In this podcast, Motley Fool analyst Matt Argersinger and host Ricky Mulvey discuss:
- What home sales data says about the economy.
- A traffic slowdown at Chipotle, and the restaurant chain's strong unit economics.
- The reasons why Warren Buffett could be sitting on a record amount of cash.
Then, Motley Fool host Mary Long and analyst Asit Sharma continue their conversation about AMD, and discuss the impact of tariffs and export controls on the chip designer.
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A full transcript is below.
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This video was recorded on April 24, 2025
Ricky Mulvey: Berkshire Hathaway is sitting on more cash than any company in history. You're listening. It's Motley Fool Money. I'm Ricky Mulvey joined today by Matt Argersinger. Matt, thanks for being here.
Matt Argersinger: Hey. Great to be here, Ricky.
Ricky Mulvey: Good to have you on a day where we're getting some home sales data. As I was looking through the headlines this morning, I got three headlines that, all of which seem to be telling different stories. From CNBC. Home sales last month dropped to their slowest march pace since 2009. From Bloomberg, US new home sales top all estimates on surge in the South. From the Wall Street Journal, home sales in March fell about six percent biggest drop since 2022. Which one are you buying here?
Matt Argersinger: I'm going to buy the CNBC headline only because I love data points that go back way long in time. The fact that we're at the slowest sales pace since 2009, I mean, remember from a moment where we were in 2009. That's right. In the midst of a global financial crisis caused in part by a housing crash. If you're telling me that we're at the slowest pace of home sales since that period of time, that's going to get my attention. I'm definitely buying the CNBC version of this story.
Ricky Mulvey: Also pointing out that it's the March 1. We're only doing every March from this year. There's a little bit of trickiness within the way they're positioning this. I want to dig into this Wall Street Journal commentary though, which is that so far this spring supply is increasing faster than demand. The inventory of homes for sale is rising because some sellers who have been waiting for mortgage rates to fall have decided that they can't keep waiting. This is a big difference. I'm thinking about during the pandemic, being in a neighborhood in Cincinnati while I'm watching streams of people trying to look at one existing home and offers are getting taken off the marketplace instantly. This is one data point, Matt, but is this an inflecting point? Is this one data point? What are you seeing here?
Matt Argersinger: No, I hate to say that. But I think it's one data point. Yes, inventories were up 20% year over year. Probably a good sign. But remember, this data largely reflects contracts that were signed in January and February before we had all these tariff developments. People thin were probably a lot more certain and less worried about the economy than they are today. I think sadly, the data could actually inflect downward Ricky, because you have to remember the situation we're in. We still have millions of homeowners. We're locked into long term fixed mortgage rates under 5%, under 4%, in many cases, under 3%. If mortgage rates are still above 6.5% right now, which they are, I still think the vast majority of sellers are willing to wait longer, especially now if they feel even more uncertain about the economy. I feel like, yes, we've got this rise in inventory data for March, but I don't think it's Dick's. I think we're probably still in a situation where less inventories come to the market and sellers are still in this frozen mode.
Ricky Mulvey: Maybe two very different markets for existing homes and also new homes. On this coming Monday's show, I'm going to dive into some specific Home Builders with Anthony Shavon. But for now, there's a pretty odd disconnect going on with this where the data for March is showing that purchases of new single-family homes rose 7.4%. You mentioned home sellers being hesitant to leave. Home construction is still happening. You look at a company like D. R. Horton. This is the country's largest home builder and they recently reported they're telling a very different story. In their latest earnings call, sales dipped, the company's lowering sales guidance. There's a lot of questions for these Home Builders, specifically around tariffs as you mentioned. Also, worth mentioning, a lot of the people that are involved in new home construction Matt, are immigrants and that's going to be a challenge for these Home Builders. On the one side of this specific data point, you see a macro trend way more purchases of new single family homes and yet the country's largest home builder is saying, we're selling fewer homes and we expect that trend to continue. Makes sense of that. What's going on?
Matt Argersinger: It does feel paradoxical, in a way. But you have to remember, the new home sale side of the housing market pie so to speak, is very small. But it's important and I think the fact that Home Builders for the most part, have kept building throughout this whole period and have kept selling homes is important. But when I see the new home sales data, what I think it tells me is more about the demand side of the equation, which we know to be strong. We've got the biggest generation of first time home buyers in history. Ricky, I think that's you. But millennials who are desperately in a lot of cases trying to buy homes and they just can't because there's really no inventory despite the small rise that we saw in March. I think that generation, by the way, like previous generations is largely unfazed by mortgage rates. I think they understand the situation they're in. They just want a home. They're getting a job, they're moving to someplace. They'd love to be able to buy a home and not rent a home.
But I think on the Home Builder side, so to take D. R. Horton side, you're pushing discounts to move inventory right now. You know mortgage rates are expensive, financing is hard to get. To get deals done, you have to do discounts which hurts your sales. At the same time, you mentioned you got higher labor costs, you've got higher input costs. You now have a lot of uncertainty about the economy and what these tariffs are going to do to your business. You're putting less shovels into the ground. You're probably pushing off new development, holding that land a little bit longer than you want to. I wouldn't say this number is a blip. I think it's important that new home sales are up for the month, but I don't think it's telling the whole story about the demand and supply problem that we still have and I tend to buy what D. R. Horton is saying. New home sales are probably going to be heading in the wrong direction for the time being.
Ricky Mulvey: I'm out in Denver and the rental market still significantly different than buying a home out here right now. I'll be staying in the rental market for maybe a year or two, Matt. Let's move on to Chipotle Earnings. They reported yesterday after the bell. Matt, the big story is the comp sales decline, comparable sales for Chipotle dropping about half a percent. This is the first drop since COVID and also coming off a heater, a five ish percent rise from last quarter. CEO Scott Boatwright, very quick to mention that this could be a weather problem and a macro problem, you never love seeing a CEO immediately going after the weather in the first few sentences of a call. But that's what they're going for. Are you agreeing with what they're selling here?
Matt Argersinger: I will buy the macro story there, Ricky. I don't know about the weather angle. I don't know about you. I still buy burritos, even if it's rainy or cold out. But yeah, the macro story is something. If you look at what Chipotle did last year, mid to high single digit comps every quarter, they did over 7% in comps for all 2024. The negative comp this quarter was definitely a shocker, especially because Chipotle had been really holding its own. I mean, if you look at other restaurant brands, including Starbucks, which I think serves a similar demographic, I mean, they were already seeing coms fall off the table by last summer, where Chipotle really held its own. But I think it's this slowly leaking economy that we're seeing. It's lower consumer spending, it's lower consumer confidence and I think that's finally catching up even with the Chipotles of the world. Look, I think it's actually going to get a little worse going forward. I think management said they expect things to improve by the second half. They expect comps to be positive overall for the year. But you have to remember what they did last year.
Look at COMMS Q2 of last year up 11.2%. That just shows you how tough the comparisons are going to get this year. Especially now that there's this elevated level of uncertainty among its customers which they said bled into April. I expect July's results when we get them will be pretty challenging. I think if you're a Chipotle shareholder, you certainly have to anticipate that growth this year is going to be a lot slower than it was last year. A lot of the growth is really just going to come on the revenue side, is just going to come from new store openings. It's not going to really come from the comp side. If you look at Chipotle's stock price, yes, it's down roughly 30% from its all time high. That's a big drop. I'm a shareholder. That hasn't felt good, but it still trades at a very rich valuation. This year's results certainly aren't going to support that any longer. Hopefully, this is a situation where 2026 is the year when things really turn around.
Ricky Mulvey: I want to start seeing management credit the weather when things are going well for them. Weather is only a problem. It's only a headwind. You never hear a CEO saying, who's really nice out this spring and we saw more people coming in. Yes. Few other parts of the business results and I think it is worth mentioning why this stock trades at such a rich premium is that even with this decline in comparable sales, these are incredibly profitable businesses. Later in the call, they're mentioning that the year two cash on cash returns for a new restaurant. A restaurant that's been open a little bit is 60%, for older restaurants, it's 80%. You follow the commercial real estate market. I mean, that is blowing the socks off any office building, retail establishment. These are still incredibly strong businesses. Sales still growing six percent to about three billion dollars and they're still opening new restaurants, 57 new restaurants open in the quarter. What else in the business results stood out to you?
Matt Argersinger: No, I mean, that was certainly it. Those returns cash on cash returns for store openings, it's incredible. That's why I believe the story when management says we can ultimately have 7,000 stores. I mean, of course, you're going to open that many stores if they can be this profitable. Yeah, having them observed real estate, other retail businesses, I mean, they're hoping for cash on cash returns in the high single digits, maybe low double digits so they can get it. Sixty percent in year two, that's extraordinary.
Ricky Mulvey: There's a Wall Street Journal column earlier this month that had the unfortunate title of your new lunch habit is hurting the economy. There's a few key points here that I think relate to Chipotle. One of which is that the number of lunches bought outside the home were lower in 2024 than in 2020, in the height of the pandemic. Also going out to lunch right now is just stupid expensive. Hybrid office workers spending about $21 on lunch in 2024. That was up from 16 bucks in 2023. That research coming from a video conferencing company called Owl Labs. Shout out to them for finding out the cost of lunch. I still think there's a version where Chipotle wins in this environment, where people are tightening their spending, but I still want to go out to eat. If I go to Chipotle, I can get a steak bowl for about $11.50. I'm not getting the 20% tip screen. There's some headwinds here, but this is still really affordable compared to a lot of their competitors, Matt.
Matt Argersinger: It is. I mean, I think of Chipotle as high quality food at a reasonable price. I think that works no matter what happens to the economy. But I have to say Ricky, lunch is stupid expensive. If I could share one anecdote, I just recently helped my wife and son move up to New York City. They're spending the spring and summer there and we rented an apartment, and I was helping the move in. Of course, when you're moving in, people get hungry, you don't have any food, you haven't been in the grocery store. I made the mistake of ordering from Uber Eats, three sandwiches from a local deli, $55 for the sandwiches. Uber Eats fees plus tip, I was close to 80 bucks for lunch for three people.
Ricky Mulvey: What are you putting in the sandwiches?
Matt Argersinger: I mean, they were good sandwiches. One was a meatball, one was a turkey. I think the other one was roast beef. I mean, they were good, $80 good? I'm not so sure.
Ricky Mulvey: Yeah, we're seeing a similar thing in Denver and what I've noticed is sometimes the mains are still all right but now it's like a bag of chips. It's three bucks and then we're adding on more of the toast tipping environment. It makes it very unaffordable very quickly. Let's move on to this Berkshire story. Lot of Wall Street Journal today. I promise I read other news outlets. This is a column from Spencer Jacob, which I thought was good. It was actually sent to us from a listener named Chris pointing out that the annual Berkshire meeting is coming in less than two weeks. There's a question for shareholders, which is what is Uncle Warren going to do with all that cash? Right now, Berkshire Hathaway is sitting on more cash than any company ever in history including Berkshire Hathaway. It's about $318 billion. This is how he got there. He's collecting a lot of the cash dividends that the businesses send him. Also, he sold about $80 billion worth of Apple stock back in 2024. To be clear, Berkshire still has about $174 billion worth of Apple stock, so not a complete sale, but trimming some of the winners. I think the first thing people may be wondering, is this a macro signal? Is Warren Buffett battening down the hatches to buy up a bunch of stuff if the market turns south? Are you taking this cash pile as a macro signal?
Matt Argersinger: I've tried to reason my way through this a few different ways. Warren is 94-years-old. Is this just him being very conservative with the time he has left? No. First of all, he's always invested with a long term mindset. He did that through his 70s, 80s when most of us would be at that point in our lives, 100% in bonds or treasuries. He was still taking risks with equities so I don't think that's the answer. I think he's probably investing like he's going to live on 20 years. But relatedly, could it be succession planning? After all, we've known since about 2021 that Greg Abel is going to be taking Buffett's place. Is he just setting up Abel with a lot of cash, a clean slate when it comes to allocating Burch's capital? No, I don't think that could be the answer either. I think if Buffett saw a compelling investment or acquisition opportunity, he'd make it probably regardless of what Abel or anyone thinks. He's certainly proven that over time. Is it because he's lost faith in the direction of the country and therefore the US economy and maybe therefore US corporate profits?
No. I mean, Buffett is the ultimate optimist. We know this when it comes to the future of the US and that's regardless of who may currently be in the White House. I can't help but conclude Ricky, that I think this is actually macro sickling. I mean, forget the investments for a moment. Berkshire the corporation has 200 billion in net cash. Take all the cash, take out all the debt, and it still has over 200 billion. That's up from 35 billion a year ago. If you go back a little over two years ago, they actually had net debt of about seven billion. In a little over two years, they've gone from a net debt position to over 200 billion in net cash. I do think Buffett is making a market call here. You remember, one of his favorite market valuation tools is the market cap GDP ratio. It's often called the Buffett indicator for good reason, but it's the total market capitalization of a country stock, US, relative to its gross domestic product. He said in the past, when that ratio is above 100%, the market is overvalued when it's below 100%, that might suggest undervaluation. Depending on what source you use and how you calculate the US total market cap of stocks here, that ratio was over 200% coming into the year. That was at or near a record high. It's actually higher than it was in the peak of the dot-com boom. I'm finally here. I think the evidence is undeniable that Buffett thinks or thought that valuations were expensive, and he was preparing Berkshire Hathaway for just that.
Ricky Mulvey: It's not that he can only shoot with what is it? He can only shoot with an elephant gun. When you have that much cash, your only option is to take companies private or you're looking at Coca Cola or American Express, you don't think it's that.
Matt Argersinger: No. I would say it's him being patient. I think he does see a lot of clouds on the horizon. I think there's probably storms ahead, not just for US stocks, but I think for the US economy. I think Buffett believes that. You mentioned the elephant gun. He wants to make 50, 60, $70 billion blasts with first year's capital. The only way he's going to be able to do that if there are big dislocations in the market. I do think he thinks or expects there might be in the near future and that's why he's going.
Ricky Mulvey: We'll keep watching. We'll see what happens. The annual Berkshire meeting less than two weeks. Matt Argersinger, thanks for being here. Appreciate your time and insight.
Matt Argersinger: Thanks, Ricky.
Ricky Mulvey: Up next, Mary Long and Asit Sharma continue their conversation about AMD and how macroeconomic forces are impacting the chipmaker.
Mary Long: Asit a big ongoing news story that's a subsection of the tariff story has been how changing export rules have affected semiconductor stocks, in particular, how they've affected Nvidia and AMD. Last week, US government changed its export rules for certain chips last week, particularly those that are going to China. This was a big news for Nvidia which warned of a $5.5 billion write off as a result of that rule change. AMD was hit by those changes too. We on the show have already talked about the impact of that $5.5 billion write off on Nvidia. But while I have you I want to focus on what that might mean for AMD. This company is racing for closer to an $800 million impact as a result of these rule changes. Help us understand this a bit better. These rule changes impact AMD's MI308 chip. Numbers, letters, you and I talk a lot about names. What does that chip actually do? How is it different from AMD's other chip offerings? It's MI400 offerings, for example.
Asit Sharma: Yeah, so the MI308 chips are, as you suggest, basically pared down versions of AMD's latest GPU series accelerators that go in data centers. They're purpose made for this market and the interesting thing Mary, is that 2025 was supposed to be the launch year for these. They have been in prototype and the R&D phase so we didn't see a lot of sales to China in GPUs from AMD last year. This was going to be the beginning of a pretty nice opportunity. If we can translate that $800 million that the company has signaled, it's going to take us right down on inventory and work in process and translate that to revenue, probably it means about 1-$2 billion in revenue each year. Now, as a function of $31 billion in estimated revenue for 2025. That's not a huge chunk. Let's say it's going to land somewhere between four and 6% of total revenue this year. But it's really about the Ford opportunity. What the US is doing, in essence and this is not just on the Trump administration. It started with the Biden administration, but the US is increasingly putting up barriers for its greatest companies that develop AI technology like Nvidia, like AMD, making it harder for them to play in what, in essence, is the world's fastest growing market or market of most demand for these chips. The companies have been working around export controls for some time. They already understand they can't sell their most capable accelerators into China. But here we have a situation where, look even the pare down versions aren't going to be able to gain the required export licenses and hence, AMD and Nvidia are getting shut out of a market even on the lower end.
Mary Long: Where exactly in the production process were these MI308 chips? Were they designed but not yet built? Were they built, and there's already orders for them? Is there a stockpile of these designed manufactured chips that AMD thought it was going to be able to deliver to China that now is just going to sit there, or they're going to have to find another market for or is this more theoretical revenue that they were planning on that they have to find another way to generate?
Asit Sharma: Well, I think your question beautifully illustrates what we read in the very brief description, the 8K filing that AMD released, which is to say they're hinting that it's inventory, it's prototypes, it's some capitalized R&D, and it's some product that was ready to change hands. It's really a mix of everything, but we do know from that press release that some of it was inventory. This was stuff that was already developed, probably waiting to be shipped. Total cost of all of this including some of the prototyping and investment is about 800 million. Not a huge hit for AMD when all is said and done. But really, again, to come back to this point that it is taking some future opportunity off the books.
Mary Long: How much does that subtraction of future opportunity change or impact your overarching thesis for AMD? Do you view this as materially impactful to the company? Upon hearing this news, the stock market reacted like, hey, this is a big deal to both what it meant for Nvidia and AMD. How does Asit Sharma react to that news?
Asit Sharma: Yeah, same way as the market, Mary. You rerate the multiple on the company to adjust for that lost opportunity. But again, you mentioned the company has good business in China. Last year, it was about 25% of revenue that AMD derived from China, 6.23 billion. But most of this was in server chips, chips that found their way into desktop computers, gaming computers. There is a whole ecosystem of chips that are below the radar of US regulators that AMD is selling in China, those really aren't going to be impacted. The impact on my thesis isn't material. I have the same view of this as I have of Nvidia is that the demand for generative AI technology and the ability to just serve up inference and also train new models is going to be huge for a long time even as we see innovations come out of China and they will because we are forcing China to innovate. These two companies will still have a lot of white space to play in, so they'll make it up elsewhere over time. Near term though, there is, of course, that little bit of rerating on the stock. It was down, I think five or 6% on the news the day that they had their press release.
Mary Long: There's another branch of this that I want to touch on. It plays less to the changing export rules story, but more to the geopolitical situation, trade war situation more broadly. CEO of AMD, Lisa Su announced that the company will be producing key processor units in the United States for the first time. Historically, AMD has relied on manufacturers like Taiwan Semiconductor to build its chips. Historically, TSMC's manufacturing has taken place in you guessed it, Taiwan. Now though, TSMC has a new production facility in Arizona in the US and so more manufacturing will be able to take place stateside. The timing of this announcement, it was pretty recent. The timing of it makes it very easy to assume that, this movement, this change, this is the result of President Trump's trade war and the recent push for American manufacturing. But in actuality, these plans have been in place for a long time. Let's put the tariff situation aside for a moment. Big hypothetical, but let's just do that for the sake of conversation. What does making its chips in America mean for AMD on a cost basis? Again, putting the larger ever changing tariff situation aside for the moment.
Asit Sharma: I think it's a net positive on a cost basis. You would say glancing at this proposition how could it cost AMD less to have chips manufactured in the US versus Taiwan? Even though those chips have to be shipped over assembled in different components and pieces. Well, the answer is there's some opportunity cost here that plays into AMD's calculations. What if supply chains get disruptive? What if there's an earthquake in Taiwan which is a key risk that's always been there with TSMC. What if China invades Taiwan? That's always been a key risk. For AMD, on a long term basis for its supply, when it extrapolates costs of the chips themselves to its operating margin which you and I have been talking about, it makes sense to start having some of those chips made here. I think this is a big win for TSMC, because TSMC, for a long time itself didn't believe that it could be able to manufacture chips outside of Taiwan because they have such a specialised engineering workforce there. The Taiwanese, the engineers there, work incredible hours relative not just to the United States, but other parts of Asia.
I mean, these are specialized engineers who work very hard and it's extremely complex to make this advanced chip packaging. But TSMC has surprised itself. It's branched out into South Korea, it's branched out into Japan. It's branched out into Germany. It's branched out into Arizona of all places, and they are looking to have smaller and smaller node processes out of that Arizona facility which is a boon for TSMC, but it's also a boon for AMD because then that cost proposition doesn't look so bad. If it's a little more expensive to make it here in the US, well, you'll take that trade if you're AMD. Look, in a tariffs world, it makes even more sense. I think Lisa Su is feeling pretty good about those commitments and the decision to try to bring some of that manufacturing here and participate with TSMC. As a shareholder, I'm all for it.
Mary Long: We'll leave it there because Shocker Asit, I believe you and I are out of time, but always a pleasure. Thanks so much for shining a light on this company and how it exists in the ever changing geopolitical landscape.
Asit Sharma: Thanks a lot for having me, Mary. Always happy to talk AMD.
Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. While personal finance content follows Motley full editorial standards and are not approved by advertisers. Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.
American Express is an advertising partner of Motley Fool Money. Asit Sharma has positions in Advanced Micro Devices, Coca-Cola, and Nvidia. Mary Long has no position in any of the stocks mentioned. Matthew Argersinger has positions in Chipotle Mexican Grill, Coca-Cola, and Starbucks and has the following options: short June 2025 $90 puts on Starbucks. Ricky Mulvey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Berkshire Hathaway, Chipotle Mexican Grill, D.R. Horton, Nvidia, Starbucks, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
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