Chit Chat Stocks - Amazon’s Annual Letter Insights; New Insider Buys; Claude’s Record Setting ARR Growth

Episode Date: April 10, 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 to Financial Markets and AI News (03:17) Claude's Revenue Surge and AI Impact (06:03) Amazon's Cloud Business and AI Developments (09:10) Consulting Industry Challenges in the Age of AI (12:25) Investment Insights and Market Trends (15:16) Exploring Underperforming Stocks and Market Dynamics (33:25) Understanding Market Dynamics and Pricing Strategies (38:37) Meta's Capital Allocation and Market Positioning (45:58) Delta Airlines: A Barometer for Consumer Spending (49:09) Rocket Lab's Financial Strategies and Market Position (51:57) Exploring Smart Fit: The Planet Fitness of Latin America (59:17) Rebuilding Portfolios and Investment Strategies (01:01:00) OpenAI's Business Model and Revenue Concerns ***************************************************** 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.  ********************************************************************* Check out Value Spotlight: Stockwriteup.com  ********************************************************************* 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

For the past three years, IBKR individual clients averaged 24.3% annually, beating the S&P 500's 23.1%. Lower costs and 170-plus global markets matter. Interactive brokers, member SIPC, visit ibkr.com slash performance. Welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I'm one of your hosts, Ryan Henderson, and I'm joined, as always, by the one and only Brett Schaefer. This is our weekly Power Hour episode. We do these every Thursday at 5 p.m. Eastern time, unless we have any schedule changes,

but usually it's 5 p.m. Eastern time on Thursdays live on YouTube if you want to ask us any questions. We've got a full slate today on these episodes. We talk all things financial markets, any headlines, any news. We have lots of news. We've got Claude's latest revenue numbers. We've got consulting industry in the gutters. We have some insider buys, a potentially very flawed compensation policy at a big tech company that you called out, which I thought was hilarious.

We've got Delta earnings. We've got, I mean, of course, we have to. More AI news. And also, I don't know if you saw markets today, but a little more AI wreckage for software companies as well. I did see that, Ryan. Yeah, welcome in, everyone, to the show. Yeah, software stocks. I saw my old friend, my back-and-forth flame, Wix.

They're down below $70 again. I mean, you own some software stuff. You probably see it when looking at your portfolio. What's happening? Is it just more product releases from AI startups? Every clot announcement seems to destroy billions in market cap for the software industry. Adobe is, I saw this today, they're in their largest drawdown ever. I believe the data is a little spotty going back to 86, which is when they were public.

But at least- They're probably a hundred beggar. Yeah, it's actually kind of insane. So the stock is down 67%. it's trading at its cheapest valuation ever uh i think shares are like flat for the last eight years what do you think their total annual return has been over the last 10 years total annual return eight percent ten percent ten percent isn't that kind of staggering after a 70 percent drawdown that they've been flat for eight years yeah it's been a two good two years

before that that sas transition really helped them but now apparently if you're a sas company you're absolutely dead you're still a holder shareholder yes i am we can maybe talk about that a little bit there's some interesting stuff monday.com has just been destroyed they have i think uh they traded on eevee to free cash flow of five times i mean there is there's some hairy situations but cheap situations in the software space but we also have open ai's user count which i think is interesting because this is a potential stagnation which i'm curious how much that hurts uh ipo demand as well yeah well we're going to talk about a lot of that i also have some small caps that we can look at i know a lot of people are suggesting small caps

we talk about i actually asked hey what type you know this is maybe our fault for targeting smaller cap community sometimes but i asked in the sub stack chat which people should join it's completely free link is in the show notes uh hey what stocks would you like us to cover either from interviews or ourselves and we got tossed a lot of random micro caps that no one's going to listen to so we're going to talk about them in the small cap of the week maybe some interesting stuff there but yeah ryan i think we should just kick things off what's what's going on with your number one topic here so i was pretty blown away by this number but claude or anthropic had an announcement this week i'll just read through a tweet from anthropic it says we've signed an

agreement with google and broadcom for multiple gigawatts of next generation tpu capacity coming online starting in 2027 to train and serve frontier claude models our run rate revenue has surpassed $30 billion, up from $9 billion at the end of 2025 as demand for Claude continues to accelerate. This partnership gives us the compute to keep pace. So just to reiterate that, they went from $9 billion in ARR at the end of 2025

to one quarter later, $30 billion. This has to be the fastest growing company of all time. at this size sure yes definitely we'll give two caveats one ARR is not necessarily ARR because if someone's using a lot of compute up front to train an application for themselves that may not be you understand what I'm saying you're putting all your development resources into hey let's build an internal AI tool for our enterprise and then when you use it it's not going to be as compute intensive but I mean still regardless insanely impressive there was the i don't know i'm gonna call it famous interview it's just one of the ones that

emoti went on uh earlier this year we said well our trajectory has us going for 100 billion in arr by the end of 2026 and he's like i don't know if we're gonna get there but we gotta prepare and kind of if it happens and hey they're on they're on track so far um it is i've been using clod a bit myself the got a got a nice uh company company uh company account that you could use yeah nice nice it is staggering how many this might be the biggest like platform shift i don't know if that's the right term for businesses since the internet like you see you are seeing people seeing companies like building on claude which i know i'm late to the party with all this but i just don't know if

i've ever seen one single company take over the business world the way claude has in the last two years yeah that's fair i don't really know much about it uh from a use case perspective because i'm not in the corporate world like seeing what people are doing but i mean look at those numbers it's impressive we also have here information from amazon shareholder letter maybe we can save that for the next topic did you have anything else or is this our claude well this is our ai startup uh update for the week google cloud i mean more today oh yeah what do they say here something google cloud's doing well sure yeah they signed this agreement to extend capu is with google cloud okay well that that relates to amazon's cloud business and they released their

annual letter today as usual extremely optimistic on growth and reinvestment runway which i'm not sure shareholders care too much although the stock is up five percent uh i think uh about today either way jassy of course is writing bullish stuff he has some things on you mean jassy former high school soccer coach that was yeah yeah yeah he's a big sports fan is he's more of an american football guy now but you know he's an athlete he uh i don't know if that bodes well for the executive world but i like it i think it's funny for context he started the letter describing his past roles and how he got to amazon and he mentioned he was a high school soccer coach for a while there so that's the reference but what was give us some highlights from the letter okay so

first let's talk about commerce i thought two interesting quotes before we get to ai for a larger discussion here. Quote, in India, where we have more than 360 micro-fulfillment centers, Amazon now orders are increasing 25% month over month, with Prime members tripling their shopping frequency once they start using it. So it sounds like they've hit some nice product market fit with rapid delivery in places like India. Here's another quote, and this is, I think, applicable to North America. Since introducing perishables into same-day delivery in early 2025, perishables sales have grown by over 40 times. Again, this is two years, right? No, less than two years, barely over a year. 40X growth. That's kind of astonishing. And it now makes up nine of the top

10 most ordered items for same day delivery where they're available. I got to say, not being in the United States, the biggest thing you miss is just anything you can get on Amazon if you want it. like, oh, I might need this. All right, I'll order whatever it is. And I would recommend people to try Amazon grocery because it's quite cheap and you can now get it within an hour or two delivered to your house. And that's grocery specifically is one of the things I think Jassy has been the most optimistic about. I remember listening to, I don't know if it was an interview or a conference call, but at one point he's like, I think the world really underestimates the impact we can having grocery uh and it seems like he's investing there sure yeah all right now let's talk ai

there are ai revenue of 15 billion dollars how they define that you know you guys you guys investigate yourselves but they talked a lot about their computer chip business their internal one that they're building so for listeners instead of a lot of the times them just buying third-party chips from nvidia amd or intel amazon now along with the other cloud providers like ryan mentioned with the tpu that's why i think this relates to that announcement from the first topic uh they have their they have a lot of names graviton tranium a lot of names but they have a big business now and they said they estimated that they're going to sell their own inventory because they use it for their own cloud so they're not necessarily selling it uh to third parties i

don't think they do that at all really but they estimate that they were going to sell this to like a third-party cloud provider they would be doing 50 billion dollars in revenue for the segment i do think over the next five to ten years nvidia that's their number one worry is these internal builders i mean i think for sure that's revenue that's completely lost to another player and you have not necessarily a commodity from tmc TSMC, of course, there's engineering design going into these things, but they give these companies an opportunity to put, hey, we invest a lot of money, steal some talent, we can build something that's applicable for our cloud business, and we don't have to sacrifice that huge cost of sales to NVIDIA, Intel, AMD, and others. yeah the one pushback i'd have there is that every time big tech talks about the success of their chips business they always preface it by saying we still want to make them happy we still

have a great partnership with nvidia don't get me wrong but we have a growing chips business and it's like you can tell they still need those gpus well they want to make i maybe they just want to make nvidia happy i'm i guess i wouldn't think they would yeah yeah i always read those it's funny reading that because why do you need to mention it they don't want to piss them off that has to be it yeah well i mean he mentioned it like jesse said a lot of the customers still want the gpu capacity from nvidia specifically there there here is a quote i did want to share relating to what you just said jesse says as an aside two large aws customers have already asked if they could buy all of our graviton instance capacity in 2026 graviton is our widely adopted

custom cpu chip we can't agree to these requests given other customers needs but it gives you an idea of the demand yeah he's a pump artist now oh is that what we're is that what we're doing of course there's a lot of demand yeah there's hundreds of billions of capital flowing to the industry of course of course i can't make up my mind about jassy like i read his letters and i like him i think he's directionally doing a lot of the right things like strategically uh but he does feel a little more promotional than bezos was oh bezos is promotional do you remember the 60 minutes he did the drone thing in 2013 or something like that he's saying this future yeah come on he's a hype man yeah jesse's just not as articulate time i have a hard time

with like the acquisitions and the investments like that the open ai stuff it just it feels like a red flag and we're about to talk about the user stagnation but i'll let you kind of finish up any any other big standouts from the letter well we'll mention on jesse i agree like he's not as great at describing the narrative of what the story the company wants to build. Bezos is great at that. Other executives are great at that. They kind of craft a narrative that is very easy to understand in a few sentences. But I will say the one time I met someone, Bellevue Municipal Golf Course, we're waiting on, I think it's the eighth hole. There's always a backup. There's like three groups always backed up there. There was a guy there. He worked for Amazon. He goes,

Andy Jassy is the smartest man I've ever met. So I was like, oh, that's positive there. Now he's running the company. Have you talked to him since five years of flat returns? Oh, no, this is a random guy. Oh, yeah, yeah. He also said advertising is the guy that said that advertising will be more profitable than AWS, which turned out potentially to be right.

But let's go on. The next quote here, we're not investing approximately 200 billion dollars in capex in 2026 on a hunch the recent open ai commitment of over 100 billion dollars is an example of this but there are several other customer agreements completed and not announced or deep in process of the aws capex we expect to spend in 2026 much of that will be monetized in 2027 and 2028 and we already have customer commitments for a substantial portion of it sure that's good yeah that's good but i will say open and i better come with the money that's kind of the push and pull here yeah like

aws is good nice few years ahead of it but the funding better be there for these startups that are losing a lot of money it all comes back at the end of the day to the ai startup ecosystem yeah i'm starting to wonder if the amazon investment in open ai was sort of uh strings attached deal where it's like look we'll invest if you turn around and plow it all back into a capex for amazon or aws the or orders for aws i would love to see a tally on open ai's full uh cloud capacity commitments because it's got to be in the ballpark it's got to be north of 500 billion yeah i think they're supposed to be spending and this is the one that's really suspect 50 billion dollars at oracle every year starting next year so but they already oh okay

i was gonna say you look at the oracle like remaining performance obligations but they've made massive commitments now to azure uh if you go look at the backlog for microsoft on the cloud side they've now made 100 billion dollar commitment to aws i'm sure they've made some commitment to google i believe they use google cloud in some capacity if i'm not mistaken and then oracle so call it 300 billion and projected uh cloud commitments on what are they doing 20 billion in revenue maybe 30 outrageous yeah yeah well and they're also we'll talk about this later we don't want to do a full hour on open ai but maybe i'll save this for the end there was a great video that our friend aria uh who's been on the show before talked about this new circular

revenue deal and the investigation that this random youtube channel did wall street millennial i think it's quite promising they have a good theory on what exactly is going on there but let's talk something else for a little bit besides ai consulting which might be getting killed by ai Ryan, what made you want to do this topic? You research your investments, you analyze markets, you manage risk, but did you research your broker? For the past three years, IBKR individual clients averaged an annual return of 24.3% compared to 23.1% on the S&P 500. 100 IBKRs, lower trading costs, competitive rates, efficient execution, and access to more than 170 global markets helped investors keep more of what they earn and put more capital to work.

Over time, the broker you choose matters. Interactive Brokers member SIPC. If you care about performance, find out why the best informed investors choose Interactive Brokers at IBKR.com slash performance. Yeah, the topic is, is consulting dead? So I'm working on a piece right now about the consulting industry. Part of it's trying to figure it out for myself kind of piece, but also the industry just seems to be in the gutter, especially as of late, like 2026, especially like year to date. A lot of the stocks have performed really poorly. It's worth noting most of the large consulting companies are not public, so we don't have perfect visibility into their results. I'm sure there's anecdotes out there. But if you look at some of the big consulting or pseudo consulting businesses that are public, you got Gartner, who's in a 73% drawdown, Booz Allen Hamilton, 57% drawdown, Accenture, 54% drawdown. And then you have more niche or, I believe, sort of domain-focused consulting businesses like Huron Consulting, Marshall McLennan, FTI Consulting, all down more than 20%.

The obvious culprit here is AI. If you look at the revenue growth, Gartner's seen a big slowdown, but most of the other ones haven't seen huge slowdowns. So I guess, and I was trying to read up on, you know, what is the narrative, what's happening at the AI companies specifically, that what kind of changes are they making? From what I've understood so far, they are reducing the number of junior-level employees at consulting firms or at least the number of new hires for junior-level roles. So like recent MBA grads, that kind of stuff, the hiring has kind of dried up a bit because a lot of that work – saw estimates that 20 to 50 percent of junior level tasks are data retrieval market research and slide creation so that is probably the most automated part of ai or of consulting since the rise of ai i mean whether it's slides going out and asking for data getting like a quick simple

market research report that is stuff that literally these junior level employees were just doing google search after google search to pull a lot of this stuff together i think that will maybe not be obsolete but will be highly automated in the future what they are hiring more of is apparently they're switching from these junior level employees that they're bringing on to more of these mid-level technical or like ex-tech employees or data analysts that are kind of senior or mid-level and they have like real technical expertise and and maybe there's more to the consulting industry than this but the way i see it is there are two reasons for consultants there's one you don't have the capacity to do something yourself so

you bring them on which or you outsource it which i think is right for disruption from ai and then two you're renting expertise basically so for example uh if you're switching systems maybe you like you're switching to a bit different crm maybe you get like a hubspot expert or whatever from a consultant or a salesforce expert they help with the migration that kind of stuff like very technical i have a third category scapegoats they can be the scapegoats for true your your product strategy uh i think compensation consultants are perfect examples of that uh but i think the like the domain expertise renting that will all i think that will still be relevant in an ai world i am interested in a couple of these businesses accenture is probably

at the top of the list gartner i don't really know but if you look at the backlog or the remaining performance obligations people are still adding more orders from accenture more service would you i mean these are generally asset light other than you know human beings and i would guess that if a lot of the contracts stay in place margins will go up as the junior level employees start using ai as they use ai uh i i don't i think this is a chance you're picking up pennies in front of the steamroller it's not something I go well I just want to marry this business for the next

10 to 15 years yeah of course you have to re-evaluate your investment every quarter or year you know every week I guess if you're an investor in OpenAI and they do something crazy they seem cheap if you have a good capital allocator at the helm

a management team you can trust maybe but I worry that these are just a factory of consultant mercenary robots sorry for any consultants listening but they have a reputation for doing nothing for companies for a reason you know for example one of them goes to like a pepsi oh what are you going to do well we'll split off a business yeah why well we're going to get leaner okay like it's just stuff like that it's not gonna where where where the game-changing return is going to be

but on the other hand i pulled up on our friends fiscally i right now garner pe of 15 evd a bit of 12 yeah not bad the magic quadrant brett people need to have the gartner magic quadrant where's chitchat stocks in the magic quadrant i i assume if you pay gartner enough you can be wherever you want to be on the magic if we if we take our full budget we can get the magic quadrant i don't even know what is it what is the magic quadrant i have no idea what it's just like the i'm well i could totally be wrong but it uh i believe it's like they'll map competitive landscapes so like okay they'll go industry specific here's where each competitor kind of fits on the magic quadrant and it's based on certain like expertise or features that they provide but i think and then

every company that ranks well on the magic quadrant just turns around and like puts a press release about it so i wonder if they just pay gartner they're like yo we need a magic quadrant that makes us look good how much how much do you need for this yeah and the hype cycle you know that that is something i think what are we going to spend a bunch of money oh they put us at this point of the hype cycle all right cool it yeah i think you could be right i i would like to get to the bottom of how much of paying consultants is slide decks, is data retrieval, is market research, as opposed to actually something a little more advanced. But anyway, I did want to share this little tidbit from this week. I thought you might like this in case you

can't see it oscar health ceo bought 12 million dollars worth of shares in the open market yeah i did see this since oscar health is some sort of twitter not meme stock but it's popular let's just say that uh yeah i thought that was nice to see the insurance companies they trade i mean the sector trades together and if there's any sort of news like for example this week oscar health stock was up yeah because of the oscar or the insider buy but there was a ruling that medicare insurance payments for a certain category i believe medicare advantage or instead of the payout bump for the insurers i think instead of going up 0.5% this year. It was going up like 2.8% and it's better than expected. So all the

healthcare stocks or all the health insurance stocks ran up, but Oscar Health doesn't even play in the Medicare Advantage space. So the thing trades wildly. And the CEO has said that like if we execute, our stock should be at 50. So I like that he's putting his money where his mouth this we got a comment here in the chat thoughts about wix today you know we had an interview coming on this but in two weeks should be fun i think i'm gonna take a flyer on it honestly it it's i mean they bought a third of the company at 20 higher than today's prices i mean even if it does decline from here like say cash flow decreased every year from here for the next five years that if they just turn around and put all that into buybacks i think you can make out

a decent return yeah it's extremely pessimistic uh i've covered them on emerging modes before i will say tomorrow or today as you're listening to the recording of your podcast players i'll have a quarterly update out on gambling.com group and i'm outlining you know there's been a lot of volatility lately i'm going to be outlining some various trades uh i am making uh today and well as we're recording it tomorrow but as you're probably listening today yeah it's getting cheaper and wix uh yeah everyone hates these software stocks but i don't think they're going out of business in three years that's kind of what they're getting priced at with these 80 percent drawdowns okay let's do a little dumpster diving real quick pulled this up 10 worst performing

stocks in the s&p 500 year to date i'm gonna rattle them off you tell me what you like the worst performer the trade desk second worst performer work day third nope no no third co-star group no fourth into it which there's a lot of interesting stuff going on around into it right now uh perplexity is coming for them correct that that is yeah seems to be the narrative a bit i do as a customer of turbo tax and really as a tax paying citizen of the united states i would love there to be a cheaper solution to paying taxes or not have to pay to pay for taxes yeah yeah it's frustrating and i it does feel like that would be like the target of a lot of ai improvement like i could see competition heating up eventually and and perplexity had

a big announcement this week that they are going down trying or i don't i didn't actually use the tool but basically they launched a tax tool uh okay fifth robin hood they're down this year really they're down 38 would you ever own robin hood or is there are there some stocks that are just uh oh yeah it's much worse than tobacco and fast food and defense contractors no i don't robin hood it's just uh they're a little casino like right i don't a casino yeah it's a good business them and ibkr i think you're going to take over the world they are investing they are pretty pretty darn good businesses and layering on the prediction markets even though i have some concerns about that like it's going to be lucrative for them uh okay a couple more

aries management uh don't know anything don't know anything uh gartner no app loving which no not a serious company i was michael burry had a piece this week that was insanely detailed he needs an editor on stock-based compensation there was a lot of good info what i did like is that mercato libre kind of came out and asml came out clean on the other side and their spc is actually understated maybe it's because they're foreign companies but apple oven was in the category of i can i can maybe pull it up and it's going to take me a minute same as tesla maybe shopify but it was where like your spc your true spc so not the spc that stayed on gap but your true cost of equity issuance was like wiped out your entire net income of the last decade

so apple oven is it's it's in a risky business there's pure fraud allegations which seem potentially credible because of how they're describing how they've grown so quickly and if your company is named apple oven yeah i don't know if i can ever own a company with that name but the i saw someone say like every time they hear the name they think of mick lovin i do oh i 100 do it if you've ever been served one of those mobile ads where the exit button is like yeah they just get not formatted properly it's fake cpc yeah 100 and they're training at what what is it let's pull up a real ev to sales 22 times ev to sales get out of here and there are companies who i think genuinely treat in they think investors are the enemy of employees

like i i think the ones that give like really issue just a ton of stock treat it like being public is a nuisance like uh like we gotta we gotta prioritize employees over our owners because they're just you know they're just merchants and just ignore them because they don't care about us the minority shareholders why would we invest in anyone that doesn't care about us yeah all right last two epam systems well i think it's epam systems uh it's actually i believe like a tech consulting business and then boston scientific what is boston scientific i don't know but you know who's pretty close to this list fico nice what are they at 80 times i would well let's pull it up i actually could see myself being an owner of fico

at some point i'm just gonna spam my banking app and keep keep getting my fico score i don't know what multiple makes the most sense for fico all right boston scientific for anyone that is medical devices it looks like yeah yeah evie to ebit 28 oh wow yeah yeah i was saying that as a joke but it's cheap well what's what is the risk are they getting disrupted by ai or something else i believe the concern is that uh people are outraged about the price increases oh meaning like real estate people yeah so i i apparently fico increased the cost of its scores by uh literally a thousand percent in like the span of a few years so it frustrated some people but it it's still pretty low cost when you think about the it in context to like

the transactions that it that they enable so ten dollars in the mortgage yeah ten dollars for a fico score to buy a home and to pension potentially lower costs on on your interest rate i think it's a pretty big deal but yeah people people are upset about it and then on top of it i think there's probably some ties to just like housing in general as well would be my guess in terms of still frozen yeah but yeah all right that's the dumpster dive any of those that would be the highest on your interest list honestly robinhood would be number one the trade desk is is it was just such a it was like the bell of the ball i would just look at them to a 25 revenue growth trading at 40 times sales now the whole business model is in i'd say question

like why were we paying 40 times sales for that and it's still not cheap i think some businesses are better off with people not knowing exactly what they do and like palantir and i think there was a lot of people that just knew digital ads for the trade desk but maybe can't understand the competitive position i'm one of those no they're getting outside the walled gardens just visualize that in your head that's their business it's a good story we're the anti-big tech but yeah big tech tends to win uh so meta built a model that like knows how your brain waves function when an ad gets targeted do you think you're going to compete with that no it's pretty dystopian and you should get off instagram but like you're not gonna compete

with it speaking of meta there were some interesting tweets that you shared this week that i thought were kind of hilarious so i'm not sure who this is maybe it's a reporter but uh this person says ranking engineers by token spend and for anyone not living in the software or the tech world lately there has been an emphasis on how much token usage how much money you're spending on tokens and ai to help you as an engineer as like a measurement of productivity which obviously you can see some of the flaws in that uh but she says ranking engineers by token spend is like me ranking my marketing team by who spent the most money we may not have hit our kpis but joe spent two hundred thousand dollars on a branded blimp that only flies over his own house

and then someone quote tweeted it and says plenty of my meta friends told me folks have been building bots that just run in a loop burning tokens as fast as they can due to this policy It's an absolutely stupid policy and is similar to how Meta uses – I actually don't know what this stands for – LOC to measure engineering output. But yeah, apparently Meta has been measuring productivity by token burn, which – Not great. No, this is a true anecdote that is very concerning. yeah and i i think i got a lot of pushback for saying that i don't believe they are good at capital allocation which i think is quite obvious um but maybe people don't like that because they

own the stock i like people are saying well if you hate their capital allocation you should short them no it's a phenomenal business but i think their stock could be two to three x higher if they actually focused on not buying back stock the peak in 2021 uh not over hiring like double the amount of engineers or for a decade and they're not spending money without any roic discipline like for example they came out with a model today of course everyone's hyping it up like it's it's a good model but they spent so much dang money they had the 14 billion dollar man leading the company uh division the ai division so many other so much other talent there that and then you have these stories of just unconstrained spending and they better gain market share or it's just

going to be another money pit because i don't understand exactly what their full trajectory is people have this vision of oh they're coming out with smart devices they're going to have the ai layer then they're going to have the social layer and it's all going to connect together you're going to have this fused thing i doubt people are going to use that but they have no market share in general of these ai tools like who's using llama i i don't i think i i told you this but i was getting beers with or getting drinks with friends and they were uh they don't follow this they're not chronically online like me but they were like what what uh ai service do you use and a couple people were like uh chat gpt or gemini or uh this sounds like a fun night out

yeah i said i i i use llama and if for the few people that actually knew what llama was they thought that was hilarious it's it is a like a joke of a it's a joke in the ai space do you think there is any first mover advantages here what do you mean oh you mean for open ai yeah for sure yeah the thing is meta has the footprint they have three billion users like i made a facetious joke like okay well they have this model who's going to use it then someone said three billion people are going to use it first off if a bunch of people in asia start using it which is half their user base like they're going bankrupt because they have zero roic from extremely the poor people in Asia.

Now, if the models were good and they had a good go-to-market, people would start using it because they use meta products every day. But so far, you're seeing none of that traction. So I really think Alphabet has crushed it in AI, and I feel like meta is just aimless and is actually not developing stuff worthwhile. Like, look at Alphabet. Waymo, crushing it.

All the sort of stuff that DeepMind is doing, especially with healthcare, biotech research, plus many other things. And then you have Gemini actually, not necessarily crushing it, but wiggling its way in there, growing impressively, bundling across the entire Alphabet ecosystem

where people are actually using it. And Meta is spending just as much money, if not more, and getting nowhere. monetarily did you listen to the interview with sundar pichai i did not i can't listen to the stripe guys it's too oh we're just irish guys taking over silicon valley we're so happy i just it's it's too much they do get a little on my nerves sometimes and they they would you could tell some people just are uh too in the valley like to just in the tech world maybe like not seeing how normal people experience some of these technological advancements

but it was i i came away with it impressed by sundar pichai he is uh like built by mckinsey it feels like he was so resistant to saying yes resistance is saying anything controversial he's a politician but i mean i guess oftentimes it's kind of who you end up for a lot of times would rather have him than sergey brin kind of being an elon musk light goofball i was impressed by the amount of detail he knew about all the aspects of his business like all the different elements of google obviously that's the role of of the ceo but for someone who's google has like endless amounts of subsidiaries he seemed to have a pretty good grasp on everything okay we have a question isn't meta's new llm proof that ai llms are

commodity that you can just throw money at a model be competitive doesn't exactly scream deep moat no that's not the moat the moat is getting people to use your platform and stuck stick with it but we we aren't leaving google the google workspace slash gemini slash what have you ecosystem right we chose them it's cheaper than microsoft we're not leaving it doesn't matter if Meta's got the same product. I think if I counted the amount of Google products I use on a daily basis, I would probably feel compelled to buy more shares. Buy more stock. I don't know if – just because you spend $100 billion to replicate someone, does that make it a commodity?

No, I mean there's habitual nature to AI use. i mean that's i think i think about gemini like i go to google first tab enter i'm in gemini like it's just habitual now and i gmail workspace youtube uh drive docs gemini google search uh i'm probably miss i probably used google cloud in some way without knowing it sure sure yeah i think people get prisoner in the moment with this ai stuff like this week meta stocks up eight percent because they came out with some model next two weeks someone else is coming out with the model that's not a thesis for the stock 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 oh then it's

the vacation of a lifetime. I wonder if my out-of-office has a forever center. 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. New from Nespresso. Blend wellness into your coffee routine with the Coffee plus range infused with functional benefits choose the coffee you love with added b vitamins like coffee plus b12 to help support immune function and coffee plus b6 to keep your day moving or go with the flow and choose ginseng delight our new double espresso with ginseng extract whatever lies ahead don't change your morning let your morning change you

discover coffee plus on espresso.com i i know this is like i could have had this take six months ago and i probably did and i was probably wrong i wonder when i look at like some of these software companies like workday like service now like money.com yes in theory you can replicate all this i think people are underestimating how little most companies want to switch like do you want to spend your day switching systems like i i am reluctant to switch off anything yeah we're not going to vibe code a replacement to our recording software it's not happening no we can probably do something if we worked hard enough but i don't want to say too many bad things about riverside

in case they're listening and they give us more technical difficulties. Nah, sorry, we're their customer. They have to please us. We have had endless issues with them for a couple months now. I don't want to switch. It's just a pain.

Switching costs are generally quite high. Do we want to talk about Delta? Yes, I have plenty of topics here as we close things out here. Delta, we'll go through quickly because I have some other things before we get the hour done. I like looking at them because they're always first for earnings, and it's kind of a great

barometer on the consumer economy. Tons of revenue, just pure almost consumer discretionary spending. And the revenue guy next quarter was pretty good. Low teens, currently have low teens percent with 6% to 8% operating margin. And I also like to look at their spending and loyalty quotes. They're saying better growth from premium like usual. Quote, loyalty and related expense increased 13%, primarily driven by double-digit growth in card spend and an expanding cardholder base, American Express, who every quarter, I can't say it, remuneration of over $2 billion grew 10% year over year.

And apparently, we found out, I found out, that they have their own fuel refinery. These are some smart, they're definitely, their reputation as being the best and the smartest in the industry is showing up, I think. I had no idea they had their own refinery, which is fascinating, but at the same time, even with the refinery, they're expecting $2 billion in higher fuel bill costs next quarter just because the price of oil went from $60 to $100. I think it's an example. You look at their stock chart.

The company is good at their job. They're the best in the industry. They have a great ecosystem, but the business is just a bad one. like the sector airlines suck yeah it's just such a tough business like even if you do everything right it's so competitive but i think more for me it's macro the consumer looks fine so far we'll see what you know visa mastercard american express others say but for one more quarter i'll say right now it looks like q1 yet again the recession the consumer recession is not materializing even though we've seen bear porn around that for what four years now yeah people still travel

we got a world cup coming up i don't know if that'll have any variance yeah we'll see there's a lot of hate around those ticket prices but the uh what was he gonna say yeah the what the tsa thing when people have three hour lines just that goes to show how much people want to spend on travel like three hours you're gonna go to that sandals resort lovely like that people want to do it they want to spend money on it if fifa were a public company would you own them no no i don't know how that's possible but their biggest segment line item government bribes this has been growing year over year they are they're a monopoly oh yeah i never i i didn't like it when they forced Nelson Mandela to

bribe them. Do you remember that story? Yes. That's a sad one. Government bribes across the board. Nelson Mandela, come on. Don't force him to do it. Do we want to talk about Rocket Labs ATM? Yes.

Yes. This is a company I've been following. A lot of people are in love with this company. We've had interviews on them. Stocks up a ton. They did a huge raise of the The at-the-money offering, which is just, I love that it goes, shortens to ATM because, you know, they're going to the ATM to raise some money. It's the perfect acronym.

They raised about a billion dollars for all intents and purposes. They used some financial engineering we don't need to talk about, but they had over a billion dollars in cash on the balance sheet last quarter. I also saw that Peter Beck, the founder and current CEO, eliminated his RSU payment program, which was nice. Maybe not the whole thing, but it was a nice gesture to shareholders. right now the stock trades at something like 40 times sales with slim margins you know this is rocket company they're trying to become the second spacex they're pretty doing a pretty good job about it it looks extremely overvalued right now you know they execute on their product roadmap but it looks like they're taking advantage of this high share price and i feel like if we get a huge

fallout from this space stock bubble with the spacex ipo they're setting themselves up to weather any storm but the heat with a nice cushion on their balance sheet thought it was a good note it's one i'm following i maybe i would still be holding if i bought a long time ago but this is one i'm trying to be very patient on because i think it has a promising business trajectory and they've executed brilliantly uh with the odds against them so yeah pretty pretty interesting it's a difficult spot to be in where you're an ethical company let me double check and make sure rocket labs valuation is still insane it's not as insane as it was but it's still pretty it's insane if you're an ethical operator and you actually want to run the business for a long time

i feel like having an extreme overvaluation is an awkward place to be because the right thing to do is probably an at the money offering but it does feel like you're diluting shareholders uh i mean in this case i don't know what you were you mentioned that he adjusted the compensation policy to forego some stuff that's a nice kind of gift i guess to shareholders but i don't know so often you see companies with unethical operators uh especially during the spac boom that were taking as much advantage of the at the money offerings as they possibly could yeah that's fair that's fair all right small cap of the week you ready for a gym operator the planet fitness of latin america i've actually read up about them before

Do you have some anecdotal evidence for us? I've used them. They're busy. And it's easy to hop in and out, so you can sign up pretty quickly. It's better because, I mean, they still do the gym BS where, oh, you're canceling after a month? Well, you actually have to pay for another month. But I expect that with any gym.

The company is SmartFit. This is a Brazilian company. You can actually now buy them through interactive brokers. I would say this is another pitch for our sponsor here, Ivy Care, because they just announced access to the Brazilian Exchange as of late 2025. SmartFit is maybe the Planet Fitness of Latin America. Fairly close. Maybe not exactly like them, but fairly close.

They added 384 clubs in the last year. They're at 2,000 locations across 16 countries. And, Ryan, maybe while I'm talking, you can pull up a chart from our friends at fiscal.ai. Use our code, fiscal.ai, slash chitchat. get 15 off any paid plan uh 50 gross margin if we go down the unit economics here from what i can tell places i've gone they're packed almost too packed honestly in my opinion let's jump up the prices there okay so we get the riffraff out of there uh 5.2 million total members expanding into

high-end clubs called bioritmo which maybe is good because these gyms are pretty like basic one so there could be a nice little niche in that although it's a very very early days for that i think they only have a couple offerings they are doing different bundled subscriptions traveler subscriptions uh they're targeting corporate clients with these blanket passes which i think could hopefully make them differentiated versus other players i think gyms are an interesting area it's not the best sector because you have some operating leverage that can disappear if you lose just a like 10 of your members there's a ton of operating leverage you can work work both ways. But as economies get richer in emerging market areas, more people are going to get freed

up with time and money to go to gyms, exercise, and then you also have the weight loss drug tailwinds that could be helpful as well. The company itself is a 24% revenue CAGR over the last decade, currently priced to sales of 1.6 PE of 18. What do you think, Ryan? What charts are you looking at? I'm pulling up a couple different numbers. So EV to EBIT, I don't know if you just said this, 14 times. Nice. Doesn't seem too expensive. The, let's go, annual revenue, gross profit, and operating income all look phenomenal. Has this all been organic? Or have they acquired gyms? i have not gotten that deep in my research but they seem to have a pretty simple model expand into cities you build the bundled pass there's a lot of different this is a large population area and you can do fairly i mean the prices are pretty cheap um there's a lot they're not even in every country yet and interestingly their first non-latin american

market is morocco casablanca which i thought was funny revenue is up almost 50 fold over the last decade 50 fold really almost uh 40 42 percent cagger uh i was doing usd uh oh yeah i would do usd switch it here all right so 22 fold i guess yeah uh big difference but uh still 30 percent plus revenue growth over the last decade and you've had consistent margins it looks like operating incomes pretty solid this is interesting i like this and it fits within my theme of trying to geographically diversify outside of the united states not for any political reasons i know some people seem to tie the two lately uh but primarily because i've had other than software i've had a hard time finding super uh appealing valuations for yeah i mean s&p is at 30 times pe and the

u.s dollar might be overvalued hey geographical diversification doesn't seem like the worst idea and it is a uh it's a model the gym model i think is one that's easy to run at scale like you once you've built the blueprint for launching these new gyms i mean you've you've seen it with planet fitness obviously they do some scummy things i would say in terms of customer retention but i mean there are things you can do to help the downsides of the gym business and by the downsides i mean the fact that people are taking your taking your capex and throwing it on the ground uh literally they are depreciating your assets as hard as they can it's all right your best customers though are the ones that don't show up just get them on a decently priced plan

uh yeah oh no you forgot about it for a year that sometimes i know this is insane but that is sometimes my motivation to go to the gym is not letting them get that not letting me be that customer for them that they're the most profitable on we had someone here say their globo gym but i'm an average joe's guy i'll say would you say it which is more globo gym it's it's well Well, it's neither. It's neither. It looks more corporate-y, commoditized-y, like a globo gym.

If we're talking dodgeball design. But it's not as nice. These are pretty basic operations. What's the cost of living like down there in Brazil? Do you want to just like a comparison to somewhere? It's a big country. It's kind of like saying, what's the cost of living in the United States?

well you can go to where you're at specifically does it feel cheaper than seattle yes oh yeah yeah for sure and it's a nicer area so it's definitely cost of living's good but they're they're i guess mainly in brazil that's the biggest country but they're in a lot of a lot of different countries 16 um i i think though there should be as the economies grow pricing power with these type of businesses like again like i'm more spending power than some people but they're down here but i look at that and i went hey whatever the price is i'll sign up like it's not that bad i've been revisiting our conversation from our last episode on rebuilding the portfolio from scratch i'm gonna do it officially i'll announce this now

big announcement time i will be taking a position in grab holdings i'm gonna do it nice it uh i'll wait until we have our own little waiting period so we don't pump it but i don't think i have enough sway to pump uh grab but i just i like the business i really do and you know what i know you hate it but i like uber uh yeah i like grab more but Uber. Okay. Should be all right. Down here, I've been using them, but they don't have Waymo yet. Yeah, but people like that episode we did from Wednesday. A lot of good feedback. Appreciate it, guys. And if you haven't, I'd go check it out. It's a fun one. We kind of go quick hitters through 10 different stocks we'd buy that we've never owned. 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. New from Nespresso. Blend wellness into your coffee routine with the coffee plus range infused with functional benefits choose the coffee you love with added b vitamins like coffee plus b12 to help support immune function and coffee plus b6 to keep your day moving or go with the flow and choose ginseng delight our new double espresso with

ginseng extract whatever lies ahead don't change your morning let your morning change you discover Or Coffee Plus on Nespresso.com. Yeah, I won't spoil them. But there were a couple on there that I was taking a look at my own portfolio thinking, why have I not swapped these out yet? Yeah, that's a good point. All right. Well, we have this circular revenue thing that Aria shared with us that we haven't gotten to.

And it is firepower through this because it relates to the AI talk. So again, thank you to Aria and go check out the video from Wall Street Millennial. So remember the 17.5% promised returns from these private equity firms doing a joint venture with OpenAI? Yes, of course. Very easy.

17.5%. So what's happening here is OpenAI formed a joint venture. They own 70% of it. 30% is owned by these private equity firms like Brookfield Asset Management. But these private equity firms are going to their portfolio companies and giving them, selling them tokens of ChatGP2 credits,

which is flowing, again, back, or you could say circularly, into the joint venture which they own a part of and OpenAI owns a part of. Maybe you can share this graphic that the video makers had because I think it kind of illustrates what's happening here. there's this frontier product which is enterprise jet gpt that's trying to sell resell through to these portfolio companies of these pe companies and what's weird is that again these p firms are selling software to their own company this is selling to themselves

and it comes back to the promise 17 and a half minute percent return because interestingly all of this because open io and 70 of it will be consolidated in their financial statements which is going to pump up circular revenue that just gets recycled over and over, maybe not over and over, but just gets recycled right coming into their IPO. And it's just a perfect way

to say, oh, actually, we're not discounting anything or what have you. We're selling you to this and then we're just going to, instead of selling it to you at a discount, we're going to just sell it to you at full price. But then we're going to do this profit share

with our own customer. but it's going to make our revenue look two to three times as big open ai is a walking red flag and i'm thinking we can officially call them ai we were because i'm not sure this makes it to makes it to market i i think there are a lot of deals like this out there where it's net profit zero for both companies where they just give each other revenue growth and i should have brought up the always sunny thing just we're circling we're circling wait where's our money oh we we have not we have the same amount yeah that's nothing yeah i think there's a lot of deals like that they just want

the logo when they want to be able to announce a press release make it feel like you're getting some sort of a some momentum with it but yeah it's i am worried that this is more common with open ai than we already know fair fair i want to see the audited financial statements by a big auditor i i get i know we've already talked about this bunch open ai gives me the ick anything associated with open ai and it's astounding because chat to bt is still the leader but i've just be i've like discarded them almost as if it's not going to work out for them no matter what so it's a good point it's a good point yeah i i'm calling i'm taking the name ai we work that's that's what i'm calling them from now uh we're going along we had a listener

question around a desalinization company consolidated water that's a fun name uh sorry someone they had a nice message in the substack chat we'll do it next time we'll do it next time um but besides that ryan anything else before we get out of here we're a couple minutes long no i do recommend if you haven't already listening to the rebuilding our portfolios from scratch episode i thought that was one of the more fun ones we've done in a long time all right yeah go listen to that episode we have some fun interviews coming up hims and hers maybe a little wicks studying some super investors going to be a lot of fun episodes and of course the weekly power hour as we plug through next week we're going to be starting

earnings season so it'll be a fun one all right as a disclosure we are not financial advisors anything we say on the show is not formal advice or recommendation ryan irony podcast guests may hold securities discussed in this podcast may have held them in the past and may buy sell or hold them in the future. Thank you everyone for tuning in. We'll see you next week. I finally had a light bulb moment about a stock we've all heard about, growing at 18% a year and a 15 PE. I shared this insight in a special deep dive report to subscribers of my research service, Value Spotlight. The report is called A Generational Moment,

Reigniting Human Connections Through a Tangible Network of Intangible Assets. Chit-chat listeners can get a discount to my research at stockwriteup.com. That's stock, W-R-I-T-E-U-P.com. The Royal Canadian Legion is celebrating its 100th anniversary. And now our change has a $2 coin to mark this milestone.

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