Raspberry Pi’s London IPO & Mistral’s $640M Funding Round
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Today's number 1493. That's the year Christopher Columbus landed on the island of St. Barts and named it after his brother Bartolomeo. True story. My wife said to me, you know, sex is so much better on vacation. I thought, that's not the postcard I wanted. I

Welcome to Prop G Markets. Today, we're discussing London's IPO market and Mistral's latest funding round. But first, where are you, Ed? I'm in St. Barts. It's pretty good. It's pretty nice out here. I got here yesterday. You know, it's all right. We got the private villa here.

and it's got a private pool and it's got you know there's a private chef so we had breakfast in the morning things are okay is what i'd say so first off i'm the only one that's allowed to be cynical here how many of you are there in saint parts right now how many from the property media team went to the same parts six and you're staying at my favorite place le sereno i even picked out the villa for you where are you guys going to dinner tonight uh i'm not quite sure i think we're going to um typical man you've left it up to the women to handle everything right so

I'm not sure. Oh, there we go. Love that sound. You're really leaning into this. Good for you. All right. You're having a glass of champagne. Good for you. That's right. You're easing into the St. Bart lifestyle. How are you doing? You're back at home? Yeah, I'm in London. My life is not nearly as romantic as yours. Although, I'm going to the south of France tomorrow, which I'm excited about. That's right. You're going to Cannes. That's right. I'm going to Cannes. Excited about that. Although...

I think I've lost some brand equity. I can't get invited to the iHeart party at the DuCab with Lenny Kravitz. I called, I know, I sat next to the CEO of iHeart Media last year and I emailed him and he kind of sent me a polite message.

but still I haven't had that invite yet. So I think I've lost some brand equity. I don't know what's going on here. I don't. Anyways, I can't get into the hot parties anymore. I did get invited to Spotify, but I'm not. Is the IHOP party really that hot? Lenny Kravitz is going to be there? Yeah, well, it's at the Hotu Ducap and I'm staying there and Lenny Kravitz is playing. And so it'll be like being a prisoner at Alcatraz if I don't get invited because supposedly the prisoners of Alcatraz when the wind was blowing

Yeah.

then I'm going to be very upset. I'm going to stop listening to iHeartRadio. Is that how you feel right now with us? I mean, we're having a pretty good time here. No, I like you guys. I want you to have fun. And not only that, I like that everyone knows that you're down there. I think it makes us seem well. By the way, in case you're still wondering, we're still recruiting for a writer, a senior writer for No Mercy, No Malice. So if you want to go to St. Bart's next year, come join us.

Come join PropG. Anyways, enough of that, Ed. Get to the news. Okay, let's start with our weekly review of market vitals. The S&P 500 closed above 5,400 for the first time ever. The dollar was flat. Bitcoin declined. And the yield on 10-year treasuries dropped.

Shifting to the headlines. The Consumer Price Index showed inflation cooled again in May, with prices up just 3.3% from a year earlier. That's flat month over month and down slightly from April. Meanwhile, the Federal Reserve held interest rates steady, though many Fed officials are expecting at least one cut by the end of 2024.

OpenAI hired the former CEO of Nextdoor as its new chief financial officer. As the company's first CFO in two years, Sarah Fryer will help the company grow its global business and invest in further AI research. The company also hired the former SVP of product at Twitter, Kevin Weil, as its new chief product officer. Oracle stock rose 13% to reach an all-time high, despite reporting fourth quarter earnings that were below analyst expectations.

While the company missed slightly on revenue, the stock surged on account of new deals with Google Cloud, Microsoft Azure, and OpenAI. And finally, Tesla shareholders voted again on Elon Musk's $56 billion pay package and the move to reincorporate in Texas. They're actually voting right now as we record this podcast, so we don't know the results yet.

But the stock rose 6% this morning after Musk said he expects to win the vote. Scott, your thoughts? I think it's great that inflation cooled. I've always, as someone who likes to think they know a little bit about economic history, inflation is more dangerous than an invading army. I mean...

unless you're part of the village that gets invaded. But revolutions oftentimes can be reverse engineered to inflation. I look at what's happened here in the UK, and basically they have inflation and lower productivity. So let's figure out a way to make less money and have all of our goods go up in price, which translates to a worse standard of living. And that's when every household gets angry and wants chaos and change. It's the first time in almost two years that

The CPI didn't climb. The annual core rate of inflation came down to 3.4%, the lowest since April of 2021. And the report keeps hopes of a potential September rate cut alive. I am sick of talking about rate cuts. I just don't care. The OpenAI, you know, OpenAI seems to be kind of professionalizing, if you will. The former CEO before her position at Nextdoor, Sarah Fryer, served as CFO of Square and previously worked at Goldman Sachs and McKinsey. So she's obviously very qualified.

And hiring for our potentially signals that open AI could be thinking about an IPO. She's sort of the she's someone who comes in who has credibility in the street and says, OK, this is how you go public. And Sam, you know, do not talk about X, Y and Z. Talk about this and can kind of that those skills are very important. And the difference between a well-managed IPO for this company would be tens of billions of dollars in market capitalization. And so she is going to make a shit ton of money.

She'll be there just in time to get a shit ton of options before they go public. So they literally had their pick of anybody to be the CFO of this company. By the way, do you see how much money they're generating now? The information just reported on this. Sam Altman revealed the revenue, the ARR for the company. You see this? I did. And what did it say? $3.5 billion a year.

That is their run rate right now, which is more than double than what they were at six months ago. And just to put that into perspective, Anthropic, which is arguably their number one competitor, they're at 100 million and then Cohere is at 22 million. So it's like,

$100 million, $22 million versus $3.5 billion, the open AI business is 35 times larger than their next biggest rival. Like, they're just completely running away with it at this point. Probably the more impressive thing is who said they've grown, their revenues doubled in the last six months. Right. Yeah, that's pretty...

That's pretty impressive. Now, the question is, what was the last round of funding? I'd be curious to see what the multiple on revenues in terms of valuation. Yeah, I mean, I think it was the $86 billion, but that would still put them on the low end compared to all of these other ridiculous AI startups. So, I mean, they'll probably have another round soon. I would agree. I would bet that that, if it's $3.5 billion and it was at $80, what is that? About 25 times revenues. That's actually cheap for the AI sector. And you're right, they seem to be

running away with it. It's interesting because all of the noise around how dysfunctional it is and board members leaving and Sam using ScarJo's voice, it's all noise. It's not news. The real news is the things you're focusing on, and that is their revenues and what's going on there. But good for them. It does sound—that's an observation I hadn't even thought of. They're clearly putting on their best dress for an IPO. Oracle, it's really interesting. Larry Ellison deserves a

There's a bunch of companies that are kind of getting hit hard for not making the transition to AI. I think Salesforce is seen as someone who hasn't made that transition, although their stock has done fairly well. It's a great company. I don't know if IBM is like that. But Oracle has positioned themselves as, hey, don't forget about us. And they have made real big investments here. By the way, Oracle's in my 401k, so I'm rich. Nice.

Now you're rich. Finally. Their share's up 13%. That's the biggest single-day increase since December of 2021. People are excited about their partnership with Google, which will make its database available on Google Cloud. It's their second big deal in terms of AI. The company signed a similar agreement with Microsoft in 2023. And the company also reported stronger revenue guidance, and they've signed more than 30 AI sales contracts worth more than $12.5 billion. So Oracle and Dell have both

position themselves in the front of the AI wave. They've done a great job showing that elephants can dance, if you will. And other legacy tech companies such as IBM and Cisco have not made that transition. If you look at total stock returns from 2020 to 2022, Oracle has a 59% return, Dell's 55%, IBM 26%. Cisco's only 7%, so it's underperformed the market. It's just pretty

Pretty impressive what they've been able to pull off. I think Larry Ellison is going to go down as one of the more measured success stories in tech. Don't you think what they're doing right, though, is kind of just their storytelling? I mean, I feel like this is just more evidence that

Wall Street is basically refusing to listen to anything that doesn't have the word AI in it. Because you look at these earnings, these were pretty bad earnings. Like they missed on the top line, they missed on the bottom line, they had a 7% revenue growth. Like it's not a good quarter, but it's this story about AI that they've told, and

and about the potential pipeline of future AI contracts that got everyone so excited. And it basically made all of the other numbers irrelevant. And then you compare that to Salesforce, which you brought up and which we discussed a few weeks ago.

They had higher than expected earnings on the bottom line. They had 11% revenue growth, so it's significantly higher than Oracle. But at the same time, they had a pretty weak AI story, and they just didn't convince Wall Street that they're going to be on the front lines with Microsoft, with NVIDIA, with Google. And what do you know? The stock fell nearly 20%. So it feels like...

Wall Street is kind of sending us a message here, which is we only care about AI. I think that's really insightful, Ed, because just as you said it, it struck me that what I would want to know is that, so supposedly Oracle has signed 30 AI sales contracts worth more than $12.5 billion. I'd want to know the complexion of those contracts, and that is have they just signed up

30 new database contracts, similar to what they always sign up, but they're calling it AI. I mean, we'd hope that analysts would have something called, I'd love to produce this, an AI washing index. And that is, everyone's claiming that all the revenue now is coming from AI just because

All right. They, you know, whatever it is, it has an AI component to it. And so there is trying to separate the weed from the chaff here or the bullshit from, you know, the just kind of bowl, if you will. But it all it all distills down to the same thing. And that is the core competence in terms of a CEO is the same core competence you would hope for your kids and that you want to inculcate into your children. Right.

And that is not an understanding of accounting. It's not leadership skills or ethics or sustainability or whatever bullshit we can come up with to try and get people high-paying positions at universities so they have no accountability. It's storytelling. And that is, when I read that investor letter from 1997 by Jeff Bezos, I thought, I want to buy stock. When I hear Ted Sarandos or Reed Hastings speak, I think, I want to buy stock.

These guys just have an ability to get on an earnings call and be very straightforward and yet visionary at the same time and just instill so much confidence where you think, you know, I'm not sure I even understood what he's saying, but I just want to buy stock. The way it used to work was, okay, you're in tech hardware. You're in mainframe computing. Those companies trade between 12 and 14 times EBITDA. And if we like Bob more than Lisa, Bob gets 14, Lisa gets 12.

And then things just went fucking haywire. And it seemed like a lot of companies that were sort of, when you really peeled back the curtain, were pretty similar, but one told a much better story. So storytelling has become really the core competence for people

growth firms because their ability to get the markets excited about what they're doing, such that they could pull forward cheap capital, reinvest more capital than their peers, such that they could pull the future forward and run away with it, see above Amazon and Netflix, has become the core competence. So there's got to be at some point someone's ability to go, what's real and what isn't? And then the retort to that would be, well, storytelling is real. And if you can raise cheap capital, if you can raise capital cheaper than your competitor, you can pull the future forward and make

the promise, turn the promise into performance. But to your point, it sounds like people who teach communications or investor relations should probably look pretty closely at the Salesforce and the Oracle

Should we discuss this Tesla shareholder vote? Yeah, I guess we're recording on a Thursday. It's Thursday at 6.30 here, only because I'm planning to go to Maison Estelle tonight and get fucked up. So I'm watching the clock. My understanding is that both of these things are going to pass, that the shareholders are going to –

approve them. Is that correct? Is that what you've heard so far today? That's what Elon's been saying. Okay. Does anyone know if it's true? Yeah, I believe him on this one. I think it would be a weird thing to lie about. He'd look very stupid. And we'll know by the end of the day. By the time this podcast comes out,

you know, the vote will be in. So look, the shareholders get to decide. It's been a bit of a soap opera. I'm kind of, I'm only slightly less sick about talking about this unless, you know, unless we want to talk about Paramount. Jesus Christ, make it go away. I just want them to get on with it. Yeah, I think, I mean, I can't say anything with certainty how the vote will go. I think what I can say with certainty is

is that whether or not it's yes or no, this vote is basically meaningless. Because here's what will happen if the vote is approved. It'll go back to the Delaware Court of Chancery. It'll go back to Chancellor McCormick, who will open up that briefing. And she's going to be like, hold on, I adjudicated this case before. Actually, I looked at this case basically two months ago. I made my decision very clear. The answer is no. And I feel like what Tesla...

is forgetting is that if you read her opinion, she actually didn't care whether the shareholders were fully informed or not.

Granted, she said they probably weren't, but it had actually no bearing on her actual decision. She believed that the package was inequitable and that as a court of equity, she also believed that she had the power to rescind it. And that was it. And now here we are again, and we've got the same case on her desk. So nothing's going to change here. And we discussed this with my uncle, Charles Elson, a few weeks ago.

And he said the same thing, you know? He's like, this isn't about informed versus uninformed. This is just about, was it equitable or was it inequitable? And she's already decided it's the latter. So, you know, they can appeal the decision. That might go somewhere. But this vote...

This being their argument, oh no, we looked at it again and we still think it's equitable. It's just a non-starter. For her, for Chancellor McCormick, I just don't think this is going to go anywhere. We'll be right back after the break with a look at a new IPO in London.

This episode is brought to you by Experian. Are you paying for subscriptions you don't use but can't find the time or energy to cancel them? Experian could cancel unwanted subscriptions for you, saving you an average of $270 per year and plenty of time. Download the Experian app. Results will vary. Not all subscriptions are eligible. Savings are not guaranteed. Paid membership with connected payment account required. We're back with Prof G Markets. The London Stock Exchange got a boost last week from a surprising new entrant, Raspberry Pi.

Raspberry Pi makes low-cost computers that are about the size of a credit card. They run an open-source operating system, and for more than a decade, hobbyists have customized them for things like streaming media, hosting servers, and learning to code. They're also used in manufacturing for things like inventory management or production line automation. Today, the industrial market makes up more than 70% of the company's sales.

At its pricing, Raspberry Pi was valued at about £542 million, or nearly $700 million, and shares soared 38% on the first day of trading. So Scott, we recently discussed how the London Stock Exchange has been struggling to attract IPOs, specifically tech IPOs, but it's attracted this company,

And Shein, which we've also been discussing, is set to list in London too. So how do you think this IPO of this Raspberry Pi computer company will affect the broader IPO market in London? It's a big deal because it could change the world's outlook on the London Stock Exchange from the exchange of last resort to a player here. The total capitalization of London listed equities fell from 4.3 trillion in 2007 to

to about $3 trillion. So it's actually gone down about 40%. And over the same period, the value of U.S. stocks has almost tripled to $53 trillion in the U.S. Raspberry Pi, it's great for the exchange because it's sort of a cool little company that had options to list on other exchanges. And they've started trading with a three-day conditional dealing period.

during which trading was restricted to institutional investors? Maybe you can speak more about what this sort of conditional period means. Yeah, I didn't realize this. I had never heard of it. But basically, if you IPO in the UK, there's this three-day period where your shares are trading, but they're only available for trading among institutions. And

What's particularly interesting is that those shares are reserved, but you don't officially own them until the three-day conditional dealing period ends, which means that if you're a company and you decide to IPO and you're in the conditional dealing period, you can just cancel the IPO if you're not getting the demand that you're liking. In other words...

the London Stock Exchange basically lets you do a test run before the real thing. The thing I would ask to you is, you know, why do you think that they do this? Like,

And what does this say about the UK market versus the US that they'd say, oh, yeah, we're going to give you three days to sort of test it out among institutions. But once it's up, you know, then you then you're doing the real deal. Well, I mean, I don't I don't know if this is the reason for it. But so the IPO market is rigged. Essentially, it prices the bankers say this is a branding opportunity. You want to create positive momentum. So price at 10, 20, 30 percent.

below where we think it's going to open. And then the investment banks get to give basically free money to their institutional clients as sort of a quid pro quo for doing all their business through J.P. Morgan and Morgan Stanley or Goldman Sachs. But the retail investors who don't have access to the IPO—

buy in at the first trade, which is sometimes much higher. Now, technically, it could go down a broken IPO, but it usually doesn't. And sometimes, as in the case of Airbnb, it opens, it priced at 68. That's what institutions got to buy the shares for. And it opened it, I think, at 150, which is where retail investors got to buy it for the first time. So a guy named Bill Hambrick came up with this auction model back, I think it was like 10, 20 years ago, probably 20 years ago,

Where the IPO would be, they would basically pair the trade. And that is people would bid, buyers and sellers would bid in a Dutch auction until the market demand was sated at the number of shares. So it was sort of priced exactly at where the first trade would be, right? And that was a means of ensuring that the company got the maximum amount of capital for the same dilution. Right.

Yeah, that did not survive because it ends up the ecosystem, the biggest players in institutions, the investment banks really liked a rigged market that retail investors kind of got screwed. So I wonder if this is, I don't know the answer to this, but is this an attempt to say, look, retail investors are going to get to pay about the same number as institutional and also give the company an out if they don't like where that number ended up being? I don't understand if this is nothing but

more lax rulings for the company or an attempt to have retail investors pay the same number as institutional. Yeah, it's not totally clear to me either. Tune in next week for more shit we don't know. That's why you tune into Prop G. But what about this? No fucking idea, Ed. How's St. Barts?

I don't know. There you go. I'm sure you'll have a response to this. So the CEO, this guy, Eben Upton, was talking about his decision to list in London. He said, quote, this was not a patriotic decision. We did take a look at New York, but we realized that for a company of our scale, the London market is probably a better home. He went on to say, quote,

many of the stories people tell about the differences between the US and the UK, particularly this sort of magical multiple arbitrage, don't seem to be real. Which I find interesting because it's almost like it's a jab at us who have been basically saying exactly that. That, you know, if you're listing in the US, you're getting a little bit of a valuation jump, and that isn't true in the UK. And the reason that we say that is because we just look at the numbers.

But apparently the CEO isn't worried about that. He isn't worried about this multiple arbitrage issue. So I'm just wondering what you think of

his comments? Do you agree with his point? And do you think maybe he's finding some other value in listing in London versus New York? I don't know, because it might be. So we've pointed out that stocks that trade on the NYC and the NASDAQ traded whatever it was, an average multiple of 26, and all the other exchanges is around 13. Now, that might be a self-fulfilling prophecy, and that is the best companies list on those exchanges. It also might be much more heavily weighted towards tech, which traded a much higher multiple, whereas

The companies that list on these other exchanges, probably more manufacturing or services heavy, which don't trade it as high multiples. So it might be a function of the type of company as opposed to just that this company's ran the gauntlet here. So it deserves a higher multiple. I don't know. But I think this is really good for competition. I'm glad the LSE is getting some love. The biggest beneficiary here, in my view, is Shein because she

Everything about Shein going public potentially on the LSE has been about, oh, the exchange of last resort and they couldn't go public in the U.S. Well, this is sort of creating some cloud cover and some kind of some juju, some mojo, some sex appeal, some pixie dust across the LSE. We're good companies, innovative companies.

are choosing this exchange. So a company with whatever this, I don't know what the market cap is going to be here. I can't imagine it's going to be more than a few billion dollars. That's one thing. But the cloud cover and the umbrella brand increasing in value of the LSE, when Sheehan goes out at a 70, 80, 90 billion dollar valuation,

If that makes the LSE and de facto Shein trade up 5%, 10% more, you're talking about $7 to $10 billion. In other words, Shein, the best thing, no one is happier about Raspberry Pi going public on the LSE and having it being a good thing than Shein right now. Because what it says is, no, the LSE isn't the exchange of last resort. The good companies are going public here. Investors should look at it.

And it's not a hold your nose and buy it because it's on the LSE. In other words, Raspberry Pi a little bit turns listing on the LSE from a bug to a feature. And you're happy, right? You're invested in Shein or you're going to invest? I'm not as happy as if I was in St. Bart's, but I'm still pretty happy. Yeah, I've invested in Shein.

And I've got – I'm trying to find – I don't have any inside information, but I'm an investor, and so I've been waiting for the prospectus to come out. I think they confidentially filed on the LSA, but the numbers that I've seen and the information are that it did $30 billion last year. It's going to do, I think, $42 this year, so it's growing – I mean, the numbers are just staggering here, and it's also profitable. Yeah.

And if you look at their competitors, H&M or Zara, they traded really healthy multiples. And it looks like this company, should it maintain its growth, is going to surpass Amazon next year in terms of retail barrel sales. And then the year after that, surpass Walmart and probably have higher net margins. So anything that creates cloud cover for positive reception, I'm down with and excited about. So yeah, I hope it goes well.

We'll be right back after the break with a look at the hottest new AI startup in France. This episode is brought to you by Shopify.

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We're back with ProfgMarkets. French AI startup Mistral secured $640 million in new funding at a $6 billion valuation. That's triplets valuation from December, and the company was founded just 14 months ago. The round was led by General Catalyst and included participation from Andreessen Horowitz, as well as NVIDIA and Salesforce. So Scott, Mistral is now sitting on a billion dollars in total funding.

Do you think it has any chance of taking on the likes of OpenAI and possibly the other AI juggernauts? Well, I hope so. But according to what you just said, it sounds like chat GPT is soaking up or hoovering up all the revenue. But I would imagine that the EU, not only companies, but EU regulators are really ready to be supportive of

of a big tech or an AI company that's on the continent. I think they are kind of sick of sending all of their capital overseas to land at SFO International and then just stay there.

So I think that this company probably has, and I've heard it's a good company. I've heard the interesting technology. The French actually have a very strong background. I mean, everyone knows that they have an incredible background in luxury. When you're born in France, you're just like at the age of three, you're rearranging your blanket and asking for Hermes blankets. And you just, you know, the kids like have a rattle that is porcelain. And then when they throw up their peas on their

On their bib, it's designed better and it just looks more seamless somehow. There's something about the French, they just get beauty. I mean, I'll go to Cannes and I'll go to these dinners and I'll be like, who picked out these linens? These linens are beautiful. There's something in the water there, the DNA. Anyway. That's what we were doing last night. We were looking at the wine glasses. We were like, these glasses are so light. They're so beautiful.

Right? In French, yeah, St. Bart's. There you go. It's unbelievable. The genetic or the DNA or the business of luxury has been the gift that is kept on giving in France. The wealthiest man in Europe is Bernard Arnault, who immediately, you know, peaced out to Belgium for tax avoidance.

But still, Chanel, Hermes, you know, Vuitton is Dior. I mean, they just have such amazing brands. Clarins, you know, they have such incredible staggering. Anyway, what they don't get enough credit for is they actually have fantastic schools in engineering. And Dassault makes an incredible plane.

Daddy wants a Falcon 9X. Anyways, they have actually a very strong background in engineering, and this is coming through. And I hope—I would love to see Europe, you know, kind of punch above its weight class, or not even that, start punching at its weight class in terms of tech startups. There's Solonis out of Germany, which is an amazing software company. There's some fintech companies here.

in the UK that are doing pretty well or okay, I should say. So I hope this is a win. I'm a huge fan of General Catalyst. I'm a bit pissed off they didn't call me and say, hey, Scott, you live in Europe and you're super special and partying in Cannes. Do you want to invest? Didn't get that call, Ed. Didn't get that call. Also, did I tell you I haven't been invited to the fucking iHeart event?

party with Lenny Kravitz. Why are you so upset about that? I'm pissed off. I'm going to stay at the goddamn hotel. How embarrassing is that? I'm going to be there with my boys and I'm like, dad, it's a party. I can't. I thought you were a big deal here. No, no, let's order room service. Anyways, but Mistral, this needs to be a healthier ecosystem. It needs to have more competition. I hope that it does well. I'm kind of curious. We need to do a deep dive here and say, what is its

What is its point of differentiation as all of these things begin to look like the same goddamn company? Yeah, I mean, if you look at the cap table, the lead investor was General Catalyst, which is an American firm. Other investors include Andreessen Horowitz and Lightspeed. There are several other VCs. Most of them are American.

Most interesting though, to me, is the corporate investor list. So you've got Salesforce, Samsung, Cisco, IBM, ServiceNow, NVIDIA, and Microsoft. So basically every single big tech company who, in my view, if this were like 20 years ago,

I think Mistral would be trying to compete with those companies. I don't think they'd be taking their money and giving them equity. And you mentioned this issue of diversity. We need more competition. I feel like this all goes back to the antitrust issue, which we've been discussing. And that is, it feels like big tech has a new monopolization strategy. It used to be that you bought your competitors and

But then Lena Kahn came in, she sort of cracked down and the FTC said, no, no more of that. Now it feels like the strategy for big tech is invest in your competitors because by investing, you establish a level of power, you get some control, you also get a share in the upside. And crucially...

as it appears, you don't get regulated. I mean, we haven't seen any intervention from the FTC or the DOJ on any of these corporate investments, but it feels like it's a stone's throw away from just buying out your competition. I don't see how it's that much different. So what are your thoughts on this? I mean, am I right to be concerned by the fact that

big tech and the Mag7 is basically spread out across the cap tables of every single significant AI startup in the world right now. It's not just America. It's Mistral too, this French company that you'd think is French, but the entire investor base are just the same Americans. Is this not kind of a problem? The way I would describe it is that if you're a young man looking to lose your virginity and live in Kentucky, you should go to a family reunion. In other words, there's a lot of incest here. And that is, is that wrong? No, it's perfect.

Literally, we'll hear from a dozen people from Kentucky. I'm going to find out people I didn't even know were from Kentucky are from Kentucky and that I was inappropriate. People were upset about what we said about Austin. People were saying I was being rude to Austin for saying I don't want to live there. Yeah, just wait. It gets a lot worse. Just so you know. Half my emails are people telling me what I should not have said and how their cousin suffers from some syndrome that I've—anyways.

Look, you've pointed this out. This industry is just way too incestuous and has too many overlapping paths to one another. It's smart for them. NVIDIA wants to have a really robust ecosystem. The last thing they want is a small number of players bidding on their chips. What they want is a ton of, they want a huge customer base. So for them, it makes a shit ton of sense for them to take

Okay, 3% of the market cap would be $100 billion and do everything they can to try and foment, fund, and catalyze a super robust AI ecosystem where not only AI becomes bigger and bigger, but there's a variety of future customers all needing these GPUs. Also, just from a customer standpoint, again, I just think regulators and European companies, at some point,

I mean, one of the reasons I'm going to get geopolitical here, one of the most hopeful things about the conflict in the Middle East right now, the war, is that the Kingdom of Saudi Arabia actually coordinated with Jordan to help shoot down the projectiles coming from Iran. I realize there's a reach, but I will bring it home.

And that is the kingdom wants to normalize relations with Israel. And I think part of the motivation for normalizing relations is like we're sick of getting on planes and sending money out of the region to San Francisco for all of our tech. Israel has a ton of great tech. They're close to us. We seem to get along. You know, we're sick of being I think everybody's getting sick.

Yeah.

SFO International Airport. That was probably, I probably took that metaphor a little too far. But anyways, this is, I think that a lot of European companies, if Mistral just offers a competent product that's in shooting distance or spitting distance of these other guys, I think a lot of European companies may be under the auspices of not having to pay additional taxes or whatever that the E-regulators might place on

non-European based tech. I think this makes a lot of sense. I think the investors here are smart to get into this thing because any competent AI company on the continent

It's the largest economy in the world, the EU, and I think a lot of European companies and regulators would really like to be able to put their money into a European tech company as opposed to getting invited to listen to Sam Altman give his hushed tone concerns around AI. I think they're kind of sick of these guys, but anyways, we'll see. Slight change of subject, but

We should talk about this new company, Tempus AI, that's going public. It's a healthcare company, but it's also supposedly an AI company at the same time. So they're aiming to raise $400 million. They're targeting a $6.1 billion valuation.

And they're this precision medicine company that, quote, uses AI to make laboratory tests more accurate, tailored, and personal. Now, the reason I bring this up in this conversation is because until about six months ago, this company was called Tempus. And today...

It's called Tempus AI. So they just tacked AI onto the end of the name, and now they're going public. And Mia looked at their S1. She found that they mentioned AI 220 times in the S1 filing. And meanwhile, it's a percentage of revenue. AI makes up, wait for it, 2% of the business. I'm going to go ahead and assume that...

you and I agree that there is a very strong stench of BS coming from this IPO, this Tempest AI IPO. But, you know, as it relates to the broader market, what do you think this IPO and this company says about

about the rest of the AI market right now? - First off, I like this company. I actually emailed the CEO. He's the former CEO of-- - Okay, so I've just been shitting on air. - No, that's fine. That's why people come here. They want a no mercy, no malice view of this shit.

I mean, that's why people love PropG.ai. There's a lot to like here. Healthcare and AI, that just feels like champagne and cocaine, right? I've always thought that healthcare is the most fertile place for disruption, and the fist of stone coming for it might be AI. It's a real company. A lot of healthcare companies use the product. They have real revenues.

They've been growing really fast. Having said that, to your view, is it AI washing? That's the bottom line, right? It's not. I mean, the stat is crazy. They mentioned AI 220 times.

And yet AI accounts for less than 2% of its revenue. So this is going to be a very interesting IPO to watch because what it's going to indicate is just how frothy the froth is. And if this company goes out and say it goes up 20, 50, 100% on the first trade, then we know that the party is still going. And by the way, they might be able to take that cheap capital and get better at AI and go from 2% to 20%.

So, again, see above storytelling. Or if the market prices this thing and it doesn't have a first day pop and maybe within a few days it's a broken IPO, it might signal a top. It might signal that, okay, the halcyon days of anything that says AI are over and that people –

people are sort of, at some point, people are going to get very cynical around this stuff, right? I'm already getting just so sick of it myself. Yeah. I can imagine where at some point AI starts to have the same stench as SPAC, right? It's like, okay, enough already. Or, you know, you weren't around, but William Sonoma was one of my first clients as a strategy consultant, and they were very seriously considering changing the name to williamsonoma.com.

And there were a lot of companies thinking about .com and they added and all that. They used to run commercials with nothing but just the name and then .com. Given your experience there, what do you think was the right move? I mean, do you approve of a company tacking AI onto the end of it?

Is it actually potentially a good thing for the business? Would Williams-Sonoma have benefited from going the Amazon route and calling themselves, you know, WilliamsSonoma.com, Amazon.com? It went further than that. I think the statute of limitations are over. This was, Jesus, this was 30 years ago. Let me see, I was 26, I'm 49 now, so it was 23 years ago. But I remember being in meetings with bankers and the bankers were trying to convince people

Howard and his team, and they invited me into these meetings to spin out the dot-com business. They wanted to take williamsnema.com and spin it into a different business. And of course, Howard goes, that makes no fucking sense. And the banker's like, we get 10 times revenues for this business as opposed to your stories. He was like, yeah, but how do I get my store managers to participate? And he was just sort of, he was not easily impressed by financial engineering. I think that's one of the things that made him a great CEO.

So if you look back, if history is any guide, there aren't that many companies that were able to get so much cheap cat. Well, I guess, I mean, Amazon, it was amazon.com. Eventually they sold, they dropped the.com, but Amazon, there was, there was a there there. They were really selling all their shit online. The other companies that tried to pull a fast one and say, oh, we're an internet company that weren't really an internet company, uh,

Like that shit blew up pretty fast. It just, the whole thing just started collapsing on itself. Now, the companies that made it through that valley of death, Amazon and a bunch of others, ended up being worth a ton of money. The question is, when is that valley of death or that shakeout going to happen? And I would bet that it's

You're just seeing symptoms everywhere. Now, does that mean it happens in three or six months or in two or three years? I don't know. It kind of feels like 98 to me. I think we're full froth and we still got some running distance here. But these cycles tend to get shorter and shorter, or we tend to cycle through the cycle more rapidly, if you will. But I just think you're going to see an enormous fallout. And Tempest—bringing back to Tempest—

This will be a bit of a bellwether for where we are in the quote-unquote AI hype cycle. Yeah. So you think that the top is not already in? I think, let me put it this way. The way I would say it is the bell is in, we have visual on the bell. This stuff's just getting kind of so out of control that we can see the bell now.

Is it going to be wrong in three months or two years? We'll see. But there's no way we can sustain these valuations across a bunch of companies that, quite frankly, are just sort of David Copperfielding their business strategy by saying, look over here, we're AI, and then stuffing an analog rabbit into a hat.

It was pretty good. That was good. I think I'd argue that the bell for me was Jensen Huang signing a woman's chest. I think that I'm going to call that as my top. That was the bell. That might be the image. All right, let's take a look at the week ahead.

We'll see U.S. retail sales and existing home sales for May. Scott, do you have any predictions for us? Well, I'm just super excited. As much as I hate it and as stupid as the Vision Pro was for Apple, Apple's intelligence is that smart.

Apple is the best managed brand in the world. And in just a stroke of genius, they said, OK, AI is starting to smell like teen spirit. If teen spirit was drama and people fired and rehired and catastrophizing, it'll save the world, not destroy the world. And I think that they just said, no, we want to own this, make it our own, make it more friendly, make it less dangerous.

make it less Skynet or weirdness. Let's just call it Apple Intelligence. My prediction, as big a flop as the Apple Vision Pro is, Apple Intelligence will be that big a hit.

That was a mouthful. Go drink rosé, Ed. Take care of everybody. Realize that the reason you're there is because you work for someone who is both talented and generous, remembers what it was like to be a young person with not a lot of money, although you are overpaid. But I want you guys to have a wonderful time. Eat fromage.

Eat fromage. I want you to wear a thong. Scare some people. There's actually a nude beach at, what is it? I think it's at, where's that nude beach? It's on, oh God, what the fuck is the name of that? Anyways, you'll find it. You'll find it. Anyways, HR Nightmare. Your boss telling you to find a nude beach. Call HR.

This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavis and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Ray Dalio.