Big Technology Podcast - What Exactly Is The Market Telling Tech To Do? — With Josh Brown

Episode Date: April 26, 2023

Josh Brown is the CEO of Ritholtz Wealth Management and the host of the Compound and Friends podcast. Brown joins Big Technology Podcast to dig into why tech companies are still reeling from tighter financial markets even as their share prices return to something approximating normal after the 2022 bloodbath. In this episode, Brown shares what Wall Street demands from the tech industry and its employees and where it might be headed next. Stay tuned for the second half where we go company by company, looking at Meta, Apple, Google, Microsoft, Amazon, NVIDIA, Tesla, and Bitcoin.  --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

LinkedIn Presents Welcome to the big technology podcast, a show for cool-headed, nuanced conversation, of the tech world and beyond. Josh Brown is our guest today. He's CEO of Ridholt's Wealth Management and the host of the Compound and Friends podcast. And Josh is one of my favorite financial analysts. He is smart and funny, honest and incisive, he could speak about the market broadly and go into depth on individual companies. And he's the perfect guest for us this week here to dig into why tech companies are still reeling from a tighter financial market,

even as their share prices return, if not to normal, then to something approximating it after a bloodbath in 2022. Speaking with Josh is almost like speaking with the market itself. In his words, you can hear what Wall Street demands from the tech industry and its employees. and hear where it might be headed next. And I think you're going to really enjoy hearing his perspective. My conversation with Josh Brown coming up right after this. Hi, Josh. Welcome to the show.

Alex, so great to be back. How you doing, man? I'm doing well. Great to have you back. I think you're going to have to help me figure out why I'm feeling so nauseous from the whiplash with all these big tech companies because I thought they had like gone through a decline and then into a correction. And then now they're on the way.

way back up. So let me just read some numbers before we jump in. Meadow was at 378, went down to 90. So 76% decline. Now it's back up to 212. This has been like from the peaks in November 21, down to the trough in 22 and now it's coming up in 23 again. So down 76% up on 35. Netflix similar, right? Down from 680 to 180 and then up to 322. So almost doubled from its depths. Amazon 183 to 84 and then back up to 107. I mean, every single one of these stock charts look like a roller coaster. Why can't the market make up its mind when it comes to the weight of value tech companies? Well, I think one of the enduring features of being an investor in tech stocks is that you tend to have much greater than typical volatility with respect to, let's say, the XLK

sector ETF versus the MSCI. world, just like as an example, you're up 19% in the tech sector this year and, you know, year-to-date the world stock index while it's rallyed is really only up 9%, which is not bad, but you see just a more pronounced, because it's not just volatility in the stock prices, but it's volatility in sentiment, it's volatility in the earnings outlook. And what you get for that higher beta, what you get for that higher risk is you get companies that have higher than normal profit margins. You get like obscenely profitable companies and you get companies that scale faster than any other type of company, any other type of business. So that's kind of like the tradeoff.

On the one hand, you have stocks that could be a trillion dollars plus in market cap and dominate the entire world. and be 25 years old, in the case of Apple, 40 years old, and still have 40, 50% profit margins. That's the good part. The bad part that comes along with that is people's emotions are so charged when it comes to these stories that stock prices can move much greater than the actual fundamentals are changing underneath. Yeah. And so you look at it from like a market perspective and I often look at this coming from like

the tech company perspective. and it makes sense from a market perspective in a company it can feel completely turbulent right you're on top of the world one day the next day the market hates you and it can be difficult to actually like plan a business that way so just from your perspective like looking at it from where you are do you do you think that this volatility within tech companies like the inside of the tech companies just is just something that people that are working there just need to be prepared for and if you're running them how do you make long-term planning decisions if you can end up in this cycle where one day you're on top and the next day you're on the bottom.

Well, I think we go through eras. And if you look at the tech giants from 2016 through 2021, that five-year period, what you could call a renaissance for large cap tech, volatility was actually very low. If you pull out the pandemic month of March 2020 and you look at the volatility of the five largest tech giants, and I know some of them are classified as communications, but Just bear with me. Like, if you look at that, you will see that they had this really placid period where the stocks went up and up. They became a larger share of the S&P 500, and they didn't really experience much volatility. Like, Facebook remained dominant in all its businesses, no questions asked.

Nobody thought that Google was in any kind of risk. Apple was a one-way street. Microsoft so like that those periods can't last forever they come to an end the big question was always like if we let these tech giants become so dominant it'll be like almost like a self reinforcing thing where nobody will ever be able to challenge them and like the the risk to the economy is having these monopolies that are unchecked well it turns out we didn't need an external challenge because now they're all at war with each other and maybe that's the way that they shrink in dominance ultimately is just from chipping off pieces of one another.

So that's the period that we're in now. I would say the tech stock crash of 2022 put that in really late 2021 and 22 put that in motion. And now we see these companies basically the leadership resigning from each other's boards and they are going at it. And it's a different era. And volatility is now higher. And some areas where these businesses were considered untouchable or invincible are now being called into question. And I think the best illustration of that in the recent few months is Microsoft versus Google on search, for example. But there are many others.

Apple changing its iOS to put Facebook in the hole. Like there's just a lot more of that kind of like, I guess what you'd call nation state fighting happening between these tech giants. And that's where you get the volatility and stop price. Absolutely. And I just want to tease for the second half, we're going to go through some of these battles and really get into the way that these companies are battling with each other. But continuing on just in terms of the bigger picture, I wonder if the bloodletting that has happened

in Silicon Valley is enough for the. market. And I'll tell you why it's sort of confusing here. So obviously, interest rates go up, the way that you do business previously, it's not going to really work the same way. So you end up having these companies for the first time, sometime in their history, or at least the greatest magnitude in their history, doing very big layoffs. Look at like 10,000 people out at meta, you know, basically in a moment. And my perspective of this was always, okay, you're going to do it once you do it right and you don't have to do it again and even as their stock has gone up right like i said meta's up you know double from from the depths last week they just did another big layoff of

you or started a big layoff of another 10,000 somewhere in that neighborhood so one of the questions i have is when is the bloodletting inside these companies going to be enough if ever and you know shouldn't they just kind of be done now that their stocks are on the way up again well let me let me ask you a question back to answer that if you are mark Zuckerberg and you laid off 7% of your workforce and your stock price went up 70% wouldn't you do it again in other words well it's costing it's costing you nothing in revenue it's boosting your your profits and it's putting your share price back up where it was wouldn't you want to keep going that's one second wait let me let me answer that one though like i think that like you you can continue to cut but

And you eventually run the risk of handicapping your organization. Like this second layoff is all engineers, or not all, but it includes engineers where before it was like recruiting. Okay, you can cut recruiting if you're not hiring anymore. But if you start cutting core competency, that's another thing. Maybe the response is that they're actually cutting middle management and they think that without the middle management, they'll be able to operate better. But, you know, it is interesting.

I never really thought about the fact that they're just like, okay, well, Wall Street really like that. Let's do it again and see what happens. Yeah. So now Zuckerberg is not having letters written to him by Brad Gersner and other large investors complaining and making requests and demands. Now he's got upgrades for his stock from the sell side. He's probably in back channels behind the scenes. He's got large investors saying great job. And I want to phrase this to you a little bit differently just because we should not think of these companies. companies in the same way in which you would think of like a classic conglomerate from the 1970s or 80s that overhired or like a manufacturing business or something like that where it's just pure dollars and cents like, you know, revenue is down. We got to cut we got to cut costs to preserve our profit margins. That is not necessarily the whole story here. Zuckerberg, after the first round of layoffs, talked about how employees were thanking him. It turns out that there was. cultural rot coming as a result of the overhiring. There were engineers working at the company that were saying, why aren't we shipping? Why is there so much bureaucracy? Why are there so many layers of management or redundancies in engineering? We need to get back to actually making

and shipping product, which in their case is software or service. So I think that the entire mentality of we have to hire all these engineers to make sure the tech giant down the street can't. That entire mentality is now gone and it's been replaced with who are the people within this firm that are holding us back and that are introducing that cultural rot and how quickly can we get rid of them so that the people who are remaining afterward, A, get the message that this is a company that is now focused on execution and not empire building. And b aren't a drag on the potential earnings so that I don't have to read any more dear mark letters from activist shareholders and hedge funds etc so it's a combination of things it's not

purely about profitability I think it's about like what is the heart and soul of this business are we here to you know play games with each other and have casual Fridays and have louis or are we here to deliver something? And I think obviously they've gotten religion and it's the latter. I'm sure you saw the Wall Street Journal article about the employees inside companies like META who were just sitting around and doing nothing. Recruiters who had to wait a year before they could recruit because they were superfluous there. And maybe you're right, they were just trying to gobble up talent. So the others couldn't. Yeah. And you understand that impulse. You understand that impulse. You've got like a million startups vying for

talent. You've got, you know, 25 publicly traded gigantic companies vying for talent. And again, that placid period from 16 to 21, you know, that a shortage of talent was emblematic of that era. And now it's gone in reverse, as these things often do. So you can understand why they're not done. Definitely. So let me ask you this. So the market is obviously driving this. I mean, It's obviously cultural in some ways, right? Do you want to be able to build again? Things are more competitive. But without these, you know, the increase in interest rates, you probably wouldn't get here.

So the market is driving these layoffs. Do you think from a market standpoint, company like Facebook, company like Amazon is finished here? If I'm an employee in one of these companies, I'm sitting there, should I be like, okay, like, we've gone through these two rounds? I could take a deep breath. I'm probably going to get to keep my job or is, okay. No, if you're an employee there, you should stop focusing on that. look at your screen and do your fucking work because there's no penalty associated with these companies laying people off like Wall Street is cheering they want more and we were taught

I was taught met this with Michael Batnik the other day on one of our shows like the the wave of tech layoffs that we're talking about the numbers sound big and in this case percentage wise they are big but like Amazon firing 10,000 people they have one point. million workers. It's really not that big a deal. They could do that every year for the next 10 years and not even make a dent in just the hiring that they've done post-COVID. So there's probably still a lot of that. Look, nobody's rooting for layoffs, but I also think we could agree. There are a lot of people that have been hired in the last five years that were probably unnecessary to begin with and maybe aren't there to actually work. We, you know, we've read articles about people getting jobs in these companies so that they can walk around to be activists and, and start agitating for social justice and, you know, scheduling walkouts and this kind of thing. Like, there's just a, there's still a lot, there's still a lot of room for these businesses to refresh what they were doing and get back to basics. And, you know, it's, it's not saying that you say is good or it's bad. It's just a business.

That's really what it is. But are you telling me you didn't love the day in the life TikToks? I enjoyed them very much, but that was the top. Like, that was emblematic of the nonsense. Listen, I visited, I visited Google's campus in Venice Beach, and it was amazing. And they had, like, just the facilities. It was like in a movie. And, like, the dining hall alone was just,

I couldn't believe. It was like Versailles. And, and, you know, that's probably 2017. So it had a few more years to run. But I remember looking at the people I was with and saying, how on earth is this possible? Can you have a company this comfortable, you know, with where it is business wise that it's willing to spend this way? And so a lot of that, a lot of that stuff is long overdue. Yeah, one of those stories when I was in Facebook's Menlo Park campus. Now, look, I'm not, I still can't believe I saw what I saw, but I mean, they had laundry there that they would do for employees that I know is for real. And I'm pretty sure they had like an on-site auto mechanic that if your car was having trouble, they would. Yeah. And these things are cool. These things are great. These things are great when, when you're hitting your targets and, and, you know, the stock price is making all-time highs and you have a market cap that's a trillion dollars. These things are great. But it's just, it's not permanent. Like the, you, right. At a certain point, there's competition. there are threats, there's regulation, there were all these things that, you know, you have to

refocus on to survive. Everybody has to stay a little bit paranoid. Yeah, it takes your eye off. I don't know about paranoia, but it definitely takes your eye off the ball. And, you know, when I wrote this book about tech company culture always day one. And it was, it was, it focused zero on the perks, zero. Because the cool thing about being at these companies is that you can build a product and the next day it's in the hands of a billion people or more.

it's not about getting your car fixed in the in the lot right and it did seem like a distraction so but but let's talk a little bit about the the broader economy right now because you know it's almost it almost seems like tech has gone through its recession and now the rest of the economy is about to go through its own is that the right way of looking at it is it like tech just got it out of the way earlier i don't think so but i i think i think tech and just tech in general um was the first to feel the impact of higher rates because of the stock prices. And so you're like, who did these layoffs? The stock market fired these workers because these stocks went down 50 to 80% in value,

which is incredible in a very compressed period of time. And that was the investor class telling these companies, we don't believe that you're prepared for the economic slowdown that the Federal Reserve is trying to produce. So I think the effect was felt first in tech. But now the rest of the economy is clearly decelerating. It's not a catastrophe. It's just a fact.

All of the stimulus is going in reverse. And this is just what happens when the Fed is removing liquidity. So it's not a crash. It's not a recession or depression. But it's a deceleration. And so to answer your question, it's hard for me to picture all of the slowdowns happening economy-wide and on a globally coordinated basis and saying, like, we've seen the worst that we'll see from technology spending, technology earnings, like, I think you're going to have

a tough year in, let's say, enterprise software. You're going to have a tough time closing business. You're going to have a tough time convincing companies to expand the amount of seats they're paying for. You're going to have a tough time laying on new services and penetrating deeper into, you know, Fortune 500 companies' tech stacks and getting bigger commits. It's just, it's harder. And that's what you're hearing from the CEOs now. I listen to the CEO of CrowdStrike, George Kurtz, and he's selling enterprise software, security software, and companies can't afford to not spend money on that.

So what he's saying is, oh, we're doing the amount of deals we thought we would do, but they're taking longer to close. And, you know, if we thought something was Q1 business, it might be Q2 business. We still think we get the business, but it's not automatic. And I think that that's what you're going to hear and see for the remainder of this year, because you just listen to the commentary from corporate executives outside of tech, and they are not guns blazing. So, like, a lot of this is intuitive.

You just, you listen to conference calls, you get the vibe, you get the flavor of what they're saying, and then you listen to the responses to the analyst questions, and it's palpable. everybody is chilling out and doing way less than they were doing a year or two ago. Yeah, you recommended the quarter app to me last time you were on. And now it's a staple for me. It's a great little app. How great is that? It's amazing.

Fast forward to the Q&A and just listen, put it on 1.2, 1.5 speed. Yeah. It's a great way to blow through all these earnings. So one of the things, speaking of earnings season, like one of the things people are talking about is that earnings are going to be down this quarter. I'm curious, like, what you think that means is it just that companies are making less money now than they were, or they're less profitable, or maybe I'm hearing it completely wrong. Well, when you say down, the thing to keep in mind is that there's no absolute number.

Everything is a comp. So think about, so if you think about it in terms of a comparison, it's comparison over this time last year. So the comps are still hard because the economy was still on fire last year coming out of 21 and 22. Consumers were still spending. at peak levels for everything from PCs to gaming consoles to, you know, to non-tech things. That's obviously not the case anymore. If, you know, you bought something from Hewlett-Packard so your kid could, you know, go to college with it or whatever, like if you bought equipment, you probably don't have to do that a year later also, right? So like that, that phenomenon of the services side of the economy outperforming the durable good side, I think will be

with us for at least the rest of this year. And again, it's because of comps. So that's one very big factor. We haven't really heard from any tech companies yet. Those earnings will come in the coming week. And I think you're going to hear muted demand. But again, one thing to keep in mind that Wall Street, there's no such thing as good news or bad news. There was only better or worse than expected. Remember I said, everything's a comp. This is a really important concept. So oftentimes you'll see a company report what you think is, quote, bad news and the stock will rise. Oftentimes you'll see a company come out with blockbuster earnings and the stock will sell off. Why? Because all that matters, good and bad in absolute terms, don't mean anything.

The only thing that matters is, did Wall Street expect more or less? So that's where we are now. I think there's a lot of glasses have empty mentality about the company. earning season. We're supposed to be down about 7% on the S&P, like the S&P 500 earnings total over this quarter last year. Also, not catastrophic, coming off a very high level. And it might be slightly better or slightly worse than that. But, you know, I think that's that's kind of where Wall Street is expecting to see things shake out. And, you know, you talk about what you expect, right? And I think one of the big issues here has been, what do we expect from the Fed? Right. It's like, wow, when

are they going to stop raising rates? When are we going to get some uncertainty? Because eventually we have to have some sort of pause before people can predict what's going to happen and then plan. Yeah. Well, nobody knows is the short answer. The longer answer is if you listen to what the Fed is saying about the last rate hike, the one that they carried out during the banking crisis, they said it was an 11th hour decision. So they did a quarter of a, they They did a quarter of a point rate hike in the last meeting, but like they really decided that day or the day before. So the idea that anybody knows what the Fed is going to do, I mean, they don't even know what they're going to do. So how do you know?

So there's, you know, there's always a debate. What should they do? I'm in the camp that says they've probably done enough. And a lot of the indicators that they think are too high or haven't come down enough or whatever are really severely lagging indicators and they should give it some time. for the cumulative impact of everything they've done so far to catch up. There were some people who were in the camp that say, nope, slam on the brakes until we really, like, we really have confirmation that things are falling fast. And, you know, I think that's a mistake.

Well, maybe that's the way they end up going. Yeah, you were pretty strong. I mean, in the camp, but you were also just, like, very adamant that Powell needs to pause. I think so. look the market is pricing in weight cuts already so so when you when you look at futures prices and you look at what the market is pricing in in rates for for the second half of this year for next year the market is saying they've already gone too far and you don't even need to know like where to look and and we've you know surveys all you have to do is look at bond prices

themselves. The Fed tends to follow what the two-year does. And the two-year is not with the Fed, you know, going significantly higher than where it is right now. The 10-year fell off. So like I think the market is already saying some of these last weight hikes are going to have to be given back because it was already too much. So, you know, it's more than just like my feelings on the subject. This is the consensus is that it's already overdone. Josh Brown is here with us. He's the CEO of Riddle's Wealth Management, the host of one of my favorite podcasts, Compound and Friends. I listen to it every single week. Really fun ending the last week's episode about ICE in Europe. I recommend you go check it out. Josh gave us the report. Europe, you need more ice. So there's also some great financial analysis right before that. So before we go to break, I just want to say if you're enjoying the show, a rating and review goes a really long way, a rating on Spotify, a rating interview on Apple Podcasts. If you can do that, that will help us. get great guests like Josh to come back again and again and show folks. I'll always come back, Alex.

I don't even read your ratings. I appreciate it. Man, I'll just come. Okay. Well, thank you. In which case, if you need a great way to let you off the hook, then just remember, Josh will be back. But, uh, but hey, if you've got your app open and, and you're willing to hit that five-star rating, that would go a long way and we'd appreciate it. All right. We'll be back right after this.

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like the one you're using right now. And we're back here on big technology podcast with Josh Brown, CEO of Ridholt's Wealth Management, co-host of The Compound and Friends with Michael Batnick. Where else can people find your stuff, Josh? Well, I used to write a lot more than I do now, but the blog is the reformbroker.com. And maybe I'll get back to writing at some point. But like, I'm kind of like, I'm kind of focused on building the business. And I can only do so much media.

And I think I've just kind of defaulted to doing a lot more. television and podcasts and such um but you know things things could change but that's the primary way to catch my stuff these days is audio and video yeah and uh like i said before the break compound and friends staple for me i'm in the gym i'm cooking i'm walking somewhere i'm listening to compound and friends oh we love it thank you thank you friends i'm watching cnbc there's a great chance that josh is on also and i always turn the volume on so just just putting it out there joining me for today right here at post nine josh brown stepany link and jim labenthal let's check the markets uh we've been in the red for i'm on less than people think uh just a couple of times a week but it's uh it's a lot of fun

awesome so um i thought for the second half we could like i teased that we would go through some of these battles let's definitely do that i wrote like a little bit of a i would call maybe provocative thesis um about each one of the tech companies maybe i could just like read it to you and kind of get your take on it. So let's start with Facebook or meta if you prefer meta. I wrote doing everything right in the market size, but pretty weak in its future business and vulnerable in its core. Do you think they'll change the name back to Facebook? I keep saying they should just change it to AI at this point, like, or meta AI. Is that what they're going to do? They're going to keep chasing the next buzzword and keep changing the name? Well, I have this later on for you. But I think, I think,

think that the AI stuff, at least in the near term, is definitely more real in the Metaverse. But maybe, maybe, I mean, isn't Metaverse such like a zero interest rate name? Like, once you have a 5% interest rate. It's awful. I hated it when they did it. And it made sense when they did it and I still hated it. And now it just looks, now it just looks goofy. Yeah.

I don't know. Wait, do you know any Facebook people that say I work at Meta? No, actually, I know they do. They all have taken to it. I mean, they call themselves Metamates. Oh, really? What if they rebranded as Instagram? It's an interesting idea, but do you want to rebrand as a company that is sort of second in the market next to TikTok?

I don't know. I would rebrand from a position of strength. Yeah. So I really don't know what they should do, but it might be one of the all-time worst name changes in corporate history. I would have to think about that. that, but it's, it's pretty bad. There may be, who knows, maybe with, like, what's happening, the reputation that TikTok is getting and what's happening with Twitter, having some nostalgia for old social media,

like you have to, I mean, I have to say that Mark Zuckerberg probably looks a lot better now than he did two years ago. And there might be some nostalgia for Facebook, even if not many people are using it in the same way that they did beforehand. Maybe go back to Facebook. If TikTok gets banned in the United States, the no-brainer is to rebrand his Instagram. Yeah, but do you think TikTok? is going to get banned.

No. No. I think it'll get subsidiaryed. Right. And hand it over to American ownership. And the Chinese will content themselves with a really, really big royalty revenue stream. And I think that's how it'll end up going. Yeah, I'm with you on that.

If it gets there. I mean, maybe it just, the U.S. government, when it comes to tech, has a habit of just letting things continue as they are. But this is a little different, but I don't know. There's all this talk. But if this is a pressing threat, where's the action? Because there's no action yet, it just doesn't seem like what's going to be that compelling event? Well, you know what?

The American public is not clamoring for this to happen. And that's the missing ingredient. Politicians do things to get reelected. And so if their own internal operations are taking polls and seeing what their constituents think and there's not a lot of energy behind, you know, there's not a lot of fervor to go after and TikTok, then they'll just stop and they'll go chase whatever the next issue is. So I think you're right. Yeah, there was an article in the Washington Post last week talking about how the Democrats are

worried that they're vulnerable because of their, this potential crackdown on TikTok. Well, the other side is cracking down on Mickey Mouse, so maybe it's a push. Yeah. All right. Well, we'll see also like, I don't know, it just, well, this is, again, gets to the government's role in the private sector. So, but when you bring a national security and that's one thing, but I've always felt that there needs to be an egregious foul on TikToks and for something like this to get done. Well, I guess, I guess we'll have to see then.

Right. Some kind of, some kind of leak where we find out, you know, what they're actually doing with TikTok specifically. And if it, if it pisses enough people off, maybe. But for right now, it doesn't feel like putting a lot of time and energy into banning TikTok is going to be a winning strong. for either party for any particular reason. Correct. And definitely not for Facebook either, at least in my opinion. So let's talk about Apple.

So I wrote that Apple is somewhat vulnerable with inflation. There was a 40% decline in laptop purchases. They're about to push a risky mixed reality device without a clear roadmap. Who knows that people are going to upgrade iPhones in the same degree as they were beforehand. Now, the company has been pretty invulnerable. but maybe there's some vulnerability there. What do you think? Well, the stock is off. It's all-time high. But I think the important thing to remember is that Apple is one of the greatest cash machines ever built. And the ability to buy back

stock, pay a dividend, engage in R&D, enter new market. Like, they do it all. It's one of these companies that has just been able to walk and chew gum. And look, there have been periods where they've looked very vulnerable and they've figured it out even just in the tim cook era so like until they really miss until they really launch something that falls flat uh i think it would be a mistake to bet that that's what's going to happen um it hasn't been a successful bet so far so apple has this speaking of like doing everything right from financial standpoint they have this new apple i think it's a savings account or apple card or something of that nature where you you put your money with Apple and you get like 4% back.

What would you tell your clients about that? I was going to say the odds of that even showing up on, you know, in terms of like moving the needle for Apple or zero. Right. So it's part of their services business. That's where that gets bundled into. And the services business is just massive. And, you know, I don't think that's a big picture.

I don't think that's terribly important. It is interesting. And it could open the door to more. financial services, but I think the big picture is the installed user base and the overall growth in services revenue and, you know, what they can then do with all that cash flowing in. And it's, it doesn't feel like it's on the verge of changing. Probably the biggest risk there is TSMC and China, Taiwan, and some kind of event that limits their ability to access the chips they need. Like, if you ask me, like, what's Apple's Achilles heel? It's something geopolitical

where they're asked to bow down to China in some way. They refuse to kick that out of the country from selling iPhones there or some kind of disruption to chip supply because of China and Taiwan. And by the way, that China, Taiwan story and Taiwan send me in particular, I would say that's the Achilles heel of the entire global economy right now. Like that's the, that is the one. Because if you thought supply chain shortages were bad last year, you know, any kind of geopolitical event in that part of the world, you will see an economy literally like off a cliff if something goes wrong there. But I think that's Apple's probably biggest point of risk. And you see it. You see all the effort to build their own chips.

You see all the effort for Taiwan semi to start building in places like Mexico and Wisconsin. Everybody sees this. It's not exactly visionary for me to say this, but I'd worry way more about that than a lot of the other concerns about Apple. We just had Congressman Rocana on the show last week, who was fresh off a visit to Taiwan. And, again, this is also fairly known. But it was interesting to hear from him where, you know, he was behind this scenario. How long does it take to get these chips in the U.S., as opposed to being manufactured in Taiwan? And the answer is a decade.

So it's sort of a, you know, 10 years of being sort of, you know, fingers crossed, hopefully nothing happens. It's a long time. Right. You have to start somewhere, I guess. You had to plant the tree at some point. But yeah, look, I think a lot of interesting things can come from this economically. If we in a cost effective way can start producing this stuff here.

But we're nowhere near close to that. And all of these companies that make up our stock market, Apple, and video there's a huge amount of vulnerability to that one part of the world and all of the things that it supplies and nothing we do in congress or on the ground in the western hemisphere is going to change that right now okay let's do google i wrote risking its core business by not being ahead of the chatbot wave sell i did you read the bloomberg story uh yesterday about they interviewed all the google people yeah yeah I did. I mean, I'm a shareholder in alphabet, and that's terrifying. They really seem to not know what the hell they want to do. So in response to that article coming out, which I'm sure freak them out, they came out and said that they're going to merge their two AI entities, one of them being Google Brain, which is homegrown, and the other being what is it called, deep mind, which they acquired. So now they're going to smash those two things together and make a more concerted effort to have a competitive.

of the product out there in the market. Right now they don't. I was playing with Bard and it was giving me false information that I was very easily able to verify was false using Google search. So it's extremely problematic that their AI product is a piece of shit, but it is. And chat GPT is not so amazing. Like it's, you know, let's call it what it is. It's a, it's a, it's a prediction engine for language.

you know i mean it's it's amazing in that the the usorship of it has exploded overnight like a hundred million users out of nowhere that's the amazing part of it not the tech the tech is going to be blowing our minds six months from now a year from now now that we're all playing with it now we're first going to be amazed right um but google like google not even being able to compete with this rudimentary version of chat gpt which is a not for profit foundation that has a you know a profit seeking department within it and then you have the third most valuable company in the world like trying to play catch up with that it's really astonishing what's going on here yeah it's fascinating there's a line from that bloomberg article

that i was looking for and i found it where in february they're testing it and someone writes google employee writes bard is worse than useless please do not launch that was the line where i looked And I was like, oh, boy. But one thing I'll say, Google has never played defense before. Right. Google has spent the entirety of its life on offense since coming public. So they came public in like 2004. They were after the initial wave of dot coms came and went.

So they had like all of those like all of those examples of what to do and what not to do to follow. and they immediately took like 85% market share and then they had it the entire time without really any challenge whatsoever, even Bing, Yahoo committed suicide. They never had to defend their turf. So it'll be interesting to watch them try to do it. Maybe they will.

So my personal opinion is that you're not going to see Bing be 10% of search. any, maybe ever, because Google will get their act together before something like that could happen. And they'll figure out how to incorporate some of the Bard stuff, uh, or some other AI stuff into what it is so that they keep their user base. But they're going to have to fight for it because they don't have it all for themselves anymore. Absolutely. And they have the capabilities. So they can definitely try to counterpunch. So that'll be really fun. They have the expertise. They just, you know, they have to strategically think

this through. And the irony is that a lot of the people working on AI for Open AI could have been at Google. They kind of had an exodus from their AI initiatives because the CEO is being too cautious. And he was spending too much time listening to all these in-house ethicists and all these people trying to throttle the AI. And then Microsoft just comes along, drops a check on, on Altman and says, do what you want to do. Like we're on board. We'll say all the nice things in public about ethics, but like, let's go. And, you know, maybe that's where Google has to get to.

It's terrifying for the rest of us because we don't know what the ramifications are for that. But that's kind of where it seems to be sitting right now. So let's talk about Microsoft now that you brought it up. So for Microsoft, I have well positioned for every trend, cloud, AI, enterprise technology. Bye. I mean, it seems that way. This is the stock that I think fell the least out of the group from its highs during the October lows for tech last year. And very quickly regained a lot of the market share that it lost.

Fundamentally, it doesn't appear as though the business has lost the beat and definitely still has the confidence of Wall Street. So this is like one of those trades where while it's working, just enjoy it. You know, nobody seems to be looking at anything Microsoft is doing critically in terms of like, this ain't going to work or they're behind the eight ball. I think right now, Microsoft is probably the name out of this group that people are least concerned about. And it's fascinating because the company for a decade had a lost decade, terrible leadership, was stuck in the mud. And then I think the energy to move them from the desktop operating system of Windows to cloud just show them that sometimes it's okay to rip everything up and start again, which is what all these companies need to be able to do. And that's probably, I mean, the same person that did that, Satya was the head of server and tools, which had all that money coming in. Well, there's two things that people should know about Microsoft's last decade.

one of those things is that earnings actually grew. Right. So Steve Balmer, all-time worst timing. Bill Gates gives him the reins, I think, in the year 2000. So he inherits the reins at the all-time high price for tech stocks. So almost no matter what he did, he was not going to be able to say the stock price grew by X percent over my tenure. So that's a little bit, it's a little bit unfair to him and his legacy, although he did some clumsy stupid stuff that have become memes and we all we all know he left at the iPhone he launched

the Zoom we know but like earnings grew while he was there and they grew I think faster than they did for the overall stock market so it's not like he was eating crayons but he had that unfortunate timing of where the stock was priced when he took over but then I think the the best thing you could say is that he knew himself when it was time to walk away and let some somebody else have a turn. Because he's still the second or third largest shareholder and always will be. And so he correctly recognized, I'm, it turns out, I'm not the guy. So I think he, I think when we look back, we'll give him more credit and he'll be less of a punchline than maybe he was at one point. But Microsoft, Microsoft now, or the second thing I wanted to say,

Wall Street didn't really understand the degree to which there were employees at every government and every Fortune 500 company and every large multinational company all over the world. Wall Street didn't fully understand the fact that these companies had employees who were Microsoft certified and were never going to change things over to Linux or Apple or so when, Cloud came along as a business, it was, I mean, AWS, yeah, but it was really Microsoft's business to lose because you're going to these companies and you're asking them to move things from internally to the cloud. If you have at least a Microsoft cloud environment, all of those Microsoft certified IT professionals working at these companies could get on board with that. They didn't look at that.

They didn't look at that like, oh, shit, this is going to replace the need. for me. They looked at it like job security. And that's one of the most unsung aspects of the cloud migration and why Microsoft was able to preserve its lead and then grow it. And again, that's something that's also not going to change anytime soon. There is an entrenchment in cloud that I think continues to help companies like Microsoft. Which could be very interesting as they go and try to sell AI into companies as well. So, yeah. I think it's, I think it's an enduring advantage that they will enjoy for a long time to come. And it's behavioral.

Because again, who's making these decisions? It's people at companies that have a vested interest in staying with Microsoft. Okay. Let's let's talk about Amazon. Amazon is very interesting position. And I have, this is what I wrote, Cloud CEO in a moment where the retail business needs the most attention. Rough in the short term, good position then. long term. Well, I don't know if this guy's going to be the CEO a year from now.

Really? Okay. So tell me why. I could see, I could see Bezos coming back. Really? Why? They all do. Because he's too young to be done. Too much of his fortune is at risk based on the decisions of someone else. They all come back. Howard Schultz came back three times already. Right. Like it's, it's to me, so this, I'm a shareholder in Amazon. Here's why I like this situation. Either Jassy like gets the confidence of the street and the stock heads back to 150

or Bezos comes in and it happens anyway. But like look just watch what what's going on with Bob Iger at Disney and then ask yourself, do I think Jeff Bezos is paying attention to that? He definitely is. Yeah. Okay. So they all come back.

I think he's coming back. Or I'll be shocked to the upside because jassy figures it out but i i feel like either way this this company will get back on its horse and uh we'll get its momentum back it's just a matter of time so um invidia is a very interesting one for them i just wrote get on the get on board and ride the a i train the only way that you can really like buy it right now is if you just don't care about the valuation because it's the most expensive large cap stock in america i would say worth more

than that it's not yeah and it's 60 times earnings do you know how much stuff I'm long the stock the thing is I own it for so long and from such a low cost basis and I've trimmed it on the way up so I just don't feel as at risk as I probably am but like a new position right now because you're chasing AI I would advise against that there will be a disruption in the stock market at some point this year there is every year where they're going to hit these high beta names hard and maybe you're that's the time to not be fearful and take advantage of a big drawdown in invidia i could be wrong yet an analyst this week uh double downgrade double upgrade the stock go from a sell to a buy and his maya culpa guy from hsbc he's basically saying look i uh i was focused too much on the enterprise and data center slowdown and i missed the the chase that would be on for ai chips and that's really the most important part of the story, it turns out. So his target is like 355. So, yeah, he went from a target of 175,

which is substantially below where the stock is trading, to 355, which is substantially above. So I think there's a lot of that. You've got retail people obsessed with, quote, playing AI, and Nvidia is the most obvious way to do it. Their chips have 80-something percent of the AI chip market and you know it's quote the analyst again you're getting $10,000 for the A100 chip right they're getting $20,000 for the H100 chip which is the one that's so powerful the government won't let them sell it to China yeah so that that pricing power and the volume of these chips that are going to be needed for this AI revolution that combination is insane so who else makes AI GPUs that are suitable for AI.

There are other players, but Nvidia is so far ahead, both in its ability to produce the chips and the chips capability that, like, it's just hard to see a scenario where Nvidia doesn't keep winning and they, and keep this market. So that's why it's trading. So people are like, oh, it's so expensive. And I say, well, don't you think there's a reason? Like, do you think the market is that stupid that it's not aware how highly valued it, or how high of a multiple it's paying.

The market is aware. There's a reason. It's not out of nowhere. Right. So that push and pull is difficult. There are some investors on Wall Street who just, that's part of their process. They don't care how great the story is. They don't get off on the tech, the technical aspects of what a company is making.

They just will not invest at this valuation no matter what. And we watched, we watched this happen with Tesla. You had, you know, traditional investors who had to, like, invent new metrics in order to justify buying the stock. And then the stock at its maximum valuation gets added to the S&P 500. And you know they didn't want to do that. You know, the index committee at Standard & Poor's was like, S&P Dow Jones indexes. You know, they were like, this is a trillion dollar stock and it's not in the index. And now they're profitable.

I guess we have to add it. Right. So in every era, there is one stock that just defies the investor community. And I think Nvidia has become that stock for this era. It was probably Tesla last time right now. This is the stock that it's almost like, it's almost like a religious dispute at this point. Interesting. Okay.

Two more before we have to jump. We could do it quickly. Tesla, I say, would double if Elon sold Twitter? I don't know because that last quarter that they reported this week, they're starting to look more and more like a traditional automaker. And if that's how they're going to start to get valued, there's a lot more room to go lower. I do agree that Twitter thing is not doing them any favors.

And I don't know how much longer he's going to continue, being as hands-on as he is and his vocalist. as he is, but, you know, listen, this is what happens when you buy into a cult of personality. Right. You got to take the good with the bad. This is, this is the bad. Yeah. Last one, Bitcoin will never reach $64,000 a coin again.

No way. You said that? That's the provocative thesis I'm throwing on to you. So you think it's going to go above? I think there's nothing, I think there's nothing intellectual to be said about the future price of Bitcoin. my personal opinion it's all it's all feelings and ideas and concepts there's that there uh i had a guy on my podcast rick edelman say he thinks it's 150 000 by 2025 and i said why

and he said to have it in it's just math and i said oh all right yeah i guess i understand i still don't but i guess i get it i love hearing you talk about bitcoin josh it's always funny your perspective. I don't, I, I, I don't have a very, if you told me, you told me next month, it'll be 20,000 or 40,000, I would, I could believe either, I could believe either case. Right. Which is why, I think just your agnosticism about it and, you know, I think that you're approaching it in the right way, which is that there's no fundamentals here. So, who knows? It's, I got a, I got it, right. I got a wallet for the lottery tickets. Josh Brown. Thanks so much for joining. Oh, so great to be with you, Alex. Thank you.

and that'll do it for us here on big technology podcast thank you so much josh brown for coming on it's always great to speak with you and i love listening to your compound and friends show so i hope we can do it again soon thanks to nate gawattany for handling the audio thanks to linked in for having me as part of your podcast network thanks to all of you the listeners for coming back week after week if you're liking the show as i mentioned please give it a rating and review on apple podcasts and spotify those go a long way really appreciate some people who've done it recently. I want to shout out in particular. We've got some good ones recently. Thank you, W.S. 77. Weekly deep dive into all things tech, an absolute must if you need

to listen to deep insightful discussions on tech, especially in the air we're in. Can't pass by a week without it. Thank you, WS 77. Thank you to CalCT. Big Tech Made Conversational. The podcast features the most high profile guests from the tech community. They and Alex with its few. Love that. host that lets experts talk and take the lead. Simple against strategic questions, break down what few truly understand. I read the likely tech news outlets as my primer then come here to learn more about specific topics that I want to better understand. Like the latest AI-fueled newsfeeds, listen to completely different points of views among engineers who create products. This podcast is pretty special. Thank you very much to the two of you. And thanks to everybody who's

rated among the many who have. And I can't thank you enough. You really do help the podcast. And we've been on a role lately getting great guests. And you are a large part of the reason why. So thank you for that. All right, that'll do it for us here on this week's edition of Big Technology Podcast. We will be back on Friday.

That is going to be live on LinkedIn. And then we'll have it on the feed shortly afterwards. Breaking down the week's news. And we'll see who comes on next week. We're going to have a special guest next week. So stay tuned for that on the flagship interview. All right, that will do it for us here. we will see you next time on big technology podcast.