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- [00:00]
Yonatan Adiri
Foreign.
- [00:04]
Michal Avram
You are listening to an art media podcast, Sayonatan. What's your number?
- [00:12]
Yonatan Adiri
1.1% inflation for the month of April. That is way outside the government's target and on an annualized basis puts us at 3.6%, which is even further out the bank of Israel target. It's another ticking bomb for the government to defuse the. As Israel's cost of living continues to rise.
- [00:29]
Michal Avram
Well, mine is 1.98%. It's slightly higher, but in this case it's good that it's higher. This is the percentage of Israeli workers with AI related skills, according to a recent report from LinkedIn which analyzed global data. So take it with a grain of salt. Of course, people can put whatever they want to put on their LinkedIn profiles, but this puts Israel in the top position, ahead of Singapore, Luxembourg, Estonia and of course the US when it comes to concentration of AI talent. So I feel like I'm the winner every week. But whose number wins?
- [01:00]
Yonatan Adiri
I think this number is the 1.1% actually was a surprise. It's very consequential. And, you know, we had Corin Alal, an Israeli singer who had a famous song, Eretz Ktanayim Safam a small country with a mustache. We're a small country with a lot of AI granted, but for that to continue to fly, we gotta fight this inflation coming up. And I'm worried about this one.
- [01:20]
Michal Avram
I'm worried too. But you know what? I just, I feel kind of funny winning with inflation, you know, so I'm going with mine. But whatever, we'll call it a tie this week.
- [01:29]
Yonatan Adiri
Let's see what our listeners think. We had a couple of weeks with a lot of feedback, so keep the feedback coming. This one's a tie.
- [01:42]
Michal Avram
Welcome to what's yous Number? The newest podcast from Ark Media where we focus on Israel's economy through a global lens. I'm Michal Avram.
- [01:51]
Yonatan Adiri
I'm Yonatanadiri.
- [01:52]
Michal Avram
It is around 12pm here in Palo.
- [01:54]
Yonatan Adiri
Alto, 10pm in Israel. I just landed after a long flight through Abu Dhabi. Less than 24 hours. And as we record this on a Saturday evening in Israel, Yuval is about to compete in the next couple of minutes in the Eurovision contest. We are in the finals.
- [02:12]
Michal Avram
Amazing. And thank you for missing this. In order to record today, Yonatan, I know your family is closely watching as the family's downstairs. Yeah, Eagerly awaiting. Well, we're doing things a little bit differently today because later this afternoon I'm going to be boarding a flight. We're ships in the night here. Ionatan. I am heading to Riyadh week after President Trump. Interesting story.
- [02:33]
Yonatan Adiri
You get a good warmup. Presidential warm up to Michal. Yeah.
- [02:37]
Michal Avram
Hopefully they left the red carpets rolled.
- [02:39]
Yonatan Adiri
Out, you know, and the horses are still around.
- [02:41]
Michal Avram
Yes, definitely. So we're recording a little bit earlier in the week than usual so that we could put out an episode this coming week before I take off. And speaking of Saudi Arabia, this week's episode, another thing that's a little bit different is going to be part one of a two part long play. That's what we call our deep dive into one critical issue. And it's going to be focusing on the recent U.S. saudi deal. But first, as usual, we're going to take a look at some of the week's other pressing news, AKA our big shorts, including some key numbers that should be on your radar, like the Windex. Stay with us. Let's kick things off with this week's Windex or what's your number Index. This is our index of the stock performance of 50 publicly traded companies on U.S. exchanges that are headquartered in Israel and or founded by Israeli founders. Yonatan, how is the Windex looking this week?
- [03:35]
Yonatan Adiri
So the Windex has another additional company as of last week. We spoke a bit about Etoro, an Israeli company that opened frankly the IPO window for digital financing and crypto last week. A big hug from Wall Street. The equity shot up well beyond the top expectation and a very warm welcome for Etoro in Wall street and a new addition to the Windex. We saw the Windex underperforming S and P&NASDAQ. You mentioned last week as we recorded the huge uptick following the good news from Geneva, China, US Tariff negotiations which were going well. And so Wall street kind of responded to that very positively. So windex is up 1.29% but still below S and P and Nasdaq. I think A couple of things to add on that. We saw Fiverr.com, an Israeli DTC giant, growing 9.1%. This is a very interesting equity to watch as AI. We're going to cover that later today. AI grows, what happens to the gig economy, right? Is it continue to grow? Is it going to shrink? Are we actually going to see more gig economy intermediating between people who get AI and do kind of vibe coding? But then the folks on the other side are going to be in higher need. And so that's one theory about Fiverr. The other one is AI is going to eat everybody's lunch so let's see where that goes. Market was positive last week and just last but not least, SolarEdge, we covered them last week after a 50% increase, but way far out from their, you know, classic top figure of north of $300 per share continues to rise 20% further this week. So very hectic week for Israeli equities and really close again by welcoming Etoro to the Windex and to Wall street in general.
- [05:17]
Michal Avram
So Etoro, do we need to Update this is 51 companies now in the Windex now 51.
- [05:22]
Yonatan Adiri
No, actually the one this week still doesn't include Etoro, but next week Etoro has joined and we now have 51 actually, you know, meaningful equity. There was a 5 billion market cap and really one of the market leaders in its category and I think also showing the audacity of Yoni Asia, the Israeli entrepreneurs around that company to make the window in Q2 2025, as we discussed in some of the earlier episodes, with some big companies refusing to even issue straightforward projections. So kudos for that and seems like it was well received.
- [05:54]
Michal Avram
Well, this is a good problem to have to need to solve, Yonatan, because we need to figure out whether the Windex, you know, do we keep it to 50? So if a new company enters the picture, do we knock one off?
- [06:03]
Yonatan Adiri
Like that's a good point.
- [06:05]
Michal Avram
Enter Coinbase and exit Discover. Right.
- [06:08]
Yonatan Adiri
Yeah. Michal and Jonathan sit together and, you know, we'll take ideas.
- [06:12]
Michal Avram
Yes.
- [06:12]
Yonatan Adiri
From the crowd.
- [06:13]
Michal Avram
Maybe we just add. But yeah, we're happy to take listener feedback on that. All right. There are a lot of other key numbers floating around this week that we should be paying attention to. Yonatan, you started things today with the inflation numbers in Israel up 1.1%, as you said, in the month of April, much faster than expected. This is maybe not the most noteworthy. It's a small data point here, but fresh fruit prices are up while fresh vegetable prices are down. What's really moving the needle here, though? Crazy number to see here. Foreign and domestic travel up 15.9%. Transportation costs were up as well. Yonatan, you covered that in a previous episode. But what do we make of this? Where are things going and just how concerned are you about this?
- [06:56]
Yonatan Adiri
So I think you're spot on. We're going to cover later the Moody's rating reduction. Also for the US The Israeli government response to that is the CPI is not indicative. We heard it also from some members of Congress and Senate vis a vis the US cpi. Right. If the iPhone price will go higher because of the tariffs, that doesn't matter because gasoline and food prices are actually going down. I think it's a good point. We may cover that in some future episode. In terms of how does that, you know, what's the difference between the classic CPI and how come, you know, we think overall standard of living is going up, but actually there are a lot of disgrunted folks in the middle class and lower middle class because the stuff that impacts them is actually going up. And so I think that's a bit of what's going on. April, given Passover so on is usually a bit of a higher index in Israel, but that was a surprise. And airfare and some other elements are rising high. We need to keep a close eye on that because the war continues. We're still in this fog of war. The Trump visit in the region did not subside the cannons and artillery, neither from the Houthi territory nor from the dynamics in Gaza. So, you know, I think this weighs heavily on inflation.
- [08:06]
Michal Avram
Jonathan, you mentioned Moody's. Big news over here in the us, also not a happy number. On Friday, Moody's downgraded the US's Triple A credit rating. This is the first downgrade in more than 100 years. Yes, Moody's has been around for a while and this is largely agency said due to rising debt.
- [08:27]
Yonatan Adiri
Yeah, it's rising debt. I had a chance to read the report on the plane and you know, we got in Israel very well versed in the downgrading business over the last 12 months. We saw Fitch and Moody's and S and P following suit. And I have to say some of the rationale for Israel when we kind of double clicked, it had to do with geopolitical risks that I think have pretty much resolved and is still a negative guidance there. And when you read the report about the us, obviously no big geopolitical risk. But the two main things I took from the report, as Michal, as you noted in the last episode, around Wall street saying we can't give guidance because we really don't know, one element is kind of fog of tariff war, which I think is important. Again, I'm not an expert on the topic, but it feels like they overstretched that one. The second piece, which I think is very professional and makes a lot of sense, is a macro analysis around what the administration calls the skinny budget for 2026. And basically Moody's argues this is not going to get America to where it needs to get in terms of deficit target. That combined with tax cuts and others simply won't Do. That's the math. Now, is it true, is it not? I think still a lot of balls in the air, so early days, I think. And it's another burden for the administration to disprove, as there are some other balls that require that.
- [09:44]
Michal Avram
And by the way, the administration's response to this has largely been that this is politicized, that there's a political agenda here on the part of Moody's and if the US doesn't have a triple A rating like who should? You know, literally that was one of the statements.
- [09:57]
Yonatan Adiri
And you know, classically this was as investment banking works, right. The 10 year yield of US government backed debt is sort of the zero risk asset after which the entire global financial system kind of builds. Right. So there is something to be said about the dominance, monetary and geostrategic dominance of the us but it doesn't mean that when the agency looks at the math, if it doesn't add up, they should say it. I think I do agree with the administration, having read the reports about Israel. When they go into sort of the political fog and whatever, it's just a matter of interpretation.
- [10:29]
Michal Avram
It's subjective. Absolutely.
- [10:31]
Yonatan Adiri
Yeah.
- [10:31]
Michal Avram
Okay, let's stick with the U.S. obviously we talk about the U.S. often because of the ripple effect and because of the special relationship of the US and Israel in particular on the tech side. Clearly that's a very strong dynamic. So also in the US there are some signs potentially that are worrying about AI advancement. And one key thing that happened this week on that end is that Meta reportedly is delaying the rollout of its flagship AI model, Behemoth. So, Jonathan, I know you have a lot of thoughts on this. I mean, what are we looking at? Obviously this isn't good for Meta's own business in the race against, you know, OpenAI, Google, et cetera. But does it say potentially something bigger about the state of AI advancement?
- [11:15]
Yonatan Adiri
I think this is very pertinent also for the long play today because I would say the dominant piece of the President's visit in the Middle east had to do with AI. I think there is an overall sense, a consensus that AI is on an exponential curve. It's climbing. We saw the difference between GPT 3 and 4 and 4.0 and so on. And we're seeing also the expansion of what's called tokens. Right. How many tokens can an AI engine digest? And give us a rationale? And that's the curve. That's where everybody's eyes on we tend, unfortunately, and I think a great example is where we were, you Know, when I was a CTO in the government of Israel, we kind of looked at certain dynamics and tried to interpret are we close to an S curve? I mean, is this going to subside soon or is this crazy? You know, kind of Moore's Law dynamic doubling is going to continue on and on. A great example is autonomous driving. 2017, 18, 19, we had Elon Musk declare, ah, by 2020, we're going to have level five autonomy and this and that. And the thing with these technologies is that you get to 99. The last percent is not just another step, it's orders of magnitude more complicated. And I think if I read into the behemoth thing and we don't know. Right. But if I read into that, and I read also into some other news around, we're getting to a bit of an edge of an S curve here. It doesn't mean we're not going to see phenomenal things coming out of AI, but I think that the kind of race into like the imminent AGI, artificial general intelligence coming up right around the corner, this might be a sign that says that we'll have to wait and that it's more difficult than we think.
- [12:49]
Michal Avram
Yeah. I think, by the way, your analogy to what we've seen on the autonomous vehicle side is so spot on. I remember 10 years ago I did a story about the future of transportation. It was exactly 10 years ago, 2015, I. I sat down with Marc Andreessen and kind of picked his brain about this and he said to me, I quoted him in the piece, in 10 years time we will think it was insane that we ever let a human behind the wheel. And you know, here we are 10 years later. And by the way, it's amazing. I mean, there are waymos all around me here in Palo Alto and San Francisco. Of course there have been huge advancements, including in just consumer sentiment about this, you know, but there were no pun intended, so many bumps in the road. Right. And it's not mainstream, it's far from mainstream.
- [13:32]
Yonatan Adiri
So I don't think it's surprising that you mentioned Marc Andreessen. It's very common for people in the industry who have a vested interest to project the accelerated pace of change to create FOMO. And sometimes you see two CEOs, one calling the other ones bullshit. Right. We saw Amnon Shashua kind of rising to a challenge to Elon Musk in the big peak Tesla mobileye argument about how do you get to level five. And ultimately with mobileye, IPO sports spoke the same language, same Bullshit. Promising. I think it was 2021 with Volkswagen or another big giant OEM that we will see robo taxis in 2020 or 2021, the last percent is really difficult. It is orders of magnitude different than the 99 before. And by the way, not to sound Luddite, we're going to see massive AI changes over the next three years to productivity, types of job, to the labor market. We're going to see specializations, we're going to see agents discussing, we're going to see specialization. I'm not sure we're going to see the AGI. And maybe we're reading too much into the behemoth of the news, but I think it's a good sign to go back and ask yourself, how long can an exponential curve rise? And are we seeing what are the signs of actually a sigma, as we call it, like an S curve starting to take shape? And in the context of the Trump visit in the Middle east, somebody took a big bet.
- [14:51]
Michal Avram
Yeah, for sure. And this is something we'll keep watching, by the way. Google IO is taking place over the course of the next few days. And so lots of eyes on Google as well and Gemini updates and AI updates kind of across the board with their products. So I think we'll get additional signs of, you know, how things are going on this space up ahead. Okay, it is time for our long play, our deep dive into one significant issue affecting the Israeli economy. And as I said earlier, we're going to do part one on the US Saudi deal. Next week is going to be part two. But today what we're going to do is really just analyze what we now know about what's in the deal and also notably what's not in the deal. So let's start with what's in the deal. So obviously all eyes were on Riyadh and the rest of the Gulf region as well last week as Trump made his visit. And we knew that he wanted to come back with some major wins, but it wasn't clear exactly what this would mean. By the way, there's still a lot that we don't know about the actual deal and its components, but there are some key numbers that we do know. So $600. $600 billion. Excuse me. That would be funny if he came back with $600. This is a commitment, an investment commitment. So keyword commitment from Saudi Arabia. It's important that we keep that in mind. But still huge, huge numbers here. And there is some meat on the bones. 20 billion to establish AI data centers and energy Infrastructure. There's partnerships between Saudi and US companies including Google, Uber, Boeing. Outside of the White House deal, the official 600 billion deal. There were also some announcements kind of adjacent at the Saudi US Investment Forum, including Nvidia providing 18,000 of its most advanced chips to Humane. This is the kingdom's AI startup, AWS partnership, also AI focused, amd, lots of really high profile people involved. Clearly huge, huge bet on both sides on AI. And listen, let's get to what was not there and who was not there. We've already talked about the fact that Israel has felt very cut out of the diplomacy side of things. Right. That that was clearly not on the table, which is huge for the country. Israel's also not at least directly involved with any of these AI deals. So let's start there. Yonatan, what does this mean? Just put aside diplomacy, let's just talk dollars. What does this mean for Israel?
- [17:24]
Yonatan Adiri
The framing I sort of look at the visit through is that this is in essence an AI preemptive strike on China. Right. China wasn't there. Right. You know, there was no Chinese leader, but China was everywhere. Since the trip was planned, the first thing to understand when it comes to AI is when you look when if you're America and you decided to, you have to win AI. Right. Going back to what we discussed a couple of minutes ago, AI is on the rise. We're on the verge of artificial general intelligence, which means whoever gets there first has the best arms and so on, the best medicine, so on and so forth. We can't lose. We have to win. We. That is sort of the view from the White House or from Beijing. America has big leverage. The previous administration, Biden administration at the tail end, divided the world into three tiers of who can get chips. You were just mentioning that AMD and Nvidia are going to invest in Saudi Arabia. That was not possible a couple of weeks ago because of a presidential and a government policy. They were tier two like Israel.
- [18:23]
Michal Avram
So, yep, the AI diffusion rule, which the Trump administration has now rescinded.
- [18:27]
Yonatan Adiri
So Israel in a way wins here. The whole tier system is gone. Israel can now also build its own supercomputer without limitations. That's sort of a side story. But if again, going back to the view from the White House, do I rely on Europe for AI? I mean, nothing major coming out of Europe, not in the silicon side and not on the AI side. Definitely no money. Right. America is with a huge deficit. It cannot kind of print more money to invest in AI. And so who's left The Gulf states, they want to play. They're open, right? The bazaar is open. They actually indicated in the last couple of years they're willing to go the Chinese way. Saudi Arabia predominantly opened the door to Chinese diplomacy. And so I think the administration, the right way to think about what happened here last week is really a. An American understanding we can't lose this war. We have to win this war. The biggest adversary is China. No money in Europe, you know, like France at 115, debt to GDP. I mean, there's no money out there and no significant AI capacity to enhance the US ability to win this. The Gulf has the money and it has the resources and is interested in siding with the US as we saw. So, you know, that's sort of how I look at that. We spoke last week. 4% of the entire grid use in the US last year was for AI and cloud. The projections are this is going to grow a lot faster than America can build. Middle east has access to easy molecules for energy. Less red tape. Those who are listening, who read Ezra Klein's Abundance, the episodes about how America wasn't able. It decided, the government decided it's going to give $46 billion. Right. For a government initiative for bandwidth and so on and so forth and just couldn't get it done in four years because of red tape and because of the legal dimension that does not exist in the Middle East. So I think this is the path of least resistance to get as much energy into data centers. That's why you saw all AI players there. So energy is a big deal here. I'll draw your attention to something and then we can cover a couple more points. The speech he gave in Saudi, the fact that he openly said, and this was a recurring theme, the neocons in Washington or the liberals in Washington came here and told you how to run your business. You built incredible countries that are genuinely Arab. I mean, the overture made it sound like there's something bigger. In my view, it's an AI preventive play on China and the Gulf states were up for grabs and he made the right choice in going there.
- [20:57]
Michal Avram
Yeah, well, let's get back more directly to Israel because I think you laid out the sort of what's at stake here vis a vis the U.S. china, AI arms race. Right. And how critical Saudi and Gulf money and partnerships across the board are to dominance. Is there a way for us to see Israel as still being critical here? And we're talking about Nvidia, so. Well, Nvidia's got huge presence in Israel and it's investing in Israel. We just talked about AI21 the other week, right? So there's already this presence of Israel, even though they weren't part of the summit and all of these meetings. But what happens next? You know, I think that's really critical.
- [21:36]
Yonatan Adiri
So I have a bit of a contrarian view on, you know, where Israel is on that. What did we not see in the visit? We didn't see Arab companies. I mean, think of the President visited India, right? You see a lot of American CEOs born in India on the delegation, right? We didn't see that. We didn't see ip, no intellectual property created in the Middle east in any meaningful space. We didn't see universities. Qatar investing billions in American universities and in their home in Qatar. We haven't seen any big academic publication or whatnot in the Middle East. I would rather be Israel still after this, where, as you said, Nvidia has a huge R and D center and invest in creating IP in Israel. And if I'm Google, I buy a $32 billion company in cyber because there is unique IP. So I don't invest $32 billion in building a data center that I need anyway. And there's no way I have enough energy in the US to build it. So where do I go? Oh, I go to Saudi Arabia. I think Israel is still in a very strong position. That said, as we discussed with Dan a couple of weeks ago on Israel's third founding moment, the window has now opened for a competition over the next five years. If Israel doesn't do what it needs to do, there will be IP in the Middle east, there will be unique companies emerging in AI in the Middle east now. The ground has been laid, the fertilizer has been provided. And so I think the race begins now. I don't think that specifically in these weeks, something of significance happened beyond that point, I will say. By the way, for me, I noticed that Abu Mazen wasn't there and that and Assisi wasn't there. That's a big deal for Egypt. That's a big deal for the current Palestinian leadership. Not a good sign for Israel. These are two. You know, Egypt as a partner, Abu Mazen as hopefully, you know, the Palestinian Authority or whoever on that side as a partner for the day after the war. Not a good sign from my perspective. But I think when we'll talk a month from now, it's going to be like a whole new reality.
- [23:32]
Michal Avram
Let me do this. I want to embark on a little thought experiment with you. Let's just Say, let's just dream here with me that Saudi Arabia was already in the Abraham Accords, that things had moved forward. What would this summit and these meetings and these deals have looked like if that had already taken place? What could things have looked like if Israel had been a part of the picture?
- [23:54]
Yonatan Adiri
Well, look, I think that if the summit happened after Saudi Arabia had normalized relationships or as part of that, we would have seen Israel involved at the architecture phase of this incredible new opportunity. Is it worth a trillion dollars? I don't know. Even if it's worth a third. Right. That's a lot of money. And this capital is going to form the Middle east for the next 20 years. Gaining access to this capital is now, I don't say impossible, but it's infinitely harder than it may have been if Israel had normalized the relationships. I will say one thing that sort of I learned, I don't want to say the hard way, but in these summits, there's a smell, there's a tone of voice, there are friendships created, and those friendships where people were, oh, I was there when the Trump administration visited and we met there. And business becomes infinitely easier. There's a lot less friction. And from that perspective, Israel is going to still have to work hard, as hard as ever, to gain access to this capital and to make inwards over to the east, ideally, in my view, ending up with India, which is the sort of real anchor for. For the next 20 to 25 years in the region. When you lose that, and we lost a great opportunity this week for the smell, for the friendship, for the ability to then make things infinitely smoother and easier. We're now still climbing up the mountain.
- [25:09]
Michal Avram
Well, I'm going to channel the great musical Hamilton and say, I want to be in the room where it happened.
- [25:15]
Yonatan Adiri
Right, exactly. That's really important. We can talk money and architecture and this and that, the friendships that are created, the trust that is created. Because this is ground zero, day zero, ground zero for a whole new architecture of the Middle east when it comes to tech and energy and maybe two last points that are critical, I'm very happy the American administration has now reignited its commitment to the Middle East. This goes far beyond Israel. I mean, you spoke to Saudis in the last 10 years and so on, mainly after the Obama administration and to an extent through the Biden administration. Oh, you know, America is a dominant energy player, doesn't think of us anymore. It's Asia Pacific that matters. This renewed commitment is very critical and it does serve Israel. I'm very optimistic from that perspective as well. Where I am concerned is where the Iran dynamic is going to go. And I think Iran and Ukraine, Russia are going to keep us very busy in the next few weeks. And that's where I would keep my eye on. If America gets the bad deal with Iran, then the entire architecture doesn't just become difficult for Israel to be part of. It almost precludes Israel from playing in that field. And that would be. I think that would be dramatic.
- [26:25]
Michal Avram
Well, we'll be talking about Saudi Arabia a lot more on the next episode after I'm back from Riyadh, where it is 105 degrees, by the way. So more to come. Well, we began our show with the numbers of the week and we are going to end with the words of the week. This comes from President Trump's address in Riyadh at the start of his Middle east trip. Yonatan, you alluded to sort of this different tune that we're hearing from the American leader. And let's give it a listen.
- [26:56]
Yonatan Adiri
Before our eyes, a new generation of leaders is transcending the ancient conflicts of tired divisions of the past and forging a future where the Middle east is defined by commerce, not chaos, where it exports technology, not terrorism, and where people of different nations, religions and creeds are building cities together, not bombing each other out of existence. We don't want that.
- [27:22]
Michal Avram
So I have one thing to say about that. My reaction is, inshallah, that's about it.
- [27:29]
Yonatan Adiri
Exactly. That's about it. And again, you know, this optimism and this commitment to the region is a big departure from where we were in the last 15 years. That gets me very optimistic.
- [27:40]
Michal Avram
All right, that's it for today's show. Thank you for tuning in to ARC Media's what's your number? We hope you found it interesting. If you did, be sure to, like, subscribe rate review. You know the drill. But most importantly, please share it with others who you think will find it interesting. If you want to make suggestions or share your feedback, please reach us at whatsyournumberarkmedia.org.
- [28:07]
Yonatan Adiri
What'S yous Number is produced by Ilan Benatar and edited by Her Royal Highness Michal Levram. Sound and video editing by Martin Juergo. Our theme music is by Midnight Generation. We've got a lot of questions on that. You can put it on Spotify. You'll get the full track. I'm Yonatan Adiri.
- [28:23]
Michal Avram
And I'm Michal Avram. See you back here next week.
- [28:26]
Yonatan Adiri
See you next week.
- [28:33]
Michal Avram
This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.