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Hello and welcome to Market Domination. I'm Jake Connley live from our New York headquarters. We just heard the closing bell. Let's take a look at how stocks ended the day with our very own Jared Blickery. Jared, what are we seeing after that day of red on Friday? All right. Well, you know what? It's another day of red in the stock market, but not the overall stock market.
It is just chip stocks mainly and throw some software special especially cyber security to boot. Let's go to the Wi-Fi interactive and we can check out the today's price action. First in the Dow, another day when the Dow is positive and uh we can see still kind of closing in the mid part of its range.
A little sell off on the close, but up about 200 points there. NASDAQ though really taking it on the chin. Started out green. chips were green when I began the day about 9:30 a.m. Eastern and uh ended in the red down about another 1%. S&P 500 down about half that and small caps up just a little bit uh into the close.
But let's check out the bond market one more time. Then we're going to go to uh some heat maps. So here's a 10-year Tote yield uh down to 489 about three basis points down on the day. And you can see that's well below 5%. It was elevated above that just a month ago. The AI sell-off has really dented bond yields, which is usually good for stocks, but not when it comes as a result of an AI selloff.
There's all kinds of feedback loops involved there. So, it's pretty interesting to watch that. But here we have the the large cap sectors for the day. Consumer discretionary, uh, that was up over 2%. That's in the upper left. Financials number two, the materials, staples, industrials, real estate, the entire top row is up over 1%.
And yet, as we saw just a minute ago, the S&P 500 down. So, it's a lot of those big names dragging and yet tech was not the worst performer. It was energy down about 3.9%. Tech down 3%. And let me just show you real quickly how things have fared since the October 6th interim high. You can see it's been a lot of gains except for some of those big names in tech and also communication services where you find Alphabet and Meta to a lesser extent also industrials.
But let's check out the today's price action in the NASDAQ 100. And here we see the big names. A lot of those underwater. Apple reporting in about 30 minutes. That's down 2%. Nvidia down over one. Microsoft over two and a half. Amazon though that's cons that was up 2%. That's why consumer discretionary is in part higher.
Walmart also part of that uh group. Well, maybe it's consumer staples, but nevertheless, Walmart up over 3%, SpaceX up one, Tesla up one. So Elon Musk had a pretty good day, but I'll show you who did not have a good day. That would be the chip group. And I'm going to sort by performance so you can really see those dark red names.
Lumenum and Marll, uh, those are that's an M&A story, but you can see Lmentum there down almost 20%, Marll down about 12, 13%. But it wasn't just them. Here's Intel down another 8%. Let me show you the last three days. Uh, 37%. Most of that was Friday after earnings. And then uh also today, so the today was down another 8 n% there.
AMD down 7% there. Uh reporting after the bell tomorrow, Jake. And um tell you what, there's a lot happening. I think we got Palunteer earnings in just a minute. So you let me know if you want to continue on because there's a little bit more carnage here in software, but for the most part, pretty good day for the stock market, not so good for a lot of the tech trade.
Jared, I think we'll take that. Thank you for your insight as always, sir. Well, Americans head to the polls tomorrow for the 2026 midterms. With affordability, AI infrastructure, and the war in Iran dominating the ballot, stocks historically rally once the election uncertainty clears. Joining us now with his post-election playbook is Scott Croner, city head of US equity strategy.
Scott, it is great to see you. Thank you for coming in to chat with us today. I want to maybe start here. Polling shows really two realistic outcomes for these elections. You either have a Democratic sweep through the House and the Senate or we see the House turn blue while the Senate stays in Republican hands.
Given who's in the White House, that the White House is Republican held. Both of those scenarios on the surface kind of sound like split government, like nothing's going to get done, but there is some nuance between those outcomes. Let's start there, Scott. What is What is the difference you see for the markets between those two outcomes?
Yeah. Okay. So, I think you're spot on, Jake, with calling it or referring to it as nuances. Um, let's start start out in level set here. In terms of fundamental impact of the midterms, we don't think we're going to see much impact in a split Congress or even in a blue sweep, if you will. What matters a little bit more is as to sentiment, right?
And so what we would suggest is that yes, the the uh the pollsters and the prediction markets have gradually now favored a blue sweep, which is something that we thought would probably make some sense to assess a month or so ago. But now we're looking at this blue se sweep scenario. But you still have a range of potential outcomes now whereby you have to really kind of look at outlier effects.
Outlier one would be if in fact the Republicans hold the Senate. Outlier two though would be if you get a stronger Senate sweep in the favor of the Democrats and is currently being projected. So we've got base case probably looking at a blue sweep, but you got outlier cases that still set up for some volatility in the days ahead.
Scott, I want to drill down in that just a little bit. You know, there's a sense here that the idea is, okay, the Democrats take the House. But to your point, it also matters the amount of seats they pick up, what that split looks like after the election. How does the amount of seats Democrats may or may not pick up impact what what what things might look like going forward after the election?
Yeah. So, let's pivot over and talk a little bit more specifically on the Senate because we think that's where the uh the immediate discussion really takes this. the House looks like it's a pretty foregone conclusion um to the extent we can debate. But over in the Senate, it's where is where it gets interesting because these new senators are going to be in for six-year terms, right?
So, I'd say right now the consensus projection out there is probably a 5248 uh Democrat Republican uh split if you will. However, however, if you see that 52 moving out to 53, 54, who maybe 55, then you begin to set up a different discussion thinking ahead two years to the 28 presidential elections.
You probably in that mode would still have a uh you know a democratically controlled house and senate. But what it does then is set up a different discussion around the presidential election. The bottom line here is when we look at that outcome, um it does two things for us. Number one, it conjures the 24 election whereby the main democratic policy platform was higher corporate taxes.
Um, and then number two would be as we come back to this AI storyline, if a more massive blue sweep kind of goes handinhand with Democratic control in certain state legislatures such as Texas, then this sentiment shift on anti-AI becomes uh increasingly more relevant as well. Scott, I want to drill into that last point you're mentioning there.
I think it's a really smart one on the data center. uh the fact that we see the data center issue on the ballot in so many races, including some really key races, AI really on the ballot here, depending on the outcomes we get tomorrow and into Wednesday. What's your team expecting for the impact to the data center economy?
Is this something that the market's really priced in or is this left to be an unknown until we see how some of these ballot measures and races end up? Yeah, I I we we suspect that ultimately ultimately a lot of these concerns are dealt with. You find some means of compromise that gets you past some of these moratoriums and towards construction.
But in the marketplace right now, it's a sentiment issue. And what it ties back to is the earlier discussion on how the semiconductor part of the market's trending right now. sort of this AI data center supply chain that's kind of really led by the uh by the uh the uh the the tech enablers as we call them but really comes back to the semis and related.
So if you think about it, you you've got the potential of delays and buildouts and then you throw in the other aspect in terms of how are we going to finance all of this expected capital expenditure. And what ends up happening is the sentiment shift is a function of those two has been marketkedly negative for the semis.
And that's what you're seeing in in the tech trade certainly over these past few days. But that's how it kind of comes together. elections plus the financing mechanism in general. Scott, on the data center front, on the AI front, what are maybe two or three of the key races your team's going to be watching tomorrow night to see kind of the the the the direction of travel for where this is going?
Yeah. You know, I'd say first and foremost, it's it's it's probably Texas is the one that jumps out at us and we're going to be watching that one pretty closely. There are a couple of other states, but I think they're they're in terms of where the issues are, where the uh where the uh the Senate races along with the governorship come into play and where there's a lot of data center activity and existing moratoriums.
It kind of starts there, right? So, that's where I would put most of the focus. Um but again, you know, this is going to be uh one of those topics that's going to be ongoing in terms of, you know, does your average American really support AI buildout? Some of the polls would say maybe not. But there is probably a path to compromise, but it will take time.
And what that does in the meantime is just lead to this uncertainty dynamic that we'll have to contend with. Scott, the other source of uncertainty for Americans around the midterms, one of those at least is the Iran war and how the election might impact what's happening there. President Trump again today reiterating this idea that he will not strike Iran after the midterms, but that of course doesn't mean things can't change.
There's a there's a theory that if the the Republicans lose control of the House and maybe the Senate, then President Trump might feel a little more emboldened to act. How should investors be reading the impact of the midterms on the war going forward given how uncertain all this is? What's what's the impact you see there and how should people be looking at that issue?
Yeah, very fair question. So, we sit back and we look at it and you know, in a strategist seat, you like to get conviction or think you have conviction around something. trying to get conviction on how Iran unwinds is is really quite difficult right now. So, we're sort of information takers on this and it's hard to see where the actual midterms will make that much of a difference in terms of finding a path to resolution.
That said, as a result, we maintain a focus on the oil price direction as it potentially influences inflation expectations and with it interest rate expectations. We've seen rates pull back here. We saw some relief on oil prices today. When that happens, you can see what happens under the surface. You begin to trigger a little bit more of a broadening play within the markets whereby that half of the index that isn't so directly exposed to AI can can benefit.
And I think that's some of what happened in the marketplace today. So, we're watching oil prices as a lead indicator read through to inflation ultimate read through to Fed to Fed actions as we go forward. Scott, thank you for your time, sir. Much appreciated for your insight. We always enjoy having you.
Well, coming up, we'll bring you Palanteer's latest results on the other side of the break. Do not go anywhere. Heat. Heat. N. Heat. Hey, heat. Hey, heat. Heat. Heat. Heat. Hey, Heat. Downow down. Down. Palanteer third quarter earnings crossing the wire moments ago. Let me get you those numbers. Diving in here, Q3 revenue coming in at 2.313 billion, growing by 96% yearonear.
That beat analyst estimates of 2.17 billion. Third quarter adjusted EPS coming in at 44 cents. Analysts have been looking for 41 cents. That's also a beat. Let's take a look at the revenue segments here. US commercial coming in at $984 million for the quarter versus estimates of $937 million. And US government revenue, Palanteer reporting at $953 million, also surpassing analyst estimates.
That marks the first quarter on record for Palunteer that US commercial revenue has surpassed the US government business. Just another massive beat for Palunteer on this quarter. Stock is moving up in after hours trading. We're bringing in Gil Lurri, head of technology research at DAD Davidson for more here.
Gil, it's great to see you. Alex Karp, the CEO of Palunteer, calling this a celestial quarter in his statement he just put out. Is this a celestial quarter for Palanteer? It actually is. Uh, in fact, in the title of the press release, they said that they are crushing it, and I'm not paraphrasing, and they are.
There are no other software companies growing at these rates. This company is doubling uh and this is at a you know eight billion dollar run rate. They're doubling with over 60% margins. There's no other software company even remotely close to that. You know, if you look at the next cohort of fast growth companies, they're growing in the 30s with maybe h half the margin at best.
So Palanteer is extraordinary. They're doing extraordinarily well. Every time we think they can't possibly accelerate more. They did 93% growth last quarter. We thought there's no way they can accelerate from that. And here we are with 96% growth. So yes, it is uh it it is uh celestial. Gil, I want to take one of the one of the headlines coming out here that US commercial revenue for the first time surpassing US government revenue.
What do you make of that uh of that shift in in where the money's coming from for Palunteer? Yeah, the commercial business move faster, right? The the fact that they have such extraordinary growth in government is is is really decades of work that they've entrenched themselves as a a prime provider uh on the software side for a variety of government agencies usually associated with the department of war.
But on the commercial side, it can scale a lot faster. They don't have that many customers. They have in the magnitude of a thousand customers and they have millions of potential customers. So as those customers attract new customers and then the they have growth within the existing customer base that just scales very rapidly.
And these days Palanteer's gotten especially good at scaling. You'll note that they they're not growing their headcount by 96%. They're growing their headcount by a lot less than that. So they're able to get scale even on their four deployed engineers which which is what's really remarkable here. Gil, you make a point uh in your note today about the the trust that Palunteer has.
You write, "Trust means Palanteer is naturally positioned to become the control plane, the orchestration layer, and the harness provider for a wide range of customers." Pointing out the growing distrust in the frontier labs, especially around some of the promises to not look at customer data. What kind of edge do you see that trust that Palunteer that you say it has?
What what kind of edge does that give it? uh it gives them an extraordinarily long run uh runway because uh Anthropic and Palanteer I'm sorry Anthropic and OpenAI famously now have more than hundred billion dollars of revenue. Palier only has eight and uh what companies are now working directly with OpenAI and Palanteer and what the point Alex Karp is making is that that doesn't make sense.
Open AA and Palanteer want to compete with everybody to justify their size and to continue to grow. And so if you're a company that's interfacing directly with the frontier models, you're really providing them all the valuable information about how to compete with you. And Dr. Karp is warning everybody that's not a good idea.
And he's really only started delivering that message. So we're early on in that which is as companies realize that they're giving away their business and in fact they're not just giving it away anthropic and openi to take all their business secrets with them. As companies realize that they're going to want to buffer they're going to layer in the middle and ponteers perfectly positioned to do that.
They already do that for the both their commercial and their government customers and so that's a very natural place for them to continue to grow and extend that runway. Believe Alex Karp calls this idea sovereign AI the idea that he's been pushing forward. Do you see that that idea getting picked up by customers when you're out talking to clients talking to people?
Do you see that idea of sovereign AI kind of gaining hold? Very much so. We just attended their event a couple of weeks ago and uh the difference between that event and the one before that AIP Con 11 from AIPcon 10. That topic became uh from from not even being there to being the primary conversation because if you're a Palunteer customer again, one of those thousand commercial entities that that's spending often uh tens of millions if not hundreds of millions of dollars on Palunteer, you are paying attention to that message.
You do realize that this is what Palanteer does. The whole secret sauce of Palunteer is how do you take disperate data sources, combine them without sacrificing privacy and confidentiality and then apply AI tools to draw conclusions and and uh and execute mission critical tasks. That is what Palanteer does.
And if you're a Palanteer customer, you're definitely recognizing that and you're embracing it because you feel like that gives you an advantage over your competitors. Yeah. One of the longunning uh critiques of Palunteer's stock has just been how expensive it is in terms of the valuations, the multiples it trades at.
I'm curious what you make of that of that hesitancy from some on the street. It hadn't been justified. It's just that the valuation even now even if after the big run since July is it's just a slight premium to to that cohort of companies. If we talk about the cohort of the other four or five fast growing software companies you're talking about Data Dog, Snowflake, Crowdstrike, Shopify, Palier only trades at a slight premium to that group that grows a third of the rate with half the profit at best.
So that that premium is very much justified. And as long as Palanteer continues to grow these rates and even accelerate from these rates, it's going to warrant that premium and possibly even a higher premium than that. Gil, you see Palunteer becoming uh kind of the layer that customers trust to manage AI.
This comes back to that sovereign AI argument. Curious what you make of uh you know someone might say what protects that position as model developers and even companies using their own AI can kind of develop that that themselves and build some of that security and what gives Palunteer a moat with the technology it's building.
Yeah, there there will be other companies that insert themselves into that position. uh specifically I I would expect Microsoft to play a big role, Amazon to play a big role there in being that buffer between the model companies and the customers and and I expect those two companies to have a giant business doing that.
But Palier at $8 billion has a very long runway because that is only a part of the value ad that they provide. They provide the whole value ad of transformational for their customers. They go into a customer, figure out what the most important problem is, solve it using their software approach, what they refer to as ontology, then applying the AI tools to set up that uh mission critical information and reporting.
So, it's only one part of what they do and they are such a small part of the market now that they still have a big runway even if other companies step into that layer. And again, I expect Microsoft and Amazon to lead the way because they are model agnostic as well. They they work with all the models.
They would rather provide a a good experience for their customers than be beholden to a model. Can't quite say that about Google and definitely can't say that about anthropic and open AI. Well, Gil, that'll be something to watch. Thank you, sir, for your insight. Stick with us because we'll be back with a little bit more coming up.
The earnings keep on rolling. We'll have Apple for you next. Stay tuned. Heat. Heat. Down. Heat. Hey. Hey. Hey. Heat. Heat. Apple's fourth quarter just crossing the wire. Their revenue coming in at $114.48 billion. Analysts were expecting 113.47 billion. So that is a beat. EPS coming in at $210 per share.
The estimate was for $2 a share. So that's another beat. In iPhone revenue also topping estimates coming in at 57.58 billion versus estimates of 56.49 billion. We're still here with DA Davidson's Gil Lur with us to dig into these results. Gillan, first blush, the streets not loving this. Stocks trading down by about 1.2%.
When you look at these numbers, what's the first thing you're seeing? That the quarter was still good. The concern is what's the follow through? What happens next quarter for a variety of reasons? Because this is the last quarter of the upgrade cycle for iPhone, right? This has been the biggest upgrade cycle in five years.
The iPhone 17 was a big upgrade cycle. The last one was iPhone 12 and therefore this year as we've moved forward there's going to be pressure on unit growth. Units may actually decline. Now they've raised prices to make up for that. Duo which appears to be successful will help with the ASP but the concern is that somehow that's not going to net out well for next quarter.
And that's what we're going to wait for. We're going to wait to see what the guidance is and what the detail is for the guidance is both on can they still achieve revenue growth even after comping a big year and can they hold on to the margins next quarter because as memory prices start filtering through the memory chips they put in over the last couple of quarters were ones they bought at a much lower price than they're buying now.
So the gross margins going forward will will also be strained just like revenue growth will be strained. So we're going to be waiting to see what guidance flushes out to. But the quarter itself, the backward-looking view is good. It's the it's the forward-looking view that investors are going to be um sensitive to seeing depending on what the company says.
Gil, this is a big first test for John Turnis, of course, taking over as CEO. Already during his tenure, we've seen a range of products rolled out, right? We've seen the duo, as you mentioned. We've seen the home line and there's this narrative around Turnis that unlike Tim Cook, Turnis is a hardware guy.
He could be really pushing into more product releases, trying to widen out the bench instead of just the uh kind of iterative work that Tim Cook was doing, the services work. How are you thinking about that for Apple going forward and the the impact that a different approach from Turnis might have? Yeah, it's very timely and I think this was very orchestrated around the Duo.
I think the the company knew the Duo would be successful. They they they saw the design. They tested it. They tested with focus groups. They picked a price point that was actually, believe it or not, even at $2,000, probably at the low end of what they had considered. So, they're setting him up for success.
That the big the first big hardware launch is going to be successful. What happens after that? What new form factors we see? What iteration of Vision Pro? a new Mac that with a touch screen. We're going to see that when Apple picked John Turners to be the next CEO for the next decade or so, they made a very conscious decision to say that for the next 10 years, hardware is the most important thing.
For Tim Cook, it was about operations, phenomenal financial results. Now, they're they had this binary choice. Do we double down on software? Do we gamble that Apple's a big AI company or do we go back to basics and extend our hardware line, add new form factors, and the decision to put John Sternis, John Turnis in the seat, was exactly a reflection of that.
And the duo's success, which we should hear about today, is a really good first step for him. Gil, one of the things that might be weighing on the stock here in the the aftermarket trading greater China revenue for the quarter missing estimates coming in that revenue coming in at 17.54 billion. The estimate there was 18.75 billion.
So about a billion dollar underperformance there. How should we be thinking about that se sector of the business uh that you know that business line for them and what China means for them as a company? It's by far their most challenging geography because it used to be a really big part of revenue. It used to be more than 20% of revenue.
It drove growth for several years, but the last few years it's been a source of not only declines, but volatility. That market is so competitive and there's so much intervention in that market that they they have not only volatility, but they've also had a a downward slope in result. So, it's been a headwind to their business.
So, a disappointing result there. doesn't reflect well going forward because that may be a competitive situation that's causing them to fall short. That would add a little bit of concern. Gil, stepping back here, uh, go back to maybe call it 9 months ago. A lot of investors looked at Apple and questioned why Tim Cook wasn't plowing a hundred billion or $200 billion into AI capex like we saw an Amazon or a Microsoft or Alphabet doing.
In the last few months, it seemed that the stock, the company has been a bit rewarded for not plowing a ton of money, for taking on a for not taking on a ton of debt, for AI. How should we be thinking about that story going forward and kind of Apple is the differentiator maybe in the classic Mag 7 grouping we always talk about?
Yeah, Apple, they were definitely vindicated on that decision. For a couple of years, it looked like it was a problematic decision, but since then, they've absolutely been vindicated. And look nowhere else but the multiple where they traded a huge premium on earnings at least to the rest of the uh of the large cap technology stocks.
The ones that are plowing hundreds of billions of dollars into the ground to build data centers that are funding these frontier labs with tens of billions of dollars in order to to be at the cutting edge. What Apple's Apple's calculus has always been, we'll let them worry about all that. Consumers are still going to use AI through our devices.
we're still going to take a cut. And at some point, Siri will mature to being that assistant, that personal assistant, that agentic um uh application that we're seeing previews of with Muse right now. Longer term, we're going to use Siri in the same way. Siri will be sitting on top of another model whether it's open eyes or anthropics or Google's or another model but the consumer will be interacting with Siri in order to accomplish what they want with AI in order to make those agentic requests to have that personal assistant and the reason they're so well situated is that they're integrated into their own native applications messaging email contacts calendar those are things that their integration is always going to be better than third party software so long term they're still situated well.
They're going to let everybody else fight it out, incinerate all their cash flow and then some. Well, Apple sits pretty and and ends up picking out the one that they want to work with. You know, you you make a point there um kind of indirectly about the fact that Apple has stayed by and large a consumer business.
They are not chasing the massive enterprise contracts that an Alphabet or a Microsoft is going after. Is that set to stay a healthy differentiator for Apple as they push forward with the AI story they're trying to tell? Very much so. And it's because they have such a big part of that consumer market.
They they don't have the majority share. They have a big very big share, but they have a majority of the profits coming from consumer handsets and to a large extent even from uh consumer computers. and they they're happy there and they're happy in that market. They have some enterprise business selling Macs.
They have some enterprise business helping iPhones work in an enterprise context. But why would they compete head-to-head with Microsoft, Amazon, and Google if they have a terrific business with 46% gross margins in consumer technology with a huge moat compared to other participants here? They don't need to do that.
They don't need to put in the investment to compete in the enterprise market. They're doing so well wrapping themselves around the consumer. So then let's bring it back to today. Gil with that moat you mentioned with the uh the differentiators they have. What does John Turnis need to come out and say to analysts to investors on this call to signal that you know the ship is in steady waters.
We're in good hands. We know where we're going. Now this is one of those quarters where it's actually not the granular picture. It's not the iPhone units that are going to matter. It's the big picture. It's with all the crossurrens comping a good year for iPhone having price increases, having a higher average selling price because of Duo.
What does that net out to? Can they still grow high single digits next year? Can they have growing margins as opposed to contracting margins with higher memory prices? It's actually going to be that topline growth and the gross margin that investors are really going to be focused on for this quarter.
To the extent they can give us good detail on the duo or any any part of the hardware uh roadmap, that would be helpful. But really, people are going to care about the trajectory of revenue growth coming out of this cycle and then can they hold on to margins. Those are going to be the key two items.
Gil, thank you for your insight on both of these companies. Uh we always appreciate your time. Thank you. Coming up, Anthropic just dropped an amended S1. We'll dive into the latest data on the other side of this break. Hey, hey, hey. Heat. Heat. Down. Heat. Anthropic updated its S1 with third quarter results in a massive computing bill.
Let's dig into the details with Evan Schlloman. He's a principal at Neostellar Capital. Evan, thank you for joining us today. Thanks for being with us. I just want to start with a few of those numbers right off the top here. Quarterly revenue growing from almost 12 billion in Q2 to nearly 17 billion in Q3.
However, companies disclosing nearly $900 billion in future purchase and lease commitments. If you're a potential investor looking at this company, how do you square those two figures? Yeah. So, one of the interesting things you're looking at and look if you look at the topline numbers there as you said right was 45% growth going from Q2 to Q3.
So you're talking about really, you know, a extremely unique story in terms of the growth at a a pretty high dollar figure in terms of absolutes. So let's just keep that in mind for the context there. I think when you look at the spending side, one interesting thing is you see the short-term compute which they disclosed there, right?
Going from about 1.5 billion to I think a little over five billion. um when you look at sort of the what they were disclosing in Q2 and then the Q3 update and so what that's telling us really is that if you look at the pace of growth and what Anthropic may have been anticipating right in terms of long-term compute that they were purchasing that obviously comes at a cheaper price and so you would ideally like to have more of your compute bill come from long-term compute.
The fact that the company is tripling shortterm compute contracts to that over5 billion dollar value really tells us that the growth rate there is coming even faster than Anthropic may have anticipated when they were originally coming into those compute contracts and it's showing just the absolute sheer demand that they are needing to pull the trigger in order to satiate right and so that's one thing when we square sort of the compute value and demand is this company is now growing at the clip that you described before right and they are needing to anticipate and sort of built for this and the question is how do you provide that compute satiate that demand in the most cost effective way and that is building up long-term facilities building up long-term compute capacity so that you can you know properly be able to provide the supply that meets the demand that anthropic is seeing on the other end of that equation
Evan one of the big questions here with anthropic also with open AI but really with giving the upcoming IPO has been this idea of when the customers of what these labs are producing are going to start seeing some of that ROI, that return on investment. When are we going to start seeing the actual uh you know business production case of all the spending that's going on here?
When you look at Enthropic, the numbers coming out of this company, how do you think through that question and what it could mean for Enthropic going forward? I think you're seeing it right. And so if you look at the composition they disclosed in terms of the customers, you're seeing an increase in sort of diversification.
You're seeing an increase in customers at the you know call it 100k mark at the million in terms of annual spending commitment mark and the reason you are seeing customers spending more and more with these platforms you have you know a what 900% in RR figure if you go back from sort of Q3 to I think a year ago is because customers are presumably getting value out of the products right and so when you think about models that are getting more and more performant you're having a use case for AI that's expand expanding.
So your base is expanding there. I think the reason we are seeing that these customers, one, you're growing your base of customers. You're seeing more and more customers on the platform, but two across the board in terms of AI, you're seeing more and more usage. And the reason you're seeing that usage is because people are determining that the value they're getting out of it is, you know, at least within merit, if not sort of value creative for them to use the product.
And so that's I think what's generating some of the expanded use cases here. um when you look at sort of actual usage you're seeing a huge amount of usage coming from recent models right so about 80% I think of current quarter of revenue or Q3 revenue was being generated from models that were created within the last 6 months the reason is because these models are more and more performant and so you would expect to see with more and more performant models a broader use case of where sort of the ROI intersects you're able to justify the costs and use of the model um and so I think we're already entering that curve I think there's probably still early innings though in terms of how far we're able to go when we see more and more performance coming out of these models where companies are going to be able to generate value.
Evan, looking at the IPO, the upcoming IPO for Anthropic, we've seen some ripples around the potential valuation for this company. Enthropic of course looking for $2 trillion. A story coming out of the Wall Street Journal you quite literally just minutes ago reporting that institutional investors have been telling Anthropic that the company should be targeting closer to a$ 1.5 trillion$ 1.6 trillion valuation.
Those investors citing a few things. I'm quoting from the journal here, including choppy markets and growing concerns about overexposure to AI bets, political backlash to data centers, uncertainty around how soon hyperscalers will show AI related profits. Looking at that IPO, where is your head at on the valuation for this company and what Anthropic should be aiming for and then what they might actually end up getting?
Yeah, I think you're seeing a few different trends here, right? and they're all sort of intersecting and that's that's part of what you have to locate is one you're seeing if you look at the base story for what's driving AI and what's driving anthropic or AI these companies you are seeing companies that are quite literally driving the frontier right they are you are talking about technology that is shaping almost every part of a technology stack across the economy right now and these are companies that are driving sort of the bleeding edge of that and so you have that on one end you also have a fundamental case of increasing demand an increasing demand from repeat customers customers as well as new customers coming in the platform.
But that right of course is buttressed up against a for what we see in the public markets extreme you know a volatile market timing. Um right and so if you look at just macro risks even risks that exist within the market uh if you think about sort of any sort of short term of what you're looking at those have to be taken into consideration.
I would also say that if you think about the IPOs, right, Anthropic is seen here as, you know, one company that may be able to open up sort of a broader IPO landscape at Aperture. And so, you would think that this IPO is likely going to be positioned to give it the best chance possible to perform well.
Um, and obviously, if you're putting in money at the current IPO pricing, you have to be underwriting a higher price in order to make money on it, right? no one's, you know, putting in at X value because they think they're going to sell it a year from now at that same exact value. And so you have the confluence of all these events um that are driving sort of uh you know supply demand equilibrium and where they'll find that price.
Evan, that'll certainly be something to watch when we do get this IPO. We thank you for your time. Much appreciated for your insights. Absolutely. Thank you. Coming up, we break down the top headlines to watch on Wall Street next. Stay tuned. Heat. Heat. Time now for what to watch. Tuesday, November 3rd.
Another big day of earnings. Starting with AMD. The chip giant reporting third quarter results after the markets close. Data center revenue surged 107% last quarter. And the chipmaker has lined up major AI deals with OpenAI, Meta, and Anthropic. But investors will be looking beyond those announcements to see when they translate into sales.
Analysts are also watching for updates on AMD's server processors, AI chip deployments, and its outlook for 2027. Fizer is also on the earnings calendar. Analysts watching if the drug maker raises its fullear guidance, but a longerterm story center centers on its drug pipeline. As key products face patent expirations, investors will be looking for updates on Fizer's develop developing cancer treatments and its obesity drug with the big question being whether those new medicines can help drive growth beyond 2028.
And on the economic front, we're getting September's job openings and labor turnover survey. Economists expect 7.17 million job openings, up from August number. That's a wrap on today's show. Thank you for watching. We will be back with more tomorrow. Heat. Heat.
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