The AI Land Grab Has Started

In this podcast, Motley Fool senior analyst Jason Moser discusses:

• Microsoft (MSFT 1.65%) CEO Satya Nadella hailing "a new day in search."
• Shares of C3.ai (AI 3.52%), an enterprise artificial intelligence (AI) platform company, doubling in the past five weeks.
• Zoom Video Communications (ZM 3.49%) announcing it's laying off 15% of employees.

Motley Fool personal finance expert Robert Brokamp talks with former Pittsburgh Steelers lineman Jonathan Scott about playing in Super Bowl 45, managing an irregular income, and other takeaways from his book, The Winning Playbook: Strategies for Life on and off the Field. 

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center, or you can check out our quick-start guide to investing in stocks to get started investing. A full transcript follows the video.

This video was recorded on Feb. 07, 2023.

Chris Hill: Zoom Video joins a growing club, and Microsoft unveiled a new and improved being. Motley Fool Money starts now. I'm Chris Hill and, back by popular demand, Motley Fool senior analyst Jason Moser. Thanks for being here again.

Jason Moser: Popular by you, by your standards, I think, right?

Chris Hill: Yeah.

Jason Moser: Certainly, the listeners aren't clamoring for this.

Chris Hill: Well, we'll get to the company in a second that I wanted to talk about because the business, the industry, is very much in the spotlight today. Because the big event today, from a business standpoint, is Microsoft's AI event, which is happening as you and I are recording this. CEO Satya Nadella said, "It's a new day in search," and he promised rapid innovation is going to come. Microsoft search engine Bing is now updated to answer questions with context, similar to the way that ChatGPT does.

We'll see how all of this plays out. I'm curious to see what the Bing segment does in the coming quarters from Microsoft. But, among other things, Jason, one of my thoughts was that this is why it's nice to have deep pockets, so you can make investments like the $10 billion investment that Microsoft made in ChatGPT.

Jason Moser: Yeah, it sounds like a lot of money and that's because it is. But in the context of Microsoft and its balance sheet, I think they can afford it without really any problems. It's interesting, you would think -- based on the conversations of the last week, based on the headlines of last week, maybe two weeks -- you would feel like AI is just this brand-new thing that nobody had ever heard of until just now.

Obviously, you've been talking about AI for a long time and the potential that it holds. I'm getting a little bit of a metaverse vibe here, and what I mean by that -- I'm not saying that AI won't reshape how we do certain things, I'm not saying it doesn't have tons of potential much, I'm not saying that the metaverse won't be a thing that ultimately creates value and opportunity. But it feels like we've gone from zero to 60 here, and I think it's just worth stepping back and remembering this change isn't going to happen overnight.

We're hearing a lot of things that are being said -- the what, really, not as much of the how and the why. I think the how and the why will be important, and we'll hear, I'm sure, more about that as time goes on. It seems that search is the area where many feel the most obvious changes can and will occur with these investments in AI. I do get that to an extent. You ask ChatGPT to give you some output, and it does. If that is going to make our world of search better, I think we're all for it.

Remember, though, a couple of things. No. 1: This is not just a Microsoft world. We know, obviously, Alphabet and its ilk are all making the same investments in AI in however they see fit to pursue it. Also, remember that part of the challenge here is changing actual consumer behavior. I think that's just a little bit easier said than done. It's telling someone who has performed search, for example, in a given away for a long time now to do something different. It's not to say that consumers won't ultimately do that, but it is not always so simple just to change consumer behavior. There are going to be plenty of questions that come along with AI.

What is going into the outputs that it's ultimately giving us? Because I know there are a lot of questions out there today just based on some of these interesting outputs as people test this stuff. But I do appreciate where Microsoft is coming from. I think Bing has always been something that's held a lot of potential. They've just never really been able to take it over the top in what has just been such a Google-driven world for so long, supplemented by Meta on the social front. But this sounds like certainly a neat step forward in investments in AI and generative AI.

Chris Hill: Let's get to C3.ai, which is an enterprise AI platform business. This is a stock you have recommended in one of the services you run. While the long-term chart over the past year or so has been kind of rough, just in the past five weeks, shares have doubled for C3.ai, and I'm wondering -- to your point about how much these big companies are talking about AI on their conference calls, etc., and how much it is now part of the narrative in the business and investing world -- do you feel like we are in some land grab here? Because one of the thoughts I had was that this seems like the type of business that someone, not necessarily Microsoft but some larger tech company, might want to snap up.

Jason Moser: Yeah, it definitely feels like we're in the beginning stages of that. The competitive jockeying that exists in this space right now, it's not unexpected. I think it's really fun to watch play out. When you look at a business like C3.ai compared to other companies focusing on AI: So C3, they're in the enterprise AI space, and essentially, they have a model-based approach to AI.

They have a library of conceptual models that, ultimately, consist of all of the elements that are required by an enterprise AI application. Their customers are ultimately able to incorporate and build out AI functionality and capability of their businesses; they can do it a lot more quickly. They can do it more efficiently. It can be certainly more consistent, and they have, like I said, a very large library from which to choose.

As C3 continues to invest in that library and the capabilities, we've seen the announcements related. I think one of the big reasons why we've seen C3 takeoff over the last several weeks is simply because they announced at the end of January their generative AI for enterprise search. This is a generative AI product suite that, ultimately, is integrating AI capabilities from all of these different companies -- Google, OpenAI and ChatGPT, Microsoft, Adobe, and so on.

I think we're seeing enthusiasm from that perspective, in that C3 is playing in that sandbox as well, with a lot of bigger and better-endowed competitors. At its market cap today, given the challenges it's witnessed over the last year or so from the share-price perspective, you do have to wonder if someone's not looking at this company and saying, "This would be a nice little bolt-on to what we're trying to do." Now, I don't know that that necessarily is bound to happen, because Thomas Siebel, the founder of C3, is really the one controlling the company's fate, so to speak.

I don't know if that's really what he wants to do. But again, when you look at all of the companies in this space and the investments that they're making, from large to small, the competitive jockeying is really fascinating to watch. And I understand all of the enthusiasm. I got this question on Twitter the other day in regard to C3 because it's stock that I own personally and someone, basically, was asking me, "With this big run-up, should I sell -- I'm still down 30 percent from where I bought in -- or should I hold?" You know my answer to this, generally speaking, unless there are red flags to the business itself, where I'm saying, like, no, I just don't think this one is worth holding onto.

I think C3 has made some mistakes along the way, and I'm certainly holding leadership accountable and want to see a little bit more consistency in the metrics that it's presenting in the overall strategic vision there. But given the long-term opportunities in AI -- given that you've got CEOs, like Advanced Micro Devices' Lisa Su, saying on their earnings call recently that AI represents the largest market opportunity that they can pursue here over the next several years.

It's just a very big market opportunity to be able to say with any certainty exactly how it's going to shake out today. I think is a little bit much. I think we're going to learn a lot more over the coming quarters and years as to exactly how this is going to be able to impact us, both as consumers and as investors. From that perspective, I think C3 is one worth hanging onto and watching. But that's also, of course, in the broader context of a well-diversified portfolio.

Chris Hill: Shares of Zoom Video popped 7% in the middle of the day, when CEO Eric Yuan posted a memo to his company online, announcing that 15% of the staff is going to be laid off. Yuan said they've accomplished a great deal over the past three years, but, and I'm quoting here, ''We also made mistakes. We didn't take as much time as we should have to thoroughly analyze our teams and assess if we were growing sustainably toward the highest priorities.''

They join the club, Zoom Video, this nets out to about 1,300 individuals. Obviously, it's tough for those folks, but I understand why they have become the latest company to announce layoffs. Certainly, I'm not surprised by the reaction from the investing community.

Jason Moser: It almost feels somewhat ironic, just given what we've seen play out over the last few years. But like you said, this is not something unique to Zoom. The business itself has slowed down considerably. I think that any time you start to look at the challenges that your business may be witnessing -- we've talked about this before on the show -- it is very easy today to look back at the single biggest change that's occurred over your business in the last two to three years. It was what we all went through in regard to the pandemic and the distribution of the workforce and, ultimately, what the future of work looks like.

I think we're still just watching that materialize. They had to make some big investments early on really to take care of all of that demand. They had so much demand for their services, pulled forward into one small window of time. They never anticipated that. Yes, maybe they made some mistakes, but they were understandable mistakes.

This was a business that found itself in a very tricky position early on, and it makes sense that they have to rightsize a little bit. Again, not unique to them, not surprising at all. As always, we don't like seeing people losing their jobs. But by the same token, from the investor's perspective, this ultimately is exactly what you want to see.

Chris Hill: Jason Moser, always great talking to you. Appreciate the time.

Jason Moser: You got it. Thank you.

Chris Hill: The highest-paid player in the Super Bowl this year is Patrick Mahomes, whose contract pays him $45 million this season. Meanwhile, rookies in the NFL made just over $700,000 this season. The average player only lasts in the league for about three years. After that, the paycheck can vary wildly, with some just falling off a cliff.

Back in Super Bowl 45, Jonathan Scott was a starting offensive tackle for the Pittsburgh Steelers. Today, he's the coauthor of the book The Winning Playbook, Strategies For Life On and Off The Field. Robert Brokamp caught up with him to discuss what Scott learned about managing an irregular income and what it's like to play in the big game.

Robert Brokamp: In the book, you tell a story of being a rookie and having a locker next to Damian Woody, who had won a couple of Super Bowls with the Patriots before joining the Lions. Tell us about the advice he gave you.

Jonathan Ray Scott: It was priceless. It was the beginning of really understanding money. For him to just tell me, hey man, don't compare your paycheck to my paycheck. At first glance, you would think someone's being arrogant, maybe talking down. But what really gave me insight is that all NFL players, all NBA players or MLB players are not created equal. I'm speaking from a monetary sense.

It was just one of those moments that I realized that he had a beautiful Phantom Rolls-Royce. It was one of those things, it's like, I knew that I could buy one, but I couldn't necessarily afford one. And so it put a lot of perspective on understanding -- well, one of the biggest payroll-ees is called the internal revenue service. I didn't really understand IRS until you saw that check, and you realize that a big majority goes to them. Thanks to Wood, he really helped me out on that one.

Robert Brokamp: From what I understand, you learned that lesson, and instead of buying a $300,000 car -- which is what that costs -- you bought a house, which has appreciated in value and you now rent out and get income from.

Jonathan Ray Scott: Yes, you are absolutely spot on. I chose to live in the house instead of living in my Rolls-Royce. That's the beauty of assets.

Robert Brokamp: You mentioned taxes, and I think there are many aspects of playing in the NFL that a lot of people probably don't appreciate. One of them is you have to pay taxes in every state in which you play.

Jonathan Ray Scott: That is correct.

Robert Brokamp: Tell us a little bit about the so-called Jock tax.

Jonathan Ray Scott: Let's say, I play for the Dallas Cowboys in the State of Texas. We play a game at AT&T Stadium at home. That week, you got your taxes, and you look at your W2 -- boom; it doesn't matter who you play. Let's say you're the Dallas Cowboys and you fly to San Francisco. I know this joke may be a little too soon for some people, but let's say, you fly to San Francisco. You play that game. The prorated amount that you are going to make for that game, you have to pay taxes on in the city that you played in.

So it's literally like being a resident in that city for that one day. Just imagine if you played in the State of New York or played in New Jersey. Some people not only have state tax, but they also got city tax and county tax, and that can easily be up to 15% of your paycheck. That's not including federal tax.

Robert Brokamp: That affects not only the players; it affects the coaches, the trainers, and anyone who is traveling with the team.

Jonathan Ray Scott: All employees that are assigned under W2.

Robert Brokamp: I read one estimate that California gets over $200 million a year from professional teams that travel to California. That's quite something. Another aspect that I think people probably don't know about is that if you have a normal job, you're used to getting a paycheck throughout the year. But if you play in the NFL, you don't get a paycheck the whole year, do you?

Jonathan Ray Scott: That is correct. You would think you'd pay throughout the year. Well, in the NFL, you just get paid for the time you've been playing. Now, of course, it's simple math: If it's a $1 million contract or a $10 million contract, it'll be dispersed throughout those 18 weeks. If you happen to get into the playoffs, you get a little bonus money the further and further you get into the playoffs. But after that season's over, so are those paychecks. You got to remember: Not every player has the megadeal; like that's the one we just see on a ticker on ESPN. But I know when I was playing, the league minimum if you were on an active roster was maybe 300,000?

Now, some people are probably saying, "I can do that. That's great," blah, blah, blah. But what about the guy that's on practice squad? He's only making $85,000. Then on top of that, they only get it for 18 weeks. Now, you have to think proactively on making your money last or make your money efficient or your currency efficient for those remainder weeks when there is no season. And there is no guaranteed contract, at least not for every player. Those are the nuances that you have to forecast and think in the future. Well, how do you do that? What do you do? Yes, the check says $20,000, but that doesn't necessarily mean that I can spend $20,000 this weekend. It doesn't work like that.

Robert Brokamp: Let's close with a question about a certain sporting event coming up this weekend. You've played in a Super Bowl, that being Super Bowl 45 when you were with the Steelers. But that wasn't your only big game. Because when you were at the University of Texas, you played in the 2006 Rose Bowl for the National Championship. Texas won when Vince Young scored a touchdown with 19 seconds left on the clock in what is considered one of the greatest college games of modern times. What's it like to play in such a big game?

Jonathan Ray Scott: You really feel like you're on top of the world. When we start with the collegiate level and then the pro level, you really feel like you're on top of the world. There are very few times in life that you can actually have a snapshot of what you want it to be, and it's exactly that. It wasn't exactly that. It was even better.

It's cool. It may be a little narcissistic, but it's cool. It's like no one else can get it. No one else can have it but me, unless I share it or unless I talk about it. It's very precious to me because I recognize, too, it's a tremendous blessing to be able to do something that very few people on this Earth can do. And I hold it dear to my heart because it's rare. It's money, baby. It's one of those things that I know very few people can talk about. But I'm always grateful that I got to experience it, and it was just fun. It's an elation of just joy. It's just great. Nothing else I can say. It's just great.

Robert Brokamp: Well, I guess that's been Jonathan R. Scott, former NFL player and co-author of The Winning Playbook. Jonathan, thanks so much for joining us.

Jonathan Ray Scott: My pleasure, sir.

Chris Hill: As always, people on the program may have an interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.