Morning Brew Daily - Nvidia Calms DeepSeek Nerves & Amazon Juices Alexa With AI

Episode Date: February 27, 2025

Episode 528: Toby and Ann recap Nvidia’s latest Q4 earnings that quelled the concerns of Wall Street after DeepSeek made its way into the scene. Phew. Then, Amazon unveils its new beefed up Alexa that’s taken the AI juice. Also, AppLovin is caught in the crosshairs of short sellers that have raised many eyebrows about its expansion strategy. Meanwhile, Toby and Ann share their favorite numbers on religion, the ‘null’ number, and Argentina soccer players. Finally, it’s a rundown of headlines to close out the day.  LinkedIn will even give you a $100 credit on your next campaign so you can try it yourself. Go to LinkedIn.com/MBD Terms and conditions apply. Only on LinkedIn ads. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Check out https://linkedin.com/MBD for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Hear more from Ann on After Earnings: https://open.spotify.com/show/5I5q3LIg1ueDWoTM8AZsHQ?si=d427df87994941e2 Learn more about your ad choices. Visit megaphone.fm/adchoices

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Today, Amazon unveiled a spruced up Alexa that might actually be useful for something other than checking the weather. And Invidia earnings, another bumper report, but will it be enough

to keep investors happy? It's Thursday, February 27th. Let's ride. Good morning. Happy Thursday. Now a new method for ranking the most dangerous animals in the world just dropped called the Crespo scale.

A paper published by author David Crespo ranks animals based on two main factors, population size and mortality rate. It does exclude humans and domesticated animals, ranking instead the other creepy, crawly and tooth-filled terrors on a scale of one to five, where five is considered very high danger. So what are some of the fives on the Crespo scale? Well, depending on where you live, mosquitoes, Russell's Vipers, blood flukes, and feral dogs, some of the animals you really got to keep an eye out for. So Toby, what better way to start

your Thursday than to have to think of feral dogs? So I found this list very fascinating. Most of the animals present in this study that pose the biggest threats are carriers of disease or parasites, think blood flukes, think mosquitoes, with the exception of the Russell's Vipers. Of course, I had to look this thing up. This is a snake, very scary, mostly found in India, Southeast Asia, parts of China. And the main issue is unlike some snakes that flee, when they see you. Russell's Viper, very quick to strike when threatened. So they are very cranky. They hang out in rice fields too, so you can't really see them. Nasty stuff. But before we jump into our ad and the rest of our show, I do want to leave people on a happy note. Crespo, the author of the

paper said, even though most of the results were roughly as expected, there were a few surprises that caught my attention. One that springs to mind is the Asian giant Hornet being much lower on the scale, only being classified as a category one. So good news. No need to stay up late. worrying about Asian giant hornets, as I'm sure many of you are. Now a word from our sponsor, LinkedIn ads. And LinkedIn is known for its precision targeting, letting you reach people by industry, job title, and company. But really what makes it great is all the bad targeting it helps you avoid.

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Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th, Exclusion supplies, see Home Depot.com slash price match for details. So welcome you in with our first story on Nvidia, the AI chip company, reported its fourth quarter earnings yesterday where sales grew 78% bringing Nvidia's full fiscal year revenue to a whopping $131 billion. It also gave Wall Street a much need desire of relief. When it forecasted, it'll be able to continue its historic run driven by AI well into 2025. shares ticked up 2% in after-hours trading. Now, while this report may come to some as no surprise,

the lead-up to the report had had many on edge who wondered how Nvidia would fare with the sudden emergence of Chinese AI company Deepseek that was able to develop AI models apparently at a fraction of the cost of Western counterparts. This led investors to question whether as many Nvidia chips would be needed as previously expected because at the heart, Toby, of Nvidia's continued success,

it really hinges in large part on Blackwood. which is the company's next generation of AI chips expected to bring in several billion dollars more of revenue, with 2025 being a massive production year. So Toby, seems like at the moment not so much to worry about at Nvidia compared to where folks were worried beforehand. But tell me what you thought about this. Demand and production seems alive and well. How did you interpret this? I mean, first of all, we just got to sing the praises of Nvidia.

This really put the finishing touches on one of the greatest years ever for, a large cap company. I mean, 78% increase in revenue. Sales for the full year more than double to 130 billion. Data Center revenue has increased about 10-fold over the past two years. You just don't see this kind of stuff. This is not normal. In the past two years, the stock is up over 440%. It's got a market cap of over $3 trillion. But that is what you get when you are selling shovels, selling picks in a gold rush. Yesterday then was mostly about answering those lingering questions, as you mentioned from investors, from analysts about what the AI boom is going to look like in one year's time, in two years' time. And so far, it looks pretty good. Their forecast was implying

year-to-year growth of about 65% from a year earlier. Obviously, it's not going to be, you know, those 100% 200% year-over-year growth that we've been seeing over the last two years because it's just simply not sustainable at the scale they are right now. But I do think it quelled some of those fears, quelled some of those deep-seek fears saying that, hey, this is a model that isn't going to cause people to use less chips, it probably will cause them to use more chips to, you know, train models that are on a similar level. So I do think it was, the future looks pretty bright. And it is all about the future. I remember you and I talked about the watch parties. Last year, whenever Nvidia delivered amazing results, the share price response still seemed

to be just about what the forecast was. It was always forward looking. Just in terms of the importance, Toby, of invidia, to all investors, just one thing that I saw that, This fact really struck me. The Nvidia share price was up about 170% in 2024. That gain made up over 20% of the S&P 500's overall return for the year. So the significance of the company is just really striking. Yeah, you are absolutely right. The market goes as Nvidia goes at this point.

Let's dive into demand post-deepseek a little bit. So obviously, it raised some questions about Nvidia's to sell its newest generation of Blackwell model. Jensen Huang pushed back on the idea yesterday, saying that Deep Seek popularized reasoning models that will need more chips. He actually said that the demand for the next generation of AI models will need 100 times more compute than older models.

And the result of that, a lot of people think that mostly Nvidia's chips are used for training these new models, which is true. They are used to train the models. But also, you need these chips to, do this process called inference, which is inference is when a model is making predictions or decision based on a new data. So how it works is basically the AI models are trained on these large amounts of data to

learn these patterns. You know, it eats the whole internet, as we've been saying. But once they're trained, when the model is deployed out in the real world, they have to make these predictions on real world data. Whenever you prompt a reasoning model like, you know, open AI's 01 or something like that, it has to go through this process of applying what it learned, and that input is called inference. And that's what Jensen Huang is pointing to and saying all of these thinking models are going to require far more compute than the previous generation of models, which is why we feel so good

about continued demand for our AI chips. He's also just final thought, been popping some seeds for the future as well. There was one little nugget in there, automotive and robotics. Jensen Huang's called it physical AI, came in at $1.7 billion of revenue for 2024, little teeny tiny part of the $130 billion overall. But Jensen Huang has been saying, like, watch this space. Yeah, I think you're absolutely right. It is small right now, but it saw 103% rise on year-over-year basis.

So I think you are totally right in calling that out as, you know, this growth opportunity for Nvidia going forward. Alexa, Amazon's oftentimes frustrating voice assistant, is getting an AI makeover. So you can do more than just set timers for cooking rigatoni with it. The revamped service now powered by generative AI has been dubbed Alexa Plus and requires a monthly $20 subscription fee to access or its free to prime members. The shiny new features were on display at a launch event yesterday. A video showed it booking concert tickets, restaurant reservations, and even texting a babysitter. She's useful Amazon exec, Pinoos Panei, said after the demo,

she'll learn the rhythm of your life and proactively take action with you. Amazon thinks they are finally drawing closer to the all-knowing Star Trek-Eweights assistant that founder Jeff Bezos envisioned when he originally conceived of Alexa. In the years since the tech debuted, she hasn't been all that transformative. Most consumers use her for very simple tasks like checking the weather or playing music according to Forrester Research. But now the hope is the injection of AI will take it from a glorified kitchen timer to something entirely new and turn the money-losing device business into a growth opportunity.

Also, I just want to say sorry to anyone listening to this on a speaker phone or on their TVs, whose Alexa's I just set off. I know that's one. But, Anne, what do we think about Alexa Plus? Well, learn the rhythm of your life really struck me, as you said that. This is sort of a co-pilot for everyday living. The pricing on this, it was sort of struck me. The service will be $19.99 a month or free for Amazon Prime members.

So that feels sort of compelling in terms of trying to get people to take it up. One thing that Alexa has struggled with in the past, Toby, do you remember all this? It's privacy, people not knowing that they really want a device picking up everything it says and in their own home and sort of every room and you sort of don't leave it behind. It has stayed a major issue, this issue of voice data, particularly in age where things like voice driven deepfakes have caused alarms in the cybersecurity world. So, you know, take up on this is going to be really key. Yeah, I do think another problem with the Alexa device unit in general has just been, it's remained very unprofitable for Amazon. They've never charged for access to Alexa. They actually, the hope was that people would use it to, you know, do online shopping, but that never really took off as a monetization route. And the devices themselves are usually priced well below the cost it takes to actually make them because they thought they would get this added revenue from people shopping on their speakers. So they've kind of stumbled around. They've been in this a little bit of a funk recently.

Nuccio, Andy Jassy, came in and kind of pared down the devices unit because he was looking at it and saying, you guys are not profitable. Let's figure out a way to reduce headcount a little bit here. But they kind of stumbled into this generative AI revolution. And now suddenly these devices do have a pathway towards being useful. People can integrate them into their daily lives. They can do things like, you know,

order food on them, make a restaurant reservation in a much more conversational manner. That's better than the stilting one thing I say. Alexa responds in this very jilted voice and then comes back and forth. It's just not very natural. They think this will be a much more natural co-pilot to your life, as you described it. So are you going to, are you going to pay another 20 bucks a month for this? Well, I'm actually a prime member already. So it does fold into it.

But they think if they can just, the incremental revenue they can get from people who do have an Alexa device in their house who might say, all right, maybe. let's try to turn this into something useful. They do think it can lead to meaningful revenue because the devices are pretty widespread. So maybe generative AI just saved this unit that wasn't doing so well beforehand. Really also a way to try and cover some of the cost of AI development.

I mean, not cheap. To back to our conversation on a video and the chips and the investment that everyone's putting behind it. Moving on to our next story, the mobile app marketing company, App Lovin, has been getting no love. Two short sellers released slamming reports causing company shares to sink down nearly 20%,

though it did make up some ground after the report came out, closing the day down just about 12%. Now, prior to these reports, the market was excited about app-loving expanding beyond the mobile gaming advertising where it's really had its strong history to e-commerce brands and elsewhere. But some were left wondering if maybe the company was being overvalued. The short sellers, Fuzzy Panda and Culper Research

questioned the credibility of the expansion, saying App Loving has been misrepresenting the benefits of its AI advertising platform and force-feeding app installations onto phones to inflate its revenue numbers. Now, in a post on the Fuzzy Panda website, we've got it in front of me, they said, applovin's accent model was, quote, the nexus of a house of cards built on fraudulent advertising tactics. App Lovin's CEO Adam Farogey denied those claims saying, quote, it's disappointing that a few nefarious shortsellers are making false and misleading claims

aimed at undermining our success. Now, if we remember, App Lovin's stock shot up over 700% in 24, making it one of the years best performers. But Toby, whenever short sellers go after a company like this, eyebrows do get raised with people asking, is there no smoke without a fire? Do they have a legitimate claim here? More like App Haten, am I right? And App Loven is a little bit of a confusing business on the service. It basically helps mobile apps make money and get more users through these ads. It helps app developers earn money by placing ads inside their apps. And also some of those apps bring in new users for apps as well. So it's a lot of these mobile gaming ads that, I don't know if you play a Candy Crush or something like that, you might see

a banner ad pop up. It's stuff like that. It's a big industry. I mean, this stock has been the Apple of Wall Street's eye for a long time now, which is why we're talking about it, because when you see multiple short-seller reports come out like this and the stock kind of react pretty violently to it, you do want to talk about it. The idea behind these Fuzzy Panda and Culper Research reports is that they've been misrepresenting the benefits of its AI advertising platform. Again, they are saying that they're force-feeding apps installations and passing it off as if their new Axon platform is driving increased revenue. And that is a real problem because AI is the thing that's been the rocket fuel to this

stocks rise. And if you are misrepresenting exactly what that AI is capable of, then of course you're going to see its evaluation take a hit. For sure. And when I took a look, I mean, this report's really long. I mean, it's holding up this really chunky wodge of paper where I printed out the Fuzzy Panda report. One of the things it talks about is app loving, it suggests, is just waiting to get the ire of meta. It basically accuses app loving of just reverse engineering meta's data.

And it's saying it's only a matter of time before meta takes up and tries to protect its valuable data. So, you know, that really, if there's any legs to it, and we don't know, emphasis, we don't know yet, this is just, you know, a report that was out there, then, I mean, talk about waking the sleeping giant. And one thing I will say is analysts have pushed back calling some of these short reports misguided. They are saying if App Lovin is actually committing Frog, the argument is why haven't they faced legal challenges from competitors like Meadow? Why haven't they faced legal challenges from things like former employees? Usually they would be onto it and very incentivized to call it out. And then they also point to the fact that no legal authorities have been really sniffing around. There's no active investigations against App Loven.

So Wedbush maintained their outperform rating. they maintain their price target for shares of Apploven. So you were seeing a little bit of pushback from some of the analysts that do cover this stock. That being said, maybe where there is smoke, there is fire. So I think the only thing left to do is just wait and see to see if some of those lawsuits materialize, if meta does come sniffing around, and if there is something, you know, nefarious going on under the hood here. Up next, it is Thursday, which means it's time for Neal's numbers. Study and play.

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Coffee shop, get an insurance quote simply and easily. Anne made sure a floral delivery van was able to make someone's day. We're the Hartford, with decades of experience ensuring millions of unique small businesses. When it comes to your small business insurance, Thank you. One size, absolutely does not fit all. Get a quote or find an agent today at thehart.com slash small business. But Toby, but Toby, how can there be Neil's numbers if Neil is still out enjoying his vacation?

Because Ann and I put our heads together and came up with some other alliterations to bring you three stats from the week's news that would make Neil proud. Introducing Toby's tally and Anne's analysis. For my first tally, America's turn away from religion appears to have been halted for now. According to new research from Pew, after years of decline, the Christian population in the United States has stabilized with 62% of Americans identifying as Christian. The study also revealed that spirituality is still a big part of American life. 92% of adults say they hold one or more of the spiritual beliefs that Pew asked about, with 85% saying they believe in God or a universal spirit.

Now, if you zoom out, the country has certainly grown more secularized. Religiously unaffiliated adults came in at 29% up from 16% in 2007, while the share of those identifying as Christian declined from nearly 8 in 10 back in 2007 to 6 in 10 today. If you look at the long term, it's a story of decline in American religion. Gregory Smith, a director at Pew told the New York Times. But it's a completely different story if you look at the short term, which is a story of stability over the last four or five years. And it looks like the country isn't secularizing at the rate. Many thought it was.

Far from bringing red its last rights, religion isn't going anywhere quite. yet. That's really interesting. I went back and I grabbed the Pew Research Center and not only to your point, Toby, does it look like religion's not sort of disappearing in recent years as quickly as people thought. Spirituality doesn't really seem to have gone anywhere. If you take a look at this, folks born in the 1940s or earlier, this research report says 86% of people said that they believe people have a soul or spirit in addition to their physical body, 86%. That percentage for those aged 18 to 24 is 82%. So even if religion has a different importance by different age group, this idea of spirituality seems to be constant throughout. Right. You are right. There is a little bit of a

gap between age groups. Obviously, older people tend to be more religious than younger people, and that gap is only growing in the modern age. But I will say, just look at some of the centers of American power, and you can see why America is embracing religion again. I mean, in Washington, President Trump, J.D. Vance, they talk a lot about God. In Hollywood, there's a lot of shows about faith, spirituality. I mean, Conclave is up for, you know, Best Picture at the Oscars. Late season of White Lotus talks a lot about spirituality. Secret Lives of Mormon Wives. I mean, this is reality TV show, but it's still centered around religion. Even look at Silicon Valley, too. The current obsession right now is call it religion

adjacent products like something like generative AI, artificial intelligence. You know, people are trying to live longer. There's this idea towards immortality. So all of these are tangential, but you can all see how they feed into this idea of spirituality remaining consistent and persistent across multiple generations in America. My second tally is zero, as in the amount of things that operate correctly when your last name happens to be null. Noll is the word that computer scientists chose decades ago to mean no value. But as the Wall Street Journal found, when you're a human with the last name, that means no value. You are met with a lifetime of challenges from processing errors to non-existent logins.

Null was first used 60 years ago, coined by the British computer scientist named Tony Hoare. It has since infiltrated most of the systems that make America run today from hotel reservations to government agency forums. And while Hoare was almost certainly not thinking of people with the 4,000's 910th most common last name when he first chose to use null, he does regret it calling it his billion dollar mistake due to all the time wasted for programmers and the pain is. inflicted on users. Nantra Null, a null who took her husband's last name, told the Wall Street Journal that she has had lots of headaches since making the name change. A decade ago, she tried

to fly to India for a friend's wedding, but the Indian consulate told her their computer system could not process her last name. She ended up not going, and to this day, hotel reservations are still a pain. And there are a lot of these instances, all because computers don't like your last name. Can you imagine it turns into real life null by name, null by nature? No fun at all. So Toby, I'd like to introduce my very own segment, which is Anne's analysis, where I take a look at a number and zoom into the story behind it. And so to kick this off, my number is $1 million. And that's the amount a growing number of Argentine soccer players have been signing for. Why is this big? Well, a couple of years ago, Argentina would have had at most maybe 10 players making a million dollars or more. Now, there are more than two dozen players signing big contracts.

So if my math's correct, that's double the amount. Some have pointed at this influx of star players to Argentina's president, Javier Millet. Since he started in office 15 months ago, he's been on an all-out push to cut down the government's deficit. He's been on an all-out push to cut down the government's deficit, which has brought some stability to the peso. Now, if you recall, prior to his term, Argentina dealt with climbing unemployment, rising poverty, sky-high inflation, and was on the brink of economic disaster in the country for a long time. But now at Central Bank estimates that the peso is the strongest it's been in years, so much so that after factoring in its double-digit inflation rate,

it's actually strengthening sharply against the dollar. So with inflation under control, a number of superstar soccer players have been lured home to Argentine clubs. And frankly, a dollar there goes a little bit further than the dollar goes in Europe or in the United States, which is other places they could play. So, Toby, are you moving to Argentina to play soccer? I would love to. I mean, that's the dream right there.

I mean, for a long time, one of Argentina's biggest exports over the years has been its soccer players. I mean, obviously, everyone knows Lino Messi, players like Carlos Tevez, Masciarano, Otementi, DiBala, Martinez. The list goes on. There's lots of these players that have moved over to Europe. Suddenly now, though, some of those players are returning home because of these bigger salaries. Call it the Javier Milley effect. One issue that some economists have said about this is that, You do not want this to create a trade imbalance.

And what I mean by that is right now when the peso is strengthening, you can go across to places like Chile, your neighbor, and your dollar, your peso goes much further there. And so you can start bringing goods back that you are buying on the cheap, bringing back to your own country. You go to places like Brazil as well. When that happens, you can kind of create this trade imbalance. When you're going out and shopping for all these players,

it might do stuff that will create something that will, you know, potentially bring back some of the inflation that you've worked so hard to kind of eliminate at this point. So right now it sounds good. Like you do want to bring some of these expensive players home, but you don't want it to lead to something that has could go towards kicking off inflation once more. Soccer players, stability of the peso, inflation and trade deficit. Who knew that that one billion, one million? One million dollar number could represent so many things.

Now, let's sprint to the finish with some final headlines. Up first, Jeff Bezos ignited an internet firestorm yesterday by announcing an overhaul to the Washington Post opinion section, saying it will now only publish pieces that champion personal liberties and free markets. The move prompted the resignation of opinion editor David Shipley and marks a major strategic shift from the newspaper's traditional broad spectrum of viewpoints, as Bezos now intends to leave dissenting opinions for other outlets to publish. The decision sparked a lot of criticism and concern among journalists and readers

who fear it may further erode the publication's editorial independence and diversity of perspectives. And democracy dies in darkness, but in this case it looks like the owner of the paper is turning out the lights in some sense. Well, this relationship between the ownership of the media outlet and what it allows that publication to say is an age or problem. Like this isn't the first time. It won't be the last, I imagine. It's sort of been around as long as media assets have been privately held. So, you know, we'll see. As you said, Toby, a lot of journalists have spoken up against us.

There have been some high-profile resignations. What I'm going to be watching is what happens to the subscriber numbers. It's been a tough couple of months, too, for Washington Post. I mean, go back to October. Remember, the newspaper decided to not endorse a presidential candidate, a move defended by Bezos at the time. That led to about 300,000 subscribers defecting. We'll see if this.

latest unpopular decision might lead to some more defections, as you said. Next headline, Toby, is Eli Lilly announcing that it will invest $27 billion to build four new U.S. manufacturing sites to meet the demand of its weight loss drugs. The move brings Eli Lilly's total U.S. manufacturing investments to over $50 billion in recent years, making it, quote, one of the largest pharmaceutical expansion investments in U.S. history, that's CEO, David Ricks. Eli Lilly also released higher doses of its marquee weight loss drug Zep bound at a lower price to reach more patients who are paying with insurance. This announcement comes at a time when companies across all kinds of industries are building goodwill with President Trump, who has emphasized bringing back manufacturing to the U.S. and reducing the reliance on foreign supply chains.

Toby, so what does this mean for GLP1 drugs? Oh, I think it is exactly what you said. They are cozing up to the current administration right now. I mean, Commerce Secretary, Howard Lutnik, explicitly tied the investment to some of Trump's policies saying this is exactly what the Trump administration is all about, which is building and manufacturing and reshoring in America. Investing in America, building in America. So he was thanking Eli Lilly for doing what the president was hoped they would do, bringing back some of those manufacturing processes, investing in America again, especially because pharmaceutical business in particular has been under a microscope recently, specifically pharmaceutical business. benefit managers, places like that. So I do think that with the looming threat of tariffs,

if they do not manufacture products in the U.S. was enough for them to say, hey, we are open to, we are amenable to putting, you know, billions of dollars in investment towards these, developing these very popular class of drugs in the United States. Finally, last night, as you were brewing at your chamomile tea, intuitive machines sent up another lander towards the moon. Remember, this is the company which has the title

of being the only private sector enterprise on Earth. that has made a safe touchdown on the moon. Unfortunately, after that safe touchdown in the moon's South Pole region, the vehicle broke a leg and landed on its side, then tipped over on the edge of a crater. This time, Intuitive Machines is hoping for better luck. Its Athena spacecraft is moonward-bound as we speak after hitching a ride on a SpaceX Falcon 9 rocket,

which took off at around 7.15 p.m. last night. The six-legged lander, roughly the size of a telephone booth, will take about a week to reach its destination, where it hopefully won't tip over this. time and collect some important data instead. I remember that story. I can't quite remember, but wasn't it still able to transmit? Do you remember this?

It was transmitted. It was really sad, though, because it got there. Everyone cheered because technically it did land on the moon. And again, it holds that title of being the only private enterprise to ever accomplish that. So everyone was cheering. But then it tipped over and everyone's like, oh, so close. But no cigar here.

So this has definitely been something that a lot of private sector enterprises are going after. I mean, right now, there's a multiple private sector spacecraft's going towards the moon as we speak. There's another one from Austin, Texas-based Firefly. It's called Blue Gross. There's another lander from Japan-based, iSpace that it will touch down on the moon this spring. So clearly, the moon is becoming this destination that is pulling a lot of money from the private sector. Hopefully it doesn't actually tip over and we get some good data this time around. That is all the time we have for today.

And great show, as always. let's roll these credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Yuchana Naugu is our technical director. Scoop Stardaris is on audio. Hair and makeup is trying to book a flight to Vietnam to go find Neil, but the system won't accept their last name. I wonder why. Devin Emery is our chief content officer and our show's production of Morning Group. Great show Toby. See you all tomorrow. All. Pay off your home. Travel for life. Drive a Ferrari. In celebration. of the world premiere of the Monopoly

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