AI Fuels Nvidia to Nearly $2T Valuation & IRS Coming for Private Jets

0:00This episode is brought to you by State Farm. Checking off the boxes on your to do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there.

0:26Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Wall Street's hopes and dreams rested on NVIDIA's earnings. Did it deliver the goods? Then can Beyond Meat get its plant-based groove back with a redesigned, healthier recipe? It's Thursday, February 22nd. Let's ride.

0:50Okay, let's start the show by debunking some phone myths because I'm in my geek squad era. This week, Apple released a post saying that if your phone gets wet, do not put it in rice. Instead, tap your iPhone against your hand with the connector facing down to let the liquid drip out and then leave it in a dry area. Apple said that small particles of rice can damage your phone. Second tip, closing your phone's background apps does nothing to conserve battery life. And in fact, closing them may use even more battery than leaving them open. Apple recommends you only close an app if it's unresponsive.

1:27Toby, did any of these surprise you? Neil, I'm not going to lie. I'm going to ignore both of these things. One, because it's so satisfying putting a phone in rice because you feel like the rice is doing something. It's drawing liquid out. And then two, the app thing, there is also nothing more satisfying than just going through and swiping all those apps away. You're a Google Pixel guy. I don't even know if you have that feature. Of course we do. Okay, okay, okay. But yes, I'm going to exercise my right of free will and decide to ignore Apple's guidance. After I read this about closing the apps, I just did not realize how much I did it subconsciously.

2:00Well, for me, it's also a trip down memory lane. Sometimes you go through and you're like, oh, wow, I haven't seen that app in probably six months or something. So I'm going to keep them open. Before we jump into the show, let's hear a quick word from today's sponsor, Veeam. It was really funny. We got a YouTube comment this past week from someone asking if they could buy the Veeam mug that we keep on our desk. Honestly, that is a question for Veeam. But I will say this mug is huge, like two times the size of a normal mug. But, hey, that is what you get from Veeam. Outsize protection for your data and outsize recovery, too.

2:33So I guess what Neil is saying is, unfortunately, the Veeam mug is not for sale. But the services Veeam provides are so. Head to Veeam.com today to learn more. That's V-E-E-A-M.com. Raise the runners. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sales solution? Reach sales professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title, and more. Start converting your B2B audience today. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started today at linkedin.com slash campaign.

3:15Terms and conditions apply. Toby, I don't remember an earnings report as hyped as NVIDIA's yesterday. I mean, it was approaching Linsanity levels. CNBC had a countdown ticker like the ball was going to drop on New Year's Eve. Jim Cramer was shotgunning monster energy. But the hype maybe was justified. NVIDIA was called the most important stock on planet Earth by Goldman Sachs this week because its chips underpin the entire AI ecosystem. And for the past year, as it goes, so goes the stock market. So with this report, an anxious Wall Street wanted to find out, Was the AI revolution real or was it just another bubble waiting to be burst?

3:54Well, according to NVIDIA, it is real and it is spectacular. The tech giant crushed expectations with quarterly sales reaching$22.1 billion, a 265 % increase from the same period a year ago. Its net profit also surged to$12.3 billion from$1.4 billion in the same period last year. The Wall Street Journal said this quarter capped off one of the quickest rises in corporate history. CEO Jensen Huang says he believes the AI moment has arrived, that the technology has hit a tipping point with demand surging worldwide across companies, industries and nations. I mean, I just genuinely don't feel like this company is real right now.

4:34I'm going to rehash some of those numbers that you said because I just can't wrap my head around them. quarterly sales increasing 265 % from a year ago. That does just not happen on a company of this scale. Net profit jumping by$11 billion from a year ago. And then also just the market cap, it's added more than$1.2 trillion to its market cap in the last 12 months. And again, they are just lapping the competition right now. NVIDIA controls around 80 % of the high end AI chip market. There's just no one who can really knock it from its perch right now, or so it seems. Not at all. So what does it sell exactly?

5:09Because this is all very techie. They sell the chips, the GPUs, graphics processing units, that power ChatGPT and all these other large language models that have become so popular in recent years. And every tech company wants to produce something like that. So they sell these chips. The benchmark chip is H100 chip. It goes for$30 ,000 to$40 ,000 per unit. OK, so that's a very expensive thing. That's buying a car. How many of these things does it sell? Well, in the third quarter, it sold 150 ,000 H100s to Meta and Microsoft each. Again, you told that stat to me this morning, and I just got lost in all the zeros there.

5:51You need a calculator. You need a calculator. There's a lot of zeros there. And then if this is not a sign of the times, if you just look at the activity around the stock itself, it is now the most traded stock by value. It surpassed Tesla, which, again, is a sign of the times. And I actually want to tell you about this other company called Super Micro Computer. It sounds like a made-up company, but what it does, it sells AI-related server components to NVIDIA. And it has seen its value nearly triple,$43 billion so far in 2024. So, again, even the halo effect of this company is lifting up companies that Super Micro Computer, that sound made up, but are really real.

6:28Let's see. Let's talk about if anything can slow its roll. What are the potential roadblocks that could not have it grow 265 % year over year? One of them is geopolitical tensions. NVIDIA used to get 25 % of its total revenue from China. The U.S. has placed export curbs on high-end chips like NVIDIA sells to China, and its CFO said that sales had declined significantly to China. Basically, what it has to do is lower the quality of its chips that it can sell to China because the U.S. won't let them sell the most advanced ones. So that's one potential roadblock. It seems like NVIDIA is working its way around that, but that could be a potential headwind.

7:09And then the other headwind is eventually there will be competition. I mean, I said no one can knock it off its perch, but again, when you're at an industry that is selling umbrellas to people when it's raining right now, of course, other people are going to want to get involved. So you got Sam Altman is the big elephant in the room in his chip development ambitions. So those are potentially the two things that could slow this company down. I think we just went through that whole story without saying NVIDIA. Well, you just blew it right there. Now let's move on. The Alabama Supreme Court passed down a ruling last week that could change fertility treatments forever.

7:46A couple brought a wrongful death suit against a fertility clinic after an accident destroyed frozen embryos in their care. Now, previously that clump of cells that make up an embryo were considered property, not an actual person, so a wrongful death suit wouldn't apply. But the Alabama court turned that on its head, interpreting an 1872 law in such a way that classifies all unborn children, regardless of their location, as people. The reason why this ruling is such a big deal is because it opens up so many different questions around both medical professionals and for patients. Are you allowed to freeze embryos created during IVF?

8:24Can someone donate or destroy unused embryos? Will research on fertility treatments be allowed to continue? With one ruling, this entire industry has been thrown into limbo. Yeah, and the dominoes began to fall yesterday. The University of Alabama, Birmingham, which is the largest hospital in the state and the eighth largest hospital in the U.S., said it's going to pause all parts of the process through egg retrieval. Advocates of reproductive rights and women's rights said that this is going to have a chilling effect across the fertility industry, and you're already seeing it with UAB stopping it, because they do not want to be held liable for wrongful death for anything that happens to a frozen embryo, so they do not want to keep these.

9:04Yeah, it's just too legally tenuous, too perilous for them to continue to perform this treatment. But also, I just want to zoom out a little bit. Infertility is a very big issue that affects a lot of people. One in six people in the U.S. have experienced some form of infertility. And also, 2 % of babies born last year were born via IVF. If you just want to look at the monetary impact of this industry as well, expected to be an$84 billion business by 2028. And again, if you just look at the sheer number of people undergoing this treatment, there was 413 ,000 of these IVF treatments or reproductive technology procedures in 2021.

9:42That was up 78 % from 2015. So again, this is going to affect a lot of people. Yeah, it is super expensive. It is$20 ,000 a cycle can get up to that. A lot of insurance does not cover it. So it's been interesting to see companies start to offer infertility treatments as a perk for in this tight labor market. Now, 4 in 10 large employers do offer this as a way of getting more employees to come join them as competition for workers heats up. So, this is becoming a huge industry. Private equity is getting into it. VC is getting into it. So, you're starting to see, you know, this is sort of putting the brakes on a growing, growing healthcare market.

10:25Yeah, and this ruling also probably is going to bump those prices up even more, make it more expensive. because, again, if you cannot do as much research, we probably will see that price tag grow even bigger. So right now, this just applies to Alabama. Reproductive rights advocates are warned that it could spread to other more conservative states. Let's move on. Everyone with a private jet, listen up, because I've got bad news for you. Now it's just you and me, Taylor Swift. I want to tell you that the IRS has pledged to crack down on using corporate planes for personal travel and then writing those flights off as business expenses.

11:00The agency is developing new technology to track down execs at large companies, as well as other wealthy taxpayers, to see if they're really using their private wheels like they say they are. And even though, yes, this will likely lead to more responsible jet usage and extra money for the IRS, perhaps the real reason behind this crackdown is that the IRS wants to show that it's putting the funds lawmakers sent its way to good use. Remember, Congress granted the IRS$80 billion two years ago to clean up its act and help recoup some of the estimated$700 billion in tax revenue that goes uncollected each year.

11:33But lawmakers have already agreed to take back$20 billion of that initial$80 billion. So the IRS is maybe peacocking a little bit here to show that they can, in fact, get some results. That's a good term. I think that's true. Yeah, there are more than 10 ,000 corporate jets flying around the United States right now. And you can write off a lot of those expenses if they're used for business ventures. If they're used for personal recreation, which sometimes they are, or actually many times they are, you're supposed to just take that as income, taxable income, and not write it off. And the IRS wants to actually dive into the details here and do some audits, see how that breakdown actually plays out.

12:14They think there's tens of millions of dollars left on the table here. No, absolutely. And one thing in the post-COVID era, private jet usage kind of exploded at the highest level of execs at Fortune 500 companies. I mean, if you just look at Mark Zuckerberg, recent guest on this show, Meta spent almost$7 million ferrying him around to various different places. And so, again, distinguish between business and personal travel, not very simple. And the IRS could kind of engage in these lengthy litigation battles and have to do a lot of research to really pin this down. So when I say that they're peacocking a little bit, I do think that saying like, oh, we're going to go after the elite of elite for private jet usage.

12:55It might not drive meaningful revenue in the grand scheme of things, but it is showing that, hey, we are actively working to try to step our game up here. All right. That's enough private jet talk. We're coming back with Neil's numbers, though, right after this quick word from our sponsors. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema.

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14:13Tonight on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. May the best idea win! On Brand with Jimmy Fallon. Series premiere tonight on NBC. What are the odds that satellite debris will fall on your head? I'll let you know in Neil's Numbers, the segment where I share three stats from the week's news that may cause dizziness and a burning sensation, doctors say.

14:56First up, it may seem like Saudi Arabia has unlimited money to spend on a$500 billion megacity owning entire sports like golf, bringing in superstar soccer players, a brand new airline and a ski resort in the desert. But it turns out all of that is quite expensive. Saudi Arabia's Sovereign Wealth Fund, which is behind these huge projects, said its cash levels had fallen by three quarters to just 15 billion as of September, the lowest level on record. So it needs to raise money to make sure these construction projects don't stall out. And it's going to do that in two ways. issuing debt and selling 1 % of the state-owned oil giant Aramco.

15:35Toby, I thought standard economics did not apply to Saudi Arabia when you can offer Messi$400 million per year to play in your league. Apparently, the whole push to modernize is catching up to it. Yeah, this was honestly a very big surprise to me because you're so right. So many of us are just used to them spending money like it's monopoly money. Money isn't real. We just assume they had this unlimited supply, but you really don't. And part of the reason is oil prices haven't really been cooperating for them. The oil would need to be above$86 a barrel in 2023 and$80 a barrel this year to kind of balance the Saudi's budget.

16:10And prices have hovered around that$81 a barrel price point. So, again, the budget isn't balanced. The money is running out. So they're looking for alternative funding sources. Yeah, just to zoom out. So MBS, Mohammed bin Salman, the de facto ruler of this country, launched this plan called Vision 2030 to turn Saudi Arabia from this oil-dependent kingdom into a modern paradise that has tech and sports and video games and a Hollywood rival and a self-driving car rival. And what he was going to do is use all the oil money and funnel that into these projects. That has been going on for a couple of years now.

16:49But like you said, oil prices have kind of stagnated, so they do need to look for alternative ways to raise money because I'm just getting nightmares of seeing huge skylines unfinished with cranes on them. We've seen that in China. We've seen that in other places. So Saudi Arabia wants to make sure that it can actually finish these super expensive projects. My next number is four, and that's how many films about the Beatles we're going to get in 2027. Director Sam Mendes announced on Monday that he's going to make movies about the four individual Beatles, John Lennon, Paul McCartney, Ringo Starr, and George Harrison, in a music biopic event that will dwarf all the others.

17:26It is the first time that the Beatles, who rarely grant rights to projects, have pledged their full support for a scripted film. And what's especially interesting to me is the release strategy, because apparently these movies are going to get released in theaters around the same time and intersect in creative ways. So it's not going to be the classic, first you get one movie, then the next, and so on. Yeah, I mean, music biopics extremely hot right now. Bohemian Rhapsody, Rocketman, Elvis, Bob Marley one just recently came out. It's the number one movie in theaters over President's Day weekend.

17:56There's a Michael Jackson biopic in production. So definitely a lot of energy around the space. I personally love them. I think they're very entertaining. I want to handicap this, though. Should we place bets on which movie? Because they're each centering on one member of the Beatles. Like what, The Order? No, no, Will Gross the most. Who do you think will be the most popular? Oh, it's tough. I mean, Lennon has the most mystique about him. Paul McCartney is alive right now and kind of can promote it himself. So maybe I'll give the edge to McCarthy. I think he's the odds on favorite and I think he's the best one.

18:29He's my personal favorite. Can you imagine if Ringo comes out of nowhere, though, and everyone just rallies? I could see TikTok rallying around Ringo. True, true. I think you're right. Maybe TikTok will determine the winner. For my final number, the chances of satellite debris falling on your head is 1 and 1 billion. So I'd love to hear from the eight people who woke up with a welt this morning when a satellite called ERS-2 hurtled back to Earth yesterday. Just kidding. No one was hurt when a dead satellite, which weighed as much as an adult male rhino, made an uncontrolled return to Earth yesterday, 13 years after ending its mission.

19:02It mostly burnt up in the atmosphere but could have spread some remaining pieces in the Pacific Ocean, which is where it reentered the planet. Experts say we should start incinerating more defunct satellites in the atmosphere so they don't contribute to the growing problem of space junk. There are now about 500 ,000 marble-sized objects orbiting Earth and more than 25 ,000 objects bigger than 10 centimeters. Many are worried that space is just becoming one big scrapyard. Yeah, I was reading that, though, and saying, like, what about Earth junk? I mean, again, the satellite does end up burning up and kind of harmlessly falling into the Pacific.

19:37But when you see the headlines at one in a billion, you never want to be that one person. And there was some estimates that one piece or the largest piece that could reach the ground would be 115 pounds. So that's more than a wealth. So I'm concerned with space junk, but I'm also concerned with earth junk. All right. Beyond Meat is trying to get its plant-based groove back by making their fake burgers even more healthy. The company is launching a new version of its famous plant-based burger recipe that uses avocado oil instead of the old canola and coconut oils that cuts its saturated fat by 60 % and takes sodium down by 20%.

20:12Now the question is, will it lure consumers back? Because Beyond Meat has been going through it. Retail sales of alternative meats have fallen 34 % in just the last year, while sales of Beyond Meat in particular have dropped 29 % over the last two years. And its stock, well, it ain't pretty. It's trading at just$463 million, down from a high of over$14 billion just four years ago. Neil, can a newer, healthier version rescue Beyond from the great Beyond? We are going to find out. But the point here from CEO Ethan Brown is saying he wants to make this product fully unassailable from a health perspective.

20:49The Beyond Meats of the world, the Impossible Burgers, have come under fire from some people saying that they are super processed. They're high in sodium. They don't bring the health benefits that they claim. So he wants to put his flag in the ground here and make an absolute health claim saying, these are healthy. Whatever you want to say about Beyond Meat, you can say anything you want, but you have to seed that they are healthier than their beef counterparts. Yeah, there's always been ammunition from critics saying like, hey, listen, there's more saturated fat here than in just a normal burger.

21:23There's higher sodium content. So stripping away those last vestiges of criticism. To me, though, this screams as kind of a last-ditch marketing effort because, again, cutting it 60%, you're taking it from 5 grams to 2 grams. It's not life-changing. And 20 % less sodium is not life-changing either. So, I mean, if you compare it to a normal burger, single patty has 230 calories versus 290 for a normal burger. It actually has less saturated fat but around the same amount of sodium. So I don't know if there's that big of a health difference to kind of rescue this industry that started with so much praise, but it's kind of wilted a little bit.

22:02No, this is an industry in decline right now. I mean, the size of the plant based meat market actually fell 3.6 percent year over year for the entirety of 2023. This whole market in general is just one point five billion dollars, which is is not big. Like, you know, when Beyond Meat IPO'd four and a half years ago, this was seen as a huge disruptor. People were predicting it was going to grab 10 % market share of the entire massive meat market. And it has just floundered for whatever reasons. I still don't fully understand the full reasons. Like, is it a health thing? Is it a taste thing? Is it a, you know, public perception thing?

22:43I think it's all of the above. They should get into AI. But the one bright spot, though, is in Europe where it sells burgers and nuggets at McDonald's. Sales rose. International revenue rose 17%. So maybe the Europeans have a more refined palate than we do and are more on board with it. But yeah, in the U.S., it's still kind of suffering those losses. Very interesting. I think we might skip the plant-based meat and just go straight to the lab growing meat. I'm bullish on that. Yeah, absolutely. Okay. Okay, MLB spring training kicks off in Arizona today. But instead of talking about X's and O's, we're talking about S's, M's, and L's.

23:21And that's because the new jerseys Nike rolled out for this season are causing loads of controversy. Players and fans say they look like cheap TJ Maxx knockoffs and don't give off that classic stitched vibe of a traditional baseball jersey. And these jerseys are supposed to be different. They're designed by Nike, manufactured by Fanatics, and are intended to be more performance wear than fashion statement. Nike says they provide 25 % more stretch and will also dry 28 % faster. The lettering, emblems, and numbering are all less bulky to make the jerseys more breathable and comfortable. Because after all, the point is to wear these when you're running and sliding and batting and fielding and diving.

24:00Toby, I think any jersey change is going to be met with pushback because jerseys are so loaded with history, meaning passion. but it seems like they really dropped the ball with this one. Yeah, absolutely. First of all, that was bars, S's, M's, and L's right there, not X's and L's. So just want to give you props for that. But yeah, these things look so, so bad. There is a person on Twitter who posted a picture of an actual MLB player wearing one of the jerseys, and someone contacted Fanatic Support who manufactured them, and Fanatic Support says, oh, we're so sorry, that doesn't look right. It's literally the actual jersey on a professional baseball player.