Episode 88 | Q1 Check-In for Big Tech

In Episode 88 of “Market News with Rodney Lake,” Professor Lake delivers a check-in on several of the Big Tech companies, including Nvidia, Tesla, Alphabet, Apple, and Amazon. He highlights Nvidia’s dominant role in the AI ecosystem, emphasizing its exceptional revenue growth, industry-leading margins, and strong free cash flow, while also addressing investor concerns about the sustainability of its rapid expansion. The episode explores Alphabet’s position at the forefront of AI through its Gemini model, cloud capabilities, and advertising ecosystem, noting its massive scale alongside a comparatively moderate growth outlook. Professor Lake also examines Tesla’s ambitious vision for AI with the Terafab project, while acknowledging its lower margins and premium valuation, which reflect strong future expectations. He further discusses Apple’s resilient ecosystem, steady revenue growth, and significant free cash flow generation under Tim Cook's leadership. Concluding with Amazon, the episode underscores the strategic importance of AWS and the company’s aggressive investments in AI infrastructure, which may temporarily pressure free cash flow.

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started. Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. Today is an episode that we're going to go over a few companies that are part of the Mag 7, not the whole Mag 7.
But we're going to give a check in here because there's been a lot of news. There's a lot of new information. As a reminder, this is a GW investment Institute, School of Business. GW School of Business podcast. This is for educational entertainment purposes only. We're here. And the heart of Foggy Bottom, George Washington University School of Business, Duquès Hall.
Duquès family studio. All right. Let's kick it off. So we're going to talk about the Mag 7. Mostly. Not all of them probably make it to all of them, but maybe not all of them. But we're certainly going to talk about the ones that I think are most important, which are mostly all of them. All right, so let's dive in.
So what are we going to definitely talk about today? We're going to talk about Nvidia, which I know is a fan favorite. And it's one of my favorite. And it's the largest holding for the GW Investment Institute. And there's obviously lots of news around Nvidia. So we're going to take a quick look at Nvidia. We're going to take a look at Alphabet, also known as Google.
Also super important I think the AI world. Up next Tesla that we're going to talk about Apple. We're going to work on Amazon and Microsoft. And if we get to it we might talk about Meta or somebody else that's not technically in the Mag 7. But certainly, that are important. And we'll talk about other companies, some of these companies we own, some of these companies we don't own as part of the GW Investment Institute student portfolios.
And by the way, we're coming up on the end of the semester, and our students are doing a fantastic job this semester. We're running a couple of different classes. We're running the Phillips Fund, which is a students managing on the fundamental analysis side, broken down into sectors, and we look forward to their stock pitches up coming here soon.
We also have the quant fund running here. And students are building models and coming up with different ideas on how to find great companies that are publicly listed with their models. And so the model building is going really well, actually. And I think, everybody in the class has actually been doing a fantastic job of using AI to help build their model.
So really looking forward to the final pitches, in that class as well. And so our students are accelerating their performance towards the end of the semester. And we're looking forward to that. We're also running, the venture class. So a shout out to Bill Collier. Thank you, Professor Collier, for running that class. You know, the that's, you know, the coin of entrepreneurship and, you know, VC, the two sides of that same coin.
Bill is doing a great job, Professor Collier on that and then shout out to Professor Song, who's running the finance 4101 Phillips Fund, and I'm running the quant fund for reference. Okay, so let's get into the companies. I know everybody, everybody, everybody. And if you do that, you know, maybe there's one person that we haven't identified yet is not following Nvidia if you're in the market.
So if you're a business person, analyst, investor, you are absolutely laser focused in on what's happening with Nvidia. Whether you own or you don't own it, you should absolutely be, aware of what's going on with it. So let's just give a few stats right now where it is, okay. So let's talk about market cap. So $4 trillion, obviously a large company here, depending on the day, largest market cap company in the world.
All right. And what's been happening on performance, let's just do a quick check here. So if you look at the year to date number, you would, you know Nvidia all the talk has been so it's so great in all this. And again, it's been fantastic for our portfolio over the years. But the year to date number is -8.5%.
So then this is again maybe for a timestamp here. This is March 31st when you recorded this to come out a little bit later, but we're, end of March coming in on April 2026. And the year to date number basically through the first quarter of 2026, where -8.6. Well, that does not sound like Nvidia performance. Now let's rewind back a little bit further and you talk about okay well what's the one year number.
Well that's still plus 57%. So it has done fairly well in the last year. It definitely has not done that well over the last quarter. And so we'll have to see what's going to happen there. Now, one of the things that I do think is important is like when we, you know, we'll go through a little sort of modified version of BMPB, which is business, management, price valuation, balance sheet for each of these companies, for today's episode.
So not a full episode, as we do sometimes go into spending a whole episode on an individual company. Today we're going to cut across at least six companies here, and go through a little bit of each one of those components. So when we talk about the business, obviously Nvidia is at the forefront of AI, and their Blackwell chips and Vera Rubin coming out next.
But if you if you think about, and we'll get back to the valuation where they are now, it's quite interesting giving the self so but let's go in a little bit to the numbers on the business side. So if you think about Nvidia from the business side, the $4.4 trillion market cap is obviously a huge market cap, 4.1 at the moment.
But okay. Well what's the revenue number look like? So if you look at the last 12 months through, 125 2026, which is their fiscal year and the end of January. So they have a different fiscal year than that. You know, sometimes traditional, let's say, 12/31, fiscal year, the revenue is 215 billion. And now what's the what's that, from last year?
Well, that is a 65% increase, which is kind of crazy when you consider these numbers, that are so big. So what was it last year, 1/26/2025? Well, it was 130 billion, so 215 billion. But these are very large numbers. And by the way, what is the expectation? The expectation for 2027 on the revenue side is 365 billion.
And, you know, I'm laughing a little bit because the numbers are so crazy. That is anticipating revenue acceleration in the growth, going from 66% year over year to almost 70% year over year. And then, by the way, cooling to 30%. But then the number gets to 478 billion in 1/31/2028. So these numbers are fantastic. They're incredible.
And if it maintains that and I think that has something to do with the valuation, people have concerns, you know, that they can actually maintain this pace. And actually the expectation right now, the consensus is that that it increases. So these are these are huge numbers. Now let's get into what's the gross margin for this. Gross margins for Nvidia for the last fiscal year again through January 70%, 71%.
What were they last year 71%. Year before 75%, that was in 2025, and 73 in 24. So these, these numbers are fantastically high and the basically best in class. Right. So these are our outstanding gross margins. Okay. Well what's the net margins here. Net margins are 52%. For fiscal year 26, 25 is 50% and 55%, so look, these are these are fantastic numbers.
And so the numbers for Nvidia are so high, that lots of people have concerned that they can't maintain these levels. I think that's part of the consideration. So business, you’re absolutely giving this a fantastic score on the business side. And by the way let's talk about the free cash flow just for a second. We got gotta get to some of these other companies.
Or the whole episode will be about Nvidia. But we'll we'll cruise through fast. And some of the other companies I do think Nvidia is important now to to be paying attention to free cash flow. Through 1/25. What, again, is the fiscal year here, $96 billion in the free cash flow. So super interesting to see, what's happening on that.
All right. Now, let's get you know, that's the business obviously in the management side. Jensen Huang, you know, I think is historical. Operator here, CEO co-founder of Nvidia. So, owner operator, we love that. We'd love to see people who are still passionate about the business and super focus. He's got 40 direct reports or something in that neighborhood, has his own way to run the business, has been doing a fantastic job crushing it there.
If you look at the PE on the valuation side now the forward PE 20 times. So this number is crazy. You oh well this seems so cheap. But people are worried about those growth numbers I think. And people are worried about can they keep up this pace. It's already a $4 trillion market cap. And then if you look at the balance sheet, no real concerns on the balance sheet here.
13 balance sheet. These guys remain rockstars. Now on the balance sheet. 62 billion in cash and 11 billion in debt. So net cash, you know, in the in the 50 billion category here. So all good. They're all right. Let's move it on. Let's talk about alphabet or Google, if you like. Here. Alphabet is the parent company, so.
Okay, quick check in here. Very good. We're going to have to breeze through some of these other, companies, quite more, with a better pace, rather, so let's, let's pick up the pace. Market cap 3.4, trillion dollars, obviously massive company the year to date. Well, this is also where the, you know, nearly through the first quarter here, -10%.
But you look at the the one year +82%. So these numbers, in the short term, very challenging, maybe not very challenging. Let's say challenging -10% is not very challenging. That's a challenging number. But the one year return, 82%. So if you bought it in the last year, your last quarter, you're thinking, well, you know, not as good.
But if you bought it last year, you're like, oh, okay, that's not too bad. All right. Up on the stats next here, let's get into the business side. What's happening? With the with the revenue numbers, for Google or Alphabet, revenue numbers. These numbers are also incredible. The scale of them, they're not growing as fast, as Nvidia, by the way.
And what we'll check in here, but you're talking about 400 billion in revenue, for 12/31, they have a traditional fiscal year. 12/31 and so if you look at, the 12/31/2025, again, 400 billion projected for next year. Again, that's what we always care about, not where the company has been. But it is instructive sometimes to look at that, to understand, well, how is this company navigated in some of these markets, and particularly if it's the same management team, if they've done a good job, maybe they're likely to do a good job again.
So not a huge number for, for this year. So they're talking about 408 is the consensus number. That's a 1.5% growth in the 2027 a 15% growth. So the numbers are not staggeringly high and certainly not even remotely comparable, to the numbers that we saw for Nvidia on the growth side. And so that's something to think about as investors.
So the business is doing well I think, you know, not investment advice. Google/alphabet is at the center has one of the frontier models. Gemini three is doing fantastic. And if you use it, it's a multi-modal model and I think it's very capable. And certainly building it into the enterprise is super helpful. I think, they have their own TPUs and tensor processing units for their chips, which are supplements.
They got the cloud business. So really at the front of the line here in AI and, certainly, Google is also or is also a machine with respect to YouTube. And so important to pay attention for that, but not a huge number expected for the growth. Now, let's check in on the gross profits here. Gross profit margin, nearly 60%.
It was 60%, around 60% the year before. You know that these numbers are looking good and the net margins here not as good. On both gross in net, but very good net margins of 28% for this past year and 28% for the prior year. So 25, going back into 24 expected, to be about the same across the board.
Now, one of the things that's interesting is the gross margins for the projected 26 number for the calendar end this year, is going to raise from 60 to 67. So raising the gross margins at this scale is really interesting. So we'll have to pay attention to, to what's happening there on the free cash flow side.
They're investing heavily. So expected. So last year they invested 91 billion expected to invest, by the way, 188 180 billion, for full year, 26. Huge number, but free cash flow last year of 73 billion, even after $180 billion invested for CapEx, 23 billion of free cash flow. So Google, a total machine, you know, doing a great job on, on the management side, really hitting on all cylinders here.
So, you know, no, no questions. No concerns there. But if you look at what's happening on the valuation side, so let's go, to, to the PE right now, we overuse the PE for our classes and we'll do it here, as well. But not super expensive when you, when you're thinking about okay, it relative to the market.
So 23 times the is the forward PE for for alphabet and then back to the balance sheet here very quickly when we talk about what's happening, on that 126 billion and in cash, so no concerns there. 62 billion in debt. And so, you know, again, a huge net cash position. I don't know, concerns for Google.
All right. Moving on. Let's talk about Tesla. Tesla is doing data centers in space. They got the fab lab coming. The Terafab, coming in. So that's something I think is really interesting and paying attention to that. They're going to be building their own chips in. They're launching that now. And I think that's something to pay attention to.
They think that's going to be the limiting factor on growth for AI, and you're going to need chips and you're going to need power to turn on those chips. They're talking about sending those into space and having data centers in space. But let's check in on some of the numbers. Market cap here $1.3 trillion. Not as big as some of the other companies that we talked about, but obviously a very large company.
The year to date number. All right. -19%. So it is not fair that well, for the first quarter here in 2026, but the one-year return also quite good. Plus 40%. So, you know, we own Tesla in one of our, two of our portfolios for the Investment Institute. Again, not investment advice, but our students, are looking at all these companies and trying to position our portfolios as best they can.
Obviously, in the real world, application of AI and the self-driving cars for right now and the Optimus robots. Tesla is a leader. And now talking about the Terafab building their own chips and deploying those into space, I think is going to be super interesting. And possibly they'll have a, tie up, with SpaceX as well.
Obviously on the business side, it's, you know, not as, profitable as some of the other companies that we talked about. But let's take a look, what's happening on the revenue and the gross margin side for Tesla. So if you look at the revenue side, the 2025 number, they have a traditional. 12/31/2025, is the end of the last fiscal year, 94 billion, in revenue, gross margins, you know, 2%, 2.9%.
So really, really not, you know, fantastic gross margins. And certainly, you know, not not the case. Oh, sorry. That's the revenue growth. Slightly down. Excuse me, gross margins. Pardon me, 18%. So these are nowhere near the the numbers that we see for Nvidia and Google. And so in a different business, what are people betting on.
People are expecting that they're going to have a huge growth in the AI world. And the application, the self-driving, and certainly the data centers and space and Optimus, the humanoid robot I think is a is a big deal. So, on the management side, you talk about Musk, you know, executing well, obviously a frontier business as far as pushing the envelope to do interesting things.
And so obviously got to continue to pay attention, to that on the valuation side, this is where people also get concerned. If you think about, Tesla, the valuation has been high, continues to be high. And if you look at the forward PE here 185 times. So really you're paying up for that growth. And people are expecting that, but certainly hasn't deterred a lot of people.
Again, not investment advice. Now let's check the balance sheet quickly before we move on to Apple. All right. On the balance sheet here. Not a big concern. 44 billion in cash and 14 billion in, in debt. So you know, again, net cash position we're not worried about 30 billion in net cash. No concern there. On to Apple. What's been happening with Apple?
This is one of Berkshire's, largest positions. Their single largest position, that it doesn't own completely as an operating company. And. Okay, well, what's the market cap here? 3.65 trillion. Year to date number. So first quarter effectively, for 2026 for Apple, -8.5%. You can see a lot of these mag seven names have had a very challenging but maybe not is too strong but challenging first quarter.
But the in the year to date number not quite as good as some of the other companies but positive about 12%. On the one year number for Apple. So again, let's dive into the business a little bit here for Apple. So if you talk about what's happening on the business side, you know, the revenue numbers are really monster here, for, for Apple, kind of like Google 435 billion, 1227 trailing 12 months, their fiscal year is 9/30 or 9, you know, depending on the date.
But, September end, is their fiscal year. But if you look at the 12/27/2025 numbers, which is the trailing 12 months, we're looking at 435 billion. That's up 10%. And if you look at the end of the fiscal year, which was, September of last year, 416, that's, you know, 6.4% increase. So these numbers are not and monsterous in the last 12 months, 10% increase.
Expectation. Where are they going? That's what we're concerned about: $464 billion, 11%. And so these are massive numbers and 496 out to 27. September 30th, 2027. So percent wise is not a big number, but absolute number wise. Monster number 496 billion closing in on a half $1 trillion on the revenue side for 2027. So but let's look at the the gross and the net margins here quickly.
So if you look at the gross margin, it's very good at 47%. And net income margins 27%. Okay. What's the the free cash flow here. Not investing as heavy as the other companies on the I. Well they're not expected to. So 12 billion effort last 12 months and generating 123 billion of free cash flow through December 27th, 2025 and expected to generate 135 billion, nearly, for this fiscal year through 9/30/2026.
And, you know, the expect the CapEx 13 billion. So not these enormous numbers that some of these other companies, are talking about management. Tim Cook doing a fantastic job, really, you know, all time talent, been operating the company, you know, succession plans are, the concern, for Apple. How can you find somebody as good as Tim Cook?
Well, you had to replace Steve Jobs with Tim Cook, so hopefully they'll find somebody, as good or better for that period of time for the company moving forward. But obviously for now, Tim Cook, can manage to be friends with everybody in the world, doing a great job running really the business very efficiently. Obviously, the consumer product here, I have an iPhone 17 myself, upgraded recently from the 13, fantastic product built into the ecosystem.
That continues to be the case. For that. All right, so we're not going to get to everybody, but we'll close out here on Amazon. So we'll get the five of seven today. Maybe we'll check in on some of these other companies. But let's close it out. Well what with Amazon. So what's happening with Amazon? So market cap 2.2 trillion.
So again very large company here. And what's been the experience for the returns here? Well, the year that they return also very challenge here as part of the Mag 7 -10% and then the one year return. Not great. Plus eight. So not a monster return or anything. But certainly a company that is also at the center, in the AI world is deploying it.
AWS is obviously a huge part of the business there and a big driver, for their profitability. And also, is it going to continue to be, at the center, the largest cloud player, Google, being number two or a Microsoft number two and Google number three, Oracle number four. So obviously a big player in that market.
And very important, when you talk about that. So let's get into the the numbers very quickly here. So if you look at the revenue side, these are really crazy numbers. When you talk about Amazon, obviously the profitability not as high, but the market very large, 708 $716 billion closing in on $1 trillion of revenue for 12/31/2025.
The fiscal year is December for them. That's a 12% growth. So pretty good, especially when you consider the numbers here. The gross margin. So quite good, 50% in the net margins at 10%, not quite as good. They're plowing a lot of money back in though. So if you talk about that, so what do they generate here?
Cash from operations? Last 12 months, 139, billion 131 billion, reinvested, right. CapEx, which, you know, 7.6 trillion or billion, excuse me, in free cash flow. So then if you think about, okay, next year, what's the projected revenue? Up to 806, you know, 12% growth. They're projected to basically invest up 200 billion, and so they'll have negative free cash flow for 2026, 12/31.
So we'll have to see. And I think people are concerned about what's happening there. Again, dominant player here in AI, Andy Jassy talked about the management team really executing built AWS. I think doing a fantastic job here. Jeff Bezos coming back, doing more work around the AI business. I think that's important. Let's take a quick look at what's happening on the valuation side.
So certainly, like much of the other Mag 7, not super expensive for PE 22 times here. But, you know, there are concerns about can these companies continue to scale, where they are. Quick look at the balance sheet, for Amazon. No concerns really. They're, modestly levered. So 183 billion in cash and 169 billion in debt.
Now, people are starting to worry a little bit because the free cash flow is projected to be modestly negative for 2026, but that's after investing heavily 200 billion effectively, for 2026, in AI principally. So something to watch out for. Amazon I do think is at the center here. They have a big platform to deploy AI, AWS, the robotics within the retail platform.
And that this sort of next day delivery that is hooked everyone to stay into the prime world. And so, all these companies, I think, we're invested in all these nine investment advice, but I think it's important to watch what's happening at these mega companies. You know, can these companies continue to grow? I think so I think that the market will continue to grow, the GDP will continue to grow.
These companies will continue to get bigger and bigger, but they have to execute. Gotta watch what's happening on the management team. And they can falter. It doesn't mean that they're going to do it right every time. But as investors, business people and analysts, that's our job to continue to watch. And again, our students are coming up towards the end of the semester.
So we'll be looking forward to the stock pitches. We'll be looking forward to the models. And there's, the company ideas for the venture class. So super exciting time here on campus and exciting time in the market. Keep watching. We really appreciate everybody that watches Market News with Rodney Lake on YouTube and certainly checks in on the podcast, whether it's Apple or it's Spotify.
Thank you very much. Or Amazon or whatever platform that you use and please continue, to let us know if you have ideas for the podcast. Put it in the comments. Subscribe on YouTube. Thanks very much. That is it for this episode of Market News with Rodney Lake. We'll see you back on the next one. Thank you.