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Foreign.
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How does the market in 2025 fit into the history of the stock market? Motley Fool Money starts now.
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Everybody needs money.
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That's why they call it. But you can give them to the birds and be that.
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From Fool Global Headquarters, this is Motley Fool Money.
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Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by John Quast and Jason Moser. And I think this is an important time in the market to take a step back and look at a little bit of context in history. There are sort of these decade long trends that we typically go through and it seems like we're either at the beginning or end of one of those with artificial intelligence and all of the companies that are going crazy right now. So I want to get your guys thoughts on kind of where we are. We all see the potential of artificial intelligence but the Internet was a massive opportunity in 1999. Mobile was a huge opportunity in 2007. That didn't stop the crashes that ensued. So what sort of historic parallels, Jason, do you see in the market today that investors can learn from?
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Yeah, well, I love this idea. I mean I think there are a lot of parallels we can draw here. There are some similarities and think there are some, some differences as well. You go back to for example the build out of, of, of the Internet right back 1999, the.com crash that ensued. I mean there's a lot of similarities from then to, to what's going on today. Right. There's massive infrastructure build out. It's the foundation for what looks to be a new era of technology. And it's also accompanied by a lot of speculation in the markets and, and we're seeing that in the form of a lot of nosebleed valuations. I mean I'm not saying they're all nosebleed valuations but there are, there is some data that shows that AI first companies today that are coming to market are getting 20 to 40% premium valuations over their non AI driven types of companies. And then you're also seeing some of the most speculative names are garnering valuations in the neighborhood of 200 times sales. And so that some of them have.
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Gone parabolic just in the past few weeks.
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Yeah, absolutely. And I mean that I understand the enthusiasm. But you know, there was an interesting interview with Orlando Bravo the other day on, on tv. You know he's heads up the firm Thoma Bravo, which they specialize in SAS software and stuff like that. The question that was posed, and it's as it's been posed to most of us is, are we in a bubble? And he, he answered simply, yes. I mean, you can't have companies that are working on $50 million in annualized recurring revenue valued at $10 billion, right? That just doesn't work. It's not sustainable. And so at some point we will see that, we will see that shift. But I, I do think there are some differences too, right? I mean, primarily you look at the physical restraints of what was being built out back in, in, you know, 99, that was laying all that optic cable, right? Physically difficult to do, but a little bit different than really kind of the restraint today. Right now we're talking about power, right? We're trying to figure out how to get the electricity and the power to really make all of this stuff run. I think funding is a little bit more this time around just because so much of it is coming from the hyperscalers. Let's, let's put OpenAI aside here and look at the other companies, your Amazons, your Alphabets, your Nvidias of the world that are helping to fund a lot of this. And when you have businesses that are, that are that big with more reliable cash flows, I think the funding side of it seems to be a little bit less speculative than it was back then.
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Do you think that has changed over the past, even the past few weeks with things like guaranteeing revenue? I think Nvidia did that. With Core Weave, you're seeing more variable interest entities, or they're going by different names now, but it's basically, you know, doing some of these financings off balance sheet. That's what ultimately got Enron in trouble. That isn't necessarily a parallel that we want to go down, but it's, it's, it's one of those things where there are these small red flags that you can look throughout history and go, okay, when you start to see this happen, you should perk up a little.
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I think you need to be asking the questions. I think it's no accident that this week we really saw a lot of those maps circulating around that kind of were showing the intertwined blindness of all of these. It's just handful of companies that are really sort of dictating this space and you want to put some numbers around it. I mean, this is what really makes me nervous. I think you look at Morgan Stanley research, they say that OpenAI itself, they make up more than $300 billion of this, something like $880 billion total future contract value. Right? That's tied to the spending with Microsoft, Oracle and Core Weave. Among others. And so you think about that in the context of the fact that OpenAI, I mean, they just generated basically $13 billion annualized at the midpoint of 2025, and they're losing money still hand over fist. So that's where that capital ultimately comes from, I think is a question that investors really need to be focused in on. It's not to say at OpenAI will continue to grow. Right. But that is a big delta that they're going to have to figure out a way to shore up.
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John, how do you think about this in a more historical context? What sort of things are you trying to learn from history that could maybe apply today?
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Well, I think historically, whenever you see something new and exciting, investors are wanting in on that, they're not wanting to miss out. And I'd say that applies to both retail investors and private equity investors. And you can kind of see that in a couple of fronts here, that there are some companies, I think, that are preying on that, taking advantage of that, knowing that investors are willing to pay up for the excitement, the admission to the theme park. And you know, you look at the public markets, for example, look at special purpose acquisition companies. I'm not saying that all of them, these are SPACs.
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This is what was really popular in 2020 and 2021.
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Yeah, right before we had major, major pullback in so many of the companies out there. These are companies that don't even have a business. They're saying, give us money so we can go buy a business. Many of them came forward in 2020, 2021. There's been a couple of years of a lull. But now this year we have 161 that have gone filed so far this year. And the year's not even over yet. That's as much as basically the last three years combined. I'm not saying that they're all bad opportunities. I'm not even saying that most. But I'm saying somewhere in there the data is saying, yeah, somebody is taking advantage of a situation where investors are very excited and they're willing to pay for a lottery ticket. Essentially the same thing in the private equity space. You look at the AI, private companies out there starting to do perhaps some questionable things, maybe counting some one time deals as part of the calculation in their annual recurring revenue and in doing that so that they can boost their valuations and that increases the amount of funding that they're able to get from these private investors. And you know, we would think that private investors are a little bit smarter than that. But again, I mean, we all have human psychology and we don't want to miss out on something that is truly transformative in artificial intelligence.
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Jason, you brought up that those images that are going around, there's one from the fte, there's one from Bloomberg, they just show this web around OpenAI. And one of the things that I think I Learned in the 2008, 2009 downfall of the market and the recession that ensued was things just got really, really complicated when a lot of things didn't need to be complicated. Right. Like we started with mortgages. Mortgages are fairly straightforward financial instrument. But then you start turning it into 48 different products that you're cutting into different pieces and nobody knows where the risk is or who's holding the risk. And that's what I sort of get concerned about right now is if AI is such a no brainer and it's such a high return on investment, then why do we need all this complicated, these complicated financial structures that again, it's just raising red flags to me. So let me put it this way because I think what we're trying to do today is take a little bit of our knowledge and pass it on to everybody who's listening. So if you were going to go back, Jason, I'll start with you. If you were going to go back and talk to yourself in 1999 or 2007, what would you tell yourself that you could maybe implement as an investor?
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Wow. Yeah, I like that question a lot. I think if I look back to 1999, while I was investing at the time, I wasn't a member of the Motley Fools. I think first and foremost, and I'm being dead serious here, I would have told myself to get a subscription to the Motley fool because from an educational perspective alone, I think that style of thinking, that style of investing and sort of taking that longer term view is just invaluable. I'd also say while it's tempting steer clear of speculation. I mean, I think you're right. One of the big problems back in 2007, eight was just the, the how un understandable that web of financial instruments ultimately became. And I think that was a result of greed primarily. But I also, you know, I look at today and kind of you're talking about these, these special interest entities and whatnot. You know, money, money isn't limitless. Right. And so I think they start to make it a little bit more complicated when they need to figure out ways to raise more money and that becomes a little bit more concerning as well. So I'd say from, from me I'd steer clear speculation. You know, these were stretches of time when some of the great businesses of our time went on sale. So stay focused on owning those high quality businesses. Leave the speculating to those who think they probably know what they're doing and maybe don't necessarily actually know.
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John, what do you think?
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So 99, I wasn't an investor yet and so it didn't really start for me until around the Great Recession. And I.
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Do you remember you weren't investing but do you remember feeling the dot com bubble and crash? Because I think that is an interesting, you know, until you actually have money in the market, it is kind of this thing happens, but it doesn't really affect me.
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Well, I would say absolutely not. I mean just where we were in our little corner of North Carolina back in those days, I mean man, we had dial up Internet so I mean we weren't even all that aware of what was going on. For me, the Great Recession was where I really began to take investing seriously. And what I tell myself, besides what Jason already said was I wish that I had just held on to my original vintage of stocks that I invested in that I know it's 20 years later now, but I look at some of the ones that I had at the time, Buffalo Wild Wings, which is no longer publicly traded. But if I'd have just held on to Buffalo Wild Wings from the time I invested until the time that it went private, it was a 10 bagger or more and I sold after it doubled. You know, I owned Marvel back before Disney acquired it and sold around the time of the announcement. I wish I had just held onto Disney all that time. McDonald's was one of the first stocks I ever bought. And yeah, maybe that's not the flashiest thing, but it's up over a thousand percent with dividends. And I know some of the listeners are saying, hey, well that's 20 years ago, but let me tell you something, for me it's 20 minutes. I just started investing. Like time goes by so fast and at the time, right, you say invest for three years, invest for five years. How could you ever. 20 years is a heartbeat. So man, I wish I could just go back and say, hang on, don't try to get cute, don't try to buy and sell, trade all this. Just buy and hold.
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Yeah John, the lessons that I have learned more than anything is not selling. To give you an idea of what I owned in those days that I sold Chipotle, Apple, you know, these are Las Vegas sands. I remember buying for $2 a share. I think that was a 20 bagger over the next couple of years that I sold too early. So yeah, owning those companies that aren't going anywhere that can survive any sort of downturn, I would also say start paying attention to balance sheets because if companies are going to not survive, it's going to, it's not going to be because the revenue drops a little bit. It's going to be because there's more risk on the balance sheet than they can handle. So something to keep in mind when we come back, we are going to talk more about this build out and where there could be opportunities. You're listening to Motley Fool Money.
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Welcome back to Motley Fool Money. One of the big topics of the AI buildout has been energy. And this has gotten a lot more attention over the past couple of months. Every hyperscaler, every neo cloud is looking for basically as much energy as they can get. Some of them have made deals with bitcoin miners. I think that's an interesting play here. Bitcoin miners spent a lot of time building out the energy they need to run their mining equipment. Now we're moving that to AI. So John, where are there opportunities for investors in energy or at least what should we be keeping an eye on?
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Well, I think that nuclear power is a big trend and I know that people have been hearing about it, but I just think it's going to be a lot of emphasis put there and even the emphasis that we put there isn't going to be enough. So you look at what OpenAI is reportedly wanting. Their reportedly wanting 250 gigawatts of electricity by 2033 just for running their AI data centers. That's just one company. President Trump earlier this year signed an executive order to quadruple the country's nuclear power. So it will add basically 300 gigawatts of nuclear power. But and so you look at that 250 is what OpenAI wants. We're saying, yeah, we'll add 300 gigawatts of nuclear power. So basically they'll take all of that.
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Doesn't seem like a lot of wiggle room there, John.
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Exactly. And here's the thing. The order is by 2050 to have that much extra power. And so President Trump is saying, well, we're going to add 300 gigawatts, give us 25 years. And OpenAI is like, we need it now. And so does every other company that's doing what OpenAI is doing. And so I just think we're going to have a heyday for nuclear, but even if we do, it's still not going to be enough.
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I want to put some numbers to this. The EIA Energy Information Administration, which is a phenomenal source for energy information because they pull all the prices, all the capacity production, all that stuff. Between 2024 and 2028 in the US there is a planned about 200 gigawatts of additions. About half of that, over half of that is solar. So an intermittent energy source, you have to consider that the capacity factor of solar, meaning the amount of time that it produces energy on an average day, 2025 percent of the time. So we're not anywhere near hitting those numbers in what is planned. And power plants don't go up. Even a solar plant, which can be built relatively quickly, you're still talking many months, in some cases years. So all that said, Jason, where are you looking for opportunities today?
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Right. It definitely feels like we're going to need all we can get. So it's all hands on deck. And I think that the key is going to be focusing on every resource available. I think in regard to AI specifically and sort of capabilities that it's driving, I think that the overwhelming demand is going to be on those reliable or firm energy sources. Right. The stuff that's on 24 7, that's easily distributable. Right. And so renewables are one thing, but, but I think for, for AI specific stuff, we're going to be looking at nuclear natural gas and hydroelectric primary electric primarily. We saw Google earlier in the year, made a deal to provide some early stage capital for elemental power to prepare some, some nuclear sites here in the US I think those were with the small modular reactors. And I think the other thing to think about longer term, and I'm talking about longer term, Travis, but think a decade out. There's an interview with Jeff Bezos this week that I was pretty, I was fascinated by Because I actually could totally see this happening. I mean, he was talking about data centers in space. Right. Essentially.
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Sounds crazy.
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Sounds crazy. It does. It sounds like, huh. But if you think about it, they're already trying. Right. They're already in the process of trying to figure out how to make this work. Now that solves two key problems. Right. You get the limitless resource of solar up in space and you've solved. Yeah.
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Suddenly that becomes a base source energy.
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Exactly.
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As opposed to a variable.
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And you. And you solved your cooling problems as well. So. So it kind of knocks it. You kill two birds in one stone, so to speak. So I think that's pretty interesting to think about just further out. So just keep an eye on that. I don't think that's pie in the sky stuff. I think that's actually pretty legit. And then beyond that, I look to other companies in the value chain that sort of enable smart usage and monitoring. The company I've talked about before called Itron, that does that. They help their customers sort of safely and securely monitor that critical infrastructure and power and water. So you can look beyond the providers and look to those value chain adders as well.
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Do you think that the rise in electricity prices, which again is getting more attention this year, I've noticed it with my electricity bill. Jason, is that a pending problem in the US because if AI is what's raising the costs for the average person seems. Seems like an issue.
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Consumers will not like it, I can guarantee you that. I mean, I noticed the power bill difference when the winter hits here in Northern Virginia and it basically doubles. And if we see things going beyond just your typical seasonality, I think that's going to be a real problem.
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Yeah, that's something to keep an eye on because, you know, regulators do play a pretty big role in this. Who's going to get the electricity? What are people paying? And that is. That's not just an economics process. Although the economics could help with justifying some of these investments too. Something else to keep in mind is that, you know, energy costs are important and if prices are going up, people are going to put more money into the ground. When we come back, we're going to see how well Jason and John know their history of investing. You're listening to Motley Fool Money.
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Welcome back to Motley fool of Money. I want to know how well Jason and John know their market history.
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So I'm gonna.
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I'm gonna ask you guys a few questions and see who knows the answer. John, I'll have you go first here.
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What.
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What was the date of the 1987 crash? And as a bonus, how much did the Dow Jones Industrial Average drop on that day?
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Oh, and I assume that you're wanting more than the year 1987.
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Yeah. Yeah, I would like.
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I would.
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You.
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You can give me the day of the week. Any, any information is.
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Well, it was on a Monday, right?
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Was this Monday?
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Yeah. Well, there we go. I've heard Black Monday. I would think it's in October, but I don't remember.
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Jason, do you know the date?
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I actually do know this one. It's October 19, 1987.
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And how much did the Dow drop? What are your guesses?
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Is there a, do we have like a little wiggle room here? I know it was, it was like 20%. It was a little bit more than 20%, but I don't think it was 25%. It was kind of somewhere in the middle between 20 and 25% zone.
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Oh, that's good. John, do you have any.
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I was going to say 12.
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Okay. 22.6% drop for the Dow Jones Industrial Average. But the other thing that's interesting with that historically is the Dow was what really got all the attention back then.
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Yeah, yeah.
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It was not the S&P 500. We don't talk much about the Dow anymore. But it was those 30 stocks that was, that's what was reported on the nightly news. That's, that's the numbers that everybody knew is what was the Dow doing?
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Yeah. And it's interesting to think about the difference between the Dow and the S and P. You know we talk about like, like they definitely tried to modernize the Dow to a degree. It's a little bit more up to speed now. But there's also that difference between like the stock price weighted index, like the Dow Jones.
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Do you want to explain that?
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Because.
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Because that is a really weird thing about the Dow.
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Well, yeah, essentially. I mean you're just looking at one index in the Dow where it's basically measured by the value of the stock price itself. Right? Yeah, the number. The number.
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So, so if you have a hundred dollar stock, it has a 10x weighting of a stock that has a 10 DOL stock.
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Right. Whereas with the S and P it's market capitalization weighted. So you're actually talking about how heavy the whole company is. Right. Stock price can be a function of anything. I mean stock splits and whatnot can change it. So it is just interesting to see that difference there and how that ultimately plays out in the way those indices perform.
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Yeah. And back then that was a big reason that a lot of stocks typically were kept with stock splits and things like that between somewhere around $30 and $100 per share.
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Yeah.
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Once you hit 100 you would expect the stock split to come. We don't really think about that anymore because we have fractional shares and all that kind. That stuff didn't exist.
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Yeah. And I think didn't memory serves. I think when Apple, Apple joined the DAO and didn't it actually split its stock in order to be able to facilitate that membership? I feel like that might have happened.
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That is a historical question I do not have the answer to. Speaking of big tech though, and maybe I'm giving things away here. What was the most valuable company in The World on 1-1-2000? Jason, I'll have you go first here. This is, this is.com bubble.
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So lots of options Here there are a lot of options. Was it Global Crossing? I don't know. Honestly, just, I feel like that's a.
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John, I would guess Cisco.
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You know, that's, that would have been my guess. Cisco was the most valuable company in the world for a short period of time, but that was in March of 2020on. At the turn of the century, turn of the millennium, it was Microsoft that was the most valuable company in the world. So interesting parallel to where we are today. Microsoft was the most valuable company in the world. That is still one of the most valuable companies in the world. But if you would have invested in Microsoft at the beginning of 2000 and held it for the next 15 years, you would have basically the same amount of money.
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Yeah, I was going to say the Ballmer years didn't treat shareholders very well.
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Yeah.
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And so it's, you know, there's a couple of things. I mean, their business actually did fine during the 2000s, but end of the 1990s, early 2000s, the price that you were paying was extremely high. And so multiple compression, meaning the price to earnings multiple, or the price of sales multiple, was going down over that period of time. So instead of multiples being a tailwind like they've been for a lot of stocks over the past couple of years, it was a headwind for Microsoft. So again, just something to think about as we, as we kind of think about the market today. Pets.com gets a lot of attention in the dot com bubble. Do you know when pets.com IPO'd and what its highest market cap was before falling apart? John, I will have you go first. When was the IPO and what's the highest market cap?
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Oh, how should I know? You want more than the year, right?
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B
Let's say actually you might not get the year.
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Right.
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C
I know, right? I mean, I feel like this is a high bar. I'm going to go with June 12, 1995, and I'll say peak valuation was 50 billion.
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B
Jason, I'll give you a guess here, but these numbers surprise me.
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A
Yeah, the ipo. I, I don't know. So I'm just going to guess March 1997, valuation wise. I know we've given the, given the valuations that we see today, you would want to say something like 50 billion or 50. I get that, but I think actually it was really, especially at that time, this was even big at that time. I think it was something like $450,500,000,000.
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B
Wow.
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A
Wow.
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B
So you guys are both way off for the, for the Timing. Their IPO was February of 2000. So, yeah, way later than I would have guessed.
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Very short lived.
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B
But Jason, you're Almost exactly right. $400 million was their top market cap. And what's, what I think is interesting about that is that is the name that we all remember from the dot com bubble. I know, but it wasn't all that big of a company.
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A
No, no. Well, I mean, at the time it was, I mean, considering.
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B
But you're looking at, I think, I think today's prices. That would be still less than a billion dollar.
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A
Yeah, yeah. And I think I literally guess 100.
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Times more than that.
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A
They had a very, obviously a very short lived, lived campaign as a publicly traded company. But yeah, I mean that was just like, that was like the quintessential Internet stock. Right. I mean, just advertising at the yin yang found a clever brand with that little sock puppet puppy and they were just selling stuff on the Internet like this is the way we do it and just making no money in the process. But it's interesting how like we gave Amazon so much leeway to build out that concept and yet your pets.com of the world just, just never really stood a chance.
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B
The lesson that I take from that one, because you're right, Amazon has become obviously a household name everywhere. But if you would have just waited, right? Like if, if you would have just said, I'm not going to invest in the, the Internet, I think is a huge thing. But 1999, I'm just going to say, you know what, I'm gonna, I'm gonna let, let things play out a little bit. And you just waited even till 2002-2003-2004-2008, when you knew who the winners were. That was actually a great time to invest in, in even a company like Amazon.
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A
That's a really good lesson there.
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B
Okay, this, this one's fun. How many users? OpenAI has 800 million weekly active users. So how many users did AOL have at its peak? And then I have a follow up, Jason.
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So users as.
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How many. Yeah, how many subscribers? So that would be basically households.
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A
Okay.
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We were, we were, we were sending discs around.
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A
Yes, yeah.
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In those days.
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A
Yeah. And I mean that's the thing. Like OpenAI, 800 million weekly. Some odd users, like 20 million paying subscribers. Like they got to figure out a way to shore that up. AOL, I have no idea. Households, 125 million, John.
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C
Well, I want to change my answer now. I was going to go with 8 million and here's why I Mean, you had other companies, you had Juno, you had Net Zero, you had all those. And the trend started, but then eventually we switched off of those things. So I was going to say 8 million.
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Yeah. John, I could be spectacularly off.
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B
Yeah, the answer, John, you're actually pretty close. 25 million was their peak. But here is the, here's the follow up. When did AOL shut down its dial up service?
- [30:07]
C
John, I think I know this one. Earlier this year.
- [30:11]
A
Jason, do you, I, I, I was going to say, you would have, you would think they did this 15 years ago. I think it just happened like John said, very recently. I think sometime within the last year they actually stopped the whole thing.
- [30:27]
B
It was last week.
- [30:28]
A
Wow. Yeah, yeah, I, I would love to.
- [30:33]
C
Know the guy who was still using it like two weeks ago and who.
- [30:36]
B
Was, who was shocked that their Internet was shut down?
- [30:38]
A
One person.
- [30:41]
B
Okay, I got a couple of quick ones here. At its peak, how much was invested annually in the US Telecom build out? The thing that I wanted to bring in here is we talk about the dot com bubble bursting, but in the late 90s there was really two bubbles. There was the Internet bubble, so the companies, that was a sort of evaluation bubble and there was basically an investment bubble where telecoms were investing a lot of money in building out the fiber that Jason mentioned earlier. But what was the actual number that they were putting in the ground? This is just in the U.S. what is your guess, Jason? Annual number.
- [31:16]
A
So annual peak $100 billion.
- [31:20]
C
John, did you say million or billion?
- [31:23]
A
Billion.
- [31:23]
B
Billion.
- [31:24]
C
Oh man, I was going with, I was going with 10 billion.
- [31:27]
A
Yeah. Again, could be spectacularly off.
- [31:30]
B
Jason, you're about right. 118 billion in 2000 and I believe we've only passed that number in two years since then. So interesting that the, the telecom buildout was basically hockey stick growth rate and then it just plateaued.
- [31:47]
A
Yeah.
- [31:48]
B
The other one that we're not, that is sort of a similar is Apple in, in 2007, built sold 1.4 million iPhones. 2015 that got up to 231 million and then essentially plateaued. So the question, you know, for all of these businesses is when do you hit that plateau? Because that's when you could potentially run into problems. Okay, here's the one I wanted to end on quickly. From January 1, 2000 to March 2000, how much did the QQQ Nasdaq 100 rise? And then my follow up is how much did it fall over the next six months? John, so what is what, how much did it go up in those first three months, how much did it go down in the next six?
- [32:34]
C
I'm gonna guess for going up. I'm gonna guess it went up 15 during those three months. And then I believe there was a 50% drawdown from there.
- [32:45]
B
Jason?
- [32:45]
A
Yeah, I was going to say 20% for the first one. And then for the next six months from that point, I think it fell.
- [32:56]
B
From March to September.
- [32:57]
A
Yeah, from March to September, I would say it fell probably a good 60%.
- [33:02]
B
Up 18% in those first little less than three months. And then over the next six months fell 71%. So up an escalator out a window.
- [33:11]
D
Yep.
- [33:12]
B
Is the way that we kind of talk about this. Well, hopefully that was good context for people because I think we can always learn from history. Whether things repeat or not, they typically rhyme. I think that's how the saying goes. When we come back, we will get to the stocks that are on our radar. You're listening to Motley Fool Money. The legend lives on from the Chippewa on down of the big lake they call Gitchigumi the lake, it is said, never gives up her dead. When the skies of November turn gloomy with a load of iron ore 26,000 tons more than the Edmund Fitzgerald we'd.
- [33:55]
A
Empty.
- [33:58]
B
That good shipping true was a part to be too.
- [34:05]
C
When did making plans get this complicated?
- [34:09]
A
It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together.
- [34:14]
C
Use polls to settle dinner plans, send event invites and pin messages so no one forgets mom's 60th and never miss.
- [34:21]
A
A meme or milestone. All protected with end to end encryption.
- [34:25]
C
It's time for WhatsApp message privately with everyone. Learn more@WhatsApp.com.
- [34:37]
B
As always, people on the program may have interest in the stocks they talk about and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. One company I want to bring into the discussion. We've kind of high level talked about history and AI, but Google had some interesting announcements. OpenAI is obviously getting all all the attention but Google Enterprise, Gemini Enterprise was was announced this week. Jason, what did you take away from that?
- [35:18]
A
Yeah, tech, a few things. I think I use Both Gemini and ChatGPT interchangeably. Probably use Gemini a little bit more I wasn't terribly surprised to see the announcement because this is kind of an arms race and I think it speaks to Google's ability to respond to market forces and competition and I think also the real advantage that it has and it's already massive user base and the powerful business model, not to mention just customer mind share. Right. I think ChatGPT absolutely is doing a great job on the customer mind share. But kind of going back to earlier in the show when we were talking about 800 million some odd weekly users, only 20 million really of those are subscribers. And I think that is just a big hurdle for a company like ChatGPT to overcome. And the reason why Google doesn't have to worry about it so much is because they've got a business that's funded by this powerful advertising model, not to mention it's growing cloud business as well. And now when you look at, at Google in this space, like they're kind of the total package, right? I mean, what's that? They call it a full stack player. I mean, yeah, so the, a few.
- [36:32]
B
Of the things they announced, it kind of pulls Gemini into applications and this is, this goes into gcp, Google cloud platform. And that is actually a profitable business. I think that's something, you know, as investors we should, we should highlight that OpenAI is losing money, they're not public yet, but this is a huge growth business for Google, for Alphabet, and it is now profitable as well. And so the idea here is, I think the idea here is this is going to be an enterprise play along with, hey, you know what? If Gemini as a, as a consumer app wins, great.
- [37:03]
A
Yeah. Well, I think this shows a couple of things, right? I mean this technology at its core is totally replicable, right? I mean basically all they, all they need is the resources and the time to be able to do it. I think the thing that's not necessarily replicable is sort of the power under the hood, so to speak, with what Google has built through the decades. ChatGPT is just not there yet. It's not to say they can't get there, don't get me wrong, but I'm just saying that it's a much younger company that still has a lot to prove. And so from that perspective, again, I mean I look at something like a Google today and I think, wow, you know, I mean, they're doing a lot of really neat stuff. I think Chat GPT is doing a lot of really neat stuff too. But I think we're going to see at some point OpenAI is going to have to resort to some sort of an ad supported model in order to be able to continue generating that revenue. Or they're just going to have to come up with a way to grow that subscriber number which is just so small today compared to what Google has just on an ongoing basis.
- [38:01]
B
The 800 pound gorilla in the room that we always continue to overlook. Let's get to the stocks that are on our radar. John, I'm going to have you go first. What is on your radar this week?
- [38:11]
C
Yeah, on my radar right now is a company called Rubrik that is ticker symbol rbrk. And this is a small cybersecurity company. But what I like about this is that it's not trying to prevent attacks. Its business model is assuming an attack has already taken place and it's going to get your business back up and running in a fraction of the time. And so you think about that. That's really an interesting counter positioning when it comes to maybe what your crowd strikes of the world are trying to do. And so that's really interesting. It trades at about 15 times its sales. You look at its annual recurring revenue, it's up 36%. That's a good growth rate. Gross margin has jumped to about 80%. Those two things right there kind of signal to me that I don't think it looks terribly overvalued. It does generate positive free cash flow. Despite being a young business, it has a net cash position. It's adding new customers at a good pace. But with only 2,500 spending 100,000 a year, I think there's plenty of room to grow that net dollar retention is over 120%. So its existing customers are spending more over time. I really like its co founder and CEO Bipol Sina. He really values this mentality of basically innovate or cease to be a business. And so that could make things a little bit volatile. But I think it's going to also potentially make it a key innovator here in the cybersecurity space. So it's definitely one on my radar and one I'm watching.
- [39:38]
B
Dan, what do you think about Rubrik? So I do like the company, John.
- [39:42]
C
But I have a question about what they call themselves.
- [39:44]
A
They call themselves a zero trust data security.
- [39:47]
B
And zero trust doesn't exactly make me feel good.
- [39:53]
C
Yeah, that's an unfortunate way to talk about it in the trade.
- [39:57]
B
All right, Jason, what is on your radar?
- [39:59]
A
Yeah, something we've been doing here on the website recently with the analyst team. It's something we're calling the analyst stream. And a couple of days a week we're taking a topic of the day and all just sort of offering our spin on it. And today, Friday, we've got got safety stock pitches for folks. And so a stock that I recently purchased from my own portfolio with safety in mind is Waste Management. Ticker is wm. You know, as the old saying goes, your trash is my treasure. And we certainly produce a lot of trash here. But Waste Management, they own or operate the largest network of landfills in the US and Canada with 262 sites, making it the top dog. They also benefit from a growing recycling segment, renewable energy segment, and healthcare solutions business too, because you remember, they just acquired Stericycle last year. I think given the nature of the market there, trash is pretty reliable. I think holding onto this one for a decade or longer makes a lot of sense for investors.
- [40:54]
B
Dan, what do you think about investing in garbage? I mean, garbage isn't going anywhere, gang. We're not going to stop making it. It's going to be something that we're.
- [41:02]
A
Going to have to deal with forever. As the kids say. Dan, it true.
- [41:06]
B
All right, Dan, Rubric or Waste Management? Which one is going on your watch list?
- [41:10]
C
This.
- [41:11]
B
Like I said, garbage ain't going anywhere. We're going to go Waste Management. I like that dividend, too. We are out of time this week. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.