Wall Street Unplugged
Episode: 1059July 26, 2023

Microsoft’s warning about AI

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Today’s episode starts with a look at the Hollywood strikes that have been dominating the headlines. I explain why a win for the actors could spell serious trouble for the industry. 

The Fed is meeting this afternoon (after I finish recording this). I break down why no one seems to care about the Fed’s rate hikes… and why that’s a big mistake.

Next, I highlight two contradictory calls from a couple of Wall Street analysts. One was right about the direction of the market… but wrong on his bullish thesis. The other was right about several bearish headwinds… but wrong about stocks falling. I break down both viewpoints… and why now is a turning point for the market.

We’re in the heart of earnings season. I share why Alphabet (GOOG) and Microsoft (MSFT) are moving in opposite directions after their latest results… Microsoft’s warning on AI… and the one Big Tech name I like heading into earnings (hint: it’s had an incredible run lately, but still trades at a modest valuation).

Don’t miss tomorrow’s episode of WSU Premium. Daniel and I will discuss one of the few sectors where earnings and revenue are rising—and how to profit from it.

Inside this episode:
Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.
Transcript

Wall Street Unplugged | 1059

Microsoft's warning about AI

This transcript was automatically generated.

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How’s it going out there? It’s July 26th.

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.

Nothing really going on.

Just tons of earnings Fed meeting, longest winning streak at the Dow Jones in 35 years.

Put nothing to see today in the Fed meeting.

It’s like nobody cares.

Barely being mentioned, at least in the mainstream financial media, talking more about the strike in Hollywood than the Fed meeting.

And by the way, is everyone strike happy or is it me? I mean everyone, every time I look, someone’s going on straight.

 Not just the us, Canada, Europe, everybody.

 Strike, strike, strike and Hollywood.

 So Writers Guild of America, Screen Actors Guild, they’ve come together for the first time in 60 years to strike together.

And I see this because they’re making much less money now that streaming has gone pretty much mainstream with all of the studios.

But now the Hollywood actors have joined these guys as well.

This after negotiation with the Alliance of Motion Picture and Television Producers broke down.

So Alliance of Motion Pictures represent major studios like the Netflix, Disney, Apple, Amazon, Warner Brothers.

It’s a pretty big deal.

 It’s been going on for a while.

 It could continue.

Now, strikes happen all the time.

 We saw airlines recently.

Some of ’em signed deals.

 U PS just signed a deal.

 They were worried.

 Amazon, Starbucks, Trader Joe’s, even the UK with thousands of doctors in England walked out, which is pretty effed up.

Imagine you’re operating on someone and the head doctor walks in and says, Hey, you know what? Gotta go on strike.

 I mean, do you stop operating? What do you do? I mean, there’s people are actually sick.

You have to take care of the doctors.

 Walked out, every doctor in the hospital walked out.

 What do you do? I mean, ethically, it’s pretty insane, but not surprising.

 Since money trumps everything, which we saw firsthand during COVID Trump’s safety.

The safety of our kids doesn’t matter.

 Money’s more important.

We saw that so much s**t coming out now.

 It’s pretty crazy about COVID.

The lies and all BS, the suppression of doctors and leading doctors around the world.

It’s coming out.

 If it makes much difference now see how control the media is.

But strikes they, they take place.

 Why? Because workers wanna get paid more money, money and have more benefits.

And the reason why they want more money is because the company they work for and its executives usually generating a shitload of money for themselves.

The salaries and the benefits of all the employees pretty much stay the same.

So they want a little more.

 You can’t blame them.

 This case, that airlines where profits are soaring over the past couple of years, no pun intended there.

 U P S is doing well, Amazon’s doing well.

Healthcare especially holy cow healthcare as you can see, it makes sense and you’re seeing lots of strikes.

 But Hollywood, I mean what are the actors and writers thinking? If you’re gonna go on strike the time to do it was a couple of you do 2020 ones.

Perfect stock price of every media company.

So executives were making a fortune coming off of COVID investors born into streaming, as was the next biggest trend ever behind the invention of the internet.

We had Disney, Netflix, paramount warn brothers, look at stock prices on fire.

That was the time to do it.

 I’m talking about inflation.

We had inflation in 2021.

 Now we’re not keeping up with inflation now, but you wanna strike now when all these companies just realize that holy s**t streaming is a really, really bad business model.

 Horrible.

We just realized it, you know, ’cause of COVID, we thought it’d be great, but ah man, that Netflix company’s pretty good that can still do this.

Nobody else can and make money off of it.

I mean, you have lower royalty payments, which are p****d at because the TV series in the movies that they were in, they received large royalty payments from.

 But now that it’s moved to streaming, you don’t get paid based on Viewage.

 So now a lot of these people, even actors and most of them aren’t, you know, the Rock and Tom Cruise and stuff like that.

So they’re seeing these payments go down, they’re like, holy cow, it’s terrible.

But this was a problem for actors and writers in 2019, 2021, when streamers growing like a weed all the way to today where it’s not just not growing, it’s crushing their profits.

And it’s maybe spending 30 billion on content a year while charging $5 a month per person is a s****y business model.

 Doesn’t work, it’s great.

It’s great for us.

 I love it.

 I hope they continue to do it.

But outside of Netflix, nobody can really make that work.

And now how are they gonna make it better for everybody? They’re gonna make it better for you by charging you more prices and throwing ads all over it.

And that’s why you’re gonna see tens of millions of people leave Disney and all these platforms and say, enough, enough is enough not worth it.

I don’t need six streaming platforms.

That’s why Netflix definitely upper hand here, have a lot of international content, good for them.

But the workers and writers are also concerned about AI taking their jobs.

And look, the Alliance of Motion picture television producers came back with a pretty good deal the other day.

 It’s a three year contract, including a 5% increase in one year, 4% in the second year, and three and a half percent and a third.

 And this is relevant to stocks.

So listen up also includes better benefits and limits on their images to be used by AI and the rise.

And actors looked at this and said, you know what? They get in the middle finger and said F you, that ain’t good enough.

They want 10%, a 10% raising in year one, six and a half percent raising in year two and a 5% raising in year three.

So a 21% increase in wages over three years, while most media companies are seeing massive declines in sales and earnings right now.

 And that just massive declines.

Fundamental structural changes, secular declines where people are not going to the movies as much.

We’re talking 160,000 writers and actors.

So now Iger, right? Disney, CEO went on the media and said the actors writers, what they’re asking for is unrealistic.

 They’re crazy.

 It’s unrealistic.

This comes from a guy going through his new contract for coming back, makes $1 million a year, guaranteed $2 million bonus every year along with stock awards.

That total $25 million.

I agree what the actors asking for is unrealistic.

 But maybe just, maybe just a suggestion here.

You should have someone other than Iger or a filthy rich person at the top delivering this message.

I’m just saying it’ll probably come out better from somebody else, not from the rich guy who just came back who was rich already and making a fortune.

 Even though Disney, what are you doing selling off divisions now and trying to figure out E S P N, holy shit’s a disaster and laying off employees.

 Well, you’re making a shitload of money anyway.

It’s not a good situation for anyone except for Netflix.

 I mean, they have tons of international content, not gonna get hurt as much.

They’re gonna get hurt.

 Not as much.

 But you look at Disney, paramount, Warner Brothers and some of these companies with Fortune every year and with the secular changes in the movie industry and ad ad sales, linear tv, just seeing a, a total shift, crazy situation, massive layoffs.

But if the studios cave on this deal, I mean it’s gonna be horrible for them.

It’s gonna result even bigger losses for these companies.

 But even worse, and pay attention to this guys, I’ve been around business all my life.

It’s gonna result in a terrible culture.

 ’cause executives, employees, they’re not gonna like each other much no matter what deal is signed here.

’cause they’re not gonna get the current deal with the writers and the actors want.

 They’re not gonna get that.

 They just can’t.

 It’s too much, especially for companies.

 Again, I’m not talking about airlines, I’m not talking about U p s, I’m not talking about companies that that are, they’re making money hand over fist.

 These guys are in, you know, trying to save themself mode, laying off employees, selling off divisions.

That’s not what you see in the media industry.

 And it’s happening, it’s real.

And they haven’t found a bottom yet.

 So now’s the time to do this.

And this could last for a very long time.

 If you only leave these companies, be careful it’s gonna impact Netflix too, which is trading at a very premium valuation now after its recent runup.

So be careful with these stocks, but pretty crazy Strikes everywhere.

 Nuts.

Anyway, that’s like the big story compared to what Fed Day.

 It’s the Fed Day, right? Everybody’s supposed to be talking about the Fed.

 It’s what we day, it’s supposed to raise rates by 25 basis points.

And I find it amazing that nobody really cares about anymore.

It’s kind of like it’s built in.

 We’re used to it.

Media’s just focusing on, on, on, you know, Microsoft, Google, at and t earnings, Boeing, Koch, snap, middle of earnings season, 25% of of the S&P 500 reported.

 I think as of Monday, the next two to three weeks everybody’s gonna report.

But the Fed used to be a pretty big deal.

 If we think about that for a minute, think about since March, 2022 and the Fed ‘s 75% basis point hike, And everyone’s saying that they’re not gonna go further than 3% not gonna go further than 4%.

 Oh they’ll no way get the 5%.

 We’re at 5%.

They’re still raising.

 It’s a pretty big deal and this is a big deal.

 Every single.

 Are we not? We have to hear what the Fed says.

 Maybe they’re not gonna be as hawkish.

Maybe they’re gonna be, you notice that nobody’s even talking about it.

Inflation’s still well over the 2% goal set by the Fed.

We’re starting to see prices move higher.

 Again, the home prices are just a shade off their all time highs.

Last month was the second highest in terms of the sale price for homes on record.

 It’s gone up for like five straight months after going down.

Wages still growing.

 I dunno if you saw energy.

The energy oil’s starting to fly higher, which is great.

We have energy across all of our portfolios.

And gasoline prices I think are paying at least 20, 25% more, I paid probably three to four weeks ago.

It’s three 70 where I’m paying right now.

I think it’s 360 on average around the us.

 But these just the past couple weeks, we do think c p i’s gonna come in at, again, we’re looking at a 2% goal set by the Fed, which is not gonna be achievable, which is admittedly by almost every research firm out there past 2024.

And we’re assuming, oh they’re just gonna raise like one more time or no, they’re gonna keep raising.

 I mean unemployment we’re full and employment, if the Fed’s gonna raise, now’s the time to do it.

’cause the biggest risk is inflation’s coming back, which it is coming back a little bit.

But with the Fed now’s the chance.

 Keep doing it because that big risk, which is the case study, the biggest mistake, one of the biggest mistake ever made in Fed history.

Reverse costs too quickly in the eighties.

 So inflation come back.

That’s what they’re worried about.

You wanna have your name on that in the history books but raise now that you can with the market just surging beyond belief.

So nobody really cares about the Fed.

 But you know what? You should, you should care about this.

 Look, the past six months we’ve seen maybe the bullish of the most bullish markets on record.

 And we have the Nasdaq up 35% plus the Dows up 12 straight days.

Longest wing streak in 35 years since 1987 if it goes up today.

 But a close, by the time you’re gonna listen to this again, I’m even with the Fed, assuming they’re gonna raise by 25 basis points and talk the hawkish game that we have to continue and, and rely, we’ll, we’ll decide what we’re gonna do based on the data we see, see which is projected.

 Again, I’m doing this before, you’re probably going to see all this information.

 But when you, you look at a Dao, if it closes up today, which is kind of just floating up and down, it’s right on that line with Microsoft being down today.

But other components doing well, it’s gonna set the all time record of consecutive days up and that’s gonna be I’ve been looking at data and everybody’s reporting this and I hope they’re right because they’re reporting it.

But the Dow Jones index was first calculated in 1896.

And I don’t know if they’ve been keeping track of the data since then, or maybe it’s just the past 60, 70 years or whatever.

But think about it.

 And even if they, they’re wrong and, and, and it’s not goes back to 18, it doesn’t really matter.

I mean it’s an amazing win streak, but it’s happening while earnings are down 9% year over year, thus far from the companies that reported 2020 5% P 500.

It’s happening when sales, sales the top line, it’s expected to decline this quarter year over year.

And it’s happening when margins for the S&P 500 are gonna see its sixth straight quarterly decline.

That’s how crazy this is.

Now throwing the fact that Mike Wilson from Morgan sailing the biggest bears on Wall Street, someone who is dead right in his 2022 called the crash very wrong in 2023, basically threw in a towel.

 It should be a culpa.

Raises estimates on thes P 500.

 Said, you know, my fault.

I thought it would come down and look, I’m not one to, to step on someone or whatever and just, you know, again, just trample over him when things are down.

I was bullish because I mean I was bearish for the first six months of the year.

’cause I saw what he saw.

 We, we never, never see multiple expansion and multiple expansion means what means P ratios companies are getting more expensive ’cause they’re going higher, but their earnings are going lower.

 Earnings usually drive stock prices, throw in the fastest increase in interest rates over a 12 to 18 month period in the history of the Fed.

 You know, and it’s crazy to think even with the economy sluggish all around the world.

 You would think like you was, you’re supposed to see multiples contract not go higher.

So he was right on a lot of the data that he said, but he is wrong on the outcome.

Now here’s something that’s different because Tom Lee was on CNBC yesterday and Tom Lee’s been right saying the market’s gonna go up and they were celebrating him and like pat him on the back yesterday.

His squawk box was pretty cool and and he deserves credit.

He was right when many of us were were wrong, including me.

 The though, you know, I thought stocks would fall sharply to start this year.

But then Joe Kernan asked him what he saw that was different from everyone else.

And this is where things got interesting ’cause he said he knew inflation would moderate and the Fed was too aggressive on its hiking initiatives.

Think about that for a minute because that’s funny.

It’s actually hysterical because it’s not the reason why stocks are going higher.

 Inflation’s still more than double the Fed’s 2% objective.

And if you predicted, the Fed would not raise rates at all in 2023.

Yeah, this leads to, to a huge rally in stocks.

 I mean it’s crazy.

And you’re looking at, at, at you, you predicted this, right? You predicted this in December, 2022.

And I want you to listen to this ’cause I pulled the clip and this is Tom Lee, okay? I’m gonna play this for you guys.

 See if you could listen to it.

 Okay? So here it’s Fun straps.

Tom Lee says there’s an outside chance the Fed might not raise rates at all in So let’s go to, I’m not cherry picking here, but let’s go ’cause I go back and forth.

 But I want you to get to the point we, you see the point where he actually goes over his forecast and why this is gonna happen with the Fed.

 Here we go.

John, one thing to keep in mind is inflation for the last three months has annualized at 2% a a month.

 If we get December, that’s another month of that at 2%.

And housing, as we know, is starting to soften.

 So in fact, I I actually think with the run rate for inflation into the first half of next year could be even below 2%.

 I, Okay, so what he is saying there is there’s gonna be no rate.

 This is December.

This is December that he came on, right? So December, he said the Fed ‘s done raising rates and this is what his bulge call was based on.

 And his thesis was housing softening.

 Housing’s not softening, it’s near, its all time highs, but stocks are still going higher.

So he also talks about the bond market later on.

Assume that the Fed won’t raise rates a two year back then it was at 4.

3%, assuming that they’re not gonna raise rates for the whole this year, the whole this year.

 That’s what he was predicting.

 Well it’s at 4.

8%.

So you’re right on the call with stocks going higher but wrong on your research where Mike Wilson was right on his research in terms of earnings coming down but wrong on his call.

 I think you’d rather be right and make more money and, and and you know, making more money and be wrong on the actual research.

But the point is, is when you throw all this stuff here, again, I’m not not picking on these guys, right? I’m not picking on Mike Wilson here.

Uh, but there’s a lot of stuff going on When you look at, at the beginning of this year, everyone’s expecting a market crash.

 First half, 2023.

 Okay? Now everyone has given up on it.

This is evident from the Greed Fear Index where the greed Fear index, if you look at Goldman Sachs and others like tractors, but Goldman Sachs check a whole bunch of indicators.

 It was at extreme fear, which is a contrarian indicator, meaning that everyone’s fearful that the market’s gonna crash and it’s expected and it’s priced in, it’s gonna go higher.

 And, and that’s what happened.

Now we’re at the opposite.

 Now we’re at extreme greed.

We’re at extreme greed.

We have Mike Wilson doing a mea culpa.

We have Tom Lee taken victory lapse when his thesis for the reason stocks going higher was totally wrong.

We have the Dow Jones up a record number of days in this market.

We’re in an earnings recession right now.

 We’re looking at slower growth, probably heading to a recession, okay? Leading indicators.

And that number that came out earlier, like two weeks ago, took a week and a half ago.

 And that was reported like a negative 10 number.

If you look back to like the 1950s and it hit that level probably like six or seven times.

 I had a great chart of it, like six or seven times it hit that level every single time it resulted in a recession.

 This is the first time it hasn’t ever resulted in this session.

But all this stuff happening at the same time.

 It’s usually, from my experience being in this market, it’s usually that we’re getting pretty close to a top.

I’m just saying ’cause where stocks are trading, everything’s trade is trading.

Like we’re in this massive bull market.

 And that’s fine.

If you thought that in 2011, 12, 13, 14, you had 0% interest rates, free money.

I mean companies are doing whatever they want.

 Assets, you could borrow money.

You had a an idea on a cocktail paper napkin said, hey this’s a good idea here.

Here’s three $4 million you could raise money easily.

 You can’t do that.

The IP O I P O might mights have frozen.

 A couple have come out, but you think the banking crisis are over.

 We look at, look at PAC West, right? It’s not still seeing some of the banks, the biggest banks are fine.

But when you see things like this, like the reversal of what Mike Wilson call it and Tom Lee taking Victory Relapse going, Hey I was great when the reason why you thought stocks are going high is ’cause you thought inflation was gonna come down and it hasn’t come down as fast as you thought.

 And the Fed ‘s not even close to stopping raising rates.

They’re gonna continue to raise ’cause they’re not closer to 2% target.

And then you have the Dow win streak and stocks going up no matter what and everybody giving up and nobody caring about the Fed meeting today.

Nobody even caring what, what, what Powell has to said, which is basically a massive part of of the markets and what’s going on.

Just something to think about.

 Something to think about.

So if you’re fully invested, especially in large cap tech, be careful because what we’re seeing right now is the top 10 names are no longer together driving the markets higher, we’re seeing separation among these names from Tesla and Netflix already report to Google and Microsoft reporting today.

Let’s break down Microsoft and Google before I do that.

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Now let’s get to earnings.

We saw Boeing great numbers at and t I think that stock should be trading at 20.

I think there’s agenda against them in terms of, the media going against ’em, environmental go going against them.

 It’s, you know, they’re reporting numbers that shows that I understand they deserve to go down And they were expecting 16 billion at the end of the year.

They kept that number.

 Now you just reported what, 4.

2, and yet, you know, reported very, very solid numbers and reiterated the 16 billion in free cash flow, which I think is a given considering, what is it 23 billion in, in in CapEx that they spend every year.

 I mean the amount of money they, they’re able to generate, able to save, they’re gonna be great in a perfect condition, but nobody really cares.

It’s not a stock that you want in a market like this.

 And we stopped out.

So my me Copa on at and t that said, we’re doing very, very great and very, very well in other areas.

 Lots of our stocks.

 Again, nice weighting in oil, which has taken off right now.

 Small caps really taking off.

But now you look at the main technology companies, right? Starting with Google, probably its best quarter in over a year.

And my problem with large tech and the valuations of why these things were moving higher, they were moving higher while their biggest segments were slowing, whether it was earnings growth with Netflix and they added some subscribers, which is kind of shady, you know, 5 million subscribers, but you didn’t increase revenue, means you got them for free.

And they’re probably internationally you’re paying like 25 cents for those names.

 So yeah, you’re seeing subscribers decline, profits decline.

Netflix kind of fixed that a little bit and you’re seeing the stock go high, which is fine, but look at Tesla and margins for Tesla are getting crushed.

Cloud for Amazon and Microsoft we’re slowing as a percentage of growth.

iPhone sales for Apple were slowing.

And then you had this slowdown ad and search for Google and being challenged by binging now with ai.

 So, but yet big problems for their biggest divisions.

But these stocks are hitting all time highs going through the roof.

But now you’ve seen the separation and with Google, you know, search basically the biggest part of their business.

 And you can say, well what about cloud? You know, you’ve gotta throw a cloud on top of that, which can’t exist without, without a search platform.

 Uh, you know, and the YouTube platform as well, thrown all that together.

 But, but this quarter was fantastic and clear inflection point.

YouTube shorts watched over 2 billion, by 2 billion users every month, past three, four months up from 1.

5 billion a year ago.

 So a big growth there.

YouTube revenue, the ad revenue popped 5%.

Cloud sales increased 27%.

 I mean, this is gonna generated close to 400 billion operating income from cloud.

That’s a big deal because they lost $600 million from this division their last comparable quarter.

 That’s a massive shift.

Ad sales increased 3.

2% overall when we’re seeing overall ad sales for these platforms not doing that well.

 So they turn the corner, they figured it out, seeing strong demand for his generative AI systems, which you wanna see.

They’re controlling costs and you’re seeing Google pop, what, five, 6% today? And the big reason, it’s not just because they turned it around, but there’s a difference between these big tech companies.

Google is trading at a market multiple, they’re trading in a market multiple.

What does that mean? It means S&P 500 is trading about 20 times 19, That’s where Google is trading now that they’re growing faster than they deserve to trade a premium that compares to Microsoft at 31 32 times.

Apple’s up there at 32 times, NVIDIA’s up there at 70 times.

But NVIDIA’s showing those numbers, that’s fine.

So you wouldn’t consider expensive, especially the growth that they, the guidance that they issued last quarter, but for the rest of the companies, whoa.

 So Google being up 6% makes a lot of sense.

 And Microsoft different story.

I mean they beat strong quarter their guidance light little light, the stocks down almost 5%, which is why the Dow might not see it’s win streak.

Go to 13 because expectations were sky high and the stock going to the quarter.

I was trying to at, at, I think it was 32, 33 times forward earnings.

 And I, I, I love Microsoft, I love Microsoft for this reason.

 I like Nike.

They’re one of the best at manipulating their earnings.

Legally manipulating seems like a pay, but that’s what they do.

They manipulate their earnings absolutely perfectly, right? Just like, like Nike does a great job of this.

 And I, and I love it.

It’s someone that follows numbers.

 I mean, if you look at the numbers and you break down the divisions, just listen to this, it’s kind of funny.

So Azure Cloud expecting growth of 26, 20 7% would they come in at guess 27%.

 It’s a little bit better than expected.

Then you go to a division of productivity and business processes segment, that’s Office 365, LinkedIn Dynamics 365, that’s expected to generate revenue of 18.

1 billion.

 What do they generate? Why don’t you guess? 18.

3 million, just a little bit better.

Intelligent cloud segment is your, I probably pronounce that wrong by always Azure, S Q L server windows Nuance, expecting revenues of 23.

8 billion.

And what did it generate? Wanna guess? 24 billion, a little bit better personal computing segment, which is Windows surface, Xbox, expected revenues of 13.

6 billion.

 And what did they report? 13.

9 billion.

Again, perfectly, just a little bit better than expecting.

 I mean, we’re talking about hundreds of billions dollars on almost hundred billions dollars of revenue with all these employees, everything coming in.

And you’re just able to beat by the slightest perfect amount in every single division, which I don’t know if you’re a mathematician, I’d say statistically probably again, you, you’re getting these orders in and you could filter ’em in and make ’em longer or shorter, whatever.

 And this, this is what happens when, when they force companies report every single quarter when they really don’t have to.

 Uh, but, you know, you can push out revenue and different things and, and, and different costs and take charges whenever you want.

But it’s just so funny how when you have the best accountants just perfect every single segment perfectly, just a little bit than unexpected.

But their guidance was a little light.

And Nadella tried to talk up ai, who’s one of the best CEOs in the world, incredible, thank God for Bill Gates.

He took over or that stock would probably be at the four, $500 billion mark of where Gates left compared to two and a half trillion, because Nadella is is the one that got him into cloud.

 Uh, but he said they’re leading the race in ai.

 However, on the call is a different story.

 The chief, um, the fi the chief, financial officer, she said that growth from AI will be gradual.

This is a surprise ’cause they just came out and said, Hey, we’re gonna incorporate this in 360, five’s gonna be great.

 She said, it’s gonna be gradual.

 And said that the impacts.

 So when I, when she’s used the word impact, everyone on the call who’s listening, that means sales.

So the impact to sales won’t come until the first half of 2024 until probably after that.

 I mean, that’s a long time from now.

We have the biggest company in the world, aside from Apple.

This is Microsoft who has what, hundreds of billions at its fingertips.

$2.

5 trillion valuation, unlimited amount of money to hire the best AI developers in the world.

And they’re saying that they won’t see AI ramping up until a year from now.

What does that say for everyone else? Everyone else who has not only talked about this trend, every single chance they get during earnings calls and CNBC appearance.

But what about the stock prices? I mean, you’ve seen stock prices go up several hundred percent for anyone that has anything to do with AI.

And talking is a great thing.

 Talking is a great thing.

 I mean, it got Disney stock to 190 in 2021 talking about how big streaming’s gonna be for the company.

 Even though you were adding, you know, all these subscribers, nobody cared that they weren’t paying for them.

These people weren’t even paying anything, right? Nobody cared.

 But eventually, which Disney shareholders unfortunately know, now you have to follow through with the numbers, right? Eventually you have to have those numbers and you can see how big a trend is and how big.

 It’s great and it’s awesome.

 Holy cow.

But you have to show the numbers.

 You have to show the growth in earning, even in sales, not necessarily earnings, not even in margins.

But you have to see sales, you have to see user growth.

You have to see some kind of growth that you can monetize from in a future date.

So something to think about for all the AI bulls, because man, everyone thinks this is the greatest, biggest trend ever.

But yet when you have the largest company who says, we are leading this space, but we’re not gonna see any benefits in terms of sales from it in over a year from now, holy cow, because these companies are so inflated in value.

 Talk about ai, that if they’re gonna miss earnings, these things are not gonna go down 10, 15%.

They’re gonna go down 30% plus you could see, can see what happens when you misestimate.

 It’s a week, quarter a week growth.

I mean, snap down 20%, boom like that.

Especially in a market where so many stocks are inflated going into earning season, you better report decent numbers.

 Microsoft’s numbers were not that bad.

They were a little bit light on guidance, but it’s a super expensive stock and now it’s getting hit by 6%.

Who knows the way this market is.

 It might be up 10% tomorrow, I don’t know.

But just something to think about.

 If you have AI stocks in your portfolio, ’cause that would scare me.

But what are we seeing now getting back to this theme to finish up here.

Tesla margins got crushed more than expected.

 Stock got hit.

 Microsoft, little bit weaker than expected guidance, which is rare for them.

AI’s gonna take a little long to go mainstream across all its product lines of division.

 Stock gets hit.

Google cheapest of the big 10 tech that’s been driving the market.

Higher reports, great numbers, knocks outta the park stock ramping higher Meta on deck.

Another company trading, believe it or not, Meta as much as it went up, is trading at a market multiple.

 It’s trading 21 times forward earnings.

And this is a company that’s seen growth among almost every one of its divisions.

 And they’re either gonna be able to, they’re gonna monetize a new Twitter platform.

 It’s great.

That’s how you monetize.

 You take all these people off of Instagram and, and, and Facebook create another platform.

 A lot of these people, again, not that many need to transfer over.

When you have 3 billion people on Facebook and Instagram, just get a small percentage over.

Now you have a new platform and you generate more advertising revenue.

That’s a growth model.

 Good for them.

I don’t know if that platform’s going to be good or not.

 I haven’t tried.

I have no idea.

 But now you’re looking at a, the cure for, for ads which have come down, and the ad market is doing much better.

 Reels.

 Again, Zuckerberg is the best at copying stuff and stealing s**t from people and making a fortune often.

 He’s done it again, right? With reels off TikTok.

TikTok is still the king, but again, that’s a guy, okay? If you look at technology companies, go back to Google.

Every one of these guys are scumbags.

 I’m sorry, they’re, they just steal everything.

 And then, you know, go into to Google’s history, and, and, and just all the patents that they stole and pay, just it’s so fun.

Like they just steal everything and then they’re like, okay, we’ll pay this fine.

 Just, you know, again, that that’s what they do and that’s fine.

 Gates as well.

 You know, you go back, these aren’t good people.

 However you wanna make money on their stock, and that’s all we care about.

 We really don’t care about them personally.

We really don’t.

 But getting back to the point here, Meta’s on deck, cheap, growing fast in the overall market, probably a good place this a couple weeks ago.

Had to pick two would be Google and Meta.

 Let’s see how Meta reports.

So let’s see what Amazon reports.

 Amazon has a lot of catching up to do, hasn’t, hasn’t performed like the rest of them.

 And, and let’s see, deal with strikes as well in different things.

 Then you have Nvidia, which is not in the same boat as the other AI names that I mentioned because they’re a hardware provider.

Anyone who wants to get into it has to come to Nvidia.

 Right now.

 They’re, they’re, they’re king, they’re king of the mountain.

 For now.

It’s gonna take a few years and it’s so fast development, so ever changing.

It’s so hard.

 But you’re looking at Apple, Google, A lot of companies, Microsoft are trying to create their own chips because they have 70% margins, which is incredible in, in this industry.

 That’s usually commoditized in, in the semIcahnductor industry.

But Nvidia not in that boat because they’re first in line because they’re getting all the orders, they’re shipping ’em out.

And then what people do with them, they’re the ones that the, the software part, implementing AI into your existing business, that takes a lot of time.

It’s gonna take a lot of time.

 It’s cool, it’s amazing.

It’s gonna change the world.

But in terms of generating money for certain companies, it’s gonna take longer than expected.

And the companies that are gonna benefit the most are the largest ones where even if they’re generating, I mean if you look at this company generates two 300 million in revenue.

That’s nothing to Apple, Microsoft, Google in sales, that’s nothing, right? These guys generate, you know, 17, $18 billion per division.

So it’s gonna take a while for this to really filter through and let’s see how AI companies report.

 ’cause I thought that was a big deal.

 Uh, getting not too much attention about the AI comments from the chief financial officer that hey, it’s gonna take a little while, but that’s the result of Microsoft going down, which I think was down 1% and then after they reported, and then it opened up down 5%, So lots to digest there.

Tomorrow we have Wall Street Unplugged Premium.

 Dan, I are going to talk about the fastest growing sector in the entire market in terms of earning sale earnings and sales growth.

 Uh, don’t try to guess because you won’t, you’re gonna be surprised when we talk about it.

 Uh, we’re also gonna recommend a, a really great under the radar name in this industry that’s likely going to produce several 100% plus winners over the next six to 12 months.

One of those are making their way into our Curzio Venture portfolio.

Small cap portfolio right now.

You probably got that already if you’re listening to this.

 It goes out today.

Uh, but this new recommendation gonna go into our Dollar Stock Club portfolio, which is our weekly trading product that you get for free as a Wall Street Unplugged Premium member, which is just $10 a month to subscribe.

It’s really cool.

 Get lots of compliments on it.

 Uh, if you’re interested in subscribing, you can do that.

 Go to our website, curzioresearch.com and also you’re gonna find a special discount for Curzio Venture Opportunities.

 Again, we just came out with a new recommendation today where the average position in this portfolio, I’m proud to say is up over 95%.

Uh, that’s outta the 15 stocks in the portfolio right now.

 Listen, last year was not that good of a year, right? just like it wasn’t good for the markets right now.

 I mean, I’m making the case where small caps have been making the case for the last two months and you’ve seen small caps absolutely take off.

You’ve seen it within our portfolio.

Seven names are currently buyers in the portfolio, but I I’m very bullish on small caps.

 Uh, I mean it’s just, it makes a lot of sense in this market.

They’re still down 23% from the November 21 highs where everything else is surging.

 These companies already adjusted.

 We knew over a year ago that hey, a recession could be coming.

 They’re already cut costs.

They’re starting to see earnings grow.

 You’re seeing them buy back their stock.

You’re seeing, insiders purchase a stock as well.

 But nobody caress, nobody cares.

 Okay? Nobody cares about these stocks and that’s why it’s a lot of fun right now.

’cause I’m like, wow, this stock should be trading so much high and it’s not.

And then after they report earnings a couple times, then positive earnings for, for a couple quarters, then you see Wall Street take notice and we’re already in these names and some of ’em have gone up 67, 80% when they’re getting upgrades now from Wall Street.

Uh, you don’t see me talk about our products.

 Like I’m talking about this one.

The reason why, I am is ’cause I think, you know, people subscribing, it can do very, very well.

 you can go on our website, curzioresearch.com, we still have the 80% discount there.

 On top of that, you get a 10 minute call with me personally.

 You get to call personally.

 Again, if I gave you a bad stock, you could pay for it and yell at me during that call.

But we extend the offer for another week since we’re seeing really, really high demand.

 And, and, and look small caps, we’re starting to see the rotation from large caps into small caps right now.

Uh, there is a major rotation taking place.

 If you notice over the past 30 days, the S&P 500 has outperformed the top 10 large cap stocks, right? So we’re seeing the rotation out of that.

 And again, small caps are just forgotten.

So I want to extend this offer ’cause I think you guys could do really, really well.

 And, and again, Russell’s still down tremendously.

Not every stock in the Russells will buy, but there’s a lot of small cap names, biotech, FinTech, oil, a lot of different areas I’m seeing great, great Buys.

 But if you wanna subscribe to that, gonna have it for probably a couple more days, maybe through, through the weekend.

 Again, go to curzioresearch.com for that offer.

 So guys, that’s it for me.

Questions, comments, email me, frank@curzioresearch.com.

That’s frank@curzioresearch.com.

If you, Wall Street Unplugged Premium member, I’ll see you tomorrow with Daniel Creech.

Take care.

Announcer: 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.

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