Motley Fool Money - Is Robinhood Stock Too Expensive?

Episode Date: October 28, 2026

Robinhood's growth is slowing, but new products and subscription revenue could offer a path forward. Oracle is diversifying beyond Nvidia as competition in AI chips heats up. Meanwhile, Microsoft's latest voluntary buyout offers raise questions about how Big Tech will fund its massive AI investments and whether artificial intelligence is actually making companies more efficient. Travis Hoium, Lou Whiteman, and Matt Frankel discuss: - Robinhood's Slowing Growth - Gold Momentum - Oracle's AI Chip Strategy - Nvidia's Growing Competition - Microsoft's Voluntary Buyouts - Growth or Cost Cuts? Companies discussed: Robinhood (HOOD), SoFi Technologies (SOFI), Charles Schwab (SCHW), Interactive Brokers (IBKR), DraftKings (DKNG), Oracle (ORCL), Nvidia (NVDA), Alphabet (GOOGL), Taiwan Semiconductor Manufacturing (TSM), Broadcom (AVGO), Microsoft (MSFT), Block (XYZ) Host: Travis Hoium Guests: Lou Whiteman, Matt Frankel Engineer: Dan Boyd Disclosure: Advertisements 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. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Earning season has hit full swing. Motley Fool in Jems Investing starts now. Welcome to Motley Fool in Jem's Investing. I'm Travis Hoym, joined today by Lou Whiteman, and Matt Frankel, guys, we are in the middle of that period of the year where I seem to be up until one in the morning every night, just listening to conference calls. I don't know if you guys are as wacky as me,

but one of the big earnings reports last night was Robin Hood. This is one of the ones that we've talked about a fair amount here and on YouTube, but Matt, the market didn't seem particularly happening. with Robin Hood's results. Early in trading, the stock was down about 6%. There's some weakness and some things to liken the results. So what stuck out to you? Yeah, I mean, their member growth is slow.

That's one of the key things. I mean, you know, I follow the fintech industry very closely. A lot of companies are managing to grow their membership base. SoFi, for example, reported, you know, the highest single quarter additions in members ever, the same day Robin Hood reported its earnings. But it's really, it's something that's worth watching, not worth panicking for. Robin Hood's business model has really shifted from grow the user base at all costs

to get more of your user's money. And on the second half of that, they're actually doing a very good job. Yeah, Lou, this seems like one of those challenging companies to look at right now because we've exited the hyper growth mode where they were not only adding a lot of users, but also those users were adding a ton of assets to the platform. They're trading cryptocurrencies, brought in prediction markets now, which are doing extremely well. You're seeing weakness in some of these markets. They're not adding customers at the same rate that a company like SOFi is.

And yet, the stock is really expensive. That is ultimately the concern is if this is a more mature company. And I love that Robin Hood is growing their IRA business at an extremely rapid rate, but you're not going to make a ton of money off of IRA customers the way that you are off of crypto traders. That's it exactly. To their credit, they've come a long way. They are not this little like startup now. If user growth is slowing because Robin Hood has kind of captured so much of its target demographic that it's hard to go higher, but they are capturing more of the share of those customers. That's a great thing. That's a sign that this business, like you say, is maturing, but you also know what to pay for that. I mean, maybe Schwab is, it's too harsh to say Schwab, but the stock trades at 3x the multiple. Schwab. All right. So if they are becoming Schwab, look, the business, they might be doing the right

moves for the business. This might be exactly what they need to do. But as an investor, you have to understand that it could have massive impacts on the stock from here. They do have levers they can pull and maybe Schwab is just undervalued. Interactive brokers is, you know, maybe a better comparison because it's still trades in a discount to Robin Hood, but it's a lot closer. But look, something's got to give here as these companies mature, and it's usually not just the market saying, okay, well, let's just reprice everyone higher. It's usually regression to the mean. I mean, I can name one thing just off the top of my head that they're doing a lot better than companies like SOFI just to kind of, you know, to your point of maturity. And you're right.

They're not going to make a ton of money. Even if the average IRA has $100,000, you're charging no commissions on anything. That's not a very profitable model. But Robin Hood Gold, their subscription product. That's something they're executing better than most other fintech that have subscriptions up 34% year every year. Impressively, there's, you know, about 20% of Robin Hood members, give or take are Robin Hood gold members. 40% of their new customers are signing up for it. That's a very impressive figure. And how about prediction markets too? I mean, look, I don't know, guys, event contracts were up 230% year over year. Don't tell like gambling, Lou. Yeah, you tell me what that is, but like, isn't it ironic for years? It was like, well, is draft kings a big winner?

Is there's a, forget draft kings. We might have finally found a company that can profit off of sports betting. Go Robin Hood. They, they seem to be doing this. And again, maybe we want this, a one-stop shop where I can gamble not just my, you know, disposable income, but my retirement funds, too. I wouldn't want that. You know, it's nice to be, and I'm kidding, but look, if this is what people want and they are providing the hub where you can do all of this more. It works out well for them. It might actually work out for their customers too if as they mature they have. If you're a draft king's doing whatever you're doing, you can't get cross-sold an IRA or a retirement. So maybe it's good for society too to have them sort of soaking up the attention, soaking up

the funds and then we can see what they do with it. Just so listeners are clear, you cannot do predictions in your retirement account on Robin Hood. Not yet. Not yet. They are kind of separate. You know, you can make these other little accounts. They actually,

I think, separated them all off. So there's a specific predictions tab. If you don't want to open it, you don't want to see it. That's actually an option now, which is nice as somebody who doesn't go into that tab all that often. When I go into my Robin Hood account,

I just want to see what's in my Robin Hood account. But, yeah, maturation is a great thing for businesses in a lot. of ways. The challenge is what do you pay for it? It seems like the market is trying to figure that out right now. When we come back, we're going to talk about the latest with Oracle. More on that in a moment. Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only.

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Welcome back to the show. When Oracle started on its massive AI buildout, it was going to be an Nvidia shop. And Open AI was going to be its biggest customer. But Lou, Lou, we learned yesterday that Oracle is now open for business, no matter what kind of chip you're making. Sounds like they're going to be carrying Google's TP. use OpenAI's jalapeno chip. This seems like a pretty big shift for one of the biggest cloud infrastructure companies out there. Yeah, I feel like it's kind of reaffirming what the narrative is already, and I think it's the

accurate narrative, that just this idea that the compute layer is kind of becoming commoditized. If not commoditized, people want multiple options for different things. They don't want to get locked in, is that kind of thinking? Right, right. And also, look, certain things. So there are, if you are driven by cost and driven by efficiency, then not all chips are created the same and you are going to want different solutions for different problems. Oracle among all of these guys, they should be agnostic. They don't have a model like, say, Google does or, you know,

so, I mean, it makes sense for them to be, we are the home for everything. Kind of for them, too, just kind of the idea of just spreading your bets and make sure you don't get too tied to one player as the market evolves. This is just kind of common sense taking over for what may be zealotry at the beginning and just kind of, you know, making the business work. I think it's just part of a trend that will continue. Matt, how do you think about this with the whole industry? Because it seems like three years ago, it seems like NVIDIA is going to win everything

related to artificial intelligence. It doesn't appear that that's going to be the case, whether that's, you know, something like TPUs, which is getting attention, but also these custom chips. I think that's really going to be interesting over the next year or two from OpenAI. And then you have the big choke point, which is TSM. TSM doesn't just want to be in Nvidia shop. So if Nvidia chips are undersupplied, that could partly be because TSMC wants to allocate to Broadcom and to Google and to Open AI and all these other companies.

Yeah, I mean, you kind of just said that some of this was out of necessity. It's not just the strategy of being an agnostic player. It's necessity. There aren't enough chips to go around. If you're sticking to a video chips, it really limits how fast you can build your data centers out. And Oracle's edge is being able to build their data centers fast, deliver on that backlog that everyone's so worried about. I mean, being chip agnostic, it widens their customer pool. Like you said, it reduces their dependence on anyone's supplier.

It also deepens that relationship with Open AI, which is half of their backlog. Yeah. So, you know, by using their chips, you're making them happy. So, you know, making a company happy who is committed to paying you $300 billion for your services is a pretty smart strategic move. Lou, if you're an Nvidia shareholder right now, what are you thinking about news like this? You know, you're probably, again, I think we're in this weird state where the best growth days related to AI are over, but that doesn't mean the music is stopped. You know, it's interesting to see how, I think we actually have seen this in the last few quarters. is just the market's reaction.

The sense is that I think Nvidia can sustain these elevated numbers that we've seen, but maybe we're not going to see them keep growing the same way. That's not ideal for a shareholder, but it's fine. I can deal with that. As long as it's not falling off a cliff,

I think they'll be fine. Are we starting to see the shape of what this market will actually look like in the future? It seemed like a few years ago, it was just all Gaga growth, you know, buy Nvidia chips as fast as you can. Now it seems like companies are starting to think about, well, where do we want to be strategically long term? What sort of cloud infrastructure companies do we want to have as our counterparties?

What sort of chips do we want to be using? It seems like it's much more of a, we talked about maturation with relation to Robin Hood. But it seems like this is a more mature decision on the part of all these AI players, diversifying, commoditizing your compliments. You know, if you have the power, you can do those kinds of things. I don't know if we're mature yet. I think we are still kind of in a land grab, but the land grab is shifting. I think the big thing that this comes back to is that, you know, there is a focus now on efficiency over raw spending. Like how can we spend smart versus just the kind of just get anything out there before? So yes, the market is evolving. I think I'd be surprised if we are at its solid state yet. I think we still have evolutions to go, but that's that's where we are now. Yeah, I would agree with that. And I would also point out that, like, you know, I mean, with Oracle, one, their investor

day is today. So we didn't get, we got a lot of clarity on, on their chip strategy and things like that. We don't know their financial strategy, which is really kind of to tie it back into what you were saying, that's the part that we, we don't know where it's not mature. We don't know what the financing is going to look like. There are going to be, you know, these companies are going to have to find more capital light ways to do what they're doing in a lot of cases. You know, you can't just exponentially grow your borrowing.

even if you're a Google or a Microsoft or whatever. So I think we're not a maturity yet. There's a lot of unknowns, maybe not as many as two years ago. But in terms of how all this is being paid for, I think we're still in the very early stages of answering that question. We are going to learn more even after the market closes today when Microsoft reports earnings. We'll talk about their recent layoffs in a month.

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Learn more at nofrills.ca. Welcome back to the show. Microsoft is going to be reporting earnings after the market closes on Thursday, so we don't have that news yet, but we did find out earlier this week that the company is going to be, I guess it's not layoffs, Matt, of 60,000 people.

It is voluntary buyout offers you know, potato, potato, but they want to cut their workforce. This seems like one of these things is we talk about more artificial intelligence. You're either going to grow your way into that market and all this spending in a payoff, or you're going to cut your way, and this is the cut side, it seems like. Yeah, and the 60,000 number, take that with a big grain of salt. That's who's eligible for this voluntary exit offer. It's not going to be nearly that many, but, I mean, history tells us it could be thousands

because this has been a year of Microsoft trimming its headcount. They did their first ever round of voluntary buyouts, and this is a company that's been around since the 80s, so that's pretty significant. Their first ever round of voluntary buyouts happened in April. They did a round of layoffs in July, and both were in the mid-single-digit thousands range, including those voluntary buyouts. So I would expect the actual number to be a fraction of that 60,000. That would represent 27% of their workforce. They don't want 27% of their workforce to leave at the same time. The real kind of thing here is, one AI is replacing some work.

So there's that narrative that we need fewer people. A lot of companies, Block has done layoffs and kind of blamed it on that recently. And on the other hand, companies like Microsoft, and I talked about this in the last segment, are going to have to figure out how to pay for all their AI buildout. They don't want to just grow their debt forever and ever and ever. They don't want to dilute shareholders forever and ever and ever. Reducing headcount is a way to free up capital. to pay for the AI buildout.

So it serves two purposes. I'm curious as to what the real number is going to be, but it's a sign that, you know, big tech has to find ways to pay for this. Yeah, Oracle, this is a strategy that Oracle has also deployed a company that we just talked about. Right. So as Matt said,

this isn't layoffs. Maybe it's like Gwyneth Paltrow. It's a conscious uncompling or something like that. We need better words for this. But I just, we need to underline what Matt said, because yes, they are offering this to 60,000 people.

There is no way in heck, they want anything near there. You offer this broadly so you get some. It's going to be well short of that. And I think that that needs to be said. These are always interesting, though, buyouts because, you know, you tend to sometimes lose the people you want to keep. So you have to be careful there, like the ones who are confident enough to get another job. Sometimes with the first ones out the door.

But it is just a way to kind of thin the head. count. And I'll say, too, I just, I don't know what to think. I don't think that this, we necessarily say, oh, because AI works or anything like that. Look, even if all 60,000 take it, and even if Microsoft allowed that to happen, because remember, if that happened, they'd probably say no to most of them, but even if all 60,000 leave, Microsoft would still have a higher head count than they did in 2019. There was a lot of bloat during the pandemic. We've talked about this forever. but to some extent, this is using AI to reverse that bloat and all of these layoffs have been. So I don't think we can say this proves that they are seeing efficiency up.

And I certainly don't think that's true of the overall economy. There was just an Apollo graphic out that, yes, revenue per worker is up at the MAG 7 since 2022. But adjusted for inflation, the S&P 493, the rest, they have not seen any revenue per worker gains since pre-COVID. Maybe it's coming, but I think it's much too early to say, oh, this is relevant or this is a signal as far as how AI is doing. I just don't think we know yet. Yeah, to put this number into context so far, according to layoffs.orgia, 135,000 tech employees laid off at 333 companies so far in 2016. In 2023, that number was over 260,000. So we are not seeing huge job cuts across the board in tech. So that narrative isn't quite maybe what it would seem

to be at the moment. As always, people in 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 our sell stocks based solely on what you hear. All personal finance content follows the 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. For Lou Whiteman, Matt Frankel and Dan Boyd Behind the Glass, I'm Travis Toyam. Thanks for listening. We'll see you here tomorrow.