Salesforce Is Now An "AI" Company

Welcome back everyone. Today on the Joseph Carlson Show, Salesforce has reached an all new high, trading up to $338 per share. Now Salesforce was undervalued a couple months ago. It's something that I've been talking about for some time. So the stock could be just moving up because a pure valuation means, but it seems

like there's more to the story. Just a couple days ago, Salesforce announced that they're hiring 1000 new salespeople to sell one product, one single product that Marc Benioff has been talking about called Agentforce. And again, they're hiring 1000 people just to sell this one thing. So what is Agent Force and why is it making the stock go up 5% today? We're going to be taking a look. We also have news that Netflix has surged past $800 per share. It's on its way to $1000, up 71%

year to date. It's one of the best performing companies in the market. And Netflix is the chameleon stock. It's ever changing, ever evolving. Management continually changes what Netflix is doing from being a pureplay streaming company where you can share passwords, the one where you can no longer share passwords because they implemented a password crackdown to a company where they would never have advertising to. Now they have a cheaper advertising tear.

And the next thing that this chameleon stock may be going into and maybe a game changer for this company is live TV. Now, we've seen little hints of this before, small live things, but we're going to be taking a look at this new strategy for Netflix and how it may change the company. Now we also have news that crypto, specifically Bitcoin is surged to $82,000. This has created a lot of FOMO in the crypto markets. Lots of people chasing these

gains. I'll be going over why I'm never going to own crypto, why I don't buy it. And then we also finally have take two interactive CEO going on ACNBC and giving perhaps the best explanation of what artificial intelligence actually is. Needless to say we have a full episode, a ton of news to get into. If you like all this type of content, just make sure you subscribe to the channel, hit

the like button. Let's go ahead and get started now we start off the day with news that sales for stock is

surging. It's reached a stock price of $338 per share. It's up 5% today because of news that they're launching this new product and hiring 1000 new salespeople. Now before we jump into today's news, I just want to give a rewind of my ownership of this company because it's been a bit of a interesting one. It's gone through a little bit of drama. If we look at my ownership of Salesforce, we can jump into the passive income portfolio. Salesforce is one of my larger

holdings in my main portfolio. So we have it right here in the tech category and we look how this ones doing now. It's a 70 around $74,000 position with $13,500 in the green. So it's a relatively big position. I'm up around 25% on it, $13,000 in the green. But that wasn't always the case. Just a few months ago this position was in the red. So what happened with Salesforce? Well, Salesforce is a company that I bought in my initial buy. I don't buy companies all at once.

I usually do a buy of like 1/2 size position and then I see what happens over the next 30 or 60 days. The stock rockets up. I just keep it a half size position. If the stock drops, I typically add more to it. In this case, right after I bought Salesforce, the stock dropped 16%. So that's always an embarrassing situation when I make a video saying I think a company's undervalued. I think it's a great company. I think they're going to do really well. I buy a bunch of the stock and

then the stock price drops 16%. That's always an embarrassing thing. I look silly after that, but in this case I didn't think the drop was warranted. Now if we look at a video rewinding 5 months ago, this is a video precisely on the day of the 16% drop from Salesforce. So let's go through my thoughts at that time where Salesforce dropped down to a stock price of $220.00. So the stock. Is now down around 17%. It's getting punished if you're new to the market and you have

added. I'll just freeze it right there. If we rewind, you can see right there in the video, Salesforce is $226, down 16 1/2 percent. Again, the stock price today is 338. So it's come a long ways, but this is my perspective at the time after a massive disappointing result to this earnings after investors were just tossing the stock. Aside, it's getting punished. If you're new to the market and you have to add experience in companies like this, this can be a little startling.

It can be a little frightening, like you're doing something wrong. My opinion on this company and these earnings is I feel no stress in the situation. I thought that this was actually pretty decent earnings. I realize they have mixed guidance. I don't think it's crazy the stock is selling off, but I'm not concerned about this at all. When I look at Salesforce, it's

pretty simple. I'm just going to be buying more of the stock, I really am. I'm going to be putting in a small order tomorrow and I'll be buying it throughout the week next week. I just think Salesforce is a winner. I really do this. Doesn't change my mind. A single quarter of mixed guidance does not change my thesis overall on the company. Salesforce is a highly profitable dominant enterprise cloud business in five different business segments.

Now, again, now it's during a time period where investors were very bearish on Salesforce, sentiment was negative. But that video showed that you can separate your sentiment from the rest of the markets, but you don't have to follow the pack and become gloomy when other investors are selling out of a company. The reality of the situation is during that time period where Salesforce sold down 17% after this earnings report, Salesforce stock was fine.

The numbers were fantastic. In fact, Salesforce during this quarter, this very quarter posted record high free cash flow. Investors are overall emotional. They're overall driven by narrative. This is why it's important to follow the fundamentals of a company. Investing back into the company during this drop of course, lowered my cost basis on the stock and made it so that the subsequent recovery made me more

gains in the process. In a way, I would have made less money on Salesforce if the stock went directly up then had it fallen and I bought more during the dip. And This is why volatility, if used correctly, often leads to better returns, not worse. That decision to focus on the fundamentals and buy more Salesforce during that sell off is what turned this position from a $4000 loss to a $13,500 gain. Salesforce has always had the

catalyst of a low valuation. In fact, it's always been cheaper than almost every other enterprise application software company. In fact, I think it's cheaper than literally all of them. There's a video where I went over highlighting that all these companies, ServiceNow, Palantir, Microsoft, Adobe, DocuSign, so on and so forth, are more expensive than Salesforce. So this company has always been

discounted to some extent. And the reason for this discounting has been because of one reason Salesforce has been unable to sell the narrative that they are an AI company. Now Salesforce is surging because investors finally might be coming on board that Salesforce is possibly potentially an AI play. And that is because Salesforce is apparently hiring 1000 additional employees to just sell an AI product. For a company the size of Salesforce, that is a lot of employees.

To put that in perspective, a company that's an AI company that's often compared to Salesforce is Palantir. Palantir's total number of employees is around 33137 hundred in this case. So Palantir has under 4000 employees total for the entire corporation. So you can see that put in perspective here, Salesforce is hiring 1000 people just to sell this single product, this one AI product called Agentforce. But that also raises a question,

what is Agentforce? Part of the difficulty of investing in a company like Salesforce is figuring out what the company actually does. In the case of Salesforce, generally it's ACRMA, customer relationship management tool, which basically just manages overall your customer relationships, the billing, the acquisition of customers, customer support and so on. So that in and of itself is not too complex. Salesforce is the dominant player in that sphere. They have some competitors, but

they're by far the biggest. But Agentforce is something different, something newer, and something apparently AI. Now, when I looked at different descriptions of what Agentforce actually is, there's some hair that are a little bit descriptive. For example, we have the CEO Marc Benioff explaining on a podcast what Agent Force actually does. Listen to his explanation.

Releasing Agent Force and we are getting ready to transform all of these incredible Trail Blazers we have all over the world into being Agent Blazers. And that idea that we've taken the community into the cloud, into social, into mobile, into AI with Einstein, into data, with data cloud, with analytics, with Tableau, and with collaboration with Slack. But now we're taking them into a whole new world, which is building an agentic layer for their companies.

And that idea of an agentic layer, a layer where agents are doing, acting, taking actions, reasoning, operating on your behalf, this is a very new component of computer science. Did you get all that? Neither did I. It's difficult to understand what these tools actually do when the CEO talks in such vague terms. But Marc Benioff, again, is a salesperson. He's trying to talk in very glowing terms about his tool rather than descriptive applications of the product.

When we look at what this new product actually does, this video I believe gives the best description. Every company has more jobs to be done than resources available to do those jobs. An agent force helps you build and customize autonomous AI agents to help with those jobs. Like an AI service agent that deflects incoming support cases by responding intuitively and conversationally to resolve customer inquiries that a chat bot never could.

Or an AI sales development agent that proactively works leads by contacting customers, responding to their questions, and scheduling meetings. So one of them is a basically like a chat bot but enhanced with AI. But it's interesting they highlight another one here that proactively goes after leads, the salespeople that Salesforce are hiring to sell Agentforce. They're selling a product that

in a way replaces salespeople. An interesting conundrum where they're hiring salespeople to sell something that makes it so you need less salespeople. We see that going on with these companies right now. This one is is literally the application here is Salesforce Agentforce will go after your leads and start going through the funnel and working the

funnel. Needs by contacting customers, responding to their questions and scheduling meetings, or an AI sales coach agent trained on your best practices that attends calls with your new sales reps and provides helpful real time

tips and objection handling. These are just a few of the standard agents included with Agentforce, but you can also create your own custom AI agents, which you'll do by describing a natural language, the jobs you want those agents to do, and then equipping those agents to do those jobs with the workflows and actions you've already built in Salesforce. Your agents will then work inside the guardrails you've established to do these jobs, reasoning intuitively to respond

reliably to complex request. So here you can build new agents based on plain text descriptions, and it will look at your overall CRM, which Salesforce already has all that data. Because if you're using Salesforce, you're going to have all your company's information already in the CRM and it uses all of that context with your description to carry out any task you want. So it's like you can make many employees within your own system to do different tasks and you can give them different

guardrails. Now whether or not this makes Salesforce an AI company or whether they're still a non AI company at the end of the day doesn't really matter. And this is something that investors often miss. I've highlighted this over and over again. Artificial intelligence in and of itself is not what generates

returns. Returns can be amplified by newer technologies, but at the end of the day, being able to get a return on your investment, being able to generate real cash flows, is what gives investors true returns. So it doesn't matter whether a company is Texas Roadhouse and they have nothing to do with AI, they can still have amazing returns. Whether or not Salesforce is an AI company or not an AI company is not my primary concern here.

The concern is that Salesforce can make money from this tool. The reason that I believe Salesforce is going to make a bunch of money from this is because they already maintain the dominant market position in the CRM category. They have well in excess of 150,000 businesses using their product. So these thousand new salespeople are already going to have a huge existing customer pool to sell to. And I think that's going to make the job a lot easier than cold calling different businesses.

So ultimately, time will tell if Agentforce becomes a successful tool for Salesforce. But if I had to guess right now,

I think they're going to make a lot of money with it. Now moving on, we have news that Netflix surpassed $800 per share. This, of course, has been one of the core holdings in My Portfolio. It's really carried a lot of weight. This one has done the heavy lifting in this portfolio. Now it's an $85,000 position. It's done really well. I'm really proud of Netflix. It's one that I'm really glad that I decided to double down on and hang in there with.

But Netflix is a company that overall I would describe as the chameleon, and it's been described that way many times, I think accurately. So because Netflix evolves, they change over time. They change their strategy. They evolve from renting DVDs to doing online streaming. They evolve from just licensing other people's content to original content. They evolved from just doing a subscription only sharing plan to just a no sharing plan.

They evolved from doing no advertising to now having an ad tear. And the next evolution in Netflix may be live TV. Netflix, home of the binge watch. Try something new. Live TV Now. They note that a lot of people aren't quite used to this. The presence of live programming at Netflix is still a bit strange and disorienting, even for the people who work there. After all, the company created its streaming service as an alternative to live TV.

While cable asks viewers to show up at a certain time and place, Netflix allows customers to watch what they want, when they want, and without obligatory advertising. But they note that there's a specific reason why Netflix might be pushing into live programming. Live programming is particularly complementary to advertising. So as they're trying to grow their ad tear that only has like 40 million users, they also want to grow out their live programming to complement that ad tear.

So basically what Netflix has been doing for the past two years is perfecting their live streaming technology. And they're kind of doing this secretly in the background. They're doing small live tests with small shows that don't really have big consequences if there's problems just as tests. And they're even testing big events happening, like big

adverse events. For example, during the live taping of Gad and Khalif, Netflix intentionally shut off its servers on the West Coast to replicate a system failure. And they said the transfer to the East Coast was seamless. Once they get this tested and they get it perfect, then they feel more comfortable doing the events like the Jake Paul Mike

Tyson fight or the WWE. That's going to be every single week coming in 2025. This is another move, another directional move that I think will benefit the Netflix customer. They'll create more value, more pricing power for Netflix and a broad swath of customers to begin with. They're still going to have their huge on demand library, but now they're sprinkling in these fun live events every so often.

And I think the more that they can do this, the more successful the company will be. Netflix is headed towards $1000. It's going to get there eventually. It's just a matter of time. Now moving on, we have news that

crypto markets are doing well. Bitcoin is surging. It's now at 85,000, almost $86,000 for a single Bitcoin. And a lot of people point this out. They go, Joseph, have you noticed crypto? Have you noticed Bitcoins going up? And in most cases, I just ignore it. It's not something that I'm really that interested in. It's not something I do analysis on. It's not something that I really commentate on all that often.

And the main reason why if I'm looking at any type of Bitcoin crypto, any type of asset like this, I don't have anything against them. I have no ill will for them. I don't really care if they go up or down in value, but it goes against my investing philosophy of where I put money to generate wealth. What I do with My Portfolio is I invest in assets where I would make money even if other investors never invested in them.

Meaning that they're things that in and of themselves have intrinsic value, that the thing that I'm buying in and of itself has intrinsic worth. Now, when we look at crypto or Bitcoin, the value that you're getting is derived off of what other people are willing to pay for it. So the reason that it's at $85,800 is a lot of people are trying to buy the same thing. There's not a lot of supply and there's a lot of demand for the same thing.

With stocks, it's different. Of course, stocks can go up. If a lot of people try to buy the same stock, they can push the price up. But if a stock goes down far enough and it generates cash flow, it doesn't really matter if other people buy the stock or not. It has an intrinsic value floor of what it's actually worth.

For example, if everybody was to hypothetically sell out of a company like Salesforce or like Netflix, if every single person sold out of it and I was the sole owner of it, I'd be super wealthy. I'd have $5 billion or $7 billion of cash flow every year that I could extract out of those companies. Being the sole owner makes me wealthier. In those cases, having less ownership, it makes me less wealthy.

If you compare that to Bitcoin, if everyone else sold you all of their Bitcoin, if they sold 100% of theirs and you owned all the Bitcoin in the world, 100% of it, it wouldn't really be worth anything. The value in and of itself is derived by the fact that other people own it and are willing to buy it. That's what creates the value. With Bitcoin, I don't like owning assets where the sole value of it is derived on what other people are willing to pay.

With stocks, the sole value of them are not derived on what other people are willing to pay. That can cause temporary price fluctuations, but the cash flows determine the true value of the stock. So I invest in assets that have intrinsic value derived by cash flows. I don't invest in Bitcoin, I don't invest in gold. I don't invest in any type of speculative asset like paintings or anything. We have to resell it to gain

value. I invest in productive companies that grow their cash flows and they can return those cash flows back to shareholders. Now moving on.

Finally, we get to the news that one of the companies that's best position to take advantage of artificial intelligence, of course, gaming companies. One of the companies that has the most anticipated game of the past decade is Take Two Interactive, which is the creators of Grand Theft Auto Grand Theft Auto 6 is coming out next year.

Now the CEO of Take Two Interactive went on the CNBC and although I think he has some interesting thoughts overall in the company, the biggest thing that stuck out during this interview is his assessment of what artificial intelligence actually is and what it's not. Here's his thoughts on AI. In terms of AI, look, the interactive entertainment business has been in AI forever. And let me just remind you, AI stands for artificial intelligence, which is an oxymoron. There is no such thing.

It's just a description of a digital tool set, and that digital tool set will affect every part of our lives in the same way that when we got smartphones, they affected every part of our lives. So how does it affect us right now with Take Two interactive games and what will it in, let's say 2-3 years? I would love to say that it's going to make things cheaper, quicker, better or easier to make hits. I don't think that's the case.

All of our tools do help us become more efficient and that's a part of our three-part strategy, creativity, innovation, efficiency. That said, it'll be commoditized. Everyone's going to have access to the same tools. That is the history of tool sets. What it means though, is our creative people will be able to to do fewer mundane tasks and turn their attention to the really creative tasks. But they'll be the ones doing the creative. Decisions on this? Absolutely.

You know the machines can't make the creative decisions for you. It seems like he's throwing a little bit of cold water there on many of the things said about artificial intelligence, but I think he's right. He says that it overall is a commodity, and I think that's going to be the case with AI. Most of the things that you can benefit from AI are going to be commoditized. We've seen that with so many different things from chat models and LLMS. We've seen it with image generators.

We've seen it with things that can answer questions. It's getting quickly commoditized. The things that artificial intelligence do, you're finding more and more examples of different companies doing it. But he is correct in saying it's taking away more mundane tasks at different companies. They're simply going to be

iteratively more efficient. And if I had to think of a group of companies that likely aren't commodities with AII, think the most difficult ones to replicate are the ones that require heavy CapEx. The companies like Amazon, NVIDIA, companies like Google Cloud, and of course Microsoft. The ones that are the big cloud hyperscalers are the most difficult to replicate because it requires the most capital.

But other companies that are using different AI products to enhance their customer experience, that can be easily replicated. I think it gives a good nuanced take on AI. That's it for this episode. Hope you enjoyed. See you in the next one.