Nike originally started as a running shoe company. 

It has dominated the space since its inception, but new players such as New Balance, Hoka, and Asics have been giving Nike a run for its money. 

Dying Monopoly

People just don’t resonate anymore with what Nike has to offer. They feel as though their product is inferior to competitors, and its once heroic image of being the hero brand for star athletes has grown stale in the eyes of the consumer. The brand has lacked the innovation and forward-thinking that it has been most known for in recent years.

Nike has long monopolized the art of grabbing attention and the wallets of avid runners; however, there has been a noticeable shift to other areas of focus for the business, including basketball shoes and the release of limited-edition sneakers. This divestment from its core offering of running shoes has really hurt the brand, especially when you look at its stock.

Nike's shares plunged nearly 20%, which was their worst day on record after the company cut guidance for the first quarter and fiscal 2025. This drop adds to an overall total return of roughly -33% over the past year. 

Comparably, the S&P 500 has delivered a total return of around 27%.

Big difference.

Recent Struggles

On top of the decline in their running category, other recent struggles have propelled the company to new lows. The cost pressures due to inflation, as well as competition from China and the United States, have intensified the pressure on Nike. Their lead in market share has dramatically shrunk, giving hungry competitors a chance to swoop in for themselves. In fact, the gains in market share from players like New Balance, Hoka, and Asics have almost exclusively happened at the expense of Nike.

However, even still, Nike still appears to be overvalued. 

The brand reported a quarterly revenue decline of around 2% on a year-over-year basis. This equates to $12.6 billion. Adjusted earnings per share also came in at around $1.01. This is slightly better than consensus estimates. 

Yay, at least some good news. 

The real issue is the cut to its guidance. Nike expects first-quarter 2025 revenue to be down approximately 10% on a year-over-year basis. This is a significant miss versus previous expectations for a drop of just 3.20%. 

In other words, Nike is in BIG trouble. 

Something is happening in the AI chip world that can only be described as a rarity.

Nvidia is earning so much money that they have no idea what to do with it. 

Already hitting all of its investment quotas into experimental projects within research and development for further innovation within the company, Nvidia only has one logical option for what to do with its extra cash. 

They can either store their cash in low-risk investment assets or do the more financially intuitive option: buy back their own stock.

Regardless of what they decide to do, shareholders are set to be heavily rewarded with an embarrassing amount of riches in the coming years. 

Unfair Competitive Advantage

The AI chip giant has done something incredible; they have mastered both hardware and software, giving them the ultimate advantage in their field in a way that no other company could dream of competing with. 

This isn’t something that happens ever, really, even in other unrelated industries. That is like a milk company mastering both its product, the milk, and also the carton and the machines it uses to make the milk. 

The Kicker

So, obviously, Nvidia is running away with it. One might add that Nvidia should keep looking back over its shoulder to make sure others aren’t catching up. Here is the crazy part. Nvidia is already investing in such a way that it is miles ahead of its competition. It truly does not make financial sense for them to put in more money than they already have into R&D. 

For them, the best course of action is to reinvest their cash back into their own stock to secure even more profits from their business. 

How crazy is that? Who would have thought a thing like that would happen in our economy? 

Best Stock In Its Class

Currently, the common consensus for Nvidia’s price target is $160 despite ongoing selloffs beginning earlier this month. Shares have soared over 150% so far this year and have more than tripled since a year ago. This fast incline in stock for such a large and well-known company is practically unheard of. 

Even with this sharp increase, Nvidia is not planning on slowing down anytime soon. Among the Magnificent 7 stocks, Nvidia still has the most upside, even with these big increases. With such a sharp leap in valuation, major selloffs are bound to happen, but not with a stock such as Nvidia, which has such an incredible valuation that it has more than enough room to grow much, much further.  

Nvidia’s Innovation

Going back to R&D, another one of Nvidia’s major advantages is the pure speed and cadence of its new innovative products. The AI chipmaker not only has the funding necessary to spur fast and bountiful innovation, but it also has the best talent and brains in the world to make it happen. This means that Nvidia is the one that is discovering all of the new innovations and not some startup or other major competitor. This, yet again, puts them even further ahead than the rest of its competition. 

The best way to describe their progress is that they are a bullet train going 150 miles an hour while everyone else is trying to catch up in a 60 mph Prius. 

With this in mind, the company is set to generate $270 billion in cash over the next three years, which sets them up brilliantly to buy back their stock and cash in on their own growth. This will, in turn, make them even more money and allow them to balloon to new heights using their own success. 

How wonderful. 

What to do?

The situation is so unprecedented that analysts simply don’t know how to properly view or analyze the whole picture. Typically, stock buybacks are associated with older companies, which can be seen as negative as it implies that the company has stopped growing; however, Nvidia’s situation is a whole different ball game. 

To begin with, they have already invested in everything that possibly could on the R&D side; there is justn’t anything left to invest in on that end. The government and regulators themselves will likely not allow Nvidia to buy assets big enough for what $270 billion in cash could afford them to buy. So what more can they do? Either park their money in a low-risk investment or just reinvest it back into themselves through stock buybacks. 

In fact, the company has already started doing so. Last year, it announced a $25 billion stock repurchasement program, and as recently as last month, Nvidia boosted its quarterly cash dividend by 150% from $0.04 per share to $0.10, equivalent to $0.01 per share on a post-split basis.

It's not an insult to buy back stocks if you have nothing else to do. 

The Financials

Looking at Nvidia’s recent financials shows that the company's cash generation is accelerating at a new rate. The end of Q4 last year saw Nvidia’s net cash from operating activities soar to over $28.1 billion from $5.6 billion the year prior. Just in the first quarter of 2024, the company earned more than $15.3 billion from operating activities, which is already more than half of last year’s total. 

They are well on their way to breaking their record.

The Good News

Meanwhile, Jenson Huang had even more good news to tell investors this past week as he explained that Nvidia will continue to remain the gold standard for AI chips. 

Some investors were concerned that competitive rivals could cut into the company's market share; however, these concerns were dispelled with the upcoming rollout of Nvidia’s Blackwell system later this year, which the CEO claims will likely be the most successful product in company history and even in the entire computer history.

To say something like that, you must be on another level, which Nvidia certainly is. The company looks to solidify its lead in the industry even further, which they are more than capable of doing.

When major indexes are only chalking up smaller gains, but you have individual stocks booming, it creates an interesting dynamic in the market. 

Moderate losses in large-cap energy and financials are offset by outsized gains in consumer discretionary, such as Amazon and Tesla. Typically, no matter how large the individual stock is, it can’t keep the entire market up, right?

Well, things are changing. 

The Seesaw Theme

Nvidia is certainly an example of a stock that, with its gains alone, has driven the entire stock market, especially within the overall tech sector.

It's a fascinating seesaw theme that has led the market narrative this year. Typically, individual stocks do not have such power over the entire market, but here we are. It hasn’t been this bad, even during the post-COVID comeback when the Magnificent Seven took charge. At that time, around seven stocks controlled the swings of the market, but that's just it; there were seven stocks, not one. At least in the eyes of the market, thats a little better in terms of the diversity of assets (even though it's not diverse in all when seven technology stocks control the market).

Stock Comebacks

Returning to the present, on the days when AI isn’t leading the market, there are still select pockets of strength that are keeping the S&P 500 from more pronounced sell-offs and holding index volatility levels to low levels. 

This is great because we don’t want one company to continue to lead the market. 

Let's take Nvidia’s recent plunge under observation. This Monday, the chip maker closed down 13% from its record high. By surveying social media, especially X, you would think that the world was burning. With the way Nvidia has carried the market, it was interesting to see what would happen when the stock faltered. 

The ensuing market behaviors were definitely a surprise. The Dow Jones, which was only 3% YTD compared to the S&P 500 at 14%, staged a major comeback with energy stocks perking up and biotech showing signs of life. These are pockets of innovation that typically wouldn’t show gains if a major player in innovation fell the same day. 

It's not like Monday was the first time this has happened. The seesaw behavior is everywhere right now; even as major stocks are correcting, others are gaining. It's propping the market up and continuing its rise. The corrected stocks then see signs of life as other stocks fall, and they are the ones now propping the market. 

Even the next day on Tuesday, the S&P 500 managed a gain of 0.4% despite most of the market in the red. This doesn’t happen often, if ever, leading to a very “weird” market. 

Stock Market Purgatory

In a bull market, leading stocks eventually come to a halt as investors sell-off. This event should have already happened in theory, but currently, we are in some sort of market purgatory where sell-offs are happening every day, but other areas of the market are offsetting those losses with comebacks of their own. 

Take, for example, the Magnificent Seven. In the past 6 months, there are often times when, say, Microsoft and Alphabet are up, but Nivida and Apple might be down. The correlation between directional moves between the Magnificent Seven is just a mere 43%, which is very low compared to how it used to be.

The normal market cycles are not taking place, and that has put the overall market in a weird situation. We have sectors in the US markets, such as AI and tech, that are marching to the beat of their own drums, disrupting the rhythm of the markets. For now, this is great as it is leading to steady gains month-over-month; however, once the music stops, the market could see a major sell-off and start a bear market or even a recession.

The current market is almost like a toy with dying batteries. The build-up of risk due to the fact that a select few companies are controlling the global equities market could lead to the metaphorical “batteries” dying out and a free-fall plummet in the markets.

At first glance, the Volkswagen and Rivian partnership seems like an odd pairing, however, when considering two major facts, this development makes complete sense. 

1. Volkswagen has struggled with EV development and needs Rivian’s engineering expertise.

2. Rivian is low on cash and is desperate for a much-needed cash infusion. 

The Partnership

Let's look at Rivian first. 

The EV company has struggled to turn a profit even as sales have increased for two of its most popular vehicles: the R1S Sport Utility and the R1T truck. 

The final quarter of 2023 saw a car production and delivery record but reported losses of more than $600 million. During this period, the compay delivered 14,000 cars but is evidently bleeding money. 

Not only would a cash infusion help stop the bleeding, but streamlining costs and operations may help lower losses. Since beginning operations in Germany before World War II, Volkswagen has grown into a global powerhouse with over 114 production facilities worldwide. They have been in the industry and know the ins and outs better than most vehicle manufacturers. They are the perfect partners who will know how to lower costs without compromising on quality. 

However, Volkswagen isn’t perfect either. For the first quarter of 2024, Volkswagen has brought in over $80 billion dollars in sales. This is about 67 times larger than the revenue generated by Rivian during this same time period. Even though Volkswagen is Goliath and Rivian is David, the company has struggled with the transition to EVs and hybrids. Massive supply chains and infrastructures weren’t able to save EV sales from falling slightly in 2024. 

So how will the deal work?

Companies are learning from Tesla’s example of building out internal software for their cars rather than relying on third-party companies. The partnership will focus on the development of internal software used to operate EVs. 

Why is this important?

Because improved software will lower production costs and accelerate advances in new products. 

The theory is that the savings gained from software improvements could help Rivina erase its losses and reach an even wider market with new offerings. This, in turn, would allow Volkswagen to produce more competitive electric vehicles with better software. 

It's a win-win.

What does this mean for the EV industry?

Analysts expect the EV industry to grow over the coming years, with sales quintupling by 2030 and accounting for over 40% of vehicle purchases in the world. The companies that are at the head of this space will be the real winners of the overall car industry. 

Currently, the market is divided among fierce competitors. We have companies that exclusively focus on EVs, such as Tesla and Chinese carmaker BYD. These companies are known for their advances in the EV space and are currently leading the industry. However, deep-pocketed legacy companies aren’t willing to back down that easily. With heavy investments in the space, they have been able to slowly but surely begin to close the gap to the new incumbents. 

Ford, GM, and Stellantis have invested tens of billions into EV development. Volkswagen's partnership helps the German automaker match the scale of investments taken up by its peers.

This year, we’ve seen varying decisions from the leading central banks across the world. The ECB, Swiss National Bank, and Sweden’s Riksbank are just a few of the central banks that have decided on lowering borrowing costs this year.

Meanwhile for the United States, the Federal Reserve hasn’t decided on interest rate cuts. In fact, the opposite. In March, policymakers were forecasting three rate cuts this year. Now, the Fed’s median projection is only a single 25 basis point reduction in 2024.

Since 2022, we’ve seen 525 basis points of interest rate hikes.

What’s happening?

In short, inflation is still an extremely prevalent problem. The Fed is aiming for a 2% inflation target over the longer run, as measured by the annual change in the Personal Consumption Expenditure (PCE) Price Index. The latest Core PCE data showed a +2.8% YoY change.

This upcoming week, on June 28th, we will get a new PCE reading.

The Truth about Inflation

The core PCE Index shows the annual inflation rate is at 2.8% and the core CPI Index shows an annual inflation rate at 3.4%. However, the real inflation rate is much higher.

Everyday items have became increasingly expensive and consumers are feeling the pain.

Notable price changes (year over year):

• Crude Oil futures have increased +15.74% YoY

• Poultry futures have increased +19.61% YoY

• Cheese futures have increased +20.66% YoY

• Rubber futures have increased +27.90% YoY

• Milk futures have increased +33.71% YoY

• Butter futures have increased +37.29% YoY

• Orange Juice futures have increased +62.26% YoY

• Cocoa futures have increased +174.57% YoY

Note: The core PCE and core CPI Index exclude food and energy prices. To account for food and energy prices, look at the headline figure.

The Secret Indicator

Historically, gold prices have been a good indicator of inflation and market sentiment as investors tend to flock to gold as a hedge against inflation.

In May, gold prices hit an all-time high of 2450.05 per troy ounce. Since then, the price of gold has held steady and hovers around that all-time high price.

Price of Gold (USD/t.oz)

Like anything, the price of gold is primarily driven by supply and demand. As demand for gold has increased over the past year, the price of gold has skyrocketed.

• The price of gold has increased +20.99% over the past year

From 1971 to 2024 gold has had an average annual return of 7.98% (Statista).

With the Federal Reserve lowering its guidance on interest rate cuts and the price of everyday items being inflated, the underlying outlook on inflation doesn’t appear as optimistic as the headlines you may see. While the Fed has made progress in the fight against inflation, the battle is far from over.

Once seen as a playground for the super-rich, the wealthy are quitting London amid the political and economic turmoil the great city has seen in recent years. The city seems to have lost its once-promising allure. 

As of now, the UK is seeing an unprecedented exodus of millionaires spurred by political and economic issues, with as many as 9,500 high-net-worth individuals set to leave the great nation. The only other country where this number is higher is China, with an estimated 15,200 individuals. 

This all makes sense. China’s economic output has slowed as companies take their manufacturing to cheaper countries. As for Britain, who wants to live in such a dreary country anyway?

Post-Brexit Outlook

Access to the European Union was a big draw for millionaire business owners. Now post-Brexit, challenges have emerged for companies and business owners in the European market. Why struggle when you can vote with your feet and leave the country for a better situation? The world is currently grappling with the perfect storm of geopolitical tensions and economic uncertainty. Not to mention the increase of regulations and the lack of significant innovation and progress has put off the super rich. Living in a country that promotes innovation is very important for business owners, so it is not a surprise that many are leaving for sunnier pastures. 

Traditionally London has been seen as a top destination for migrating millionaires due to its large number of wealthy families, rich history, and incredible list of investors. Post-Brexit, the trend has reversed itself, as we have seen over 16,500 millionaires migrate during the 6-year period. This is an 8% decrease over the past decade, a bad look for any country's prospects of innovation. 

The Future

The UK and Russia were the only two European nations to record an outflow of millionaires. When you are listed in the same breath as a former communist nation in the middle of a massive war in Eastern Europe, you should be worried about your future outlook. Of course, Britain is no Russia; however, they have the potential to fall into an even worse fate: Mediocrity. 

Apple Intelligence came out this month, and with it, there is a big generational push to add AI to the company's feature offering. This wonderful new shift to AI will finally upgrade Apple’s Siri and allow for a tiny AI assistant to hang out with you inside the device. The catch? If you own an iPhone 15 or older, you are out of luck.

Upgrade Or Move Aside

Apple says this is because older models don’t have a powerful enough processor to handle the AI platform, and yes, this is likely the truth as it requires tons of computing power to handle generative AI; however, this is likely by design to get users to shell out cash for the newer models. 

So if you want to experience the power of Apple Intelligence, you will need the newer iPhone 15 Pro or 15 Pro Max to take advantage of the software. This is a big bummer for those who bought an iPhone 15 this year, expecting it to stay updated with the latest software for more than at least a year. 

With the hype surrounding Apple Intelligence, early adopters and Apple enthusiasts will surely spend the big bucks to obtain a newer model. This will create a very favorable situation for Apple, which has had a plethora of problems over the past year, including its falling out with China, a big portion of its user base. 

The company is approaching market saturation, and rather than pushing to new markets (which are now far and few between), they are decidedly focusing on their current users and making sure they upgrade to new models. Their thinking is that potential customers using competitor products will see Apple Intelligence and that their friends won’t stop raving about it and will switch phone companies. That is great in theory, we will have to see how fast it will take competitors like Samsung and Google to create their own LLM or partner with a company like OpenAI.

Apple’s Big Problem

Apple makes durable phones. That is a massive problem for the tech company. Users are sent software updates quarterly that take care of operating system upgrades. Unless the phone battery deteriorates or the screen cracks, users do not have a compelling reason to upgrade their phones. The operating software is top-of-the-line, so what's the point of paying hundreds of dollars for a slightly improved camera? 

According to a recent study, 61% of iPhone users have had their previous iPhone for two years or more. Another 29% have held on to their phone for three years or more. Many only decide to upgrade if it is through a promotion being held by their data provider. Apple was losing out on millions of sales, and that is now all set to change for the foreseeable future. Users finally have the incentive they need to ditch their older phone models. 

Cashing in on the AI Hype

So, Apple is the big winner when it comes to generative AI for mobile devices. They are ensuring anyone who wants Apple Intelligence and doesn’t have the top-of-the-line model will need to pay up for it or risk being left in the dust. Exclusivity often breeds economic gains. My friend has Apple Intelligence, and I need it, too. 

Moreover, Apple is taking a holistic approach by introducing the software across many existing apps rather than containing it in one singular app. They have also finally upgraded Siri, a long-awaited upgrade many iPhone superfans have waited for. This will allow Apple to truly compete with Google Search. 

Now, the company just has to sit back and wait to see how well Apple Intelligence preforms during its early beta testing period. Then, they will truly understand how many users actually want to buy their next smartphone based on its software when it lands later this fall. Partnering with the industry leader, OpenAI, certainly won't hurt its chances. 

Who is Bill Ackman?

Bill Ackman is one of the most prominent figures in finance and the founder and CEO of Pershing Square Capital Management.

Ackman founded hedge fund ‘Pershing Square’ in 2004 and has grown the fund’s assets under management from $500 million to well over $18 billion over the course of the last two decades.

Source: Pershing Square Capital Management

But we’re not here to simply admire Bill Ackman’s success. We’re here to reveal Bill Ackman’s strategies and show how you can apply it to your investing strategy.

We’ve spent countless hours studying Ackman and the strategies he’s employed over the years.

Bill Ackman’s Investment Strategy

Ackman calls his process for investing a “big research project”, and we’ve broken his research project down step-by-step:

1. Finding a Business with a Moat.

Ackman describes a moat as “high-quality businesses with a long-term trajectory of growth, that generate lots of cash, can be easily understood, have huge barriers to entry, and don’t have to raise capital constantly.”

Ackman’s reasoning is simple. If you believe the value of any financial instrument is the present value of the future cash flows, you need to know the future cash flows. And if you don’t, well then you don’t know what it’s worth.

After passing this step, Ackman looks to see where the stock is trading. If there is a wide gap between the price and value of the stock, then Ackman takes “a hard look to try and understand why it trades at a deep discount.”

2. Deep-dive into Research.

This phase starts with public data - things like SEC filings and the company’s investor relations page. Reading through forms such as quarterly reports (10-Q’s), annual reports (10-K’s), proxy statements, and even conference call transcripts.

However, the intention isn’t to evaluate the company’s financials. Typically, by this point, Ackman already knows if the company is in a strong financial position.

Ackman looks through the various forms to see if the management of the company is performing.

Ackman says it’s “very helpful to go back five years and learn the story.” This help him determine how competent and truthful the management is. He does this by looking through historical filings and seeing how management describes their business and what they say they are going to do. He then progresses through the years to see if the company’s management lived up to these statements.

3. Evaluate the Risks

Here, Ackman is trying to understand the ins-and-outs of the industry.

If its an industry Ackman’s fund doesn’t know too well, they talk to industry experts, listen to podcasts and interviews from CEOs in the industry, read books about the industry, and look at competitors.

The main question Ackman is trying to answer during this phase is “what could dislodge this company?”

Conclusion

Bill Ackman is an activist investor. Ackman looks for situations where a great business has made a big mistake or lost its way but remains recoverable. He then buys a stake from the existing disappointed shareholders of the firm who’ve lost confidence and are selling at a low price relative to what the company is worth if fixed. Ackman then works with management to help ‘fix’ the company.

Apple and Google’s relationship can be classified into many things: friends, collaborators, enemies, and competitors. It’s a strained partnership that pits them together and against each other amongst their various departments. They have worked hand in hand when it comes to search and online advertising; however, this may now change as Apple looks to partner with OpenAI to bring ChatGPT to the iPhone. 

The Google-Apple Relationship

To say that things have not been difficult for Google would be inaccurate. With many AI misfires for Google this year, people often overlook the significance of the landmark antitrust lawsuit against Google’s search engine dominance. 

Apple was featured heavily in this lawsuit. Pivoting at the perfect time, an opportunity has fallen to them at the most convenient hour as AI looks to change everything that we know about search and the way that people seek out information online. 

For more than two decades, Apple had locked Google down as its default search engine in its Safari browser. The deal had Apple steering the traffic of its massive user base to Google search business. In exchange, Google would pay Apple a minuscule $18 billion a year for it. 

This could all change, as to the delight of investors and iPhone users alike, Sam Altman has inserted himself into the fray. Apple's foray into AI is a bold effort to catch up to the Big Tech rivals who are already ahead in the game. Soon, iPhone users will get free access to the chatbot, which will mesh with the long-forgotten Siri and other apps. This will give users a repository of knowledge in a way that may cut out Google from the equation. Afterall, this does mean that Apple and Google are competing on the AI front. As for OpenAI, this is their ticket to mainstream AI technology. Users who are not already using the LLM will now have the opportunity to finally give this “viral” technology a try on their phones. 

Should Google be worried?

Even if just a small number of users begin interacting with the internet through AI-infused Siri rather than the Google-partnered search bar, that could spell a heavy influence on user traffic and ad revenue for the search engine.

This comes at a pivotal moment in the battle for AI. Google has Gemini, while Apple is now attempting to coin the term Apple Intelligence. Meanwhile, OpenAI continues to ink new deals with media and technology companies in an attempt to strengthen the alternative to search, ultimately siphoning attention away from Google’s empire and even other search engines like Microsoft’s Bing.  

It's not like these AI partnerships are set in stone. There is still a lot of time for Apple to continue its collaboration and long-term union with Google and partner with Gemini. As it stands now, Apple's partnership with OpenAI does put a wrinkle into their decades-old partnership. Things can always change, but as it stands for now, the AI game is up for grabs from brand new faces and brand new players, as the search business is set for a major disruption.

Tesla’s CEO Elon Musk’s pay package vote is on its way to being passed, meaning that Tesla stockholders are planning to send $56 billion dollars his way. 

The vote is currently passing with wide margins, including a shift to change Tesla’s place of incorporation from New Castle, Delaware, to Austin, Texas, its headquarters. 

Disaster Awaits if Approval isn’t Given

When a single man is majorly responsible for more than $735 billion dollars in added value over the past six years, some compensation is well deserved. 

It looks as though Tesla stockholders are in agreement, especially if rejecting the deal would be catastrophic for the stock. 

Scrolling through the endless abyss that is Twitter, it was puzzling to see Tesla cynics and short-sellers truly believe in their hearts that institutional investors, most of whom are long on Tesla and are active managers of their funds, plan to vote against Musk’s compensation plan. 

You don’t need a financial degree to see how voting against the plan could cause the stock to tumble. 

This is especially true given the fact that large institutional investors can’t simply trade in and out of large positions. Voting against the compensation plan would be the equivalent of shooting themselves in the foot, no matter how much they may dislike Musk in the privacy of their board rooms. 

Some analysts predict Tesla will drop toward $150 if the vote does not pass, but even with that gloom prediction, short-sellers could be correct, and the package does not get approved. After all, Musk has built out quite a list of enemies in the past couple of years. 

What the Major Players Have to Say

For now, the public is aware of at least one fund, Norway’s sovereign wealth fund, a player that holds more than 1% of total Tesla stock, planning to vote against Musk’s payday, alongside Calpers, which has about 0.3% of non-Musk shares. 

On the other side, Baron Capital, Baillie Gifford, Ark Invest are voting for the deal bringing their total control to 1.6% of non-Musk shares. 

Along with many other names in the game, the tally seems to be about even; however, don’t count out the mighty retail investors who hold a combined 45% of non-Musk shares. 

With Musk’s cult-like following, over 90% of retail investors plan to approve the package, carrying over 40% of the votes that are needed for the vote to pass. Including the institutional investors that are pro-Musk, there isn’t much of a doubt that the vote will pass. 

This all relies on the fact that Musk hasn’t made a mistake in his calculations. Let’s say that he is spot-on with the numbers. The retail inventors, plus the institutional players mentioned above, make up around 42% of the total. To get to 50%, the number needed to get across the finish line, all eyes will be on Vanguard, State Street, and BlackRock, the three biggest institutional holders of most of the largest U.S.-based stocks through their ETFs. 

If Vanguard says no, 8% of non-Musk shares are out of the door, but a yes from State Street and BlackRock would be more than enough to seal the deal. 

The politics continue to rage on, but for now, stockholders and stockhaters alike must sit patiently and wait for the results to go through during Tesla’s annual shareholder meeting.

Google can’t seem to catch a break as their AI troubles continue. 

This time, it was their new AI Overview feature in its Search Platform that was causing them problems. The feature is supposed to provide generative AI-based answers to search queries on top of your search results. 

In theory, this would be an awesome addition to the platform, which is facing heavy competition from the likes of ChatGPT, Anthropic, and Perplexity. Except what happens if your product fails in such a way that it provides wrong, misleading, biased, and, in the worst case, dangerous answers?

You get a disaster on your hands and a product that is telling you:

• To use nontoxic glue to keep the cheese from sliding off your pizza.

• To eat one rock a day.

• That Barak Obama was the first Muslim President. 

• To use black beans as a thermal paste for your computer.

• That taro can be cooked in either 15-20 minutes or 1.5 hours (you can decide).

• To smoke 2-3 cigarettes a day as a pregnant woman

Users on social media were having a ball this weekend, sending the most off-the-wall answers to see what they could get the AI to say. Exploitation of features in this manner is very common; in fact, you can count on the average user to test all use cases to find your vulnerabilities. The issue is that these vulnerabilities need to be figured out in testing as you don’t want your core user base finding these themselves. 

Googles Other Big AI Fails

To make matters worse, this isn’t the first time Google has failed in such a drastic manner. 

Google famously had to rebrand their company's chatbot, Bard, to Gemini after its horrible launch. The company accidentally included an erroneous response in its promotional video for the product, sending Google shares sliding.  

Later, Gemini’s image generator had even more problems as it began generating photos of diverse groups of people in inaccurate settings, including as German soldiers in 1943. 

AI has a history of bias, and Google was trying to overcome this issue by introducing a wider diversity of ethnicities into its image generation. However, the company overcorrected, leading to inaccurate and, at times, offensive generated images.

The Big Problem

It looks like Google has the habit of releasing unfinished products early or, even worse, sending out half-baked finished products that have lots of inaccuracies. 

Who can blame them? They have to compete with all of the startups that are taking over the scene. Nobody wants to fall behind in the AI rat race, especially a conglomerate like Google, which has been dominating the way we search for decades. 

Controversy builds for any company when they release suboptimal products, as it can be seen as a low-quality effort to create something that is not only worse than their startup competitors but is also blatantly giving wrong and biased answers. This leads to a loss of trust and credibility for a brand that is slowly losing its grip on its core search business. 

Can we trust the product? The answer is no, as Google needs to work harder to overcome these challenges and release a quality product with no problems. The fact that Google continues to release products with flaws and then explain them away is growing old and needs to stop before they destroy the brand that they have built so well.

Shares of Trump Media & Technology Group (DJT) have taken a hit lately after Trump’s conviction. Jurors found Donald Trump guilty on every felony count he was charged with (34 to be exact).

But that’s not the only reason the stock has been volatile and declining. The company stinks (from a valuation perspective of course). Trump Media & Technology Group (DJT) is the result of a merger between SPAC ‘Digital World Acquisition Corp’ and ‘Trump Media & Technology Group’ ⬇

Trump Media & Technology Group (DJT) shares have returned over +170% YTD and +390% since being a SPAC. This rally has been primarily fueled off two things:

1. Truth Social

2. Donald Trump

These kinda go hand-in-hand.

Truth Social is a social media platform that “encourages an open, free, and honest global conversation without discriminating on the basis of political ideology” - basically just another social media platform, but this time backed by Donald Trump.

But unlike other social platforms that are extremely profitable - Meta, YouTube, or TikTok - Truth Social is the opposite. Not only are they unprofitable, but it’s worse than you would imagine.

The disastrous earnings.

Trump Media & Technology Group (DJT) reported an operating loss of $98.35 Million in Q1 of 2024, compared to a loss of $3.85 Million loss for the same period in 2023 - not to mention a revenue decline of 31% YoY.

Now I know what you’re probably thinking: “they probably trade at a low revenue or earnings multiple, right?”. Well no. The market cap currently sits around $8.67B, or an over 1000x TTM price to sales ratio. And you can’t really apply an earnings multiple, because, well they’re unprofitable. I shouldn’t even have to justify why this market cap is insanity!

How is it valued versus competitors

I could put together some fancy excel model where I try and validate the company’s valuation, but it isn’t even worth the time. This snippet, from this blog post, says enough:

“To make a generous estimate of the true value of DJT, we can perform a simple comparison to X (formerly Twitter), the market leader in the social media space which Truth Social is trying to compete in (microblogging). If we rely on Fidelity and take the valuation of their stake in X, X is likely worth around $12 Billion, 50% more than the current valuation of DJT”

This is about as optimistic of an approach you can take to value Trump Media & Technology Group (DJT), and it was still overvalued. And I don’t wanna see any comments saying “use a real option valuation method” or “you need to apply more generous assumptions to account for it being a growth company”.

I would love to hear any other contrarian opinions on the company, because all I see is a stock trading at a ridiculous multiple, that bleeds money, and has a declining user base and declining revenues - aka a big no no.

The bullish argument

Okay, I lied. There is 1 argument I believe is ‘valid’. But I put this in quotations because I don’t believe there is any real long-term benefits that are going to realized from it.

“If Donald Trump wins the election then there will be a mass influx of users to the platforms”

Yes, this is true, but it won’t last. These users are going to churn out. In fact, those users will probably be churning faster than my great grandma making butter.

Conclusion

Stay away. Stay far away.