Chit Chat Stocks - Nvidia's Unbelievable Earnings; OpenAI's Carnage; Salesforce Earnings And The Software Comeback

Episode Date: August 28, 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: (0:00) Introduction (02:04) NVIDIA's Revenue Growth and Supply Commitments (16:41) Meta's Legal Challenges and Regulatory Environment (30:13) Software Earnings and Market Trends (35:27) OpenAI Employee Departures (38:20) AI Industry Valuations and Future Projections (41:33) Apple App Store Growth Trends (43:30) Intuit's Business and Investment Potential (01:02:24) Wingstop's Valuation and Global Appeal ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/chitchat  ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Trade, election, climate, and economic outcomes with IBKR Prediction Markets right alongside your stocks and options. Earn interest on your position and receive $1 per contract if you're right. Learn more at ibkr.com slash predictions. 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 am joined today, as always, by the one and only Brett Schaefer. Today, we've got our weekly investing power hour episode. We do these live on Thursdays at 5 p.m. Eastern time, and we do these on YouTube. So if you've got any questions and you want to ask us in real time, head on over to YouTube, Chit Chat Stocks, and feel free to fire away any questions you've got.

We also take questions from the Substack chat, which is free to join. It's Emerging Moats, Substack. You'll be able to find it. We've got a packed schedule this week. uh nvidia reported salesforce reported into it we've got matthew mcconaughey back in the financial news uh surprisingly and a couple of other stragglers as well meta is paying a sizable fine there's some news controversy around social media we've got open and ai employees departing and a whole bunch of other topics but i will leave it there brett where do

we want to kick things off this week i thought ryan we would do 20 minutes on the real remax merger uh no we'll save that actually wrote them up a lot i think it was last week for the substack newsletter i believe since it is now pushing once again to the largest market cap in the world we got to talk nvidia why don't you show while i send a link out to the substack chat and twitter this what is it forward commitments something like that it's exploding higher does the hundreds of billions of dollars tell the listeners what this is yeah i don't know if listeners want us to talk about like the headline numbers on these episodes because i think a lot of people follow them anyways but long story short revenue grew very quickly uh i think it was

It's more than 100% year-over-year revenue growth driven by, no surprise, the data centers and all the AI-related compute. So the, I guess, headline that was picked up here, and there's kind of a couple ways to think about it. So NVIDIA obviously bringing in a lot of money, but they are making some kind of insane commitments for supply and capacity purchases. So this is something that they report in every Q&K, and they have to – I believe that they have to mention all the uncancellable commitments that they have to buy from suppliers. So in this case, supply and capacity purchase commitments, I believe, refers primarily to high bandwidth memory. So basically committing to purchasing memory chips from the likes of Micron and Samsung and SK Hynix. You can see it took quite a jump. Brett is sharing a chart here.

A year ago, they had $46 billion in purchase commitments. 46 billion. Today, this quarter, they have 279 billion. So it's growing 500% year over year and a massive jump this quarter specifically. The reason I say there's a couple ways to look at this is one, if you're optimistic here, apparently the newest generations, again, we're not that technical when it comes to the semiconductor analysis but the newest generations of nvidia chips require a lot of high bandwidth memory which requires a lot of chips from the major memory chip suppliers so they are locking up that supply it is essentially what these commitments are it's we are going we will pay you in advance i'm nvidia speaking here we'll pay you in advance

for those memory chips so that we get priority placement over any of our competitors or anyone else that would be purchasing that those that volume from the memory chip players on the one hand that's good i guess if you're if you're bullish nvidia and you think that ai demand will continue to grow it's good that they're locking up that supply On the flip side, they're sort of getting cash squeezed a bit at the moment. Accounts receivable jumped a lot this quarter, like massive increase, because the hyperscalers, the big cloud providers, the largest NVIDIA customers, Google, AWS, Azure, probably Oracle as well in there. Don't forget SpaceX. Trillion dollars in revenue 2030, Ryan.

They count. large nvidia customer i mean they yeah they they will be a large customer they are a large customer um but they're extending their payback days so they the the average days receivable jumped basically nvidia is loosening the terms that they have with the uh hyperscalers so that it can take google and amazon longer to pay them back from what i heard is that the account these companies the hyperscalers are receiving say nvidia chips and video racks but they're sitting idle for the moment so you have like bottlenecks from energy or electricity or what have you are getting the data centers up and running and for nvidia they're not going to

receive that as revenue until they're actually operating the data centers that could maybe be you know like they're shipping stuff to customers but they haven't gotten paid for yet maybe nvidia is recognizing the revenue but hasn't received the payment yet but yeah it seems like classic large customers trying to extend contracts like this and you kind of look at a glass half full glass half empty yeah you honestly can't see it either way like the skeptic in me and i don't look i don't know when google wires the money to nvidia i'm not sure like when that recognition process happens but either way you look at it nvidia is committing to purchasing more from its suppliers significantly more from its suppliers and paying in advance to

do so while their customers are extending the period before they pay them back so so there is there is like this working capital squeeze going on nvidia's got the balance sheet to do it they've i mean they've got the income to do it as well so you could say it's not a great situation to be in where you're getting sort of cash squeeze but But simultaneously, the fact that they're in the position to make these $300 billion worth of commitments is a testament to their position, and it might be an advantage come two or three years from now. Yeah, it could be an advantage, but it's also throwing cash flow away that could be piling up in the balance sheet. I feel like we should just list off everything they've done in the quarter each time they report. they are agreeing, this was just announced today, to buy, I think it's an open source platform for

AI called Hugging Face. Interesting name. Kind of like it. For $12.9 billion. That's just another Thursday. Let's toss around $13 billion. But on the other hand, their guidance, I don't know if you ran the numbers on this, Ryan, was absurd. So they were revving 100% every year. Q3 and Q4 are going to be strong as well. But what was most astonishing, I think why the stock is up today is they expect fiscal year 2028, which is next year, so pretty much calendar year 2027, to grow revenue 70%. So if they get to $400 billion plus this year, which they're pretty much on pace to, that can mean $700 to $750 billion in revenue in fiscal year 2028 on a 60% gap operating margin, which would be a slight compression. That is $420 billion in operating income at the low end

of that guidance. That would be by far the most profitable company in the world. We're not a low teens multiple at a $5.5 trillion market cap. My question for you to wrap up this segment is, is this a fair price? Maybe. It certainly isn't a bubble in the valuation. and i think this is an important distinction that's my opinion in the earnings multiple valuations you know yes sorry the face multiple is not what you'd look at and say there's a bubble it would be in the actual earnings themselves whether or not those are sustainable whether or not it's being buoyed by kind of uh unrestricted capital at the moment you know vc dollars piling into private companies that are vc dollars and public equity dollars uh piling in

to help customers pay for more nvidia chips but at the moment it kind of feels like we're in no man's land right now because the it's quite with the valuations not the face multiples not that stretched relative to you know like other big tech companies the the big question is are we in an earnings bubble and with every passing quarter the the question just keeps getting bigger because it's getting harder yeah that's a good point yeah it's it's not like and maybe part of this is the sort of the circular financing question and all that but it it seems like they are kind of scaling the wall of worry a little bit here even though it's hard to say that five trillion dollar valuation anyone's worried necessarily but they continue

to prove uh skeptics wrong at least on the top line so i i impressive quarter from nvidia kind of a weird situation to analyze because the cash squeeze i did see a funny comment from jensen huang on the conference call where he said last year he would i believe the quote was last year the funnest part was every day picking who i'd go to dinner with because i knew that we'd get caught on photo and their stock would double the next day so let's not get caught up in the market it too much jensen but yeah that is funny the guy is busy have you ever read the nvidia book the man is insatiably busy we have a question here revenue still seems very circular now yeah that is a concern but i think looking at those commitments that ryan laid out it's not that big of a deal

across the entire supply chain i think the biggest question and why you know they have not a too crazy earnings multiple is if you're worried that at some point, earnings will drop 90%, which could happen if they see a revenue dip and margins collapse, which has happened to them before. What's a fair multiple? It's very difficult to say. Is it five times, 10 times, 15 times? This is extremely hard to just do any sort of evaluation on, which is why I just put my hands up i look at the astonishing numbers every quarter and you know the party keeps going i i wonder they have this line of sight here i wonder how much of it is spacex going kind of the next level into this overdrive because they're looking to spend tens and tens of billions of

dollars on nvidia chips over the next two three years maybe a hundred billion dollars so how much as that added to the pile after the spacex ipo and them formulating kind of their long-term strategic plan i don't know yeah i don't want to go too long on a video here because i would be i don't know if it's the the type of company our listeners follow that closely just because it's already so big it was all over all over that all over the nvidia earnings yeah it the yeah the spacex investment right now investment is maybe the wrong word expense uh towards nvidia chips that's the one that i would point at and say how sustainable is it you look at google cloud you look at aws same with azure there's clearly a lot of customer demand for that compute and for

ai workloads uh from those cloud providers but it feels like grok could be maybe sort of a temporary boost to uh earnings for nvidia it's so i don't know it feels so uncertain i i honestly if it were trading at five five times earnings i still don't know what i think like maybe you just take a swing on it at that point because it's a you know like whatever the most you can lose is 100 and this could be a much bigger business but it's still like i have no clue what this business will earn in 2030 i would so much rather just own taiwan semiconductor yeah that's maybe a better mold let's see how they react today i haven't checked them yet today up two percent yeah that i mean they have a pe of 31 that feels somewhat fair for taiwan

semiconductor um yeah yeah i could see that we have a comment here i wish uh jensen would do something with lvmh so i could get out of my holdings yeah that's a good point why doesn't he go out with more e-commerce companies mexican airport operators nintendo you know nintendo come on let's get a little public uh dinner there here's though ceo is looking for someone to dine with this next uh yeah that's true and they're starting a cloud business i think something yeah we'll see they get into a lot of nonsense uh yeah bernard or no you should go to dinner with bernard or no uh this one's interesting though kind of a serious one the people who want to own nvidia already own it the rest of us are using it to gauge market reaction or direction yeah that's

probably a good point if you don't own nvidia yet what's gonna cause you to kind of get in now it's fair point yeah like like if i owned nvidia up until this point i would probably be one of the people banging the drum saying this is cheap relative to what they're going to earn in a few years or next year even but not only just like i have no next year will be good probably now you you really do not know it could be significantly better than today and it could be you know more competition maybe uh less capacity from customers like grok to purchase your chips it's yeah i think there are potentially some headwinds a few years out but all right for now the music's playing yeah that's true when the music's playing you have to dance

uh earnings should we do this little it's been software earnings should we do some of that or do you want to hit meta's fine first yeah let's talk about it let's talk about it this is interesting all right so there's those lawsuits they were saying there was going to be a trillion dollars in payments but it ended up being a lot less at least for now there could be more only 18 billion dollars just a small 18 billion ryan in settlements with 48 states over child safety harm first off i guess this is not too investing related but kind of is this an admission of guilt by them what do you think i kind of think it's like a half like yeah we screwed up it's not like it affects the investment too much but you know maybe if you have a child

yeah uh maybe partially i think sometimes companies just want to settle to get out of the like ire of regulatory scrutiny and get out of like i don't know it kind of sounds better to the public i guess than this ongoing legal debate or whatever you think this sounds good that they're admitting that they purposely are addicting children to their applications and making them depressed i don't know if that sounds good i don't know if it sounds good but i don't know if it's better for the business for this um legal fight to go on for an extra three years or however yeah that's fair that's fair all right here's what's maybe more long-term potentially impacting them they are moving into rules like requiring two-hour time limits limiting parts of

the app that may be harmful to teens like uh or just features like aggressive push notifications or no extreme makeup filters they're also trying to force youtube and tiktok to the party as well the whole fine will not be paid unless tiktok and youtube admit guilt kind of an interesting play here by meta's lawyers d i guess this is not even much of an investing one but i wanted to ask if youtube deserved the malice too i think if they're all kind of short form video stuff they probably do if it's all targeting kids stuff with all the slop but i think the potential ramifications from an investing perspective is you're opening up the end of top of funnel dominance for instagram where every kid starts using it they're a user for a long long time this is potentially leading

to another app that doesn't have these restrictions taking its place i think that is a potential yes if they kind of make it so it's not as quote-unquote fun meaning addicting anymore maybe kids and teens will go somewhere else i'm not sure you gotta you've got to believe that if they slap these rules on the largest companies that at some point these rules would be applied to smaller companies too right yeah that's fair but what do you do like all internet platforms what's a social platform what is an entertainment like the it's it's very very hard to define um i am not against strict rules on push notifications yeah that's good that's nice and hiding the like stuff i guess i'm not really a social media savant by any means but i mean i'm

for no electronic devices in all schools you know a bit of a lead for the for the for the children but that's more of a personal stance, not from an investing perspective. I think from an investing perspective, this is probably better than people expected, but I think this is an ongoing headwind for Meta where they kind of are like the lawyers out there and the state regulators, prosecutors are kind of sharks seeing chum in the water. World events unfold in real time, and now you can trade them. With IBKR Prediction Markets, you can trade election, climate, and economic outcomes alongside stocks, options, and bonds all in one integrated platform. These are simple yes or no contracts priced to reflect the market's view of probability.

If your prediction is right, you'll receive $1 per contract and earn interest on your position while you're invested. IBKR Prediction Markets turn market expectations into actionable trades. Prediction contracts are not suitable for all investors. learn more at ibkr.com slash predictions yeah i think if these kids knew what was good for them they'd get off of instagram and get onto the emerging moats substack chat talking about the virtues of mexican airports it's like culturally i'm i'm all for this i i think that some this stuff is so addicting uh i happens to me all the time too i fall for it like youtube shorts i yeah yeah twitter twitter if i didn't have work i i would i genuinely think i

would convert to a flip phone just to get away from it but and you have a fiance so you don't you know in that capacity you don't you don't need it either make things a little more yeah yeah that's very true uh i mean this was certainly well received by investors i think maybe people were expecting bigger fines or that this would just carry on for a long time it i'm curious what who the states were that held out oh they had already settled with some other ones so there's some early it's pretty much everyone and it was in california so what someone was saying in our sub stack chat is that this is pretty much going to be applied blanket wide i think around the united states and potentially globally we'll see how that happens

there but yeah besides that probably no no change in opinion on meta i kind of had the assumption that there was going to be i don't want to call it a headwind but maybe just one percent of revenue is going to have to go to legal and fines every year doesn't kill the business model but for certain businesses that's kind of just the case once you get to a certain size and it's usually uh ends up being worthwhile the i mean i don't know why why they're on trial for this and not the capital allocation practices yeah that's fair how about throwing money down the drain with uh virtual reality can we yeah i mean i actually bet people there are probably those loss those shareholder lawsuits oh yeah they come up every month those are the worst uh by far what about

ryan we moved to salesforce earnings software's back software's back matthew mcconaughey's back it's uh they're on cnbc with kramer and emoti we're all friends okay this is maybe the one thing that has kept me out of salesforce honestly is this whole matthew mcconaughey debacle you cannot espouse like rationalizing your expenses while having while paying him to report your earnings no one needs that it's the biggest waste of money out there all right i got before you go into the actual numbers here ryan i do want to since you mentioned mcconaughey i saw this gem from benioff this is a tweet welcome to claude for us i'm going to play the first 10 seconds here so let's talk about what seems to be on everybody's mind the saspocalypse yes

long slow death of software as we know what you think of that that's some good cinematic stuff yate mcconaughey kind of his mumbly soft whisper we're talking software i mean this is some of those exciting stuff in the world yeah yeah whatever it i guess it's just a commercial but But like I would be really curious lifetime earnings from McConaughey – for McConaughey from Salesforce. The little bit – as for the actual numbers, a little bit boring. Revenue grew 11%. On an organic basis, it's probably more like 9%, I think, like right around high single-digit percentage revenue grower. There should be an acceleration in the second half of the year.

Operating margins have been steady at around 20% for last year and a half now. And some of that is sort of acquisition expenses too. So maybe there's a little bit of margin expansion going on as well. The shares jumped 23% on this report. the only big standout thing i'd say here is that one slack hindsight slack looks like it was a home run acquisition this it had a much better competitive position than people maybe thought four or five years ago when teams was out there i think that's what they use as their uh correct conversational yeah teams was out there slack i think there was another chat based competitor

but slack has been a massive success for them and the ai integrations with slack have been really impressive they mentioned slack i think like 40 times on the conference call it's becoming i think right up there with core salesforce as for like actually driving the business. Today, stock trades at 23 times earnings. Shares are up about 38% off their lows, so it's not outrageous. But to me, it's starting to feel like an old company. You should expect high single-digit revenue growth, percentage revenue growth annually, which is it's not like that's that's still fine i think a lot of investors will take that especially with some profit margin expansion as well but

at 23 times earnings are you comfortable paying 23 times earnings if you think you'll get low to mid-teens earnings growth over the next five years yeah i think i think returns will be fine you probably get double digit returns owning salesforce software like i have never made much money on software i have companies such as like wix i i think i understand but i i'm never able to trade it very well i don't have that high conviction in it so i always maybe switch it out for something else you know at the wrong moment and it's not like something you switch it out for. It doesn't do well. But with Salesforce, it's kind of the same thing where I don't understand the sector all that well. And that keeps me out of it. But you look at the numbers,

it's very, very hard to argue. It's just I hate the thesis of, well, it has grown at this percentage for this long. So it's probably going to keep growing. And I need conviction on what the next five years are going to look like. And with software, you know, it's probably a good bet that salesforce will do well but i just don't understand the market terribly well uh slack though yeah molly fool has been integrating it very very heavily into workflows it seems quite quite productive uh did you know though ryan quarter over quarter shares outstanding up they they did that big buyback and now let's just start diluting again well they didn't yeah they Didn't buy back much this quarter, but, I mean, they timed the last one well, it looks like.

That's fair. Yes, that is fair. Kudos to them on that. I'm kind of with you. I think I have often found that short-term, I'm wrong on a lot of software businesses. And it seems like one of those industries where people are always like, Mr. Market is feeling manic depressive about Adobe now. And it's like, in reality, maybe just a bunch of really bright analysts had access to better information than you. And maybe they have more resources, better other conversations with management.

that you don't know about. So I feel like I'm often wrong early with software, but it's one of those where if you are confident that it's gonna be continuously meaningful to customers, it's, you're probably gonna do well over a decade or so, but yeah, I do think it's a lazy thesis of the last 10 years have been good, The next 10 years will be the same.

It feels too – I don't know. I see that all the time. Dangerous. Nice pretty chart. If you exclude SBC, here's the earnings multiple, cheapest multiple, and here's the revenue for the last 10 years. I post those charts all the time because it's engagement-based. It is a lazy thesis. yeah only thing worse is free cash flow multiples when there's like a big working capital

thing in a company or some sort of fintech or it's like all right yeah customer payables that's a that's sustainable earnings growth okay that's interest earning right there that's true that's that's true uh what about autodesk earnings i want to look at what exactly happened to the stock but they're another one that's come back uh they're about down five percent after hours maybe maybe they're flat now uh you know they're another one flat over the last five years but the stock kind of similar on a price basis to adobe it fell just below 200 in june and it is already up uh close to 300 about 270 dollars this kind of situational awareness special. I wonder if he was just shorting all of this stuff and now it's getting

unwound. A little bit of a short squeeze. Not necessarily. That's not exactly how it's worked, but kind of just unwinding that whole trade of AI losers. But if we look at the numbers, billings, 10% growth. Revenue, 16% growth. Gap operating margin, 29%. Free cash flow up 24% for the quarter year over year. Revenue growth, double digits in all geographies and all segments, But only 2% RPO growth, and no, that is not run-pass option. That is remaining performance obligations. Probably strong again, except for that 2% RPO growth. Let's look at where we are at with the earnings multiple.

Remaining performance obligations could be a lumpy metric, so I wouldn't take that. That's fair. One quarter, yeah. yeah it autodesk uh are you a shareholder brett no are you still or did you switch it out no i am a shareholder it's uh it's been all right but i was a shareholder since the like 2020 time frame so ended up buying it what seemed like ludicrous multiples now but returns have been meh. They've been fine. In June it looked like

for a week maybe two it was at a cheap multiple EBITDA a bit of 22 but again I mentioned that gap. Our margin is still higher at EBITDA a bit of 28. You're kind of at a similar thing of Salesforce. Slightly more expensive. Like alright is revenue going to grow at 10%? I think so.

And then we'll probably get decent returns but we're It doesn't really get you out of bed. Here's a question for you. Would – if someone said, what is your favorite way to invest in AI or invest – yeah, I guess in a way that's – What's your favorite AI play? There you go.

What would you say? I don't know. Let's look at my portfolio. not an l net i don't think so honestly i would just think through i mean nothing that's like well maybe taiwan semiconductor or something like that but for for the most part it would be what businesses do i own that are actually the most benefited by ai and i think honestly autodesk would be up there it's one of those platforms where it it's not going to get replaced purely from ai their customers are you know very locked in with uh autodesk but it will be

genuinely helpful to the customer workflows uh someone says google in the chat here yeah i think that's that's another one as well i wish i was a was that wish i was a shareholder yeah we've got a comment from uh chris in the chat remember when i accidentally signed up our firm signed our firm up to like 20 autocad accounts as opposed to 20 seats the accountant wasn't too happy you're welcome ryan thank you that's that's good for shareholders yeah autocads is a little great i mentioned growing double digits that's something they've been trying to phase out slowly for the last 15 years and it still grows so you show the stickiness there. I don't know

if I have any in my portfolio, Ryan. Don't own Google or Autodesk. Can I say MercadoLibre coupon, kind of with the e-commerce efficiency? They love talking about that. Airbnb? No.

Nah, customer support help. Yeah. Do you think it has improved the Airbnb experience? No. Yes. Not at all yet. Okay, should we talk about the OpenAI exodus?

Sure. I have a tweet here. There was a Wall Street Journal article about it. The last person to leave was, OpenAI's head of data centers has left the company. Here's a tweet from Katie Miller. Katie, I do not know what you do, but I appreciate you building this list. All right, here is the major positions that OpenAI has had people leave since January.

Now, I'm going to read this list, and I kind of think maybe it's good some of these employees are gone because you can make up your mind, Ryan, of how important these positions are. Quote, head of data centers, chief revenue officer, chief operating officer, chief communications officer, head of robotics, chief marketing officer, head of science, head of SORA, CTO of enterprise, CEO of AGI, head of preparedness, chief futurist, head of safety, AI ethics lead. now about half of those i'd say yeah it's probably good we don't need those roles but data center's revenue officer operating officer there's a it's a lot of people it's a lot of attrition futurist you know i like kind of preparedness it's the local boy scout always be prepared yeah some of these names are hilarious you wonder why they have negative 100 operating margins you wonder i think generally speaking this is a bad sign but

i don't know you have a company growing this fast hiring this fast the business has really it's in a very different state than it was even two three years ago it it's maybe not suited for everyone i i don't think it's too surprising to see higher turnover in a situation like that but yeah i would i'm saying i would feel concerned but i don't really this has no impact on anything i can invest in at the moment anecdotally okay people are um positive developer i've done my developer for channel checks in fiscal and

Chauchuk T slash Codex is on the rise. Good. Well, they got to catch up with Anthropic, Ryan, because I have another bubble watch here. Anthropic is going to tell investors they have a TAM of $30 trillion

in the upcoming S1 that's going to be launched before the IPO is supposed to be, I'm guessing, given the kind of rumors we've seen early October. S1 should be coming soon yeah what do you think of this who's it what's worse open ai all these employees leaving or saying you're gonna have 30 trillion dollars in revenue i shrug my shoulders because didn't spacex top that if i'm 26 actually around yeah you gotta get your numbers correct yeah they're

gonna top them they don't even have a space division who can say the biggest number yeah Wow. The big brains in AI are going crazy. The last thing I have before I have a serious, I don't even know if it's a bubble watch, I just put it in there, is there's been a lot of uncovering on what exactly happened with the situational awareness man, Leo Aschenbrenner. I'm just going to read this Wall Street Journal article. For the past few years, at happy hours and dinner parties in San Francisco, Leo polled Aschenbrenner, kept confusing people by sharing his favorite outlandish idea.

He wanted to buy galaxies. Some of his friends weren't always sure what to make of Ashenbrenner's intergalactic ambitions. He once left the room and they debated this. No, he assured when they came back, he meant actual galaxies. His idea was that advances in AI would soon unlock resources on a cosmic scale, enabling humans to colonize faraway planets. Is AI going to solve the speed of light here? These are the bullish indicators we are dealing with.

i guess seeing that and i'm not surprised the fund blew up if you're that bullish on ai you'd expect none of these stocks go down ever again it's uh it's amazing the complete 180 that's happened on ashenbrenner the the returns make everyone made everyone think he's smarter well i don't want to downplay or underestimate how intelligent it is but i think oh he's a genius yeah i think it honestly hurts you more than it helps you to be like genius like top of the line in terms of just like general intellectual capability because you never feel wrong and you kind of get used to always being proven right.

And it's, I think this is maybe a good example of how far you can push that. Yeah, it's a $45 billion of humble pie. Usually, yeah, that happens. When you're younger, you're cockier, you understand. Here's the last topic I have on this, Ryan. What are your thoughts? This is SensorTower data on estimates on year-over-year growth for Apple's App Store.

It's fallen for the first time this decade, year-over-year, in Q2. Again, estimates, SensorTower. And it has, it looks like, since kind of the last decade, really most of the time, appreciated double-digit revenue growth. And that is extremely high margins. What are your thoughts here? Because I couldn't figure out why this would be happening. like why now are people evading apple pay for payment processing in the app store i

i don't think there would be that abrupt of a change but i was kind of perplexed seeing this figure i can't think of what would cause this it doesn't seem like i think about a lot of the major earning apps on ios i mean you think about the leaders the robloxes of the world maybe maybe mobile gaming maybe less maybe more people are using more kids using instagram we talked about it in mobile games when we were kids wasn't it all mobile games do you remember the take on ads though don't they oh not with facebook no i thought there was an ad take from apple oh if that was the case they would be printing way more money okay uh i don't i don't know what

could cause it maybe a slowdown in mobile games yeah but i mean i guess we've seen that in some of roblox's numbers it i guess i wouldn't think too much of it i look at apple and this is probably the part of it that i like the most this services segment it's a little concerning yeah yeah but as you know if i'm if you had to all lsql if you had to pick the iphone the ipad the mac the wearables or the services division to own i guess iphone and services kind of go hand in hand which would you pick yeah it's up there for me services yeah services and iphone go hand in hand for sure that's got Well, I guess more durability, but yeah, I'd be concerned.

I'd be curious how it affects services numbers because we know that a lot of it comes from Google search and that type of stuff. I don't know how impactful is this for Apple. I'm not exactly sure. 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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You got a nice looking chart. Yeah, so. It's their Q4, so this is their full year numbers, which is kind of nice. 2025, TurboTax units, which I think equates to basically just customers, declined 2% versus 2024. I believe that's the first time in a long time, maybe ever, maybe like 2008 or something, that they had declining customers. It's still a pretty large part of the business. I think it's around 30% to 40% of revenue, although they group their reporting in a weird way. Business Solutions, which is QuickBooks for the most part, is now the majority of the business.

But the earnings split could still skew pretty high for TurboTax. I guess my question to you is, do you have any interest in this business? I'll put some numbers on it real quick. just under six billion dollars in operating profits over the in 2025 enterprise value is around 96 billion so ev to operating income we're looking at about 16 times they have gotten pretty aggressive with the buyback in recent quarters nothing too crazy but i think they're on pace for about four percent annual share reduction would you have any interest in this i would out of all the software companies we've looked at this is definitely the most interested

you i i guess i'm a schmuck that used turbo tax this year i paid 100 bucks it worked okay five million yeah uh if they rose if they raised prices a little bit every year i think i would still stick with them it is an interesting business because i do agree on the whole that the united states government shouldn't like no no government should make you do your taxes yourself the government should tell you what you owe that's what i think but if the government's not going to do that turbo tax is a fine service to have on top of that and yeah maybe they lobby for more complicated tax code i don't know that that whole conspiracy never made too much sense to me like how much power does TurboTax have to change the tax code I think there are much more

influential interests out there but on the business side you have QuickBooks solid seems like a good business probably will benefit for small businesses to utilize it for AI yeah they I heard MailChimp got ditched as like its own segment because they were sick of it doing bad so that was a bad acquisition but you look at the the multiple here 16 times reducing share account, you should probably see revenue growth. But again, that's what we're saying here. Probably revenue growth. I would like to formulate a thesis of what exactly I'd expect revenue growth to be over the next five years. But you look at this chart, Ryan, which I'll mention, Fiscal.ai. Use our link, fiscal.ai slash chitchat. Get 15% off any paid plan. I know a lot of listeners have.

So thank you on that. I know it'll help you with your own stock research. Operating profit, is still soaring here i mean 12 percent cagger since what is this is that 2005 2005 2005 yeah it's really strong so i like it what about you yeah it's people are coming up with a whole lot of reasons why the tax business is screwed but from management's commentary the biggest reason that they saw a reduction in customers on TurboTax was because on their lowest tier plans, they priced too high. They lost customers to the H&R blocks of the world

and the alternative services that were a little bit cheaper. Not to perplex today, not to Claude, to have them prepare your tax returns. It was to these other cheaper solutions. Well, what's interesting is I used Gemini a lot when doing my taxes on TurboTax. Now, Gemini didn't do my taxes, but it was very helpful in formulating what my plan should be, and then you consult actual websites and experts on that. It's a good research tool. It's not replacing these services.

Yeah. Yeah, it is. It's supplemental. I think they'll be in a fine spot. But I think TurboTax should, again, I just use the same word as you, should continue to grow. QuickBooks looks like a really good business. I look across the software universe, and I would be more comfortable owning Intuit than a lot of the names. I'd be more comfortable with Intuit here than Salesforce at 23 times earnings.

I would be more comfortable probably with Intuit than Autodesk. even maybe the buyback helps quite yeah and some valuation i mean valuation is much different or earnings multiple sorry catch myself earnings multiple is much different for autodesk than it is for intuit yeah a couple headlines uh i thought this was funny uh dicks sporting

goods uh reported suffering consumer softness yes yes i think i i wrote a molly fool headline i did not use those terms but i thought of yeah using some of that wording uh that quarter was pretty bad and the stock absolutely collapsed their footlocker acquisition looks bad uh yeah down 30 a day yeah they really missed on earnings and revenue gains like significantly i think it was something like analysts expected 14 to 15 dollars per share and they got it for like 10 to 11 so it's it's not surprising uh i looked at the p it's down to like 12 but they said something about how there is aggressive uh promotional activity going on in footwear and apparel and we don't need to ring the bell or put the siren on never invest in

apparel look at onan uh it's not named onan that's the ticker on holdings onan that's i always see that and think onion yeah same they're down 38 year to date it always turns on apparel if you had to give let's go your mount rushmore of industries you will never invest in what would they be apparel cyber security even though i know they're doing well i could tell you not a thing about what makes a cyber security solution good uh media interesting what media stocks have done uh anything from tiktok and instagram now to legacy cable it's anything that's entertainment and maybe even include video games so that could be a little bit of a special case but anything where it's entertainment on like a electronic

some sort of visual device at home i don't like it so netflix is a no-go they're like the number one in that it's hard to make a mountain rush where you would never invest in any stock in a sector but they seem to be the most well run within that i'm trying to think of fourth how many sectors are there well probably biopharma which is obvious you know it's so hard for everyone outside of that expertise and then if we want to go i don't know if we want to do entire energy but exploration for energy what do they call that not upstream is it upstream yeah upstream i think whatever whoever the ones that are getting the oil and gas out of the ground that's very hard you gotta explore you gotta put a bunch of capex in oh and then i yeah maybe i'd

exclude media because i would put mining uh okay the commodity the commodity players i think i'm with you the commodity players would be a no-go for me just have no expertise there maybe you could make a case that certain companies have like long-standing cost advantages and and if they pay a good dividend or whatever you can if it's really well priced to the point where even if the commodity itself went through a big downturn you could still generate money i think maybe you can make that case my others would be i'm with you on apparel never invest in apparel i don't restaurants yeah we got someone in the chat here saying that too yeah restaurants and i i think video games just to add two more because video games i've always gotten burned ea uh activision

actually made money on Activision Blizzard thank you for poor capital allocation Microsoft but video games is so competitive that it feels like a lot of them are just running in place yeah but I can't say that because

the one video game company I like Nintendo yeah the returns haven't been great yet the other ones I'll add two more here sporting goods retailers i know that's going to do apparel yeah you can probably lump that in but

i mean it just feels like every sporting goods retailer at some point runs into major bumps in the road and dating apps someone in the chat you're here with tyler in the chat crypto apparel restaurants dating apps and chris says automotive i think automotive is so broad if you're talking purely like automotive oems manufacturers i i would agree but i mean copart is in the automotive industry yeah supply chain yeah it's kind of like airline like okay airlines terrible but across the aerospace supply chain there's a lot of interesting stuff and not just airports i know we like to make that joke uh yeah that's a good question ryan i did want to call this one out ulta beauty reported earnings today i do not understand why this company doesn't get more love it feels like

a really i know it's retail so people kind of hate retail but the category is extremely durable the they have a differentiated brand they've done really well on the omni-channel aspect so the buy online pick up in store the it it's not i don't think it's going to be too susceptible to losing out to like the amazons or the online players because the cosmetics and the fragrances industry you kind of want that in-person touch a bit of like what does this smell like what does this feel like on my face that kind of thing yeah i have no idea but sure this is where you got to consult the women in your life uh here what about the sephora risk i i had to go to a sephora once and it was packed there's one anecdote in one place but i guess i just looked up

ulta maybe they both can thrive ulta i'm pretty sure sephora is struggling too because they're part of um lvmh yeah yeah yeah let me look it up but i don't i don't see it as that big of a risk it hasn't hindered growth thus far and they've both been competing for 10 years they can both do okay yeah comp sales four percent not bad buy back a lot of stock this should be i i i see ulta a durable play just make sure you don't have get anecdotes from the like i said the women in your life if they turn on it just get out they should get the typical economies of scale of a like big retailer distributor here with some of these brands like i assume there's a working capital advantage a bit i assume they get negotiating leverage because of the distribution and maybe

can buy in bulk a little cheaper than your i don't even know if there's like small mom and pop cosmetic stores but maybe there are uh i think those are the ones that are yeah those are the ones that are unprofitable funded by a rich family kind of a nice little local village downtown area those aren't true competitors did you see this ryan i always say this and i know you probably didn't the x the x x ai cfo from laster he left to join open ai he took a picture of a license plate let me just share this he took a picture of a license plate and an up-close photo which looks very cinematic and he gave a hundred thousand dollar cash reward for anyone to find concrete elements of who is paying someone to follow and intimidate him coincidentally it

started within 24 hours of me abruptly walking out as cfo of xai first off these photos are fantastic that looks like a pi from a movie i have an idea of who it is yeah it's i'm guessing it's elon musk's henchmen yeah yeah uh who most would not want you to speak poorly about them publicly yep i think people running x if you were the cfo like maybe you weren't comfortable about financial projections you're like right yeah i thought that matters the cfo for anyone under the musk complex probably has to deal with that but i would think you would know that going in like you should you you should have had some sense of what you were walking into maybe not quite to the degree that they've pushed it with the 27 trillion dollar tam but who knows

uh any other headlines from this week we had something in the sub stack chat here i know we said never invest in restaurants but i wanted to look at it uh kender put in a nice thoughts he wrote up or someone else wrote a black rock coffee but he said i want to try again i'm doing a quick write-up on wingstop let me just read through some of this wingstop has been a company i've been aware of it's down 73 over the past year we're getting closer to a 20x multiple however growth has compressed a lot same for sales declined by seven percent last quarter some of this is correlated with cheaper chicken prices but you know that's how it goes wingstop operates on a franchise model and has sass like margins the concept and food are as simple as it gets bread

butter and chicken wings and fried chicken with dips fries and some corn inside the menu is very simple something i think would work in most places personally i cook a lot of home but i don't like making fried food at home i love the franchise model where if you show that you bring value to franchisees they will automatically invest in your company and both sides can focus on what They're best at return on invested capital, 37%, five-year revenue growth rate, 21%, PE down to 21 times on next-year estimates. Would you still be out on Wingstop?

Popeye's making a comeback. I like franchise models better. Yeah, Domino's, McDonald's, yeah. Than company-operated. I mean, Domino's, McDonald's are great examples of the successes in the industry. but wing stop maybe at the right price i don't know if he mentioned that it's close to 20 times earnings i think i don't know if that's quite enough for me i gotta say i walked into a wing

stop and i was uh not i did not enjoy the experience but again i don't want to don't want to use anecdotes too much it franchise models can work really well and it is much better it's more durable like your balance sheet doesn't get blown up it's more durable and it's mutually beneficial for the franchisee and the franchisor when done right and i think wingstop has been one of the best of the growing franchise concepts over the last five years yeah i don't know kava runs on that too right franchise no kava's kava's same as chipotle and starbucks they they do the uh company owned i think yeah i like what he said here about chicken bread sides kind of comfort food stuff because maybe you could say that has global appeal i know again i've been traveling

around south america there are certain foods that don't play well in certain areas for example they if you don't they don't like spicy food here if you didn't figure it out if you haven't known that for some reason argentina brazil do not like spicy food uh so mexican stuff other spicy dishes don't play as well but something like just meat and bread i think would play well in most markets globally almost like i guess kfc is probably the number one uh that has done that and you know it's super popular in china and other places but it's similar to the pizza the burgers the chicken a few other things are probably missing where there's probably more of a global appeal if they can get there but maybe we're still way too early days on wing stop yeah 20 times so i like

restaurants at 10 times earnings and even that you can get in trouble like with me and portillo's yeah and to be clear restaurants do trade at uh low teens 10 times earnings like that is not uncommon the i i kind of wonder i was listening to a podcast like seven years ago a long time when i was first getting into the investing world i think it was jason moser but money for money old school money for money yeah he asked like i he said i wonder what sort of an impact the uber and the door dashes the world will have on restaurants long-term because it levels the playing field. And I wonder if we've seen that play out a bit where –

the results have been good for these restaurant chains, don't get me wrong, but I do think anyone that used to have sort of that name notoriety advantage, delivery advantage like in the case with dominoes uh it's sort of gone now with doordash and uber eats but yeah this might be cope for my take of never invest in restaurants i i still don't like using those delivery platforms if possible all right before we close ryan this will take 10 seconds 20 seconds can you guess crowd strikes return on a total return annualized and just complete total return since going public in 2019 annual total return yeah 26 47 wow yeah

sometimes you just buy the best in cyber security i don't know why why crowdstrike's good yeah i wish i did that's why i came to mind because i'm like these companies are great but i have no idea why crowdstrike sentinel on palo alto i have no clue you know what it is it's the pricing power it's when you get because when you get hacked yeah as a company you will pay anything to have it fixed and then you will pay extra to have it never happen again yeah the true business model is on churned customers you pay someone under the table to hack the churned customers then you go back to them see you knew you needed us you should have bet you wish you had our eighth module yeah all right i think that's gonna do it thank you to everyone for tuning in thank you for the

questions in the chat we want to remind everyone 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. Thank you all for tuning in, and we will see you next time. do you wish you could just hit skip on the worst parts of your life you know the same way you can skip an ad i get it i'm siaya and i live in ice cove i've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently that's how I roll. So bundle up and come along

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