Latest / The Financial Exchange Show / Why are markets unsure of how to react to Nvidia's earnings?

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Why are markets unsure of how to react to Nvidia's earnings? · The Financial Exchange Show

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Speaker 1: Chuck Zada and Paul Lane.
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Speaker 2: Chuck, Paul Tucker with you here on a Thursday. It's
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Speaker 2: the day after in Video's earnings reports, and we got
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Speaker 2: kind of a weird day of trading so far in markets,
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Speaker 2: and I think a lot of it does stem from
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Speaker 2: in Videos. So le's dive right into that earnings report
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Speaker 2: and what we saw there. Paul, what were your takeaways
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Speaker 2: from what they reported after the close yesterday and then
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Speaker 2: what they talked about on their conference call.
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Speaker 3: My takeaways is that in Vidia is a company that
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Speaker 3: has been priced for perfection for a really long time.
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Speaker 3: If you look at the numbers underneath the hood, this
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Speaker 3: was a very strong quarter, but they've set themselves such
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Speaker 3: high expectations that beating analysts forecasts is not enough anymore.
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Speaker 3: It has to be by wide margins because they had
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Speaker 3: just crushed them in prior quarters. In terms of what
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Speaker 3: we saw from this Arnience report, Chuck, they came in
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Speaker 3: with thirty five billion in quarterly revenue that was up
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Speaker 3: ninety four percent from a year ago. In the same quarter,
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Speaker 3: to give a basis of comparison, what they had printed
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Speaker 3: in terms of revenue increases year over year for quarters
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Speaker 3: one and two of this year was one hundred and
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Speaker 3: twenty two percent revenue increase in Q two year over
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Speaker 3: year around two hundred and fifty percent revenue increase in
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Speaker 3: Q one and Q four of last year two hundred
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Speaker 3: and sixty five percent. So I mentioned that to indicate
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Speaker 3: that was the level of revenue growth that they were seeing,
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Speaker 3: you know, doubling and tripling of revenue. It slowed down,
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Speaker 3: but still to a ninety four percent year over year
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Speaker 3: growth In terms of Q four what they're projecting in
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Speaker 3: this current quarter, they came in a thirty seven point
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Speaker 3: five billion, which was slightly over forecast. Initially in the aftermarket,
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Speaker 3: it looked like in video would be trading negative on
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Speaker 3: the news that they were not beating in less expectations
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Speaker 3: by enough. But now we head into the first half
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Speaker 3: hour plus of trading or so, it does indicate that
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Speaker 3: they are up slightly. There clearly is incredible demand according
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Speaker 3: to the CEO for their new chips, but ultimately it
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Speaker 3: seems like the markets are having a mixed reaction to this.
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Speaker 3: It seemed like initially some cause for perhaps challenges ahead,
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Speaker 3: but then after there was a little time to digest this.
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Speaker 3: The stock has rallied a bit.
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Speaker 4: Well.
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Speaker 2: It's interesting because even just as you talked, it's given
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Speaker 2: up those games now and so it's just really chopping.
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Speaker 2: And I think this is a market that isn't quite
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Speaker 2: sure what to do with this number. And the problem
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Speaker 2: is that there's so much in terms of the overall
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Speaker 2: market performance, the S and P five hundred performance that's
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Speaker 2: riding on this. Then I think it affects you know,
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Speaker 2: other holdings around it in terms of and I'm not
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Speaker 2: talking about how individuals handle this, but let's say that
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Speaker 2: you're a hedge fund, just as an example, and hedge
3:58
Speaker 2: funds one of the things that they they try to
4:01
Speaker 2: focus on, and again it depends on you know, the
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Speaker 2: specific fund, but they really try to manage the specific
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Speaker 2: risk within positions. And one of the ways that they
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Speaker 2: measure that risk is basically looking at the performance of
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Speaker 2: a position and the projected volatility of that. And that's
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Speaker 2: that's where hedge funds will you know, say, okay, we
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Speaker 2: might be out over our skis on this is not
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Speaker 2: necessarily because a position is done you know, badly or well,
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Speaker 2: but hey, how much volatility, Like what's the projected range
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Speaker 2: that we could see this position in and how much
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Speaker 2: could that affect our overall bottom line.
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Speaker 4: And so when you.
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Speaker 2: See a position like h in video that's reporting immediately
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Speaker 2: afterwards for the entire S and P five hundred this morning,
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Speaker 2: like in pre market, you basically saw all of this
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Speaker 2: concern that we can measure through what's called the VIX,
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Speaker 2: which is also known as you know, kind of the
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Speaker 2: fear index for for markets. I don't know that that's
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Speaker 2: the best term for it, but it's it's, you know,
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Speaker 2: what's what's tossed around. And basically when you see the
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Speaker 2: vi moving down, it's a sign that, hey, those market
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Speaker 2: participants that are nervous about the S and P five
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Speaker 2: hundred falling, they have become less concerned with that, and
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Speaker 2: as such the market may rise because they're closing out
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Speaker 2: hedges and things. Well, once that happened this morning, that's
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Speaker 2: when in videos started falling in. It's when the S
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Speaker 2: and P five hundred started falling again, and so it
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Speaker 2: suggests that one of the things that was causing that
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Speaker 2: early move was really just some hedging in the overall
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Speaker 2: market burning off, rather than investors being thrilled with in
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Speaker 2: video's performance. Again, I think we can say it's a
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Speaker 2: really good quarter. They're printing money hand over fist, But
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Speaker 2: as you noted, Paul, when they're worth three and a
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Speaker 2: half trillion dollars, you can't just have a good quarter.
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Speaker 4: Yeah, you gotta do better.
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Speaker 2: And I don't think they did better. And it's not
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Speaker 2: to say they're a bad business. It's just, hey, what
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Speaker 2: drives the company's stock forward. You have to do better,
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Speaker 2: You have to do you know more, Like that's that's
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Speaker 2: just what the market is saying. And so two things
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Speaker 2: can be true, and video can still be a company
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Speaker 2: that's making a ton of money. I mean, but you
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Speaker 2: look at they're trailing twelve month numbers, free cash flow
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Speaker 2: forty six billion dollars, net income fifty three billion dollars,
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Speaker 2: revenue ninety six billion dollars. I mean, it's as close
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Speaker 2: as you can come to printing money with an actual company.
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Speaker 2: It's you know, it's like you just don't. These are
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Speaker 2: video game numbers from a company that makes you know,
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Speaker 2: the use that started, yeah, that started making graphics cards
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Speaker 2: for video games. So yeah, it's it's one where there's
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Speaker 2: so much gravity just in this company and how it
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Speaker 2: moves markets that I think it's kind of like, okay,
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Speaker 2: if the company doesn't go up or down, you know,
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Speaker 2: eight to ten percent. I think part of it is
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Speaker 2: the market just looks at is like, well what do
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Speaker 2: we do now? You're like, what do we do with this?
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Speaker 2: And that's kind of where we are at this point.
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Speaker 2: So again, I think that this is something where there's
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Speaker 2: clearly just this monster market for these chips right now.
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Speaker 2: I'm still not sure if it's just gonna be a
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Speaker 2: couple of year cycle or if this is gonna be
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Speaker 2: how it is in perpetuity, because we've seen this before
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Speaker 2: from tech companies where they spend a bunch of money
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Speaker 2: for a couple of years on new tech, they get
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Speaker 2: to a point where they're like, Okay, we can't really
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Speaker 2: make any more money off this, so you know, onto
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Speaker 2: the next and then you kind of go from there.
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Speaker 2: So it's it's hard to tell where it's gonna go.
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Speaker 2: But it's still a company that's just printing money right now.
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Speaker 3: I was thinking about that statement earlier this morning, Chuck
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Speaker 3: and prepping for the show, and I just with all
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Speaker 3: the smart people at all these respective companies, and I
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Speaker 3: don't think we've seen anything to this size and scale
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Speaker 3: of spend that we're witnessing here with these companies. For example, Microsoft, Facebook, Google,
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Speaker 3: and Amazon are doing about two hundred and forty two
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Speaker 3: billion of capital expenditures this year, and then what's projected
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Speaker 3: at to eighty five billion next year. Again, not all
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Speaker 3: of that is going necessarily to these types of chips,
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Speaker 3: but a whole heck of a lot of it is.
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Speaker 3: And I just wonder not to say that, oh, it's
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Speaker 3: different this time, but there's so much money behind this,
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Speaker 3: you'd have to think that all these people and all
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Speaker 3: these respective companies believe in the power of this or
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Speaker 3: else it's gonna be the most epic failure of capital
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Speaker 3: end you in an economic history, just because the number
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Speaker 3: is being thrown around here. But I was just thinking
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Speaker 3: kicking that around, it has to succeed with all the
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Speaker 3: money that they've thrown at it.
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Speaker 2: And ultimately what it's going to be. The question that
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Speaker 2: needs to be answered is can you replace an employee
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Speaker 2: with AI? Now you can't do it for you know,
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Speaker 2: a lot of manual labor jobs. I'm not saying that,
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Speaker 2: but for the white the jobs like my own, where
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Speaker 2: I'm sitting in front of a computer doing stuff all
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Speaker 2: day and I don't have to, you know, do backbreaking
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Speaker 2: work day in and day out.
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Speaker 4: That's gonna be the job that the question exists for.
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Speaker 4: And so.
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Speaker 2: Because ultimately, look Microsoft right now, look they charge like
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Speaker 2: twenty dollars a month for chat GPT if you want
9:06
Speaker 2: their copilot program. I think it's like thirty it's like
9:09
Speaker 2: four hundred bucks for the year. Instead, they're not gonna
9:14
Speaker 2: make enough money selling twenty dollars a month subscriptions to
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Speaker 2: chat GPT. Like, they're just not gonna do that. But
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Speaker 2: the question for them and why they're investing this money is, Hey,
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Speaker 2: your company there, you've got you know, an accounting department,
9:37
Speaker 2: or you've got a billing department, or you've got a
9:40
Speaker 2: claims processing department and an insurance company. How much do
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Speaker 2: you pay the people in that department right now? Oh,
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Speaker 2: you pay them, you know, sixty thousand a year. What
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Speaker 2: about with benefits? Oh, you pay them eighty thousand a year.
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Speaker 2: We have an AI agent that can do what they do,
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Speaker 2: and it can do the work of two people at
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Speaker 2: the cost of forty thousand a year. That's the selling
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Speaker 2: proposition for Microsoft is not how many twenty dollars subscriptions
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Speaker 2: can I sell because Microsoft doesn't want to be in
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Speaker 2: that business. That's a crappy business, right, I mean, it's
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Speaker 2: not like a crappy business. But when you're worth three
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Speaker 2: trillion dollars, okay, you sold an extra twenty dollars subscription Yahoo, wonderful.
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Speaker 4: What's that do for anyone? Nothing?
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Speaker 2: You say, Hey, I've got a Fortune five hundred company
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Speaker 2: that wants five hundred AI agents at forty thousand dollars
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Speaker 2: a year. I just made a twenty million dollar sale.
10:40
Speaker 2: And if I do that for half of the Fortune
10:44
Speaker 2: five hundred, two hundred and fifty companies, now I got
10:48
Speaker 2: five billion in revenue for the year. Oh, that's more
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Speaker 2: interesting to me than needing to sell two hundred and
10:55
Speaker 2: fifty million, you know, twenty dollars a month subscriptions or
10:59
Speaker 2: something like that to chat GPT.
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Speaker 3: And you have a bit client base that you can
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Speaker 3: continue to upsell to once you have them locked in
11:06
Speaker 3: and again these additional features and things of that nature.
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Speaker 2: And that was looking at you know, five hundred employees
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Speaker 2: for a company. How many companies are there where they say, hey,
11:14
Speaker 2: we've got you know, ten thousand employees, we can do
11:17
Speaker 2: ten x that scale, We'll do this and it will
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Speaker 2: be a two hundred million dollar contract for you. That's
11:22
Speaker 2: what Microsoft wants to sell, not twenty dollars subscriptions to
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Speaker 2: chat GPT like they're doing to me, Like they don't
11:29
Speaker 2: make enough money off me. For all the you know
11:31
Speaker 2: pictures of dinosaurs playing poker that I make, there's no
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Speaker 2: money in that for them. So's take a quick break
11:39
Speaker 2: here and when we come back, talk about what we're
11:43
Speaker 2: seeing in the markets overall.
11:44
Speaker 4: Immediately after the election, we saw this move upward, the.
11:47
Speaker 2: Trump bump, if you will, talk about, Hey, the market's
11:51
Speaker 2: kind of faded a little bit in the last week
11:53
Speaker 2: and a half.
11:54
Speaker 4: What gives man When we return.
11:57
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Speaker 2: Let's talk a little bit about what we've seen from
12:54
Speaker 2: markets in the last two plus weeks now. So immediately
12:57
Speaker 2: after the election, we saw a you know, decent sized
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Speaker 2: bump in the equity markets. You know, the S and
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Speaker 2: P five hundred went from around fifty seven hundred up
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Speaker 2: to around six thousand, So it's about a five percent
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Speaker 2: bump that you saw there.
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Speaker 4: And subsequently, you know has given.
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Speaker 2: Back about you know, two percent, one and a half
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Speaker 2: two percent of that, and it's pretty much back to
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Speaker 2: where it was in mid October. Remember, markets had fallen
13:21
Speaker 2: about three percent in late October and early November before
13:26
Speaker 2: the election. So I think ultimately we're in a position
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Speaker 2: now where stocks are kind of treading water, and I
13:34
Speaker 2: think a lot of it comes back to something that
13:35
Speaker 2: we talked about earlier in the week, which is just
13:38
Speaker 2: that we still don't have many details when it comes
13:41
Speaker 2: to specifics on the policies from the incoming Trump administration.
13:47
Speaker 2: We know, hey, you know what you want to cut
13:49
Speaker 2: red tape. We know that you know you've talked about
13:52
Speaker 2: tax cuts and things like that. Those things are potentially
13:56
Speaker 2: stimulative to the economy, but you've also talked about things
13:59
Speaker 2: that might create some drag in terms of tariffs, deportations,
14:03
Speaker 2: things like that. And until we have some clarity on
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Speaker 2: the size, magnitude, and timing of all these it's kind
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Speaker 2: of hard to make a plan for what you think
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Speaker 2: the market's going to do because there's a really wide
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Speaker 2: range of outcomes here.
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Speaker 3: There really is, and ultimately what's been pushed to the
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Speaker 3: back burner a little bit, Chuck here is the focus
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Speaker 3: that we had prior to the election from an economic
14:26
Speaker 3: standpoint was the labor market, and we talked about the
14:30
Speaker 3: October jobs report was obviously quite weak, but one of
14:33
Speaker 3: the biggest focuses from the Federal Reserve was inflation. They
14:37
Speaker 3: seem to feel comfortable that that is under control. The
14:40
Speaker 3: labor market was the area of utmost focus, and October
14:44
Speaker 3: was really hard to glean anything from in terms of
14:46
Speaker 3: the labor market because of the hurricanes and strikes really
14:49
Speaker 3: impacted that number. That's something that looms out here as well.
14:53
Speaker 3: That's been put on the back burner temporarily. So that's
14:55
Speaker 3: something that there hasn't been a lot of data on recently.
14:58
Speaker 3: So that's why you perhaps are seeing markets treading water
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Speaker 3: a little bit here. You certainly have from a valuation standpoint.
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Speaker 3: The one piece that's mentioned here.
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Speaker 4: Is a pe ratio.
15:10
Speaker 3: However, you look at it for the S and P
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Speaker 3: five hundred, that is significantly elevated. So it's a time
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Speaker 3: where markets have rallied quite a bit. But there is
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Speaker 3: a lot of sort of wait and see out there
15:22
Speaker 3: on the table. And that applies for the interest rate
15:24
Speaker 3: side of things too on the Federal Reserve, where there
15:28
Speaker 3: was early indications that perhaps we'd be in a continued
15:31
Speaker 3: rate cutting cycle, but Jerome Powell had come out recently
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Speaker 3: sort of putting splashing a little bit of water on that, saying,
15:37
Speaker 3: with where the economy stands right now and the data
15:39
Speaker 3: that we've gathered, there's not necessarily a need to potentially cut,
15:43
Speaker 3: but all that is to bear out in the future here.
15:46
Speaker 2: Yeah, and I think you make a good point that
15:49
Speaker 2: look the business cycle as a whole, there's some uncertainty
15:51
Speaker 2: still about where exactly we are there. Two months ago,
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Speaker 2: you had you know, people generally smart people going on
16:00
Speaker 2: Bloomberg and CNBC being like, the FED needs to cut
16:04
Speaker 2: seventy five basis points today and in an emergency meeting
16:09
Speaker 2: they got to do another one later at the real meeting.
16:12
Speaker 2: And we've gone from that in early September to hey,
16:16
Speaker 2: maybe the Fed shouldn't cut anymore, maybe they should actually
16:18
Speaker 2: be hiking again, and that's not a healthy place to be, Like,
16:22
Speaker 2: we all got to chill a little bit on trying
16:26
Speaker 2: to extrapolate where the broad economy is going because of
16:31
Speaker 2: a few weeks of data they get. Everyone wants to
16:35
Speaker 2: be first, because if you're first, especially in the social
16:38
Speaker 2: media world, you get to be like I called it,
16:41
Speaker 2: listen to me, pay me, and it's like, dude, like
16:45
Speaker 2: you were wrong on ninety six other things before you
16:48
Speaker 2: got that one right. If you're not first your last
16:51
Speaker 2: sometimes when you're first to your last two that's the
16:53
Speaker 2: problem is when you're first to be wrong. And so again,
16:57
Speaker 2: like these are smart people like Jeremy Siegel. I've called
16:59
Speaker 2: him for the last couple of months, because again he's
17:02
Speaker 2: got a degree, like a PhD from Wharton. He's smarter
17:05
Speaker 2: than me in basically any way that you can measure.
17:07
Speaker 2: I'm sure he's no dummy. And by the way, Jeremy
17:11
Speaker 2: Siegal typically one of the biggest bulls in like the
17:14
Speaker 2: stock market and like the periphery of it. And he's
17:17
Speaker 2: out there calling for one hundred and fifty basis points
17:21
Speaker 2: and cuts in September because of a bad jobs report.
17:27
Speaker 4: Well, where is he now? Where is he now?
17:31
Speaker 3: You know, were in hiding?
17:33
Speaker 2: Like this is the thing we all need to chill
17:36
Speaker 2: out and not make every single data point a referendum
17:39
Speaker 2: on what exactly the Fed needs to do. It's just
17:43
Speaker 2: not healthy, and it's not it's not right for markets either.
17:50
Speaker 2: And so I think in terms of where the economy
17:53
Speaker 2: is right now, hey, basically the same place it's been in.
17:57
Speaker 4: For the last two years.
18:01
Speaker 2: There's some parts of it that are hot, there's some
18:04
Speaker 2: parts of it that are cool, the parts that are
18:06
Speaker 2: cooling the labor market. It's concerning and you need to
18:09
Speaker 2: pay attention to it. But it still has been an
18:12
Speaker 2: economy that's been more resilient than anyone could.
18:15
Speaker 4: Have imagined over that time.
18:18
Speaker 2: And as such, you have to, you know, be kind
18:21
Speaker 2: of careful when you're calling for these big turning points
18:24
Speaker 2: because it just like it just hasn't happened that way
18:28
Speaker 2: this time. And I know, especially in September, we got
18:30
Speaker 2: all these indicators that you know, oh this is you know,
18:33
Speaker 2: this normally happens right before recession and this and that.
18:37
Speaker 2: But there's no hard and fast rules in economics. They're
18:41
Speaker 2: just aren't it. It's not physics, it's not hard science
18:45
Speaker 2: like that. It's social science with numbers. And so when
18:48
Speaker 2: we start quoting, you know, the some rule whose own
18:51
Speaker 2: creator has said, hey, this might not work forever, maybe
18:56
Speaker 2: we should listen to her a little bit.
18:58
Speaker 4: Certainly a fair point. That's all I have to say.
19:01
Speaker 2: Is, you know, let's let's all pump the brakes a
19:04
Speaker 2: little bit on. You know, hey, jobless claims came in
19:07
Speaker 2: today and they were lower than you know, last week.
19:10
Speaker 2: Does that mean that inflation's back. No, it means that
19:12
Speaker 2: they were lower for one week. It doesn't have to
19:15
Speaker 2: have some broader meaning in the you know, the world
19:19
Speaker 2: economy or the US economy. Let's take a quick break here,
19:23
Speaker 2: and when we come back we'll do a little bit
19:25
Speaker 2: of Wall Street Watch, and then the Justice Department saying
19:29
Speaker 2: what they want Google to do as a result of
19:32
Speaker 2: Google losing their anti trust case.
19:34
Speaker 4: We'll fill you in on that right after this.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
Speaker 1: TFE show Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving market so
19:56
Speaker 1: far today right here on the Financial Exchange Rate Network.
20:03
Speaker 5: Markets are pulling back after earlier gains as investors digest
20:08
Speaker 5: third quarter earnings from AI in Chip Giant, in Nvidia.
20:12
Speaker 5: At the moment that now is actually up by seventy
20:14
Speaker 5: three points. However, SMP five hundred is down by over
20:19
Speaker 5: a third of a percent, or twenty one points, in
20:21
Speaker 5: a Nasdaq selling off by over one percent or two
20:24
Speaker 5: hundred and sixteen points. Russell two thousand is up by
20:28
Speaker 5: nearly one percent on the day, ten year treasure reeled
20:31
Speaker 5: is off by two basis points at four point three
20:34
Speaker 5: eight percent, and crude oil up nearly one and a
20:37
Speaker 5: half percent higher, trading at sixty nine dollars and seventy
20:41
Speaker 5: cents a barrel, well after earlier gains. And video shares
20:45
Speaker 5: currently down by three percent after the chip maker beat
20:49
Speaker 5: third quarter earnings expectations, posting a jumping quarterly profit and revenue. However,
20:54
Speaker 5: the company failed to meet some investors' lofty expectations. Meanwhile,
20:59
Speaker 5: data cloud company Snowflake beat earnings expectations for the third quarter.
21:05
Speaker 5: Snowflake's guidance also beat esmonds, though losses grew. That stock
21:09
Speaker 5: is surging by thirty percent on the day. Elsewhere, Palo
21:13
Speaker 5: Alto Networks issued fiscal second quarter guidance largely in line
21:18
Speaker 5: with expectations and also announced a two for one stock split.
21:22
Speaker 5: That company, or the shares in the cybersecurity company, are
21:25
Speaker 5: down by over one and a half percent. Several crypto
21:29
Speaker 5: related stocks are seeing attention this morning, including micro Strategy
21:33
Speaker 5: and coinbase, after bitcoin hit ninety eight thousand dollars for
21:36
Speaker 5: the first time but has now pulled back to ninety
21:39
Speaker 5: six thousand dollars. Micro Strategy also said it has sold
21:43
Speaker 5: two point six billion dollars of convertible bonds to purchase
21:47
Speaker 5: more bitcoin. Micro Strategy shares down by three percent and
21:51
Speaker 5: Bjy's Wholesale Club up by seven percent after the warehouse
21:56
Speaker 5: club posted a third quarter earnings beat and hiked its
21:59
Speaker 5: full year guidance. BJ's also announced a one billion dollar
22:03
Speaker 5: share repurchase program and said it will raise its membership fee.
22:08
Speaker 5: I'm Tucker Silva and that's Wall Street.
22:10
Speaker 4: Watch Tucker. You also buried the lead on micro Strategy.
22:15
Speaker 5: Oh I did Okay, I missed something there?
22:17
Speaker 4: You did?
22:18
Speaker 2: What The stock is nineteen percent off it's intra day
22:21
Speaker 2: high from where it opened. The sye Oh oh okay,
22:23
Speaker 2: so things are kind of wild there. Coinbas is getting
22:26
Speaker 2: whack too, right.
22:27
Speaker 4: Yeah, it's actually sorry.
22:28
Speaker 2: Micro Strategy just lost another two percent now twenty one
22:31
Speaker 2: percent off of its intra day high.
22:33
Speaker 4: So it's uh, pretty bumpy. Look, here's the thing.
22:38
Speaker 2: Things that typically go parabolic up in markets, they rarely
22:43
Speaker 2: just stop and level off. They tend to get a
22:46
Speaker 2: little bit bump delicious. So uh, it's it's it's a
22:50
Speaker 2: little bit dodgy out there right now in some of
22:52
Speaker 2: these areas, and you just have to be very careful because, man,
22:58
Speaker 2: all I can tell you is hearing from crypto people
23:02
Speaker 2: right now the same way I was. You know, the
23:04
Speaker 2: last couple peaks and it's uh again, who knows where
23:10
Speaker 2: it goes. But man, once everyone's paying attention, to something.
23:15
Speaker 2: It's it's usually not. It's usually not the time where
23:20
Speaker 2: you see, like, wow, the most robust games ever are
23:23
Speaker 2: yet to come, you know, like it's you know, just
23:25
Speaker 2: buyer beware on all stuff.
23:27
Speaker 4: Right now, let's talk a little bit about Google.
23:31
Speaker 2: They lost an anti trust case earlier this year, and
23:35
Speaker 2: the DOJ spent the last couple months writing their remedies
23:39
Speaker 2: that they want to give to the judge. In terms
23:41
Speaker 2: of what they want the judge to do, Paul, would
23:45
Speaker 2: they say they would like to see?
23:47
Speaker 3: This is pretty meaty stuff here, Chuck. There's a lot
23:50
Speaker 3: to kind of go over, but basically, what they're a
23:53
Speaker 3: couple of the noteworthy points here is the Justice Departments
23:57
Speaker 3: wants to enable and encourage unfettered and un confettered search ecosystem.
24:01
Speaker 3: They want to allow for other competitors to make inroads
24:04
Speaker 3: in this market. Google has you know, eighty percent market
24:08
Speaker 3: share or maybe even more than that, eighty to ninety
24:10
Speaker 3: percent market share. They they really are the major player
24:12
Speaker 3: in the space. And what the Justice Department particularly was
24:16
Speaker 3: going after was the fact that on Google products such
24:20
Speaker 3: as an Android phone system or a pixel device phone,
24:24
Speaker 3: the default search browser if you just are in to
24:28
Speaker 3: type into. First of all, the default browser is Google
24:30
Speaker 3: Chrome on those devices and all searches go through Google.
24:34
Speaker 3: Google also pays tens of billions of dollars to Apple
24:37
Speaker 3: to be the default search engine on the Safari on
24:40
Speaker 3: iPhones out there, and the same applies for other many
24:43
Speaker 3: other different vehicles out there. That Google is able to
24:47
Speaker 3: pay to be the only game in town from a
24:49
Speaker 3: search perspective. So they want to separate its products, which
24:54
Speaker 3: are the Android phone system, from the search engine. They
24:57
Speaker 3: want the browser of Chrome to to be spun off
25:01
Speaker 3: and sold off so that they don't have this overwhelming
25:06
Speaker 3: dominance in the search engine space. And so what Google
25:11
Speaker 3: makes a lot of its money from is the fact
25:13
Speaker 3: that it is the widely acknowledged search engine out there
25:16
Speaker 3: on all these different platforms, and fifty seven percent of
25:20
Speaker 3: their three hundred and seven billion of revenue comes from
25:22
Speaker 3: ads next to search. So if you are Google and
25:26
Speaker 3: you're not able to generate as much search capacity as
25:29
Speaker 3: you were previously because some of these edicts from the
25:32
Speaker 3: Justice Department, that would hit it huge hit on revenue
25:36
Speaker 3: if that were to go through.
25:38
Speaker 4: This.
25:39
Speaker 2: Obviously, these are just recommendations from the Justice Department, And
25:43
Speaker 2: again there's a number of them. So the again selling
25:47
Speaker 2: off Chrome is part of it, maybe needing to sell
25:50
Speaker 2: off Android if Google violates some rules in the future.
25:55
Speaker 2: So there's some different pieces here. Ultimately, the judge is
25:58
Speaker 2: going to say, yes, this is what I am going
26:01
Speaker 2: to say, is you know.
26:03
Speaker 4: Gonna be the law of the land.
26:05
Speaker 2: And then from there it's obviously going to be appealed
26:09
Speaker 2: by Google.
26:09
Speaker 4: It's like good, there's there's too much money for.
26:12
Speaker 2: Google to just be like, yep, we're cool with its
26:14
Speaker 2: good guys, we'll see you later.
26:18
Speaker 3: Some money from that three hundred and seven billion of
26:19
Speaker 3: revenue to to dish around to pay some legal fees.
26:22
Speaker 2: Yeah, So this is something that again is pretty meaty here.
26:26
Speaker 2: And the other thing that we do need to be
26:27
Speaker 2: aware of is, look, there's going to be a new
26:31
Speaker 2: head of the DOJ coming in with the incoming Trump administration,
26:35
Speaker 2: and so the question that's out there is, look, does
26:39
Speaker 2: the new DOJ continue to push this case in the
26:42
Speaker 2: same way. And I don't I don't know any specifics,
26:47
Speaker 2: Like none of us do we like, we don't even know.
26:49
Speaker 2: There's no one confirmed to lead you know, the DJ.
26:51
Speaker 2: We're not at that point. But what I do know
26:55
Speaker 2: is have Republicans been you know friendly in conversation to
26:59
Speaker 2: big tech recently? Not really, right, No, it's kind of hey, like,
27:06
Speaker 2: we don't really like you that much. And so I
27:08
Speaker 2: wouldn't be surprised if the incoming administration says, yeah, like,
27:13
Speaker 2: we're not going to do anything to change this.
27:16
Speaker 4: Now.
27:16
Speaker 2: They they certainly may you know, have some some changes
27:20
Speaker 2: around the margin. But remember the first DOJ suit against Alphabet,
27:26
Speaker 2: the parent of Google, was filed by the Trump administration
27:30
Speaker 2: in twenty twenty. So it's not something where the Trump
27:35
Speaker 2: administration previously has you know, veered away from actually you know,
27:40
Speaker 2: undertaking anti trust actions against big tech. I wouldn't be
27:44
Speaker 2: surprised if they continue to push this case. It wouldn't
27:48
Speaker 2: surprise me one bit here. So this is kind of interesting.
27:52
Speaker 2: And look, the market's taking this seriously too. Alphabet stock
27:56
Speaker 2: down five point three percent today, yep, So the market
27:59
Speaker 2: is saying, huh, there's there's something there. And by the way,
28:02
Speaker 2: that five point three percent dip is the biggest percentage
28:06
Speaker 2: dip for any S and P five hundred component. As
28:09
Speaker 2: I am looking at it right now, I'm just trying
28:12
Speaker 2: to make sure that's correct.
28:13
Speaker 4: But I'm pretty sure.
28:15
Speaker 3: I see now off six yes, six six plus percent,
28:17
Speaker 3: so so certainly taking it very seriously.
28:20
Speaker 2: Here I get six point three now and the next
28:23
Speaker 2: closest is Ulti Beauty down two point seven.
28:26
Speaker 3: So it's interesting to know that in the EU they
28:28
Speaker 3: had enforced a choice screen where basically people have the
28:32
Speaker 3: choice to utilize different search engine providers, and Duck Duck
28:35
Speaker 3: go Chuck's favorite search engine, saw seventy five percent increase
28:38
Speaker 3: after that choice screen was made available. So it's it's
28:41
Speaker 3: serious if this were to go through, but it's got
28:43
Speaker 3: a long way to go.
28:45
Speaker 2: Can I tell you something about search though, because I've
28:47
Speaker 2: been I've been poking around, like all over the place now,
28:49
Speaker 2: I've been, I've been banging, I've been Duck Duck going,
28:52
Speaker 2: I've been I've been googling. I'm sure they all suck,
28:56
Speaker 2: They're all horrible. Search is broken because of AI. Honestly,
29:00
Speaker 2: the amount of AI generated crap that floats to the
29:03
Speaker 2: top of search engines now that is completely useless for
29:07
Speaker 2: what I'm trying to actually find.
29:10
Speaker 4: The Internet is broken.
29:12
Speaker 2: I don't know if if you guys have had similar experiences,
29:16
Speaker 2: but in googling.
29:17
Speaker 4: Stuff that should be you know like that.
29:20
Speaker 2: Historically, hey I google this, like one of the first
29:23
Speaker 2: two results comes up and it's exactly what I need.
29:27
Speaker 2: It's it's one of two things now. Either the stuff
29:30
Speaker 2: that's making it onto the internet is just AI generated
29:32
Speaker 2: crap and search engines are selecting for it because their
29:34
Speaker 2: algorithms are broken. The other thing that I'm starting to
29:38
Speaker 2: see a lot of companies are pulling down resources that
29:42
Speaker 2: used to be on the web. They're just not set
29:45
Speaker 2: up the same way with the same content that used
29:48
Speaker 2: to be out there. And this is ultimately going to
29:52
Speaker 2: be a bigger problem for Google than this. If people
29:55
Speaker 2: just say, hey, search engines are broken and they're not
29:57
Speaker 2: giving me the information that I need as a effect
30:00
Speaker 2: actively as I want. That's a bigger problem when people
30:03
Speaker 2: stop using them, because like, have you guys had this
30:07
Speaker 2: experience where you're just finding AI.
30:09
Speaker 5: Generatord I definitely have to double check some of my
30:12
Speaker 5: searches in terms of if it's actually accurate, because you
30:16
Speaker 5: can see the two blurbs like above, and sometimes it's
30:19
Speaker 5: not accurate in terms of like one thing is saying
30:22
Speaker 5: one thing and the other saying X, Like it's.
30:25
Speaker 4: It's fifty to fifty I'd say.
30:27
Speaker 3: Yeah, sometimes the Google AI Assistant piece is effective the
30:31
Speaker 3: way it summarizes with both points at the top.
30:33
Speaker 4: But Tucker is right.
30:35
Speaker 3: Sometimes it's exactly what I'm looking for up there, but
30:37
Speaker 3: then other times I'm like, wait a minute, I kind
30:39
Speaker 3: of gotta poke around a little bit further.
30:41
Speaker 2: I'm not even saying that like the Google summary. I'm
30:44
Speaker 2: saying the stuff that's floating to the top in terms
30:47
Speaker 2: of you know after that, that the number one, two,
30:49
Speaker 2: three search responses. A lot of times they're just AI
30:54
Speaker 2: stuff that has nothing at all to do with the
30:57
Speaker 2: topic in any meaningful way. And I'm finding that to
31:02
Speaker 2: be more and more problematic because it's getting so easy
31:05
Speaker 2: to write stuff using AI that you've just got people
31:09
Speaker 2: that are using it for everything, and it's diluting the
31:12
Speaker 2: quality of search, in my opinion, and that's bad for
31:16
Speaker 2: the Internet, like you, for multiple reasons. The other being, Hey, eventually,
31:21
Speaker 2: if all you have to train your AI stuff on
31:23
Speaker 2: is a bunch of other AI stuff that isn't right,
31:26
Speaker 2: it's not really a good feedback loop to be in.
31:29
Speaker 2: Let's take a quick break here. When we return, let's
31:33
Speaker 2: talk a little bit about TikTok. We've been talking Google,
31:36
Speaker 2: Let's talk TikTok next.
31:38
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32:05
Speaker 4: Paul, do you TikTok?
32:08
Speaker 3: I do not TikTok?
32:10
Speaker 4: Do you tick?
32:12
Speaker 3: My family likes tiktoks a lot. They've been a huge
32:14
Speaker 3: hit with the kids.
32:15
Speaker 2: But you don't tick nor talk no okay. In any case,
32:19
Speaker 2: TikTok is a if you're not familiar with them. They
32:23
Speaker 2: are a social media app that is owned by a
32:27
Speaker 2: company that has direct ties to the Chinese government and
32:30
Speaker 2: through that direct ties to the Chinese military in terms
32:33
Speaker 2: of how Chinese law works and how information.
32:35
Speaker 4: Is required to be shared as such.
32:38
Speaker 2: For basically the last six or seven years, we have
32:42
Speaker 2: seen questions about whether or not TikTok should be banned
32:44
Speaker 2: in the United States, including in twenty twenty when then
32:47
Speaker 2: President Trump attempted to ban TikTok unless it could be
32:51
Speaker 2: sold to a US fire Now there is a federal
32:55
Speaker 2: law that was signed earlier this year. It says TikTok
32:58
Speaker 2: has to be sold to a non Chinese company by
33:00
Speaker 2: January nineteenth, which by the way, also happens to be
33:03
Speaker 2: a day before President Trump's second inauguration, or TikTok will
33:08
Speaker 2: be banned in the United States.
33:10
Speaker 4: So the question is what's gonna happen with TikTok.
33:14
Speaker 3: Paul, It seems like as much as you mentioned in
33:18
Speaker 3: twenty twenty, Trump was behind trying to block the app
33:21
Speaker 3: and for sale to an American company, that he's done
33:24
Speaker 3: a bit of a turnaround on the platform. He during
33:27
Speaker 3: this recent campaign joined TikTok and had fourteen point four
33:32
Speaker 3: million followers and seems to have some ties to donors
33:38
Speaker 3: who are connected to TikTok. For example, Jeffyass, who's a
33:42
Speaker 3: billionaire investor and a Republican mega donor who has a
33:45
Speaker 3: significant share of Byteedance, the parent company of TikTok. They
33:49
Speaker 3: have had a relationship Jeffass and President Trump. You also
33:54
Speaker 3: have others that are connected to TikTok that have a
33:59
Speaker 3: reasonably close relationship with President Trump. So there now is
34:01
Speaker 3: some optimism out there that perhaps with President Trump getting
34:05
Speaker 3: back into office and his turnaround on TikTok in general,
34:09
Speaker 3: that there may be perhaps an easier solution for TikTok
34:13
Speaker 3: to stay present in the United States. But again, this
34:18
Speaker 3: is one of these items that it's really hard to
34:21
Speaker 3: determine where this is going to go from a direction standpoint.
34:25
Speaker 3: It could get tied up in the courts again as well,
34:29
Speaker 3: because I think we're waiting on some additional legal decisions
34:33
Speaker 3: here that could come before the January nineteenth deadline.
34:37
Speaker 2: Gotta say, don't love the idea of it's sticking around
34:39
Speaker 2: under its current ownership.
34:42
Speaker 4: Don't love it.
34:43
Speaker 2: I've been pretty consistent on that since day one, But
34:45
Speaker 2: we'll see what happens here.
34:47
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35:48
Speaker 4: Paul, You ever eaten a banana? Yes? I have? What
35:53
Speaker 4: do you think of banana costs? Uh?
35:57
Speaker 1: Oh boy, Paul?
36:01
Speaker 3: Just one single one seventy nine cents.
36:04
Speaker 2: It's probably about a quarter of that, but you're you're
36:06
Speaker 2: at least in the right ballpark here. Generally a bunch
36:08
Speaker 2: of bananas is usually somewhere in the ballpark at two dollars.
36:11
Speaker 2: So there is a very special banana though, that has
36:16
Speaker 2: been duct taped to a wall in Miami for the
36:20
Speaker 2: last five years. Italian artist Mauricio Catalan did this as
36:26
Speaker 2: an installation there, and in fact, it's not just one banana.
36:29
Speaker 2: You actually have to change it every few days because
36:32
Speaker 2: you know that the banana goes bad.
36:34
Speaker 5: I I was wondering that they do have to change
36:37
Speaker 5: it every few days.
36:38
Speaker 2: But they they finally sold the banana off and it
36:42
Speaker 2: was auctioned off by Southey's and it received six point
36:48
Speaker 2: two million dollars at auction on Wednesday night. In conclusion,
36:52
Speaker 2: the FED needs to hike What the heck? Well, no,
36:56
Speaker 2: so here's the thing. So again a lot of people
36:59
Speaker 2: are like, oh, like, what the heck? It was just
37:00
Speaker 2: a banana duct tape to a wall, and it is
37:04
Speaker 2: just a banana duct tape to a wall. But ultimately,
37:06
Speaker 2: here's the thing. And I'm a big believer in art,
37:09
Speaker 2: and and art's kind of weird. That's that's kind of
37:12
Speaker 2: the point of it is to use it's it's weirdness
37:14
Speaker 2: to express something inside of you that other people can
37:18
Speaker 2: relate to. In this case, the entire point that he
37:21
Speaker 2: was trying to make, and he's said this in interviews
37:25
Speaker 2: is look, I hate like what art's become where it
37:28
Speaker 2: has to be this giant thing I want art to
37:30
Speaker 2: be something that's simpler, that more people can understand, and
37:33
Speaker 2: we have to do the way to do that is
37:35
Speaker 2: by making fun of what art has become.
37:38
Speaker 4: And I personally really love that.
37:40
Speaker 2: Now, would I pay six point two billion dollars for
37:42
Speaker 2: a banana the whatever it should be? Six point two billion?
37:45
Speaker 2: It's underpriced in my opinion. Would I pay that money?
37:48
Speaker 5: No?
37:49
Speaker 2: I wouldn't. But ultimately, any art is about trying to
37:53
Speaker 2: convey a message, and in this case, the message is
37:56
Speaker 2: the medium, which is a banana tape to a duct
37:59
Speaker 2: tape to the that.
38:00
Speaker 3: Has not given anyone a better understanding of art.
38:03
Speaker 2: I think I just gave people a great understanding of art.
38:06
Speaker 2: Maybe just don't like art.
38:07
Speaker 4: It's a scam. Art is a scam. Paul, have you
38:12
Speaker 4: no soul? Have you no heart?
38:16
Speaker 2: No, We're gonna take a quick break where hopefully we
38:21
Speaker 2: can see if Paul can cry, and when we come back,
38:24
Speaker 2: we'll have more financial exchange.
38:26
Speaker 1: Right after this