Hitting Five Trillion Is Hard; Staying There Is Harder

Five trillion is a headline; the harder story is what comes next. We dig into NVIDIA’s historic market cap, the AI hardware and software flywheel behind it, and the reality that scale turns leaders into targets. From Blackwell-class GPUs to ecosystem partnerships like Palantir, we map how compute, tooling, and customers reinforce each other—and where fragility hides when growth expectations run ahead of execution.

We get candid about market structure. Liquidity and call-option fever can blur the line between conviction and speculation, and when a trillion gets added in weeks, a reset becomes more likely. That’s why we’re trimming oversize winners, keeping meaningful cash in yield-bearing vehicles, and holding a measured slice of gold. Not to sit out AI, but to stay agile. We also look beyond the obvious tickers to the underloved shovels of the AI buildout: data center construction, power, grid upgrades, thermal management, and select semis that benefit from rising compute demand without the richest multiples.

Zooming out, we unpack why U.S. tech clusters dominate: world-class universities, venture capital depth, immigration-fueled talent, and public markets that finance bold bets. But concentration is a double-edged sword. Policy shocks, China–U.S. tech rivalry, export controls, and emerging models trained efficiently on non‑NVIDIA hardware can all shift margins and leadership. Resilience comes from structure: a portfolio that blends platform leaders with infrastructure plays, and that pairs risk assets with cash optionality rather than long-duration bond exposure.

Our take is optimistic, not naive. Celebrate engineering that moves the world forward, but respect the math of large numbers. Corrections are healthy, positioning matters, and patience—funded by real yield—wins more often than adrenaline. If this lens helps you think clearer about AI, chips, and market risk, follow the show, share it with a friend, and leave a quick review so more investors can find us.

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Chapters

• 0:00 NVIDIA Hits Five Trillion
• 2:54 Market Froth And Fed Backdrop
• 5:29 Scale, Competition, And Targets
• 8:44 Speculation Versus Investing
• 11:44 Trimming Winners And Holding Cash
• 14:54 Cash, Yields, And Bond Risks
• 18:24 U.S. Innovation Engine And Moats
• 21:44 China Tensions And Tech Clusters

Transcript

Clem Miller: 0:26

Hello, everybody, and welcome to Skeptic's Guide to Investing. I'm Clem Miller. I'm here with Steve Davenport. And today we're going to be talking about the fact that NVIDIA yesterday reached a high of five trillion dollars market cap. The first time any company has ever reached such a market cap. And, you know, of course, NVIDIA ticker NVDA is kind of a market darling right now. It is the number one designer of uh AI-related chips, gaming chips as well, but AI-related chips uh has developed uh yet another advanced chip called Blackwell. Uh these are GPUs, by the way, graphical processing units, these uh AI chips. And uh and also uh is uh you know does a software stack uh as the industry calls it on top of uh the chips. So they're also a software manufacturer, and they've got various uh partnerships uh to provide AI chips for certain uh uh industries. Uh just yesterday was announced a uh a deal, a partnership between NVIDIA and Palantir, uh the uh defense uh uh advanced software manufacturer who's now trying to get into commercial markets. And so they're working with uh with NVIDIA on um uh on that. So uh NVIDIA um you know is sort of the emblem, I guess we could call it, of what's going on with AI and the AI economy, which of course extends way beyond NVIDIA, uh, but they are the the the central part of it. Steve, what do you have to say? Well I sneeze.

Steve Davenport: 2:35

I guess I'd say that um I didn't expect this to keep happening. I mean, we we came out with an hour an August podcast about the frothy fourth, and I guess I just keep seeing the market go up. And I think that part of it is the Fed cut, part of it is in general, we don't see things on the headlines that indicate there's risks. But I think that with the government shutdown going on, I don't know how we would measure it or determine that. So I think it's a little bit like we're driving blind now. And by driving blind, I I don't think that's a really good thing in terms of uh what are your guardrails and how do you make sure you stay on the road. So um I believe that NVIDIA is a great company. Um is it a company that should be five trillion? Uh I can't tell you what's going to be the top 10 companies in 10 years, but I can tell you that every time we do this and we look back at the best companies 10 years, usually one or two survive. And maybe it will be one or two of these companies, but when you look at Google, Amazon, Microsoft, you know, uh Tesla, and Nvidia, you you see companies who have unique advantages and are special um organizations. And what I believe is, I believe that the US in Silicon Valley has created um a source of innovation and a source of growth that is unlike any other country in terms of educational institutions, investors, early private investors, late stage investors, large um funds that want to uh support these companies because they believe that some of them are going to change the world of the technology and how it gets used in our economy. So, yes, I I think that it makes sense that they are now the the top of the heap. But just as at anything, Clem, I mean, when you get really good, you know, when you're um Otani and you're hitting home runs and just striking everyone out, um it's there's people who are gonna come for you. And in the next game, uh, you know, Guerrero hits a home run. Uh it's off of Otani. And I think it's it's you know, we have to realize that becoming more of a target and becoming a larger firm and becoming that big, the ship gets harder to move. And I've used this analogy before, but this is a large tanker now rolling across the ocean, but it's not gonna turn on a dime, and it's not gonna, you know, give you all of the returns, you know, ad infinitum. Doesn't trees don't grow to the sky. And I I look at this and I think, you know, there's a deep seek, which upset the whole AI universe in February, is coming out with a new version of their um their bot. And Deep Seek in December one will be releasing the newest version. And my question is, what if it's good? What if it's what if it surprises people again? And they're using non-NVIDIA chips, and their advantage has been they're programming it better, and so by programming, they you know have figured out a way to make their model as good as Chat GPT, maybe better. And so everyone is always gonna face challenges. And I think that when you hit five trillion, you you celebrate, you pop some champagne, you you have a round, and then you say, okay, we gotta go back to work because it's even harder now. Growing 20% on uh $5 trillion is adding another trillion dollars. They added this last trillion in 70 days, which is the fastest amount of time anyone's ever added a trillion in market cap. Yeah, I think that's you know, things are moving fast, people. And I think if we thought it was overpriced or frothy in August, we have to say it's frothier now. And I have no trouble saying that I think it's ripe for a correction. I think that a correction would be healthy. I think a correction would start to make people realize and we would separate some of the short-term buying call options. I don't really own these names, I'm just betting. And I think that speculation is different than investing. And what we have right now is a speculative fewer with names like Ocklo and other things that are just going up without any revenue or earnings. Yeah.

Clem Miller: 7:53

So I don't think you can separate NVIDIA's at 5 trillion, OCLO is up 600% this year, and some of these other things. I think they're all related to a market that's looking for extreme advances and short-term investors. And I I don't think that usually translates into a long-term good result. So I think people need to be a little more cautious. And I'm gonna continue to beat the skeptics drum. Are you still a skeptic or are you on board with the NVIDIA party? Have you popped your champagne, Clun?

Steve Davenport: 8:35

Well, uh, I do have NVIDIA in my uh portfolio. I think probably you do too, Steve, and others do. Um, I have been trimming it uh as it's been going up. Um, I've become the great trimmer uh lately with gold and other things um because I do think the market is frothy, and I do think that eventually we'll have a downturn. And when we have a downturn, I want to have a lot of cash. Uh and you know, when we reach the downturn and start to pick back up, that cash allows me to buy a lot of things that I think are gonna do better uh at that point in time. You know, and who knows? Maybe it'll be buying back some of the things I had sold around now. Who knows, right? Uh but but you know, it's I think it's helpful to be trimming now some of these stocks that have been rising a lot. Um, I I do have uh a lot of comfort with the AI story. And what helps me be comfortable with the AI story is that I do have a lot of cash and gold in my portfolio. So I feel those are offsets to some degree to the AI story. Um not offsets, but really, you know, if AI starts to falter, you know, gold presumably, although I'm less uh I'm less comfortable with that that concept now for gold, but presumably gold will do well if AI goes down. Um so from a standpoint of a risk uh a risk reducer.

Clem Miller: 10:11

Yeah, I mean cash is a great reducer.

Steve Davenport: 10:13

Yeah, cash is the cash is the ultimate reducer, and right now I've got about a quarter of my uh options are the ultimate reducer, but well, okay. Cash is I've got about a quarter of my uh portfolio in um uh in cash right now. Um and um about 10% or 11% uh in uh in gold at the moment. Um but a lot of the rest of my portfolio are in sort of AI adjacent stocks, um, not just you know NVIDIA uh but also in a lot of uh the construction companies and the power companies and all of that that are helping to build the data centers that are required for AI. Um also I'm in some some semiconductor stocks other than uh other than NVIDIA. Uh but and here's uh a key thing, uh I'm not in Tesla, I'm not in Amazon, I'm not in Apple, um and I'm not in Meta right now, right? And I think those stocks uh to some degree have gotten away from their fundamentals in terms of their prices. I still have Microsoft. I should I should have sold or trimmed that a lot, uh, but I'm still holding on to it because I think there's some some positive story there left. Uh and oh, and I do hold Google, which uh I'm glad I do. Um continue to hold Google, but I'm not nearly as exposed to the magnificent seven, quote unquote, as a lot of people are, and as you know, the SP is you know exposed to it. So I and I think I've done quite well by sort of going for other companies uh that are sort of in that whole AI world, uh, rather than um you know the ones that I had trimmed like Meta and Amazon and Apple or trimmed or gotten rid of Meta, Amazon, Apple.

Clem Miller: 12:25

Um, can you help me? I think that investors have this term or feeling about cash as like you're stepping away and you're not earning anything. When you have something and you say it's in cash, what vehicle are you using and what's the yield?

Steve Davenport: 12:42

Oh, it's uh you know it's a money market, so it is making money, right? Correct. So so it's got a yield on it. Um it's not a it's not a great yield, it's actually a yield that's uh that's better than uh than dividend yields for many stocks, right? Um but it's got a yield on it. And um do you mind sharing what what what the yield or what the vehicle is I haven't I haven't looked lately, but it's uh you know it's a it's a money market, so so you're saying two to three? That would be my guess, too, somewhere between two and three percent, which is higher than you know, sort of the SP 500 average dividend risk, right?

Clem Miller: 13:24

I just want to say to people that hey, you know, when we say we're taking things off, we're taking off the equity risk of downside. Correct. And the risk we're taking when we move to cash is against inflation, really, because inflation moves more. And so by doing a two to three, if you think inflation is going to be less than two to three, which I think you can debate, but you're not losing purchasing power in a lot of these cases, because there are vehicles out there that take, you know, that try to make those decisions to be in cash, um, to still have some yield and still, and so while the Fed is lowering rates, we're you know, we're still making money. It's just that we're not taking the market exposure or the individual stock exposure.

Steve Davenport: 14:14

Right. Now, I'm not a big fan of bonds, as you know. I know. I mean, the thing about bonds is yeah, you can get a higher a higher yield, right? A higher current yield, uh higher coupon, but you know, it can the the the longer-term yields, you know, this goes back to what we talked about in our Fed uh discussion. Longer-term yields can whip around, and that can affect bond prices. And uh, you know, depending on how long your uh duration is, uh that can really have a multiplier effect on uh what happens with bond prices if yields go up or down. So uh I'm not really all that comfortable with bonds. Uh, you know, whereas a lot of people might have bonds for a certain part of their portfolio, uh as in aka the 60-40 portfolio. Uh I don't really believe in that 40 part, uh, but I do believe in like uh uh a 30 to 35, at least right now, a 30 to 35 cash plus gold part. Okay.

Clem Miller: 15:22

I just think uh as everybody looks at the NVIDIA going across 5 trillion, it is a celebration of success for US ingenuity, U.S. technology, and U.S. ability to nurture companies and have employees that are you know diverse and uh across all kinds of skill sets from all over the world to solve some of these problems? Our legal environment is strong, our banking environment is strong, our investing market and and and economy is strong. So I believe that these companies are going to be great companies. The question is from this point forward, will the return mirror the past? Will the returns have to pause to give the you know the joy that refreshes? I think that a pause would be healthy here. And I believe that a pause or some question about what's happening with China in the rare earth space or in the deep sea space will cause um this rally to come to a uh you know a correction. I don't know how deep the correction will be, but I would say that given the movements we've seen in some of these days when things get uncertain, the movements are much faster and much more severe than they've ever been. So, in that way, you know, I think that if you're interested in options and option strategies, I work at Circuit Capital and we can help you with those. Um, options are a choice just like cash, just like gold. So at Circuit Capital, I've been working with options over the last 20 years, and that's part of what we do for clients. So I think that everyone should think about how their portfolios are structured and how, if anything, they should change them as they head into this, you know, end of year and holiday season. It's usually a strong term for markets, but this is a little bit different time. And I think that over the next day, we're gonna hear a lot about China and the meetings that uh in Korea. And I hope we find more things that are gonna make us confident of the rally and what's going on going forward. So, Glem, any more comments about NVIDIA and the five trillion?

Steve Davenport: 17:49

I I would just say that you know, you mentioned the uh the China talks. You know, the this was, I would say, at best, a temporary truce. Uh, and you know, there's a continuing um economic and technological war between the US and China that I think is going to continue, persist, perhaps get uh perhaps get even worse. So that's the first thing I would say. Second thing I would say is uh, you know, everybody talks about American exceptionalism as driving the market. I don't think that's the right way to describe it. I think the right way to describe it is to say that the U.S. has an unusual concentration of advanced technology firms in uh Silicon Valley, writ large. And by writ large, I mean not just the Bay Area uh but also in the Seattle area, right?

Clem Miller: 18:56

So over the Boston area.

Steve Davenport: 18:59

Yeah. Or you could throw Boston in there too, right? So you've got that that sort of greater Silicon Valley, uh, which uh which is where you know if you took if you took the firms that are in those locations out of the picture, uh, I think our um American exceptionalism wouldn't look as in terms of uh the market wouldn't look as uh as frothy or as as as strong really uh as it does now. And and why, why, you may ask, do we have uh this concentration of excellent advanced technology businesses in these areas? Well, it's because you've got excellent universities in those areas. You've got venture capital firms uh that are providing capital in those areas. You've got, because of the universities and the venture capital, you've got an incredibly highly advanced workforce uh in those areas. I mean, even when a particular firm might lay off people, you know, have a different change in direction, may lay off people, those people uh almost always can find jobs at other firms uh in the same complex of advanced technology. So it's you know, it's a uh that's what drives our exceptionalism. And and then, you know, in China, you've got the same thing going on. You know, you've got the whole Shenzhen area, uh, which ironically they also call the Greater Bay Area, right? Hong Kong, Macau, Shenzhen, uh Guang Uh Guangdong, Guangdong, Guangzhou, Guangzhou, I think, uh, in the Greater Bay Bay Area. Uh, and they uh and that is also an advanced technology complex. Um, they have advanced technology in other places in China, but that that's really the uh the center of it all. So yeah, it's you know, we're really talking about a world where you know advanced technology companies, the ones with the greatest market caps, are located in pretty small uh areas, uh pockets, and the vast parts at least geographically of the US and other parts of the world, uh including practically all of Europe, for example, um uh are uh are are less advanced.

Clem Miller: 21:32

Yeah, there's nothing wrong with them. We still like to visit, um, and they're wonderful, you know, reminders of history.

Steve Davenport: 21:39

But if you're looking for the best companies, some of the Yeah, ASML would be the exception, I think, that proves the move.

Clem Miller: 21:46

Um and I think we know that Taiwan's Femi in Taiwan. There there are examples of exceptionalism all around the world. We're just saying that, hey, this this the move of NVIDIA and the concentration of the top 10 in the world companies right now, being US companies, is um is based on a lot of good reasons. And we think that um it's not a time to run from the markets. What we are saying is it's a good time to look and think and and try to rationalize your position so that you're positioned if things were to go the other way. So again, thanks for listening to Skeptics Guide. We appreciate your support and uh we really like delivering these ideas to you and educational purposes, and we hope you uh you know improve your investing IQ and and uh financial wellness with us. All right. Thanks. Anything else, Gwen? Nope. All right, be good, everyone.