Prof G Markets
00:16:20 · Ed Elson, Paul Kedrosky
[00:16:20] S3: So here's a little conspiracy theory that I'd like to see if you think is perhaps correct. Is it possible that this is why they wanted to go public now? Is it possible that they wanted to take this one moment in time where the operational... The the operating profitability looks pretty good right before it's about to look quite bad? Because that seems like that is what is about to happen. They're at this inflection No. [00:16:51] S4: No. No. No. Listen. I've... I I was arguing that earlier today multiple times with people. So I think that's exactly what's going on. This is as good as it looks from the standpoint of the business as currently structured, and now you go through this inflection that makes it much more CapEx intensive. So you're essentially changing jockeys and changing the underlying structure of what's happening. And so I think this was probably their... And they they know this. This is the best time to do it because the future business is going to be very different. They're essentially reduplicating AWS, Amazon Web Services in both directions, building up and building down in terms of both the client customer facing as well as the the cloud facing stuff. It doesn't mean it's impossible. It could work, but it does mean that the bill... The way the business is characterized in this current statement is not representative of the future. [00:17:34] S3: So what would what would it working look like in your view?
00:17:34 · Ed Elson, Paul Kedrosky
[00:17:34] S3: So what would what would it working look like in your view? [00:17:38] S4: Well, think it would have to look like you'd see, for example, one of the statistics they wanna they wanna tout in the document is the declining compute intensity of token production that it's been coming down something like... It's fallen like 50% or something like that. And so you want to... They want... The business would have to look like collapsing cost in terms of compute intensity of the underlying business. And that's the only way that the margins are supported and could work because otherwise you just simply are gonna eat the business on the basis of the the compute costs associated with it. That has to continue to decline. The more troubling piece is is that there there is a there's a revenue deceleration underway if you looked at the leaked q three numbers in the context of everything else. They're now looking at something like 50% revenue growth, but arguing that in Q4, they'll see a spike. It's implied, but back to about 64% or so. So you... That has to... You have to see that reversal in the fortunes of the business. So one is declining compute intensity. One is a reacceleration of growth. And that I'm saying a company coming like this to market needs already to reaccelerate growth just blows the top of my head off. [00:18:39] S3: Final question. This is set to go public. The reported valuation is going to be $2,000,000,000,000. There has been some debate as to whether that will actually materialize. [00:18:49] S4: Yeah. $1.05 or so. I keep hearing him.
00:18:49 · Paul Kedrosky, Ed Elson
[00:18:49] S4: Yeah. $1.05 or so. I keep hearing him. [00:18:51] S3: Yeah. What do you think will happen here? Do you think this goes out at $2,000,000,000,000, $1,500,000,000,000? Does it go out at all? What do you think? [00:18:59] S4: I think if it goes, it goes to $1.05 or so, but I I reserve the right, and this is my long standing claim, is The US won't have a functioning government for the balance of the year, so who knows what will actually be able to come public and what won't and what won't. [00:19:11] S3: It's not very helpful, Paul. [00:19:14] S4: It's not my fault that we don't have a functioning government. Blame politicians. But nevertheless, one five assuming we have a functioning government, zero if it doesn't. [00:19:22] S3: Paul Kedrosky is managing partner at SK Ventures. Paul, always appreciate your time. Thank you. [00:19:28] S4: Yep. Thank you. [00:19:31] S3: After the break, a chill in the markets. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edwardelson.substack.com.
00:19:31 · Ed Elson, S5
[00:19:31] S3: After the break, a chill in the markets. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edwardelson.substack.com. [00:19:49] S5: Support for the show comes from SoFi. Here's the thing. Most traditional banks pay almost nothing in interest, so your money ends up just sitting there twiddling its sums doing nothing. And if your money's doing nothing, it's not doing its job. You work hard for every dollar, so why not put those dollars to work for you? That's where SoFi comes in. With the everything app for smarter money, with SoFi checking and savings, you can easily track your spending and save towards your goals while earning nine times the national average savings rate. You'll get paid up to two days early with direct deposit, and you can access additional FDIC insurance up to $3,000,000 on your deposits through a network of participating banks. You'll pay no account or overdraft fees, and you can also earn a cash bonus when you sign up with eligible direct deposit. You also can organize your savings into vaults for the goals that matter most. Small decisions like this can create big momentum over time. You can open your SoFi checking and savings account today. Head to sofi.com/profgbank to get started. That's sofi.com/profgbank. SoFi checking and savings is offered through SoFi Bank NA member FDIC.
00:20:52 · S0, S1
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00:21:56 · Ed Elson
[00:21:56] S3: We're back with Prof G Markets. Markets are beginning to feel a chill in the air. The Nasdaq one hundred fell nearly 3% on Thursday, its worst day since June, as worries about how big tech will pay for the AI build out hit tech stocks. The same fear showed up in the corporate bond market. Corporate bond yield premium surged to their widest levels since May 2025. Meanwhile, investors moved back into treasuries, pushing the ten year yield below 5% for the first time in a month. Now stocks did rise yesterday, but the S and P and the Nasdaq are coming off of two weeks of losses with big tech earnings and a Fed meeting still ahead this week. So the question for investors, is winter coming for the market? Joining us to discuss this, we're speaking with Robert Armstrong, US financial commentator for the Financial Times and author of the Unhedged newsletter. Rob, good to see you. You wrote that last week's, quote, epic treasury rally and the accompanying route in tech stocks had the feeling of a turning point, the sudden arrival of winter after a long summer. Very general question that you posed in in your piece. Is winter coming for stocks?