Chit Chat Stocks: "6 Hidden Suppliers for the AI Boom; Microsoft's OpenAI Gains; Amazon and UPS Layoffs as Recession Indicators?"

Date: October 31, 2025
Hosts: Ryan Henderson (A), Brett Schaefer (B)

Episode Overview

This Power Hour episode dives deep into developments amid earnings season, focusing on Big Tech reports and their implications. The hosts analyze the latest results from Netflix, Visa, SoFi, and other payments companies, then shift to a standout researched segment spotlighting "hidden" companies powering the AI infrastructure boom. The episode also covers the Microsoft/OpenAI deal, macroeconomic signals from Amazon and UPS layoffs, and draws on lessons for investors seeking strong businesses amid noisy market headlines.

Key Discussion Points and Insights

1. Fiserv’s Tumble: A Lesson in “Value Traps”

[02:11 – 09:19]

• Background: Fiserv’s stock plunged 43% on its slowest organic growth in five years, a strategic overhaul, and low guidance.
• Quote (A, 04:01): “Fiserv’s recent results have increasingly relied on short-term initiatives...as opposed to building long-term relationships by prioritizing business that both meet our clients’ needs and comes with high recurring revenue.”
• Observations:
  • Markets sniffed out trouble before earnings; high buyback yields often signal underlying problems.
  • Comparison between “stitched together” acquirers (Fiserv) and home-grown platforms like Adyen/Stripe.
• Lesson: Caution urged when investing in acquirer-businesses without clear integration or “playbook”.
• Brett’s Take (05:24): "It bores me to sleep... I'd like to make money on companies that actually interest me."

2. SoFi’s Relentless Growth and Cautious Optimism

[09:19 – 17:35]

• SoFi’s Numbers:
  • Members grew from 1.2M (2019) to 12.6M (2024), adding 1M in latest quarter, outpacing Ally Financial’s total base.
  • Deposits reached $33B within three years of getting a banking license.
  • Personal loans are the fastest-growing originations; delinquency rates steady, but risk exists if recession hits.
• Quote (A, 14:23): "They asked [CEO Noto] about [PayPal + OpenAI], and he said, 'We're launching products, not press releases.' I love that quote."
• Discussion:
  • Both hosts express excitement for SoFi’s flywheel effect and cautiousness about rapid loan growth in a potentially perilous lending environment.
  • Valuation: Price/book ~5x, PE ~57–72x; hosts suggest stock may be fairly valued now, but long-term is promising.
• Concerns: High lending growth and exposure to personal loans bring risk during downturns.

3. Netflix: Strengths, Vulnerabilities, and the State of Streaming

[17:35 – 27:59]

• Earnings/Stats:
  • 17% YoY revenue growth—fastest since June 2021.
  • Successful scaling of ad tier; aiming to double ad revenue in 2025.
  • Trading at approx. EV/EBITDA 37x.
• Key Insight (B, 19:55): Netflix is gaining overall TV time but is losing streaming-specific share to YouTube.
• Quote (A, 25:22): “They’ve done a phenomenal job… every big crossroads they’ve come to, they’ve done a pretty good job evolving the platform.”
• Discussion:
  • Netflix’s future growth likely driven more by advertising, additional features (gaming, live/talk shows), further price increases than by subscriber growth.
  • Password sharing crackdown seen as a success and industry trendsetter.
  • The duopoly is framed as YouTube vs Netflix—not Warner Bros/old media conglomerates.
• Brett’s Take (23:54): “Charts of YouTube taking time spent from Netflix…would be a big concern for me if that continues.”

4. 6 Hidden Suppliers Powering the AI Boom (“Picks and Shovels” Thesis)

[28:30 – 46:52]
Ryan compiles a researched list of “infrastructure” companies benefiting from massive data center/AI buildout. All have seen rapid stock appreciation, but hosts debate if they’re now too risky given runups.

The Six Companies:

1. Amphenol — Power distributors, cables, sensors for data centers; “boring” but posting 53% revenue growth, a 20-year high.
2. Quanta Services — Designs/installs transmission and distribution lines; first call for new data center buildouts. Quote from CEO (A, 32:30): “If we’re going to lead…the world, you have to have power. And we are right in the middle.”
3. Arista Networks — High-speed switches/routers and specialized data center operating software; called “the toll booth of AI.”
   • 2012 revenue: $193M → 2025: ~$9B; 34–37% CAGR.
4. Vertiv Holdings — Cooling and power solutions for data centers; stock went public as a SPAC, now a ~20-bagger.
5. Micron — Memory chips (DRAM) essential for GPUs, which require 5–6x more DRAM capacity than non-AI workloads.
   • Quote (A, 39:30): “Our HBM performance has been strong...robust demand, tight DRAM supply, and disciplined execution have significantly strengthened the profitability of the rest of our DRAM portfolio.”
6. Comfort Systems — Construction/services for making data centers “livable” (mechanical, electrical, plumbing contracting); another “20-bagger.”

Risks and Debates:

• Brett’s Concern (37:04): “I'd be so scared to buy any of these…the bottom could fall out by 90% if it’s like the telecom bubble.”
• Both highlight cyclicality of hyperscaler capex and the risk these firms face if demand sharply declines.
• Quote (A, 41:40): "These businesses will be better off, most likely...20 years from now because of the AI boom. There is likely to be a slowdown in demand, but that doesn’t kill them.”

5. Visa as a Macro Indicator

[46:52 – 53:06]

• Visa Q4 Highlights:
  • 12% YoY net revenue, 9% volume growth, 50% net income margin.
  • Repurchased $18B of stock (~2.6% of market cap).
• Insight:
  • Visa (and Amex) serve as real-time indicators of consumer health and macro strength.
  • At ~28x PE, both agree Visa is too expensive now but is on the recession-buy watch list.
• Quote (B, 49:34): “One of the best competitive advantages ever.”
• Ryan’s View (53:01): “Buying Visa for me is like admitting defeat on active investing...the cat’s out of the bag.”

6. Microsoft’s OpenAI Deal and the Structure of Big AI Partnerships

[53:06 – 60:01]

• Details:
  • OpenAI spins out a for-profit arm; non-profit holds 26%, valued at $130B.
  • Microsoft owns $135B stake (~27%), maintains IP rights through 2032, and secures $250B in Azure commitments.
  • OpenAI aims to IPO by 2027 and can now aggressively raise funds.
• Analysis:
  • Quote (A, 55:50): “It seems to benefit [Microsoft] in plenty of different directions...kind of being subsidized by venture capital in a way.”
• Prediction (A, 57:09): “I bet they do not go public by 2027... At some point it’s going to be like the WeWork situation.”
• Brett Adds: Latest round investors likely not to see expected returns; reminiscent of late-stage Uber rounds.

7. Layoffs at Amazon, UPS, and Target: Recession Indicator?

[60:10 – 64:52]

• Facts:
  • Amazon cutting 30,000 corporate jobs (still hiring aggressively for tech/science projects like Kuiper).
  • UPS eliminating 14K corporate and 34K operational roles; Target trimming 1,800.
• Debate:
  • Is this news a sign of consumer spending trouble, or just post-pandemic “efficiency” resets?
  • Quote (A, 61:23): “It feels weird to lay off 30,000 corporate employees right before the supposed busiest time of the year for Amazon...this is sort of a bad indicator.”
  • Both hosts lean “cautiously pessimistic” about what this signals for holiday demand.

Notable Quotes & Memorable Moments

• On Fiserv's Strategic Overhaul:
  “That’s when you know things are going bad. That’s like when the manager gets relieved of duty on the sports team.” — B, [03:45]
• On “Picks and Shovels” for the AI Boom:
  “We talk about the boom in AI infrastructure spending… this is sort of the modern gold rush and there will be beneficiaries besides the hyperscalers.” — A, [30:06]
• On SoFi’s Brand:
  “They have just nailed it in terms of attracting customers and being an attractive brand to younger people trying to build wealth.” — A, [11:16]
• On Microsoft/OpenAI:
  “Having the tie-up here is just a nice way of basically not having to build this internally and not having to front the expenses.” — A, [55:50]
• On Netflix’s Resilience:
  “Netflix has been doubted time and time again. I’m so scared of doubting them because of their track record.” — B, [27:59]

Timestamps of Key Segments

• [02:11] Fiserv’s Earnings Mess and Payments Industry Analysis
• [09:19] SoFi’s Explosive Growth and Caution on Lending
• [17:35] Netflix: Competitive Landscape & Revenue Mix Evolution
• [28:30] The Six Hidden Suppliers Fueling the AI Boom (Picks & Shovels)
• [46:52] Visa as a Macro & Recession Play
• [53:06] Microsoft’s Deepening OpenAI Ties & AI IPO Speculation
• [60:10] Layoffs at Amazon & UPS: Signal for Consumer Weakness?

Final Thoughts

The episode is a sweeping tour through the winners (and potential traps) in both tech and infrastructure, with an emphasis on finding underappreciated ways to bet on the AI mega-trend—while remaining wary of cyclicality and hype. Classic businesses like Visa and new school players like SoFi are judged not only on growth, but staying power, risk, and realistic valuations.

Hosts’ Parting Wisdom:

• Don’t chase value or growth without understanding business quality and risk.
• In AI, “picks and shovels” companies may be the big winners—until the gold rush slows.
• Watch macro signals (like layoffs) closely, but resist reactive trading.

As always, this podcast does not constitute investment advice.