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Chipflation and the New AI Financing Boom · The Financial Exchange Show

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  Speaker 2: Lane, Good morning, Welcome back to the Financial Exchange. Mike,
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  Speaker 2: Paul and Tucker with you here on a Tuesday where
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  Speaker 2: markets remain relatively calm after.
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  Speaker 3: Last week's massive gains.
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  Speaker 2: You've got the Dow, I'm not even gonna say down
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  Speaker 2: exactly flat for the day, off by eleven points at
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  Speaker 2: the moment, he hasn't be the same, up two points
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  Speaker 2: or less than one twentieth of one percent, of the
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  Speaker 2: Nasdaq down eighteen points less than one tenth of one percent,
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  Speaker 2: So not much movement here in equities in early trading.
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  Speaker 2: We do have oil prices now moving up slightly over
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  Speaker 2: eighty two bucks a barrel, and yield on the tenure
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  Speaker 2: Treasury down slightly to just below four point seven percent
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  Speaker 2: as we await the July consumer price index data, which
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  Speaker 2: we will get tomorrow. Our top story the hour has
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  Speaker 2: to do with the semiconductor sector in VideA, as well
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  Speaker 2: as just the general memory and chipflation that we are
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  Speaker 2: seeing right now. Let's start off with this piece from
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  Speaker 2: Emily Peckett Axios why chipflation is here to stay? Does
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  Speaker 2: not do it terribly job answer, good job answering that question,
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  Speaker 2: and I pretty thoroughly disagree with the idea that chipflation
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  Speaker 2: is here to stay. But let's walk through what we
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  Speaker 2: have already seen on the inflation front do to the
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  Speaker 2: AI boom.
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  Speaker 4: Yeah, so what we've seen. The most interesting data point
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  Speaker 4: here to note is, first of all, many listeners are
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  Speaker 4: probably aware of the fact that if you listen to
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  Speaker 4: the program, that the costs for chips and servers and
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  Speaker 4: everything that goes into building out AI data centers has
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  Speaker 4: tremendously increased over the course of the last year or two.
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  Speaker 4: In particular, an area of focus and has been a
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  Speaker 4: big contributor to the market performance we've seen this year
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  Speaker 4: is on the memory tip side of things. And always
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  Speaker 4: to simplify this for listeners out there, on your device,
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  Speaker 4: whether it be your iPhone or your laptop, there's different
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  Speaker 4: memory chips within these different devices that will keep your
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  Speaker 4: files in place, your pictures, all this different types of storage,
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  Speaker 4: so every time you fire up your computer, you're able
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  Speaker 4: to access that information. Those have gone up sixfold over
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  Speaker 4: the course of the last year or so. And in particular,
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  Speaker 4: that's just the memory side of it. If you look
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  Speaker 4: at just everything that goes into semiconductor chips, electronics and accessories,
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  Speaker 4: there's the producer price index, which is basically what at
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  Speaker 4: wholesale the costs for these goods. We talk a lot
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  Speaker 4: about the consumer price index, but the producer price index
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  Speaker 4: that has risen about twenty eight percent year over year.
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  Speaker 4: This is a very much anomaly for the chip sector
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  Speaker 4: in general. Famously, it has been a boom and bus
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  Speaker 4: cycle that goes with chips, and most notably, unlike like
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  Speaker 4: many other things that kind of trend along a normal
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  Speaker 4: inflationary path like housing and other goods and services that
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  Speaker 4: will go up you know, two to three percent over
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  Speaker 4: long term historical averages. Technology has this unique quirk where
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  Speaker 4: on the chip front we've been able to innovate and
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  Speaker 4: actually drive costs down dramatically that have not kept pace
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  Speaker 4: with inflation. But curious to hear why you disagree with
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  Speaker 4: the notion. I guess it's gonna come down to whether
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  Speaker 4: you chim think on the chipflation front, is here stay
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  Speaker 4: how long your time frame is on it? Are you
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  Speaker 4: viewing that as like here to stay for decades or
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  Speaker 4: is that what you disagree with or the short term
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  Speaker 4: Because I'm kind of on board with the short term.
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  Speaker 3: Yeah, I guess we had to define you know, stay.
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  Speaker 2: Nobody is going to be able to develop a new
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  Speaker 2: fabrication facility and compete with TSMC anytime in the next
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  Speaker 2: twelve months. So yeah, is Apple going to be able
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  Speaker 2: to lower iPhone prices in twenty twenty eight?
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  Speaker 3: Probably not.
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  Speaker 2: But you know, when I think you're to stay, I
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  Speaker 2: tend to think of longer than the next twelve to
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  Speaker 2: eighteen months. And the point that I would make is
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  Speaker 2: the same one you just made about semiconductors. They are
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  Speaker 2: a boom and bust cycle component, and what you're seeing
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  Speaker 2: right now is tremendous inflation in every area of that
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  Speaker 2: supply chain. So whether or not somebody will be able
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  Speaker 2: to directly compete with Nvidia and make a better chip
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  Speaker 2: than they do anytime in the next five years, I
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  Speaker 2: think is irrelevant, because what thing I'm certain of is
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  Speaker 2: that plenty of companies will be able.
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  Speaker 3: To supply the market with other areas.
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  Speaker 2: And what everyone is eyeing right now is the fattest
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  Speaker 2: profit margins that technology, hardware and components have seen in decades,
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  Speaker 2: and so everyone in their mother is rushing to throw
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  Speaker 2: money into how do I build this stuff and get
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  Speaker 2: to market quickly? And what you're gonna do is you're
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  Speaker 2: gonna oversupply the market, and you're gonna see prices greater.
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  Speaker 2: I don't know if that's a two year scenario. It
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  Speaker 2: might be more like a five year scenario, but it's
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  Speaker 2: certainly not going to last forever where price is just
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  Speaker 2: even if demand for all this stuff continues in a
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  Speaker 2: straight line upwards as it has, prices still come down.
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  Speaker 4: In my view, I agree with you because not only that,
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  Speaker 4: what we haven't talked about besides the supply side, is
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  Speaker 4: there's going to be innovation on all sorts of different
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  Speaker 4: fronts that will allow for alternative solutions to in video's chips.
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  Speaker 4: There's going to be more specialized chips that are created
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  Speaker 4: that specialize specifically for different tasks that go into AI
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  Speaker 4: that will probably drive down prices. But I would agree
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  Speaker 4: with the sentiment if you are taking a short time
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  Speaker 4: frame view and it the way AI evolves, you know,
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  Speaker 4: twelve to eighteen months is kind of like a long
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  Speaker 4: time in the cycle. If you want to play it
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  Speaker 4: that way for that xospiece, then that I'm on board
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  Speaker 4: for the next year or two.
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  Speaker 3: So let's turn then to you mentioned innovation.
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  Speaker 2: Let's talk about everyone's least favorite type of innovation. Which
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  Speaker 2: is financial innovation, and the effort that's being led by
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  Speaker 2: the CEO of Nvidio, Jensen Wong. His new big concept
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  Speaker 2: for artificial intelligence is looping in a bunch of financial
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  Speaker 2: experts like from the likes of Goldman Sachs, because the
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  Speaker 2: point that he is trying to make is that semiconductors,
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  Speaker 2: while they've traditionally been thought of as this rapidly deteriorating,
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  Speaker 2: highly specific product built for niche use cases, are now
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  Speaker 2: in fact going to be long lasting assets that are
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  Speaker 2: pretty much fungible.
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  Speaker 3: Fungible meaning you know, you can use.
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  Speaker 2: The same chip for different processes and there is long
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  Speaker 2: term value to that chip. And why he's trying to
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  Speaker 2: convince the financial world of this, to me is fairly obvious,
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  Speaker 2: because if you can convince the general public that instead
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  Speaker 2: of what, you know, what is being plugged into these
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  Speaker 2: data centers being a rapidly depreciating asset that was built on,
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  Speaker 2: you know, to spec for this one specific company, if
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  Speaker 2: you can instead convince them that, hey, you know, it's
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  Speaker 2: just like electricity or a mortgage, then I can package
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  Speaker 2: them and sell them, and I can get all sorts
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  Speaker 2: of new people interested in investing in them. Because hey,
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  Speaker 2: it's instead of a depreciating acid. It might still depreciate,
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  Speaker 2: but it's going to depreciate over longer time period. And
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  Speaker 2: you know, even if let's say Tesla buys you know,
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  Speaker 2: three thousand of these things, well, don't worry about it,
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  Speaker 2: because if they need to resell them in the secondary market,
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  Speaker 2: there's going to be a secondary market for them to
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  Speaker 2: resell them into, which is all well and good, and
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  Speaker 2: you might be able to convince me of that, but
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  Speaker 2: I'll tell you it sounds exactly like taking a bunch
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  Speaker 2: of products, dividing them into buckets or you know, trunches,
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  Speaker 2: and then selling the rights to investors who can borrow
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  Speaker 2: on them.
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  Speaker 3: Tell me, if you've.
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  Speaker 2: Heard this theme before, it is the housing bubble of
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  Speaker 2: two thousand and eight.
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  Speaker 3: Like this happens with all sorts of products.
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  Speaker 2: So I'm not saying it is necessarily the wrong approach,
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  Speaker 2: but we're, you know, just seemingly months away from having
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  Speaker 2: semiconductor backed securities that you can then leverage to the
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  Speaker 2: tilt and sell off to, you know, unbeknownst investors. And
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  Speaker 2: here's the problem. This was complicated enough with mortgages. Everybody
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  Speaker 2: knows how a mortgage works, it's backed by real estate.
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  Speaker 2: Can anyone listening to the program right now explain to
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  Speaker 2: me the expected depreciation life cycle of an Nvidia Blackwell chip.
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  Speaker 4: Or the alternative use cases for it, and how long
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  Speaker 4: those use cases are good for.
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  Speaker 2: By the way, don't blame yourself. I doubt there's anybody
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  Speaker 2: at Goldening that can explain the difference to me.
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  Speaker 4: Hopefully some semiconductor outlists out there, Like.
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  Speaker 2: I really have some doubts about all of this. I
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  Speaker 2: do suspect that this is happening. This is not the
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  Speaker 2: first I've heard of this. I've heard others out there
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  Speaker 2: talking about how we need to set up a financial
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  Speaker 2: market for semiconductors, how they are fungible, how you know, effectively,
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  Speaker 2: we need to create a financial market for compute which
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  Speaker 2: will allow the buildout of these assets to happen more rapidly.
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  Speaker 2: But understand what they mean by that. What they mean
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  Speaker 2: by that is they want to create a market for
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  Speaker 2: a product that they can sell to you. Right, you
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  Speaker 2: are the one that is going to fund that build
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  Speaker 2: out if they are able to do this, because guess what,
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  Speaker 2: Goldman's not going to be the one investing in it.
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  Speaker 2: They're going to be the one building it and selling it,
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  Speaker 2: so you know, he just buy or beware of what
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  Speaker 2: is happening here. Right when they talk about the commoditization
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  Speaker 2: and not the commoditization, when they talk about the financialization,
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  Speaker 2: when they talk about these things being fungible, when they
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  Speaker 2: talk about wanted to create a secondary market for it,
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  Speaker 2: all of that means they want to build something that
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  Speaker 2: they can sell.
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  Speaker 3: To you the investor.
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  Speaker 2: Maybe it's a great investment, maybe it's a really poor one,
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  Speaker 2: but that is the entire use case that they're talking about,
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  Speaker 2: because right now, the only market for this stuff are
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  Speaker 2: the people that are the big giant companies that can
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  Speaker 2: afford to buy it. All they want to create another
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  Speaker 2: market for it. Yeah, it doesn't seem like a great
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  Speaker 2: deal to me. Let's take a quick break when we
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  Speaker 2: come back Intel in the news after a big share sale.
• 11:42
  Speaker 2: These are new shares that are being listed on the market.
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  Speaker 2: I want to talk about this because they are not
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  Speaker 2: the only ones doing it here. But there is a
• 11:49
  Speaker 2: pretty distinct difference when we talk about Intel, that's next
• 11:52
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  Speaker 2: So, speaking of companies that want to build semiconductors and
• 14:41
  Speaker 2: sell to the AI demand, Intel has raised twenty billion
• 14:45
  Speaker 2: dollars in a share sale.
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  Speaker 3: It's about a third.
• 14:48
  Speaker 2: More than they were targeting when they announced the deal
• 14:51
  Speaker 2: on Monday morning, and not surprising.
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  Speaker 3: You know, Google's done this.
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  Speaker 2: Pretty much every major AI hyperscaler out there has been
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  Speaker 2: trying to raise cap for this build out to profit
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  Speaker 2: on it. The only question I have is, as an
• 15:04
  Speaker 2: American taxpayer, did I did I just get diluted? I
• 15:14
  Speaker 2: think I did? The US government owns how much Intel?
• 15:19
  Speaker 2: So now like nine point eight or something?
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  Speaker 4: Yeah, to be fair, it is up one hundred and
• 15:24
  Speaker 4: sixty five percent year to date.
• 15:25
  Speaker 3: So since we were that investment, do you and okay
• 15:28
  Speaker 3: all year to date?
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  Speaker 4: I forget when the terms were struck with the US
• 15:32
  Speaker 4: government investment.
• 15:33
  Speaker 2: So so far still coming out on top. Yeah, deluding,
• 15:35
  Speaker 2: These are not the questions that you should be that
• 15:38
  Speaker 2: our government should be asking, right Like when Alphabet decided
• 15:41
  Speaker 2: to issue new shares. It was no business of the
• 15:43
  Speaker 2: United States Government as to whether or not they went
• 15:45
  Speaker 2: to do so.
• 15:46
  Speaker 3: All that we required is that you.
• 15:47
  Speaker 2: Disclose it properly to investors. Here the US government physically
• 15:51
  Speaker 2: owns shares in Intel. And whether you think that's a
• 15:54
  Speaker 2: fantastic idea or the worst idea in the world, the
• 15:58
  Speaker 2: fact of the matter is that suddenly questions like this
• 16:02
  Speaker 2: are the subject of will it hurt or hirem the
• 16:06
  Speaker 2: US taxpayer? And I just I think that muddies the
• 16:09
  Speaker 2: waters way too much. And two, if you think it's
• 16:12
  Speaker 2: the best idea in the world, my second question for
• 16:15
  Speaker 2: you is do you think that the next president, whoever
• 16:20
  Speaker 2: that may be, but you know, put in mind the
• 16:23
  Speaker 2: person that you would think to do would be the
• 16:24
  Speaker 2: worst at you know, managing the AI boom and shares
• 16:28
  Speaker 2: an Intel. Imagine that they are the next president. Are
• 16:30
  Speaker 2: they going to be as good a steward of these
• 16:33
  Speaker 2: shares as the current president is?
• 16:36
  Speaker 3: So I think that this idea was flawed from the beginning.
• 16:40
  Speaker 2: I think if there are strategic industries that we as
• 16:44
  Speaker 2: a nation feel that we need to support for national
• 16:47
  Speaker 2: security or strategic reasons, I am open to that debate,
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  Speaker 2: but I really think that using money that was proved
• 16:57
  Speaker 2: by Congress for the Chips Act to invest in companies
• 17:01
  Speaker 2: is the wrong move because investments can take two decades
• 17:04
  Speaker 2: to play out, and our political system just isn't set.
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  Speaker 3: Up for that.
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  Speaker 4: No, I was going to go, I know you went
• 17:11
  Speaker 4: with the ownership state of the government. I was going
• 17:12
  Speaker 4: to go more to just the overall amount of just
• 17:15
  Speaker 4: demand that it continues to underlie these companies in the
• 17:19
  Speaker 4: AI trade. This offering got upsize from I believe initially
• 17:24
  Speaker 4: fifteen billion to now twenty billion. There's just continues to
• 17:27
  Speaker 4: be a tremendous appetite. And say what you will. Intel
• 17:32
  Speaker 4: has had some revenue growth to show some of the
• 17:36
  Speaker 4: reason behind the returns that they've drive year to date,
• 17:40
  Speaker 4: but ultimately it's been a business that had been floundering
• 17:43
  Speaker 4: for years in the past, and just investors are really
• 17:47
  Speaker 4: willing to continue to keep on their rose colored glasses
• 17:50
  Speaker 4: for anything in this space.
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  Speaker 3: Here's here's the other problem.
• 17:53
  Speaker 2: Let's say I am some lab at some university, or
• 17:57
  Speaker 2: forget about a university, I'm some privately held company that
• 18:00
  Speaker 2: is looking to get into the space, and I find
• 18:03
  Speaker 2: that I can make the exact type of chip that
• 18:05
  Speaker 2: Intel's doing with some new innovation at a lower cost.
• 18:10
  Speaker 3: Am I willing to enter right now? Right?
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  Speaker 1: Like?
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  Speaker 2: Hey, I just found out that I can make this
• 18:16
  Speaker 2: chip that is going to completely put Intel out of
• 18:19
  Speaker 2: business or at least significantly challenge their revenue stream. But
• 18:23
  Speaker 2: the US government owns ten percent of that. Do I
• 18:26
  Speaker 2: have any confidence whatsoever that I'm going to be allowed
• 18:29
  Speaker 2: to sell my product into the market and screw up
• 18:32
  Speaker 2: Intel's business or are they going to be basically forced
• 18:35
  Speaker 2: and required to buy me out because the US government
• 18:37
  Speaker 2: has a staate?
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  Speaker 3: Like again, I know that I keep going on different
• 18:40
  Speaker 3: I think that's.
• 18:40
  Speaker 4: A little too dire. There's already competitors in the space
• 18:44
  Speaker 4: with Intel. Intel doesn't have the most cutting edge chip
• 18:47
  Speaker 4: out there in terms of their infrastructure, AMDs right along
• 18:50
  Speaker 4: the lines with them.
• 18:51
  Speaker 3: So I just don't know.
• 18:53
  Speaker 4: It's a hard slug to just start up as a
• 18:55
  Speaker 4: startup and go into the chip manufacturer.
• 18:59
  Speaker 2: If I'm Goldman, if I'm a private credit firm, I'm
• 19:01
  Speaker 2: not lending that company any money.
• 19:04
  Speaker 3: That's a huge risk.
• 19:05
  Speaker 2: I don't know how the US government is going to
• 19:07
  Speaker 2: react to this company starting up, So I mean, I say, the.
• 19:11
  Speaker 4: Reason you wouldn't get money is lesser because of the
• 19:13
  Speaker 4: government ownership stake, and more so of just how capital
• 19:15
  Speaker 4: intensive that industry is in general, and how many fresh
• 19:19
  Speaker 4: competitors that you'd be up.
• 19:20
  Speaker 2: Again, perhaps I'm overstating it, but yeah, I do not
• 19:23
  Speaker 2: like the US government taking equity stakes. We got to
• 19:25
  Speaker 2: take a quick break when we return. Wall Street Watch
• 19:27
  Speaker 2: coming up next to.
• 19:28
  Speaker 5: Me, bringing the latest financial news straight to your radio.
• 19:41
  Speaker 5: Every day. It's the Financial Exchange on the Financial Exchange
• 19:44
  Speaker 5: Radio Network.
• 19:47
  Speaker 3: Tell you out full whoa.
• 19:49
  Speaker 1: Street Watch tracking the stocks, the dato and the headlines
• 19:52
  Speaker 1: driving markets so far today right here on the Financial
• 19:56
  Speaker 1: Exchange Radio Network.
• 19:57
  Speaker 6: Market's mostly quiet ahead of tomorrow morning's inflation and reading
• 20:00
  Speaker 6: with more turmoil in the straight of four moves after
• 20:03
  Speaker 6: the Wall Street Journal reported US forcers fired on a
• 20:06
  Speaker 6: Panama flagship that attempted to run the American blockade of
• 20:10
  Speaker 6: Iranian ports earlier this morning. As for potential deal, Pakistan's
• 20:15
  Speaker 6: defense minister said the US and Iran are quote close
• 20:18
  Speaker 6: to some sort of arrangement Right now. The Dow is
• 20:22
  Speaker 6: down only forty points, about a tenth of a percent.
• 20:24
  Speaker 6: S and P five hundred down a tenth of percent
• 20:27
  Speaker 6: or eight points lowered, NASDAK down over a quarter of
• 20:30
  Speaker 6: a percent or seventy four points lower. RUSS two thousand
• 20:33
  Speaker 6: is up about a third of a percent, Tenure Treas
• 20:35
  Speaker 6: reeled flat at four point sixty nine percent, and Oil
• 20:38
  Speaker 6: up about half a percent, rating at eighty two dollars
• 20:42
  Speaker 6: and fifty cents a barrel until now edging higher after
• 20:45
  Speaker 6: the chip maker increased the size of its stock, offering
• 20:47
  Speaker 6: two twenty billion dollars higher than the fifteen billion dollars
• 20:51
  Speaker 6: it previously announced. Meanwhile, Bitcoin minor Riot Platforms is seen
• 20:55
  Speaker 6: this stock rise about four percent after Bloomberg reported the com
• 21:00
  Speaker 6: but he secured a nine point one billion dollar cloud
• 21:02
  Speaker 6: deal with Anthropic Elsewhere shares and Hymns and Hers falling
• 21:06
  Speaker 6: one percent after the telehealth company trim the upper end
• 21:09
  Speaker 6: of its full year EBITA outlook. Swiss sneaker maker on
• 21:13
  Speaker 6: Holding posted mixed second quarter results and reduced its full
• 21:16
  Speaker 6: year revenue guide in sending the stock plunging by eighteen percent.
• 21:21
  Speaker 6: And after today's closing bill wolseee earnings from core Weave
• 21:26
  Speaker 6: and super micro Computer. I'm Tucker Silva.
• 21:29
  Speaker 1: That is Wall Street Watch.
• 21:32
  Speaker 2: There's a writer, David Kanti, who studied retirement planning and
• 21:36
  Speaker 2: has been writing about it for quite some time, and
• 21:39
  Speaker 2: he created a fear index, which is not useful to
• 21:43
  Speaker 2: us yet because he only created in the last couple
• 21:46
  Speaker 2: of years. But he goes out and surveys people, and
• 21:48
  Speaker 2: specifically he's talking about financial fears, financial fears about inflation
• 21:52
  Speaker 2: and markets and healthcare and all sorts of different things
• 21:56
  Speaker 2: that impact mainly retire rees. What I find interesting about
• 22:01
  Speaker 2: it is he makes what I believe to be a
• 22:03
  Speaker 2: really valid point, which is people don't make decisions based
• 22:11
  Speaker 2: on all of the modeling that Paul and I like
• 22:14
  Speaker 2: to do as financial advisors. We like to test out
• 22:17
  Speaker 2: and stress test things and model out income versus expenses.
• 22:22
  Speaker 2: And while it would be nice if clients made decisions
• 22:25
  Speaker 2: based on the logical models that we build, they don't.
• 22:30
  Speaker 2: They make decisions based on fear and or at least
• 22:34
  Speaker 2: that's the argument of David Kanti, who wrote this piece
• 22:37
  Speaker 2: and has been talking about it, and that's why he
• 22:40
  Speaker 2: created this fear index is okay. When it gets high,
• 22:45
  Speaker 2: you can plan on clients reacting or individuals reacting to
• 22:50
  Speaker 2: things in an unpredictable fashion.
• 22:53
  Speaker 3: I guess is how I would describe it.
• 22:56
  Speaker 2: What do you think are some good strategies not for
• 22:59
  Speaker 2: you clients of ours, Paul, but for the average person
• 23:02
  Speaker 2: out there to do what.
• 23:06
  Speaker 3: They all they all know that.
• 23:07
  Speaker 2: They should do this, but take the emotions out of
• 23:09
  Speaker 2: financial decision making, because everybody knows that emotional decision making
• 23:13
  Speaker 2: tends to be garbage decision making and can have real
• 23:16
  Speaker 2: problems on your financial scenarios. So what are some strategies
• 23:20
  Speaker 2: that I know you employ with clients and I've employed
• 23:24
  Speaker 2: with people and myself to make it at least easier
• 23:28
  Speaker 2: to take the fear piece out of the whole decision
• 23:31
  Speaker 2: making process.
• 23:32
  Speaker 4: Having a plan can provide some sort of solace when
• 23:35
  Speaker 4: you get into difficult times that hey, this is the
• 23:37
  Speaker 4: way our portfolio is constructed. We have set aside these
• 23:40
  Speaker 4: assets that have lesser risks than the equity markets that
• 23:44
  Speaker 4: we could lean on if markets get bad. Sort of
• 23:47
  Speaker 4: even just presenting it as at some point markets will
• 23:50
  Speaker 4: be down and your portfolio will be far lesser than
• 23:53
  Speaker 4: it is today. So how do we talk about that
• 23:56
  Speaker 4: when times are going well and institute this idea of
• 24:00
  Speaker 4: this is what we are going to do when times
• 24:01
  Speaker 4: get bad because that way, when it does come up,
• 24:04
  Speaker 4: the conversation isn't new. You've mentioned it before and you've
• 24:07
  Speaker 4: got a plan in place. The second thing that I
• 24:10
  Speaker 4: feel is really helpful is so few people have a
• 24:13
  Speaker 4: good understanding education as to why they own stocks or
• 24:17
  Speaker 4: why they invest in the market or.
• 24:20
  Speaker 3: In specific stocks or specific parts of the market.
• 24:23
  Speaker 4: Yeah, and I think providing the framework around the inflation
• 24:26
  Speaker 4: heads that stocks can act as, the ability to be
• 24:30
  Speaker 4: a shareholder in companies as they continue to strive to
• 24:34
  Speaker 4: grow their earnings year over year and sort of what
• 24:36
  Speaker 4: that means to be an equity owner and what you're
• 24:39
  Speaker 4: ultimately investing in is helpful context because that can take
• 24:43
  Speaker 4: some of the emotion out of the cyclical nature of
• 24:46
  Speaker 4: our economy. There's going to be good times in bads,
• 24:48
  Speaker 4: but if you understand why you're doing what you're doing,
• 24:51
  Speaker 4: that can also be helpful to lean on when times
• 24:55
  Speaker 4: get challenging. The education and the planning piece. Does that
• 24:59
  Speaker 4: solve everything. No, There's always going to be people who
• 25:01
  Speaker 4: are emotional regardless, But I feel like those two are
• 25:04
  Speaker 4: a good step and a client I got a throw
• 25:07
  Speaker 4: in a third. Not looking every single day at the
• 25:09
  Speaker 4: portfolio is another one that's very easy to kind of
• 25:12
  Speaker 4: institute yourself. Had a someone who started and just was
• 25:16
  Speaker 4: looking at a daily and sending updates to me on
• 25:20
  Speaker 4: how their portfolio is doing. And it's like, we're in
• 25:23
  Speaker 4: this for ten years. I don't need for you to
• 25:26
  Speaker 4: tell me. First of all, you better believe I'm looking
• 25:29
  Speaker 4: so don't You really don't need to update me on
• 25:31
  Speaker 4: a daily basis. But second of all, we're looking at
• 25:34
  Speaker 4: this for ten years. We're not looking at this every
• 25:36
  Speaker 4: ten days or every day the update on how the
• 25:40
  Speaker 4: portfolio is growing.
• 25:40
  Speaker 2: I think the feeling educated piece is an important component
• 25:45
  Speaker 2: to that, and it also sets up a bit of
• 25:47
  Speaker 2: a conflict because part of the reason you hire a
• 25:51
  Speaker 2: financial planner or investment manager is because you don't feel
• 25:54
  Speaker 2: like you can or want to handle it yourself.
• 25:57
  Speaker 3: Good point like, that's it.
• 26:00
  Speaker 2: If I'm perfectly well educated on financial well being and investments,
• 26:03
  Speaker 2: then I don't need a financial planner. I hire somebody
• 26:07
  Speaker 2: like that because I don't feel like I know all
• 26:09
  Speaker 2: the ins and outs of tax planning, retirement planning, investment
• 26:11
  Speaker 2: decision making.
• 26:14
  Speaker 3: But if I fully outsource it to that person.
• 26:17
  Speaker 2: Without understanding what it is that I'm doing then the
• 26:20
  Speaker 2: first time it goes wrong, I'm gonna panic. And so
• 26:24
  Speaker 2: it does have to be this happy medium where, yeah,
• 26:26
  Speaker 2: I don't want to be the one in charge of
• 26:28
  Speaker 2: those decisions, but I darn well had better pay attention,
• 26:33
  Speaker 2: understand and get educated on how it works, or just
• 26:37
  Speaker 2: be the most trusting person in the world, which comes
• 26:40
  Speaker 2: with its own problems, as we've seen from Ponzi scheme
• 26:42
  Speaker 2: after Ponzi.
• 26:43
  Speaker 3: Scheme, where people take misplaced trust and.
• 26:46
  Speaker 2: Abuse it, and so it can put you in a
• 26:49
  Speaker 2: pretty difficult position there where you need to find a
• 26:52
  Speaker 2: happy medium where yes, I understand what I am doing,
• 26:55
  Speaker 2: I understand what I'm owning investing in, but I don't
• 26:58
  Speaker 2: want to understand the intricacies of it to the point
• 27:01
  Speaker 2: where you know.
• 27:04
  Speaker 3: You're in the weeds of it.
• 27:05
  Speaker 4: I mean, it's a great point that you made, because
• 27:07
  Speaker 4: so many people give you that refrain of like, hey,
• 27:09
  Speaker 4: this is why I'm hiring you to do it, and
• 27:10
  Speaker 4: totally I completely understand that. But think about the working
• 27:13
  Speaker 4: relationship that you might have with your electrician or if
• 27:15
  Speaker 4: you're doing a renovation with a contractor. You don't need
• 27:18
  Speaker 4: to understand every in and out of the plan that
• 27:21
  Speaker 4: they may be instituting to you know, redo your home.
• 27:25
  Speaker 3: But you should have a good idea.
• 27:27
  Speaker 4: He should be he or she should be able to
• 27:28
  Speaker 4: relay sort of the framework and the approach, and you
• 27:31
  Speaker 4: should understand the generalities behind it. I think the same
• 27:34
  Speaker 4: thing kind of applies when you're hiring them to when
• 27:36
  Speaker 4: you're hiring an advisor.
• 27:38
  Speaker 2: Andthropic gearing up for a fall. IPO is hitting the
• 27:41
  Speaker 2: road to try and beef up demand for their shares
• 27:45
  Speaker 2: as they look forward to what would be likely a
• 27:48
  Speaker 2: trillion plus dollar initial public offering.
• 27:52
  Speaker 3: They're traveling out there.
• 27:53
  Speaker 2: They're nine hundred and sixty five billion dollar AI juggernaut.
• 28:00
  Speaker 2: It would be the second largest IPO of the year,
• 28:02
  Speaker 2: maybe the second largest in history, next to SpaceX.
• 28:05
  Speaker 3: And.
• 28:07
  Speaker 2: You'd be not quite a household name as SpaceX.
• 28:13
  Speaker 3: But because everyone's getting this very rapid.
• 28:17
  Speaker 2: Class on what artificial intelligence is and how it's working,
• 28:23
  Speaker 2: I think most are starting to realize that the ianthropic,
• 28:25
  Speaker 2: the creator of Claude and Mythos and these different models,
• 28:29
  Speaker 2: is generally hopping between one or two in terms of
• 28:32
  Speaker 2: the most advanced AI companies that are out there. What
• 28:35
  Speaker 2: will be really interesting to me is actually getting a
• 28:37
  Speaker 2: sense for what their financials look like.
• 28:39
  Speaker 4: Yeah, I mean, the one thing that has been mentioned
• 28:42
  Speaker 4: with Anthropic is they have seen tremendous revenue growth there.
• 28:46
  Speaker 4: Annualized revenue rate has been growing at a really rapid pace,
• 28:50
  Speaker 4: as reporting a run rate of topping forty seven billion
• 28:54
  Speaker 4: earlier this month. This is a company that was only founded,
• 28:57
  Speaker 4: I believe five or six years ago, so to be
• 29:00
  Speaker 4: able to run at a projected twelve months ahead forty
• 29:05
  Speaker 4: seven billion dollar revenue over the course of this span
• 29:08
  Speaker 4: of a short of a time, this short of a time,
• 29:10
  Speaker 4: is incredibly impressive. They are really the most cutting edge
• 29:14
  Speaker 4: I think it's viewed by the artificial intelligence community, the
• 29:18
  Speaker 4: most cutting edge models at this moment in time.
• 29:21
  Speaker 1: What they have to.
• 29:22
  Speaker 4: Sort of assuage sort of some doubts on is there
• 29:27
  Speaker 4: are popping up more and more open source models. So
• 29:30
  Speaker 4: the models that Anthropic runs are proprietary and nature, but
• 29:34
  Speaker 4: there have been many Chinese imitators and just other open
• 29:37
  Speaker 4: source models out there that would ultimately dilute their brand
• 29:41
  Speaker 4: to a degree. So that is one of the things
• 29:43
  Speaker 4: challenges that they're facing, as well as just the overall
• 29:47
  Speaker 4: sentiment on artificial intelligence that this country has there really
• 29:50
  Speaker 4: needs to be a shift in the way that this
• 29:53
  Speaker 4: is presented to calm some of those fears too. Those
• 29:56
  Speaker 4: are probably two of the biggest things that they're trying
• 29:58
  Speaker 4: to address on this roach here.
• 30:00
  Speaker 2: No doubt, let's take a quick break when we return,
• 30:03
  Speaker 2: but if stack Roulette is next time.
• 30:05
  Speaker 1: Here The Financial Exchange every day from eleven to noon
• 30:08
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• 30:45
  Speaker 6: The twenty twenty six Davy five K Boston is set
• 30:49
  Speaker 6: for Saturday November seventh at Fort Independence at Castle Island.
• 30:53
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• 30:56
  Speaker 6: More than eight hundred runners have already signed up, making
• 31:00
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• 31:05
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• 31:29
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• 31:30
  Speaker 3: Time for a bit of stack roulette. What do you
• 31:32
  Speaker 3: have for us?
• 31:33
  Speaker 4: Paully Mike always fascinated by Waimo in its development of
• 31:38
  Speaker 4: autonomous vehicles. These articles I will never not read and
• 31:42
  Speaker 4: probably never not talk about, because I do feel like
• 31:45
  Speaker 4: I'm an optimist and I'm optimistic that in the future,
• 31:49
  Speaker 4: maybe the burden of driving is removed or lesson for
• 31:52
  Speaker 4: all of us out there. I totally understand there are
• 31:55
  Speaker 4: other family members in my camp, like my wife and
• 31:57
  Speaker 4: mother in law, who think that I'm crazy for thinking
• 31:59
  Speaker 4: that would never go into an autonomous vehicle. But what
• 32:05
  Speaker 4: we're seeing here is probably a natural progression in the
• 32:08
  Speaker 4: industry where they've quadrupled the amount of vehicles that they
• 32:11
  Speaker 4: have on the road.
• 32:12
  Speaker 3: Weimo.
• 32:12
  Speaker 4: So Weaimo is owned by Google, and they had about
• 32:16
  Speaker 4: seven hundred vehicles on the road last year. Sorry, they
• 32:20
  Speaker 4: five times the amount of vehicles now. They're up to
• 32:22
  Speaker 4: four thousand today. And what they're running into more and
• 32:25
  Speaker 4: more frequently is what we all know about driving, that
• 32:28
  Speaker 4: it's not the same every single day. It's not completely predictable.
• 32:32
  Speaker 4: There are situations like the one outlined out here in
• 32:36
  Speaker 4: this New York Times piece that fourth on July fourth,
• 32:40
  Speaker 4: there are fireworks that are going on throughout all of
• 32:43
  Speaker 4: the country. There was one hundred thousand people packed in
• 32:47
  Speaker 4: San Francisco's waterfront area that shower to watch the fireworks
• 32:51
  Speaker 4: that shower over the Golden Gate Bridge. Unfortunately, Weimo did
• 32:55
  Speaker 4: not get the memo even though they actually had tried
• 32:58
  Speaker 4: to prepare for this, and what ultimately ended up occurring
• 33:01
  Speaker 4: is that several way moos just stalled out and would
• 33:05
  Speaker 4: not move and were stuck on the bridge, making for
• 33:09
  Speaker 4: five minute drives turned into an hour and a half
• 33:11
  Speaker 4: drives and emergency vehicles having to show up at the
• 33:14
  Speaker 4: scenes to get rid of these waymos that had stalled out.
• 33:19
  Speaker 4: There's other stories out there like this where in a
• 33:22
  Speaker 4: construction zone on the highway right lane was closed down.
• 33:26
  Speaker 4: Two folks driving in a WAYMO saw its vehicle swerve
• 33:31
  Speaker 4: through the crones and drive like a quote scared animal
• 33:34
  Speaker 4: to try and swerve around some of these traffic cones
• 33:37
  Speaker 4: that were put out. In the case of a construction
• 33:40
  Speaker 4: highway scenario where a lane.
• 33:42
  Speaker 3: Was closed, well you messed a really good part of it.
• 33:44
  Speaker 2: Where not a good part, but a funny part where
• 33:46
  Speaker 2: a couple got into a Waimo. Somebody lit a firework
• 33:50
  Speaker 2: from the middle of the roads, and the Waimo, not
• 33:52
  Speaker 2: understanding what a firework is.
• 33:54
  Speaker 3: Just drove over it as it exploded underneath. The car
• 33:59
  Speaker 3: apparently survived that explosion.
• 34:01
  Speaker 2: The car did not light on fire at least not immediately,
• 34:04
  Speaker 2: but the next intersection and they had to exit the vehicle,
• 34:09
  Speaker 2: which can itself be a challenge.
• 34:11
  Speaker 3: Yeah, there's still some kinks.
• 34:13
  Speaker 2: Tobi wort I, there's one thing about this that I
• 34:16
  Speaker 2: have not understand. I have not understood why this is
• 34:19
  Speaker 2: the case. But for those that aren't familiar, all of
• 34:22
  Speaker 2: the Waimos are I believe they are Jaguar electric vehicles, right,
• 34:27
  Speaker 2: that's who actually manufactures these things. And you go take
• 34:31
  Speaker 2: a look around at the other companies that are trying
• 34:33
  Speaker 2: to do this, they're all electric vehicles, and I don't
• 34:36
  Speaker 2: really understand why they.
• 34:39
  Speaker 3: Don't need to be.
• 34:40
  Speaker 4: There's a reason behind it. I'll try and find it here,
• 34:44
  Speaker 4: but there is a reason with the design that does
• 34:47
  Speaker 4: require for them to It's something with the battery and
• 34:51
  Speaker 4: the sensors on it that it is typically required to
• 34:56
  Speaker 4: be electric vehicle.
• 34:58
  Speaker 2: But yeah, I'd be interested to, you know, understand why,
• 35:01
  Speaker 2: because to me, there's a lot of people that are
• 35:06
  Speaker 2: interested in evs but not in self driving vehicles. There's
• 35:09
  Speaker 2: a lot of people that are interested in self driving vehicles,
• 35:12
  Speaker 2: but not in electric, but not in electric. And you know,
• 35:16
  Speaker 2: other than a few products from General Motors and Ford
• 35:19
  Speaker 2: that are being rolled out if you want any of
• 35:20
  Speaker 2: these self driving features, they're pretty much exclusively in electric
• 35:24
  Speaker 2: cars and SUVs, and I just haven't really understood why
• 35:27
  Speaker 2: that is the case.
• 35:28
  Speaker 4: So they do not have to strictly be electric by
• 35:31
  Speaker 4: the laws of physics, but self driving systems require instant
• 35:35
  Speaker 4: mechanical precisions, steady electrical power, and low maintenance software control
• 35:40
  Speaker 4: that gas powered engines cannot reliably provide. Interest That's why
• 35:47
  Speaker 4: you often.
• 35:47
  Speaker 3: See so somebody smarter than me already thought.
• 35:49
  Speaker 6: I'm also seeing like evs have more predictability in terms
• 35:52
  Speaker 6: of breaking as opposed to gas engines.
• 35:55
  Speaker 2: Yeah that's true. Yeah, okay, that's I guess something of
• 35:59
  Speaker 2: an explanation. The problem is that when they are forced
• 36:02
  Speaker 2: to sit in hours of traffic, you know, they run
• 36:06
  Speaker 2: out of electric charge. But I guess that could happen
• 36:09
  Speaker 2: with a gas engine as well. Speaking of gas electric
• 36:13
  Speaker 2: and hybrid vehicles, with gas prices shooting up, guess what
• 36:17
  Speaker 2: is becoming popular again? Not so much the evs, which
• 36:19
  Speaker 2: is surprising to me. There's not a tremendous surgeon demand
• 36:22
  Speaker 2: for those, although you are seeing some uptake. Remember that
• 36:28
  Speaker 2: to take advantage in some of the federal subsidies for
• 36:32
  Speaker 2: evs under the Biden administration, one of the ways you
• 36:35
  Speaker 2: could do it was by leasing one of these electric vehicles.
• 36:38
  Speaker 2: And now those least periods are coming up and they
• 36:41
  Speaker 2: are turning in those evs in droves, So some of
• 36:44
  Speaker 2: those are coming onto the market. But hybrid cars seeing
• 36:48
  Speaker 2: a real resurgence, which we've called this out before, but
• 36:52
  Speaker 2: the foresight of Toyota to you know, go left when
• 36:57
  Speaker 2: everybody else was going right and really be criticized for it.
• 37:02
  Speaker 2: During COVID, like you know, every company out there was
• 37:06
  Speaker 2: racing to develop an electric vehicle, buying up battery plants,
• 37:09
  Speaker 2: buying up the rights to future battery power, all sorts
• 37:13
  Speaker 2: of new companies. Pollstar and Rivian were getting bid up
• 37:17
  Speaker 2: in the stock market as they you know, listed their
• 37:20
  Speaker 2: shares publicly for the first time ever. And all the while,
• 37:24
  Speaker 2: Toyota's just kind of limping around, linking along, continuing to
• 37:28
  Speaker 2: explore hydrogen vehicles and push hybrids and lo and behold.
• 37:33
  Speaker 2: You know, half a decade later, those companies that really
• 37:37
  Speaker 2: spent a lot of money on evs are struggling.
• 37:40
  Speaker 4: Some of them wrote down a lot of those business investments.
• 37:43
  Speaker 4: The GM and Ford and here you have on track
• 37:46
  Speaker 4: to retake the lead in US sales from General Motors,
• 37:49
  Speaker 4: and they I remember reading the articles they were heavily
• 37:52
  Speaker 4: criticized for.
• 37:53
  Speaker 2: They had a CEO that had to resign over it.
• 37:55
  Speaker 2: Really I have to go double check, but I think
• 37:58
  Speaker 2: a CEO resigned over this controversy of not developing evs,
• 38:02
  Speaker 2: and low and behold, a few years later, they are
• 38:04
  Speaker 2: in the cappird seat. Markets are moving slightly lower. Nasdaq
• 38:09
  Speaker 2: now off a third of a percent. We'll have a
• 38:11
  Speaker 2: full market recap and an inflation read for you tomorrow
• 38:14
  Speaker 2: on the Financial Exchange