Chit Chat Stocks - Amazon and Alphabet's Capex Ramp; SpaceX and xAI MegaMerger; Software Stock Meltdown $AMZN $GOOG

Episode Date: February 6, 2026

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (01:09) The Software Stock Meltdown (04:51) Valuations and Market Reactions (13:46) Amazon Earnings Analysis (19:17) Alphabet's earnings (27:34) The AI Landscape (38:41) Bitcoin's Volatility and Market Sentiment (48:15) SpaceX and XAI Merger Discussion (57:30) Quick Hits: Earnings and Market Trends ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is presented by Interactive Brokers. You research your investments, but did you research your broker? In 2025, IBKR retail clients averaged a 19.2% return, beating the S&P 500's 17.9%. Over time, the broker you choose makes a difference. If you want to learn why, head on over to IBKR.com slash 2025. More on this later in the show. Welcome to Chit Chat Stocks, a podcast that helps you discover your next great investment. I'm one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only

Brett Schaefer. This is our weekly Power Hour episode. We do these live on Thursdays at 5 p.m. Eastern time, and we talk all things financial markets. If you want to ask us a question, head on over to YouTube and head over to the comments section on YouTube, Chit Chat Stocks, and like I said, live 5 p.m. on Thursdays, so you can ask us questions there. And then we've got tons to discuss today. I'm sorry if I'm forgetting anything as far as the talking points.

I know we were supposed to say a bunch of stuff at the start here. But we've got Amazon, we've got Nintendo, we've got Google Learnings, we've got the software meltdown. Is that a fair way to describe it, Brett? It's never-ending. So I guess that is fair. And I made a joke a couple of weeks ago, it might have been in the subscriber chat, it might have been on Twitter, that I'm getting interested in software stocks, so we have 20% farther to fall from here. Luckily, I listened to the devil on the other shoulder and didn't buy any software stocks, so maybe now finally they are a buy. How is it you – you're not fully 100% invested in software stocks, but how has it been feeling having those in the portfolio?

Because it's different – it's much easier for me just seeing those on the watch list than actually seeing that number go down in the brokerage account. Yeah, it's amazing how in the watch list it's exciting and then in the portfolio it's just dreadful. You look at it like – I don't know. You look at it like you can't buy more, like you've already lost money. But the – it's amazing as I look at a lot of the software stocks that are in 50%, 60% drawdowns and some of these are in 70% drawdowns. And you look at them and you think, OK, I can – you can make the case for this to be undervalued here. But the fact that it's in a 70% drawdown and you can make the case, it makes me think like what on earth were people thinking a year ago? Oh, yeah, I know.

It's crazy. You still have to make some like reasonable growth or reasonably aggressive growth assumptions for these to look like good investments from here. so it really is astounding the valuations that these were trading at a year or two ago i think if we want to go full circle back to 2021 sass was one of what i like the some people are calling invent this term the rolling bubbles of the last decade or so that was when that seemed to peak and when you look to today i feel like we're getting close to the official five-year washout of the software sass uh i guess ai is causing the extra the carnage here but the full popping of that bubble we're finally seeing some reasonable valuation but i was even doing a

short article for the molly fool today on the trade desk and i go oh wow stocks down 60 percent down 80 percent from highs let's check out that pe maybe it's interesting and i was kind of looking at it there's some a lot of hair on that uh it's it's in a different spot than people probably thought a few years ago but pe is still 30 it's nothing to guys sniff ahead down 80 pe is still 30 yeah i have nothing else much to say but i will for the live audience i guess but most people are listening tomorrow uh friday morning when this comes out there will be putting the finishing touches on it right now having my handy editor ryan read it for grammar a research report on a software stock we've been following for a long time that i think is getting interesting

wicks that'll go out to the newsletter tomorrow morning but for the podcast here i got nothing else to say you have a list here of huge stocks and drawdowns i saw people asking about it apparently today claude or excuse me anthropic maybe claude will just start releasing it for anthropic now uh we'll just automate the entire business they released a financial analyst or something along those lines i it said it'll do the work for you you know it's amazing how how much people react to a lot of these uh product launches and it this recent sell-off i think all sort of comes back to the launch of claude for non-devs which actually wasn't anything novel like so claude code was launched what year ago now

and then i think like two months ago or maybe less than that there was basically they released sort of claude code for non-developers and that was kind of all of a sudden what sparked it but i realized like nothing changed they just nothing changed really other than like they just launched the product to a new demographic and then all of a sudden people opened their eyes to it the the part that catches me off guard here is it's the selling is very thematic like it's not specific companies impacted it's just the whole software sector is being sold off like Like, no one really, other than cybersecurity, which is kind of its own beast, no one really seems immune to the software sell-off?

Well, yeah, for example, the company I've been researching comes to mind, Wix, sort of small businesses, entirely different market. There's totally different dynamics there versus someone that's enterprise for large businesses, such as a service now. That's an entirely different ballgame, but everything's just getting sold. It's a thematic thing. And I feel like if you go digging here, at this moment, there's a lot of babies that could have gotten thrown out with the bathwater. For example, with Wix, there's no IT departments at these companies.

I don't think the restaurant owners are going to be experimenting with vibe coding, QuickBooks, Wix, Square Point of Sale solutions, all that stuff. And frankly, they don't have time. They probably work 12 hours a day managing their business. i i think what would pause this entire sell-off is if claw if anthropic just listed just released a list of all their software vendors if if anthropic was using all these software vendors which they are i'm sure they are they it would be proof that it's still easy to go with an outside vendor i mean i like i work at fiscal ai we're a very ai forward business in that you know we're using it for core operations it's in the name of course if it's in the name

it's gotta be uh i mean i'll speak for you guys you don't have to speak uh because i don't know it's company on company stuff for who you're competing with but you guys are what from what what i my perspective is trying to disrupt some of the legacy players like a fax set like whoever like even bloomberg slightly different but within that realm making it cheaper making it more accessible in the browser using ai tools it doesn't mean a lot of these legacy softwares are going to go to zero as long as they can keep pace and yeah you're gonna have to keep pace with product innovation but that's been true forever we i mean we have a core core business that we're using that we are using ai to try to be innovative in the financial data

space but that doesn't mean we're building our own slack that doesn't mean we're building our own crm and obviously at the massive massive scale amazon google microsoft yeah you make it internal because it makes sense you're you it's worth the spend to have 20 developers on that product because you have a million employees that are using the service so so it's like the roi is there in and of itself without having to sell it to anyone else but for most of these companies it it really doesn't make sense and it's some of the biggest beneficiaries are these companies like some of the best tech talent that's leveraging clod code clods agents or whatever coding agents that are popular cursor camera replet is another big one base 44 works the developers at these big

tech companies for the most part that are not necessarily big tech but it's the development departments or the it departments at these companies i think they're the product velocity and the platforms are going to improve and it's going to be more useful and valuable to a lot of the end customers which is going to result in higher contract value is my suspicion so it actually it really does remind me of the search is dead narrative from 2023 i guess it was where and i know google was like the one that was the most impacted by that but you had a lot of other businesses that the belief was search traditional searches dying anyone that benefits from traffic from traditional searches going to implode that that kind of thing and that didn't really seem

to be the case some of those companies did get hurt because google basically took the search results and made them their own uh through ai answers but yeah don't tell the molly fool that they that is you know prime example number one uh you look at like sap go like good luck like Trying to tell the head of accounting at a Fortune 500 company, hey, I know you've been using this as a system of record for 30 years, but actually we've got these two devs that just vibe-coded a new accounting solution, and we're going to migrate off. I know you've got to report next quarter's earnings in a week, but I need you to get it perfectly done on this new tool, and we're just going to set it. It's not realistic at all. Like this isn't – it feels like one of the most random sell-offs a little bit because I'm not actually seeing this anywhere. I've seen a whole bunch of stories on Twitter of, no, we actually built our own internal system.

Is there a single – like big Fortune 500 or large software company where they're actually losing deals from this? I don't know. Maybe I'll ask Gemini that. And, yeah, I appreciate your rants on this, and I do agree with what you're saying. But I think it just presents buying opportunities, and the companies that will repurchase stock, return cash to shareholders, be part of their capital, well, shareholders will be happy over the long haul. But this is one of the weeks, Ryan, where we have basically a million things we could discuss. I think it's the heaviest earnings week of the season. We could probably go for two hours if we wanted.

If I can just – before we get to Google or Amazon earnings because I know everyone wants us to talk about that and I will. I will just mention the stocks I've been buying or have bought. Oh, all right. Monday.com because I've talked about them recently. So we're not going to do like a whole episode on them. Monday.com, Adobe. and then remitly has kind of it seemed like had some sell-offs adjacent to the software space it might have had its own like uh rating adjustments from the investment banks but it seems like it's

kind of trading in the same band is what it feels like but anyway i'll leave it there monday.com adobe yeah remitly i can't figure out why it keeps falling but yeah i think it's cheap as well and we do have a comment here that says you remember the landing scene and saving private ryan that's me as i did as a concentrated constellation software shareholder hey you're experiencing normal uh drawdowns for once as a constellation surely you're making up for years of just 20 but yeah we get a lot of people here asking about amazon alphabet someone says plus one vote for the two-hour stream if we maybe go a couple minutes long if we have an extra topic at the end for this one uh but let's talk amazon and alphabet i mean we just had amazon an hour before

this recording so maybe we can go now and just do them first and then talk about alphabet uh stock for amazon's down about 10 after hours we haven't listened to the call i think it's ongoing as we speak so if anyone in the chat sees anything on the twitter universe maybe you know let us know if it contradicts anything we say, but let me just go through the quick numbers. 12% total FX neutral revenue growth, steady growth of 10% in North America for retail sales, 24% AWS revenue growth to $35.6 billion. Fastest percentage growth in a long while. But what I will add here is that AWS quarterly revenue grew by $6.8 billion year over year. So they added $6.8 billion in quarterly it's not arr but i think that's that's a fine metric to use wait sorry repeat that so

they had 28 billion added relative to last quarter or last year last year year over year it's it's it's you know so there's probably some seasonal spend for retail and stuff like that it's not you might want to do quarter over quarter or arr this is just illustrated for how fast their competitors are growing. Google Cloud added $5.7 billion. My question is, when do we worry about AWS losing market share? Because the percentage growth, and you're going to get to it when we talk Alphabet next, it feels like AWS, they keep posting slightly slower revenue growth on a percentage basis, but historically, they were adding more absolute dollar figures to their ARR. And I feel like the rate of that Google Cloud's growing, they could close that gap pretty quickly in 2026, 2027, 2028.

It's just something I would be maybe looking at as an Amazon shareholder. Ads, 22% year-over-year revenue growth. We saw a little bit of margin expansion, even though there were some severance hits this quarter from the layoffs. I think with ads growing this quickly and with AWS growing this quickly, you probably need to expect major, you know, a couple of percentage points, margin expansion in 2026. As I mentioned, stock down after hours, probably to market at about $2.2 trillion. Given they did, I think, $80 billion in earnings this year before taxes in 2026, you probably could expect them to do $100 billion as long as, you know, the severance charges roll off and they keep getting a little

more operating leverage and keep growing across the board for north america international and aws is that cheap i mean you're an amazon shareholder here ryan probably maybe 22 times 2026 pre-tax earnings what are your thoughts on the quarter and maybe this is the first time you looked at it and then we can kind of look at alphabet as well oh i should mention the capex guide bearing the lead 200 billion dollars across the business in 2026 i'm assuming the majority maybe 80, 90% of that is AWS. Alphabet and Amazon are going big. Go big or go home, I guess,

for this AI data center spend. Just wait until it's in space. We'll get to that later in the episode. All right, what were your thoughts? You research your investments, you analyze markets, you manage risk, but did you research your broker?

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SIPC. The quarter itself looked good. If you just stripped out the CapEx guide and the uncertainty there, it's a really solid quarter all around. I mean, 24% year-over-year growth in cloud is their fastest growth rate in three years off of their largest base and like you said it doesn't look as good relative to azure and google cloud growing at 39 and 48 respectively i believe are the numbers so azure's growing 39 google cloud 48 but nominally amazon is still growing faster they're adding more revenue uh sequentially i believe i got to double check the numbers there uh then google cloud and azure and it actually i think a lot of people underestimate how close in size google cloud and azure are to one another because

microsoft doesn't report azure revenue independently they play little accounting games they have that segment of cloud revenue which includes more than what google cloud an AWS would include. Yeah, it includes office subscriptions. Let's get a boycotter for some sort of something. We've got to get that fixed. For the sake of fiscal AI, for every investor out there, let's just get some apples-to-apples comparisons, huh?

We had a friend at TSOH Investment Research. He's got to do these estimates himself. Microsoft, just tell us the number. Just tell us. And that's the part that frustrates me is it's – they're like … You have the number. Yeah. They're like, well, cloud – our business is cloud.

Like we can't just disaggregate the two. They're integrated. And it's like – but you report Azure's revenue growth. So you obviously have their revenue itself. Why don't you just report that? Anyway, that's kind of a separate tangent. before we get to amazon okay before we get to amazon we have someone in the comments here will ryan be buying more amazon if this i'm assuming after this after hours holds up what how are you

feeling with the capex i i don't know what do you think ordinarily i would say yes but everything else is selling off so much lately i mean we can talk about like pretty much my all my largest holdings seem to be i'm not even much i'm not even much software stuff and there's there's some drones hey it hasn't been a bad week to have a small percentage of the portfolio shorting some i try not to swear we got to come up another word for not saying blank codes crap all right good yeah crap codes that's fine that's fine for the car ride uh a lot of it's a good week to be short some crap codes with a small percentage of portfolio but yeah i have other stuff coupon oscar health remitly some stuff that's not even in software that's drawing down

a lot a lot a lot of stuff uh so i get where you're coming from it's actually hard nintendo i mean what's going on there but yeah yeah the part the part that throws me off here is that everyone's concerned about the capex guide and then this this applies the same for microsoft it applies the same for google the stock's all sold off on the capex guide and for context for anyone that we're going to talk about google in a second probably but for anyone that didn't follow this week's earnings basically all of them guided for massive capex growth uh google's expecting capex to like double uh i think amazon's is expected to go from like 130 billion to more than 200 billion i might be getting some 200 200 billion alphabet about 185 meta they don't even

have a cloud division they're doing over 100 billion next year and we're getting to the point where almost all of these businesses, maybe not Microsoft, I haven't checked that, but all four of them are getting close to putting in all of their operating cash flow back into CapEx. I think that could be what people are finally concerned about because what happens next? But are they? Because isn't it ironic that people are like, well, we don't know what the return on that CapEx is going to be, but also AI is going to disrupt enterprise software and we're going to sell off all the stocks because of it so it's like yeah the value has to go somewhere yeah yeah yeah i i just don't see how they could both sell off simultaneously how can you sell off on a big

investment in ai and then sell the stocks because they're gonna get hurt by ai it just i don't know at least at least they're not oracle did you see oracle tweeting like a bank from 1931 uh did you see that yes did you see the interview with jensen huang about his commitment oh i have it in the bubble watch right here i have a link directly to that video you mean the one on the street and maybe taiwan i know he's always in taiwan yeah where he loves doing random stuff in the streets of taiwan and korea they're like there's jensen getting some fruit yeah it uh let's just talk about this now because it's entertaining the quote-unquote 100 billion dollar commitment from nvidia to open ai can i play the videos

i don't well sometimes it doesn't work right it doesn't work you know that it's going to play in the record i mean we can try it but we might be able to hear it but the audience might not that's Well, I think we've done this once, but we can either, we'll try it for a couple seconds and the audience can tell us. If not, I don't know, we'll cut this out of the recording. I'll cut it out in post-production as the editor. All right, let's share the tweet here. Someone said, JJ, Joseph Jaxx, said Jensen's not happy. All right, let's see what happens here.

NVIDIA is not going to. Can you hear that, Ryan? Yes, I can. All right. I think it's working then. To invest as much as $100 billion in open AI. We never said we were going to invest $100 billion in one round. That never was said.

But how about the overall commitment? Because last September, you – There was never a commitment. It was – if they invited us, they invited us to – so let's start over again. They invited us to invest up to $100 billion. And, of course, we were very happy and honored that they invited us. But we will invest one step at a time. What do you think?

It's what a reach. Because maybe I'm mistaken, but I'm pretty sure OpenAI probably leaked this or someone involved with OpenAI leaked that NVIDIA was investing or committed to investing $100 billion. Inviting someone to invest $100 billion is very different than getting $100 billion. You can do that to anyone. I'm inviting you to invest however much you want into my new investment fund. You are welcome to do that. And that's the same type of energy. I feel like Altman and Jensen were talking,

or maybe the teams at OpenAI and NVIDIA were talking, and OpenAI's going, hey, look, we got these spending commitments. We got $100 billion slotted out for you. And then Jensen's like, cool, yeah, just buy our chips. And then they go, all right, you're in. And then he goes, no, we never signed anything. Hey, look, you were very skeptical about this type of stuff, I think, at the time of the announcements.

correct this is kind of what you would thought where it was going to happen open ai was kind of just talking out of its out of its behind and yes they actually don't have science stuff but what about this oracle or like you you go to this tweet they go the nvidia this is a direct quote from the oracle account verified account the nvidia open ai deal has zero impact on our financial relationship with open ai we ran highly confident in open ai's ability to raise funds and meet its commitments that sounds like a bank run that's like a bank that's about to collapse we are solvent don't take your money out yeah he's like i wasn't until you said that yeah yeah i saw people like pro tip don't ever tweet something like this from a corporate account

i think that's right i mean if you just don't say a word say anything about it is silence is better it's yeah i am inviting jensen huang to my next birthday party uh and now he is committed jensen huang has committed to coming to my birthday party jensen you have yeah you have an open invitation on the chit chat stock podcast you're welcome anytime yeah it's curious put out that he's coming onto the podcast? He's committed to the podcast? Is there anything wrong with that? That's true.

That seems to be Sam Altman's mentality. I got to say, I made it like, I don't know how serious I sounded on the podcast, but I said there was a small chance that OpenAI isn't around in a few years. The equity goes to zero, whatever the equity is. I'm not even sure there is any since it was a charity. I would raise that percentage to a decently worrying size now.

Because you have Gemini's market share going like crazy. It's up to like 25% in consumer. And Anthropic is going crazy on the other end, which is Enterprise. And you have the reaction from Altman when Anthropic does an advertisement for the Super Bowl, a little cheeky advertisement about OpenAI deploying ads, even though Claude isn't used at all by consumers. I got to say, there's a lot of science. This feels like – doesn't it feel like FTX at the end?

Not in the same way financially. Obviously, it's a different, crazier business. But the energy coming from Altman is similar to SBF where it's like, I got to talk everything. I'm going to talk my way out of this. I'm just going to respond to everything. I'm going to write a paragraph in response to a Super Bowl ad. Yes, Altman gives me the investor ick 100%. There's something not right.

There's just red flags galore. Here's what I thought recently is that it's who the people who watch the social network and think that Mark Zuckerberg is actually like that. That's who Altman's like. Kind of just win at all costs, sign these deals, backstab everyone. That's how it feels. It makes sense now why the Anthropic was built. Like it seems like he would be someone that's probably a little hard to work with. I guess that's evidenced by the board ousting him a while back.

Everyone else leaving, yeah. And then, yeah, what's his name? The founder of Anthropic left OpenAI, if I'm not mistaken, early on. The chief scientist officer and the CTO. They all started their own companies, yeah. Yeah. Let's talk Google. There's some fun stuff here that doesn't have to do with CapEx and AI, which if I could just not say those two words for a few weeks, that would be refreshing. The numbers were really good across the board.

Search grew 17%, cloud 48%, which is a massive acceleration. their backlog also this seems to be a recurring theme is open ai committed to it seems like open ai gave like big commitments to all these cloud providers uh and now all these cloud providers have to report a massive backlog jump that's like worrying people but they also probably don't even a lot of them aren't just ragging about it it's just like they have to like i remember even like microsoft said like yeah our backlog doubled and 45 of it comes from one customer and they like had to mention that on the call and everyone was concerned about it anyways cloud 48 growth subscriptions 17 growth subscriptions is turning into a pretty

impressive business uh for for google there youtube just nine percent growth i i'm going to come back to youtube because i actually thought it was a very impressive quarter despite single digit revenue growth and then network minus two percent other bets minus eight percent nothing both those are kind of inconsequential segments for google overall but a couple things to note with youtube i think they are putting up i i can't say enough great things about youtube honestly they they now surpassed 60 billion dollars in combined revenue between advertising and subscriptions so and advertising is at like 40 billion so subscriptions for youtube's at around 20 and they grew nine percent on top of an election cycle last year so and a lot of that

election advertising spending which is a huge boost for all advertisers rolled off so they're putting up big advertising numbers while pushing all their customers to go to ad free solutions So I just – what a business. Honestly, I wish – I saw some tweet today about Google maybe creating – that this might be the best business of all time. Yeah, welcome to five years ago. Yeah. I'm banging this drum. I haven't owned any shares but it's nice to be psychologically long and correct I guess.

and it's also one of the few juggernauts of a company that customers like and are happy about that they really like oh yeah people like there's there's kind of a stench with meta you know because the data breaches in zuckerberg a long time ago let me let me give you there's three brands that americans trust the most out of anything including like this can include the executive branch congress the police fbi or companies the three three biggest are or that say i trust them most google amazon and the u.s military that's it those those are some companies that if you get this done they're gonna get something done like the they're just reliable maybe nintendo nintendo yeah well Oh, Japanese, Japanese.

Yeah, not an American company. Yeah. And Amazon people, it seems like customers push back against Amazon a lot. Like, not customers, but like just civilians. News, media, yeah, yeah. A lot of it has to do with like Bezos just being one of the richest people in the world. It's the same thing. Yeah, basically.

it's but google i think a lot of it has to do with the fact that they just give away so much value for free so much value and they just give it away and i think it builds up good mind share with customers anyways i thought the quarter was really good again capex was a massive guide but for them like if they are booking this growth or if they are booking these cloud commitments i don't know if they have another option other than to continue to invest in the data centers like i guess they could tell these people no but they're just foregoing potential revenue here i just my hope as a shareholder and i don't own a ton of google shares but my hope is that they are qualifying these commitments well and before they build

getting a true sense of is this demand real in the same way taiwan semiconductors yeah that's fair the one thing you can say for alphabet over amazon meta probably in microsoft because a lot of Microsoft is just not internal AI stuff, it's partners. And I get that Meta has the advertising efficiencies, but I'm a little skeptical that they can spend $100 billion a year and get an ROI on advertising. But that's not all of it whatsoever. But with Alphabet, you have many different irons in the fire that can get an ROI from new CapEx spend. You have one, obviously Google Cloud, which we mentioned, but two, you have Gemini gaining a ton of market share now. And that's another way they can get ROI as opposed to you look at someone like Meta,

they don't have their own cloud and they have chatbots that don't get used. And then on top of Alphabet has Workspace that's smaller, but then you have YouTube that can benefit from AI across the board. So I think for them, throwing up that $180 billion is less nerve wracking than amazon or meta because i see a clearer path to roi if you look at um oh gosh i lost my train of thought well just respond to that part yes yes there's not only optionality because i think optionality is a loose term for i think a lot of people abuse the word optionality but a lot of highly successful businesses that are there isn't just any one core reliance i guess for for i mean obviously search is massive but they they have now shown how adaptable they can be

with search i see a lot of people saying i think google has an unfair advantage with all the data that they're pulling in from their own platforms yeah they had an unfair advantage a year and a half ago yeah they've had an unfair advantage since the beginning it's It's called business strategy. They bought DeepMind for $150 million. They bought YouTube for, well, DeepMind maybe was $500 million. Whatever, still cheap. They buy YouTube for $1.5 billion.

They build this whole ecosystem, a lot of it from scratch. You start the semiconductor business much earlier than everyone. You see the cloud business pretty early. Meta doesn't see it. Apple doesn't see it. You see the AI assistant business. You invent the LLM. You invent the transformer.

or all all this stuff yeah sorry they're just extremely smart when you hire all the best or if you have something like 20 of the smartest ai scientists software scientists scientists in general and engineers in the world working under one company well good things are going to happen i've heard they make it the interview application process at google is just like dreadful it's it's very it's very difficult process you have to be very smart yeah and on the one hand i mean that's i don't know probably discouraging for some people but it probably prevents over hiring to the same degree you have other companies now it's not to say that they've never needed to trim that if you ask uh chris hohn that letter chris hohn

they were right i mean he was right in 2021 for sure they hired too much it's okay yeah but they haven't had to do successive rounds the same way i think pretty much all the other tech companies have maybe not microsoft i can't remember but amazon for sure it is yeah we i feel like i could talk forever about google because every single business there's something to brag about i use gemini every day now i use google search every day i use g suite every day i use youtube every day i mean oh yeah about as much of a power user as he can be so i uh i guess i'm yeah power user as well yeah i think it's the best business collection of businesses ever is it the best single business ever? That's debatable. I mean, Google search as their largest one, but is it the best collection?

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Tyler says, MSTR, MicroStrategy, sorry for the correction, but I tell you, it's strategy. It's strategy now, yeah. reported negative earnings per share of negative $42.93 lol the world would be better without that company around did you see i this is my note in the in our notes here bitcoin is crashing and michael saylor is crashing out that's some good teenage lingo right there is that is that good yeah and i mean maybe we can take a second to talk about bitcoin because i've seen a lot of commentary around it and i know oh wow wow as as of this recording we're down to 63 Whoa, down 15% today. So here's, I don't want to, I don't want to pat ourselves on the back too much.

Well, if we go up to 100K tomorrow, yeah. It could go up to 100K tomorrow and also I think we were – we've patted ourselves on the back in previous drawdowns and it made us look foolish. But there are a lot of levered or embedded leverage. There is a lot of embedded leverage with Bitcoin that can cause massive withdrawals, especially with these ETFs now. It seems like – Michael Brewery did a whole bunch of writing on this. yeah what do you what do you think of are we going to are we going to renew his sub stack he thinks game stocks the next berkshire um i like some of his writing it's entertaining it's entertaining and it's super cheap actually it's not that it wasn't that expensive when we

bought it yeah yeah we have 11 months for him to we'll see in 11 months from now but i thought that his game stop thing was a bit it was a bit out there yeah but with with bitcoin now this is kind of the point i made with bill miller when we studied him which what was the approach they took i can't remember the term for it but basically like uh the odds of him being right when they bought it i think 10 years ago or so was extremely low i think it was like kelly criterion typed that yeah he pegged it i think at like two percent probability of being right i don't know how on earth you arrive at a probability like that whatever he did but the upside if he on that two percent probability was you know uh a thousand

bagger whatever now he was still holding it last we checked or last interview he did he said he still owns bitcoin but it doesn't make any sense to me because they are the probability shouldn't have changed because nothing fundamentally has changed right like it the probability of him being of bitcoin being like a pervasive currency used for anything other than other than illicit activity i don't think that much has changed over the last five years really like it's probably lower if anything you can isolate certain incidents of people using bitcoin for currency but let's be honest has anything changed about like how commerce is done and now for anyone that's bullish about bitcoin or whatever listening to the show when's the last time you bought a good

with bitcoin it's like it just hasn't really changed that much so all right we might have timed that episode pretty well because it seems like using that same kelly criterion he should have been short bitcoin yeah you should yeah uh well it's really hard to talk about because there's not any fundamentals to go off of it's kind of like when we talk about gold or silver he goes but it's going up people are buying yeah it's going down people are selling and michael saylor is getting there is yeah saylor's he's posting all caps hodl and he has this video where he just goes close your eyes it's really good he's in this office his lair goes close your eyes and imagine 10 million a coin and just think would i sell how and he's like how happy are you

going to be when that happens i'm like dude if bitcoin goes below a certain price you're going to zero and what i've seen this is not i am not a journalist so this is not sourcing this is seeing people tweet things. There are rumors that Binance is, which is by far the largest exchange. There's rumors that they're gaining withdrawals and that they are insolvent, similar to FTX, which would be quite the ironic story because SBF, founder of FTX, is sitting in prison. And one of the reasons FTX went out of business is because Binance, I think, started... I forget that story but it is pretty dramatic it was like there was like a double crossing but either way binance had a was in it for fdx's fault because they were kind of business enemies and if the

same thing happens to finance one what's the credibility on this industry nothing and two sbs probably sitting in prison just going man if only i could have just kept that philanthropic investment i'd be sitting pretty right now what do you think the odds are that in 10 years like no one's talking about this no one's talking about bitcoin except us doing some weird history thing for investing except for us doing a history podcast yeah it seems unlikely 10 years seems unlikely i could see a world where 20 years no one's talking about it because the thing yeah yeah go ahead and i know people are optimistic about what stable coins can do for commerce uh and then it's whale and dictators about bitcoin yeah

yeah it is funny that a lot of the price drop has coincided with the crackdown on illicit activity if i'm not mistaken like there's been a big breakthrough and cracking down on some of the crime that's been using bitcoin to facilitate it uh it's really hard to know why yeah i guess it's true there's a million reasons why here's the rule of thumb if you have to say if you have to rely on someone else to say something when whatever the security you own is dropping so say for example bitcoin's dropping and you need michael saylor to say something because for whatever reason same thing for me like coupons dropping if i have to sit there and like wait for bomb kim to say something it's it's testing your conviction in any security

and and it's a good point of like can't borrow conviction because when things go wrong you need to have a better sense of of what you actually own and obviously with bitcoin it's hard to know exactly what you own but i don't know well you know i'm talking myself there with a couple of companies i've had drawdowns with yeah well once you and this is yet not news or anything we've talked about this before but once a stock you own goes into a drawdown you realize either yes or no whether you actually have conviction in the business because there's some stocks i look at when i go what is this price telling me and there's other ones where i go i understand why it's dropping business is fine i have a five-year horizon and when you look at

bitcoin it's magic beans that are produced with electricity and computers and i saw that for the first time ever the cost to it's either mine or maintain or something again not an expert on all this stuff and people try to make it way more complicated than it actually is it's but it's a The cost to produce is above the cost of the coin right now for the first time ever. So who's going to be incentivized to mine more and maintain the network? I just think if that gap is sustained for a long time, the common sense thing to me is that it could go to zero because then there's no support. what are the odds that in in a week it's back up to 100k and we just look like fools i'm not saying you can't do that because then it's above the cost to produce whatever that is

but if it's below that for a long time it's just not economical i don't know i don't know what's gonna happen yeah i kind of had this moment with adobe actually going back to your like you figure out whether or not you really know something because adobe trade it was trading at its cheapest valuation and since the gfc i think it's like an ev to ebit of like 15 or something like that and it seemed at the time i think this was maybe like december that the narrative on ai could not get any worse for them lo and behold i think it's in a 30 drawdown since that time and i'm kind of stuck on the fence now of like second guessing my original thesis of it won't be

disrupted by ai and i think part of that is maybe i need to get to know the business better whereas Whereas, for example, if Coupang drops, which it has, I have a better belief in the competitive advantages of that business, better understanding there, than I think I do with creative software. Anyways, kind of a tangent. Let's talk SpaceX and XAI. This is the title topic, the one where we bring people in. SpaceX and XAI are merging. and i haven't listened to this conversations i think it's officially happened because musk did some tweet or yeah i know but i was seeing the the headlines of they're in conversations

musk just talking on both sides of the table yeah he's just writing on a notepad he's writing on notepad hit some ketamine and yeah uh but i will say on it's uh if you want to hear from the horse's mouth musk was on with what is it called stripe brothers podcast cheeky pints cheeky pint yeah with the great interviewer dwarkesh patel talking to musk and i believe and i haven't listened to it yet this is just a clip that musk implied something along the lines of that tesla could merge with these companies to create one giant business so my take i my take is getting closer to fruition ryan and that would be one of the craziest moments in all of business history i i hope it happens for for our sake just on the show but should we just talk about what happened

with this merger first give the details of the merger and then i want to make sure i find a quote from us that i saw okay okay i might have the same one in here uh it's going to be a $1.25 trillion valuation, $250 billion. I wrote million, but $250 billion is attributed to XAI. I'd say for what exactly? There's no usage of Grok outside of Twitter and Twitter ads. It can't be that much money. And then $1 trillion to SpaceX. My first thought here is what the original Twitter buyout investors think about this deal. Because maybe this is a bit of a nice little return for them i'm not exactly sure but you're kind of in this new equity today that's about to ipo i'm not sure how i would think about it musk said uh this marks not just the next chapter but the next book

in spacex and xai's mission scaling to make a sentient sun to understand the universe and extend the light of consciousness to the stars exclamation point there you go musk that's that's what we're looking for with you. We're seeing rumors that SpaceX wants immediate inclusion into indices at IPO. Someone really wants to keep the stock price high, and this is something that's never happened before. I will say S&P 500 is not going to allow this because you have to be profitable for, I think, a year as a public company before you're included into that, and it's a gap like net income profitability. If we look at the reported numbers financially, SpaceX is at $15 billion in revenue xai probably not much to add into the mix here maybe we're pushing 20 billion

total apparently spacex is generating eight billion dollars in adjusted ebitda but this adjusted figure also doesn't include rocket launch costs so you're taking all your depreciation and amortization and then oh also the cost of our business yeah let's just not include that so that's not a real number but either way i mean you're trading in north well north of 100x times this this fake figure what i'm guessing here is both businesses okay so they want to put data centers in space now i sound like an absolute alex jones freak here talking about this if for anyone has no context because i this sounds like something that people should know about uh in normally but it's for something that's not on twitter reading all the financial news

they want to put data centers in space to power at ai for gronk and they're going to try to do is by launching Starship dozens of times a year. This is one, you have to spend money on developing the AI. You have to spend money building the data centers. You have to spend money building the satellites. You have to spend money building the Starship bases. And you have to spend money launching these rockets into space. I think this combined company is going to be burning a ton of money.

And they're going to need to raise so much capital. And that's the plan here. You're going to need a ton of money. And it's a crazy plan. We'll see if they can do it. I'm not going to say it's 100% guaranteed not to work, but there are a lot of engineering skeptics out there. I mean, it's going to be tough. And data centers in space, that's a wild idea. it the yeah building one i have to imagine would be tough and costly the if you are a tesla shareholder the thought of merging with this should not excite you what business is better what business is better wait what do you mean i guess some people think spacex is i guess tesla's cash flow positive but spacex is has a much better growth trajectory i see i see your point though

but you're going to be burning so much cash i honestly honestly i think he can pull it off i think people would just love the story they'll just oh they're gonna raise the money yeah they don't care about the numbers they don't care about the numbers it's space it's the future it's musk that's that's all it is that's all he needs to do it's gonna sell we're building we're building a sentient sun to understand the universe and extend the light of consciousness to the stars i mean come on who wouldn't want to buy that this is a tweet from 2024 so it's a little outdated but elon musk said i've mentioned something like this before but if any of my companies go public we will prioritize other long-term shareholders of my other companies

including tesla loyalty deserved loyalty is that securities manipulation uh i i don't know i don't know he's he's already violated securities laws it's okay many many times so it doesn't maybe it doesn't matter. I know people like the guy, but that's the truth. The SolarCity stuff is definitive now. No one cares

about it anymore, but this feels similar to the SolarCity merger where, okay, we need a bigger company to take on this one company that's burning capital in. I just think the biggest question is, will it work? Like, one,

Starship has never launched. commercially okay we don't know how expensive that's going to be or whether they financially can pull it off two you don't know whether data centers in space which is so far from anything that's ever happened before is financially viable or even engineeringly feasible or technologically feasible you know what i'm trying to say and third is grok going to do anything in ai because that's another piece of the pie i i highly doubt that part at the moment grok appears to be used for two things these are the prompts at grok is this true at grok show me this person in a bikini bikini yeah well apparently space image generation yeah i guess space has a generation

It's – if my AC bills go up because Grok is generating bikini images, it's going to suck. Oh, boy. Oh, boy. Well, this will be a fascinating story to follow, and it looks like they are – the IPO is almost like 90% likely to happen. But I wonder, and I know this isn't WeWork. I wonder if the financials are going to get a little skeptical. with some of the – because you go through an IPO, you need the Wall Street banks to support you. I wonder what that's going to look like or if Musk will be able to tell the story and kind of bully them into it. I think Musk will be able to bully them into it.

And I think for the investment banks, they know that they can just offload these shares. and and they don't all they have to do is tell the story with the s1 they don't have to you know bury bury the financials mask them as much as you can they might not even look at them a lot of the investors probably won't you can sell it they don't do they care how financially clean the business is i kind of don't think i don't think it matters to them can they make money that's the only thing yeah there's gonna be some fees that's for sure all right what do you want to talk about uber nintendo earnings paypal earnings which is a sad story a really sad day for paypal bag holders and i have someone else talking or i wanted to mention palantir's blowout earnings and the

stock's still drawing down because it was trading at 100 times sales yeah truly i don't think you could have generated you could not have had a better report here i don't i don't know how to better report yeah truly yeah but and now i reading the report i thought oh my god they're gonna do it they're gonna somehow make it work on a hundred times sales but this is the problem with a hundred times sales you a hundred times sales on a business that's already pretty big Mind you, this isn't like 100-time sales on someone that just started generating revenue. Biotech, yeah. I mean it's so hard to fulfill and even a flawless report like this is going to hurt you.

Have you ever read Alex Karp's letters? The best thing they could do is – kind of. I've read some of them. Here's what he said this month. We are at the outset, the very beginning of a generational project. Our financial results, those crude and imperfect metrics by which a market filled with both excitement and fear attempts to access the value of companies it covets, have again exceeded even our most ambitious expectations. A little disappointed he didn't call out the drug-sniffing short sellers this time, but that's who he is.

That's who he is. But look, the stock's down to 130. It's still on like a 30% drawdown now. A couple quick hitters from this week, because we're not going to be able to get to all of them. Roblox is up 20% today after their report. I almost admire Roblox in that they do seem very committed to their mission. They seem very focused on growing the business, growing the platform. we're not buying back stock we don't care about that we are i don't know stock-based compensation

continues to go through the roof it's kind of shocking they have more get this a billion dollars in free cash flow actually let me pull up the exact numbers for you here and they reported that this afternoon for when we were recording last 12 months 1.4 billion dollars in free cash flow can you guess their operating income uh 100 million negative 1.2 billion wow all sbc majority sbc oh wow i think well um i think they have more more than a billion in stock-based comp. I'll double-check, but I'm pretty sure.

But their hours spent on the platform are growing 88% year-over-year. I mean, clearly, it's working in some capacity. Yeah, so decent... I mean, they are committed to their mission, and they kind of don't seem to care that much about, like, shareholders. Not in, like, a disrespectful way,

but they do seem to tune out the noise fairly well. Yeah, there's a difference between tuning out the noise and... Like, not caring about actually creating value and just wasting money. Roblox, maybe in the other category. It's just a company you don't hear about much anymore. Who's using it? Maybe it's all kids.

It's really hard to grasp. But the daily active users are insane. I mean, I think it's 150 million. Let me... Yeah, it's growing quickly. The number of highly active users last quarter was 144 million. That's a huge number. As you Facebook's 3 billion.

That's the path. That's what they think. Yeah. He kind of thinks he's the guy that invented Ready Player One. That seems to be the vibe. Or is going to invent something like that. Reddit. good report would you ever invest in reddit who's running it i don't know it's interesting

business for sure yeah i haven't looked at them closely it's kind of one of those where i just assume yeah it's gonna be a crap co what about someone was asking about nintendo i i don't know if there's much to say units seem fine stock stocks so you're so down you're so down there's nothing left to say wow there's not much to say because i it's kind of as expected like they're selling a lot of hardware and not sure why the stock is falling they'll eventually release more games and people will buy them it's kind of my take i'm trying to think of any other big reports from this week uber i might end up buying uber if it keeps falling i've been helping out a lot down here and i'll tell you that much i just don't think i don't think the av threat

is is going to displace them okay when i sell my business i want the best tax and investment advice i want to help my kids and i want to give back to the community Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com.

You've got to try breakfast at A&W. You gotta try breakfast at A&W And what better way than with a delicious Pret organic coffee Starting at just $1 all day, every day, now until December 31st You gotta try breakfast at A&W At participating A&W locations in Ontario Waymo's at 100, what is it, 400,000 a week now? I know, they're still very small.

They're going to Sacramento. I think there's a lot of validity to that chart they share of needing flexibility in terms of drivers, driver volumes. Sure. You don't want to oversupply, which if you're Waymo, you're going to oversupply potentially, and you don't want to undersupply and there's massive surges in demand for Uber.

So you kind of want the flexibility of drivers being able to click on and off, plus some way most. Yeah, that's a fair point. It's definitely a fair point. And overall, I mean, there are 200 million AMAUs, probably can keep growing. Trips up 22%, bookings up 22%, delivery bookings up 26%.

EV to EBIT is 29. It's not that cheap, but they're still in the middle of their operating leverage story, so maybe if you expect margins to double, it's fairly cheap here. On the whole, though, I'm not sure how – it's not like Adobe, if you kind of get what I'm saying. no i mean they've they've optimized the pnl a little better it seems and they've actually done a good job i think stock-based compensation is like flat over the last couple years yeah and you know who else is uh over the last few years wix true free cash flow coming in little tease for for the newsletter all right well we're going over a couple minutes here let's see Was there any other bubble watch?

Now we kind of hit those throughout the episode. People I know asked about Coupang. Look, stock's falling. We'll talk about them after the quarter. That's about it. Ryan, anything else before we get out of here? Let's end with this. The software meltdown of 2026.

You have to buy one enterprise SaaS company. Who's it going to be, Brett? Go. Don't look at prices. close your eyes. I'm looking at the list that you have here. I don't even know all these companies. I would pick oh gosh

Adobe. It's cheap. But they're also different. Maybe Atlassian. I don't even know what any of them do. So I can't even and I don't know what any of their valuations are. I can't even tell you. i'll tell you what they do brett they grow they grow the top line that's that's it that is what

they do yeah they have very pretty charts that's going to do it yes they do i think that's going to do it thank you everyone for tuning in this week we will be back next week plenty to talk about again earning season is busy as busy as it can be and it seems like we have an endless flow of news. But thanks again for tuning in. We want to remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on this podcast is not formal advice or recommendation. We may buy, sell, or hold any of the securities discussed in this podcast. Thank you all for tuning in. We'll see you next time. don't you wish you could just hit skip on the worst parts of your life you know the same way

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