Anduril Scores $22B US Army Contract & Inflation Sours Rate Cut Hopes

0:00Tuesday on NBC, Jimmy Fallon and Bozma 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. Make the best I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, a TikTok war has broken out between prebiotic soda brands, and the only winner is gut health.

0:42Then inflation heated up in January, which cooled off the Fed's future rate cut plans. It's Thursday, February 13th. Let's ride.

0:55Get ready for a whole lot more Legolands in California. In response to President Trump's efforts to buy Greenland from Denmark, A satirical petition has been set up to raise money for Denmark to buy California. And as of yesterday, it's gained over 230 ,000 signatures. The goal, according to the petition's Swiss-French organizer, is to raise$1 trillion, give or take a few billion, to purchase California from Trump and comment on the absurdity of the U.S. wanting to buy Greenland. Toby, are the people ready for Disneyland to become Hans Christian Andersenland? I was just thinking California could use a little more hygge in their life.

1:34But seriously, Neil, think of all the cross-cultural combinations that could occur. A California burrito with traditional curd herrings in it instead of french fries. A California club on s'more broad instead of multigrain. The possibilities are endless and honestly very hard to pronounce as well. Why stop there, though? Let's toss in Florida while they're at it. 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.

2:12Start 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. Terms and conditions apply. Now a quick word from our sponsor, Wise Business. Neil, you ever get overwhelmed by all the paperwork involved in modern life? I went to the dentist the other day. Five forms. And don't even get me started on tax season. Now imagine you're an international business owner. It's like a never-ending game of where's Waldo with all the fees and paperwork. Thankfully, wise business knows exactly where that little red and white striped whippersnapper is hiding.

2:50They simplify everything. You can pay in 40 plus currencies with no surprise charges and no pointless paperwork. Save time, find Waldo, and use Wise. If you want a cleaner, simpler way to do business internationally, visit wise.com slash business. That's wise.com slash business. Like the fringe guy at a house party, inflation is sticking around a lot longer than anyone wants. Yesterday's CPI reading for January came in hotter than expected, with prices jumping 0.5 % from December, pushing the annual inflation rate up to 3 % from 2.9 % last month. The Fed has been doing everything it can to try and guide that number closer to its 2 % target, but inflation is ignoring all road signs and driving the wrong way down a one-way road.

3:36It was the sectors most watched by consumers that led the charge, with price rises from groceries to gasoline, offsetting declines in clothing and furniture. Egg prices especially need to slow their ovular roll. The egg shortage caused by a bird flu outbreak has pushed prices up 15.2 % over the past month and 53 % since last year. That contributed two-thirds of the total increase in grocery prices alone since December. Neil, that sound you're hearing is J-PAL and the Fed doing absolutely nothing, and you'll probably hear it for a while longer. Due to stubborn prices, the market now expects the Fed to keep interest rates at their current levels until December, A huge shift from last year where traders penciled in four rate cuts in 2025.

4:2330 % believe there's a chance that there won't be any rate cut this year, up from 20 % earlier this week. Needless to say, this was not a great inflation report. No, this is like the end of a Marvel movie where you think everything's going fine, and then you see the next villain for the next movie, and our heroes have to battle it out over the next installation in the franchise. And that's exactly what's happening here with inflation, the biggest monthly increase in one and a half years. You're right. Jerome Powell is like, well, hell no, I'm not cutting rates into this environment. We have strong job growth, low unemployment and really hot, hotter than expected and hotter than comfortable inflation.

5:07So the Fed is absolutely going to stay put. and consumers are feeling the pinch right now with, you said, pretty much every category across the board, especially those consumer ones, groceries, gas, airfares, prescription drugs, all went up significantly. And so this is what we're living with. There's no, the disinflation that has occurred over the past year and a half has hit a wall. Absolutely. And the, you know, kind of underlying outlook for the economy is also very uncertain due to a lot of these Trump-era policies, tariffs, deportations, tax cuts, deregulation, all of those are expected to have some sort of economic impact, likely an inflationary impact.

5:48We already know that tariffs could increase the price of goods, but even stuff like deportations that may limit the labor supply at a time of pretty low, historically, on U.S. unemployment, which could put upward pressure on wages, which could put upward pressure on prices. So that is kind of the fear alongside this inflation report is that we haven't even necessarily entered into these potentially inflationary policy period that it looks like we are heading towards. But just the expectation of inflation coming up could spur inflation itself. It's that self-fulfilling prophecy that economists warn about because say you're expecting inflation in the future, which we know U.S.

6:28consumers are. There was that big consumer expectation reading last Friday that showed a huge jump in inflation predictions because you're going to start buying stuff now because it's only going to get more expensive. That drives more demand. That drives price increases. You're seeing this in the auto industry already. Trump has threatened tariffs, 25 % tariffs on Mexico and Canada, which would, according to the Ford CEO, cause chaos in the auto industry. People are going to buy that car now if they're thinking about it over a three to six month span. You're like, why would I wait until maybe these tariffs come in and the price of a car is going to go up$3 ,000 on average?

7:06So just the expectation of inflation creates inflation itself. Yeah. And I do just want to talk about eggs one more time. We've talked a lot about eggs, but I saw a few people yesterday because the market, when the inflation reading came out, took a little bit of a red turn. Everyone's like, basically, you know, billions of dollars in equities are being destroyed because egg prices are too high right now because 15 percent was doing a lot of the heavy lifting in this report. But the egg shock, whatever you want to call it, filters through to a lot of other items in the grocery store. Think stuff like baked goods that actually take eggs as an input.

7:39But there's also the substitution effect. So when you see eggs going up in price, you might opt for another source of protein like beef or chicken. But then you see those prices going up as well. So even though it is just one little source of white or sometimes brown protein, it does filter through a lot of other parts of the economy and other parts of especially the grocery store. Yeah, that 15 % increase was the biggest monthly increase since 2015. And you already see large grocers like Costco, all these Trader Joe's limiting the amount that people can buy. So we really are in an egg shock, egg crisis right now.

8:17Startups named after things in the Lord of the Rings are upending the existing order in the U.S. defense industry. You already know that Palantir, the military-focused data analytics company, was the best-performing stock in the S &P 500 last year. Now, Anduril, named after the sword that was reforged from the shards of Narsil in Rivendell, is making its move. The defense upstart is taking over Microsoft's$22 billion contract to make high-tech goggles for the U.S. Army. Known as the Integrated Visual Augmentation System Program, it was supposed to equip soldiers with mixed-reality headsets for things like identifying drones quickly or night vision capabilities.

8:55But Microsoft fumbled the bag over the past few years, and now, pending Pentagon approval, will take over the project. It's a breakthrough for Andrew Real and its CEO, Palmer Lucky, who you maybe remember from founding virtual reality headset company, Oculus, and selling it to Facebook for$2 billion. In a blog post, he wrote that everything in his life has led to this moment, saying that he first recognized the combat potential for high-tech goggles when he was a teenager. If you think that sounds crazy, Lucky would agree with you. He wrote, whatever you are imagining, however crazy you imagine I am, Multiply it by 10 and then do it again.

9:32I am back and I'm only getting started. Gandalf's hair just went from gray to white. That was a pretty good pronunciation of all those Lord of the Rings names, I have to say, Neil. But yes, this is kind of a relief for the Army and honestly a relief for Microsoft because this project really went south for them. $22 billion deal for Microsoft to develop these things. So it was this pretty big outlay. I mean, defense contracts are big in general, but this was a pretty big outlay. And it just went so poorly for them because in 2022, there was this leak that reports were coming out of soldiers wearing these Holo lenses that Microsoft developed, but they were affecting their mission.

10:09They were visual impairments. People were reporting headaches, eye strain, nausea. People were throwing up after wearing them. So Army officials were already very skeptical that we needed to put$22 billion into, you know, these futuristic headsets. So that was just almost the nail in the coffin. But now the contract has transitioned into Andrile. And it's very, you know, emblematic of where we are seeing the new guard emerge when it comes to defense contractors. Palantir, Andrile, two of the largest, you know, tech forward U.S. technology companies. They've been trying to, you know, rally together and bid for more of those contracts that the U.S.

10:47government hands out. Usually they move to, you know, prime contractors like Lockheed Martin or, you know, Boeing. these legacy makers. They're trying to disrupt that and be this new wave of U.S. tech forward defense startups. Yeah. I mean, the rise of Andrew Real has been pretty breathtaking. So Lucky founded it in 2017. That's three years after he sold Oculus VR to Facebook for$2 billion. That relationship did not go well. So he kind of got booted from Facebook. And then he started this other company. They are about to raise another round of funding at$28 billion. They are pledging to build a factory in Ohio that will cost them$1 billion.

11:31And this factory will produce the things that Lucky and the other defense upstarts think that the prime contractors don't do well and represent the new wave of army tech and how we fight wars, which is drones, AI, everything autonomous. They're looking at what's happening in the war in Ukraine saying, this is the future of warfare. And Northrop Grumman, Lockheed, Boeing, Raytheon, these companies are not prepared. The government procurement system is completely shattered right now. And we want to change what's going on. So they're banding with Palantir, OpenAI, SpaceX. They're forming, you might want to call it a fellowship, to bid on new contracts.

12:14And And this is a massive market because the Pentagon spends$850 billion each year. So look out for these new defense tech companies. They raised a record amount of funding last year,$3 billion. And they are coming for these legacy defense contractors. Olipop is popping off. The prebiotic soda startup that's high in fiber and low in sugar raised$50 million at a$1.85 billion valuation yesterday, showing it is a force to be reckoned with in the soda space. Olipop has ridden cute branding, viral marketing, and a legion of dedicated fans to just short of$500 million in sales last year, elbowing its way into the legacy soda conversation in the process.

12:58Functional beverages, a category of non-alcoholic drinks that come with specific health benefits beyond just hydration, are no longer something that just almond moms are pushing. Instead, they have become ubiquitous on grocery store shelves. Olipop is sold in nearly 50 ,000 retail locations across the U.S., including heavy hitters like Walmart and Whole Foods. But Olipop is hardly alone in this niche. Competitors like CulturePop and Poppy both command their own cult followings, with Poppy reporting over half a billion dollars in sales last year alone. Neil Olipop is the top non-alcoholic beverage brand in the U.S.

13:35by both dollar sales and unit growth, according to data from Circana. This company is profitable, it's growing, and now it's got a lot of extra cash to play. It has a lot of cash, and it's now locked in a TikTok fight with one of its main competitors. And this all started at the Super Bowl when Poppy bought a 60-second ad. So that's probably$14 million right now during the Super Bowl. You may have seen that. You may have not. But the real beef started when Poppy sent and I might get Poppy and Ollipop confused. I don't know how they're doing great. Very similar names. But Poppy sent 32 vending machines full of their beverages to influencers.

14:15And these were like pretty fancy vending machines. And the idea was they would post on TikTok and Instagram and just blow up Poppy in accordance with their Super Bowl commercial. But that received a lot of backlash online. you know, some TikTok users were saying, why don't you do a more community-focused event? This is just ostentatious, things like that. And then Olipop got in the comments for some reason, which we can talk about, and kind of hyped up the backlash a little bit, saying that these vending machines cost$25 ,000 and kind of added to the pig pile that was happening on Olipop right now.

14:52So it was the prebiotic soda brands were fighting on TikTok over the past couple of days in a spat that has really captured the minds of a lot of people in the marketing industry. Right. It definitely has. And I think it shows that this is clearly, you know, they think it's a gold rush for this consumer because right now they are very popular. These sort of modern sodas are very popular with Gen Z's. One in four Gen Z consumers drinks Olipop, according to the company. But they're also, you know, they're what is up for grads right now is both non-soda drinkers, people who have never really drank legacy brands in their life, but also legacy soda drinkers are making the transition over to these drinks.

15:31So it is this very fertile industry right now that a lot of people are trying to capitalize on. So of course, you're going to see this knockdown drag out fight over two very similarly positioned brands in the TikTok comment section, in, you know, on X and social media. So it has been interesting to see how it's gotten almost a little nasty at this point. These two very Gen Z, very lighthearted brands are now duking it out in the TikTok. There's a lot of money at stake. Do you think sending vending machines to influencers was a mistake in hindsight? I mean, I think people probably made too big a deal out of it, mainly because of what Olipop said.

16:07They started this rumor that they cost$25 ,000. They didn't cost$25 ,000. What sort of vending machine costs, you know, the same as a Honda Accord? So they literally were essentially spreading misinformation and it just got taken up by this sort of sector of the online audience. Poppy CEO actually recorded this video pretty exasperated saying like, no, these vending machines didn't cost that much. It was just a fun influencer package. So I think it got blown up bigger and I was of the position that it would be super cool to have a vending machine in my house because even after all the Poppy is done, you load that thing up with whatever you want.

16:44People coming in and vending their own drinks in your house. So I was team vending machine in this specific feud. Up next, prepare your mind for another edition of Neil's Numbers. This 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.

17:22The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small. From improving emergency response times to protecting against cyber attacks, local, state, and federal governments are innovating with Google AI. This is a new era of American innovation. Find out more at g.co slash American Innovation. Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will send you through the four stages of enlightenment before breakfast. My first number is a milestone for YouTube and its quest for world entertainment domination.

18:00People are now spending more time watching YouTube on their TVs than on their phones or desktop. That stat was revealed by YouTube CEO Neil Mohan in his annual letter on Tuesday, who pointed out, not incorrectly, that for more and more people, watching TV means watching YouTube. The platform has made tweaks that have nudged people to fire up YouTube on their big screens instead of another streaming service, or as the olds would say it, cable. It added a season feature that makes it easier to flip through series of your favorite YouTube show. It also adjusted the layout of the TV app to let you pull up the comments and descriptions on one side of the screen while the video plays on the other.

18:38And then there's the content itself. It's really good, and it's led by creators who are becoming the startups of Hollywood, according to Moan. He mentioned the trickshot posse Dude Perfect, which is building a$5 million headquarters in Texas, as well as Hot Ones, perhaps the most popular interview series around today. Toby, perhaps an inflection point for YouTube in its 20th birthday year. Yeah, it is definitely marking a shift from what old television was to what new television is. YouTube CEO called out that it's not just people watching YouTube videos on their TV. They're also watching things like shorts.

19:13Yes, they're watching short-form content on their TVs. They're watching podcasts like Morning Brew Daily. Go onto YouTube. Watch us right now. They're watching live streams alongside traditional things like sports and the TV shows that they like to watch. So it is really becoming this all-in-one TV watching experience. It reminds me of our conversation we had about Spotify last weekend about how they've become this all-in-one audio app. It looks like YouTube is becoming this all-in-one TV app, which, you know what? People love it. It's got a great interface. It's got good content. And it looks like this is where the winds are blowing.

19:48I can't imagine this. I think there's two kind of people in this world. One who, for this, this seems very familiar, just firing up the YouTube TV app and watching YouTube on TV. And then there's me and the rest of the people who are like, what? Like, I would never watch YouTube on my TV. I would watch it on my computer. So maybe there's this bifurcation and we're becoming an extinct species apparently. Neil, when we get in front of a TV next, I'm going to fire up my old high school soccer highlights on TV. Please, God, no. And we'll sit down and watch those. We need to move on. We need to move on.

20:19Okay. My second number is from GoFundMe, which said that people donated more than$250 million on its platform to victims of the Los Angeles wildfire since they broke out in January. That is$20 million more than GoFundMe helped collect for all natural disasters globally last year. That$250 million was sent by more than 1 million donors across 160 countries, and it includes money for victims of the fires as well as charities that are helping on the ground, like World Central Kitchen and the Salvation Army. It is an astronomical number and makes you feel pretty good about humanity, but crowdfunded efforts will not remotely cover the full cost of the wildfires, which is projected to reach into the tens of billions of dollars.

21:03Still, proponents say GoFundMe campaigns can make a small but meaningful impact on people's lives and make up some of the gap not covered by insurers, the government, or the private sector. As one man who raised$12 ,000 after losing his home in the Eaton fire said, it's definitely helped every little bit counts. It definitely does paper over some of the gaps that, you know, federal rebuilding costs and, you know, private insurers can't step in to meet. Although it does raise some questions about inequality as well, because people with wealthier social networks are definitely more apt to receive more support than people with not as wealthy social networks.

21:39So GoFundMe does know this though. And so it tries to randomize which fundraisers appear on its website. They randomize which fundraisers pop up when you go to their California wildfire specific tab. So it has raised some questions around that, but in general, GoFundMe is just very well aware of this and said, we do not want it to be just the value of your social network. We just want it to be all of humanity can come and help and contribute to these wildfire funds. For my final number, I wrote a little Valentine's Day poem for you all. Roses are red, violets are blue, but where do they come from?

22:10Miami International Airport. Yes, odds are if you are giving or receiving flowers on Valentine's Day tomorrow, they are coming from Miami International, which is the dominant hub for flower cargo in the United States, the AP reported. Around 90 % of fresh-cut flowers sold on the holiday pass through Miami, while the other 10 % arrive into Los Angeles. Flowers are MIA's top imported product by weight, with nearly 360 ,000 tons coming into the airport every year. Why Miami? Because it is a quick flight from flower-producing powerhouses Colombia and Ecuador, which provide approximately 86 % of all flowers imported to the U.S.

22:48by air. And the air network is extensive. Twelve airlines provide cargo service from Colombia into Miami, while nine airlines offer freighter service from Ecuador. From January 1st through Valentine's Day, it is pedal to the metal at MIA to offload flowers from planes and place them on trucks to send across the country for you to buy. In the run up to the holiday, officials expect that more than 1500 tons of cut flowers will arrive each day at the cargo terminal, which is a 3 % increase from last year's record breaking year. Business is blooming down in the 305. It certainly is. This is an all-time Niels number.

23:26And my mind immediately went to the agricultural specialists that have to check the bundles of flour for potentially harmful plant, pests, and foreign animal diseases that could be imported into the United States. Because invasive species are a big deal here. They can cause up to$120 billion in economic and environmental losses when you're factoring things like yield loss or loss of quality from certain harvests in the agricultural sector. So imagine being the flower inspector who has to come through and just, it is people who are doing this, look for invasive animals. So that was, I mean, that might not be the most romantic interpretation of this stat, but that was where my mind went is who's checking all these things for, you know, invasive bugs.

24:06And that's probably why Miami has established itself as the flower cargo hub is because they have these inspectors who live there and they built the infrastructure around it. You really think that was an all time Neal's number? That was a good one. I mean, 90 percent. If you ask me how much of the flour that gets imported in the U.S. comes through one port, 90 percent would have been astronomically higher than I ever would have guessed. I want your full list. Put it in the Mount Rushmore. OK, let's sprint to the finish with some final headlines. President Trump announced a surprise phone call with Russian President Vladimir Putin, saying that they'll, quote, immediately begin talks to end the Ukraine war.

24:40The 90 minute chat broke years of silence between Washington and Moscow. It was the first official call between U.S. and Russian presidents since Putin launched a full-scale invasion of Ukraine in 2022. It's unclear where all this leaves Ukraine, which could be sidelined in talks about its future and with less leverage in negotiations. Trump called Ukraine's Vladimir Zelensky after his talk with Putin, perhaps symbolic, a chat he said went very well. Oil prices fell 2 % on the news that there's been some significant movement in resolving the end of the war that shook up the global economy. And that call also came on the heels of the U.S.