Transcript
Welcome everyone to this webinar on the AI revolution. My name is Neal Bawa and I'm here with my co-host Anna Myers. We both work for two companies, Grocapitus and Mission 10K. And both of these are datadriven real estate companies and our top topic today comes out of our interest and I would say an healthy obsession that Anna and I have with AI. We are an AI first company which means that all of our employees are required to spend one hour every day working on AI.
So that's that's stuff that maybe we'll talk about in the questions if you guys have questions about what some of the things that we are doing in AI and not necessarily the content of the webinar today because today we're going to talk about all of the different impacts that the AI revolution is having and then at toward the end we're going to give you some ideas of how you can possibly invest in AI and it's not necessarily an investment in data centers. We we're not doing a data center pitch. We're not, you know, selling a data center. This webinar is purely informational where we just basically talk about what we are seeing out there and and you know, hopefully also get some feedback from you. So, uh I briefly introduced uh myself and Anna.
Um we we work for multiple companies. Uh our projects are in 10 states, 17 metros, 25 different properties. At last count, we had slightly over,300 uh investors. uh for a portfolio that's over 660 uh 660 million. Here is a I don't know why this picture came back, Anna.
This is an older outdated um you know slide. So it's back in >> all of the ones that you're seeing here that appear to be incomplete, they're all completed properties. So they're every one of these that looks like halfway done, they're all done. They're all completed. So the night came back, slide came back in.
This is about half of our real estate portfolio. Um, and we've had uh nine exits with about a 33% annualized irr. Here are two properties where we more than tripled tripled our projected IR. So, Equinox on Prince 17 going up to 59, Fair View 16 going up to 60. And here are two more where we just doubled the projected IRRa or slightly better than doubled.
So 16 going up to 37% and 20 going up to 49% for our investors. Uh our investors uh love what we're doing. Here's Jennifer. She is a super experienced investor. She met me recently.
Uh she compares us to much larger companies with many more projects and she thinks that we come out ahead. She also really likes our enjoys our high efficiency processes. I'm not responsible for those. Anna is. And she likes the fact that the team's really not changed much since the beginning.
and and I have been at it for eight straight years. Uh here's Dr. Pada. He's a general partner with lots of deals of his own. Both as a general partner and as a passive investor.
Check out his comments in orange. Comes down to use of data to optimize results. We're very very good at that and that's why Dr. Partarda is with us. Um all right, uh folks, let's get the boring legal stuff out of the way before we dive into all the good stuff.
This is just a friendly reminder. This webinar is for educational purposes only. And just because you know Anna and I are sharing our personal opinions, it doesn't mean that you are guaranteed to make a fortune in real estate by by listening to this. So So do your own research. You know, consult professionals and remember that investing in real estate and stocks is is is risky stuff.
And don't be shy to type in your questions. We're going to do our best to answer them at the end if you have time. And don't worry if you miss uh anything. We'll be sending out a recording of this whole shindig tomorrow or day after tomorrow actually. All right, let's get started.
Let's get started at the beginning of this incredible AI phenomenon, right? It took Netflix 18 years to hit 100 million users. It took Spotify 11 years, Twitter 5, Facebook 4 1/2 years, but it took Chat GPT 2 months to hit 100 million users. So, right now they're somewhere between 700 million and 800 million. By the way, that Instagram threads thing was sort of gamed, so I, you know, might as well skip it because that wasn't real.
but in two months, right? So, this was the first sign of AIA uh mania and I I remember distinctly November 30th, 2022 and we're coming up to the 3r year anniversary of the the chat GPT moment. Um, and it's been incredible since then. What's what's impressive is even though dozens of companies are releasing large language models, as of now, Chad GPT is still at the very top three years later. So these are the numbers for for last week.
In a couple weeks a model named Gemini from Google will come out and I think that these numbers may change but for the moment chat GPT is retaining its lead. What's really impressive is the amount of money that is pouring pouring into AI. We've never seen anything like that, right? Record funding is meeting record FOMO or fear of missing out. OpenAI itself recently did a $40 billion investment at a valuation of 300 billion.
And when we created this deck, it was 300 billion. Right. Today, OpenAI's valuation has jumped from $300 billion to $500 billion. That's right. half a trillion dollars for a non-public company that has never broken even and actually is making making it very clear that they won't break even or make profit until 2029.
$500 billion. Look at scale, right? Meta invested a huge amount of money into them. Basically invested $14 billion for a $29 billion valuation. That's crazy.
That's 50% of the total valuation, right? Uh we've heard about X, we've heard about Anthropic, we've heard about Safe Super Intelligence, Grock, all of these companies are getting incredible, incredible numbers. So much so that even though venture capitalists invest in thousands and thousands of different verticals, take a look at this circle here. A third of all VC funding in 2024 went to AI. This year, it looks like it's going to be closer to 50%.
Right? and and that 33% number was a crazy 80% increase from the previous year. So it just the numbers are astonishing and because of this if your startup is an AI startup as opposed to any other kind of startup you get premiums even at the seed level when you're just setting out if your startup involves AI real AI you get a 39% premium and then as you go through series A and B and C and D that premium actually starts keeps going up. In fact, at the series D level where OpenAI and a whole bunch of other startups are, you're basically getting three times as much money for the same dollars for the same revenue. That's just crazy.
We've never seen anything like this. And as a result, this guy Torson Slog, I I love listening to him. He's chief chief economist at Apollo. This is one of the the the biggest groups out there. He says, and this is very interesting.
and he says, "If I take a $100 as an investor and I buy the S&P 500, the index of 500 shares, I think I have exposure to 500 different stocks, but really I'm just betting on Nvidia and the AI story continuing." So, the market has become extraordinarily warped where even the S&P 500 is dominated by a very small number of companies and this is resulting in people talking about this potentially being a bubble. So you see the IT bubble, you see this gray bar here, that was the IT bubble. And at its peak, the IT bubble right here, right? We had, you know, uh the the top companies with a valuations of 25 times 12 months forward PE. If you don't know what that is, basically just means that they were very highly valued.
And of course, we all know what happened. You know, they all crashed and and burned. And today, if I if I basically include the top 10 in the S&P 500, forget the 25, I'm now approaching 27 28. And this this chart is actually a few weeks old, and we're probably up here somewhere. So, what we're seeing is crazy numbers.
Now, if you look at the S&P 500 excluding the top 10, you know, companies like Nvidia and Meta, then all of a sudden, you're actually at a pretty decent number. You're you're below 20 and that that happens quite often. So the what's essentially happening is that the top 10 companies in the S&P 500 are dominating the stock market in a way that we've never seen before. And as a result, these individual companies that have exposure to AI have numbers that are just absolute maddening numbers. Nvidia is worth 4,000 trillion, right?
That's 4 million million. 4 million times a million. Insane numbers, right? Microsoft's worth more than 3.5 billion. Apple's worth more than 3 billion.
The numbers are absolutely stunning. We've never seen anything like this in the history of the stock market. And the number one stock there, of course, is Nvidia. Did you know that Nvidia is the best performing stock in the S&P 500 over the last 5 years, over the last 10 years, and over the last 20 years? So, even if I go back 20 years, this is the number one stock in the S&P 500.
And after gaining 171% last year, it's still up 32% this year. Those are absolutely mind-boggling numbers. And so it's only natural for people to say, well, this whole thing, it's got to be a bubble, right? But couple things to remember, right? First, if it's a bubble, it can be a much bigger bubble because in 1999 when we had the last internet bubble, we had 250 people 250 million people connected to the internet.
about 4% of the world's population. Now, thanks to smartphones, 10% of the world's population is connected, right? So, 800 million people. So, again, you can the bubble can get much bigger before it either deflates or just completely blows up. One thing I wanted to point out was, yes, we all talk about the dot bubble.
We all joke about the fact that, you know, that bubble imploded in 2001. But take a look at all of the companies that survived that dot bubble or they came after. These are all internet companies. These are all companies that either are core internet companies or have greatly benefited from the internet. So even though that bubble burst, this is what came out of it.
Trillions and trillions of dollars of value. So no one should ever think that these bubbles don't create value. It's just they get overhyped at some point of time. So, you know, I we put this slide in about six or seven weeks ago and I I this slide has unfortunately now turned into a lie just in the last seven seven weeks. So, this guy from is one of the largest banks in the world.
Um Brian, he says it's early innings in 1999 2000. So, he's talking about the last bubble. We were doing crazy stuff. Companies were buying other companies with bad stock. that sort of be behavior isn't happening right now despite the AI boom.
So this guy said it, you know, a little while ago and I put this slide in about six six seven weeks ago. Anyone can tell me in chat why this is no longer true? Why this is now a lie? This slide is a lie. I I haven't taken it out.
Anyone? Anyone in chat? Why is this slide a lie? Come on, guys. Anyone?
Anyone? No. It's a lie because unfortunately companies are now buying each other um you know each other's stocks. They are basically doing circular transactions. Uh OpenAI is very highly responsible for it.
AMD is doing it. Uh so is Nvidia. So OpenAI, AMD, Nvidia are now doing this circular transaction. So unfortunately while I put this good news in ah unfortunately in the last six or seven weeks they're all doing really shady shady stuff. So uh so we are now seeing shady stuff and that we should be very careful about that.
Now having said all of the bad stuff so I I gave you all-time high PE ratios. I gave you the fact that the S&P 500 basically has been corrupted by the top 10 stocks. So I gave you all the all of that bad news, right? Including what the guy was just saying. But I want to step you to step back for a minute and understand that the vast majority of the smart venture capitalists in the world consider AI to be sort of the fifth or the sixth major inventions ever created that completely changed the world.
Right? So there's a few that are missing from here. You know the steam engine is not in here. Uh oil is not in here. So you can you can combine oil and steam steam engine.
But most of the smart people that I know basically talk about the fact that this is one of the five or six greatest things that humanity has ever invented. And I'm going to argue that it's likely that they're right. If they're right, and we'll talk about why I think they're right, the stock market could end up much much higher than it is today. So I want to point out to you from left to right. So bottom left is the PC revolution.
We've had you know is in when it comes to technology I'm just talking about technological revolutions in the last you know call it 50 60 years we've had five of them with AI being the fifth the PC revolution once it started it tripled the value of of the triple the market cap by 3.7x the internet 3.5x mobile took it all the way up to 3.4x 4x and the cloud revolution which has been the last one you know cloud or or you know what AWS whatever you call it basically took it up 3x again so it seems that every time there is a technological revolution whether it's PC internet mobile or cloud the stock market jumps 3x if that is the case and the market is going to jump 3x again for AI we are nowhere near the top and if you're thinking yeah but maybe this time we don't get a 3x Maybe maybe AI is not as as powerful as the last four, right? Cuz the last four were were all 3x increases. Well, most people that we talk with believe that it is the most powerful of those four examples that I gave you, right? So that whether it's PC, cloud, you know, smartphone, this is the most powerful. Why?
Because when you look at some of those, the internet, for example, didn't have a radical impact on automotive. The internet didn't have a radical impact on logistics. But we are seeing artificial intelligence being used to create a astonishing new breakthroughs in the automotive industry, especially in when it comes to both batteries as well as old-fashioned engines, ice engines, um logistics. We are seeing incredible work being done in the logistics arena. It's just easier to apply AI to every single sector in the world.
It's easier than it was to apply, let's say, a PCIe or a smartphone or the cloud. And what's nice is the PC, the smartphone, and the cloud are all things that we set in place. We already had 800 million active users, which is why the AI revolution is going faster than the previous four revolutions. So, what does this do for jobs, right? One of the biggest, you know, concerns is what does this do for jobs, right?
The shock waves. So we've seen charts like this. This is actually a pretty popular chart and this it's sort of a very scary job because chart because what it shows is well you know chat GPT releases and all of a sudden jobs instead of going upwards you know you know start going down right then there must be some correlation between these two. So a lot of people have shown this on the internet but this is there is no correlation that I'm aware of. This is just a chart that points out this is when Chad GPT released.
It's not trying to correlate anything at all. We've also seen you know other groups basically talking about there being a huge impact amongst younger workers right so we've heard that graduates that are just coming out of college there's an impact of about 44% on those you know entry jobs at 30 32% and then you know white collar jobs at 13%. These are some of the numbers we've heard. We've heard that 80% of the US workforce could have at least 10% of their task, that's not 80%, that's 88%, right? Could have 10% of their work tasks affected by AI.
We've also heard 19% of US workforce could see 50% of their tasks impacted. So these there's a lot of these numbers that we've gathered to together for you, little sound bites that we've gathered together for you. Right? Here's here's some more. 30% of current US jobs could be automated in 5 years.
60% will have tasks significantly modified by AI in 5 years. The total US jobs at risk in coming years and we don't know what that is might be 5 years or 10 years is 50 million jobs. So there's a a lot of the these statistics that people are throwing at us. But so far when we actually go out and do an analysis, right, when we do an actual analysis of how many people have that have been exposed to AI have been laid off, we can actually find no evidence. People that have actually done studies on this have find found no evidence.
Essentially, you see these three lines, the you know the the dark blue, the light blue, and the orange. These lines would have to have a curve to them for there to be an actual impact. So so far we're not available aware of any impact and and a perfect example is our own company Anna right so if you think about our company >> we have had a reduction and that is a copywriter so so far >> in our company all they've done >> parttime copywriter >> a part-time copywriter but every other job in our company that we've automated with AI over 400 or 500 automations and counting has not led to a person being let go it's possible that we're able to get certain things done faster or get certain things done quicker, but it certainly has not been enough for us to lay off people. So keep that in mind that that any fears that people have of AI taking jobs away currently there's no evidence of that in the US economy. So if we're slowing down, it's just because the economy slows down from time to time.
It doesn't have anything to do with AI. All right, moving on to the next topic. But before I move on to that, right, I am going to spend a couple minutes talking about an opportunity. And some of you have seen this opportunity before. This is an opportunity for you to invest in a tier in a very unique tier called Pref equity or preferred equity in a beautiful brand new property built in 2024.
You can see the property here and the pool. It's a gorgeous, gorgeous property. And this is an 18-month investment time frame. There's no construction involved cuz this property is already built. And you get 7 to 8% cash flow distributions that start immediately.
Just so you know, we have we're distributing 7 to 8% cash flow to about somewhere between 70 and 80 investors and we have been distributing that money for about at least a year, Anna. Right. Maybe a year and a half. >> Not in the entire amount of those people. not your entire we've just been slowly adding people >> slowly adding people right >> as the property needed it yeah >> exactly so essentially what's happened with this particular property was that as we built the property with interest rates being very high we ran out of cash and so we basically said okay we're going to bring in preferred equity and these preferred equity is a very unique tier so we had about $16.5 million in LP or limited partner equity als also called common equity in the property.
The preferred equity sits on top of them and it's very advantageous because what that means is that the senior debt is smaller. You've got a big, you know, chunk in the middle here. And that that pref tunch, not only the your principle, but also your returns come before this limited partner trench, which is puts you in a great position, right? cuz the that $16.5 million that big chunk that you're seeing down there that's a cushion both for your initial investment and for the interest that you receive which is basically 14% unless you invest a lot more money and then it's you know 16%. So this means that the day you make the investment now you're eligible to start getting 7% annualized.
We paid out every quarter cuz it's hard hard for us to pay it on a monthly basis. So it's paid out on a quarterly basis. Also, this is a shorter term investment. If you have cash in the bank and you're making three or 4% in money market or you're making 6% in lending, this is perfect for you because here you could be easily making 7% on the front end, 7% of the back end in a short-term investment in 18 months and that's secured by that $16.5 million in equity that is junior to you. So, as you can see, stunning property.
This is the clubhouse. Absolutely gorgeous property built. Uh we've got about 150 tenants or families living in the property and we continue to lease it up. It's in Phoenix which as you know many of you that have come to our webinars number one population growth in the United States, number one for net migration and number one best cities for retirement is Scottsdale which is part of the Phoenix metro. So uh incredible opportunity.
We don't ever raise huge amounts of money in prep equity because we we'd like to basically raise as we go. And that's why you've seen it a few times before, but if you haven't jumped in, it's still available. Won't be available for long. So, um, if you're interested, you know, uh, check out this barcode or this l link. You can also talk with Peter Majeski.
He's our investor relations guru. Uh, his email is up on the screen. Um, and we will also in the poll be, you know, we'll throw up a poll and you can indicate interest that way. All right. Now, I want to talk about something incred incredible that's happening in the data center in arena.
So far, we've been talking about AI, right? So, all of our conversations so far have been AI, AI, AI. Now, I'm going to start talking diving down into something that Nvidia is doing. So, the CPU that's on the screen is Blackwell. And Nvidia basically launched this CPU earlier this year.
And there have been a huge number of orders. just Elon Musk has ordered you know hundreds of of thousands of these blackwell chips and altogether I think there's been $3.6 $6 million of these ordered uh mostly by the big companies, the logos that you see on the screen, right? So, hyperscalers are ordering these CPUs or GPUs at incredible, incredible levels. And the reason for that is that we believe that this guy who is at this point the most powerful CEO in the world, his name is Jensen Wong. What he says makes perfect sense to us.
The next wave of AI will demand 100x more computing power than previous models. And as a result, Nvidia sees something that we absolutely 100% agree with. They see $1 trillion, that's $1,000 billion of data center bills just by 2028. Remember, we're at the end of 2025. So he's talking about basically, you know, we're talking about um 3 years.
Currently, there are only $40 billion worth of data centers in construction in the US. And that's already up 400% since 2022. So they're up 400%. They're at $40 billion. NVIDIA thinks we need $1 trillion worth of data centers.
They might be off by a little bit, but even if they it's onethird of one trillion, well, that's 300 billion. We're only building about, you know, currently we're only building about $40 billion. So here, this this 330 billion, remember I I I mentioned over 3 years. Well, that's what big tech spending just this year in one year. And then if you say potential growth in AI by 2028, you take take that 330 billion multiply by 300 300%.
Boom, that becomes exactly this number 1 trillion. So there's multiple groups that we're looking at. we're going to need about a trillion dollars of data centers. And as a result, data centers are basically the new oil. Right?
So here this I mentioned in on the last slide this number. There's now $40 billion worth of data centers under construction. They're up 400% since 2022. And there's so much data center construction going on that office which for decades, many many decades was the largest real estate vertical in the US. Obviously it's gone down because of you know uh work from home.
So going down, down, down, down, down. And then you look at data centers going up. We think that in just another two or 3 months, there are going to be more data centers being built in the United States than offices. And this is spiking the electricity consumption tremendously, tremendously. Right?
So that you know, you can see where we are with 2025. So we're right here, right? And we're looking and and this is about 400 terowatts. The world basically consumes about 400 terra hours as of 2025. And you can see that it really started to spike here from 2020 onwards.
And we're now projected to get to north of 800 terowatt. This looks like it's about 950 terowatts from where we are today. Um well right here we're we're at a little over 400 and we're going to more than double by 2030. So, we're going to double the total amount of electricity that we need in just five years. That's absolutely crazy.
And that's where my first tip comes. My first tip to you is this. Of all of the sectors in the S&P 500, the least sexy one over the last two decades has been utility companies, right? And if you look at their PE ratios, they're still very low compared to everything else. But electricity is all of a sudden sexy, right?
The grid cannot handle all of this expansion. So people have to use all kinds of crazy things. Look at what Elon Musk did. He was building the world's largest AI cluster in Memphis. The cluster is called Colossus 1 and Colossus 2.
To power it, he didn't want to wait for the the uh city of Memphis to give him uh power. So he basically purchased 33 gas turbines. 33 separate gas turbines, put them on a ship, bought them into to a port in Louisiana, and had them driven to Memphis, and currently about 15 to 17 of those turbines are on at any given point in time. And just so you know, natural gas is actually fairly clean burning. So he's he's not adding to a huge amount of pollution.
He's just he found his own solution. So bottom line is we're going to need to find a huge number of solutions. We are not going to be able to create the amount of energy that's on this page. There is no chance that we do that. There's no statistically it's a 0 percentile chance which basically means that energy prices have to go up which basically means that profits for utilities have to go up.
So my first tip to you and again I'm not a stock picker so do your own research is that you really need to look at utility companies right the second piece is if we if we build anywhere near a trillion dollars of data centers even if we're off by one by by 2/3 there and we build $300 billion worth of data centers they use such a massive massive amount of transformers and switch gears that if you are you know have exposure in your stock portfoli IO to companies that are making transformers, making switch gear, or refurbishing transformers, I think you're going to be in business. And haven't we had a humongous amount of trouble finding transformers for our projects? I mean, it's just >> completely crazy, right? You have to order transformers 15 months in advance. 15 months in advance.
And a lot of people are like, you know, sometimes >> I'll just I'll just buy Nvidia stock. Okay, that's fine. If you love Nvidia stock, then you and I, you know, obviously go ahead, buy Nvidia stock and be done with it. But then there's I think more of you that are listening to me are saying Nvidia may be too expensive. Nvidia may not be able to sustain this crazy rate.
You know, its P ratios are very high. If you're that that majority, that silent majority that says, okay, I don't I think it's too late to invest in these big companies, then I'm giving you examples of how you can invest in small companies. And you might say, how am I going to find companies that have exposures to transformers and switch gears? Well, through AI. I mean, you would simply ask Chad GPT.
And you would say, this guy Neal Bawa has this thesis, and I'm interested in in investigating this thesis. How do I get exposure to companies building transformers or switch gear or refurbishing transformers and switch gears? And it'll give you a lot of interesting tips.