Motley Fool Hidden Gems Investing - The Fed’s Inflation Conundrum & an AI Billionaire Battle Royale

Episode Date: August 1, 2025

The Fed’s Inflation Conundrum & an AI Billionaire Battle RoyaleThe Fed kept rates flat this week, Apple and Amazon reported earnings, and we have the biggest names in AI battle it out for supremacy.Travis Hoium, Lou Whiteman, and Jason Moser discuss:- The Fed’s decision to hold rates steady- Apple and Amazon earnings- AI billionaire battle royale- Stocks on our radarCompanies discussed: Alphabet (GOOG, GOOGL), Apple (AAPL), Alphabet (GOOG, GOOGL), Cloudflare (NET), PayPal (PYPL), Microsoft (MSFT).Host: Travis HoiumGuests: Lou Whiteman, Jason MoserEngineer: Bart Shannon, Adam LandfairAdvertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. Learn more about your ad choices. Visit megaphone.fm/adchoices

There was a flood of earnings this week, but the Fed was investors' focus. Motley Fool Money starts now. I'm Travis Hoyam, joined by longtime Fools, Lou the Legend Whiteman, and Mr. Pop Culture, Jason Moser. Today, we're going to cover earnings from Apple, Amazon, and of course, some AI news. But first, the Federal Reserve. The Fed continues to get more attention than I can remember in my 30 years of investing. They decided to keep rates steady this week at 4.25% to 4.5%, much to the dismay of some. But let's get beyond the catchy headlines. If the Fed cuts rates, and they control the Fed funds rates by, let's say, 1%, something that, you know, a big cut that a lot of investors

would love, that doesn't necessarily mean that your mortgage is going to go down and become cheap again like they were a few years ago. So, Jason, what is signal and what's noise here from the Fed? Yeah, I'm glad you brought that mortgage point up there because I think that's been a narrative I think that's been going around for a while is we need to bring these rates down so we can kind of loosen the housing market back up. But I mean, listen, if mortgage rates right now it's 6.5% to 7%. We start seeing these little incremental cuts. We're not going to be seeing those 4%, 3% mortgage rates anytime soon, if ever again. Most people, I know I certainly took advantage of it when I could. Most people have refinanced and got that 3%, 30-year fixed

rate. It's going to be a new paradigm here. In regard to the noise, I think the noise is the ongoing battle between the administration trying to push for these rate cuts. And I think we can all agree that the Fed should be making decisions based on data and not political demands, right? I mean, that mandate that we typically refer to in regard to the Fed, it is essentially to conduct monetary policy with two goals in mind, right? Maximum employment and stable prices. And they're using data to make these decisions and not sort of catering to the political demands that we see every single day, it seems like now. So, I, for one, am actually relieved, really, to see that the Fed is kind of standing its

ground here. And Jerome Powell is, I think, diplomatically sort of playing his hand. And when we look at where inflation stands today, I mean, we saw right on Thursday the report that personal consumption expenditures price index, that main forecasting gauge, it moved up to 2.6% in June. That was the highest since February. And the core inflation, which excludes food and energy, was even a little bit higher at 2.8%. So, while the inflation picture is improving from some time ago, we're not out of the woods yet. I think the Fed is doing the right thing and really playing this deliberately.

They're not taking any knee-jerk reactions, not kowtowing to the political rhetoric that's going on out there. Maybe we see a rate cut or two here by the end of the year. But like you said, it's going to have such a modest impact overall. I think we've got to probably keep our expectations in check. Well, and let's put some more data to that, too. The unemployment rate just came out this morning, 4.2 percent, same as it was a year ago. So with this dual mandate, that doesn't seem to be a problem. So, yeah, if you're Jerome Powell, the worry is inflation.

We haven't really seen the impact of something like tariffs yet. The other thing to bring into this is that the Fed controls short-term rates. The market controls long-term rates. And it's been interesting as there's been more speculation that rates are going to fall. Sometimes those long-term rates actually go up, which is a market reaction, not necessarily something the Fed can control. What do you think, Lou? Yeah, I'm spot on what you guys are saying.

I continue to believe the Fed will be much more reluctant to cut than what conventional wisdom, what everybody's saying. Rates are the primary blunt instrument that the Fed has. I don't think they were enjoying life when rates were at zero and they didn't have any levers to pull. Signal noise, I think the signal is the actual decision, is the fact that, look, hey, guys, we're fine here. The noise is all the commentary around it. The economy looks, I don't know if it looks great, but there's things to worry about, but it actually looks pretty okay. We should be celebrating that. Be careful what you wish for here. If the Fed suddenly goes into dramatic rate cutting mode, I don't know if that's

going to be something we're going to be celebrating. We should touch on inflation at least a little bit. Like Jason said, we did get some data this week and anecdotes are always a little bit dangerous, but my wife went back to school shopping. It's apparently time to start thinking about that already in July. But when she went back to school shopping, the first thing she said when she got home was, it's not even fun anymore because prices are so high. How does this murky inflation picture play into things and how we should be thinking as investors, Jason? Yeah. The cost of living has seemingly gone up across the board. Just as a father of two college students, boy, you want to talk about back-to-school shopping. You're moving from

from like shirts to mini fridges and whatnot. Lou, you know what I'm talking about. So it definitely does seem to only be getting more expensive. And we've been talking about this all year. It's starting to get a little bit frustrating, but right, the T word, tariffs, and how is this ultimately going to impact us? And it seems like every week when we have these discussions, it all boils down to, we just don't know, right? I mean, Amazon CEO Andy Jassy even said it in the call, right? In regard to tariffs, they simply just don't know because every day it's a headline that seems to counter what was said the day before. And the one thing that we do know is that tomorrow there is going to be another headline that says something else.

And so until we actually get a little bit more clarity and a little bit more certainty and understanding as to exactly what the administration is trying to ultimately accomplish or what the end goal is. We are going to see a lot of that noise, like we were talking about before here. It just becomes very difficult for investors to fully make sense of it all. That's why I think when you look at the way the market's performed to date, year to date, the market's performing okay. Today's obviously a little bit of a sellout there based on the unemployment data. But overall, the market has had a decent year thus far, given all of the noise that we've been hearing. I think the market, I think investors are starting to kind of throw their hands up and say,

you know what, we're going to admit it. We don't know what we don't know. And there's only so much we can control here. And so, it's important for investors, I think, number one, to remain focused on that longer-term picture and just focus on the fundamentals, right? If you're indexing, keep on indexing. And if you're focused on investing in individual companies, focus on the fundamentals, businesses that can weather storms like these times of uncertainty like these. Because one thing is for sure, this won't last forever. Yeah, it really feels like, I call it a boiling frog economy. Investors have been focused for months on headlines, inflation, tariffs. On Main Street, it's not really about headlines. It's

about these things just creeping in over time. I'm still hopeful we're strong enough to weather higher costs, and it's not going to just crash the economy. But if nothing else, yeah, it feels like the second half of the year. I don't know if there will ever be that clarity. I don't know if there will ever be that headline that just solves things. But I think it's just going to be a slow grind if we're going to hear more and more about costs. And I do think at some point, it starts impacting consumer decision-making, and maybe the investor debate is to what extent. And like Jason says. We're just going to have to wait and see. Someday this won't be a lead topic on Motley Fool Money, but that day is not quite here yet. Not today. As we move to earnings, Meta was one of

the big earnings reports this week. Revenue was up 22% to $47.5 billion. Net income jumped 36% to $18.3 billion. Just one quarter, they made $18.3 billion. Somehow they found 6% more daily active users than they already had. Lou, what jumped out to you in the quarter? That's it. Who knew there were actually more people out there that Meta hasn't found yet, right? That's always amazing when it goes up. But kidding aside, you hit on it. The core business, that advertising business, is just a fabulous business. $8 billion in free cash flow in the quarter. And that's with all the investments. That's actually down. But yeah, the other thing of stands out. I'm not the first to notice this, but Travis, they are putting that money to work.

CFO Susan Lee said, we really believe this is the time for us to make investments. And investing they are. CapEx more than doubled in the quarter. They made it crystal clear that will continue. They're making all the money, but boy, are they spending it. Yeah, that CapEx number, they didn't actually raise it the way that Alphabet did, but they did pump it up a little bit to $66 to $72 billion, the higher end of their previous range. The other thing, Jason, they talked about was this super intelligence plan that Mark Zuckerberg has for kind of bringing personal super intelligence. And he kind of threw some arrows at other big tech companies. Yeah, he did. And it's sort of this difference in opinion there on are we going

to be using AI to lift ourselves up at the personal level or are we going to be using AI to ultimately replace what we as people, as employees do today. And he's taking the bet that we will be able to use AI to lift ourselves up more on the personal level and become more productive. And I like that vision. I think that's something we all are aspiring to do with this technology. It's been interesting to watch the evolution of Facebook a la you slash meta, right? I mean, social media company to Metaverse company, now to AI company. I think that with Meta, the important thing to know, this is still an ad business, like Lou mentioned. They're using AI to make their core business better. They're seeing greater efficiency and gains in the recommendation model for ads.

It drove roughly 5% more ad conversion on Instagram for the quarter and 3% on Facebook. and it's bringing more engaging experiences to users, right? Helping users discover content they find most useful and AI technologies leading. It led to a 5% increase in time spent on Facebook and a 6% increase in time spent on Instagram for the quarter. So I think it's interesting to kind of note how the company is using AI. It may not be so explicit for us as users, for users of the platforms, but what they're doing with that technology to make their core business more efficient, driving that net income number, like you said, 36% of it, 38% growth in earnings per share. That's just amazing to see. And it's not driving results yet,

but they did talk a lot about momentum that they have in glasses. I know, Lou, you've got to be an early adopter of these glasses, right? Yeah. For one thing, can we just say that some of this Zuck talk, it's got an imaginary friend vibes and I'm not sure what I think about that. So, so we'll see. But yeah, the glasses, like first of all, I wear glasses. You got to fill my prescription if you want me to wear these. Cause you know, I don't know if I have a lot of desire guys to spend more than I already am even with, you know, Warby Parker. Thank you. But, um, just to use my phone less, I don't know if I'm really there. I Travis, I can't really think of why I would be an early adopter here. The tech is neat.

I think it's really cool. But if all you're really doing is meaning I look at my phone seven times less because I'm always looking at my glasses. Yeah. Pass. You're still looking at something. Yeah, that's true. That's true. Well, when we come back, we're going to get to more earnings reports from this week. This is Motley Fool Money. Apple reported earnings after the market closed on Thursday. Market seems to be happy with the results and the momentum strong in everything but wearables. Lou, what do we need to know about Apple's second quarter? So, for a Mag 7 stock, we came into earnings season kind of with a lot of uncertainty with

Apple. The company had warned of a potential $900 million tariff hit and single-digit growth, but this quarter, much better than that. 10% top-line growth, 12% earnings growth, 46% growth margin, stronger than expected iPhone sales. Travis, we even saw a return to growth in China, which was a nice surprise. We haven't seen growth in China for a while. Now, sure, there are a lot of unanswered questions, and those questions remain unanswered. Some of this momentum could be a tariff pull forward, so we'll figure that out. They're still trying to figure out AI. They're still in search of that next big thing, the must-have device. This quarter didn't answer any of those big-picture questions, but it does remind us of

the obvious, the thing right in front of our face, that Apple is a fantastically profitable company with a terrific franchise and a lot of options to partner for AI, a lot of ways to win. Bold prediction here, guys. I know Apple, maybe they do have some drama, maybe they have some questions, but they're going to be fine. And this quarter is a good reminder of that. Yeah, they even opened up the possibility of making some acquisitions in artificial artificial intelligence, which could get them from kind of nowhere to at least kind of in the ballgame. Jason, Amazon has been in the Motley Fool's portfolio and recommendations for about 30 years now has made a lot of investors a lot of money. But the company isn't the growth engine

that it once was. Revenue for the second quarter was up 13% to $168 billion. Net income jumped almost 50% to $18.2 billion. What was your takeaway from the quarter? Yeah, I mean, I think you're right. Thankfully, one of those investors have been able to hold onto these shares for a long, long time. And it's obviously done very well for a lot of our members, a lot of investors everywhere. But you're right, this isn't the same growth story as it was before. I mean, it's such a big company now. I mean, those numbers just kind of have to pull back a little bit. I think you're looking at 13% top-line growth there. I think that was relatively impressive, right? But I think when you look under the hood

with Amazon, that's when you start really realizing that this is not just an e-commerce business, and there are so many other powerful parts to this company that are helping drive growth. Now, I think what we talk about often with Amazon is AWS, right? Amazon Web Services. And that has really grown to become a big driver of the company's overall profitability. I mean, it's essentially responsible for most of its operating profit, if we're being honest. And that growth there, 17% to $31 billion of the core, that was good. Now, it seems like the whisper numbers out there, the market was expecting a little bit more, somewhere in the neighborhood of maybe 20%.

And when we see the competition coming from companies like Alphabet and Microsoft as they build out their web services aspirations, their cloud businesses. We're starting to see Alphabet and Microsoft, they're taking some share. I think that's something at least to keep an eye on there in regard to Amazon. Amazon had a big head start. They used that philosophy of just continuing to drive down prices and offer new services and features for users. That did a great job of gaining a dominant presence in the market really fast. But you look at companies like Alphabet and Microsoft, they're catching up. I think that's something that investors will want to keep an eye on here in the coming years.

Now, the other thing with Amazon that I think just doesn't get as much attention, but the thing that continues to stand out to me is this advertising business that they've built. Travis, I don't know if you've looked at this lately in regard to their ad business. This is sneaky, but it's really powerful. They grew revenue in the advertising business 22% for the quarter, and they continue to ink important relationships with companies like Roku and Disney. They're reaching a household of 300-plus million users out there on a daily basis with all of their content, the many ways they have to distribute it. Then the other part of the business, we talk about that demand-side platform business, the DSP. The company that we always

shine the light on there is the Trade Desk. The Trade Desk, tremendous company, a company that has done very well for investors. I'm included there, so I'm thankful for it also. Let's put it into context here. The Trade Desk trailing 12-month revenue is $2.5 billion. Amazon's ad business just brought in $15.7 billion this quarter alone. It's continuing to grow at those double-digit rates. I think it's worth looking at Amazon and saying, you know what? This is a business that's made up of a lot of different parts. They're executing very well. But definitely, when you look at that web services side of the business, the competition is heating up there. I think it's going to be a little bit tougher days ahead for them to really maintain that

dominant position. That will be the thing to watch. To the advertising point, it's interesting that the market is very concerned about Google's 10 blue links and artificial intelligence disrupting that, but not as concerned about Amazon's ad business. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes.

Next up, we're going to have a battle of the AI billionaires. You're listening to Motley Fool Money. We already knew that big tech was going to go all in on artificial intelligence, but the stakes have gotten even higher over the past week or two. Alphabet upped their CapEx budget from $75 billion to $85 billion this year, promised to even increase that next year. Amazon and Microsoft are spending about $30 billion a quarter. And Meta's CapEx is going to be right around $69 billion for the year. There are still a few VC companies involved here,

like OpenAI, Anthropic, and Perplexity, but a lot of the small players are kind of falling by the wayside. So I thought it would be fun to look at artificial intelligence and put these companies and their leaders in a battle. And I call this the AI billionaire battle royale. I'm going to give you guys the opportunity to pit some of these leaders against each other and give us a score like a boxing scorecard. So 10-9, 10-8 if it's really a landslide. And if there's a draw between both of you, I'm going to decide the winner here. So let's choose wisely.

And the four players that we have here, I'm not going to put Elon Musk in this, but we have Sundar Pichai of Alphabet, Mark Zuckerberg of Meta, Satya Nadella at Microsoft, and Sam Altman of OpenAI. I think those are the really big names in artificial intelligence really guiding the industry right now. So our first battle has real beef today. Mark Zuckerberg versus Sam Altman. Zuck has been buying up OpenAI's talent, reportedly $100 million offers for AI engineers. And he's spending that kind of money because he's trying to go from lagger to hopefully leader in AI. Lou, give me some blow-by-blow on who wins this battle.

So my mental picture here is Sam Altman comes out dressed to the nines. Perfect. You know, that just looks the part. Zuckerberg almost comes out like a street fighter, right? But when the actual fight starts, it's not even close the other way. Yeah. So Zuckerberg is playing catch up, but Zuckerberg's got this massive, massive ad business generating capital at his back as he's throwing punches.

Altman has to beg for money and has done a lot of deals because of the nature of open AI. He's actually in the background while he's fighting his opponent. He's also fighting Microsoft and things like that as he runs off to the side. He's doing a dual battle here. Yeah. Yeah. Yeah, so this ends up flashy coming in, looking really great. Sam Altman, he gets a few punches

in. I don't want to be too dismissive of OpenAI, but that advertising business, the muscle to play the game that goes with that, this ends up 10-8. Zuckerberg kind of running away. This could even be a technical knockout here. So, Lou thinks the balance sheet is going to be more important than kind of the mindshare that ChatGPT already has. What do you think, Jason? Yeah. One of these things is not like the other. We've got Meta, which is a publicly traded company. It has many more levers to pull in regard to raising capital, many more avenues towards raising that capital. Whereas, as Lou noted there with Sam Altman, he has to sell the sizzle. He has to get out there and keep that mindshare going and figure out

ways to raise that money. Now, will we see open AI go public eventually? Who knows? If they do, then obviously, that opens up some avenues for them. I tell you, you look at what Mark Zuckerberg has done with Meta to date. The IPO back in May of 2012, the stock is up better than 1,900% since then. I mean, he's doing something right. And I think he's doing something right in the phase of making some questionable decisions along the way, right? I mean, we were talking earlier about the evolution of Meta from social media company to Metaverse company. And I mean, that Metaverse thing just hasn't really worked out, right? Yeah. He was able to burn $15 billion or so a year and it just didn't really matter. It didn't matter at all. And I mean, they're

doing some cool stuff, but it's not having any kind of a material impact on the business, really. It's still at the end of the day, this is an advertising business. And I'm not saying that as an insult. It is a very powerful advertising business. And he's finding ways to utilize AI technology to make that advertising engine more powerful, more efficient. In April, Zuckerberg said that Meta is focused on developing an AI model that can in turn build as much as half of other AI models within the next year, which I think is just amazing to think about. Altman, he's a unique guy. He's got all sorts of interests. I think it's fascinating. He's got his pilot's license. He's expressed his dreams of starting his own airline one day. You do have

to wonder where his head's at sometime and if this is really what he wants to be doing for the long haul. I'm in agreement with Lou there. I'm not going to go with a 10.8 blowout. I would probably just go 10-9 in favor of Zuckerberg in this case, just because I think Meta has so many more ways to really raise that capital and continue building out these AI aspirations. Let's remember here, guys, one of these two is actually a trained kickboxer, too. I know we're not talking about physically fighting, but that has to come in somewhere, right?

And there was that planned actual fight with Elon Musk at one point that never actually happened. It's amazing, too, to think about these two guys that dropped out of college, right? Mark Zuckerberg drops out of Harvard. Altman drops out of Stanford. I mean, these guys are living the life. It's just fascinating to see. It's interesting that you both had it pretty decidedly for Zuckerberg.

I don't know that I would have guessed that going in, because ChatGPT, everybody kind of thinks that they're the leader in the clubhouse. All right, to the second one. This is the non-founder battle. We have Sundar Pichai from Alphabet, Satya Nadella from Microsoft, also Sam Alton's partner, sometimes on again, off again. Jason, you're up first here. These companies have more money in infrastructure than anyone else we're talking about, but who wins the battle? Yeah, two really amazing businesses, two very impressive leaders there. You look at Satya

Nadella. He took over the CEO role in February 2014. Stock is up better than 1,300%. It was close to 1,350% of things since he took over. If you remember, during the Balmer years, that was 10 years where the stock did nothing at all. Shareholders have got to really be loving him. He's a thoughtful guy. This guy, he reads Indian American poetry, he loves Russian novels. He's a thoughtful guy. He clearly has the background, master's degree computer science, master's degree in business administration. He said back in April that as much as 30% of the company's code is now actually written by artificial intelligence. They certainly are using AI to their benefit. When you look at Sundar Pichai, I think he's been a very effective

leader as well. Google Alphabet shareholders have won. They've done well. Stock is up, I think, 200% since he took over in December of 2019. But I think he's dealing with a little bit of a different situation here at Alphabet, particularly in regard to the regulatory issues, right? I mean, there are a lot of unknowns in regard to the remedies that might be suggested as far as what regulators want Alphabet to ultimately do if they want them to split off part of the business, whether it's YouTube or search or sell off Android or whatnot. So, I think there's a little bit more uncertainty there right now. And I think that with Nadella's position being with the company a little bit longer than Pichai has been with

Alphabet. I'm going to give Satya Nadella the lead here. I'm going to go 10-8 in this case, actually. I really have been so impressed with what Satya Nadella has done with Microsoft during his tenure. It seems like he really is enthusiastic and looking to keep it going. interesting so the fact that sam allman and open ai have been sort of a ungrateful partner after really really microsoft funded the company gave him 10 billion dollars i think that was almost immediately after chachi pt was released uh that doesn't that doesn't take too much away uh lou who do you have in this battle this is the heavyweight battle so not not to switch sports but if this was the final four we'd all be complaining that the two best teams were meeting

in the semifinal. That's my take on here. Jason's right. Two great businesses. Two, I think, heavyweights. The two will come out swinging. I'm going to end up with Nadella here, in part, what Jason said. They can both throw a punch, but we have to see about how I can take a punch. There are questions about the advertising business. I think it works out fine, but there are those questions. The other thing I'd say that I think gives Microsoft and Nadella of the leg up here, is when they go on the offensive. Of all of these big companies, Microsoft, with the nature of their business and all of the conduits they have into corporate customers, with Office, with 365, with so many products, they, to me, have the clearest path

to actually monetize all of this AI stuff outside of internal use, outside of just building their business. It just seems like their existing connections work so well when you go on the offensive. So, yeah, they both come out swinging. They both land some blows. But Nadella is just a little bit stronger on the punch and shy between the advertising business, the regulatory, maybe can't take the blows the same way, or it has to take a few more blows. I'll go 10-9 here, but i get it definitely i don't see this as a knockout but i think nadella wins for me all right so our championship is zuckerberg versus nadella lou i'm going to go to you first between those two so we've got basically founder-led company in meta platforms

yeah changed his name so gone from you know social media to metaverse now to artificial intelligence but it is a founder and i think it's it's pretty clear that he's been a good leader especially over the past few years and Nadella running one of the biggest, most established tech companies in the world. Who do you have? So I, this, this could really be fun to watch and no disrespect here, but if this was wrestling and not boxing, you can see Zuck playing a little dirty here, can't you? And I mean that with respect, but so, so I think this would be a fun one to watch. I do think though, again, I said, I thought the second bout with two heavyweights, just Microsoft, not just what they're investing, but Nadella, his plan to monetize it and actually

get it out. I mean, I'll be honest with you. I'm kind of annoyed with some of the prompts I'm getting in Excel right now. Microsoft, I will let you know if I need open AI. Okay. You don't have to ask me every time if I want to use it, but I do think that as annoying as it is, just like Clippy, it works. I think that they are the grand champion here. Zuck will get some blows in. Zuck will definitely go on the offensive all over the place. I think it's probably a closer fight than I, than I thought when I sat down. So I'll say 10, nine, but I am going to, to, uh, to crown a champion of Microsoft and Nadella here. What about you, Jason? Travis, I'm going to have to agree with Lou here. Okay. I'm going to go ahead and give you the answer first. I would have to give,

give the nod to the Nadella here. And I think, uh, part of it, I think the market is kind of telling us something along the way here, right? I mean, we're looking at Microsoft that just crossed over that $4 trillion market cap this week. Joining Nvidia is one of only two companies to ever do that. Now, Microsoft, yes, generates a little bit more on the revenue side than Meta does today. But I think what we've seen with Satya Nadella during his tenure at Microsoft is very clear vision. We've seen him lay out the strategy. He knew that the puck was going towards the cloud. So, he started skating there immediately. He laid out that strategy from the very beginning. It was just very clear. We could see what he was doing. We talked about Amazon before

being a company with a number of different ways to win. They do a few things, they do it very well. Microsoft's a similar business. They have a number of different ways that they can win. Just the scale that the company has in the operating platform and the cloud services that it provides, I think it does a lot of things very well. It's not to take anything away from Meta and Mark Zuckerberg here. The one concern I have, and I'm not a shareholder of either company, but the one concern I have with Meta is, Mark Zuckerberg can be all over the place. We talked about that before. Social media, to Metaverse, to AI, to what's going to be next. He does say a lot of things, and then it doesn't materialize. He pushes it by the wayside

and then goes towards something else. And what we ultimately have here is just a massive social networking company with a tremendous advertising business behind it. And I think that's something that's going to continue. But, you know, as we've seen with Facebook, right, Facebook is kind of starting to go on the, not I don't want to say the decline, but more interest is on the Instagram side, right? It's so social networks aren't forever. I think they live their life and then people go elsewhere. And so, I would be a little bit concerned just in regard to the lifespan of things like Facebook and ultimately Instagram at some point. Now, they have WhatsApp, obviously, which has got a lot of potential there as well. So, I think we probably could expect to see

Meta make more acquisitions down the road to try to expand that portfolio of platforms it has. But for me, if I'm looking at it from a confidence level, I just feel more confident with Satya Nadella and the clarity of his vision in what he's done with the company to date. I'm going to give it 10 to 9 in favor of Satya Nadella. Interesting that there's regulatory concerns for Alphabet, but Meta could make acquisitions. I don't know if the government would let any of these companies make any real acquisitions, although that's not what they're doing anymore. They're just buying talent.

So maybe that's the way around that. Yeah, definitely be under the microscope for sure going forward. well interesting that you guys were basically in agreement and i completely disagreed on every one of your choices i would have had sundar pichai in the lead here for sure uh but this is going to be fascinating to watch because there's literally hundreds of billions of dollars at stake for these big tech companies and even for them that's a lot of money next up we're going to get to the stocks on our radar you're listening to motley fool money we have time for one quick earnings take. And Cloudflare is one of those interesting companies in technology. Jason, what did we learn

this quarter? Yeah, interesting reaction. Right after the release, stock was up like 6%. We saw this morning down like 6%. Now, it seems like it's about flat. But I think it was a very encouraging quarter from a number of perspectives. For one, we did not hear mention of elongated sales cycles in the call anywhere, Travis. So, that may mean that their enterprise customers are feeling a little bit better about the money that they're spending. And that is definitely showing up in the numbers. Revenue is up 28%. They crossed over the $2 billion annual run rate. It is a company that continues to sign on to develop relationships with large customers now. 3,712 large customers spending at least $100,000 annually. That was up 22% from a year ago. Those customers now account

for 71% of total revenue. That's up from 67% a year ago. Encouragingly, dollar-based net retention rate, which is a metric we pay attention to that tells us how they're expanding those relationships. That rose to 114% for the quarter. That was up from 112% a year ago. Again, that's just a sign that they continue to keep those customers and develop new relationships, expand those relationships. So, not a lot to see here. I think this was just another solid quarter from Cloud Flare. And CEO Matthew Prince seems really, really amped about the company's future. Does the fact that the stock is trading for 40X sales make you nervous? Yes. I think valuation is going to be the biggest risk for a company like this.

Until they can get to actual profitability and cash flow, valuation is just going to be one of the biggest risks with holding a company like this. We like to end the show with stocks on our radar. Jason, you're first up. What are you looking at this week? Yeah, PayPal reported earnings, and it was a good quarter. Nothing crazy one way or the other. They exceeded guidance that leadership set a quarter ago. They raised guidance for the full year, saw revenue up 5% with earnings per share up 18% from a year ago. They saw transaction margin dollars grow 7%. Total payment volume grew 6%. Encouragingly, Venmo continues to gain traction. Revenue there was up 20%, with total payment volume in the Venmo network up 12%.

It's growing beyond peer-to-peer. They're developing more commerce relationships, and users are using it more for things like shopping and transactions, as opposed to just peer-to-peer money transfer. That's all very encouraging. It was a good quarter. Shares have had a tough year so far, down something like 18% year-to-date, certainly underperforming the market, while all the key performance indicators continue to trend in the right direction. So, with shares at around 14X full-year earnings projections today,

it just seems like the market's taking a glass-half-empty view on this one. What about you, Lou? All right. I'm going to look at Halmet Aerospace, ticker HWM. Okay, it's kind of boring, right? But they make fasteners, other small parts, mostly for aircraft engines. They reported the classic beaten race this week. Really, really strong demand. Travel is holding up. And as we all know, Boeing has had some trauma. That's causing airlines to lean on their existing fleet more. That's creating huge demand for spare parts. Halmed is riding that wave, investing in its future, building out its manufacturing capacity. It's also aggressively reducing its share count.

Guys, stock is up 84% over the past year. Some of that was low-hanging fruit. Some of that is just they went from being poorly managed to well-managed. I don't think they can do another double in the next year, but this is a very well-run company. I think it's setting up to be a long-term market beater. As I look at both of these, I can't get past the fact that PayPal is so cheap. This seems like one of these companies that just continues to perform well quarter after quarter. I don't love the products. I don't really use many of them, but they seem to have a really, really sticky business. I got to pick out of those two. Sorry, Lou. I'm going to go with PayPal. For Lou Whiteman and Jason Moser and our production leader today, Bart Shannon and

the entire Motley Fool team, I'm Travis Hoyum. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.