Motley Fool Money - The AI Land Grab Has Started

Episode Date: February 7, 2023

Microsoft's AI event is only the latest sign of the hottest area of tech. (0:21) Jason Moser discusses: - CEO Satya Nadella hailing "a new day in search" - Shares of C3AI, an enterprise AI platform company, doubling in the past five weeks - Zoom Video announcing it's laying off 15% of employees (12:00) Robert Brokamp talks with former Pittsburgh Steelers lineman Jonathan Scott about playing in Super Bowl 45, managing an irregular income, and other takeaways from his book "The Winning Playbook: Strategies for Life on and off the Field".  Stocks discussed: MSFT, GOOG, AMD, AI, ZM Host: Chris Hill Guest: Jason Moser, Robert Brokamp, Jonathan Scott Producer: Ricky Mulvey Engineers: Rick Engdahl, Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

LinkedIn is pretty amazing at helping you grow your small business. We cannot stop your new clients from emailing you at 3 a.m. We can help you sell, market, and hire in one place. We cannot help you be in three places at once. And while we can't help you organize your calendar, LinkedIn can help you land more clients so you have a calendar to organize. Grow your small business on LinkedIn. Learn more at LinkedIn.com slash small business.

a growing club and Microsoft unveils a new and improved Bing. Motley Fool Money starts now. I'm Chris Hill, back by popular demand. Motley Fool senior analyst, Jason Moser. Thanks for being here again. Popular by you, by your standards, I think, right? I mean, certainly the listeners aren't clamoring for this. Well, we'll get to the company in a second that I wanted to talk about because the business, the industry is very much in the spotlight today, because the big event today from a business standpoint is Microsoft's AI event, which is happening as you and I are recording this. So the CEO, Satya Nadella, said, quote, it's a new day in search, and he promised rapid innovation is going to come. Microsoft's search engine Bing is now updated

to answer questions with context similar to the way that ChatGPT does. And we'll see how all of this plays out. I'm curious to see what the Bing segment does in the coming quarters from Microsoft. Among other things, Jason, one of my thoughts was, this is why it's nice to have deep pockets. So you can make investments like the $10 billion investment that Microsoft made in chat GPT. Yeah. Yeah, it sounds like a lot of money, and that's because it is. But in the context of Microsoft in its balance sheet, I think they can afford it without really any problems. You know, it's interesting, you would think, based on the conversations of the last week, right, based on the headlines of the last week, maybe two weeks, I mean, you would feel like

AI is just this brand new thing that nobody had ever heard of until just now. I mean, obviously, we've been talking about AI for a long time and the potential that it holds. I'm getting a little bit of a metaverse vibe here. And what I mean by that, I'm not saying that AI won't reshape how we do certain things. I'm not saying it doesn't have tons of potential, much like I'm not saying that the metaverse won't be a thing that ultimately creates value and opportunity. But it feels like we've gone from zero to 60 here.

And I think it's just worth kind of stepping back, remembering this change isn't going to happen overnight. We're hearing a lot of things that are being said, the what, really? Not as much of the how and the why. I think the how and the why will be important, and we'll hear, I'm sure, more about that as time goes on. It seems that Search is the area where many feel the most obvious changes can and will occur with these investments in AI. I do get that to an extent. So you ask ChatGP to give you some kind of an output, and it does.

And if that is going to make our world of search better, I think we're all for it. Remember, though, a couple of things. Number one, this is not just a Microsoft world. I mean, we know, obviously, Alphabet and its ilk are all making the same investments in AI and however they see fit to pursue it. Also remember that part of the challenge here is changing actual consumer behavior. And I think that's just a little bit easier said than done. It's telling someone who has performed search, for example, in a given way for a long time

now to do something different. It's not to say that consumers won't ultimately do that, but it is not always so simple just to change consumer behavior. There are going to be plenty of questions that come along with the AI, what is going into the outputs that it's ultimately giving us, because I know there's a lot of questions out there today, just based on some of these interesting outputs as people sort of test this, test the stuff. But I do appreciate, where Microsoft is coming from. I think Bing has always been something that's held a lot of potential. They've just never really been able to take it over the top in what has just been such

a Google-driven world for so long, supplemented by meta on the social front. But this sounds like certainly a neat step forward in the investments in AI and generative AI. Let's get to C3 AI, which is an enterprise AI platform business. This is a stock you have recommended in one of the services you run. And while the long-term chart over the past year or so has been kind of rough, just in the past five weeks, shares have doubled for C3 AI. And I'm wondering, to your point about how much these big companies are talking about

AI on their conference calls, et cetera, and how much it is. now part of the narrative in the business and investing world. Do you feel like we are in some sort of a land grab here? Because one of the thoughts I had was, this seems like the type of business that someone, not necessarily Microsoft, but some larger tech company might want to snap up. Yeah, it definitely feels like we're in the beginning stages of that. I mean, the competitive jockeying that exists in the space right now, it's not unexpected. I think it's really fun to watch play out. When you look at a business like that, you know, it's a business like, like C3 AI compared to other companies focusing on AI.

So C3, they're in the enterprise AI space and essentially they have a model-based approach to AI. They have a library of conceptual models that ultimately consist of all of the elements that are required by an enterprise AI application. So their customers are ultimately able to incorporate and build out AI functionality and capability in their businesses. They can do it a lot more quickly. They can do it more efficiently.

It can be certainly more consistent. They have, they have a, like I said, a very large library from which to choose. And so as C3 continues to invest in that library and the capabilities, I mean, we've seen the announcements really, and I think one of the big reasons why we've seen C3 take off over the last several weeks is simply because they announced at the end of January their generative AI for enterprise search. This is a generative AI product suite that ultimately is integrating AI capabilities from all of these different companies. Google, OpenAI and ChatGPT, Microsoft, Adobe, so on.

And so I think we're seeing enthusiasm from that perspective in that C3 is playing in that sandbox as well with a lot of bigger and better endowed competitors. I mean, at its market cap today, given the challenges it's witnessed over the last year or so, from the share price perspective, you do have to wonder if someone's not looking at this company and saying, oh, yeah, this would be a nice little bolt on to what we're trying to do. Now, I don't know that that necessarily is bound to happen because Thomas Siebel, the founder of C3, is really the one controlling the company's fate. so to speak. And so I don't know that's really what he wants to do. But again, when you look at all

of the companies in this space, in the investments that they're making from large to small, the competitive jockeying is really fascinating to watch. And I understand all of the enthusiasm. And I got this question on Twitter the other day in regard to C3 because it's a stock that I own personally. And someone basically was asking me, you know, with this big run-up, should I sell? I'm still down 30 percent from where I bought in, or should I hold? And I mean, you know my answer to this. Generally speaking, I mean, unless they're red flags to the business itself, where I'm saying like, no, I just, I don't think this one's worth holding on to.

And I think C3 has made some mistakes along the way. And I'm certainly holding leadership accountable and want to see a little bit more consistency in the metrics that it's presenting in the overall strategic vision there. But given the long-term opportunities in AI, given that you've got CEOs like AMD's Lisa Sue, saying on their earnings call recently that AI represents the largest market opportunity that they can pursue here over the next several years. I mean, it's just a very big market opportunity and to be able to say with any certainty exactly how it's going to shake out today, I think is a little bit much, right? I think we're going to learn a lot more over the coming

quarters and years as to exactly how this is going to be able to impact us both as consumers and as investors. From that perspective, I think C3 is one worth hanging onto and watching, but that's also, of course, in the broader context of a well-diversified portfolio. Shares of Zoom video popped 7% in the middle of the day when CEO Eric Yuan posted a memo to his company online announcing that 15% of the staff is going to be laid off. Yuan said they've accomplished a great deal over the past three years, but, and I'm, of course, quoting here, we also made mistakes. We didn't take as much time as we should have to thoroughly analyze our teams and assess if we were growing sustainably toward the highest priorities.

They joined the club, right? Zoom video is the, you know, I think this nets out to about 1,300 individuals. And obviously, it's tough for those folks. But I understand why they have become the latest company to announce layoffs. And certainly, I'm not surprised by the reaction from the investing community. Yeah. It almost feels somewhat ironic, just given what we've seen play out over the last few years. But like you said, I mean, this is not something unique to Zoom. The business itself has slowed down, it slowed down considerably. And I think that any time you start to look at the business itself has slowed down considerably, and I think that any time you start to look at

the challenges that your business may be witnessing. And we've talked about this before on the show. It is very easy today to look back at the single biggest change that's occurred over your business in the last two to three years. And it was just, it was what we all went through, right? It was what we all went through in regard to the pandemic and the distribution of the workforce and ultimately how, what the future of work looks like. I think we're still just kind of watching that.

materialize. They had to make some big investments early on really to take care of all of that demand, right? They had so much demand for their services pulled forward into one small window of time. They never anticipated that. I mean, yes, maybe they made some mistakes, but they were understandable mistakes, right? I mean, this was a business that found itself in a very tricky position early on, and it makes sense that they have to to right size a little bit. Again, not unique to them, not surprising at all. As always, we don't like seeing people losing their jobs, but by the same token, from the investors' perspective, this ultimately is exactly what you want to see. Jason Moser, always great talking to you.

Appreciate the time. You got it. Thank you. The highest paid player in the Super Bowl this year is Patrick Mahomes, whose contract pays him $45 million this season. Meanwhile, rookies in the NFL made just over $700,000 this season, and the average player only lasts in the league of about three years. After that, the paychecks can vary wildly, with some just falling off a cliff. Back in Super Bowl 45, Jonathan Scott was a starting offensive tackle for the Pittsburgh Steelers. Today, he's the co-author of the book, The Winning Playbook,

Strategies for Life on and off the field. Robert Brokamp caught up with him to discuss what Scott learned about managing an irregular income and what it's like to play in the big game. In the book, you tell the story of being a rookie and having a locker next to Damien Woody, who had won a couple of Super Bowls with the Patriots before joining the Alliance. Tell us about the advice he gave you. It was prices. It was the beginning of really understanding money.

And, you know, for him to, you know, just tell me, say, hey, man, don't compare your paycheck to my paycheck. At first glance, you would think that's, you know, someone's being arrogant, you know, maybe talking down. But it really gave me insight is that all NFL players, all NBA players or MLB players are not created equal. And I'm speaking on the monetary sense. And it was just one of those moments that I realize is that, you know, he had a beautiful Rose Royce, Phantom Rose Royce. And it was one of those things that's like, I knew that I could buy one, but I couldn't necessarily afford one, right? And so it put a lot of perspective on understanding, well, one, you know, one of the biggest payroll. is called the Internal Revenue Service.

And I didn't really understand IRS until you saw that check and you realized that a big majority goes to them. So thanks to Wood. And he really helped me out on that one. Yeah, from what I understand that, you learned that lesson. And instead of buying a $300,000 car, which is what that caused, you bought a house, which, you know, you have as appreciated in value and you now rent out and get income from. Yes, you are absolutely spot on. So I chose to live in the house instead of living my Rose Royce.

But that's the beauty of assets, right? You mentioned taxes, and I think there are many aspects of playing in the NFL, though a lot of people probably don't appreciate it. And one of them is you have to pay taxes in every state in which you play. So tell us a little bit about the so-called jock tax. Yeah. So let's say I play for the. Dallas Cowboys in the state of Texas, right? So we play a game at 18th Stadium at home.

That week, you got your taxes and you look at your W-2, boom, it doesn't matter who you played, right? So now, let's say you're the Dallas Cowboys and you fly to San Francisco. I know this joke may be a little too soon for some people, but let's say you fly to San Francisco, right? You play that game. the money, the prorated amount that you were going to make for that game, you have to pay taxes in the city that you played in. So it's literally like being a resident in that city for that one day.

So just imagine if you played in New York, if you played in the state of New York or played in New Jersey. Some people not only have state tax, they got city tax, county tax, and that can easily be up to 15%. of your paycheck. That's not including federal tax. Yeah, I mean, and that affects not only the players, affects the coaches, the trainers, you know, anyways, traveling with the team. All employees that are signed as under W-2. Yeah. I read one estimate that California gets over $200 million a year from professional teams that travel to California. It's quite something. Yeah. Another aspect that I think people probably don't know about is that, you know, if you have a normal job, you're used to getting a paycheck throughout the year. But if you play in the NFL, you don't get a paycheck the whole year, do you?

That is correct. No, it's, you would think you get paid throughout the year. Well, NFL, you just get paid for the time you've been playing. Now, of course, if it's a simple math, if it's a million dollar contract or a $10 million contract, it'll be dispersed throughout those 18 weeks. If you happen to get in the playoffs, you get a little bonus money. the further and further you get into the playoffs. But after that season's over, so are those paychecks. You got to remember, not every player has the mega deal. That's what we just see on the ticker on ESPNs.

But I know when I was playing league minimum, if you're on an active roster, was maybe 300,000. Now, some people are probably saying, oh, I can do that's great, blah, blah, blah. But what about the guy that's on practice squad and is only making $85,000? And then on top of that, they only get it for 18 weeks. So now you have to think proactively on making your money last or make your money efficient or your currency efficient for those remainder weeks when there is no season. And there is no guarantee contract, right?

At least not for every player. And so those are the nuances that you have to forecast and think in the future. Well, how do you do that? What do you do? Yes, the check says $20,000. But that doesn't necessarily mean that I can spend $20,000 this weekend, right? That it doesn't work like that. Let's close with a question about, you know, a certain sporting event coming up this weekend.

You've played in a Super Bowl, that being Super Bowl 45, when you're with the Steelers. But that wasn't your only big game because when you were at the University of Texas, you played in the 2006 Rose Bowl for the National Championship. Texas won when Vince Young scored a touchdown with 19 seconds left on the clock in what is considered one of the greatest college games of modern times. So what's it like to play in such a big game? Man, you really felt like you're on top of the world. It started with the collegiate level and then the pro level.

You really feel like you're on top of the world. very few times in life that you can actually have a snapshot of what you wanted to be. And it's exactly that, right? And it wasn't exactly that. It was even better. Like, it was even better. And it's kind of cool. It's like it may be a little narcissistic, but it's kind of cool.

It's like no one else can get it. No one else can have it but me unless I share it or unless I talk about it. And it's very precious to me because I recognize, too, that it's a tremendous blessing to be able to do something that very few people on this earth can do. And I hold it dear to my heart, right, because it's rare. It's money, baby. It's one of those things that I know very few people can talk about. But I'm always grateful that I got to experience it. And it was just fun.

It's just like, what can you say? It's an elation of just joy. It was just great. Nothing else I can say, it was great. Well, our guest has been Jonathan R. Scott, former NFL player and co-author of the winning playbook. Jonathan, thanks so much for joining us. My pleasure, sir. My pleasure.

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 yourself stocks based solely on what you hear. only on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.