Jeff Richards on the AI Revolution: Winners, Losers & Investment Opportunities
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Welcome to the Risk Reversal Podcast. I'm Dan Nathan, joined by Guy Adami. Guy, how you doing, bud? I'm so excited for this one. Why? Well, you're going to know in a second when you introduce the guest. Yeah, so we have Jeff Richards, a notable capital out there in San Francisco. Jeff has been a repeat guest on the pods, but we have a new name, Jeff, as you just heard. That would be the Risk Reversal Pod. How are you? Welcome back.

I'm great. I'm in for both the risk and the reversal. Right on. Whenever it's coming, let me know. And Jeff's been around since the inception of Risk Reversal. Oh, yeah. He was one of our, I think, our first guests. And, you know, what we learned very quickly, Guy, is that not only is Jeff a great

sort of prognosticator on what's going out there in the Valley and obviously globally as it relates to private tech, but he's got his finger on the pulse of the public markets and not just in tech. We've had some great conversations on the macro and some other sectors that he's focused on maybe personally. So we're going to hit

all of that. But Jeff, let's talk a little bit. And again, you know, we spent a lot of time in the public markets. We know there's a ton going on in the private markets as far as the generative AI trade. And again, when we call it a trade in the public markets, as you know, there's probably been like 10 stocks that have accrued, let's call it 90% of the market cap

associated. It started with obviously chips and NVIDIA. It tried to move into some other names like, you know, AMD. And then, you know, as far as the storage space, whether it be memory with Micron and Western Digital and Seagate. And then it got to the server makers with SMCI and Dell and the hyperscalers. That's the big one. So

One of the things, and let's start right here, Q4 results, 2025 CapEx guidance from the hyperscalers. They gave them. They were big numbers, specifically what Amazon just did, the upgrade that they did, Google, Meta, and Microsoft. But something happened this quarter. You saw Microsoft sell off 6%. You saw Google sell off 8%. You saw Amazon sell off 5% the day after the results.

Was there some sort of switch flipped as it relates to investors in your opinion, or is it just getting kind of long in the tooth and it's just a digestion phase from the stock market perspective? Well, you guys would know better than I do what's happening in the New York ecosystem, but I'll tell you that the reaction to the deep seek news, which drove a lot of volatility,

was a little surprising out here in Silicon Valley. I think most of us look at it as a very obvious signal that the cost of AI and AI models is going down. It's getting cheaper. And when it gets cheaper, it means more people are going to use it. More of our companies are going to... It's going to cost them less to do the things that they want to do with AI. And so to us, it was...

a really positive signal on the whole trade if you're a long-term investor. But I was a little surprised that the reaction was generally negative with a lot of the names you mentioned. And look, the spending that these companies are putting into the ground on CapEx is amazing. It's like nothing we've ever seen before. People compare it to the dot-com bubble. I'm old enough to have been here for the dot-com bubble.

The crazy thing about that time period was those companies were investing tens of billions of dollars. We only had 200 million people on the internet. I mean, total e-commerce revenue in the United States in 2000 was $25 billion. That's a drop in the bucket. That's less than what Uber does in one year now. So I just think the frame of reference is wildly different. These folks are building infrastructure for markets that already exist. We know the spend is there and it's going to come. And

And so I don't know. I thought it was really interesting. Maybe it was just they'd been overfunded, overvalued throughout last year and people were taking a break. But the deep seek news and the idea that the cost of AI is coming down for everybody in Silicon Valley was viewed as a huge positive. Which makes a lot of sense. But, you know, so I'll look at it that way and then I'll say, OK, yeah.

If there's competition, margins are coming down as well. So for a lot, and I'm not asking you to play stock market here, but Nvidia, for example, which enjoys north of 75% margins, I mean, almost by definition, you're going to start to see a deterioration. And historically, that's the other side of the stock mountain. It's not to suggest the trade is over by any stretch, but through that lens, that's when things start to get a little dicey.

Yeah, and I think, look, NVIDIA is obviously one of the great stories of our time. And you would have thought by now there would be a viable competitor to NVIDIA, just given the amount of money that's at stake. But I think it shows you the time that it takes to build that real technology that they've built. And it's not just hardware, it's their software layer as well.

It'll be interesting to see how those margins hold up over time. There are some private companies that people are excited about in the chip sector, Cerebrus and a few others, but they haven't done anything at scale that would say, oh, that's a real threat to NVIDIA's position in the market. And AMD, obviously, Intel's had its own challenges. So I just, I don't know, what an amazing story. I mean, Jensen Wang, clearly one of the great CEOs of our time, but...

Again, if you think about the way this evolution should play out, first, you should see the chip sector. You should see the CapEx infrastructure lay down. Now you should start to see the benefits accrue to software. And so maybe what you've seen is a little bit of folks rotating out of those Mag7 names and looking for smaller cap software names. Happy to give you some examples, but I think you're just in the early days of

of the small cap software companies starting to point to AI as a revenue driver for them and a margin driver for them. Well, let's talk about that because some of these software names that you thought would benefit and they were telling a good story, you know, as recently as the summer of 2023 or as long ago as the summer of 2023, some of those names were,

like an Adobe, right? A thought to be, well, this is a technology that they could adopt and they could kind of integrate across their products and services. And that stock has barely seen an uptick in two years, right? And so Salesforce just joined the party a little bit, whether deserved or not.

ServiceNow just had a quarter that was disappointing on some of the kind of applications that they were talking about as it relates to generative AI integration. And so there's, I mean, we could go down the list. Some of the names like Twilio just kind of joined the party to the upside. So

You know, maybe those are too large cap for what you're thinking about, but that's kind of the next leg of this trade. Right. So you had this infrastructure build. You had the kind of, you know, picks and shovels as it relates to that. And now you have to start to see the use cases. Right. And so software seems like, to your point, the logical next step here.

100%. And I think you got to look beyond the large cap names. You just mentioned a bunch of large cap names. I mean, Adobe is an amazing company, Shantanu Narayan again, one of the great CEOs of our time. But you look at the category they're in, that is probably one of the most well-funded venture backed categories with AI in terms of creative tools. You've got Canva, you've got Figma, you've got all kinds of startups that are building amazing things using this generative AI infrastructure. So

I don't know. I love Adobe. I think it's an incredible company. But if you were to point to a category that is under attack from people in our world, venture-backed companies, that's one of them. But shift your focus to companies that have been around for a while that aren't super sexy, but a company like monday.com.

productivity tools, a lot of SMB, mid-market customers. That stock is up 53% in a year, and it's up 4x from the lows of the fall of 22. Look at HubSpot, up 27% in a year, up 3x from the lows of 22. These aren't

super sexy names that people talk about a lot. But if you're a fund manager or even an individual retail investor looking for ideas, go hunt and peck in the companies that are valued between call it two and 10 billion. That's where I think you're going to see, you know, I always had this mental hang up because my cost basis in Salesforce is $3.50.

That's my 100 bagger. Where's the next Salesforce? 20 years from now, which of these companies are going to be up 100x from here? It's probably not going to be Adobe. It's going to be some of these smaller cap names. And so what I think you're seeing is at least some of the hedge fund managers that I talk to, they're out hunting and pecking and look at those names now and saying, hey, if the cost of generative AI is going down, it's making their

products better, it's going to allow them to increase ARPU with their users. Maybe it's time to start betting on a few of those names. Okay. You teed me up nicely, I think. So I have said this and I'm sure there are other companies, but in terms of the large companies out there, Walmart, if you look at their last three quarters, the margin improvement, it's all in the back of AI and they're being rewarded for it in terms of the valuation and the stock price.

The other one is Facebook. Without question, if you look at what Facebook has done in terms of their margins, three quarters now, good for them. My question to you, at some point, I guess there's going to have to be an ROI for a broad swath of companies, which means the question is sustainability of CapEx. Because again, ROI has to be there. Otherwise, one has to start to question whether or not it's going to continue at the levels of what we've seen.

Well, I think if you look at Meta as a good example, I mean, it's up, what, 60% in four months, five months. It's not, I mean, it trades at, you guys probably have the numbers in front of you, it trades at a pretty reasonable multiple VPS given the growth rate.

But amazingly, Mark just came out and said he's cutting another 5% of his head. So that is a company that you already see. Look at return on invested capital internally, already getting more efficient with AI. I own it. I love it. I think it's a great stock to own. I think it's a must own. They've got Lama with open source, which is a good bet versus closed source and AI. They've got what?

2 billion, 3 billion users around the world. I mean, talk about a hard moat to go after. No venture capital funding can instantly get you 2 billion users like Facebook's got. So that to me, I mean, we talk about ROI. How do you grow a business? How do you grow a business at the rate that they're growing without adding headcount?

The only way they're doing it is by getting better at using technology and using tools internally. Sundar came out and said they're now developing 30 percent of their code using AI. Most of our companies are in that same zip code already today, and those tools are just getting better.

Right. The tools that people are using to write and do code generation are getting better and better and better. I think the ROI question by the end of this year will be game over. I don't think that's going to be a question for anybody. Yeah. And Jeff, to Guy's point, I mean, if you're able to kind of make this investment or in Meta's example, as they kind of

a lot of the investment from the metaverse from a few years ago, right? And they kind of got this, you know, head start a little bit as far as, you know, the idea of building an infrastructure where other people were going to pay for the compute, right? They were monetizing it internally. But, you know, I look at a story like this. I guess it's been up 17 consecutive days here right now. It's up 20%.

22% on the year. And what sticks out to me a little bit is everything that you just said, including valuation, seems to be coming a very consensus trade, right? So I'm looking at all the other kind of mag seven names other than Amazon. They're all down on the year, right? And so when you see that sort of concentration, it makes me a little nervous. But the other thing is, this is a company

where you don't have hyper growth anymore. This is an 80% gross margin company. They're expected to grow earnings maybe 10, 11% this year, 15% sales growth. So at some point, you either have to continue to cut costs, you need to continue to get better productivity and the like for the stock to make sense at 29 times. And again, I know you're not investing in a name like this, whether it's trading at 29 or 34, you know what I mean, where Microsoft is,

But sooner or later, I think that you're going to have to see that broadening out like you just mentioned to other names because everyone's exposed. And then going back to that deep seek Monday, that's why NVIDIA was down 17% because it was the one pure play. This is becoming the one pure play as it relates to guys who built the foundation models. I mean, imagine if a year ago at the start of 24, we had said interest rates would not come down.

and seven companies would carry the S&P 500. How do we feel about life? We wouldn't feel very good. And yet, rates didn't come down, and those seven companies are carrying the franchise. And I think a little bit of what's happening right now is a little bit like being dumbfounded that the Yankees and the Dodgers are in the World Series. I mean, these guys, they have the money to spend to build the infrastructure for where the puck is going. Now, will some of that get misspent? Maybe.

You made the point about the metaverse. A lot of folks weren't thrilled when Mark said he was going all in on the metaverse. Turned out that category didn't turn out to be what they thought it would be, but a lot of the investment that they made has been repurposed into this AI trade. The hallmark of a great CEO is being able to pivot. In Silicon Valley, pivot used to be a bad word. Now, it's like every CEO's forte is I need to be able to pivot when the puck moves.

I don't know how you bet against those companies over the next five years. Will they trade down in certain increments over the course of the year? Probably.

But let's remember, rates did not come down last year, right? That was the trade. The bullish trade coming into last year was buy companies that benefit from lower rates. That was certainly one of my theories when I was buying all the private equity and asset managers back in 22 and 23. It didn't happen. And yet those are still all up. Why? Flow of capital keeps coming into private assets. 80% of the companies in the world with over 100 million of revenue are private.

I don't know how you bet against that trend. I don't think we're going to suddenly see thousands of companies going public. We have fewer public companies today than we did 20 years ago. So these generational flow of capital trades have worked pretty well. You guys tell me, maybe they don't work at some point. But if we're sitting here with the Fed put and rates can potentially come down if things go sideways,

It's hard not to be bullish. I know everybody's bullish coming into the year. And like you said, it's a very consensus trade. But outside of some of the geopolitical volatility, things look pretty good for the US economy right now. Essentially, you mentioned Facebook laying people off and AI is going to be disruptive. And technology is one of the biggest deflationary forces, probably the single biggest deflationary force in the history of mankind. It's

It's also in, you know, in a vacuum or in a small window, it's a job killer too. So how important is the labor market to, you know, your macro view of things? Cause it's hanging in there like a champ. There's no denying. I mean, if you look at the numbers, just the unemployment rate alone, but there's some things around the edges that have got to give you pause. I think, I think this is the biggest, the biggest risk that nobody's talking about. I, uh,

I've put it out on Twitter a few times, Deirdre Bosa, who you guys know well, covered this at the beginning of last year. I tweeted out this morning, Peter from Carta put out a data point. Startups hired more people in January of 2022 than they did in all of 23 and 24.

And so if you look at that on its surface, you'd say, gosh, Silicon Valley is one of the great job creating engines in our country and frankly, in the world. How are we not hiring more people? The answer is these companies are a hell of a lot more efficient than they were 24, 36 months ago. We're backing companies today that are growing at rates with revenue that

We just backed a company that went from startup to 30 million of ARR, has roughly 30 employees. You couldn't do that five years ago. It was physically impossible. And so I think it's a really interesting data point. It's a negative data point from a sort of white collar labor standpoint. I think this is going to be a very big political issue for the next four years. It'll take time for us to figure it out. Eventually, we'll figure it out and the market will change.

level out. But in the near term, it's going to be a big, big headwind to hiring, particularly entry-level white-collar jobs. Nobody's really talking about that. Flip side of it is you're going to have better run companies that are more profitable, generating more free cash flow. It's going to be good for investors, but I do worry about it from a sort of entry-level white-collar marketplace standpoint. And that data point tells you everything you need to know. Just if we look at startups as the companies that should really be

attracting a lot of the talent in our country, the fact that they're not hiring tons and tons and tons of people tells you something because they're the first ones adopting all this technology that's going to drive productivity. The other side of that though is, Gavin Baker from Atreides had a great quote, one of his predictions for this year. He said, "I think we'll print a 5% quarter for GDP growth at some point in the next four years."

Yes, pressure on white collar hiring, but man, if we do a 5% GDP print or anything near that because we're getting all this productivity from technology,

That's really stimulative for our economy. Yeah, I'd take the under on that one. I mean, like Gavin's a brilliant guy, but I mean, I don't think we've seen a 5% GDP print by anyone on the planet since China, maybe 10 years ago. And we know what was going on there. But again, a treatise is from the Dune universe there. And so maybe he's thinking about things in cyberspace or outer space. But it will be stimulative to GDP growth. I mean, look at

Look at small business. Small business is 42% of US GDP. Nobody talks about it because it's hard to measure and they don't have the same PR teams that big tech does. But 42% of US GDP, 55% of employment is small business.

What if AI enables every small business owner to drive another couple points of revenue, couple points of margin? Think about a small business owner with 10 employees. They're not firing anybody because they're adopting AI. They still need somebody to serve the pizzas and take the orders and do the work in the shop, but they are going to be way more productive. Right?

All the functions that you've had to do as a small business owner manually, bill payment, accounting, scheduling, all these things are going to be automated with AI. We're funding the companies that are doing that today. I'm seeing these tools and technology be put out into the wild. And those two companies I mentioned, Monday and HubSpot, guess what? They both sell to small businesses.

So do companies like Shopify. So I think that part, if you take half the economy, if we see huge productivity gains there without a real downward push on labor, that's a positive. I don't know whether it'll drive 5% GDP growth, but it's certainly going to be positive.

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iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. Let's do some dot connecting then, because what you just sort of outlined suggests that interest rates can go higher for the right reasons.

which this administration has made it pretty clear that they're looking for interest rates to go lower. So how important is the bond market in terms of the things you... I know the answer is very important, but speak about your view on interest rates here, because I'm one of the people that think 10-year yields are going decidedly higher over the next few months.

So a little bit above my pay grade, as you know, come on, Jeff, we focus on all of these things. I know I have a tech companies. I guess a couple of things I'd say. One, I mean, you look at what's happened in the housing market with higher rates, right? Housing sales have come to a standstill and that's usually been one of the big engines of our economy.

What it's doing, though, is it's driving people to spend money on remodeling. So those dollars are sort of moving from one pocket to another, record amounts of remodeling. And I'm seeing this firsthand. We've got a company called Realm Home that's in the remodeling space, and their business has never been better. The one thing I guess I worry a little bit about, I had dinner with a former Fed governor a few weeks ago at an investment banking conference. He had an interesting comment, which he said the Fed doesn't control rates anymore.

right? Maybe for 90 days, but beyond that, it's out of their hands. And I think you've seen that with the 10-year. So you guys, this is more your category of expertise than mine. I will say famously in our industry, everybody used to say, we don't pay attention to macro. Every private market investor said, you know what? I do my thing. I don't pay attention to macro. Well, guess what? That all changed in 21, 22 when people got whacked

hard upside the head when rates went up and all of a sudden everybody in venture capital figured out, oh, wait a minute, that impacts the flow of capital to us. It impacts appetite for risk. It impacts multiples. Way back in 2021, Vertical Software was trading at over 20 times forward sales. Right now it's at six, which is the historical average, right about where we should be. But it just shows you how out of whack we got in that zero interest rate environment. So I don't think you'll see a scenario where people in our industry today ignore the macro again,

But I don't know that we're sophisticated enough to really tie in the impact of the bond market directly to our business other than it takes risk capital out of the market. The one thing I'll say that's counterbalancing that right now is there's no LP

or family office or private foundation that wants to miss this wave. We all saw this GFC 08, 09, a lot of people pulled out of venture capital and private equity and said, you know what, it's too illiquid, I can't handle it. Well, the next 10 years turned out to be the best decade in returns for venture capital.

good chance we see something happening over the next five to 10 years in our industry as well. Well, Jeff, I hate to disappoint you because your Monday trades about 13 times sales in your HubSpot, about 15 times sales. So again, about picking around at some of these names, you know, just to go back, you know, to late 2021. So when the Fed signaled that they were going to start to raise interest rates, I mean, no one thought that we were going to see the Fed funds get to about 5% or so. So here we are at 4.5% on the up

or bound. And, you know, like you just mentioned it. I mean, you saw a huge bubble burst in like speculative sort of things. Obviously, it was crypto, but it was also SPACs and it was unprofitable tech and recent IPOs and the like. But it was also four of the biggest, most innovative companies

stocks in the entire public markets, and that was Meta, and it was Tesla, and it was Netflix, and NVIDIA. They lost 70% of their value. So here we are now, and if Guy is correct about interest rates and we establish a new range, let's say in the 10-year above 5%, you're going to see multiple contractions.

Like, no doubt about it. So the point that I was just making about Meta is here's a company that's growing low double digits, right? And it has obviously an 80% gross margin, and they seem to have figured it all out as it relates to their investment. But then I look over to an Alphabet, to a Google, which also has the same EPS and revenue growth, but 64% gross margin. So as we think about this, and you just said, I don't want to bet against any of those who are in the arms race here.

Does Alphabet look interesting to you? Because if they were able to kind of get the sort of benefits that Meta did from the investments across their platforms, you said Meta has two and a half billion global users. Alphabet has like six or seven platforms that have over a billion. Half of them have over two billion and they still have...

all of this potential for margin improvement, right? So I'm just curious how you think about a name like that, because that's one, despite some disappointments that they saw in this last quarter, seems really interesting to me on their ability to kind of bridge the gap to a meta, but also on a valuation standpoint. Well, I own it, and I don't know why you wouldn't own it. I think that's a no-brainer to own. I mean, if you look at the assets that Alphabet Google owns, YouTube, Gmail,

Android. I mean, they are so well positioned. And then let's not forget that the whole idea of a transformer in AI was basically created at Google. I mean, a lot of what's happening today was invented at Google. A lot of the founders that are at OpenAI, Anthropic, and elsewhere came out of Google. They should be dominating this category. You could argue that they're not for reasons that have nothing to do with technology and has to do with the way that they went after the category and some of the

sort of mantras that they had around development and whatnot. But man, Google is incredibly well positioned. Most people I know in our industry who are deep into tech own Google. It's a must own. I mean, unless something goes completely off the rails, you look at a lot of the training data, still kind of TBD where it all came from,

but no doubt a lot of it came from Google, particularly YouTube. I look at these companies that own these franchises, Meta with Facebook and Instagram, Google, the assets that they own. Microsoft,

arguably had the weakest hand to play because they didn't really have a play in consumer other than their gaming franchise. But man, he's done a hell of a job with Azure. I mean, Azure, Microsoft was nowhere in cloud infrastructure prior to Satya Nadella. And today is sort of neck and neck with AWS and Amazon. So I don't know, I agree with you. It's times like this where you feel like, gosh, how can I keep owning these names? But they've done such an unbelievable job of innovating in ways that their predecessors didn't. I mean, you don't remember...

Go back 15, 20 years ago, IBM should have been a major player in the cloud. They weren't. They missed it. Oracle and SAP should have been a major player in the cloud. They weren't. They missed it. They've now come back to the fold.

I don't know. I mean, I'm like you guys. I'm looking for ideas. I haven't been buying anything in my personal account of late. It's hard to find things where you go, yeah, that makes a hell of a lot of sense. That seems like an obvious bet. The only other thing I'd say is where else are you going to put your capital? You're going to buy...

you know, corporate office space? Are you going to buy residential real estate? That's hard to do with high rates. Consumer cyclicals, those aren't exactly cheap. Where, you know, so to some extent, I wonder how much of this is just people saying, gosh, all things being equal, where do I put my capital other than those treasury bills I've been in for the last two years? Again, you know, you're talking about concentration in areas. Does that

concern you at all when you, to the extent that you even care about the broader market? Does the concentration of the eight to 10 names that seemingly come up every single day on CNBC concern you? It does as a viewer. I'd love to see a little more diversity in the coverage. And that's where I don't, what I, I'm mystified that more people aren't poking around these small cap tech names. This is where you're going to find alpha, right? It, you know,

I mean, these are the companies that are laying the groundwork right now to take advantage of that software layer in AI. And we haven't even seen the great consumer stories around AI other than ChatGPT, which, of course, has done an incredible job. But where's the Uber, the Airbnb? Where's the DoorDash of AI? Those are coming. And I think what you'll see over the course of this year, I mean, Apple's AI rollout is, I would argue, sort of been a flop.

But if they get it right at some point, they're a fast follower, at some point they should get it right. And when they do, every consumer is going to consider AI just part of their daily lifestyle, whether it's booking a car or reservation or a trip or managing their schedule.

And I think when that happens, you're going to start to see that innovation layer happen and you'll see some of these newer companies hopefully go public. I've been a big advocate of companies going public sooner. You look at the three major venture-backed IPOs the last couple of years, Klaviyo, Reddit, ServiceTitan, they've all done really well. Demand for the ServiceTitan IPO was 30 times oversubscribed, a little bit of a vanity metric usually in IPOs, as you guys know.

But the bankers that I talked to say they were blown away by how much demand there was for a company that's growing at 24%. Why? Really well-run company, not a flash in the pan, been around for a while, dominant in its category, and starting to look like it can generate real free cash flow is still losing money. But there was a ton of demand for that story. Reddit has

has done unbelievably well as an IPO. You guys could pull up the data, but I think it's up five or six X since it went public and even Klaviyo has done well. So hopefully that will bring in a whole new cohort of companies that are encouraged to go out this year beyond the obvious names like Stripe and Databricks. There's a whole bunch of great companies that people in the public markets haven't really heard of yet. And I'm hopeful

but they'll go out in Q2 or Q3 of this year. All right, so play this game with me. It was probably, if you said your cost basis in Salesforce was about $3, which back in the envelope means this is a 20 years ago, you got into the name. You saw something. I didn't have any money. But what did you, you know, no, don't sell yourself short. What did you see that it took other people 10 years to see?

Well, the thing you have to remember about that, though, is most of that appreciation has come post-GFC. Yeah. So Salesforce was trading at a $2 billion market cap back in 2008. I don't believe it's grown more than 35% a year since then. And some of that growth has been inorganic. A lot of that growth has been inorganic. So

What do you bet on? You bet on a great CEO. I mean, Mark Benioff is certainly one of the great CEOs of our time, and he's been able to parlay the core business, the team around him into acquiring assets that have then generated a ton of cash flow and revenue for the company as well.

There are other Mark Benioffs out there. I would look at George Kurtz at CrowdStrike, look what he's done over the last five years. Defied all odds. Huge snafu. Could have been a company killer last year with the issues that they had, and they've survived, and the stock's bounced back. Stock, by the way, CrowdStrike-

is at an all-time high right now. It's a $110 billion company trading at an all-time high, despite what you said, that move in the stock was, I think it went from 390 or so down to 240 in a straight line. Anyway, please continue.

No, no, no. And at that moment was sort of one of those existential moments of do you bet on the CEO or do you not bet on the CEO? And to me, that was a good bet. I bought more when it was down because I'm like, these guys have an incredible franchise or technology is amazing. And he's arguably one of the best CEOs in the space.

So I just, I think you got to go find these. I mean, Mark Zuckerberg is a generational CEO. Where are these outlier generational CEOs who can take these companies to new heights? And then you see companies like Snowflake, which was a darling under Frank.

Street R comes in, look at what that stock's done in the last six to nine months, largely on the backs of people betting that he is going to bring a new level of innovation and investment in AI. And a lot of the hedge fund managers that I know who are based in Silicon Valley, they own both. They own Snowflake and Databricks. They're betting that both of those companies win as more companies realize that the important layer here is the data layer around AI.

All right, so I'm going to reverse engineer this for a second. Are there companies out there that if they had that great CEO or a 10-bagger from here, I'm not looking to put you on the spot, but I can think of a few of them off the top of my head. I'm curious as to what you think. Rattle them off. I'd love to hear what they are. All right, I'll tell you. I mean, Intel is one of those names that if they brought somebody in

in my opinion, it had vision. That's a company you can lever the shit out of and make a run at it. So that's just one. IBM was one of those companies that you mentioned that actually did make that change and were able to integrate Red Hat. That's two. Oracle is obviously a company that was going nowhere for a long time that sort of flipped the switch. Microsoft is a company that was, if you go back and look,

That company was nowhere. They brought in a CEO and it obviously unleashed a lot of things. So that's just off the top of my head. But, you know, I'm curious. I mean, IBM's a great example and testament to leadership, though. The prior 10 years, it went nowhere, went nowhere. And then they bring in Arvin and the stock's up, I don't know, 40, 50, 60 percent since he joined.

but it had gone nowhere. And an unbelievable collection of assets, brand name, franchise, embedded position with large enterprises. But it took that new leadership and that new CEO. And so I think that that's a hard transition to make. We're big in our universe about backing the founder. We want to see founder-led companies. We think that that's how you make the really hard decisions without having to worry about your board disagreeing with you. Mark is probably the perfect example of that. But the downside of that is look at Snap.

Would Snap be better with a new CEO? Probably. They've got an incredible franchise among a younger demo, but they haven't done anything meaningful in five years. My favorite example of this is when, I'm blanking on his name, but the Chipotle CEO left to go to Starbucks and they added $25 billion in market cap in one day. Why? Because people know that Brian Nicol can change a company

dramatically change a company. And to your point, that's the same sort of move that Snowflake saw a few months ago. I mean, they look the same. They were trading very near 52-week lows, underperforming the broad market, but obviously their sector to a great deal. You just mentioned Snap, and this is one that I find really interesting. It's got $19 billion enterprise value. To your point, the brand value is probably worth $19 billion, right? But it's a company that's missed a

a whole host of trends in social despite being one of the formative companies, you know, 10 years ago. They're trying to mess around with AR and VR. Their offerings don't look nearly as good as, let's say, what, you know, Facebook has already done with their Meta AI glasses, but what they've kind of mapped out with Orion. I was at a conference in October and Spiegel like brought out these glasses that they had just previewed. They're the ugliest things I've ever seen. And so,

I just wonder, you know, if that company in a different regulatory environment, if TikTok, well, let's say we're sold in a sweetheart deal to Microsoft, then that company has to be on the table because Evan Spiegel is not the right guy with, you know, as a go it alone sort of thing. So I guess the question is more, do you expect some strategic M&A if we see the sort of deals that might happen with like a TikTok? Because then...

you know, everything's off the table, like just go after it, like in a way that we haven't seen, I guess, in a very long time as far as tech M&A? I mean, it's a great question. And certainly that's the hope. And a lot of the chatter coming into this year is that we'd see a different regulatory environment around M&A and you'd see a lot more unlocked value creation. It hasn't really happened yet. By the way, before we move off this, another example of a company that was sort of left for dead is Pinterest.

And Bill Reedy came in as a new CEO. 2022. I was just going to say to you, I mean, that's a guy that was at Google. I can't even believe you just, I mean, I'm going to show Dan my screen. I mean, look at what I had up. The possibility. So, I mean, you're in my head. But I mean, but here's a great example of a company that was kind of going nowhere. It was stuck in its ways. You bring in a new CEO. It takes a little bit of time for him to make his mark. But now that stock's starting to work.

And I was talking to my kids the other day, they're making a bunch of boards on Pinterest for things that they're working. I said, oh my God, you guys are using Pinterest again? But it takes new leadership. And I think that the challenge at Snap, I don't know Evan personally, it just doesn't look like he is the kind of driver who wants to bring new ideas and discipline and innovation. And it's not really known as that kind of company in Silicon Valley either. It isn't known as a really hard charging, crack the whip,

we got to make things happen type company. It's just not.

So, well, Jeff, where are you with away from generative AI? And we know that a lot of kind of, you know, these robo taxi fleets, autonomous, you know, they're going to be built on a lot of they already are. Right. Machine learning was a big part of this. But if you look at this kind of move away from LIDAR, this is obviously, you know, the track that Elon is taking. You know, this is going to be a really big part of that story. I look in a name like Lyft.

and I look at their announcement, I guess it's, I don't know if it's an announcement, but TechCrunch was reporting yesterday that they're going to have autonomous, you know, ride hailing in Dallas at some point in 2026. I'll take the over on that. You live in San Francisco. You've been using Waymo. It's an absolutely fabulous product, but the

question is, does it scale? Right. And we don't know that yet. And Elon's vision is, you know, obviously scale. You're not going to have $150,000 worth of LIDAR equipment on, you know what I mean, a car, that sort of thing. Who owns the fleets? This is going to be a big part of it. But if I'm one of these guys, let's say a GM that divested or some of these other Uber divested some of their investments, I look at a Lyft and I say to myself, well, here's a network.

Here's a brand. It's got a $5 billion enterprise value. A quarter to a third of that is in cash. Like that would be such an easy bolt-on acquisition to kind of think about or at least get you focused on what your strategy is going to be. And then in this regulatory environment, it should work. So I'm curious, like that's another example of strategic M&A that would make so much sense right now.

Well, I think, yeah, I don't disagree. I've heard that a few times. I've even heard talk of Google or Tesla trying to buy Uber. I think that for people who are naysayers on AI, go take a ride in a Waymo. I mean, it is an unbelievable experience. It's the closest thing to AGI that I've seen. And it works. And by the way, it's worked for a long time. This is not like it just started working in December.

I think Waymo really has been in production in San Francisco now for three or four years. So we know it works. We actually know it's a better driver than a human. The one thing that people underestimate about a Waymo, think about this, it knows what's coming, right? It's got a map in its mind of what's around the corner that a human doesn't have. When you're driving in a neighborhood you've never driven in before, you turn that corner, you don't know if there's a stoplight or a stop sign or a crosswalk. The Waymo knows.

And so I think what you'll see over time is cities and counties and communities will start to ask for this technology because it's safer than humans driving. That's now been proven by a mile. But what's holding it back?

political infrastructure, willpower, regulatory, that technology is ready to go. It could be in every city in America by now, but it's been rolled out slowly for good reason. But I think you'll see that accelerate over the next 12 months. And then the whole play on self-driving and autonomous gets a lot more interesting as it starts to become very clear that this is a $100 plus billion type opportunity.

Then you start to see a company like Lyft become a lot more interesting. Right now, I think the question is, what are you buying if you buy a Lyft? They're clearly the distant number two in a category. And unless self-driving is everywhere in the country, if you're a big buyer who buys that, what are you really getting? Yeah. But by the way, it's interesting that 10 years ago, it was not a layup that would be a winner-take-all in the ride-hailing business. And that's clearly what happened. And by the way, Guy Adami, 10 years ago, you and I did a couple of

Fast Money out in San Francisco and he was a Lyft driver for a day. In Hoboken. Well, yeah, before we went out there, they cut a lot of B-roll. It was pretty funny, actually. We got to find that and put that in the show notes. And the other thing I'll just say, Jeff, is I could probably make a pretty sound bet right now that Guy Dami will live the rest of his life without getting into autonomous vehicle. I'll put myself up.

Up against Waymo any day of the effing week. Yeah, by the way. So now I'm with you. It is an absolutely amazing experience. The future is definitely here. One question I have is that we've never seen private companies at the valuations that they are. You mentioned Databricks and Stripe.

but there's open AI, which is raising at $300 billion, right? Anthropic, cohere. There's a whole host of other ones that are skipping. You know, perplexity is probably at 10 billion in the next week here, it'll be at 20 billion. How do these companies,

And you've been doing this for a long time. And you just mentioned Salesforce when it was a publicly traded company 20 years ago. It was a $2 billion valuation, right? So a lot of these companies, they're not going to make money for a very long time. How do they grow into those valuations? And how do they come to the public markets with those sorts of market capitalizations? Well, I think one of the interesting questions is why aren't they coming to the public markets, right? I mean, we're in the mode now where...

If you guys remember '95 when Netscape and Amazon went public, Amazon was 50 million of revenue and a $500 million market cap. But they took advantage as did Netscape of the hype and interest in the Internet.

I am a little surprised that one of these companies hasn't said, "You know what? We're going to go public. We're going to let the masses own our stock," because I think the valuations might even be higher than they are in the private markets. Right now, the private markets are driven by supply and demand. There's a lot of money that wants to chase a small number of companies, and so you get valuations going up higher than they probably should.

But I wouldn't be shocked if in some time this year we see one of those names you mentioned go public just to build on the hype and interest that there is in these opportunities. The other thing you have to remember is our universe, private capital, it's not, it's a very, it's called a slugging percentage, not a batting average, right?

So in any given venture capital portfolio, if you have 50 companies, there's five or 10 that drive all the returns. It isn't like the S&P 500, although the S&P 500 has been heavily weighted towards those seven. So it's a little, valuation is a little subjective. 25% of the S&P 500's 25% gains last year was NVIDIA. And you talk about why haven't more companies gone to the IPO route? Well, guys like you don't want to do public down rounds is one of the

main reasons, I would say, you know, and like for every amazing company there is like a Databricks, which will go public and will hold its value, you know, or Stripe, there's going to be a couple of WeWorks that don't get there. You know what I'm saying? And that's going to shake, I think, some level of the confidence. But again, I mean,

I think we should follow this up as we see it. We get further into the year and see who's filing, who's dusting off those S1s and the like, and what the demand might look like. Because usually you'll see a couple of those. I think Stripe was doing this. Some of these share sales, they're allowing insiders to sell before you're getting ready to do that. And it's a little price discovery and the like. Yeah, look, the

The biggest challenge, one of the things that nobody talks about is one of the challenges to the IPO market was the deceleration and growth rates for the more traditional companies, the non-AI companies.

A lot of them saw a huge deceleration in growth in '22 and '23. That's now kind of rebounding. A lot of these companies are catching a tailwind with AI, particularly in enterprise software. But the growth rate decel-- and you saw it in the public software names in '22 and '23, right? Massive deceleration in net dollar retention and just pure growth rate. Now that we're seeing that start to stabilize-- I was talking to one of the bankers from Morgan Stanley. And he said, look, one of the problems is we had people who had draft S1s in Q1 of '24. They didn't come anywhere near their forecast.

So it's not just overvalued. You're not only overvalued on your last mark, you're overvalued on the current growth rate. And so I think what you've seen is also people biding their time for those growth rates to kind of normalize and get into a model where they're predictable. But again, I go back to the point about service titan. I mean, the growth rate of service titan is only 24%. So it isn't like it lights out and it's trading at 10 times forward revenue. So the market is open. There's demand from investors. It's

Again, we're in a high interest rate environment. If rates come down, that market would get more attractive. But to your point, we do have folks who are still trying to grow into valuations from two or three years ago.

And eventually the capital that they raise at those peak valuations is going to start to run a little thin. And you're going to see them look at the public markets as a better alternative than raising more private capital. Well, like you said earlier, Guy and I are looking for more diversity of names to talk about on CNBC. So let's get that IPO market humming here a little bit. Push some of those companies in your portfolio to call some of their bankers here and get things going. I'm pushing. I'm pushing. And by the way, there's a whole bunch of great names. I mean, look at Anduril. Yeah.

Well, that's rating at $28 billion right now. Amazing company. Yeah. Let's go public. Yeah, I agree with you. Let's get those IPOs humming here a little bit. All right, Jeff Richards, notable capital guy, and I really appreciate you being here. We hope you come back really soon. Good to see you guys. Let's go Warriors.