. This is a company that's going IPO tomorrow. signed a massive contract with OpenAI. As Cerebrris ramps up, FCOR is going to win a lot more business.

[00:44:17]>> Wow. Okay, that is so much to absorb.

[00:44:19]Again, my head is spinning. Thank you very much. Good to see you, Nick. I appreciate your time.

[00:44:23]>> Thanks so much for having me.

[00:44:24]>> And thank you for joining us today on Market Call. We'll see you back here again tomorrow.