#273: Is Novo Nordisk a Buy? An Undervalued Stock or Falling Knife?

0:00but it seems nuts to me that the stock has fallen so sharply that it's trading at about like 11 or 12 times 2025's earnings and just the absolute negative sentiment that's being faced towards it. And you have more experience than me about these things where you're looking at a stock and trying to figure out, okay, is this short-term blip? Is this a one-year rough year? Or is this a genuine, the start of its ultimate decline?

0:41Hey, Mitch, how are we getting on? Howdy, Mike. We're back in action, just the two of us. Yeah, it's been a while. It's good to see you. Like the sister brothers. I saw that movie over the weekend, a wild odyssey that reminded me of us two on this podcast. Right in the wild west of the podcast world. I'm doing good. How are you? I'm good. I'm good. If we're giving out movie recommendations, I went to a movie called Sorry Baby. There at the weekend, would highly recommend. And did not remind me of Me and You. But very, very good. But yeah. Is it a thriller? Is it a drama? Actually, sorry, I know I don't want to deep dive and make this a movie podcast, but we all love our movies.

1:22Is it a thriller? No, no, it was a drama. Very good. It was written, directed, and the main actor was all the one person. So it was a very impressive individual feat of filmmaking. Very good. Very tough topics dealt with very realistically. be wow uh but you're right this isn't a movie podcast and i don't think anyone is tuning in to hear movie opinions but uh so much going on it's tough to really narrow it down to whatever 45 minutes um where should we start well obviously we need to start with eon musk getting another 30 billion quid not a bother to him yeah um just throw it on the pile there just exactly throw on top of the pile yeah uh mad stuff i mean considering how much effing up he's done in the last what 18 months two years the little 30 30 billion dollar paycheck is uh is an interesting one but i i do think that there's a nuance to that story and we do like to hate on elon musk because he's a bit of a lunatic.

2:26But in fairness to him, and I don't want to say this lightly because I don't particularly like being fair to Elon Musk, the original deal, whatever it was, it ended up being, I think, $56 billion in stock options if he got the stock from, I can't remember the exact numbers. Was it six? It was an absurd. It was a lot of zeros. $650 billion to$650 billion. Something crazy like that. I remember it was shocking. it was shocking beyond belief at the time but now it's just another and what he did and he did that and you know what i mean it was the shareholders rewarding him for that he went and did it everyone was happy everyone got paid and then the courts got involved and said can't just give someone 56 billion quid so i i think there is merit to it i also think tesla needs to keep him around he's such a cult of personality especially at that company i don't know what that company would look like without him but i know it's mad as well yeah he's definitely the person we've spoken most about in the lifetime of this podcast of 250 odd episodes uh because he is the steve jobs of this particular generation of this era like if we just went back 20 years steve jobs was that visionary that was reinventing industry after industry after industry and doing it he created indigestion along the way and when you read as yeah also secretly a dick really like yeah and uh walter isaacson kind of captured his character quite i presume very well in his um biography on on uh jobs which by the way afterwards tim cook came out and said i didn't quite recognize steve from this book so he can't say it's the perfect thing but um isaacson then went on to write elon musk's uh biography and it's sitting behind me somewhere on a shelf unread at the moment because the book is still being written in real time there's no point in talking about Elon Musk unless you've decided you're just going to make it your full-time profession because it changes so fast like even that thing 29 billion compensation package approved in any other time or space would be world business news but it probably doesn't even get you know a two-inch column in the wall street journal well it probably does but that's about it and tomorrow as they say today's paper is tomorrow's fish and chip shop wrapper and it just it's like 29 billion and you're talking about the richest man in the world will he do anything in his life different as a consequence of getting 29 billion dollars and the answer is no i mean if you'd given him one dollar the life he's about to lead from this point forward would be no different to that with a 30 billion paycheck so it's it's it's a it's an odd thing really that an amount of money that could save a nation could save millions of people could reinvent industries is still just a 29 bill and we all know they have to keep them i mean tesla can't lose elon musk we see its strategic um barriers to entry are slipping and the competitive battlefield is intensifying and the future of Tesla seems to be now tethered to self-driving and by association AI and as this wild sidebar project, the optimist robot.

5:52So you kind of need him in the driving seat to not only articulate that vision, but more importantly, to bring it, land it. So give him 29 bill. There's the keys of the car or sorry keep the keys of the car elon um and let us know how you get along yeah 29 billion quid in a day and his favorite activities to argue with people on the internet maybe we're all billionaires uh okay before we get into the rest of the show emish we need to talk about investicon two weeks time yeah very excited ah look folks listen to me it's in two weeks from today that's uh 31st sorry 21st of august thursday 21st of august and investicon promises to be small i mean deliberately small but very very impactful when i mean small it's going to be outsized in its impact but uh we're going to have circa 80 people on the floor of the irish stock exchange the historic trading floor of the irish stock exchange for just one afternoon um and uh I have a deal for our listeners that it's going to cause a degree of distress.

6:55Did you ever hear a deal so good? You're like, oh, no, no, no, I have to buy this. Well, here we go. If you subscribe to Horizon today for$699, which is something like€599, we'll give you a ticket to Investicon worth€449. So it is an amazing deal. We're only going to do it for five people. email pod at mywallstreet.com so why would you want to subscribe to horizon why would you want to go to investicon well investicon is the first of its type it's the comic con for investors and i've said it in previous podcasts that i always kind of had an idea that there is a place there's a there's something required for retail investors who want to meet each other and find outstanding ideas so we have experts which we've spoken to in previous podcasts about ai about whiskey um about 10x 100x stocks and even etfs for wealth preservation it's going to be fast you and i mic are on stage we're going to interview these experts 30 minutes each what are your top three investments go and we're going to have great debate about it and apart from anything you build an incredible network um and afterwards you get a debriefing note and you'll have a laugh so that's this day fortnight thursday 21st of august our stock exchange email pod at mywallstreet.com today and we will make sure you are sorted with a deal of deals um you don't miss it because when we do another one first people top of the line front of the queue will be the people who attended this year and we're gonna it's this is an mvp mike like a minimum viable product we're looking at it to see are we going to bring this to chicago as we've been asked to do next Paddy's Day and to Texas next September.

8:45And then indeed in August of next year as well for the other. So we've already got offers to do more of them, but we want to just make sure we do the first one right. So get your ticket folks, join the parade, have some fun and support my Wall Street. Very good. Very good. Okay. Today's episode, I think I'm going to kick it off because I think this has to be the most interesting stock in the market right now that's nobo nordisk oh totally agree fascinating i mean i'm kind of annoyed i decided to talk about this stock today because there's so much stuff going on as we speak uh so it's this wednesday afternoon um august august 6th uh so yeah it's really hard to keep up as we go along um and as we go as as always happens with this show once we say something it kind of becomes obsolete in the next 20 minutes after the episode goes out or between us recording it and it big going worst oh exactly it's the plight of a podcaster first but yeah i wanted to come back and update because i i think it was a couple months ago maybe not that far uh six seven weeks ago i did a wee pitch for novo nordisk typically kind of falling into the catch a falling knife status a bit where I was like, well, surely it can't fall any further than this.

10:05It obviously did fall much further. So basically what happened was last week, Novo Nordisk cut its 2025 sales growth forecast to 8 % to 14 % from 13 % to 21 % and operating profit guidance to 10 % to 16 % from 16 % to 24 % growth. Obviously that's a very significant cut to current forecasts stock fell 22 on the day it's now down over 30 since the profit warning more than 45 year-to-date and almost 70 since its all-time highs back in june of 24 yeah which is kind of nuts because all you hear about is how lucrative and how much potential and how profitable the weight loss market is in the u.s especially but globally too now remind me are they the makers of ozempic or we govi or something ozempic and we govi is both novo nordisk really yeah so ozempic would be the first product it was initially the diabetes treatment and then we govi was the specific weight loss drug yeah well that's current that's the everyday history 100 and its current global market share is 55 of the total global diabetes market for semiglutides and 70 of obesity treatment for GLP-1 semiglutide treatments.

11:30So when you take that at face value, it's like, wait a minute, how is this all going on? All we're hearing about is the growth of this market. There's 100 million people in the US who could be potential clients. There's a billion people overall in the world that could be potential clients. And yet this stock is falling like a meme stock. It's like GameStop in 2022. Do you know what I mean? Yeah. So it's worth going into it. We discussed at length already on the pod what's going on between compounding, competition for Meli Lilly. But I just want to zoom in on this product warning. Well, two things happened last week.

12:03There was a product warning, and then there was also they hired a new CEO who was an eternal hire. This guy called Mazir Mike Duster. I think everyone calls him Mike. Mike Duster, yeah. That's D-U-S-D-A-R, D-A-R, yeah. Duster, yeah. He started the company back in 1992. And it's a great sign hiring from within for such an important position and all the rest. But I think investors were hoping and expecting, given the importance of the US market, someone with experience there. And they didn't get it. So that is kind of a two-pronged effect on the stock. And it just seems a bit, it seems like everything is going wrong at the same time for Novo Nordisk.

12:46I think it's a perfect storm. So we talked about compounding at length. It's essentially during a shortage of drugs like semiglutide and GLP-1s had last year. The FDA allows for, what are the equivalent to generics? Now these are produced hastily. They don't have the same approvals. They don't have the same safety warnings, all the rest, but they're there to replace a drug shortage. The FDA has since banned compounding. These drugs are no longer in a shortage. however compounders and hims and hers is the chief amongst them but there's plenty of companies that are doing this eli have rushed him at a product i noticed uh eli lily have a very good substitute product i understand yeah but eli lily now would be in a different category altogether eli lily is it has its own proprietary information so like the munjaro would be their we govi equivalent and And then Retretrutide is their next generation weight loss drug.

13:45But they would be the equivalent of Novo Nordic products. They wouldn't be replacements. These are literally copies made up and allowed to be copied beyond patent laws for this drug shortage. However, these compounders are acting under this loophole called personalization, which means they essentially haven't stopped anything despite the ruling from the FDA in May. So this is where this story kind of gets hairy because after the FDA outlawed compounding, Novo and Hims and Herms teamed up, the intention of Hims being a direct-to-consumer supplier for Novo Nordist. Almost straightaway, Novo canceled the partnership.

14:29They alleged that him and hers continued selling unauthorized compounded Wegovi to large patient groups, even after FDA declared the Wegovi shortage resolved, criticized him for misleading marketing, sourcing ingredients from Chinese suppliers that hadn't been FDA inspected or approved, and essentially never made the shift away from its cheaper compounded products to the FDA approved Wegovi. so what happened was basically Novo Norris had a look under the hood of what Hims and Hirs was doing and was completely discussed and it's really interesting as well when you look at the journey that Hims and Hirs is beyond, I mentioned how poorly Novo Norris has done in the past what, 14 months Hims and Hirs just this year to date it's crazy, it's one of the most volatile stocks I've probably ever seen stock is up about 150 since the start of the year maybe a bit less it tanked after earnings yesterday uh so i just want to go through the quick journey of that 2025 so far so yeah uh in the first six six weeks of the year this was before fd the fda outlawed compounding the stock was up 150 after that it fell 60 in the next five weeks after the fda made the announcement it was getting rid of compounding.

15:51No problem. We'll partner up with Novo Nordisk. In that two-month period where the partnership was alive, the stock went up 150%. Novo announced the partnership is over. The stock fell 36 % in three days in the six weeks since when I just decided it was going to keep calling its compounded versions personalization and not do anything different. It's up about 40 % to 50 % since then. It's been maybe the craziest seven months I've ever seen a stock have in just the absolute whipsaw. And look, there's a lot of retail sentiment behind this. It's kind of got meme stock status as well, but it's not just how much this stock is doing so well and the business underlying it is doing so well in this gray area where it's basically been outlawed what it's doing, but it's still doing it anyways.

16:42And this is where it really comes into focus because just yesterday, and this is why I was struggling to get my all my notes into uh one place at the same time because stuff kept happening but novo filed 14 new lawsuits to protect its u.s patents and stop the non-fda regulated prescriptions of semiglutides interestingly hymns was not one of the 14 companies being sued i imagine it will eventually be one of them but maybe novo was going after smaller companies first establishing a precedent and then like a multi-billion dollar company like hymns which can fight back in terms of resources and and money in a big long court case might have a much weaker case if they've already ruled against a similar company doing a similar thing so yeah it puts it in a very weird status and then obviously about half an hour before this podcast started recording novel reported earnings as well so it's worth going through that as well yeah talk to me i didn't get to see it i watched the share price in pre-market and it was quite banal there was nothing happening so i presumed there was not a whole lot of info in the in the podcast i mean in the quarterly yeah so so h1 results at a glance they were up sales were up 16 operating profit was up 25 these go up to 18 and 29 respectively and done on constant exchange rate basis so if you take that into account and you take account the timing of no one or this profit warning going from 18 % in H1 to 11 % at the midpoint for the entire year.

18:13It just shows how bleak management sees the second half of the year coming. I'm just quoting them here. The lowered sales outlook for 2025 is driven by lower growth expectations for the second half of the year, reflecting the persistent use of compounded GLP-1s, slower than expected market expansion and competition. The outlook is related to lower growth expectations for Wegovi in the US obesity market, for ozempic in the us glp1 diabetes market as well as for we go we in selected international markets and yeah i i don't know it seems so weird because on the other half of this uh from the quotes from the from the earnings release management has gone on to say that with more than one billion people living with obesity globally including more than 100 people living in the us and only a few million on treatment, I am confident that under Mike Duster's leadership, Novo will maximize the significant growth opportunities supported by a strong product portfolio and future pipeline.

19:08And that's reinforced by the fact that the current market share is about 50%, 55 % of the global diabetes market and about 70 % of obesity care treatments. And look, maybe it's this fallacy of getting caught up looking at the kind of status of right now or maybe the past instead of the future but it seems nuts to me that the stock has fallen so sharply that it's trading at about like 11 or 12 times 2025's earnings and just the absolute negative sentiment that's being faced towards it and you have more experience with me you have more experience than me about these things where you're looking at a stock and trying to figure out okay is this short-term blip is this a one-year rough year or is this you know a genuine the start of its ultimate decline and it feels very strange to even say that about a company like no more artists right now but that's how it's been priced it is why i've been talking about the podcast that's why it was a recent stock of the month it was this kind of sentiment of i really can't see this being its long-term outlook no way market has priced it i couldn't agree more i mean i'm very seriously considering making it the next horizon pitch and and i spent quite a bit of time looking over the business in the last 24 hours as had you in preparation for this but a couple of things occurred to me the first is that um there has never been a drug to the best of my knowledge maybe penicillin but there's rarely to never been a drug that has captured the world's attention to the extent of these glp ones and nova nordisk are in essence the inventor the inventor of the drug goes and pick and as you explained to me with govi can't believe i didn't realize that they did both of them and there is such demand for this product a black market has created biosimilars are created there you know there's people meeting other people down laneways to get it now that's fine and and uh there are so many perspectives on this company but what kept coming into my mind um when i looked at the share price crash like as you rightfully said it's down circa 70 percent from its all-time high is how the market always under overestimates the short term and underestimates the long term last year uh as far as i know Nova did about$31 billion in sales for their GLP-1 drug.

21:43I'm going to presume it's only Wigovi. I have to retire. I was then picked from my thinking. But they did$31 billion in sales last year. And they're on track to do about$70 billion in sales in 2027. Right? So while there's this noise, there's a change of CEO, there's competitive pressures left, right, and center. There's regulatory pressures left, right, and center. there's lawsuits flying in and out the door at a pace that would be very difficult to keep and i think you're very astute and on the money when you say they're probably smalling starting with a smaller weaker uh uh competitor to to create precedence and hats off to you should have been a solicitor that sounds like the right plan of action but right now when i look at nova nordisk um i think we when you just see that the level of revenue growth that is in the pipe with the other drugs it produces as one of the uh greatest drug producers of our time i do believe it's oversold we could dive into um metrics that are not very interesting for a podcast like 35x free cash flow and and it has a whole ton of cash on the balance sheet and uh like there's a lot of things we can we can analyze but whether we decide are we going to look at uh revenue growth ev divided by revenue are we going to talk about pe are we going to talk about the ridiculous 85 gross margins are we going to talk about the competitive battlefield but when you cut to wide shot when you go up in the helicopter and look down at 40 000 feet is novo uh is there any giant business that invented something wonderful something life-changing that didn't have an absolute tirade of me too's attacks, legals?

23:28No way. The answer is no. So we are looking at a business that has nailed something the world wants. Now, I've often said on the podcast that an anecdote doesn't make data. And that's so we can throw anecdotes out. They're good for conversation. But I have an anecdote. I was last week talking to someone and a friend of mine, and they'd lost a shed load of weight. And I said to him, oh, you've lost a lot of weight. How did you do it? He goes, I cheated. and uh he explained to me that he is on wagovi and i said oh wow you're the first person i've met in a while in ireland i believe it's that's prevalent or like i'm sure if we lived in la every other person you know that we know who was once overweight is now skinny probably took a glp1 but in ireland just wouldn't be as noticeable that would be just my perception and and he said oh i cheated i went for wagovi and then told me how obesity is a disease and then went on to explain I said how did it make you feel like what what's happening like tell me and he said it's unbelievable he said where I used to go out every night and have six pints now go out and I only have three and I said so why didn't you just decide to only have three and he goes I can't because I've got a I've got a disease and I thought that is actually a great summation of what's happening like this person couldn't just with their own willpower would find it i don't want to say nigh impossible but the compulsion to have to consume at a certain level is eradicated with this drug and that was just an anecdote but i was watching the new scientist um podcast because underneath it all i'm an absolute raging nerd and they had a really interesting show the other day um where it has been proven that glp1 drugs don't just act uh to help you reduce your weight and keep it off once you stay on the drug but they elongate your life and i immediately thought rubbish that's just because you've lost weight or because your heart is under less strain but no seemingly this panacea not only helps you stay in shape and reduces compulsions like biting your nails but elongates your life so really the sales pitch for that drug is pre-baked bringing it back to novo i see a stock that has been dumped as if the future is doomed um when in fact every drug business is very complex it's full of legals it's full of patents it's full of battles and it's full of biosimilars um and the fact that a black market has been created shows just how much demand is required for this drug they have the chemistry set ready they're making it already it will be in demand uh for a long time what we just want to see now is this new ceo who came from within and i presume most people don't even know who uh mike do star is and what you know what's what's he made of he's behind the curtain up until now we want to see this person navigate this uh european giant into new waters and you know god knows they've lots of other stuff in the pipeline uh they've one called uh carixema and then they've rnai eye-based therapies they've a whole big pipeline of other things that we're all just ignoring because the conversation is about the weight loss stroke yeah yeah yeah it's true and like the only pity about this is it's kind of been politicized as well yeah um with this most favored nation policy look i experts have said that's going to be so difficult to execute and actually put into place but there's the threat there of i think it's something like americans are paying as much as 15 times some european countries uh for these weight loss drugs oh yeah yeah and many other injectables like humira in humira well in ireland the most you can pay in a month for a drug as a citizen of the country i think it's 95 euro per household you go to america i was talking to somebody who landed in america and had forgotten their tnf inhibitor humira and abvi product um and they had to buy it and it was like six thousand dollars to buy the shot i mean that's just yeah that's brutal i don't want to say it's unjust because that has an implication but it just american america pays more just whatever but there are layers of problems in the healthcare system in America.

28:03It's wonderful if you're on the right side of the line, but it's not so good if you're not. No, no. Okay, we'll move on from Novo. I think it's just a big evolving mess that is going to be even bigger by the time this podcast goes out. But what do you got in store? Well, you flicked me on an email from Ben Carlson, which was a great read and it was entitled ai is eating the economy um and i really thought it was worth a quick chat i know there's a risk that a lot of our listeners a lot of people are starting to suffer a bit from ai conversation fatigue um we talk about a lot here in the stock club and uh it's out there all the time but i think it's more than fair to say that it's only just begun like the AI revolution we're all like looking at it and you know saying you're tired of hearing about AI I think is analogous to saying you were tired about talking about cars after Ford released their Model T which I think was in October 1908 so like 117 years ago or 116 years ago there were people in high society getting a bit bored talking about cars well I think in 116 years from now um chat gpt will be like the model t of the industry it is the brand that defines the birth of this new thing that we all saw on plain sight and most of us are most of us with desk jobs have interacted with um and i think the industry will be even more impactful than retail automotive of a car for every home.

29:39AI is going to be more impactful than the next 100 years. Anyway, Carlson, Ben Carlson, the guy who wrote the article that sparked this diatribe, said that when OpenAI released ChatGPT in November, it was 2022, November 2022, it feels like longer, but when they released ChatGPT less than three years ago, the stock market had just bottomed out and inflation had peaked at around 9%. which already I'd forgotten. And at the time, loads of people believed the recession was inevitable and it never materialized. And he says that the major reason why that might be was the sheer scale of AI-driven investment that followed.

30:25And without the tech sector's aggressive push into artificial intelligence, it's possible that the global economy would have slid into contraction, particularly after the added strain of trade tensions earlier just this year so we can know for sure because as ben said counterfactuals don't exist so you can postulate about what might have happened had this other thing not presented itself but we don't really know the alternative universe uh someone out there does so i believe there's infinite number of planets and there's someone out there going wow i wish we'd invented ai but it feels um like the moment when the narrative shifted.

31:04Like AI isn't just a hype cycle. It's arguably propping up both markets and macroeconomic growth. Now, in the article that you flicked down to me, Mikey, Ben shows charts from Sherwood and the Wall Street Journal, the Financial Times, and they kind of all show the same thing. The tech giants are spending extraordinary sums of money in the AI arms race, notably the ones we always talk about microsoft google google amazon and meta especially and they've they've spent between them 151 billion dollars on capital expenditure in 2023 and then a quarter of a trillion 250 billion or 246 billion in 2024 and it's projected to surpass about a third of a trillion this year and and that's a 40 it's it's insane it's actually i'd I'd love to know how much of that, a percentage of that went straight into NVIDIA's pocket.

32:03Oh, don't you know it? That's a very good option. I mean, a lot of it did. Probably at least a third, if not a half. We're talking about new sums of money. When Stock Club started, or at least a couple of years before it, when My Wall Street was born, I wondered would I ever see a trillion dollar business? because at that time, I think Apple was setting new standards of$250 billion. And lo and behold, we've breezed past that mega milestone. There's a whole handful of companies that are multi-trillion dollar now. And now the reason I mention that is you can see now even salaries being offered. Was it either Zuckerberg or?

32:43Yeah, Mark Zuckerberg offered a young fella, a 24-year-old. Yeah, isn't it? Yeah, 200 billion. I'm sorry, what was it? 200 million a year 250 million here for four years and for four years your man turned it down yeah i mean come on that's just nuts so there's more and more big number like the human brain doesn't deal very well with big numbers we just don't and i'm always conscious about when we get on the mic here rattling off numbers very difficult for a listener to actually crystallize it but i mean 200 or 250 million a year we all know that that is absolutely a mind-numbing life-changing salary like it's almost you couldn't have imagined it a few years ago just the way a few years ago i wouldn't have imagined there'd be a whole host of multi-trillion dollar businesses but even more remarkable is the economic impact that the spending is already having having mike and according to research by Ren Mac, AI-related CapEx is now contributing more to GDP than consumer spending.

33:52Despite the fact that personal consumption typically accounts for about 70 % of the US economy. Or in other words, AI is no longer just powering stock valuations. It's beginning to drive real-world economic output at scale, which a lot of our listeners have read about. where, well, AI is going, it's the next industrial revolution or whatever anecdote you want to spin on it. But if you just think about what I said for a second, that little AI helper that proofreads your essays or whatever is augmenting economic efficiency. So as Ben Carlson said, there are two obvious paths from this point forward.

34:36One is that tech companies flame out and they're overspent. they've under delivered and the market punishes their exuberance they they just didn't manage to live up to what ai needs and then the other path is that they dominate and they are backed by this transformational technology and reap disproportionate rewards and the the the bus driver in meta mark zuckerberg the bus driver in apple uh tim cook and so on through those giant businesses know there's disproportionate rewards and that's why they can go tap a young fly on the shoulder and go here join a quarter of a billion a year come on over here you go no i don't want to stay in my mom's basement or whatever like they this is they know the future is ai um so i mean it's possible that both realities coexist you know that that a pullback uh it happens and then there's a rally or we land somewhere in the middle and no one knows yeah for for for sure but i i have five fast fun facts is that onomatopoeia five fast fun facts about AI's future five fun fast facts is that onomatopoeia or assonance or neither I don't know not assonance it's just the word assonance is internal vowel rhyming is it no what's the word with all the words start with the same letter I can't believe I can't remember this my English teacher would be murdering me yeah anyway I have five fast fun facts about AI's future.

36:09The first one is that AI could add$15.7 trillion to the economy by 2030, which is currently more than the output of China and India combined. And that's according to PwC on their most recent global artificial intelligence study. The second fun fact is that by 2026 just a few months away over 80 percent of enterprise applications will have embedded ai capabilities which is just which is up from five percent in 2020 and that's according to according to gardner and their ai forecast and we we as uh as um digital natives see everything is like you finish a zoom ai writes up notes you go to slack ai once they're all at it the third fast fact is training large AI models like GPT-4 can actually cost more than$100 million per model, which is driving massive infrastructure improvements and investments specifically by Microsoft and Google.

37:12And that's another report I got my hands on through AI called Semi-Analysis for 2023. My fourth and second last fast fact is the number of AI-related patents filed globally increased 6x from 2015 to 2023 and another 6x from 2023 to this year scary um and china and us are leading the charge and then the final fast fun fact uh is that the top ai data centers under construction this year will use more power than many entire countries including ireland and portugal and lots of other countries of similar size to our own they're going to use more power than the whole of ireland even when we switch on the kettle on friday evenings yeah yeah i mean alliteration by the way was the word alliteration our old friend obviously people screaming screaming at their at their headphones well done uh bush yeah there's a lot of there's a lot to unravel there i mean yeah the big thing is the roi like these companies these are the greatest companies you've ever seen in our lives like the magnificent seven was that they've built up these cash piles they've built up incredible businesses that spit out unimaginable amounts of free cash flow and what management decide to do there is reinvest it into the business yeah now what they're doing and then in fairness like these tech companies are always built to to create long-term growth they're not like before say i i was a thing they weren't built to be like yes we'll get all this money and will redistribute it to shareholders eventually that's not that's not their goal now with ai it's lit the fire under them because for the first time say they've seen genuine threat it's a company like google like i mean i think warren buffett said it had the best economic mode he's ever seen in his life and that's a fellow who's watched you know two generations of stocks go through but then open ai comes up and generative ai comes up and it's like okay well now here is a legitimate threat to this dominance.

39:17Facebook is the same. Amazon, Microsoft, they've all got involved heavily with their checkbooks to the point where there's never been spending like it, especially focused on one sector. When and if that comes under question is kind of what the marketing as a whole is teetering on because it just feels it keeps feeling stretched and stretched and stretched but then these businesses microsoft turns around and microsoft is azure is growing you know over 30 a year like this is a trillion dollar business on its own microsoft's cloud segment and i'm kind of rambling now at this stage but i just it is kind of ridiculous to see how much money is being spent and how okay the market is with this money being spent right now without expectations just yet and when when those expectations come to call what's going to happen yeah and maybe they don't maybe people are like okay well this is a long-term plan these companies have haven't failed us in the past we're okay with trusting management to go spend this money until we see this next generation of technology truly truly provide roi but i don't know it's really up in the air and it's true that it's true that the entire market is kind of leveraged on this this point yeah yeah yeah in fact that's a lovely segue for me to just replug investicon because we've eric bleaker flying in he has the best ai podcast and he's going to tell as the three stocks that are most likely to benefit from the rise of ai so i'm very much looking forward to that conversation august 21st august 21st august 21st folks put in your diary buy a ticket today um but it really is like it it feels very much to me like the internet in the late 90s where it was very evident a sea change was happening it was equally evident that there were a whole ton of companies that had hopped on the back and some were investable via the stock market and then within that bag of coal there was a diamond called amazon or uh maybe you might say yahoo although it's it's it's risen and fallen since but there were giant companies in the making and we're looking at them in plain sight at the moment uh whether we're talking about lemonade as we've spoken about in the podcast before ai uh insurance disruptor or one of the giants that we've just discussed and there's no question or doubt that we are uh we are in a privileged position to be here in august 2025 as opposed to august 2035 when i wouldn't like to say the party's over but the mega growth has happened i think we're going to see some mega growth in the next couple of years um and when you just reconsider the things that ben carlson said that the AI CapEx tree from these giants, they're not spending hundreds of billions of dollars on a hunch.

42:25There's a team of MBAs and data scientists who have analyzed every angle and they're in an arms race. So, you know, we are here to find a business that's going to grow 2x, 5x, 10x and 100x and own it for that journey. Yeah, absolutely. I think that's a good way. that's a good way to end a pod there and just the potential that's out there right now and the opportunities that are going to come down the line even if it is a bit all up in the air right now and unfortunately i think the power and resources are definitely concentrated at the top but but yeah it's the opportunity to go and find out who's going to be the greatest beneficiaries maybe not the spenders but the people who are taking in the money and that that should be the next quiz and that's actually someone we should get a eric bleaker on at investicon as well because I think you'd have some really interesting insights.

43:15He certainly will. Before we go, do you use ChatGPT every day? Every day, probably not, but I'd say three or four times a week. Are you a subscriber? I think I'm on your subscription or my Wall Street subscription. I'm not sure which is it. I only went through my monthly bills there the other day. I realized I'm paying chat GPT 30 bucks a month but yeah I also realized you can probably start charging me a commission I think well um but I also realized that it has reduced my use of Google I'm gonna guess by 90 percent so I'm fact checking via GPT um acid like I take a photograph of a whole pile of vitamins that I take daily vitamins and ask them when can I take these together should i separate and it's just with the phone it just has so many applications in my life that it's now an indispensable tool that's become a utility and they're taking 30 quid a month for me where you google around here you go we'll show you a few ads to mind us yeah yeah different ways of monetizing i suppose for sure uh okay so on that note emmett uh i'll send you you just send me an invoice for the chat gpt i got gpt to do it yeah okay emmett thank you for joining me and Thank you everyone for listening and that's it.

44:41We'll talk to you next week.