The Dots Are Here!

0:00But that's our here in Motley Fool Hiddngems investing starts now. Welcome to Motley Fool Hiddngems investing. I'm Travis Hoyam, joined today by Rachel Warren and Lou Whiteman. Guys, Meta's muse had the market's attention for nearly a month. But that's long enough in the world of artificial intelligence. This is a muse-like product from OpenAI. You can operate within chat GBT. Rachel, they're all bringing out these interesting characters. They want us to be using agents all the time and interacting on an ongoing basis with muse, with dots. What do you think about OpenAI's play into this world? I think this is the continued push for durable monetization for OpenAI. There's been a lot of experimentation to see what works. I think this is the next iteration of that. There's a $200 a month plan. There's also a $500 a month tier for the really heavy corporate users.

1:02This is not for a casual consumer use case. This is very much for digital power users, highly technical professionals thinking data analysts that might be running massive sets across systems, software engineers running continuous background code tests. There are applications here. This isn't a chatbot. It's really an advanced workflow infrastructure layer. What's interesting, though, is I was reading that OpenAI is already cutting compute limits on the $200 tier because running the background agents is obviously wildly expensive. That could be a bit of an issue in terms of execution. As you noted with Meta's views, it's held the spotlight for a few weeks. OpenAI has jumped in with dots. I think one of the big takeaways for me here is we're seeing that, at least algorithmically speaking, modes don't exist right now. The moment one of these companies invents a new feature, a competitor clones or improves it within weeks. No one is sitting on a lead in terms of those types of products. Yeah, Lou, that seems to be a big piece here is that whatever somebody creates, no matter

2:04how awesome it is, somebody can just copy it. It only takes about 30 days. We're just talking about this two weeks ago. We were talking about why we shouldn't be too excited about the Meta stock of this. Yeah, sure enough. Look, congratulations on the monetization strategy. At $200 a month, all they need is one, about 200 million users annually to pay for their compute spend. I don't know what they're doing here. It feels like that maybe they were just annoyed with Meta's valuation because it doesn't feel like that there is a real chance for monetization here. There's no chance normals are going to say, huh, let me sign up to pay $200 a month to find out if this is any good. That's just not going to happen. I guess you could give it away for free and hope people get addicted, but again, they have mues down the street and with the compute costs. I don't know if that's a good idea. This is neat. This is fun. This is still not answering any of the questions that we have about this company. It's a great proof of concept, but if it's not a revenue producer, opening up is still

3:07got big questions. If this is an add-on to a $200 subscription plan, I've still got big questions. I don't know what problem they're solving here other than saying, look what we can do. Yeah, Lou, I wanted to touch on that because that seems like the interesting thing with all of these products. We keep coming back to this over and over again. This is amazing. I think it's great that we can do all of these things. I've found great use cases and mues. They're not massive use cases, but just small improvements to my life. And yet, I'm not going to pay for them. It's great that mues is free. Is this the fundamental problem with these companies? People are getting some use out of it, but when you say, hey, you got to pony up even $20 a month, most people aren't paying that. I don't want to say it's, I want to be careful with my words here because we're early days. And there's plenty of paths that we can take to get there. But we've said it before, you know, not with opening eye and entropic because they don't have a history, but all of these companies, basically from the valley, these guys are used to double-digit return on a vesticap of numbers.

4:08If you look at the amount of capital that they are spending on this, there's massive amounts of revenue. There was one, was it Apollo? We said, we need a couple of trugin in revenue in the years to come, just to justify all of what's going on here. And I still don't see how these things are going to get there. If they're commoditized, now that we just have two, Gemini hasn't entered the chat yet. They might. But now that we have two, how does anyone have price and power here? So how do we, just the same basic questions? And again, I'm not going to sit here and say they can't answer them. I'm not going to be that ludied. But as far as investible, there is nothing about this that changes versus two months ago what we would think about these companies. This is a neat feature that shows the potential of the technology, but I just, it still doesn't feel like a business plan. Rachel, do you think any of these products have people moving to a different service? I think that we've kind of learned that the big players in the industry are going to

5:10remain the big players in the industry. We don't really have any instinct to come out, but I don't know. It seems like they're already kind of past their peak. But as we look at Metas products, now opening eyes products, who mentioned it, Gemini's probably going to come out with something. I would be shocked if Apple doesn't integrate these kind of features into the iPhone that I have sitting in my pocket all the time. Do you think that anyone is actually going to move to a different platform, move their data, move the way that they're interacting, or is this all just entrenching the incumbents even further? I think it could risk just in entrenching the incumbents even further. I mean, kind of like I said earlier, I think opening eyes is really looking for monetization strategy that sticks. And I don't think they found it yet. It doesn't mean they won't, but that's part of the problem. You could easily see Microsoft, Alphabet's Google Apple could build these sort of tools into an operating system for free. I mean, opening eyes kind of chief advantages, the brand momentum, right? That early user data. There's a real consumer edge there in the sense that that's where a lot of kind of your

6:13average users who first got introduced to generative AI went. But if Metas giving away a similar product for free, really to protect its ad model, opening eyes paywall, it kind of looks flimsy. So the real lasting modes probably going to be those who weave these agents deepest into the enterprise systems. I think we are seeing a time where that kind of flat monthly subscription doesn't make sense long term. If you have a power users continuous usage costs, the company way more than they pay in fees, could we see a model of pivots to a consumption based utility model? That could be really interesting to think about. I don't think that this is going to be the end all be all for opening eye. I think it's the experimentation phase. I think we should expect to see more of that. It's good, but this is not going to be the solution to their cash burn and profitability problems. Yeah, the issue is at the end of the day, it's neat when something auto fills your calendar, but you're really going to pay to have something to not have to type a couple of things. But here's kind of the other argument, the argument against Rachel.

7:14I don't know if I believe this, but I think this is the way if this ends up being if we're wrong, this is why we're wrong. The looking value right now is in a rut. It is a shell of its former self. It's an echo chain. Right now we are all just copying each other and doing the same things. We need to Steve Jobs. We need someone to just say, hey, no, this is different. And I think at some point there's a good possibility that somebody will emerge with just a different idea. And that may be the path towards monetization, towards riches. I'm not that guy. I don't know what that is and I'm not sure it's going to come, but it feels like that if this moment does happen, it's not going to be from any of these companies. It's going to be from somebody outside of it, it just looks at it differently and tries something different that works. It is so fascinating to see how fast these companies are coming out with really interesting products. And then we come as investors come in and you start to think about how are you actually going to make money on this? And there's not necessarily a great answer.

8:16Even for a company like Anthropic, who we're going to talk about in that moment. Support for the show comes from Fundrise. Investing in companies already in the S&P 500 can sometimes feel like you're being served someone else's leftovers. It's still a great meal, but it's hard not to imagine what the food tasted like when it was fresh out of the oven. Historically, only venture capital investors were served access to the best tech companies in the world that had not gone public yet. And that meant the rest of the world simply had to sit on their hands and wait for an IPO. Fundrise says they're completely upending that dynamic with its new venture capital product. With just a $10 minimum investment, Fundrise's mission is to give everyone the access required to invest in the best tech and AI companies before they go public. There's nothing wrong with leftovers. But now, if you want, with Fundrise, you can take a seat at the table alongside the biggest names in tech investing. Get Fundrise.com slash fool to check out Fundrise's venture portfolio and start investing in minutes.

9:17All investments involve risk, including the potential loss of principle. Past performance is not indicative of future results. This is a paid advertisement. Get a concise daily market preview from Charles Schwab, including stock updates, US and global economic news, monetary policy decisions, and key results in statistics that may impact your trading. Rob Market Update is an original podcast from Charles Schwab. Join host Keith Landsford for this information pack, daily market preview delivered in 10 minutes or less. Listen today at Schwab.com slash market update podcast or wherever you get your podcasts. That's Schwab.com slash market update podcast. Anthropics IPO is expected in the next month or so. And we're starting to get more leaks. This is a company that has leaked a lot of its numbers in the past. Reporting earlier this week was that we got some information about what their 2025 numbers are and what their commitments are for 2027. But Lou, what did we actually get because it's not the real full filing?

10:18Now, we haven't gotten really anything. We've gotten somebody leaked something to a couple of sources is the best we can tell. Reuters and the financial times both have some information. It's select information. It's not the most recent information, which is weird. It was a third party that just had the documents. Why would you just copy and paste the old stuff that isn't interesting? So look, well, with all these things, we can get into what's there. But the most interesting, this is true with M&A all the time. I think it's true here is who's leaking it? Why they're leaking it? Why now to me is almost more interesting than the numbers. And yeah, the numbers, we can get into it. There's some things there, but it's mostly just confirming everything we thought. Yeah. So, what are the numbers that we need to keep an eye on? At least from what we learned so far. And then I do want to get to how that translates to what we should be looking at when the official S1 comes up. Yeah, I mean, there's a few key numbers to look at. I mean, some of this is from 2025, and then we had the, of course, the expectations for

11:192026. I mean, you should know that about a quarter of an enthropics entire 2025 revenue came from just two customers, right? They are operating at a total net loss of about 42 billion. That was largely driven by a $34 billion accounting charge. If you strip that out, the operating loss was still $8 billion. And Therop spent more than $7 billion on infrastructure in 2025 alone. And they have disclosed commitments to spend $518 billion on cloud computing power over the next decade. There's a couple other things I want to hate here. We, you know, they're seeking a $2 trillion valuation. You put that on there. $4.6 billion, $225 revenue. That's a $434 price to sales multiple. Now their exit run rate for the end of 2026 is supposed to hit anywhere between $100 billion and $120 billion. Let's say they hit the lower end of that range, $100 billion in revenue. That $2 trillion valuation comes down to a 20 times forward price to sales multiple. But most of that funding is coming from a tech, private credit packages, venture capital,

12:23you know, Google and Amazon, they give billions to anthropic and through up it, immediately hands those billions back. It's a circular wheel of funding, which is something I've talked about on prior episodes. So I am very curious what the final prospectus is actually going to look like. But these are some real numbers that we're looking at. And I think it paints at least a story where we still have way more questions than answers. Lou, just some context on that $518 billion number. That is commitment over the next decade. So, you know, it's not just a single year, but alphabet generated $446 billion in revenue over the past year. So we're talking about anthropics saying, hey, we're going to be one of the biggest companies in the world relatively quickly. Yeah, there's a Mark Twain line about there's lies, dam lies, statistics, numbers without context are just numbers. And just as an again, we're supposed to be talking to investors here. As investors, I don't think there is anything in any of this that is actionable.

13:25Now it's a good thing because we're going to have to see the S1 before we can take action. But look, there are other numbers floating around online that might, that I can't give any credibility to either because again, we're not seeing that, but that would imply that the recent few mods revenue growth does not look like what they had hoped for, maybe even when they were writing the S1. And this goes from you were, they were flying high late in 2025 and early in 2026 when everybody suddenly was using cloud when it was being integrated into, it was the coding one that all programmers were using. And then suddenly, Chatch B.T. and OpenAI catch up, Gemini gets this act together a little bit. So that's kind of the context behind what you're saying. Yeah, I mean, this is, this is bubble gum. This is stuff that people like us love to just chew on for a while and it makes for great headlines and great fodder. But really, we don't know anything other than, okay, some of my priors seem to be confirmed

14:28and some of them, maybe things are going differently. Let's just wait and see the S1 and judge that because again, a number without context, a number without a historical trend is just a number and there's just not much here that I think we can draw conclusions from. Speaking of upcoming IPOs, we had one that was pushed back this week. What about that? Animal. Trading Eshwab is now powered by a merit rate, giving you even more specialized support than ever before. Like access to the trade desk, our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Meet assistance? No problem. Get 24-7 professional answers and live help and access support by phone, email and in platform chat. That's how Shwab is here for you to help you trade brilliantly. Learn more at Shwab.com slash trading. Hey, it's Micah Sargent from Tech News Weekly and on this week's show, I spoke with Jennifer

15:30Paterson, two of the verge about meta having an $18 billion settlement and also sort of holding TikTok and YouTube hostage through some of that money being withheld. It's pretty wild. We also talk about the incredible cyber deck craze and how Raspberry Pi is finally leaning in and D Griffin Jones joins us to walk us through Apple's hardware announcements, the M5 and M6 chips. It's New Mac Studio, New Mac Mini and then gives us a preview of the upcoming iPhone event in September. If you would like to subscribe to Tech News Weekly, just search for Tech News Weekly wherever you get your podcasts or head to twitter.tv slash TNW. Welcome back to Motley Fool in Jim's Investing. We learned that Aura's IPO has been pushed off. This is the ring company helping track your health, getting data all the time about your heart rate and things like that. They were looking for a $15 billion valuation that's more than 10 times sales.

16:31They were supposedly oversubscribed. They were supposed to go public earlier this week, but Lou, they did not. Why does this happen and what does this say about the IPO market right now? I think it's just what we already know. Look, it's weird. In some sense, the markets are near and all time high, but if you look at volatility and specifically single stock volatility, one thing you can look at is kind of a form of the VIX fixes a measure of volatility, looking at single stocks versus the VIX and that is at a spread that is very unusual, which I think speaks to the choppiness of the market. We're talking about Aura, but what if we could talk about Holtek, SB Energy, Inspire Brands, the Dunkin' Donuts owner, Bamboo Insurance and about a dozen more who have delayed IPOs citing market conditions or other reasons. The last month or so, that's just from my syndicate list, just looking at it. This is not a great time. Volatility is actually the volatile times of the worst times to take a company public. The mechanisms of going public is you have to build your order book. You have to build buyers and sellers ahead of the launch and they have to commit.

17:33And when you commit, you don't want volatility. You're putting your money out of your hands for 72 hours in some cases. It is really hard for the banks behind in offering to manage in offering, keep it stable when things are volatile right now. I don't even know if this is Aura's decision. It could be the banks just saying, look, IPOs, they really love to make them controlled. They really like it to be orderly. These are, it's almost like trying to go fishing in a hurricane. You may be fine. It might turn out, you can probably get your hook in the water, but it's not going to be a smooth sale. I think that this is just a simple case of the bankers recognizing the market. They're pulling them left and right here and saying, let's just wait until the volatility goes down and then we can try and then we can do a more controlled offering. Rachel, what do you think about this in relation to some of the bigger IPOs that we may have, not only in the next month, but in the next six months because I enthralled by click we mentioned earlier, hoping to go public in the next month,

18:36although there was talk that it may have already been public by now, open AI is the other one talking about early 2027. Those are maybe bigger. Maybe we don't have quite as volatile IPO with a $1 trillion valuation than you do with a $15 billion valuation. But it just, it seems like a strange time in the market, given the fact that we are near all time highs, but companies are saying, we're going to wait until things are even better. Yeah, I mean, I think that what's happened with Orhan, some of these other companies that have delayed their IPOs, I think it's a very, very different story than the interest and likely hype and excitement. You'll see in the markets around IPOs, like the anticipated ones of open AI and Anthropic. I think if anything, if you're an AI-focused company right now, the window is wide open, I think, but for everyone else, it's narrowed significantly. And it's interesting. I bet Orhan had just launched their IPO plan last week. So there's a very sudden pullback. The deal was reportedly four times oversubscribed. You institutional buyers were fighting on the price and forced demand at the bottom of the range.

19:37I think there's an understanding that investors are not willing to pay the favorable multiples of years gone by for consumer hardware companies, essentially. We're seeing, of course, rising sovereign debt yields, surging borrowing costs are impacting investors. And I think they're demanding wide pricing discounts to offset rising interest rates. So there's, I think, a lot of concern about how that impacts some of these private companies entering the public markets. As Lou noted, there's been a string of other IPO delays and withdrawals. I think there's also the idea that some of these companies pulling their listings essentially close to the finish line. They might struggle to find another open window to return to the public markets anytime soon. And I think it also highlights this idea that, whereas once a really strong consumer brand, a popular flagship product, I mean, in this case, or are there profitable revenues growing favorably? They have millions of users. That's not enough to guarantee a successful public debut, at least not in this market. I think the interest, the real tailwinds, are centered on the AI companies right now. And I think at least for the foreseeable future,

20:38that will probably remain the case. Yeah, it would be interesting to see how these companies are going to be able to finance themselves in the future too. Not just ORA, but some of these companies are still burning money. It's easier to do that in public markets when you can go access public debt, which they can do as private companies. But also, just sell a little bit more stock if you need to. We've seen that often, even SpaceX did that shortly after their IPO, just to raise some more funds. So the options get a little bit fewer when you stay in those private markets. That's been okay for now. But I would like to see some of these companies go public to actually see what the real valuation ends up as. As always, people on the program may have interest in the stocks they talk about, and I'm not going to have formal recommendations for or against. So don't buy yourself stocks based solely on what you hear. All personal finance content follows the Molly Fools editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. For a Lou Whiteman, Rachel Warren, and Dan Boyd behind the glass. I'm Travis Sawyer. Thanks for listening. We'll see you here tomorrow.