We're now seeing inflation, which I believe is here to stay because I don't think we're getting out of Iran anytime soon. And as soon as that impacts consumer spending such that it impacts advertising budgets and digital ad dollars, I do believe that could have a serious impact on the tech companies and, as a result, how much money they're willing to spend on AI, and therefore sentiment and excitement and momentum as it relates to the AI trade, which, as we have discussed, is essentially propping up this entire market.
Today's number: $109 billion. That's how much Americans spent on lottery tickets last year. More than they spent on movies, books, concerts, and sports tickets combined. Ed, true story. My ex-wife asked if I'd still love her if I won the lottery. And I'd say, 'Yes, of course, sweetheart. I'd miss you, but I'd still love you.' I've never bought a lottery ticket. Have you?
Whenever my kids have friends over, I go out and I buy a bunch of lottery tickets and I come back and we play scratch. We love it.
It's totally fun. Kids love lotto. They love lotto. It is just amazing watching them celebrate me spending $20 so they can win three.
So they get the money? Because I'm imagining this like it's your opportunity to win the lottery and they are allowed to be witness to that. They're just child labor scratching stuff off.
But they... so they get the money if they win. Is that the deal?
Yeah, of course. Unless it's big. Unless it's big, then Papa needs to come in and buy a second Ferrari.
Look, let me give you a little tip. All right. When you go on a vacation or something and there's kids around like eight — not eight, like 10, teenagers, anyone like 10 to 16 — you want to be the cool uncle. Like at some point your friends will start procreating, and I was looking for a good joke there. I couldn't think of it. Anyways, and you'll show up and what you do is you bring lottery tickets for the kids. It's fun. It's a ton of fun.
Sort of buy your way into their hearts.
Yeah. That's called being a man, Ed. Wait, you don't think that's... I agree. Okay, okay, Mr. Purist.
Buying your way into their hearts.
I'm just putting words to it. I'm with you. I'm with you.
What do you think you get in on, your charm and EQ?
Like, yeah, that's what we do, Ed. That's what we do. I love it. I think it's good advice. Bribe them with lottery tickets, maybe candy. That's what my granddad used to do. He would just give us a bunch of candy and then my mom would get all upset with him because we weren't allowed to be having that. But we loved him for it. It was a hit. That's the way to do it. I think I'll probably employ that strategy as well.
I just give up straight-up cash. And I like to put it in a rubber band so I feel like a mobster. Now I slip it in their pocket. I'm like, 'Don't tell your dad. Don't tell your dad. Don't tell your dad.'
I love that. I genuinely love that.
We only have nine days until the Prof G Markets tour kicks off with a sold-out show in San Francisco on May 27th. We're then headed to LA on the 28th, where Ted Sarandos, the CEO of Netflix, will be our special guest. And then we head to Miami for the 30th. And then Chicago on June 1st, where we'll be interviewing Governor JB Pritzker, who will be joining us on stage. And on June 2nd, we're finishing things off with the one and only Anthony Scaramucci in New York City. Tickets are still available, but we are going to sell out. So if you're interested in LA, Miami, Chicago, and I think we still have a few left in New York City, visit profgmarketstour.com to secure your tickets now. You excited about this, Ed?
Very excited. Finally hitting the road. We've got our guest, the CEO of Netflix. We're going to ask him, Ted Sarandos, what's happening to Hollywood? Does Hollywood have a future? It'll be very spicy, I'm sure. I'm sure you will have some hot takes and kind of put him in the hot seat. I'm excited to speak with Governor Pritzker about the future of America, what we should do about AI policy, what we should do about policy related to wealth inequality and income inequality, which has obviously been a huge theme on our show. And then there's nothing better than finishing things off with the Mooch, who's just the man. I'm very excited, Scott. This is going to be big. It's going to be a lot of fun.
Yeah, it's going to be a good time. Shall we get into our stories?
Let's do it. Hey guys, if you haven't already, please subscribe to our Prof G Markets YouTube channel. And if you want to get notifications of our latest episodes, click the bell icon as well. Thank you.
Two new inflation reports last week painted a very discouraging picture. Consumer prices rose 3.8% in April from a year ago, marking the highest inflation reading in three years. But perhaps even more notably, for the first time in three years, wage growth failed to keep pace with inflation. So real wages are going down. The pressure wasn't just on the consumer side. Producer prices, which measure wholesale inflation, they also climbed 6% year-over-year. That was not only hotter than expected, but it was the biggest increase since 2022. So Scott, the inflation picture is not looking good.
First, we had the tariffs. We had Liberation Day, which we said on this show would increase inflation. It was somehow a debate back then. I remember saying I think prices are going to rise significantly by the end of the year, which is exactly what happened. And I remembered a lot of people saying, 'Oh, really? You think so?' Because the Treasury Secretary is saying the opposite. The President is saying the opposite. And now, of course, that's exactly what happened. We went from 2.3%, which rose to 3% in just a matter of months. And then you add on top of it this war in Iran, which is massively increasing the price of fuel, massively increasing oil prices, and therefore gas prices, is probably going to have some more effects on food prices down the line. We're up to 3.8%.
And you know, they say about the producer price index, the wholesale inflation, that that is really our best indicator of what is to come because that's sort of the top of the supply chain. That's what businesses are paying for products, and then those businesses are going to pass those on to consumers. So it's probably going to keep going up, and I think there's so much to get into here on what prices could do to not only our economy but also to markets. I have some thoughts on what the chain reaction might look like, but let's just start with your reactions to these inflation numbers that we just got last week. Trump won re-election in large part because of his promise to reduce prices, but now his approval on inflation is worse than President Biden's ever was. Striking.
Obviously the Iran war is driving a very visible price, and that is energy, and specifically that was responsible for 40% of last month's inflation increase. Gas is over $4.50 nationwide. In California it's over $6. What's interesting, or what I find interesting, is that this type of thing — I think people are too focused on, from a societal standpoint, unemployment. Unemployment is 4.5%. At some point, someone has to acknowledge that this whole AI job apocalypse has been a bunch of [__]. But that doesn't mean we're off the hook. Because if you look at societal unrest, it's not when people aren't working that they revolt. It's when people are working and yet they're hungry. And that's exactly what's happening now. Basically, inflation is outpacing wages, which means your quality of life goes down. So someone who's out of work is depressed, but someone who's working two [__] jobs and can't pay for their health insurance, they're angry. And so I do think this is really going to haunt the president and the Republicans in the midterms.
Yeah. This is when people get very, very angry, is they think, 'Okay, I can't take a vacation this year despite the fact I just took on another evening shift on the weekends.' No, I think the political impacts are plain to see. We're already seeing it. Consumer sentiment, which is in a lot of ways a political poll, hitting record lows. His approval ratings just tanking. We're definitely going to see this show up at the midterms and maybe even the next election, too. I mean, the political implications are just enormous.
I think what is interesting is the markets, so far as we've discussed, investors aren't so worried about this. There's the political implications, then there's the market implications. And one of the things that we've been talking about is, yes, these higher prices impact the real economy. It impacts consumers. But increasingly that doesn't matter when you look at stock prices because the stock market is largely a reflection of big tech and also the spending habits of the top 10%. And those people and those companies aren't really affected by inflation. They're not really affected by gas prices going up. This stuff doesn't really matter.
Something I'm beginning to think, though, and bear with me on this because I'm going to go through kind of like a chain reaction of events that could occur here that I think investors should really be considering, and perhaps even pricing in. I think we are underestimating the possibility that we're going to see an impact on consumer spending as a result of inflation, which will be semi-material to these big tech companies but will be very material to the stock market. So the reason I think this is because it feels very much like what happened in 2022.
And what happened in 2022 was you had this unbelievable inflation which had an impact on consumer spending, but it wasn't gigantic. Essentially what you had was very, very strong consumer spending growth in 2021. And then as inflation started to show up and people started to really feel the pain of that, consumer spending still grew, but the growth was a lot smaller. It was 3% versus 9% the year before. So consumer spending growth fell 70%, around six percentage points. So you saw a deceleration in consumer spending.
Now that sounds like not a big deal. That probably doesn't matter. But what it led to was something really interesting, which I think we could be in for in 2026, which was a deceleration in marketing budgets and advertising budgets. And people kind of forget this, but this was the thing that really killed the tech sector in 2022, which by the way fell around 30% that year. It was a lot bigger drop than the S&P, which fell around 20%, which is its worst year since 2008. But all the tech stocks just got crushed. Meta got crushed. Google got crushed. And a big reason why that happened was because suddenly consumers didn't have as much money to spend. They weren't spending as much, or the trajectory of their spending wasn't as fast and accelerating as it used to be. And as a result, advertisers decided to stop spending.
And this was an SEC filing from Meta back in 2022, which I think has a lot of similarities to what we're seeing today. They said, quote, 'As macroeconomic pressures reduce the likelihood of consumer purchases of discretionary goods and services, advertisers are more likely to reduce their spending as they anticipate a lower return on investment.' The company also believes that marketers have reduced spend as a result of pressures on their advertising budgets by factors such as inflation, rising interest rates, and related market uncertainty. So that was their diagnosis: that you had inflation which was affecting the marketing budgets, which was affecting their revenues, and indeed that is exactly what we saw.
Meta's revenues declined. They declined by about 4% by the end of the year. We saw the same thing with Google's ad business. Search revenue declined 2%. YouTube ad revenue fell 8%. The Google ad network, their revenue fell 9% by the end of the year. And so essentially what you had was this small little moment of inflation not reducing consumer spending overall, but just having an impact on the growth. It had a material impact on the advertising ecosystem, which then had a material impact on the businesses of big tech.
And then of course we saw Meta come out and they say, 'Hey, we're struggling right now, and so we're going to be a lot more efficient. We're going to pull back on our spending. We issued these very large capex guidance numbers, and we're going to reduce them now because now we need to get serious because we're seeing that our growth isn't as exciting as we used to see.' This feels very much like what could happen this year. The entire market is dependent on the capex guidance of a few companies.
We're now seeing inflation, which I believe is here to stay because I don't think we're getting out of Iran anytime soon. And as soon as that impacts consumer spending such that it impacts advertising budgets and digital ad dollars, I do believe that could have a serious impact on the tech companies and, as a result, how much money they're willing to spend on AI, and therefore sentiment and excitement and momentum as it relates to the AI trade, which, as we have discussed, is essentially propping up this entire market. I'm not saying that is going to happen, but I think that is a series of events that could happen. I apologize for the long explanation, but I do think it's important, and that is at least on my mind right now.
Your narrative is a logical one. The two things that I think will probably, you know, again along the lines of what could go right, I think that you likely will see a reduction in consumer advertising because of a decrease in consumer spend because of inflationary pressures and sort of this no-hire, no-fire environment and a lowering in consumer confidence.
The only thing that I think will buttress the ad market — and I'm seeing this firsthand — the AI companies are going to spend tens of billions of dollars on marketing, and that's money that didn't exist even two, three years ago. Because between OpenAI and Anthropic, they're in a celebrity death match, and then Gemini, all of these guys, there's literally trillions of dollars up for grabs. At least their view is that whoever establishes leadership or the number two spot — whoever is the leader gets a trillion more in market cap. Whoever is the number two gets 500 billion more than the number three. You know, they just trade at higher multiples and then down and down and down. So they're going to, as I think they hit technical parity, I think they're going to massively increase their traditional marketing budgets. And those line items didn't even exist before.
We're starting to get advertisers from AI that I just had never heard before because the race is so fast. It's like in '98, '99 when I raised money for Red Envelope. We just spent so much. We were drunk sailors. It was like, okay, got to get brand awareness because we're going public in '99 or 2000. So we're buying pages in Condé Nast. By the way, I just went to see The Devil Wears Prada 2. You can save your money. They all look very hot. I will give them that. But it took me back to the aughts when I was just spending a [__] ton of money trying to build e-commerce companies, and e-commerce companies were spending money like drunken sailors. And I think you're going to see that for the next 12 or 24 months.
I just think the hyperscalers are going to spend more. I don't think Anthropic even has a CMO right now. They're going to spend so much money on marketing over the next 24 months once they actually get a CMO who comes to them, who will be someone who wears black and looks cooler than they do and gets invited to cooler parties and starts talking about brand and intangibles and associations and feelings and brings up the 'Sophie' ad, the Google search ad that made everyone cry, and they will talk Dario and Amodei into spending $20 billion on branding that did not exist before.
In addition, the thing your analysis doesn't incorporate is that Andreessen Horowitz two or three years ago spent zero dollars on elections. This year they're going to spend $115 million. The midterms are coming up. We're about to see the most obnoxious, unhealthy, anti-democratic tsunami of money go into these elections. And it's all going to flow through podcasts, print ads, direct mail, local TV, local news stations, and I think that will be another crazy sugar high. So I'm actually — I think I'm less bearish on the ad market than you are.
It'll be very interesting. I'm going to Cannes next month to get their read, although no one ever really talks about anything. We just drink rosé and then we go see like The Killers at the Spotify Beach Party. But I'll try and track down someone who knows what they're talking about to ask them about the ad market, but my sense is the hyperscalers are about to become entirely new spenders in this space.
So I think that's a really interesting point, and I just want to be clear on where I stand on this. I'm not necessarily bearish on the ad market as a whole, but I think that there is a philosophy in the markets right now that if inflation rises, all of these tech companies are just completely protected from it. And I think that we're being a little bit too, I don't know, lenient, resting on our laurels, whatever the phrase may be, to describe just this idea that it's not going to affect the tech companies. And my point is we have seen inflation and consumer spending affect the tech companies before.
Now your point, which is an interesting one, is that AI marketing budgets will essentially save the advertising ecosystem if we were to see a pullback in spending on advertising in 2026 or in 2027. I think that's plausible, and that's a really interesting point. I would point out, though, we're continuing to put all of our eggs in this one basket of AI, where we're not only depending on the hyperscalers to increase our GDP growth — which, as we know, AI was responsible for a third of GDP growth last year — we're then saying we need AI companies to prop up the advertising market too. And at a certain point, you start to run out of AI companies to do that. I mean, you've got Anthropic, you've got OpenAI, but if we're waiting on Alphabet to be the primary advertiser, well, we're waiting on Alphabet to advertise on its own platform, being Google.
So we're becoming like dangerously concentrated and dependent if that is the dynamic that we think is going to play out. Again, very dependent on these AI companies to be sort of the rising tide that lifts all boats, and we should just recognize — I mean, these companies are still very dependent on advertising as a business. Meta, it makes up 97% of their overall revenues still. For Google, it's about 75%. I mean, these companies still need regular people to spend money such that advertisers go out there and buy ad slots.
So I think your point is interesting. I think it's point taken. I would just clarify: I'm not necessarily bearish. I just think this is a dynamic that is worth acknowledging. And I don't think we can say that big tech and the top 10 stocks are completely protected from what might happen in the real economy, what might happen in inflation. If we do see a consumer spending pullback, that could be a problem.
Some people would say, well, the difference between 2026 and 2022 is that now we have these gigantic companies like Nvidia and Broadcom, and they don't need the advertising dollars. But what I would also point out is that half of their revenue was coming from those five same customers: Meta, Alphabet, Amazon, Microsoft, Oracle. I mean, those companies are still dependent. Those are still the big tech companies, and they're propping up the entire business. So we're kind of going back to this circular issue that we've discussed before. And my only warning: I don't think you can assume that inflation won't hurt these players. I think it can, and we'll start to see it, if it does, in the form of lower growth in their biggest businesses, which is digital advertising.
So to your point, if you look at from November of '21 to I think it was September of '22, there was a slowdown in Meta. It wasn't a collapse. I think it slowed down — I think you said their decline was 5%. But when the market is pricing that you'll continue to grow 23% a year and you don't, your stock collapses. And in that 12-month period, Meta shed 77% of its market value. It lost three-quarters of its value.
So there's the actual gross dollar volume slowdown, and then there's the impact — a small gross dollar decrease. I mean, Meta has been — these stocks are sort of priced to perfection, and they are huge companies growing at 20% a year, and their stocks reflect that. So say the ad market doesn't collapse, but people kind of pull in the reins a little bit. If Meta doesn't continue to grow at 20%, and say if Meta announced we only grew 4%, you know, or 8%, I think the stock is cut in half.
So price discovery — and for stocks that are trading at this kind of multiple, you know, you don't need to have a decline in the business. You just have to register a deceleration in the growth, and the stock will throw up. So I think you could see — I wouldn't be surprised if some of the bigger players — I still think Google is incredibly well positioned. I'd be a little scared to hold Meta right now because of what you're saying. Although Instagram just feels like such a freaking juggernaut, right?
It does. And we should also recognize that Meta is priced pretty well right now. So, I mean...
It looks reasonable, doesn't it? For the first time in a while. Yeah.
I'm on Instagram and on Reels all the time. I'm either watching The Economist or some other stuff which we won't get into. Don't ask to see my Explorer page. Bad.
We're going to do it one day. We should do it at the live show. We should AirPlay your phone onto the screen. That'll get a lot of views.
Well, that's one way to end your livelihood when you go back to Princeton. You'll be famous at your Princeton reunion. You'll just be much less wealthy. They're like, 'Oh, yeah. What happened to that guy? Wow.' So, it's Prof G Markets with Ed Elson and Anthony Scaramucci.
That's a good show. I'm bullish on that.
It would be a good show. It would be a good show. Don't get any ideas. I know what you're up to. It's like when my kids are, 'Dad, can I see your phone?' No.
Anyways, where were we? Meta. Yeah, these companies are juggernauts. So just a slowdown would significantly impact their stock prices.
Yeah, absolutely. The slowdown is a really important point. Some of these businesses — like, Google's revenue did grow that year, but it was single-digit growth in Q3, and that was enough to completely freak them out, completely shake investors' confidence. And if we saw that, that is certainly what would happen again.
And then the other thing that we should just recognize in terms of this inflation point: rate hikes. I mean, that was the other big force in 2022, is that we entered this extremely aggressive rate-hiking cycle. And I will just point out what we saw on Kalshi at the beginning of the year. The odds of having any rate hikes in 2026 were less than 10%. Today, after we've gotten these inflation numbers, the odds have risen to 32% on Kalshi. So the odds of a rate hike in 2026 have tripled.
And that is also striking because you'll remember one of the big themes coming into the year for 2026. We pointed out some of the concerns going into the year, some of the issues about maybe there's an AI bubble that was maybe a problem. There was some uncertainty around AI's impact on the job market, etc. But what we all knew is that we were entering a rate-cutting cycle, and you don't want to bet against the markets when you're experiencing rate cuts. Suddenly that has changed because of these inflation numbers.
And I would also add it basically all goes back to Iran. It's like, how long are we going to stay there? Is this going to be another month or is it going to be another year? If it's the latter, then suddenly you're dealing with a completely different inflationary picture, which will have a completely different interest rate environment, which will have a completely different impact on the stock market. So I do believe we're getting to a point now where inflation could be a real problem from an investment perspective, and I don't have any decisions to make yet, but I think if you're an investor, this is something to start taking seriously.
We'll be right back after the break. And if you're enjoying the show so far, send it to a friend. And please follow us on YouTube or Spotify or wherever you get your podcasts.
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We're back with Prof G Markets. The IPO market is heating up in a meaningful way. AI chip maker Cerebras pulled off the biggest public offering of the year so far, pricing above its expected range at $185 a share. The stock opened at $350 a share and then later rose to $385 per share. It raised roughly $5.5 billion in the IPO markets, and investors are already looking ahead to what could be an even bigger wave of offerings, with SpaceX, Anthropic, and OpenAI all reportedly preparing for IPOs in the coming months.
So Scott, we have got our first really big AI IPO, Cerebras. Cerebras is this chip company. Just a little bit about what their actual offering is. They're known for having these chips that are essentially really big. They're about the size of a dinner plate. You can actually fit 57 H100 chips — that's the Nvidia chip — onto a Cerebras chip. And as a result of that, they are reportedly very fast. They are reportedly 15 times faster than other GPUs when carrying out standard tasks. Reportedly over a thousand times faster for highly specialized tasks.
Not to get too technical, but essentially the reason that they are faster — reportedly, again, I'm not an AI expert — but the reason that they are reportedly faster is because they take the compute and the memory and they put it all on one piece of silicon, all in one place. And compared to a standard GPU, an Nvidia GPU, where you have compute and memory in different places in separate chips which are stacked next to a processor, essentially means that you have to move the data across these chip boundaries. For the Cerebras chips, you don't have to do it because it's all in one place and because it's this giant chip where it all sits together.
So that's why investors, at a very, very broad level, are excited about this company. Also just an incredible time to be a chip company because, as we've discussed, Intel is skyrocketing. AMD, Micron, SanDisk, all of these chip companies are just on a tear right now. So you couldn't really imagine a better time to IPO as a company. Having said that, there are some red flags here which we should get into, but first just your reactions to this flagship AI IPO and perhaps what this might mean for the IPO market going forward.
I [__] hate this company.
We have never seen in the history of the markets a sector accelerate this fast, this quickly, as the chip sector. I think the chip sector is literally up 60% in the last 45 days. An entire sector is up 60%. This company, as far as I understand it, its revenues have increased less than 2x, but its valuation has increased sixfold. I think it went public at a $40 billion valuation. Now it's trading at, I think, 60 or 70. It's trading at 100 times revenues, and it's doubled its revenues. Nvidia trades at 26 times revenues and still controls 85% of the chip market.
They were going to go public in 2024, but at the last minute, over intense scrutiny of its heavy reliance on a single customer, it withdrew. It still has that reliance. Emirati AI firm G42 — what the [__] is that? — which accounted for over 85% of its revenue in the first half of '24. So they canceled the IPO. Their revenue is still concentrated in the same foreign state actor. Group 42 accounted for 24% of revenue last year, and state-owned UAE University accounted for 62% of its revenue. This feels like one of those Chinese companies that the moment it had anything resembling an audit, you found out there was nothing there.
Well, the investors disagree. And I just want to point out exactly what you're saying here with this G42 point because it's so important. Because last year you and I discussed this company and we pointed out that they were getting 85% of their revenue from G42, which is this UAE state-backed AI firm that sort of burst onto the scene kind of randomly, basically because the UAE has a bunch of sovereign wealth money to just put this AI company together. Investors agreed, and there was a lot of scrutiny. They were like, 'Hey, 85% from one company.' This year they say, 'Don't worry, we've reduced our G42 revenue exposure to 24%.' Went from 85 to 24, so don't worry about it.
But to your point, 62% of revenue now comes from a new customer, which is Mohamed bin Zayed University of Artificial Intelligence, which is the UAE state-backed research university based in Abu Dhabi, which means 86% of their revenue is still coming from one customer, which is the sovereign wealth fund of the UAE. So they didn't fix the problem, to your point. Like, that is striking. It's not only revenue mix, but the incentives of the customer base.
So when both your customers are in the UAE, and I imagine the UAE wants to at some point transition out of fossil fuels and start having to, like, you know, kiss the ass of Iran and move into an information and technology economy and a tourism economy, they want some of that AI pixie dust. And someone there said, 'I know if this company succeeds, you know, this bodes well for us.' So it's not only revenue mix, but it's quality of customers.
When I sold L2 and when I sold Profit, the reason we got another couple turns on revenue when we sold was the quality. We had Nike, P&G, Toyota as clients. And when you look at the customer mix here, this is crazy town. This literally is crazy town. And so I look at this thing. It's trading at 322 right now. This is pets.com out of the UAE. I just don't — this thing makes — they doubled their revenues and they reduced their revenues from one UAE entity to another government-owned UAE entity.
And then bragged that they had diversified their revenues. That's the part that really bugs me, is that they're lying about what's changed since last year. Nothing's changed. In fact, they're more reliant. It was 85% last year. Now it's 86%.
All I know is somewhere in this thing we're going to find out that either Steven Witkoff or Jared Kushner is a shareholder. That's the only thing I'm fairly certain of here.
I think that's probably a good point just to expand on the issue of customers. So one thing, just to sort of steelman Cerebras, from what I understand — and granted, I'm not an AI expert, so I can't tell you how great their chips really are — but from what I understand, hearing it from AI leaders, their technology is pretty good. That's my understanding of the situation. Whether I should believe these people, I'm not sure. That's a different story. But supposedly the technology is pretty exciting and impressive.
But the trouble, you do have to look at the customer base and you do have to look at the financials. The financials are not great. I mean, they doubled their revenue. Okay, great. But in the AI world, that's actually not that impressive, and it's about half a billion dollars, which is certainly not that impressive in the AI world specifically, and it doesn't warrant the valuation that we're seeing right now.
You talk about their other customer. The other potential customer that is in the pipeline that everyone is excited about is OpenAI. They have this deal with OpenAI where OpenAI is going to deploy 750 megawatts of Cerebras chips. And this is very exciting because if they...
Ramp it up to full capacity, it essentially means that Cerebras is going to generate around $7 billion in annual revenue from OpenAI. Everyone's very excited about that because that is, of course, more than 13 times their 2025 total. So they're like, they're going to make a ton of money in the future with OpenAI. But this gets back to the classic AI question. And it's like, how confident are you really that OpenAI is actually going to make good on that contract? They've promised to spend $1.5 trillion. The number goes up and down. And this entire company is basically a bet on OpenAI making good on that contract. And the contract's very important because they also have an exclusivity agreement in there which says that you can't sell your chips to these other competitors. They don't name them, but we could assume it's probably Google, XAI, Anthropic. So, they're so dependent on OpenAI. And again, in the backdrop of that Ronan Farrow article, which says that board members at OpenAI say that Sam Altman is unconstrained by the truth. The fact that he is a serial liar — that's what they say. It's not a fact, it's a rumor. They say that he's a serial liar. That's important when it comes to these financial contracts. And there's another strange detail here, which is that OpenAI just gave a $1 billion loan to Cerebras at 6% interest. And my question is, why — I mean, why aren't you just paying for their services? Why is the customer giving out a loan to the provider and then monetizing that loan? Like, that's a very strange relationship. In addition, by the way, OpenAI is going to receive stock warrants in Cerebras. So that's the other weird part of the deal. Like, we'll have this contractual relationship, but then also we'll get equity in your company. This goes back to the problem with the circular revenue in AI. It's like OpenAI is now a customer, a lender, a shareholder in the company, which just adds more fuel to the fire, which is like these deals and these contracts are very confusing and a little shady, and they're certainly not something that you want to rely on or could project any sort of meaningful consistent cash flows in the future. You just can't really trust these contracts. It's kind of like the press release thing with Trump. He just says that we have a deal, but is it really a deal? I'm not so sure.
They want to jump the line to buy those chips in case, on the odd chance, they actually have an application or a use case. Loan them a billion dollars — they just raised a certain amount of money. I get — I'm debt, so I'm top of the capital stack, so I'll get my money back. And should these chips actually have an application, I have another potential supplier. So, is this an overvalued company? May it go away? Yeah. But is it worth at least a billion dollars, which I get back because I'm on the capital stack with debt? I understand that. Absolutely. This thing just smells to high heaven. It feels really sketchy. And I can't wait till this thing has options. This is — I won't be able to resist going way, buying way out of the money.
Oh yeah. This feels ridiculous to me. And by the way, do not try this at home. I won't short it because your losses are technically — this company could go to 2,000, right? What I'll do is I'll buy puts, way out of the money puts, because then I know my losses are limited to the money I purchase. I usually like to write.
Well, if you buy — okay, so there's different ways to short a stock. If you short it, you're technically loaning it to someone else and you agree to buy it back at the current price, meaning if it triples, you have to go into the market and buy a stock at triple the price and then deliver it at the price you agreed to short it at. So technically, your losses are unlimited. You can also write calls, and that is you can say, okay, in this stock the calls are going to be very expensive because there's a lot of volatility. So you could be on the side where you write calls to people who are buying calls and you could get some premium that way. You also have unlimited losses if the stock goes to a thousand, 2,000, $3,000 if it becomes a meme stock. If you want to limit your losses and it doesn't have the same sort of asymmetric premium, you would buy puts. So you might buy puts struck at, say, I don't know, September trading, you know, with a strike price of 250, meaning that if it goes below 250 you're in the money and you'd have to pay to buy those things, but then you know your downside is limited to what you spent on those puts. Options are a really great way to lose money because so much has to go right in terms of timing and there's huge transaction costs and even when you win it's short-term capital gains. So it's not something to be done at home. I do it because I have an addiction to gambling and I try to limit it to playing options, which makes me feel like I'm not gambling but investing, which is a total lie.
I sequester it to a small portion of my portfolio. So it's more like fun. It's more consumption for me, the way I look at it. But this thing is just — this is insane. This is crazy town.
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We're back with Prof G Markets. The romantic recession doesn't seem to be letting up. Recent earnings from Match Group and Bumble showed continued weakness in dating apps with paying users declining across the board. Match Group's total paying users fell 5%. Bumble's dropped 21%. At the same time, dating itself is getting more expensive. According to a survey from BMO's Real Financial Progress Index, the average cost of a date in the US has climbed nearly 13% year-over-year to $189. Americans are now going on fewer dates overall, roughly 12 a year now, down from 14 a year in 2025. So, Scott, I mean, the earnings here are interesting. In Match Group, which owns Tinder, Hinge, OkCupid, their paying users fell. However, I would also note that their revenue per user also rose and as a result their overall revenue did rise. Not great, but they rose 4% year-over-year. So that is interesting. Probably relates to the K-shape. But Bumble, I mean, just a flat-out loss. Total paying users fell 21%, revenue fell 14%. There are a lot of questions around are these businesses sustainable in a market where young people seem to be kind of opting out of dating. They seem to be just getting tired of swiping. What do you make of these earnings and the fact that dating itself might potentially be dying?
