Latest / The Financial Exchange Show / Anthropic Files for IPO as Meta's $95 Billion AI Bet Raises Concerns

Transcript

Anthropic Files for IPO as Meta's $95 Billion AI Bet Raises Concerns · The Financial Exchange Show

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  Speaker 1: is The Financial Exchange with Chuck Zotta and Mike Armstrong.
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  Speaker 2: It's Chuck, Mike, and Ben with you here on a Monday.
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  Speaker 2: I hope you all had a great weekend. And as
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  Speaker 2: we kick things off in the last week of October,
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  Speaker 2: I've got to tell you, it is a busy week.
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  Speaker 2: This is going to be a fun one. Again, occasionally,
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  Speaker 2: you know, we'll come in on a Monday and you'll
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  Speaker 2: hear us go, well, you can take this one off
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  Speaker 2: like nothing interesting. This week, we've got all kinds of
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  Speaker 2: interesting things. In terms of, you know, previously scheduled items
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  Speaker 2: that are on the calendar, you take a look out
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  Speaker 2: at what we have here. And, again, it's jam-packed. Do
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  Speaker 2: you want to start with earnings or just the overall calendar, Mike?
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  Speaker 3: Let's start with the earnings because those are big pieces here.
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  Speaker 2: So here's what we've got this week. Today, like, you've
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  Speaker 2: got a couple smaller but still big companies. I mean, Verizon, like,
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  Speaker 2: doesn't matter to the overall market, but it's still a
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  Speaker 2: $ 200 billion company, which is kind of wild to me.
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  Speaker 4: Yeah.
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  Speaker 2: But tomorrow, you've got Visa, which I think is a
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  Speaker 2: big one just for telling us about the overall state
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  Speaker 2: of the consumer. Again, biggest payment processor in the country.
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  Speaker 2: I believe biggest payment processor in the world. But I
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  Speaker 2: hesitate to say that because I'm sure that somewhere in
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  Speaker 2: the Chinese financial system, like WePay or something like that
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  Speaker 2: is probably at a scale that's bigger just because there's
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  Speaker 2: so many people.
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  Speaker 3: Also, they don't really allow cash payments in China.
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  Speaker 4: No.
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  Speaker 2: So it's WePay or Alipay or something like that. I
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  Speaker 2: would imagine is bigger, but for the U.S., Visa's kind
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  Speaker 2: of a big deal. Wednesday, we've got Microsoft reporting earnings.
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  Speaker 2: Amazon was originally slated to, I believe, but not seeing
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  Speaker 2: them on the calendar this week. I know they always
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  Speaker 2: tend to move around a little bit, so they're coming
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  Speaker 2: up a little bit later. But Microsoft on Wednesday, obviously
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  Speaker 2: going to be a big one for us. And then
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  Speaker 2: on Thursday, this is when we've got Amazon reporting. And
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  Speaker 2: Eli Lilly as well. Eli Lilly, $ 1. 1 trillion healthcare company,
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  Speaker 2: basically first out the door for GLP-1s, or at least
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  Speaker 2: biggest out the door for them. Intel's also on Thursday,
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  Speaker 2: so that's big just from, again, when you talk about
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  Speaker 2: data center build-outs and things along those lines.
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  Speaker 3: I'm going to derail this for a second.
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  Speaker 4: How many non-AI tech-related companies are over a trillion dollars?
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  Speaker 3: Berkshire Hathaway, Eli Lilly. Anyone else?
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  Speaker 2: That might be it. Let me see. We're talking, I mean,
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  Speaker 2: Saudi Aramco technically is, but its shares don't really trade
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  Speaker 2: on a real exchange anywhere. Taiwan Semi is, but the
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  Speaker 2: actual shares don't.
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  Speaker 4: I would toss them in the same. I mean, again, semi-related, tech-related.
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  Speaker 4: I'm trying to exclude that.
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  Speaker 2: Oh, you're trying to exclude that.
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  Speaker 3: Yeah, so anybody outside of that space, I don't.
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  Speaker 2: Walmart is.
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  Speaker 5: Walmart, yeah.
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  Speaker 2: Yep, Walmart's trillion now.
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  Speaker 1: Okay.
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  Speaker 2: That's it.
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  Speaker 1: Yeah.
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  Speaker 4: So the three companies in the world that you can
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  Speaker 4: consider to be the great behemoths that are not operating
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  Speaker 4: in the AI space or tech space, Walmart, Berkshire, Eli Lilly.
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  Speaker 3: Fascinating.
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  Speaker 2: Yeah, that's basically it. And so Intel reports on Thursday
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  Speaker 2: as well. Caterpillar, which has emerged as an AI adjacent
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  Speaker 2: trade because of all of the construction equipment that is
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  Speaker 2: needed for data centers. Look at how closely the Caterpillar
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  Speaker 2: has correlated with some of these AI related trades over
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  Speaker 2: the last six months or so. And, you know, you'll
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  Speaker 2: see a pretty convincing pattern there. So I kind of
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  Speaker 2: lump them in as an important one. Just because they
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  Speaker 2: might tell us about what they're seeing for demand in
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  Speaker 2: the next year or so.
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  Speaker 4: Which, by the way, is why answering that question of, oh,
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  Speaker 4: how much of this market is relying on AI to
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  Speaker 4: drive it forward is so incredibly difficult to answer. We've
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  Speaker 4: done the math a couple times on the program, but
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  Speaker 4: I'll do it again briefly. The tech sector as a
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  Speaker 4: whole represents nearly 40% of the S & P 500
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  Speaker 4: by market cap.
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  Speaker 3: Yes.
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  Speaker 4: I think you can reasonably pull Apple out of that
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  Speaker 4: because they are not in the same way pouring money
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  Speaker 4: into AI as all the others are or receiving money
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  Speaker 4: from AI in the same.
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  Speaker 3: Way that all the others are.
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  Speaker 4: So, okay, you got like a third of the S
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  Speaker 4: & P.
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  Speaker 3: Then you need to add in Google. You need to
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  Speaker 3: add in Facebook.
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  Speaker 4: You need to add in Amazon because none of them
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  Speaker 4: live in the tech sector according to S & P 500.
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  Speaker 4: So that gets you up over 40% again. And then
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  Speaker 4: you talk about all these other companies, right? The entire
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  Speaker 4: utility sector. A bunch of industrial companies.
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  Speaker 2: Utilities don't matter, though. Utilities are like 1.5% of the
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  Speaker 2: S & P, so it doesn't matter. But Caterpillar is
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  Speaker 2: still a $ 400 billion company that has its fortunes more
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  Speaker 2: tied this year to AI than anything else.
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  Speaker 4: So you do wonder, what would happen to these companies
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  Speaker 4: if the mood sours on AI?
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  Speaker 3: And I can't imagine much great.
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  Speaker 2: So this is what we have coming up from an
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  Speaker 2: earnings perspective. In terms of economic data, not much today,
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  Speaker 2: but tomorrow we get durable goods data, ADP weekly employment data,
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  Speaker 2: Case-Shiller home price and FHFA home price indices are out,
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  Speaker 2: new home sales out tomorrow as well. On Wednesday, a
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  Speaker 2: little group known as the Federal Reserve Open Market Committee,
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  Speaker 2: the FOMC, if you will, they are going to be meeting.
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  Speaker 2: Kevin Warsh is going to put on his Deep Navy
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  Speaker 2: blue tie, I think, has been the trend that we've
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  Speaker 2: seen so far. It's not quite as catchy as putting
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  Speaker 2: on his purple tie, but he's going to put on
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  Speaker 2: his deep Navy blue tie and tell us what the
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  Speaker 2: Fed is doing with interest rates and probably not much
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  Speaker 2: else because he doesn't want to give a ton of
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  Speaker 2: guidance on what the Fed's doing. We also get EIA
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  Speaker 2: data on oil inventories on Wednesday. Thursday, PCE price index
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  Speaker 2: along with personal income and spending. Jobless claims out then
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  Speaker 2: as well. And then Friday, the employment cost index. So, again,
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  Speaker 2: it's like you can look at basically every day but
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  Speaker 2: today and be like, hey, there's something for everyone there.
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  Speaker 2: And then this morning at 9 a.m., the Anthropic S1
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  Speaker 2: dropped for their IPO, officially filing to go public.
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  Speaker 1: Yeah, I.
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  Speaker 3: So I was having a big one.
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  Speaker 4: I was having conversations earlier this morning. I call into
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  Speaker 4: Jim Polito's show and have a brief conversation there.
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  Speaker 3: Like I was kind of.
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  Speaker 4: Arguing the next two weeks could be really make it
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  Speaker 4: or break it for the stock market. And the anthropic
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  Speaker 4: IPO question mark was one of the items on the
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  Speaker 4: list there where I said they're going to have to
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  Speaker 4: either list or pull this S1 out.
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  Speaker 3: Within the next two weeks, if they want to get
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  Speaker 3: it done. And yeah, by 9 a.m.
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  Speaker 4: This morning, we had the document itself indicating that they
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  Speaker 4: want to move forward. Not that they necessarily definitely will,
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  Speaker 4: but it brings them a step closer.
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  Speaker 2: They want to get this puppy out the door. And
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  Speaker 2: it's the questions, there are a number of them. And
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  Speaker 2: so let's take a quick break. But when we come back,
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  Speaker 2: I want to dig into this. It also dovetails with
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  Speaker 2: Meta's announcement this morning as well. And so we're talking anthropic.
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  Speaker 2: We're talking meta next after this.
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  Speaker 2: All right, before we get to Anthropic, we've got to
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  Speaker 2: close the loop on Meta. Meta, if you remember, reported
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  Speaker 2: earnings last week, and the earnings were fine. Like, again,
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  Speaker 2: there were no problems there or anything. And then Meta did,
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  Speaker 2: you know, indicate, hey, we're going to put out this,
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  Speaker 2: you know, third share class. And, oh, by the way,
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  Speaker 2: we might need to raise hundreds of billions of dollars
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  Speaker 2: through equity raises in the coming years.
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  Speaker 4: And the third share class was its cash raise, and
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  Speaker 4: it's a way of issuing new shares without diluting Zuckerberg's
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  Speaker 4: control over the company.
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  Speaker 1: Yeah.
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  Speaker 3: That's it.
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  Speaker 2: So here's the deal. Meta comes out this morning at
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  Speaker 2: about 7 a.m. and they are doing an immediate raise
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  Speaker 2: of $ 35 billion. And then they are doing a follow-on
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  Speaker 2: offering in January once the new share class is issued
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  Speaker 2: of $ 60 billion. So $ 95 billion total in an equity raise, which, again,
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  Speaker 2: I think that we need to talk about what this signals.
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  Speaker 2: The first is Meta does not issue new shares of
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  Speaker 2: its stock because it wants to. It's issuing new shares
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  Speaker 2: of its stock basically because the sense that I get
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  Speaker 2: is it's becoming prohibitively expensive to issue new debt. And
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  Speaker 2: capital is saying, hey, it's not enough for us to earn,
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  Speaker 2: you know, X percent on this. We need to be
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  Speaker 2: able to participate materially in the upside if this works out.
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  Speaker 2: And so we want equity, not debt. It comes with
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  Speaker 2: additional risks in that, hey, remember, debt, as long as
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  Speaker 2: the money gets paid back, you're made whole at the
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  Speaker 2: end of the period. Whereas equity, you have no idea
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  Speaker 2: what it could be worth. But investors are saying, no,
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  Speaker 2: we need like whatever that extra risk premium is in
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  Speaker 2: order to justify getting into this business and contributing another
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  Speaker 2: $ 95 billion. So that's part number one. Second piece, Mike,
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  Speaker 2: did you happen to follow the pre-market and early market
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  Speaker 2: performance of Meta today? No.
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  Speaker 3: I did.
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  Speaker 2: And here's what we saw. Meta, as it sits right
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  Speaker 2: now at this very moment, is down 1%. Not a
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  Speaker 2: huge move in either direction. It is currently at $ 637.
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  Speaker 1: 29.
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  Speaker 2: It was as high as $ 641. So it was as
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  Speaker 2: high as back above water. But at one point in
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  Speaker 2: pre-market and even in early trading today, it was down
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  Speaker 2: about 2.5%.
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  Speaker 4: I'll also remind people that this is after last week's
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  Speaker 4: 7% drop after their earnings.
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  Speaker 2: Yes. And so the interesting thing to me, if you
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  Speaker 2: were watching pre-market, so immediately after the announcement, the stock
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  Speaker 2: fell 3% in pre-market trading. It then bounced from down
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  Speaker 2: three to up two on word that NVIDIA, AMD, and
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  Speaker 2: Broadcom were going to invest $ 5 billion each into this
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  Speaker 2: $ 35 billion raise. So taking down three-sevenths of it, about 42%.
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  Speaker 2: So again, let's just talk about what this is. Meta
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  Speaker 2: is buying chips from NVIDIA. It's not all the chips
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  Speaker 2: they're using. They use some other chips from other people
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  Speaker 2: as well. But Meta is buying chips from NVIDIA. NVIDIA
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  Speaker 2: takes $ 5 billion in revenue, turns around, and gives it
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  Speaker 2: back to Meta in the form of equity. They're not
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  Speaker 2: buying product from Meta. They are buying equity in Meta.
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  Speaker 2: So we own part of you, and here's our $ 5 billion.
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  Speaker 2: So let's talk about the good and the bad of this.
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  Speaker 2: The good is that that new $ 5 billion that's going
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  Speaker 2: in allows Meta to go and buy more chips because
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  Speaker 2: specifically they raised the cash so that they could buy
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  Speaker 2: more chips. So this keeps the wheel of revenue going
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  Speaker 2: for NVIDIA. The problem that you run into at some
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  Speaker 2: point is if the revenue from AI is not big enough...
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  Speaker 2: in order to actually pay for the chips, then at
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  Speaker 2: some point, Nvidia says, look, we want to stop taking
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  Speaker 2: $ 5 billion in revenue and giving it back to you
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  Speaker 2: every time. Like, that doesn't do anyone any good. If
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  Speaker 2: you sold me, Mike, a loaf of bread, and I
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  Speaker 2: paid you $ 5, then you gave the $ 5 back to
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  Speaker 2: me so I could buy another loaf... You're like, I'm
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  Speaker 2: not making any money. I can't buy anything because I
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  Speaker 2: keep giving you all the money I'm making. That's a
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  Speaker 2: bad business.
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  Speaker 4: Can we also talk about how the difference is there
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  Speaker 4: between a business that has standard financial reporting compared to
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  Speaker 4: a household? Because in that household example, we're out the
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  Speaker 4: five bucks. In NVIDIA's example of them reporting their earnings
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  Speaker 4: and audited financial statements to their investors, this is not
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  Speaker 4: an expense to them. Them turning around and taking that
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  Speaker 4: $ 5 billion and giving it back to Meta in the
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  Speaker 4: form of share purchases does not show up as an
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  Speaker 4: item that deteriorates their financial situation because all they've done
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  Speaker 4: is exchanged one asset, cash, for another asset, Meta stock.
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  Speaker 2: The other piece, as long as we're talking financial reporting,
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  Speaker 2: which this is great. I'm so happy we get to
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  Speaker 2: talk about this. NVIDIA gets paid $ 5 billion for those
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  Speaker 2: chips that they got paid.
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  Speaker 4: Mm-hmm.
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  Speaker 2: Meta does not have that all hit their earnings statement
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  Speaker 2: all at once.
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  Speaker 1: Why?
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  Speaker 2: Because they are buying a fixed asset that they are
• 14:12
  Speaker 2: going to depreciate over time. Generally, somewhere when you're talking
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  Speaker 2: data centers, the depreciation for most of these guys is
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  Speaker 2: anywhere from six to nine years. Let's call it seven
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  Speaker 2: just to make it easy. And so Meta is saying, okay,
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  Speaker 2: if we buy $ 5 billion in NVIDIA chips, we're going
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  Speaker 2: to have that hit our earnings to the tune of
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  Speaker 2: $ 700 million for the next seven years. which is why
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  Speaker 2: you need the revenue to spool up, because you're going
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  Speaker 2: to be paying for those chips into the future, and
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  Speaker 2: not just this year's chips, you also got to pay
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  Speaker 2: for next year's and last year's, and this builds upon itself.
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  Speaker 2: And this is where you get to the problem, which is, hey,
• 14:48
  Speaker 2: if you're going to do $ 3 trillion, let's not look three,
• 14:53
  Speaker 2: if over the next four years, actually including this one,
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  Speaker 2: if this year plus the next three, the big guys
• 15:01
  Speaker 2: are going to do somewhere in the ballpark of $ 5
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  Speaker 2: trillion in CapEx. If you depreciate that over a seven-year period,
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  Speaker 2: that's $ 700 billion in depreciation that you've got to cover. Okay? Now, remember,
• 15:18
  Speaker 2: you can't just cover it. You can't just be like, well,
• 15:21
  Speaker 2: if we do $ 700 billion in revenue, that covers it. No, no, no, no, no, no, no.
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  Speaker 2: Because your revenue doesn't just come with the depreciation is
• 15:31
  Speaker 2: the only cost. That's one of your costs that you have.
• 15:35
  Speaker 2: You also have everything else that goes into running those
• 15:38
  Speaker 2: facilities and selling the product and this and that. And
• 15:41
  Speaker 2: so if you look at this from a margin perspective,
• 15:43
  Speaker 2: where you get to is that on an annual basis
• 15:46
  Speaker 2: to cover $ 5 trillion in build-out, you need anywhere between
• 15:51
  Speaker 2: like $ 2 and $ 4 trillion annually in revenue in order
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  Speaker 2: to make the math make sense.
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  Speaker 1: Mm-hmm.
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  Speaker 2: Based on current margins. And so this brings us to
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  Speaker 2: the problem, which is, look, Mike and I work in
• 16:08
  Speaker 2: the financial business. And there is, Mike, do you want
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  Speaker 2: to read the piece that we were talking about in
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  Speaker 2: the break?
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  Speaker 3: Yeah.
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  Speaker 4: So Charles Schwab, one of the largest financial firms out there,
• 16:19
  Speaker 4: they also are one of the largest independent custodians of
• 16:23
  Speaker 4: registered investment advisors out there. And so I pay close
• 16:26
  Speaker 4: attention to them because that's the world that we operate in.
• 16:28
  Speaker 2: And RIA Biz- And in full disclosure, Mike and I,
• 16:31
  Speaker 2: our business uses Charles Schwab as our custodian. So it's
• 16:35
  Speaker 2: a business with which we're very familiar.
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  Speaker 1: Yes.
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  Speaker 4: And there's a publication called RIA Biz that reports on
• 16:41
  Speaker 4: our industry that I follow closely. And they reported just
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  Speaker 4: the other day that Schwab had previously announced this tie-up
• 16:49
  Speaker 4: with Anthropic and Claude and this new software that they're
• 16:52
  Speaker 4: planning on rolling out to their entire industry. This piece
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  Speaker 4: was actually about the fact that it's really much less
• 16:59
  Speaker 4: targeted to the everyday financial advisor and much more of
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  Speaker 4: their larger firms.
• 17:02
  Speaker 3: That they work with.
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  Speaker 4: But nonetheless, they are rolling this out and they partnered
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  Speaker 4: with Anthropic to offer a specific AI model to their
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  Speaker 4: customers for $ 20 per seat per month.
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  Speaker 2: So if we go and look at the math on this,
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  Speaker 2: just as an example, because again, as someone who's used
• 17:22
  Speaker 2: different AI platforms for a while. I have a $ 20
• 17:27
  Speaker 2: a month subscription, and never once have I run into
• 17:30
  Speaker 2: usage limits where I'm like, oh, gee, I can't do
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  Speaker 2: enough with it. So if you look at the numbers
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  Speaker 2: here for the United States, just as an example, because
• 17:44
  Speaker 2: let's assume, and again, let's look at the bull case
• 17:47
  Speaker 2: on this. Let's assume that every knowledge worker in the
• 17:52
  Speaker 2: United States is going to be equipped with an AI
• 17:56
  Speaker 2: platform in the next three years. I'm not saying that
• 17:58
  Speaker 2: that will be true or not. I'm just saying, bear
• 18:00
  Speaker 2: with me. If you look at the breakdown, I actually
• 18:04
  Speaker 2: looked at this during the break just to make sure
• 18:06
  Speaker 2: I had it right. The estimates on knowledge workers, again,
• 18:09
  Speaker 2: people who are sitting down using a computer in one way, shape,
• 18:12
  Speaker 2: or form for the majority of their day, it's somewhere
• 18:15
  Speaker 2: between 70 and 100 million US workers. We don't know
• 18:18
  Speaker 2: exactly how many, but let's take the midpoint and call
• 18:21
  Speaker 2: it 85 million. So if we have 85 million workers
• 18:27
  Speaker 2: and they pay $ 20 a month.
• 18:28
  Speaker 3: Or their employer does, doesn't matter.
• 18:30
  Speaker 2: Or their employer. That's $ 1. 7 billion per month.
• 18:34
  Speaker 3: Okay. How many months are in a year?
• 18:36
  Speaker 2: Ben, is it 12?
• 18:38
  Speaker 5: That would be correct.
• 18:39
  Speaker 2: What about in a leap year? Still 12 months?
• 18:42
  Speaker 5: No, jump up to 14. It's really weird.
• 18:43
  Speaker 2: I don't know how that works. 12 months. If every
• 18:47
  Speaker 2: single knowledge worker in the United States is using a
• 18:50
  Speaker 2: $ 20 a month subscription in three years.
• 18:55
  Speaker 2: It's $ 20 billion a year in revenue. Mike, is $ 20
• 18:57
  Speaker 2: billion less than or greater than $ 3 trillion? Quite a
• 19:02
  Speaker 2: bit less. It's not even 1% of $ 3 trillion.
• 19:04
  Speaker 4: And frankly, I don't think you can even expand this
• 19:07
  Speaker 4: across the entire globe, including China's knowledge workers, and get
• 19:10
  Speaker 4: to that $ 3 trillion figure.
• 19:12
  Speaker 2: You can't.
• 19:13
  Speaker 3: Okay?
• 19:14
  Speaker 2: Like, again, if you just do this proportionally, you'd say, okay,
• 19:16
  Speaker 2: there's about, call it 25 times this number, that's $ 500
• 19:21
  Speaker 2: billion if everyone around the world did that.
• 19:23
  Speaker 1: Yeah.
• 19:24
  Speaker 2: Let's take a quick break. Let's walk more through this
• 19:26
  Speaker 2: as we talk more about the Anthropic IPO next.
• 19:38
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:41
  Speaker 1: TFE Show. Breaking business news is always first right here
• 19:45
  Speaker 1: on the Financial Exchange Radio Network.
• 20:02
  Speaker 5: The 10 o'clock hour, the Dow Jones is up 300
• 20:04
  Speaker 5: points or six tenths of a percent. The S &
• 20:06
  Speaker 5: P 500 is up 46 points or six tenths of
• 20:07
  Speaker 5: a percent. The Nasdaq is up 158 points or six
• 20:09
  Speaker 5: tenths of a percent. Oil is down 2.31 percent, while
• 20:11
  Speaker 5: Brent is down 1.46 percent. And it is still over $ 115.
• 20:12
  Speaker 5: Gold is up four tenths of a percent, while silver
• 20:16
  Speaker 5: has declined three tenths of a percent. Verizon Communications is
• 20:31
  Speaker 5: down 2.2% despite reporting an earnings beat for the third quarter.
• 20:35
  Speaker 5: The company also hiked its full-year 2026 earnings guidance. Tesla
• 20:41
  Speaker 5: is higher by 6.2% after Barclays upgraded the stock to overweight.
• 20:45
  Speaker 5: Analysts at the bank said a merger and acquisition opportunity
• 20:48
  Speaker 5: with SpaceX, growth in the company's robo-taxi business, and core
• 20:52
  Speaker 5: business strength are making them more bullish on Tesla's outlook.
• 20:56
  Speaker 5: Moderna shares are up 0.4% as the company's sell-off finally
• 21:00
  Speaker 5: halted after last week. The stock had tumbled more than
• 21:05
  Speaker 5: 18% over Thursday and Friday. And finally, Meta Platforms has
• 21:09
  Speaker 5: dropped 1% after it announced a $ 35 billion stock offering
• 21:13
  Speaker 5: to help finance its artificial intelligence build-out. Meta also plans
• 21:17
  Speaker 5: to raise $ 60 billion through an at-the-market program. I am
• 21:21
  Speaker 5: Ben Kitchen, and that was Wall Street Watch.
• 21:24
  Speaker 2: So Mike, during the last segment, we walked through the
• 21:26
  Speaker 2: math where even if you were to believe that every
• 21:31
  Speaker 2: single knowledge worker on earth would have a $ 20 a
• 21:35
  Speaker 2: month subscription in the next few years to any AI service,
• 21:40
  Speaker 2: doesn't have to be anthropic, works out to about $ 500
• 21:43
  Speaker 2: billion in annual revenue, whereas you need somewhere between like
• 21:48
  Speaker 2: two and four trillion in order to make the math
• 21:51
  Speaker 2: make sense.
• 21:52
  Speaker 4: And I'll further say like, okay, maybe much like Uber
• 21:57
  Speaker 4: and other services in the past, the AI is being
• 22:00
  Speaker 4: discounted right now as a loss leader for these new
• 22:04
  Speaker 4: tech companies that just want to grow their user bases. Okay,
• 22:07
  Speaker 4: so even if you double it, you're still not there.
• 22:10
  Speaker 2: Here's the thing. I actually think like if you look
• 22:12
  Speaker 2: through the Anthropic S1, and again, I haven't done like
• 22:15
  Speaker 2: a deep dive, but I've seen some people that I
• 22:18
  Speaker 2: trust who know numbers who have like publicly commented on it.
• 22:21
  Speaker 2: Like if you go through like different social media platforms,
• 22:25
  Speaker 2: the financials for the company actually don't look awful.
• 22:29
  Speaker 3: So they're not the ones underpricing the service.
• 22:32
  Speaker 2: No, it's not even like that. There's an underpricing of
• 22:35
  Speaker 2: the service. It's just like, okay, like most of their
• 22:39
  Speaker 2: money right now isn't being made from people spending $ 20
• 22:41
  Speaker 2: a month. It's from freaking huge users that are spending
• 22:46
  Speaker 2: tens of thousands or hundreds of thousands and they have
• 22:49
  Speaker 2: a way to get pretty close to profitability there i'm
• 22:52
  Speaker 2: not saying that they're there but like pretty close but
• 22:55
  Speaker 2: here are the problems that are coming in the next
• 22:57
  Speaker 2: few years that that make this challenging in my opinion
• 23:00
  Speaker 2: the first is just the scale because when you look
• 23:03
  Speaker 2: at where the value's been created in the stock market
• 23:05
  Speaker 2: it hasn't been in the hyper scalers it's been in
• 23:08
  Speaker 2: the chip makers and The reason why NVIDIA is a
• 23:11
  Speaker 2: $ 5 trillion company is because everyone thinks they're going to
• 23:15
  Speaker 2: sell X trillion dollars worth of chips in the next decade.
• 23:19
  Speaker 2: And what if the demand just isn't there for that,
• 23:22
  Speaker 2: is question number one. Question number two is, okay, what
• 23:26
  Speaker 2: if the demand is there for it but not at
• 23:27
  Speaker 2: that price? What does that do? And this is the
• 23:31
  Speaker 2: other part that you have to pay attention to because
• 23:34
  Speaker 2: we've been talking for the last six months to a year, hey,
• 23:37
  Speaker 2: the real risk with these models is commoditization. And that
• 23:41
  Speaker 2: it's just, okay, like, it's great that you have this
• 23:44
  Speaker 2: model that can do this. But if it keeps getting
• 23:48
  Speaker 2: cheaper and people keep coming out with cheaper options and
• 23:53
  Speaker 2: there's no meaningful difference between models, people aren't going to
• 23:57
  Speaker 2: stay paying $ 20 a month if they can get it
• 24:00
  Speaker 2: for $ 10 and end up with the same product.
• 24:03
  Speaker 1: Yep.
• 24:04
  Speaker 2: And so this is the other piece that you look
• 24:06
  Speaker 2: at and you go, I don't know that we need
• 24:08
  Speaker 2: that scale in that time. And even if you do,
• 24:11
  Speaker 2: I'm not sure that you need that scale at that price.
• 24:15
  Speaker 2: And so this is going to be the whole question,
• 24:17
  Speaker 2: and I don't know how it resolves. There are paths
• 24:20
  Speaker 2: that you can see that potentially go either way on this, but...
• 24:26
  Speaker 2: understand that these are the questions that we are facing
• 24:28
  Speaker 2: in the next 18 to 24 months, and they will
• 24:32
  Speaker 2: be answered one way or another. Yeah.
• 24:34
  Speaker 4: And these are the questions that CoreWeave is facing, Meta
• 24:36
  Speaker 4: is facing, that Anthropic will be facing if they choose
• 24:39
  Speaker 4: to go public. They're already facing them now just by
• 24:42
  Speaker 4: their private investors in debt markets, but we'll face in
• 24:45
  Speaker 4: a more forward way if they are publicly traded, I suppose.
• 24:49
  Speaker 4: And I don't think we're going to get any of
• 24:50
  Speaker 4: the answers this week. And also, this is not, sorry,
• 24:53
  Speaker 4: go ahead. It's just, It's a pretty critical week for
• 24:57
  Speaker 4: hints about that answer this week.
• 24:58
  Speaker 3: I think.
• 24:59
  Speaker 2: The other piece that is, again, just probably more of
• 25:03
  Speaker 2: a mere oddity than anything really interesting. This is not
• 25:07
  Speaker 2: my original work. This I originally saw from Conor Senn,
• 25:10
  Speaker 2: who we've covered his pieces a few times.
• 25:12
  Speaker 3: Bloomberg, right?
• 25:13
  Speaker 2: Formerly Bloomberg.
• 25:14
  Speaker 4: Oh.
• 25:15
  Speaker 2: Now with the housing wire.
• 25:16
  Speaker 4: Oh.
• 25:17
  Speaker 2: Off on his own.
• 25:18
  Speaker 3: Got it.
• 25:20
  Speaker 2: When you think about big tech companies historically, or like
• 25:22
  Speaker 2: some of the ones that have, you know, the big
• 25:24
  Speaker 2: ones in the last 25 years. Amazon, named after the
• 25:30
  Speaker 2: biggest river in South America. Google, named after a giant,
• 25:35
  Speaker 2: giant number. Anthropics ticker that they want to apply for?
• 25:40
  Speaker 3: Saw this.
• 25:41
  Speaker 2: Ant, A-N-T.
• 25:43
  Speaker 3: Seems to me like there's a good Paul Rudd tie
• 25:45
  Speaker 3: up there.
• 25:47
  Speaker 2: Or just... No, I was thinking Ben Stiller.
• 25:49
  Speaker 3: I was thinking Ant-Man.
• 25:50
  Speaker 1: Zoolander, right?
• 25:51
  Speaker 2: What is this, an IPO for ants?
• 25:52
  Speaker 3: Yeah, okay. Yeah. You know? Yeah.
• 25:56
  Speaker 2: But, again, I'm trying to think, like.
• 26:01
  Speaker 2: Do you think that this has more hype behind it
• 26:03
  Speaker 2: than SpaceX? It's tough for me.
• 26:06
  Speaker 3: Like, I don't know.
• 26:07
  Speaker 2: Texas at 617-362-1385. Interested to hear.
• 26:13
  Speaker 2: What our listeners think is the most hyped IPO of
• 26:16
  Speaker 2: this year. Again, 617-362-1385. Is it SpaceX or is it Anthropic?
• 26:23
  Speaker 3: I think it's SpaceX. But I'm not sure it has
• 26:27
  Speaker 3: much to do about their businesses.
• 26:28
  Speaker 2: You think it's just Musk?
• 26:29
  Speaker 4: I think there's Musk. I think there's the manner in
• 26:32
  Speaker 4: which they did their IPO, where they gave shares to Schwab, Fidelity,
• 26:36
  Speaker 4: Robinhood in order to get to retail customers. Unclear that
• 26:40
  Speaker 4: Anthropic could do that here, but they haven't mentioned that.
• 26:42
  Speaker 3: They're planning to.
• 26:44
  Speaker 4: And this is not where SpaceX actually makes all their money,
• 26:49
  Speaker 4: but AI model builder versus rocket ship company?
• 26:53
  Speaker 3: I don't know.
• 26:55
  Speaker 2: But they're not a rocket ship company.
• 26:57
  Speaker 3: I know, but everybody thinks that they're a rocket ship company.
• 26:59
  Speaker 1: I know.
• 27:00
  Speaker 2: The reason I say that is because in their last quarter,
• 27:01
  Speaker 2: I think it was about 12% or 13% of their
• 27:04
  Speaker 2: revenue actually came from space launches, and the rest came
• 27:07
  Speaker 2: from everything else. So that's kind of interesting. Just to
• 27:13
  Speaker 2: noodle on again, 617-362-1385, let us know what you think
• 27:17
  Speaker 2: the most hyped IPO of this year is. We are,
• 27:21
  Speaker 2: I guess, assuming that the Anthropic one gets off the ground, which...
• 27:25
  Speaker 2: Got to tell you, the next couple weeks are going
• 27:26
  Speaker 2: to be fascinating to see how they develop. Because there
• 27:29
  Speaker 2: are paths where this thing does not launch.
• 27:33
  Speaker 3: I mean, it has to launch in what, the next,
• 27:34
  Speaker 3: let's see, when's Thanksgiving?
• 27:36
  Speaker 2: Mike, they got like four weeks. They got to get
• 27:39
  Speaker 2: this thing out the door. They don't have four weeks.
• 27:43
  Speaker 2: They got to get this thing out the door by
• 27:44
  Speaker 2: the 16th or 17th of November.
• 27:46
  Speaker 3: Yeah, I agree.
• 27:47
  Speaker 2: Like, you're not going to launch the Friday before Thanksgiving.
• 27:49
  Speaker 3: Probably not.
• 27:50
  Speaker 2: You know, and then you go into a shortened week immediately. Like, no.
• 27:54
  Speaker 2: You've got to get this thing out the door by
• 27:56
  Speaker 2: the 16th or 17th.
• 27:57
  Speaker 5: SpaceX took 23 days from the time they filed the
• 28:00
  Speaker 5: S-1 to the official IPO launch.
• 28:03
  Speaker 3: That's a tight window.
• 28:04
  Speaker 2: Okay, so seven.
• 28:05
  Speaker 3: Calendar days, though.
• 28:06
  Speaker 2: 23 gets us to the 18th. That's as tight as
• 28:11
  Speaker 2: it gets. You can't go past that. Yeah.
• 28:15
  Speaker 3: It's going to be fascinating.
• 28:17
  Speaker 2: Do you want to take a break and then do
• 28:18
  Speaker 2: a little bit of Fed talk?
• 28:20
  Speaker 3: Let's do that.
• 28:20
  Speaker 4: We've got a Fed meeting coming up tomorrow, press conference Wednesday.
• 28:24
  Speaker 4: We'll be talking all things Warsh in the Fed next
• 28:26
  Speaker 4: on the Financial Exchange.
• 28:42
  Speaker 1: The business news doesn't stop and neither does our coverage.
• 28:45
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• 28:48
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• 28:52
  Speaker 1: This is the Financial Exchange Media Network.
• 29:09
  Speaker 2: Mike, with all of the talk about earnings and Anthropix IPO,
• 29:17
  Speaker 2: we would be remiss if we didn't mention that there
• 29:19
  Speaker 2: is a Fed meeting that begins tomorrow and ends on
• 29:21
  Speaker 2: Wednesday with an interest rate decision.
• 29:23
  Speaker 4: Yeah, we've got the countdown clock, two days, three hours,
• 29:26
  Speaker 4: 12 minutes and 16 seconds until the next FOMC meeting,
• 29:31
  Speaker 4: which I can't believe they have a countdown clock on
• 29:33
  Speaker 4: the CME FedWatch tool.
• 29:34
  Speaker 3: But they do. And right now there is a 90.6%
• 29:36
  Speaker 3: chance that the Fed announces.
• 29:40
  Speaker 4: That they are not moving anywhere on interest rates, a 9.5%
• 29:43
  Speaker 4: chance that they bump rates up by a quarter percent.
• 29:46
  Speaker 4: I'm with those betting on this, that they are not
• 29:50
  Speaker 4: going to do anything. That's certainly been insinuated by different
• 29:53
  Speaker 4: Fed members, not Warsh.
• 29:55
  Speaker 3: Himself, I think.
• 29:58
  Speaker 4: But what are the interesting questions that are going to
• 30:01
  Speaker 4: be asked here? Because Warsh has made a lot of
• 30:05
  Speaker 4: the technological boom of AI and what that's going to
• 30:09
  Speaker 4: mean long term for the economy. He's made a lot
• 30:12
  Speaker 4: about the move in bond markets and what that has
• 30:17
  Speaker 4: meant for restrictiveness of Fed policy. And there's been a
• 30:21
  Speaker 4: lot of moves on both since the last meeting. So
• 30:24
  Speaker 4: I think it will be interesting even if they don't
• 30:26
  Speaker 4: do anything, which I assume they won't.
• 30:28
  Speaker 2: Yeah, I mean, markets, again, as you mentioned, they're pricing
• 30:30
  Speaker 2: in no action happening here. The piece that I just
• 30:36
  Speaker 2: don't understand on this is if you voted for a
• 30:43
  Speaker 2: hike in the September meeting, has anything meaningfully changed by
• 30:51
  Speaker 2: this one to have you say, no, I now believe
• 30:54
  Speaker 2: that inflation is less of a problem and that unemployment
• 31:00
  Speaker 2: is more of a problem?
• 31:03
  Speaker 3: I think you could.
• 31:04
  Speaker 2: We got a good jobs report and a bad inflation report.
• 31:07
  Speaker 2: So my answer is no. So the way I look
• 31:09
  Speaker 2: at it is, and again, this is how I would
• 31:12
  Speaker 2: approach a hiking cycle if I were running the Fed. First, again,
• 31:17
  Speaker 2: I know I joked back in 2022 that I would
• 31:19
  Speaker 2: just raise interest rates 5% and then be done. And
• 31:22
  Speaker 2: that would have worked because they raised interest rates 5%
• 31:24
  Speaker 2: eventually and then we're done. If I were running a
• 31:28
  Speaker 2: hiking cycle, I don't skip meetings. Because I'm not hiking
• 31:35
  Speaker 2: because I might be off sides in one direction. I'm
• 31:38
  Speaker 2: hiking because I said, nope, there's too much inflation and
• 31:42
  Speaker 2: we got to deal with this. So I start hiking
• 31:45
  Speaker 2: until I think we get to a level. where rates
• 31:49
  Speaker 2: are restrictive.
• 31:50
  Speaker 4: By the way, it was not a debated topic as
• 31:53
  Speaker 4: to whether or not the Fed should hike at the
• 31:54
  Speaker 4: next meeting.
• 31:55
  Speaker 3: They voted 12-0 to do so.
• 31:56
  Speaker 4: So I could see if it was like, oh, yeah,
• 31:59
  Speaker 4: this was a 8-4, 9-3 vote and enough people were
• 32:03
  Speaker 4: persuaded to hold off.
• 32:05
  Speaker 3: It wasn't.
• 32:06
  Speaker 4: It was very much, we know we need to raise
• 32:08
  Speaker 4: rates here and we're going to do so. But I
• 32:12
  Speaker 4: will say that I also don't think, well, I think
• 32:15
  Speaker 4: the Fed holding off on the next meeting would be
• 32:17
  Speaker 4: very much in line with this Federal Reserve and the
• 32:20
  Speaker 4: last Federal Reserve, which is we're terrified of recession a
• 32:23
  Speaker 4: lot more than we are of inflation. We're pretty timid
• 32:26
  Speaker 4: when it comes to hiking rates, pretty quick to cut them.
• 32:29
  Speaker 4: And we like to do things and then monitor what
• 32:34
  Speaker 4: happens for an extended period of time.
• 32:35
  Speaker 2: Which is why this would be a great chance for
• 32:37
  Speaker 2: Kevin Warsh to put his stamp on this being a
• 32:40
  Speaker 2: different Fed. He talks like an inflation hawk. Here's his
• 32:42
  Speaker 2: chance to prove it. Do another hike. And by the way,
• 32:45
  Speaker 2: if you then don't hike in December... The market will
• 32:49
  Speaker 2: give you a pass then. They're already giving him a
• 32:55
  Speaker 2: pass now, so why wouldn't he take it?
• 32:57
  Speaker 3: I know.
• 32:58
  Speaker 2: I know.
• 32:59
  Speaker 4: The market's giving you a pass to do nothing at
• 33:01
  Speaker 4: this meeting. You're going to get torched on the Hill.
• 33:07
  Speaker 4: by people who tell you it's political if you hike
• 33:10
  Speaker 4: at this meeting. So, yeah, I think they're going to
• 33:13
  Speaker 4: jump at the opportunity to not hike. And that's really
• 33:17
  Speaker 4: the only move that they're.
• 33:18
  Speaker 3: Going to make.
• 33:19
  Speaker 4: But I'm with you. I don't think enough has changed.
• 33:22
  Speaker 4: And I would justify another hike from here.
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• 34:19
  Speaker 1: The proceeding was paid for and the views expressed are
• 34:21
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
• 34:23
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• 34:27
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• 34:30
  Speaker 2: Mike, the fine folks at Axios have done exactly what
• 34:36
  Speaker 2: you would hope that they would do given the release
• 34:41
  Speaker 2: of the Anthropic S1 this morning for their IPO.
• 34:44
  Speaker 4: Did they ask a question and then in three pages
• 34:47
  Speaker 4: not answer the question?
• 34:48
  Speaker 1: No.
• 34:48
  Speaker 3: Okay, cool.
• 34:49
  Speaker 2: They do that a lot, too. They asked both Claude
• 34:53
  Speaker 2: and ChatGPT whether the Anthropic IPO is a buy.
• 34:59
  Speaker 3: Okay.
• 35:01
  Speaker 4: So. I mean, if there's one thing that wouldn't surprise
• 35:04
  Speaker 4: me would be Claude saying no, given how their CEO
• 35:09
  Speaker 4: talks about the end of the world.
• 35:11
  Speaker 3: And there's just some self-hatred there, I think.
• 35:13
  Speaker 2: Claude said yes with a caveat.
• 35:15
  Speaker 1: Okay.
• 35:15
  Speaker 2: Yeah. Claude said, yes, but at a sensible price, pointing
• 35:19
  Speaker 2: to the fast revenue growth and deep pockets in terms
• 35:23
  Speaker 2: of cash they've already raised this year. It did say,
• 35:27
  Speaker 2: I'm Claude made by Anthropix, so weigh my view with
• 35:30
  Speaker 2: that conflict in mind. And they still don't know the
• 35:33
  Speaker 2: IPO price or anything. Chad GPT did not recommend investing
• 35:39
  Speaker 2: in the offering. because of the long-term lease commitments, concentrated
• 35:43
  Speaker 2: executive control, and uncertainty over the ultimate IPO price.
• 35:46
  Speaker 3: Definitely seems like something that.
• 35:48
  Speaker 2: Which brings us to the ultimate point of, if you
• 35:52
  Speaker 2: are asking AI what investments you should make, you shouldn't
• 35:59
  Speaker 2: make them, most likely.
• 36:00
  Speaker 3: Most likely that is the case.
• 36:02
  Speaker 4: I will also point out that it is very, very
• 36:05
  Speaker 4: unclear right now whether or not these companies are breaking
• 36:08
  Speaker 4: the law by providing investment advice.
• 36:11
  Speaker 1: Right.
• 36:12
  Speaker 2: Like, again, like I don't even know what grounds they
• 36:15
  Speaker 2: have to be able to say that.
• 36:17
  Speaker 3: Right. Again, to if you don't work in this space,
• 36:22
  Speaker 3: then it's unclear.
• 36:23
  Speaker 4: But there's nothing wrong with, you know, your neighbor, Bob,
• 36:27
  Speaker 4: talking stock with you and telling you that you think
• 36:29
  Speaker 4: it's telling you that he thinks it's a good idea
• 36:32
  Speaker 4: to invest or not invest in a stock if they
• 36:34
  Speaker 4: don't get registered and aren't working in this industry.
• 36:38
  Speaker 2: There's nothing wrong with Claude or ChatGPT walking you through like, hey,
• 36:42
  Speaker 2: here's what's in the Anthropic S1 and here are the
• 36:44
  Speaker 2: risks that are disclosed and so on and so forth.
• 36:47
  Speaker 4: The moment you take compensation for that investment advice, which
• 36:50
  Speaker 4: these platforms are doing by charging their users a monthly fee,
• 36:54
  Speaker 4: or the moment you hang yourself out there as an
• 36:57
  Speaker 4: institution that does this as a profession or as a
• 37:01
  Speaker 4: service to different people, then you are, at least as
• 37:05
  Speaker 4: a human being, immediately required to register for as an
• 37:08
  Speaker 4: investment advisor with the proper authorities and these companies, don't
• 37:12
  Speaker 4: do so.
• 37:13
  Speaker 3: Don't adhere to any of those rules.
• 37:15
  Speaker 4: And again, it's not that I have a problem with
• 37:19
  Speaker 4: it doing so, because I kind of find it funny.
• 37:21
  Speaker 4: And to your point, if you're taking the advice from
• 37:23
  Speaker 4: one of these things, be extraordinarily cautious. But yeah, it
• 37:30
  Speaker 4: just adds to the potential for regulation and all sorts
• 37:34
  Speaker 4: of different kneecapping that might come down the road for
• 37:37
  Speaker 4: these companies.
• 37:39
  Speaker 2: So there's that. Yeah.
• 37:44
  Speaker 4: Again, my take is that people just seem more than
• 37:48
  Speaker 4: willing to take all sorts of advice from things they
• 37:50
  Speaker 4: find on the Internet. You know, how many doctors listening
• 37:54
  Speaker 4: right now have had their patients come in, explain to
• 37:56
  Speaker 4: them what's wrong with them based on a WebMD search
• 37:59
  Speaker 4: and now an anthropic search?
• 38:03
  Speaker 2: Well, I mean, here's the thing about the WebMD search.
• 38:05
  Speaker 2: Every time you see something, it's the worst possible outcome
• 38:09
  Speaker 2: because your brain goes to it. It has to be this. Well, no,
• 38:13
  Speaker 2: you just banged your knee. Let's take a quick break.
• 38:16
  Speaker 2: When we come back, we've got Hour 2 coming up
• 38:18
  Speaker 2: in a little bit.