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Why Corporate America Is Starting to Ration AI · 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 2: And Tucker with you, and we've got stocks up modestly
1:14
Speaker 2: starting the day here. The S and P's up about
1:16
Speaker 2: a quarter percent seventeen points. The Dow is up three
1:19
Speaker 2: hundred and forty points, about two thirds of a percent.
1:21
Speaker 2: The NASDAK composite is up thirty nine points about point
1:26
Speaker 2: one five percent, So all three of your major US
1:28
Speaker 2: indices are in the green. To kick things off here,
1:33
Speaker 2: ten year Treasury is down one point four basis points
1:36
Speaker 2: to four point four four one percent. Thirty year Treasury
1:40
Speaker 2: also back below five percent as of yesterday. We don't
1:43
Speaker 2: really talk about the thirty year very much because quite honestly,
1:46
Speaker 2: almost no one actually trades it outside of you know,
1:49
Speaker 2: some insurance companies and pension systems. Uh So, the tenure is,
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Speaker 2: you know what we typically reference Dollar index is downero
1:56
Speaker 2: point two percent to ninety eight seventy seven. We've got
2:00
Speaker 2: hold up sixty six sixty an ounce to forty five
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Speaker 2: ninety nine, and crude oil West Text Intermediate down another
2:06
Speaker 2: dollar thirty four a barrel overnight do not overnight, I
2:09
Speaker 2: guess during the day to eighty seven to fifty six
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Speaker 2: triple A national Averagur gas prices down another three cents
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Speaker 2: overnight as well, to four to thirty nine and one tenth,
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Speaker 2: So we're about sixteen seventeen cents off of the highs
2:22
Speaker 2: that we've seen here, and based on where gas futures
2:26
Speaker 2: and crude oil futures are, there's chance that over the
2:28
Speaker 2: next week or two maybe you get down into that
2:31
Speaker 2: four twenty to four to twenty five range. So there's
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Speaker 2: a little bit more room to run over the first
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Speaker 2: week or two of June. Obviously, this is all gonna
2:40
Speaker 2: be contingent on what happens in the Middle East. President Trump,
2:44
Speaker 2: about when was this here? Maybe ten minutes ago, sixteen
2:50
Speaker 2: minutes ago, made the following post on true social I'll
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Speaker 2: quote here. Iran must agree they will never have a
2:57
Speaker 2: nuclear weapon or bomb the Horn move Straight must be
2:59
Speaker 2: immediately open tolls for unrestricted shipping traffic in both directions.
3:02
Speaker 2: All water mines, if any, will be terminated, and Iran
3:06
Speaker 2: will complete the immediate removal and or detonation of any
3:09
Speaker 2: minds that are left, which will not be many ships
3:12
Speaker 2: caught in the Straight due to our amazing and unprecedent
3:13
Speaker 2: and naval blockade, which will now be lifted may start
3:16
Speaker 2: the process of heading home. Say say hello to your wives, husbands, parents,
3:20
Speaker 2: and families from me, your favorite president. The enriched materials,
3:23
Speaker 2: sometimes referred to as nuclear dust, which is very deep
3:26
Speaker 2: underground with virtually collapsed mountains caused by our powerful B
3:29
Speaker 2: two bomber attack eleven months ago, sitting on top of it,
3:32
Speaker 2: will be unearthed by the United States, which is agreed
3:34
Speaker 2: is the only country, along with China, with the mechanical
3:37
Speaker 2: capability of doing so in close coordination, in conjunction with
3:40
Speaker 2: the Islamic Republic of Iran plus the International Atomic Energy
3:44
Speaker 2: Agency and destroyed. No money will be exchanged until further notice.
3:48
Speaker 2: Other items of far less importance have been agreed to.
3:50
Speaker 2: I'll be meeting now in the situation room to make
3:52
Speaker 2: a final determination. Thank you for your attention to this matter.
3:56
Speaker 2: So it might be that we get a deal announcement
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Speaker 2: later today. Again, we would need confirmation from Iranian sources
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Speaker 2: as well, but we'll see where things go. But that's
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Speaker 2: the latest in terms of where things stand on a
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Speaker 2: potential deal is uh yeah, it's it's we're maybe heading
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Speaker 2: in that direction and we'll have to see what it
4:18
Speaker 2: actually means for the straight up horror moves, because that's
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Speaker 2: the big thing economically that is going to determine where
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Speaker 2: things go over the course of the rest of this year.
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Speaker 3: I am unsure as to whether it take that post
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Speaker 3: as good news or bad news.
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Speaker 2: I don't really know, right, Like, it's actually, we don't
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Speaker 2: know what's in the deal, so like.
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Speaker 3: It's a pretty clear on the nuclear situation, which we
4:41
Speaker 3: know that President has put a lot of importance on,
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Speaker 3: but it has also seemed like the US and around
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Speaker 3: are pretty far away on expectations on that.
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Speaker 4: So yeah, the reporting has.
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Speaker 2: Been that the nuclear stuff isn't included in the memorandum
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Speaker 2: of understanding, right, which is why him posting about it
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Speaker 2: in this true social post.
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Speaker 4: Kind of makes me sense. Maybe it's not.
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Speaker 3: A good news post if you're hoping for immediate opening
5:07
Speaker 3: of the straight up from news. But then again, the
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Speaker 3: post also specifically sites reopening the straight So yeah, I
5:14
Speaker 3: think we've got to give this one a little bit
5:15
Speaker 3: more time.
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Speaker 5: Just I'm sorry, just to follow up on this about
5:18
Speaker 5: ten minutes ago, I know, if we saw this report, Chuck.
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Speaker 5: President Trump said on Friday that he's convening with his
5:23
Speaker 5: national security team in the White House situation room to
5:26
Speaker 5: make a final decision about the agreement reached between the
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Speaker 5: US and Iranian negotiators.
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Speaker 2: That from Axios. Yeah, so we'll see it's, uh, yeah,
5:36
Speaker 2: we'll see what happens. I don't know, like it's maybe
5:39
Speaker 2: there's progress here, maybe there isn't. And I'm not going
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Speaker 2: to claim that I know what's going to happen on it.
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Speaker 3: And oil prices are virtually unmoved on that post too,
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Speaker 3: So you know, I don't think anybody else has any
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Speaker 3: better sense than we do about what it might mean.
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Speaker 2: Piece of the New York Times Anthropic tops open Ai
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Speaker 2: to become the world's most valuable AI startup. They just
6:00
Speaker 2: went through another fundraising round where they raised an additional
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Speaker 2: sixty five billion in financing that values the company including
6:08
Speaker 2: that financing, at nine hundred and sixty five billion. That
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Speaker 2: puts it a head of open AI's last valuation of
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Speaker 2: seven hundred and thirty billion. And so there's a few
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Speaker 2: things that are going on here, and again, trying to
6:21
Speaker 2: make sense out of all this is a little challenging
6:25
Speaker 2: because there's a lot of circularity in here. There's also
6:29
Speaker 2: this piece in the Wall Street Journal, and there were
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Speaker 2: a couple things that came out to this effect yesterday,
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Speaker 2: Corporate America is starting to ration AI as cost skyrockets,
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Speaker 2: and specifically, like there was reporting yesterday that some company
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Speaker 2: ended up working through five hundred million dollars of AI
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Speaker 2: spend in basically a quarter and had to like stop
6:52
Speaker 2: things because they were like, no, we didn't realize this
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Speaker 2: was going to get this expensive.
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Speaker 4: Shoot.
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Speaker 2: You've also got open AI announced new pricing that take
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Speaker 2: effect I believe on Monday of next week, and so
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Speaker 2: you've got some higher pricing that's coming through. And remember,
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Speaker 2: the promise of AI is that it can do what
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Speaker 2: your employees do for the corporate side, it can do
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Speaker 2: what your employees do more quickly and more.
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Speaker 3: Cheaply, and twenty four hours a day. I think that's
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Speaker 3: part of like the more quickly it's like through doing that.
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Speaker 2: And if we get to a point where the only
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Speaker 2: way that this stuff is profitable is with it being
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Speaker 2: at cost relative to employees or higher cost, then the
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Speaker 2: proposition doesn't necessarily make sense.
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Speaker 3: Yeah, check, I was going to say this story, the
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Speaker 3: second one about Corporate America starting to ration AI is
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Speaker 3: the type of scenario that pops the AI bubble.
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Speaker 2: An uber executive said by March the company had blown
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Speaker 2: through its annual budget for a AI use.
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Speaker 3: So, like mechanically here, when we talk about what is
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Speaker 3: driving this industry forward, it is the relentless spend that
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Speaker 3: all these tech companies have been willing to put out
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Speaker 3: because they see in the short term that companies are
8:16
Speaker 3: not rationing their cost when it comes to spending on
8:18
Speaker 3: artificial intelligence, learning how to use it, and having their
8:22
Speaker 3: employees test it. I'm unconvinced that a story in the
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Speaker 3: Wall Street Journal is actually the signifier of the you know,
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Speaker 3: the top of that and the beginning of a new
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Speaker 3: trend in AI where it's no longer hey, you must
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Speaker 3: use the story would be, hey, you must use AI
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Speaker 3: is now going to you must ration how much AI
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Speaker 3: you use, and we are going to judge your job
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Speaker 3: performance on how well you're using AI and how effect
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Speaker 3: efficiently you're using it. I'm not convinced that we're seeing
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Speaker 3: that play out right now, but if we are, then
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Speaker 3: it does raise some pretty big questions about the value
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Speaker 3: of everyone in the AI supply chain, from semiconductor makers
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Speaker 3: all the way up to model creators.
9:07
Speaker 2: Mike, you ever think about long term care insurance.
9:10
Speaker 4: All the time. Why do you ask?
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Speaker 2: So I I'm just having this this flashback to you know,
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Speaker 2: the nineteen nineties when long term care insurance became big,
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Speaker 2: and all the companies put out these you know, pricing
9:27
Speaker 2: models of oh, we can price this at X because
9:31
Speaker 2: you know, this is the uptake that we're going to get,
9:33
Speaker 2: and here's the lapses that we're going to see in policies.
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Speaker 2: And then they didn't see those lapses, and so in
9:37
Speaker 2: the twentys and twenty tens, they had all these additional claims,
9:40
Speaker 2: and what they ended up doing was raising the costs
9:43
Speaker 2: by not just like doubling, like we're talking like tripling
9:46
Speaker 2: and quadrupling of annual premiums in order to make the
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Speaker 2: money work.
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Speaker 4: Right.
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Speaker 2: And I bring this up just because let's say that
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Speaker 2: you're a company and you decide, hey, like we we
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Speaker 2: see the promise of you know, agentic Solutions, we're gonna
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Speaker 2: lay off you know, a bunch of our workforce, and okay,
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Speaker 2: we can do all of this. You know, the workforce
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Speaker 2: we're laying off cost us you know, one hundred million
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Speaker 2: dollars a year. We can do this for fifty million
10:14
Speaker 2: dollars a year using agentic AI what if you're so
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Speaker 2: committed to that and there's so few companies that you know,
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Speaker 2: provide those solutions. What if in order for those to
10:26
Speaker 2: be profitable for them, two years down the road, they
10:28
Speaker 2: come back and say, hey, we got a jack your
10:30
Speaker 2: rates up by three hundred percent, and now instead of
10:33
Speaker 2: paying fifty million a year for that, you're paying two
10:35
Speaker 2: hundred million, which is more than you were paying your
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Speaker 2: people before, Right, And I just wonder about the risk
10:42
Speaker 2: that's present there. But then I also try to rationalize
10:46
Speaker 2: that with the fact that, look, these models are being commoditized,
10:50
Speaker 2: which means there are fewer differences between them, and pricing
10:53
Speaker 2: should collapse on commoditized models. But how do prices collapse
10:59
Speaker 2: on commoditized mode models if the inputs to them are
11:03
Speaker 2: still going parabolic meaning memory prices are going up, GPU
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Speaker 2: prices are going up, this and that.
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Speaker 3: Yeah, the rationing has to happen first, So the price
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Speaker 3: won't go down because of feared rationing. No, the rationing,
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Speaker 3: the demand part has to come down, at which point
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Speaker 3: those valuations creater a bunch of companies go out of business.
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Speaker 2: That's where things start to pop. And sorry, what starts
11:26
Speaker 2: to pop? That's what so it's the bubble. The sequencing
11:30
Speaker 2: is companies say, no, the prices are too high. We've
11:33
Speaker 2: got to cut our spend.
11:34
Speaker 4: Right.
11:35
Speaker 2: Then the models say, well, to keep you, we'll cut
11:37
Speaker 2: our costs.
11:39
Speaker 4: But they also then have to go to the.
11:42
Speaker 2: Data center providers and say we need cheaper contracts here,
11:46
Speaker 2: and then the data centers have to say we need
11:48
Speaker 2: cheaper chips and other inputs.
11:50
Speaker 4: Right.
11:50
Speaker 3: So that's the mechanics. The questions, are we there anytime soon?
11:55
Speaker 3: It doesn't feel like we're there yet.
11:57
Speaker 1: No.
11:57
Speaker 3: But this story from the Wallstreet dren which I think
12:00
Speaker 3: is an interesting one to mark and is talking to
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Speaker 3: executives of real companies, I do think pretty well. They
12:10
Speaker 3: don't lay out the bubble popping argument, but I think
12:13
Speaker 3: it lays out what would be the beginning stages of
12:15
Speaker 3: it if you were to see it.
12:17
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Speaker 3: Hey Chuck, we got a text during the first hour
14:10
Speaker 3: of the show that I thought we would get to
14:12
Speaker 3: if you don't mind, sure would love to. So we
14:14
Speaker 3: were talking at the moment about this phenomenon where when
14:18
Speaker 3: you ask people about their financial situation, much like when
14:22
Speaker 3: you ask them about their ability to be a good driver,
14:25
Speaker 3: more than you would expect say their financial situation is
14:30
Speaker 3: actually pretty good, but the national situation's horrific. Somebody texted
14:34
Speaker 3: into the show. I see differently. People who say their
14:36
Speaker 3: personal situation is fine probably have worked hard to prepare
14:39
Speaker 3: for the future. Massachusetts is not in good shape. I
14:43
Speaker 3: think the point that I'm making that we're making here
14:45
Speaker 3: is data that we get on individual's financial situation indicates
14:51
Speaker 3: that in a lot of cases it's not very good.
14:54
Speaker 3: And yet people's opinions of their own situations when you
14:58
Speaker 3: do polling is consistently higher than what you see in
15:02
Speaker 3: the data. And so, yeah, it could be some random
15:06
Speaker 3: situation where people actually are preparing well, but I think
15:08
Speaker 3: it tends to be this bias that we all have
15:11
Speaker 3: to say that we are in better shape than on average.
15:15
Speaker 3: We might be right, and we see the same phenomenon
15:18
Speaker 3: outside of financial stuff, right, We see the same thing
15:20
Speaker 3: when you ask people, are you above average in terms
15:23
Speaker 3: of your driving capabilities? And I think seventy or eighty
15:26
Speaker 3: percent of people say that that's the case. In terms
15:29
Speaker 3: of Massachusetts being not in good shape. I think that's
15:32
Speaker 3: a I think that's an interesting an interesting argument to make. Right,
15:38
Speaker 3: So the national unemployment rate is lower than what we're
15:40
Speaker 3: experiencing in master what's the national average right now?
15:43
Speaker 4: Chuck for unemployment for three uh.
15:45
Speaker 3: Yes, So Massachusetts is right now sitting at four point seven.
15:48
Speaker 3: That's nowhere near the top where DC and Nevada are.
15:53
Speaker 3: Nevada is at five to three, District of Columbia's at
15:56
Speaker 3: six point two percent. But we are in the upper
15:58
Speaker 3: third of the employment situation here in Massachusetts. And what's
16:03
Speaker 3: been an interesting question, you know, knocking around my brain,
16:06
Speaker 3: is hey, in previous recessions, when things got pretty ugly,
16:10
Speaker 3: you had these segments of the Massachusetts workforce, biotech education
16:17
Speaker 3: that make up such a big chunk of it that
16:20
Speaker 3: you kind of got your weather through the storm better
16:23
Speaker 3: than other parts of the country. And yeah, I'm just
16:27
Speaker 3: I've been pondering whether or not that will consistently be
16:30
Speaker 3: the case in this region the next time around. Hey,
16:33
Speaker 3: it is healthcare, biotech, and education such a good insulator
16:37
Speaker 3: in twenty twenty six as it was in two thousand
16:40
Speaker 3: and eight, for example.
16:41
Speaker 2: Yeah, it's Look, it's very consistent. The data that I'll
16:46
Speaker 2: site here is from Gallop. They do a poll every
16:51
Speaker 2: year where they ask people, Hey, tell us how your
16:56
Speaker 2: personal financial situation is and what we see like just
17:02
Speaker 2: as an example, in two thousand and seven, uh, fifty
17:06
Speaker 2: percent of Americans, so this is pre financial crisis, fifty
17:09
Speaker 2: percent of Americans said that their situation was better off
17:12
Speaker 2: than a year ago, thirty percent said worse off, and
17:15
Speaker 2: nineteen percent said the same in two thousand and nine, Okay,
17:21
Speaker 2: in this is May of Yeah, May two thousand and nine.
17:25
Speaker 3: So and this is pretty much arguably ninety percent of
17:28
Speaker 3: people's financial situations were worse off than they were a
17:30
Speaker 3: year ago.
17:31
Speaker 2: Yes, only fifty four percent of people replied saying that
17:35
Speaker 2: they were worse off than a year ago. Yeah, which
17:37
Speaker 2: is just the rest were either better or the same
17:40
Speaker 2: right now. They also ask, Okay, what did you see
17:46
Speaker 2: from you know, the like the broader economy, and what
17:50
Speaker 2: you generally see from just about every poll is that,
17:55
Speaker 2: like people consistently say the broader economy is worse than
18:00
Speaker 2: my personal financial situation. And look, there's probably like an
18:04
Speaker 2: ego thing related to this, like.
18:06
Speaker 4: We know, the American spirit right there. Quite honestly, it is.
18:10
Speaker 2: It's like it's you, you know, the economy might not
18:13
Speaker 2: be good, but you can't keep me down right, and
18:15
Speaker 2: like I it's it's pretty awesome. Actually, Like I kind
18:19
Speaker 2: of like that, Like I really respect that that it's like, hey,
18:23
Speaker 2: the economy's terrible, but look how well I'm doing right? Oh,
18:27
Speaker 2: Like yeah, I can get behind that. It's it might
18:31
Speaker 2: be delusional in two thousand and nine, but I don't know.
18:35
Speaker 2: Sometimes you need to believe in yourself before you can
18:37
Speaker 2: actually get to where you want to go. And so
18:39
Speaker 2: I think that's kind of great, to be honest.
18:40
Speaker 3: Yeah, it's hard to define, but I think there is
18:43
Speaker 3: something about the American optimism that has led to it
18:47
Speaker 3: leads to some at least to some bad things too,
18:49
Speaker 3: in terms of our savings rate, and you know, preparedness
18:52
Speaker 3: for financial disaster, but it does lead to risk taking
18:56
Speaker 3: and all sorts of things here in the United States
18:58
Speaker 3: that kind of define its capitalism.
19:01
Speaker 4: Moment of the last hundred years.
19:03
Speaker 2: Yeah, So, I just I think it's interesting looking into
19:06
Speaker 2: this and trying to glean insights out of it, because
19:11
Speaker 2: the dominant thing in US economic polling is the economy
19:15
Speaker 2: is bad. But I'm gonna do okay, at least like
19:18
Speaker 2: to a certain extent. Again, let's take a quick break here,
19:23
Speaker 2: and when we come back, we've got the trivia answer,
19:26
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20:05
Speaker 5: said she is meeting in the Situation Room to make
20:08
Speaker 5: a final determination to approve a cease file fire deal
20:12
Speaker 5: with Iran. Investors are also seeing yet another major rally from.
20:15
Speaker 1: A tech company.
20:16
Speaker 5: Right now, the Dow is up over three quarters of
20:18
Speaker 5: a percent, SMP five hundred up about a third of
20:21
Speaker 5: a percent. Nasdaq also up about a third of a
20:24
Speaker 5: percent or eighty four points higher, RUSS two thousand selling
20:27
Speaker 5: off about three quarters of a percent. Then Your Treasure
20:29
Speaker 5: reeled down two basis points at four point four to
20:32
Speaker 5: three percent, and Oil is retreating two percent, trading at
20:37
Speaker 5: eighty seven dollars a barrel. Dell Technologies rocketing thirty percent
20:42
Speaker 5: higher after the tech company hiked its full year outlook,
20:46
Speaker 5: where its first quarter sales surge eighty eight percent on
20:49
Speaker 5: demand for AI products. Meanwhile, Gap cut its sales outlook
20:54
Speaker 5: for the year after posting slowing sales for its old
20:58
Speaker 5: Navy chain. That stock is down by seventeen percent. Another
21:01
Speaker 5: retailer in American Eagle Outfitters, is also seeing a loss
21:05
Speaker 5: of twelve percent after the company said its core brand
21:08
Speaker 5: isn't performing as well as management would like, where the
21:11
Speaker 5: segment sales fell in the first quarter, and several space
21:15
Speaker 5: stocks including AST, Space Mobile, Echo Star, and rocket Lab
21:19
Speaker 5: seeing losses on the day after Blue Origin rocket exploded
21:23
Speaker 5: on a launchpad during a ground test last night in Florida.
21:29
Speaker 5: I'm Tucker Silva and Matt Is Wallstreet Watch and in
21:31
Speaker 5: the previous segment, we asked you the trivia question who
21:34
Speaker 5: is the youngest US president in history? That would be,
21:38
Speaker 5: of course, Teddy Roosevelt. And Bob from Wilmington, Mass is
21:42
Speaker 5: our winner today, taking home a Financial Exchange Show T shirt.
21:45
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21:49
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21:53
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21:55
Speaker 2: Teddy Roosevelt might have to be in my list of
21:58
Speaker 2: four historical figures to have to or with.
22:02
Speaker 4: H Yeah, he's got to be.
22:05
Speaker 2: I mean, for like just a you get some great
22:07
Speaker 2: stories from him, but like.
22:09
Speaker 4: The dude did everything.
22:11
Speaker 2: I mean, like it's it was basically like Michelangelo of
22:15
Speaker 2: like the nineteen hundreds of late eighteen hundreds, you know,
22:19
Speaker 2: not as good as a painter, but maybe a better
22:22
Speaker 2: sculpt Do you know that I'm giving him credit work?
22:25
Speaker 2: Teddy could okay, but there's a reason why Michaelangelo is Michaelangelo. Yeah,
22:32
Speaker 2: you know. Uh, let's see what do you want to
22:35
Speaker 2: get to Mike, What's what's what's catching your eye?
22:37
Speaker 3: Let's talk SpaceX because everyone is, uh, well, I don't know.
22:42
Speaker 3: I feel as though I'm hearing a lot of interest
22:45
Speaker 3: in what's going to happen here. Obviously, yesterday you had
22:48
Speaker 3: the failed Blue Origin rocket that again no loss of
22:53
Speaker 3: life here, so fortunately there, but Blue Origin lost a
22:56
Speaker 3: rocket an explosion on its launch pad. And you've got
23:00
Speaker 3: SpaceX now targeting and IPO here in two weeks, we're
23:06
Speaker 3: getting very we're getting out there for general information out here.
23:12
Speaker 3: They're going to start their official is the roads or
23:16
Speaker 3: the marketing of the IPO, I think on June fourth,
23:20
Speaker 3: and we are now talking about what is very likely
23:23
Speaker 3: to be the largest IPO ever. It's looking like they're
23:28
Speaker 3: targeting evaluation of one point eight trillion with a T dollars,
23:33
Speaker 3: and of that valuation though they are only offering seventy
23:38
Speaker 3: five billion dollars worth of shares, which again, seventy five
23:42
Speaker 3: billion dollars worth of shares is the largest IPO of
23:44
Speaker 3: all time. But it's a fraction of the ownership of
23:46
Speaker 3: the overall company. And there are a lot of different
23:49
Speaker 3: things that make this IPO just incredibly unique in the
23:55
Speaker 3: structure of the company itself too.
23:58
Speaker 4: I think the.
24:00
Speaker 2: Look, here's the thing. No one knows how this thing's
24:05
Speaker 2: going to end up, you know, going off when it
24:07
Speaker 2: when it you know, initially does because it's such a
24:10
Speaker 2: light float and because of what they're trying to do
24:12
Speaker 2: with index inclusion. There's a pretty good chance that it does,
24:16
Speaker 2: you know, just fine. Like at the beginning, I think
24:20
Speaker 2: even look, you can make a convincing case that, hey,
24:23
Speaker 2: if there's one thing Elon Musk is really good at doing,
24:25
Speaker 2: it's keeping you know, elevated valuations for his companies even
24:29
Speaker 2: in the face of you know, kind of stagnant growth.
24:32
Speaker 2: I mean, you look at Tesla just as an example.
24:34
Speaker 2: Tesla revenues have basically been flat for the last few
24:36
Speaker 2: years now. It's it's it's not like Tesla is a
24:40
Speaker 2: you know, rapidly growing company at this point in time.
24:45
Speaker 2: If you take a look at Tesla revenue, it's ninety
24:48
Speaker 2: seven billion dollars over the last twelve months, it's the
24:51
Speaker 2: same place it was in June of twenty three, you know,
24:54
Speaker 2: like the revenue has grown an average of one percent
24:56
Speaker 2: a year since then. You take a look at net
24:58
Speaker 2: income for billion dollars that is, after you know, a
25:03
Speaker 2: big spike in the early twenties, their net income is
25:07
Speaker 2: basically the same place it was at in you know,
25:10
Speaker 2: late twenty twenty one. Hasn't really moved in five years,
25:14
Speaker 2: and yet the stock price during this time. Again, like
25:18
Speaker 2: you just look at where it has gone. The stock's
25:21
Speaker 2: at four thirty four a share right now, and in
25:25
Speaker 2: late twenty one it was at you know two fifty
25:27
Speaker 2: uh even the stock to be honest, like by early
25:29
Speaker 2: twenty two it was up to three eighty. Tesla stock
25:32
Speaker 2: is you know, up ten percent over the last four
25:35
Speaker 2: and a half years. I know it seems like that
25:38
Speaker 2: can't be true, but it is now. Granted, Tesla stock
25:42
Speaker 2: has more than tripled since mid twenty three, when it
25:45
Speaker 2: you know, had had pummeted for a while there, but
25:49
Speaker 2: over the last you know, three and a half years,
25:52
Speaker 2: it really hasn't gone anywhere. Yeah, there's you can make
25:56
Speaker 2: a convincing case that SpaceX could do something similar. I mean,
26:00
Speaker 2: I know everyone likes to be like, oh, like, this
26:02
Speaker 2: isn't gonna work, and I trust me, I'll tell you,
26:04
Speaker 2: Like you look the valuations and you're like whoa, Like
26:08
Speaker 2: they're going for that. But that's what Tesla's been doing
26:12
Speaker 2: as a publicly traded company for the last five or
26:15
Speaker 2: six years, is trading at crazy valuations.
26:18
Speaker 4: And sure, at some.
26:19
Speaker 2: Point the chickens may come home to roost, but it
26:22
Speaker 2: hasn't yet for Tesla's shareholders, it's much more. The stock
26:25
Speaker 2: just hasn't really gone anywhere in the last four or
26:28
Speaker 2: five years. It's just been this choppy, volatile trading for
26:31
Speaker 2: that time period where it's you know, up one hundred
26:34
Speaker 2: percent down fifty back up, one hundred down another forty
26:37
Speaker 2: like that's kind of what we've seen from the profile
26:41
Speaker 2: of it since twenty twenty two.
26:43
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Speaker 3: the Financial Exchange, and that's the last chance to get
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Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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28:28
Speaker 2: Mike, did you happen to watch the video of that
28:30
Speaker 2: Blue Origin rocket blowing up yesterday?
28:33
Speaker 4: I did not know. Oh, it's wild.
28:35
Speaker 5: It is very A lot of different angles.
28:38
Speaker 4: Yeah, ight, imagine so it's a rocket explosion.
28:41
Speaker 5: Well like including from a ring door bell, which is
28:43
Speaker 5: pretty wild to see.
28:44
Speaker 4: Wow, yeah, it's it's it's not great.
28:47
Speaker 2: You know. This is something that NASA was trying to
28:52
Speaker 2: use as a second vendor for some of the Artemis
28:55
Speaker 2: missions and potential you know, mood transport, and so this
28:59
Speaker 2: is a pretty big set back here. I I hope
29:03
Speaker 2: they're able to you know, square things away.
29:05
Speaker 4: Obviously.
29:05
Speaker 2: One thing you don't need to really worry about with
29:07
Speaker 2: Blue Origin is uh dollars. Jeff Bezos has enough of
29:10
Speaker 2: them to be able to pour whatever money is needed
29:13
Speaker 2: into this. Sure and you know, fix it like so
29:16
Speaker 2: money will be no object. But disappointing day, and uh,
29:21
Speaker 2: just disappointing day for spaceflight overall. And as someone who
29:24
Speaker 2: does really enjoy just the overall idea of space exploration, Uh,
29:29
Speaker 2: tough one, quite honestly to uh to to see and
29:31
Speaker 2: and and watch this again.
29:33
Speaker 3: Fortunate no loss of life, yes, and I'm just going
29:38
Speaker 3: to this is not a positive for anybody, but uh,
29:42
Speaker 3: you do have to look at that and say, wow,
29:44
Speaker 3: it does put SpaceX as the really indisputed, undisputed leader
29:50
Speaker 3: in this space right now.
29:51
Speaker 4: Let's take a quick break.
29:52
Speaker 2: When we return, we're joined by Paul A Monica from Barons.
29:55
Speaker 1: After this, remember you can watch the show live every
30:00
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30:24
Speaker 6: Ladies and gentlemen the weekend.
30:33
Speaker 2: Right, all right, all right, all right, all right, as promised,
30:36
Speaker 2: we're now joined but Paul Monica from Barons, and we're
30:41
Speaker 2: gonna be talking about a company that's near and dear
30:47
Speaker 2: Paul's hard, I believe, Paul. How are you doing today?
30:50
Speaker 7: I'm good? Thanks, Yes, sir, we're talking about what stock again?
30:54
Speaker 4: Is it? Oh?
30:55
Speaker 7: Yeah? Madison Square Gardens Sports.
30:59
Speaker 2: Talk to me about the Knicks before we even get there, Like,
31:01
Speaker 2: what's the vibe down in New York in terms of
31:04
Speaker 2: excitement level for the Knicks?
31:07
Speaker 7: Yeah? Yeah, they're needless to say, a lot of excitement
31:11
Speaker 7: given that it has been nearly thirty years since they've
31:16
Speaker 7: last been in the NBA Finals, So, you know, I
31:21
Speaker 7: think a lot of fans are hopeful that this might
31:25
Speaker 7: finally be the time, and investors are clearly optimistic as well.
31:30
Speaker 7: With MSG Sports, which owns the Knicks franchise as well
31:34
Speaker 7: as the New York Rangers hockey club, you know, at
31:37
Speaker 7: all time highs.
31:39
Speaker 2: So talk to me about, like, what do you actually
31:41
Speaker 2: own when you own MSG Sports, Like, are you like
31:45
Speaker 2: an owner of the team.
31:47
Speaker 4: How does it actually work?
31:49
Speaker 7: Yeah, I mean you have, you know, shares of a
31:52
Speaker 7: publicly traded company that owns the team. So I think
31:56
Speaker 7: it's not as clear as say having stake in the
32:03
Speaker 7: team the way that fans of the Green Bay Packers can,
32:07
Speaker 7: you know, publicly own their team. But you have that
32:11
Speaker 7: financial interest in the Knicks and the Rangers and some
32:15
Speaker 7: of the other teams as part of the Dolan Empire.
32:17
Speaker 7: It's a little convoluted because you know, the Dolans also
32:22
Speaker 7: have the MSG E stock MSG Ener Entertainment, which actually
32:27
Speaker 7: owns the garden itself and the physical rights of you
32:31
Speaker 7: know above the garden, which a lot of people feel,
32:34
Speaker 7: you know, has a lot of attraction from a financial standpoint.
32:39
Speaker 7: So if you want to own the team, per se.
32:42
Speaker 7: It's msg S is the stock that you want, and
32:47
Speaker 7: you know, it is trading now at an all time high.
32:49
Speaker 7: And I don't think it's just because of the Knicks
32:53
Speaker 7: there and their success. It's the hopes that eventually there
32:58
Speaker 7: could maybe be a split of the Knicks and the Rangers.
33:02
Speaker 7: The company has talked about possibly splitting off the Rangers
33:07
Speaker 7: so that the Knicks are a public you know, pure
33:09
Speaker 7: play you know stock. And you know, valuations for teams
33:16
Speaker 7: has gone up dramatically, with the Lakers recently being sold
33:20
Speaker 7: for about ten billion, the Celtics recently sold I believe
33:24
Speaker 7: more than six billion, so there is clear cut demand
33:28
Speaker 7: for sports franchises. And you know, I think that's just
33:32
Speaker 7: going to drive the Knicks valuation MSGS higher.
33:35
Speaker 2: So talk to me about that, because like I've been
33:38
Speaker 2: looking at the stock, you know, for the morning, just
33:41
Speaker 2: you know, trying to get ready and everything. And as
33:45
Speaker 2: you've noted, look that the stock has gone from a
33:47
Speaker 2: market cap of around five billion dollars towards like you know,
33:50
Speaker 2: the end of Q four last year, now up to
33:52
Speaker 2: nine billion. This is despite revenue not really moving at
33:56
Speaker 2: all for the last couple of years.
33:57
Speaker 4: So is this very.
33:58
Speaker 2: Much something that is idiosyncratic in that hey, it's not
34:03
Speaker 2: really dependent on the underlying business, but more what other
34:07
Speaker 2: NBA or NHL franchises are selling for.
34:11
Speaker 7: Yeah, I think that is a big part of it.
34:13
Speaker 7: With sports franchises. You've clearly seen the valuations going up
34:20
Speaker 7: in recent sales, and you know, I think that is
34:24
Speaker 7: what's you know, driving MSGS stock up as well. It's
34:29
Speaker 7: less about the fundamentals per se, and you know that
34:33
Speaker 7: that might be, uh, you know, a bit discomforting for
34:36
Speaker 7: investors who like to dig into the numbers and really
34:39
Speaker 7: kind of value things on a you know, revenue and
34:42
Speaker 7: earning spasis. But you know, sports franchises are you know unique,
34:47
Speaker 7: and the number of publicly traded sports franchises are you
34:50
Speaker 7: know also very unique. And then there's you know, there's
34:52
Speaker 7: the media rights angle. Obviously a lot of people are
34:57
Speaker 7: cognizant of the fact that, you know, ratings continue to
35:00
Speaker 7: be strong and increasingly fragmented world. It's why you're seeing
35:05
Speaker 7: I think other sports related stocks do well. You know,
35:09
Speaker 7: Rogers Communications, which on some of the Toronto teams. You know,
35:13
Speaker 7: the Formula one stock that's part of Liberty Media has
35:17
Speaker 7: been you know, a hit as well, So you know,
35:20
Speaker 7: I think in general there is this scarcity value with
35:23
Speaker 7: sports that on Wall Street that has helped MSGS.
35:27
Speaker 2: So any way you can get tickets to games by
35:30
Speaker 2: being a shareholder.
35:32
Speaker 7: I don't think so. And funny story, I had season
35:36
Speaker 7: tickets for the Knicks way back in the late nineties
35:40
Speaker 7: when I was a younger person who didn't have the
35:43
Speaker 7: family and financial responsibilities that come with it. So I
35:47
Speaker 7: was at the the LJ game and some of the
35:51
Speaker 7: other games the NBA Finals. So I'm excited, but I
35:54
Speaker 7: won't be i won't be attending.
35:56
Speaker 2: Well, Paul, we appreciate you attending our show today and
35:59
Speaker 2: joining us, and I hope you have a great weekend
36:03
Speaker 2: this weekend.
36:04
Speaker 7: Thank you very much.
36:05
Speaker 2: That is Paul Monica with Barons talking about Maddis Square
36:09
Speaker 2: Madison Square Gardens Sports Corporation.
36:12
Speaker 5: Chuck real quick, the get in price for the game
36:15
Speaker 5: three in New York for the NBA Finals. Did you
36:18
Speaker 5: see this?
36:19
Speaker 4: I'm gonna guess, give it. Hang on, let me guess.
36:21
Speaker 2: So we've got twenty thousand seats in a city of
36:25
Speaker 2: eight million people that hasn't been there in I'm guessing
36:29
Speaker 2: get in prices twenty five grand get in yeah no, no, no, no, five.
36:36
Speaker 5: No, thirty five hundred.
36:37
Speaker 2: Not as bad as I would have thought to get in,
36:39
Speaker 2: but not as bad as I would have thought.
36:41
Speaker 5: But down low, you're getting close to six figures.
36:45
Speaker 2: Honestly, that's better than I would have thought. Given the
36:48
Speaker 2: level of wealth and the number of Knicks fans that
36:50
Speaker 2: are out there, that is way cheaper than I would
36:53
Speaker 2: have thought.
36:54
Speaker 3: Did an MSG set aside like five hundred tickets for
36:56
Speaker 3: under privileged youth.
36:57
Speaker 4: To watch this game?
36:59
Speaker 1: I don't know.
37:00
Speaker 4: I think that is awesome.
37:02
Speaker 2: I wonder where the seats are. Yeah, I have no idea,
37:06
Speaker 2: Yeah they don't.
37:06
Speaker 3: Because five hundred plus NBA Finals tickets to underprivileged families
37:11
Speaker 3: in New York.
37:11
Speaker 4: That's so cool given.
37:13
Speaker 2: What the tickets are going for. Sell the ticket, take
37:16
Speaker 2: the money.
37:17
Speaker 3: Yeah yeah probably, you know, I don't I don't know
37:19
Speaker 3: how the organization would feel about that, but.
37:21
Speaker 4: Yeah, probably not great.
37:23
Speaker 2: But like I'm just saying, like, man, if someone hands
37:28
Speaker 2: you a ticket that's worth thousands of dollars.
37:31
Speaker 4: Thirty five hundred bucks minimum, I think the.
37:34
Speaker 2: Money could be useful. Yeah, you know, just uh, just
37:37
Speaker 2: just spitballing here.
37:38
Speaker 5: Well, it's rare you get a Game seven on a
37:40
Speaker 5: Saturday night, So if you haven't tune in on the
37:44
Speaker 5: OKC and Spurs series at all, you can on Saturday.
37:47
Speaker 5: It's going to be highly entertaining.
37:49
Speaker 2: It should be. That should be a fantastic game in
37:51
Speaker 2: what has otherwise been just not a great NBA playoff. No, no,
37:55
Speaker 2: I haven't be watched at all, but this one should
37:58
Speaker 2: be entertaining on Saturday. Docks remain largely in positive territory
38:02
Speaker 2: with all three major indices up. We'll see what happens
38:05
Speaker 2: over the weekend. If we get any kind of Iran deal,
38:09
Speaker 2: we'll have any information on it, good, bad or ugly
38:12
Speaker 2: on Monday, and we will see you then