SoftBank Dumps Nvidia for OpenAI & Reward Cards No Longer Accepted?

0:28This message is brought to you by AppleCard. SoftBank just sold its entire stake in NVIDIA. And why Netflix might be launching a Disney World of their own. It's Wednesday, November 12th. Let's ride.

0:44Happy Wednesday, everyone. The deal is still out on vacation and the government is still shut down. After the Senate managed to pass a bill on Monday to reopen much of the government through January, the bill now heads to the GOP-controlled House, who planned to vote on it later this evening. And what a rare sight that will be. The House of Representatives getting down to work. Since the House cast its last vote on September 19th, the Dodgers have won the World Series. Taylor Swift has released Life of a Showgirl. Nicole Kidman and Keith Urban filed for divorce. And Neil traveled all the way to Portugal.

1:17Kyle, when is this long national nightmare going to be over? And I don't mean Neil being gone. One, I just found out live about the Nicole Kidman divorce. So that's news to me. I have a bit of a conspiracy. I don't think Neil's in Portugal. He goes out for a week. He never goes on vacation. All of a sudden things start moving in the government. Like, I think he's in D.C. secretly working on behalf of the American people. So thank you for that, Neil. Tonight, as you said, the House is going to vote. There's a slim GOP majority, so it should pass in time, hopefully, to get holiday travel back up and going for the people.

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2:24Whether you're paying for an unexpected vet bill or paying for a new sofa, pay later on every purchase with the U.S. Bank Split Card. Learn more at usbank.com slash split card. That's usbank.com slash split card. SoftBank and its enigmatic leader, Masayoshi Sun, just sold its entire$5.8 billion stake in NVIDIA, shocking many by cashing out on the world's hottest AI stock. SoftBank's position began as a small $180 million investment back in 2020 before growing into a nearly$6 billion winner. But believe it or not, it's a bittersweet victory, as the sale is also a painful reminder of what could have been.

3:03SoftBank once owned 5 % of NVIDIA in 2016, only to sell their position in 2019, ironically to plow money into startups like WeWork right before the stock took off. If you're doing the math back home, that original stake would be worth over$210 billion today. But it also prompted questions, Why is Sun suddenly souring on the world's most prominent AI stock? Remember that scene from Toy Story when Andy drops Woody in favor of his newer toy Buzz Lightyear? Well, SoftBank is Andy, and rather than toys, they're ditching NVIDIA for OpenAI. In a move that echoes 2016 all over again, SoftBank is selling NVIDIA to put more funds into a private company, partially because Sun is obviously bullish on OpenAI, but partially because they have to.

3:47SoftBank is scraping together cash to make good on its$30 billion investment commitment to OpenAI, which it pledged to send Sam Altman's way pending their conversion into a for-profit entity. It's already deployed$7.5 billion of that total and will use the NVIDIA funds to up that total. Kyle, hope Masayoshi-san knows what he's doing. Selling NVIDIA once, okay, selling it twice takes a lot of nerve to do that. It's right. And, you know, there's that saying, like, when there's a gold rush, you invest in the companies that sell picks and shovels and not the people actually going to try to find gold.

4:18Many people think NVIDIA is the picks and shovels in this analogy. And so it's very interesting that Masa is actually pulling out of NVIDIA and plowing it into OpenAI, which in this decent analogy might be the people searching for gold. But Masa is very known for big visionary bets. One of his most famous investments was turning a modest$20 million investment in Alibaba in 2000 into billions. He also was a big winner with DoorDash. However, as you mentioned, not all of his big bets have paid off, WeWork being the prime example. But taking a big profit from their NVIDIA bet here and plowing it more into OpenAI seems to be the strategy.

5:00And as you mentioned, they had commitments to OpenAI. What I think is also interesting here is looking at OpenAI versus Anthropic and how they're running their businesses. Masa is betting big on OpenAI, which is kind of shooting for the moon and investing more in chips, investing more in data centers, going for broke. It makes Anthropic almost look like a lifestyle business that is focused on profit. Anthropic expects to break even by 2028, according to internal documents. By contrast, OpenAI expects operating losses to hit$78 billion in that same year. And so you're seeing two very different strategies played out by two of these large AI companies.

5:40Yeah, as soon as this news dropped, there was an alternative report from the Wall Street Journal saying like, hey, Anthropica actually might be the horse to bet on here because opening eye is going to obviously burn through tons and tons of cash. Let's go back to what the heck is SoftBank doing here? What is Masayoshi Son thinking? That's what investors kind of mirrored as well, because SoftBank's shares actually plunged more than 10 % when the company disclosed that it sold its NVIDIA holdings. because, again, that is potentially a symbol of the top. When you have someone like SoftBank saying, all right, I'm taking my chips off the table when it comes to NVIDIA, that's not necessarily a bullish signal.

6:19Now, of course, once the news broke that it was going towards opening AI, that's still a very bullish signal for AI in general. But you started to see some of, hey, is this the top? Are we reaching a moment where even Sun feels uncomfortable with the valuations we're currently sitting at? And then you also factor that into news that Michael Burry, you know, of big short fame on Monday this week said that AI firms were understating depreciation of their chips. They were inflating profits. He's been kind of preparing for this bearish thesis on the AI trade right now. So all of those news combined made investors a little bit uneasy with the state of the AI trade right now.

6:58Now, of course, stocks have been up on news that maybe the government shutdown is ending here, but some wrinklings, some whisperings of potentially bubblicious activities from a lot of these major players in the AI space. That's right. And Altman, we talked about this on Monday, had tweeted out about their big spend commitments,$1.2,$1.4 trillion over the next, I think, five, 10 years. And that has people worried about maybe this is a bubble. But Altman also, in a previous life, was running YC, very used to the growth at all costs playbook, which is like, get so big so fast and then focus on profitability.

7:35Going back to this Anthropic comparison, they're more focused on incremental profitability in the short term. So it'll be really interesting to see which strategy ultimately pans out here. A new perk might be dropping soon for those with premium credit cards, the opportunity to be turned away at the register of your local convenience store. Now, what do I mean? Well, Visa, MasterCard, and merchants came to a settlement over a 20-year legal battle, which would now allow stores for the first time to accept, for example, some Visa credit cards, namely the basic no-frills credit cards, which are cheaper for stores to process, and reject other Visa credit cards like those with crazy rewards and high annual fees, which cost more for stores to process.

8:15Or if the merchant still chooses to accept all Visa cards, they will now be permitted to adjust prices based on the cost of accepting different cards. For context, every time you swipe your credit card to purchase an item, The merchant pays an interchange fee, which Visa and MasterCard set, and often range around 2 % of the purchase price. Now, while that might seem minuscule, merchants paid$83 billion in swipe fees in 2024, which is up 71 % from 2019. These fees allow banks to invest more into credit card rewards, which get more people to use the cards, which then get them more money in interchange fees, repeat ad nauseum.

8:51The settlement also requires an average 0.1 percentage point reduction in the interchange fees phased in over five years. The settlement does not go into effect right away as it still needs court approval. And it's likely to actually be contested by some groups representing merchants who still think the deal is not good enough. Toby, dropping that premium credit card down on the table used to be a flex. But now pulling it out of the convenience store might cost you. What do you think here? Yeah. Will retailers really reject premium cards? That's the question that this settlement introduced to people because in theory, if you go to your local cafe and they say these premium credit cards are costing us too much money, they could say, uh-uh, X, we're not going to accept your Amex Platinum.

9:36We're not going to accept your Chase Sapphire Reserve. But that is a lot easier said than done because, one, you risk disappointing your customers because these are very popular cards right now. Now, also, what's the alternative? People are paying less and less in cash right now. So they're basically, every consumer is using, every customer is using a credit card. Cash transactions have fallen to fewer than 20 % of overall transactions. So there's not that many alternatives anymore. And then also a Fed survey recently found that 16 % of consumers said that they were discouraged from using their credit card at least once in the past year.

10:08That is a layer of friction that you don't necessarily want to introduce. Why would you want to make your customers angry about or confused about which cards they can actually bust out. So you can see why it's, in theory, it makes sense for them to save money on these interchange fees. But in practice, it's very difficult to actually wean people off of their premium credit cards. That's right. And you hit on the point of some of these retail groups that actually aren't happy about the settlement. That is one of their main points of concern is that basically you've allowed us to do this thing, but the thing is gonna piss off our customers.

10:41And we're kind of like the first line of defense. The customer is not going to go home after and write to Visa, hey, it's because of you that I got charged more. They're going to be mad at the cashier and then never come back to the store theoretically. So that is why a lot of people are mad. They are happy about the interchange fees coming down. But in essence, this is a perceived monopoly or duopoly, Visa and MasterCard, owning so much of the payment rails that they have a lot of power here. And that's what this lawsuit is trying to get at. There is examples of stores just outright rejecting cards based on them being a certain type.

11:13Costco, for example, only accepts Visa cards and that's it. I've tried to pay with an American Express and they're like, what are you doing here, sir? So there is examples of stores, but that is Costco. They're big. They have a lot of market power. Your local bodega is not anywhere near a Costco. Little flex there. Little American Express flex right there. I didn't say which one, Toby. Exactly. All right, moving on. Welcome back to Toby's Trends, a segment where I take a deep dive into the business world to emerge with the trend that'll make your grandma say, wow, where'd you learn all that? Usually this is a Tuesday segment, but the brew was off yesterday because of Veterans Day, so you get a special Wednesday edition.

11:47And today's trend is how buses and trains are so back, baby. Nearly six weeks into the government shutdown, the national air travel system is still in full-on meltdown mode. With passengers facing over 6 ,000 cancellations and 20 ,000 delayed flights over the past few days, bus and train bookings have jumped 12 % year-over-year, according to Wanderoo. If you live near a hub like DC, New York, or St. Louis, booking traffic has risen as much as 30%. Megabus and Greyhound say that sales are trending higher than any recent holiday period, while Amtrak is preparing for what it thinks will be a record-breaking Thanksgiving, having already seen double-digit growth in bookings compared to last year.

12:28On the flip side, airlines have seen a total reversal in what was supposed to be a strong year for travel. As recently as Halloween, flight bookings were up 2.2 % year over year. That trend has now totally flipped in just a week later. Bookings were up barely 1 % over last year. Cal call up Steve Martin and John candy because planes, trains and automobiles is turning into buses, rental cars, and I guess still train. I love it. I mean, I feel like this is just people realizing how us Midwesterners always get around. I mean, a 17 hour car ride from Minnesota to Montana for me growing up, totally normal.

13:02I took an Amtrak from New York to Toronto. That was 13 hours loved every minute of it. So this is just showing and highlighting the power of like a very dynamic transportation network that like you don't always have to use planes. There's other great ways to get around that sometimes are a lot more scenic and enjoyable. Marjorie Taylor Greene, someone who doesn't immediately come to mind as a big public transportation advocate, wrote and had to ride an Amtrak because of the flight situation. Tweeted like, oh, my gosh, this is amazing. Amtrak's are actually lovely. Like, yes, Amtrak's are awesome.

13:33Amtrak's are awesome. The other thing that we've been seeing a massive rise in bookings is rental cars, specifically one-way rental car journeys. Turo, which is kind of the Airbnb for cars startup, reported a 30 % jump in rentals on Friday as they turn to this peer-to-peer car sharing platform. Avis confirmed that they've seen an increase in one-way rental activity. And then Avis Hertz as well have said they've been flooded with one-way bookings as people had their flights canceled. and you're like, all right, I guess we're jumping in the rental cars. A little travel update as of this morning.

14:07As of 4 a.m. Eastern on Wednesday, actually things look like they're improving a little bit on the travel front. Just 878 U.S. domestic and international flights have been canceled, according to FlightAware. That's actually the lowest number of cancellations since the administration imposed these flight restrictions. So it's a potential sign that the system is stabilizing a little bit. Now, again, part of that is the flight volumes themselves have decreased. Right now, there's 2 ,500 fewer on average flights departing per day than in normal time. So maybe the fact that there's less cancellations, less delays, is just the fact that there are less flights in general.

14:46So we are expecting flight disruptions to increase throughout the week because the administration said that they were going to reduce 10 % of airline traffic. So we'll see if that 878 number actually starts to rise. But for as of right now, as of this morning, it looks like things are coming a little bit to a equilibrium. Yeah. Bad news for people who didn't want their uncle to show up for Thanksgiving. It looks like they are going to find a way. All right. We're going to take a quick break and come back with a story about Netflix.

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17:05Get started at DisneyCampaignManager.com. That's DisneyCampaignManager.com. Netflix, the company that started by mailing DVDs to your house, is now inviting you to theirs. That's right, the inaugural Netflix house, a flagship 100 ,000 square foot destination, opens today at the King of Prussia Mall in Philadelphia. The house is all things Netflix, including a 200-seat theater called Ta-Dum Theater, Netflix Bites, a restaurant featuring Netflix-inspired cuisine, a grand entrance that resembles the red envelopes Netflix DVDs used to come in, and a variety of rooms and experiences built around Netflix IP, like a recreation of Wednesday Addams dorm room.

17:46And Netflix has no plans to stop with just Philadelphia. The company will open up another Netflix house in Dallas next month, featuring Stranger Things and Squid Games experiences, and in Las Vegas in 2027, with CEO Ted Sarando saying he envisions over 60 houses globally in the future. Fortunately, it is free to enter Netflix house, so if you're still using your cousin's ex-girlfriend's Netflix password, there will not be bouncers checking if you're a legit Netflix subscriber. However, the cost of the experience inside the Netflix house will cost you and start at about$15 each. Toby, when are we making a morning brew house?

18:23This has me very excited. It does have me excited. And how did you know I'm still using my cousin's ex-girlfriend's Netflix password? Why build a Netflix house? Right now, Netflix is not a very, you know, distributed or varied business model. They draw 95 % of its revenue from subscriptions. So they're looking to diversify a little bit. So who do you look to? You look at the entertainment giants of yesteryear, Disney, NBC, Universal. They have had this park ecosystem that has started as a way to drive a lot of love for their characters and their stories, but also is a bottom line revenue generator as well.

19:02So Netflix is saying, how can we diversify a little bit? Let's get into the experiences a little bit because it does make a lot of sense. You want people to be able to, you know, interact with Wednesday Adams, with these characters and these ecosystems that you've built. And so they're looking at the Disney playbook and saying, work pretty well for them. Let's see if it works well for us. Yeah, 100 percent. And what's really cool, they built this house to be very, like, interoperable and flexible. So, like, K-pop Demon Hunters popped off while they were building this. So they couldn't fully integrate it, but they were able to put some K-pop elements into it.

19:32And the idea is that this would change as new IP gets very popular. They could swap things in and out. The other thing I really love is this theater. They have now live, some live TV. They have a deal with WWE. They have a deal with NFL to stream some NFL games. They're actually going to stream those in the theater, which is a little bit of a full circle moment that Netflix disrupted malls. Now they're in a mall. Netflix disrupted a lot of this like cable TV and now they're kind of doing the same thing. So a full circle moment for Netflix. I think this is a really good move. It's free too. So their pricing strategy with this Netflix house is interesting because free to enter, But then once you're in, there's mini golf in there that you can pay$15 for.

20:09And then there's also these premium interactive experiences, kind of like interactive theater. I don't know if you've been to Sleep No More here in New York City, but it's basically you step into Wednesday's Adams dorm room and then you see the characters moving around. You interact with props from it. You have to solve a mystery in the world of Wednesday. So I think that is what they're thinking is like get people into the door, blow them away with these sets that you're seeing. and then you start to charge them a little extra for these additional experiences. So they're stepping into theme park territory.

20:41If you brought a family of four, you did the experiences, you did the food, that's around$160 total. So a lot more affordable than something like a Disney World outing. But it is something that can hopefully be a revenue generator if you start to scale these across 60 cities as they've floated that they will. And the through line through this all is as the streaming wars heat up and people consider dropping Hulu or Netflix or Peacock or Paramount Plus, which one are you going to stay with? And I think this is trying to drive brand love for Netflix, the brand. So the actual subscription is more sticky and we'll see if it works out.

21:16I might have to go to Philadelphia soon. I know. Crazy that it's at a mall too. It is a kind of full circle moment, but they're kind of saying, hey, where do we have the space to do these things? It looks like there's a mall. I guess the only negative I would see here is there was a Squid Games experience in New York City for a couple months, right near our office, actually, and I walked by it all the time. I had zero desire to step into a world of, you know, squid games like that. I don't know. When you go to Disney, it's a full day out, and you know you're going to ride roller coasters. I don't know if this is halfway or if the experience is going to be enough to make people, you know, go out of their way to go to, you know, a mall in Philadelphia.

21:52So we'll see how the overall strategy plays out, but you can see where their head's at here. Like, let's drive some affinity. Let's try to make a little revenue along the way. Now let's sprint to the finish with some final headlines. A buzzy Airbnb competitor suddenly shut down operations this week, leading to chaos for guests. Sonder, a sort of centralized Airbnb, managed properties in 40 cities across the world and was once valued at over a billion dollars. It eventually went public before attaching itself to Marriott hotels through a licensing and distribution deal. But a variety of issues were lurking in the background, starting with the pandemic obliterating occupancy and revenue and compotted by growth pressure post IPO leading to some overextension.

22:34A heavy load of leases combined with a sharp decline in revenue led Marriott to break off the deal earlier this week, forcing Sonder to abruptly wind down operations and file for bankruptcy. When I say abrupt, Kyle, I mean abrupt. Guests were notified literally overnight sometimes that their stays were canceled with no staff help or alternatives provided. Nightmare stuff. Let's hope Neil didn't book a Sonder. Yeah, I mean, not to kick Sonder while it's down, but it kind of feels like they combined the worst part of Airbnb and the worst part of hotels into one offering. And we're kind of seeing that play out now.

23:09The other thing that was tough is they actually owned all of the leases. very dissimilar from Airbnb, which is much more of a platform play. And so they had a big, big risk of occupancy ever dropped. That's what we're seeing here. Also, a tough move for Marriott, which has, I think, a great reputation in the hospitality world. A lot of people are mad at Marriott for putting them in the situation. They put their stamp of approval on it. Not shortly thereafter, the company goes out of business. And it was just horror story after horror story when this shut down, because imagine you book what you think is a hotel.

23:39You arrive there sometimes, do notes on the door saying, this hotel is closed and cannot honor your reservation. What do you even do in that situation? And that literally is everyone's horror story. What if I get there and my hotel doesn't actually exist? That started happening. One person was in Miami for a one-night stay before they jumped on a cruise, and their digital key code failed. A staffer eventually let them in manually, but then minutes later, an email arrives saying, hey, Marinette deal was terminated. We're out of business now. The staffer left. So the person stayed locked in the room all night because they're like, if I leave, I won't be able to get back in.