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Speaker 2: Alex Steele, Paul Sweeney. I think we're all used to
Speaker 2: the crazy numbers being thrown around a big tech in AI.
Speaker 2: But how about this one. Meta pays fourteen point three
Speaker 2: billion dollars for a forty nine percent stake in a
Speaker 2: company called Scale AI. That seems like a big number
Speaker 2: to me. Then I read man Deep Singh's research note
Speaker 2: and it's fifteen times enterprise value to sales. Fifteen times
Speaker 2: sales even for like AI tech. That seems crazy to me.
Speaker 2: So we hauled in Mandeep Sing here to defend this
Speaker 2: thing or explain it to us. Mandeep Sing's senior technology
Speaker 2: analys for Bloomberg Intelligence, Mandep, I'm looking at your research.
Speaker 2: That's a big valuation for a big company like Meta
Speaker 2: to I guess scale up in AI. Is that what
Speaker 2: they're doing?
Speaker 3: Yeah, and they have a president. If you remember, they
Speaker 3: bought Instagram and WhatsApp back in the day, and if
Speaker 3: you look at the multiples, that seem rich at that time.
Speaker 3: But look, I think in this case, Clearly they have
Speaker 3: made all the right moves when it comes to Capex,
Speaker 3: it's comparable to the Microsoft and the Googles of the world.
Speaker 3: But they've open source their model. It's just that when
Speaker 3: it comes to the usability, that's where they've been lacking,
Speaker 3: the likes of open AI and Tropic and Google. And
Speaker 3: I think Mark Zuckerberg is trying to fix that by
Speaker 3: acquiring this data company. I mean, there's a lot of
Speaker 3: skepticism whether the data alone is the answer to catching
Speaker 3: up to the opening eyes of the world, but clearly
Speaker 3: that's now.
Speaker 2: I noticed being a former banker that they didn't buy
Speaker 2: the whole thing, and they didn't buy a controlling stake.
Speaker 2: Is this to get around government regulatory oversight, which kind
Speaker 2: of they can't buy anything control of anything.
Speaker 3: Yes, and the president here is what happened a year
Speaker 3: back with the other three hyperscalers. So Microsoft bought this
Speaker 3: company Inflection AI, brought over the founder Moustafa Solomon. Google
Speaker 3: had an investment in this company, Character Ai. They brought
Speaker 3: over the founder Noam Shazir, and Amazon did something similar.
Speaker 3: So in all three cases it wasn't an outright acquisition,
Speaker 3: but an investment with a forty nine percent stake and
Speaker 3: getting over the co founder, so that playbook is pretty
Speaker 3: well established at this point. Is this a defense or
Speaker 3: offensive play I mean it's defense because Meta has invested,
Speaker 3: you know, seventy billion dollars in Capex just this year
Speaker 3: on Open ai on their AI investment the data centers,
Speaker 3: so it's comparable to your Open ai and in Tropic
Speaker 3: and Google. But it's just that their models are not
Speaker 3: as heavily used as some of the other names, and
Speaker 3: that's where you know they are just trailing and engagement.
Speaker 3: I mean, they have the surface area. Think about it.
Speaker 3: They get almost three billion users to come on their
Speaker 3: family of apps, you know, Instagram, WhatsApp, and the Core
Speaker 3: Blue app. They can deploy their AI, which they have
Speaker 3: done on WhatsApp, but it's just not used. So open
Speaker 3: aiy is right now used by their daily active users
Speaker 3: for twenty nine minutes every day. Think of how much
Speaker 3: Meta EI is used, not even a minute, right, So
Speaker 3: that just goes to show the usage here.
Speaker 2: All right, you mentioned WhatsApp. I got to ask you
Speaker 2: this because this was back in my days covering the
Speaker 2: stock when they bought WhatsApp. He said, ah, they can
Speaker 2: monetize it at some point in the future. That was
Speaker 2: like ten years ago. Dude, It's they're just now putting
Speaker 2: advertising and thinking about subscription type situation. Is this Meta
Speaker 2: actually finally trying to monetize WhatsApp?
Speaker 3: Yes, And look, messaging is I mean think about Apple.
Speaker 3: I message can't really show an AD if you're saying
Speaker 3: your messages are encrypted, you can't really show a targeted
Speaker 3: ad there. So it's very different from your social media feed.
Speaker 3: At the same time, Meta does have a ten billion
Speaker 3: dollar existing business even before this launch on the update
Speaker 3: page or the update tab where click to messaging ads,
Speaker 3: so they would show you an ad on their messenger
Speaker 3: or even your Facebook feed with a click to WhatsApp,
Speaker 3: and they charge you for that. So a lot of
Speaker 3: small businesses do use that click to messaging ad, which
Speaker 3: is outside of WhatsApp, to bring people to WhatsApp and
Speaker 3: solve for their customer service use.
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