Latest / The Financial Exchange Show / Why is Broadcom slumping despite record revenue?

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Why is Broadcom slumping despite record revenue? · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada
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Speaker 1: and Paul.
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Speaker 2: Lane, Chuck, Paul, and Tucker with you here on Friday
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Speaker 2: the twelfth.
1:17
Speaker 3: We almost had it.
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Speaker 2: But in any case, we're here and we've got some
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Speaker 2: stuff to talk about. Some of it involves money, some
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Speaker 2: of it involves finance.
1:32
Speaker 3: Money talks me more money.
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Speaker 2: And we're gonna kick things off with a talk about
1:37
Speaker 2: a company that's currently worth less money than yesterday, and
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Speaker 2: that is Broadcom. They reported earnings after the bell yesterday
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Speaker 2: and again kind of like we've seen from a couple
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Speaker 2: of these, uh, you know, semiconductor companies over the course
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Speaker 2: of the quarter. The actual numbers weren't bad, but there's
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Speaker 2: some stuff maybe just that is spooking investors about what
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Speaker 2: the future looks like. And so Broadcom stock, which was
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Speaker 2: down about five percent after hours in pre market, now
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Speaker 2: sitting here today down almost ten percent on the day, discuss.
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Speaker 3: Yeah.
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Speaker 4: So I think what you mentioned there earlier is really
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Speaker 4: one of the big takeaways is that the bar for
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Speaker 4: these companies that are tied to the artificial intelligence business
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Speaker 4: is really high. The hurdles have been raised to a
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Speaker 4: significant level. To be clear, Broadcome was up sixty one
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Speaker 4: percent year to date, so important to kind of put
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Speaker 4: that context it had swelled over a trillion dollars their
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Speaker 4: solid year for them. It's been a really good year
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Speaker 4: for them. They've exceeded a trillion dollar market cap, so
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Speaker 4: things have gone quite well. I do think what you
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Speaker 4: were mentioning is the reason for some of the sell
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Speaker 4: off today is investors are a little bit jitterly. They're
2:50
Speaker 4: expecting the world and these numbers, like you pointed out,
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Speaker 4: were tremendous. Some of the reasons that I'm going to
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Speaker 4: highlight as the potential investor concerns that I am not
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Speaker 4: overly concerned, but just to get a sense for why
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Speaker 4: we're seeing this sell off could be and this is
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Speaker 4: just theoretical. They did mention in some of their guidance
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Speaker 4: that they expect a little bit lower margins going forward
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Speaker 4: next year, losing a percent or so on the margin
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Speaker 4: business as they create more and more artificial intelligence chips
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Speaker 4: on the design side. Those are lower margins than some
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Speaker 4: of their legacy businesses that were more accustomed to your
3:22
Speaker 4: phone chips, Bluetooth, et cetera. Those are a little bit
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Speaker 4: higher margin than some of these artificial intelligence ones. Another one,
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Speaker 4: and this one is not something that they mentioned in
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Speaker 4: the earnings call, but something that has just been sort
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Speaker 4: of in the investment ether over the course of the
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Speaker 4: last few days or so is Google. They have the
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Speaker 4: TPU chips, which we've talked about on the program before.
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Speaker 4: They are probably the biggest competitor to Invidia's Stellar chip
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Speaker 4: that goes into all of these data centers to power chat,
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Speaker 4: GPT and all artificial intelligence malls. Broadcom is the one
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Speaker 4: who designs those chips for Google, and they take a
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Speaker 4: pretty healthy margin out of that design effort. They did
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Speaker 4: get the next contract, so Broadcong's still in line to
4:00
Speaker 4: work side by side with Google. However, Google is exploring
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Speaker 4: working with potentially other designers out there for future generations
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Speaker 4: of their chips. Perhaps that is some of the concern
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Speaker 4: that lingers out there that Google is really scrutinizing ways,
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Speaker 4: like all these artificial intelligence companies to reduce their reliance
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Speaker 4: on companies like Broadcoms so that they can be as
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Speaker 4: efficient with all of the costs that go into this
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Speaker 4: development of artificial intelligence as possible. So those could be
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Speaker 4: some of the reasons why you're seeing a bit of
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Speaker 4: a self I do think from a longer term perspective,
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Speaker 4: we're going to get to a point with these models
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Speaker 4: Chucks where they are going to become so sophisticated that
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Speaker 4: the training exercise is going to be less and less necessary.
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Speaker 4: And in Nvidia is really behind a lot of the
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Speaker 4: training just how powerful their chips are, and there will
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Speaker 4: be an opportunity for companies like Broadcom to design other
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Speaker 4: sorts of chips that are going to be sort of
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Speaker 4: lesser versions are not as powerful as in Vidia's chips.
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Speaker 4: So from a longer term perspective, I don't think that
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Speaker 4: this earnings is, you know, dramatically bad, but it's just
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Speaker 4: reflective of sort of a high bar environment that we're in.
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Speaker 2: It's a company that's trading thirty nine times forward earnings,
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Speaker 2: twenty times forward sales and has margins right now of
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Speaker 2: forty percent, which is.
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Speaker 3: Not the norm for computer hardware.
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Speaker 2: Like you just again, this stuff all gets commoditized, and
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Speaker 2: I want to make the case right now that what
5:28
Speaker 2: we are seeing in the last three or four months
5:32
Speaker 2: of this year is that commoditization process that's happening. Tucker,
5:36
Speaker 2: can you fire up the time machine stand bye? I
5:39
Speaker 2: want to take us make sure you give it enough fuel.
5:42
Speaker 2: We're going back to nineteen ninety five, all right, it's
5:47
Speaker 2: nineteen ninety five. Microsoft has released Windows ninety five, and
5:53
Speaker 2: everyone is getting all happy on you know, the very
5:56
Speaker 2: start of the tech bubble and the thing that we
5:59
Speaker 2: had I've seen over the prior like five or six
6:03
Speaker 2: years in the tech space. The nineties were the decade
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Speaker 2: of the PC rollout. Like that was the dominant feature
6:09
Speaker 2: of tech in the nineteen nineties and specifically all of
6:13
Speaker 2: the IBM compatible PCs that.
6:15
Speaker 3: Were running Windows.
6:16
Speaker 2: And originally, like in the nineties, you had a couple
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Speaker 2: manufacturers that hey, they'd have, you know, an annual release
6:22
Speaker 2: and here's you know, our computers for the next year,
6:25
Speaker 2: and then okay, here's our next ones. And basically in
6:28
Speaker 2: the mid nineties and ninety five, everything changed because a
6:33
Speaker 2: ton of money poured into the space looking at the
6:35
Speaker 2: margins that were there, and you got all these companies
6:38
Speaker 2: that just started trying to make PCs because they shot
6:41
Speaker 2: all the money that was being made. I mean you're talking.
6:44
Speaker 2: You had, you know, Dell, HP, Compac Gateway, I can't remember,
6:49
Speaker 2: like there were dozens of them out there, and basically
6:54
Speaker 2: what ended up happening in order to compete, they started
6:57
Speaker 2: moving to faster and faster releases so like updating their
7:01
Speaker 2: catalog more frequently, they started cutting pricing, and in the end,
7:07
Speaker 2: most of those companies ended up either having to merge
7:09
Speaker 2: with other ones or they went out of business. Like
7:11
Speaker 2: you look at who actually makes IBM compatible you know,
7:15
Speaker 2: Windows compatible PCs these days, there's like three or four
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Speaker 2: names that are left. They either absorbed the other ones
7:22
Speaker 2: or the other ones died off. That's just kind of
7:24
Speaker 2: how it went. And I just look at the last
7:27
Speaker 2: month now, and you know, Google comes out with its
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Speaker 2: new Gemini and says, oh, this is the best model ever.
7:34
Speaker 2: And then yesterday open Ai says, no, like by point
7:39
Speaker 2: two's here, we ran our code red you know program
7:41
Speaker 2: for the last few weeks cause you know, Sam Altman
7:45
Speaker 2: ordered the code red and hey, this is even better now.
7:49
Speaker 2: And ultimately, like what this is in my mind is, hey,
7:53
Speaker 2: these these companies are now having to actually compete on product,
7:57
Speaker 2: which means that you've got to do it cheaper, faster
7:59
Speaker 2: and better than the other guys. And that is how
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Speaker 2: commoditization happens. This is ultimately a good thing for all
8:07
Speaker 2: of us who may use these products. Definitely unfortunately for
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Speaker 2: the companies that sell them or that sell the hardware
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Speaker 2: that goes into them. It means that those margins are
8:16
Speaker 2: going to have to compress because you have to do
8:19
Speaker 2: more with less, you have to compete, and in doing so,
8:23
Speaker 2: that's what typically happens. And so I think that's kind
8:28
Speaker 2: of the you know, one of the other realizations that
8:31
Speaker 2: is creeping in now, which is, hey, if there are
8:34
Speaker 2: going to be multiple ways to do this, using multiple
8:38
Speaker 2: technologies and needing to actually compete to win market share
8:43
Speaker 2: and not just being like, hey, open ai is the
8:45
Speaker 2: only game in town. Man, that's a competition that normally
8:50
Speaker 2: compresses compresses margins, and margin compression means less profit per
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Speaker 2: unit sold. And now you've got to make it up
8:58
Speaker 2: on volume. Yeah, exactly, And and and that's where we are,
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Speaker 2: I think, in the early stages of realizing. And the
9:07
Speaker 2: problem here is and this is why Oracle got bludgeoned yesterday. Here,
9:13
Speaker 2: here's the deal with the two types of two ways
9:16
Speaker 2: that you can finance this. You can finance this through
9:18
Speaker 2: equity raising equity in which case, hey, if someone invests
9:21
Speaker 2: in your company and you're the winner, okay, like yes,
9:24
Speaker 2: there could be untold trillions you could make. And if
9:27
Speaker 2: you invest in the loser then you lose your money,
9:29
Speaker 2: and that's you know it, that's that's fine. But ultimately,
9:32
Speaker 2: if you pick like five or six AI companies and
9:35
Speaker 2: do equity investments into them, you could say, yeah, I
9:37
Speaker 2: could do pretty well because that one winner is going
9:39
Speaker 2: to make me a bunch and who cares what happens
9:41
Speaker 2: to the losers.
9:43
Speaker 3: The problem is that.
9:44
Speaker 2: A lot of this financing is now starting to happen
9:46
Speaker 2: on the debt side of things, and debt doesn't have
9:49
Speaker 2: that upside. Like if if you invest in, if you
9:53
Speaker 2: lend a million dollars to six companies and five of
9:57
Speaker 2: them go belly up, you don't look at the winner
10:00
Speaker 2: and say, well, my million there turned into six million. No,
10:02
Speaker 2: Like you went a million dollars, you get back a
10:05
Speaker 2: million with the interest. But it's not going to be
10:08
Speaker 2: like that. It's not going to be enough. So what
10:12
Speaker 2: the market I think is also waking up to, and
10:14
Speaker 2: this was you know, the case of Oracle yesterday, is hey, you're,
10:18
Speaker 2: you know, raising an awful lot of debt to try
10:20
Speaker 2: to do this and you may not be the one
10:24
Speaker 2: who ends up winning. And your debt costs are rising,
10:28
Speaker 2: your capex is rising as a percentage of revenue, Your
10:30
Speaker 2: depreciation is rising as a percentage of revenue, and you
10:34
Speaker 2: got to start selling some more stuff otherwise this is
10:36
Speaker 2: going to be a problem. And so these are the
10:39
Speaker 2: realizations that the market is having with AI. These can
10:43
Speaker 2: be solved, but it's going to take a lot of
10:46
Speaker 2: sales growth in a short period of time or a
10:49
Speaker 2: pulling back of some of the capex plans.
10:52
Speaker 4: Which I don't think that's gonna happen in any In
10:54
Speaker 4: any case, really, I.
10:55
Speaker 2: Think you got to go full steam ahead because the
10:57
Speaker 2: only way out is through exactly exactly.
11:00
Speaker 4: If you don't do it, you're probably likely to crash
11:02
Speaker 4: and burn. So you may as well burn the boats
11:04
Speaker 4: and just give it all you got and oracles case,
11:07
Speaker 4: make it up on volume, like that's what you have
11:09
Speaker 4: to do.
11:09
Speaker 2: The next two years are going to be wild on this,
11:12
Speaker 2: and it's like these are the two years where it's
11:14
Speaker 2: going to start to matter, and we're going to see
11:16
Speaker 2: the actual winners and losers decided in twenty six and
11:19
Speaker 2: twenty seven. In my opinion, let's take a quick break
11:22
Speaker 2: when we come back. Uh, that's enough AI for now.
11:26
Speaker 2: Let's talk a little bit about how resilient the US
11:29
Speaker 2: consumer can.
11:30
Speaker 3: Be without a job. Let's do that. When we return.
11:33
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Speaker 2: Peace in Bloomberg opinion by Connor sen It's titled how
12:41
Speaker 2: Resilient will the US Consumer be Without a job? And
12:43
Speaker 2: basically what it's talking about is that when you look
12:46
Speaker 2: at how companies are talking about their twenty twenty six plans,
12:50
Speaker 2: there's not a ton of room for labor force expansion
12:54
Speaker 2: in them if you you know, try to figure out,
12:57
Speaker 2: you know, where their profits are going to come from
13:00
Speaker 2: with you know, the projected revenues, and so you know,
13:03
Speaker 2: he makes the point specifically looking at housing home Depot
13:06
Speaker 2: gave guidance that pretty much shows no real revenue growth
13:10
Speaker 2: and only slightly better earnings growth next year. Told Brothers,
13:14
Speaker 2: a major US home builder, particularly on the high end,
13:17
Speaker 2: guided that they're going to deliver fewer homes next year
13:19
Speaker 2: and have a smaller backlog than they've had, so they're
13:21
Speaker 2: going to build less. This is stuff we've been talking
13:24
Speaker 2: about for the last couple of weeks, and so you know,
13:28
Speaker 2: we're in this curious place where, again, like you, you
13:32
Speaker 2: look at the actual data that we have as it
13:36
Speaker 2: relates to you know, wages and what's being earned by people,
13:41
Speaker 2: and the best place that I have to find that
13:44
Speaker 2: you know, in real time is with the fightah withholding
13:49
Speaker 2: that is the Treasury releases a statement every day showing, hey,
13:54
Speaker 2: here's what was paid into FIKA by employers and employees.
13:58
Speaker 2: And basically, what we've seen is that the pace of
14:01
Speaker 2: growth in FIICA withholding year over year has gone from
14:04
Speaker 2: the mid sevens at the middle of the year down
14:06
Speaker 2: to you know, the low threes through November. And that's
14:11
Speaker 2: pretty consistent with no real growth in payrolls. The reason
14:16
Speaker 2: being think about, you know, the employer that you work for.
14:19
Speaker 2: You might be coming in this time of year and
14:21
Speaker 2: they say, hey, we're going to give you, you know, a
14:22
Speaker 2: three percent bump and pay or a two percent bump
14:25
Speaker 2: and pay, and so three percent you know, payroll tax
14:29
Speaker 2: withholding growth year over year pretty much implies that there's
14:32
Speaker 2: not really any job growth that's happening. And despite this,
14:37
Speaker 2: consumer spending has remained robust. And there are reasons that
14:40
Speaker 2: we've talked about where this may be true or why
14:43
Speaker 2: this may be true.
14:44
Speaker 3: Number one, a.
14:45
Speaker 2: Larger portion of the population today is retired. They're not
14:49
Speaker 2: dependent on their wages, they live on Social Security and
14:52
Speaker 2: income off their portfolio. Sure, and social Security doesn't get cut,
14:56
Speaker 2: you know, it doesn't shift downward. And portfolio years have
15:00
Speaker 2: been up this year, so that can support consumer spending.
15:03
Speaker 2: So I think that when you look at this, the
15:07
Speaker 2: question is, Look, we're still consistently seeing across all these
15:11
Speaker 2: different platforms four to six percent year over year spending
15:15
Speaker 2: growth from American consumers. Connor's asking the question, can that
15:20
Speaker 2: continue if the labor market keeps worstening? And it's a
15:24
Speaker 2: valid question, but the data that we have in hand
15:26
Speaker 2: right now shows that, at least to this point, the
15:29
Speaker 2: worstening labor market has not ended up being reflected in
15:33
Speaker 2: worsening consumer demand.
15:35
Speaker 4: We had talked about this sommrule concept last fall, when
15:39
Speaker 4: unemployment increased by over a half percent from the troth
15:42
Speaker 4: that had found itself in coming out of twenty twenty two,
15:45
Speaker 4: where the labor market was in a tremendous place, and
15:48
Speaker 4: typically with this summrule, the idea was that if you
15:51
Speaker 4: were to exceed that half percent increase in unemployment that
15:54
Speaker 4: looking back in history, that would trigger a recession. At
15:57
Speaker 4: this point, given how long it's been since we last
16:00
Speaker 4: cover that a year plus, I sit in a position
16:02
Speaker 4: where I would be more open to the idea check
16:05
Speaker 4: that perhaps the labor market could slightly worsen next year.
16:08
Speaker 4: Now I know the argument could be made that that's
16:10
Speaker 4: not usually how the labor market goes. It's usually not
16:13
Speaker 4: a slower worsening. It's usually think of a snowball rolling
16:16
Speaker 4: down the hill. It goes fast and furious and it's
16:19
Speaker 4: hard to stop. But I'm more open to that possibility
16:22
Speaker 4: because of the spending trends that we've examined throughout this year,
16:25
Speaker 4: which defy a lot what's going on on the labor
16:28
Speaker 4: market side. And you hit on a couple of reasons
16:30
Speaker 4: as to why that's the case. Markets have been tremendous
16:33
Speaker 4: over the course of the last three years. For all
16:34
Speaker 4: those retirees, that's been a huge boom. And for those
16:37
Speaker 4: higher income consumers out there, they're invested in the markets too,
16:40
Speaker 4: so that also is a benefit to them. So it's
16:42
Speaker 4: a great question that he poses, and I would say
16:45
Speaker 4: on our end of things, probably one of the biggest
16:47
Speaker 4: focuses for next year is the artificial intelligence trade itself.
16:51
Speaker 4: That's powering a lot of economic growth and opportunity, and
16:55
Speaker 4: it's the labor market. If I were to narrow down
16:57
Speaker 4: two things that you're just looking at heading into Tour
17:00
Speaker 4: twenty six, those would probably be my top two.
17:03
Speaker 2: Yeah, it's look you've got this tug of war that's
17:06
Speaker 2: gonna happen next year. These are the lines that you're
17:10
Speaker 2: the battle lines as I see them. On the weakening
17:14
Speaker 2: side of things, you've got a labor market and a
17:16
Speaker 2: housing market that have some problems. Right on the strength
17:19
Speaker 2: side of things, you've got the provisions from the one
17:23
Speaker 2: big beautiful bill that are gonna kick in next year
17:25
Speaker 2: that are gonna be helpful, and AI continuing to power through.
17:29
Speaker 2: And the question is going to be which side gives
17:32
Speaker 2: because right now, like if you look at it, you
17:34
Speaker 2: can see it's just kind of this tug of war,
17:36
Speaker 2: and there's a plausible path for the economy to worsen
17:38
Speaker 2: next year, there's a possible path for it to get better.
17:41
Speaker 2: And I do think the window of weakness for it
17:44
Speaker 2: is in the front half of the year, because I
17:46
Speaker 2: tend to believe once you start getting larger tax refunds
17:50
Speaker 2: that are coming through and things like that, that likely
17:53
Speaker 2: starts to juice up, you know, consumer spending heading into
17:56
Speaker 2: the summer, but not in.
17:58
Speaker 3: The fall of the following year. Yeah. Correct, So I.
18:00
Speaker 2: Think that ultimately it's kind of okay, like, what does
18:05
Speaker 2: the balance between these look like? And it could be
18:09
Speaker 2: a timing thing as much as anything, where it's like, hey,
18:11
Speaker 2: the labor market was set to worse and further, but
18:13
Speaker 2: then that extra spending kicked in and kept us from
18:16
Speaker 2: going there. Or if labor goes in January, maybe it's
18:19
Speaker 2: too early and then the extra spending boost isn't enough
18:22
Speaker 2: to help. Can I ask you one question. I know
18:24
Speaker 2: we're run up against break here at tariff story. Do
18:26
Speaker 2: we think that's dead?
18:27
Speaker 4: Because we had really said that hey by December of
18:29
Speaker 4: this year, if we're not seeing impact on the pricing front,
18:32
Speaker 4: we haven't mentioned inflation, as you and I have gone
18:34
Speaker 4: back and forth here for concerns for twenty twenty six,
18:36
Speaker 4: is it dead and gone pretty close? I would say
18:39
Speaker 4: I think it is.
18:40
Speaker 2: And the reason why is that, ultimately, like all of
18:42
Speaker 2: us live and experience these things through how they change,
18:46
Speaker 2: and once they're in place for you know, basically a
18:50
Speaker 2: full year, you sit there and you say, okay, we've
18:53
Speaker 2: absorbed this, and now like that's kind of a baseline
18:57
Speaker 2: that we're competing against, you know, relative it's kind of
19:01
Speaker 2: it's look at it in terms of housing, just as
19:04
Speaker 2: an example, housing in twenty twenty two went from selling
19:08
Speaker 2: six million units a year down to around four million.
19:12
Speaker 2: Once you're down at four million and just selling that
19:14
Speaker 2: in subsequent years, it's neither a net drag or a
19:17
Speaker 2: net help for the economy.
19:18
Speaker 3: It just is steady.
19:21
Speaker 2: I kind of view the tariffs the same way and that, yeah,
19:23
Speaker 2: they were a net drag this year, They're not going
19:26
Speaker 2: to be a larger net drag next year, and so
19:28
Speaker 2: it's it's neutral on the economy at that point. Quick
19:31
Speaker 2: break Wall Street watches next.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:54
Speaker 1: Watch a complete look and what's moving market so far
19:57
Speaker 1: today right here on the Financial extra Change Radio Network.
20:01
Speaker 5: Tech sector seeing a pullback again today as investors react
20:05
Speaker 5: to more tech earnings from Broadcom, which impressed. By the way.
20:09
Speaker 5: We also have some major news coming out of the
20:12
Speaker 5: retail space this morning. Right now, the Dow is off
20:15
Speaker 5: only seven points, mostly flat, SMP five hundred down two
20:19
Speaker 5: thirds of a percent or forty five points. Nasdaq is
20:23
Speaker 5: selling off over one percent or two hundred and sixty points.
20:26
Speaker 5: Rusted two thousand is down over a quarter percent. Tenure
20:29
Speaker 5: treasure reeled is up one basis point. Oh wait, no
20:32
Speaker 5: it's not. CNBC is doing that weird thing again. I'll
20:35
Speaker 5: get that for you later. Don't worry about now. What
20:37
Speaker 5: do you got, Chuck? It's up four point three basis points.
20:40
Speaker 5: Thank you very much, appreciate that. I'll never forget this.
20:43
Speaker 5: And the crude oil is down six tenths of one percent,
20:47
Speaker 5: trading at fifty seven dollars and twenty five cents a barrel.
20:50
Speaker 5: Well Broadcom is dropping ten percent, despite the chip maker
20:54
Speaker 5: beating earnings in revenue expectations driven by AI sales. The
20:58
Speaker 5: company also issued a strong forecast for the current quarter,
21:01
Speaker 5: expecting AI chip sales to double from a year earlier.
21:05
Speaker 5: Is AI demand remained strong again. Broadcom down by ten percent. Meanwhile,
21:10
Speaker 5: at leisure where retailer Lululemon announced CEO Calvin McDonald will
21:14
Speaker 5: step down in January. In a statement, Lulu said its
21:18
Speaker 5: board is focused on identifying a leader with the track
21:20
Speaker 5: record of driving companies through periods of growth and transformation
21:25
Speaker 5: to guide the company's next chapter of success. Lululemon also
21:29
Speaker 5: beat street forecasts on both lines for its previous quarter.
21:33
Speaker 5: That stock is rallying nearly ten percent. Elsewhere, Furniture company
21:37
Speaker 5: URH reported mixed third quarter results and narrowed its annual
21:40
Speaker 5: sales outlook towards the lower end of its range. The
21:43
Speaker 5: company noted tariffs had resulted in product delays, items out
21:47
Speaker 5: of stock, and price increases. Shares in RH are up
21:52
Speaker 5: eleven percent. Costco recorded higher quarterly revenue from membership fees
21:57
Speaker 5: as it aims to open more warehouses to drive growth.
22:00
Speaker 5: Cost goes down nearly one percent, and several cannabis stocks
22:03
Speaker 5: are rallying, falling reports that President Trump is expected to
22:06
Speaker 5: direct his administration to move to reclassify marijuana as a
22:11
Speaker 5: less dangerous drug. Shares in both till very brands and
22:14
Speaker 5: cannopy Growth are surging twenty three percent higher.
22:18
Speaker 1: On that news, I'm.
22:19
Speaker 5: Tucker Silva and that is Wall Street Watch, and remember
22:22
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22:40
Speaker 2: AI shopping could drive two one hundred and sixty three
22:43
Speaker 2: billion dollars in holiday sales. Walmart and Target are racing
22:48
Speaker 2: to get in. That's the headline from CNBC. It's talking
22:51
Speaker 2: about global holiday sales this year, so not you know,
22:54
Speaker 2: in the United States, but basically, Salesforce is saying that
22:59
Speaker 2: I'll amost a quarter of all holiday orders could be
23:02
Speaker 2: driven by AI. Now, this is going to be a
23:06
Speaker 2: very informal survey of a very small number of people.
23:09
Speaker 2: But are either of you using artificial intelligence to do
23:12
Speaker 2: your Christmas shopping this year?
23:13
Speaker 3: No?
23:14
Speaker 1: Not at all.
23:16
Speaker 4: Am I heavily involved in Christmas shopping like grocery shopping? No,
23:20
Speaker 4: So the answer is a no, free okay, but no
23:23
Speaker 4: biomission because I'm just not in No.
23:24
Speaker 2: That's fine though, so I think here's I'm not either.
23:28
Speaker 2: By the way, do either of you use AI on
23:32
Speaker 2: a regular basis right now?
23:33
Speaker 3: Yes? No?
23:35
Speaker 2: Okay, good Paul, give me like I'll give you my
23:38
Speaker 2: examples of stuff that I tend to use it for. Yesterday,
23:42
Speaker 2: I was I had done some grocery shopping earlier this
23:46
Speaker 2: week and was going to be making some sweet potatoes yesterday,
23:50
Speaker 2: but instead I saw some yams at the grocery store,
23:54
Speaker 2: and my two year old daughter sitting in the cart
23:57
Speaker 2: heard me say the word yam, and she's still sar
24:00
Speaker 2: going yummy, yammy, yummy yamy. And so we had to
24:03
Speaker 2: buy the yams instead of the sweet potatoes. And so
24:07
Speaker 2: just before dinner last night, my wife asked me, Hey,
24:10
Speaker 2: what what's the difference between a yam and a sweet potato?
24:13
Speaker 2: And rather than going to Google, where I would have
24:15
Speaker 2: had to like find like that, I pulled up you know,
24:18
Speaker 2: chat Cheepatina. I was like, what's the difference between this?
24:20
Speaker 2: And it gave me like the four key differences. Yams
24:23
Speaker 2: have thicker skin, their starts here. They're actually an entirely
24:26
Speaker 2: different uh family of plants from sweet potatoes, which I.
24:29
Speaker 3: Didn't know, but like, it gave me that pretty easily.
24:34
Speaker 2: Or I might ask, hey, you know, what are the
24:37
Speaker 2: tax brackets for next year, just so I don't have
24:39
Speaker 2: to look through eight web pages and you know whatever.
24:43
Speaker 2: So I use it more for just finding basic information
24:46
Speaker 2: than making decisions about my life at this point. And
24:50
Speaker 2: I'm curious if you're similar or difference.
24:52
Speaker 3: I'm similar.
24:52
Speaker 4: The examples I would give to you are similar ones
24:55
Speaker 4: where my son, you know, has a lot of trains around.
24:58
Speaker 4: He asked, what is this part of the train? Take
25:00
Speaker 4: a picture of it? Hey, what is this part that?
25:02
Speaker 4: And I give a couple of specifications there. I had
25:05
Speaker 4: a nice bottle of wine the house that someone had
25:06
Speaker 4: left there that I opened on Sunday night, and I
25:08
Speaker 4: was like, oh, I'm not really familiar with this one.
25:11
Speaker 4: Chat GPT. Here, here's a picture of this bottle of wine.
25:13
Speaker 4: Tell me what it's like, you know, give me a
25:15
Speaker 4: little bit of background on it that I wouldn't be
25:16
Speaker 4: able to grab before all that type of stuff, workout stuff. Hey,
25:19
Speaker 4: I just ate a big Thanksgiving meal. What's a good
25:22
Speaker 4: way to try and burn some of this out that
25:23
Speaker 4: that kind of conversation. But I do think from things
25:26
Speaker 4: that I've listened to from other podcasters and people out there,
25:30
Speaker 4: that it's going to get to a point if you're
25:31
Speaker 4: looking for revenue, if you're open, aye, this is where
25:34
Speaker 4: you clip it. And it's the same business model as Google.
25:37
Speaker 4: But ads are coming. Ads are coming. They're coming big time,
25:40
Speaker 4: hard and heavy, I bet. Because for the example of
25:44
Speaker 4: let's say you want to buy your niece. This is
25:46
Speaker 4: sited in the piece here a gift that is fifty
25:48
Speaker 4: bucks and these are the four things that she likes.
25:51
Speaker 4: Give me some examples chat ept of something that would
25:54
Speaker 4: fit under these constraints. You better believe that there's going
25:57
Speaker 4: to be a link there to Walmart or Target or
25:59
Speaker 4: whatever fits the It.
26:00
Speaker 3: Might even be buy right through there with an integration.
26:02
Speaker 4: And that's what I think it's gonna I think it's
26:03
Speaker 4: going that way, and they're gonna take viig. They're going
26:06
Speaker 4: to take a commission off of the fact that they
26:08
Speaker 4: just gave Walmart or Target, whoever. And I've heard it
26:11
Speaker 4: for travel too. That's been another one that is going
26:13
Speaker 4: to come that way. Restaurant reservations. It's kind of getting
26:16
Speaker 4: to that point where it's going to act as an
26:20
Speaker 4: assistant and that's how they will take revenue. And I
26:23
Speaker 4: sit here reading this piece, I'm like, so, if you're Google,
26:26
Speaker 4: how relieved you are that you're at least in the game,
26:29
Speaker 4: because if we're having this conversation and a year ago,
26:32
Speaker 4: it would not have been as optimistic of a picture
26:35
Speaker 4: because that is their whole game, right, this is what
26:37
Speaker 4: we would do previously to answer your daughter's question about
26:40
Speaker 4: the yams or my sons about the train parts Google,
26:42
Speaker 4: That's where I would have gone.
26:44
Speaker 2: And I do think it's also important to note though
26:47
Speaker 2: this is not new revenue to these companies. This is
26:50
Speaker 2: them basically trying to hold on to the revenue that
26:53
Speaker 2: would just like be going through a different channel.
26:56
Speaker 3: YEP.
26:56
Speaker 2: So it's kind of like, hey, if you're not there,
26:59
Speaker 2: you're not you don't have a chance.
27:01
Speaker 3: SEO is the.
27:01
Speaker 4: Big term, right, Search engine optimization. Now the new one
27:04
Speaker 4: that I just read in this piece is is AEO,
27:07
Speaker 4: which now I'm blanking what the A was, but maybe
27:10
Speaker 4: our professional intelligence it's something along those lines.
27:12
Speaker 3: We'll go with that.
27:13
Speaker 4: You basically have to position yourself to be picked up
27:16
Speaker 4: by these searches if you want to continue to grow.
27:20
Speaker 3: That's really AEO.
27:22
Speaker 1: Is that what you said?
27:23
Speaker 4: Answer engine optimization, it's all the valels. I got it.
27:27
Speaker 5: It's answer engine optimization. That's it, Google says, American Eagle Outfitters.
27:31
Speaker 2: Well, that is the ticker for well, actually the ticker
27:35
Speaker 2: there's a song about this.
27:37
Speaker 3: EI EIO and on that.
27:40
Speaker 2: Farm there was no, that's not it. Anyways, here's the
27:44
Speaker 2: other question that I do have. How am I going
27:49
Speaker 2: to know I'm being advertised to by AI. Let's say,
27:53
Speaker 2: as an example, I ask, hey, what's a good you know,
28:00
Speaker 2: give me a list of good fast casual restaurants that
28:05
Speaker 2: I can get a meal at for under this price point.
28:10
Speaker 3: If company X is.
28:13
Speaker 2: Paying open AI why dollars a year, is it going
28:17
Speaker 2: to say that as like the first option preference and
28:21
Speaker 2: is it going to have to disclose that that was
28:24
Speaker 2: a paid advertisement or am I just going to think, no,
28:28
Speaker 2: this is what AI is saying as the preferred option.
28:32
Speaker 4: They'll probably have to replicate Google's playbook of you know,
28:35
Speaker 4: sponsored posts, which is like, that's the people paying to
28:37
Speaker 4: be at the top of the page, and Google's algorithm approach,
28:41
Speaker 4: which is a combination of who is doing this the
28:44
Speaker 4: best that comes up that fits the bill, but also
28:47
Speaker 4: a little bit of who's going to pay the most
28:49
Speaker 4: that auction style system for this placement on the page.
28:52
Speaker 2: Because like the insidious thing is when you're when you're Googling,
28:55
Speaker 2: you at least see, okay, here's like these results. Right
28:59
Speaker 2: If this is just if I asked chat GPT, hey
29:01
Speaker 2: where should I get a stake and it just says, oh,
29:04
Speaker 2: you should go to the Capitol grill. You just how
29:07
Speaker 2: do I know that that's actually what I should do
29:10
Speaker 2: to go? You know, like how do I know that
29:12
Speaker 2: they didn't just that who owns them?
29:14
Speaker 3: It's a arden.
29:16
Speaker 2: How do I know the darden didn't just write a
29:17
Speaker 2: big old check and say yeah, like if asked, X
29:21
Speaker 2: respond capital grill, so like that, because if it's just conversational,
29:28
Speaker 2: you're kind of like, Okay, what do I do here?
29:30
Speaker 2: And other platforms have figured out how to deal with
29:32
Speaker 2: this if you're on social media, which I'm not like
29:35
Speaker 2: any more, Like I don't really do it anymore if
29:39
Speaker 2: you're on social media, at least the way I remember it.
29:42
Speaker 2: If someone was doing a paid ad, they indicated in
29:44
Speaker 2: the post that it was a paid the cad And
29:47
Speaker 2: so we're going to get some kind of you know,
29:51
Speaker 2: disclosure that needs.
29:51
Speaker 3: To happen around that. But is it required by law?
29:56
Speaker 3: Is it just no?
29:56
Speaker 2: We think this is best practice. Like this is where
30:00
Speaker 2: things get a little bit murky for me in trying
30:03
Speaker 2: to navigate that kind of stuff.
30:05
Speaker 3: But I thought this was, I don't know, interesting.
30:08
Speaker 2: Just take a quick break when we come back. We're
30:11
Speaker 2: talking two things that you wouldn't think fit together, fiber
30:14
Speaker 2: and silver, and they don't fit together, but we'll discuss
30:17
Speaker 2: them together after.
30:18
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30:41
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30:45
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30:49
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31:18
Speaker 2: Okay, PCE and CNBC Fiber, The Next Protein and the
31:23
Speaker 2: next grocery obsession. Apparently this is what all the big
31:28
Speaker 2: food companies are working on the last year or two,
31:31
Speaker 2: they've spent a whole bunch of money trying to get
31:32
Speaker 2: more protein into their food. Now they're trying to get
31:35
Speaker 2: more fiber into their food. And I gotta tell you,
31:39
Speaker 2: I am very pro fiber. Love the stuff, eat it
31:42
Speaker 2: every day, can't get enough of it. But here's what
31:46
Speaker 2: I know about food. I know enough to know that
31:52
Speaker 2: no one's entirely sure how the human body and digestive
31:56
Speaker 2: system actually work, and that when you take specific micro
32:02
Speaker 2: nutrients out of kind of the macro picture and lifestyle
32:05
Speaker 2: from which they normally come from, you don't normally get
32:07
Speaker 2: the exact same results. And so I'm always a little
32:11
Speaker 2: bit skeptical whenever something becomes like the next big trend,
32:14
Speaker 2: because my general rule of thumb is, hey, just wait
32:17
Speaker 2: twenty years and whatever they said was bad becomes good.
32:20
Speaker 2: And so my basic starting point is, hey, don't eat
32:24
Speaker 2: too much, try to eat a mix of different things,
32:26
Speaker 2: and you know you'll generally end up working out fine.
32:30
Speaker 2: But it does appear that we're about to get a
32:33
Speaker 2: real kick in the fiber next year, and so that'll
32:36
Speaker 2: be fun.
32:37
Speaker 4: I'm all with you on fiber, though, some of the
32:40
Speaker 4: areas that they plan to be launching in. I'm not
32:42
Speaker 4: sure as if this is the place I'd be looking
32:44
Speaker 4: for it. Smart food, fiber pop featuring six grands of
32:48
Speaker 4: protein per serving, sun Chips, fiber incorporating fiber variants like
32:52
Speaker 4: whole grans and whole glarient, whole grains and black beans e.
32:57
Speaker 4: I don't know if those are that.
32:58
Speaker 3: I'm very pro bean.
33:00
Speaker 4: I'm very anti been, Paul's anti been, but it's a
33:02
Speaker 4: good fiber source.
33:03
Speaker 5: I feel like we went through this phase by the way,
33:05
Speaker 5: because yeah, I feel like in like I don't know,
33:09
Speaker 5: middle school or something, like everything was fiber branded.
33:12
Speaker 2: Just wait twenty years and like it all goes to
33:15
Speaker 2: the circle.
33:15
Speaker 3: Yeah, yeah, you know. So I don't know.
33:17
Speaker 2: I am very pro fiber, and I think it's great
33:21
Speaker 2: that you can maybe get fiber in more places. But
33:24
Speaker 2: I remained skeptical that this is more anything more than
33:30
Speaker 2: just kind of marketing, because it's, Hey, we're a food
33:33
Speaker 2: company that is showing declining sales.
33:35
Speaker 3: How can we get people excited?
33:37
Speaker 2: But in a different way, Okay, like, yeah, look at
33:39
Speaker 2: all the fiber in here, as opposed to Hey, I
33:41
Speaker 2: went to the grocery store, and I bought a cann
33:43
Speaker 2: of beans for a dollar fifteen, and I got all
33:47
Speaker 2: the fiber I need, and I look great.
33:52
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35:15
Speaker 2: I do think that the bean is actually basically the
35:17
Speaker 2: ultimate food, high protein, high fiber, low glycemic index.
35:24
Speaker 3: Which bean do you prefer?
35:25
Speaker 2: So I've done, I've done a bean taste test. Actually okay,
35:29
Speaker 2: and I am very much on team kidney bean. Okay,
35:34
Speaker 2: preferably the dark kidney beans.
35:35
Speaker 3: Not my chili though, but keep going. I do.
35:37
Speaker 2: I do darks in my in my chili, my black bean. No,
35:41
Speaker 2: my chili is dark red kidney beans and then black beans.
35:45
Speaker 5: I'm a no bean and chili guy. I do two
35:47
Speaker 5: beans in the chili, just two single beans, yes, two.
35:50
Speaker 5: If you find them, you get ten dollars. That's the goal.
35:55
Speaker 5: Is silver, the new gold. This is the question that's
35:57
Speaker 5: posed by the Financial Times, Paul, Have you been practicing
36:01
Speaker 5: any alchemy lately?
36:03
Speaker 4: I haven't, but I'm so glad you guys did that
36:05
Speaker 4: being a little sidetrack because there was a tickle on
36:08
Speaker 4: my throne and I was just barely holding on. So
36:12
Speaker 4: perhaps it was one that didn't want to go down.
36:16
Speaker 4: Silver has been woo crushing it, just absolutely crushing it
36:21
Speaker 4: this year. Gold's up sixty percent year to date, and
36:24
Speaker 4: silver over the last I believe trailing twelve months has
36:28
Speaker 4: doubled in price. And so if you're in Germany and
36:32
Speaker 4: looking forward to your collective commemora of silver coins at
36:37
Speaker 4: the Christmas issuance of the Three Wise Men, unfortunately that
36:39
Speaker 4: has been canceled this year cancels. Prices have swelled so
36:43
Speaker 4: much on those coins.
36:45
Speaker 3: Why didn't they just raise the prices.
36:49
Speaker 4: Well, they're giving them out, Oh they give them yes, yeah,
36:52
Speaker 4: so they're eating the cost of the double cost.
36:55
Speaker 3: Oh god, yes.
36:59
Speaker 4: Germany's finance ministry took a remarkable step and canceled the
37:03
Speaker 4: long planned Christmas issuance of the Three Wise Men. It's
37:05
Speaker 4: a commemorative silver coin and a second less festive silver
37:10
Speaker 4: token celebrating monoails.
37:13
Speaker 3: Monoails, What is that? What is happening here? Great question?
37:23
Speaker 2: So yeah, look, here's the thing. I don't know anything
37:27
Speaker 2: at all about how these silver market actually functions. It
37:31
Speaker 2: is not something where I am educated in any way,
37:34
Speaker 2: shape or form, and I know enough to know that
37:36
Speaker 2: there are plenty of different games that can be played
37:38
Speaker 2: in markets, and if you don't understand, you're best not
37:41
Speaker 2: commenting on it or participating in them. And so that's
37:43
Speaker 2: generally the way that I tend to go. Having said that,
37:48
Speaker 2: from you know, talking with people that are more knowledgeable
37:50
Speaker 2: than myself in that area, it does seem like there
37:53
Speaker 2: is a real industrial squeeze because there just is not
37:56
Speaker 2: enough silver that's being produced and that's driving this in
37:59
Speaker 2: addition to some retail speculation. Eventually, both of those things
38:04
Speaker 2: do end up breaking, and generally in commodity markets, those
38:07
Speaker 2: breaks don't end well. But I have no idea when, where,
38:11
Speaker 2: or how that will be. Let's take a quick break
38:14
Speaker 2: when we return our two coming up in just a
38:17
Speaker 2: little bit.