NEOS Joins Goldman Sachs ($2.3B), Nvidia's $500B in Financing & Tariff Refunds

0:28This episode is brought to you by Accenture. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Welcome back to the Rich Habits Radar, a Friday episode of the Rich Habits Podcast, where every Friday morning, we're coming at you with the biggest headlines impacting you and your money.

1:06This episode is brought to you by shuriance.com. My name is Austin Hankwitz, and I'm joined by my co-host Robert Croak. The three things sitting at the top of our Rich Habits radar this week include NVIDIA's$500 million financing deal that was just announced, inflation data that came in pretty boring, which is good, and tariff refunds that you personally might get deposited to your checking account. So stick around. We'll talk about that. Also, be sure to stick around to the end where we talk with Troy Cates and Garrett Paolella, the founders of Neos Funds, about their recent partnership with Goldman Sachs that was announced just the other day.

1:44Robert, let's dig into our first story about NVIDIA turning their chips into this new asset class. Definitely. This is an exciting one that's hitting all the headlines. On Monday, NVIDIA signed memorandums of understanding with six of the world's largest financial institutions, including Apollo Global, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR, to mobilize more than$500 billion in third-party capital. The goal? Let hyperscalers, frontier AI labs, and enterprise finance data centers and NVIDIA hardware purchases without tapping into their own balance sheets. So instead of Amazon or Microsoft borrowing money directly themselves, these financing platforms would underwrite the GPUs and the data centers themselves, treating compute the way a bank treats a mortgage or a toll road, a long-lived revenue-generating asset that you can lend against.

2:42CEO Jensen Wong went on CNBC and made the case directly. This is really the first time that technology chips have become an investable asset class. These are revenue generating assets now. They're productive. They're long lived and they're fungible and they're flexible. That's a direct challenge to how the markets have always treated GPUs as rapidly depreciating hardware that's obsolete in three to five years. Now, here's where things get interesting, because the CEO of BlackRock, Larry Fink, called this the start of, and I quote, the next future of financial engineering, comparing it directly to the creation of mortgage-backed securities in the 1970s.

3:23Mortgage-backed securities completely transformed how trillions of dollars of housing debt moved through the financial system. It also caused the great financial crisis of 2008. Larry Fink is saying that AI compute could do the same thing now for tech infrastructure. And Blackstone president John Gray added that demand for AI at Blackstone's own portfolio companies has surged sevenfold this year alone, which is part of why alternative asset managers are racing to structure debt and equity financing for AI infrastructure players like Anthropic. But there's a reason this deal is happening right now, and it's not because everything is fine.

4:00Three weeks ago, Moody's ratings put out a research note warning that unprecedented AI spending is eroding free cash flow and increasing balance sheet risk at these hyperscalers. Think Amazon, Meta, and Alphabet. Now, these companies used to run asset-light software businesses, but now they're taking on debt to build physical infrastructure at a pace that Moody's calling historically unprecedented. This financing platform is NVIDIA's answer to that problem. So if hyperscalers can't keep funding the buildout on their own balance sheet, NVIDIA is like, nah, let me massage the shoulders of some banks a little bit.

4:37Let me help you borrow the money so you can buy more of our chips, essentially. So, Robert, what does this mean for our listeners and their portfolios? It means exactly that, Austin, that this is a structural shift in how the entire AI buildout gets funded. And it tells you two things at once. First, the demand for compute is still outstripping supply badly enough that Wall Street's biggest capital allocators are willing to underwrite it at a half a trillion dollar scale. And second, the hyperscalers are running low on cheap ways to keep funding this themselves, which is exactly why Moody's flagged it in the first place.

5:12For your portfolio, I pulled up NVIDIA on WallStreetFavorites.com just this morning, and it's sitting in stage two, advancing, trading around$224 against an analyst target of nearly$320 from 84 different analysts. That's over 40 % upside still priced in by the street, even after everything NVIDIA has already run. This financing deal is also thought of as a tailwind because it removes a bottleneck, which are these capital constraints that could have slowed down the buildout. If you're subscribed to the Rich Habits newsletter, you might remember from about a month ago, one of my call outs inside that Rich Habits newsletter, which if you're not subscribed, just go type in Rich Habits newsletter on Google, find it, subscribe.

5:53But I'd called out that the credit default swaps on the bonds tied to these hyperscalers were increasing because more and more of Wall Street, you know, Wall Street for a long time was like, yeah, sure. You want another 20 billion bucks? Here you go. Go figure it out. You're Amazon. You're Microsoft. You're, you know, not Apple. You're Meta. We trust you. Right. But now Wall Street's like, OK, maybe if you want more money, sure. But hold on. Let me do a little bit more math. Let me just make sure that you're good for this. Right. So it's not that these companies can't pay back this money. It's just that Wall Street and Moody's, which was shared again three weeks ago, is a little bit more apprehensive to just throw dollar bills at these people.

6:31And so the winners of this AI financing$500 billion deal, of course, is NVIDIA itself. Plus, though, the six financing partners that are now positioned to earn yield on AI infrastructure debt for years to come. The risk is the same one Fink's mortgage-backed securities comparison should remind you of, which is when financial engineering is this new asset class and it becomes a fast, sexy thing. You're also building leverage now into a system that nobody had ever stress tested before. And from the 70s, when mortgage-backed securities came about, through 2007, right, a lot of that leverage and sexiness came about for 30, 35 years.

7:14And then it really got stress tested and everything fell apart. And, you know, Robert, this reminds me a lot from, you know, that quote from Charlie Munger, which is, show me the incentive and I'll show you the outcome. I think NVIDIA right now is very much incentivized to figure out how all these hyperscalers can get more, more, more, more money. So all of them can continue to give NVIDIA more, more, more revenue for their chips and all of, right? It's not just NVIDIA, but all of the companies NVIDIA has invested into all of the, I mean, there's 70 of them at this point, right? And give all those companies more money, right?

7:46So like NVIDIA is really like the puppeteer, you know, kind of the top trying to make sure that everything gets done here. And, you know, it's cool what's happening, but it's like one of those things I'm just like, show me the incentive and I'll show you the outcome. Yeah, I love that. It reminds me of another, you know, wise old financial tale, and that is high tides raise all ships. And so for me, I agree 100%. And the biggest takeaway here is the AI trade just graduated from being a spending story to a financing story. You alluded to the fact that this now gets all of that hyperscaler spending off of their own books, and it becomes a lending and finance play, which I think is really great news for the AI trade and this sector in general.

8:30And that's usually what happens right before a big boom accelerates or right before it gets fragile. So we'll be watching this closely to see what happens first. So let's now jump to our second story. So on Wednesday, the CPI report came in and it was anticlimactic. And that's what's good and that's cool. That's why we're talking about it here. So when inflation data stops surprising people, the Federal Reserve gets to do nothing, right? And nothing is the market's favorite outcome because the market does not like uncertainty. So let's now unpack why this is such a big deal. The consumer price index rose just 0.1 % in July, which was exactly in line with the Dow Jones forecast.

9:10Core CPI, which strips out food and energy, the more volatile things, rose 0.2 % for the month. Now, when you annualize that, headline inflation came in at 3.4 % year-over-year for the month of July, and core inflation came in at 2.5 % year-over-year for the month of July. They're both down a tenth of a point from the month of June when you annualize that. Now, both numbers are still above the Federal Reserve's 2 % target, which sucks. But the direction is what matters more. And that direction is cooling, right, a tenth of a point down, not reaccelerating like it was, I think, in like, you know, May or April after energy spiked because of what's happening in the Middle East.

9:55And here's the breakdown underneath those headlines. Energy prices fell 1.5 % for the month following a 5.7 % drop in June. And even though energy is still up 14.7 % year over year after the spring spike tied to the Iran conflict. Shelter rose a modest 0.1 % and still accounted for roughly two-thirds of the total monthly increase because it's such a large share of the index in general. Lodging away from home actually fell 2.8%, offsetting a 0.3 % rise in the measure of what property owners could get in rent. New vehicle prices ticked up 0.1%, used cars and trucks rose 0.4%, and medical care rose 0.4 % as well, and airline fares jumped 2.2%.

10:42Nothing in that list screams runway inflation. It's a market cooling in a normal fashion. Now, as it relates to the Federal Reserve, the FOMC doesn't meet again until September. So the CPI print plus one more month of data is what they'll have in hand before making a decision. Right now, the Fed's benchmark rate sits at that three and a half to 3.75 percent, held steady for a fifth straight meeting during the month of July on that nine to three vote, with all three of the dissenters pushing for a rate hike, not a rate cut. Following Wednesday's boring CPI data, traders on the CME FedWatch tool cut the odds of the September rate down to 42%.

11:20That's a meaningful drop from where sentiment stood just a week earlier, when a week July jobs report had already started shifting the conversation away from the Fed needs to hike and back towards the Fed can afford to wait. Now, Morgan Stanley's chief economic strategist for wealth management said this. In-line inflation will keep the no-need-to-hike-rates narrative that took hold after last week's job report intact. There'll be another round of inflation data before that September FOMC meeting that I was alluding to, so the storyline could still change. But markets are now leaning toward the next real move, and whichever direction ends up being landing in October or December instead.

12:00We've been saying this on the show for a little bit. I don't think Kevin Warsh is going to move rates at all in 2026. I think we're chilling at least until January of next year. I don't think there's going to be a rate hike, a rate cut. I don't think there's going to be anything, fingers crossed. Well, there's a ton of numbers to digest here. So, Austin, I don't know anyone better than you to break down for everyone. What does this mean for you and your money? So, like, since the symposium back in August of last year, you know, Jerome Powell at that made it clear that the Fed was no longer focused on combating inflation like it was from 2022.

12:34until then, right, 2025, three years period of time, Jerome Powell said, hey, we're now focused on a weak job market. And that job market is pretty weak. We heard more about that today. And so now the Federal Reserve is now having to thread this needle between two bad options, which is a continuing softening labor market or holding rates steady, letting sticky inflation hang around at that two and a half to three and a half percent. And now an inline CPI print buys them a little bit of time to do neither. I don't have to rate hike. I don't have to rate cut. I can just kind of hang out for a little bit longer and see how the markets, more so the economy and the jobs data and all this stuff reacts.

13:17It's good news for markets in the short term because uncertainty, as we alluded to when we started this segment, markets don't like uncertainty, specifically with rate sensitive sectors like technology and unprofitable anything. But for your portfolio, this print begins to take pressure now off real estate, utilities, long duration growth names that get hurt most by these rate hikes. It's a reason stock futures rose immediately after the release while treasury yields moved lower across the board. But don't mistake, no hike in September, right? Don't say that and think like, okay, well, rates are going to start coming down.

13:53I'm not saying that. I just don't know if rates are going to move in a meaningful way in 2026. Core inflation, it's still at 2.5%, Robert. CPI came in at 3.4%, right? That's above the 2 % target. And one more jobs report plus CPI reporting is now standing between us and a September meeting. And this is a very data-dependent Federal Reserve. So those two things, that jobs report and the next CPI plan, are going to help that Federal Reserve Chairman Kevin Warsh and all of his coworkers over there make a decision as to what to do with interest rates. Mortgage rate relief, a lot of people are waiting on, is not guaranteed, unfortunately for me, as I'm actively building a house right now and figuring out my mortgage situation.

14:39Yeah, I think the biggest takeaway here is markets have spent the summer whipsawing between the Fed's about to hike and the Fed's about to cut. And this week's data says neither. It says wait. And a Fed that's willing to wait after a divided nine to three vote just one meeting ago tells you that the committee itself is genuinely uncertain about which risk, inflation or unemployment, is the bigger threat right now to the economy and America in general. So, Robert, let's wrap up our top three headlines here with these tariff refunds that are both turbocharging corporate earnings, as well as potentially putting some money back in our listeners' pockets.

15:16So let's kind of go walk down memory lane. You guys all remember those tariffs that got thrown out by the Supreme Court earlier this year. Well, those refund checks that all of those companies went and applied for, they said, give us our money back, right? This was illegal. They're actually now starting to show up in bank accounts and padding the S &P 500 earnings, those profits of the companies during this quarter. Yeah, Austin, over 40 S &P 500 companies have now reported roughly$9.6 billion in tariff refunds in the past quarter or so, with at least$2.1 billion of that already saving cash. This stems from the Supreme Court striking down a key piece of President Trump's tariff policy, invalidating$166 billion in duties collected under the International Emergency Economic Powers Act.

16:07And as of July 31st, U.S. Customs and Border Protection had received just over 252 ,000 refund applications. And they accepted$128.7 billion of those applications for processing, with roughly$100 billion sent to Treasury for disbursement, according to an agency official. So$100 billion has been sent, is what I'm seeing. And here's who's cashing the biggest checks for all of you listening so you can keep an eye out in your own bank account and see what you qualify for. Apple's refund has reached nearly$2.2 billion, by far the largest of any company thus far. And Apple said tariff refunds contributed$0.11 to earnings per share last quarter alone, roughly 5 % of the total.

16:50Nike reported$986 million, having received$302 million in the last quarter of its fiscal year, and almost all of the remaining$684 million by mid-July. FedEx booked about$800 million, Amazon reported$640 million, and General Motors came in at$500 million. GE Healthcare said refunds added$0.18 to its$1.24 per share quarterly earnings on$107 million received and another$38 million expected. Now, here's where things get more complicated. Not every company is going to treat this the same way. Not every dollar is just like pure upside on the earnings per share perspective. Caterpillar reported$392 million in expected tariff recoveries this quarter, but they still expect to pay$2.2 billion in tariffs for the full year of 2026.

17:43So that refund barely dents the bill. And Zebra Technologies expects a full$73 million refund, but only collected$41 million of it as of July 31st, booking the rest as a receivable rather than cash in hand. And Ford said it expects around$3 billion in total tariff reimbursement, but only about$1.3 billion of that traces directly to the Supreme Court ruling. The rest comes from supplier agreements, a very different and less certain source. So here's the part that affects you and your wallet directly. There's several companies out there that have said they're passing on some of this money to their customers.

18:21FedEx said it will start dispersing its$800 million in refunds to shippers and consumers this August, since it legally functions as a pass-through that collects duties on customer behalf. And Costco said it plans to pass refunds back to customers in some form at levels similar to what it originally passed to them in tariff costs. IDEX said it will rebate$14.7 million to customers, about two-thirds of the more than$20 million it received. Amazon CEO Brian Olsavsky said on the July earnings call that Amazon identified a limited set of circumstances where it can trace tariffs' costs directly to specific consumers and will refund those directly.

19:07Otherwise, he said, we'll utilize refunds to continue to invest in low prices for customers. So, Robert, what do these tariff refunds mean for our listeners and their money? This is a genuine if temporary earnings tailwinds hitting the market right now, and it's one investor's need to model correctly instead of assuming it repeats every quarter. $9.6 billion split across 40 companies isn't enormous in the context of the S &P 500's total earnings, but concentrated in specific names, it's meaningful enough to boost the reported numbers. Apple's 11 cent EPS contribution and GE Healthcare's 18 cent contribution are the kind of thing that can make a quarter look stronger than the underlying business actually performed with all of this capital being returned.

19:57Yeah, it's important for investors to not be, and I think Wall Street figures this out pretty easily, but it's important for investors not to see a little bit of a boost in profits and think those profits are permanent when those profit boosts is really just a refund back to them from these tariffs. Now, for your portfolio, I just pulled up Apple on WallStreetFavorites.com, trading around$300 a share, but the Wall Street price target across 70 different analysts is$324. So Wall Street sees some modest upside, even with the tariff boost already priced into these recent results. The companies that I'm watching closely are Caterpillar, who are still going to be paying more on those ongoing tariffs than they're getting back in refunds.

20:36That's a name where the tariff story is still a net cost to them, not a net benefit, despite the headline recovery number. And if you're a customer of Costco or FedEx, keep an eye out for these ones because some of the money will genuinely just head back your way in the form of either lower prices or a direct refund later this year, which would be pretty cool. Now, the bigger takeaway is that tariff policy chaos created real financial pain for these companies over the last year. And now that this unwind is creating a real one-time earnings boost, the market needs to separate the durable earnings growth from just refund noise when it prices stocks going into next year, especially as we get more and more earnings calls done between now and the end of 2026.

21:16Because once these refunds finish flowing through in the next one or two quarters, that tailwind is going to disappear. Yeah, what a great episode, because on one hand, we have softening labor. We've got some of these other things, but then the tariffs are coming back. But then we have all of this new financing model for AI. So there's just so much going on. And that's why these episodes are so important to keep everyone abreast of what is actually going on, aside from the noise in the headlines that we see every day. So I really enjoyed this episode and excited for the interview we have coming up next.

21:50Well, before we jump to that interview, if you've not yet gone to suriance.com slash rich habits to shop for term life insurance, you need to do it. That's S-U-R-I-A-N-C-E, suriance.com slash rich habits, because term life insurance is a non-negotiable, Robert. I've got term life insurance. You've got term life insurance. And if there's someone listening right now where you have somebody that depends on your income for their livelihood, think your spouse, think your children, think your parents. Like, I don't know. If someone depends on you and your income so that they can live their life, you need term life insurance.

22:29because if you suddenly, unexpectedly die and your income evaporates, term life insurance is gonna pay you out 1 million, 2 million,$5 million, whatever your policy says, to the beneficiary of that policy, your spouse, your children, your parents, whatever. They take that$2 million, they put it in the stock market and they take out 4 % per year with the 4 % rule and they're able to now supplement your income that is now lost because you are not on this earth anymore, right? So like you need term life insurance insurance go shop term life insurance at shurience.com slash rich habits you call them up you do a little email inquiry russ mcbride robin mcveigh they're going to be there they're going to talk to you they're going to figure it all out we cannot recommend term life insurance enough i have my prudential policy i think it's like a two million dollar policy i found it through shurience it was very easy it's very cheap it's like it costs like 30 bucks a month it's awesome it's a little bit more than that but it's like it's not that expensive robert it's easy go do it you should not wait on this stuff because if I learned anything, people die and they die unexpectedly.

23:33And it is no fun, especially when there's not a plan in place to take care of the people that depend on you. So go to shariance.com slash rich habits and get that figured out. 100 % term life, not whole life. Shariance is amazing. Make sure you check it out. Now let's jump to a very exciting segment of this episode of the Rich Habits Radar. We are joined by Garrett Pellella and Troy Cates, the founders of Neos Investments. And if you have seen or been on the internet in the last 24 to 48 hours, you have seen that Neos Investments has now joined Goldman Sachs. We could not be more thrilled about this news.

24:09So we were like, guys, come jump on the show and talk about it with our audience because we all own SPYI and QQQI and BTCI and all these NEOS funds. So guys, what is going on? Break it all down for our listeners. What just took place this week? Yeah, thanks, Austin and Robert, for having us on. Always love to come on and talk to the audience. Listen, big news. We're really excited about it. We have entered into an agreement to join Goldman Sachs Asset Management. But I think what you know and love about NEOS, that all continues. And so we'll break that down today in the discussion. But we're excited as this is the next level of innovation and opportunity for us to leverage Goldman's resources, you know, but keep Neos who we are, keep our tickers, keep our funds, keep our team, do everything it is, keep our office.

24:53We're not leaving this office. You'll continue to see this background every time we come on and join you, you know, and so that's a little bit of the lay of the land to start, but we're happy to kind of unpack that, but we're excited and, but investors should not think anything's going to change, you know, on the go forward. So I'm an investor in Neos ETFs. I've got countless of your ETFs in my portfolio. Let's kind of just like unpack this one by one here. You know, you're saying nothing's changing for the tickers. Nothing's changing in, I'm assuming, the underlying strategies. It's all the same rules-based strategies that you all have built over the last several years.

25:27So nothing is different. Goldman isn't coming in and saying, we want to do this. We want to change the expense ratios. We want to change. Nothing's changing. Yeah. I think what was exciting for us about this disagreement with Goldman was the fact that they were really embracing us, our investors, our team, and talking about our investors and really making it clear to them that owning these products because they like the way we manage them. And they're like, we don't want to change that. The amazing part of it is seeing this growth and seeing this space grow more. And they want to be a part of that, but they also want to embrace our entire team.

26:04So they want to bring every employee over. They want to make sure that everybody's comfortable becoming a Goldman employee. But Like Garrett said, we're going to be staying here in our office in Connecticut. Same background that we have now. So we're really excited about this opportunity because it's everything we've been doing and from the core of what Neos is and what we've been trying to build. But with a lot of support, you could imagine the global support that Goldman Sachs can offer us as we continue to build out and bring out new products. Guys, I'm so excited to have you here today because obviously we've been inundated in the Rich Habits Network with questions, you know, because people have been involved in NEOs for years now, just like we have with the Rich Habits podcast.

26:44But what's exciting for me is now that you're part of Goldman Sachs, what does this mean for all the international investors? We have so many people from other countries that want NEOs ETFs in their portfolios. So walk us through, you both have mentioned having all of these new resources. What does that look like for international investors now? Yeah, so I think as we viewed international, we viewed investors as a whole, hopefully having access to the products, right? not every country, not every investor can buy a U.S. listed ETF. And so I think what's really unique with Goldman and their entire global reach, they're in a lot of countries.

27:17They have a lot of infrastructure that ultimately produces products for all local investors. That is something that we are spending a lot of time having conversations around. I think Europe is one of those areas where it's a very differentiated market than the U.S. Most European investors are challenged to really buy U.S.-based ETFs, as opposed to like Asia or Latin America that have a little bit more flexibility. And so that is certainly an area of focus and topic of the conversation to be able to leverage, you know, the great team that's over in Europe to help bring these strategies, you know, over to other locations.