Chit Chat Stocks - Earnings Kickoff (TSM, ASML, NFLX); AI Absurdities; Amazon's Starlink Competitor; Hermes Opportunity

Episode Date: April 17, 2026

We officially announce our transition to building an AI Neo Cloud. (00:00) Introduction (03:09) Allbirds' Pivot to AI: A Meme Stock Phenomenon (06:10) Taiwan Semiconductor and ASML Earnings (12:07) Hermes (18:20) Coupang's AI Investments (24:49) PayPal's Market Position (30:58) Stock-Based Compensation and Its Impact on Software Companies (37:40) Netflix Earnings and Strategic Shifts (43:14) Consulting Industry Insights and Trends (49:13) Amazon's Satellite Acquisition and Market Implications (55:45) OpenAI Losing Market Share ***************************************************** 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

Will the Fed raise rates 25 basis points in June 2026? IBKR prediction markets let you trade the outcome alongside your stocks and options. Earn interest, get it right, and earn $1 per contract at ibkr.com slash predictions. Last trading day, June 17th. Welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I am your host, one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. Today we have our weekly Investing Power Hour episode.

We do these live on Thursdays at 5 p.m. Eastern time, and we talk all things financial markets, any news from the week. Earnings season is heating up again, so we're going to be talking about that. We've got Taiwan semiconductor earnings, ASML. We've got Netflix, just reported. And we have one of the craziest business model pivots in recent history, a former fashion brand people might know, Allbirds, or I should say New Bird AI, new name change there. Brett, I don't know if you saw this. Is that what they officially called it?

That is going to be the rebrand, yes. All right. Can we pivot to Chit Chat Stocks AI? I'm thinking either chit-chat stocks supercomputer, chit-chat stocks compute. It's got to be something along with the compute. I use the C words as help here. It seems like if you announce that you acquired GPUs, which I think we technically have because we have laptops that might have an NVIDIA core processor on them. We can update our laptops and say, hey, we've acquired some GPUs for some AI compute.

Yeah. It seems you get 10 times the valuation. So our company is not worth that much money. We've tried to figure it out before. But if we just pivot to AI supercomputers, I think we can do well. The irony here is that people are treating – well, we can talk about whether or not there's any valuation work being done here. There's obviously not. A little spoiler alert there. But they're treating GPUs like they are the assets, the most valuable assets in the world, which I guess maybe they are. It obviously depends what you do with them. But they are also the fastest depreciating assets in the world, close to them. but we've got other topics as well i've got a little more on the boring industry of consulting

i won't spend too long yeah can we let's let's not start with that one get everyone to tune out we'll do that in the middle we've got an amazon acquisition that's right global star we'll talk about that in a sec uber's got some av investments and you've got claude potentially massaging the numbers so all that hype we've seen is uh well there's still plenty of hype to be had but the uh i think there's some interesting accounting going on there potentially where do you want to start brent well let's start with alberts what happened here ryan people might not have heard people that are in the online world following all the financial news every day like us what exactly did this company do and what was your reaction

one first thing because i just started laughing i laughed as well yeah i mean that's all you really can do what's the point of getting frustrated this is going to be uh maybe the future of uh crappy microcaps bankrupt companies like we for better or worse we live in a meme stock world we live in a world where you can catch virality fast if you're in the right subreddit i guess or twitter or twitter it seems like it went viral on twitter if you have low flow you can you can pop a lot in a single day so let me let me go through the actual announcement the press For those that don't know, I think Allbirds was sort of a – it was a trendy thing I'd say five years ago. They were a shoe company that just looked very casual.

It was started by a former soccer player and when they went public, they reached I believe a $4 billion valuation at one point. Well, they've had a horrible run. They were functionally bankrupt and they recently sold their business. really to i believe a private equity group but they released uh an announcement on tuesday morning that reads as follows all birds inc executes 50 million dollar convertible financing facility agreement announces expansion into ai compute infrastructure which caught the world off guard uh the one this stock was pretty much left for dead so if you are one of those like investors that loves to just dig through complete trash and find bankrupt stocks most of them are

going to be trash but you can find occasionally find something like this where uh ethics maybe are not like the highest concern here's the quote uh the facility which is expected to close during the second quarter of 2026 will enable the company to pivot its business to AI compute infrastructure with a long-term vision to become a fully integrated GPU as a service and AI native cloud solutions provider. In connection with this pivot, the company anticipates changing its name to Newbird AI. So here, okay. What do you think they were doing at the executive meeting before this plan? They just go, look, we're, we got no options left. And someone goes, what if we kind of as a joke what if we pivot to ai and then everyone starts laughing and then they

go maybe that's our only option left so they sold their business to they sold their footwear business brand assets i believe they've already closed down all their stores to american exchange group i think for 38 million dollars and then they've raised this 50 million dollar convertible facility to basically beg nvidia for gpus uh following this announcement all bird stock jumped 781 percent in a single day yes i got i got the numbers right here yeah 250 two dollars and 50 cents monday tuesday pretty much uh yesterday we go up to 20 at its peak Today, down 30-something percent. It's a little bit of a drawdown.

Already entered a bear market. Closed at 11. So, yeah, wild ride. Here's my question. Do you think there was genuine intention from management that they thought they have some expertise in AI, some edge where they can be – No, no. Is this like – It's just a Hail Mary.

You don't think that they like deep down believe this business model could maybe work or is this just pure let's get the stock pumped as much as we can? I don't think they're necessarily doing it solely to pump the stock, but I think they're saying this is a Hail Mary. This is an option a lot of companies are doing. It's not illegal. We can technically any company can get into this business. It's not like there's something illegal going on here unless there was insider trading or something like that. Yeah, it's absurd. It's the same thing as it really brought me back to one of the formative events in my investing career when the Long Island blockchain debacle happened.

Do you remember this one? So Long Island Ice-T in 2017, I think it was 2017, 2018, crypto boom slash bubble. I guess, you know, Bitcoin's much higher than it wasn't then. So it was definitely a boom-bust cycle, the fallout down 80% from there. But during the uptimes, there was a lot of companies, and in this period, it was more about the blockchain. A lot of companies were doing blockchain initiatives, press releases, kind of like the one Allbirds is doing here, but just insert, we're investing in blockchain strategic assets, blah, blah, blah, blah, blah. Long Island Ice Tea, which you know is a brand, they decided to do essentially what Allbirds is doing

and then pivoted their company name to Long Island Blockchain, which was just an all-timer at Allbirds, I think. It goes up there in the mountain rush more of hilarious business pivots. What do you think about this, though? We titled this episode as a press release, Chit Chat Stocks Unveils New AI Supercomputer. Quantum. Don't forget quantum. Quantum, yeah.

I mean, we're investigating. It's like the nuclear energy companies, the fusion ones, the small nuclear reactors, the micro nuclear reactors, some of them, full disclosure, I may be short. They put out these press releases that just go, we're investigating new technologies for this micro fusion reactor that'll fit into semi trucks. And you have no approvals for any of this. The Nuclear Regulatory Commission hasn't done anything. So, yeah, you can announce chit-chat stocks can get into the nuclear energy program if we want. Like this stuff is just all nonsense. It's all hail bears.

Let's – I'm going to veto that podcast title. I just – I think we get a lot of listens. I think we would. Well, that's probably the pitch they gave at this board meeting. I think we'd get a good share price. so the irony here is that so i check there's this there's several lists online that it's like biggest movers biggest stock movers today biggest gainers biggest losers and every single day you

check there's some micro cap up 200 this is the world like they're now usually they're they're nothing it's not like a company that used to be something like all birds but here's what i find ironic is if they did this just to sell shares like if the goal was just for insiders to get out with this pop they could have gotten out at a four billion dollar valuation in 2021 like if the stock is still down i think 96 from highs even after a 700 gain so that's less than shorting don't press your short when a stock's already gone down 90 for some percent for you and the market cap's below 100 million dollars yeah there's another company out here on the toronto exchange i may have told you about this one i was talking about in the

substack chat it's called xanadu quantum technologies limited and it's up like 400 percent in the last week just went public how did these companies get public like is it not insanely toronto exchange australian exchange there's less otc markets there's less regulations and that there was another company found called the stable coin development corp it had just it was a it used to be a biotech there's so many they used to be just no something relay pharmaceuticals something yeah we've gone forever on them but these are the like jordan belfer meme companies basically exactly uh but let's talk some real news do we want to talk the world of semiconductors real semiconductor businesses the companies that this is the real the fulcrum in all birds is

supply chain tsmc and asml take us through the numbers here uh i i glanced at them you read the call looked fantastic yeah i mean the numbers were really good so taiwan semiconductor revenue was up 41 gross profit up 52 and just i want to pause for a second there that those are staggering figures for a business of this size uh it's you can tell how impressive the growth is because management focuses on sequential growth quarter over quarter and they're talking about like massive like impressive jumps like i was reading this and i think it was like we grew revenue 20 i was like oh yeah that's all right decent results quarter over quarter it's like okay that really is impressive uh anyway revenue growth 41 gross profit 52 earnings per share up

58 wafer shipments grew 28 so they're they are uh the majority of their wafer shipments are now the most advanced nodes so uh seven nanometer and below 61 of revenue comes from high performance computing now which hit a record for for taiwan semiconductors so for context smartphone i think is second is their second largest revenue contributor about 25 or a quarter of the business doesn't grow that much and for anyone high performance compute just think of that ai cloud ai cloud yeah exactly they hit record operating margins this quarter so this was their highest operating margin quarter ever in their history 58 operating margins and i was reading the conference call which the conference calls are hilarious for for most i think for most

people it's question interpreter yep who just basically repeats the question almost to cc whiz ceo and then cc way just gives the most like blunt short response he could it's like the japanese baseball players that pretend they don't know english yeah yeah um but anyway the first question i was actually i thought it was a good question it's from an analyst uh who basically so tsmc is generating record operating margins right now because all the ai customers are can't get enough chips they're supply constrained whatever and they're paying more for the most advanced nodes which now accounts for the bulk of taiwan semiconductors business so margins are higher they taiwan semiconductor is getting basically full utilization out of their

manufacturing facilities and they are ultimately operating at their highest margins ever The analyst was basically like, OK, supply is still constrained and people are paying whatever they can, not really, but they're paying more than they historically would for these advanced nodes should you expect margin strength to be better throughout the rest of the year. and the interpreter asked him will margins will margins be better than we're estimating and more or less ccoa is like uh yes and he keeps it so short but it's it's funny because you read these results and you're impressed they beat estimates whatever you think of estimates they beat them 41 revenue growth is staggering for a business of the size stocks down two and a half percent after earnings it they could generate let me check the updated estimates here for operating income for 2027 now again there is potentially some cyclical nature to this but analysts think that

Taiwan Semiconductor could produce – I'm pulling this up right now, a friend at Fiscal.ai – $133 billion U.S. dollars in 2028 operating income, 133. The market cap today in U.S. dollars is 1 point – well, the enterprise value is 1.8 trillion. Do you have any interest in this? Yeah, I think it does well over the next decade. The question I believe people should ask is not what one year is going to be, because who knows if 2028 is the peak spending for the AI build-out. I think I would ask, what would the average earnings power be over the next decade? And off the top of the head, I'd maybe say per year, $100 billion, maybe $90 billion,

depending on how bullish or bearish you are in AI. There's a lot of uncertainty there, probably a wide range of outcomes. But I'd say, on average, maybe $100 billion per year over the next decade is a good way to put it. That feels like a good price, not a great price. I like it. But you have to expect margins to come down a little bit once the boom period ends. And I think that's why we had someone in the comments here on the live show say, best quarter in history, and it drops 4%.

Yeah, the market doesn't care about the past. hey that's yeah that's that's really it and the ceos are not going to sell the future uh this is they are he's no elon musk they are the anti-promotional uh folks asml reported i think a day before tsmc maybe two days um and it's kind of funny when you read both of the reports Because they're kind of similar where the tone is sort of the same where it's like, look, yes, demand is incredibly strong. We are fulfilling orders as fast as we can. We will continue to raise prices. And it's kind of that simple.

I think Taiwan Semiconductor and TSMC maybe has a little more variability in terms of demand. Like maybe they have to have more mobile phone or Internet of Things revenue during a certain quarter, more shipments towards that. So it might affect margins. But generally, they have the same tone. My question for you, ASML trades at 39 times EBIT today, trailing. TSMC, 26 times EBIT. If you had to pick one for the next five years, which do you think generates better returns? I, for the next five years, my gut says go TSMC, but the one thing I would just reiterate again,

same thing I said, I'm less concerned about ASML margin compression. I'm more concerned about TSMC margin compression over a five-year period. What happens if in year five, operating margin goes back down to 40-something percent? That earnings multiple you're buying might not be as attractive as you think and it's not like it's dirt cheap and we've already had three years of mega growth so yeah i think it does fine i like tsmc a little bit more kicking myself for not buying asml last year uh right around this time maybe a couple months after here like nine ten months ago so i was trading at 20 something times earnings i would like that a lot more there but this disparity yeah i lean tsmc what about you yeah my assumption is that they'll probably grow

earnings at a similar rate over a decade maybe maybe one i would say asml is maybe a little more predictable but you're going to get probably faster earnings growth from taiwan semiconductor over the next couple years just because they can move a little faster uh so purely on valuation i would go taiwan semi the also i assume that as the arizona fab and the jap japanese fab start to become operational those are going to be a little bit of a drag on margins would be my guess until they're at sort of full utilization so i think you're right there probably will be a little more margin compression than people are expecting I mean, I just can't pay above 30 times EBIT for a business that's really mature.

Yeah, for a large, mature business, even if I think they can grow mid-teens earnings growth for a while. 30 above and almost 40 times is a lot to pay. Will the Fed raise rates 25 basis points in June 2026? At IBKR Prediction Markets, the yes recently traded at $0.05, while the no traded at $0.90, but the markets can change quickly. Trade prediction markets on political, climate, and economic events with simple yes or no prediction-style contracts where prices reflect probability. Explore trending data, spot the trends, and if you get your prediction right, you earn $1 per contract at settlement. Plus, you'll earn a 3.14% APY on your investment with an interest-like incentive coupon, and you'll get $3 for signing up with IBKR Prediction Markets, which you can use for any purpose or to start trading. Prediction contracts are not suitable for all investors.

Go to IBKR.com slash predictions and turn your views into IBKR Prediction Contracts today. Last trading day for this contract is June 17th. Yeah, similar in a way to Costco. the costco 40 50 times earnings you kind of go yeah if your argument is this is going to be a bond like instrument forever yeah tsmc and they smell a little bit different but if that's the argument it's a little bit tough for me to get excited maybe we could take some listener questions there were a lot in the substack chat this week someone asked and they did have an earnings update uh hermes going down is there an opportunity did you look at the quarter they

kind of the european style just some unaudited stuff a couple numbers i did not see their quarterly report let me pull it up here uh stocks down again uh let's look let's go draw down first give some context for the listeners draw down from high we're at 41 we are back at the same era we were in 2023. I mean, it was much cheaper in 2022. People are very worried about one, the Middle East conflict, because there's less travel from the Middle East to Europe to buy goods. That's kind of one of their big markets. The euro strengthening, I think, also hurts them. And honestly, besides that, there's been a slowdown in luxury spending in general. but if you look at the figures i kind of think they're doing all right regardless of like a slow

period like okay you're facing overall headwinds in the luxury space you're seeing a lot of your competitors post worse figures and maybe if you have the numbers right i forget but i think leather goods were still at eight nine percent it feels like they still have a good lock here and can consistently raise prices and i'm looking at maybe our friends at fiscal ai again i'll use ebit to ebit don't know what the best one is maybe you can use pe we're back to 25 you know you probably do all right here yeah it's durable girls weathering weather goods business is growing seven percent top line last quarter and a lot of this is a lot of the headwind is the drag from asia specifically china and even that is with all everything that's happened to

the chinese consumer and you look at like ferrari for example shipments to china or have basically been cut in half as total asia revenue flat year over year the latest quarter yeah that's pretty that's not bad if i were this is kind of a contrarian opinion it seems but something about luxury the luxury industry just doesn't do it for me i don't know why i'm just not that interested durable growth that's it it's a that's kind of the whole thing oh can they raise prices at three percent above inflation forever that's kind of the big question yeah i don't know you just look at like lvmh did they just destroy their brand over the last couple years with such strong growth like or and i guess they have a lot of different brands but oh yeah for sure that's

There's a huge risk for LVMH, specifically with the core Louis Vuitton business, with that. But I think with Hermes, less so. They still have the artisan French makers. It's incredibly difficult to buy their top-sought bags. The aftermarket prices are still 2, 3x higher than the retail prices, meaning there's a disconnect between supply and demand that they keep permanently low. You probably do well from here. There's just something about it that like – okay, I walk by an Hermes store like every time I go to the office here in Austin and maybe it's just because – maybe Austin is struggling. I have never seen a single person in that store and maybe all it takes is one to cover their costs.

Yeah, you're not – nope. Ninety-nine percent of the population of Austin isn't allowed to buy flagship stuff. I know, but it just – They're not allowed to. No, their core market is not Austin. It's Paris, Tokyo. monaco yeah yeah if i were to buy one i think hermes would be the one because it feels like they hermes or ferrari maybe they nurture the brand maybe the best uh and and try to avoid

like diluting it by letting more people access it but i don't know something about luxury just feel it's like a sweetie investment yeah uh well yeah yeah i've never owned them but i think i think you do well here all right other one then maybe we can talk netflix earnings someone wanted to talk coupons investments in ai and robotics uh we are officially yes yeah ryan you're a shareholder as well you're both shareholders of a company that's decided to pump up its ai investments in press releases did you see this come in your email i didn't see the press release Oh, yeah. So U.S. technology company Coupang announced today that it has invested more than $84 million in U.S. and global AI tech startups since 2023, one of the many efforts by the company to redefine the future of global commerce through advanced technologies. I'm going to be honest. This doesn't matter.

no i it yeah i mean i would assume they're investing in ai and robotics and uh it seems like they are already super advanced in terms of like fulfillment uh capabilities they're just doing it for the calling themselves a u.s technology company they're talking about the u.s korea tech prosperity deal you know yeah that's about it yeah i don't think much of it But Coupang, I think it's up around, let me pull up the numbers real quick, 27% over the last couple months. Because they're pumping their AI startups. They're a GBU company now. They have the Coupang Intelligent Cloud.

It's beautiful. It's great. We love to hate and laugh on all the companies talking about AI. But if it happens to my company, then I'm totally fine with it. I don't mind if a stock that's been a dog is up 30% in a month. It's good for – fine with me. Can't complain about that. We've got a comment here in the chat.

Burry buying 3.5% of PayPal at $49. Guess people will stop killing me for buying it at $45. First off, commenter, never listen to what anyone else is saying. everyone hates not everyone there's gonna be someone that hates at least all of your investments right it would not be a good purchase if everyone liked it would not be a good investment if everyone loved it although i've been wrong about it seemed like that was the case on a video three years ago but it doesn't matter um that's fair uh yeah perry i don't know i we subscribe payment stuff because his conclusion i felt was completely off uh and maybe that's why at the end i think

is a good opportunity because he was like well that part's a whole commodity i was like well look at adjunct it's doing fantastic yeah yeah the authorization rates vary by processor and and i think a lot of that comes down to your tech advantages um but paypal paypal paypal i've been saying the same thing for a long time but the core do you think their pe is the core business is screwed right like am i wrong to think the core business is screwed like the the branded checkout like apple pay google pay destroyed that and it's gonna keep looking cheap but maybe make out a good return here i would guess the true earnings multiple is nine nine times wow that's good 9.2 yeah i'm the price earnings price earnings gap yeah the you probably that is

interesting you do okay uh it's just not like all right if i'm trying to buy and never sell something of course that's a philosophy and not always in practice i look at something like adgen at under 20 times earnings uh maybe not gap net income but ebit or something like that that is where you know i i see that durable revenue growth secular tailwinds market share gains and that is something that attracts me much much more although you know like your i feel like you do all right with paypal it ripping and replacing a payments processor is really tough for for businesses um like huge merchants like mcdonald's or whatever probably use multiple payments processors so they can kind of ebb and flow their their volume to whoever's

got the best authorization rates at the time but generally for like startups or growing businesses the last thing you want to do is rip and replace stripe or add-in so an add-in is partner for a lot of businesses that are growing really quickly so let's give you i'll give you four starbucks chipotle mcdonald's lvmh partnerships where they're a small percentage today but that authorization rate is giving them slow land and expand over time they're big spotify if i'm not mistaken spotify is early spotify and uber kind of the core digital only players uh especially european ones they are they were way like before yeah yeah i mean the nice thing is as those businesses grow add-in doesn't really have to do a whole lot of work to grow with them so

true yeah the i saw a comment here it looks like the sass apocalypse is over thought so i saw something online this week that was like because everyone's talking about how software is cheap myself included i own some software stocks someone was like do any of these companies actually trade at less than 10 times gap earnings and i put together i put together a full dashboard with every single software company I could find. So that was the bat signal for you to do some Fiscal.ai listicles. Yes. Yeah, 100%. And I found, well, let me just pull it up right now.

I actually, yeah, here's a good, nice little shameless plug here. Share my screen. Yeah, let me just do, I'll do the advertisement while you're loading up here. Use our link, fiscal.ai slash chitchat. they're adding so many new features all the time i like the annotations one as you read through quarterly results it's going to help me build my own research database not having to using google docs as much not having to use my own yellow legal pad stuff like that consolidated into that one research terminal it's fantastic they're building no ai tools all the time use our link

fiscal.ai slash chit chat get 15 of any pay plan all right ryan is wix on this list the love of my life i'm guessing no uh yeah it is i mean it's like every software company you can imagine is on here uh okay okay so ev to free cash flow if you look at this metric for this cohort you're going to find a ton of companies below 10 times i think we've got probably 20 companies below 10 times free cash flow if you look at it on a pe uh if you exclude the ones with negative earnings there are there there is not one oh my there is wow the sbc the silent killer yeah and it's it's kind of an and i've seen a whole bunch of people lately that say like there's empirical evidence that stock-based compensation just doesn't matter which could

not be further from the truth it it has to matter obviously but you said that there's a whole bunch of studies done that it hasn't it hasn't impacted that is not the like key contributing factor to investments results i don't know a lot of it is like venture capital studies so that tells you what you need to know but if you're the software company and you've traded at 60 times sales for a decade at Lassian, for example, because everyone bashes at Lassian for using stock-based compensation. And they are egregious, just to be clear.

I mean, they are probably the worst about it. If you're trading at 60 times sales, doesn't it make sense to be heavily deleted using that as currency? Well, what if, okay, you gifted all that stock at an inflated price. You know, the dollar amount looked good to your employees at the time.

But if you go into a 90% drawdown, they go, well, either my options are worthless or these RSUs at $10,000 are now worth $1,000. I wouldn't look at it that way. Maybe acquisitions make sense. For example, I was just doing Kraken Robotics this week for emerging moats, a little quarterly update coming in your inboxes. They made an acquisition, I believe, I don't have the numbers in front of me, But something like a company, the market cap is like 25% of their size. But the company they acquired has two and a half times their revenue because they were able to use their stock price at 20 times sales

to acquire something at 10 times EBITDA. That is smart. Stock-based compensation, I don't care how people spin it. It is a headwind. It is so annoying. And stock prices would be so much higher. But if the companies stop doing that, I wish I could just shake Wix management's head and just go stop this because your stock price would be at 200 if you didn't do this over the last decade. Yeah, and it's – if you pay people well in cash, I think most of them are happy.

You can get talent that way. And you actually – now you kind of see the double-edged sword that is stock-based compensation because you're seeing it all the time now where it's like ServiceNow, CFO, just left to join Claude or Anthropic or something like that. He joined Claude? Well, he probably was. He probably did join Claude at some point. He started using Claude and he goes, uh-oh. Yeah. But executives leaving enterprise SaaS companies to go join Anthropic or OpenAI or whatever, it's like, yeah, because their options are not worth anything now.

They're all underwater. And if that was what your compensation was based on, you go where the grass is greener. But yeah, I was astounded when someone was like, there's no companies with an earnings multiple below 10 in the software space. I was like, that can't possibly be right. That's score one against the software bulls. My God. Well, back to that question. Is the SaaS apocalypse over?

Thoughts? Let's give it a quarter. It's been a week. The NASDAQ was up like 10 straight days, which was an absolute record. One of the best 10 days in market history. I think it was the biggest anomaly since, like, the 50s, according to some random Wall Street Journal article I was reading. Let's calm down, everyone. Allbirds is up 1,000%.

Let's give it a little bit before we determine the status apocalypse itself. We don't want to be the George Bush mission accomplished on the aircraft carrier. 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 out-of-office has a forever setting.

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Always earn high regular interest rates that grow the more you save and invest. Conditions apply. Visit scotiabank.com slash HISA to learn more. Scotia Bank. You're richer than you think. All right. Do we want to talk Netflix earnings? Just reported.

Sure. So I guess, first of all, Reed Hastings, stepping down from the board of directors. So generational run. Congrats to Reed Hastings. It sounds like he was pretty uninvolved to begin with. Apparently, he was also kind of anti the Warner Brothers acquisition from some stuff I heard, but ultimately that didn't go through. Revenue grew 16 percent. Operating income up 18 percent. I've got a couple of quotes from the report. I guess I'll quickly on the regions. United States and Canada grew 14 percent. Europe, Middle East, Africa up 12. APAC up 18 percent and Latin America up 19 percent. Here are the quotes. So the first one is, our recent price changes have gone well, reflecting the strong value we provide members, and our advertising revenue remains on track to reach $3 billion in 2026, up 2x year over year. I was a little surprised by this number. I know the advertising business is pretty new, but Netflix is probably going to do $50 billion or so in revenue this year. So I would have thought the contribution would be a little higher than just $3 billion. Anyways, here's the second quote that I thought was interesting.

In Q1, we aired more than 70 live events, including our first regional live event with the World Baseball Classic exclusively for our members in Japan. This massive event delivered 31.4 million viewers, becoming our most watched program ever on Netflix in Japan and sparked our largest day of signups in the country. As a result, among the 190 countries in which we operate, Japan was the largest contributor to member growth in Q1. what do you think of this idea of i mean they've been doing live events for a while but live events as sort of the top of the funnel draw people in keep them with everything else i've been with them them in prime they got to do that with the sports that's how you get how you get the biggest uh biggest audience i agree that i've been on this bandwagon for years they've done it largely without paying the big league well i guess nfl they've got like a couple days or a couple games or so

they pay hundreds of millions of dollars for the single nfl game yeah they're not locking in a 10-year commitment uh i don't know yeah i wonder if that's a better way to go to do like single events as opposed to big watch the whole season here kind of thing i mean amazon's gonna have much more scale in american sports within a few years and then there's no way for netflix to get in you kind of get what i mean so that's a downside yeah when i think about the the channels or apps that have done like full exclusive league rights for an extended period of time i feel like it rarely works out for those platforms i'm thinking of like apple tv with the mls um yeah but they have zero scale amazon or

netflix could do it and they're not exclusive you know prime does not have an exclusive league rights just certain amount of games sunday nights i guess isn't isn't prime exclusive on sunday nights or am i misremembering uh what sport for nfl no no that's thursday yeah they're not the all but they don't have every nfl game that's right i guess netflix kind of bores me a little bit now because it feels very predictable like i think it's a really well-run business by the way got a got a nice little 2.8 billion dollars in cash from a termination fee this quarter so record free cash flow congrats netflix for them it i just think it's more mature than than a lot of people think yeah it's going to be a harder next 10 years to

get you know execute to get earnings growth in the last 10 i think more important they mentioned that price increase i saw what it was for me and internationally you actually can't get an advertising tier in every market so you have to use uh the the full price tier and even though t-mobile helps me out uh i can't i canceled immediately it's like what this is how much was a pretty big jump for a single pair what was it i think it's like 20 something a month yeah that's not or maybe low maybe high teens like 19 before tax the uh i mean it makes sense what they did it's kind of funny how long they held out from advertising but now with the like eight dollar whatever ad supported tier it introduces so many more people that can access

the app now and if you want to be the the premium member and not pay you can do that as well not much else on netflix now can i bore you for five minutes on consulting sure sure okay what uh what what do you want to follow up here uh so i last week we talked about the some of the consulting businesses i said i was looking into them i did a little more digging and i do think some of them actually look cheap especially the ones that are sort of like vertical specific consultants. So, and also last time we spoke about this, we mentioned that there was like two reasons, two or three reasons why people would use a consultant. And it's because either they don't have the time themselves, they don't know how to do it. And then you also said, because they

need someone to seem objective. So those three reasons are actually like well-known, i guess they're called the three c's it's capacity capability and cover so capacity is you don't have the time to do it yourself you don't want to hire someone full-time so you bring on a consultant capability someone's good at a certain thing you want to hire them to do that certain thing maybe like a erp implementation or something like that and then the third one cover the third c this one is the funniest one to me and it's probably the irony is in the world of ai this might be the most durable reason to hire a consultant. So political cover is timeless. People have used this for a hundred years. And an example here would be, and you've probably seen this,

we hired outside counsel to conduct a comprehensive review of our organizational structure and the results determined that we need to conduct a layoff basically. So whether it's It's compensation consultant, an outside counsel told me I need to get paid $50 million this year, or you need someone to do the layoffs, and you need someone to point your finger at, and it can't be you. These are perfect reasons to hire a consultant. Anyways, back to the point. There are a bunch of – pretty much all the consulting businesses are in big downturns, or it seems like all of them almost, but most of them. uh gartner is really struggling accenture really struggling epam systems really struggling as well they're all trading around 10 times ebit and i think some of them are sort of maybe being

thrown out with the bath water and i want to get your take on this epam systems for example is basically outsourced software developers so basically they have a bunch of engineers in ukraine russia belarus it's almost like contracting less consulting we're going to go with the two separate definitions yeah the and and the stock sold off well initially it sold off because the ukraine russia war but they were able to relocate a bunch of their employees and now with ai hitting the concern is that people aren't going to hire as many developers do you think that is likely do you think less people are hiring contracted developers in the future yeah outsource to claude instead of outsource to ukraine or india

it's an interesting bear point stock stocks at 19 times earnings from what i'm seeing on fiscal ai here it doesn't seem that cheap to me if you think the business could go away it's not a call center which are all going to zero but yeah maybe maybe they'll have claude and these cheap engineers it's hard for me to say i kind of go on the fence yeah i'm seeing maybe they have a big cash balance ev to ebit today of 10.9 so maybe something some big i'll check but there's a difference yeah yeah significant difference between enterprise value and market cap yeah this was a incredible business for like three decades apparently like there was just when it was like a belarusian founder in the 90s

or maybe early 2000s that knew there was a whole bunch of engineers in ukraine and belarus that Like coming out of the Eastern Bloc. Yeah. Yeah. That were being underutilized. And he literally just connected them to a bunch of American companies. They were way cheaper than their American counterparts. And the revenue growth over the last 20 years. Let me just see if I can pull this up real quick. Revenue CAGR of 26 percent since 2006. What about the last three? well it's flawed by ukraine russia but uh okay well that's a that's an event that happened that is uh since 2021 revenue has grown at 10 a year yeah it was not bad they had a little and they're recovering it's interesting yeah this is one maybe you could lean into if you uh you like the management team evd a bit of 11 okay not bad yeah i'm kind of a doubter that there'll be less developers just because of claude like it seems people like like who uses claude the

most developers it feels like it'll just be a massive improvement to output as opposed to like hiring less people yeah i'm just not sure yeah it's a tough question it's a tough question all right we want to talk amazon they're acquiring global star just it's this one was a twitter dot take all caps tweet machine um the hype around satellite stocks it's getting a bit much i will say heading into this spacex ipo so what happened here for anyone that didn't follow quote global star satellites uh this is part of the acquisition radio frequency spectrum and operational expertise will enable amazon leo to add direct to device services to future generations of its low earth orbit satellite network amazon is building its low earth orbit satellite network

to compete with starlink we're going to have direct to device internet services as well as with the terminal i'm guessing also with commercial aviation they're trying to deal with delta they're acquiring global star here for i think 13 billion dollars i can't remember the exact term it's not giant for them but it's pretty significant they're also taking over apple's emergency messaging contracts and here's another quote beginning in 2028 amazon leo will deploy its own next generation direct to device satellite system allowing amazon to deliver more advanced voice data and messaging services to mobile phones and other cellular devices they're debuting a gigabit antenna for commercial aviation the first thought isn't this bearish for ast space mobile i

was this competition for them uh starlings also getting into that that's my first thought and i feel like this might be turning into a very competitive market where i'm unsure what the full demand is going to be for satellite internet where do i need this besides an airplane i agree there will be airline customers there will be rural customers there already is okay well it's rural for a reason there aren't that many people no that's fair and i i i kind of have the same concern which is like i feel like the addressable market is already kind of figured out like airlines are trying to like okay airlines obviously most people want internet on them i think most airplanes i've been on lately have internet they might not i assume it's i don't

know who the provider is uh but a lot of the people i know that live way out in the middle of nowhere have already looked into potentially satellite internet if they don't have fiber as an option like i kind of think there might be a limit on the tam as well maybe maybe i'm just wildly uh underestimating that and internationally it could be very different but yeah i have the same concern the i think for ast space mobile this would certainly be bearish is there there must be advantages to scale right the more satellites you have well sure sure yeah you need the most throughput however you want to describe it the most capacity um that means the satellite the antennas the the capabilities have to be improved as well as just your ability to uh like how much

um what do they call it is bandwidth right i don't know the exact terms but you know a gig versus 10 gigs versus a whole terabyte there's also the specific radio spectrums which is why spacex made that giant acquisition this is also part of the global star acquisition and then there's also the crowding out in certain areas so if you can serve 100 people in a square mile well that's great in rural areas but in the middle of the city it's pretty useless there's a lot here. Did you mention a price tag on this deal? I think $13 billion. It was either $11 or $13.

I don't have the price release in front of me. But they have an existing business. And the spectrum is highly valuable. They have the Apple relationship now, which will be interesting once they can get that direct-to-device internet. But the thing that I come back to is if this was ready today, and I could go, boom, I can sign up for

any of these services would i i don't think so t-mobile's already got me pretty covered around the world when i need him yeah well if you moved 30 miles outside the city would you yeah that's fair but starlink already exists no yeah 13 billion i am an amazon shareholder i honestly didn't realize the price tag was that high that's nothing i mean i guess but when you spend 200 billion dollars on capex and you're and you're not generating cash flow anymore starts to mean something uh yeah i do either either their financial department is playing 4d chess and they are just so sound that they can go on as low of margins as possible

to improve their consumer value proposition or it is such chaos there and there's so many antennas to the business that costs are simply just getting out of control. And I really don't know which one it is, honestly. We'll see. Yeah, there was some real big brain takes on this one talking about AWS, robotics integration, self-driving cars.

They're like, once you see the big picture of Amazon Robotics, AWS, Zooks, and Amazon Leo, you're going to get it. I was like, let's see it. I'll wait and see what happens in reality. Now, bundling the internet with Amazon Prime, I could be into that. But I just don't know what the capacity of these things are going to be. And SpaceX has that monopoly on launch, pretty much, where they can just put Starlink on their own. Rocket Lab and Blue Origin don't have the capacity yet.

That's what makes it really tough. Do you think it's bad for Amazon's business to have all these different verticals that are like begging for capital and begging for resources? Because you talked about it, like Bezos is like poaching talent, literally poaching talent from Amazon. 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 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

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Conditions apply. Visit ScotiaBank.com slash H-I-S-A to learn more. ScotiaBank. You're richer than you think. I don't know I think the stock has done well it's rebounded I think we're almost to an all-time high again

or maybe another all-time high but I think you should be nervous about their capital decisions they are aggressive there's going to be some uncertainty there okay do you want to talk bubble watch sure we get some updated market share estimates

for the AI tools and if I saw this and I was opening AI I would be well they debuted the code red so I guess they're already in code red this is similar web thank you to

Rahar Jark current guest for posting this on the good old twitter machine it shows Gen AI traffic they even have you know Grok and Perplexion on their smaller players but if we look at 12 months ago Open AI 77% market share dominant chat GPT

77% market share Gemini, 6%, Claude, 1.4%, and this is a Gen AI website traffic share. So, not enterprise, just website traffic. Today, we're at ChatGPT, 57%, Gemini, 25.5%, and Claude, 6%. That is a, I mean, one more year of this and Gemini matches ChatGPT almost, pretty close. i'd be quite nervous i had to take a while ago i think chat gpt will be the yahoo of this if we're making the analogy back to like the search engine days or the search provider days where i think they were early days maybe aol is better comp since it's gone uh i believe unless someone else still use the AOL.

No, Molly Fool Partners get posted on AOL.com still. Yeah, I mean, it's a tiny business. But it, I just don't see why ChatGPT retains dominant market share.

And it's, I mean, the switching costs are nothing. Unless I'm wrong. Like maybe you have certain things, certain chats stored in your memory. Yeah.

Unless you fall in love with the chatbot, which we've seen. kind of a weird dystopian news stories but i don't think that's happened to ryan i uh yeah well on the other hand there was a leaked memo from open ai it was obviously leaked by them because they wanted this information out there but they believe anthropic is juicing up revenue by eight billion dollars for their arr which also the arr is not arr it's like the last week's revenue or more it's revenue it should just be r it's it's annualized revenue from the last week or maybe month or quarter uh well they did last

hour that'd be hilarious but it's it's like what are what are claude's revenue generators subscription fees and token credits yeah i guess i'm not even sure yeah i would guess a lot of that's recurring but the recurring is a dangerous word this isn't subscription refuge no netflix the okay but apparently they're juicing up revenue by eight billion dollars because they're reporting improperly on their accounting for revenue share agreements with google and amazon i'm sure they're supposed to the way open ai reports you kind of net it out and i'm sure anthropic is doing gross yeah well look we talked about t let's bring it back to the beginning of show we talked about tsmc once again the whole ai supply chain this entire growth market is relying

on anthropic and open ai to go to like 300 billion dollars in revenue in three or four years call me crazy i don't want to be attached to this supply chain none nothing yeah run the math tell me why that's wrong why i think it's funny that open ai leaks this because people really don't care that much about the specific number that Claude is putting out for today

compared to a month ago. They care about the direction and directionally it's phenomenal. Yeah, it's taking a lot of market share and usage at least. That's probably most important. So it feels like OpenAI has been like

just on the on the butt end of the joke for the last year and just constantly like beneath anthropic i guess maybe it's just my echo chamber but it feels like all the news is very positive anthropic and negative open ai well ryan did you see that one of our other investments remitly just launched a something with OpenAI, and that's why the stock is up. Let's see.

Yeah, I saw that line. Remitly Global has launched the Remitly app within the chat GPT platform, making it the first cross-border money transfer service on this widely used AI application. This integration allows users to effortlessly check exchange rates and compare international money transfer delivery methods.

That's good for a nice 15% boost in the stock price. that's bizarre the like whatever on the partnership but i don't think that moves the needle are people really in their company yeah wait it's not a native like plug-in right you can't it's not like send this money to my grandma in brazil okay uh i'd have to look i'd have to look if it is i question anyone who is sending money through chat gpt to their family uh but yeah this feels like it will contribute very little to volume if anything it's like the

equivalent of seo it sounds like or what do they call it geo not g generative engine optimization yeah i whatever again if this was a company i wouldn't own i would say that's stupid but since Since it's a company I own, I will clap and let it keep going. Let it ride. It's up 15% on nothing. Great. Good. Should have been up 15% anyways.

This is just people repricing for intrinsic value. Yeah, yeah. That is, I think, joking around with Xanadu Quantum Technologies. Their discounted future free cash flow is one up 400% in three days. Fish and markets. Same with New Birds AI. Yeah. I think maybe to close things out, it's been tens, again,

well, I don't know if this is a full recovery of the bull market or just a bear market rally, but let's just say I've been rotating out of some of the gross stuff a little, you know, repositioning into some of the value stuff. Or it's not a time to say, oh, I have FOMO on this company. I got to get in now. Like to stay disciplined. One of the worst things to have in times when a market goes up 10 straight days in a row is FOMO. This is one of the most dangerous, dangerous things. Yeah. Probably the biggest investing mistake I've made is late 2020, early 2021, feeling like I had to get in on a lot of these businesses that were growing, partly digital businesses that were benefited by COVID, and I kind of ignored valuation a bit.

Like I just just wanted to be a shareholder of the business and wildly overpaid. And I would guess 80 percent of those stocks are down over the last five years. But and the market darlings change to like that. I think that's an important one is you think like we make fun of Wix or investors make fun of Wix now. that was a market darling in 2021 so that's fair all right yeah i'm also seeing this feels very 2021 e 2017 e this is from consensus media so it could be parody it says avis budget continues to after company floats mobile data center concept i hope that's a parody a tweet i don't know what all that means but i please tell me that's a joke please tell me that's that's uh yeah what was the hertz thing a while back wasn't oh they had a tesla order they bought a hundred thousand teslas and it was a terrible investment the rental car companies i have will never get interested never yeah it's tough business and there's some of the worst

to deal with as a customer but we're going long ryan anything before we get out of here No, I think that's going to do it. Thank you, everyone, for tuning in. Thank you for those on the live show for asking questions. If you have listened this far, please give us a review if you like the show. It helps a ton. It helps the show grow. And we just like hearing from listeners as well. So thank you again to everyone for listening. We want to remind listeners that Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Stocks is not formal advice or recommendation. We may buy, sell or hold any of the securities discussed in this podcast. So please do your own work. Thank you all and we will see you next time. 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 StockWriteUp.com.