The Prof G Pod with Scott Galloway
Prof G Markets: Meta’s AI Promise, Microsoft’s Disappointing Beat & Why Google Should Spin Youtube
Mon, 04 Nov 2024
Follow Prof G Markets: Apple Podcasts Spotify Scott and Ed open the show by discussing the U.S.’s GDP growth, Reddit’s earnings, Eli Lilly’s third quarter drug sales, and xAI’s new funding round. Then Scott and Ed break down big tech’s earnings and discuss how the tech companies are using capital as a weapon. They also examine the shifting media landscape and explain why advertisers have been cutting their spending on legacy media. Finally, Scott offers his prediction for the Presidential election. Check out Prof G Markets in Spanish and Portuguese on Youtube. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What is the current state of the U.S. GDP?
In addition, we have this new inflation data that just came out. It's down to 2.1%. In other words, inflation has...
officially been dealt with meanwhile you look at other developed nations that have struggled with not only higher inflation than we had but also longer inflation so it sort of makes the case well not sort of it does make the case for kamala harris if you believe that kamala harris is just a continuation of the current administration
And if you care about the economy, then this is a big reason to vote for Kamala Harris. But if you've made this point before, she should be making a way stronger argument about how she's sort of the economy vote. If you care about the economy, you should be voting for Kamala Harris. It hasn't really resonated. But for those of us. They care about statistics.
They care about data, what the data is actually telling us. And when you look at the U.S. compared to other nations that have struggled with problems way worse than ours, you know, the answer is pretty clear. Statistically speaking, Kamala Harris should be your answer.
I so badly want to be head of comms for like 11 days for the Harris campaign.
I've heard people saying you should be, by the way.
I just think she should have it in her back pocket every time someone starts complaining about the economy or saying the economy is saying, okay, Sean Hannity, there's 190 sovereign nations. You're an intelligent guy. What economy globally is stronger than ours right now? Name it. Instead, they always go to this democratic self-hate of, I know things are tough out there and we have work to do.
It should be, bitch, we are on fucking fire. Get your head out of your ass. Anyways, okay, Reddit. Why don't I listen to my own advice? I bought some stock here, but not enough. I believe the stock is now at about triple where it priced in its IPO about two months ago. Can I ask how much you bought? You can ask. May you answer? Yeah.
I think I bought about $3 million worth of stock, but I paired some of it. So I don't own nearly as much as I'd hoped, but I've done very well. But it popped so big the first day I trimmed some of my holdings and I just didn't listen to myself. I knew this thing. I still think it has more room to run. Anyways, its revenue up 68% year on year. Daily users is up 47%. They're going global.
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Chapter 2: What are the recent earnings results from Reddit?
Anyways, we're going to the Reddit beach party. That's what I take away from all of this. I can't wait.
I'm waiting for my invite. Let's move on to Eli Lilly. As many of our listeners probably know, Eli Lilly sells Zetbound and Munjara, which are these... GLP-1 drugs, they are the alternatives to Ozempic and Wegovy, and it's not selling as much as people had thought, or at least that Wall Street had thought. And the obvious question is, of course, why? What is going wrong?
Now, what's interesting is that the CEO's answer to that question was that there isn't a problem with demand, but there is a problem with supply. So supposedly, the suppliers of the inventory for these drugs, those suppliers cut down on their stock and it affected Eli Lilly's ability to get the drugs out. But as a Barclays analyst pointed out,
if that's true, that could only have accounted for around 20% of that drop-off in revenue. In other words, there must be something else afoot here. Something else is going wrong in the Eli Lilly GLP-1 drug story, and it can't just be this sort of chokehold on inventory, and certainly Wall Street doesn't believe that story either. So,
I have a few thoughts of my own as to what might be going on, but I will throw it back to you. What do you think could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won't tell us?
I wonder if we keep hearing about all these compounded GLP-1 producers being able to sell I don't know if you call it off-market, but there's a bit of a glitch in the matrix or a loophole where if a product is sold out, you can build almost like a generic version of it that costs much less. I got to think that that's denting demand a little bit.
And I would think that, and not only that, you have a lot of these kind of upstarts are sort of scrappy and maybe don't take this institutional approach, but are great marketers and understand new mediums. So I wonder if it's some of the new guys or these compounded GLP-1 producers maybe slowed their growth. What are your thoughts?
I was thinking that too. And if you look at HIMSS, which we have discussed before, they have been getting into the GLP-1 game. Yes, the compounded version. Their revenue increased 52% last quarter. And a large part of that was their weight loss drug business. And there are several other companies that are offering these compound alternatives. It's sort of becoming... a growing space.
And I think it is possible that this duopoly that we've seen on Semiglutide that has been owned by Novo Nordisk and by Eli Lilly, it could be a little more fragile than we think. The other thing I think is worth mentioning, which one of our team members, Jessica Lang, pointed out, and it's a simple but important point, is when you think of GLP-1s, Manjaro and Zepbound do not come to mind.
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Chapter 3: Why is Eli Lilly struggling with drug sales?
Our final headline is XAI, which Elon, this is Elon's AI company, which he is supposedly trying to raise around at a $40 billion valuation. Just a reminder of what this company is. So people may remember the premise of this company was to create a competitor to ChatGPT, that was, quote, more truth-seeking. So for a while, Elon was calling it kind of jokingly TruthGPT.
He saw how successful ChatGPT had become, and he wanted to make a competitor that was also less woke, pretty much. So XAI did build that product, and the product is called Grok. Many people may have heard of it. And it's available to all paid users of the X platform formerly known as Twitter. I've used it. It's fine. There was a period where it tried to be anti-woke and funny.
And it felt like a not very funny guy who's trying to just crack jokes at every second. It wasn't a great product. Yeah, it's the Tony Hinchcliffe of LLMs. It's exactly right. And they fall flat. So I'll get your reactions to XAI in this funding round. There are a few more details we can go into, but what are your thoughts on this round?
So I think this is Musk's next opportunity to turn $40 billion into $10 billion. My sense is this is now a distant fourth or fifth in the LLM market. And he did some sleight of hand trying to take the rights to the data, I think, of Twitter and spin out XAI. And he got a disproportionate amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter.
But El Grok right now is a distant fourth, fifth, or sixth trying to trade at the same valuation as Anthropic. And that's the analog here. And I would imagine that Anthropic has dramatically more traffic, revenues, better technology. etc. And what they keep leaking is that Jensen Huang did say that it's easily the fastest supercomputer on the planet.
XAI has built its own data center, but I'm not sure if that ends up being much of a competitive advantage anyways.
I think that's an important point, is that a competitive advantage? And when I look at XAI, it's like there are three main differences that make it different from other AI companies. The first is that Elon Musk is leading. So that's a big deal. It means you can raise a bunch of money. The second is, as you said, they're building their own data centers, and that's what sets it apart from OpenAI.
OpenAI does not own any data centers. Instead, they essentially rent data their compute from Microsoft. And that's why they have that partnership. And then the third big difference is that XAI is building its own frontier models.
And that's where it's similar to OpenAI, but not similar to a company like Perplexity, which is building models on top of the models that are built by other companies like OpenAI. So in other words, their sort of strategic differentiation is that they want to own everything that they create.
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Chapter 4: What is Elon Musk's XAI and its latest funding round?
Chapter 5: How is AI transforming the media landscape?
So I think the other explanation here could be a very simple issue. It's just a marketing problem and a brand awareness problem. We know what Zetbound and Manjaro is because we study this stuff for a living. But for the average American, you just think Ozempic and Wegovian. You probably don't even know what GLP-1 is either. It's interesting.
I agree with you. I usually don't like the idea of
Typically, when I walk into a brand and they say they want to show me a brand campaign and they're going to spend money on advertising, I usually say, well, if you're spending a lot of money on advertising, usually you have somebody who wants to hang out with really cool, interesting people, which ad agency people are, or you're out of ideas because the companies with the best products don't need a lot of brand marketing.
In this case, I think an awareness campaign exactly around what you said around ZipBound and Munjaro. Also, Munjaro is awesome. If I came back and in my next life as an MMA fighter, I want to be called Munjaro. I think that's a badass name. It's a really cool name, Mungiato. But I agree with you. I think they need— Fire up the ad budgets. Yeah, get some awareness out of that.
There's so much money on the line here. Also, supposedly there's a lack of scarcity that finally there's enough production here to meet demand. I wonder what's going to happen, though, when it reaches into the markets it should be in. I'm just such a huge fan of— Of this technology. Speaking of which, let's bring this back to me, Ed. I'm doing this NAD treatment. Have you heard of this?
Only from you mentioning it last week. Ed, that's it.
I'm fine.
I'll leave. No decillion dollar bonus for you. I'll make my way out. Just Claire's getting a decillion dollars. Anyways, this NAD stuff is really, really powerful, but I wonder if it has a similar compound as GLP-1, because I have noticed... I'm losing my taste for the sauce, and I don't—I'm going to fit right into Baja Summit. I told you about Summit last year.
They all take drugs, but they don't drink. I would bet, going back to Eli Lilly—I apologize, I'm all over the place. This fucking NAD was supposed to give me focus. Maybe it isn't working. I think this is probably a buying opportunity. I think anyone in this market with two great brands or one great brand, Monjato, and Zepbound, that's a terrible—you're bound for Zep. Zepbound? That sounds awful.
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Chapter 6: What predictions can be made for the 2024 Presidential election?
When comedian Chris Gethard was growing up, he went to a place called Action Park. It was one of the first water parks in the country. And it was built by a man who had no experience building theme parks. Some people called him a berserk Willy Wonka.
Anyone who went to Action Park understood you could get really messed up going there. Not only did we know that, it was a huge part of the appeal.
I'm Phoebe Judge. Listen to our latest episode, Action Park, on Criminal, wherever you get your podcasts.
We're back with ProfgMarkets. Most of the Magnificent Seven reported earnings last week, bringing AI demand and spending into sharper focus. Google and Microsoft both reported cloud revenue growth above 30%, beating expectations. But while Google's stock rose, Microsoft's fell as the company advised its overall revenue growth would slow in the current quarter.
Meanwhile, Meta's stock also fell after the company missed expectations on user growth and warned that its AI expenditures would continue to increase in 2025. So I think let's just start here. A lot of tech earnings telling slightly different stories. Let's just start with what Wall Street thought about these earnings. So for Google, Wall Street was very happy. Revenue grew 15%.
Cloud revenue skyrocketed. And the stock rose 4%. And I think the main story with Google is there was nothing that you could really fault the company for in that earnings report. Everything was going well. Microsoft and Meta, on the other hand, Wall Street was not so happy with. And it's a very similar story that we've seen before in tech, which is the top and bottom lines were very strong.
They beat expectations at both companies. But there was just one tiny little gap pimple on the earnings report for both of them. And for Microsoft, it was that their guidance was a little bit soft, not as strong as Wall Street wanted. And for Meta, the user growth was slightly weaker than expected. 3.29 billion active users versus 3.31 billion expected.
I should remind you that's daily active users, so it's still pretty incredible. As a result, Microsoft stock fell 4% and Metastock fell 3%. So I think the summary with these earnings here is that it's very strong overall, but again, incredibly high expectations for these companies. Let's just start with your headline reactions to the tech earnings that have come in this week.
What you said was really prescient and insightful a few months ago, and that is the expectations are now that you're going to blow away expectations. So Meta actually, the revenue and earnings beat expectations, increasing 19% and 35% respectively. But investors were disappointed by weaker-than-expected daily active user growth. And also, I think the thing that freaked everybody out is when
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