Market Hang (12:30–1:30 p.m. ET)

Hey, it's Dandy Franchesco. Welcome to the market hang. Happy Friday, everybody. >> Yeah, man. >> How are we feeling? We got Liz here. [music] We got Turney here. We got Praz here. We got Brian here. Very, very fun show. Excited for this one. [music] So, right off the bat, PR, this is right in your wheelhouse. How perfect that you're here. >> Delta Reports earnings, that's a company you cover very closely. >> Yeah, it's like we planned it, right? >> Yeah. Yeah. Almost. It's amazing how it works like that. Give us the uh the top line. What's the what what came out? Expectations better, worse, what what are we what are we looking at here? >> You know, we're basically seeing, you know, Delta sort of trying to weather this high fuel bill, right, storm just they're they're the amount of costs associated with, you know, the from the US-Israeli war with Iran just seeping into their fuel cost. I mean, we're talking six billion they're seeing for the for the whole year, right? I mean, and and this quarter, of course, they you know, earnings missed both in topline, bottom line. They knocked down their guidance. Uh, and I spoke to the CFO early on a media call and he said basically it's all due to fuel. Uh, that's why they missed and that's why they're bringing down uh, Profit Guy. And so, you know, that's one thing, but on the other side of it, they're still growing premium, still growing growing loyalty, uh, still growing their MX card remuneration stuff. So, they're they're able to weather it and they're able to still make money. They're still projecting, you know, several billion a year in operating profit, but it's the fact that they're not >> where they were before. Sure. >> Because they're just trying to eat this fuel cost, >> right? Was it I mean obviously all of this is not surprising as far as the full fuel costs. We saw this coming down the pipeline. So as someone that's looking at this space all the time ultimately was it was the hit as bad? I mean we're looking at the stock here down uh you know one and a half% roughly. I mean what's your take on like is this actually not as bad as it could have been basically or right in line with where you thought? >> I think it's about what we thought. I think it's I think the $6 billion hit for the full year is probably around what we what analysts probably think what was going to be the the sort of the the the damage there. I think it's it's a Delta specific story in the sense that they're able to still do operate business able to grow capacity a little bit uh for the rest of the year. It's the other guys that are going to be scary, right? Like what's what's American going to show? You know, what's JetBlue going to show, right? I think those are going to be the big stories here for Delta's sort of the best of breed here. So, they're going to be okay. >> It is. Right. >> Full disclosure, I'm a Delta loyalist, so I have to say that. So, I had a little bit of a chuckle seeing the Wall Street Journal interview with the CEO and he said that they are pioneers in Wi-Fi [laughter] >> and they don't have Starlink, which is another debate, but it's also, you know, you it never works on the airplane. >> You know what he said? They pioneers free Wi-Fi. >> Free Wi-Fi. >> Yeah. That's not just service. >> Yeah. Minor minor. >> Yeah. We've all, as a as a Delta loyalist myself, I I've had problems with a lot of their free Wi-Fi, right? Oh yeah. [laughter] >> Well, Brian, I want to get your take, but first you have to share what's your allegiance? What's your what's your airline or are you a multi- airline person? [snorts] >> No, home base is in Denver, so I'm I'm kind of forced to be a United guy and when they said on [laughter] the plane, it's amazing, right? So, it it it it is what it is. Um, but I you know, with with Delta kind of being the first to go here, you got to remember they have the biggest hedge in this space that they own their own refinery. They grow energy in their back pocket. And one of the things they said today was that they could actually net an extra $700 million in the next couple of quarters because they're going to be selling jet fuel to everybody else at a premium and obviously they they generate that fuel to try and be a hedge against their own cost. And so I I would totally agree with Pros that the next guy to go is not going to have that same kind of ace in the hole if you will. It's a very important distinction for Delta to make you know premium you know sales up 18% that triple our expectation of about 6% growth there. So, in terms of demand and consumer spending, everything falls in line in a positive way. It's just that 62% increase in fuel that that kind of dampens the near-term for Delta right now. >> Brian, I want to come back to the hedge point, but attorney, what's your airline allegiance and then what are your thoughts? >> Um, I'm I'm a Delta first, but I, you know, I spread myself around. >> You're not exclusive. Maybe it's exactly I I date the on Facebook, [laughter] >> but um I've owned it for two years. I'm definitely not selling. I I look at Delta as bestin-class. Um it, you know, if you believe the wealth gap is going to continue, like Delta's, you got to be there, right? Because I mean, it's like it's not even an airline, right? 60% of the revenues are premium um and uh the credit card, right? And so I just feel like if you believe in the wealth gap, it's going to continue, you need to own Delta. So I would I would not sell like remotely close. >> Mhm. So, as the others start to come through, Brian or Pratt, happy to have either of you jump in on this. What's the where are we looking at and where could the pain really really hurt as far as the other airlines come through? >> You know, I think it's obviously going to be the fuel costs are going to be sort of how do they calculate that? How do they hedge that? How do they how do they not just pass it fully on to the consumer? Delta basically said they're they're passing the prices fully [laughter] to the consumer. So, they can get away with it because of premium, right? But can can America get away with it? Can United might be able to I mean, they're a huge airline. They have Brun Polaris. uh we haven't even talked about Starlink, right? That supposedly is siphoning off more of these higher spending uh leisure and also business people to that airline. So that's one thing to watch. Uh I mean I I guess the other thing I would be sort of concerned about is capacity, right? We've been we've been talking about, you know, loss of Spirit Airlines. Uh what happens there is are other airlines growing? They're not. They're actually cutting their their unprofitable flights because they can't survive with the high fuel cost. So the question is is anyone moving in in spaces where they can find something find some sort of some some volume there without killing their business. I think that'd be an interesting to see thing to see uh when the next sort of airlines were to report. >> Yeah. Brian are you any airlines? >> Yeah. Sure. Go ahead. >> The biggest distinction there for for I I think the other guys to go is going to be that capacity that utilization. Uh I think what you are finding in in you know this is anecdotal but again being a United flyer you know I've I've got over 70 segments already this year everybody's talking about Starlink. It is so much more productive to be on a flight with Starlink. It's amazing. It's fast. It's free. Uh you're starting to see loyalty change as a result of that. If that shows up in the numbers in terms of like utilization where you're starting to see more bookings as a result of that, that could be a really big offset and a positive for United, you know, in the face of that high fuel charge at this point in time. Uh American I I don't have a lot of hope for them. I flew one American segment this year uh and it was probably the original 737 ever produced. It was old. The cabin was old. It was really in bad shape and it didn't have any internet service at all from LA to Miami. Uh that that's a tough day. >> Did you see the Wright brothers there somewhere? Were there like fingerprints on it? [laughter] >> We got passed by a flock of Canadian geese. That's all I know. So, I mean it it it is going to come down to the experience, right? I I when I when I see, you know, the consumer spending, there's lots of booking. You know, this is going to be a big travel weekend, fall break, all of that kind of stuff ahead of Thanksgiving. I'm interested to see again what those capacity numbers look like. They seem to be very positive. And so, it's about capturing that premium dollar and and all of that kind of stuff. I think that United is probably in the second best position behind Delta here to capture those those dollars. So I I hate to do this because you try to do a topic and not mention AI, [laughter] but I believe that you know AI can't eat the airlines, right? And AI is eventually going to create more demand for human connection experiences. >> Travel demand is not going anywhere. And so whether you're like number five, number six on the list, if I need to get to Vegas, I need to get to Vegas, right? And so, so I'm I'm buying the ticket. >> Well, you bring up AI. So, as luck would have it, again, it's funny how it works like this. It's so convenient. Brian Sazi made a point about the AI impact on airlines. I think we have a clip here we can go to. Watch right over here. Delta Airlines corporate sales grew double digits in all sectors in the third quarter. But what stood out here to me is the strength in technology, banking, and energy. Where are all how all these companies tied together? How are all these sectors tied together? They're all related to the AI boom. Uh they these are people uh going to actually Delta called out uh Boston too. These are folks doing deals, going back and forth to Silicon Valley getting a lot of things done. So if you were worried about an AI uh top or an AI bubble bursting, you didn't really see it in Delta. So as luck would have it, we have someone that's always looking to cut deals in the AI space. Liz, you're in this world. Do you see the same or is it like, oh, hey, how's it going? Same person on the same flight. is have you noticed an uptick in the the regular folks or what what's your take as someone that's that's always traveling looking for the next deal? >> Well, I think in this day and age so much happens over video. I think there's it's not like you know decades ago where you had to go meet we we've invested in companies that are in Australia and New Zealand and we never met them. We I've never been to Australia and New Zealand. Um so I don't think it's necessarily an uptick in in travel but it's just fascinating. I was on a flight last week and the people next to you, everyone's talking about their startup or their deal and so it's everywhere. Especially if you're flying, we mostly fly, you know, the coasts and so I think if you if you broaden it out a little bit, maybe not as much. >> Sure. Uh Brian, I want to get back to the hedging point. Now I have So I I had a cup of coffee once as a reporter covering commodities. It did not go well for a number of different reasons cuz that space is is impossibly difficult to understand for an outsider. But the one thing that always stood out to me was airlines hedging fuel costs, right? And how not a ton of them do it. And I think they've pulled back even more. Brian, you mentioned that Delta has the physical hedge, an actual refinery. But as far as going in the derivatives market with all the chaos we've seen in fuel prices, is this maybe an opportunity for airlines to restart their hedging programs? The big risk, right, is that you lose money on a hedge. If it if you don't need it, you end up spending money. the counter is in this fuel cost spike and you kind of you get in trouble. So I I don't know Brian you since you mentioned the hedging guy I'll go to you first. Do you see is this an opening for you know a bunch of commodities desk to pop up at these airlines or what do you think? >> Boy if it if it were I think it would be a very difficult job to pull off at this moment in time and the reason being the volatility and interest rates in addition to the commodities and then the value of the dollar moving off at the same time. Right. I mean, I think those tail risks just start to grow when you start to enter into that program at this moment in time. I think you probably be better off in the spirit of Halloween, getting out your crystal ball and and just trying to figure out when the conflict is going to end and and oil comes back down. I mean, in the short term, there are some outside influences here, not just the pure commodity price of oil, but the fact that rates are out there, so you're seeing premiums for some of these options contracts go up significantly. How you're going to time that out, what the duration risk, all of that kind of stuff. I think it's an incredibly difficult, you know, project to try and undertake in hedging all of that right now. >> Fair. Brian, would you um would you put GLP1 on the list of maybe like a tiny tailwind >> because we're getting skinnier? >> In terms of overall weight, >> I mean, our country Yeah. [laughter] >> the average weight per person. >> I think it it's >> Sorry. I I think I think it balances out the way the way I'm seeing suitcases get packed, the way my wife travels. Uh I I think that it's negligible. One 1% here or there isn't going to make that big of a difference on the overall flight. I I certainly understand the point, but uh on on the basis of everything, probably not that big. >> The GOP one play is to buy Victoria Secrets. [laughter] >> There you go. >> I I I definitely see your point, Brian. I'll throw another one out there. And I promise I'm not one of the five people who's still not sponsored by a prediction market, but maybe, right? I know they want to get into Wall Street. I know they want to get into more of these kind of interesting, you know, unique hedging opportunities. Like certainly we've talked I've talked to the folks at Cal Street before about how they're trying to push in this space. Maybe this creates an opportunity for again to pitch to the airlines like, "Hey, come to us. We can create a custom hedge for you." Again, I know right now when you can't create a hedge in the middle of the crisis, right? It's like you can't ask for insurance on something when you already have are diagnosed with it. But I don't know, maybe a future opportunity. Uh maybe not. Um what you know, we talked a lot about premium. So you're you're a big flyer. >> The the thing that I wor I wonder and we've written about this is like as we get to more the premium plus and the premium plus+ and then the business that you end up paying extra for things that you previously got for free or you know they end up kind of nickel and dimeming you on these things. Do you see that as someone that flies a lot? Is that a fear fear of yours at all of like, "Hey, this used to come complimentary. Now I need to be the plus+ plus to get it." >> Absolutely. The let me just be clear, the flying experience is not good regardless of [laughter] what airline you're on. So, you just have to pick the best of the worst. >> And I think as opposed to cutting price, if you're a premium airline, your service needs to be better. I think you're seeing like BA and others have have better cabins, but the service needs to hold if the price is going to go up. >> Right. Right. Yeah. Anyone else get for I mean I I just had to book a flight with my kids down to Florida and it's just it's amazing what a base ticket gets you now and what you have to pay. Like essentially I have to pay extra if I want to bring any like a jacket on. It's it's just it's it's it's crazy. I know I'm kind of preaching to the choir here, but it really is frustrating. >> I just want to bring something real quick talking about fuel hedges if you don't mind quick. Uh you remember a while ago Southwest Airlines had a massive f fuel hedge program they had for many many years >> they had a whole desk right I think >> who told them to get rid of it >> Singer when they did the activist sort of uh investment in there right >> they're like get rid of the hedges cost you too much money why you doing it they got rid of it in 2025 [laughter] >> wow here we are so you know but I understand both sides of the argument but it's funny that timing just wasn't wasn't right for them >> yeah everybody doesn't need a hedge until you need a hedge you know it's like everybody's better than Jaylen Brunson until you need to be better than Jaylen Brunson. Um, >> I do have an airline complaint. >> Sure. >> When you go on and you check for a price, but you don't book it and then you come back like an hour later, it's higher. >> Mhm. >> Like the price fixing. Like I I get so angry. Well, did you see there was a story recently about people booking airline tickets at libraries because they were afraid about being geotracked and all these different things. I didn't know. >> So the best way So first of all, libraries underrated. Like my mom was a librarian. And it's just, you know, people need to read more. Um, but go to a library, take out a book, and book your next trip, and maybe you'll save a couple dollars. I don't know. You know, >> do you know the best day of the week to book a flight? Google just came out with all of this data. >> What is it? >> Any guesses? >> No. Tuesday. >> Wait. To to to book it or to fly? >> To book to get the cheaper prices. >> Brian and I say Tuesday. I'm I'm going to I'm going to go Saturday. >> Tuesday. Wednesday. >> Isn't it Tuesday night going into Yeah. Yeah. >> Tuesday. Wednesday. >> Tuesday. Wednesday. Okay. >> Yeah. >> Good. Good. Okay, my last comment is I use this as as kind of a parable for the health of the consumer. I have the top status on United and have had for some time. So, I don't have to pay for the extra stuff, but I can't get an upgrade to save my life. So, I'll know when the economy is about to turn when I start getting upgraded to first class for free because they just keep selling out. So, again, that that premium experience, people are more than willing to pay for it. And I'm even seeing young families, kids in, you know, three or under getting their own seat in first class and that kind of stuff. And it's like at one hand it's great, right? Because they're spending that money and that keeps the economy going, you know, selfishly I'm like, man, that could have been my seat, too, right? So, it's one of those things where I and I travel all over the country and lots of weird little places and that kind of stuff. And the story is true. No matter which route you're on right now, there there seems to still be a large appetite for that premium experience. I don't know, people are still just yoloing or whatever, but that's that's the certainly the case that I've run into both last year and this year for sure. The Brian Malberry upgrade seat indicator has a really nice ring to it. I think I could really get behind that. Um, the last thing I we we talked about it here a little bit, but Starlink, right? That being I guess, you know, again, I'm not a massive flyer. I'm going to take a hot take. Is it so terrible that maybe all of us can be disconnected for a little bit when we're flying? Like, do we do we have to be online? >> It's nice to be disconnected. However, when the airline has the promise of good Wi-Fi, so you feel obligated to do work, but you spend the whole time refreshing, it would be better if from the beginning of the flight, they just said, "Hey, there's no Wi-Fi on here." And you can just say, "Okay, we're offline." >> Okay, here's here's an idea. An airline that promises to give you Wi-Fi, but you actually know it's not going to give you Wi-Fi. And you get on the flight when you have a deadline due with a boss so that you can say, "Look, I wanted to get you the work, but the I had no service. I What do we think? Can we get behind this? Maybe this is turns around the airline stocks. I don't know." Um, all right. I think uh, you know, we talked about Starlink. So, Elon Musk had a uh had a very big uh announcement, right? Uh, we're all Can you hear me now? Can Can Elon Musk hear you now? Uh, he's taking on the telecoms, right? So, I think we have a sound here again from, you know, this happened yesterday. Chris Versace really just like looking into his crystal ball. Had some really interesting thoughts about Starlink and the disruption. And I think if we could cue this up a clip here before we get into things >> as I think with Starlink there's more disruption coming. If you're AT&T Verizon T-Mobile you should be worried >> because they've gotten FCC clearance I think for for carrier service in Europe >> and I think they're coming for their business total connectivity one account. >> So what do we think? I mean expectations are high here. I think I saw a tweet from Elon saying uh SpaceX could be bigger than the Earth's economy I think was what he said. Uh are we are we bullish on the idea of Starlink taking on the uh the big telecom giants? >> Yeah. Well, just look at the carriers stocks today. >> Sure. >> Saw T-Mobile down 10%, others are down similar. >> See it right there. Yeah. >> Yeah. Given uh his announcement yesterday buying up more spectrum. I think that's just a sign that he's taking on more and you're seeing it today in the stocks. >> So I see it from two sides. One like back for two decades um people would call it it got Amazon, right? So if Amazon came into your industry like it was over, right? It was beginning of the end. This feels very similar, right? But like one line on the on the conference call like erased billions of dollars from these three companies. >> Is it a 2027 2028? Like no, it's probably like 2032, but it is the beginning of the end. I would not go out and buy these stocks. >> Yeah. I mean just talking about SpaceX is the Starlink end is is it interesting move here to go into that space and they're they're telegraphing it basically. The question is how does it end up right because there's still a lot more to go in terms of you got to be able buy more bandwidth you need more land assets terrestrial assets. Uh do they buy a carrier? Do they get an MVNO deal? >> Right. Because they don't have towers right or >> it's all satellites. Yeah. Brian you're shaking your head here. What what do you what what are your thoughts on this? >> Well I mean it really is an issue in terms of the competitive advantage is coverage versus capacity. Right. With satellites, you can cover every corner, you know, really of the planet, but you have to have the terrestrial towers to give you the capacity. So, to have the bandwidth, you know, think about people in a stadium, right? You know, it's it's playoff baseball season. If everybody's in Yankee Stadium all at the same time, then what is the capacity, the bandwidth actually look like from a satellite coverage perspective, cover lots and lots of area all at once. But you got to have the capacity and that's bandwidth and towers. And so, that's why it's really more of a five-year project and not a tomorrow project. >> Yeah. cuz I think you know and and Elon talks about this and we actually at Business Insider had a story about Starlink and and how it's kind of the the crown jewel of SpaceX is the plan I think for them is to continue to shoot more satellites up because the more satellites you have over there the more coverage cuz Brian to your point you can get you know as these satellites are you know low and spinning around you get a lot of coverage in the middle of nowhere but over the metropolises is moving too quickly but that really sinks your margins right the more the more you're sending stuff up to space the more that cost and that becomes a real issue and then perhaps to your point maybe they need to kind of dip into making some type of deal to acquiring some land assets. >> Yeah. So if you you do you you rent with American Tower you buy your own assets you you you become an MVNO basically where you rent [clears throat] space to someone else but the question is no carrier is in their right minds going to want to rent them any kind of bandwidth. So, it comes down to do you buy a Verizon? Do you buy a T-Mobile? Uh, or because you or some notes have been talked about Walsh Shamat, they're going to make such a threat that one of these guys will cave. Verizon like, you know what, we have no choice. We got to give them B, you know, we got to >> Well, aren't they already sort of in bed with T-Mobile >> a little bit? Yeah, a little bit. Yeah, they have a deal there, but not like >> I I mean, I'm I have Elon fatigue, so I mean I own Tesla, but I don't know. I I I struggle with him, but he is very strategic, right? So, I feel like there's something way beyond what we're even like discussing right now. I don't It's above my pay grade. [laughter] >> I mean, >> if if the turning to your point, if if the photonics come out where they can actually increase the bandwidth with literally lasers from satellite to satellite and then beam that down to the ground. if they can do that with photonics, which I know that they're working on. That's the only way data centers in space would be viable at this point as well. Okay. It's just there's not there's not a there there yet. They're working on it and and if that were to become a viable technology, then you wouldn't need any terrestrial assets, but again, that it just pushes this out. And yes, I think it puts a lot of pressure on the existing carrier regime, but not all at once and not all tomorrow. >> Yeah. It's, you know, look, Elon is notorious for not holding to a deadline, but he's also notorious for ultimately like getting the job done eventually. Not necessarily on how he says he's a great salesman, but I mean, the proof is in the pudding, right? We have rockets that are kind of coming back to Earth and landing. That's an incredible thing. We're speaking about rockets. Another billionaire is making a big push, Mr. Jeff Bezos, right? So, Blue Origin big fundraising also kind of talks about pursuing an IPO. Look, I think ultimately historically more competition is always better. Starling's kind of been the only game in town, so getting more players in there feels like a good thing. What Liz, you're shaking your head. What do you think? >> Yeah, I think it's just a matter of timing. I that I don't think that's on the horizon tomorrow. So, I think there's definitely a little bit of an advantage with with Elon and Starling, but yeah, I tend to agree more competition is is better. >> Right. Right. >> And it's interesting to go into the full vertical integration route, right? So, it's not just they have their own Amazon star uh satellites or or project Cooperat satellites. It's we have we're going to have the rockets potentially. >> Rockets go up, satellites go up, create service. >> Oh, we have a slew of data centers across the world. Amazon does we have the ability to to capture everything to get data to do everything to to be enterprise and and res res like like just regular people, right? Civilians. So, uh, it's an interesting sort of take on the Starlink sort of SpaceX model, the Amazon AWS model on on the Bezos side. So, it's a pretty compelling competitor. They just have a long way to go, it seems. >> I mean, they're using Starlink and SpaceX rockets to get up there. So, that shows how far we are in here. >> When is when does Musk cut that off, right? [laughter] >> Yeah. Well, he seemed pumped. He said he was excited about Jeff, you know, investing his own money and whatnot. Brian, sorry I cut you off there. >> No, no, I think what Pas just said is is absolutely the dynamic right now uh in in this race if you will. SpaceX clearly has the technological advantage in launch, right? I mean, they're catching rockets out of midair with chopsticks and that kind of stuff, right? Landing them in the ocean and and Amazon has the clear terrestrial lead in terms of data centers, right? So, for me, who wins this race is who's able to monetize their business to pay for it, right? So, when does that come around? I I think in the moment, you'd have to give the edge to SpaceX because Amazon's paying them just to launch stuff, but also so is NASA, right? So there's there's a buffer of revenue that SpaceX is generating as an ancillary to their own goal in trying to to to be the biggest or the best out of this, you know, the this duality, if you will, >> right? What's what's driving this race? Is it ego or is it the good of mankind, profits? [sighs and gasps] >> Yeah, it's it's an interesting question. I think if if I remember so obviously Elon is big on colonizing Mars and if I remember correctly and someone feel free to fact check me I think Bezos is actually the camp of colonizing the moon right does anyone remember my >> I don't know so I think there's a little divide there I will say as far as the competition though attorney so we had written about this how um Blue Origin had a didn't have the best uh uh compensation package as far as the equity and there's a lot of belief among Blue Origin employees that Bezos would never sell and he would never IPO and the counter is obviously SpaceX offered all these opportunities and then eventually went public and a bunch of people got rich. So I do wonder about this funding round. They ended up actually changing some of their compensation and interestingly they changed a bunch of their equity packages but one caveat was I think if you leave and work with a competitor within the next 18 months you lose all of that equity. So, I wonder between the funding round, this announcement, and also him teasing, oh, we could IPO. I wonder if it's a little bit of like, all right, we need to get some people in because a lot of Blue Origin people have sitting there been like, our friends over at SpaceX are getting filthy rich, and we're kind of sitting here and and as we know, like talent kind of leads the game in these type of things, >> right? >> Yeah. Uh, speaking of talent, we had another big talent story kind of wrapped in a political story, but I think it's really a talent story with um this recent kind of Microsoft tiff with the White House. So, uh, specifically the the White House targeted Microsoft for, um, PERM, which is applications, um, that eventually lead to a green card. But I think the bigger picture here, right, is about foreign talent and bringing in foreign talent and the impact. So, we're about a year removed from the big H-1B visa, you know, kickoff where uh, it was the fee was raised to $100,000 and then there was back and forth. Um, and I think it really comes at an interesting time because time and again we hear about how the US needs to stay ahead specifically of China. And at the same time now we're getting some messages about how we need to ease up on pulling in foreign talent and high American. And if you look at the H-1B visa, right, uh, people from India are the biggest proponents or biggest users of H1B. Number two is China. So if this continues to be an issue as far as like bringing in foreign talent, the next logical step for them probably is to stay domestically and that means more talented technologists staying in China which benefits who the administration says we need to stay ahead of. So I know there's a lot to unpack there a lot of everybody but what do you think about >> before we get into the weeds? >> Um I think whoever the headline writer is over at Business Insider should get a raise. >> Okay. I loved what smart people are saying. >> Oh yeah, >> we like pulling that lever. Yeah. Yeah, we like pulling. >> It was like smart people are here and the government is on this side. [laughter] >> I think there were some government people pitching it. But yes, I >> there was I'm just saying when I read the headline, I was like, "Oh, that's good." >> Well, you know, look, you come to business side, you get the news right away. And Yahoo, too, of course. Uh, but I don't know if anyone else wants to weigh in on like this this unique time for foreign talent trying to work in the US. I'm curious about what you have to say about with your VC clients and then and portfolio companies that are trying to grow and use leverage foreign talent, right? >> Yeah. I think companies like Microsoft, they have, you know, massive teams that can handle the news that changes on a daily basis as it as it comes to, you know, H1B, etc. But startups are really impacted because they don't have the teams and the bandwidth to navigate all these daily changes and it's it's even more challenging. Talent is really the competitive advantage that startups have. And so I think you know Microsoft it'll be okay but this will really impact startups and we're seeing that on our on our end on a daily basis. >> But do do we sorry but do we believe these headlines like this administration >> people are saying this to okay [laughter] >> I'm not I'm not making this political but like sometimes we get things for headlines and then two weeks later they don't really matter. Well, that's that's the issue is that a lot of companies don't know what's going to change or what will stay a week from now and so they're just hesitant to make any decision. >> Liz, I completely agree to your point. Um, when the H-1B stuff was kicking off, Jensen from Nvidia came out, which is like we'll pay it. Like whatever the case, like we're paying because they have very deep pockets. But if you're a startup and you're like in the process of maybe hiring someone from India or China that you think is going to be really talented but now you don't know to attorney Tony whether it is headline or or actuality you're you can't afford to maybe suffer such a big loss. This also brings up kind of what you kind of alluded to is that you have you know Sachin Nadella at the White House just the day before getting an award right and then people like Elon Musk for better or worse saying actually we need to bring in foreign talent of all people to say this but he's a proponent of H1B right because he needs we need people that necessarily can't do the job here if they're scientists or engineers coders software writers that sort of thing >> and and we sorry bringing it all all the way back to competitive like at the end of the day this country is like only cares about results. We're so competitive. We're going to hire the best person. And so I think after the midterms like this isn't even >> and just to chime in here real quick. So the what's happening and Brian I want to hear your thoughts too. The what's happening with Microsoft is not specific to the H1B, right? The H1B is the bigger story specifically Microsoft had to do with PERM which um you know we don't have to get too in weeds but has to do with basically the the path towards getting someone a uh a green card that that works for you. But Brian I want to hear your thoughts on all this. Well, I I know I kind of want to endorse what Tony just said and and just simply recognize that all of this capital globally is coming to the United States because this is the best place to invest especially in technology [clears throat] and AI. There's no physical infrastructure that exists in Europe or anywhere else other than China at this point in time and most of other Asian countries are just in the components, you know, portion of of the AI race. So when you start to see what people want to do and how they want to compete, there's this giant flow of capital and talent that all wants to come here. So I can understand, you know, a little bit of the protectionism of trying to make sure that, you know, US citizens have, you know, their opportunity, if you will. So the H-1B is not going to go to zero, if you will, but that also is an enormous amount of capital and demand that we might be stifling if we do this in in in too much of a heavy-handed way in terms of regulation. So, it's a a backhanded endorsement to the US economy and and you know how well we're doing here because we are attracting this level of investment and this level of talent all at the same time. >> Yeah, Brian, you bring up a great point and I'll I'll tell a quick story. Um, and it's going to sound a little bit humble braggy, but I promise not. So, I I went to Davos this year and as Davos was going on, there was this whole kickoff about Greenland, right? And what was going on there. >> I missed those days, man. [laughter] And I I just so happened to have lined up an interview with someone who was from Denmark, right? Which Denmark is the, you know, autonomous, you know, whatever. So I was talking to them and I was like, "Hey, so what do you think?" This was before it had all things had settled down by the end of the week, which is how quickly that whole thing moved. But you know, are do you feel like the global reputation of the US is really going to take a hit for this? And the person was like, there's too many resources. There's too much talent. There's too many businesses. There's too much too much too much in the US for people to really turn their back. And this person who was a business owner in Europe was like, I'm still planning on moving my business to the US. Like that was the end goal for them. So I now the counter is right, you make the hurdles too high, right? And it becomes too difficult. Then eventually people pull back. But there is like this is such an aspirational place for so many people on the business side because of the investors, because of the talent, because of the businesses. It really does, you know, in the face of everything make it such an an interesting spot to land. Yeah. Um I think we can uh I want to shift here now to AI because of course we've gotten pretty far without like [laughter] really >> Except I brought it up. Sorry. >> So I think you know Liz, this is where we're going to have to lean on you here, right? Where how are you feeling? Right. You're in the trenches. You're cutting the deals. You're seeing things. Lots of talk bubble. Lots of talk come down. Lots of talk of circular financing. Feel like you're you I would imagine you're very bullish on things. What's what ease everyone's concerns? It's Friday. We're trying to have a nice weekend. Why should we not worry? And why are things going to be okay? I think there's a lot of hysteria in the headlines, but if you spend every day with early stage AI startups like we do at Shockti, you're you can't not be optimistic. Whether it's looking at companies that are changing every industry using AI, such as a distributor AI company that's helping uh food distributors effectively price their goods or a company that we work with called Nexwork that's upskilled 200,000 learners globally. So, everyone talks about job loss and doom and gloom. there's so much good going on there as well. Um or companies in the autonomous trucking space that are helping, you know, deliver your Doritos and your Pepsi doortodoor without a driver given a lot of the driver shortages. So from our seat, there's so much optimism, so much bloom out there. >> Mhm. One thing I found really interesting just poking around and because of the space you play in so being very early stage I think [clears throat] on your your website right it says that you are so early pre-venue pre-product sometimes pre-inccorporation so what does that look like from an investor are you like you meet an 18-year-old like you seem like you got a good head on your shoulders like here's here's some money like how I mean I know that's a little bit of an exaggeration but like how how do you navigate something where it's really just like back of a napkin idea? >> Yeah. Yeah. Well, caveat, we we do meet pre-incorporation, but we never invest until until they're incorporated, of course. Um, and and it's like that. I think when we meet founders today, the first question we ask ourselves, whether they're the 18-year-old coming out of, you know, coming out of school or someone who was a second or third time founder, we ask ourselves, is what they're doing a toothbrush? >> And what we mean by that is, you know, a toothbrush, you brush your teeth hopefully multiple times a day. >> Hopefully. >> Hopefully. The the is the market that [laughter] they're going after a toothbrush market? is it's something that's touching everyone on the planet every single day, maybe multiple times a day. >> Because if you don't have that in this day and age, it doesn't really matter and you're not going to get ahead. So, the first number one, it has to be a toothbrush. >> Uh and the second is of course the founder. >> Has anyone pitched you a toothbrush idea? >> They have not. We do have some shocky toothbrushes, but >> Okay, fair enough. All right. >> It's funny this No, you go. >> You know, we were talking about this earlier today about the So, you have this push and pull with AI, right? of the, you know, investors on uh that want to get in that private market investor that people like yourself and on big private equity companies that oh open is raising money. We want we want in we want in uh Anthrop raising money. We want in we want in. And then the other side of it is people freaking out about all the crazy debt happening with hyperscalers and and and other companies looking to to raise money to to build their businesses and and build you know the ARR that we're all talking about. I [snorts] think there's just this push and pull of people are excited about it and people that are concerned about it, but then also is that an opportunity, right? Isn't that isn't that when there is an opportunity is when there's some concern? It can't all be, you know, everyone's happy on on each on each side, right? [laughter] Or one side. >> Yeah. That isn't isn't that the case with any new technology though? There's there's so much concern in the headlines about oh over capacity in data centers this, but when you actually look under the headlines, I think less than 15 of data centers that have been announced are actually even started construction. So there's going to be an over capacity for a long time. >> Yeah. And I I think I might be more bullish than you. I mean I I just think you know people talk about I think there was a headline that said like AI versus everything else and I'm like what are you talking about? Three years from now it's one trade. Like AI is going to touch every single part of your life and these non- tech companies are going to be dramatically different. The entire world's going to be dramatically different. And I don't even think we're scratching the surface. I don't think we're in the first inning. Like I I I'm long everything and I don't care if it's down 15, 20, 30%. Like [snorts] this is so transformational. Like I don't know. I mean, >> Ryan, you're shaking your head. I would love to hear your thoughts. >> Yeah. So, I mean, you know, when we do our homework, it's all about who's going to monetize this and do so profitably, right? That's what we feel like where the market is going to go. And the energy is certainly there. There's a reason that we're trading at such a high premium in the S&P 500. You know, it it's all of the capex. It's all of the AI anticipation, all of the good vibes that are baked in there. But, you know, the cautionary tale is like Uber. Uber blew through their entire annual budget of it in Q1. And what did they get from it, right? Did they were they four times more profitable? No, they had an okay quarter and they're looking to have okay earnings growth. So, again, what's the return on investment? Other companies are having a different experience, but the demand overall is very strong. Every CEO that reports earnings publicly says, "Hey, if we had more access to more AI tools, we probably would have been more profitable." Now, it's just simply that supply and demand picture where there's too few tokens and they're getting to be more expensive if you're wanting to use the frontier models. On the other side, you have more or less super search, right? The large language side is really getting cheaper and cheaper to interact with. So, how are you going to put all of this together and increase your own productivity? And that's kind of the the yin and the yang of the AI trade right now in the moment is we're we're finding that capex is still the driver of valuation in the market that makes you want to favor the infrastructure trade today, but a year from now it starts to move over to those companies once more compute is available using the tools attorney's talking about and becoming more productive, more profitable with less capital in investment on their own. So we're waiting for that pivot point. At the moment, it still favors kind of the infrastructure trade and and and the chips and and memory and power and all of that kind of stuff. But AI will absolutely be additive to the economy. It's just going to take more compute online to get there, >> right? But if it let let's take a time machine back to like 1997, right? We could be having a very similar conversation and and if you had the ability to pick the winners in 97 and withstand the dot bubble, you're not even working anymore. And you're not flying Delta, you're flying private. >> Absolutely. And it, you know, so the only thing that I think really hurt in the dot bubble was the assumption that everybody was going to want high-speed internet access at home. And so we overbuilt the fiber optic network just assuming that everybody was going to need high-speed internet at home by 1998 or 1999 when the reality was we only had access to the internet at work and most times it was still a dialup modem right and that demand curve came around 10 years later in 2006 2007 when you had a little bit easier terminal to work with the personal computing space started to explode obviously Microsoft came out with the Mac that made it a lot easier to connect directly to the internet and then that higheed bandwidth came around. So the question is are we overbuilding the infrastructure right now? No. Based on the demand structure that I just described, I really don't think so. And so again, everything is okay as long as the capex gets spent and we start to see, you know, really positive results downstream from that like we have been all year this year. >> But I guess that's the the catch, right? Is you may bring up the Uber example like spending a ton and like productivity's kind of shrug shoulders. That that's where I get a little nervous cuz you you hear stories about like yeah the ROI we're not quite finding it and you talk to CFOs and they're kind of very conf they're having a tough time and then you look at like a lot of them want to lean into these open weight models which that's a disaster for the open AIs and throughout the world that doesn't work at all for their business model that feels like a a really big problem that we're kind of not addressing but I don't know am I not looking at it the right way >> are you are you invested No. So, [laughter] no, cuz it's it's too and that that I wasn't taking a shot, but like there's two different things going on, right? Like when you're putting real money >> Sure. >> that I'm think I'm I'm I would never short stocks right now, right? Like like >> Well, you can be right and also be wrong, right? Because you the eventually things can drop off, but if it takes long enough, you miss out on all that value. >> My biggest concern would be missing the trade to the upside. Sure, >> that's what I'm concerned about. >> Yeah, that's fair. That's fair. where Liza on your side right we just saw an Nvidia backed company kind of pull back on its IPO I know you're on the very opposite side of you're in the very early stages but thinking about yeah >> we're in the in the kindergarten stages of the >> but eventually for things to be realized right you want some type of exit opportunity does that pull back or things like that does that give you pause or is that just so far down the road it's not even something that's on your radar >> I mean when you look at the data it's I think people forget that going back there's so many more startups out But there's only so many IPOs you can have. There are so many public companies and vendors that can exist. And there's some great data coming out of University of Florida professor Jay Ritter looking at 40 years ago the number of startups per year that have been funded is about 20 times per year and the number of IPOs per year has remained the same. >> So I think that people forget that there's really so many companies that can make it to the bottom of the funnel. And over that same time period you had about companies that were used to be 80% of them were profitable at IPO. It's about 20% now. [laughter] And so things have really fundamentally changed and we keep that in mind. And and and so we are optimistic but you have to remember that not every company can make it through the bottom of the funnel. And you saw I think it was last week or Aura Aura pulled back as well. I think we'll see more of that too. Dan, you brought up open weight models and I'm I'm curious the companies you work with that this early stage are they some of them very excited [snorts] about openw weight >> 100%. It's all about cost and we saw the exact same thing in in the internet and once the cost starts to fall it's kind of the golden age for startups used to cost in the beginning of the internet era cost tens of thousands or hundreds of thousands of dollars to do something like prop up a website. Now you can do that you know overnight or within a matter of minutes using AI. So openweight models and prices coming down is like the perfect building blocks for startups. It's good for startups, but because it's so bad for the two titans, how much does that shake up everything, right? Because of the circular finance, because of how many companies are backing anthropic and open AAI if it's catastrophic for their business model, which maybe that's hyperbole, but doesn't feel great, right? So, it'll be good for the little guys, but do the little guys even have a place to go if the big guys fall apart? >> They do. And there's a time and place for every model. Look, if you're doing, you know, deep health care and science research, you want to use the frontier model. But if you're just doing a prompt to, you know, figure out what you're going to do on your vacation in Spain or whatever or what airline you should fly, you don't need the Frontier model for that taking up all of your tokens and >> cost. You don't need Fable Five for >> There's still a time and place for all the different models. >> Going full circle. Oh, sorry. I was just going to say that um sorry, the smaller companies not being able to deal with like the lawyers with H-1B, right? Like that's a divide, right? Because Microsoft can throw a bunch of money at it and get whoever they want. a smaller company, they might not be able to. >> I take principle. I I do need the highest end model to help me understand how to make the best shrimp pasta. But we'll leave it there. Brian, what do you think? Where do you come in on this? So, you want to say something? >> Well, I think you got the first warning shot yesterday, right, with OpenAI coming in, you know, short of expectations or a couple of media reports saying as much as $20 billion. And then they refuted that saying, "Hey, wait a second. We're just not including our partner revenue, you know, that comes from the data centers and that kind of stuff." But the the the downstream impact of that was significant. I mean, you saw Corning, Oracle, Intel, all down over 5%. Now, a couple of those are back up a little bit today. But on the memory and inference chips, you know, like Micron, SanDisk, Super Micro, they're down still again today. So, the concern being that if they come in light on revenue expectations, how are they going to pay for their financial commitments when it comes to that next wave of hardware? You know, this is where I'm talking about how interconnected it is. You mentioned circular financing. It's all of the above. And if OpenAI cannot generate the amount of revenue to make good on those financial commitments, then you can start to see how it has a very negative impact on the market in the short term. In the long run, these companies are still going to be here because we need their innovation. We need those frontier models that will eventually lead us to what will be AGI. We're not quite there yet at this point in time from a technology perspective, but they're the ones that are going to get us there if they are. the the other ones again are just more or less super search or or large language models, you know, that are helping us with some of the the the lower information tasks, right? And the true autonomous that's going to become, you know, general generative AI is going to come from those frontier models and those frontier labs. They just have to be able to monetize it in the short term to be able to fund that future growth. >> Sure. something that um a little separately but kind of in the same vein something that caught my eye Wall Street Journal story about it's October 9th and the fight for summer internships full-fledged already like getting it in you know figuring out Liz you kind of ran through that rigma roll right um you know before I'd love to get your thoughts about how early this process whether it's the summer internships for the college kids or whether it's the private equity or the investment banking it's just it seems earlier and earlier and earlier you kind of get the foot in for two years or three years and and I have a lot of thoughts on it, but I someone that went through it and saw firsthand. I'm curious where you fall out on it. >> Well, look, I I went through this I was at Morgan Stanley for a decade. I went through this a long time ago and they were not recruiting me from middle school like they are today. And I think on on one hand, it's kind of sad because kids, you know, they can't have your typical summer jobs because you're getting recruited so early. Um, but I it's it's extremely competitive and look, we're we're so impressed by the next generation. And people are very worried about what the kids are going to be doing. And I I just think the kids are going to be all right. They're super tech-savvy. And if you're a bank or another institution, bringing in young talent that's very AI savvy is really going to change the game. >> Sure. Attorney's former Wall Streeter kind of had a front row seat. What do you think about uh again like a lot of this stuff kicking off way earlier, way way way ahead of time? Um, as a father of a 20-year-old at NYU, I'm telling her to live life and enjoy and not worry about it. >> Um, I think it's, you know, it's fine people who start that early and, you know, their their their lives start, but I just I think you need to live >> miss out on, you know, >> I'm a I'm a fellow Morgan Staner. Yeah, there we go. I I I agree on all that. I also just I just have a real problem with if you and this is maybe very specific, but certainly the the investment banking route to private equity and that whole thing. >> You basically need to know what you want to do when you're a junior in high school pretty much. >> It's crazy >> because you need to get into the right target school and then right when you get in, you need to get in the right financial clubs and then you need to get the second, you know, the and then it's just it's it's insane to me. Even worse than that, they tell 12-year-olds to pick one sport. >> Baseball or hockey or football, you can pick one sport. >> Specialization is Yeah. And and I think, you know, as a far as especially as we talk about like, you know, sheeps hurting to the same thing. Like, we need diversity of minds. We need someone that maybe didn't even realize investment banking was an option until they were a senior in college. I think that's so important as opposed to the same kids that have been on a specific track that have kind of been formed a specific mind. I I I it's it's it's not great. I don't know PR, where do you where do you come out on all this? >> You know, I think we all got to have our chance to sort of do what what we like and do what we want, like sort of pursue interest, right? I think in college it was I was also, you know, I was forced to be premed, right? [laughter] That's another another story. But I found that when I took classes that I just thought were [snorts] just sound and interesting, I was way more into it even though even though it was maybe something new and I didn't knew nothing about it, right? So I just felt like the more exposure you get to different things, the better off we are all we all are, right? And that's what's better for us as generalists. I think generalism is going to be a thing that maybe might be valued. >> The the return of the liberal arts major. >> Yes. >> Hot take. I think that'll be the most popular major. >> In in addition to that, the best people using AI are like English majors, philosophy majors, like being able to interact with AI. You're better off with that type of >> critical thinking, connecting dots, right? It's a lot less uh technical there. Um, it's Friday, so I think we should end on something fun, which is a lot of movies, a lot of tech movies. So, we have The Social Reckoning, which is kind of the sequel, kind of sequel for um for the social network that's hitting theaters today. Uh, there's also Musk, which is a 4-hour documentary about Elon Musk. Um, you can see everything uh which is Nathan Fielder's uh film about Elizabeth Holmes that has gone very viral for the trailer. And then, oh, here we see right there. And then Artificial, uh, which is about the, uh, Sam Alman kind of fiasco from a couple Thanksgivings ago. It's coming out, um, right around, uh, Christmas. And then, oh, and then also The Altruist, which is about Sam Begman Freed. So, a lot to take on. Um, I guess real quick, let's go around the room. What of all those is everyone most excited to see? Liz, we'll start with you. >> Most excited for the Elizabeth Holmes, mostly because of the trailer. Gave me chills. >> Yes. Yes. Turn. So, as an AMC rewards member A-list, I will see all of them, but artificial, I think, is the one I'm looking forward to. >> Okay, Brian, >> I got to go with Musk. I mean, the first trillionaire on the planet. I'd love to know a little bit more about him and where he came from. >> So, for me is two that I got two. Okay. >> Musk for work because I'm I'm technically but also by it's my coverage beat, right? Tesla and everything. But you can see everything just looks like the most compelling movie. I have not seen a trailer like that before in many, many years. Everyone walks out of the movie saying they they're speechless, >> right? >> They come out, they don't know what they just saw, but it blew them away. So, that's going to be incredible. >> And if you're not familiar with the director and the infielder, >> like you watch the rehearsal, watch anything for you, just watching the rehearsal. There were times where my wife and I were like, I I can't believe you did that. And it's like, I can't believe you did that. And obviously, Elizabeth Holmes is such a fascinating person. Yeah. I'm really excited. Turn though, you have kind of a history working with it. I guess what do you think in general about Hollywood's continuing fascination with tech and with finance and and having worked in with people in this space? >> Well, um I mean if you'll notice every single one of those films are not a flattering take, right? Sure. >> And so the general public there has a taste for a demand. They don't love corporate America right now, right? And so I think Hollywood's sort of feeding feeding them exactly what they want. And it's entertaining like it's >> Yeah. So, I mean, I'm like I said, I'm going to see every single one of them. >> Yeah. I have a little bit of a counter take here. I wonder if ultimately all these people actually enjoy it in a weird sick fan sick kind of way. Like they're still talking about, you know, like we're in October, right? Reggie Jackson famous said they don't boo nobody's, you know, like the fact that these movies are still being made. Like these people are choosing ultimately to be public figures. They're choosing to be on Twitter. They're choosing to tweet. They're choosing to make public statements. And you know, I remember famously when the social network came out, uh Zuck went on SNL when Jesse Eisenberg was on and he kind of came out. Maybe he didn't really quite recognize how critical that movie of him was. Uh but I I do wonder even as much bashing as it is if they actually like in a weird kind of way like Yeah. Well, they're still talking about us. >> Well, I I mean I don't know if that's a like a opposite take because two things can be true, right? like they like it but it's still like a sort of a negative portrayal. >> Oh yeah. Yeah. For sure. For sure. This kind of speaks to just how important these tech has become in our lives and you know before maybe was railroad guys was finance guys right now it's all these people are even Elizabeth Holmes was is a tech type of company and it's so pervasive that >> you know we can't get get away from it and and these guys who are running these founders who are running these companies are so like just cult of personality Balk in particular right is just has its own troll troll army right [laughter] so just it's just it's almost kind of hard to contextualize just looking from the past cuz there's no past to actually look at. >> Yeah. >> Yeah. I think if you're tweeting from prison, you like being in the limelight. [laughter] >> Fair fair. >> That's the quote of the day. >> Yeah. Brian, you're nodding there. What do you Where do you come at it? What do you think? >> Well, I mean, even to go back to like the big short, right? I mean, a really really big production from Hollywood that had a lot of villains in it, you know? I I I think that a lot of people just are interested in how the mechanics of some of these things happen behind the scenes of the stock market. You know, I mean, my favorite movie is Wall Street. I'm still waiting for that phone call from Blue Horseshoe, right? Anacot Steel, that whole thing, right? So, there's there's it's interesting how I think there's a lot of villains that get portrayed by Hollywood in our business. And that's mainly because they deserve it, right? I mean I it's going to be interesting to see you know what the reaction is in terms of ticket sales and that kind of stuff but you know I think the fascination is when you start to see success money power and then start to see the people behind that you want to humanize that and I think that's what Hollywood is really good at doing >> an interesting fact about that um between Lyus Poker and the movie Wall Street which came out around the same time both of them were supposed to be cautionary tales and it inspired a generation of people to come to Wall Yeah. Well, and then you had Wolf Wall Street that pretty much I think did the same thing for for a certain group. Real quick, I think we got less than a minute here. What's Brian, you mentioned Wall Street. Favorite business finance type movie. Liz, do you want to start? >> Um, favorite business finance type movie. I think I think any Wall Street movie hits a little bit too close to home. So, on the tech side, I really love The Social Network. That was like right when I was coming up. >> Sure. Margin margin call. Margin Call. >> That's a good one. But I got to go with original Wall Street. I mean, >> original Wall Street. Okay, got to go there. >> No big short. >> He got He got me a blue horseshoe. I mean, I had I had to I had to. This to [laughter] me. >> I mean, it's the weekend. Maybe a little rewatch. Maybe, you know, get it going. I margin call. I'm attorney. I'm with you. I think Margin Call is is underrated. It came out at a weird time. Came out during Occupy and I think they kind of leaned into that in a way that they maybe shouldn't have and and tried to lean in more to Wall Street. I think Margin Call underrated. Go watch it. But um either way, you have now plenty of things to watch. So, thanks so much for being here, guys. This is great. This is so much fun. And thanks everybody for tuning in. We'll uh we'll catch you on Monday. 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