This value investor lunched with Warren Buffett and cornered Bill Gates. Here’s his take on AI, Nvidia and Microsoft.

Mohnish Pabrai, like many value investors, is a long-time admirer of Buffett and once jointly paid $650,000 to have lunch with the Berkshire Hathaway chief. His $637 million Dalal Street hedge fund, based in Austin, Tex., filed its most recent 13-F with just two investments — Micron Technology
MU,
+1.25%
and Brookfield
BN,
-1.10%
— though he also runs funds investing in India.

Pabrai posted a discussion he had with an Indian investing club, and he noted an interesting conversation about Nvidia
NVDA,
+0.26%,
the microchip company at the center of the AI speculative frenzy. Nvidia stock has soared a breath-taking 190% this year.

“I would say that there’s a lot of euphoria around Nvidia, and if one were to do some type of analysis of a discounted cashflow model where you look at the earnings of Nvidia today and you do some projections of what you think their earnings are in 3 years or 5 years or 10 years and then you discount it back, I think it’d be difficult to justify the trillion-dollar market cap,” he said.

He compared Nvidia, now, to Microsoft in 2000, when Pabrai had the opportunity to meet many current and former executives of the software company, when it, along with Cisco and General Electric, were the most valuable companies. “None of those would’ve been a great investment,” he said. “When I look at Nvidia’s situation today, to me it rhymes a lot with the way Microsoft was at that time.”

Speaking of Microsoft
MSFT,
-0.75%,
Pabrai said he had the opportunity to be seated next to Bill Gates in Omaha this year, presumably at an event tied to the Berkshire Hathaway annual meeting.

Pabrai said he asked Gates about a range of companies — including Nvidia, AMD
AMD,
+1.68%,
Alphabet
GOOGL,
+0.17%,
Salesforce
CRM,
+0.18%
— and whether the Microsoft co-founder would go long, short or be neutral. Unfortunately, he didn’t provide those responses, though he characterized the conversation.

“He was just rapid-fire, giving me answers and drilldowns and why, and so on, and the breadth and depth of his knowledge on a wide variety of subjects, even beyond technology. We spent time talking about nuclear reactors and we talked about toilets in India. He’s just a guy who has picked up a lot of data and he’s got a brain that can synthesize a lot,” he said. To Pabrai’s telling, Gates does “interact a fair bit” with current Microsoft CEO Satya Nadella.

On the question of who wins the AI race, Pabrai said he has an idea of where to invest. “I won’t share that here, but I would say that if you were an investor in Microsoft, I would just keep that investment. I don’t know if you were looking to invest in Microsoft today, whether I would do it, or again, pay a rich price for a company that’s a tremendous company,” he said. “I’m a cheapskate at heart, so it’s hard for me to pay up for things.”

The markets

U.S. stock futures
ES00,
-0.51%

NQ00,
-0.60%
were weaker after the one-day break. Crude-oil
CL.1,
+2.32%
futures were trading over $71 per barrel. Copper futures
HG00,
-1.21%
were weaker after the latest set of disappointing Chinese economic data.

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The buzz

The economics calendar includes factory orders data, and then at 2 p.m. Eastern, the release of the minutes from the June 14-ending Fed meeting. Heading into the release, markets are pricing in an 86% probability of a July rate hike.

China responded to U.S. curbs of high-tech components by banning the export of gallium and germanium, while the U.S. is looking to restrict China’s access to cloud computing, according to a Wall Street Journal report.

Meta Platforms
META,
-0.33%
is set to release its Twitter rival called Threads as early as Thursday, though the product might not be available in the European Union.

Netflix
NFLX,
+0.22%
was upped to neutral from sell at Goldman Sachs.

Rivian Automotive-made
RIVN,
+17.41%
vans for Amazon
AMZN,
-0.11%
are being rolled out in Europe.

Wolfspeed
WOLF,
+2.07%
shares jumped as it signed a 10-year wafer-supply agreement with Japan’s Renesas Electronics.

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