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The $META Investment Thesis: The Markets are Wrong · In the Loop AI

0:03
Ejaaz: Do you guys remember when Mark Zuckerberg spent $300 million to hire a single AI researcher?
0:10
Ejaaz: Well, this week he spent 10.5 times that amount, $3.5 billion to hire one person from his competitor.
0:18
Ejaaz: At this point, I think it's evident that Meta is relentless with the amount
0:21
Ejaaz: of money that they're spending to win the AI race.
0:24
Ejaaz: They've given away tens of billions of dollars in AI models for free to try
0:28
Ejaaz: and undermine their competitors, which failed.
0:30
Ejaaz: And they've already committed to spending $600 billion over the next five years
0:34
Ejaaz: here in the US to build our data centers to train frontier AI models.
0:38
Ejaaz: But one question remains unanswered, Josh.
0:41
Ejaaz: Is Metastock a buy or is it a sell?
0:44
Ejaaz: And I ask that question because it's pretty clear that competitors like Google
0:48
Ejaaz: and Open AI are eating their lunch.
0:50
Ejaaz: They're beating them in apps. They're beating them in models.
0:52
Ejaaz: They're beating them in data centers.
0:54
Ejaaz: So in this episode, Josh and I are going to cover the bull case and the bear
0:59
Ejaaz: case to investing in Meta stock.
1:01
Ejaaz: Make sure you stay until the end because we have a special surprise for you
1:05
Ejaaz: from our friends at OpenAI.
1:07
Ejaaz: Josh, I want to show you a chart.
1:10
Ejaaz: I want to show you the Meta stock chart. Over the last month,
1:14
Ejaaz: it is down 5.6%, which
1:17
Ejaaz: may not seem like much but that is billions of dollars um
1:20
Ejaaz: whilst their competitors like google like nvidia
1:23
Ejaaz: have been up only do you have any thoughts about why this is because i'm personally
1:28
Ejaaz: confused right zucker spent i think 30 billion dollars now to hire like a killer
1:34
Ejaaz: team to build out ai for the company they have released a bunch of models and
1:38
Ejaaz: open source them and they're investing in data centers what like why is this happening
1:43
Josh: Yeah, I think the market's trying to understand the new meta,
1:46
Josh: because this is a very different company than what it previously was.
1:50
Josh: Previously, it was a social media company, they sold ads, they made a ton of
1:53
Josh: money, they had billions of users.
1:54
Josh: Now they're pivoting to, I mean, first it was a pivot to the metaverse,
1:57
Josh: where they started building the virtual reality goggles.
1:59
Josh: Now it's more of a pivot into AI and fully putting the balance sheet on investing
2:04
Josh: in these large infrastructure projects,
2:06
Josh: investing three and a half billion dollars on a single developer.
2:10
Josh: Their their capex is going through the roof when we're not
2:13
Josh: really getting the results to see it so what i think we're seeing here
2:16
Josh: in the meta price and you just if you move to the six month chart it's actually
2:19
Josh: like fairly good i believe like they've been
2:21
Josh: doing pretty well it's up well um people are trying to get a gauge for what
2:26
Josh: they're doing right what they're doing wrong and how they could price this into
2:28
Josh: the stock and i think this episode we could kind of walk through the different
2:31
Josh: elements of meta's business and kind of talk about what we like what we don't
2:35
Josh: like because the market very much feels wrong when it comes to evaluating some things,
2:39
Josh: but it is kind of right when it comes to evaluating others.
2:42
Josh: So I think we're going to just kind of diagnose why the market is wrong for
2:45
Josh: specific things that we have like a pretty unique interest in covering.
2:50
Ejaaz: Let's start with hiring, Josh, because like, sorry, I can't get this headline out of my head.
2:57
Ejaaz: Let's give some context for the listeners here. This week,
3:00
Ejaaz: Zuck is rumored to have spent three and a half billion dollars to hire this
3:04
Ejaaz: guy called Andrew Tullock from a company called Thinking Machine Labs,
3:09
Ejaaz: which coincidentally was founded by an OpenAI co-founder, Amir Amir Murati,
3:15
Ejaaz: who left OpenAI and started his own Thinking Lab.
3:18
Ejaaz: What's so interesting about this is Zuck already made this guy an offer about
3:23
Ejaaz: two months ago for $1.5 billion, which he turned down.
3:27
Ejaaz: But apparently everyone has their own price.
3:30
Ejaaz: Why this is shocking to me, Josh, is
3:33
Ejaaz: meta literally announced that they were not going to spend any more
3:35
Ejaaz: money hiring people for their ai team and they've
3:39
Ejaaz: gone ahead and kind of broken that rule and spent the most amount that
3:42
Ejaaz: they they ever had um but number two and i have to be honest here i'm gonna
3:46
Ejaaz: i'm gonna eat some humble pie i remember on an episode about two months ago
3:50
Ejaaz: when zuck went on this spending spree i said hey we've got to give zuck some
3:55
Ejaaz: time because it's going to take some time to build these ai models to build out some apps.
4:00
Ejaaz: Now we're three months later and he still hasn't produced anything to kind of show for it.
4:06
Ejaaz: So I'm kind of feeling like Zuck is misspending his money and he's not able
4:12
Ejaaz: to execute on building out the grandeur AI vision that he promised us.
4:16
Ejaaz: Where's the artificial general intelligence?
4:18
Josh: Since they've started this huge hiring spree, the only thing we've really gotten
4:22
Josh: is vibes, which was that like social media, TikTok scrolling based thing.
4:26
Josh: Did it actually release you, Jess? Is it even out?
4:28
Ejaaz: Because I haven't played with it if it is. No, well, I mean,
4:31
Ejaaz: that says something about both of us. When was the last time you were on Facebook?
4:35
Josh: I can't tell you. I'm not sure I even have Facebook still downloaded.
4:38
Josh: It might be downloaded on my phone. I'm not logged in. But I do want to talk
4:41
Josh: about the spending because there is the bull case and the bear case both to be made on spending.
4:45
Josh: What we're seeing Zuck do is he's really going all in.
4:47
Josh: And that level of conviction matters because the company needs to also be all in.
4:51
Josh: And they're spending a remarkable amount of money in doing so.
4:54
Josh: Uh the thing though is is three and a half billion dollars
4:57
Josh: is a drop in the bucket if they do this right if they actually do create
5:00
Josh: really high quality ai experiences for
5:03
Josh: their many billions of users that generates a tremendous
5:07
Josh: amount of revenue and metastock is very very clearly undervalued
5:10
Josh: now if they're actually able to deliver on that because when you
5:12
Josh: think about the costs associated with building up these giant data centers they
5:15
Josh: are tens to hundreds of billions of dollars that they're
5:18
Josh: going to be pouring into this and if one single ai
5:21
Josh: researcher can create one single algorithmic unlock or
5:24
Josh: make a small incremental improvement that lowers
5:28
Josh: the amount of compute required by even 10 percent that covers his entire compensation
5:34
Josh: and then some with many multiples to spare so the leverage of the decision making
5:38
Josh: of these employees is astronomically high and if you can get one person that
5:43
Josh: could save you even one percent on a hundred billion dollars that's a billion
5:46
Josh: dollars it's a lot of money how.
5:48
Ejaaz: Much time are you going to give zuck to do this josh because like is it months
5:52
Ejaaz: is it a year like like how long am i holding my metastalk for
5:55
Josh: You have to give them time to release something i
5:58
Josh: know vibes was something but it was very much not it was just kind of like a
6:01
Josh: nothing burger i'm not sure why they did that um it was kind of a waste it left
6:05
Josh: bad very very bad like optics and a taste in my mouth because it's just like
6:09
Josh: what are you doing with all this talent you're making more ai social media um
6:13
Josh: applications but i want to give them an opportunity to actually release something substantial.
6:18
Josh: Like release a big model, release some sort of large product.
6:22
Josh: I would say wait until version one of whatever they're working on to come out
6:27
Josh: before evaluating is my take.
6:29
Ejaaz: My gut wants to basically say that I want to sell my Meta.
6:33
Ejaaz: I hold Meta, but my brain is telling me
6:38
Ejaaz: like it took years to build the first version of
6:41
Ejaaz: chat gpt and it's like no secret that
6:44
Ejaaz: zux joined this race kind of late and he's
6:47
Ejaaz: trying to make up for that by spending the money to hire the talent but
6:50
Ejaaz: the talent needs time to cook as you
6:52
Ejaaz: say right so put quite clearly i'm gonna reserve my judgment until the next
6:59
Ejaaz: ai model that meta releases is out whatever that is if it's llama 5 or behemoth
7:05
Ejaaz: or whatever the hell they call it i'm gonna wait for that because the model
7:08
Ejaaz: the chat gbt competitor will basically determine whether they're good enough or not yeah
7:12
Josh: That's that's interesting okay so disclosures ejs does have meta stock i
7:15
Josh: have none but i do i guess i have a bull case to make for them um
7:18
Josh: which is that meta has a couple billion users which is
7:21
Josh: a ton they also have a ton of data on those users in terms of preferences what
7:25
Josh: they like what they don't like they also have a algorithmic engine to serve
7:30
Josh: those users exactly the type of content that they want and that pairs very well
7:34
Josh: with their advertising engine which is world class i mean And Instagram,
7:38
Josh: at least, because Instagram uses the same engine,
7:39
Josh: they're able to serve me ads that are better than basically any other ad that
7:43
Josh: I get anywhere on the internet.
7:44
Josh: So they have this really vertically integrated stack of users,
7:48
Josh: technology to serve users, and technology to serve their preferences.
7:51
Josh: Now, if they can apply an AI layer on top of that stack, where they can now
7:57
Josh: coerce these, I don't even know how many billions of users they have,
8:00
Josh: but many billions of users to further embed AI into their lives,
8:04
Josh: I think that's a really unique advantage.
8:06
Josh: Nobody really has the software stack that meta does and also the hardware capability
8:12
Josh: now meta is very bad we'll talk about them we've left a lot to be desired but
8:16
Josh: they're doing it and they have a product and they're learning manufacturing
8:20
Josh: and they are iterating quickly.
8:22
Josh: And if they can combine this really amazing software stack with billions of
8:27
Josh: users and combine a compelling hardware product, which would hopefully be the
8:31
Josh: glasses, and create this really nice ecosystem around it where you can augment
8:34
Josh: your entire life with AI,
8:36
Josh: that's a pretty unique position they're in because there's not many other companies
8:40
Josh: that have that type of leverage.
8:41
Josh: I mean, OpenAI has the most users. They don't have the hardware.
8:45
Josh: Google has a lot of hardware and kind of users, but their products suck.
8:49
Josh: Zuck actually has both. they just both need to be good and they both need to
8:52
Josh: work together so if they could do that green charts ahead.
8:55
Ejaaz: Another thing that zuck has repeatedly shown
8:59
Ejaaz: he's good at is taking all
9:02
Ejaaz: of this data and these users that you mentioned josh and actually
9:05
Ejaaz: creating really fun like social features or products or network effects from
9:10
Ejaaz: that right he created facebook he acquired instagram you have the whatsapp thing
9:15
Ejaaz: everything is like kind of cultivating this like um ecosystem of people just
9:20
Ejaaz: like communicating with each other as much as they can and
9:23
Ejaaz: Probably no one better at it, right? From a hardware perspective,
9:26
Ejaaz: again, we'll talk about it in a second.
9:28
Ejaaz: I'm hoping that he can pull this off for AI.
9:32
Ejaaz: He's had a few shots on goal. And in my opinion, they've missed.
9:36
Ejaaz: He's had the meta chat bot AI assistant.
9:40
Ejaaz: And do you remember when news broke that all user prompts and conversations
9:45
Ejaaz: were actually made public? Really weird decision.
9:47
Ejaaz: He released the Meta Vibes app, which is kind of like a TikTok competitive with
9:51
Ejaaz: all AI generated video. We're going to talk about that in a second.
9:53
Ejaaz: And that has kind of also flopped.
9:56
Ejaaz: So I commend him for trying. And he is like the master.
10:00
Ejaaz: He has so much history behind this. So I'm still bullish that he will be able to pull something off.
10:05
Ejaaz: And to be honest, and I know this will seem like a cop out, Josh, it is still too early.
10:11
Ejaaz: Like no one's created a sick AI social media layer.
10:14
Ejaaz: Some have taken some kind of bold attempts, but we haven't figured it out.
10:17
Ejaaz: We haven't had the final hardware form factor we haven't
10:20
Ejaaz: had the final kind of like perspective on what this
10:23
Ejaaz: ai kind of like system will look like i'll be just talking to chat gbd for the
10:27
Ejaaz: rest of our lives or is there kind of something else i think once that materializes
10:31
Ejaaz: zuck is going to come in like a cannonball and absolutely blow everyone apart
10:36
Ejaaz: um so i'm i'm still reservedly bullish i'm just short term i'm kind of like whatever okay
10:42
Josh: Well you mentioned hardware doesn't have a form factor yet the final form factor
10:46
Josh: at least we do have a form factor and that is what these meta glasses so can
10:49
Josh: we please i'm dying to talk about that.
10:50
Ejaaz: Okay please let's talk about
10:53
Ejaaz: i wonder why josh is excited to talk about this okay right so some context um
10:59
Ejaaz: we released an episode about a week ago where meta announced this new ai glasses
11:05
Ejaaz: they're called the ray-ban meta displays and the reason why this kind of like
11:09
Ejaaz: blew everyone's minds when they announced this news was
11:12
Ejaaz: People kind of have like never seen something like this before.
11:15
Ejaaz: It's a pair of glasses that you kind of wear, like a normal pair of glasses,
11:17
Ejaaz: but you see a screen projected on the right side of your glasses.
11:21
Ejaaz: So you can see things like apps that you see on your phone.
11:24
Ejaaz: If you're like walking somewhere, you can have a Google Maps that tells you
11:27
Ejaaz: where to go. You can answer texts.
11:29
Ejaaz: You can take pictures. There's a camera embedded in the frame of the glasses itself.
11:33
Ejaaz: You've got speakers in the handles that like kind of like project audio into
11:37
Ejaaz: your ears, like an AirPod.
11:39
Ejaaz: It was this new device that we haven't really seen since Google Glass,
11:42
Ejaaz: which kind of like flopped way back when. But now supposedly is the time.
11:46
Ejaaz: And this is the first bold step that Meta has taken. And we've got a tweet here.
11:51
Ejaaz: And for the listeners, I'm going to read it out to you from Shil Monat,
11:54
Ejaaz: which is, you know, he's been a Meta bull for a while.
11:57
Ejaaz: And he goes, the Ray-Ban Meta displays are fulfilling the original promise of
12:01
Ejaaz: Google Glass. Society wasn't ready for the glass, to be honest.
12:04
Ejaaz: Now phones are out recording stuff all the time. Meta has done a better job of it. They look normal.
12:10
Ejaaz: $800. dollars it's mine I'm gonna buy it um and then literally two weeks later
12:16
Ejaaz: Josh I have to share this tweet from the same guy from Shilmanot and it goes as follows
12:22
Ejaaz: First impressions matter, and Meta really blew it with the Ray-Ban displays.
12:26
Ejaaz: I was ready to buy them on launch, but instead of letting me order them,
12:29
Ejaaz: they forced me to book an in-person demo at Best Buy.
12:33
Ejaaz: It was a complete disaster. And he goes on to explain his experience where the
12:37
Ejaaz: rep didn't know anything about the product.
12:40
Ejaaz: They couldn't get the glasses to work. And he told him to go away and come back
12:44
Ejaaz: later where, you know, hopefully it works.
12:46
Ejaaz: So long story short, I think it was all talk and no walk.
12:52
Ejaaz: And I have to spend 20 seconds, Josh, before I pass the mic to you.
12:55
Ejaaz: I need to eat some glass and humble pie again, because I was super bullish about this, dude.
13:01
Ejaaz: I was bullish because I'm tired of buying a new iPhone with like a better camera every year.
13:08
Ejaaz: I want something new. I want something that would blow my mind,
13:10
Ejaaz: like when the original iPhone came out.
13:12
Ejaaz: And so when Meta, when Zuck specifically took this step forward,
13:15
Ejaaz: I was applauding him because I was like, no one's been bold enough to do something like this.
13:19
Ejaaz: And I'm excited to see this work out. and it's and it's suck it's meta
13:22
Ejaaz: like they can't like release a shitty product
13:25
Ejaaz: right apparently the product is kind of
13:28
Ejaaz: shitty and it's made me bearish about buying one dude um i told you like you
13:32
Ejaaz: know you asked me like hey have you bought these yet i'm like they don't have
13:35
Ejaaz: an appointment for me to walk in i have to walk into a physical store to buy
13:38
Ejaaz: this thing instead of being able to order it online which sucks to start off
13:41
Ejaaz: with so yeah i don't i'm confused josh help me make sense of this well
13:46
Josh: I commend you for your optimism and in a way i envy it because i think when
13:50
Josh: it came to evaluating these, the pragmatic part of my brain one.
13:53
Josh: And I remember saying after watching the presentation, like,
13:56
Josh: this is not a serious presentation. This is not a serious product.
14:00
Josh: It's disappointing that that's the reality.
14:02
Josh: Um meta really just has no business releasing these
14:05
Josh: products to the public yet and i respect the fact that they're.
14:08
Josh: Doing it in public they're shipping in public they're testing in public but these
14:11
Josh: are very much uh developer versions that i
14:14
Josh: mean if you could even call it that because they hardly work i mean we're seeing
14:17
Josh: on screen now another disappointed review from uh
14:19
Josh: robert scoble on x he's been wanting them for a really long time
14:22
Josh: i think everyone is everyone kind of has this aspirational idea
14:25
Josh: of what the next type of hardware interface
14:28
Josh: looks like and it's very much glasses but meta is just releasing just
14:31
Josh: like horrendous products one of the things that i
14:34
Josh: think they made a really big mistake with is forcing people
14:38
Josh: to go in store to purchase but forcing them to go into
14:40
Josh: a store that they don't control you just if you
14:43
Josh: remember the division pro with apple you you didn't need
14:46
Josh: to go in store but you could go in store and get a demo but you go into
14:49
Josh: an apple store and it is a beautiful experience they pulled
14:52
Josh: out these brand new couches for it they give you this fully walkthrough
14:55
Josh: guide it showcases all the amazing technology and it
14:58
Josh: actually worked to go to a best buy and have
15:01
Josh: like the the random guy from the neighborhood who hasn't been
15:04
Josh: trained on this who just read a little pamphlet from meta and said okay go
15:07
Josh: show people how this works and then to to have to
15:10
Josh: have that person demo a half-baked product with like
15:12
Josh: pretty mediocre software and horrendous hardware quite frankly
15:15
Josh: um it just it it doesn't work and that paired with the fact that there's supply
15:20
Josh: constraints where even if you wanted to go to most best buys they don't even
15:23
Josh: have them in stock um the software doesn't work the hardware doesn't work it's
15:27
Josh: a total disappointment i think zuck should do what they've been doing with the
15:31
Josh: software and ai models and just just don't ship mediocre stuff like.
15:35
Josh: With open source models, they were going to ship Behemoth, which was their very
15:38
Josh: large open source AI model.
15:41
Josh: And it never was good enough, so they never shipped it. And I think that's fine.
15:44
Josh: I'd rather you just keep it to yourself.
15:47
Josh: Don't ship garbage. What they're doing is they're shipping garbage.
15:49
Josh: It's not a good product. It doesn't work well. And it's just disappointing.
15:53
Ejaaz: To kind of like push on the bear case, Josh, it seems kind of desperate to me.
15:57
Ejaaz: You know they're shipping half-assed products which
16:01
Ejaaz: um look like something an infant used back
16:04
Ejaaz: in the 1990s i mean like look at this like um this
16:07
Ejaaz: is someone's perspective of what they can see using google maps
16:10
Ejaaz: on the glasses and for those of you who are just
16:13
Ejaaz: listening to this it looks like an old school projector that
16:16
Ejaaz: you used to have at high school back in the day where people where
16:19
Ejaaz: the teachers would move slides i don't know whether you guys had this here in america
16:22
Ejaaz: but growing up in england this was like literally a lamp and a
16:25
Ejaaz: piece of glass and you kind of like see what you see what
16:28
Ejaaz: you see this is what it looks like it looks like something like um
16:32
Ejaaz: some hacker made um in the early 2000s it
16:35
Ejaaz: doesn't seem or inspiring so number one like the tech just seems rushed and
16:39
Ejaaz: desperate um another point is the point that you brought up on the episode of
16:43
Ejaaz: a week ago josh which is i don't know if meta is playing in the right field
16:48
Ejaaz: like do they have the hardware chops to even scale this hardware out like who
16:53
Ejaaz: are their partners who are their suppliers.
16:54
Ejaaz: The fact that you have to walk into a Best Buy, a store that they don't even own, is kind of tragic.
16:59
Ejaaz: And it doesn't speak very well of their brand.
17:01
Ejaaz: Now, when I look at the bull case of this, I'm impressed that Mark is taking
17:06
Ejaaz: the shot. No one else has taken the shot.
17:08
Ejaaz: No one else at the major level of a Mag 7 company has produced a new device yet.
17:15
Ejaaz: And it's brave of Mark to be the first one to step out. And
17:18
Ejaaz: Knowing the amount of cash reserves that Meta has, they're going to invest in
17:22
Ejaaz: this. They're going to iterate really hard.
17:24
Ejaaz: They've got all these new AI researchers. They're going to work hard at making
17:29
Ejaaz: this better really quickly.
17:31
Ejaaz: And I wouldn't be surprised if version two or version three of this actually slaps.
17:35
Ejaaz: Number two is they're making net new hardware as well. Don't forget the motion
17:40
Ejaaz: wristband, which they created, which is so, so cool.
17:43
Ejaaz: Like any kind of slight gesture of your fingertips and stuff will kind of like
17:47
Ejaaz: translate into the metaglasses that you're wearing.
17:50
Ejaaz: And that helps you select an app or move to the next track when you're listening
17:53
Ejaaz: to music. So there is something here. I just think it's super early and it's super rushed.
17:58
Ejaaz: Again, this will be a matter of waiting a couple more months or maybe six months
18:03
Ejaaz: to see whether they can deliver on a second good version.
18:06
Josh: Yeah, so here's probably where the market is wrong in the downside,
18:09
Josh: where I'm looking at the stock right now.
18:12
Josh: It's up 37.4% in the last six months. It's had an amazing run. The reality is that,
18:19
Josh: they've never shipped a great hardware product they've haven't.
18:22
Josh: Really shipped any great software products that use ai at all um the
18:25
Josh: meta quest is just not that good
18:28
Josh: these new meta ray bands are even worse um
18:32
Josh: they have no track record of shipping anything good everything they've
18:35
Josh: shipped has been poor there's no in the
18:38
Josh: case that they do ship good hardware there's no ecosystem for it
18:40
Josh: so in the case that these meta ray bands were fantastic i still
18:44
Josh: don't use any meta applications like you said i just
18:46
Josh: like i don't use facebook i don't use whatsapp i don't use i use
18:49
Josh: instagram sometimes um but i love my phone as
18:52
Josh: my camera to interface with that because it's a far better camera than
18:55
Josh: the meta ray-bans so there's no world in which i
18:58
Josh: would even want to invest in this ecosystem in terms
19:01
Josh: of buying hardware products even if they were excellent so
19:04
Josh: meta has two really difficult problems to solve one is building a
19:07
Josh: useful software ecosystem that i actually want to participate in
19:10
Josh: and the other is building actually good hardware products they don't have either so
19:13
Josh: the fact that meta is up 40 without releasing any good
19:16
Josh: software uh ai or not with their
19:19
Josh: 10 trillion dollars of employees or 10 billion dollars of employees
19:22
Josh: they just hired and they shipped like a half-baked hardware
19:25
Josh: product it's like why is this talk up 40 i think they
19:28
Josh: they're betting on the fact that meta will be able to convert these users
19:31
Josh: to cash at some point but like my god they have a very long way to go and zero
19:34
Josh: proven track record the bull case like you mentioned uh just briefly is is they
19:39
Josh: have cool technology like the potential energy is there they have unbelievable
19:43
Josh: talent they have this really cool technology in the wristband that can predict
19:46
Josh: your neural uh signals and it can know what you want to tap before you tap it.
19:51
Josh: They have the foundation and the roots to build something cool.
19:54
Josh: They just haven't done it.
19:55
Josh: So, hey, hopefully they do. And I think that 40% gain is probably indicative
19:58
Josh: of people being kind of optimistic and hoping that they will.
20:02
Ejaaz: Let's talk about Meta's bread and butter, what they're actually good at.
20:06
Ejaaz: They're good at making social media apps, right? That's how they've made all their money.
20:10
Ejaaz: That's why they have all their billions and billions of users, right
20:14
Ejaaz: um unfortunately when it comes to
20:17
Ejaaz: ai meta apps it's actually my
20:20
Ejaaz: most bearish argument for this entire episode for
20:23
Ejaaz: my meta investment because um i think two weeks ago they announced their first
20:28
Ejaaz: meta ai app it's called vibes which is basically kind of like a tiktok style
20:33
Ejaaz: app except every single video that you scroll past is ai generated and they
20:38
Ejaaz: had this kind of like cool promo video where,
20:41
Ejaaz: you know, they explained that it's super easy to make AI videos.
20:44
Ejaaz: You just type in a prompt.
20:45
Ejaaz: And if all of this is sounding familiar, it's because it sounds like Sora,
20:50
Ejaaz: OpenAI's app, which does pretty much the same thing, except,
20:53
Ejaaz: Josh, there's one major difference between these two apps.
20:56
Ejaaz: One of them hit number one in the App Store and is still number one in the App
21:01
Ejaaz: Store, whilst the other has kind of like fallen down the App Store rankings as well.
21:06
Ejaaz: And Like I said earlier, I don't remember the last time I opened the Facebook
21:09
Ejaaz: app. Why didn't they just create a new app?
21:11
Ejaaz: And so the point I'm trying to make here is how has...
21:15
Ejaaz: A company with, you know, trillions of dollars of value and billions of dollars
21:20
Ejaaz: to spend and some of the best social media app engineers ever to kind of coalesce in one single company
21:26
Ejaaz: flopped on their opening AI app whilst, sorry, pun intended,
21:31
Ejaaz: I guess, OpenAI's app, Sora 2, is absolutely killing it.
21:35
Ejaaz: Like they've let like a newbie come in and eat their lunch.
21:39
Josh: This is the tough thing with the ecosystem is I'm not even sure how to access
21:43
Josh: the Vibes app. Is it a standalone app? Is it built into my Facebook app?
21:47
Josh: I don't know. I haven't used it, nor do I have any incentive to.
21:51
Josh: Because, I mean, even though Sora came out later, well, Sora,
21:55
Josh: I use ChatGPT. In fact, I love using ChatGPT.
21:58
Josh: And ChatGPT is very present on my timeline too. There's a lot of people talking
22:01
Josh: about it. There's a lot of people using it.
22:02
Josh: I want to be engaged in that community. There's nobody on my timeline talking about Vibes.
22:08
Josh: There's nobody talking about how much they love their AI generated video on
22:12
Josh: the Vibes app. I haven't even seen any screenshots or videos of it,
22:15
Josh: which is why I'm not even sure if it's live yet.
22:17
Josh: There's just this like huge disconnect between the velocity of,
22:21
Josh: I guess, social acceptance of OpenAI's products versus Meta's products.
22:26
Josh: And while they were both mostly the same, it would appear at least from the announcements.
22:30
Josh: I very obviously just prefer OpenAI because that's where I am.
22:33
Josh: They have my data. That's where my friends are. That's where I can scan in my face and make a cameo.
22:38
Josh: And I think that's the most viral element of the Sora app versus Facebook's
22:44
Josh: vibes, which just it's very sterile. It's very generic.
22:47
Josh: So I think like Meta very clearly lost. This was the one on one they lost,
22:51
Josh: mostly because of the social virality brought to the application through Sora's
22:57
Josh: Cameo feature, where you can actually insert yourself into the AI content.
23:02
Josh: And it's, again, it's just, it's a disappointment. You're sealing the announcement
23:04
Josh: from Alexander Wang. They spent billions of dollars on him.
23:07
Josh: He's in charge of this whole AI infrastructure plan. And they're just releasing
23:10
Josh: something that, again, it's kind of like half baked.
23:13
Josh: I'm not even sure how to use it. No one's talking about using it.
23:15
Josh: There's nothing compelling about that product.
23:17
Josh: So that to me is a swing and a total miss.
23:21
Ejaaz: I actually think it's the biggest swing. I think this is the bullet in the chamber,
23:27
Ejaaz: Josh, because of a few things.
23:30
Ejaaz: Okay, so number one, I'm going to pull up this tweet from Alexander Wang,
23:33
Ejaaz: who talks about this MetaVibes app.
23:35
Ejaaz: And he says, for this early version, we're partnering with MidJourney and Black Forest Labs.
23:39
Ejaaz: Okay, what this instantly tells me is this isn't fully thought out.
23:44
Ejaaz: They've rushed this product once again, just to get something out there,
23:48
Ejaaz: probably because they heard that OpenAI was going to release their own social media app.
23:52
Ejaaz: Number two, this is kind of an emperor has no clothes situation, in my opinion,
23:58
Ejaaz: because what it tells me is you need a really good AI model at your core product
24:06
Ejaaz: offering in order to build any cool app on top of it.
24:10
Ejaaz: So either you use someone else's AI model or you build it yourself.
24:14
Ejaaz: And Meta has tried building their own model
24:16
Ejaaz: in their llama models they open sourced it and the fact is
24:20
Ejaaz: does anyone talk about it anymore i haven't seen it
24:22
Ejaaz: on the timeline i haven't seen anyone of my friends uh software engineers using
24:26
Ejaaz: it at all um so that kind of flopped and everyone's kind of being quiet about
24:30
Ejaaz: it and it's translating into their apps now they don't have a good enough model
24:33
Ejaaz: to create good enough ai video to compete with the open ais and the googles
24:38
Ejaaz: of this world they have google has vo3 they're putting it in YouTube Shorts.
24:42
Ejaaz: So Meta has the distribution, they have the users, but in my opinion,
24:46
Ejaaz: they don't have the foundational key component.
24:50
Ejaaz: And this, in particular, the Meta Vibes app, kind of revealed that the most to me.
24:55
Ejaaz: It's where I'm most bearish on it, on Meta as an investment at this moment.
25:00
Ejaaz: Now, I need to force myself as an investor to look at the bull case, right?
25:03
Ejaaz: Because either Meta stock's going to zero, because I don't care what anyone says, AI is the future.
25:08
Ejaaz: If your company doesn't execute on it effectively, you are going to zero.
25:13
Ejaaz: So is meta going to zero or are they going to swing things around?
25:16
Ejaaz: One thing that I've seen suck
25:18
Ejaaz: Um perform really well at josh is not
25:21
Ejaaz: only creating things from zero to one but taking things
25:24
Ejaaz: from one to 100 right we saw
25:27
Ejaaz: it when snapchat came out right and zuck was like uh
25:30
Ejaaz: let's try and buy them and they were like no and they
25:33
Ejaaz: were like okay cool we're gonna just do our own thing we're gonna create snapchat
25:37
Ejaaz: competitor and here we go and you had instagram stories he
25:40
Ejaaz: did the same thing with tiktok they created reels
25:43
Ejaaz: and now all the famous soar videos that
25:46
Ejaaz: are released in the last week are getting shared on ig reels and they have millions
25:49
Ejaaz: and millions of views right so i'm still confident that zuck will kind of like
25:54
Ejaaz: take this hit on the chest and be like okay cool well whatever the good version
25:58
Ejaaz: of this ends up becoming we're going to build a better app and maybe again that is meta vibes 2.0
26:04
Josh: Yeah it's getting harder to copy because like you mentioned having that brain
26:08
Josh: at the core of your infrastructure matters and i think a big difference that
26:12
Josh: we see between open AI and Meta is that OpenAI builds that brain first,
26:17
Josh: and then they figure out a vessel to wrap it up with a product and ship that
26:22
Josh: as a way of distributing the brain.
26:25
Josh: That's what we saw with Sora. They developed this amazing video generation software.
26:28
Josh: They packaged it up into a product. They shipped it. They created this amazing LLM.
26:33
Josh: They packaged it up into ChatGPT and they shipped it. So they developed the
26:36
Josh: technology prior to developing the product.
26:39
Josh: What Meta is doing is they're starting by developing the product,
26:42
Josh: but they don't quite have the technology to place inside of the product,
26:46
Josh: nor is the product particularly good.
26:49
Josh: So, OpenAI, in this case, they beat Meta on product because they had the Cameo
26:53
Josh: feature, which was amazing for virality. Meta.
26:56
Josh: Didn't have anything uniquely compelling about it and
26:59
Josh: it's clear from this that they had to outsource the brain the thinking
27:02
Josh: to mid-journey and black forest labs so they only
27:06
Josh: had to make the product they failed at making the product and they tried
27:10
Josh: to make the brain but failed and had to outsource it so from from
27:13
Josh: my perspective they just they're getting just like crushed at all
27:16
Josh: fronts and i think it's increasingly difficult
27:19
Josh: to see a company like snapchat and crush it because
27:22
Josh: you can't just copy a code base and run on a cpu you
27:25
Josh: need a gigantic gpu cluster in order to
27:28
Josh: to copy these with the actual level of
27:30
Josh: vertical integration that we see from a company like open ai so in
27:34
Josh: a world in which zuck's competitive advantage was just crushing his competitors
27:37
Josh: by copying them and making it slightly better it's getting increasingly challenging
27:40
Josh: to do um so that would be my concern as i'm just kind of observing the the meta
27:45
Josh: stock is like hmm okay you haven't shipped a great product you haven't shipped
27:49
Josh: any good ai you haven't shipped any good hardware like when is this going to happen?
27:53
Josh: That's my big concern. It's like, when are you actually able to do this?
27:56
Ejaaz: Well, let's take a peek under the meta head, shall we?
28:00
Ejaaz: Let's actually look at the brain that they have right now, which is their AI model, LLAMA, right?
28:06
Ejaaz: The reason why we haven't heard from the LLAMA models for like the last,
28:11
Ejaaz: I think, three or four months, which in the AI world is a heck of a long time,
28:14
Ejaaz: is because they just suck, Josh.
28:17
Ejaaz: Like, I'm going to pull up this this uh this
28:21
Ejaaz: um bar graph which basically compares um
28:25
Ejaaz: maverick 4 which is that you know their best thinking
28:27
Ejaaz: reasoning model and it sucks compared to an old gpt4 model to gemina to gemma
28:35
Ejaaz: sorry and through claude 3.7 sonnet and if you're wondering hey ijaz why are
28:40
Ejaaz: you talking about old gpt models gemma models from google and um claude models
28:46
Ejaaz: Because Lama hasn't released anything that is as good as the latest models from
28:51
Ejaaz: those same companies, which tells me that Zuck and Meta are in a bit of a rut
28:56
Ejaaz: when it comes to forming that brain that you're talking about, Josh.
28:59
Ejaaz: Their AI model isn't good enough. And you mentioned that they were secretly
29:03
Ejaaz: working on a much, much bigger model, right, called Behemoth.
29:07
Ejaaz: And they didn't end up releasing it, supposedly, because it just wasn't good
29:11
Ejaaz: enough. And then coincidentally, they went on this hiring spree,
29:15
Ejaaz: spending $30 billion to hire, I don't know, whatever.
29:18
Ejaaz: 50 people or however many people they hired. And that was by already having
29:24
Ejaaz: an AI team, which has now gone quiet.
29:27
Ejaaz: Who was the guy that led that old AI team at Meta? Do you remember his name, Josh?
29:32
Josh: Oh, I am forgetting. I know what his face looks like.
29:36
Ejaaz: I'm forgetting his name. But all I remember is he would argue against all the
29:40
Ejaaz: top AI researchers at competitive companies who were saying,
29:43
Ejaaz: no, you have to be aggressive.
29:44
Ejaaz: We need to spend a lot money in this.
29:47
Ejaaz: And he would just be like, nah, like there's a different architecture we can use.
29:51
Ejaaz: I haven't discovered it yet, but I'm almost confident that the way that you
29:55
Ejaaz: guys are doing it isn't the right way.
29:57
Josh: That's Jan, Jan LeCun.
29:58
Ejaaz: Yeah, Jan LeCun, exactly. And fast forward six months and you've had people
30:03
Ejaaz: like Elon Musk, who was late to the race, much later than, you know,
30:07
Ejaaz: Meta or AI when they were kind of already focused and created this team with Jan LeCun heading it,
30:12
Ejaaz: race ahead of them and beat them and spend more time on compute and more money on compute.
30:16
Ejaaz: So I guess the point that I'm making at is they've dropped the ball creating the brain.
30:22
Ejaaz: Now, that's my bear case. The bull case is they've hired away all the smartest
30:28
Ejaaz: AI researchers from the competitors that give them the best shot at building
30:34
Ejaaz: the best brain in the future.
30:36
Ejaaz: And my bull case tells me that they're not gonna create it in a few months.
30:40
Ejaaz: They're probably gonna create it in six months because remember, they're
30:43
Ejaaz: not trying to create Llama 5 they're
30:47
Ejaaz: trying to leapfrog all the existing models that exist today that's going to
30:51
Ejaaz: take a bit of time that's going to take a ton of money and he's spending the
30:54
Ejaaz: money and hopefully he's spending that money on compute so my guess is the next
30:58
Ejaaz: model that Llama that meta releases is going to be killer it's probably not
31:02
Ejaaz: going to be open source but it's going to be killer
31:04
Josh: Well, we'll know it's better if it's not open source, because open source,
31:07
Josh: as we've seen from China, is very much a signal of you being at a disadvantage.
31:11
Josh: So if Meta comes out, they release a closed source model, it starts crushing benchmarks.
31:15
Josh: That's a good signal to look out for.
31:18
Josh: But this, I mean, the episode, this leaves me with a lot to be desired.
31:21
Ejaaz: I'm like, man, Meta,
31:23
Josh: There is a bull case. And the bull case is if Meta can execute,
31:26
Josh: they are better positioned than basically anyone else. They have the hardware
31:29
Josh: manufacturing capability. They have the software capability.
31:32
Josh: They have more users than anyone in the world.
31:34
Josh: If they are able to hit a home run, it is going to be a grand slam.
31:39
Josh: That feels like a low probability. The reality is they haven't shipped any great software.
31:45
Josh: They haven't shipped any great hardware. They have never created an original
31:47
Josh: product that is compelling, at least in my personal opinion.
31:50
Josh: And they have spent tons of billions of dollars on talent that seemingly isn't
31:56
Josh: making any progress fast.
31:58
Ejaaz: Okay, so what you're looking at here is a
32:01
Ejaaz: graphic or a video showing how big
32:05
Ejaaz: the data center that meta is building currently
32:08
Ejaaz: will look like it is the size of manhattan
32:12
Ejaaz: pretty much or like the good stretch of the main island so it's
32:15
Ejaaz: huge um and this is set to produce i believe it's five gigawatts of uh compute
32:22
Ejaaz: which is don't get me wrong a huge amount but if i were to compare it to colossus
32:29
Ejaaz: 2 which is what elon musk's company xai is building right now to power their next Frontier model.
32:35
Ejaaz: I think that's going to be between five to 10 gigawatts.
32:38
Ejaaz: And, you know, Elon's already thinking about what the next data center is going to look like.
32:41
Ejaaz: And he's delivering on that really, really quickly, by the way.
32:43
Ejaaz: Like, I think I read a statistic, Josh, where in the first five months of building Colossus 2,
32:49
Ejaaz: he had already delivered 500 megawatts of power, which is just crazy and unforeseen,
32:54
Ejaaz: because usually it takes like a couple of years to even set the foundations
32:57
Ejaaz: before you can start powering this up.
32:59
Ejaaz: And, you know, Jensen has said many times that Elon is the best at scaling these things.
33:04
Ejaaz: Zuck, I haven't heard of Hyperion, their data center, since they announced it.
33:09
Ejaaz: Like, they had an extended timeline of going, and they gave a vague post about
33:12
Ejaaz: this, Josh, 2030 and beyond.
33:14
Ejaaz: That's when we're going to be kind of done with it. With the first gigawatt
33:19
Ejaaz: sometime in the late 2020s.
33:21
Ejaaz: And I'm like, dude, you need to ship this now.
33:25
Josh: Yeah, I can say this with 100% levels of conviction that if...
33:29
Josh: Meta has to compete directly with other companies uh with no edge and they have
33:33
Josh: to compete on the front of building data infrastructures they are going to get
33:37
Josh: absolutely destroyed um there's just no way uh xai is moving at an incredibly
33:42
Josh: fast velocity open ai has partnered with the entire planet to help them build these data centers 25.
33:47
Ejaaz: Gigawatts at this point
33:49
Josh: Yeah 25 gigawatts they're getting money from saudi arabia they're getting money
33:51
Josh: from broadcom they're getting they have custom chip fabs they're vertical integrating
33:54
Josh: they are going to absolutely slaughter meta on this front
33:57
Josh: so if meta is competing one-on-one on this and they're trying to win here
34:00
Josh: it's just not possible um they have to win elsewhere they
34:03
Josh: have to win on the software stack they have to win on the hardware integration um because
34:07
Josh: this is cute but like okay go build it go build your five gigawatts i love that
34:10
Josh: you are aiming for that go go build the damn thing they're not making progress
34:13
Josh: so yeah it's disappointing on the data center front which is which is hard because
34:17
Josh: it is so critical and they have the the wherewithal to build it they just clearly
34:23
Josh: are not building it and just can't really compete at these levels can i.
34:27
Ejaaz: Give you my low iq bold thesis given that we've spoken about everything meta ai right now why i'm
34:32
Josh: Normally this is what moves the lower iq the better so what do we got okay okay.
34:36
Ejaaz: I have two simple arguments for why i think meta is a good buy right now number
34:41
Ejaaz: one i've never seen mark so aggressive as he is today.
34:47
Ejaaz: And he's putting his money where his mouth is literally.
34:51
Ejaaz: He's committing to spending hundreds of billions of dollars,
34:54
Ejaaz: probably hitting a trillion dollars over the next five years to win at this game.
34:59
Ejaaz: So that gives him a high probability of winning.
35:02
Ejaaz: It may not look like he's winning in the first couple of months,
35:04
Ejaaz: but who cares on the grand scale of things if this thing is going to be a life world changing thing.
35:10
Ejaaz: Okay, number one is his aggressiveness. Makes me
35:15
Ejaaz: Meta is kind of too large to fail. And I might end up eating my words a year or two years from now,
35:21
Ejaaz: but they have so much money that is coming in from other sectors of their platform
35:26
Ejaaz: that isn't AI related that they can use to keep funding this thing until they
35:31
Ejaaz: hit it. So will they hit it the first couple of times?
35:33
Ejaaz: Maybe not. It might suck, but I bet you they're going to hit it on the second,
35:37
Ejaaz: third, or maybe even fourth time.
35:39
Ejaaz: Those are my two reasons why I'm bullish on Meta.
35:41
Josh: Okay, so we have a fun surprise to give to the listeners. But before we do,
35:45
Josh: um i just i need to ask you the final question which
35:48
Josh: is yes as a meta stock holder are you planning to continue
35:51
Josh: holding meta stock uh yes i
35:54
Josh: am okay nice i i feel like that that's
35:58
Josh: interesting because to me i concluding this
36:01
Josh: episode i'm i'm bullish on meta stock in the sense that i believe
36:04
Josh: the number will go up on a relative basis compared to
36:07
Josh: other opportunities i am very bearish to invest
36:10
Josh: in meta at a 1.8 trillion
36:13
Josh: dollar valuation when a company like tesla is
36:15
Josh: at 1.3 uh it just feels like a misallocation
36:19
Josh: in terms of potential returns risk adjusted returns
36:22
Josh: perhaps but i do believe the case that meta will absolutely go up because ai
36:26
Josh: is growing so fast the gdp of the planet is growing so fast and they will most
36:31
Josh: certainly capture some percentage of that just by being just by their nature
36:34
Josh: like you said just being such a colossal company they stand to benefit from the up wings of AI.
36:40
Josh: So I guess at the end of the day, we're both probably bullish on meta.
36:45
Josh: We both believe the company will go up. Regardless of where their downfalls
36:49
Josh: are, the stock price, if we're just talking on a basis of that,
36:52
Josh: seems like it's going higher.
36:55
Josh: But let's get to the little gift that we have, EJ. You have sourced us some
36:59
Josh: magical codes, right? For the actual good product.
37:03
Ejaaz: Yes, we have. Okay, so if you remember, my most bearish take on this episode
37:09
Ejaaz: was like the Meta Vibes app sucks, but their competitor, OpenAI Sora, is absolutely awesome.
37:15
Ejaaz: And I'm loving it. And I'm still creating videos on their app and it is like
37:18
Ejaaz: AI generated TikTok, but Josh, I'm sorry, it makes me laugh.
37:22
Ejaaz: And I love making cameos with my friends. and I have seen so many Sora videos
37:27
Ejaaz: go viral on TikTok and Instagram Reels that it's just too good to use.
37:32
Ejaaz: But there's an issue with this. Not everyone has access to it.
37:36
Ejaaz: They're keeping it super locked down and you need an invite code.
37:39
Ejaaz: So we went to our friends at OpenAI and we said, hey, like, you know,
37:42
Ejaaz: we have a bunch of really awesome listeners who listen to this episode right
37:45
Ejaaz: till the end, like you guys are right now and they deserve something special.
37:48
Ejaaz: And they were like, you know what?
37:50
Ejaaz: We'll give you 500 Sora codes. and that's what we have.
37:54
Ejaaz: And if you guys want a Sora code, we just have a few very humble requests.
38:00
Ejaaz: If you enjoy our episodes, if you enjoy listening to The Limitless Show,
38:04
Ejaaz: please like, please subscribe to the videos and to the episodes that you listen to.
38:08
Ejaaz: But most importantly, give us a five-star rating on whatever listening platform
38:13
Ejaaz: that you listen to this on.
38:14
Ejaaz: Or if you're on YouTube, give us a thumbs up, subscribe to us.
38:17
Ejaaz: And if you DM Josh and I or The Limitless account, proof of this, you can reach us out.
38:22
Ejaaz: On x or on our personal profiles or whatever that might be or if you comment
38:26
Ejaaz: and tell us that you have done this we will send you a code josh is that fair
38:31
Josh: I think that seems fair. Yeah. So the intention is like, okay,
38:35
Josh: we're starting, we have a fairly small show.
38:37
Josh: We're trying to grow a small show. And what's really helpful in growing a small
38:40
Josh: show is when people who enjoy it, they signal to the platforms that amplify
38:45
Josh: our shows that they enjoy it.
38:47
Josh: So therefore the platforms will want to amplify our stuff more.
38:49
Josh: So when you go on a platform like Spotify and you rate it five stars,
38:52
Josh: it really helps us kind of elevate the rankings and get more distribution for
38:56
Josh: more people to hear the show.
38:57
Josh: So as a thank you for the service, I said, it doesn't even have to be five stars.
39:01
Josh: If you think we're four stars, fine, I'll take it. But if you have a five star,
39:04
Josh: that's really appreciated.
39:05
Josh: But if you can take the time to do that, it is so very much appreciated.
39:11
Josh: Ejaz was like very gracious in getting us these codes from the OpenAI team.
39:15
Josh: And it's like a fun little exchange that we could do. So we have plenty.
39:18
Josh: We'd love to give them out. We'd love to let you try them.
39:20
Josh: As always, thank you for making it to the end. This was a little longer than usual.
39:23
Josh: So thanks for sticking with us and just being here for the journey.
39:26
Josh: We are on a one-way trajectory up and to the right. and it is thanks to all
39:30
Josh: of you supporting us through the way so tell.
39:32
Ejaaz: Us if you're gonna buy or sell meta stock please
39:35
Josh: Yeah and are you bullish or bearish on meta stocks i'd love.
39:38
Ejaaz: To know yeah give me some crazy crazy crazy like
39:41
Josh: Maybe i'm just delusional just living in this bubble but yeah that's that's
39:44
Josh: been the meta episode thank you all so much for watching for supporting for
39:48
Josh: all the things and uh yeah we'll see you on sora if anything yeah and also the
39:52
Josh: next episode all right peace guys.