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The $4 Trillion AI Boom Is Running Out of Time to Prove Itself · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
• 1:11
  Speaker 2: Chuck, Mike, Tucker with you. Hope you all had a
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  Speaker 2: fantastic weekend. The weather was lovely, I'll say. Tough to
• 1:20
  Speaker 2: find a better fall day than yesterday in the New
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  Speaker 2: England area. I mean, the birds were flying south. The
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  Speaker 2: pumpkins were carving the leaves. Carving pumpkins this early? What
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  Speaker 2: do you mean carving pumpkins this early? It's two weeks
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  Speaker 2: to Halloween.
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  Speaker 3: I do it a couple days before Halloween.
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  Speaker 2: Yeah, me too. I think you're alone on this one. Otherwise,
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  Speaker 2: you're going to attract squirrels, Chuck. Yeah, some rotten pumpkins.
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  Speaker 2: I'm sorry, but nothing says creepy more than pumpkins with
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  Speaker 2: some fungus growing in them. That's true. So I don't
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  Speaker 2: know what you guys are doing with your lives, but
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  Speaker 2: here at the Zada House, we want some fungus-covered pumpkins
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  Speaker 2: to really— Littered with.
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  Speaker 4: Dead squirrels from Chuck's pellet gun that he's using outside
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  Speaker 4: the window.
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  Speaker 2: No, so here's the thing. I've got to be honest.
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  Speaker 2: Last year, I saw something wild that I've never seen before.
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  Speaker 2: The squirrels and chipmunks and rabbits were just very aggressive
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  Speaker 2: to the point where last year my neighbors have like
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  Speaker 2: a little like stone wall like near their like in
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  Speaker 2: front of their house. And they always put like, you know,
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  Speaker 2: the little pumpkins like little like four or five inch ones.
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  Speaker 2: They pop a bunch of those. And I saw like
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  Speaker 2: a team of chipmunks. excavating a set of them off of, like,
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  Speaker 2: part of the thing. And I'm like... Like a bunch
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  Speaker 2: of ants? Basically that. And I'm like... Carrying 50 times
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  Speaker 2: its weight? I'm like, guys, like, what are you doing here?
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  Speaker 2: I had one a couple years ago. A squirrel just
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  Speaker 2: rolled one of my pumpkins. I watched it roll a
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  Speaker 2: pumpkin just down the front steps. And I'm like... Makes
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  Speaker 2: me proud. Okay. So we've got... This year, the solution, obviously,
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  Speaker 2: if they can carry the little one so easily... We've
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  Speaker 2: got some huge pumpkins this year. You know, you got
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  Speaker 2: to get stuff too heavy for them to move. It's
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  Speaker 2: the only option at this point. And maybe sprinkle it
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  Speaker 2: with a little cayenne also, and that does the trick.
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  Speaker 2: You guys don't cayenne your pumpkins?
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  Speaker 1: Wait, why?
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  Speaker 2: To keep the squirrels away? Because the second they lick it,
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  Speaker 2: they immediately recoil. Yeah.
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  Speaker 1: Please get out there and have a video.
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  Speaker 2: I don't just do it with pumpkins. You put a
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  Speaker 2: little cayenne on all kinds. It's like, you got tulips? Sure.
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  Speaker 2: Pop them on the tulips. You'll never have deer eating
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  Speaker 2: your tulips again if you put cayenne on them. And
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  Speaker 2: they taste pretty good if you eat them yourself then.
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  Speaker 2: A little, you know, hey, how's it going? So, in
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  Speaker 2: any case, we've got a nice little week this week.
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  Speaker 2: Not much in the way of economic data, which is fine.
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  Speaker 2: We've been kind of deluged by economic data in the
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  Speaker 2: last couple weeks. Only thing of note, we got building
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  Speaker 2: permits and housing starts coming up on Tuesday. The rest
• 3:57
  Speaker 2: is kind of your normal weekly calendar. EIA data Wednesday,
• 4:01
  Speaker 2: jobless claims Thursday. It's fine. But we are getting into
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  Speaker 2: earnings season with some of the big boys getting set
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  Speaker 2: to report. I know the banks report and everyone gets excited,
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  Speaker 2: but let's be honest. Raise your hand if you understand
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  Speaker 2: how to interpret bank earnings. Most people don't. It's a
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  Speaker 2: very different business from everything else. So this week, tomorrow,
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  Speaker 2: we've got Netflix reporting. We've got Raytheon, GE Aerospace, 3M,
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  Speaker 2: General Motors, Northrop Grumman, Capital One. So a nice little
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  Speaker 2: list there. Capital One, I'm interested in just seeing what
• 4:35
  Speaker 2: they're saying on credit card defaults because I think there's
• 4:38
  Speaker 2: just some, you know, it's something that we've wondered about. Hey,
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  Speaker 2: how's the lower income consumer holding up? And Capital One
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  Speaker 2: targets that group with their lending. They tend to have
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  Speaker 2: higher default rates.
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  Speaker 4: They make more interest because of who they target. But, yeah,
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  Speaker 4: they are an indicator for that group.
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  Speaker 2: So, interested to see what those guys all report. Wednesday,
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  Speaker 2: a couple big boys. Meta is out after the bell,
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  Speaker 2: and so is Tesla. And so those... either have the
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  Speaker 2: ability to, you know, staunch the bleeding that we've seen
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  Speaker 2: from AI-related stocks in the last week or two, or potentially,
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  Speaker 2: you know, continue it. So I think that's going to
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  Speaker 2: be a big one on that side. I'll toss another
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  Speaker 2: interesting one, Lamb Research, in there on Wednesday, I believe.
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  Speaker 2: Texas Instruments, too. So, like, put them in that group
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  Speaker 2: for semis. I mean, much smaller, I know, but, you know, interesting.
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  Speaker 2: Not much. They're still a $ 300 billion company. Yeah, but
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  Speaker 2: what's meta? $ 1. 5 trillion, you know, amongst friends.
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  Speaker 1: Yeah.
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  Speaker 2: No big deal. And then Thursday, kind of coming back
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  Speaker 2: to more real life. I know meta is like real life,
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  Speaker 2: but it's really not if we're being honest. But you
• 5:49
  Speaker 2: get more like real world companies reporting. Procter & Gamble,
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  Speaker 2: Union Pacific, Honeywell, Lockheed Martin, Valero. So a whole bunch
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  Speaker 2: of them coming through. Comcast reports earnings as well. So
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  Speaker 2: we get to see what's going on there.
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  Speaker 3: And SpaceX on Tuesday.
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  Speaker 2: Is SpaceX Tuesday? Yeah, SpaceX is this week, yeah. I
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  Speaker 2: didn't see that yet.
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  Speaker 3: After the bell tomorrow.
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  Speaker 2: I'll be honest. Don't know what to do with it.
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  Speaker 1: Right.
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  Speaker 4: Not a component in many people's portfolios. Clearly exciting, but nobody's.
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  Speaker 2: Going to have any idea how to digest the earnings.
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  Speaker 2: No one's buying SpaceX because of the 2026 earnings. It's
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  Speaker 2: just fundamentally immaterial.
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  Speaker 1: So.
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  Speaker 4: This market last week, again, the setup here is that
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  Speaker 4: we had, I think, two separate narratives drawing investors in
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  Speaker 4: different directions. And on Friday, one of those narratives won
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  Speaker 4: out over the other, which was concerns over the AI trade.
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  Speaker 4: You had the Nasdaq sinking 2% on Friday of last.
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  Speaker 2: Week, making some of that up this morning.
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  Speaker 4: The other narrative that was drawing in the other direction
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  Speaker 4: was really hot inflation that had people concerned the upside
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  Speaker 4: on interest rates. But again, the AI concern story won out,
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  Speaker 4: I think, on Friday.
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  Speaker 2: What's your data point of the week then?
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  Speaker 4: For this market that we are in, let's not talk
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  Speaker 4: about the economy or consumers, but for this stock market
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  Speaker 4: right now, what is our data point of the week?
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  Speaker 4: I think it's meta, given the success they've had with
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  Speaker 4: their AI tool and the spending that they want to do.
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  Speaker 4: Tesla might tell you some interesting stuff too. I don't
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  Speaker 4: think any of the smaller companies you can justify. I
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  Speaker 4: can't justify that Lam Research or Texas Instruments are going
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  Speaker 4: to tell you something more interesting than meta. Although, Honestly,
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  Speaker 4: any of those, if they had a real surprise in
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  Speaker 4: terms of their projections, then.
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  Speaker 2: That could do it. But that would be my pick,
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  Speaker 2: I guess. I think if I'm looking at the one
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  Speaker 2: thing that really matters for this week that'll tell you
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  Speaker 2: how markets have gone, I don't think it's any of
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  Speaker 2: these data points that we've talked about here. What do
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  Speaker 2: you got? Whatever CoreWeave stock does. They are front and
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  Speaker 2: center to the concerns about... what's going on in AI.
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  Speaker 2: And just as an example, Goldman Sachs was out this
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  Speaker 2: morning with an upgrade for them. And the stock traded
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  Speaker 2: up about 6%, 7%, to like 65 bucks a share.
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  Speaker 2: It's back to red now.
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  Speaker 4: And so, look, the- So let's, sorry, before you go
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  Speaker 4: further on that, Chuck, I would guess that a full
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  Speaker 4: half to two-thirds of our listeners have no idea what
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  Speaker 4: CoreWeave is, what they do, and why the concerns exist
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  Speaker 4: about them.
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  Speaker 2: So we should start there. They make baskets. And then
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  Speaker 2: they sell them to a core group of people. So
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  Speaker 2: here's what CoreWeave does. They are basically one of these
• 8:39
  Speaker 2: what's called a... Call them a neocloud provider is the
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  Speaker 2: term that gets used quite a bit. If you look
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  Speaker 2: at what that means and what their business actually is,
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  Speaker 2: CoreWeave goes out and they say, okay, we want to...
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  Speaker 2: I just want to make sure I'm segmenting this out
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  Speaker 2: because when we talk about data center construction, CoreWeave basically builds...
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  Speaker 2: cloud platforms that they can then rent out to other
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  Speaker 2: people who use.
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  Speaker 4: Them this is an oversimplification but they've been called the
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  Speaker 4: we work of data centers that's what i called them
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  Speaker 4: last week oh because i thought that they were starting
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  Speaker 4: to sound like that when their ceo was you know
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  Speaker 4: talking about oh the market doesn't understand me it's like
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  Speaker 4: my dude well if you're saying that you're not you
• 9:30
  Speaker 4: know ai is complicated you're not answering the right thing
• 9:34
  Speaker 4: So basically what they do is they buy a whole
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  Speaker 4: bunch of these GPUs, graphics processing units, from NVIDIA. They
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  Speaker 4: put them into big buildings, and they then rent them
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  Speaker 4: out for AI workloads that companies have.
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  Speaker 2: That is their business. They lock those customers into long-term contracts.
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  Speaker 4: It's different from the WeWork and that model where you're
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  Speaker 4: not getting a bunch of people paying month to month.
• 9:57
  Speaker 4: They have most of their customers, I think, on 10-,
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  Speaker 4: 15-year contracts to lease this stuff.
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  Speaker 2: Yeah, and the big thing with them is that they
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  Speaker 2: do not make money right now in any way, shape,
• 10:08
  Speaker 2: or form that you can measure it. Their free cash
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  Speaker 2: flow is negative. Their net income is negative. Obviously, their
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  Speaker 2: margins are negative. They've got about $ 50 billion in debt.
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  Speaker 2: They've got about $ 7. 5 billion in revenue. The revenue is
• 10:22
  Speaker 2: growing quickly, doubling over the last 12 months. But the
• 10:26
  Speaker 2: losses have also doubled over the last 12 months as well.
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  Speaker 2: And so there's no expectation, I think, that this company
• 10:31
  Speaker 2: is going to be profitable in the near future. So
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  Speaker 2: what we come down to, in my opinion, is a
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  Speaker 2: question of timing as it relates to this AI build-out.
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  Speaker 2: So let's take a quick break here. And when we
• 10:42
  Speaker 2: come back, we'll talk about what that timing means. We'll
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  Speaker 2: talk about why it is starting to matter to markets
• 10:46
  Speaker 2: now and what are the things that we need to
• 10:48
  Speaker 2: look for over the next 12 months or so to
• 10:51
  Speaker 2: figure out whether that timing is going to end up
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  Speaker 2: being successful or not. because this is a big one
• 10:58
  Speaker 2: as it relates to markets and the economy. Quick break,
• 11:00
  Speaker 2: then we'll discuss that next.
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• 12:03
  Speaker 2: Been doing some real training for that recently, Mike. Have you? Uh-huh.
• 12:07
  Speaker 2: Had a nice little interval workout over the weekend.
• 12:11
  Speaker 1: And, uh.
• 12:12
  Speaker 2: The legs are feeling good.
• 12:13
  Speaker 4: See, I was actually, yeah, we don't need to go
• 12:15
  Speaker 4: into a story about my running lack thereof.
• 12:19
  Speaker 2: It's fine. It's fine. So during the last segment, we
• 12:22
  Speaker 2: were discussing the AI build out. And I said, look,
• 12:26
  Speaker 2: this is ultimately going to be a question of timing.
• 12:28
  Speaker 2: And here's what I mean by this. Mike, is there
• 12:30
  Speaker 2: any doubt in your mind that the world is going
• 12:34
  Speaker 2: to be using more AI 10 years from now than
• 12:37
  Speaker 2: it does today?
• 12:39
  Speaker 4: I would say there's like a 95% chance that we do.
• 12:42
  Speaker 4: There's like a 5% chance that the world ends because
• 12:47
  Speaker 4: of the AI, and then we're not using a whole
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  Speaker 4: lot of AI.
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  Speaker 2: But it would be some sort of massive backlash against it.
• 12:52
  Speaker 2: Let me ask you this. Absent the world ending, then
• 12:55
  Speaker 2: more AI. Okay, good. I'm in the same boat. I
• 13:00
  Speaker 2: think it is basically almost a certainty that the world
• 13:02
  Speaker 2: is going to be using more AI 10 years from now,
• 13:04
  Speaker 2: just like, hey, the world is going to be using
• 13:07
  Speaker 2: basically anything computing related. We're going to be using more internet.
• 13:10
  Speaker 2: We're going to be using more file storage. AI is
• 13:13
  Speaker 2: part of that ecosystem now, and there's just going to
• 13:15
  Speaker 2: be more of it. So it's undeniable, in my opinion.
• 13:20
  Speaker 2: I'm not saying this is good or bad. I'm just
• 13:22
  Speaker 2: saying that it is. I'm not passing a judgment on that.
• 13:27
  Speaker 2: The question, though, is going to be the pacing of this.
• 13:30
  Speaker 2: And here's the problem that we're up against. Right now,
• 13:35
  Speaker 2: if you look at the next three years, we've got
• 13:36
  Speaker 2: about $ 4 trillion in AI spending projected from the big
• 13:42
  Speaker 2: AI CapEx spending projected from the big hyperscalers. So it's
• 13:47
  Speaker 2: $ 4 trillion that you're talking about. And... They've committed to this.
• 13:55
  Speaker 2: And if you look at the biggest beneficiary of this
• 13:58
  Speaker 2: CapEx right now, it's not the hyperscalers in and of themselves.
• 14:02
  Speaker 2: It is the chip makers. It's the NVIDIAs of the world,
• 14:05
  Speaker 2: the AMDs, the Broadcoms, the Intels. You go through that
• 14:09
  Speaker 2: entire ecosystem. Those are the companies that have benefited the most.
• 14:16
  Speaker 2: So here's the problem, is that if in the short term,
• 14:20
  Speaker 2: the adoption curve isn't steep enough, such that you see
• 14:25
  Speaker 2: growing revenues that are capable of offsetting all of that
• 14:30
  Speaker 2: capex that starts coming back to the balance sheet as depreciation.
• 14:34
  Speaker 2: Then you get companies that say, hey, we're going to
• 14:37
  Speaker 2: slow this rollout and slow this development here. So really
• 14:42
  Speaker 2: what you end up with is a situation where the
• 14:46
  Speaker 2: revenue growth needs to be very, very rapid in the
• 14:48
  Speaker 2: next few years. And at the beginning of this year,
• 14:51
  Speaker 2: it was incredibly rapid. Like this is when Anthropic went
• 14:53
  Speaker 2: from going at like $ 10 trillion in annualized revenue up
• 14:58
  Speaker 2: to like 70, I'm sorry, 10 billion in annualized revenue
• 15:01
  Speaker 2: to like 70 billion. And people were like, whoa. And
• 15:04
  Speaker 2: then the last few months, it seems like things are
• 15:05
  Speaker 2: kind of plateauing a little bit. And so I think
• 15:09
  Speaker 2: the place that you get to is this one that's challenging,
• 15:12
  Speaker 2: which is, okay, if the revenue can grow quickly enough,
• 15:16
  Speaker 2: then this all works forever. the chipmaker's and for the hyperscalers.
• 15:22
  Speaker 2: If it can't grow quickly enough, then you get these
• 15:26
  Speaker 2: neoclouds that end up blowing up because they can't finance
• 15:29
  Speaker 2: their debt anymore. They can't build this stuff out. The
• 15:32
  Speaker 2: hyperscalers say, okay, we're not going to build this stuff
• 15:35
  Speaker 2: out anymore at this pace. And so they cancel projects
• 15:38
  Speaker 2: left and right. And then the chipmaker's go from being, hey,
• 15:41
  Speaker 2: this is, you know, everyone's going to buy NVIDIA chips
• 15:43
  Speaker 2: forever to, okay, this is just another business cycle, but,
• 15:47
  Speaker 2: you know, a significantly expanded one. And margins come in.
• 15:52
  Speaker 2: You got to take losses on, you know, inventory that
• 15:54
  Speaker 2: you got to sell it, you know, discounts and this
• 15:56
  Speaker 2: and that. And that's where the pain potentially is.
• 15:59
  Speaker 4: This is just not that dissimilar from the internet, Chuck.
• 16:03
  Speaker 4: In 1999, I am quite certain everyone was saying that, yeah,
• 16:08
  Speaker 4: 10 years from now, we're going to be using way
• 16:10
  Speaker 4: more chips. internet than in 1999. And 10 years from then,
• 16:15
  Speaker 4: there was a whole lot more internet usage than in 1999.
• 16:18
  Speaker 4: The problem was not that the technology was unimpactful or unimportant.
• 16:25
  Speaker 4: It was that it took, I'm trying to think through,
• 16:28
  Speaker 4: what was the first genuine internet company?
• 16:32
  Speaker 1: Google?
• 16:33
  Speaker 2: Well, no, there were plenty of them.
• 16:35
  Speaker 4: The genuine profitable internet company was were the likes of
• 16:40
  Speaker 4: Google and Facebook and many others that came after Uber,
• 16:44
  Speaker 4: all these things that couldn't exist without high-speed internet.
• 16:49
  Speaker 2: But it didn't happen overnight. It took the better part
• 16:51
  Speaker 2: of a decade.
• 16:52
  Speaker 4: And that same question I think is being asked of
• 16:54
  Speaker 4: AI right now is, are these companies going to be
• 16:57
  Speaker 4: able to generate really profitable revenue in the short term
• 17:01
  Speaker 4: to justify this, or is that going to come on
• 17:05
  Speaker 4: a longer timescale?
• 17:07
  Speaker 2: And the other thing that I say on this, and
• 17:10
  Speaker 2: I come back to this quite often, if this in
• 17:13
  Speaker 2: fact is the first major CapEx cycle that we see
• 17:17
  Speaker 2: for a new business that doesn't result in some major losses,
• 17:22
  Speaker 2: it'd be the first time ever. Because you go back
• 17:26
  Speaker 2: through these and it's like, okay, the internet bubble. Think
• 17:29
  Speaker 2: about everything that got hammered there. Talk about airlines in
• 17:33
  Speaker 2: the 20th century. Talk about radio in the 20th century.
• 17:36
  Speaker 2: Talk about railroads in the 19th century. Like you go
• 17:40
  Speaker 2: back through all of these new booms that had a
• 17:43
  Speaker 2: ton of CapEx associated with them. And the answer in
• 17:46
  Speaker 2: every single case is yes. Like these laid the foundation
• 17:50
  Speaker 2: for all of the growth that happened in that industry,
• 17:53
  Speaker 2: you know, in subsequent years. But also a ton of
• 17:56
  Speaker 2: capital got destroyed in the process because people didn't know
• 17:59
  Speaker 2: how to allocate it and people didn't understand the pace
• 18:02
  Speaker 2: of the build out. And so they built way too
• 18:04
  Speaker 2: much capacity and a bunch of companies went belly up
• 18:08
  Speaker 2: as a result of it. We're not going to just
• 18:10
  Speaker 2: suddenly like nail it this time.
• 18:12
  Speaker 1: Right.
• 18:13
  Speaker 4: I'll say a few things. One, the interconnected, the Corweave
• 18:18
  Speaker 4: story is not just a Corweave story.
• 18:19
  Speaker 1: Hang on.
• 18:19
  Speaker 2: We got a headline we got to go through here.
• 18:23
  Speaker 2: You can read it one of two ways. Either Turkey
• 18:27
  Speaker 2: market regulator chief resigns amid fund crisis, or Turkey market
• 18:32
  Speaker 2: regulator resigns amid fund crisis. Is there a futures market
• 18:37
  Speaker 2: for Turkey? It's almost undoubtedly right. There has to be.
• 18:39
  Speaker 4: Sorry, I digress, but that one just popped up on
• 18:41
  Speaker 4: the screen. One, NVIDIA holds a major stake in CoreWeave.
• 18:45
  Speaker 4: It's approximately 10% of the outstanding shares. These companies are
• 18:48
  Speaker 4: very interconnected. Two would be, if you are of the opinion...
• 18:54
  Speaker 4: that this build-out is going to be successful and the
• 18:56
  Speaker 4: revenue is going to come that quickly, then, in my
• 18:59
  Speaker 4: opinion at least, you also have to be of the
• 19:01
  Speaker 4: mindset that it's going to come so quickly that it's
• 19:04
  Speaker 4: going to be seriously disruptive to labor markets and, I
• 19:10
  Speaker 4: would say, country security generally.
• 19:12
  Speaker 2: Because there's no other way that companies can spend this much.
• 19:15
  Speaker 2: The only way they can is if they start cutting
• 19:17
  Speaker 2: their labor costs significantly. So those two things, yeah.
• 19:22
  Speaker 3: Yeah.
• 19:23
  Speaker 4: A perfect stock market with no labor problems just doesn't
• 19:27
  Speaker 4: seem to work out in my mind.
• 19:28
  Speaker 2: You can get one or the other. Quick break here.
• 19:30
  Speaker 2: Wall Street Watch is next. I've got one other thing
• 19:31
  Speaker 2: to tidy up on this as well.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE Show. Breaking business news is always first. Right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:51
  Speaker 1: Street Watch, tracking the stocks, the data, and the headlines
• 19:55
  Speaker 1: driving markets so far today, right here on the Financial
• 19:58
  Speaker 1: Exchange Radio Network.
• 19:59
  Speaker 3: We're seeing a rebound in tech on this Monday morning
• 20:02
  Speaker 3: with a busy week of third quarter earnings ahead from
• 20:05
  Speaker 3: the likes of Netflix, Meta, Tesla, and SpaceX, among others.
• 20:09
  Speaker 3: Right now, markets are mixed. The Dow is down a
• 20:11
  Speaker 3: tenth of a percent or 55 points lower. S &
• 20:14
  Speaker 3: P 500 is up a half a percent or 39
• 20:16
  Speaker 3: points up. NASDAQ up 1.1% or 306 points higher. Russell
• 20:18
  Speaker 3: 2000 is up about a half a percent. 10-year treasury
• 20:20
  Speaker 3: yield is up two basis points at 5.121%. Crude oil
• 20:22
  Speaker 3: is down about three quarters of a percent, trading at
• 20:25
  Speaker 3: $ 100 a barrel, while Brent is at $ 108. Intel shares
• 20:39
  Speaker 3: are rebounding 5% after JP Morgan upgraded the chipmaker's stock,
• 20:42
  Speaker 3: saying that while the turnaround will take years, management execution
• 20:46
  Speaker 3: has been solid. Meanwhile, Amazon was named a top pick
• 20:50
  Speaker 3: by Morgan Stanley and raised the e-commerce giant's price target,
• 20:53
  Speaker 3: citing accelerating growth at AWS. Amazon is up by 4%. Elsewhere,
• 20:59
  Speaker 3: Datadog was upgraded by Bernstein, sending shares in the cloud
• 21:02
  Speaker 3: monitoring company up 6%. On Friday, the Wall Street Journal
• 21:06
  Speaker 3: reported that investment bakers have approached Blue Owl Capital about
• 21:10
  Speaker 3: a potential full or partial sale. Blue Owl shares are
• 21:14
  Speaker 3: up by 2%. And steelmaker Cleveland Cliffs is seeing its
• 21:19
  Speaker 3: stock rally 12% after posting better-than-expected third-quarter earnings. I'm Tucker Silva,
• 21:25
  Speaker 3: and that is Wall Street Watch.
• 21:29
  Speaker 2: So, I want to just clean up one last item
• 21:32
  Speaker 2: on the AI build-out that we were talking about the
• 21:35
  Speaker 2: first couple segments. Get out the room, Chuck. And Mike mentioned, hey,
• 21:40
  Speaker 2: if you look at how this plays out, if AI
• 21:44
  Speaker 2: usage is going to really increase that much in the
• 21:46
  Speaker 2: next couple of years, then you're going to have some
• 21:48
  Speaker 2: negative impacts, too. unemployment because... I would argue beyond.
• 21:53
  Speaker 4: I would argue societal disruptions if you're going to have
• 21:55
  Speaker 4: that quick of a build-out.
• 21:56
  Speaker 2: Okay. So, Anthropic Staff, this came out over the weekend.
• 22:03
  Speaker 2: What do they think U.S. GDP growth is going to
• 22:07
  Speaker 2: be in 2030?
• 22:08
  Speaker 1: U.S.
• 22:11
  Speaker 4: GDP growth in 2030, I mean, for their growth expectations,
• 22:15
  Speaker 4: it would have to be 7%.
• 22:19
  Speaker 2: You're guessing 7% is what they're saying. Tucker, any guesses
• 22:21
  Speaker 2: as to how quickly anthropic employees think GDP is going
• 22:28
  Speaker 2: to be growing in... He can't answer you because he
• 22:30
  Speaker 2: is having technical difficulties. Oh, sorry. I was looking down. Okay.
• 22:34
  Speaker 2: Tucker says... Yes. Which is obviously like nine. Nine times.
• 22:40
  Speaker 2: Thank you. So here is what anthropic employees actually think
• 22:46
  Speaker 2: GDP growth is going to be in 2030. the median
• 22:50
  Speaker 2: was 17.1%. Why do they even ask their employees this?
• 22:55
  Speaker 2: Here's the thing. Here's the thing. We all know people
• 22:59
  Speaker 2: who are really smart in their own field, but you
• 23:03
  Speaker 2: get them out of their comfort zone and it's like, whoa,
• 23:07
  Speaker 2: I can't believe that you just said that. That's basically
• 23:11
  Speaker 2: what this is. Because make no mistake about it, the
• 23:14
  Speaker 2: math skills that you need to have to work at Anthropic...
• 23:18
  Speaker 2: are significant.
• 23:19
  Speaker 1: Yeah.
• 23:20
  Speaker 2: You know, like, you have to be not a genius,
• 23:23
  Speaker 2: but you've got to be really freaking smart. Like, miles
• 23:27
  Speaker 2: smarter than I am. Mike, do you know how many
• 23:31
  Speaker 2: times real GDP has grown at 17% in the United
• 23:34
  Speaker 2: States since World War II?
• 23:37
  Speaker 3: Nine times.
• 23:38
  Speaker 2: Incorrect. Zero times. Correct. Do you know what the fastest
• 23:43
  Speaker 2: pace of GDP growth is that we've had since World
• 23:45
  Speaker 2: War II? Let's see.
• 23:49
  Speaker 1: Eight.
• 23:49
  Speaker 2: We had one quarter in 1950 where we got up
• 23:52
  Speaker 2: to 13%. Okay. Okay. Other than that and coming out
• 23:56
  Speaker 2: of the pandemic, which obviously was not a real GDP
• 24:00
  Speaker 2: growth year, we have never been above 10. Never been
• 24:05
  Speaker 2: above 10.
• 24:05
  Speaker 1: Yeah.
• 24:06
  Speaker 2: So when anthropic employees are like, oh, we're going to
• 24:09
  Speaker 2: grow GDP at 17%, first of all, no, you're not.
• 24:11
  Speaker 2: Secondly- These employees have all seen what's been going on
• 24:21
  Speaker 2: in the last couple of years in terms of like
• 24:23
  Speaker 2: how hard it is to actually build data centers. Like
• 24:26
  Speaker 2: think about like the permitting problems you have, the delays
• 24:29
  Speaker 2: that you have because you can't get enough chips at first.
• 24:32
  Speaker 2: And now because like even the stuff that you want
• 24:35
  Speaker 2: to build, hey, we can't get enough power. And so
• 24:38
  Speaker 2: we have to negotiate all this power and this and that.
• 24:42
  Speaker 2: do these employees think that we get just, like, this
• 24:45
  Speaker 2: artificial general intelligence and all of these problems just go away? Like,
• 24:52
  Speaker 2: it's just, it's fundamentally unserious. And, like, this is the
• 24:57
  Speaker 2: problem that I have, is it's just, like, it's magical thinking. Like,
• 25:04
  Speaker 2: it's no different. And again, like, these are very smart people. Like,
• 25:07
  Speaker 2: they're smarter than me. And they're literally out there being like, Well,
• 25:12
  Speaker 2: we can have a chicken in every pot. And it's like, dude,
• 25:16
  Speaker 2: the problem is not that we don't have enough compute
• 25:19
  Speaker 2: to get enough chickens, man. There are enough chickens in
• 25:23
  Speaker 2: the world to go in every pot. You're not going
• 25:28
  Speaker 2: to solve these problems with AI. You know, like you're
• 25:34
  Speaker 2: using AI to book trips for people. How are you
• 25:41
  Speaker 2: going to get to 17? We're just going to all
• 25:43
  Speaker 2: take trips every week?
• 25:44
  Speaker 1: Yeah.
• 25:45
  Speaker 4: No, you're going to have to cure cancer. You're going
• 25:47
  Speaker 4: to have to, like, I think that's.
• 25:49
  Speaker 2: That won't have 17%. Again, this fundamentally gets at, like,
• 25:53
  Speaker 2: what is GDP growth?
• 25:54
  Speaker 4: I recognize that that's not going to get you there, but, like,
• 25:57
  Speaker 4: that's the type of optimism they need to have.
• 26:00
  Speaker 2: But this is how, like, bonkers this is, is you
• 26:03
  Speaker 2: could cure cancer and still not get 17% GDP growth
• 26:07
  Speaker 2: because that's just not what it means. It's not to
• 26:11
  Speaker 2: say that curing cancer isn't worth it. Like, it would
• 26:13
  Speaker 2: be arguably more impactful... than 17% GDP growth.
• 26:17
  Speaker 1: Agreed.
• 26:19
  Speaker 2: But, my goodness, like, what are you people talking about?
• 26:25
  Speaker 2: They're fundamentally unserious people. And... They're uninformed.
• 26:29
  Speaker 4: Like, honestly, I don't know why you would ask anthropic
• 26:31
  Speaker 4: employees what you think GDP is going.
• 26:33
  Speaker 2: To grow at. Right? Like, do you ask... Because the
• 26:37
  Speaker 2: whole promise of AI, more than any other industry... Like,
• 26:42
  Speaker 2: think about what they're talking about. It's, oh, like, this
• 26:44
  Speaker 2: will usher in a new era of human growth. Like,
• 26:47
  Speaker 2: it's literally talking about that.
• 26:49
  Speaker 3: Yeah.
• 26:50
  Speaker 4: I just don't think it's a relevant question to ask
• 26:52
  Speaker 4: an AI staff member, maybe the leadership.
• 26:54
  Speaker 2: Don't call them staff members. That makes it seem like they're, like, some, like,
• 26:57
  Speaker 2: trivial person. Like, these are, like, math PhDs, Michael. They
• 27:02
  Speaker 2: are nerds amongst nerds. I don't care.
• 27:04
  Speaker 4: If you're coding a computer, I don't know why I
• 27:07
  Speaker 4: need to ask you what you... It's akin to asking
• 27:10
  Speaker 4: me what I think global temperatures.
• 27:12
  Speaker 2: Are going to be No, you and I are not
• 27:13
  Speaker 2: that smart. I recognize that. These people are. Yeah. These
• 27:17
  Speaker 2: are the people who successfully answer how many ping pong
• 27:20
  Speaker 2: balls can you put in a 747. I agree.
• 27:23
  Speaker 4: I don't know why I would trust their answer on
• 27:25
  Speaker 4: what GDP growth is going to be.
• 27:26
  Speaker 2: I don't find it to be I'm not saying like
• 27:28
  Speaker 2: trust it. Yeah. But to be off by that much
• 27:31
  Speaker 2: means that they just don't understand the world is my point.
• 27:35
  Speaker 2: Like if they come in at like 6% fine If
• 27:40
  Speaker 2: they had come in at zero, like there's a range
• 27:42
  Speaker 2: of possible explanations. Because these are not just like random
• 27:47
  Speaker 2: people off the street. Like, yes, if you pulled like
• 27:49
  Speaker 2: the average American and like, hey, how quick is the
• 27:52
  Speaker 2: economy growing right now? I'm sure you get a bunch
• 27:55
  Speaker 2: who say 17%. And I wouldn't look down on them
• 27:57
  Speaker 2: for it because they got other things to do. But
• 28:00
  Speaker 2: this is a company that is focused on like, hey,
• 28:04
  Speaker 2: our product is going to transform how fast the world
• 28:07
  Speaker 2: can grow. And to misbuy that much is just silly. Now, watch,
• 28:13
  Speaker 2: of course, the economy's going to grow 17% in 2030,
• 28:15
  Speaker 2: and they're going to be like, hey, Chuck, you idiot. Like,
• 28:19
  Speaker 2: look at us now. So, like, look, if... Tucker, put
• 28:22
  Speaker 2: this on the board. If U.S. GDP is 17% in 2030,
• 28:25
  Speaker 2: I will eat my shoe. I will eat the shoe
• 28:29
  Speaker 2: off my foot live on this show.
• 28:32
  Speaker 3: Why don't we make it somebody else's shoe? Make it interesting.
• 28:35
  Speaker 2: Fine, Tucker. I'll eat one of each of your shoes.
• 28:37
  Speaker 1: Ha ha ha.
• 28:39
  Speaker 2: I get Tucker's left and Mike's right.
• 28:41
  Speaker 3: I like my left shoe.
• 28:42
  Speaker 2: I know, that's why I want it. You can't have it.
• 28:48
  Speaker 2: Give me that shoe! But it's just, again, it's just wild.
• 28:53
  Speaker 2: I'm eating your shoe. Let's see. Quick break? Yes, let's
• 28:58
  Speaker 2: take a quick break. And then I've got one other
• 29:01
  Speaker 2: anthropic thing that I've got to talk about as well.
• 29:03
  Speaker 2: Let's do it. Because, listen, this is a big one, actually,
• 29:07
  Speaker 2: this next one. We'll discuss after this.
• 29:10
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• 29:15
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• 29:18
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• 29:24
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• 29:49
  Speaker 2: We're talking about AI here.
• 29:55
  Speaker 3: Does.
• 29:57
  Speaker 2: been, you know, pretty important to markets for the last
• 29:58
  Speaker 2: four years. And last week, obviously, it was, you know,
• 30:01
  Speaker 2: one of these times where we've had a few of
• 30:03
  Speaker 2: them where the AI trade is, you know, receiving fresh
• 30:06
  Speaker 2: questions and fresh, you know, scrutiny. So yesterday, at, I
• 30:13
  Speaker 2: think it was like, early mid afternoon, like sometime during,
• 30:16
  Speaker 2: you know, afternoon football games. Anthropic announces, did you guys
• 30:21
  Speaker 2: see what they announced? The creation of the Anthropic Public
• 30:25
  Speaker 2: Benefit Fund?
• 30:26
  Speaker 1: Yeah. Yes.
• 30:27
  Speaker 2: So, basically what they're doing is they're putting 5% of
• 30:31
  Speaker 2: their shares into this, and that for, you know, as
• 30:35
  Speaker 2: the valuation of Anthropic goes up, they'll put more in
• 30:38
  Speaker 2: with the idea that these shares, the money from them,
• 30:41
  Speaker 2: can then be used to fund public goods throughout the
• 30:45
  Speaker 2: United States. And I gotta tell you, it's pure poppycock.
• 30:52
  Speaker 2: Like it is just horse manure of the highest order
• 30:57
  Speaker 2: that they are doing this. And basically like what it is,
• 31:01
  Speaker 2: like think about what they're doing. They're saying, Hey, like
• 31:04
  Speaker 2: if you make our stock more valuable and dedicate more
• 31:07
  Speaker 2: money to us, then we'll give more money back to you.
• 31:12
  Speaker 2: It is like circular logic, circular reasoning with the express
• 31:18
  Speaker 2: intent of of, hey, support us, and you'll be amazed
• 31:23
  Speaker 2: at what we can do to, like, help you. And
• 31:26
  Speaker 2: I gotta tell you, like, it really makes my skin crawl.
• 31:30
  Speaker 2: And the Anthropic guys, I... They're smart people, but the
• 31:35
  Speaker 2: way that they're going after just like, hey, like, we
• 31:38
  Speaker 2: need regulatory capture to help prevent us from doing something bad.
• 31:42
  Speaker 2: But if something bad does happen, here's this public good
• 31:45
  Speaker 2: fund that we're creating for you. They're tying themselves in knots,
• 31:50
  Speaker 2: trying to figure out some way. To get like a
• 31:54
  Speaker 2: government or societal implied backstop for them because I think
• 32:00
  Speaker 2: they know that the math isn't mathing. Well, it just,
• 32:04
  Speaker 2: it feels sick to me.
• 32:05
  Speaker 4: Instead of doing the normal human thing of realizing that
• 32:13
  Speaker 4: the technology you are developing could be world and society
• 32:17
  Speaker 4: ending and therefore stopping the research into that technology. They
• 32:23
  Speaker 4: are openly saying, we think this could ruin the world,
• 32:27
  Speaker 4: end human society as we know it, but because other
• 32:32
  Speaker 4: companies are researching it, we're going to continue to plow
• 32:34
  Speaker 4: ahead without guardrails.
• 32:36
  Speaker 2: And that's just not a, I don't know, normal human...
• 32:43
  Speaker 2: I can't justify it in my mind. Yeah, it's a problem.
• 32:48
  Speaker 3: Giving assets to your children can be part of an
• 32:51
  Speaker 3: estate plan, but giving them away directly can create problems
• 32:55
  Speaker 3: you may not expect. Cushing and Dolan's new guide called
• 32:58
  Speaker 3: Making the Most of Gifting Assets explains what to consider
• 33:03
  Speaker 3: before you transfer assets to your family. Once you give
• 33:06
  Speaker 3: an asset directly to someone else, it's no longer yours.
• 33:09
  Speaker 3: You may lose control over it, and if your child
• 33:12
  Speaker 3: runs into financial trouble or goes through a divorce, that
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  Speaker 3: asset could be at risk. This new guide suggests ways
• 33:19
  Speaker 3: to pass along assets while keeping them better protected. So
• 33:23
  Speaker 3: before you give away property, investments, or other assets, make
• 33:27
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• 33:30
  Speaker 3: guide called Making the Most of Gifting Assets by calling 866-848-5699.
• 33:33
  Speaker 3: That number again is 866-848-5699. Or you can request the
• 33:36
  Speaker 3: guide from their website, LegalExchangeShow.com.
• 33:47
  Speaker 1: The proceeding was paid for and the views expressed are
• 33:48
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 33:51
  Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
• 33:54
  Speaker 1: Cushing and Armstrong do not endorse each other and are
• 33:56
  Speaker 1: not affiliated.
• 33:58
  Speaker 2: I just need to read this segment from the Anthropic announcement.
• 34:02
  Speaker 2: Today we're committing a portion of Anthropic shares to the
• 34:04
  Speaker 2: Anthropic Public Benefit Fund, a new entity with a structure
• 34:07
  Speaker 2: that increases the stake as the company grows. So again,
• 34:10
  Speaker 2: they're telling you, like, if we get bigger, you'll get more.
• 34:12
  Speaker 1: Hmm.
• 34:13
  Speaker 2: Subject to stockholder approval, 5% of Anthropic shares will be
• 34:16
  Speaker 2: committed today, with an additional 2% to be added at
• 34:18
  Speaker 2: the board's discretion for every 50% increase in the company's
• 34:22
  Speaker 2: value above a set baseline. That at the board's discretion
• 34:25
  Speaker 2: is also doing a little bit of work there, but
• 34:28
  Speaker 2: hear me out. As a public benefit corporation, most of
• 34:31
  Speaker 2: our work in pursuit of our mission takes place inside
• 34:33
  Speaker 2: the company. Research relevant to AI safety and interpretability, applied
• 34:37
  Speaker 2: biomedical research, discount on Claude for non-profits and scientific institutions. Wee!
• 34:42
  Speaker 2: Look at all the, like, good things that we're doing! Like... Okay, like,
• 34:48
  Speaker 2: thanks guys. Fine. The Anthropic Public Benefit Fund will have
• 34:52
  Speaker 2: increased flexibility and scale, enabling us to pursue our mission
• 34:56
  Speaker 2: in new ways. For example, we might explore large donations
• 35:01
  Speaker 2: to traditional nonprofits or direct distributions to specific populations. Hey,
• 35:06
  Speaker 2: if you guys are lucky... If you guys are lucky,
• 35:11
  Speaker 2: we might give you some money one day. I mean, like,
• 35:18
  Speaker 2: this is really... There's just a right or wrong way
• 35:24
  Speaker 2: to do... Charity. What's the... Mike, it's not about charity.
• 35:28
  Speaker 2: I recognize that. This is literally saying, can we buy
• 35:31
  Speaker 2: your acceptance of what we're doing?
• 35:34
  Speaker 4: What's the beverage company that donates something like half of
• 35:38
  Speaker 4: its profits to charitable work? Does anybody have any idea
• 35:43
  Speaker 4: what I'm talking about?
• 35:44
  Speaker 2: Newman's Own Salad Dressing donates all of its profits to charity.
• 35:49
  Speaker 2: I see it on the labels at the grocery stores. Yes.
• 35:51
  Speaker 4: Like, there are some companies that are genuinely set up
• 35:54
  Speaker 4: in a structure where their profits... They're like public benefit
• 35:58
  Speaker 4: companies and actually set themselves up in a way that they.
• 36:01
  Speaker 2: Well, because salad dressing doesn't kill anyone, Mike. Right. Cogged artery, okay. Like, yeah,
• 36:07
  Speaker 2: depending on... The ranch is thick.
• 36:10
  Speaker 4: There's a genuine way to set up a product for,
• 36:14
  Speaker 4: you know, a charitable giving, even if it's all about
• 36:17
  Speaker 4: a public image.
• 36:18
  Speaker 2: And then there's this way.
• 36:20
  Speaker 1: And.
• 36:21
  Speaker 4: this one doesn't seem terribly genuine.
• 36:26
  Speaker 2: No, it really doesn't. And especially, like, then you get
• 36:33
  Speaker 2: this also. None of the anthropic equity held by this
• 36:36
  Speaker 2: LLC will be used for lobbying or political giving in
• 36:39
  Speaker 2: the U.S. or abroad. Well, then, what do you call
• 36:42
  Speaker 2: what you're doing with it? Like, let's be 100% honest.
• 36:49
  Speaker 2: At some level, like, anytime there's a large charitable donation
• 36:53
  Speaker 2: that's made, part of it is made because it's like, oh, like,
• 36:57
  Speaker 2: this will, like, allow me to, like, get some recognition
• 37:00
  Speaker 2: for doing it. Because if you didn't want your name
• 37:03
  Speaker 2: to be attached to it, you don't have to. You
• 37:05
  Speaker 2: can make anonymous charitable donations. You don't have to tell
• 37:08
  Speaker 2: the world that you're going to do it. I know
• 37:12
  Speaker 2: this because I've made anonymous charitable donations. Not anywhere near
• 37:15
  Speaker 2: this big, but I don't go telling everyone about the
• 37:18
  Speaker 2: causes I've donated to. You just did. I didn't tell
• 37:22
  Speaker 2: you what causes they were. Chuck's anonymous. Okay, yeah. If
• 37:27
  Speaker 2: you ever see an anonymous one, it's me. It's a
• 37:32
  Speaker 2: Curb episode, by the way. Is it? Yeah. Ted Danson's anonymous.
• 37:36
  Speaker 2: He's not anonymous. He said it's anonymous. The fact that
• 37:40
  Speaker 2: they're telling you about this, they're telling you for a reason.
• 37:45
  Speaker 4: What are Lindsay's charitable causes in Arrested Development?
• 37:48
  Speaker 1: Oh.
• 37:50
  Speaker 2: That one I do know, but I just need to
• 37:52
  Speaker 2: rack the brain a little bit for it. Clean up
• 37:53
  Speaker 2: the wetlands. What are you trying to do to the wetlands?
• 37:56
  Speaker 2: Drive them? What? So there you go. Let's take a
• 38:04
  Speaker 2: quick break. We got hour two coming up. I promise
• 38:06
  Speaker 2: we'll talk about something else, but we just had a
• 38:08
  Speaker 2: lot of ground to cover on this. And now we've
• 38:11
  Speaker 2: covered it. Let's take a quick break. Hour two in
• 38:14
  Speaker 2: just a bit.