Good morning everybody. Welcome back to another episode of the market open. Thank you everybody for being here. We are live. We've got a lot to talk about. It is Thursday, December 4th. A bunch of different headlines that came out yesterday and we will discuss them. The biggest one being Jensen on Joe Rogan. I really did not expect that one to happen, but it did. And we got a bunch of clips from that podcast that are going pretty viral. So, we'll talk about that.

I got some new updates this morning. We got some jobless claims data. We have some labor market data. Some of it being good, some of it being bad. We've got Palantir. I know Palantir has not really been in the news for the past couple weeks, ever since earnings. A lot of people have been asking what's going on. Well, they put out an announcement today and it's a pretty big one. That was Oh, wow. And as I'm talking, Vlad's on CNBC. All right. Boom. This is why we have multiple screens. This is We are a professional media production.

Okay. Let's go to Vlad. Here we go. This is why we have two screens and then we'll get into all the headlines that we got today. Vlad Tenev of Robin Hood live right now.

>> What is this all what does this all ultimately look like? Meaning A, who's using it and how are they using it? But B, are there going to be 10 20 uh firms that basically are doing this in different ways? Is there is it all going to be merged up into two or three of them? What does this look like in your mind?

>> Yeah, I mean two things there. one uh what one thing a lot of people don't understand about prediction markets is actually a relatively small percentage of the customers that are interacting with prediction markets are actually trading the much bigger use case is as a source of information almost as a complement or alternative to the news and that's why you see a lot of news networks starting to integrate prediction markets into their reporting.

>> I think prediction markets are going to change the world for the better. Perhaps they already have. And the ability to price any event accurately, I think solves a big problem that we've had for multiple decades, which is we're flooded with all of this information. Anyone can produce content and share an opinion, but how do you get to the ground?

>> But it's interesting you're thinking about it more and tell me, maybe I'm wrong. Are you thinking about as an economic vehicle, meaning when I say economic vehicle, something as an an exchange or a company like yours that creates a profitable business because you know millions and millions and millions of people ultimately are actually trading in the prediction market or is it the funnel of data that's coming off of it that ultimately is more valuable?

>> I think that in terms of what's valuable for society, right, the funnel of data is much more interesting because, you know, whereas only let's say hundreds of thousands of of people will actually want to trade what's happening in the election, the information of who's likely to win an election is something that affects hundreds of millions.

>> But I guess that's where I'm going with this. Ultimately, do you think it really is only hundreds of thousands of people who will trade this stuff? um or do you think it actually turns into be a much larger business, the trading of it unto itself?

>> What we're starting to see is that, you know, Robin Hood, we started with one contract uh a little bit under a year ago, which was the presidential election contract, and now we have over 1,500 uh I think maybe even 2,000 or more. And that's going to continue to grow, and it's going to continue to get more specialized and granular. So I think it will in aggregate increase the total number of traders because

>> I mean the products allow you to specialize relative to other derivative products. They have pretty clear resolution criteria. You can kind of understand when the contract resolves positively or negatively and you don't have to worry about your exit point, right? the exit point is sort of like put so but I think for any individual contract the number of traders might not be huge but in aggregate there's going to be lots more contracts

>> the other prediction market question I have that I've been thinking a lot about is I know a couple people now who say they're playing the prediction market as a hedge against other things that they're doing meaning they might own stocks and something but they're using the prediction market as a hedge against those things which made me start to think well then when we see the results of a prediction market scenario scenario is that a believable scenario if in fact somebody's trading trading it to actually offset something else.

>> Yeah. Well, every derivatives market has three participants. You have the speculators who are trying to predict the price. You have hedgers that are offloading risk and then you have arbitrurers who are connecting all the different markets together. And I think for a functional market there has to be equilibrium of those. You can't just have people hedging to your point um because then it won't reflect the right

>> it wouldn't be effective price if it wouldn't be as effective of a hedge without speculators. I think that's another thing that people don't understand. Speculation is actually integral to the functioning of any of any market.

>> You do need some speculation.

>> Yeah. the the the thing is can you have the equilibrium of of all of those and and I do think to your first question it's going to evolve similarly to other equities and derivatives markets where there will be a lot of exchanges and I think Robin Hood benefits in that world because a lot of exchanges means lots of choice for us as the broker ultimately better pricing more competition for the customer and like we do on the crypto side or the equity side we connect to dozens of different venues and market makers and route to whoever offers the best selection and price.

>> I just there's a lot of hand ringing. We had had Stifel on the other day, Ron Chris talking about the rise of all types of speculation including gambling, prediction markets, perpetual futures, all these all these things. And then I think back to that was always a wrap on commodities. Oh, it's speculation. But the the real use for commodity futures is for farmers and airlines that are trying to hedge fuel costs. I mean the the most of the trading is is done. You need the speculators for the liquidity and they but but there's a real use case other than gambling for all this stuff.

>> Well, to his point, not everyone can be hedging. You need the spec. Hedgers don't have accurate prices,

>> right? But yeah, uh to your point, this is a criticism as old as time. Every time there's a new asset class, people with futures, people say, "Oh my god, there's there's gambling. There's

>> the meme stocks were gambling."

>> Yeah. I mean, I'm not I'm not going to say that, but that there were no speculation in meme stocks, but I do think

>> but also they that might have cured the naked short situation or whatever. You know, there may have been a reason for that as well. It's all cathartic, all this stuff, or else it wouldn't be happening, right?

>> The great thing about markets is they're transparent. Anyone can participate in in the ideal case. Um, and you bring together lots of different participants in a in a common framework. And I think that's why this has been so disruptive.

>> What What do you see happening with your with your customer base right now as it relates to crypto? Because we keep talking about crypto every single day. Bitcoin, you know, came down. I mean, really came down. Now where we we're at 92,000. So the low recently was what about 85

>> below that?

>> Below that. And how connected do you think the price of Bitcoin is to what's happening in the equity markets right now?

>> Yeah, I mean I think that equity markets have been fairly strong and this is the other thing that you can see with prediction markets. One of my favorite things to look at is the Fed decision contracts. And you saw toward the end of October of this year, we were at 85 roughly 90% chance of a cut in December. And then you saw the odds of the cut plummeting. And actually towards the end of November, the leading option was the Fed would would not cut. The rates would stay the same. And and you saw that that was basically correlated with how the technology sector did. Mhm.

>> So the these things are are very connected. And then right now you look at the the odds of a cut back up to 90%. And the markets have

>> that's what we just were saying. Now it's the next cut we're worried about. Anything that that indicates that maybe the next cut is in and it is in question the next one that they may skip.

>> Absolutely.

>> And now now we're worried about that one. [laughter]

>> You can track the markets on that as well.

>> Um but yeah, I think Bitcoin has decoupled from technology a little bit in the past couple of weeks. And I think there's idiosyncratic concerns about the dats of course. Um

>> but the the great thing about our platform we we offer everything under one roof. So prediction markets are ripping even if there is some weakness on the crypto side. Customers are still depositing money. They're they're trading a variety of assets and we want to be there financial and trading super.

>> Can I ask you real quick about something that I think you're doing that's super cool? I mean, you do a lot of super cool things, but these Trump accounts, we didn't I I haven't seen you since it was announced with grad and and with DE with with the Dell family. I think it's unbelievable. It's really extraordinary. Extraordinary.

>> I think they could change the world.

>> And you're you're involved in this in terms of uh providing some of the technology or what what do you how how are you engaged in this?

>> Are you arguing? We got to call it something else for for you people. I mean, it

>> you mean for me people?

>> Well, not you people. Not I don't mean you. I mean I mean just for people that hate Trump. We can't call it Trump. We can't call because they're a really good thing and there's a lot of

>> that's what Gavin Gavin Newsome yesterday made that was actually one of his comments. He said that [laughter] Trump hijacked the name and that it should be you know invest America or whatever it can't be called Trump because half the country won't won't like it.

>> Look at Vlad just sitting there watching mom and dad argue about politics [laughter] and he's just like guys I'm just providing the tech. You can call it whatever you want to call it.

>> No, but but but h how do you think this is going to get implemented? How easy is it? and and are you how involved you I saw you you quoted in the the journal article I think about this.

>> Yeah. So there was an event at the White House to announce the um creation of of this initiative as part of the budget reconciliation bill and um you know we I was there sort of as a representative of the retail brokerage industry. Um, I've I've talked to the president about this personally, given him uh my assurance that I care a lot about this and Robin Hood's ready to give technology resources, operational resources, put our best people because

>> Well, I I think this super important particularly now because getting people from a young age to buy into our free market system and be owners of America, I think that could solve a lot of the problems that we have brewing. We just put out for Michael Dell is one of the good billionaires. I mean, most most of them are all

>> All right, that was Vlad this morning on prediction markets. Again, I was talking about it on Monday. I've been doing a lot of research on it. I will have a Substack post coming soon on prediction markets. I think the industry is here to stay and I think is going to continue to grow. And if Robin is a major player in that industry, I think there's going to be a lot of different ways that they can basically use what's happening in the industry to become a not only a revenue stream for the business, but put Robin Hood at the heart of the intersection of financial data that more and more people are valuing and I think a lot of institutions are going to value that data over time as well. All right, so that's what we had with Vlad on CNBC.

Let's get to the Palenteer partnership that announced this morning. So this is a pretty big deal. Uh Palunteer has launched a brand new product. So they have Foundry, they have um Apollo, they have AIP, they have Warp Speed, which was kind of like re-industrializing America.

Now they are introducing an operating system for American AI infrastructure aka they are getting into the data center race. Pounder launches chain reaction. That is the name of this new product and the founding partner of this product. Founding partners are centerpoint energy and Nvidia chain reaction aims to transform aging power generation into high uptime resources capable of meeting AI's massive demand. Stabilize and expand the power grid to meet surging demand from data centers and electrification. accelerate construction of new generation transmission in compute capacity and enable the design development and reproductive uh reproducibility of future hypers scale data centers supporting AI workloads.

So everything we've been hearing about data centers, every deal we've been seeing, Google spending 40 billion, Meta spending 28 billion, all of that accelerating at scale, I mean last week Amazon spent 60 or announced they were spending 65 billion, 15 billion in um Indiana and 50 billion in Virginia for data centers. Palunteer is like, "Wait a second. If you're going to build all these data centers, if you're going to have all this energy infrastructure, if you're going to be able to manage the ecosystem that is required to get these data centers online and actually make AI real, because without the data centers, without the energy, without the compute, it's not possible. Our software should be at the front lines of this."

Um, vice president of AI infrastructure at NVIDIA said, "A new industrial revolution has begun. one where intelligence is manufactured at scale through an extraordinary complex supply chain of AI infrastructure now being built across America to strengthen our economy, workforce, and security. By partnering with Palanteer in our ecosystem, we are accelerating the transformation powering the engines of the AI age, transforming data into intelligence, and securing America's technology leadership for decades to come.

And of course, as I'm announcing this, Meta is pumping. I can't get through one news story today without something else happening. Goodness gracious. Meta 3% right here. Why is Meta pumping? Did they announce a new Oh, but Chris is about if Chris is sleeping. This is going to somehow he's just going to know that his options are printing right now and he's going to wake up somewhere.

Okay. Why is Meta moving? Can't even get through my pounder segment. What's going on with Meta? I don't see a headline. There's got to be something coming pretty soon. We'll talk about we'll get back to pounder in a second. Let me just see the reason why Chris is not sleep. See, I knew he was there. I knew he was there.

Um Oh my goodness. Oh my goodness. He did it. He did it. Meta Zuckerberg plans up to 30% cuts for metaverse efforts. Oh my goodness. Zucks woke up and he realized he can't keep spending on the metaverse. Wow.

Wow. By the way, Chris, Steve, and I had a had a Meta podcast like three weeks ago, and one of the things we all agreed on was that if Zucks comes out and says, "Yeah, we kind of don't need some of these initiatives like Reality Labs anymore, and just says, "Hey, we're going to pull back a little bit. Stock's going to go up." That's that's all they had to do. That's all they had to do. And this was part of Chris's thesis. That's why he bought those naked calls. He knew that or he at least had a thesis that eventually Zux would pull back some of this honestly nonsense spending and the stock would react to that.

Look at that. Zuck said, "I want to be in this Santa Claus rally as well and I am pulling back my spend." Wow, dude. This was also This makes so much sense. Like no one uses the metaverse. They lost $4 billion last quarter. Not last year, last quarter. In 90 days, they lost four billion on something no one uses.

30 bucks on the day. And it's going it's it's not stopping. $34 5 6 72 on Meta. Oh, but Chris is not going to work today. Chris is Chris is going to be staring at these options all day. There you go. Congratulations if you bought the Meta Dip. I mean, I bought the Meta Dip. I did not buy as heavily as our friend, Mr. Chris Patel and that's why I shouldn't get the crazy gains as our friend Chris Patel. This is the beauty of the market. If you have conviction, if you go against the the consensus opinion and you take a heavy bet, you could be rewarded. And so for those that heavily heavily bought this meta dip, congratulations.

Uh this is big and I think when the market opens now, could this get sold off when the market opens? Sure, anything is possible. But if it gets sold off, people are buying that dip again because guess what? EPS just went up. Operating income just went up. Free cash flow just went up. I mean, pretty pretty much every operating metric that Wall Street cares about, especially in the age of hyper capex spend where Wall Street wants to see certain verticals that are um effectively being spent even if your capex is high. All of those metrics just went up. If this report is correct, that Zucks is pulling back metaverse spending by 30%.

There you go. [laughter] That's why Chris was in your dream, dude. I said yes. You guys didn't believe me. Chris was in my dream yesterday saying buy meta. I woke up thinking of Chris. I'm like, why am I thinking of Chris, dude? And I realized, dude, he was just in my dream. There you go. Congratulations if you bought the meta dip heavily. There you go. 5.2% 673. If you have Meta Options, those are going to be up much more than 5% on the day.

And here is the move. Matias says, "I loaded up on Meta under 600 with a screaming bot." You know what's going to happen today as well? A lot of people are going to jump into Meta. lot of pe because you know the market waits for a piece of news that can change the narrative. The people that buy the dip believe that the narrative will be changed before the narrative changes and that's you know Google shareholders saw that heavily happen uh this year. If you bought stocks in 2023 when narratives were really bad and then the narratives changed you saw that happen as well. And you know this is another classic example happening with Meta. So we'll see when the market opens if this can sustain itself. I find it very hard to believe it completely sells off but this is a big deal. I'll try to get some more details on it.

Right now, the headline is Zux is pulling back 30% um of metaverse spend. And also the other meta news we're about to talk about is that um is that uh they just they just poached one of Apple's senior design engineers to to work on Meta or to to work on a new product at Meta. So that that's also a big piece of news just given the person who left Apple has been there for a long time.

Uh Mark Zuckerberg and Meta have reportedly expected to meaningfully cut resources for building the Metaverse. Executives have reportedly discussed potential budget cuts as high as 30% for the Metverse group next year. So this won't show up in the next quarter's earnings, but for fiscal year guidance 2026, that could have a meaningful increase if they're cutting 30% of the spend for the metaverse.

Now granted, that spend might leave the metaverse and go to capex. So there there is a nuance here that the spend might not automatically show up in the operating metrics because it's it's just being diverted spend. However, if it's being diverted spend on something that has a real chance of working like AI, not a metaverse that no one uses, then maybe the street forgives it. You know, maybe the street doesn't send it back to 800 anytime soon, but the street forgives it and they're more excited to bet Zucks on spending another 15 billion on capex versus 15 billion on the metaverse.

So there you go. There you go. Yeah. And look, this is actually bullish Nvidia because if it is going to go back to GPUs, bullish Broadcom, Nvidia, Google, if there's going to be more TPUs, AMD, you know, Meta is like I think AMD's biggest customer or their second largest customer. So you got Nvidia getting a little pump right there as well, 0.53%.

And you know, honestly, this is bullish the entire market because a lot of that spend on the metaverse was doing nothing for all of us. Definitely was doing nothing for Metaverse shareholders or for Meta shareholders. So if that spin is diverting and just going into other initiatives and eventually into other stocks that benefit from those initiatives that all of us own that that yeah that's actually a really good announcement for the entire market not just Meta itself. Meta right there 5.7% 675 on the day.

All right so that's what you got for Z. We'll get back to that story in a bit and we'll see if we can get some more details to wrap up what's going on in the world of Palunteer. Again I think the Pounder announcement is a very very very big deal. They are partnering with Nvidia to build a brand new product. The founding partner of this new product called chain reaction is Nvidia. And it looks like Palenter is bringing their software to one of the largest industries growing at an exponential pace which is data center and energy.

Now the pounder quote from this uh is right here. Let me pull this up. This is from Tristan Grusa who's the head of Pounder's energy and infrastructure uh in investments and buildout. The energy infrastructure buildout is the industrial challenge of our generation. Yet the software that the sector relies on was not built for this moment. We have spent years quietly deploying systems, keeping power plants running, grid stable, and orchestrating complex supply chains. Chain reaction is what it looks like when you rebuild from the ground up for the demands of AI.

Very big deal. Makes a lot of sense. Uh I think this is going to be one of those announcements that look, I don't know if it has any impact on the stock today because at the end of the day, it's a new product announcement. It's not necessarily a brand new like contract or anything. But if you think data centers are uh going to be a very large industry. We looked at some JP Morgan reports two days ago that showed just the kager of the tan of data centers. Yeah, it's obvious you're going to need software to make that like real and to operationalize it in a meaningful way.

I mean a lot of these 10 gawatt 15 gawatt deals like none of them have gone online. And for them to go online you have a massive bottleneck of energy more than compute and the software needed to make all that happen. I think obviously should be one of the companies like Pounder that has a relationship and experience with managing complex data sets for energy. So really important partnership for Pounder and Nvidia makes sense that they announced this today and I think we're going to see Pounder play a heavy role in the data center buildout which again is them expanding their TAM their revenue potential and them being at the heart of this AI buildout.

Meta right here 6.2% on the day 679. For those that are just joining, Zux is pulling back metaverse spend allegedly. Um, as for Bloomberg and 680 pre-markets, that's why this stock is up 6.4%.

Could the Santa Claus rally be starting? Well, December 3rd again was the worst day in December historically. We got through December 3rd yesterday. S&P was, you know, relatively flat. Uh, this Meta announcement is a hell of a way to start the Santa Claus rally if we are officially starting it. And again, it's not just good for Meta shareholders. I mean, Nvidia's up 1%. Why is Nvidia up 1%? Because it's kind of obvious if Zux is not spending on the metaverse, he's probably going to be spending a little bit more on Capex or a lot more on Capex and that helps everyone else.

Roy says, "I entered 50% of my portfolio yesterday to Meta Shares." Wow. [laughter] Pretty good timing for anyone who bought the meta dip in size over the past couple of weeks. I mean, pretty pretty freaking good timing, dude. Chris is about to buy a jet. Chris Chris doesn't have spreads on Meta. Remember, with spreads, you cap your profits because you have the uh short call counteracting your long call. It reduces your premium you have to pay, reduces your risk, but it also caps your profit. With naked calls, your profit is theoretically infinite. like Meta could just keep going up and up and up and the calls could just keep getting more and more valuable

and that's why we're getting some momentum. Chris, I'm gonna give you a call right real quick. Let's get your take on this and uh then we'll keep going from there for again for those that are joining Meta right here up 6% on the news that they are cutting efforts on the metaverse.

Real quick, let me just show you guys the jobs data. It wasn't that different from what we've heard before. So in the month of November, US employers made 71,000 new layoffs. That is up to 1.17 million layoffs for the year. This now marks the first year with 1.1 million job cuts since the pandemic lockdowns in 2020. That means that we need to cut rates. That means that we need to cut rates. So

71,000 layoffs in November. Uh the highest level of layoffs since 2020. Obviously, it means we probably should be cutting rates. The other piece of job data that is actually relatively bullish is jobless claims we get every Thursday. Came in at 191,000. The street thought it would come in at 220,000.

So again, the labor market is weakening. We should be getting this rate cut, but it's not deteriorating. And I think that's a very, very, very important nuance for everyone to remember. If jobless claims were at like 300,000, we would have an issue. They're at 191,000. Not good, but definitely not horrible. And it means that there is a world which we get a rate cut, but the labor market doesn't deteriorate, which ultimately means that corporate earnings can be strong with the Fed easing. And that means it could set up for a strong bull market going into 2026.

Chris Patel, good morning.

>> I am about to send you something very interesting. Let me just uh hold on one second. So, remember that day when

>> Chris, get closer to the mic. It's a little it's a little hard to hear you.

>> All right. You remember when we were talking about Meta and I was like, "Hey, listen. I'm about 750,000 deep in this thing."

>> Uh, yes, I do remember that because that's a pretty aggressive bet to make.

>> I lied. I got 1.25 million and all naked calls. Bro, after our conversation, I was like, I don't get this bullish on things without sort of convictions. I was like, you know what? So, I cleared up some of my uh returns on my IRA and I bought a lot of calls on there, too. I just sent it to you. Take a look.

>> Oh, boy.

>> Yeah. Yeah. You know how when you had that Robin Hood conviction, you were just like, "Screw it, man. I don't care what it is. Let's go." I was like, "You know what? I've got conviction, too." So, I just uh

>> Are you saying you learned from me on this trade? Am I responsible?

>> I I would say Yeah. Well, yeah. Yeah. You know, I also was like listening to a lot of drug. I was like, "Dude, if you know what you're doing and you know, don't be afraid to take

>> Oh, hold on. Hold on. Let's play that clip real quick. This is why you I I was wondering why you shared this clip yesterday. I was wondering. Let's share this clip real quick and then we'll go

>> No, no, no, no. I don't I don't I don't need any cut. First of all, Chris is the reason I even learned about options in the first place. But, dude, I'm happy for you. It's not easy to go 1 million deep into a trade. And that 1 million, theoretically, these are naked calls, could turn into a lot more than 1 million. But this is what Ducken Miller said and what Chris shared yesterday, which kind of sums up the entire uh meta trade.

>> Well, my idea of risk control is a little non-conventional. I like putting all my eggs in one basket and then watching the basket very carefully. I think uh [laughter] I don't know what they teach at Marshall, but at most business schools they teach I think a lot of nonsense called risk adjusted return and diversification.

>> As a money manager, if if you look at a normal portfolio, most people will make 70 80% of money that year on two or three ideas, even though they'll have 30 or 40 things in their portfolio. My concept was to put into those two or three ideas that I had the most conviction in. I was also lucky to travel across asset classes. So I traded commodities, currencies, bonds, and equities. And it gave me the discipline. If I didn't have a good idea in equities, I was happy to have no equities or put all my eggs in one basket and watch that basket.

>> So, here's the question, Chris, before I even get into the your opinions on the actual announcement. Uh, are you taking any profits this morning?

>> Uh, no. No. I think Meta is gonna Meta is going to get rerated much higher. If you look at how much cash flow that was deployed to the reality lab section and then how much cash flow these guys were generating on top. Anyway, there was a lot of uh a lot of bullishness behind it. So I think a lot of what we're seeing today is you know and this is not something that's hasn't happened in the past. If you guys remember when when Zuck was challenged in 2022, you know, he cut the he cut the fat where he needed to to invest in the things that needed to get invested in so that this way he could maintain high levels of growth within the company, right?

>> So that's the one thing I mean if you look at last year and early parts of this year, he ended all DEI programs and started cutting all low performers. So you know at the end of the day Zuckerberg is and he's the largest shareholder of the company. He's the founder. the one thing he's not going to do is let this company flounder by any means, you know. So, as much as as much of a ideologue he is when it comes to these passion projects, and I think he'll still invest in the metaverse, don't get me wrong. It's just right now the metaverse is not the most important thing to the market, to shareholders, and to the company.

>> So, you know, it's and and believe it or not, guys, everyone who's in the mega cap space, they have to try new things. If you don't try new things, you're going to run into the innovator's dilemma. You know, your your core markets are eventually going to get challenged by newcomers and the newcomers are going to eat away. Like I mean, this is the problem with companies like Apple in my opinion where Apple's topline growth has basically been flat and they haven't really been investing too much into other things. Now guess their cash flows are supported massive amounts of share buybacks which has provided shareholder returns but at the same time in terms of future growth Apple is there for stability but they could be challenged you know so that's the key

>> so I think all the mega caps they have side hustles look at Elon Elon has everything going but he still has multiple side hustles dude Amazon loves failing fast they try new things all the time does the same thing Google dude Google the amount of money that they like spent on all these side projects.

>> Yeah.

>> Insane. They lose money on Quantum. They've lost money on Whimo for a decade. They've lost money on so many things. But the thing is, all you need is that one thing to hit and what happens? You're your your your next leg of growth is going to explode. And I think with Zuckerberg, they've really hit the head nail on the head when it comes to AI. And they unlike the other businesses that are still kind of discovering how to generate more profitability, dude, he's getting instant ROI right now. If you look at their cash flow statement on it, they doubled operating cash flow in the last two and a half years.

>> Okay. So here here here's the question then. So AI is giving them an ROI on advertising. That's fair. The street was upset because they don't see anything else besides advertising. At least that was the narrative. Do you think this counteracting of balance sheet efficiency by by getting rid of some of the metaverse costs and potentially just putting that into the capex, do you think that helps change the narrative that the street was upset about or or how do you think the street's going to interpret this long term?

>> No, I mean even even from a even from a capex perspective, dude, if you look at the transaction that they did with Blue Blue Owl, right? So a lot of people they saw that and they were like wow this these guys are headed into the same direction that Oracle is where they're promising all this capex but the ROI is not there and I'm like don't if you really if you look at the deal that they structured with Blue Owl it's very very value accreative to shareholders where basically the one big beautiful bill came in and and made it so that you could immediately expense certain certain um certain things from your capex right

>> so before like Let's say you built a building, right? You would spend the next 30 years depreciating that building at at a very low amount every single year. So now you're taking all of this capital and locking it away. The deal that they did with Blue Owl was that Blue Owl would build these build the infrastructure. Meta would supply the GPUs that Meta could immediately expense as a as a cost and save themselves a bunch of money on taxes. So no longer do you have to carry these things on your balance sheet for the next five years. The amount of income that Meta generates is insane. So they can expense that that that right away and take the benefit of that cash flow and they can stay liquid the entire time.

>> And at the same time because they can stay liquid, they can keep doing share buybacks, they can keep doing dividends. Yep.

>> And and also remember the cost for them for buybacks is I mean the ROIC on buybacks is way better than locking that away in some capital. That's why if you look at all these all of these major companies, why don't they just go out there and build their own buildings and and and not pay rent to landlords? Well, that's because that's such a low margin part of their business that they they would rather be paying some leasing charges and keep the rest of the money and invest back into the business.

>> Right. Right. So, I think that's the challenge that a lot not I want to say challenge, but that's like the thing that a lot of people don't necessarily realize that the ROIC that Meta is getting on a lot of their um AI spend is massive. Dude, I'm telling you, look at their operating cash flow. two and a half years they were able to take 50 billion in operating cash flow to 107 billion in operating cash flow and then in another two years that thing right now the projections are they're going to do 1.5 1 point like 150 billion in operating cash flow you tell me what the value of a business is with 150 billion in obscat operating cash flow and at the same time their capex while they're investing a ton of it right know, IT'S GOING TO MODERATE EVENTUALLY and get back to a normal normal level.

>> No, I agree and it really does feel like the narrative uh sort of issue with Google. They had a DOJ issue, but again, the market was discounting them so heavily over something that was so external and it feels like that's the same thing with Meta in terms of this AI narrative. That's, you know, where is the ROI coming from? To your point, offering income doubling means the ROI is there.

>> that we are in some form of a bubble. Are we overspending? Does the math of all of this make sense?

>> So, this is really complicated and I want to separate out the technological side of it from the economic side of it. On the technological side of it, I feel really solid. I think I'm one of the most bullish people around and I think it pencils out. On the economic side, you know, I I I have my concerns where even if the technology is is, you know, really powerful and fulfills all its promises. I think there may be players in the ecosystem who if they just make a timing error, if they just get it off by a little bit, bad things could happen.

>> So, let me go through both of them. On the technological side, the the reason that I'm not in honestly by the pure technology, not that surprise is myself and some of the people who eventually became my my my co-founders, we were the first to document the scaling laws of AI, which is you put more compute, you put more data into AI with small modifications. We've seen these things like reasoning models and test time compute. They're all tiny little tweaks. And I've been watching that trend for the last 12 years or so since I joined the field.

>> And the thing that is most striking about all of it is as you train these models in this very simple way, you know, with a few simple modifications, they get better and better at every task under the sun, they get better at coding. They get better at doing science. They get better at biio medicine. They get better at the law. They get better at finance. They get better at at, you know, materials and manufacturing. and and that's just that's just a listing of all the sources of e of of of of value of value in our economy.

>> If I just take anthropic itself, which because we work so much in the enterprise side, I think we're a good barometer, maybe a pure barometer than the others, which kind of filter through consumers, which kind of have their habits and their use cases. We look at our revenue, it's grown 10x a year every year for the last three years. zero to 100 million in 2023, 100 million to a billion 2024, one billion to it's gonna land somewhere between eight and 10 a at the right there as well.

I just want to highlight when everyone says AI is a bubble. This guy has 10x the revenue of his AI company every year for three years in a row. I mean, again, I don't understand how you can generate that type of growth if all of it is fake. You can say some parts of it are overvalued, but you cannot say that it's fake. there's no use case and that it's just not real.

>> The end of this year, will it continue? I don't know. But the technology is driving there and the economic value is coming with it. I it will, you know, that that trend is going to slow down for sure, but it's still going to be really fast. And so I have this confidence that the the ulti eventually the economic value is the e eventually the economic value is going to be there.

>> Um, but when you but let's just go to this because there are companies that are spending hundred billion dollars a year more. You're going to be spending 50. You look at what Sam Alman, who was here last year, plans to be spending. These are extraordinary numbers. And this is all a bet, a big bet that this is going to scale in this way. And and my question is, is there a real way to pencil this out or is this uh more of a a gut feeling at this point?

>> So, let me let Yeah. So that really gets to the second part of it and and I I I I will describe as transparently as I can. I think there's a real dilemma deriving from uncertainty in how quickly the economic value is going to grow and the lag times on building the data centers that that drives it. So I think there's genuine uncertainty, there's genuine dilemma which we as a company try to manage as responsibly as we can. And then I think there are some players who you know who who are yoloing who who pull pull the wrist dial too far and I'm very concerned.

>> Who is yo aka open AI

>> yoloing?

>> So I that's a question I'm not going to answer. Um uh uh so on the first one put yourself

>> we'll come back to that.

>> Put yourself We won't put put yourself in in the position of of entropic. Put yourself in my position. you you you've seen this revenue curve that goes up 10x a year for three years. You're like, "Okay, what's going to happen next year?" If I'm really dumb and I extrapolate the pattern 10 to 100 billion. I don't believe that. Just to be clear, I don't I don't believe that at all. Even though it's happened in the last three years just at this scale, I don't believe it. But that's one of the outer bounds of, you know, the the outer limits of possibility.

>> If I go in and I'm like this enterprise and that enterprise and this use case and this is our go to market motion. If I try and do it you know bottom up then you know maybe it's maybe it's 20 or 30 or something like that. So there is what what I've been calling internally this cone of uncertainty where I don't know if a year from now it's going to be 20 billion or you know it's it's going to be 50 or or like you know it's it's it's very uncertain. I try to plan in a conservative way. So I plan for the lower side of it. But but that is very disconcerting.

>> And you add to that the idea that building the data centers has a long lag time. It's like a year or two. So I have to decide now, literally now or in some cases a few months ago, how how much compute I need to buy in, you know, early 20 for to serve the models in early 2027 when I get to that revenue amount. And there's two coupled dangers. One is that if I if I don't buy enough compute, I won't be able to serve all the customers I want. I'll have to turn them away and send them to to to my competitors. If I buy too much compute, of course, I might not get enough revenue to pay for that compute. And and and you know, and and you know, in the extreme case, there's kind of the risk of going bankrupt.

>> And how how much buffer there is in that in that cone. Um it's basically determined by my margins. If I have 80% margins, I can buy $20 billion of compute and it could serve hundred billion dollar hundred billion dollars of revenue. But because the cone is so wide, it's hard to avoid, you know, making a mistake on on one on on one side on one side or the other.

>> Now, we've been a relatively responsible company. Um, and I think because we focus on enterprise, I think we have a better business model. I think we have better margins. I think we're being responsible about it. But again, let's say you have a different business model. Let's say you have a consumer business model, aka Open AI, you know, you're you're you're you're kind of the source of your revenue isn't as good. Your margins aren't as certain, and let's say you're a person who just kind of like constitutionally just wants to yolo things or just likes big numbers. Um, uh, then that then you may turn that dial pretty far. And so I think there is a real underlying risk. Whenever there's uncertainty, there's a risk of overextension. We all face it.

>> is my point. So currently that that is a big bottleneck right is energy.

>> Yeah it is the bottleneck.

>> The bottleneck is this. So was it Google that is making nuclear power plants to operate one of its AI factories?

>> Oh I haven't heard that but I think in the next six seven years I think you're going to see a whole bunch of small nuclear reactors.

>> And by small like how big you talking about?

>> Hundreds of megawatts. Yeah.

>> Okay. And that these will be local to whatever specific company they have.

>> That's right. We'll all be power generators.

>> Whoa.

>> You know, just like just like your you know, somebody's farm.

>> It probably is the smartest way to do it, right?

>> And it takes the burden off of Yeah. takes the burden off the grid. It takes and you could build as much as you need

>> and you can contribute back to the grid. It's is my point. So current

>> uh over time at Google we're always proud of taking moonsh shots. You mentioned Whimo earlier you know that's been over a decade in the making. We're working on quantum computing. In that spirit one of our moonshots is to how do we one day have data centers in space so that we can better harness the energy from the sun. You know that is 100 trillion times uh more energy than what we produce in all of Earth today. So we want to put these data centers in space closer to the sun uh and and I think we are taking our first step in 27. We'll send tiny uh tiny racks of uh machines uh and and have them in satellites, test them out and then start scaling from there. But there's no doubt to me that a decade or so away we'll we'll we'll be viewing it as a more normal way to build data centers.

>> In this country, it you have 1% of the country in prison. 1% who were in prison and therefore have no rights. Do you know what happens to you when you go to prison? They take you away from your kids. You know who that happens to? Disproportionately workingclass, disproportionately black and Hispanic men and white men in the underclass. Where are the thousands of articles about them? Nobody cares. And they don't care because it does not either serve the ability the the the desire to force me to vote for one party, which basically takes away all my power. That's effectually what it does. If I agree to say this is the worst thing in the world, I essentially have given up my vote. My vote is not for you. My vote is for these two issues.

>> The second reason they don't care is because somehow no one has empathy with any of those people because no one none of us really deal with those people. At Palunteer, we are on the side of workingclass Americans. We support people who go to the military. We save their lives. We bring them home safer. Our AI actually makes workers more wealthy, more valuable. And the 10 to 15 million people that love me despite what's written, half of them made a lot of money on us. And you know what they're like? They're like people like me who think, you know what, we have to do better. Of course, we have to do better.

>> I didn't shift my politics. The political parties have shifted their politics. The the idea that what's being called progressive is in any way progressive is a complete farce. I've been progressive since the beginning of Palunteer. I'm continue to be I grew up in a highly intellectually intellectual mostly Jewish incredibly left-wing environment. And every Saturday and every Friday, I heard a lecture about how the conservatives are going to destroy this country with illegal immigration because it's going to undermine the fabric of the American worker. That was 50 years ago. That's what it be means to be a progressive.

>> Being a progressive doesn't mean just, oh, I oh, it feels so good to be involved in dysfunction, things that can never work, a form of socialism that's never worked, having no meritocracy. That's not progressive. That's pretend. That's honestly cowardly. And most people on very half my old party knows it. They don't speak up. It's [ __ ] It will never work. And it does not help. You know, the biggest problem with that is it's not helping the poor people that they claim to hurt. If you think that's helping a black person in the inner city, you're ridiculous. The last thing anyone in this country needs is a dysfunctional educational system and handouts that have never worked and are not going to work.