Prof G Markets: Meta’s AI Promise, Microsoft’s Disappointing Beat & Why Google Should Spin Youtube

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1:24Today's number,$20 decillion. That's how much Russia has fined Google for blocking its news channels on YouTube. A sexual predator, a racist, and a Russian spy walk into a bar, Ed. The bartender says, what can I get you, President Trump?

1:51Boom, a little election humor there. We're going to have a selection. We'll count some votes, says James Carvel. That guy's got to be like 110. 10, the LSEM. That guy, I like him. Do you like him? Do you like James Carvel? I think I prefer your impression of him. I think that's sort of my highlight so far. I appreciate that. It must be bonus season. Someone's kissing someone's ass. Hello. Plucker up, you little podcast co-host bitch. Today, we're discussing earnings from Google, Microsoft, and Meta. But first, here with the news is PropG Analyst Ed Elson. Ed, what is a good word? How are you? I'm doing very well.

2:29I didn't know that 20 decillion was a number, but I looked into it. It's 20 trillion times a trillion times a billion. And the global GDP is 100 trillion. So that should put it into perspective. Just shows you the Russians have their heads screwed on straight. That's what I'll say about that. That's actually what our producer Claire requested as a bonus for managing young, irresponsible podcasters. That's right. We can't quite get there. This is a profitable business, but I had never heard the term decilion either. Where are you at? You're in New York. I'm in New York, as always. We're past Halloween.

3:04I need more banter. Pretend I'm interested in your life. What are you doing for Thanksgiving? I haven't made a Thanksgiving plan yet. I know what that's like. It's okay, soldier. Things will get better. I could go back to London, but it's kind of weird to celebrate Thanksgiving in London. It's not really. Yeah, they don't have Thanksgiving. We left them. Yeah, exactly. What are you doing for Thanksgiving? Are you going to celebrate now you live in London? No, I'm doing my world tour. I got back to London yesterday, and in two weeks I head to New York for a speaking gig, then to Los Cabos for Baja Summit where I'm speaking, and talking about vertical farming and doing mushroom chocolate at night and listening to some DJ who's supposedly as hot.

3:44And then I go to Vegas or I go to L.A. for another writer's room because I don't know if you've heard I'm working on an original scripted drama for Netflix. So what do you do in the writer's room? Do you kind of like sort of shout over them at sort of things they're doing wrong or how does it work? No, it's the guy, the showrunner and the lead writer will say, well, what do you think, Scott? And I'll say, no, they would never say that, even though I'm not listening. I just I pretend that what they're saying is unrealistic. Okay, so I'm kind of on the right track. I'm supposed to be the person that puts you in the room that makes it feel authentic.

4:19And I'm supposedly the person that understands these people, which is kind of comical. But yeah, it's fun. It sounds very fun. You don't actually have to do the writing. You just kind of like opine on what's happening. You know me. I don't like to actually work. There's no real work involved in this whole Prop G enterprise for the Prop G. It's actually a lot of fun. I get to envision scenes and I'm working with this really talented guy named Scott Burns and Media Res and all these super talented people. So, you know, so far, so far we're in the honeymoon period. We'll see. Sounds like the best job ever.

4:55All right. Enough of that shit. Ed, stop delaying. Get to the news. Well, before we get started, just a quick reminder to subscribe to Prof G Markets on its dedicated feed. Type in Prof G Markets wherever you get your podcasts, hit follow and tune in to our interview with Anthony Scaramucci on Thursday. That interview will only be available on the dedicated feed. And now let's start with our weekly review of Market Vitals.

5:23The S &P 500 declined, the dollar fell, Bitcoin rose, and the yield on 10-year treasuries increased. Shifting to the headlines. US GDP grew 2.8 % in the third quarter. That was slightly slower than the previous quarter and just below expectations. However, economists were largely encouraged by the growth driven by strong consumer spending on goods. Reddit turned a profit for the first time ever, with revenue reaching almost$350 million in the third quarter. That's up 68 % from a year earlier. The company also reached nearly 100 million daily users, and those strong earnings sent shares up more than 40%.

6:00Shares in drug maker Eli Lilly fell more than 6 % after its third quarter profit and revenue missed analyst expectations. The company also reported disappointing sales of its weight loss and diabetes drugs. And finally, Elon Musk's artificial intelligence startup XAI is in talks for a funding round that would value the company at$40 billion. That's nearly double the valuation from its previous round. Your thoughts, starting with this national economic data GDP growth in America, 2.8 % in Q3. A GDP number doesn't mean a lot unless it has a benchmark. So just some benchmarks here. Japan's annual GDP growth was up 0.3%.

6:41So we're growing nine times faster than Japan. France up 1.1 % and Canada up 1.3%. I mean, this is just the economy here. It's just really striking to listen to these kind of person on the street interviews about how people feel about the economy. It's so obvious that there's kind of a vibe session, as Kyla Scanlon called it, or people, again, have this habit of crediting their character and their grip for their raises and blaming everyone else are blaming the government for whatever price hikes there are. But our growth is impressive. And 2.8 % may not seem a lot, but what that means is about every 25 or 27 years, the size of the American economy would double.

7:21In addition, we have this new inflation data that just came out. It's down to 2.1%. In other words, inflation has officially been dealt with. Meanwhile, you look at other developed nations that have struggled with not only higher inflation than we had, but also longer inflation. So it sort of makes the case, well, not sort of, it does make the case for Kamala Harris. If you believe that Kamala Harris is just a continuation of the current administration, and if you care about the economy, then this is a big reason to vote for Kamala Harris. But if you've made this point before, she should be making a way stronger argument about how she's sort of the economy vote.

8:00If you care about the economy, you should be voting for Kamala Harris. It hasn't really resonated. But for those of us that care about statistics, that care about data, what the data is actually telling us, and when you look at the U.S. compared to other nations that have struggled with problems way worse than ours, you know, the answer is pretty clear. Statistically speaking, Kamala Harris should be your answer. I so badly want to be head of comms for like 11 days for the Harris campaign. I've heard people saying you should be, by the way. I just think she should have in her back pocket every time someone starts complaining about the economy or saying the economy is saying, okay, Sean Hannity, there's 190 sovereign nations.

8:37You're an intelligent guy. What economy globally is stronger than ours right now? Name it. Instead, they always go to this democratic self-hate of, I know things are tough out there and we have work to do. It should be, bitch, we are on fucking fire. Get your head out of your ass. Anyways, okay, Reddit. Why don't I listen to my own advice. I bought some stock here, but not enough. I believe the stock is now at about triple where it priced in its IPO about two months ago. Can I ask how much you bought? You can ask. May you answer? I think I bought about$3 million for the stock, but I paired some of it.

9:16So I don't own nearly as much as I'd hoped, but I've done very well. But it pops so big the first day I trimmed some of my holdings and I just didn't listen to myself. I knew this thing. I still think it has more room to run. Anyways, its revenue up 68 % year on year. Daily users is up 47%. They're going global. They're being really smart. They've translated their posts via AI into French, Spanish, Portuguese, and German. And its international daily active unique visitors increased 44%. Which was huge. And it's just such a simple innovation. It's such a great use case for AI. Just simply translating the language of your content, but it's so, so effective.

9:57It essentially just 10Xs your total addressable market. And that is what we're doing, or at least we're trying to do it. We're using AI to translate this podcast into Spanish and Portuguese at the moment. El número de hoy es cero. Esa es la cantidad de acciones que el candidato a vicepresidente demócrata Tim Walz posee. Así que prefiero hablar de J.D. Vance. Parece una de esas ilustraciones en los cartones de leche que muestran cómo se vería un niño perdido si fuera adulto. But I think this is something that everyone in content should be looking at. How can we figure out a way to just overnight flip a switch and make this all available to the 8 billion people across the entire globe?

10:35It's just a really quick and nice way to just skyrocket your total addressable market. So that would be the first thing that I would commend Reddit on. The second key driver of their growth actually was not intentional, but it's very interesting. And that is Google recently changed the way it ranks search results. So they made this update called the hidden gems update. And what they've done with the algorithm is they're now preferencing what they call authentic content, which is the content that is generated by users, content that you find on forums and on chat rooms. And so as a result, you will find that Reddit is showing up more and more when you search things on Google.

11:16It's also appearing higher in your rankings. And here's a great stat. Reddit is now the sixth most Googled word in the US. So it's this great combination of this intentional play with AI, but also the market dynamics are shifting to Reddit's benefit. And it's just translated to this explosion in the business and in the stock. So incredible quarter for Reddit. But when you were talking about flipping a switch and accessing a global market using AI. And again, the operative term there was flip a switch and go global. You sound like me in our all hands last week, where at that point, the person who runs the company, Catherine Dillon, said, bitch, you translate this shit into Farsi and try and find the equivalent of zip recruiter in Iran to advertise.

12:03It's not quite flipping a switch is what the pushback I got. It's flipping a million switches. Yeah. And someone actually has to build a switch and manage it while I just, you know, the podcast host say, flip a switch and let's go global. This is strategy versus operations. Yeah, this is the difference between being front of house and back of house, right? So I interviewed the CEO at their annual advertiser event, and they had big advertisers in the room. I saw the CMO of Mars. They had the biggest media agencies there. It feels to me a little bit like kind of, I don't know, Meta or Pinterest or Snap in the early days.

12:41one of the reasons I'm going to kind of kiss the ass of the CEO, that he seems like a nice man, is I bet my prediction is they're going to have an amazing party at Cannes in the next one or two years. They're going to decide, we need to be stroking the hair of people who we are putting out of business and bring them to some great party and get Dua Lipa or Bad Bunny or somebody. Anyways, we're going to the Reddit Beach Party. That's what I take away from all of this. I can't wait. I'm waiting for my invite. it. Let's move on to Eli Lilly. As many of our listeners probably know, Eli Lilly sells Zepbound and Munjaro, which are these GLP-1 drugs.

13:20They are the alternatives to Ozempic and Wagovi. And it's not selling as much as people had thought, or at least that Wall Street had thought. And the obvious question is, of course, why? What is going wrong? Now, what's interesting is that the CEO's answer to that question was that there isn't a problem with demand, but there is a problem with supply. So supposedly, the suppliers of the inventory for these drugs, those suppliers cut down on their stock and it affected Eli Lilly's ability to get the drugs out. But as a Barclays analyst pointed out, if that's true, that could only have accounted for around 20 % of that drop-off in revenue.

14:01In other words, there must be something else afoot here. Something else is going wrong in the Eli Lilly GLP-1 drug story. And it can't just be this sort of chokehold on inventory. And certainly Wall Street doesn't believe that story either. So I have a few thoughts of my own as to what might be going on, but I will throw it back to you. What do you think could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won't tell us? I wonder if we keep hearing about all these compounded GLP-1 producers being able to sell, I don't know if you call it off-market, but there's a bit of a glitch in the matrix or a loophole where if a product is sold out, you can build almost like a generic version of it that costs much less.

14:48I got to think that that's denting demand a little bit. And I would think that, and not only that, you have a lot of these kind of upstarts are sort of scrappy and maybe don't take as an institutional approach, but are great marketers and understand new mediums. So I wonder if it's some of the new guys or these compounded GLP-1 producers maybe slowed their growth. What are your thoughts? I was thinking that too. And if you look at HIMSS, which we have discussed before, they have been getting into the GLP-1 game. Yes, the compounded version. Their revenue increased 52 % last quarter. And a large part of that was their weight loss drug business.

15:27And there are several other companies that are offering these compound alternatives. it's sort of becoming a growing space. And I think it is possible that this duopoly that we've seen on semaglutide that has been owned by Novo Nordisk and by Eli Lilly, it could be a little more fragile than we think. The other thing I think is worth mentioning, which one of our team members, Jessica Lange, pointed out, and it's a simple but important point, is when you think of GLP-1s, Manjaro and Zepbound do not come to mind. The two names that come to mind are Ozempic and Wagovi. And so it could be just a simple brand recognition problem that these products just aren't present in the public discourse enough.

16:12If you've been watching the World Series recently, you will likely have seen this Wagovi ad over and over, this new Wagovi jingle that is probably stuck in a lot of people's heads right now. So I think the other explanation here could be a very simple issue. It's just a marketing problem and a brand awareness problem We know what Zetbound and Manjaro is because we study this stuff for a living. But for the average American, you just think, oh, Zempick and Wegovian. You probably don't even know what GLP-1 is either. It's interesting. I agree with you. I usually don't like the idea of, typically when I walk into a brand and they say they want to show me a brand campaign and they're going to spend money on advertising, I usually say, well, if you're spending a lot of money on advertising, usually you have somebody who wants to hang out with really cool, interesting people, which ad agency people are, or you're out of ideas because the companies with the best products don't need a lot of brand marketing.

17:02In this case, I think an awareness campaign exactly around what you said around ZepBound and Munjaro. Awesome. Munjaro is awesome. If I came back and in my next life as an MMA fighter, I want to be called Munjaro. I think that's a badass name. It's a really cool name, Munjaro. But I agree with you. I think they need - Fire up the odd budgets. Yeah. Get some awareness out of there. There's so much money on the line here. Also, supposedly there's a lack of scarcity that finally there's enough production here to meet demand. I wonder what's going to happen, though, when it reaches into the markets it should be in.

17:37I'm just such a huge fan of this technology. Speaking of which, let's bring this back to me, Ed. I'm doing this NAD treatment. Have you heard of this? Only from you mentioning it last week. Ed, that's it. I'm fine. I'll leave. No decillion dollar bonus for you. I'll make my way out. Just Claire's getting a decillion dollars. Anyways, this NAD stuff is really, really powerful. But I wonder if it has a similar compound as GLP-1 because I have noticed I'm losing my taste for the sauce. And I don't—I'm going to fit right into Baja Summit. I told you about Summit last year. They all take drugs, but they don't drink.

18:17I would bet, going back to Eli Lilly, I apologize, I'm all over the place. This fucking NAD was supposed to give me focus. Maybe it isn't working. I think this is probably a buying opportunity. I think anyone in this market with two great brands or one great brand, Manjato, and ZepBound, that's a terrible. You're bound for Zep. Is ZepBound? That sounds awful. That's like some rock climber started, you know, some bad ropes company or something. I think other than the CEO making lame excuses, I'd say on this one kind of buy the dip. Our final headline is XAI, which Elon, this is Elon's AI company, which he is supposedly trying to raise around at a$40 billion valuation.

19:03Just a reminder of what this company is. So people may remember the premise of this company was to create a competitor to ChatGPT that was, quote, more truth-seeking. So for a while, Elon was calling it kind of jokingly TruthGPT. He saw how successful ChatGPT had become, and he wanted to make a competitor that was also less woke, pretty much. So XAI did build that product, and the product is called Grok. Many people may have heard of it. And it's available to all paid users of the X platform, formerly known as Twitter. I've used it. It's fine. There was a period where it tried to be anti-woke and funny, and it felt like a not very funny guy who's trying to just crack jokes at every second.

19:54It wasn't a great product. Yeah, it's the Tony Hinchcliffe of LLMs. It's exactly right, and they fall flat. So I'll get your reactions to XAI in this funding round. There are a few more details we can go into, but what are your thoughts on this round? So I think this is Musk's next opportunity to turn$40 billion into 10. My sense is this is now a distant fourth or fifth in the LLM market. And he did some sleight of hand trying to take the rights to the data, I think, of Twitter and spin out XAI. And he got a disproportionate amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter.

20:34But Il Grok right now is a distant fourth, fifth, or sixth trying to trade at the same valuation as Anthropic. And that's the analog here. And I would imagine Anthropic has dramatically more traffic, revenues, better technology, etc. And what they keep leaking is that Jensen Huang did say that it's easily the fastest supercomputer on the planet. XAI has built its own data center. But I'm not sure if that ends up being much of a competitive advantage anyways. I think that's an important point, is that a competitive advantage? And when I look at XAI, it's like there are three main differences that make it different from other AI companies.

21:15The first is that Elon Musk is leading. So that's a big deal. It means you can raise a bunch of money. The second is, as you said, they're building their own data centers. and that's what sets it apart from OpenAI. OpenAI does not own any data centers. Instead, they essentially rent their compute from Microsoft and that's why they have that partnership. And then the third big difference is that XAI is building its own frontier models. And that's where it's similar to OpenAI, but not similar to a company like Perplexity, which is building models on top of the models that are built by other companies like OpenAI.

21:54So in other words, their sort of strategic differentiation is that they want to own everything that they create. They want to be a truly independent AI company, which is a little rare these days because it's developed into this massive supply chain where you have the chip manufacturers selling to the data centers and the data centers selling the compute to the model makers and the model makers selling their models to the app makers. It's a big supply chain. And XAI has decided we're just going to own all of it ourselves. I just don't know if XAI is going to have the capital. They're starting from less than zero versus everybody else, and they want to raise at the same valuation as the number two or the number three player Anthropic.

22:36So I have a bias because I'm not a fan of Musk, but on just a straight valuation standpoint, this feels to me like a bad deal. Yeah. I mean, it sounds like the Elon Musk premium, but it's why he still deserves a premium like this to me is beyond me. The fact that he's destroyed 80 % of the market value of Twitter. That was his last venture. I mean, it's crazy. It's loco. He's gone munjado on us. We'll be right back after the break with a look at big tech earnings. If you're enjoying the show so far, be sure to give Prof. G Markets a follow wherever you get your podcasts.

23:48We'll be right back. Terms and conditions apply.

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24:54We're back with ProfG Markets. Most of the Magnificent Seven reported earnings last week, bringing AI demand and spending into sharper focus. Google and Microsoft both reported cloud revenue growth above 30%, beating expectations. But while Google's stock rose, Microsoft's fell, as the company advised its overall revenue growth would slow in the current quarter. Meanwhile, Meta's stock also fell after the company missed expectations on user growth and warned that its AI expenditures would continue to increase in 2025. So I think let's just start here. A lot of tech earnings telling slightly different stories.

25:35Let's just start with what Wall Street thought about these earnings. So for Google, Wall Street was very happy. Revenue grew 15%. Cloud revenue skyrocketed, and the stock rose 4%. And I think the main story with Google is there was nothing that you could really fault the company for in that earnings report. Everything was going well. Microsoft and Meta, on the other hand, Wall Street was not so happy with. And it's a very similar story that we've seen before in tech, which is the top and bottom lines were very strong. They beat expectations at both companies. But there was just one tiny little pimple on the earnings report for both of them.

26:14And for Microsoft, it was that their guidance was a little bit soft, not as strong as Wall Street wanted. And for Meta, the user growth was slightly weaker than expected. 3.29 billion active users versus 3.31 billion expected. I should remind you that's daily active users, so it's still pretty incredible. As a result, Microsoft stock fell 4 % and Metastock fell 3%. So I think the summary with these earnings here is that it's very strong overall, but again, incredibly high expectations for these companies. Let's just start with your headline reactions to the tech earnings that have come in this week.