Prof G Markets
00:19:04 · Ed Elson, Josh Brown, Scott Galloway
[00:19:04] S3: Yeah. [00:19:05] S4: Yeah. They have an accounting loss for sure. [00:19:07] S3: The 80,000,000,000 is a red herring. Okay. 100%. [00:19:10] S4: So we're on the same page. [00:19:11] S3: We're we're on the same page about that for sure. [00:19:12] S4: I'm just waiting for I'm just waiting for Scott to shut up already. [00:19:19] S3: Scott, chime in and shut him up. [00:19:22] S0: Yeah. Well, in the words, another great Rocky quote. I must break you. So, like, Talia Shire [00:19:29] S3: I love you, Josh.
00:19:29 · Ed Elson, Scott Galloway
[00:19:29] S3: I love you, Josh. [00:19:30] S0: I wasn't expecting her to to make an appearance here. I had dinner with Josh last night, just for shits and giggles, I'm gonna put forward the thesis I put forward. And and Ed and Ed Elson are gonna are gonna literally turn in their graves. I think in the next thirty six to forty eight months, there's a non zero probability that Anthropic is the most valuable company in the world. Revenue went from 1,200,000,000 to 16,000,000,000 in the first half, that's a 13x increase. No company has ever grown revenue this fast at that absolute dollar scale. Palantir's historic 85% year on year growth viewed next to Anthropic's 1200% looks anemic in Anthropic, went from 9,000,000,000 to 65 in that seven x and trades at, what, 60 times revenues? So they're estimating, and I think it's a conservative estimate, that in '27 or '28, they'll be at a $200,000,000,000 run rate, which implies a multiple of 10, which looks cheap or even looks reasonable compared to NVIDIA, which I would argue is trading at suppressed earnings because there are PE because everyone's worried about where the e goes. But I brought up that thesis last night with Josh, and he had pretty severe pushback. So I wanna I wanna recreate it. Josh, I think Anthropic might be the most valuable company in the world in three to four years. Your thoughts?
00:20:54 · Josh Brown
[00:20:54] S4: I don't think they have the moat that SpaceX has. SpaceX is sort of like the blueprint for how do you go public worth 1,000,000,000,000 or 2. People understand that what Elon has built is not replicable by any other company. The rockets, the payloads, the cost of getting satellites into space, the setup of Starlink, Starlink now going for 200,000,000 users, a way, like it's not, There's not an obvious competitor to SpaceX. There's another publicly traded company called Rocket Labs that are, it's tiny in comparison. They have two launch sites. They're trying to put up a couple of rockets a year. I'm not saying it's not a good company, but like it's a dwarf. So when I think about like what could be trillion dollar companies, I try to think of companies that have moats that are like undeniable. Like you cannot replicate these. It's not that you can't compete with them. It's that it's like almost a one of a kind asset. Scott, I don't know that Anthropic has the type of moat that SpaceX or Nvidia or Apple. I think those moats are unassailable and Anthropic, we're not sure. It might be. So you could absolutely end up right. I just don't feel as sure of that. OpenAI will go public in Q1. It might even get... If Anthropic is as well received as anything it's gonna be, OpenAI could be a January IPO. And they could rip each other to shreds for the next three years and Gemini in the mix. Like it could be really, it could be ugly. It could be a price war. I'm like, I'm open to that possibility. I don't think you're definitely wrong. I just don't feel as good about agreeing with you as I would want to.
00:22:56 · Scott Galloway
[00:22:56] S0: Ed, you talked about profitability. These gross margin... I mean, it looks like it's gonna have... Morningstar says it's a 100... At a 150,000,000,000, which it might be the end of next year, and a 30% free cash flow, which it looks like it's charting towards, or 30% free cash flow margin, that's 45,000,000,000 a year in potentially free cash flow in the next twenty four months against a $2,000,000,000,000 valuation. That's 44 times free cash flow. Palantir is at a 150 times, and there is no free... I mean, there is... I mean, this is the kind of multiple markets have paid for durable moat protected infrastructure businesses to be clear. And, Josh, the way I would summarize what you're saying is it's hardware versus software. Right? The ultimate moat is the Falcon nine or whether... Whatever the new rocket is called. Right? That is very hard. You could argue NVIDIA. It's not in hardware. It's in design and IP. So that's technically is... Yeah. That's a moat, I guess. But this to me... I I wanna be clear. I I I wouldn't feel comfortable saying in eight or ten years or even five years, this is the most valuable company in the world. But I'll say it here. I think at some point in the next forty eight months, if this company can sustain anything like the numbers and the lines, even if it decelerates to, like, five x growth. Right? And, also, I have a bias here. I have found... And this is anecdotal evidence, but occasionally anecdotal evidence is evidentiary, is that the product here is unbelievable. So I would say I think there's a real shot that this thing, when people get excited about it, bumps up to 4 or $5,000,000,000,000 when NVIDIA and Apple have a bad quarter and that for... I think this thing's gonna sit on the iron throne for for a bit.
00:24:41 · Josh Brown
[00:24:41] S4: It's an unbelievable product, and it is now undergoing this process of recursive learning. It's teaching itself to get better. It is learning the habits of hundreds of millions of individual daily users and conforming the way it works to those habits on an individualized basis, there has never been software development like that, like ever. So, what we have, you look at the large enterprise software players, they build a product, they observe the market. If it's vertical software, they understand the ins and outs of whatever. We make software for dry cleaners or we make software for people that manage payroll at large enterprises. It's a version. And then they update the version every three to six months and it's great. This is like updating based on what you, a normal person say to it. You're not a developer. You don't have a dev budget. The thing is getting better based on its interactions with you. I feel like that aspect of it is being glossed over. I would also say, if you are primarily concerned with the financial aspects of Anthropic, bear in mind what its cash balance is relative to how much it's raised. It really has not used up a lot of the cash that it's... So I wanna get into these numbers. Ed, I'll have you react to this. Okay. They said in the S1, they have 112,400,000,000 in cash and cash equivalents as of June 30. That's 80% of the 141,000,000,000 that they've raised over the course of six years since they founded the company. So they've raised 141. They're still holding on to 112. They have 19,000,000,000 in what they call securities and short term investments. Some of that is money market funds. So just like consider that liquid, let's say. So they've been pretty good with the money they've been able to raise plus the cash flow they've generated versus the costs of running this thing. I think it's fair to say that. What do you think?
00:26:50 · Ed Elson
[00:26:50] S3: I think that's totally fair to say. And that's why, you know, I I don't have big problems. I was thinking that we were gonna get this filing, and it was gonna be like non gap palooza, and they were gonna make all of these ridiculous adjustments, take out the training costs, do all of the... These gymnastics. They didn't do that. It was clear. It was honest, and it's very clear, as you point out, that they are making real efforts to be sustainable in terms of the amount that they spend. And I give them total credit for that. And I think it's something that we have given them credit for in the past. But the thing that I I... I'm a little stuck on is the fundamental business model itself because... And this goes... Scott, you mentioned the the cash flows. I think that that is a backward looking analysis that... And we're not paying enough attention to the fact that they have already signed up to spend $800,000,000,000. And we're not seeing any of that... Those dollars reflected in the income statement currently. They have a more than $160,000,000,000 compute agreement with Broadcom. They have a a $120,000,000,000 agreement with SpaceX, $110,000,000,000 agreement with Amazon. And to Josh's point about these moats, they have recognized that it's kind of a problem that they have to spend all of this money buying compute from companies that are actually their competitors in a lot of ways and that they have actually expressly named as their competitors. And they have said that that's that's