Prof G Markets - Meta’s AI Promise, Microsoft’s Disappointing Beat & Why Google Should Spin Youtube

Episode Date: November 4, 2024

Scott and Ed open the show by discussing the U.S.’s GDP growth, Reddit’s earnings, Eli Lilly’s third quarter drug sales, and xAI’s new funding round. Then Scott and Ed break down big tech’s earnings and discuss how the tech companies are using capital as a weapon. They also examine the shifting media landscape and explain why advertisers have been cutting their spending on legacy media. Finally, Scott offers his prediction for the Presidential election.  Check out Prof G Markets in Spanish and Portuguese on Youtube.  Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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active investment managers. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Today's number, 20 decillion dollars. That's how much Russia has fined Google for blocking its news channels on YouTube. A sexual predator, a racist, and a Russian spy walk into a bar, Ed. The bartender says, what can I get you, President Trump? Boom, a little election humor there. We're going to have a selection. We'll count some votes, says James Carvell.

That guy's got to be like 110, the LSU. That guy, I like him. Do you like him? Do you like James Carvell? I think I prefer your impression of him. I think that's sort of my highlight so far. I appreciate that. It must be bonus season. Someone's kissing someone's ass.

Hello, plucker up, you little podcast co-host bitch. Today, we're discussing earnings from Google, Microsoft, and Meta. But first, here with the news is PropG analyst Ed Elson. Ed, what is a good word? How are you? I'm doing very well. I didn't know that 20 decillion was a number, but I looked into it. It's 20 trillion times a trillion times a billion.

And the global GDP is 100 trillion. So that should put it into perspective. Just shows you the Russians have their head screwed on straight. That's what I'll say about that. That's actually what our producer Claire requested as a bonus for managing young, irresponsible podcasters. That's right. We can't quite get there. This is a profitable business, but I had never heard the term Decilion either. Where are you at? You're in New York. I'm in New York, as always. We're past Halloween. I need more banter. Pretend I'm interested in your life. What are you doing for Thanksgiving? I haven't made a Thanksgiving plan yet. I know what that's like. It's okay, soldier. Things will get better. I could go back to London, but it's kind of weird

to celebrate Thanksgiving in London. It's not really... Yeah, they don't have Thanksgiving. We left them. Yeah, exactly. What are you doing for Thanksgiving? Are you going to celebrate now you live in London? No, I'm doing my world tour. I got back to London yesterday, and in two weeks, I head to New York for a speaking gig, then to Los Cabos for Baja Summit, where I'm speaking and talking about vertical farming and doing mushroom chocolate at night and listening to some DJ, who supposedly is hot. And then I go to Vegas, or I go to LA for another writer's room, because I don't know if you've heard, I'm working on an original scripted drama for Netflix. So what do you do in the writer's room? Do you kind of like,

sort of shout over them at sort of things they're doing wrong or how does it work? No, it's the guy, the showrunner and the lead writer will say, well, what do you think, Scott? And I'll say, no, they would never say that, even though I'm not listening. I just, I pretend that what they're saying is unrealistic. Okay. So I'm kind of on the right track. I'm supposed to be the person that puts you in the room that makes it feel authentic. And I'm supposedly the person that understands these people, which is, which is kind of comical, but yeah, it's fun. It sounds very fun. You don't actually have to do the writing. You just kind of like opine on what's fun. It sounds very fun. You don't actually have to do the writing.

You just kind of like opine on what's happening. It sounds... You know me. I don't like to actually work. There's no real work involved in this whole Prop G enterprise for the Prop G. It's actually a lot of fun. I get to envision scenes

and I'm working with this really talented guy named Scott Burns and Media Res and all these super talented people. So, you know, so far, so far we're in the honeymoon period. We'll see. Sounds like the best job ever. All right, enough of that shit. Ed, stop delaying, get to the news. Well, before we get started, just a quick reminder to subscribe to Prof G Markets on its dedicated feed. Type in Prof G Markets wherever you get your podcasts, hit follow and tune in to our interview with Anthony Scaramucci on Thursday. That interview will only be available on the

dedicated feed. And now let's start with our weekly review of market vitals. The S&P 500 declined, the dollar fell, Bitcoin rose, and the yield on 10-year treasuries increased. Shifting to the headlines. US GDP grew 2.8% in the third quarter. That was slightly slower than the previous quarter and just below expectations. However, economists were largely encouraged by the growth, driven by strong consumer spending on goods. Reddit turned a profit for the first time ever, with revenue reaching almost $350 million in the third quarter. That's up 68% from a year earlier. The company also reached nearly 100 million daily users, and those strong earnings sent shares up

more than 40%. Shares and drug maker Eli Lilly fell more than 6% after its third quarter profit and revenue missed analyst expectations. The company also reported disappointing sales of its weight loss and diabetes drugs. And finally, Elon Musk's artificial intelligence startup XAI is in talks for a funding round that would value the company at $40 billion. That's nearly double the valuation from its previous round. Your thoughts, starting with this national economic data, GDP growth in America, 2.8% in Q3? A GDP number doesn't mean a lot unless it has a

benchmark. So just some benchmarks here. Japan's annual GDP growth was up 0.3%, so we're growing nine times faster than Japan. France up 1.1%, and Canada up 1.3%. I mean, this is just the economy here. It's just really striking to listen to these kind of person on the street interviews about how people feel about the economy. It's so obvious that there's kind of a vibe session, as Kyla Scanlon called it, or people, again, have this habit of crediting their character and their good for their raises and blaming everyone else or blaming the government for whatever price hikes there are. But our growth is impressive. And 2.8% may not seem a lot, but what that means is about every 25 or 27 years, the size of the American economy would double.

In addition, we have this new inflation data that just came out. It's down to 2.1%. In other words, inflation has officially been dealt with. Meanwhile, you look at other developed nations that have struggled with not only higher inflation than we had, but also longer inflation. So it sort of makes the case, well, not sort of, it does make the case for Kamala Harris. If you believe that Kamala Harris is just a continuation of the current administration, and if you care about the economy, then this is a big reason to vote for Kamala Harris. But you've made this point before. She should be making a way stronger argument about how she's sort of the economy vote.

If you care about the economy, you should be voting for Kamala Harris. It hasn't really resonated. But for those of us that care about statistics, that care about data, what the data is actually telling us, and when you look at the U.S. compared to other nations that have struggled with problems way worse than ours, you know, the answer is pretty clear. Statistically speaking, Kamala Harris should be your answer. I so badly want to be head of comms for like 11 days for the Harris campaign. I've heard people saying you should be, by the way.

I just think she should have in her back pocket every time someone starts complaining about the economy, saying the economy is saying, okay, Sean Hannity, there's 190 sovereign nations. You're an intelligent guy. What economy globally is stronger than ours right now? Name it. Instead, they always go to this democratic self-hate of, I know things are tough out there and we have work to do. It should be, bitch, we are on fucking fire. Get your head out of your ass. Anyways, okay, Reddit. Why don't I listen to my own advice? I bought some stock here, but not enough. I believe the stock is now at about triple

where it priced in its IPO about two months ago. Can I ask how much you bought? You can ask. May you answer? I think I bought about $3 million worth of stock, but I paired some of it. So I don't own nearly as much as I'd hoped, but I've done very well. But it popped so big the first day, I trimmed some of my holdings and I just didn't listen to myself. I knew this thing. I still think it has

more room to run. Anyways, it's revenue up 68% year on year. Daily users is up 47%. They're going global. They're being really smart. They've translated their posts via AI into French, Spanish, Portuguese, and German, and its international daily active unique visitors increased 44%. Which was huge. And it's just such a simple innovation. It's such a great use case for AI, just simply translating the language of your content. But it's so, so effective. It essentially just 10Xs your total addressable market.

And that is what we're doing, or at least we're trying to do it. We're using AI to translate this podcast into Spanish and Portuguese at the moment. But I think this is something that everyone in content should be looking at. How can we figure out a way to just overnight flip a switch and make this all available to the 8 billion people across the entire globe?

It's just a really quick and nice way to just skyrocket your total addressable market. So that would be the first thing that I would commend Reddit on. The second key driver of their growth actually was not intentional, but it's very interesting. And that is Google recently changed the way it ranks search results. So they made this update called the Hidden Gems Update. And what they've done with the algorithm is they're now preferencing what they call authentic content, which is the content that is generated by users, content that you find on forums and on chat rooms.

And so as a result, you will find that Reddit is showing up more and more when you search things on Google. It's also appearing higher in your rankings. And here's a great stat. Reddit is now the sixth most Googled word in the US. So it's this great combination of this intentional play with AI, but also the market dynamics are shifting to Reddit's benefit. And it's just translated to this explosion in the business and in the stock. So incredible quarter for Reddit.

But when you were talking about flipping a switch and accessing a global market using AI, and again, the operative term there was flip a switch and go global. You sound like me in our all hands last week, where at that point, the person who runs the company, Catherine Dillon, said, bitch, you translate this shit into Farsi and try and find the equivalent of ZipRecruiter in Iran to advertise. It's not quite flipping a switch is what the pushback I got. It's flipping a million switches. Yeah. And someone actually has to build a switch and manage it while I just, you know, the podcast hosts say, flip a switch and let's go global. This is strategy versus operations.

Yeah. This is the difference between being front of house and back of house, right? So I interviewed the CEO at their annual advertiser event and they have big they have big advertisers in the room i saw the cmo of mars the they had the biggest media agencies there it feels to me a little bit like kind of i don't know meta or pinterest or snap in the early days one of the reasons i'm going to kind of kiss the ass of the ceo that he seems like a nice man is i bet my prediction is they're going to have an amazing party at of the CEO that he seems like a nice man, is I bet my prediction is they're going to have an amazing party at Cannes in the next one or two years. They're going to decide we need to be, you know, stroking the hair of people who we are putting out of business

and bring them to some great party and get Dua Lipa or Bad Bunny or somebody. Anyways, we're going to the Reddit beach party. That's what I take away from all of this. I can't wait. I'm waiting for my invite. Let's move on to Eli Lilly. As many of our listeners probably know, Eli Lilly sells Zetbound and Munjara, which are these GLP-1 drugs.

They are the alternatives to Ozempic and Wegovi. And it's not selling as much as people had thought, or at least that Wall Street had thought. And the obvious question is, of course, why? What is going wrong? Now, what's interesting is that the CEO's answer to that question was that there isn't a problem with demand, but there is a problem with supply. So supposedly, the suppliers of the inventory for these drugs, those suppliers cut down on their stock and it affected Eli Lilly's ability to get the drugs out. But as a Barclays analyst pointed out, if that's true, that could

only have accounted for around 20% of that drop-off in revenue. In other words, there must be something else afoot here. Something else is going wrong in the Eli Lilly GLP-1 drug story, and it can't just be this sort of chokehold on inventory. And certainly Wall Street doesn't believe that story either. So I have a few thoughts of my own as to what might be going on, but I will throw it back to you. What do you think could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won't tell us? I wonder if we keep hearing about all these compounded GLP-1 producers being able to sell, I don't know if you call it off-market, but there's a bit of a glitch in the matrix or a loophole where if a product is sold out, you can

build almost like a generic version of it that costs much less. I got to think that that's denting demand a little bit. And I would think that, and not only that, you have a lot of these kind of upstarts are sort of scrappy and maybe don't take as institutional approach, but are great marketers and understand new mediums.

So I wonder if it's some of the new guys or these compounded GLP-1 producers maybe slowed their growth. What are your thoughts? I was thinking that too. And if you look at HIMSS, which we have discussed before, they have been getting into the GLP-1 game. Yes, the compounded version. Their revenue increased 52% last quarter. And a large part of that was their weight loss drug business and there are several other companies that are offering these compound alternatives it's sort of becoming a growing space and i think it is possible that this duopoly that we've seen on semi-glutide that has

been owned by novo nordisk and by eli lilly it could be a little more fragile than we think the other thing I think is worth mentioning, which one of our team members, Jessica Lang, pointed out, and it's a simple but important point, is when you think of GLP-1s, Manjaro and Zepbound do not come to mind. The two names that come to mind are Ozempik and Wagovi. And so it could be just a simple brand recognition problem that these products just aren't present in the public discourse enough. If you've been watching the World Series recently, you will likely have seen this Wigovi ad over and over, this new Wigovi jingle that is probably

stuck in a lot of people's heads right now. So I think the other explanation here could be a very simple issue. It's just a marketing problem and a brand awareness problem. We know what Zetbound and Manjaro is because we study this stuff for a living. But for the average American, you just think Ozempic and Wegovia, and you probably don't even know what GLP-1 is either. It's interesting. I agree with you. I usually don't like the idea of, typically when I walk into a brand and they say they want to show me a brand campaign and they're going to spend money on advertising, I usually say, well, if you're spending a lot of money on advertising, usually you have somebody who wants to hang out with really cool, interesting people, which ad agency people are. Or you're out of ideas because the companies with the best products don't need a lot of brand marketing. In this case, I think an awareness campaign exactly around what you said around ZipBound and Munjaro.

Also, Munjaro's awesome. If I came back and in my next life as an MMA fighter, I want to be called Munjaro. I think that's a badass name. It's a really cool name, Munjaro. But I agree with you. I think they need to fire up the ad budgets. Yeah, get some awareness out of that. There's so much money on the line here. Also, supposedly there's a lack of scarcity

that finally there's enough production here to meet demand. I wonder what's going to happen, though, when it reaches into the markets it should be in. I'm just such a huge fan of this technology. Speaking of which, let's bring this back to me, Ed. I'm doing this NAD treatment. Have you heard of this? Only from you mentioning it last week.

Ed? That's it. I'm doing this NAD treatment. Have you heard of this? Only from you mentioning it last week. Ed, that's it. I'm fine. I'll leave. No decillion dollar bonus for you. I'll make my way out. Just Claire's getting a decillion dollars. Anyways, this NAD stuff is really, really powerful, but I wonder if it has a similar compound as GLP-1 because I have noticed I'm losing my taste for the sauce. And I don't, I'm going to fit right into Baja Summit. I told you about Summit last year. They all take drugs, but they don't drink. I would bet, going back to Eli Lilly, I apologize, I'm all over the place. This fucking NAD was supposed to give me focus. Maybe it isn't working. I think this is probably a buying opportunity. I think anyone in this market with two great brands or one great brand, Manjaro and Zepbound, that's a terrible, you're bound for Zep. Zepbound, that sounds awful. That's like some rock climber started,

you know, some bad ropes company or something. I think other than the CEO making lame excuses, I'd say on this one, kind of by the dip. Our final headline is XAI, which Elon, this is Elon's AI company, which he is supposedly trying to raise around at a $40 billion valuation. Just a reminder of what this company is. So people may remember the premise of this company was to create a competitor to ChatGPT that was, quote, more truth-seeking. So for a while, Elon was calling it kind of jokingly TruthGPT. He saw how successful ChatGPT had become, and he wanted to make a competitor that was also less woke, pretty much. So XAI did build that product, and the product is called Grok. Many people may have heard of it. And it's available to all paid users of the X platform, formerly known as Twitter.

I've used it. It's fine. There was a period where it tried to be anti-woke and funny, and it felt like a not very funny guy who's trying to just crack jokes at every second. It wasn't a great product. Yeah, it's the Tony Hinchcliffe of LLMs. It's exactly right, and they fall flat. So I'll get your reactions to XAI in this funding round. There are a few more details we can go into, but what are your thoughts on this round? So I think this is Musk's next opportunity to turn $40 billion into 10. My sense is this is now a distant fourth or fifth

in the LLM market. And he did some sleight of hand trying to give, take the rights to the data, I think, of Twitter and spin out XAI. And he got a disproportionate amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter. But El Grok right now is a distant fourth, fifth, or sixth trying to trade at the same valuation as Anthropic. And that's the analog here. And I would imagine Anthropic has dramatically more traffic, revenues, better technology, etc. And what they keep leaking is that Jensen Huang did say that it's easily the fastest supercomputer on the planet. XAI has built its own data center. But I'm not sure if that ends up being much of a competitive advantage anyways. I think that's an important point is, is that a competitive advantage? And when I look at XAI, it's like there are three main differences that make it different from other AI companies. The first is that

Elon Musk is leading. So that's a big deal. It means you can raise a bunch of money. The second is, as you said, they're building their own data centers, and that's what sets it apart from OpenAI. OpenAI does not own any data centers. Instead, they essentially rent their compute from Microsoft, and that's why they have that partnership. And then the third big difference is that XAI is building its own frontier models, and that's where it's similar to OpenAI, but not similar to a company like

Perplexity, which is building models on top of the models that are built by other companies like OpenAI. So in other words, their sort of strategic differentiation is that they want to own everything that they create. They want to be a truly independent AI company, which is a little rare these days because it's developed into this massive supply chain where you have the chip manufacturers selling to the data centers and the data centers selling the compute to the model makers and the model makers selling their models to the app makers. It's a big supply chain. And XAI has decided we're just going to own all of it ourselves. I just don't know if XAI is going to have the capital. They're starting from less than zero versus everybody else,

and they want to raise it the same valuation as the number two or the number three player Anthropic. So I have a bias because I'm not a fan of Musk, but on just a straight valuation standpoint, this feels to me like a bad deal. Yeah, I mean, it sounds like the Elon Musk premium, but why he still deserves a premium like this to me is beyond me. The fact that he's destroyed 80% of the market value of

Twitter, that was his last venture. I mean, it's crazy. It's loco. He's gotten Mungiato on us. We'll be right back after the break with a look at big tech earnings. If you're enjoying the show so far, be sure to give ProfitG Markets a follow wherever you get your podcasts. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see? For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night.

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Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Support for this podcast comes from Anthropic. You already know that AI is transforming the world around us, but lost in all the enthusiasm and excitement, is a really important question. How can AI actually work for you? And where should you even start? Claude, from Anthropic, may be the answer. Claude is a next-generation AI assistant, built to help you work more efficiently without sacrificing safety or reliability. Anthropic's latest model, Claude 3.5 Sonnet, can help you organize thoughts, solve tricky problems, analyze data, and more. Whether Thank you. need to distill the essence of complex images or graphs, or generate heaps of secure code. Clawed is a great way to save time and money.

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Microsoft's fell as the company advised its overall revenue growth would slow in the current quarter. Meanwhile, Meta's stock also fell after the company missed expectations on user growth and warned that its AI expenditures would continue to increase in 2025. So I think let's just start here. A lot of tech earnings telling slightly different stories. Let's just start with what Wall Street thought about these earnings. So for Google, Wall Street was very happy. Revenue grew 15%, cloud revenue skyrocketed, and the stock rose 4%. I think the main story with Google is there was nothing that you could really fault the company for in that earnings report. Everything was going well. Microsoft and Meta, on the other hand,

Wall Street was not so happy with. And it's a very similar story that we've seen before in tech, which is the top and bottom lines were very strong. They beat expectations at both companies. But there was just one tiny little pimple on the earnings report for both of them. And for Microsoft, it was that their guidance was a little bit soft, not as strong as Wall Street wanted. And for Meta, the user growth was slightly weaker than expected. 3.29 billion active users versus 3.31 billion expected. I should remind you that's daily active users, so it's still pretty incredible. As a result, Microsoft stock fell 4% and Meta stock fell 3%.

So I think the summary with these earnings here is that it's very strong overall, but again, incredibly high expectations for these companies. Let's just start with your headline reactions to the tech earnings that have come in this week. What you said was really prescient and insightful a few months ago, and that is the expectations are now that you're going to blow away expectations. So Meta actually, their revenue and earnings beat expectations, increasing 19% and 35% respectively. But investors were disappointed by weaker-than-expected daily active user growth. And also, I think the thing that freaked everybody out is when Zuckerberg wasn't threatening to spend tens of billions of dollars in mixed reality headsets. He was promising, and he did it.

And he kept spending well beyond any evidence that this was working. And when Zuckerberg says, no, we're going in on AI and get ready, folks, hold on to your hats, it kind of spooked, I think, his investors a little bit. Just because, you know, relative to the earnings and the revenue beat, the revenue and earnings were amazing here. And at the same time, let's go to the other end of the spectrum. Everyone's sort of waiting and anticipating Snap to start a death rattle. And even though their sales jumped 15%, not as much as the other guys, their stock was up 10% because the expectation, people are sort of, when people listen to a Meta call, they're waiting to see just how fucking amazing it is. When people listen to a Snap earnings call, they're kind of a little

nervous. Like, is this the quarter that Snap announces that Meta is just putting them out of business? And the expectations here have gotten so crazy. And I know I'm jumping around a lot, but let's talk a little bit about Microsoft. They also beat revenue and earnings expectations. The stock was off 4% in after hours trading on weaker guidance. Good CEOs, sandbag guidance. You always want, in my opinion, under-promise and over-deliver. And when you start getting desperate or you're worried about losing your job, you start over-promising and under-delivering. Their total revenue increased, get this, at 16% off a huge number. That means that they found another $8 or $10 billion per quarter in incremental revenue.

And also the revenue mix is getting more solid because their cloud offering, Azure, revenues were up 33%. And that is a business with incredible margins. And 12 points of growth came from AI services. So in sum, this was just striking. And the only wrinkle here, the thing I would offer that I noticed, and we've been talking about this a lot, is that if I were to ask you, what comes to mind when I ask you who is the leader in the streaming market? Who comes to mind? Well, you know my real answer, but I think the average person would say Netflix. That's right. Yeah. But it isn't, right? It's YouTube.

And YouTube's combined ad and subscription revenue over the past four quarters has surpassed $50 billion. So Netflix is at $37 billion over the same period, over the last four quarters. So YouTube is a bigger streaming network, bigger revenue. I'd be curious what the growth rate is there. I'm not sure they break it out. But if you applied the same multiple to YouTube, you'd have a half a trillion dollar market cap company. And I wonder if there's opportunity for Alphabet to cut a deal with the DOJ and among other things in their remedy trial, say, look, what if we spin YouTube? But across all of these folks, whether it was Reddit, which looks like it's becoming a truly big tech company, Meta, all of them, Snap showing that we're still here. Snap's like, hey, don't forget us. We're

still here. We're still growing. We're still doing really well. And the other guys, the big guys, the alphabets, the metas of the world are just, you know, still on fire. Yeah, a lot, a lot there. We'll start with YouTube. I just want to reemphasize that number you said. $50 billion in revenue in the past four quarters compared to Netflix at $37 billion. With the same multiple, YouTube would be a half a trillion dollar company

in market cap. It'd probably be higher given the margins and given the growth rate. But if it were broken up into its own company, which you have just suggested, I just want to point out, it would be one of the top 20 most valuable companies in the world.

It would be more valuable than world. It would be more valuable than Oracle. It would be more valuable than MasterCard. It would be more valuable than Johnson & Johnson. And yes, of course, it would be more valuable than Netflix. So I'm, I mean, we've discussed why we believe YouTube is basically the most underrated asset in the market right now. I think this should really drive it home for people. It's something that people don't seem to talk about that much. And I think to your point, it's a little bit of the conglomerate tax. It sort of gets lost in the noise because of all of the other things that Google is doing. But this is just a juggernaut in the entertainment space. I am just fascinated by this business of YouTube and they continue to crush it. One of the other things you pointed out there is the idea that Meta, you know,

they spent really big on the Metaverse and it freaked everyone out. And now they're spending really big on AI. And so the numbers are Meta is raising its CapEx forecast for 2024 to between $38 and $40 billion. And that is slightly freaking the market out. They don't love how much that expense line is going to grow. Having said that, though, all the other tech companies are doing it. So over at Google, their CapEx rose 62% from a year ago to $13 billion. Microsoft is doing it too. Microsoft's CapEx doubled from last year to $20 billion. And this is just for the quarter. The ultimate business strategy has become capital as a weapon. Mark Zuckerberg goes, we have access to cheap capital, so I'm going to outspend you. I mean, there's kind of three or four. No one can keep up with these guys except each other. The biggest companies in the world that aren't big

tech can't make these types of investments any longer. They're spending more money on, you know, on GPUs than Exxon spent on oil exploration at their peak. I mean, so just some data here. Microsoft Meta and Alphabet will spend more than $150 billion on CapEx in 2024. And more importantly, Microsoft Meta, Alphabet and Amazon account for roughly 40% of NVIDIA's sales. So what we're seeing here is a dynamic where, you know, NVIDIA is pretty much propping up the stock market. We've all kind of identified that. And NVIDIA's entire top line is being propped up

by the CapEx spend of Microsoft Meta, Alphabet, and Amazon. So in a way, that CapEx number is the most important number in the entire global stock market right now. We should all care a lot about how much they're spending. But as you mentioned, the competitive aspects to this, the idea that they're all ramping up spending, I wonder to what extent this is becoming a little bit of a big dick contest, where if you're Mark Zuckerberg and you're seeing, you know, you're seeing Sundar Pichai

invest billions and billions into this space and you've decided to get into the space too, I wonder to what extent they're just going to start outbidding each other, not because it necessarily makes sense for the business, but because they don't want to be caught out and they don't want to look to the world like the loser or like the coward

who wasn't down to look to the world like the loser or like the coward who wasn't down to double down on AI. And, you know, maybe I'm not giving them enough credit, but I could certainly see if I were in their position, how I could get caught in that dynamic. Google's doing it. Microsoft is doing it. So we better do it too. Well, I think correctly, in hindsight, it looks like the stimulus plan during COVID that the Fed and the White House overdid it. They spent more money than was needed. And Janet Yellen, when faced with that question, did you overdo it? She said, we decided. She said, yeah, we probably did.

But at the time, the analysis was it's much riskier to underdo it than overdo it. And I think that's how these guys are approaching AI. And that is, if they overdo it, they spend too much, that's not the same risk as being the company, one of the big tech companies that had all of the assets, all of the IP, all the customer interface, but got bested and saw their stock lag everyone else's because they underinvested in what appears to be the most seminal technology trend of the last 20 years. So I got to imagine that, okay, we need 10 billion. The range of requisite capex to meet our plans is somewhere between,

I don't know, call it 20 and 30 billion. You got to think the CEO says, with a stock at an all-time high, with access to cheap capital, I'm not going to be the CEO that missed on AI. You say $20 to $30 billion. Here's $32. We'll be right back. And if you're enjoying the show so far, hit follow and leave us a review on Profiteer Markets. We'll see you next time. The all-new reimagined Nissan Kicks is the city-sized crossover vehicle that's been completely revamped for urban adventure. From the design and styling to the performance, all the way to features like the Bose Personal Plus sound system, you can get closer to everything you love about city life in the all-new reimagined Nissan Kicks.

Learn more at www.nissanusa.com slash 2025 dash kicks. Available feature. Bose is a registered trademark of the Bose Corporation. Support for this show comes from Constant Contact. You know what's not easy? Marketing. And when you're starting your small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind.

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Staggering number. And you mentioned earlier about revenue mix, the point that Microsoft has done a really good job of diversifying its revenue, which makes that revenue a little bit more stable. They're able to weather a storm. It's a great reason to diversify your revenue. I just want to point out this one stat about Meta. 96% of their revenue still comes from advertising. So they're not

in a very strong position from a longevity perspective, but it sort of highlights just what a juggernaut this advertising business is. The fact that this company is one of the top 10 most valuable companies in the world, and it's all just from all of that advertising. You talked about how they've been getting into AI, which has been massively increasing their ability to accumulate users and also monetize those users. I'm just amazed that Meta is worth this much and making this much money.

And it's still just a pure play ad business. I just thought that was quite fascinating. I mean, these companies combined probably have ad-driven revenue growth of somewhere between, I don't know, $20 and $40 billion in incremental ad growth. And I had dinner the other week ago with this iconic broadcast anchor. And this is someone who likely, I don't know what this person makes, but I imagine it's tens of millions of dollars, household name, outstanding at what they do. You have to tell us.

No, I can't. I can't in this instance because we're good, good friends and I don't like to prostitute my relationships. I'm imagining it's Anderson Cooper and i'll just let you not comment what i will say is it wasn't anderson cooper i have a second friend i have a second friend now on the media ecosystem anyways oh tucker colson got it okay me and tucky yeah we fisted each other and we were screaming out um the ghost of rick santorum i don't know where I got that name. That's an image. That's an image. Anyways, and he said that every contract renewal that's coming up across the biggest anchors, the biggest stars in broadcast television, the conversations are going something like this, as you know, it's a stressed ecosystem. We know you are making 10 million a year. Now we're going to pay you $3.5 million. And it's directly correlated to these earnings because the economy is growing 3% a year and all of these companies are growing 18%. Ad spending is not up 18%. This has become a bit of a zero-sum game. And that is, say ad spending is up because it's a strong economy, say, okay,

fine, it's up 5%. Ad spending isn't up 15%. So that incremental 10% is coming from somewhere else. And I can tell you where it's coming from. It's coming from, generally speaking, ad-supported media that isn't one of these guys. And so whereas if you, the ultimate morning show program, right, and they were just printing money, they could pay Hoda, you know, $7 or $10 million a year. And now they're like, Hoda, we love you, but revenues are down 30%, profits are down 60%. We're going to pay you $2 million. It's like, fuck that. I'll just go drink white wine all day, you know. Also, just more generally speaking, I have spoken to two individuals. I like to think

I'm trying to be good about my word and I'm coaching young men. I've had two men reach out to me and ask to speak to me, and they've both been men who are my age, who are both very successful in the media market, and they've either quit or been laid off, and they have no idea what to do right now. Because the motion picture and television market in Los Angeles, and generally speaking, the media market, is really strained if you're not working for one of a handful of companies that are just killing it. And it strikes me that these folks haven't connected the dots. There is real pain on the other side of these revenue numbers, and that is it is a terrible time to be a CBS or an MTV. Does anyone even remember what MTV is?

Or newspaper revenue is off 80% in the last 30 years. You know, billboards, drive time. If it wasn't for the election, local news stations would be just gone. Yeah, that's a great point. And you think about the other beneficiaries of that revenue growth. Where is that advertising going? It's going to the people who are creating content on Instagram and on TikTok and on YouTube. Those are the beneficiaries. Granted, they're not getting multi-million dollar contracts, but the reason you're seeing those millions getting shaved off of the Anderson Coopers of the world is because, frankly, it's going to the Scott Galloways of the world and people a lot less famous than you.

People who are creating content on Instagram, who are making videos, who are commentating on things in the news. There are thousands, probably millions of these people out there who are making a living and who are making real money by creating on the digital platforms. And what I just can't wrap my head around is how those people continue to not be taken seriously by the mainstream media. It's been almost like mainstream media just sort of covers their eyes and pretends like they're still in their heyday, while what's happening is we're seeing the social media companies having this explosion in growth. And meanwhile, legacy media

is completely drying up. Well, it's really interesting. So election night, and I'm bragging right now, but I was asked to appear on a variety of cable networks, right? They want to bring in, they go for 12 hours straight. They have a lot of time to fill. So they're like, oh, bring in the guy on Young Men. Just tell him not to tell dick jokes, right? So almost every network called and said, do you want to come on an election night? And the one I chose, I'm going on Amazon with Brian Williams. And that's kind of telling, right? It used to be go on CNN or Fox or CBS or ABC because those are the high prestige. Now,

I'm like, no, I'm going with the new guy. And today on Pivot, we interviewed Margaret Brennan, who I just think is so talented and sober. And as I was listening to Margaret, I thought, she's going to get hired by YouTube or Amazon, and she's going to be positioned with the right technology in the right format in one of these mediums, and she's going to be positioned with the right technology in the right format in one of these mediums. And she's going to drive so much more economic value for the parent company and herself. And even our little podcast, we just started posting our videos on YouTube. We're now making $40,000 or $50,000 a month in incremental ads from YouTube just by putting our stuff on YouTube. Not to mention all the stuff that's happening on Instagram, where you'll post an Instagram reel,

and it'll go viral, and then you'll get speaking engagement requests. I mean, the flywheel is up and running. It's flying. Yeah, in social media. One of the things I've learned over the last 10 years, we're in an attention-based economy, full stop. If you can command attention, you can get revenue. Otherwise, the person running the firm should be let go. And what you want to find is companies where there's a delta between the two. So newspapers used to get 30% of the advertising and they were getting 10% of the attention. You knew they were

in trouble. And the web was getting 30% of time and had 8% advertising, you knew those two were going to true up. Right now, the greatest delta in terms of attention to revenues is podcasting. Total consumption is up 15% or 20%. And revenues are solid and growing, but they're nowhere near the attention. And in addition, I think if you collapse that with the following, and that is there are very few ways or increasingly fewer ways for an advertiser to reach you. You're the great white rhino for advertisers. And that is at the age of 26, you're what I would affectionately refer to as stupid and that is you're in your mating year so you'll spend 150 bucks on that stupid crew net shirt you're wearing

you'll join Soho House you'll spend seven dollars on coffee you on the other hand would never do any of these things no no I'm much more down to earth Ed I'm much more down by the way did I tell you about the Global Express I flew back here from Miami anyways

I'm not nearly as superficial as you, Ed. Anyways, but advertisers love young people because they're stupid, and they're in their mating years, so they will spend a ton of money on high-margin products trying to attract a mate. They are the ultimate target. And the problem is MSNBC's average viewer is aged 70. MTV is like 52 or 54. And you or your cohort is listening to podcasts. So you not only have growth in attention, but you have growth in attention across a group that is increasingly difficult for advertisers to reach. So I think you're going to see, in one of my predictions, I'm doing predictions, I think that podcast revenue is going to grow faster than every digital platform's revenues, maybe with the exception of TikTok, who align, claim their numbers are lower. But I think you're going to see next year revenues, ad revenues grow 25% plus. I think 2025 is going to be the year of podcasts busted open by these election or candidate interviews, attention, and advertisers are figuring out.

The media landscape is dramatically shifting under our feet. Let's take a look at the week ahead. We'll see the Fed's interest rate decision for November. We'll also see earnings from Palantir, Novo Nordisk, Airbnb, and Paramount. I doubt we will care about any of that because we'll have bigger fish to fry tomorrow. Scott, your predictions? Well, look, it's the election, Ed. I'm predicting that Vice President Harris is going to win the election.

The gambling markets say that it's 2 to one in favor of Trump. You correctly pointed out that that might be skewed because of these markets over-index young men who are much more biased towards Trump. A lot of people think these markets are being manipulated to send a signal of confidence around the Trump campaign. I also want to recognize I have huge confirmation bias here. I'm very emotionally caught up in this. I could not get over. I was happy to get back to London. I don't know if you've noticed it and maybe you don't notice it when you're in boiling water, but I cannot get over how tense things are. I wonder, and again, confirmation bias here, that people are just fucking exhausted and think, how can I take some of this temperature down

and distinctive the policies, distinctive whether, you know, perfect is not on the menu here. I think a lot of people are gonna go, you know, I just rather not go back to that shit. So anyways, my prediction simply put is that it's not only going to be a Harris win, but I think it's going to be a decisive win. And all of the odds and all of the data say that that's unlikely.

But anyways, in sum, I'm predicting that in January of 2025, we're going to inaugurate Vice President Harris. People forget how much it sucked, not from a policy perspective, but from just a day-to-day discourse perspective, having that guy plastered over the news, people freaking out about him 24-7, every single conversation is about politics and about how the U.S. is in decline, and whether or not you believe any of that is true, are you really down for that to just dominate your life all day, every day for the next four years? That to me is just, that was the big nightmare of the Trump presidency is how I

just, we could never escape him. We had four nice years of some kind of boring politics. And I really hope that we can have four more of them. My favorite thing about Senator Bennett, I did a fundraiser at my place for him. And he said, they said, what would you be like as president? Someone asked me, he's like, I'm going to be the president you never hear about. And I thought, Jesus Christ, wouldn't that be refreshing? I absolutely love that. He said, I want to be the president you don't think about. I'm going to do the job. I'm not going to say incendiary things.

I'm not as charismatic as some of these other people. I'm just going to be the guy that gets the job done. Anyways, I hope that the guy that gets the job done is a she. And I really hope that when I move back to the U.S., it feels less tense, less anxious, that we keep this economy going, that young men recognize that their default operating system should be one of protection, and that I genuinely do believe that women are under threat here, and that men don't recognize how much this could affect us. So I'm hoping, I'm hoping and trusting that some of these things enter people's brains as they enter the voting booth. And I'd also just like to highlight, I acknowledge that a lot of people don't come to this podcast for politics. I endorsed Harris in my newsletter, No Mercy, No Malice. We had the greatest number of unsubscribes we've ever received. And as I've said before, there's no point in having economic security and people who love you unconditionally if you can't speak your mind. And also to all the people who unsubscribed,

I just want to tell you a full refund is coming your way. Why don't you read us out, Ed? This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lange is our research associate. Drew Burrows is our technical director.

And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our unpack on the election with Anthony Scaramucci, only on the Prof G Markets feed. You have me in kind reunion As the world turns and the dove flies In love, love, love, love.

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