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sex is so much better on vacation. I thought, that's not the postcard I wanted. Welcome to Prof G Markets. Today we're discussing London's IPO market. And Mistral's latest funding around. But first, where are you at? I'm in St. Bard's. It's pretty good. It's pretty nice out here. Got here yesterday. You know, it's alright. We got the private villa and it's got a private pool and it's got, you know, there's a private shaft. So we had breakfast in the morning. Things are okay as what I'd
say. So first up, I'm the only one that's allowed to be cynical here. How many of you are there in St. Bard's right now? How many from the property medias anyone to St. Bard's? Six. And you're staying at my favorite place, Lissarino. I even picked out the villa for you. Where are you guys going to dinner tonight? I'm not quite sure. I think we're going to typical man. You've left it up to the women to handle everything, right? So I'm not sure. Oh,
there we go. Love that sound. You're really leaning into this. Good for you. Alright, you're having a glass of champagne. Good for you. This is your easing into the St. Bard lifestyle. How are you doing? You're back at home? Yeah, I'm in London. My life is not nearly as romantic as yours. It's, although I'm going to the South of France tomorrow, which I'm excited about. That's right. You're going to camp. That's right. I'm going to camp. Excited about
that. Although I think I've lost some brand equity. I can't get invited to the I Heart Party at the Duke app with Lenny Kravitz. I called, I know I sat next to the CEO of I Heart Media last year and I emailed him and he kind of sent me a polite response, but still I haven't had that invite yet. So I think I've lost some brand equity. I don't know what's going on here. I don't. Anyways, I can't get into the hot parties anymore. I did get
invited to Spotify, but I'm not. Is the I Heart Portsy really that hot Lenny Kravitz is going to be there? Yeah. Well, it's at the Houtu Duke app and I'm staying there. And Lenny Kravitz is playing. And so it'll be like being a prisoner at Alcatraz. If I don't get invited, because supposedly the prisoners of Alcatraz on the wind was a certain way they could hear people parting in the war, which was supposed to be torturous for them,
because they got to hear what life was like for people who are free. So if I'm in my hotel room at the hotel du cap and I hear, you know, I start hearing Lenny Kravitz play his, you know, his three songs, then I'm going to I'm going to be very upset. I'm going to stop listening to I Heart Radio. Is that how you feel right now with us? I mean, we're having a pretty good time. Yeah. No, I like you guys. I want you to have fun. And not only
that, I know that I like that everyone knows that you're down there. I think it makes us seem out by the way. In case you're still wondering, we're still recruiting for a writer, a senior writer for no mercy, no malice. So if you want to go to St. Bart's next year, come join, come join ProvG anyways, enough of that. Get to the news. Okay. Let's start with our weekly review of market vitals. The S&P 500 closed about 5400 for the first
time ever. The dollar was flat, Bitcoin declined and the yield on tenure treasuries dropped. Shifting to the headlines, the consumer price index showed inflation cooled again in May with prices up just 3.3% from a year earlier. That's flat month over month and down slightly from April. Meanwhile, the Federal Reserve held interest rate study, though many Fed officials are expecting at least one cut by the end of 2024. Open AI hired the former
CEO of next door as its new chief financial officer. As the company's first CFO in two years, Sarah Friar will help the company grow its global business and invest in further AI research. The company also hired the former SVP of product at Twitter, Kevin Wile, as its new chief product officer. Oracle stock rose 13% to reach an all-time high, despite
reporting fourth quarter earnings that were below analyst expectations. While the company missed slightly on revenue, the stock surged on account of new deals with Google Cloud Microsoft Azure and Open AI. And finally, Tesla shareholders voted again on Elon Musk's $56 billion pay package and the move to reincorporate in Texas. They're actually voting right now as we record this podcast, so we don't know the results yet. But the stock rose 6% this
morning after Musk said he expects to win the vote. Scott, your thoughts. I think it's great that inflation cooled. I've always as somebody who likes to think they know a little bit about economic history. Inflation is more dangerous than invading army. I mean, unless you're part of the village, you get invaded. But revolutions oftentimes can be reverse engineer to inflation. I look at what's happened here in the UK. Basically,
they have inflation and lower productivity. So let's figure out a way to make less money and have all of our goods go up in price, which translates to a worse standard of living. And that's not every household gets angry and wants chaos and change. It's the first time in almost two years that the CPI didn't climb the annual core rate of inflation came down to 3.4% the lowest since April of 2021. And the report keeps hopes of a potential
September rate cut alive. I am sick of talking about rate cuts. I just don't care. The Open AI, you know, Open AI seems to be kind of professionalizing, if you will. The former CEO before the position of next door, Sarah Fryer served as CFO of square and previously worked at Goldman Sachs and McKenzie. So she's obviously very qualified. And hiring for our potentially
signals at Open AI could be thinking about an IPO. She's sort of the, she's someone who comes in who has credibility on the street and says, okay, this is how you go public. And Sam, you know, do not talk about X, Y and Z, talk about this and kind of that those skills are very important. And the difference between a well managed IPO for this company would be tens of billions of dollars in market capitalization. And so she is going to make
a shit ton of money. So be there just in time to get a shit ton of options before they go public. So this, they literally had their pick of anybody to be the CFO of this company. By the way, do you see how much money they're generating now? The information just reported on this. Sam Altman revealed the revenue, the ARR for the company. You see this? I did what it would say. Three and a half billion dollars a year. Is there run rate right
now, which is more than double than what they were at six months ago? And just to put that into perspective and the topic, which is arguably their number one competitor, they're at 100 million. And then cohere is at 22 million. So it's like 100 million, 22 million versus three and a half billion. The open AI business is 35 times larger than their next biggest rival. Like they're just completely running away with it at this point.
Probably the more impressive thing is who said they've grown, the revenue's doubled in the last six months. Right. Yeah, that's pretty, that's pretty impressive. Now the question is, what was the last round of funding? I'd be curious to see what the multiple revenues in terms of valuation. Yeah. I mean, I think it was the $86 billion. But that's still, I would still put them on the low end compared to all of these, all of these other ridiculous
AI startups. So I mean, they'll probably have another round soon. I would agree. I would bet that that if it's three and a half billion and there was an 80, what is that about a 25 times revenues, that's actually cheap for the AI sector. And you're right. They seem to be running away with it. It's interesting because all of the noise around how dysfunctional it is and board members leaving and Sam, you know, using scargis voice, it's all, it's
all noise. It's not news. The real news is the things you're focusing on and that is their revenues and what's going on there. But good for them. It does sound. That's an observation I didn't even thought of. They're clearly putting on their best dress for an AGO. Oracle, it's really interesting. Larry Ellison deserves a lot of credit here because there's a bunch of companies that are kind of getting hit hard for not making the transition
to AI. I think Salesforce has seen a someone who hasn't made that transition, although their stock has done fairly well. It's a great company. I don't know if IBM is like that. But Oracle has positioned themselves as, hey, don't forget about us. And they have made real big investments here. By the way, Oracle is in my 401k. So I'm rich. Now you're rich. Finally, they're,
there shares of 13% that's the biggest single day increase since December of 2021. People are excited about their partnership with Google, which will make its database available on Google Cloud. It's their second big deal in terms of AI. The company signed a similar agreement with Microsoft in 2023. And the company also reported stronger revenue guidance and they've signed more than 30 AI sales contracts worth more than $12.9 billion. So Oracle and Dell
have both positioned themselves in the front of the AI wave. They've done a great job showing that elephants can dance, if you will. Another legacy tech company, such as IBM and Cisco, have not made that transition. If you look at total stock returns from 2020 to 2022, Oracle has a 59% return. Dell's 55 IBM 26. Cisco is only 7% so it's underperform the
market. It's just pretty, pretty impressive what they've been able to pull off. I think Larry Olson is going to go down as one of the more measured success stories in tech. Do you think what they're doing right though is kind of just their storytelling? I mean, I feel like this is just more evidence that the Wall Street is basically refusing to listen to anything that doesn't have the word AI in it because you look at these earnings,
these were pretty bad earnings. Like they missed on the top line. They missed on the bottom line. They had a 7% revenue growth. Like it's not a good quarter, but it's this story about AI that they've told and about the potential pipeline of future AI contracts. They got everyone so excited and it basically made all of the other numbers irrelevant. And then in a compare that to Salesforce, which you brought up, and which we discussed a few weeks
ago, they had higher than expected earnings on the bottom line. They had 11% revenue growth. It's significantly higher than Oracle. But at the same time, they had a pretty weak AI story and they just didn't convince Wall Street that they're going to be on the front lines with Microsoft, with Nvidia, with Google. And what do you know? The stock fell nearly 20%. So it feels like Wall Street is kind of sending us a message here, which is we only care about AI.
I think that's really insightful because just as you said, it struck me that what I would want to know is that so supposedly Oracle has signed 30 AI sales contracts with more than 12.5 billion. I'd want to know the complexion of those contracts. And that is they just signed up 30 new database contracts similar to what they always sign up, but they're calling it AI. I mean, you would hope that analysts would have something called I'd love to produce
this an AI washing index. And that is everyone's claiming that all the revenue now is coming from AI just because all right, they, you know, whatever it is, it has an AI component to it. And so there is trying to separate the wheat from the chap here or the bullshit from, you know, the just kind of ball, if you will. But it all, it all distills down to the same thing. And that is the core competence in terms of the CEO is the same core competence
you would hope for your kids and that you want to inculcate into your children. And that is not an understanding of accounting. It's not leadership skills or ethics or sustainability or whatever bullshit we can come up with to try and give people high-paying positions in universities so they have no accountability. It's storytelling. And that is when I read
that investor letter from 1997, my jet pesos, I thought, I want to buy stock. When I hear Ted Cerandos or Reed Hastings speak, I think I want to buy stock, these guys just have an ability to get on an earnings call and be very straightforward and yet visionary at the same time and just instill so much confidence, you know, I'm not sure I even understood what he's saying, but I just want to buy stock. The way he used to work was,
okay, you're in tech hardware, you're in mainframe computing. Those companies trade between 12 and 14 times EBITDA. And if we like Bob more than Lisa, Bob gets 14, Lisa gets 12. And man thinks just what fucking haywire. And it seemed like a lot of companies that were sort of when you really peeled back the curtain were pretty similar. But one told a much
better story. So storytelling has become really the core competence for growth firms because their ability to get the markets excited about what they're doing, such that they could pull forward cheap capital, reinvest more capital than their peers, such that they could pull the future forward and run away with it. See above Amazon and Netflix has become the core competence. So there's got to be at some point, someone's ability to go, what's
real and what isn't. And then the retort to that will be, well, storytelling is real. And if you can raise cheap capital, if you can raise capital cheap and then your competitor, you can pull the future forward and make the promise, turn the promise into performance. But to your point, it sounds like people who teach communications or invest relations should probably look pretty closely at the Salesforce and the Oracle earnings calls and
say, what went right and what went wrong. Should we discuss this Tesla shell to vote? Yeah, I guess we're recording on a Thursday. It's Thursday at 6.30 here only because I'm planning to go to Maison Estell tonight and get fucked up. So I'm watching the clock. My understanding is that both of these things are going to pass, that the shareholders are going to approve them. Is that correct? Is that what you've heard so far today?
That's what Elon's been saying. Okay. But does anyone know if it's true? Yeah, I believe him on this one. I think it would be a weird thing to lie about. He'd look very stupid and we'll know by the end of the day. By the time this podcast comes out, the vote will be in. So look, the shareholders get to decide. It's been a bit of a soap opera. I'm only slightly less sick about talking about this and less, you know, unless we want
to talk about Paramount, which makes it go away. I just want them to get on with it. Yeah, I think, I mean, I can't say anything with certainty how the vote will go. I think what I can say with certainty is that whether or not it's yes or no, this vote is basically meaningless because here's what will happen if the vote is approved. It'll go back to
the Delaware Court of Chance 3. It'll go back to Chancellor McCormick, who will open up that briefing and she's going to be like, hold on, I adjudicated this case before. Actually I looked at this case basically two months ago and I made my decision very clear the answer is no. And I feel like what Tesla is forgetting is that if you read her opinion, she actually didn't care whether the shareholders were fully informed or not. Granted, she
said they probably weren't, but it had actually no bearing on her actual decision. You know, she believed that the package was inequitable and that as a court of equity, she also believed that she had the power to rescind it. And that was it. And now here we are again and we've got the same case on her desk. So nothing's going to change here. And you know, we discussed this with my uncle Charles Ellsson a few weeks ago and he said the same thing. You know,
he's like, this isn't about informed versus uninformed. This is just about, was it equitable or was it inequitable and she's already decided it's the latter. So, you know, they can appeal the decision that might go somewhere. But this vote, this being their argument, oh no, we looked at it again and we still think it's equitable. It's just a non-starter. For her, for Chancellor McCormick, I just don't think this is going to go anywhere.
We'll be right back off to the break with a look at a new IPO in London. Support for the show comes from Adlession, the org chart that topped a bottom list of who works for who, but really aren't you working for the customer? So maybe the real question is, who am I working with? Adlession wants to make sure that the organization is working together with the same shared language and goals across all departments. Adlession software, including
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the size of a credit card. They run an open source operating system, and for more than a decade, hobbyists have customized them for things like streaming media, hosting servers, and learnings code. They're also used in manufacturing for things like inventory management or production line automation. Today, the industrial market makes up more than 70% of the company's sales. At its pricing, Rosbury Part was valued at about 542 million pounds, or nearly
$700 million, and shares soared 38% on the first day of trading. We recently discussed how the London Stock Exchange has been struggling to attract IPOs, specifically tech IPOs, but it's attracted to this company, and she and, which we've also been discussing, is set to list in London too. How do you think this IPO of this Rosbury Part computer company will affect the broader IPO market in London? It's a big deal, because it could change the world's outlook on the London Stock Exchange
from the Exchange of Glass Resort to a player here. The total capitalization of London listed equity is fell from 4.3 trillion in 2007 to about 3 trillion, so it's actually gone down about 40% and over the same period, the value of US stocks has almost tripled
to 53 trillion in the US. Rosbury Part, it's great for the exchange, because it's sort of a cool little company that had options to list on other exchanges, and they've started trading with a three-day conditional dealing period during which trading was restricted to institutional investors. Maybe you can speak more about what this sort of conditional period means.
Yeah, I didn't realize this. I had never heard of it, but basically if you IPO in the UK, there's this three-day period where your shares are trading, but they're only available
for trading among institutions. What's particularly interesting is that those shares are reserved, but you don't officially own them until the three-day conditional dealing period ends, which means that if you're a company and you decide to IPO and you're in the conditional dealing period, you can just cancel the IPO if you're not getting the demand that you're liking. In other words, the London Stock Exchange basically lets you do a test run before
the real thing. The thing I would ask to you is, why do you think that they do this? What is the say about the UK market versus the US that they'd say, oh, yeah, we're going to give you three days to test it out among institutions, but once it's up, then you're doing the real deal. Well, I don't know if this is the reason for it, but so the IPO market is rigged. Essentially
at prices, the bankers say, this is a branding opportunity. You want to create positive momentum, so price at 10, 20, 30 percent below where we think it's going to open. Then the investment banks get to give basically free money to their institutional clients as sort of a quick pro quo for doing all their business through JP Morgan and Morgan Stanley or Goldman Sachs, but the retail investors who don't have access to the IPO buy in at
the first trade, which is sometimes much higher. Now, technically, it could go down a broken IPO, but it usually doesn't. Sometimes, as in the case of Airbnb, it opens, it priced at 68. That's what institutions got to buy the shares for. It opened it, I think, at 150, which is where retail investors got to buy it for the first time.
A guy named Bill Hamburg, who came up with this auction model back, I think it was like 10, 20 years ago, probably 20 years ago, where the IPO would be, they would basically pair the trade. That is, people would bid buyers and sellers would bid in a Dutch auction until the market demand was sated at the number of shares. It was priced exactly at where the first trade would be. That was a means of ensuring that the company got the maximum
amount of capital for the same pollution. That did not survive because it ends up the ecosystem, the biggest players and institutions and some investment banks really liked a rig market that retail investors got screwed. I wonder if this is, I don't know the answer this, but is this an attempt to say, look, retail investors are going to get to pay about the same number as institutional and also give the company an out if they don't like where
that number ended up being. I don't understand if this is nothing but more lax rulings for the company or an attempt to have retail investors pay the same number as institutional. Yes, it's not totally clear to me either. Tune in next week for more shit, we don't know. That's why you tune into Proffce. What about this? No fucking idea. How same parts? I don't know. I'm sure you'll have a response to this. The CEO, this guy, Eben Upton was
talking about his decision to list in London. He said, quote, this was not a patriotic decision. We did take a look at New York, but we realized that for a company of our scale, the London market is probably a better home. He went on to say, quote, many of the stories people tell about the differences between the US and the UK, particularly this sort of magical multiple arbitrage, don't seem to be real. Which I find interesting because it's almost, it's
almost like it's a job at us who have been basically saying exactly that. That, you know, if you're listing in the US, you're getting a little bit of evaluation jump and that isn't true in the UK. And the reason that we say that is because we just look at the numbers. But apparently the CEO isn't worried about that. He isn't worried about this multiple arbitrage issue. So I'm just wondering what you think of his comments. Do you agree with his point?
And do you think maybe he's finding some other value in listing in London versus New York? I don't know because it might be. So we pointed out that stocks that trade on the NYC and the NAS Act traded, whatever was 20, an average multiple of 26 and all the other exchanges is around 13. Now that might be a self-fulfilling prophecy and that is the best company's list on those exchanges. It also might be much more heavily weighted towards tech which traded
a much higher multiple. Whereas the company is the list on these other exchanges, probably more manufacturing or services heavy, which don't trade it as high as multiples. So it might be a function of the type of company as opposed to just of this company's ran the gauntlet here. So it deserves a higher multiple. I don't know. But I think this is really good for competition.
I'm glad the LSE is getting some love. The biggest beneficiary here in my view is she in because everything about she and going public potentially on the LSE has been about oh, the exchange of last resort and they couldn't go public in the US. Well, this is sort of creating some cloud cover and some kind of some jujuz some mojo, some sex appeal, some pixie dust across the LSE where good companies, innovative companies are choosing this exchange. So a company with whatever this,
I don't know what the market cap's going to be here. I can't imagine it's going to be more than a few billion dollars. That's one thing. But the cloud cover and the umbrella brand increasing in value of the LSE when she and goes out in 70, 80, 90 billion dollar valuation. If that makes the LSE and de facto she and trade up five, 10% more, you're talking about
seven to 10 billion dollars. In other words, she and the best thing, no one is happier about Raspberry Pi going public on the LSE and having it being a good thing than she and right now. Because what it says is no, the LSE isn't the exchange of last resort. The good companies are going public here. Investors should look at it and it's not a hold your nose and buy it because it's on the LSE. In other words, Raspberry Pi a little bit turns listing on the LSE from a
bug to a feature and you're happy, right? You're invested in she and are you going to invest? I'm not as happy as if I was in the same parts, but I'm still pretty happy. Yeah, I've invested in she and and I've got I'm trying to find I don't have any insight information, but I've been investor and so I've been waiting for the prospectus to come out. I think they confidentially filed on the LSE, but the numbers that I've seen and the information are that it did 30 billion
last year. It's going to do I think 42 this year. So it's growing 40. I mean, the numbers are just staggering here and it's also profitable. And if you look at their competitors, H&Mers are they traded, you know, really healthy multiples and it looks like this company should have maintained its growth. It's going to surpass Amazon next year in terms of retail, barrel sales, and then the year after that surpass Walmart and probably have higher net margins. So
anything that creates cloud cover for a positive reception, I'm down with and excited about. So yeah, I hope it I hope it goes well. We'll be right back off to the break with a look at the hottest new AI startup in France. Farx creative. This is advertiser content from Atlassian. The universal truth of our customers is they're all struggling to get stuff done. Our goal is how do we help them unleash the potential of their people, their teams and their technology to actually
get the right things done at the right time with the right people the right way. And when we do that magical things truly happen. Dom Price is Atlassian's work futurist. It's his job to help Atlassian customers imagine more effective ways to work. There's completely natural to focus on what you can control in your team. The problem is if if that's all you do, you get pretty myopic. The best teams I'm working with they really work on who are the people,
upstream and downstream that we need to work with. How do we get flow across the organization, how do we get value into the hands of our customers quickly. And sometimes achieving flow means that instead of asking who do I work for it's asking who do I work with. When you get team connection right everyone benefits the employee, the employer and the customer right to get stuff
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in new funding at a $6 billion valuation. That's triplets valuation from December and the company was founded just 14 months ago. The realm was led by General Catalyst and included participation from Andreessen Horowitz as well as Nvidia and Salesforce. So Scott Mistral is now sitting on a billion dollars in total funding. Do you think it has any chance of taking on the likes of open AI
and possibly the other AI juggernauts? Well I host it but according to what you just said it's not the CHF-GP2 is soaking up and hoovering up all the revenue but I would imagine that the EU, not only companies but EU regulators are really ready to be supportive of a big tech or an AI company that's on the continent. I think they're kind of sick of sending all of their capital overseas to land it as FO international and then just stay there. So I think that this company probably has
and I've heard it's a good company after the interesting technology. The French actually have a very
strong background. I mean everyone knows that they have an incredible back on a luxury. When you're born in France you're just like at the age of three or rearranging your blanket and asking for a mes blankets and you just you know the kids like have a rattle at this porcelain and then when they throw up their peas on their on their bib it's designed better and it just looks more seamless somehow.
There's something about the French they just get beauty. I mean I'll go to can and I'll go to these dandars something like what like who picked out these linens these linens are beautiful. There's something in the water they're the DNA anyway that's what we were doing last night. We look at the wine glosses we were like these glosses are so light they're so beautiful. Right? In French they're at St. Bart's. There you go. It's unbelievable. The genetic or the DNA or
the business luxury has been the gift that is kept on giving in France. The wealthiest man in Europe is Bernard Arno who immediately you know pieced out to Belgium for tax avoidance but still Chanel, Hermès you know Veton is Veton is Dior. I mean they just they just have such Chloe they have such amazing brands Clarence you know they have such incredible staggering. Anyway what they don't get enough credit for is they actually have a fantastic
schools and engineering and Dachshuo makes an incredible plan. Daddy wants a Falcon 9X anyways they make they have actually a very strong background in engineering and this is coming through and I hope I would love to see Europe you know kind of punch above its way class or not even that start punching at its way class in terms of tech startups. There's Solonus out of Germany which is an amazing software company there's some Fintech companies here in the UK that are doing
pretty well or okay I should say and so I hope this is I hope this is a win. I'm a huge fan of General Catalyst I'm a bit bit pissed off they can call me and say hey Scott you live in Europe and you're super special in parting and can do you want to invest. Didn't get that call it didn't get that call. Also I tell I haven't invited the fucking Ihard party with Lenny Kravitz. I don't know why he's so upset about that. Pist off. I'm gonna I'm gonna stand the God Am Hotel
how embarrassing is Agamem. I'm either with my boys and I'm like dad it's a party I can't I thought you're a big deal here. Yeah. Yeah man. No no let's let's order room service. Anyways but mistral this needs to be a healthier ecosystem it needs to have more competition. I hope that it does well. I'm kind of curious we need to do a deep dive here and say what is it's what is its point of differentiation as all of these things we begin to look like the same
goddamn company. Yeah I mean if you look at the cap table the lead investor was General Catalyst which is American. Other investors include Andrews and Arowitz and Lightspeed there are several other VCs most of American. Most interesting though to me is the corporate investor list. So you've got Salesforce, Samsung, Cisco, IBM, ServiceNow, Nvidia and Microsoft. So basically every single big tech company who in my view of this were like 20 years ago I think
mistral would be trying to compete with those companies. I don't think they'd be taking their money and giving them equity and you mentioned this issue of diversity we need we need more competition.
I feel like this all goes back to the antitrust issue which we've been discussing and that is it feels like big tech has a new monopolization strategy it used to be that you bought your competitors but then Lena Cohen came in she sort of cracked down on the FTC said no no more of that now it feels like the strategy for big tech is investing your competitors because by investing you establish a level of power you get some control you also get a share in the upside and
crucially as it appears you don't get regulated. We haven't seen any intervention from the FTC or the DOJ on any of these corporate investments but it feels like it's a stone's throw away from just buying out your competition. I don't see how it's that much different. So what are your
thoughts on this? I mean am I right to be concerned by the fact that big tech and the mag 7 is basically spread out across the cap tables of every single significant AI startup in the world right now it's not just America it's mistral too this French company that you think is French but the entire investor base are just the same Americans is this not kind of a problem. The way I would describe it is that if you're a young man looking to lose your virginity and live in Kentucky you
should go to a family reunion. In other words there's a lot of incest here and that is is that wrong? No it was that wrong. Literally we'll hear from a dozen people from Kentucky I'm going to find out people I didn't even know we're from Kentucky are from Kentucky and that I was in appropriate anyways. People were upset about what we said about Austin people were saying I was being rude to
Austin because they don't want to live that. Yeah just wait it gets a lot worse. Just you know half my emails are people telling me what I should not have said and how you know they're there their cousin suffers from some syndrome that I've anyways. Look you've pointed this out this industry is just way too incestuous and and has too many overlapping paths to one another. It's smart for them and video wants to have a really robust ecosystem the last thing they want is a small
number of players bidding on their chips. What they want is a ton they want a huge customer base so for them it makes a shit ton of a sense for them to take okay five percent of their mark three percent of the market cap would be a hundred billion dollars and do everything they can to try and foment fund and catalyze a super robust AI ecosystem or not only AI becomes bigger and bigger
but there's a variety of future customers all needing these GPUs. Also just my customer standpoint I can't I just think regulators in Europe and companies at some point I mean one of the reasons I'm going to get geopolitical here one of the one of the most hopeful things about the conflict in the Middle East right now the war is that the Kingdom of Saudi Arabia actually coordinated with
Jordan to help shoot down the projectiles coming from Iran. I realize there's a reach but I will bring it home and that is the Kingdom wants to normalize relations with Israel and I think part of the motivation for normalizing relations is like we're sick of getting on planes and sending money out of the region to San Francisco for all of our tech. Israel has a ton of great tech. They're
close to us. We seem to get along you know we're sick of being I think everybody's getting sick of sending money back to the you know you want to talk about real at least metaphorically colonization. It's it's American tech companies that have basically turned every company in the world into their colony sending sending resources back to back to Britain from India and India is every company in the world sending money to some company that's a bike ride from SFO international
airport. That's probably a protein metaphor a little too far but anyways this is I think that a lot of European companies of mistral just offers a competent product that's in shooting distance or spitting distance of these other guys. I think a lot of European companies may be under the auspices of not having to pay additional taxes or whatever that the e-regulators
my place on non-European based tech. I think this this makes a lot of sense. I think the investors here are smart to get into this thing because any company AI company on the continent it's the largest economy in the world the EO and I think a lot of European companies and regulators would really like to be able to put their money into a European tech company as opposed to getting invited to listen to Sam Altman give us hushed tone concerns around AI. I think they're I think
they're kind of sick of these guys but anyways we'll see. It's a slight change of subject but we should talk about this new company tempest AI that's going public. It's a healthcare company but it's also supposedly an AI company at the same time so that they're aiming to raise $400 million that's targeting a 6.1 billion dollar valuation and they're this precision medicine company
that quote uses AI to make laboratory tests more accurate tailored and personal. Now the reason I bring this up in this conversation is because until about six months ago this company was called tempest and today it's called tempest AI so they just tacked AI onto the end of the name and now they're going public and Mia looked at their S1 she found that they mentioned AI 220 times in the S1 filing and meanwhile as a representative revenue AI makes up wait for it 2% of the business.
I'm going to go ahead and assume that you and I agree that there is a very strong stench of BS coming from this IPO this tempest AI IPO but you know as it relates to the broader market what do you think this IPO and this company says about the rest of the AI market right now. First up I like this company. I actually emailed the CEO he's the former CEO of okay so I just been shitting on it. That's why people come here they want to know mercy no malice view of this shit.
I mean that's why people love prop G dot AI. There's a lot to like here. Healthcare and AI that just feels like champagne and cocaine right. I've always thought that healthcare is the most fertile place for disruption and the fifth of stone for coming for it might be AI. It's a real company a lot of a lot of healthcare companies use the product they have real revenues they've been growing really fast. Having said that to your view is it AI washing that's the bottom
line right. It's not I mean the status crazy they mentioned AI 220 times and yet AI accounts for less than 2% of its revenue so this is going to be a very interesting IPO to watch because what is going to indicate is just how frothy the froth is and if this company goes out and say goes
up 20 50 100% on the first trade then we know that the party is still going and by the way they might be able to take that cheap capital and get better at AI and go from 2% to 20% so again see above storytelling or if the market prices this thing and it doesn't have a first-day pop and maybe
within a few days it's a broken IPO it might signal a top it might signal that okay the housing on days of you know anything that says AI are over and that people people are sort of at some point people are going to get very cynical around this stuff right I'm already getting just so sick of
it myself yeah I can imagine where at some point AI starts to have the same stench is back right it's like okay enough already or you know you weren't around but Williams to know was one of my first clients is a strategy consultant and they were very seriously considering changing the name
to William Sonoma.com and there were a lot of companies thinking about.com and they added and all they used to run commercials with nothing but just the name and then.com given your experience there what do you think was the right move I mean do you approve of a company attacking AI onto
the end of it is it actually potentially a good thing thing for the business would Williams Sonoma have benefited from going the Amazon route and calling themselves you know Williams Sonoma.com Amazon.com it went further than that and I think the statute of limitations are over this was
Jesus this was 30 years ago let me see I was 26 I'm 49 now so it's 23 years ago but I remember being in meetings with bankers and the bankers were trying to convince Howard and his team and they invited me into these meetings to
spin out the.com business they wanted to take William Sonoma.com and spin it into a different business and of course Howard goes that's makes no fucking sense and the bankers like we get 10 times revenues for this business as opposed to your stories we was like yeah but how do I get my store managers to participate and he's he was just sort of he was not easily impressed by financial engineering he was I think that's one of the things that made him a great CEO so if you look back
of history as any guide there aren't that many companies that were able to get so much cheap cat well I guess I mean Amazon it was Amazon.com eventually they sold they dropped it.com but Amazon there was there was a there they were really selling all their shit online the other companies that tried
to pull a fast one and say oh we're an internet company that weren't really an internet company like that should blow up pretty fast it just the whole thing just started collapsing on itself now the the companies that made it through that Valley of Death Amazon and a bunch of others ended up
being you know worth a ton of money the question is when is that Valley of Death or that shake out going to happen and I would bet that it's you're just saying symptoms everywhere now does that mean it happens in three or six months or in two or three years I don't know it kind of feels like 98
to me I think we're full froth and we still got some running distance here but these cycles tend to the the cycles tend to get shorter and shorter or we tend to cycle through cycle through the cycle more rapidly if you will but I think you're going to see I just think you're going to see an
enormous fallout and and tempas bringing back to tempas this will be a bit of a bell weather for where we are in the quote unquote AI hype cycle yeah so you think that the top is not already in I think I let me go this way the way I would say it is the bell is in we have visual on the bell
if this stuff is getting kind of so out of control that we can see the bell now is it going to be wrong in three months or two years we'll see but there's no way we can sustain these valuations across a bunch of companies that quite frankly are just sort of David Copperfielding
their business strategy by saying look over here where AI and then stuffing an analog rabbit into a hat that was pretty good that was good I think I'd argue that the bell for me was jensen Huang signing a woman's chest I think that I'm going to call that as my talk that was the bell that might be the image all right let's take a look at the week ahead we'll see US retail sales and existing home sales for me Scott do you have any predictions for us well I'm just super excited
or super excited as much as I hated and as stupid as the vision pro us for apple apples intelligence is that smart apples the best managed brand in the world and in a just a stroke of genius they said okay AI is starting to smell like teen spirit of teen spirit was drama and people fired and
rehired and catastrophizing and it'll save the world no to destroy the world and I think that they just said no we want to own this make it our own make it more friendly make it less make it less sky net or weirdness let's just call it apple intelligence my prediction is big
a flop is the apple vision pro is apple intelligence will be that big a hit that was a mouthful go drink rosé and take care of everybody realize that the reason you're there is because you work for someone who is both talented and generous remembers what it was like to be a young person with not
a lot of money although you are overpaid that I want you guys to have a wonderful time eat from ash eat from ash I want you to wear a thong scare some people there's there's actually a new beach at what is it I think it's at where's that new beach it's on oh god what's the fuck is
her name without anyways you'll find it you'll find it anyways HR nightmare you're boss telling you to find a new beach call HR this episode was produced by Claire Miller and engineered by Benjamin Spencer our associate producer is Allison Weiss our executive producers at Jason Stavis and Catherine Dylan me as a whole various I'll research lead and Drew boroughs is our technical director thank you
for listening to prof. G markets from the Vox Media podcast network join us on Thursday for our conversation with Ray Dalio support for the show comes from Atlassian what do you think of when you hear the word flow how about a smooth river of collaboration culminating a new shared ocean
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