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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The Stock Movers podcast,

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Speaker 1: your roundup of companies making moves in the stock market.

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Speaker 1: Harnessing the power of Bloomberg Data.

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Speaker 2: Alex Steele, Paul Sweeney. I think we're all used to

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Speaker 2: the crazy numbers being thrown around a big tech in AI.

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Speaker 2: But how about this one. Meta pays fourteen point three

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Speaker 2: billion dollars for a forty nine percent stake in a

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Speaker 2: company called Scale AI. That seems like a big number

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Speaker 2: to me. Then I read man Deep Singh's research note

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Speaker 2: and it's fifteen times enterprise value to sales. Fifteen times

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Speaker 2: sales even for like AI tech. That seems crazy to me.

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Speaker 2: So we hauled in Mandeep Sing here to defend this

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Speaker 2: thing or explain it to us. Mandeep Sing's senior technology

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Speaker 2: analys for Bloomberg Intelligence, Mandep, I'm looking at your research.

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Speaker 2: That's a big valuation for a big company like Meta

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Speaker 2: to I guess scale up in AI. Is that what

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Speaker 2: they're doing?

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Speaker 3: Yeah, and they have a president. If you remember, they

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Speaker 3: bought Instagram and WhatsApp back in the day, and if

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Speaker 3: you look at the multiples, that seem rich at that time.

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Speaker 3: But look, I think in this case, Clearly they have

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Speaker 3: made all the right moves when it comes to Capex,

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Speaker 3: it's comparable to the Microsoft and the Googles of the world.

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Speaker 3: But they've open source their model. It's just that when

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Speaker 3: it comes to the usability, that's where they've been lacking,

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Speaker 3: the likes of open AI and Tropic and Google. And

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Speaker 3: I think Mark Zuckerberg is trying to fix that by

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Speaker 3: acquiring this data company. I mean, there's a lot of

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Speaker 3: skepticism whether the data alone is the answer to catching

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Speaker 3: up to the opening eyes of the world, but clearly

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Speaker 3: that's now.

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Speaker 2: I noticed being a former banker that they didn't buy

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Speaker 2: the whole thing, and they didn't buy a controlling stake.

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Speaker 2: Is this to get around government regulatory oversight, which kind

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Speaker 2: of they can't buy anything control of anything.

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Speaker 3: Yes, and the president here is what happened a year

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Speaker 3: back with the other three hyperscalers. So Microsoft bought this

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Speaker 3: company Inflection AI, brought over the founder Moustafa Solomon. Google

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Speaker 3: had an investment in this company, Character Ai. They brought

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Speaker 3: over the founder Noam Shazir, and Amazon did something similar.

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Speaker 3: So in all three cases it wasn't an outright acquisition,

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Speaker 3: but an investment with a forty nine percent stake and

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Speaker 3: getting over the co founder, so that playbook is pretty

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Speaker 3: well established at this point. Is this a defense or

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Speaker 3: offensive play I mean it's defense because Meta has invested,

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Speaker 3: you know, seventy billion dollars in Capex just this year

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Speaker 3: on Open ai on their AI investment the data centers,

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Speaker 3: so it's comparable to your Open ai and in Tropic

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Speaker 3: and Google. But it's just that their models are not

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Speaker 3: as heavily used as some of the other names, and

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Speaker 3: that's where you know they are just trailing and engagement.

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Speaker 3: I mean, they have the surface area. Think about it.

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Speaker 3: They get almost three billion users to come on their

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Speaker 3: family of apps, you know, Instagram, WhatsApp, and the Core

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Speaker 3: Blue app. They can deploy their AI, which they have

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Speaker 3: done on WhatsApp, but it's just not used. So open

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Speaker 3: aiy is right now used by their daily active users

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Speaker 3: for twenty nine minutes every day. Think of how much

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Speaker 3: Meta EI is used, not even a minute, right, So

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Speaker 3: that just goes to show the usage here.

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Speaker 2: All right, you mentioned WhatsApp. I got to ask you

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Speaker 2: this because this was back in my days covering the

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Speaker 2: stock when they bought WhatsApp. He said, ah, they can

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Speaker 2: monetize it at some point in the future. That was

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Speaker 2: like ten years ago. Dude, It's they're just now putting

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Speaker 2: advertising and thinking about subscription type situation. Is this Meta

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Speaker 2: actually finally trying to monetize WhatsApp?

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Speaker 3: Yes, And look, messaging is I mean think about Apple.

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Speaker 3: I message can't really show an AD if you're saying

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Speaker 3: your messages are encrypted, you can't really show a targeted

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Speaker 3: ad there. So it's very different from your social media feed.

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Speaker 3: At the same time, Meta does have a ten billion

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Speaker 3: dollar existing business even before this launch on the update

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Speaker 3: page or the update tab where click to messaging ads,

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Speaker 3: so they would show you an ad on their messenger

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Speaker 3: or even your Facebook feed with a click to WhatsApp,

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Speaker 3: and they charge you for that. So a lot of

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Speaker 3: small businesses do use that click to messaging ad, which

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Speaker 3: is outside of WhatsApp, to bring people to WhatsApp and

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Speaker 3: solve for their customer service use.

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