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Well, as for Nvidia shares, they are on the rise ahead of its results. They're due out after the bell on Wednesday, and it looks to be lifting other magnificent seven names with it ahead of earnings. So what does all this mean for the AI trade and for the market more broadly, joining us now Phil Palumbo, Palumbo wealth management CEO and CIO who oversees more than half a billion dollars in assets under management. Among them Nvidia. Phil, thanks for being with us. So, you know, obviously we're watching the shares very closely, the company very closely, but we're also looking at the ripple effect here. So talk to us about sort of the importance for Nvidia for the rest of the market.

Nvidia's the backbone of this AI movement that we're seeing, which I believe we're in the second or third inning and is there's more than just the AI, then there's robotics, the autonomous driving, which is all tied to chip development, and Nvidia has a leg up relative to their competitors, closest being AMD. So in my personal view, it's, you know, short term there could be volatility around all this, but, but longer term Nvidia's the biggest player then and that's not going to cease as we think about that space going forward.

Phil Simmy and Hyman. How are you? I've been looking at the AI sector for the last couple of years and it's almost the upside down of the late 90s, where the benefits have been going to incumbent players rather than new disruptors, but we've been talking a little bit this morning about some of those disruptors starting to get some traction. Does that make it better for everybody or does it challenge some of the dominance of the incumbents?

I feel that it's, you know, it's a it's an area right now where they're going to be a lot of players, especially the pure plays that are private, like Cerebrus, you know, which eventually go public. You know, they're going to be a big, big player in this particular space. So I think there's just a lot of room for other people to also thrive. It's not just Nvidia, but Nvidia for sure is the dominant player and I just don't see that stopping right now.

Phil, if Nvidia, um I mean what we've seen recently is even if it reports strong numbers, the shares sometimes go down because the expectations are quite high. What then does that do to the Magnificent Seven trade? Is it lasting? Is that an opportunity on the flip side for people to maybe add to their positions? What do you think?

It's not all tied together. I mean, everybody within the mag 7 does something different, right? Like Microsoft right now is dominating in the cloud business. Nvidia is dominating in the chip business. I mean there's they're they're all, it's all relative to AI, but they all do something different. So it doesn't mean if Nvidia is going to get crushed, that they're all going to get crushed in tandem. So, but I just don't think that's going to happen. I do believe that I think Nvidia is going to have a very strong print and I think that it'll, it'll put some, it'll be an engine behind the other mag 7s. I do think you'll see some of that, um, but I do think at this point it's going to be on an individual, uh, individual company basis.

Um, sorry, go ahead. Go ahead, Simmy.

The quality of the broad market, the S&P 500, we have return on assets, other quality metrics almost double than they were 20 years ago, driven in part and in large part by those magnificent seven. Is there anywhere else we can see some of that earnings and return on capital power coming from?

I don't for now, because the, the growth behind this economy is going to be in AI and continue to be for some time. A lot of the investment today is, which is over 300 billion dollars and that's only going to grow going forward. So AI is definitely going to be a big, big part of that. In utility space, um you know, that's a particular space, you know, we need energy to drive these data centers. So we're seeing growth in the in the utility space and I think that will continue going forward. So so it's all kind of tied together in some way. Look at copper, you know, on the commodity side is starting to rally, you know, why is that rallying because electricity and copper is needed for that. So, so we're seeing different markets uh that's that that are going to grow as a result of this AI demand.

So Phil, when you're talking about portfolio construction, how you know, everybody's talking about the sort of AI thesis these days. So how heavily do you sort of wait in that direction? How diversified should people be? What you know, what role should that be playing in people's investments?

So I'm a big believer in quote unquote the Warren Buffett Munger style investment where you own a core group of really great businesses. You know, Berkshire Hathaway is one of them, Costco's another one, waste management, Johnson and Johnson as a couple of examples. And then, you know, you have your, we call elite tech, right? So elite tech, those that are dominating in an area that's really growing today and that's what you want to be involved with. You know, you mentioned before the the late 1990s, I would argue that when you think about these businesses and you think about the free cash flow generation, it's much different than the late 90s and those internet companies. We're talking about companies that have real strong growth. You have incredible free cash flow, I mean, Microsoft's at 70 billion, Nvidia's at like 80, 90 plus billion, margins are at 40% on Microsoft, greater on Nvidia. And their multiples are not nearly as high as they were back in the late 90s. So, so when you're thinking about building a portfolio, you want to have your core positions, you want to have your elite tech, which for me is the Microsoft, Nvidia, uh Netflix and Tesla. And then I do believe you want to have your emerging technology, companies that are going to emerge like the next Nvidias of the world and the next Amazons at some point in the next five or 10 years. And then we, we wrap that around using privates, you know, so because in the private market, there are, like I said before, pure plays that will perform really, really well over the next 5 and 10 years. So, so you don't want to, you want to make sure you're involved in a private market as well, which is really an area that's growing tremendously.

Phil Palumbo, thanks so much for being here. Appreciate it.

Thank you.