Morning Brew Daily - US Markets vs the World & OpenAI's ‘PhD-Level’ AI Agent?

Episode Date: March 10, 2025

Episode 535: Neal and Toby discuss if recent market activity are reasons to believe the US is losing its lead as the most sought after financial destination. Then, a report says OpenAI may be planning a top, top-tier AI agent that could provide PhD levels of research for a hefty price. Also, Abrdn firm is returning the vowels back into its name after years of online ridicule. Meanwhile, sports analytics and Stephen A. Smith are the weekend’s winners. Finally, a preview of the week ahead.  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. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow There are risks involved with investing in ETFs, including possible loss of money. ETFs are subject to risks similar to those of stocks. Investments focus in a particular sector, such as technology, are subject to greater risks and are more greatly impacted by market volatility, than more diversified investments. Invesco Distributors, Inc. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning for a daily show. I'm Neil Fryman. And I'm Toby Howell. Today, the once-dominant U.S. stock market is getting lapped by other countries in 2025. What's behind the changing of the guard? Then can an AI agent that costs $20,000 a month ever be worth it? It's Monday, March 10th. Let's ride.

Good morning. Welcome back to the week. It might be a rougher start to the day than usual, especially if you're a parent of a young kid or dog. because overnight on Sunday, Americans lost an hour of sleep as daylight saving time began. The idea of daylight saving time is to add more sunshine in the evening over the summer to encourage more activity and get us all to spend more money. But here's a fun fact. Not all 50 U.S. states observe daylight saving time.

There are two holdouts, Arizona and Hawaii, for whom Sunday was just a normal day. Toby, why don't they spring forward? I am so glad you asked deal. For Arizona, it's hot. Summers in particular are very hot. So when the clocks spring forward and sunset is an hour later, that would keep people out later during hot months and no one wants that. State leaders also believe that springing ahead and falling back would increase energy consumption

because of all those extra AC costs. As for Hawaii, it is close enough to the equator as is. So it gets plenty of sunlight without shifting time. So no need to go around changing clocks twice a year. So if you needed any extra motivation to move to Hawaii or Arizona, add the stasis of their clocks to the list. Now a word from our sponsor, Invesco QQQQ. So not sure if you guys know this,

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which is over two years ago at this point. Which is why Invesco QQQQQATF is such a welcome break from that parade of sameness. It has 100 of the most innovative companies, so it's not just the same raspberry and blueberry companies. You're getting variety and innovation across sectors. Healthcare, communications services, industrials, you name it, this ETF has it. So we start changing up our orders then? Now, leave the variety to Investco.

With InvestcoQQQQ, you can rethink what's possible. Before investing, consider the funds investment objectives, risk, charges, and expenses. Visit investco.com for a prospectus with this information. Read it carefully before investing, full disclosure, and podcast description. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College deal, everything you need,

to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last, ends June 30th, terms at AKA.m.m.S. For more than a decade, one of the surest bets on Wall Street was that American stocks were going to beat international stocks.

But that may no longer be the case. Due to uncertainty over the White House's on and off again tariff threats, U.S. stocks are getting trounced by foreign companies so far in 2025. The broadest measure of the U.S. stock market, the S&P 500, is coming off its worst week since last September, while the tech-focused NASDAQ has entered a correction down 10% from a recent peak. As your 401k has taken a licking, shares outside the U.S. are booming. The leader in the clubhouse is the Hangseng Index in Hong Kong, which is up roughly 20% this year compared to the S&Ps 2% decline. Booming Chinese stocks like electric vehicle maker BYD and tech giant Alibaba are leading the charge over in Asia. Meanwhile, in Europe, indexes such as the Dax, notched record highs after an earth-shattering week in which countries like Germany pledged to spend hundreds of billions of dollars rearming their militaries, giving defense, stocks and other corporations an unprecedented tailwind. Toby, it's still early in 2025, but investors say there's been a clear shift in their calculus. U.S. stocks are no longer the only game in town.

Yeah, you're seeing two forces here. One, there is that uncertainty over the U.S.'s economic state, but then you also are seeing what other countries are doing to, you know, inspire more dollars to fly their way. You mentioned Germany's plan to massively increase their spending. That's been lauded as this big moment of change in European policymaking. So now Europe's stocks, currency, government bonds, they're all ripping. Then you look over at someone like China. Deep Seek was raising questions about America's supremacy in the tech sector. You have BYD that is now a bigger EV automaker than Tesla.

So you add it all up. And suddenly this aura that the U.S. had, the market exceptionalism that it had for more than a decade is looking a lot shakier than it ever has. If you even go back a month ago, though, the S&P 500 was at a record high. Go back to last week, though. it's logged one of its worst weeks of underperformance relative to the rest of the world in this century. So things have shifted quite quickly over just the past few months. Now, on Friday, as stocks were falling, we did receive some economic good news. The jobs report came out, which we previewed Friday morning. 151,000 jobs added unemployment at a very low

4.1% rate Fed Chair. Jerome Powell was asked about the state of the U.S. economy, which has had a greater deal of uncertainty recently. He said, despite elevated levels of uncertainty, the U.S. economy continues to be in a good place. President Trump was also asked about the faltering stock market and increased business concern in an interview on Sunday. And he said, I can't necessarily rule out a recession. I'm in a period of transition now. We're trying to move fast and break things here. We're in a period of transition. And he acknowledged that there was a little turbulence now, but said that, you know, over the long term, things would be all right. So there's what you're seeing from U.S. policymakers over this, you know, slight changing of the guard here.

And, of course, write the U.S. off at your own peril because we have seen in the past that sentiment can shift literally on a dime. It took three weeks for the S&P 500 to regain all-time highs after that, you know, deep seek, freak out that everyone had, that hammered markets early in the year in January. So it's definitely one of those things where you can't just say, the U.S. is on the decline, invest in Europe, invests everywhere else except for the U.S. It's still, you know, the biggest game in town, but now it's clearly not the only game in town anymore. Picture this, you're running a research lab and you have two candidates for an open position. One is a PhD student, eager, smart, and maybe a little sleep deprived, but affordable at around $30,000 a year.

The other, an AI agent with no student loans, no coffee addiction, and a $20,000 a month price tag. That is the choice that OpenAI is. putting on the table. They're reportedly working on a PhD-level AI that can perform high-level research tasks, analyze massive data sets, and write your next academic paper if you are willing to pay the equivalent of a six-figure salary for it. Open AI isn't just saying its models can assist with research or automate basic tax. These premium models will supposedly operate at the level of and maybe even replace highly trained experts. They're reportedly also working on tiers, a $2,000 per month knowledge worker assistant, a $10,000 a month software developer agent, and at the top,

that $20,000 PhD level researcher. Neil, none of this pricing is confirmed yet, but it does shift the conversation around AI, replacing classic white-collar workers to a much different one, because if these models can handle problems that typically require years of specialized academic training, that could be worth the eye-popping price tag. To understand why these companies are rolling out AI agents at a price tag of something like $20,000 a month. You kind of have to look at their balance sheets. Open AI lost about $5 billion last year. It is raising even more money now. It is, you know, in not necessarily financial dire

straits, but it needs to start monetizing all of these chatbots and AI models that they're pouring so much money into. You see it across the AI sector where they're rolling out these products in order to start making money because they need to start making money. They think that PhD-level AI agents that replace workers is one of those ways that they can start become a more a more sustainable business for context actual phd students earn about 20,000 to 30,000 dollars per year so this is we're talking in the range of eight to 12 times more expensive which means they have to be eight to 12 times more productive so what does phd level AI actually mean it's not an official standard by any means it's just more of a marketing term that's based on how these AIs do across a variety of you know benchmark tests

this new AI agent that Open AI has released does very well across a lot of benchmark tests. So maybe it doesn't automatically translate to real world problem solving or original research capabilities, but it does do well in these tests environments. But maybe you can push back and say, hey, they can't really do critical thinking. They can't do any physical work in a lab. They are still, they don't have an ability to interface with the real world. So maybe that is something. But on the other hand, you are saying,

that these things never turn off. They don't take coffee breaks. Like, they don't fall asleep. They can just chug along on these really complex problems over time. So you can see the argument for both sides of it. Who knows if the price range will be justified, though? There's no question that going forward in the next two years, you know, company management will be looking at their payrolls and saying, okay, we have a million dollars to spend. Are we going to do it on this new AI agent? Or are we going to hire, you know, a Ph.D. level researcher. That is an actual question that will be facing executives in the coming years. At least one AI executives said that this does not necessarily look good for the humans. Anthropic

CEO Anthropic has this Claude Chapot. They've also rolled out an AI agent predicts that by 2026, the tech industry will have developed AIs that can mimic what highly capable humans can do today and warns of severe human job losses as a result. In 2021, as the world reeled from the pandemic, supply chain snarls led to shortages of all sorts of goods, semiconductors, jewelry, clothing, and also vowels. The poster child was Aberdeen, pronounced Aberdeen, but written like a CAPTCode with no ease, who during that time debuted its new modern, agile, digitally enabled brand, ditching its ease to try to show how hip and cool the global investment company was. The reaction, universal mockery.

The backlash was so strong that Aberdeen's chief investment officer actually complained about, quote, corporate bullying. But at long last, the A-E-I-O's and U's are back. Last week, Aberdeen announced it is bringing back its vowels and rebranding as Aberdeen with all the ease in their rightful place again. Neil, despite finally seeing the light when it comes to vowels, Aberdeen is still hopping on another trend of keeping their name in all lowercase letters like a teenage texter. So A, B, R-D-N-E-R-D-N-E-R-A-R-R-E-R-E-R-E-R-E-R-E-R-E-R-E-R-E-R-E. And there certainly was a trend of ditching vowels in your name, if you look at companies. Born in the midst of the 2000s, you had Grindr, which is the DR at the end, Flickr, Tumblr. Twitter, in its first iteration, was just TWTTR.

Now you have this 200-year-old investment firm that wants to play at the cool kids table. They ditch their vowels. They got corporate bullied, which is probably true. And now they are going back. So yes, it does show the perils of chasing certain trends in branding, especially when your financial institution that doesn't necessarily need to be cool. You want to maybe project stability and security and authority rather than, you know, these other companies, which are more social media-based.

I do think that the issue was that they were just chasing a trend that had already passed them by at this point. I mean, all those companies you mentioned were founded in like the early 2000s. Aberdeen did it, you know, in 2021. So they were, you know, decades late, if you really want to consider that. it would be like, you know, wearing skinny jeans now. Like, oh, it used to be a trend. You know, 10 years ago, the kids used to be wearing it, but now the opposite is true. So it does show the perils of, like, being too late on a trend.

You just look way, way worse. It also kind of maybe joins the branding disaster Hall of Fame. There's been a lot of those. I mean, I think back to 2009, Tropicana tried to change this iconic orange juice logo. Two months later, the orange juice logo was back because everyone hated it. Twitter actually was TWTTR, but then. finally got the domain which added its vows back. And then just recently, I think of Jaguar,

which has been getting skewered. It's been getting, you know, absolutely made fun of online because their rebrand people have not liked at all. So you run this risk of every time you try to change something, there is a risk that people really don't like it and you have to walk it back a few years later. But for every rebrand fail,

we talk about there have been a rebrand success. Pricewater's House Coopers shorted its name. Got rid of all the vowels for sure. They went to PWC. Accenture was known as Anderson Consulting at one point. They went through thousands and thousands of different names landed on Accenture, and that has worked out. Even Meta's name change has essentially worked because we call it Meta and not Facebook anymore. They are the poster child of chasing trends because meta is certainly sidelined its push to work on the Metaverse, which is the whole point of the name change in the first place to work on AI.

and yet we still call it meta. Craft Heinz created Mondales international as an umbrella brand for its snack food. So I hear your point about there being a lot of fails, but there are also a lot of successes, or should I say, you know, corporate rebands that we don't necessarily think of fail, so they are successes. My favorite is Dunkin' Donuts. Remember when Duncan Dota's dropped donuts? And everyone, again, you know, jumps on their backs and say,

how could you do this? But now Duncan, everyone calls it Duncan, and it's done really well. like the stock is up since they did that rebrand. So I do think you are right for every, you know, failure. There are just as many successes. Up next, it is time for our winners of the weekend. Own it all. Pay off your home, travel for life, drive a Ferrari.

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the segment where Toby and I pick two things that just punched their ticket to the NCAA tournament. I will go first because I won the pre-show Dad Joke contest. Speaking of, you want to hear a joke about pizza? Never mind, it's too cheesy. My winner is Sports Nerds. weekend, thousands of them gathered in Boston for the 19th annual M.I.T. Sloan Sports Analytics

Conference, the largest student-run conference in the world. Once dubbed Dorkapalooza by commentator Bill Simmons, the event draws heavy hitters from the world of sports, tech, and media to discuss how the analytics movement has revolutionized athletics and what comes next. This year's conference came at an inflection point for sports analytics. More than two decades since the release of Moneyball showed how teams could leverage big data and AI to make smarter decisions. Analytics has infiltrated sports leagues leading to optimized strategies, but also concerns that analytics is worsening the product and entertainment value. The NBA has been the poster child of those criticisms this year. Teams are jacking up more three-pointers

than ever because the data shows that that's your best bet to win the game, but viewership has slumped, putting pressure on Commissioner Adam Silver to tweak the rules and reintroduce variety back into the game. In fact, one of the panels this weekend was called have the nerds ruined basketball. Toby, X's and O's have been replaced by ones and zeros, and executives are scrambling to respond. And it's not just the NBA yet. The NBA is definitely the poster child because their ratings have been falling off a cliff this year because, you know, watching eight players on the Celtics jack up more threes than Steph Curry did during his, you know, record-breaking seasons a few seasons ago. It's just not that fun to watch. Like the mid-range

jumper is gone. People call the NBA a solved game at this point. But it It's certainly not just an NBA problem. The MLB also went through the same crisis where the game just started getting dominated by a few things. Strikeouts, walks and home runs, which all of those, what do they have in common? The ball is not being put in play, so there's no defensive plays to be made. So they have done some things like Institute of Pitch Clock. They've banned these extreme defensive shifts to try to, you know, bring some more balance back to the game. Even the NFL football, which you think is in a very healthy spot,

dealing with a little bit of an analytics crisis of their own. No one really runs the ball anymore. It's, I mean, sorry, Sequin, Barclay and the Eagles, which actually did run the ball a lot. They're seeing more passing attempts. There's more fourth down attempts, two-point conversions. A lot of it has improved the game, but it's kind of on a knife side's that if you realize that, wait, our most effective plays are passing, then the game does become more one-dimensional again.

So it's definitely something that's affecting all of the sports leagues. NBA probably is getting the worst of it right now. It's just a remarkable rise for the analytics movement. What was just very niche a few decades ago is now completely changed these leagues and the pro sports industry completely. If you go on the websites to work for the Lakers or the Eagles or the Knicks or the Edmonton Oilers, you're about to see probably as many data engineers and software developers on their big data scientists, on their hiring board pages than anything else. And that's because data and AI has completely overwhelmed these leagues.

The problem for the commissioners is that aesthetics does not or analytics has no use for aesthetics. And oftentimes the incentives are misaligned where you have solved games like the NBA or MLB where teams are using strategies derived from big data. Don't necessarily lead to and better on the field product, which is how these leagues make money through TV deals. So matching those up and creating better incentives. are absolutely top of mind for all sports executives. My winner of the weekend is a fiery co-host of a popular morning show. No, it's not Neil Fryman. I'm talking about NBA commentator Stephen A. Smith.

The polarizing media personality got a bag from ESPN, inking a five-year, $100 million contract extension that makes him the network's highest paid talent ever. That is a 67% raise over his last contract and will raise his salary higher than 80% of NBA players and every single player in the NHL. Smith is ESPN's Golden Goose hosting its highly rated morning debate show first take,

which is the most popular non-new show on cable in its time slot this year. He's also cranking out his podcast, the Stephen A. Smith show that regularly brings in hundreds of thousands of views on YouTube. Neil, probably the best way to put Smith's influence in perspective is that he has stirred presidential candidacy rumors after he made appearances on The View in Sean Hannity late last year.

The dude is a media. tour day force. At a time when so many things are competing for people's attention, Stephen A has the ability to keep your eyeballs glued to the screen, which is the most valuable thing you can have for a media company. It's why you're seeing huge contracts go to a select few at the very top end of the market. ESPN did a licensing deal with Pat McAfee for the Pat McAfee show. That was worth $85 million over five years. Fox paid Tom Brady $300 million, to be a sport, to be an NFL, you know, color commentator for 10 years. Even as Disney broadly as a company is cutting staff, last week, it cut nearly 66% of its

workforce across ABC News and Disney Entertainment Networks operations. So even as they're cutting, let's say, the middle class of their workforces, they're paying up for the high end because they think that's worth the value. I would love to see the sports analytics nerds that we talk about in the previous segment, break down. what Stephen A's impact is on the network because he really is the embodiment of the new era of creator. He'll show up on a morning show that you can watch on cable, but it'll also show up all over your social media feeds on his own, on YouTube, on his own show, on talk shows. He's

getting into court side fights with LeBron James that drives an entire media cycle. And he's kind of just these omnipresent figure in sports. And ESPN figures that it's probably better to have them in their stable than let him walk to someone else. It's Monday. So here's your preview of the big events of the week ahead. The saga of the astronauts stuck on the International Space Station might be entering its final chapter. On Wednesday, NASA will launch a space X capsule to bring Butch Wilmore and Sonny Williams home nine months after they left on what was supposed to be an eight-day trip before it got derailed by problems with Boeing Starliner. The mission launching Wednesday will carry four other astronauts up to the ISS, where they'll catch up with Wilmore and Williams

for a week until the two end their extended space opera with a return. trip on March 16th. Truly the Gilligan's Island of Space Exploration. I was looking into the longest space fights overall because nine months sounds like a really long time. The overall record is held by a Russian cosmonaut 437 days and that was back in the mid-1990s. The longest American trip in history was 3701 days in space. It was this guy named Frank Rubio.

He initially thought the mission would be six months long, but the spacecraft that he was aboard began leaking cooling and NASA. said it couldn't make a normal return to Earth. So it feels like a similar situation to what Sunni and Butch Williams have been going through. On Tuesday, one of the most closely watched elections around the globe will take place in Greenland, not normally on the top of most people's radars. The Greenland vote could chart a different future for the island at a time when President Trump has ramped up threats to buy or take over the territory, which has been owned by Denmark

for centuries. The top issues of this election are Trump and independence from Denmark. a splitting off that all the leading candidates support. Yeah, it's not that it's on the ballot right now. They're not voting for independence, but the way that Greenland votes will kind of offer some clues as to how they feel about it. So you're right, that it is funny that we're all kind of tuning in for Greenland.

Like, I don't think anyone has thought about the Greenland election, but here we are. They are important when it comes to all these different nations trying to snag a piece of Greenland. So we will be paying attention. And then the madness is upon us. Conference College basketball tournaments are happening. all week long as teams jockey for position ahead of selection at Sunday,

which is on Sunday, and the brackets for the men's and women's field will be revealed. I already have goosebumps. Oh, I thought you were going to say. I already know who's going to win, and I was curious this year. I mean, I think you think Maryland, my take is the SEC is just monstrous this year. They've turned from a football conference to a basketball conference, so one of my winners is coming from that conference, even though the bracket isn't out yet. But the best part of this week in particular is all of the small.

schools that win their conference championship games and punch their ticket to the NCAA tournament, like High Point did yesterday for their first time they're going dancing. So it'll be just a super fun week leading up to Selection Sunday. And then in celebrations, porum is Thursday night. Holy is on Friday and Friday is also Pi Day. Toby, I'm looking for 200 digits out of you this year. 200. You know, that makes for a really good podcast and just hear me list out digits. Well, we're doing it. Nause. Okay, I'll start studying. All right, let's wrap it up there.

Thanks so much for starting your morning with us and have a wonderful start to the week. For any questions, comments, or feedback, send an email to Morning Brew Daily at MorningBrew.com. And if you're enjoying the show, share it with a friend, family member, or coworker. Toby, who should everyone listening share it with today? I want you to share today's episode with someone who's not afraid of a little inefficiency in sports, a connoisseur of the mid-range jumper, a fan of hard nose rushing. I think they may enjoy the rough edges of MBD too. Let's roll the credits.

Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer. Eugenwa Ogu is our technical director. Scoop Star Daris is on audio. Hair and makeup would like to buy a vowel. Devin Emery is our chief content officer and our show is a production of Morning Brew.

Great show today, Neil. Let's run it back tomorrow.