Frank Curzio 00:00

How’s it going out there— it’s Wednesday, October 21. I’m Frank Curzio. This is the Wall Street Unplugged podcast where I break down the headlines and tell you what’s really moving these markets. Daniel, what’s really moving these markets? SpaceX. Holy cow. Holy cow. I mean, you’re looking at a stock right now, it’s trading at 161, it’s up 9%, and a lot of people that I know said, “Hey, should I buy this on IPO day?” Because this is where it opened up on IPO day. It was priced at 135, it opened up around 160. And I said, look, there’s going to be a lot of shares being unlocked, you know, be careful. And then when it went down about 110, we came on and said, look, a lot of this is factored in, I think it’s a good buy here. If you’re someone that bought this on day 1 of the IPO, 160, and yes it went to 180, how are you not doubling down here after this quarter with those numbers that were absolutely incredible? And I looked through this, I dug through this.

Frank Curzio 01:01

You know, you might see a couple holes here and there, people might be worried about CapEx, and yes, you have lockups coming of a billion-plus shares, I think it’s 1.8 billion, you know, in the next few weeks. However, those people who own this stock and own it early, that’s, you know, Ron Baron who’s owned Tesla and owned SpaceX and never will ever sell, ever. How are you selling after those numbers? Because it just shows a clear path of how big this company could get, which I saw Ron Baron say, and people laughed at him when he said Tesla was a trillion-dollar company. They were laughing in his face. He’s saying that this could be a 30, 40 trillion-dollar company years from now? Who knows? I mean, you want to doubt it, you want to go, say, you know, you’re full of shit when you look at the numbers. But we’ve said that a lot of times when it comes to Elon Musk, but holy cow, there’s a lot of positives in this quarter that we’re going to break down right now. But what do you think?

Daniel Creech 01:51

Well, leave nobody to outdo Elon other than Elon. If Baron says that, Musk took to X and said what, his company would be more valuable than all the global economies someday. So, you know, yeah. I mean, he starts out the conference call on page 4, for those of you following along, he talks about expanding consciousness. So there’s a little bit of everything in this conference call to go over, Frank. It was incredible. I mean, I’ll let you kick off wherever you want to start, I got my own thoughts. But anytime you can expand consciousness and talk about launching and catching rockets and then everything in between, it’s a hell of a Tuesday.

Frank Curzio 02:27

Look, what we try to do is provide different perspective here. What you’re not hearing when people talk on CNBC or Fox Business, and you know, they have good analysts on there. But we look at things, sometimes we look at things differently. And you’re going to see, you know, a lot of things we’re going to point out that I’m not seeing mentioned too much. So, yes, they reported their first profitable quarter. Revenue surged 160%. Revenue projected to come in at 12.8 billion, it came in at 14.6 billion. A massive beat. Which, by the way, when companies IPO, that first quarter is such a pain in the ass. Yes, you have executives that are used to it, but especially with a company this big, this many divisions, it’s very hard when you’re a publicly traded company to have all the accountants ready, and yes, they prepare. But just, there’s so much going on, and it’s so, it’s this big event when you go public, and behind the scenes, it’s very difficult. A lot of companies disappoint the first couple of quarters out.

Frank Curzio 03:21

You know, maybe they show growth, but you know, they don’t understand the guidance part. I mean, again, Elon Musk has, you know, Tesla, an existing company that’s public, but there’s just so many moving parts that you usually don’t see this kind of growth right off the bat. Because if you saw this kind of growth, and the reason why, they would have put this shit in the IPO, because it would have commanded a much higher price when you IPO’ed, right? So the fact, this is a big surprise. Because if you’re like, hey, well, I mean, there was, we weren’t throwing out numbers when we saw this thing being launched, S1 came out, they weren’t like, oh, we’re going to be, you know, revenue’s going to surge 160% right off the bat. You know, they would have provided a lot of these numbers in IPO, because what you want to do during IPOs, you want to raise as much money as you can, right? It doesn’t matter. Even if the stock goes down, you’re raising that money, it’s a lot of cash coming into the company. So to see this kind of explosive growth right out of the gate is incredible. And we all knew when I broke this down, I was talking about satellites, which is a highly profitable business inside SpaceX, it’s massive.

Frank Curzio 04:14

The huge story here, Daniel, is how Elon Musk is able to integrate so many of these divisions and make it work in terms of scale, which is incredibly difficult. That’s why you see so many spin-offs within companies. Oh, this isn’t part of like, you know, our huge growth now, let’s spin it off into a different division. Oracle’s great at this when it comes to roll-ups. But when you’re looking at Starlink, which is a connectivity division, sales are up 160% year over year. But space, which is rockets, revenue up 85%, and then AI, holy cow. I mean, you’re talking about up 830% year over year. And now they’re likely going to merge Tesla into SpaceX, which we said would happen six months ago, right? And it wasn’t too big of a surprise, not a bold call, but they’re probably going to do it. And I think he owns 20% of Tesla, Elon Musk. Man, even with this move, I don’t even know how much he’s worth right now, but holy cow. Joe, you could try to find that out, how much Elon Musk is worth, they have to, like right now, today.

Frank Curzio 05:12

You know, based on all the stock he has. Because even Tesla’s up a lot today too. But it makes sense, we felt, is Tesla to go into the SpaceX umbrella, which we got a glimpse of last week, right? When he’s putting jets, or rocket jets on a Tesla roaster and making it fly in the air, right? So, you know, and we’re not even talking about robotics yet, which, you know, we’re going to see people using these things, and they’re going to be affordable in a couple of years from now. And the people that, the all-on podcast is great, they gave them, you know, a glimpse of this, you know, months ago, and saying this is like the greatest thing they’ve ever seen in their lives. And they’ve seen every single technology, they’re all billionaires that are, you know, seed investors in some of the biggest technology companies in the world. I like that podcast a lot. And that’s not even factored in yet. But when you look at everything in sync, it reminds me of when I would see Google, Meta, Amazon, right, Daniel, when they report, you know, yes, AI, holy cow, it’s growing, but, you know, they’re buying massive electricities, right, to power AI.

Frank Curzio 06:05

But then if you look at AI, it significantly is driving their cloud revenue. And then AI drives ad revenue, it drives Amazon’s retail division, Google, their search division and ad division. Meta is driving their ad revenue and cloud, and, you know, Muses on fire. So you have everything in sync with the biggest companies in the world. And you always see these companies that grow almost every single division by 20%, 35%, 30%, right? Which is incredible. It’s hard to integrate where, from top down, as long as that part of the business grows, AI, it’s filtering into every single part. And now you’re seeing this with this company where, you know, we know Starlink is a great business and growing rapidly, has pricing power. But connectivity and AI, I mean, Elon said this at an inflection point, where we’re going to see massive growth. Where Starlink generated 5.2 billion in revenue. That’s Starlink. We knew that was going to be great. Even when I analyzed, I said, listen, this is the division that’s driving everything.

Frank Curzio 06:59

But its AI division generated 7.6 billion, compared to Starlink at 5.2 billion. Which tells you why every hyperscaler continues to spend like crazy to build out data centers. Because the amount of cashflow these data centers are going to generate once they’re built is literally billions and billions and billions per month for many, many, many, many years. And they know all of this. And yes, that CapEx is crazy, you can always shrink that CapEx if you want. But when I see that, that was the biggest takeaway of how you have everything integrated here that’s working together, which is incredible. And I think that caught a lot of analysts by surprise. They’re all raising their price targets today. But this is, you know, all around an incredible quarter.

Daniel Creech 07:40

It really was. Clearly, as you said, the way he can integrate and scale is pretty impressive. And obviously the XAI acquisition that they did through SpaceX was very good, and it’s driving revenue, as you said. One of the things that stood out to me when I go through the conference call is he was still talking about how the hiccups or bottlenecks, and it’s not necessarily just the chips, but it’s the infrastructure, the cooling, the transmission lines, and all that kind of stuff. So as Frank likes to talk about, you know, when you’re reading an article in the Wall Street Journal, just don’t focus on whatever the article is about. Kind of think about reading in between the lines or looking at these other companies. And several of the familiar names we’ve talked about, Vertiv, VRT is a great one. You can look at GEV, GE Vernova for the natural gas turbines. And also Quantum Services with the transmission lines. But Frank, he talked about adding capacity, compute capacity. And essentially he was saying, listen, we’re going to try to bring online this 2.5 to 3 gigawatts by the end of this year.

Daniel Creech 08:40

So let’s just round up and say the entire quarter he’s adding, say, 2.5 to 3 gigawatts of compute capacity. Now, what does that mean? That means he’s building out and using all of the picks and shovels, building massive servers, and then either renting that out or using it towards Grok, which they had very positive things to say. It’s basically a competitor to Muse, in a sense, or will be if it’s not classified that way just yet. But he talks about bringing 200,000 chips, the GB300s. 200,000 online per month, every month for the remainder of this year, and then going into next year. And that gigawatts bringing online, again, 2.5 to 3 this quarter by the end of the year. 10, Frank, 10 next year, and maybe even 20. Listen, Musk is a great salesman. He threw out the 20 number, even a little over 20. But let’s just go with 10, because when you look at, if you’re bringing on 2 to 3 right now, which is a huge increase compared to what most people are.

Daniel Creech 09:41

I also like the fact, Frank, that he called out, and listen, it’s all competitive. I didn’t take this as a cheap shot, but I thought, I hadn’t looked at this, so shame on me. But he talked about how hyperscalers, and we’ll get a glimpse of this tonight with Meta reporting, Frank, after the close. But he talked about how Musk is trying to be specific with how many GPUs they’re bringing online. How many are they plugging in to get up and running? And other hyperscalers haven’t disclosed that. Just something to think about there. But when he talked about, last thing here, Frank, and I’ll give it back to you, because this is what stood out to me most, and it is perfectly fitting, and we’ve told you guys this in the past, Musk is probably the best ever. I don’t want to, be careful with ever. But he is so good at conference calls and telling the market and analysts what they need to hear and what they’re fearing most. And he addresses that in a lot of sense. Frank, he was talking about how you’re renting, you’re basically getting 30 to 50 dollars per watt of energy in these data centers.

Daniel Creech 10:37

And he said it’s near the high end of that right now. And why that’s important, and CoreWeave, gosh, love them, Frank, they can’t get out of their own way. They were up 4 or 5% yesterday, didn’t hold it. They were up 4 or 5, 6% today. Joe, where’s that at right now, if you would? So he gave it all back. But the reason this is important for CoreWeave is we’ve talked to you about how these guys are in the news and credit worries and debt and all that kind of stuff. However, if the cost per watt continues to stay in that 30 to 50 range, or goes up and gets higher, as Musk projects, it will, that is incredibly powerful for the NeoClouds. I get it, as Frank’s already hit the nail on the head. Sentiment right now is, hey, we’re not rewarding you until you execute. We’re over this running your stock up just because you announced you’re going to spend a ton of money. Now it’s kind of that show me state and show me the productivity. But I’m with you, Frank. This, I was impressed, and I give Musk, you know, hell when I think he deserves it, but you got to tip your hat to him when he deserves it.

Frank Curzio 11:33

What is the market cap on CoreWeave? Joe, scroll down. It’s a $34 billion market cap. Remember that number, $34 billion. I’m going to throw this at you, because we did some math on this. When you do the math on 7.6 billion of revenue from AI, SpaceX has 1.7 gigawatts of compute that’s operational right now, right? That’s 4 billion of revenue per gigawatt of power. And that’s now, that number’s going to go up significantly. So if you put a 10 times sales multiple on that, which is very, very conservative, right? Because it’s massive growth. You have $40 billion in value per gigawatt, right? So think about every company that has a gigawatt of power that will eventually come online. And now you’re looking at CoreWeave, which has over contracted 4.2 gigawatts. And at 34 billion valuation, right? They’re trading at less than one gigawatt of value. Yes, there’s a lot of debt that has to come out with that. Yes, we’re talking about sales and not, you know, earnings, which are going to be huge, and the margin is going to be incredible once these things are open.

Frank Curzio 12:27

That’s why you’re seeing CapEx through the roof. You’re going to see that when Meta’s reporting tomorrow, I believe.

Daniel Creech 12:32

Tonight.

Frank Curzio 12:33

Tonight, and then you’re going to have the rest of them report, I think, next week. At least most of them. But when you’re looking at the value, and just when you look at CoreWeave, but another good example is when you said Elon says SpaceX should have 10 to 20 gigawatts of compute power by the end of 2027. Which explains the massive revenue guidance, which he provided, which was 500, what was it? The run rate, right?

Daniel Creech 12:59

By the end of ’27, between 500 billion and one trillion.

Frank Curzio 13:04

Trillion. So, I mean, that’s a pretty big window, by the way. The end of 2027. I don’t think that is going to happen. If it did, you’d see the stock up a lot higher. However, when I look at what they’re building with the Terrafab, this is how he gets ahead of things. And this is a massive, you know, super fab. It’s going to be in Texas, and I think, you know, first phase is going to be done by 2028. So you’re looking at maybe 2030 before all this stuff comes out. But they’re going to be building all of the chips. When you’re looking at memory as well, right? So logic chips, advanced patching, testing, all this stuff under one roof, one of the biggest factories that you’ll ever see. And he’s going to do this. But by 2030, this way you don’t have to worry about these bottleneck supplies, which I’ll get to in a minute. But, you know, by 2027, if you could have 10 to 20 gigawatts, I don’t think people realize how much a gigawatt of power actually is. Even CoreWeave has massive business, and that’s four gigawatts of power.

Frank Curzio 13:54

Again, we’re not talking megawatts. Like if you have 100 megawatts, 40 megawatts of power, they’re getting billion-dollar contracts right now. But we’re talking about, you know, 40 billion in value created based on their numbers right now. So, not every gigawatt is the same. It’s based on, I would say, who your clients are. But, you know, CoreWeave should easily be trading over $100 right now in this. Because one, they have Nvidia as a partner, they have, you know, Meta, I believe Microsoft as well, OpenAI, I’m not too sure if they have Anthropic in there as well. All these companies benefit significantly in a dire need of power. All these companies could come together easily and say, hey, we’re putting an equity injection into this company. All right? Or they could lend them money at a lower rate if they want. You know, again, they could have, you know, just sign different deals, which you’re seeing lately with some of these NeoCloud companies where, you know, they’re accepted, you know, you have warrants and they’re taking stakes in these companies, which you’re seeing Nvidia do, and OpenAI do.

Frank Curzio 14:44

So the fact that it’s such a necessity, even the government and Trump could come along and say, hey, we’re making an investment in CoreWeave because it’s so important for all these gigawatts to come online and for these guys to build it. That’s the wild card here. And you can say, well, it’s not fair if that happens with Trump. I don’t care. What we’re talking about is if the stock goes higher at this level, that’s a significant risk for a company. I didn’t know what the short ratio is on this company. I know it’s massive because watching, what’s Vivo trading at today? A company that’s crashed along with most NeoClouds that, you know, they’re going to be speaking at my conference. They came out with good news today, talking about Sovereign AI, which is, you know, controlling the AI for governments. How, you know, they can’t be on traditional servers and everything, and how they signed a deal with one of the only persons who provides the software for this. And we’re talking about multiple gigawatts of power, and this thing goes up 20, it’s up 27% right now. It’s gotten annihilated. We have it in our portfolio.

Frank Curzio 15:30

I get it. Same with Digital Power as well. I have Michelle and I have Vivo Power speaking at my conference on Monday. But, you know, this fantastic news. But when you see the shorts leaning on this as much as they are, if you see anything like that, CoreWeave’s going to be $85 in a day if you see something like that happen. And that’s a real possibility, because if this company continues to go lower or people are worried about the fault, and again, Goldman came out and just upgraded the stock. Another company, HSBC, came out and said the stock’s worth 30 bucks. So everyone’s kind of all over the place. But Goldman did really good research showing that, you know, if you’re looking at their weighted average cost of capital, it’s only going to go up a certain amount, and then they’re looking at revenue going up much, much more than that amount at this level. But be careful. It’s kind of like the credit crisis. You were right when you shorted, but you better cover your ass as soon as the government got involved, because they’re just going to spend a limited amount of money to, you know, recapitalize the banks, and holy shit, the whole market takes off.

Frank Curzio 16:18

So, you know, you always have a lot of short sellers learn that lesson the hard way. And even in 2010, ’11, ’12, I saw millions of bears talking about it. I’m like, don’t fight the government. You can’t fight the government here. So when you’re looking at a company that’s the biggest hyperscalers in the world dependent on power, you know, I think that’s why I like CoreWeave. I think it’s a good bet here, because there’s a lot of things that could happen and get capitalized. Nvidia, I mean, you talk about companies with 5 trillion, 4 trillion, 3 trillion valuations that could easily write a nice check for this company and say, hey, we need this done. We’ll push more money into you. You could pay us on the back end when this shits up and running. That could easily happen here, because it benefits all the biggest companies and hyperscalers in the world to have these data centers built as quick as possible. So, you know, when I look at these numbers, it’s incredible. I mean, again, Meta reports tomorrow.

Frank Curzio 17:04

We’re going to see what’s going on with CapEx and stuff like that. And after these results, I saw JP Morgan upgraded their target price. Did you see what they upgraded to, Daniel?

Daniel Creech 17:14

For who, Meta?

Frank Curzio 17:15

No, not for Meta, for SpaceX. They upgraded their target from 240 to 500.

Daniel Creech 17:20

Nice.

Frank Curzio 17:21

Now, let’s go, you know, both sides. Let’s talk about some of the negatives for the bears, whether they say CapEx is insane. They spent $7 billion last year’s comparable quarter, Q3 last year. This quarter they spent 20 billion. Holy shit, that’s a lot of money. That’s what we see. All this money being spent, all this money being spent, all this money being spent. But CapEx could always be dialed back, especially if they believe AI is going to slow. It’s clearly not. We’re going to see all Meta, all hyperscalers, they’re increasing it because they know how much money they make once these data centers are up and running. That’s why they’re spending all that cash flow. But again, if they see that change, they could dial back CapEx. They’re not dialing back. They’re increasing CapEx because they know what this is going to generate in year two, three, four. And we’re seeing that with SpaceX very, very quickly of the amount of money this is generating for them when the capacity comes online. You’re going to see, I think it’s 1.8 billion shares being unlocked.

Frank Curzio 18:08

And I said it earlier. I mean, you have people in the stock that, if it’s Ron Baron or whatever, who’s never ever going to sell. I think he owned Tesla in 2012. A lot of people after this quarter, yeah, they might sell a little bit, but you’re going to see lots of demand from this quarter, because this shows a clear growth profile that this stock can go significantly higher if they execute. Again, I’m with Daniel here. I think those estimates are absolutely crazy. But even if you dial them down and you say 250 to 500 billion in revenue, that’s a massive number that’s going to drive the stock significantly higher from here. So, you know, the billion shares are going to be unlocked. We know that. Everybody knows that. I mean, if you’re in it earlier, you’re going to sell it after this quarter? Yeah, I’ll probably take profits and you might want to put in some other things and some other venture capital or whatever you want to do. But I could see, you know, not as many people selling as you believe, because the billion shares are owned by lots of institutions.

Frank Curzio 18:55

And there’s lots of guys, I know the guy on CNBC today talking about how he’s a long-term shareholder in this company, Peter, I think it’s Demantis. You know, guys that aren’t going to sell the stock. So you could see a little bit, maybe you get into a cheaper price, but you have this long-term runway. That’s great. And like I said, 160, I did not like this stock when it came out at 160 and it went all the way to 180. And then it went all the way down to, I think, 104, 105. And we liked about 110, 112. I said a lot of the risk is priced in. But, you know, if you liked it and bought it in the IPO at 160, you should love it now, because these numbers are 10 times better than anybody would have believed. Now, a couple of takeaways, Daniel. This is important. Takeaway, AI demand very, very, very, very strong. And we’re hearing that across the board. There’s no slowdown on it. Yes, you know, we understand the debt profile and how these things are going to take longer than expected to build.

Frank Curzio 19:47

Smith Micro also reported. Did you see those numbers?

Daniel Creech 19:49

Well, they pre-announced, yeah.

Frank Curzio 19:50

I mean, just, so stock’s up 11%. It was up 11%. Where is it now? So, SMCI. And they basically, they’re expecting 15 billion in revenue, and they said now it’s going to be more like 19 billion in revenue. I mean, holy shit, that is massive. That is a massive increase. And if you look at the stock right now, you know, you got up in the chart there. Look at the 52-week high. You’re looking at a company that’s down 8% for the month still, even on this move higher, right? Because a lot of AI names got crushed. 35% off its highs, and it trades at eight times forward earnings. I mean, you don’t see many companies trading at this level with that kind of growth. So, if SpaceX can really exit 2027 with 23 gigawatts of power, Dell’s an easy double from here. We have that in the portfolio, and we have it in the portfolio for a while. We’re kicking ass on it. Yes, it came down, you know, 15, 17% off its highs. Now Dell’s having a great day as well. Smith Micro is a double from here. I mean, these are two of the biggest suppliers of enterprise servers and storage for hyperscalers.

Frank Curzio 20:53

CoreWeave and many NeoCloud companies that have existing power, right? I mean, they should significantly re-rate higher based on the numbers and how much money they generate off AI when it comes to SpaceX. And you were talking about this before, Daniel, real quick. My sources, who help build these data centers, right? Work for large companies, help build these data centers. Told me a few things in the past week. Almost all the new data centers are using Dell and Smith Micro. And one of them pointed out a huge change when it comes to suppliers. I thought this was interesting. So, suppliers and installers had six, eight-week response times, which is basically factored into delivery schedules. But now almost all the materials and products they produce are completely sold out. So, while six to eight-week delays were common, suppliers are saying their total manufacturing capacity for the next two to three years has been accounted for. So, we can’t help you. Think about that. So, they’re also saying that they don’t have the factory space to expand production.

Frank Curzio 21:57

And when you’re looking past three years, it’s very dangerous to increase in spend, because who knows what’s going to happen three years? We’re going to have a huge recession. We’re going to have a world war, anything, COVID, another COVID event. You know, you’re going to be spending a ton of money to increase, you know, you have demand that you could see two to three years out. Do you really want to build stuff where maybe this trend changes? And we see this all the time in technology. But we’re not talking about routers or switches or one or two components that make these, you know, that go into these AI data centers. It’s optical transmission gear, cooling equipment, power infrastructure, cabling of all types. All right? So, you’re seeing a massive shortage on this front. Also, raw materials. And why this is happening now, what I was told, Amazon, Meta, Microsoft, the hyperscalers have bought their forward production for two or more years out. Basically, what does that do to small competitors?

Frank Curzio 22:48

You’re pricing them out of the market. I mean, it’s effing crazy when you think about it. So, you could be pissed and say, holy shit, you know, they’re making sure that they have this stuff out. It makes sense, because you have Microsoft signing nuclear power deals for 20 years out, right? Should tell you. Which is crazy. Usually, you have the Exxons and Chevrons. You know, they think 10, 15 years out with their CapEx. We never saw that with these companies before. I think 15, 20 years out of how their entire need of this power. But you have to, have to, have to, have to own the hyperscalers. They have to be in your portfolio, at least two or three of these. Because it’s a layup. And yes, you can go over the rest of the market. Healthcare’s doing good, energy’s doing good, and you’re seeing this rotation back and forth. Now you’re seeing rotation back into a lot of these companies. Dell’s up like 5%, it was up a little bit more. But if you look at these companies and what they’re doing when it comes to the suppliers and buying this up, and you’re looking at what I’m being told as well, and I talked to a lot of NeoCloud companies, and both of them said the same thing, that Google, Meta, Microsoft, they’re all poaching everyone.

Frank Curzio 23:47

So, they were paying, they were literally paying guys $300, $400, $500,000. These are AI engineers, AI experts. Google’s coming and paying them like $2 million, $3 million. And in order to be competitive, they have to come up with stock packages, which one of our companies, which is DGXX, came out when everyone’s like, oh my God, they’re increasing the shares because they want to pay themselves more. No. In order to retain the talent and get great talent, which they just opened up a facility in Silicon Valley, you have to come up with these stock-based compensation packages. This way, if your stock goes from $3 to $25, these guys are going to make 10 times more money than Google could pay them. That’s what makes sense. That’s how you have to pay. Where they participate in the growth, you know, you’re giving them, you know, shares based on, you know, if the stock goes higher, then, you know, a lot of these options. So, the fact that they’re controlling this whole industry, they don’t want any more competition.

Frank Curzio 24:36

They’re already competing against themselves, four or five of them. You could see with Google, when, you know, you’re not on the AI train, they lost a trillion dollars in value. We recommended it. They figured it out in that stock. We took 100% gains in it. Look what happened to Meta. Meta was down tremendously. They figured out Ambuz. Microsoft was getting its ass kicked, right? So, and now that’s, they figured out as well. So, you have these companies saying, okay, we don’t want anyone else competing. Okay, we just got SpaceX in the mix. All right, that’s it. We’re controlling this whole entire industry. We control the growth in AI forever. We’re going to generate massive revenue. That’s not going to change anytime soon. And it’s why you’re seeing the Dow, you know, it’s highest level since April. You’re seeing the S&P just off its highs, even though a lot of stocks have been getting their ass kicked, because these big companies are going to get much bigger and bigger and bigger, because they’re controlling everything out there.

Frank Curzio 25:21

It’s going to be very hard to other companies compete. You know, so you have to have these names in your portfolio no matter what. You have them if you buy the S&P 500, but we just recommended, you know, one of the hyperscalers in our portfolio. You know, so these are some of the takeaways. The last takeaway I would say is Amazon, I think, is a much better buy than SpaceX here. Amazon, because you’re looking at Starlink, and they have the competition for Starlink when it comes to Amazon, where they’re going to put out, I think, 3,000 satellites, and I forgot how many they’re going to put out, maybe 10,000, 9,000 for Starlink. This is the new wave. This is significantly going to disrupt the industry. That’s why you saw AT&T, Verizon, T-Mobile get their ass kicked, right? They kind of have these little monopolies within their spaces that you have to use them, and they have pricing power. But the fact that these satellites and connectivity, and, but you have two companies. No one’s talking about the Amazon part of this division, but look how much Starlink is making.

Frank Curzio 26:13

Massive margins, huge, going to see huge growth, very, very profitable. No one’s talking about that on the Amazon side, which is another growth engine on top of retail, which I never knew this, only 20% of all sales, retail sales are done online. I think that number would be much, much higher, right? So, 80% are done in stores, which shows the growth of retail, the growth in, you know, their competitor services, Starlink, the growth in AI, they have more power than any other hyperscaler. And they’re just operating on full capacity on every single one of their divisions. For me, when I look at Amazon, I think Amazon’s a much stronger buy than SpaceX here, which you’re going to see when they report, because I think they’re going to report a blowout quarter where this thing is, it could touch its new highs of 280, because the quarter is going to be absolutely astronomical for Amazon. I looked at the estimates, and they have to be rated a lot higher from here. So, Morgan Stanley just sets their pick of the year.

Frank Curzio 27:02

A lot of companies coming out. I just think the estimates are way too low on Amazon for what they’re doing. And, you know, under the hood, they look fantastic right now. So, those are the takeaways from SpaceX.

Daniel Creech 27:11

And these guys are going to continue to manage, as Frank said, you can manage CapEx. The market will kind of force its invisible hand on you. And overall, I think that’s a good thing. Obviously, it can be very volatile and painful, especially if our timing isn’t correct. But that’s just kind of part of that game. Quickly for me, it’s okay to be a critic on the CapEx and how much money is SpaceX going to have to spend and such. They guided, okay, they guided for this quarter, Frank, 35 to 40 billion in CapEx. Now, again, their CFO and secretary, Brent Johnson, actually talked on the conference call about how he’s emphasizing the payback period is very short. Now, they didn’t get into crazy details there. But what I wanted to kind of transition to here real quick, Frank, is we talked about this on the GPU side. And everybody, not everybody, but there was a couple of big wigs, the gentleman that calls the shorts from the movie, talking about how the amortization is wrong and these GPUs aren’t going to be very valuable for very long and all this kind of stuff.

Daniel Creech 28:06

Well, we talked about this a few months ago when Shelley Lee from Sprout was on CNBC. And it was back in.

Frank Curzio 28:13

Great interview about it.

Daniel Creech 28:14

Near the end of August is when she was on, and we first talked about it, August 25th, if my notes are correct. And then she was on earlier this week. And she had just reiterated more of what she said in August. And essentially, that these GPUs and different types of chips are not being used for three years. They’re being used for six years or seven years.

Frank Curzio 28:31

And she has like the H100 chips, the early version, they’re still being used, right? And we’re talking about two, three generations next for NVIDIA. Yes, I mean, it was a really great interview.

Daniel Creech 28:39

And she was talking about these hopper chips, and she was going through different things. But just think about this. This is what she said and then reiterated. You have a three and a half year old chip that are retaining 60 to 70% of their value. Now, why is that important? Because your NeoClouds and everybody else, they can do shorter term contracts. And so CoreWeave is talking about how they can get maybe $40 per watt on a short term contract. But you got to keep rolling those over or filling those orders. And you need demand for that. And that’s good that demand is through the roof. And Musk even said, hey, listen, compute capacity is going to be a major headwind for years to come. And so, like I said, don’t just get caught up in the CapEx numbers. Look, as Frank said, yeah, you can worry about the debt, but you also just worry about servicing and paying that debt. And that with Shelley Lee’s comments, again, not everybody’s going to make it. Ken Griffin, bringing us down to, Ken Griffin of Citadel Capital was talking in New York yesterday.

Daniel Creech 29:30

Said AI’s in a bubble. Well, no flying Florida it’s in a bubble. Everything’s in a bubble. I mean, come on. But that doesn’t mean it’s going to pop right away. It doesn’t mean you still can’t make money off of it.

Frank Curzio 29:38

Yes, exactly. So, for us, I mean, you’re looking at SpaceX, I think, is a good shot in the arm for AI. Everyone’s saying demands there, demands there, demands there.

Daniel Creech 29:47

Unless needed, really.

Frank Curzio 29:48

But now you actually see it. But on the other end of the spectrum is Netflix. Netflix reported. Drop Netflix. Netflix is down. I think it was down a lot more than it is now. What is it down? 4% now? It was down 8% when they reported. They missed the numbers. Fifth straight quarter, they disappointed. I would be a buyer right here of Netflix. You know, if you look at streaming, you think about it. I’m going to talk about the negatives right now, right? Because we were told such a different story that it’s going to be cheaper. It’s going to be better for you. It’s awesome, right? If you think about it, we all have numerous streaming services with Netflix, HBO Max, Disney Plus, Paramount, YouTube TV, Prime, Apple TV. These companies have been raising rates almost every single quarter. Disney’s been raising rates the most. While almost all of them are not providing as much new content as they once did, at least the new content isn’t fantastic. And they’re also providing a worse service as commercials everywhere all over it.

Frank Curzio 30:44

Which now you’re making this much more expensive than cable. And I saw a stat. I think 20% of the market is going back to cable.

Daniel Creech 30:54

20%?

Frank Curzio 30:55

It’s much cheaper, right? I mean, YouTube TV alone is $100, right? For a month, right? So, and that’s, you know, it’s going to give you like all the channels. That’s the live TV, right? So, you’re looking at this where, look at the economy. I mean, high oil prices, gasoline prices, high rates on credit cards, all loans, you know, home insurance, right? You’re going to see a ton of cancellations where do we really need four, five of these services? And a lot of them, nobody really has just one service, two services. If they’re watching TV, they have more because a lot of these companies are broadcasting live sports just on their channels, like Prime, Thursday Night Football. But when I look at a lot of these companies, this is an industry that’s dying for growth. And I feel like this industry has become pretty much a secular declining industry. And I mean, it’s still growing, but it’s growing at a much slower pace. And it’s going to continue to grow at a slower pace. You’re saying, why would I like Netflix?

Frank Curzio 31:49

Netflix is down 60% from its highs. Ad revenue is taking long to ramp up, but it’s going to ramp up. You still see a stock that’s growing revenue. It’s growing revenue by 11%, double digits. Its forward PE is 19. 19 now. I mean, they have 300 million paying subscribers. They’re going to figure out advertising. Margins are expanding. They’re getting into sports, you know, much bigger sports presence this year. It’s going to result in even a bigger surge in ad revenue. If you’re looking at their growth profile, it only accounts for 5% of TV viewership globally, Netflix. So, you know, they do have some room for growth. It’s not like, hey, growth topped out, we’re not going to see that. They do have pricing power because you don’t see a lot of people canceling their Netflix accounts because they had, I mean, you look at Netflix and you look at, which is Skydance now, which is Paramount, which locked up Taylor Sheridan, which, you know, the content on there is just incredible, incredible. I find myself watching Paramount like crazy and also Netflix.

Frank Curzio 32:43

People are going to cancel Disney first. They’re going to cancel HBO Max first. And what I love about Netflix is Netflix is one of the only ones that puts a whole series out at the same time. So, you could just sit there for two days and binge watch, which is awesome. Where all the others put out their new series, whether it’s, you know, Lioness just finished their season. And a lot of others, which, you know, they have, you know, Marshalls that came out, which is good. And what else? Mobland, which is awesome. You got to watch it. You want to watch all the episodes, and it only comes out once a week. But when I look at Netflix, this is a company I think that does have strong growth. It still could grow from these levels. It’s a name that’s gotten hit incredibly hard. And there’s a lot of analysts that are coming out defending it because ad revenue, I mean, this is companies trading as like everything is declining. And it’s not. It’s just growing slower, but it’s still growing at a pretty strong rate.

Frank Curzio 33:31

So, the point where I think there’s a name you’re going to see some bottom fishing in. I think if you buy it here, the low is 60. The high could easily go to 95 to 100 again. But this is a name right now. I know you’re looking at that quote going, holy shit, Netflix has been bad. We recommended Netflix before, and you know, we stopped out of it a while ago. But now looking at it, five straight quarters, I think the expectations change where you just need one little positive here and this thing’s going to go. And this is a good service. It isn’t like shitty and keeps getting worse and worse and worse. People love Netflix. They love this brand. 300 million paid subscribers. There’s a lot of different things that you could do with that. Maybe partner up with another, one of the hyperscalers and the big AI companies. But this is a name that I think could grow significantly from here. And you’re seeing that because it was down 8% today, I think, 9% when I saw it, when I first reported earnings last night.

Frank Curzio 34:18

I was surprised that earnings were that bad, but, you know, they missed by that much, but you’re going to see these expectations lower. I like Netflix going forward. I think it’s going to be a good buy here. You know, be patient with it, right? We’re not trying to bottom fish here, but when you’re looking at the fundamentals and everything, and the analysts have finally lowered their estimates to the point where they’re turning around and saying, look, you should be buying on this. There’s a lot of analysts that came out today and said, you should be buying on this pullback. We’re pretty close to the bottom here.

Daniel Creech 34:39

I’m going to ask you a tough question here with Netflix. And remember, I don’t own a TV, Frank, so I’m probably the last guy to own these series and stuff. Do you think, because like you said, it’s not that they’re not profitable, it’s not that they’re losing subscribers like crazy and all this kind of stuff. They’ve had some headlines. They’re shaking up talent or, you know, series, you know, the people that kind of lead the series or whatever. Do you think that the sentiment needs, do you think they need another big, pick your latest hit that people binge watch? Do they need another one of those to get the stock going? Or does the market just need to say, okay, we’ve punished this enough for trying to buy Warner Brothers or whatever, and now we’re just going to take a fresh look. Or is this industry just a constant, hey, if you don’t have the next big fill in the blank, whatever, Game of Thrones, Game of Mobland, whatever, do you always have to have that to sustain your stock?

Frank Curzio 35:37

You have to have new content, which separates Netflix from everybody else. Their new content other than Paramount is the best. You always have new content on there all the time. They’re always coming out with a ton of new stuff. And they realized a long time ago that it’s not about hitting Grand Slams with, you know, Stranger Things or, you know, great shows, right?

Daniel Creech 35:54

So, you don’t think they need another one of those to rebound the stock?

Frank Curzio 35:57

There will be. There will be. All right. They’re just going to add on seasons on some of their best content. But however, you need singles and doubles where people look at it and say, hey, this is pretty good. I enjoyed watching it. It doesn’t have to be that, oh my God, did you see this? But people want to be entertained. They want to sit down, put on Netflix and watch it. And they’re good at that where you don’t have, you know, just they have so much content where you’re like, oh, did you see this? Yeah, this is pretty good. Oh, this is a good story. You know, it doesn’t have to be the blockbuster because you’re focused on a blockbuster. It’s going to cost even more. You’re probably going to have to hire good actors. You know, I think a lot of Thunder, when it wanted to buy, and we were dead on in this, and my thesis was like, hey, they’re not going to be able because of politics, right? Reed Hastings actually stepped down, one of the greatest CEOs. He’s very far on the left. Hates Donald Trump, said a lot of bad things, and they were looking to buy Paramount. And that fell through. And we said, you know, I look like an idiot.

Frank Curzio 36:42

They were like, no way is going to fall through. And I thought that would have been good for them. But once, you know, their stock got hammered because they were paying a lot of money for it. And then you had, you know, basically Skydance and Ellison, you know, and then more on the right side and, you know, with politics, and they were able to purchase that asset. But I thought once they didn’t purchase that asset, the stock would go higher and it went even lower. Usually, it does one or the other. It goes lower because you’re spending too much money. And then if you say, hey, I’m not going to do it, the stock comes back and goes higher. That’s why we recommended it. And it didn’t happen. So, my thesis was right. I was surprised the stock didn’t go higher. It still went lower. But, you know, they come out with great new content. But you’re looking at valuation where, hey, you know what? This makes a lot of sense at this valuation. I love the analysts coming in defending it, saying, okay, this ad revenue is going to work. It’s just, you know, people thought it would grow a lot quicker.

Frank Curzio 37:28

There’s a new company to ads, very, very new to the ad revenue stream, which is not easy. But every single, I tell you one thing, there’s not an actor in the world that doesn’t love working with Netflix. The greatest actors in the world love it. They love it. And when you look at what Disney did to Scarlett Johansson and, you know, they effed her pretty bad with, what was it? Black Widow when it came out. And it was only supposed to come out in the movies and she was getting a percentage of revenue. And they put on Disney Plus as well, which she wasn’t entitled to that revenue. She’s only entitled to revenue in theaters. She wound up suing the company and they settled. And they actually threw her under the bus completely. They’re like, oh, in these times and COVID, they tried to damage her credibility, which you don’t do that because Scarlett Johansson’s like, you know, just been around the industry forever and ever since she was a kid. You don’t see that with Netflix. Netflix always does the right thing.

Frank Curzio 38:13

Everybody wants to work with Netflix, which is good, which ensures that they’re going to continue to come out with good content. The stock is really depressed right now. You know, everybody wants growth, growth, growth. And that’s why the stock has come down because that growth is slow. But they’re still growing. They’re growing sales, double digits, and the stock’s getting hammered. That means expectations were way too high. They’ve been way too high for five straight quarters. And I think they’re going to, those expectations are low enough where it’s going to be easy beats going forward from here and the stock’s going to go high. We’ll see. We’ll see. Before I go further, I want to say this. I keep forgetting this. I went online and bought Metallica tickets, October 29th at the Sphere. And it’s only a couple of days after my conference and I can’t go. So, I have them and I paid a lot for them because I bought them off of a site that didn’t even buy them yet. And I was looking to sell them for half that price. I’m looking to sell them for $500 each. I paid $900 each.

Frank Curzio 38:59

If you look on every single site, there are a lot more than that. But I figured, you know, instead of going through online and stuff like that, I’d rather give it. We have people listen across all states. It’s a ticket that you’re going to die to get into. It’s section 408, which is the top sphere, which is the best seats. Usually, the concert, you want to be down low. You get to see, no, you want to be as far back to see the whole entire thing. And just, you know, if you go on TikTok or Instagram or whatever, short videos, YouTube, just if you see, you know, that event and the clips that they’re, it’s absolutely amazing. I’m disappointed I can’t go. And at $500 each for those two tickets, that’s the cheapest you’ll see on any single site. So, if anybody wants them, email me, frank@curzioresearch.com. Someone said, why don’t you just give them away or give them to someone at, you know, just pitch them on the podcast.

Daniel Creech 39:41

Giveaways stuff here.

Frank Curzio 39:42

Not giveaway, but the podcast. I’m actually giving them away. I said $500 each, but if you go online, they’re going for like $600 each. And I paid $900 each for them. So, I can’t go, but if somebody wants them, I can quickly send them to you and transfer them to you through Ticketmaster. But if you’re interested, let me know. I figured I’d do this first before I just throw them on the sites because they’re probably going to go very, very fast at that price. But I can’t make it because.

Daniel Creech 40:01

Look at you buying Metallica tickets.

Frank Curzio 40:03

Yeah, I really wanted to see them at Sphere.

Daniel Creech 40:05

I got spoiled. I watched the Eagles at the Sphere, but I did sit very close and it was still amazing.

Frank Curzio 40:10

It was amazing, right? Yeah, it’s unbelievable.

Daniel Creech 40:11

And a guy tried to talk me into doing, not gummies, but mushrooms. It’s like, no. I was like, yeah. He’s like, come on, man.

Frank Curzio 40:19

Ad environment?

Daniel Creech 40:19

Huh? I was like, man.

Frank Curzio 40:21

Maybe it didn’t because you probably.

Daniel Creech 40:22

My luck, I’d be, yeah, I’d do something silly and miss the whole show and be on TV for all the wrong reasons.

Frank Curzio 40:27

Yeah. All the kids that listen to this, shut your ears. Probably pretty good environment to do mushrooms in.

Daniel Creech 40:31

Oh, here we go. Moving on.

Frank Curzio 40:33

Moving on before I get in trouble here. I just want to mention oil. I mean, oil’s been on fire. It’s been $97 a barrel, pullback. I mean, you know, you have these talks and we’re in political season, just a couple of weeks away for the midterm elections where, you know, there was news out yesterday that a deal might come through and, you know, now it’s not going to come through. So, back and forth yesterday with oil, but still $97 on WTI. And I heard a very interesting stat on oil. I bet you’ll find this interesting, Daniel, that energy only accounts for 3% of the total weighting in the S&P 500, which, you know, many people might have guessed under 5%. Did you know it accounts for 20% of the dividends? That’s a pretty good stat.

Daniel Creech 41:13

No, dude, that’s good.

Frank Curzio 41:13

20% of dividends. So, I thought that was interesting. And look, oil companies are generating massive, massive, massive amounts of free cash flow right now with prices here. And a lot of the world outside of offshore, Western Africa, North Sea has been explored. So, you know, what’s the best use of their money? Okay, dividends and maybe buying back your stock where you’re looking at different from tech companies because, you know, they’re seeing every dollar they spend, they’re going to make $3.5 on. So, increase that capex dramatically, lock in that power. And that’s the best use of their money compared to, hey, let’s, you know, have a dividend. And when we have tech companies issuing dividends, a lot of times it’s a signal that, hey, you know what? We’re a mature company. We’re not going to grow as fast. These companies are growing like weeds again. You’re going to see that today with Meta and everybody else next week with the hyperscalers. But you look at these companies, they’d rather use that cash flow, you know, for dividends.

Frank Curzio 42:00

And you’re looking at Exxon, you look at Chevron just off their highs, very, very good, but still the value here, energy’s been on fire. People believe this war is going to probably, you know, I don’t know if it’ll ever end, but maybe they come to terms after the midterm elections. And if that happens, I think you see oil fall, but there’s just so much radicalism in Iran that you’re not dealing with, you know, Xi, you’re not dealing with Putin, you’re not dealing with someone who’s in charge. There’s 30, 40 different groups and someone can just throw mines in there. They could, you know, maybe they have access to drones and some, you know, crazy people in the military. It’s not easy when you don’t have anyone that’s really in charge there that you could say, hey, okay, we’re doing a deal with them and then something else happens on the back end. You know, I just can’t see oil coming down below $75 and even at $70. I mean, these companies are so profitable at over $50 a barrel now. It’s insane.

Frank Curzio 42:56

But yeah, I mean, it’s just a good place to earn dividends. And yes, oil could come down a little bit, but these companies, you know, just have incredible value in this market that’s really volatile right now and all over the place, which we saw United Airlines. Again, what do we say a lot of companies are going to do? They basically narrow their guidance. So, and that included the high end and you’re looking at United Airlines got hit. You’re going to see that a lot because there’s just so much uncertainty with higher rates going forward and, you know, higher oil prices. You know, it’s hard to predict what the consumer’s going to do, how much you’re going to cut back in because the affordability, especially with houses, it’s just insane right now. You could be a lawyer and a doctor in New York and, you know, you’re still thinking, should I buy a house? You know, I mean, yeah, you can bring in a half a million dollars, $250, that goes right to the government in California and New York.

Frank Curzio 43:43

I mean, you’re making $300,000. That’s like an average household salary to make ends meet. It is. It’s crazy. I know. I’ve lived in New York all my life. It sounds crazy if you’re living in some, you know, other states, but when you’re living in some of these other places, holy cow, I mean, the cost of living, how can anybody afford a house right now? It’s insane. Especially if you have the bar, how can you afford a house? It’s just, it’s incredible how high rates are. So, I can see a lot of these companies, even going forward, the tech companies are going to be outstanding. We know that. Maybe that’s priced into some of these, but going into earnings season, a lot of these companies, they just came off 30% plus earnings growth. That was the average for S&P 500. Everything’s on fire. They issue positive outlooks. How do you issue another positive outlook going into the next three months, the next six months when all these uncertainties, they’re going to be more conservative? You don’t want to overpromise under deliver. You’re going to get annihilated when your stock, when you really miss.

Frank Curzio 44:30

So, yeah, we’re probably going to see that with a lot of companies, probably create some good buying opportunities, but you’re not going to see this huge optimism unless you’re really into AI or, you know, maybe energy and healthcare is on fire right now. But outside of those three sectors, be very careful because, you know, a lot of them are based on the consumer and the consumer, yes, it says they’re spending on retail, but you could see it, you could feel it now. People are changing their habits and they’re going to change their habits. And when they do, they’re not going to spend as much. It’s going to hurt a lot of companies. I think if you’re a CEO, you’re absolutely crazy to issue a super bold forecast for next quarter because, you know, it’s just expenses too high. You’re going to see consumers pull back at least a little bit. So.

Daniel Creech 45:07

Yeah, and oil’s going to continue to be a headwind for quite some time. I do think after the midterms, something happens that pushes oil prices down a little bit. I don’t think oil has been in a good range here. If you pull up any kind of chart on it, I wouldn’t get too crazy at the highs. Listen, I feel the pain too. I’m not saying ignore it and it doesn’t cause prices, groceries, fuel, and all that to go higher. I’m simply saying, don’t get extremely bullish or fearful about oil when it crosses the 105 mark or so on our side. And don’t get too bearish if it does get down into the 70s or whatever.

Frank Curzio 45:37

Yes.

Daniel Creech 45:38

Interesting, Frank. The Wall Street Journal reported that the Persian Gulf exports and the shipments through the Strait of Hormuz and alternative routes actually surpassed the pre-war levels. Now, a couple of big massive caveats here, like the difference between $500 billion and a trillion wide. That was, you know, on October 18th, they said that 24 million barrels a day got through the Strait of Hormuz and alternative routes. That surpasses the pre-war levels of about 23.3. That was one day. You can look at prices. If that is sustained, that would be a huge positive. But as Frank says with cinnamon and companies, cinnamon and oil and energy prices are nowhere near positive. And you can take a headline like this and think, oh, that’s great. Hopefully prices come down. One day does not make a trend in this. I do think that that, kudos to them for reporting that. I think that that’s important and they need to continue to do that. You’ll see a lot of infrastructure build out, but that doesn’t help us today.

Daniel Creech 46:33

Oil will remain a headwind and a kind of a tailwind for asset or, excuse me, inflation prices going higher and higher. But also the government spending is going to continue to do that. And I’ll just quickly beat this dead horse here, Frank. We are getting through October, which is the end for the year for the government. And we’re on pace for the second largest deficit only to the COVID outbreak. That is beyond Florida embarrassing. It’s about 6% of GDP. It’s rounding up, not very much. Unfortunately, you don’t have to round up to get to $2 trillion. That, even though there are talking heads that have more money and dress better than I do on TV, Florida lying to you about that doesn’t cause inflation. It absolutely does. The money supply is increasing. That’s going to be a big headwind that nobody else is going to tell you about.

Frank Curzio 47:22

Yeah. By the way, October 19th was the anniversary of Black Monday, you know, which happened in 1987. And I actually went on X account, I have Frank Kurzweil, if you want to take a look at it. So, I don’t know if I shared that with any subscribers before, but I have my dad’s newsletter and this was three weeks before the crash happened and he titled it Crash, his newsletter Crash. And he said this crash, which is going to happen in October, is going to be worse than the three previous combined. It’s one of the greatest calls I’ve ever seen to this day. And a lot of people take credit for making that call. In reality, you know, he was the only one that did it in writing. Everyone always says that everybody always takes credit. They’re like, well, the market could come down a little bit, you know, here and there. And then when it crashed, like I told you, so no. You know, back then there’s only like 10, 12 people that were on CNBC that really anyone paid attention to. It wasn’t the network it is today where they have hundreds of people on every month and different opinions and analysts.

Frank Curzio 48:15

So, and the reason why I’m saying that, if you go on an X account, I have the newsletter up there, Joe has it there and I highlighted some things. You have to see how eerily similar to the markets it is right now to what’s going on. You know, just higher interest rates, you know, massive debt, you know, just in the middle of these rates going higher and higher where everyone’s like, oh, the market’s fine. It could take this. You know, there’s a limit, right? I mean, we never thought that four, like four and a half, we thought we’re higher than 10 year. Now it’s, you know, still over five, 5.1. You know, it’s crazy. We have mortgage rates 7.5%. I mean, look at the housing market. Can you just see the latest stats? And I always like the, Daniel, like I always think she’s great reporter for the folks that covers housing for CNBC. Pending home sales last month dropped 7.3%. That’s month over month. Okay, they’re down 11.3% year over year, but that’s from August where we had 6.7% rates. So, if you think the difference between 6.7 and 7.5 is not huge, there it is, right?

Frank Curzio 49:12

Housing starts fell 4.5%. Home builder sentiment is at a 14-year low. You know, so when you look at the data on housing and a factor that used to drive our economy incredibly, right? A big, big factor, especially when it comes to CPI and stuff. It’s been overshadowed because AI and CapEx has, you know, basically stole the thunder, but you’re removing a key component that helps our economy grow tremendously. And buying a house, you’re buying new furniture, you know, you just, you get more bills, you’re buying more stuff. It’s just, it’s amazing how it factors into that literally hundreds of thousands of different companies in terms of spending and filters through the economy. And when you’re shutting that off, be careful. There’s a lot of companies involved in this part of the market. There’s a lot of companies involved. If it’s airlines and cruise ships, well, oil’s a big deal because now they have to raise prices tremendously. And this is happening just month over month. We’re not talking about, you know, oh, you know, they’re used to it and oil prices are going up 5% a month.

Frank Curzio 50:13

No, they’re up tremendously over the past few months, right? So, even gasoline prices, I mean, $4 is the norm. It was below $3 not long ago. It costs a fortune to fill up your car. And when you throw in that and all the high costs with healthcare, I mean, they don’t even cover shit anymore, healthcare. Every time you go someplace, I feel like you got to pay a bill and then you call them 10 times. You get answer machines, AI shit, and they’re like, whatever. You know, it’s no surprise United Healthcare. I mean, what is it, $6 billion in profits or whatever it is. I mean, no kidding. You don’t cover shit and you get free checks from everybody all the time. They have to pay you every month. And when we really need you, you don’t cover it. Or you fight us and you make it very difficult. It’s why, oh, you got to use your doctors in this network. They make it as difficult as possible. This way you have to pay more. So, you know, again, more costs going higher. That could be good for UNH if you want to make money on that side. But, you know, seeing these costs go higher for everyone, you have to be very careful because it’s going to impact a lot, a lot of companies.

Frank Curzio 51:00

And I think that’s where it’s going to come down to the next six months is, you know, where the growth trends are at, what companies sold off more than they should. And it’s not going to be based on this sector’s doing good, that sector’s doing good. We’re seeing that with AI. Dell’s still kicking ass, right? Dell’s doing great. Yes, it’s off its high, but Dell’s just doing great where a lot of companies are 50, 60% off their highs, like a CoreWeave. You know, so, you know, you’re looking at some of these companies where, you know, there’s going to be a difference within the same industry of companies that are getting it done and companies that aren’t. That’s going to be airlines as well, which, and cruise lines as well, right? You’re looking at travel. I mean, travel’s a fortune now. Hotels. I mean, you can’t even get a freaking hotel with AI systems is so fucking bullshit. I mean, you want to talk about, I’m going to talk about it with Savvy on stage who created a platform which is, you know, a competitor to Airbnb and Vrbo, right?

Frank Curzio 51:48

No fee platform. And now they’re growing like a weed. They have 200,000 people using the site. They have tons of listings now. And he’s going to give us an update on stage. But you’re looking at AI and what they’re doing to the system. AI is tracking your patterns and how you book trips. For me, I always book trips late because I decide I’m so busy. Okay, I’m going to go on this and I’ll book two weeks before. I’ve been dealing with Expedia probably 15 years, right? I’ve got like platinum membership, everything, right? So, I always, you know, use them. It doesn’t matter what airline, as long as I can get to wherever I have to go. And I got to tell you, I’m booking stuff and then I just happened to sign on, I signed off and signed on as a regular person. It was 35% lower when they didn’t know who I was compared to me being their premium client because they know that I’m going to book this, I have to book it, I have to travel. I’m like, so when you have AI systems that are actually working against you, right?

Frank Curzio 52:37

And that’s what you see in the travel industry. Look out because, you know, people are going to figure that shit out and it’s crazy. I’m going to ask, you know, Eric Goldwire, who is the CEO of Savvy, who sold bed and breakfast.com. He had a nine-figure exit, eight-figure exit. Now we’re investing in Savvy through our one membership. I want to hear what he has to say. And this Savvy just shows you and actually every single vacation that you book on Savvy, and I’m not getting paid by Savvy to say this, I’m just an investor. They put up the cost savings of Airbnb. And a lot of it’s more than $500, $600 per stay that you’re saving because, you know, a lot of these companies, they just, they have to raise prices. You look at Uber, Uber was great. Now you can take a taxi that’s cheaper. That was never the case with Uber. Here, Airbnb, you’re like, oh man, hotels are going to be in big trouble. Well, you know what? Now you’re looking at Airbnbs being higher than hotels because they’ve raised prices.

Frank Curzio 53:23

Because once you have this massive market, you have to find ways to growth and it comes down to, you know what? We’re going to have to raise prices now. And when you do, that brings in all that old competition that you disrupted back into the mix. That’s what’s happening with really like Savvy. But, you know, how these online aid agencies are using this when it comes to AI, it’s not in your benefit. It’s 100% in their benefit. And a lot of companies using AI for your benefit. You can use a large language model. You pay for the tokens. Okay, it’s great. You’re able to run your business. It’s good for you. It’s not good for you with AI systems that they’re using in these airlines. I think you’re going to see a lot of these travel sites are going to get hit pretty hard here. So, because AI is not working in the benefit of your customer and when you don’t take care of your customer, you know, that’s the worst thing you could do as a business. If you focus on yourself, you’re going to eventually lose your customers. I see it over and over and over again. So, a lot going on.

Frank Curzio 54:09

Lots of earnings going on. Daniel, I don’t know if you want to talk about it. We got Meta, right? You’re going to be doing the podcast tomorrow because I got to prepare for my conference, which is going to be huge. It’s Sunday, Monday, Tuesday. I’m interviewing, I believe, 18 CEOs on stage. I don’t know what I was thinking. So, providing slides and everything. So, they’re like, are you going to provide this slide? I said, don’t worry about it. I know your companies. It’ll be great. I think we got like 125 people that are going to be there, all credit investors. And it should be a lot of fun, a lot of entertainment. I don’t want to give away a lot of the entertainment that’s going to be there, but almost all the companies are giving away free stuff. A couple of surprise announcements, great announcements. If you’re a one member, it’s going to give us lots of access to new ideas from great people. So, it’s going to be an awesome conference. I can’t wait. But man, do I have to prepare. I got a lot of work to do. So, with that said, let’s sign off. Questions and comments, feel free to email me at frank@curzioresearch.com. Daniel?

Daniel Creech 54:54

Daniel@curzioresearch.com.

Frank Curzio 54:56

All right, guys. We’ll see you. Daniel, we’ll see you tomorrow. I’ll see you next week. Take care.

Announcer 55:01

Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money, and your responsibility.