Morning Brew Daily - US Railroad Mega Merger is On Track & Google Fends Off AI Search Rivals

Episode Date: July 25, 2025

Episode 634: Neal and Kyle discuss what a merger between Union Pacific and Norfolk Southern would mean for the entire US freight system. Then, many thought AI companies getting into the search business would scare Google…not so fast. Also, the clothing store American Eagle is joining the meme stock bandwagon thanks to Sydney Sweeney. Meanwhile, the USPS is turning 250 years old this week.  Gain the edge with Amazon Ads at advertising.amazon.com/startnow  Check out Per My Last Email: https://www.permylastemailshow.com/  Morning Brew Daily Puzzle: https://docs.google.com/forms/d/1Yzrl1BJY2FAFwXBYtb0CEp8XQB2Y6mLdHkbq9Kb2Sz8/viewform?edit_requested=true  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://www.swap.fm/l/mbd-note⁠⁠⁠  Watch Morning Brew Daily Here:⁠ ⁠⁠https://www.youtube.com/@MorningBrewDailyShow⁠ 00:00 - Chuck E. Cheese arrested 3:00 - Mega train merger 7:00 - Paramount merger approved 9:30 - Stock of the Week: Google 12:45 - Stock of the Week: American Eagle 16:35 - USPS celebrates its 250th birthday 20:20 - Sprint Finish! Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.c.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 Kyle Hagey. Today, meme stock mania has a new champion, Sydney Sweeney.

And we'll take a look at the birthday plans for an iconic American institution that is turning 250 years old. Today is Friday, July 25th. Let's ride. Yesterday brought us one of the most indelible images of the year. And if you don't know what indelible means, neither do I, but it sounds right. Anyway, the photo shows a cop arresting Chuck

E. Cheese and escorting him out of a Tallahassee location in handcuffs. Apparently, authorities got a tip that the guy under the mascot had been stealing a customer's debit card and had used it six times to buy things at a smoke shop, meat market, and what a burger. In the police report, Tallahassee officer, Jared Cruz explained how it went down. I grabbed his right arm while giving the verbal instruction, Chuck E, come with me, Chuck E. Meanwhile, there were kids in the Chuck E-cheeses watching mouths agape at their hero getting cuffed. That's the kind of image that haunts you forever. Yeah, this, I saw a tweet under this image that said we now know what the E stands for embezzlement, which I thought was hilarious. I need the ACLU all over this. I want to make sure

they had a warrant. I want to, we have to protect Chuckie cheese. An iconic American, we have to save Chuckie. And now a word from our sponsor, Amazon Ads. Kyle, have you ever had to measure the success of an ad campaign? No, I just talking to the mic. Same here. But if you do have to, check out Amazon ads. They make it easier for advertisers to plan, activate, and measure their streaming TV campaigns. With the help of trillions of buying, browsing, and streaming signals, brands can reach their ideal audiences. You don't even need to sell on Amazon to be a part of it. But your ads are right there on your audience's favorite content like Prime Video, Twitch, and Top Third Party TV publishers. Gain the edge with Amazon ads by going to advertising.amazon.com slash start now. That's advertising.com slash start now.

A potentially historic rail merger is in the works, one that would connect the West Coast and the East Coast with a single railroad for the first time in American history. Union Pacific, the West Coast giant and biggest U.S. railroad by sales, said it was in advanced talks to merge with Norfolk Southern, which dominates the eastern tracks. If this deal came to fruition, it would create a $200 billion freight behemoth and revolutionize the way all types of goods move around the country. Right now, if you try to ship something from an L.A. port to New York, you won't find any nonstop routes, which, as you know, someone who browses on Google flights, can be frustrating. Cars crisscrossing the continent have to be moved from one railroad to another at clogged handoff points in cities like Chicago, Memphis, and New Orleans. A Union Pacific Norfolk Southern marriage would be transformed.

formative as the first coast-to-coast single-line railroad, potentially delivering faster shipments, lowering costs, and unclogging choke points. However, a deal could run into heavy opposition because right now the rail industry is less competitive than your family's weekly game of ticket to ride. The number of major railroads in the U.S. has dwindled for more than 100 in the 1950s to just six currently, and bringing that six to five would raise concerns that this new company would have too much power, squeezing customers with price hikes and degrading service. Still, the companies seem prepared to fight those regulatory battles. When Union Pacific CEO was asked about the merger yesterday, he said, if you stand still, you get left behind. Yeah, this would be a major deal. It would create

90,000 miles of track, and it would be the first coast-to-coast railroad, as you mentioned. We tried to do this in the past. George J. Gould, going back to the Gilded Age, came close to creating this, but the 1907 financial panic stopped his plans. Amtrak also runs coast to coast, but it's not technically all on their own track. So this would be a really big deal. I want to look at the regulatory approval. You had mentioned this briefly. There currently is two Democratic appointees and two Republicans on the Surface Transportation Board. That is the group that would have to approve this. It's chaired by a Trump appointee, Patrick Fuchs, and he is seen as a proponent of industry consolidation. And so I have a sense that this would go through. However, it is likely going to be a

long process. In 2023, Canadian Pacific closed a deal for the Kansas City Southern Railroad. That was valued about $31 billion. The board took nearly 17 months to approve this merger. So even if this does happen, it's not going to happen tomorrow. It'll be really interesting to see how this plays out. And the reason for all that scrutiny is you have a bunch of train customers, like retailers, manufacturers, suppliers of everything from coal to oil, they love to play railroads off of each other so they can get the best prices. Oh, Norfolk Southern, you know, I want you to come down because I got CSX over here and I got Berkshire Hathaway's BNSF over here where I can sort of solicit deals from everyone.

If there's only a smaller amount of players, then you have just less negotiating power, less leverage, and those prices could go up. Norfolk Southern has also been talked about as a potential target for a while now. You might remember their name because they were the railroad that had that big derailment in East Palestine, Ohio, that led to all sorts of contamination and the residents having to evacuate for a temporary amount of time. And they had kind of a cold plate concert thing go down with their CEO last year who resigned after allegedly having an affair with the chief legal officer. officer. So Northfolk Southern is not in a great spot. So it might, it might want a bigger player like Union Pacific to come in and do a little rescue mission. But this would be a huge deal.

And I just want to put a point on the historic nature of it. It would be the largest ever buyout in the railroad sector. And it would also be the biggest transaction of M&A anywhere this year. And speaking of that, this wasn't the only big dealmaking news yesterday. We also had the Federal Communications Commission, approving Skydance media's $8 billion acquisition of Paramount, the owner of CBS, Paramount Studios, Comedy Central, and more. This deal, which had once seemed like a routine media merger, has become a flashpoint for politics, power and free speech in Trump's America. Brendan Carr, the Republican FCC chairman, said he greenlit the deal only after Skydance,

which is run by Larry Ellison's son, David, made commitments to offering a diversity of viewpoints across the ideological spectrum at CBS News and pledged to not implement any DEI programs going forward. Critics of the deal said these strings attached sets a new alarming precedent for media mergers or M&A of all kinds that a president can wield his power over corporate dealmaking to stifle unfavorable coverage. Remember, Trump sued CBS's 60 minutes for an interview with Kamala Harris, which Paramount recently settled for $16 million. That settlement was bashed as Paramount paying Trump, an extortion fee to secure deal approval by the company's leading stars, including Stephen Colbert, whose show was canceled earlier this week, and what Paramount called purely a financial

decision, the only member of the FCC committee to vote against approving the Skydance Paramount deal was Democrat Anna Gomez, who said in a statement that the agency was, quote, imposing, never before seeing controls over newsroom decisions in editorial judgment in direct violation of the First Amendment and the law. That's right. And if you're on the internet yesterday and felt like you were back in fifth grade because you kept seeing South Park everywhere. You're not alone. Google searches for South Park surged over 600%. They dropped a new episode. And South Park, for context, was part of this big deal with Paramount. They signed a five-year streaming deal, including 50 new episodes. The issue for Paramount is South Park is not pulling any punches, and they're actually

going after the streaming service for their quote-unquote dealings with the president. And so Paramount got the deal they wanted, but their crown jewel of content is making fun of them. And South Park is back in the news. It's everywhere. Okay, moving on, it's Friday. You know what that means. Stock of the week, dog of the week, where we pick one stock that harmonized like CSNY and another that was pitchy like Bob Dylan. But with Kyle here, he's just so joyful and optimistic about everything. Picking a dog just doesn't feel right. So we've got two stocks for you today. And my stock of the week is Google. Remember, AI was widely predicted to be Google's kryptonite with a growing number of chatbots dethroning the internet king by providing a more helpful and efficient search experience.

Well, Google's proving harder to take down than most thought. Shares climbed nearly 4% this week to nearly an all-time high after the company reported an impressive quarter that showed not only has its search business not been weakened by AI, it's only growing stronger. Search revenue grew 12% annually to $54.2 billion. a new record and much higher than expectations. Like a chess player under attack, Google has been deploying a variety of defenses to thwart its opponents' advances and even turn defense into offense.

It rolled out AI overviews that gives you the information you want at the top of the search page without having to scroll through hyperlinks. It also launched AI mode for search, a more direct rival to chatbots like OpenAI's chat GBT. Those strategies seem to be keeping users on search and just as importantly for its business, keeping advertisers happy. according to SEO firm Bright Edge, Google search impressions, which is the number of advertiser links that appear in searches, grew 49% since AI overviews was launched. Kyle, as they say, you come at

the king. You best not miss. And with Google's surging stock price, I think we need to congratulate sooner, but Chai, because he can finally join the billionaire club. I know he's missing out on those parties. His net worth is now estimated to be $1.1 billion. So he's finally eclipsed the billy mark. And the interesting kind of broader story here is we thought AI was going to be very disruptive to search. It might actually just be expanding the amount of time that we use on the internet. And, you know, AI is pretty interesting. Normally innovative technologies disrupt the incumbents. But in some ways, the amount of capital you need, the amount of talent you need gives benefits to the incumbents like Google who have the resources to drive AI across their whole product suite and to like Mark Zuckerberg, pay top talent.

you know, sometimes hundreds of millions of dollars to come join them. And so while we thought AI might be disruptive to Google, it might actually boost it into the coming years. The company is also just incredibly diverse. They have hardware. They have YouTube. They have Google cloud. So, you know, I wouldn't bet against Google. And again, congrats to Sundar. You're very happy that he's a billionaire. But it is very rare to see a non-founder be a billionaire. I mean, Jensen, Hwang, Mark Zuckerberg. They all founded the companies. He soon as a Jebazos. He came in as a

non-founder and has just kind of grinded for, now he's the longest ten-yeared CEO in Google's history. There's a lot of chatter about Google stock specifically because it's really cheap compared to its peers. It's priced out about 18 times estimated earnings. That's by far the lowest

of any company in the Magnificent 7. The second lowest is Microsoft at 33 times estimated earnings. So if you are on stock Twitter or or other forums that talk about stocks and which are the most undervalued stocks. There's a lot of talk about Alphabet because of how well it's played defense in the AI game and how cheap it is.

Sydney Sweeney has landed her toughest role yet. In this new role, she'll be playing herself as someone trying to convince the public that American Eagle is cool again. And so far, she is crushing her role. That's right. My stock of the week is American Eagle who landed Sidney Sweeney as the main brand ambassador and launched its most expensive ad campaign to date. featuring her activating on social CTV out of home, including Times Square in the Sphere,

and in their more than 800 stores nationwide. Now, shares of the casual where retailer rose 6% during Wednesday's session. Then the stock popped 17% in after hours trading. The ads put Sidney Sweeney front and center around the theme, Sydney Sweeney has great genes, spelled J-E-A-N-S. It feels like it's Sydney-Sweeney's economy and we're just living in it. Neil, I feel like I've been transported back to seventh grade because is American Eagle cool again? American Eagle is certainly cool. It's certainly also a target of meme stock media had all of the features that have come to be characterized by these particular companies over the past week that we've seen shoot up in price for no apparent reason.

It has high short interest. There's that brand recognition. There's that hint of nostalgia. combine that with this super buzzy Sydney Sweeney campaign, and yet a lot of people talking about it on Wall Street bets and other stock forums where these other companies have shot up recently. Now, earlier in the week, we saw other kinds of meme stock mania. It was a little different than the Sydney Sweeney version

because that was called Dork Companies. And I don't think Sydney Sweeney has anything to do with DOR companies, but those D-O-R-K was Krispy Kreme, which has the ticker don't D-N-U-T, open door, rocket mortgage, and coals were all part of this meme stock frenzy that happened earlier the week. It kind of fizzled out, but it seems like every day the torch is handed to another company and yesterday, the torch was handed to American Eagle with this hugely expensive, hugely visible marketing campaign with one of the biggest stars on the planet. Yeah, the marketing meeting must have been like five seconds long where they're just like Sydney, Sweeney, and they're like, yes, book it.

All right. Don't go anywhere. We'll be right back with a birthday toast to the U.S. Postal Service. The service you used to send birthday cards to friends around the country is having a birthday itself. That's right. The United States Postal Service turns 250 years old this Saturday, which means it was originally established in 1775 a year before the colonies declared their independence from the British crown.

Now, in modern times, you may be most likely to hear about the USPS from your grandma, complaining about the price of stamps. However, it is seen by historians as crucial to the nation's independence and to keeping the young country unified in the late 1700s. In fact, it is in the Constitution itself, specifically Article 1, Section 8, Clause 7, which grants Congress the power to establish post offices and post roads. Now, like any proper birthday, it's important to send some compliments to whoever is turning another year old, and the USPS truly does not get enough credit for its impact on the country and technological innovation. So I want to share a few things here. In 1918, USPS introduced

airmail. They worked with the Army Signal Corps to use leftover World War I aircraft to launch the service. Think about this. There was no commercial aviation, no airports, no radio, no navigation, and these efforts laid the groundwork for the major airlines that we know today, American Airlines, United Airlines, and a much more robust commercial airline industry. In 1963, they weren't done. They hit us with what might be their best performance to date, the zip code. And for the first time, mailing lists could be digitized in computers and sorted in new ways. And then in 1965, They began to send large volumes of mail through OCR machines, which are basically a digital eye that would recognize addresses and make sorting mail much more efficient.

Today, 98% accuracy for handwritten addresses and 99.5% accuracy. I do wonder how they can read my handwritten. You might be in the 2%, Neil. Neil, I think it's easy to think of government as non-innovative or kind of technologically backwards, but for 250 years, the USPS has often been on the cutting edge of new technologies and found ways to kind of practically apply them, the question for you. Yeah.

What are you getting the USPS for their birthday? What am I getting the USPS for their birthday? I am probably just going to send them a check because they need it. You know, you heaped praise on the USPS, and the fact that they've been around 249.99.99 years is very impressive, but there's no birthday party without a little roast, and that's where I'm going to go. The service is in some financial dire straits. It's operated at a deficit for at least 15 years, losing $100 billion since 2007.

There's no mystery why people don't send letters anymore. There's been a huge drop in that. And this service has come under a lot of criticism in the past few years about ways to shore up its finances, cut costs, figure out ways to make more money. there's been talking the Trump administration of privatizing it. That's got a lot of pushback. There's a new postmaster general, which is an exceptional name for a leader. We got David Steiner came in. He was the CEO of waste management for 12 years. He's pushed back against those privatizing calls. He said, we need to keep USPS a public service because at its core, from its very beginning, it does things that are not economically sound. And that is the reason why it exists.

It delivers mail to you, whether you're on the plains of Nebraska or the foothills of the Rockies or New York City. It will deliver mail to you, even if it's much cheaper to deliver mail to higher population centers than those rural areas. That's why USPS exists as a public agency. And David Steiner, the new guy, wants to keep it that way. Yeah, Neil, you said you were going to start with the roast, but it sounds like you came around to the USPS there by the end. Let's sprint to the finish with some final headlines. died at 71 yesterday, leaving behind a legacy as one of America's greatest entertainers and its most famous wrestler. Hogan, by sheer showmanship, is credited with helping transform pro-wrestling

from an under-the-radar regional circuit in the 80s and to the multi-billion dollar industry we know it as today. He squared off with the rock. He toppled Andre the Giant. He teamed up with Mr. T at the first WrestleMania event ever put on. If there was a newsmaking wrestling moment, Hogan and his 24-inch biceps were at the center of it. Kyle, first Ozzie, then Hulk Hogan. The stage lights got a little dimmer this week. Yes, they did. And you mentioned On to the Giant.

33 million people tuned in to see the fight between Hulk Hogan and Audit of the Giant. And with today's media landscape, we just will probably not see those numbers again. So he was truly this iconic wrestling star that kind of transcended the sport and became an American icon. For all the kids who grew up going to a fast food restaurant, getting a large, SOTA, going over to the Soda Fountain, and mixing God knows how many sodas together into the craziest drink of all time. I have good news for you. Your strategy has gone corporate. That's right. McDonald's plans to test to launch a range of refreshers, coffees, and dirty sodas, which are spiked with add-ins such as dried fruit and flavored syrup. Now, beverages, one of the hottest

growing growth businesses for U.S. restaurants providing kind of a bright spot as restaurants seek to attract inflation-futteach consumers. Sales at beverage and snack-focused restaurant chains grew 9.6% in 2024. McDonald's will introduce these roughly 10 drinks in 500 McDonald's restaurants concentrated in Wisconsin and Colorado. So, congrats if you live in either one of those states, I guess McDonald's has decided you're crazy enough to try these drinks if you live there. Neil, would you try a McDonald's dirty soda? I don't quite get this trend. And maybe it's just me being older. And because as the beverage and dessert, head of McDonald's said, the trends are all pointing in the same direction.

And we can say that's driven by Gen Z. So Gen Z is obsessed with these refreshers, these really these iced, these very colorful drinks. And every single fast food chain is rolling these out. Taco Bell unveiled a refreshkas lineup. They sponsored this show and we promoted that refreshka's drink. Wendy's has new sour powerade options. and KFC is parting with Mountain Dew on a dirty soda made with sweet vanilla cream. They expect this to be a $100 billion market.

You're starting to see fast food chains like Burger King and McDonald's and Taco Bell start to compete against Starbucks, Dunkin' Donuts, and Dutch bros. They're all kind of converging because people are buying so many drinks and specifically young people are buying these refresher drinks. Yeah, I mean, I'm a big bevy guy. And also, I hate to admit on the show, but I drink energy drinks. so I feel like this is targeted exactly at me. So I will go try the McDonald's Dirty Soda and I will report back.

All right, let me know. Looks like you have to fly there. Yeah, we'll go to Wisconsin. Okay. It's a Friday in peak summer, which means some of you are listening to this from a vacation home. Is anyone perhaps listening from a vacation home in Maine? If so, you are currently in the state with the highest share of vacation homes in the United States. And Brian Potter's analysis of vacation homes on his substack, he looked at the geographic distribution

of these houses across the country and found that. rugged beautiful Maine was the state with the highest percent of housing units that are vacation homes with a share of 15.6 percent. Vermont was not far behind at 15.1 percent, followed by neighboring New Hampshire at 10.2 percent. Think you can guess the state with the lowest share of vacation homes? It's Illinois at 0.8 percent. As someone pointed out, that's probably because once you see Peoria, you never want to leave. I love this article. I do encourage everyone to go check it out. It's just someone getting super nerdy and going deep on a topic that they're clearly passionate about. The conclusions were pretty funny.

Americans like vacation homes on the beach, on the lake, near skiing, and near amenities. So it kind of plays out. I want to give a special shout out to the Upper Midwest. I'm from Minnesota. That was also a main area where people had a ton of vacation homes. I grew up going to lake houses all the time in Minnesota. So that was really fun to see. It's a really underrated vacation home destination.

There are memes all the time circling the Michigan area around Traverse. city up there and being like, this place is so bad. You don't want to go here. And the thing is, anyone who's actually been there knows that it's a really incredible place. Finally, have you ever looked at America's $36 trillion in debt and thought, I'd love to help chip away at that? Well, you can. In a post on X that went viral, MPR's Jack Corbett noticed that the U.S. government allows you to Venmo it to pay down the debt. If you go to the Treasury Department's website, there's a page called Gifts to Reduce the Public. debt that lets people donate through bank transfer credit card, PayPal, or Venmo.

This program has been live for decades just under the radar. And since late 1996, over $67 million has been donated. Even crazier than people donating money to the government to pay down debt besides taxes is how little that makes an impact in the grand scheme of things. With debt rising about $55,000 in a second, the total amount donated since 1996 is about 20 minutes worth. Yeah. The real question is, what emoji do you put on the Venmo transaction when you Venmo the U.S. government? But I have an idea to solve the U.S. government debt right here and right now. I am going to Venmo them $40 trillion. That takes care of their debt. Put it all on me. That's my cross to bear,

but we're debt free now, Neil. The problem is, Kyle, there is a maximum donation of $999,999,000. So you'd have to make that donation in 18 seconds or less just to keep up with the debt that's spiraling. So this is a little bit insurmountable. But hey, if you want to help out, I'm sure they would want you to chip in any way you can. You can go to that website, probably just to laugh at the idea. Okay, that is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Friday and an even better weekend.

Kyle, thanks so much for joining us as well these past two days. Toby will be back on Monday, maybe. If you have any thoughts on today's episode, send an email with questions, comments, or feedback to Morningbrewdaily at Morningbrew.com. You've made it to the last day of password, where we'll reveal the fifth and final clue to the game asking you to find a secret word from a series of hints. So if you haven't responded with your answer yet, open up your notes app with the clues from the past few days and write down this one. The password means to pick up the pace. The password means to pick up the pace. When you've got it, head to the form in our show description to submit.

for a chance to be the winner, which will reveal early next week. Okay, let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Heron Bakeup is Summering in Kinabunkport. Devin Emery is our president and our show is a production of Morning Brew. See y'all on Monday.