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Chapter 1: What is the main topic discussed in this episode?
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Today's number, 47.6. That's how many hours of sleep the average American gets each week. Today's other number is zero. That's how many hours of sleep Michael Saylor got last week.
Welcome to Profiteer Markets.
I'm Ed Elson. It is February 11th. Let's check in on yesterday's market vitals. The S&P 500 and the Nasdaq declined on weaker-than-expected retail sales data for December. Financial stocks also dropped after Altruist released an AI tax planning tool. Charles Schwab fell 8% and Raymond James fell 9%. Meanwhile, the Dow notched its third record close.
Spotify soared 15% after reporting record user growth and tripling profits from a year ago. And finally, Paramount sweetened its hostile offer for Warner Bros. Discovery. It offered to pay the $2.8 billion termination fee that WBD will owe Netflix if the deal falls apart. WBD stock rose more than 2% on that news. Okay, what else is happening?
Google just executed one of the biggest corporate debt offerings in history. On Monday, the company priced its largest ever US dollar bond sale, raising $20 billion across seven different maturities. That deal drew more than $100 billion in investor orders, one of the most heavily subscribed order books ever for a corporate bond sale.
The next day, Google raised another $11.5 billion in sterling and Swiss francs. The sterling deal included an ultra-rare $1.4 billion 100-year bond, which attracted close to 10 times the amount offered in investor demand. All in, Google raised nearly $32 billion in debt in less than 24 hours.
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Chapter 2: What major financial move did Google recently make?
People said last week, software is dead, AI killed it. Where do you stand today?
AI is a major disruptive force in all of technology and the whole economy and specifically for software. What happens when you have major disruptive forces is that excellent companies and good businesses execute well and win. and companies that are not very good and not very good markets end up falling by the wayside. That's true in software as well.
But what happened the last couple of weeks is that all software stocks sold regardless if they're in the first or the second category. And we love that because that's what creates opportunities. You know, I've been in software for a long time. I've always resisted putting revenue multiples on any company, including software companies. We don't have to anymore.
These companies are now trading on free cash flow, on their actual profit. And you had an opportunity last week to buy unbelievable companies like Snowflake and Datadog at 35 times cash flow. Microsoft at 20 times earnings because of this onslaught on all of software that, again, ignores the fact that Datadog, Snowflake, massively big winners in software. Microsoft, massively big winner in AI.
But the sentiment against software was so negative that really good companies that are executing well and are well positioned for AI We're selling alongside companies where the disruption may actually hurt them, even though they have some years to execute. I understand that part. But again, I love the opportunity to buy companies growing 15, 20, 30 percent on a multiple of cash flow.
We've never had that. And that's a great opportunity for investors.
All right. Gil Luria, head of technology research at D.A. Davidson. Thank you, Gil.
Thank you, Ed.
After the break, why memory chip prices are soaring. And for even more markets insights, you can subscribe to my weekly newsletter We're back with Profiteer Markets. Memory chip stocks are on a relentless tear right now. Shares of the three industry leaders have soared in the past year. Samsung is up 200%. Micron is up 300%. SK Hynix is up 340%. All of the memory chip stocks are soaring.
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Chapter 3: How does Google's debt offering impact its future plans?
That's a complete side, kind of like a side tangent. But yeah, that's really what happened. There was essentially no supply. And I think the place that we're seeing, like our business is very focused on like kind of seeing where
uh ai impacts chips and semiconductors hence semi-analysis right and we think the biggest bottleneck in the market right now today is memory and that's just because there's so much demand and there's so little supply and the supply response takes often 18 24 months and we're you know i think we're six to 12 months in into that so we have at least 12 months before more supply comes online
So some of the memory names we're talking about here, Western Digital, Micron, Seagate, Sandisk. Sandisk is up 1,500% in the past year. Kind of unbelievable. Do you expect that this is going to continue over the next 12 months? It sounds like you think that the chips themselves will keep going up in price.
Would you expect that the demand for the stocks that make the chips will also continue to go up?
Well, this is where memory stocks are kind of like a whole, you know, a whole like 40 chess altogether. Because what happens is stocks are very, very forward looking, right? And the thing that really matters is right now, every day, the stocks have been ripping on the fact that spot or contract price effectively has been going up.
Now, what's going to happen is that's going to continue to happen until there is real fungible, like a real supply response. And so we just don't see it until the first half of 27. We think that memory prices will continue to go up.
quite meaningfully into the rest of this year and then in the first half of 27 we expect a meaningful amount of supply to come online and we just don't think that cross is going to happen historically what happens is when the first um supply starts to come online the stocks tank there's no other way to put it right going up uh this amount of uh this like you know precipitously is often not sustainable and i think everyone in the industry would tell you
every everyone understands this is not a sustainable price and this this just takes capitalism to fix it right supply will react to demand but at this exact moment we're at this like crazy parabolic thing um and i think right now we see no reason that memory prices won't continue to rip for the rest of the year and so that's kind of like the
right that's how you think about it is i would expect them to continue to do well but maybe not the past rate they've done well especially out of the worst cycle of all time into the best cycle of all time that kind of inflection is usually where the socks go crazy um how i think about it actually if we're talking about like from pure soft perspective if you um
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