ASML Faces 89% Profit Test as AI Dominates S&P 500 Earnings

ASML面临89%利润大考，AI主导标普500指数盈利 美债收益率飙升令股市承压，除非ASML等半导体风向标企业实现近90%的净利润增长，才能支撑当前高企的市场估值。 Joseph Carlson分析了第三季度财报季空前的利害关系，重点探讨主要由AI与能源板块推动的标普500指数高企盈利预期。他审视了包括ASML、TSM、JPMorgan和Meta在内的多只高确信度持仓，着重指出了ASML的技术护城河以及Meta新发布的前沿AI模型Muse Wonder。节目最后讨论了与市场相关的“本周败笔”，分析了歌手Kelly Clarkson与布鲁克林一家小型精品店在网络发酵的公开纠纷。 预计标普500指数第三季度盈利增长将突破35%，其中总增幅的70%至80%完全由能源和科技板块拉动，而必需消费品板块增长缓慢，仅为3%至4%。 (2:35) 半导体垄断巨头ASML在第三季度财报公布前面临严苛考验，在对应33倍远期市盈率和1.5%自由现金流收益率的背景下，市场一致预期其营收增长50%至55%、每股收益（EPS）激增约89%。 (6:17) 身处AI硬件供应链顶端的台积电（Taiwan Semiconductor）以相对温和的21倍远期市盈率步入财报季；无论Nvidia还是AMD赢得芯片设计份额，台积电均能从整个行业的芯片出货规模中受益。 (14:02) Meta发布了Muse Wonder前沿AI模型，通过在新型推理任务上扩展测试时计算（test-time compute），性能几乎追平Claude Opus 5.5，这也进一步支撑了Carlson关于Meta远期市盈率有望扩张至26倍至27倍的目标预期。 (19:30)

Joseph Carlson argues that the current earnings season presents unprecedented market risk because aggregate profit expansion is dangerously concentrated in a small group of artificial intelligence and energy leaders while Treasury yields climb. With expectations elevated, Carlson emphasizes that valuation cushions have thinned, making long-term competitive moats the decisive factor for navigating volatility. Macro Bifurcation and Elevated Earnings Bars (2:35) Rising Treasury and bond yields typically depress equity valuations, but the S&P 500 continues trading near all-time highs under expectations of weighted earnings growth exceeding 35%. While consensus estimates baseline at 29.6% EPS growth, markets anticipate beats given that index companies surpassed forecasts in 37 of the last 40 quarters. Carlson points out that this advance is severely bifurcated, with technology and energy driving between 70% and 80% of total aggregate profit expansion. Forecasts project energy earnings per share to surge roughly 110% year-over-year, while tech and communication services track between 50% and 60%. In contrast, legacy sectors such as consumer staples are crawling along at 3% to 4% growth. Because expectations have been raised rather than lowered, Carlson notes that bellwether companies face a strict "show me" test where any growth shortfall could trigger sharp market pullbacks. Semiconductor Monopolies at the AI Top (6:17) Carlson views semiconductor suppliers ASML and Taiwan Semiconductor (TSM) as sitting at the apex of the tech value chain, capturing secular AI spending regardless of whether chip designers like Nvidia or AMD capture individual market share. ASML—Carlson's fifth-largest personal position at $124,000—faces steep near-term targets heading into earnings, with analysts modeling 50% to 55% revenue growth and an 89% EPS increase. Trading at 33 times forward earnings with a 1.5% free cash flow yield, the stock offers minimal valuation cushion, which previously led Carlson to trim shares near $1,000. Over a 10-year horizon, however, Carlson expects ASML's monopoly to widen rather than erode. Its technological lead in High-NA EUV machinery is backed by thousands of exclusive supplier agreements and deep fab integration, where chipmakers prioritize operational yield and time savings over machine price tags. Furthermore, Carlson forecasts that ASML's high-margin Installed Base Management segment will triple from nearly $10 billion today into a $25 billion to $30 billion servicing business over the decade. Meanwhile, TSM faces comparatively tempered expectations at a 21 forward P/E and a 1.5% free cash flow yield. Divergent Moats Across Banking, Healthcare, and Food (15:26) Evaluating other early corporate reports, Carlson distinguishes resilient business models from deteriorating moats. He praises JPMorgan Chase (valued at 13.5 times forward earnings and 2.49 times book value) for consistent deposit growth, climbing net interest income, and an expanding loan book. Its Common Equity Tier 1 (CET1) ratio of 14% indicates a highly conservative capital buffer well above the sub-9% risk zone. In contrast, Carlson avoids UnitedHealth Group despite value interest, citing pervasive customer dissatisfaction and the regulatory vulnerability of health insurers sustaining wider margins than the medical providers actually administering care. Carlson also highlights structural headwinds for Domino's Pizza. While third-party aggregators such as DoorDash and Uber Eats are seen by some as growth partners, Carlson argues they have fundamentally eroded Domino's competitive advantage. Domino's once dominated local delivery through its proprietary fleet, but app-based platforms have turned food delivery into a generic commodity, transforming Domino's from a unique distribution channel into merely one menu option among hundreds. Meta's Frontier AI Advances and Valuation Upside (19:30) Meta shares gained 4% after Mark Zuckerberg teased "Watermelon," the internal codename for its Muse Wonder frontier model family. Benchmarks place the flagship Muse Wonder Full model virtually neck-and-neck with Anthropic's Claude Opus 5.5, validating internal assessments from Scale AI's Alexandr Wang that Meta has rapidly closed the gap with leading frontier labs. Addressing industry concerns over "benchmaxing" (optimizing models purely for public benchmark tests), Carlson notes that Muse Wonder demonstrated test-time compute scaling on novel, out-of-distribution reasoning tasks. Beyond technical benchmarks, Meta displayed practical agent capabilities, such as cross-referencing user calendars and local map data to plot running routes and record itineraries into personal notes. Because Carlson sees Meta positioning Muse as an integrated, daily-driver personal assistant rather than a narrow search interface, he argues Meta's multiple deserves expansion toward a 26x to 27x forward P/E ratio on top of its already expanding core advertising revenue. Celebrity Outrage and the Value of Perspective (24:01) Turning to his "Fail of the Week," Carlson examines an online feud ignited by singer Kelly Clarkson against Brooklyn boutique Art of Play. After feeling condescendingly dismissed over a $15,000 non-sale automaton bird named Molly, Clarkson publicly blasted the shop's name and address to her 8.8 million followers on X, amassing 44 million views. Even after the shop explained that the piece was an integral prop for in-store magic shows rather than retail inventory, Clarkson publicly doubled down, accusing the business owner of lying. Carlson criticizes the disproportionate damage inflicted on an independent retail store over an alleged single unfriendly interaction. Referencing professional rock climber Alex Honnold's perspective on managing life's trivial stressors—such as calmly waiting out missed airport flights—Carlson argues that escalating minor retail friction to tens of millions of people reflects a broader social failure to keep inconsequential grievances in perspective. Carlson concludes that while hyper-concentrated earnings and elevated multiples heighten short-term downside risks, investors should look past quarterly volatility by anchoring to durable monopolies like ASML and capital-efficient tech leaders like Meta. The central unresolved question is whether climbing bond yields will eventually force a broader valuation reset across the few growth engines supporting the market.

[2:35] Bloomberg analyst: It's not make or break, but it's a show me [8:57] Joseph Carlson: bigger and deeper and wider [11:11] Joseph Carlson: full-on monopoly [17:28] Joseph Carlson: where basically every customer hates the company [19:30] Mark Zuckerberg: Muse ordered me watermelon. How thoughtful. [24:01] Kelly Clarkson: Just drove all the way to Brooklyn to check out this store I thought looked really rad and had a few things in mind to buy and literally was looked at as if I couldn't afford it and was told he could find something comparable for me. Wow, dude, you're an idiot and just lost a huge sale. But y'all could go check out Art of Play in Brooklyn if you enjoy being treated like Julia Roberts' character in Pretty Woman. For sure. Check it out. Thumbs down. [26:47] Art of Play: Molly is permanently attached to the wall and isn't for sale. However, the negative experience Kelly described on Twitter would resonate with anyone who has ever felt judged in a shop. [26:47] Kelly Clarkson: Cool, cool. Sure. It wasn't for sale. That's the narrative Art of Play is going to go with. Thumbs up. [26:47] Kelly Clarkson: So, you're not only rude, you're also a liar. Got it. [29:04] Joseph Carlson: Was the experience so bad, Kelly, that you had to get it out to 40 million people? Do you think that's a proportionate response? Do you think they really deserve this? [29:04] Alex Honnold: Oh my gosh, I lost my flight. What am I going to do?

[0:00] Now, we're finally getting into the [0:01] third quarter earning season. Over the [0:03] next four weeks, the majority of [0:04] companies in the stock market will [0:06] report their earnings and give us a [0:07] progress update. In that, it'll [0:10] determine the direction the market takes [0:12] because like many earning seasons, [0:14] there's a lot priced in. But in this [0:16] case, that is especially the truth. [0:18] There is a lot riding on this earning [0:21] season. The growth expectations are [0:23] extraordinary. In fact, the weighted [0:25] growth of the S&P 500 this earnings [0:27] quarter is expected to exceed 35%. [0:31] That is an a massive growth by the [0:34] market. And the majority of this [0:35] earnings is reliant on a small number of [0:37] companies, these so-called AI companies [0:39] and the energy companies. Now, I'll be [0:42] breaking down this data, trying to make [0:44] sense of it. We'll be going through how [0:45] much of the market is made up by AI, [0:48] where the earnings are all going, and [0:50] how this will likely play out over the [0:51] next year. We'll also be looking at my [0:53] portfolio and we'll be breaking down how [0:55] fast my portfolio is expected to grow [0:57] this quarter. We'll also be looking at [0:59] the week ahead. For example, if we look [1:01] at the calendar here, we have a lot of [1:02] companies reporting earnings this week. [1:04] For example, we have JP Morgan. That's a [1:06] big one tomorrow. We have United [1:08] Healthcare. We have ASML. I own a lot of [1:10] ASML, super important company in the [1:12] semiconductor industry. Then, of course, [1:14] we have TSM and many others. We'll be [1:17] going through each of them and I'll be [1:18] giving you my thoughts on what to [1:19] expect. We also, of course, have news to [1:21] go through. For example, Mark Zuckerberg [1:23] ordered a watermelon. He teased that [1:25] this morning. In reality, that was the [1:27] code name for the new model that he was [1:29] going to release. The new model's called [1:31] Muse Wonder. The stock is now up 4% on [1:34] the day. And he posted the benchmark. [1:36] So, we'll be looking at how good this [1:37] model actually is. And then, finally, as [1:39] a fail of the week, we have to highlight [1:40] Kelly Clarkson. We'll be going through [1:42] her spat with a small business at the [1:44] end of this episode. Now, of course, [1:45] just a reminder, if you haven't already, [1:47] try out qualum.com. It is the website [1:49] that I own. I created the membership, so [1:51] it's mine. But even objectively, [1:54] scientifically, it is the best [1:55] membership in the world. I really think [1:57] you'll enjoy it. A lot of people have a [1:59] lot of fun with this membership. You [2:00] gain access to a private Discord [2:02] community that's moderated. You'll meet [2:04] like-minded investors and they're very [2:06] ambitious. You'll learn about a lot of [2:07] stocks that I don't even talk about, as [2:09] well as you gain access to a lot of [2:11] exclusive content, deep dives, AMAs. I [2:13] have hour-long portfolio updates going [2:15] over each stock that I own and ones that [2:17] are on my watch list as well as Qualrum [2:19] is getting better and better with the [2:20] technology. For example, I just released [2:22] the mobile app in iOS and Android. The [2:24] feedback has been overwhelmingly [2:26] positive. People love it. It helps you [2:28] check your stocks, keep up to date. It's [2:30] really easy to use. I think you'll like [2:31] it. So, try it out now risk-f free. You [2:33] can do so at qualim.com. Now, jumping [2:35] in, we start off with Q3 earning season. [2:38] It has begun. This is the first week. [2:40] Around week three is where we really [2:42] have the biggest earnings drop. That's [2:43] when all the big tech companies report [2:45] their earnings. But even this week, it [2:47] starts off with a bank with TSM and [2:48] ASML. Those are two companies that are [2:50] very symbolic of how the AI how the [2:53] whole AI thing will go. And why is AI so [2:56] important? Well, AI is not just a [2:58] buzzword. AI really means a lot of [3:00] earnings growth in this market. Now, the [3:03] media has hyped this up to of course be [3:05] a very important earnings season. [3:07] There's many articles like this where [3:09] Barren is saying that the next move for [3:11] stocks hangs in the balance as we jump [3:12] into Q3 earnings. Now, even though [3:14] oftentimes it feels like every earning [3:16] season is the most important earning [3:18] season, I do believe that this one is [3:20] actually really important. And part of [3:21] the reason why is because bond yields [3:23] are going up. There's a lot of reasons [3:25] that the market should be down more, but [3:27] yet the S&P 500 is trending towards [3:30] all-time highs. So, when we look at [3:31] this, we're in a situation where stocks [3:33] should have a lot of pressure because [3:35] yields are going up on treasuries. [3:36] Yields are going up on bonds, which [3:38] typically pushes stocks down, but [3:41] they've been resistant. And part of the [3:42] reason they're resistant is because [3:44] stocks are growing quickly. So investors [3:47] are more forgiving of their lower [3:48] starting yields when you can assume a [3:50] great amount of growth. And the growth [3:51] being implied in this quarter is [3:54] substantial. From fact, they say that [3:56] the S&P 500 is likely to report earnings [3:59] growth above 35%. [4:02] So that's the total earnings growth of [4:04] the S&P 500. Just incredible. So now we [4:07] know that the analyst estimates [4:09] expectations are at 29.6%. [4:12] But the reason they say that it can grow [4:14] at maybe above 35% is because a majority [4:17] of time companies report earnings that [4:19] are above analyst expectations. And this [4:21] isn't just like a wild prediction. This [4:23] is mathematically significant. In fact, [4:25] in 37 of the past 40 quarters, the [4:28] actual earnings growth rate has exceeded [4:31] what the analyst predicted. So, [4:33] overwhelmingly, we have a likelihood of [4:35] exceeding it again. Now, we know that AI [4:37] companies, it's not it's not just talk. [4:40] These companies make up the huge [4:41] majority of earnings in the S&P 500 to a [4:44] staggering amount. This highlights the [4:46] concerns that investors have that so [4:47] much of this market is being driven by [4:49] AI. While investors are enthusiastic [4:51] about hyper earnings growth fueled by AI [4:54] companies, many are also wondering about [4:56] how long this trend can continue and [4:58] what will happen to share prices when it [5:00] ends. It's all AI land, to a lesser [5:02] extent, energy and materials, but that's [5:04] because of geopolitics. [5:06] It wouldn't surprise me if 70 to 80% of [5:09] the growth can be attributed to tech and [5:11] AI. What they're saying here is not an [5:12] exaggeration either. It is all dependent [5:14] on AI. Another analyst at Bloomberg [5:17] said, "It's not make or break, but it's [5:18] a show me." and the rally needs [5:20] confirmation because the bar has been [5:21] raised. Normally companies get to step [5:24] over a lowered bar. This time they have [5:26] to jump over a higher one. The risk is [5:29] with this bifurcated market that the [5:30] companies that are really generating all [5:32] the earnings are concentrated into a [5:34] smaller number of companies specifically [5:37] technology and energy. Energy is [5:38] expected to grow around 110% in its [5:41] earnings per share. technology when you [5:43] factor in AI companies, communication [5:46] services is going to be in the range of [5:47] around 50 to 60%. And then you get to [5:50] the other sectors, the ones that nobody [5:52] cares about anymore, financials, [5:54] utilities, consumer discretionary, [5:56] consumer staples, some of these are [5:58] barely growing at all. For example, [6:00] consumer staples are expected to grow [6:02] EPS around 3 to 4%. These analysts [6:05] aren't exaggerating by saying that so [6:07] much of this market hinges on AI [6:09] companies. There's such high [6:10] expectations for them and the market's [6:12] growth and revenue and earnings per [6:14] share is being driven by AI companies as [6:16] well. I can even see it in my portfolio. [6:18] When I look at my portfolio and the [6:21] growth of it, I have a number of [6:22] positions, 14 different companies, all [6:25] different sizes. And the one that is [6:27] expected to grow the most in both its [6:29] earnings per share and in both its [6:31] revenue is ASML. ASML is my fifth [6:34] largest position. It's a $124,000 [6:37] position with $92,000 in the green. So, [6:40] it's been an insane winner already. And [6:42] ASML is still expected to grow [6:44] substantially. Now, this is also a [6:47] company that's reporting earnings on [6:48] Wednesday. So, let's go ahead and take a [6:50] look at ASML before it reports its [6:52] earnings this Wednesday. To put this in [6:54] perspective, when I do analysis on my [6:55] companies going into this quarter, I [6:58] have each one of them here with their [7:00] unreported quarter expectations. The top [7:03] company by revenue growth this quarter [7:05] is ASML. It's expected to grow 50 to [7:08] 55%. It depends on what analyst you're [7:11] listening to. The the estimates range [7:13] from upwards of 60% to like 45 with a [7:16] mid-range of around 50 to 55%. That is [7:20] incredible revenue growth. Again, this [7:23] is not earnings per share growth. This [7:25] is revenue growth. That's a lot of [7:27] year-over-year growth. Now, if we look [7:29] at ASML through the lens of earnings per [7:31] share, which is even more important than [7:32] revenue, usually we want the earnings of [7:34] the company to grow. What do you know? [7:36] ASML again is at the top of the list. In [7:38] this case, my more pure AI company, the [7:41] one that only focuses in the [7:42] semiconductor industry, both contrasting [7:45] AI and physical hardware, is the one [7:47] that's doing the best. ASML is expected [7:48] to grow its earnings per share by 89%. [7:52] Somewhere in that range. Again, the [7:53] analyst assessments vary, but most of [7:55] them agree it's going to be substantial [7:57] earnings per share growth. When we look [7:59] at the earnings per share on the chart, [8:00] we see that it's not a particularly low [8:03] year a year ago. So, this isn't like [8:05] it's coming off of some super low [8:06] baseline or anything irregular. No, this [8:08] is just organic growth by ASML. So, ASML [8:12] like many of these AI companies has [8:14] extraordinarily high expectations and [8:16] they need to fulfill on this. They need [8:18] to come in with these numbers otherwise [8:19] the stock will be very hurt. So there is [8:22] downside here. When we look at the [8:23] company itself, the valuation is [8:25] relatively high. It's at a 33 Ford PE [8:28] ratio, a 1.5% free cash yield. So ASML [8:31] is no deal today. It's not a great value [8:33] stock by any means, and it has extremely [8:36] high expectations. Now, normally when I [8:38] have a stock that's a large position [8:39] with a high valuation and extremely high [8:41] expectations, I would approach this [8:43] earnings with this stock with a lot of [8:45] trepidation. It would be something where [8:46] I'm concerned or nervous about going [8:48] into it because well, I don't want to [8:50] lose my gains. With ASML, I have taken [8:53] some money off the table. I sold some [8:55] when it was close to $2,000 per share, [8:57] but even with its current share price, I [8:59] remain holding this position, and I'm [9:02] going to hold it into earnings. Now, I [9:04] can't guarantee which way the market [9:06] will react. The market has sold down [9:08] ASML incorrectly in the past and they [9:10] could do it again. But I believe with a [9:12] high degree of confidence that this [9:13] company is going to generate incredibly [9:15] good returns and good business prospects [9:17] over the next decade. When I look at [9:20] ASML, I'm not looking at this one just [9:22] for this quarter. I do own it going for [9:24] the next 10 years. And when I look at [9:26] the 10 years for ASML, I believe it has [9:29] a very bright future. Let's go ahead and [9:30] just look at some of the things that [9:32] could occur that I believe are very [9:34] probable. One of them is continued [9:36] revenue growth. Now, revenue growth [9:39] drives everything else. The margins, the [9:41] the earnings, all of that is driven [9:43] first by the revenue growth of the [9:44] company. And why does revenue growth [9:46] continue to grow for ASML? Well, we're [9:49] going into a world where everything [9:50] needs a chip. Like virtually every [9:52] device needs a chip. And in order to [9:54] produce good quality chips that actually [9:57] work for all different applications and [9:59] to produce them at a cheap price with a [10:01] high yield efficiently, you have to go [10:04] through ASML's machines. 10 years in the [10:06] future, I believe you'll still have to [10:08] go through ASML's machines. Now, there's [10:11] a thought that over time moes erode. [10:14] They get weaker. Like ASML will have [10:16] Chinese competitors catch up or or [10:18] different companies like Sony will [10:20] compete with them somehow. That does [10:22] happen in some cases, but I actually [10:24] believe it's going to be the opposite [10:26] with ASML. I think the moat is actually [10:28] going to get bigger and deeper and wider [10:31] over the next 10 years. When you look at [10:32] what's going on, they are actually [10:34] starting to sell more of their high NA [10:36] EUV machines. These are like their [10:38] supreme EUV machines, not their lower [10:41] the the lower ones, which even the lower [10:43] ones are so they're such a wide moat, [10:45] nobody can copy those, but they're [10:47] starting to sell their new generation [10:48] ones that are so far ahead of [10:50] competitors, they're just not even in [10:52] sight. There's no one else doing [10:54] anything remotely close. They are [10:56] literally over a decade ahead of the [10:58] next competitor. And they are gaining [11:00] distance. The distance is not closing [11:02] in, it's getting wider between ASML and [11:04] the next closest competitor. There's [11:06] also the thought that people want [11:07] cheaper chips, but that means you have [11:09] to go through ASML. And over time, the [11:11] moat for ASML is not just expanding [11:14] technologically. They're not just [11:15] getting better at what they do at a [11:17] faster clip than anyone else, but it [11:19] also expands in lots of different ways. [11:21] For example, in their supplier [11:23] relationships, in all their materials, [11:25] in their logistics with their customer [11:27] relationship, ASML has navigated this [11:30] perfectly. Management has been [11:31] restrained and disciplined in growing [11:33] the relationship with their customers. [11:35] They they like them. They have [11:37] agreements. Their customers up until a [11:39] point were even invested in ASML. And [11:41] now they have deep rooted relationships [11:43] with all the fab makers. These are [11:45] companies that have ASML machines [11:47] embedded into their systems and [11:49] operations. And these are big expensive [11:51] machines that would take an enormous [11:52] amount of effort to uproot. And then [11:55] just going into the supplier [11:56] relationships, all the exclusive [11:58] agreements, literally thousands of [11:59] different companies that ASML gets it [12:01] supplies from, that would be very [12:03] difficult for another company to [12:04] replicate. Not only would a competitor [12:07] have to replicate ASML's technology, all [12:10] their supplier relationships, they'd [12:12] have to figure out all the chemistry, [12:14] build all of it together, but even if [12:16] they have a machine that's about as [12:18] good, they need to convince all the [12:20] customers of ASML to switch from ASML to [12:22] them to save some money in the process. [12:25] Most of these companies don't want to [12:27] save money. They want to save time and [12:28] they want to increase yield. That's [12:30] really what costs them the most. So they [12:32] will go with the company they have trust [12:34] with. So you also have a logistics a [12:37] distribution mode. You also have the [12:40] fact that when they install machines you [12:42] have to continually upgrade them service [12:44] them and you have exclusive agreements [12:46] doing that. This is called the install [12:48] base management sales. It it seems like [12:51] uh management's a bit of a euphemism [12:53] here but it's basically after machine is [12:55] installed it's still incredibly complex. [12:57] You need experts to run it and service [12:59] it and upgrade it to the new iterations, [13:01] the new technology. All of that is very [13:04] expensive. ASML has expertise and [13:06] they're growing this part of their [13:08] business dramatically. I believe that in [13:10] 10 years, this could be a 25 to30 [13:12] billion business. Right now, it's just [13:15] approaching 10. So, if you have install [13:17] base management triple over the next 10 [13:20] years, the earnings per share growth of [13:22] this company is going to grow on a [13:23] baseline. The biggest thing I'd portray [13:25] for investors here is when I'm looking [13:26] at companies, I'm always trying to look [13:28] at potential weaknesses. Competitors on [13:30] the horizon, taking their market or [13:32] stumblings from management team, and I [13:34] just don't see any here. ASML remains [13:36] with top tier management, highly [13:38] disciplined and long-term focused. I [13:40] don't see any competitors that are doing [13:42] anything that's remotely threatening to [13:43] the company. There's always chatter of [13:45] it that maybe it will happen, but I [13:47] don't see it here. And I believe that [13:48] ASML is one of the true companies that [13:51] has a full monopoly. A full-on monopoly. [13:55] Now, they're not going to abuse it [13:56] because they're good stewards over it, [13:58] but they are in a very unique position. [14:00] So, this one I'm remaining fully [14:02] invested in. Now, the next one I think [14:03] is worth going over. The the company [14:05] that's likely the most consequential [14:06] this week, closely followed by ASML, is [14:09] TSM. And many of the things that I said [14:11] about ASML, I also think are completely [14:14] the same for for TSM. They share a lot [14:16] of the same bullcase. For example, both [14:19] of these companies, it doesn't really [14:21] matter which design company wins or [14:23] which chip ends up winning. Doesn't [14:25] matter if it's AMD or Nvidia. These [14:27] companies fulfill on overall AI demand. [14:30] So, they're at the top of the food [14:31] chain. Now, TSM is just below ASML. ASML [14:35] has like a super monopoly, but TSM is [14:37] pretty monopolistic as well. It only has [14:39] a couple companies doing the same thing, [14:40] so it does have some level of [14:42] competition, but it is very [14:43] concentrated. And overall, the company [14:45] has an incredibly fruitful path ahead. I [14:48] view a world where everything is done by [14:50] robotics, by machines, by AI. There's so [14:53] much devices. There's so many things [14:55] that people are creating all the time to [14:57] even keep the base level of chip [14:59] production necessary. Companies like [15:01] ASML and TSM are going to continue [15:03] growing for the next 10 years. TSM is [15:06] also not that expensive by the numbers. [15:08] Trading at a 21 Ford PE ratio, 1.5% free [15:12] cash flow yield. This doesn't look like [15:13] it has overly high expectations. It's a [15:16] little bit lower expectations going in [15:18] than ASML. So, I believe that TSM will [15:21] have great earnings. I think that [15:22] investors invested in this company [15:24] should see no reason to sell it as of [15:25] yet. Now, looking back through the week, [15:27] we also have companies like JP Morgan, [15:28] United Health Group, and Domino's [15:30] reporting earnings all tomorrow as well. [15:33] I generally think these companies are [15:34] going to do well. With JP Morgan, this [15:36] is one of the best companies in the [15:37] market. I actually really like this one. [15:39] I own JP Morgan for a while. I made some [15:42] good money buying this one close to [15:44] COVID. I sold it at what I thought was a [15:45] big gain and it was, but the stock just [15:48] kept going up. So, this was a mistake to [15:49] sell this one. It currently trades at a [15:51] 13 1/2 Ford PE ratio. With banks, you [15:54] should probably use the price to book. [15:56] 2.49 is expensive for a bank. So, it [15:59] depends on how you value this one. If [16:01] you value it as a digital tech company [16:03] that also is a little bit of a banking [16:04] system, then JP Morgan's cheap. If you [16:07] value it as primarily just the bank with [16:09] some tech add-on stuff, then it's [16:10] expensive. In any case, the growth has [16:13] been incredible. Look at how much it's [16:14] grown in the past 10 years. We also look [16:16] at the deposit size. We have KPIs here [16:18] showing that the deposit size is [16:21] increasing. More people are saving [16:22] money, putting their money in JP Morgan. [16:24] The net interest income is also going [16:26] up. So, as treasury rates go up, as [16:28] interest rates go up, the average loan, [16:30] this is an interesting one. This is [16:32] throughout all of their business, [16:34] commercial and personal, continues to go [16:36] up as well. So, they have more average [16:38] loans. We have another KPI that's been [16:40] added here. This is one that I actually [16:42] had to look up. I wasn't familiar with [16:43] it. I'm not a banking expert, but it's a [16:45] CCT1 ratio, and this basically says how [16:49] good the company would be at covering [16:51] for severe loan losses or their risky [16:53] investment profile. If it gets up to a [16:56] point where they have 15% that's almost [16:58] like the bank is being too conservative. [17:00] It just has too much money to cover for [17:01] even terrible situations. If you get [17:04] below 9% that's where things start to [17:06] get dangerous. And for JP Morgan they've [17:09] never really gotten down below that 9%. [17:11] They are right now at 14%. So right now [17:14] JP Morgan has a very conservative [17:16] profile. There should be no concerns as [17:18] far as their banking and their loan [17:20] profile is involved. I like it going [17:22] into this earnings. I think it's going [17:23] to be good. I think that banks are set [17:25] up really well right now. I wouldn't [17:26] mind being invested in JP Morgan. [17:28] Another company that I've looked at [17:29] before is United Health Group. This is [17:32] one that a lot of investors jumped in [17:33] with Warren Buffett. I decided to stay [17:36] out of it because I just don't love the [17:38] business. Insurance companies are not a [17:40] fun business. I I don't like companies [17:43] in general where basically every [17:45] customer hates the company. That's not [17:47] something that I that I like investing [17:48] in anyway. And with United Health Group, [17:51] it also is one of those situations where [17:53] they earn a lot more money than even the [17:55] hospitals do, which doesn't make sense. [17:57] Why should insurance companies have such [17:59] higher margins than hospitals and [18:01] healthcare providers themselves? So, [18:03] there's some problems with the industry [18:05] that I think could cause issues [18:06] legislatively down the road. And now the [18:08] stock is being viewed as a deep value [18:10] turnaround company. I think it [18:12] eventually will, but it's not an [18:13] industry that I'm interested in going [18:15] into. For me, there's just too many [18:16] customer bad vibes with that one and too [18:19] much regulatory concern. Then we have [18:20] Domino's reporting earnings. This is [18:22] another one that I'm not super bullish [18:24] on at this point. There's a thought that [18:25] Domino's is actually accelerating growth [18:27] because of Door Dash and Uber Eats, but [18:30] in my opinion, I don't think that's a [18:31] good thing for Domino's because Domino's [18:33] historically was one of like the few [18:35] places that had delivery. So, when you [18:37] wanted to order food delivered, you [18:39] would basically pick between like [18:41] Domino's and Papa John's and other pizza [18:43] places. and you'd call them and they [18:45] have their own delivery network. That [18:46] was a unique part of the company. But [18:48] now with Door Dash, when people want [18:50] food delivered, it's not limited to just [18:52] pizza. So, I have to believe that that's [18:54] that's a little bit of a downgrade in [18:56] the operations of Domino's. Now, people [18:58] are just ordering from any restaurant. [19:00] They open up something like uh Door Dash [19:02] and they they have a whole menu full of [19:04] different restaurants all over the [19:05] place. Domino's is just one more [19:07] company. In the era of Door Dash and [19:09] Uber Eatats, it doesn't make me quite as [19:10] excited to own a company like Domino's [19:12] where their whole thing is delivery. [19:14] Now, those are the most important [19:15] companies reporting earnings this week. [19:16] And then next week, it gets even bigger. [19:18] We have companies like Tesla and Netflix [19:20] reporting earnings. And then the third [19:22] week is by far the most important with [19:24] all the big tech companies. So, just [19:26] make sure you're following along. [19:27] They'll have more commentary in advance [19:28] to those. Now, moving on, we get into [19:30] some Meta news. Meta continues trading [19:33] with a lot of confidence. This stock has [19:34] a lot of momentum. It's moving up 3 to [19:37] 4% on the day after Mark Zuckerberg said [19:41] on a on Twitter. He posted that Muse [19:44] ordered me watermelon. How thoughtful [19:46] with a picture of a watermelon. Now, [19:49] what does that mean? Well, watermelon [19:51] has been the code name for their new [19:53] model, for their advanced model. [19:55] Alexander Wing has said internally that [19:57] Meta is finally catching up to OpenAI. [20:00] They're finally catching up to the [20:02] Frontier models. And how are they [20:04] catching up to OpenAI? Well, with this [20:05] model, which is Watermelon, that's the [20:07] code name for it, but its official name [20:09] is Muse Wonder. Mark Zuckerberg released [20:12] today, introducing Muse Wonder, our new [20:14] family of Frontier models with [20:16] state-of-the-art performance for [20:17] personal and professional agentic work. [20:19] To put it simply, Muse Wonder is super [20:22] good and Meta has been leaprogging ahead [20:24] of the competition at a rapid pace. You [20:26] can see a visual here. You have Muse [20:28] Spark, which was behind the pack. Then [20:30] we have Musepark 1.1, then 1.2 two that [20:33] leaped ahead two positions. Then we have [20:36] Musepark 1.3 that leaped ahead another [20:39] three positions. Then we have Muse [20:41] Wonder. Then we have Muse Wonder full [20:43] which is now literally ahead of all the [20:45] models except for Claude Opus 5.5 and it [20:49] is barely behind Claude Opus. So you can [20:52] see how fast this is gaining on the [20:54] other models. Now it's virtually at the [20:56] top of the pack. It's right there with [20:57] Anthropic's best current model. Meta [21:00] also addressed concerns of the [21:02] benchmarks because we know a lot of [21:03] models can be trained specifically to [21:06] perform well during some like benchmark [21:08] test. This is benchmaxing is what some [21:11] of them are calling it. Now the [21:13] important thing here is that both of the [21:14] models improve similarly on [21:17] outofdistribution tasks as we scale test [21:19] time compute but given its distribution [21:22] performance muse wonderful full performs [21:24] even better on unfamiliar tasks in Muse [21:27] Spark 1.3 uh trend would predict. So [21:30] this is like a weird way of saying that [21:32] they're not trying to game the [21:33] benchmark. They're not benchmaxing by [21:35] just making their models good at a [21:37] couple tasks that are particularly [21:39] curated to advance in a benchmark. No, [21:41] even when you throw all different random [21:43] tasks, things that it's unfamiliar with, [21:45] it also has incredibly good performance [21:47] across the board. Now, they give [21:49] examples of this model like planning a [21:51] run. You can see it just open up [21:52] someone's calendar. It makes a new [21:54] calendar entry and then you can see the [21:56] the things like going through all the [21:58] code and iteration looking at a map of [22:00] of the location and then it literally [22:02] draws out a run depending on the [22:04] person's desired distance they want to [22:07] run. It it puts all the information into [22:09] the notes. it has the time for it and [22:12] everything based on what they want. So [22:14] if you want Muse to map out a run, you [22:16] can do that. So this is like one example [22:18] of I think how Mark Zuckerberg and [22:21] Alexander and all these people envision [22:22] people actually using Muse. It's just to [22:25] do the kind of annoying things that you [22:27] don't want to do for you, like planning [22:29] a run. You probably want to go on a run, [22:31] but you don't want to actually go and [22:32] figure out where to run and the distance [22:34] and where would be a good run that's [22:35] different from the last one you did. So [22:37] you could have it do that kind of [22:38] annoying part while you get to focus on [22:40] the fun part which is going out and [22:41] actually going on a run. I think that's [22:43] how they envision it. Of course there's [22:45] going to be a lot of people that try to [22:46] use it in bad ways. There's a lot of [22:49] controls are doing to make sure that the [22:50] models are safe that they ask for [22:52] permission before taking tasks that they [22:54] don't display your information or your [22:56] personal stuff anywhere. uh there's an [22:58] enormous amount of effort doing that [23:00] because if Meta loses trust with their [23:02] models, if Muse isn't trustworthy, then [23:05] people aren't going to use the Muse app [23:06] and so far that's one of the best things [23:07] they have going for them. I see overall [23:10] that this is another huge step in meta. [23:12] I become more and more bullish on this [23:14] company over time. I think the base [23:16] thesis for the company is that it was [23:18] growing really fast. It has a wide moat [23:19] and it's at a cheap valuation. But now [23:21] you have a company that also is leading [23:23] in the pack of AI companies. It has a [23:26] truly a truly frontier model, one that [23:29] is right there with Claude. And it's the [23:31] only company that has a personalized [23:33] agent, which is Muse. Nobody really [23:35] looks at ChateBT or Claude as being [23:37] their personalized agent. They use it [23:39] for different business applications, [23:40] maybe answering questions, but Muse has [23:43] become the deacto agent. So, I believe [23:45] that Meta still has a significant [23:47] opportunity here. When I look at this [23:49] company, it's one of my most exciting [23:51] investments today. I think the company [23:53] should be trading at a 26 to 27 Ford PE [23:56] ratio. I think there should be more [23:58] multiple expansion. I still believe Meta [23:59] is undervalued. Now, moving on, we get [24:01] to this week's fail of the week, which [24:02] in this case, I have to I believe [24:04] somewhat surprisingly highlight [24:06] Clarkson, who is somebody that I I don't [24:08] believe I've even thought of once since [24:11] American Idol. I think she's on the [24:12] first season. That's back when that show [24:14] was actually really cool. It was [24:15] exciting. The first season of American [24:17] Idol, it was something I think the [24:19] family could gather around and watch. [24:20] Now they're on season like 15 or 16, who [24:22] knows? Uh, but in any case, Kelly [24:25] Clarkson is the singer, American Idol [24:28] winner. Presumably, she's done stuff [24:30] after that. I'm not familiar. But [24:32] regardless, she showed back up on my [24:34] radar when she went ultra viral after [24:37] after having a very angry post about a [24:40] small business. Let's go ahead and take [24:42] a look at this post. Kelly Clarkson [24:44] says, "Just drove all the way to [24:47] Brooklyn to check out this store I [24:49] thought looked really rad and had a few [24:51] things in mind to buy and literally was [24:53] looked at as if I couldn't afford it and [24:56] was told he could find something [24:58] comparable for me. Wow, dude, you're an [25:01] idiot and just lost a huge sale." But [25:04] y'all could go check out Art of Play in [25:07] Brooklyn if you enjoy being treated like [25:09] Julia Roberts character in Pretty Woman. [25:11] For sure. Check it out. Thumbs down. [25:14] That's the post. So, from her own words, [25:16] she was excited to visit this Art of [25:18] Play store in Brooklyn, like the small [25:20] shop that has some rad things in it, and [25:23] she was looking at something that was [25:24] probably expensive. And the the store [25:27] employee or owner, whoever it was, uh, [25:29] gave her the Julia Roberts treatment in [25:32] Pretty Woman. So, said like, "God, you [25:33] can't afford this. Look at you dressed [25:35] in normal clothes. Maybe she wasn't like [25:37] dressed up fancy or something." And so [25:39] the employee just assumed that she [25:41] couldn't afford something expensive. [25:43] When I was reading this, I was [25:44] immediately skeptical. What store owner [25:47] is actually judging whether or not [25:49] someone can afford something by what [25:52] they're currently wearing? I don't think [25:54] people are doing that that much anymore. [25:57] Most people that that have a ton of [25:59] money don't dress up super nice. There's [26:02] plenty of people that have millions of [26:03] dollars that are dressed in just [26:04] completely normal clothes, blue jeans [26:06] and a t-shirt. So, I don't know who [26:09] would be doing that. It just makes me a [26:10] little bit skeptical. Am I really to [26:12] believe that Kelly Clarkson drove to [26:14] this place? She looked at something [26:16] expensive and said, "Hey, I'm interested [26:17] in this thing knowing of the price of [26:19] it." And the employer or owner, whoever [26:22] it was, looked at her and said, "You [26:24] know what? Uh, I don't think so. I I can [26:27] tell you can't afford this. So, let me [26:29] find something a little bit more [26:30] comparable for you, something that you [26:32] can afford." Does that sound like a real [26:34] exchange? It doesn't to me, but that's [26:36] apparently the exchange that she had. [26:39] And she posts this and it just goes [26:42] super viral. This is like a level of [26:44] viral that we don't often see. It got [26:47] 11,000 reposts, 10,000 comments, 266,000 [26:51] likes, and 44 million views. Now, again, [26:56] this Art of Place store is like a small [26:57] business. It's like a hole-in-the-wall [26:59] business. And now it's a post with 44 [27:02] million views. Now, the owner of the [27:04] place, getting bombarded with, I'm sure, [27:06] tens of thousands of people enraged by [27:08] Kelly Clarkson's post, responded with [27:10] this. Yesterday, Kelly Clarkson visited [27:12] us in Brooklyn and inquired about buying [27:14] Molly, a one-of-a-kind singing and [27:16] dancing bird automation who plays an [27:18] important role in our magic show we host [27:20] here. Molly is permanently attached to [27:23] the wall and isn't for sale. However, [27:25] the negative experience Kelly described [27:27] on Twitter would resonate with anyone [27:29] who has ever felt judged in a shop. At [27:32] Art of Play, whether or not someone [27:34] comes in to make a purchase or simply [27:36] look around for a while, they are [27:37] equally welcome. We greet everyone who [27:40] walks in the door with an invitation to [27:41] pick things up and play, and they do. [27:44] Many stay for hours enjoying puzzles, [27:46] games, and toys. Imagine our surprise [27:48] when our small local business was [27:50] suddenly attacked by 8 million people [27:52] who have never visited our store. It's [27:54] been a surreal experience to be the [27:57] focus of such widespread outrage after [27:58] just one mention by a celebrity. So that [28:00] was their post. And and keep in mind [28:03] prior to this, this store had really [28:05] good ratings on Google. Like everybody [28:07] thought that they were treated really [28:08] well. So Kelly's experience here was [28:10] somewhat unique by the company's own [28:12] reviews and ratings online. Uh and you [28:15] think that it would end there, but it [28:16] didn't. Kelly responded to that, [28:19] doubling down on her criticism for this [28:21] small business, saying, "Cool, cool. [28:23] Sure. It wasn't for sale. That's the [28:25] narrative art of play is going to go [28:27] with. Thumbs up. So, the whole [28:28] conversation we had when I asked you if [28:30] it was for sale whilst pointing to the [28:32] price tag hanging on the wall with the [28:34] title singing bird didn't happen. As you [28:37] elevator eyed me, saying in a [28:39] condescending tone, "Yes, it's for sale, [28:41] but it cost $15,000. So, if you'd like [28:44] me to find something comparable for you, [28:45] I can." That all never happened. And now [28:48] it's not for sale. Okay, cool. So, [28:50] you're not only rude, you're also a [28:52] liar. Got it. Now, the store responded [28:54] to that again, saying they've tried to [28:55] talk to Kelly in person to clear the air [28:57] because that specific one isn't for [28:59] sale. It's for a different model and so [29:01] on and so forth. And this is really [29:02] blown out of proportion. Now, when I [29:05] look at this, I think I don't know what [29:07] happened here. I don't know what [29:09] experience Kelly Clarkson really had. We [29:12] don't have like video footage or audio [29:14] recording of what went down in this [29:15] store, but even by her own admission, it [29:19] was a store employee acting [29:20] condescending to her. That's the crime [29:22] that was committed here. One employee in [29:25] one exchange in one store acted [29:28] condescending to Kelly Clarkson of which [29:30] she took to Twitter or ex to post with [29:34] her 8.8 million followers blasting the [29:38] company, putting their full name, [29:40] putting their address, what city they're [29:41] in, and then telling of this terrible [29:43] experience she had. Now, I get it. You [29:47] know, stores should treat people well. [29:49] Employees should be nice to their [29:50] customers. that's in their own incentive [29:52] to do that and they shouldn't be [29:53] judgmental or they shouldn't try to look [29:55] at people and judge how much money they [29:56] have by how much they wear. Even though [29:58] I'm skeptical of that happening, if [29:59] there is any store doing that, they [30:01] shouldn't do that. But regardless, even [30:04] if the store was rude, even if this [30:06] employee was judgmental, even if she had [30:08] a bad experience, does that warrant [30:10] posting this on an 8.8 million follower [30:14] feed? Millions of people, literally 40 [30:16] million people have now seen this post. [30:19] Was the experience so bad, Kelly, that [30:21] you you had to get it out to 40 million [30:23] people? Do you think that's a [30:25] proportionate response? Do you think [30:27] they really deserve this? 44 million [30:30] people. Now it's on national television. [30:32] NBC and ABC are doing news articles on [30:35] Kelly Clarkson's interaction with one [30:37] person at one small business, one [30:40] hole-in-the-wall shop that she had a bad [30:42] experience in, that somebody was a [30:44] little bit unfriendly to her. To me, it [30:47] just feels a bit disproportionate. I [30:49] don't think this is a this is not a [30:51] proportionate response by any means. [30:53] This could have been handled in a [30:54] thousand different ways. One of them by [30:56] specifically talking to the owner [30:57] beforehand and explaining the rude [30:59] experience. Maybe doing that before [31:01] escalating it to your feed of tens of [31:04] millions of people. And I think there's [31:05] a lesson to learn in this. It's that we [31:08] should all just settle down a little [31:09] bit, not sweat such small things. This [31:12] is a small thing. Having somebody treat [31:14] you unkindly or judge you a little bit [31:16] in one store or small business is not a [31:18] big deal and it's certainly not [31:20] deserving of blasting that entire small [31:22] business to the world, making them a [31:25] national news story over that minor [31:27] inconvenience. [31:28] Uh, and it's also something that I think [31:30] relates to what Alex Hnold has said [31:32] before. He's the rock climber. He does [31:35] climb sometimes where he doesn't use any [31:36] gar. It's called free soloing. When you [31:38] do that and you make any mistakes, you [31:40] die. So, he has to be extremely focused [31:42] when he's doing that. In one interview, [31:44] Alex said that he thinks generally [31:46] people stress out about too many little [31:48] things. For example, he'll see people [31:50] you'll see people in airports freak out [31:52] if they miss their flight. Like they [31:54] just lose their mind. They'll go, "Oh my [31:56] gosh, I lost my flight. What am I going [31:57] to do?" And he's like, "Catch the next [31:59] flight. They they happen every couple of [32:02] hours. It's not a big deal. What's the [32:04] problem with waiting a couple hours in [32:05] an airport? It's an air conditioned [32:07] building with food all around. yet this [32:09] person's acting like it's life or death [32:11] that they missed their flight. And we do [32:13] that a lot. Someone cuts you out. [32:16] Someone cuts you off in traffic and now [32:18] you have road rage. Someone is unkind in [32:21] a business and now you're going to put [32:22] them on blast in front of the whole [32:23] world. These are small things that [32:25] people should just relax and forget [32:26] about and move on. That's going to be it [32:28] for this episode. Hope you enjoyed. See [32:30] you in the next one.