John Croteau (4:24)

That's right, it was the classic fat cat Wall street person, cigar in mouth, getting excited looking at a stock update coming over on a ticker tape machine. And I had to laugh. It was just so archaic.

Anne Berry (4:34)

Look, well, I will always be nostalgic for the classic ticker tape machine. Hold on to that thought. But we are glad to have Public, the investing platform that's made for this century with a clean, intuitive modern design. And if you have questions about your investments, no problem. Public has Alpha, an AI powered research assistant that can help you find the answers you're looking for. Public combines a wide range of asset classes with the tools you need to build and manage your wealth. Whether it's for stocks, options, bonds, crypto and more. Fund your account in minutes or less. Get started at public.com brewmarkets that's public.com.

John Croteau (5:06)

BrewMarkets paid for by Public Investing. Full disclosures and Podcast description Amazon announced.

Anne Berry (5:12)

Today that it's expanding its car sales business through a new partnership with the rental giant Hertz. Now, you may remember that Amazon first waded into vehicle sales last December when it launched Amazon Autos in partnership with Hyundai. That arrangement was a buy online pickup in store concept with the store being a Hyundai dealership. So why does that work so well for Amazon? Well, by acting purely as an interface with the buyer, Amazon avoids the burden of owning or managing expensive vehicle inventory. That is the beauty of a marketplace model, right?

John Croteau (5:43)

And millions of consumers are already shopping on Amazon, so directing them to a dealership and just taking a piece of the pie is a logical extension of the platform strategy.

Anne Berry (5:51)

Well, earlier this month, Amazon Autos expanded to include used and certified pre owned vehicles. This is different from that partnership which focused on new models. And today's deal with Hertz marks Amazon's first partnership with a massive fleet seller. Well, news of the agreement this morning initially sent Hertz stock up 7%. And that's because this company benefits from an efficient way to sell its used cars and to refresh its fleet. Now just one thought on that. Hertz has actually just reported seven straight quarters of consecutive losses. So it really needed something to help it find its way again and this helped get the stock price back up. In contrast, Amazon shares nudged down a little bit. That's along with the broader tech sell off. We're going to come back to that. But what caught our eye is that online news car retailer Carvana saw its shares drop more than 6% on this news. And here's what we deduced from these market moves. Although Amazon Autos and Carvana both operate in auto sales spaces, they have different models, right?

John Croteau (6:50)

Carvana owns and manages its vehicle inventory. It actually buys used cars, inspects them, reconditions them, then delivers the cars directly to consumers. It's the classic retail model, not Amazon's marketplace model.

Anne Berry (7:02)

Well, Carvana's stock, when we took a look at it, has surged over 100 fold over the past 30 months, making it one of Wall Street's most impressive success stories in terms of post Covid recover. That's been driven by strong earnings reports. Carvana's latest marked the sixth consecutive quarter of operating beats and improvement in managing down its debt burden. It's on Track to earn $1.2 billion for this year and has hit a market cap of over $70 billion. Now, Carvana's success points to the fact that there's a lot of money to be made in the used car market, if you can figure it out. And the market in the United States is enormous. The US has more than 40 million used cars looking to change hands in a relevant way each year. And the market is really fragmented. Car represents around 1 1/2% of market share. It's really small today. Now, I've no doubt that Amazon has been watching these numbers, sees the opportunity, sees that Carvana has proved it can work and now is ready to move in. And even though there's plenty of market share to go around, the mere threat of the marketplace giant Amazon moving in is likely a major reason for Carvana stock moving down today.

John Croteau (8:06)

Right, and I understand that Amazon is big enough to be a disruptor in any segment, but I personally would rather buy a used car that's been inspected and fixed like those and not rented by multiple people. When I rent a car, I put it through its paces.

Anne Berry (8:19)

I'm a city girl. I don't drive. I'm a very good pedestrian. But I will be following the numbers for this massive sector. John, we have a question from the audience.

John Croteau (8:29)

Yes, we heard from Gina in Portland, and she wrote, hey, Anne, I'm a big fan of TJ Maxx, and I saw that its stock is up today. Does Wall street like shopping there as much as I do?

Anne Berry (8:38)

Thank you for the email, Gina. And I would mention that you are not alone. So in our morning production meeting this morning, we brought up, should we talk about T.J. maxx? Shouldn't we? And there was a lot of love for the discount store, much like yours. And I got to tell you, there's even a store right by our studio. So I popped in right before we started filming. But let's first take a look at what's working for shoppers, because that translates into why the share price is done actually pretty well. TJX Companies is the owner of value retail brands, TJ Maxx, Marshalls and Home Goods. And today, collectively, they reported for the quarter $14 billion and beat earnings forecasts, sending the stock up now. Same store sales, which is a crucial metric in the retail game, were up 4%. And the company continues to expand its footprint. It's going to open six new TJ Maxx locations this month alone. And don't forget, folks, this is a moment when a lot of retailers are actually shrinking their store footprints. So what's driving the growth? Well, for one, consumers are looking for value. Recent reports have seen retail sales holding pretty steady. But with softer jobs and wage growth numbers, shoppers are looking for alternatives to expensive department stores.

John Croteau (9:44)

And at that point, shares in Macy's are down nearly 24% year to date, while TJX is up 15% and at close to 155 billion. TJX's market cap is over 40 times that of Macy's.

Anne Berry (9:56)

It is also, by the way, three times the market cap of Target. But I've been beating on Target enough today. We'll let that one slide. We also keep hearing how much shoppers at these value stores enjoy the treasure hunt aspect. And so I did pop into the store right by the studio that came in here, and I got to tell you, things were piled up everywhere. You could still find your way through it. There was a lot of choices, a lot going on. And the beauty of this is you never really know what new products are going to be delivered week in or week out. So there's a draw to return regularly to discover something new. And you know who actually really nailed that concept? Zara Fast Fashion. Zara H and M nailed that idea of discovery in TJ Maxx is doing the same thing here.

John Croteau (10:37)

I've also seen that at Costco. When I go to Costco, they have new seasonal items. The, the shelves are different, the aisles are different, and I enjoy exploring in the store.

Anne Berry (10:45)

Everybody loves Costco. If you see someone sort of lurking around hunting for things, you know it's our producer John on the hunt. TJ Maxx, Marshalls and HomeGoods are benefiting from a clear identity and value proposition that resonates with their fans like Gina. And again, Target and others who don't have a clear identity are the retailers, who, in contrast, are struggling. Well, shares of TJX were up 3% today. Let's take a quick break. And when we come back, is AI now too big to fail?

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Anne Berry (12:46)

Welcome back to Baru Markets Daily and it's time to touch on the elephant in the market, which is today's tech sell off. So there's a lot of context to this one. There's going to be a ton to unpack, but let's just set the stage with with what went on today, the Nasdaq hit a two week low and when we're talking about the markets, it's incredibly easy to get hung up on one particular day's movement, particular week's movement. And the important thing and something we focus on here is what is the long term view, what is the context, and at what point do small changes or big changes that happen in a particular point in time, at what point is that a sign of bigger things to come? And that's why we decided today to touch on this tech sell off. Now, in terms of the sheer scale of the narrative around AI, it's certainly too big to ignore. And I want to touch on one thing that really caught our eye in amongst all of this, and that's talking about the sheer scale of the money that has gone into funding building AI infrastructure very broadly defined. Now we talk a lot about big tech's commitments of hundreds of billions of dollars of capex into AI infrastructure. There's one voice that a lot of people, both retail investors and institutional investors, listen to, and that's Torsten Slok, the chief economist at Apollo Global Management. He recently sent some analysis out showing that data center spend for this year's first half alone contributed as much to GDP growth as consumer spending. Consumer spending constitutes 70% of the United States of economy. So the fact that they're equal contributors to growth now is absolutely extraordinary. And the pressure is on for that spend. For the companies doling out the dough to fund it, the pressure is on to deliver real returns. And that drove Torsten Slok to his second point. If you look at valuations today, he believes that we are now in a bigger tech bubble than we were during the it one of the 1990s. That's a really big statement from a really influential voice. That's all at the macro level. So when we now look at the micro level, when we look at specific stocks, we're starting to see individual tech names becoming symbols of fears of an AI bubble. Let's start with one that's a little bit less controversial and that's Meta. It's seen a 75% increase in short interest in the stock this year, which is basically a way that the market bets that a stock is going to go down at some point. So that's a pretty important data point. But the one that's really been catching attention over the last 48 hours is Palantir. I want to just point out what some of these powerful voices in the market have been saying. Let's start with the publication the Economist, which led with the headline Palantir might be the most overvalued firm of all time and draws the parallel between Cisco, when it was up at the equivalent today of a trillion dollars of valuation, to then getting a massive correction downwards. Then there's another voice out there, Citroen Research. You may have seen this report going viral on X. Well, yesterday it sent out a report saying if OpenAI is valued at $500 billion, then Palantir, with a market cap of 350, has no business being valued at such a close level. It then went out to say, Citroen Research today again on X, that it's looking at databricks, the software company, and it's looking at its recent valuation of $100 billion and says once again, Open says once again that Palantir has no business being three times bigger than databricks. So others are more positive. They're saying, actually Palantir and others are signs that we're entering a new industrial revolution. One of the voices saying that is Dan Ives. Not so much on Palantir, but certainly on others. He is the tech analyst at Wedbush securities. Gets a lot of coverage and he has basically said that he's got 30 names that he's watch that are really going to drive innovation in decades to come and that even though it feels expensive right now, there is still room to run over the longer term. Now we are following these voices and many more. And most excitingly, we're going to be talking to them right here on our show. Some of the folks I've mentioned by name are booked already. They are going to join us as guests. We always do our own homework. We aren't afraid to have a point of view. So we're going to be challenging them. And most importantly, we want to hear from you which guests you want on, what do you want to ask them and what are the assumptions you want to push on the most more soon. Well, it's 4pm on the east Coast. The markets have closed and while we don't have a ticker tape, we are going to throw back to fat cats with cigars looking at their machines with our human ticker producer, John that's right.

John Croteau (17:25)

The S&P 500 closed down a quarter of a percent. The Dow finished flat and the NASDAQ, as you noted, finished down nearly 7/10. And as some of the companies moving on quarterly reports today, Lowe's, the big box home chain, beat earnings and revised up their forecast for the year with the stock finishing up about half a percent. Estee Lauder sank 4.5% after the beauty retailer warned that tariffs will take $100 million bite out of that company's profits. And finally, one of my favorites, La Z Boy was down over 11% today thanks to reduced foot traffic and lower sales.

Anne Berry (18:00)

A lot going on. Well, we are of course this week in the thick of retail earnings. And the one I'm excited about, one of my favorites, the Grand Puba, the big enchilada, the Milk and my tea is Walmart announcing tomorrow morning and there is so much that we are going to be watching. I'm obsessed with Walmart. Some of the things that we are looking at One, how did its deals week go? Fighting Amazon right on its prime home turf? Will tariffs hit the OG of the Quote Buy American campaign, which it launched as far back as the 1980s? And how is its budding digital ad business connect going? It's one that I wrote about four years ago as an early sign that this retailer really wants to be a tech giant. We'll be coming back to that. And that's all for today's Brew Markets Daily.

John Croteau (18:45)

Brew Markets Daily is hosted by Anne Barry and produced by John Croteau, Tarek Abdelatif and Emily Miliron. Our technical director is Uchena Waugu, and the president of Morning Brew, Inc. Is Devin Emery. If you'd like to get in touch, send an email or voice memo to brewmarketshow morningbrew. Com.

Anne Berry (19:00)

Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here, folks. Same time, same place.