Trascrizione completa di Weekly-ish Episode 2

Jeff Henriksen: Time has clearly already won? yeah, it's it's it's crazy. All Donnie Sattar: Yeah. Jeff Henriksen: right, well, what else is going on top of mind for you this week? I know Magnite has some news. legal doctrine. Donnie Sattar: So yeah, so I you know, I I have been going down a big rabbit hole on data centers and in that analysis, and then we got hit in the middle of the week with a with a ruling from what I discussed on the podcast that I presented Magnite and and part of the story, it's not the whole story, part the story, is that there's an antitrust trial that was going on. Google had found been found guilty to be a monopoly in ad tech. And of course, middle of this week, we get a hundred and I think four or six page memorandum of opinion from Judge Brinkama, Eastern District of Virginia. So for the last, I guess, I don't know, twenty-four, forty-eight hours, I've been living inside this legal document. And Jeff Henriksen: Lovely. Donnie Sattar: there's a lot here to unpack, but I I wanted to read this one line because we probably have read Jeff, you know. I don't know how many K's and Q's in our life. And you get so used to reading these sentences that say nothing in the legal. Jeff Henriksen: Yeah. Donnie Sattar: But but here's what you know the the the judges have written about monopolies. and I I just thought this was a a fun sentence in a sense. So it says effective relief must seek to unfetter a market from anti-competitive tom conduct, terminate the illegal monopoly, deny to the defendant. the fruits of its statutory violation and ensure that there remain no practices likely to result in monopolization in the future. And so I can see these judges, you know, probably they they probably read a lot of books and they like to get a little flowery. so I I thought that was a a a good line. I was thinking I was gonna read a lot more deep legal terminology here, but you know, but if in effect, you know, just to, you know, on this This case, I think a lot of people going back to I th I discussed some of this in the Magnite podcast, but at Google, you know, it would be there was a potential that they could have been have a breakup where a lot of their ad tech business. I remember this is not search, this is not YouTube, this is not cloud, this is a very it's called in the network business, it's a decline it's only a declining item. Jeff Henriksen: It's the assets they got click acquisition, or that was one of the big ones way back when in seven Donnie Sattar: Right. Yep. Jeff Henriksen: or eight or whatever that was, yeah. Donnie Sattar: That's correct. The double click acquisition, two thousand and seven, and fast forward today and Google was declared to be a monopoly. And a lot of there was some you know, rumor that could rumor or thinking that potentially it could be a a breakup, but it was not. It was only behavioral remedies. And she lays out, why that's the case, and lays out the remedies and in the you know the the There's a

lot to take away in this thing. It's 100 pages long, and I could go on for hours. I've highlighted I don't know how many passages from this thing. But what I would describe is that you Google seem to they really do not want to be broken up. I think that's just most ant monopolies don't. but they seem to really make a good faith effort on the behavioral remedies. And in fact, most of the behavioral remedies for what the plaintiff, meaning the DOJ in this case, and which was, informed by the industry and Google's behavioral remedies, they really matched a lot. And in fact, one of the reasons I think she didn't have a structural remedy, meaning you have to spin off that double click, all those double click assets, is because when the questions were asked to the industry, like if you did a behavioral change, would that solve the problem? And there's all these people who kind of came out and said, well yeah, that would that would do everything. And I think judges are hesitant. For breakups. It goes back to the Bell Labs. You know, that was when when the ATT broke up, Bell Labs was kind of this, you know, had all those, I guess, innovation from from ATT at the time. It kind of became orphanasset and it atrophied quite a bit and was taken, I think, by Nokia today. I'd go back and look. But anyways, it was something that I think judges are they're very hesitant to do breakups. and so they went with behavioral remedies. it'll be interesting to see how this all plays out. We get more information in two weeks, but at least to start, I think it's it's really interesting. It's gonna take fifteen months to kind of get going. So it'll be some time before this really kicks off. But yeah, we gotta we we actually got a ruling, a judgment, opinion, something to to go into instead of always being in the future. So that's been really what's been on my desk for the last forty eight hours here. Jeff Henriksen: So Magnite, just looking at the stock, was down a little bit today, popped yesterday quite a bit. on the news. So I mean generally speaking, Donnie, I mean, I know your early days and trying to unpack all of this, but I guess at first glance, do you think this is constructive to the Magnite thesis? or at least at the very least, not destructive. Donnie Sattar: Yeah, I think so. I think there's couple of reasons why is because one of the concepts that the judge brought up was that you know, you don't you you don't want to just resolve the behavior that's causing a problem, that's causing harm to competition. And she wrote something there's a line here it says instead they should include affirmative, bored looking remedies that will foster much needed competition in this market. So I think that But the the proposal wasn't just about how do I make this, how do I stop what they were doing? It's about how do I make the market fair. And they go quite a bit. And I th there was a cut there was a couple of wins, I think, that for the supply side guys. One being that there

is going to be a technical oversight committee for six years. in the meantime, the Google CFO and compliance officer is going to have every 30 days have to sign saying that they are. Abiding by these rules. I mean, this is personal liability. And if you are a recidivist monopolist, meaning that you know you're a monopolist and you do it again, those aren't civil. That's criminal. And so I think you have some pretty good ways to keep everything in check. So I think that's really positive. they opened up another demand source called AdWords that gets really into the weeds, but it's just think of it as like a part that Magnite never had access to before, that they will have access to now. yeah, so I think I think it's a it's a good start. Look, it's not if you're kind of wanting to do ex ante, you know, evaluation approach and say, well, Magnite's gonna get all this market share or SSPs, it's gonna be worth why. I think that's the wrong one. I think the right one is if we look back in five years, it opens the door for competitive innovation. And you'll see these guys now they can really they can compete and they can innovate, and there'll be a lot of changes in this industry. And think this is what this unlocks. So I think that's the big win. and it'll it'll take some time, but I think it's I think it's it's interesting enough in a good way. Jeff Henriksen: Yeah, and Donnie, I know we talked about it on the Magnite podcast, but maybe for people watching that didn't see that, just really quickly, you know, could you in a nutshell describe the abusive behavior Google is accused of doing with regards to sell side platforms? Were they disproportionately in ways favoring their own? were they not giving access to certain information that that that benefited them? Like what's in a and I know it's probably a complicated issue, but just in a Donnie Sattar: So yeah, it's all of the above. Yeah. So you look. Jeff Henriksen: quite number of things, right? Donnie Sattar: Right. Right. So look, there's on your if you go to CNN.com, there is a banner ad that you and I all see, right? Or whatever, pick your pick your ESPN. That that banner ad, what's behind that, to get that ad, there's this entire instantaneous auction that takes place. And Google, to real the real short and I'm oversimplifying it, is okay though, but they they c they run the auction because and The reason why is if you're a CNN, you want to get all the advertisers to go on Google search. So you're going to use Google's tools. Well, when they were in charge of that auction, they just kept favoring themselves to win. And they weren't letting competitors in. And that's the really, really short way to think about it. But it's it's more complicated than that, obviously. But by continuing to create rules and change rules and change things, Google kept out having themselves win these auctions. And A they suffocated competition and they gave them they were able to earn super competitive rates on their the prices they were charging. but that's all should stop now. And there's there's no reason, you know, I think a lot of people think that hey, these monopolists they always go back and do bad things again. And it's it's not the trade case. I mean, I think with we wouldn't look, we wouldn't be talking about this if Microsoft had gone back and kept doing bad things after Internet Explorer, the you know, decoupling Internet Explorer. That that allowed Google Chrome to grow. So I do think that, you know, there's some positives here for the industry. It's probably not the slam dunk home run that, you know, causes ten X move or whatever people wanted. but I think over time it's gonna be pretty positive for the industry as a whole. Jeff Henriksen: Yeah, well, Google, I mean, you know, they're moving on to to to AI and the Gemini and they're on to they're on to different Google Cloud now and you know, so they're on to to to greener pastures, so to speak. So and I think you Donnie Sattar: Yeah. Jeff Henriksen: said the other day, like, you know, this isn't a huge part of Google's, you know, operating profit at this point. So it would seem to me to be kind of like, I don't know, wasted effort. to not comply, if it's not really what's driving you know your stock price, if I'm you know if I'm the CFO or the CEO of Google. so it would seem to be that would be you know a good a good a Donnie Sattar: Yeah. Jeff Henriksen: good way to Donnie Sattar: Another, you know, it's funny because or you know, this week before that, I because there's a lot of I think people who you I talk to who give you a stock pitch or whatever they're looking at and this is in private and public, but it's really tied to at the end of the day, the data center trait in a lot of ways that hey, there's this infinite demand for compute and you have to build these data centers. And I started to just cause I wanted to understand the first tailwind, how data centers are moving, and And to get data center capacity in the United States is challenging. And and just going back to Google, I mean, what are you worried about? This this thing, or are you worried about getting, you know, more cloud compute capacity and data centers, you're focused on the data centers, you're focused on competing against anthropic and open AI, for the future of the AI, which is all across the news these days. I think there's some big big things going on there. So I just say I think this is something that is it's you're you're focused in streaming wars. I you YouTube is the number one streamer. So there's just too much too much other stuff to worry about. trying to clip kind of nickels for these guys at this point. i in this industry. So I think I think it's an overall positive for competition. you know, that's kind of the how I today, how I'd leave it today. But again, only a couple days into this thing, we're gonna get more information in the next couple weeks. But figured figured I would let you know it's on my desk

after a long week here. in a lot of a lot of time in this document. Jeff Henriksen: No man, totally. Well, you know glad at least the magnet thesis is working out. I mean it's up quite a bit, I think, from when you pitched it on here, right? I mean it was trading mid teens. Is that right? Is it kind of mid twenties now? Donnie Sattar: I I man, these weeks are so long and days are long. I don't even remember when we we're on here. We'll have to go back. We'll fact check all of it. and just see. But yeah. Well Jeff Henriksen: Yeah. I don't know, let's see here. Yeah. We we did that back in in the spring, right? So yeah. Something call it I think it was like fifteen or sixteen at the time. So it's been a good one. Donnie Sattar: There you go. Yeah. Jeff Henriksen: You did a lot of work on it. you know, I think it's one of these stocks that it's it's a complicated story. And you know, you really unpacked it, I think, in a way that that for me made a lot of sense. And you know, it's it's not, you know, understanding ad tech is a very complicated ecosystem to kind of wrap your brain around. So kudos on you for Donnie Sattar: Yeah. Well, it's still early days. Let's see. full disclosure, I own Magnite and Google. Yeah, there you go. Yeah, probably should. so Jeff Henriksen: I do not own Magna. I do not own Magna. I I should have I should have bought it, but I did not. but yeah. Donnie Sattar: lot of should us in in this business. so what Jeff Henriksen: sure. Donnie Sattar: so you know the other other I guess top of news thing that I've kind of lightly been fracking is this the Jacob Coxon I think is his name. if I'm not mistaken, double check that. But yeah, Enthropic Jeff Henriksen: You got that from that left. You right? Donnie Sattar: coming out and alerting us all that we're we're on the path to to doom in some sense. I just figured get your take on that, see if you re heard anything interesting. we we haven't talked about it so I've you know, even in the off off camera. So I figured, you know what, what the hell I'll talk about it to you now 'cause it's a pretty interesting topic. Jeff Henriksen: so this is you know, it's interesting, Gonnie, because at the beginning of the week we you know came into the week, it was what was okay, AI is gonna kill us. Everybody's saying slow down. The all the AI figureheads are saying slow down all AI. Investment, AI is selling off because the ramification and all the you know the picks and shuffles, you know, the SK Heinrich is of the world, the invade's the world, Shrewbris is of the world, all selling off because you know we're gonna have to slow down the AI investment. interest rates are higher, oil's higher because you know the Middle East is never gonna end, and you know, the Fed's gonna raise rates, but to the end of the week, AI trades leading, you know, leading the charge. Long-term rates have come down since the Fed hyped on Wednesday, which I think was the right move for them. Oil prices have come down, and now there's new talk of, you know, some type of interim thing in the Middle East. So it's amazing to me how quickly in this market we go, by the way, today was triple witching day, right? So we go, yes, there's that, right? And so Donnie Sattar: yeah. Yeah. Right. Yeah. Jeff Henriksen: we go through these narrative swings that it's like I feel like it used to be that would take months to go through a narrative swing that we can go through now in a week. Donnie Sattar: Yeah. Jeff Henriksen: And the big one obviously is AI is gonna kill us. And you know, I don't I don't know what to think about that. Part of me thinks, yeah, like there's some serious risks. Part of me is a skeptic. I mean, it seems like every time these risks get in into the media, there's a valuation round coming up. I mean, you know, it's interesting, Anthropics gonna IPO, open AI is trying to do a $1.2 trillion round. Like it's you know, the timing there is interesting. I've also heard people make the argument that look, they want to slow, they want to have a reason. They've overcommitted to the investment, you know, spend. And so they want a natural, you know, way to slow it down and to all get together and say, well, we got to slow it down because it's going to kill us is a way. So there's all these skeptical views on what it means. And then there's the real view. Like, I don't think this Coxswain guy, you know, I think he thinks it's a real risk. I don't, did he throw the 10%? Like, was it him or another guy that threw around like, Donnie Sattar: I I thought that was another one who who who was in Jeff Henriksen: Might even know. Donnie Sattar: the safety group who who said the ten percent number, but I I could be getting it Jeff Henriksen: Yeah. Donnie Sattar: configured. yeah, I'm I'm pretty excited Jeff Henriksen: Well Donnie Sattar: to see the S one for anthropic in the risk section. Is it is it really is it gonna be well, we could end it all. Yeah, it's at a risk Jeff Henriksen: Yeah, you might wipe out that a is that a risk? Donnie Sattar: that you have to disclose. be interesting to see you get the lawyers right in there. Jeff Henriksen: Well, you know, the the thing, the way I look at it, you know, I think I don't know if I've told the story on this podcast. I've definitely told it to friends before. I I read it, I think, in one of the Jack Schwager books way back in the day on The Market Wizard. But there's a I don't know this is true story, but it's it's interesting. That during the Cuban Missile Crisis, there was a guy, the trader, who went into the weekend like that, that all happened, like levered long. Right. And he's sitting there on a Saturday, you know, having a beer with a friend. And his friend is like, wait, you're levered long? Like we might be on the brink of nuclear war. You know, and to which the trader said, Look, I mean, if nuclear war happens, yeah, market's gonna tank, but we're all gonna be dead. So what does money matter? And if they

figure it out and it doesn't happen, the market's gonna rip. So either way, I should be levered long, right? And game theory would say that's my you know dominant position. And therefore I should play it. And I think that analogy I've always liked a lot. And I think it kind of applies here. Like if AI does wipe us out, like what are we working on? Like, you know. Donnie Sattar: There you go. Jeff Henriksen: What our portfolios are worth for the the least of our problems. But if AI, you know, is as powerful, if it's powerful enough to wipe us out, but doesn't wipe us out and actually does all the good things, the productivity enhancing things, what does that mean for the market? Market's probably gonna rip. So I'm you know, I'm I'm bullish and I'm not whistling past the graveyard. There are risks here for sure, but you know, I I I'm not losing sleep at night about. AI you know killing us. Donnie Sattar: you know, it's it's still it's still early days in this and you know I I think that these these models they're gonna do a lot in to damage in the could do a lot of damage to the software side, but I think, you know, hopefully you have enough bandwidth on to protect as much as you can harm. Jeff Henriksen: Right. Donnie Sattar: You know, now that we're gonna you I think we're getting getting into physical AI at some point in the future where, you know, there are other robots that that start to land. maybe that'll get a little scarier. so we'll see. Jeff Henriksen: You I like I said, Terminators walking around would change my team. I I wouldn't Donnie Sattar: Exactly. which I think is kind I think the the physical AI is coming, and it'll it'll be I think pretty rapidly adopted in in the next like five years or so. So maybe that'll make it feel a little bit, you know, real. You can actually see it and sink your teeth into it. but you know, right now it just seems like you know, it's going to the weekend. Jeff Henriksen: Yeah. I I what Donnie Sattar: Buffett told you Father Time always wins. So You know, we Jeff Henriksen: Yeah. Donnie Sattar: can leave the fears at the door for a little bit. Jeff Henriksen: You know, I think part of me too I've been thinking of this idea that like if you think about everything that's happened with artificial intelligence, you know, that's just the how amazing it is, like if you really get into to using it and how Life-changing can be in terms of making your workflows more productive. If you look at just the sheer amount of investment being made, the power, the energy demand over the next five years, you know, the numbers being thrown around in terms of total capex between now and 2030, it's so mind-blowing. And unlike anything we've ever seen, I think there's this natural reaction in markets, right? To not believe it. You know, just to say there's no way this can be the case. And so I think it it lends itself really well to be the ultimate momentum trade, you know, because momentum. Momentum works because something positive happens, there's a positive reaction, stock goes up. But you get, you know, at a certain point, quite a bit of supply coming on in sellers because they're trying to realize gains, or they don't believe they think it's gone too far. But in the reality, on a momentum stock, it's it hasn't gone too far. And the selling pressure that comes in is what causes it to be undervalued, and then it just keeps going up, right? That's kind of the behavioral side of momentum. And I feel like on a macro, like macro level that could be happening with AI. Like the story is so far fetched. I mean you start talking to people and they're like, well, you need to, you know, things that were talked about in the Matrix and the Star Trek and Star Trek is that are now relevant and just seems so crazy that there's an inherent disbelief, I feel like, in what's happening. And that's why NVIDIA on a Ford basis trades at a very reasonable multiple, right? People just don't believe in the sustainability of it. But From my perspective, I you know, I this is totally my view here, but I think there's a good chance that we could be in the third or fourth inning and a lot of people think we're in, you know, extra innings at this point. And so I d I don't know, I'm still very constructive, Donnie, on and especially on the Donnie Sattar: Right. I in the NVIDIA thing is interesting because I think there is some view that it's five plus trillion. How could it go to ten trillion? yeah, there's that view. and as you mentioned, some skepticism of what the AI trade could be. But Jensen said they're gonna set double the chips next year. so there's clearly demand is there from the boots on the ground. So I don't think you fade it today. well. Jeff Henriksen: Well, and and like when you talk about market caps, like the idea of a trillion or two trillion or what's Nvidia's market cap now? Is it four? Is it five? Donnie Sattar: I think it's five point three or something. Jeff Henriksen: Five point three trillion. Okay. That's such an insane number. I remember when the first company crossed the trillion dollar threshold. And people still when they hear trillion dollar market caps, it's just like, but you remember the guy in in in Oxford that broke the five minute mile? Before he broke the five-minute mile, nobody came close, right? It was like nobody, it would Donnie Sattar: Right. Jeff Henriksen: never be done. And then he broke the five-minute mile, and then now tons of people have done it. So it's there's this psychological threshold that once you cross it. And I wonder if the trillion dollar market cap, like we've crossed that threshold. So to me, if I'm very constructive on economic growth, right? And if if we do get when the productivity draw comes from all this investment, we really find out. you know what it's doing to you know GDP per capita to productivity. If those numbers come in as bullish as some people think, I mean, you know, yeah, I I could easily see, you know, these

numbers, these valuations getting a lot higher. And it's easy to anchor on a number and say it's just too insane, it's too high. but in terms of multiples, you know, they're they're not crazy. We're not talking dot-com level multiples here. So I Look, I get the bearish arguments are very seductive in a way, but you know, lots of times I would argue most of the time they're not very profitable. You know, we talk about but Donnie Sattar: Yeah, I think the other side of the bearish argument for that, not bearish, but maybe just not overly bullish is just that is is there eventually gonna be competition coming in and and you know, with CPUs and wafer scale and other types of chips that start to be able to to work its way into some of the the margins that they're charging, but Jeff Henriksen: Well the same element on the on the the frontier models, right? You if you look at the cost to To work with Deep Seek versus Anthropic, it's you know, and it's it's massively cheaper. and so there's questions, you know, even though obviously at the frontier, OpenAI and Anthropic are the most cutting edge, but you know, what does that market look like? You know, when we really get into an agentic type of framework where companies have thousands of agents, you know, are they gonna prefer a deep seek simply for cost savings? Or is it gonna be a bifurcated model where they'll use the frontier for the really important stuff and then you know the the cheaper model for for more basic work I don't know so there's there are a lot of unknowns about how this evolves but Donnie Sattar: Yeah, look, I mean and I think there was one the area that I've been going down a little bit is the is the wrappers. So I think a lot of people default that it's gonna be open AI or anthropic, you're gonna use one of these tools and they're gonna kinda do everything. But there's wrappers that sit on top of these things. So think of like open evidence or you know, the the legal Harvey, I think the legal one they they sit and they use these different models and there's even some other ones for coding agents and whatnot. And it's I think there's an easy path of like, well, why can't you just use Robert for that? But I think that these rap the companies that wrap on top of them, kind of to your point, they Jeff Henriksen: Right. Donnie Sattar: they're becoming a lot I think they're they're interesting. And I'm probably look slow on the uptake on this. So I know that others who who've been following this a lot longer have have probably gotten ahead of me on this thing. But I do think it's worth Following that, it's kind of the new crop of SaaS, if you will, that instead of it being built on the cloud, it's being built on these other intelligent computes on intelligence. But that could be, you know, the the cost. Could you use a a lower cost model and sort of reap that profit gain, margin gain? And will people just be accustomed to maybe not always plugging into just anthropic or clo or child GPT for every tool? They'll be they'll they'll use other ones that can pick and choose the model that's most efficient. I think that's that's coming. I I think that's a really interesting fertile ground to hunt and and I know I'm spending some time there trying to find what could be interesting. so to your point, it yes, it could open up a lot of different avenues, I think sort of as as we continue to evolve here. Jeff Henriksen: Right, right. Well, I mean it's fascinating time, Donnie. It's a good time to be alive and be an investor. there's no lack of debates to have and so Donnie Sattar: No, not at all, man. And yeah, you know, we'll we'll start where we ended this, that you know, the Warren's stepping down, he gave us his his last bit of or another bit of good wisdom that Father Time always wins and and you know that it that Father Time's been generous to him. So, you know, maybe we'll after my run I'll I'll make sure to pour one out for Warren or or have one with Warren and just just keep that in mind over the weekend. Jeff Henriksen: Yeah, no, absolutely. Well I'm flying to Chicago tomorrow. I've got to teach at U Chicago all next week. So I will I'll I'll have a nice cold beer tomorrow night in Chicago for Warren. Closer Donnie Sattar: Yeah. They were local. Jeff Henriksen: to Omaha in Charlottesville, right? And Donnie Sattar: Yeah, there you go. Jeff Henriksen: Yeah, I but no, I think it's it's awesome to have, you know, lived and watched watched that man, you know, do what he's done at Berkshire and to to have gone out of Berkshire many times and you know, to kind of think I mean it's still a good meeting obviously to go to, but to have gone back when the the the Oracle was was at the peak of his powers, so to speak, I think will be a pretty big be you it's like watching it's like being able to go to a US Open when Tiger Woods was his prime, you know, it's like to see that type of magic at what Work is really cool. So Donnie Sattar: Yeah. Absolutely. Totally agree. So I think it's a good way to end it. All right, have a good weekend. Jeff Henriksen: Absolutely. You too, and we'll see you guys in a couple weeks for our next podcast. Otherwise, until then, happy investing. Take care. Donnie Sattar: Thank you. Take care.