Prof G Markets
00:28:24 · Dan Chiolan
[00:28:24] S4: It's pretty early days for autonomous vehicles. But as the technology progresses, I think there's gonna be a couple places you can look for winners. The places where I'm gonna be looking is first in the sort of picks and shovels play, which are companies that are actually making the components that go into these vehicles. I think the first opportunity here are gonna be companies that make LiDAR sensors. And those are... Those expensive sensors that are in Waymo's and and and Zoox's and pretty much every autonomous vehicle. And I think the reason why there's an opportunity there is because currently, 95% of passenger car LiDAR sensors, which are in these autonomous vehicles, are made in China. And, obviously, that's a huge national security risk. Those Chinese made sensors are already banned for military use. And there's actually bills in congress that would ban them for civilian use as well. So if that happens, there would be a huge opportunity for American companies to come in and manufacture those sensors. So there's gonna be some winners there. The second is gonna be in the maintenance and upkeep of autonomous vehicles. Right? Because unlike Uber and Lyft where drivers themselves are maintaining their vehicles, these companies are going to have to maintain thousands of vehicles at scale across the country. You know, they need to to charge the vehicles. They need to park them. They need to clean them. Currently, there are a few startups that are looking to do this as a service for those companies, but there is an industry here in America that I think is gonna see a huge windfall from this need, which is the car rental industry. You know, if you think about car rental companies, they already have these facilities around the country sort of ready to go. And just last week, actually, Hertz announced that they're standing up a new leg of their business to do exactly that, to service autonomous vehicles. So I think we're gonna see see more car rental companies sort of pivot in that direction as well. And then I think the last winner is gonna be the trucking industry. Because if you look at trucking, about 44% of trucking's marginal costs come from driver compensation and benefits. So if you can automate those costs, you know, it's obviously very lucrative. There's currently a company called Aurora that's testing self driving on American roads.
00:30:31 · Dan Chiolan, Ed Elson
And then Tesla also produces a semi truck, which they say will eventually have full self driving capabilities, although it doesn't quite yet. [00:30:39] S5: Dan Chiolan is our research associate at Prof G Media. Really fascinating stuff. Thank you. If you wanna watch a replay of the the livestream that Dan did on this industry, it's like an hour long, I wanna say. It's it's super in-depth, but it's super informative. You can go to profgmedia.com, click on the Prof G plus tab. We do a lot of these, more, in-depth deep dives over on Substack. Dan, thank you. I'll see you tomorrow. Appreciate your time. [00:31:10] S4: Thanks for having me, Ed.
00:31:16 · Ed Elson
[00:31:16] S5: Before we end, let's return to Anthropic's s one filing, which has polarized a lot of investors. Some look at the revenue growth, and they say that the company is incredible. Others look at the net losses, and they say it's terrible. The largest IPO in history is bringing out a lot of emotions from investors, which I get. But it also makes me think that maybe this IPO is fundamentally misunderstood. So to end this episode, I would like to do a little bit of myth busting on Anthropic and more specifically on Anthropic's IPO. So number one, yes, the company did rack up an $80,000,000,000 net loss in the first half of the year, which sounds bad, but no, that doesn't actually matter. Why? Because those losses were a product of the increase in the fair value of Anthropic's convertible notes. In other words, investors lent Anthropic money, and in return, those investors later received equity. And because of how accounting laws work, Anthropic technically had to write that up as a widening expense. But in reality, it was simply reflection of how valuable Anthropic had become in a remarkably short period of time. So the $80,000,000,000 net loss, that's a red herring. Okay. Number two. Yes. Anthropic's first half revenue grew 1300% year over year, which is incredible. But, no, as Steve points out, it has not kept up that extraordinary growth, not even close. The part that the s one in many places left out is that revenue growth slowed down significantly in q three. As Steve said, it was a 150% quarter over quarter in q two and then less than 50% in q three. Now that's not necessarily bad, but it does show that maybe the AI frenzy is beginning to come to an end. And finally, number three, yes, Anthropic did narrow their losses quite significantly. It was more than $2,000,000,000 in the first half of last year versus less than $700,000,000 this year. That is good, but, no, that trajectory is not going to continue. The most important numbers in the filing came at the end of the document where we learned that Anthropic has signed more than $800,000,000,000 in future compute commitments, none of which are reflected in the current income statement, but all of which eventually will be. That includes an $110,000,000,000 contract with Amazon, a $115,000,000,000 contract with Google, a $161,000,000,000 contract with Broadcom.
00:33:45 · Ed Elson
What it doesn't include, however, are the billions of dollars in capital expenditures, which they are about to register probably to build out their own compute. That's not something I believe because I had a hunch about it. I believe that because they literally told us that in the s one. In other words, that $800,000,000,000 number is actually probably gonna be a lot higher. And as a result, this company's losses are about to explode. Now did they time this IPO so that we wouldn't have to look at those losses on the income statement? Possibly. But that's a theory. It's not a fact, and this segment is specifically devoted to things that we know for sure. The truth about the Anthropic s one is that the income statement doesn't tell you the full story. It doesn't mean it's a bad company. It doesn't mean they don't have an incredible product. They do. But it does mean that there is still a lot of risk. The business model hasn't been figured out yet. And until it is, we must treat Anthropic with the appropriate level of caution. It's still a highly risky venture bet. Things could still go spectacularly wrong. What it certainly isn't is a proven safe corporate investment, something that it's potentially $2,000,000,000,000 valuation might suggest. In sum, not much has changed. But whatever picture the profitability is painting right now, all I can tell you is that next year, that picture is going to look drastically different. Okay. That's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Chiolan, Kristen O'Donohue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Prof Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I'll see you tomorrow.