Loading summary
Transcript43 lines
- [00:01]
Sponsor Announcer
Support for the show comes from bcx, the public ticker for private tech The US Stock market started history's greatest wave of wealth creation. From factory workers in Detroit to farmers in Omaha, anyone can own a piece of the great American companies. But today, our most innovative companies are staying private longer. Which means everyday Americans are missing out. Until now. Introducing vcx, a public ticker for private tech now available wherever you buy stocks. Visit getvcx.com for more info. That's getvcx.com carefully consider the investment material before investing, including objectives, risks, charges and expenses. This and other information can be found in the Fund's prospectus@getvcx.com this is a paid sponsorship
- [00:46]
from the Goldman Sachs trading floor in 10 minutes or less. Investors and analysts share timely analysis on the week's market activity. The Markets Podcast from Goldman Sachs Listen
- [00:58]
now
- [01:01]
Avoiding your unfinished home projects because you're not sure where to start. Thumbtack knows homes, so you don't have to don't know the difference between matte paint, finish and satin or what that clunking sound from your dryer is. With thumbtack, you don't have to be a home pro, you just have to hire one. You can hire top rated pros, see price estimates and read reviews all on the app. Download today.
- [01:31]
Bradley Tusk
Money markets matter. If money is evil, then that building is hell.
- [01:41]
Ed Elson
Welcome to Profit you Markets. I'm Ed Elson. It is July 16th. Let's check in on yesterday's market vitals. The major indices rose after another inflation reading from the producer price index came in cooler than expected. Treasury yields fell broke. Brent crude had another volatile day as the US Continued to strike Iran. And finally, Apple stock hit an all time high after announcing it will integrate Alibaba's Quinn model into Apple intelligence in China. Okay, what else is happening? The largest IPO in history is officially underwater. Yesterday, SpaceX fell below its $135 IPO price for the first time, touching an all time low of $132.75. The now dropped 40% from its peak, wiping away more than a trillion dollars in value. That downfall comes just one month after a debut that raised a record $86 billion and briefly made Elon Musk the world's first trillionaire. The new low also comes just one week after SpaceX joined the NASDAQ 100. That means that the index fund and the millions of Americans whose retirement accounts track it bought in right before a 10% decline. It also means, more importantly, my SpaceX prediction is on its way to becoming reality on June 10th. This. Here is my prediction for what will happen tomorrow. As soon as it hits the market, SpaceX stock will immediately explode, 25%. However, my other prediction is that within six months, probably sooner, Space X stock will be cut in half. Why? Because the valuation makes no sense whatsoever. Almost two for two. We'll see. Joining us to discuss Space X's decline, we're speaking with Nicholas Owens, equity analyst at Morningstar, one of the few analysts who has been bearish on this stock. Nicholas, thank you for joining us on the show. Just as a reminder for our audience, you published your SpaceX research before the IPO, you valued the company at $62 per share. So even lower than where we are now, of course. Just walk us through your valuation. Again, as a reminder, the $62 is
- [03:53]
Nicholas Owens
the result of three scenarios. You know, a bull case, medium case and a bear case. And some probabilities that we assign to those. Only in the bull case do you get into the 130, 150, $160 range. The problem is that depends on so many things going right that we think there's only a 7% chance of that happening. So that's where you get to a weighted average fair value of 62. You know, the medium case on its own is about $71 a share. So I think we're in the same camp, if you will, thinking about halfsies
- [04:26]
Ed Elson
valuation wise, just looking at what's happened so far. So the stock, I mean, obviously it popped immediately, as I thought it would. It continued to rise and now it's coming down. I mean, it's been pretty quick the way this has happened, especially considering the fact that it joined the NASDAQ 100 so recently. What do you make of how quickly it has started to drop back down?
- [04:50]
Nicholas Owens
I think it's a really good point. I think there's two kind of buckets that I would want to point out there. First of all, maybe working backwards, it's quick, I think, partly because the float is still so small, only 4ish percent of the company. But then on top of that, I think, and I go back and forth between thinking about the fundamentals, like what do you have to believe about AI data centers in space, etc. Or what the margins on that might be in 10 years. And then you go to just the market, the supply and demand for the shares themselves. Right. So both of those should drive the price. So I think here you have in the next couple weeks, I think they're supposed to announce earnings August, something August 8th or 9th and two days after that, a whole nother 7% of the company can be sold by insiders. So that's supply. And then I wanted to comment on the NASDAQ 100 inclusion, which is notable because it was a result of some changes in their methodology and so forth, but I think actually not even that huge a deal in terms of demand. So I, I googled how what's the market cap of all the funds attract the NASDAQ 100 and something like $800 billion. Or if it's $800 billion and they're weighting it at 1%, that's $8 billion of demand. That, that would have been a result of that inclusion, which does not offset, if you look at the market cap and even with the float, you know, the potential supply of someone who bought it at 135 and was selling at 156 or whatever in the last couple weeks.
- [06:24]
Ed Elson
One of the crucial things you mentioned that is the fact that we haven't even gotten to the lockup expirations yet. I mean, that was what I was kind of waiting for, is as soon as people can sell. My assumption is there are a lot of people who are very rich on paper right now. As soon as those lockups expire, I assume they're going to want to sell and maybe go out and buy a boat or buy a house, whatever they want to do. That hasn't even happened yet, and yet the stock is still declining. Surely that means it can only keep going down. What do you think will happen?
- [06:56]
Nicholas Owens
I think that seems likely. My, my, I think two kind of. So I, I go back then to the fundamentals. What are, what are maybe some changes in what people believe about what's, you know, what drives the value of this stock. There's certainly the Starlink business, which is actually kind of the gem, you know, right now, but you have motivated competitors making some advances in their, their launch and their technology. Ironically, I think that the, the economics of this business may resemble the terrestrial telecoms business, where Morningstar would call it an efficient scale source of moat, which is problematic because the more players there are, the worse the economics get. So SpaceX is kind of king of the hill there, and having a eager competitor launching a bunch of satellites looks like a capacity glut could happen. And so pricing doesn't look as good. So there's maybe some overhang even on the Starlink case in terms of AI. There's so many assumptions you have to make to get to these upside scenarios. And the Payoff there, you know, is in, let's call it decades. And there's a couple news items I would point to. Meta starting to run out, capacity, OpenAI probably delaying their IPO. Those are things that would make people question the thesis of what is the ROI on all these investments that have been made. And SpaceX today looks a lot like an infrastructure play and, and also an LLM that is not in the top ranks, shall we say? So lots to question.
- [08:39]
Ed Elson
And when you look at some of the research that we've seen from some of the other Wall street analysts, to be clear, 27 of the 31 analysts who cover this stock have recommended it as a buy. And the average price target is shockingly $242 per share. One analyst gave it a price target of $800 per share, which would value it at $10 trillion in market cap, which would make it by far the most valuable company in the world. Like double Nvidia, Double Apple. I mean, it's just nuts. What are your reactions to some of the other price targets we've seen, given the fact that you rate it at 62?
- [09:17]
Nicholas Owens
I would sort of like to go back to first principles and I would say things like the market works on disagreement and it's really good that investors have, let's say, different sources of information about what. What do you have to believe to buy this or that version of what the stock might be worth? I think there's also a methodological difference. I have a discounted cash flow model. We have forecasts out to 2045. We're discounting those today. So we're saying these shares are fundamentally worth $62 today. Again, probability weighted. A lot of those analyses that you're refer to, they're doing things like, oh, let's get to 2027, 2028, when they might be making money a little bit, and then we're going to put a hundred x multiple or something on that number. And they're doing some of the parts, you know, with starlink and AI and so forth. But that is a different methodology that gets you. And again, I think when you're doing a multiple, you're baking in assumptions that are not necessarily being stripped out. You're making growth rate assumptions and discount rate assumptions that we always are very explicit about at Morningstar. So I think that's, that's as much of a compare and contrast as I'd be comfortable doing.
- [10:23]
Ed Elson
Fair enough. It's a polite way of putting it. Just looking ahead for the rest of the year. I mean, We've got the supply of the new shares coming down the pipeline. We've got, I mean, as you mentioned right after the Q2 earnings report, lots more supply because of the lockup expirations, but then it's going to continue for the rest of the year. Lots more investors will be able to sell. Given all the information at our disposal, do you have any thoughts on how the stock will perform over the course of the year?
- [10:53]
Nicholas Owens
Honestly, I think it could go either way and I'll tell you why. So with everything we've said, right, there's certainly a lot of items in the negative column in terms of supply of shares and small changes in people's sentiment can make a bigger move again given the smaller float. You could say a positive argument is the float will actually increase with each of these lockups expiring. And depending on what investors appetite is, you know, the price could find a new, a new direction. And I'll say too, I expect the quarterly report to be glorious. You know, we have, we have pretty good growth rates for even for 2026. And I think if they did it kind of according to what I think of as the classical IPO playbook, they've got 2/4 of numbers pretty much in the bag that they will be happy to share. Right. And I'm looking mostly at those, those rental agreements with, with Anthropic and Google one that are pretty nice chunks of revenue at low marginal cost. They're still spending a lot, et cetera. But anyway, I think you'll see some nice comps and then people might be more comfortable thinking, oh, AI might be whatever, cash flow neutral in 2033 or whatever the story ends up being. So I'm not excluding the possibility that there will be some good news there and it wouldn't take much in terms of, let's say, the collective appetite if the story turns positive again. So I wouldn't sit here and say it's totally going to crater. That said, there has to be more demand than supply for the stock to go up. It's again, first principles.
- [12:36]
Ed Elson
All right. Nicholas Owens, equity analyst at Morningstar, very respectfully bearish, which we always appreciate. Thanks again for joining us. Nicholas.
- [12:48]
Nicholas Owens
Thanks so much.
- [12:51]
Ed Elson
After the break, New York hits pause on data centers. And for even more markets insights, you can subscribe to my weekly newsletter, simply put@simply put. Prof.gmedia.com.
- [13:09]
Sponsor Announcer
Monday AI agents took over my work and I absolutely love it. Chasing deadlines, writing status reports, updating stakeholders. Agents handle the daily grind. Now they live inside. Monday.com, so they see the full picture. My work, my team, the whole company. And I don't have to worry about the data. It's safe, which means I'm free to focus on the big stuff. Knowing everything runs smoothly in the background. It's completely shifted the way we work. Create your own AI agent in minutes on Monday.com
- [13:41]
excuses are easy. An epic movie night. We don't have enough snacks. Dinner party with the girls. We'd have to decorate. Surprise date night. Nothing to wear but Amazon's prime same day delivery lets you say yes before the moment slips away. Try that new popcorn maker. Order those cheeky drink glasses. Get that new perfume and turn that I wish we could into an I'm so glad we did. Visit Amazon.comprime to find millions of items delivered from fast same day delivery. It's on Prime. Available in select areas. Terms apply when you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit@ Indeed.com podcast. That's Indeed.com podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored jobs.
- [14:53]
Ed Elson
We're back with property markets. New York just issued the country's first statewide data center moratorium. Governor Kathy Hochul signed an executive order on Tuesday that pauses state permits for the largest AI data centers for one year. During that pause, the state will write rules to protect the environment, the grid, and rate. The move comes amid growing opposition to data centers nationwide. A recent Gallup poll found that 7 in 10Americans oppose constructing data centers in their own community, and local resistance has already delayed or blocked nearly $130 billion worth of projects in the first quarter of 2026. The big question now is, will other states follow New York's lead? Joining us to discuss this, we're speaking with Bradley Tusk, venture capitalist, political strategist, and writer. Bradley, good to see you. Thank you for joining us. That is my first question. Is this moratorium the first of many?
- [15:49]
Nicholas Owens
Yes.
- [15:50]
Bradley Tusk
Now, I don't think it's sort of an absolute yes, but let's work off the basic thesis which pretty much defines everything that I do, which is that every policy output is the result of a political input. Every politician makes every decision solely based on winning the next election and nothing else. If you assume that's the case in 34 years in politics, has taught me that that's the case. Then you look at the unpopularity of AI across the board, then of course, politicians are going to pass bills and regulations and sign executive orders that come off as anti AI. And we've seen lots of stuff happen in this past legislative session which wrapped up about a month ago, kind of across the country, where new laws regulating chatbots, new laws regulating AI use in insurance, new laws regulating AI use in healthcare, in hiring data center. So there's a lot of areas of it because politicians want to seem responsive to the voters, and data centers are particularly controversial. However, I also do think when you read the governor's executive order, it does kind of point towards a resolution of all of this that I think is pretty doable. And I will say that Kathy Hochul, for a Democrat, is really pro business. So when she did this, that's an indication of one, how powerful this issue is. She is also up for reelection this fall, and she's not stupid by any means politically either. But I think that she did sort of lay some breadcrumbs as to how this all works out. And to me, really, there are kind of three things that if data centers say, hey, we can do these things, most of this is pretty resolvable. So one is energy. And the thing that made that data center so unpopular is that initially the ones in Northern Virginia, in Georgia, were just plugging into the grid. And by doing that, because of their vast energy consumption, people's electricity, electricity bills are going up 30, 40%. And they're saying, why am I subsidizing Sam Altman? Why am I subsidizing anthropic? And of course, they shouldn't do that. If data centers are required to either bring their own power or pay for their own costs and not impose those negative externalities on anyone else, that solves a lot of it. So that's number one. Number two is water usage. And even though it doesn't get as much attention, data centers, when you have a system that big, requires a lot of water for cooling. There are things called a closed loop system that are really not that hard, hard to install. And a data center can be built in a way that it brings in its own water, it circulates, it refrigerates it, it meets its own needs, and it's not drawing from the water utility itself or the risk of it then putting polluted water back into it like you just saw with a metadata center recently. And the third would be a Relationship with the data center itself is a benefit to communities. One challenge that data centers have is they don't create a lot of jobs. They create some construction jobs. So some of the building trades unions like them and that's but long term permanent jobs. It's really not all that many. So if you're going to be in a community, how can you help it? Are you going to help pay for energy grid improvements? Could you pay for some sort of property tax rebate? Could you pay for libraries and parks? And I think the good data center builders and hyperscalers are open to these ideas. And so I do think there's a solution here. But it's not just going to be, hey, AI is a national security issue. So we're just going to put these wherever we want and everyone just has to suck up and bear the clock cost of it.
- [19:20]
Ed Elson
Something I can't quite tell from this legislation is how genuine it is. I think it's certainly an element of this which is like she wants. She's running for reelection. It is more popular to be anti AI today, just based on the numbers, which makes me think, okay, maybe, I mean, it's unclear if this is actually an anti AI policy or if this is just pressing pause pretending to be anti AI policy and then it's actually something else. I mean, where is it?
- [19:52]
Bradley Tusk
I think you may be giving politicians too much credit in your question itself there. Right? Which is you're almost assuming there's substance, there's politics and where's the distinction? I don't think there is a distinction. Right. It's politics and then substance gets impacted by the politics of it. But I think the reason that the governor did the executive order supposed to sign the legislation was to sort of not further the notion that data centers in and of itself are a bad thing because we do need data centers.
- [20:19]
Nicholas Owens
Right?
- [20:19]
Bradley Tusk
You can't have a country that whose economy is so reliant on AI, whose international security kind of race around AI with China, and then not have the ability to actually power AI. So clearly we need data centers, but needing them and then imposing costs on voters and consumers are two different things. And I think that they are reconcilable. So I think what Governor Hochul was trying to do is not in any way imperil her reelection bid because she's a politician first and I don't want to pretend that she's not, but within the realm of politicians because I do work with her enough to know her reasonably well. She is pretty pro business, she is pretty reasonable. She's pretty moderate. She's the furthest thing from a DSA type Democrat. And so I think she was trying to split the baby a little bit.
- [21:03]
Ed Elson
Where do you think this goes from here in terms of data center regulation? Because if she's the pro business governor who is putting a moratorium on data centers, it makes me think that we're going to see even stricter anti data center regulation going forward.
- [21:19]
Bradley Tusk
So earlier this year, Vermont and Maine did both pass moratoriums that were vetoed by their governors. Now, the governor of Vermont happens to be a Republican. The governor of Maine is Janet Mills, who's a pretty moderate Democrat like Hokule. But in Oregon, a Washington state, are we going to start to see, you know, the most left wing states potentially do this? You know, absolutely. But. But here's one thing that's really important to understand about the politics and regulation of AI. It's really not that partisan. Meaning that when you look at the different types of AI regulation and legislation that have been enacted over the past year, it's not just the left, it's red states and it's blue states, it's rural states and it's urban states. And so fundamentally, the polling and unpopularity of AI kind of cuts across all of the normal partisan lines and ideological spectrums and everything else. And so I think politicians on all sides are certainly concerned about this final question.
- [22:15]
Ed Elson
A very important politician bashed this decision. President Trump said, quote, one of the biggest driving forces in the future for jobs are data centers. New York State has made a terrible decision. So he has come out publicly pro data centers. What does that do to his political standing?
- [22:32]
Bradley Tusk
I mean, I'm not quite sure what he means by one of the most important sorts of jobs, because data centers themselves don't create a lot of jobs. I assume what he means is that the AI economy powered by data centers needs data centers. And he's right about that. And he is the one that put together the whole Stargate program that was OpenAI committing $1.4 trillion in capex for data centers. So I guess he feels some ownership of it. And in terms of his own personal finances, you never know with this guy one way or another, but even he clearly has started to lean into the regulation of AI. He had an executive order a little over a month ago that asked the hyperscalers to give them meaning. The US Government advance copies of frontier new frontier models like Mythos from Claude before they're publicly released. And so even Trump, I think, understands which way the wind is blowing and so to a certain extent, he's probably trying to have his cake needed too. But also it's quite possible he doesn't even really understand what data centers are and someone said something to him and then he fired off a post and didn't even really realize what it was.
- [23:37]
Ed Elson
Giving him too much credit to say there's any strategy to it.
- [23:40]
Bradley Tusk
But yeah, I think the recurring theme of this interview has been you keep giving politicians way too much credit.
- [23:49]
Ed Elson
Okay, I'll stop doing that going forward. Bradley Tusk is a venture capitalist, political strategist and writer. Bradley, really appreciate your time. Thank you.
- [23:58]
Bradley Tusk
Happy come by. Thanks.
- [24:03]
Ed Elson
Exciting news from the Treasury Department. The United States will start producing new $1 gold coins emblazoned with the fetch face of President Donald Trump. That makes Trump the first sitting US President to appear on our national currency. But he will join a long line of other international leaders who featured on their currency while in office, including but not limited to Saddam Hussein, Gaddafi and Mao Zedong. So you know he's in good company. According to Treasury Secretary Scott Besant, the Trumpified coin quote celebrates the strength of American values. We're not sure what values he's referring to specifically, but they may include idolatry, greed, corruption, hubris. After all, these are the hallmarks of any self idolizing political leader, especially ones who have literally flirted with the label of dictator. And so it does appear that we are approaching, I don't know, the end times. And it's not just the gold coins. It is not just the gold statues. It's also the billions of dollars that were stolen from households via a literal Ponzi scheme called Trump Coin. It's also the dozens of children who were sexually abused by his confidant Jeffrey Epstein and all of the other young women who were clearly exploited, if not directly by Trump, then certainly indirectly through his social circle. It's also the fact that all of this was covered up by an administration that has systematically rewarded sycophancy and punished integrity. And if you don't believe me on that, just search up the name Margaret Ryan and you will understand what I mean. It's also the $5.6 million that he just paid this week as settlement in a lawsuit that literally found him liable of sexual abuse by a jury of his peers. It's the bombing of other nations with no real contingency plan. It's the accidentally murdering 120 children in a drone strike and then never actually acknowledging why or how that happened. It's the pardoning criminals and the threatening allies and then suggesting that we should invade them. It's a lot. And so what better way to commemorate this individual than to enshrine him on the legal tender of the United States States. Let's put him in the ranks of George Washington and Benjamin Franklin and Abraham Lincoln. Now, you might say that I have Trump Derangement syndrome. You might say I'm, I don't know, brainwashed by the media. But anyone with two eyes, a brain and a basic understanding of history knows exactly what's happening here. And that is this is, is what third world countries do. And if you cannot acknowledge that or you feel a need to justify it or explain it away or downplay it by any measure, then, dare I say it, you have been brainwashed yourself. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Kristen o' Donoghue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Profg Markets from Profeti Media. If you liked what you heard, give us a follow. I'm Ed Elson. And tune in tomorrow for our conversation with Mike Novogratz.
- [27:43]
Sponsor Announcer
Athletic Brewing Company crafts award winning non alcoholic beers for those who want to be part of every round. With over 185 flavor awards, they're exceptional NA beers that fit your lifestyle and any social occasion. Summer's full of good times and Athletic fits right in. Go to athleticbrewing.com to have brews delivered to your door or find them at a bar, restaurant or store near you. Near Beer Athletic Brewing Co. Fit for all times. Evening buyer's remorse. Buy a new car. I'll be moving in. Let's get started.
- [28:18]
Sorry, I think there's been a mistake. I bought it from Carvana.
- [28:21]
You what?
- [28:22]
Yeah, great price. I even have seven days to love it or return it. So there's no, no, no buyer's remorse. More like buyers rejoice.
- [28:30]
I guess I'll let myself out. Congratulations. I mean it.
- [28:35]
Buyers rejoice. Buy your car today on Carvana. Limitations and exclusions may apply.
- [28:39]
See our 7 day return policy@carvana.com your team just added its 67th AI tool and also your 67 security blind spot. The good news, the Vanta agent works like a GRC engineer in the background finding every app your team uses, scoring the risk and drafting fixes for you. Vanta is the platform used by over 16,000 fast moving companies like Ramp, Cursor and Harvey who are shaping the future with AI and staying ahead of AI risk. Get started@vanta.com.