Prof G Markets
00:42:01 · Scott Galloway
[00:42:01] S0: I wanted to hate this s one, but after reading it, I I just... I couldn't help but recognize some of the numbers here. And I've now... I wanna say I've done a one eighty. But this is a company that, as far as I I can tell, posted positive adjusted operating income. And I hate the word adjusted because it did take excluded stock based comp. But they posted essentially adjusted operating income for a company that's scaling at an unprecedented rate. It... What's so rare here is the combination at this growth rate. Most companies growing 13 x are burning cash in an accelerating rate, not approaching profitability and on an adjusted basis. And if you look at this thing in the pricing, it's pricing cheaper than Palantir and roughly in line with NVIDIA while growing much faster than both. It just feels like on a risk adjusted basis... And I wanna be clear. There are existential threats everywhere. If all of a sudden, if a programmer at Anthropic actually tells tells the bots or the agents to be creative and have a sense of humor and it starts... It decides to disclose a billion people's porn usage, the next day, it's shut down. There's all sorts of political political existential rescue. If NVIDIA figures out a way to put their chip on an iPhone and go straight to client, if if if Facebook takes advantage of the agentic layer and connects the 500,000,000 businesses they already have a relationship with or the 3,000,000,000 consumers they already have a relationship, there are existential threats everywhere. But based on what we're seeing now, if they can navigate this landmine and continue to show a fraction of the growth they're recognizing right now, this thing becomes a cash spigot trading at a multiple that makes that makes NVIDIA and especially Palantir look expensive.
00:43:59 · Ed Elson, Josh Brown, Scott Galloway
[00:43:59] S3: But I'm not worried about the political risk. I'm worried about the financial risk that they've already signed up for. I'm worried about the $800,000,000,000 that are about to show up. I worry more about the former. [00:44:10] S4: I worry about both. If the Europeans decide that they don't really want this in their country, or there's gotta be- [00:44:23] S0: US frontier labs, you're out. [00:44:24] S4: Yeah, there has to be a different version that conforms to the EU, and this could happen in Asia too. Think we're so early in this. We don't even really know where the true political fault lines are. And like to me, that's why Scott, it's not pricing in line with its growth. Think the market is being, I know it sounds crazy. I'm saying the market's being rational and then it's gonna be a $2,000,000,000,000 company with losses. I just think like we're not pricing this thing based on its its growth rate and and not taking into account all the existential risks that you just cited and I did. I think we're we're sort of doing both at the same time. [00:45:14] S3: Do you think it goes out, Josh, at $2,000,000,000,000? Cause there's been debate what might get cut down to one and a half.
00:45:14 · Ed Elson, Josh Brown, Scott Galloway
[00:45:14] S3: Do you think it goes out, Josh, at $2,000,000,000,000? Cause there's been debate what might get cut down to one and a half. [00:45:21] S4: If it gets cut down to one and a half, it'll get to two. I think the the enthusiasm around this company will be peaking right as it goes public. Like, I don't think this is one of those things where, oh, they fucked up, they stayed private too long and the heat is off of this thing. I actually think they nailed the timing. And again, Sam Altman did something interesting. He said, actually, we're not going to go public until we figure out all these safety issues because this is the part he didn't say out loud. I don't want my s one to read like Dario's s one. [00:46:01] S0: Yeah. Because he's such a thoughtful guy concerned about us.
00:46:03 · Josh Brown
[00:46:03] S4: Well, no. Opportunistically, he's saying, let Dario write the s one that talks about the extinction of humanity, and then come public and say, I've solved safety. That might've been a tactical error. So I think this company is coming public just as the excitement around it is peaking, and that's a good thing, that bodes well for the first few days of trading. I also think we now have some prototypes in the market for staggered liquidation periods for shareholders like Cerebras didn't go as well as it could have, and then SpaceX came along afterwards and sort of did it better. And then, you know, whatever they've learned from that, they'll apply now to the Anthropic IPO. Like, we we are learning to do 100,000,000,000 to $1,000,000,000,000 IPOs in real time. The bankers have this instant feedback loop that they're benefiting from and it's just a different day and age. So do I think they could raise a $100,000,000,000? Yeah. Like with their eyes closed, they could do it in the private market right now if they wanted to. What they actually, what they need to do is say, we're the safe one. We're publicly traded. We're conforming to SEC. We're answerable to like all of the regulators around the markets, debt and equity. Like we're the consumer friendly, safe. We're the ones that wring our hands in public about all the risks to humanity. Like we're the good guys. That's what they're doing here with the IPO. They don't have to go public right now. I know people said they better go public right now or they're screwed. I don't think that's true. I think they could do a series G and easily raise a 100,000,000,000. I think this is the smart move to the ducks are quacking on Wall Street. If you if you never learn anything from me other than this, it's good enough. What... When the ducks are quacking, you feed the ducks. That's what they're doing.
00:48:08 · Scott Galloway, Josh Brown, Ed Elson
[00:48:08] S0: Alright. So, Josh, we're increasingly hearing, open quote, bubble claims. Ken Griffin and Ray Dalio both suggested last week they rent a bubble. What's your response to the bubble question today? [00:48:19] S4: If it is a bubble, it is the most pathetic bubble I have ever seen in my life. We are discounting. We are [00:48:30] S3: I agree.
00:48:30 · Josh Brown
[00:48:30] S4: Factoring in growth skepticism every single day the market is opened. It is an anti bubble. The only thing that you can credibly say is that it's an earnings bubble and that the profitability our tech giants are enjoying today is not sustainable. You could say that. You cannot say it's a valuation bubble. The semiconductor industry is the largest contributor to tech earnings growth. And there's a lot of tech earnings growth and the semis are by far the biggest contributors. The year over year estimate for tech earnings growth is 65.6% for the quarter that we're in now. Just think about that number for a second, okay? Sector wide, it's not one company. 65% for the tech sector, if you exclude semis and semi equipment, it falls to only 24.9%. So the entire tech sector is growing 25%. And within that, the semis are almost triple that. We're getting tech reports now that are continuing to crush. We had Western Digital print $4.64 in earnings versus $4.11 expected. Oracle, dollars 1.92 versus $1.74 big earnings per share surprises. And yet we are seeing a contraction in the number of fifty two week highs within the SMH, the semiconductor ETF. There has not been an above average reading, which I would say is like 70% or higher names making new highs. Since July, there are zero percent fifty two week highs for the semis. Explain to me how that's a... Why is it a bubble? How is it a bubble? Here are the three cheapest stocks in the market right now. SanDisk has a price to earnings growth or peg ratio of 0.08. 0.08. In a bubble, it's like five. Micron, point one o. Western Digital, point one three. Micron is selling at five times earnings. So if this is a bubble, it is the worst bubble ever. I want my money back.