Morning Brew Daily - Nvidia is World's Most Valuable Company & Why the Cartel is Impacting Avocado Production

Episode Date: June 20, 2024

Episode 348: Neal and Toby recap Nvidia’s historic and rapid rise to the top, surpassing Microsoft to become the most valuable company in the world. Then, luxury sneaker brand Golden Goose (Taylor Swift’s fave) pulls back on its IPO at the last minute citing political conditions. Plus, two US agricultural inspectors are attacked in Mexico causing the US to halt all inspections of avocados, which may affect its prices if a solution doesn’t come soon. Next, Neal shares his favorite numbers from the WNBA, credit cards, and time in space. Lastly, is it the Summer of Finance Bros? Chipotle thinks so…and wants to cash-in with their latest “Chipotle Boy Bowl.” Download the Yahoo Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. Get your Morning Brew Daily Mug HERE: https://shop.morningbrew.com/products/morning-brew-daily-mug?utm_medium=youtube&utm_source=mbd&utm_campaign=mug Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howe. Today, avocado shipments from Mexico to the U.S. have been

paused. What are we supposed to eat toast with now? Then NVIDIA has vanquished all foes to become the most valuable company in the world. Where does it go from here? It's Thursday, June 20th. Let's ride. Happy first day of

Summer, everyone, today, an absolute scorcher, is the summer solstice in the Northern Hemisphere, which is the start of summer and the longest day of the year in terms of how much daylight we're going to have. If you live in cities like Denver, New York, Chicago, Portland, you'll have at least 15 hours of daylight to play with today. So make the most of it because I don't want to be a Debbie Downer, but it's only getting darker from here. Oh, come on. Look on the bright side. We have tons of things to look forward to this summer. There's ice cream. Ice cream. I mean, you can have ice cream now that it's summer.

No, seriously, summer is definitely my favorite season by far. Fall, winter people, get the heck out of here. You don't even believe yourselves. Give me shorts. Give me that vitamin D. Give me heat domes. Neil, what do you associate with summer? Like, what's a food that you associate with summer?

Peaches. Oh, wow. Peaches. A hundred percent. I mean, there's nothing like a ripe summer peach. When I think of summer, all I do is I can't wait for peach season. I think of like salad season. Those alternative salads, though, with fruits in them, a corn salad, watermelon, feta salad.

So we're going to be eating good this summer. Now let's hear a word from our sponsor, Yahoo Finance. So a friend of mine who listens to the show said that he's getting better at predicting what we'll talk about the next day. And I go, oh, no, no, we're becoming predictable. And he's like, no, no, no, no. I've just started to read Yahoo Finance's news content. Oh, no. Our ads are working too well.

We'll need to start gatekeeping our purple prints. No, we love that you guys are using Yahoo! Yahoo Finance, it is an awesome place to stay up to date on the latest business news while also having real-time market data right at your fingertips. Whether you want to use it to become a better investor or to predict what Neil's numbers might be that day, you're not going to predict it at all today, I promise you. That is up to you. Yeah, honestly, Neil pulls numbers out of nowhere, so good luck with that.

I'd stick with the becoming a better investor part. If you want to give Yahoo Finance a test drive, visit Yahoo! whofinance.com or download the mobile app for easy access on your phone. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill 3-burner gas grill, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. 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.

through May 6th. Exclusion supplies.com.com slash price match for details. There has been a game of mega-cap musical chairs happening this week between Apple, Microsoft, and Nvidia for the title of the biggest company in the world. But when the music stopped and the market closed before Juneteenth, it was newcomer Nvidia perched atop the rest with a valuation of $3.34 trillion. It's the first time Nvidia has held the mantle and also marks the first time, a company not named Apple or Microsoft has held the title of largest company in the world since 2019 when Amazon briefly reached the summit. Neil often says that Invidia is in the pickax business during a gold rush. Its chips have been the workhorse of the AI boom with the likes of

meta, Google, Microsoft, and any other company with AI dreams lining up to purchase its chips to train their hungry models. The rise has been dizzying. Last year, Nvidia was the fifth biggest company in the world. Two years ago, it was 10th. And five years ago, it didn't even crack the top 20, but its stock price has tripled in the past 12 months, and now here we are. I want to go all the way back to its IPO. From then till now, Nvidia has posted a total return of 591,078%. I don't think I can even comprehend that number. But if you do want to see how big Nvidia is right now, after that gain of nearly 600,000 percent. Nvidia is worth more than the collective value of every single building in New York City.

It's bigger than the global aviation industry. It's bigger than the entire GDP of France. And it's bigger than every ticket sold for Taylor Swift's 2023 Aeros Tour. If she toured for 3,000 consecutive years, the amount of money this company is worth right now, $3.4 trillion is mind-boggling. With the AI revolution that it's helping to have. and Taylor Swift could feasibly be on tour for the next 3,000 years. But you're right.

Just listen to what people who cover the stock are saying. There's a research analyst, Angela Zeno, who said that Invidia will be the most important company of our civilization over the next decade. And that chips in VINVIDIA pioneered will be the most important invention of this century. People are speaking like this. Like, it is the fourth industrial revolution. It's the fourth wave. This is propelling civilization for it.

When you're talking on civilization scale change, that is why NVIDIA, even though if you look into the fundamentals of the stock, you look into its actual revenue, its valuation sees absurd. But then when you look at the sheer impact it's going to have on or what people expect it to have moving forward, it is mind-boggling. The question here is what happens next, right? Is NVIDIA going to be this superpower, this huge company going forward, only getting bigger and bigger and continuing to power the AI revolution? what may be the next industrial revolution, or does it look like maybe a more dot-com bubble stock,

where it has a meteoric rise and then it has a major fall? I think you could find arguments for both. I mean, on the one hand, let's talk about maybe the Bulls for Nvidia. It is putting up actual sales numbers. I mean, its stock rise has been insane, like nothing we've ever seen before. But in the recent quarter, it notched 262% revenue growth, and the average S&P 500 company posted 5% revenue growth. So it's actually bringing in sales.

I mean, tripling revenue year over year as a company this big is almost unheard of. So it really has the balance sheet to back up, not necessarily back up this valuation, but to show that it is growing. On the other hand, if you go back to the dot-com bubble, look at another company that also provided the infrastructure for a new wave of technology, which is what NVIDIA is doing. That company, people are not going to know what I'm going to say, Cisco, because we don't talk about it anymore. At one point, Cisco was the most valuable company in the world in 1999,

and its valuation has fallen a lot since then as people moved on as competitors have come into the space. So, Nvidia could be the next Cisco or it could be the next Nvidia. Right. Cisco hasn't recovered to its peak stock price from 1999, still trading below that number. Another stat that's potentially concerning, about $50 billion have been invested in Nvidia's chips since the artificial intelligence boom began, according to Sequoia Capital. but generative AI startups as a whole have only brought in $3 billion in sales. So there is clearly a mismanagement here. So again, if you're in the pickax business, but if you never find gold, then the pickax business suffers as well.

So you need some of these AI startups, these AI companies that have promised big things to actually start delivering on them in order for them to still plow all this money into Nvidia. Meanwhile, just 12 companies in history have led the S&P 500 by market valuation. since the S&P was created in 1926. Just an interesting list to see how our economy has changed and what industries we valued the most. Those companies are AT&T, Apple, Cisco, DuPont, ExxonMobil, General Electric,

General Motors, IBM, Microsoft, Philip Morris, Walmart, and now in video. What does that bring up to you? I don't know. Put a... A lot of hardware makers. Yeah, I guess so. All right, Golden Goose's plans to go public are looking.

looking almost as beat up as its shoes. The maker of sneakers, donned by your favorite celebrity, has postponed its Milan IPO slated for this week, saying that the European Parliament elections and the call for a snap election in France have led to a significant deterioration in market conditions. If you haven't heard of Golden Goose, just look down at the feet of an A-list celebrity or a rich Gen Zer you know. It's distressed-looking sneakers with a signature star emblem, which sell for more than $500, have been worn by celebs like Taylor Swift, Selena Gomez, and Reese Witherspoon.

They've also caught on with younger people as an understated status symbol. Ahead of its listing, the company was aiming for a market value of $2 billion. But then the European Union elections happened earlier this month, and the gains by the far right in France led President Emmanuel Macron to call a snap election that could put a big dent in his pro-business policies. French stocks were wiped out, and Golden Goose is putting its much-hyped IPO on ice. But Toby, Golden Goose blames the French election for pulling its public listing. Do you think there are other factors at play here?

Yeah, there's definitely some other factors here because this was extremely contentious. The Financial Times reported that one advisor on a call on Tuesday when they were discussing whether to go public or not said, with all due respect, what the are you talking about? You fill in the blank there. And then one banker responded, it looks bad to pull out two days before the debut, but it looks much worth if the stock plunges 20% in the first week of trading. And I do think per Myra, the PE firm that owns the majority of Golden Goose, got a little cold feet because of some past experiences they've had.

They brought Doc Martin's public in 2021, which makes this very high-scale, high-quality boot. And they've issued five profit warnings. Their stock has plunged 80% since they've gone public. So here they are sitting on top another kind of upscale luxury shoe business, looking at the current political environment, looking at what happened to Doc Martins and saying, let's just pull the plug here. Things aren't looking great right now. So definitely contentious decision, but one that they felt that they had to make. Yeah, and it's not just the political environment or what happened to Doc Martins, which they could look as sort of a proxy for what

their stock might do. The entire luxury business is slowing down. Caring, which owns Gucci, said that Gucci sales fell 18% in the first quarter because of lower demand in China. And then LVMH, which is the biggest luxury company in the world, saw just 2% organic sales growth in their fashion and leather goods business, which was down 18% from a year earlier. And then you have Golden Goose, which is trying to pitch itself as a luxury company. The problem is that 90% of their sales come from these sneakers. They're very concentrated in footwear. So when investors look to this company, they're looking at it and saying, I don't know if you're a fully fledged luxury company yet. You make sneakers that have caught on with the

youth, 80% of their sales go to Gen Z and millennials and a bunch of celebrities are wearing it. Yes, that's all great. But fashion trends come and go, and you don't really have a mature business other than your sneakers. They were trying to rise. They had a reported 12% rise in revenue in the first quarter. They were trying to position themselves as we are the exception when it comes to the broader overall slowdown that the global luxury market is facing. But it is also just a blow to the resurgent IPO market. I don't want to call it fully resurgent, but Europe was getting a little bit more momentum around its IPO market. This one, though, is definitely going to halt that momentum.

Meanwhile, the French elections are just causing all sorts of problems. The French stocks were wiped out 6% last week for their worst week since 2022. That had over $260 billion worth of market cap. And you even have athletes, French athletes like Killeen Mbapé, is the biggest superstar in the world warning about the French election coming up, saying that extremes are at the gates of power. More than 200 French athletes have signed into a document, urging people to vote.

So this French election, which we didn't even know was coming before two weeks ago, it's going to be the talk of the summer. Your side of guac at Chipotle might be getting more expensive after two U.S. Agricultural Department employees were assaulted and temporarily detained at a local protest in the Mexican state of Michel Khan last week. In response, U.S. authorities have temporarily halted avocado expectations in Mexico. This is a big deal because most of the avocados you do the squeeze test on and grocery storage here in the U.S. are imported from Mexico, and Mishoacan is the biggest producer in the country.

U.S. employed inspectors are an important part of the supply chain. Since we also farm avocados in the U.S. The Agricultural Department has inspectors stationed in Mexico to make sure exported fruits don't carry disease or pests that can hurt U.S. crops. The inspectors have been released, and Mexican and U.S. authorities are in talks about improving their safety measure before the halt is lifted. But still, any pause and experts of the so-called green gold could impact prices here in the U.S. Yeah, this happened in 2022 as well when an inspector got a threatening message and they paused shipments for a little bit. It didn't impact avocado prices here. It didn't impact much. And they're hoping that if they get this situation resolved, it won't have any impact on the

supply chain either because the avocados and mangoes that are orange shipments, are still coming to grocery stores here in the United States. But it just speaks to the boom in avocado industry in Mexico. The United States used to grow them. We never, as recently as 1993, I was born in 1991. When I was born, there was no avocados being imported from Mexico into the United States. And those were because of trade barriers with the United States trying to protect California growers. But the industry here has completely plummeted.

And the industry there has boomed. to a lot of organized crime, cartels getting into the action, which has led to a lot of violence, which is what we're seeing here today. Right. It wasn't until NAFTA really came into place that we did start that flow of avocados across the board. And as demand has grown, as more money has entered the industry, cartels have started becoming involved in the industry. A lot of avocado growers in Micho Ocana say that gangs threaten them and say, unless you pay

us protection money, then we'll make your life difficult. And yeah, it is interesting, too, because this is a very, concentrated supply chain. It used to be that Micho O'Con was the only Mexican state supplying the fruit to the United States. Now, Halisco has begun its own export, so it's a little more diversified still. It is very, very concentrated in this one Mexican state, and so you don't want to see U.S. inspectors being threatened there. Micho O'Conn supplies a third of all global avocados. So, yes, you're right. It is super concentrated. What's one interesting thing about the avocado plant is that it consumes so much water. Some say.

12 times as much water as a tomato. So concerns about, well, the water supplier also impacting the potential future of avocado that the United States has just grown to love. And it's just crazy to think that, like, just a few decades ago, no one was eating avocados. And now it's been certainly one of the biggest global success stories of any produce. Up next, a segment that is guaranteed to get your heart rate pump in. My favorite segment of the week, Meals Numbers.

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When you want savings, not surprises. It matters where you stay. Hilton, for the stay. Welcome to Neal's Numbers, the segment where I share three stats from the week's news that will quench your thirst for knowledge like a glass of cold lemonade. First up, if you're wondering

whether the buzz over women's basketball has made the leap from college to the W&N, NBA. Oh, it definitely has. Sunday's matchup between the Indiana fever and the Chicago Sky on CBS was the league's most watched game in 23 years, drawing peak viewership of 3 million people. It's pretty easy to explain why this game was a showdown between Caitlin Clark and Angel Reese, whose teams Iowa and LSU were big rivals in college ball. But the surge and interest over the WMBA is not limited to just one game. Clark, Reese, and the rest of a star-studded rookie class are drawing historic number of eyeballs to the sport since the season began in May.

Fans are packing stadiums. The WMBA has had its highest attended opening month in 26 years, and on TV, the league said it had its most watched start to the season ever. So just what the doctor ordered, right? Well, with all this interest has come loads of controversy, and the WMBA and Caitlin Clark have now become a battleground for culture wars over race, gender, sexual orientation, and other topics that divide Americans. Toby, the WMBA has to be happy the way more people are paying attention so far this season. It feels like the basketball is being overshadowed by off-the-court drama. See, that to me is encouraging to see because if you look at the men's side, if you look at the product the NBA puts on, the drama is as much a part of the equation as the actual

basketball that has played on the court. The interpersonal drama, the social media posts, that has always been a part of basketball. I think part of it is because they're so accessible. You see their faces. It's very much a personality-driven sport. That same thing is happening on the WMBA level as well. That intention that they're getting, as well as the play on the court, is what's making this swell and viewership across not just Canton Clark games, but the league as a whole. So I think that the drama is a feature, not a bug of this. This is what makes people care about sports, specifically basketball in general. Definitely drama. I mean, it has verged on some really nasty and toxic stuff related to race. And,

gender and people have I've called on Caitlin Clark to push back on critics of her people who have been fouling her hard. That's been a main storyline. And she said, and she did come out recently said, I don't want anybody to use me to push their political agenda. So this is where we've come to where it's just become a very nasty discussion. And I agree with you that, you know, drama and chatter is good. It has gone quite ugly in terms of what is being said about these players.

So, I mean, it's just a lot of drama, a lot of chatter. If you turn on ESPN any morning now instead of their, they used to be talking about football and the NBA. Now they're talking about the WMBA, but it has drawn a lot more eyeballs. Teams valuations are surging. Mark Davis bought the Las Vegas Aces for $2 million in 2021. A recent valuation put the Las Vegas Aces at a valuation of $140 million. I can't do the math in my head. But that is almost in video like.

explosion. So there is so much more interest in the WMBA. So I think it's, I think it's really good that, you know, we were wondering whether all the interest around college basketball would transfer over. And I think it has. And the fever started to win some games, too. So at least the product on the court has caught up to the attention that they've been getting it. But Cameron Brink. Come on, ACL. It's tough. Yeah, Cameron Brick, one of the stars of the roster class is, or of the rookie class is out for the season with a torn ACL. For my second number, take this scenario. You brought a, you bought a product online, say a chair, but when it was delivered, it had a leg missing. You're angry, but instead of taking it up with the company that sold you the chair, you call your

credit card company, dispute the charge, and they credit your account with the amount you paid for the chair. Anyone done something like this? Well, it seems a growing number of you are. According to the Wall Street Journal, last year, consumers in the U.S. disputed about 105 million charges worth $11 billion with their credit card issuers. That's up from just $7.5,000. $1.2 billion in 2019, and the value of disputed charges is expected to grow by nearly 40% in the next two years. Why is this happening? Well, calling up a bank and challenging a charge on your account used to be time-intensive, time-intensive and complicated. It was your last resort when you couldn't reach an agreement with a merchant. But during COVID, when everyone was canceling everything,

credit card companies made the disputing process a lot easier, and they're quick to replenish your account, no questions asked once you lodge a complaint. Toby, this is a sign that consumers are becoming even more savvy about their rights as cardholders, but it's got to be a pain in the butt for merchants who say this move to sidestep around them is right for abuse. Yeah, the power hierarchy is clear here. Credit card companies get to almost play God when it comes to settling these disputes, and they want to keep the cardholder happy more so than the merchant because that relationship is more valuable to them. Consumers have more options when it comes to choosing a credit card.

So they do tend to want to side to them. And then merchants are at the bottom of the pyramid here. Yeah, this is not necessarily something about, you can call it savviness, but it's also friendly fraud is another term for it because if you do just want to try to get something for free, then it is you're engaging in fraud there. So consumers right now face very few consequences. So I do think we're only going to see a rise in these disputes going forward. Half of the largest, 12 largest credit card issuers, just give you a, just,

say the refund or the chargeback, as it's called, makes it permanent, even if the merchant disputes it and says that you are engaging in fraud. Half of them just say, yeah, sure, take the money. So you can see why a lot of people are starting to do this. My final number is a date, June 26th, which is when the two astronauts who rocketed up to the International Space Station on Boeing's Starliner spaceship are now scheduled to return to Earth. It's an important date because their return was not supposed to be June 26. It was initially intended to be June 18th. this Tuesday. They got pushed back to June 22nd. And now it's four days after that. If they do come home on the 26th, it'd mean their stay in space was 20 days, more than double the original plan

of eight days. So in effect, these two astronauts, Barry Wilmore and Sunita Williams, are stuck in space. And yes, it's because of a problem with the spaceship. Two problems, actually. One is a series of helium leaks in the propulsion system, and the other are concerns about thrusters that temporarily failed when the ship was docking with the ISS. Boeing and NASA are studying both of these issues before they allow Starliner to leave the station with the two astronauts. And just to be clear, this isn't a David Bowie Major Tom situation. There's plenty of food on the ISS, and it seems like they'll eventually be back home. But remember, this mission was a pivotal moment for the U.S. space program.

Starliner's first time carrying a human crew, and it's not exactly going according to plan. Right, not going to plan, but it is not an emergency situation as of now. They said if it was an emergency, we could put the astronauts on and bring them home right now. And you're right, this helium leak issue is something that they identified before launch. During the actual spaceflight itself, there was helium leaking, and now it's continuing to go on. Just to put it in perspective about how small these leaks are, Starliner needs seven hours, give or take of helium on board to finish the flight. Right now, it has 70 hours of helium left remaining. So again, this is all being more than cautious.

It is technically feasible to fly the craft right now, but you don't. If you have the time, you have the resources to leave the astronauts up there, then you might as well dot your eyes and cross your T's because it is spaceflight after all. Finally, move over Josh O'Connor and Jeremy Allen White. Hot Rat Boy Summer is out. Chipotle Boy Summer is in. Chipotle Boys, a term that the internet has assigned to a very specific type of boy, exists in the middle of three overlapping Venn diagram circles.

You got finance bros, gym bros, and people who love Chipotle. They don Airpods, wear butt and d'ouds, usually take their health and fitness seriously, and yes, eat a lot of the fast casual chain like six to seven days a week of Japole. A bustle piece from early June first identified the phenomenon, and now Chipotle itself is embracing its boys. The restaurant has leaned into the schick, adding an option to order a Chip on its app, complete with guac and, of course, double chicken. In its description of the dish, it says, you know who you are. Neil, I wouldn't necessarily call this a new trend, but the internet has codified it,

and we have an in-app promotion, so now it's officially a thing. Is it Chipotle Bowls Boy, Summer? Chipotle has been very quick to hop on viral trends. I mean, many brands have, but Chipotle, especially after a reviewer, Keith Lee, started doing something with his fajitas and his and his tortillas at Chipoli. They started rolling out a new menu. item just for that, and they're very quick to hop on this particular trend as well. It just seems like the finance bro has had a come up this summer. There was that viral song. I don't know if

anyone's heard. They probably trying to skip everything they see on it around TikTok and Instagram, where there was a girl who is looking for a man in a guy in finance, and that song has sort of gone viral. So I feel like these twin trends of the Chipotle boy, which is technically a finance bro who has his AirPods in and he's going there for lunch from his desk. job and this song have sort of contributed to a rise in, I don't know, love of, love of finance bros, or at least an acknowledgement of them that they're a big part of our society. Yeah, it's a smart play from DePoli because the young urban male office worker, which call it the DePoley boy, is the chain's most reliable customer, the most reliable cohort.

So again, pantering to them or giving, showing them that they, they understand that that is who their core audience might be, is something that's smart for them. And you're right, Tripoli is very savvy, very with on the top of the internet trends, and their app is something that they've used as a vehicle to kind of direct those trends through. So just smart all around. All right, let's wrap it up there. Thanks so much for listening and have a wonderful first day of summer. Your feedback on the show helps us immensely.

So don't hesitate to shoot your shot at Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Yucena Wa Ogu is our technical director. Billy Minino is on audio. Ground control to hair and makeup. Your circuit's dead. There's something wrong. Devin Emery is our chief content officer and our shows of production of Morning Brew. Great show, Daniel. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theater stage on April 30th,

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