In this podcast, Motley Fool contributors Travis Hoium, Lou Whiteman, and Jon Quast discuss:
- AI's hidden gems.
- TikTok's sale.
- Where there are opportunities today.
- Meta's AI plans.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.
A full transcript is below.
This podcast was recorded on Sept. 26, 2025.
Travis Hoium: Where are the hidden opportunities in the stock market and artificial intelligence? Motley Fool Money starts now.
Welcome to Motley Fool Money. I'm Travis Hoium joined today by Lou Whiteman and Jon Quast. I think we're obligated to talk about artificial intelligence at the top of the show, but I don't want to go in the direction that we're talking about all over the place with Oracle's deal with OpenAI, what's happening with Google? We'll maybe touch on some things with Meta a little bit later. But my question for you guys is what's intriguing in artificial intelligence when you dig a little bit deeper? We saw some pictures this week of the massive facility, Stargate facility that OpenAI is part of building in Texas. There's got to be a lot of opportunities there. Jon, what's hidden underneath the surface that investors should be looking at with AI build out that isn't just these big names like NVIDIA?
Jon Quast: Travis, just the way that I tick, I don't really like the headline grabbing companies as much as I do like the beneath the surface kind of ways that you can play this artificial intelligence trend. I think that energy is actually interesting, which if you know me, you know that I normally would be looking for something shinier in the investment world. But if you look at the information from the US Energy Information Administration, there was basically 2% annual growth for energy from 1990-2005. Then for the next 15 years, there was essentially no growth in energy. But now we're entering a period where we're getting back to that 1990s growth trend for electricity.
Travis Hoium: This is electricity demand. Really I think there was even a century before that, so you have more light bulbs, you have more air conditioners. There's more stuff. I think what happened in that 2005-2020 is things got more efficient. We have more efficient fridges, we have more efficient light bulbs, and so there's a little change, but now we're back to growth.
Jon Quast: You're exactly right, Travis. If you look at residential electricity, we're still seeing basically no growth because things do get more energy efficient. Where the growth is coming from is the commercial market, the commercial end use, and the data centers for AI are one of the big drivers of that.
Travis Hoium: Opportunity is that power producers, utilities, or is it just the tide lifts all boats in the energy space?
Jon Quast: For me, personally, as someone who doesn't really closely follow the energy space, probably it's a rising tide lifts all boats. I have done well with my investment in Vistra Energy, but there are many different ways that you can look at this. What's going to be interesting in the future, too, is just what is saying that necessity is the driver of innovation. I think that there will need to be some innovations in the energy space if we're going to meet all this demand that is booming between now and potentially 2040, according to some reports.
Travis Hoium: Nuclear has gotten a lot of attention, but that's still 5, 10, maybe 15 years away. Lou, Jon brought up a lot of picks and shovels ideas, and energy isn't a space that I'm looking for these opportunities, too. We've seen not only is demand going up, but also prices are going up. That's not necessarily something that those of us who are paying our electric bills every month like to see. But it does mean there's maybe more opportunity financially for investors. What's intriguing you about beneath the surface in AI right now?
Lou Whiteman: I'm going to be glass half full here. I'm going to start out with everything I don't like, and I want to like the picks and shovels. I agree with Jon in theory. The problem for me is, I think that we're late to that. A lot of these businesses have been bit up already, so it's not as intriguing to me. Energy, to me, is just a minefield because there's so much CapEx that's going to have to go into this, so much of it is transmission and investments everywhere. As you say, nuclear, it sounds great, but making it work. I see so many pitfalls. I'll be honest with you, Travis. I don't own NVIDIA, but I would rather own NVIDIA today's valuation than to really explore some of these, I think, overvalued picks and shovels. I also would avoid the data center reads and the CoreWeaves, like Travis, I'm not even going to use your money to buy those.
Travis Hoium: Thank you.
Lou Whiteman: Because depreciation scares me. This isn't like railroads where the track lasts 100 years. These NVIDIA trips are outdated six months after they come off. How does this play out over time with this investment? That scares me. As far as where I would like to go, I think the next big thing is the boring incremental progress with AI. I look at things, maybe they're not flashy, maybe they're not consumer focused. Maybe it's not going to be like your imaginary friend on your shoulder, AI. But places like robotics, where you can go anywhere from here, like Honeywell and Amazon, even in the warehouse, drone companies like Kratos, AeroVironment, Intuitive Surgical, all of these things where incrementally robotics can get better due to AI. I think that's a huge opportunity. I'd also say the same as boring as is business processes. Whether or not it's Microsoft, whether or not it's Salesforce, whatever you're talking about, but I think the next big thing in AI is going to be all those boring, mundane back office tasks getting automated successfully, a next level to what we've done in the last 30 years. I know it's not as sexy as a lot of these things we talk about, but I really do think that's where the money is going to be made. To me, I see revenue growth, I see opportunity there. I think boring is better here.
Travis Hoium: You brought up robotics. I think this is going to be a really interesting space to watch. Do you think there's both opportunity and risk with some of those names like Honeywell? Amazon's maybe a little bit more innovative, but Google announced basically has a robotics operating system that's powered by AI that could allow a lot of different companies to develop their own robots. You have companies like Figure. Seems like there's a ton of innovation going in the space. Is that possibly a threat to some of these legacy companies that maybe aren't innovating quite as fast? Or is this, again, just a rising tide lifts all boats, and at least Honeywell or companies like that are going to be better off than they were?
Lou Whiteman: I would push back on Honeywell not innovating as fast. I think you're right that if Google can commoditize some of the operating systems, that there's a lot more opportunities. I do think that's a risk, but I think that some of the companies that actually have deployments and real world experience and they are innovating based on what their customers and they have real live customers are communicating to them what they want. I don't know if I think Honeywell's at a disadvantage here, but, yes, it's going to get more competitive from here.
Travis Hoium: Jon, you had another interesting idea. I think we all know that these GPUs run hot, but how are they keeping them cool?
Jon Quast: The traditional way to keep all of these GPUs cool is just by blowing cold air over them. I forget how many months ago it was now, but there was a generative AI trend where everyone was turning their pictures into Ghibli studio art. Sam Altman, the CEO of OpenAI, comes out and is like, our GPUs are literally melting right now because the demand, the workload is so much that the GPUs are just overheating. That's going to only increase in time as GPUs become more densely packed in there as workloads grow. Liquid cooling is something that is actually an interesting trend to watch here, a beneath the surface thing. A better way, a more efficient way to keep these GPUs from overheating. Some market research out there, it's a small market, but it's essentially predicting that it's going to 10X in size over maybe the next seven years give or take. This has actually been a boom for a company such as Vertiv, symbol VRT. It's trends like these that I really get excited about this beneath the surface that nobody really thinks about, but is actually really important to making all this work.
Travis Hoium: Other one that's been a big beneficiary in The Motley Fool Universe is Comfort Systems. That's a company that's just doing industrial air conditioning. It's a roll up. They've got a bunch of different things that they can do. But when you build out a data center, you look at it's not just GPUs that goes into it. There's a lot of different systems that go into it. That's going to be another way to play this. But there's going to be a lot of surprising stories companies that do well, Lou, what do you want to add there?
Lou Whiteman: Well, I agree with all this, but again, just what scares me, and I may be proven wrong here. But Comfort Systems, I think, is up 1,500% over the last five years. I've heard of it's a relative bargain up 700% for industrial companies. I would love to have gotten in on this and been smart enough to see this five years ago. Right now, I just like I said, I think I hate to be this boring, but I'm just going to go within NVIDIA.
Travis Hoium: Could be the value play here is the company that everybody already knows about. Let's touch on another story in AI that could have a ton of demand for data centers and GPUs. That's TikTok. We got some news this week that there's at least potentially a deal for TikTok to stay alive in the US. Oracle, Silver Lake, and Andreessen Horowitz are going to take 45% stake. Jon, how does this impact companies? We don't need to get to the legality and if this is actually going to happen, but assuming that TikTok stays live, is there companies that see this as either an opportunity or a threat?
Jon Quast: Well, first and foremost, AppLovin symbol APP, it really wanted to be the one that acquired TikTok here. It put in that bid, and it's disappointing that it didn't get it because you look at an advertising technology company such as AppLovin. A lot of people may not realize they're just watching videos, but TikTok has this whole social commerce element to it. I really think that's where the world is going more and more. I think if you could have married that commerce element with the advertising technology of AppLovin, that could have been a really powerful thing together from a business perspective, like a 1+1 = 3 kind of a thing. Poor AppLovin didn't get the bid here. But no, I think that there are a lot of companies that do use TikTok, and so they're going to be happy to see that it's staying live here in the US.
Travis Hoium: Lou, Oracle is always the elephant in the room here. They're involved. Somehow they're going to pay for this, even though they have now, $120 billion in debt just took out another 18 billion this week. What's your takeaway? Is this going to be a big deal? Is this another Oracle roll up? What's going on with TikTok?
Lou Whiteman: Oracle, I guess they're paying for it, but Jon pointed this out in our show notes. The reported price, Oracle isn't paying a lot for this, less than what Pinterest is worth, which is curious to me, and I'll say this, too, just in terms of competition. I am not TikTok's core audience. You may not be aware of that, but I'm pretty sure I'm not, but I do have someone who fits into that demographic in my household. I don't think TikTok is today what it was a few years ago. I don't think it's done.
Travis Hoium: It's losing momentum, you're saying?
Lou Whiteman: I think the momentum has passed. I don't think Meta has to worry about this too much. I'm sure they would love to have seen competition just disappear. But I don't think that this really changes the course for Meta. I think Instagram is still a big winner and some of the other apps. As far as Oracle, it's a great deal on paper, but this isn't their wheelhouse, Travis. This is a very different thing from Oracle. I'm wondering how hands on or hands off they're going to be with it. Larry Ellison loves to meddle. I can see this being a trophy asset. It's going to be fascinating to see it play out, but Jon said it best. AppLovin, you can make a case with a lot of companies, why it would make sense. For Oracle, it just feels like you're buying a customer and you're putting a trophy on the mantel.
Travis Hoium: Elon Musk was a power Twitter user when he bought the company and eventually renamed it X. Maybe we can get Larry Ellison to be a power TikTok creator.
Lou Whiteman: How great would that be? Travis, is there a world where Paramount Skydance could figure out how to incorporate TikTok?
Travis Hoium: Absolutely. I think that's the other thing is all these individual people and very wealthy people are playing in this, when you get the media and tech involved. We'll see where this goes, but I do think this is going to be notable for even companies like Alphabet who owns YouTube. YouTube Shorts, YouTube on TV. That's a growing business. But when we come back, we are going to see in this frothy market where AI is the big topic, what else are Lou and Jon looking at for deals you're listening to Motley Fool Money.
Welcome back to Motley Fool Money. In a market that looks very highly valued today where artificial intelligence is all people are talking about. I want to know what Lou and Jon are looking at that looks a little bit more like a value. Lou, what's being overlooked in the market right now?
Lou Whiteman: Wait, it doesn't look overvalued. I think it is overvalued. The S&P 500, as a multiple of earnings is at near record highs relative to the 20 year average. This is an overvalued market, but the neat thing is, Travis, as you say, it's so focused on just the AI, the hyper scalars, all of this. Arguably, 400 of the S&P 500, decent value here, it's so top heavy. I even go a lot of places. I'm going to go to regional and midsize banks. Right now, the super regionals, companies like Truist, PNC, Regions, US Bancorp, but there's a ton of them. They're all trading at less than 1.5 times their book value. Book is a pretty good measure for banks because it's a way to just look at their deposits, what they'd be worth in a sale. All of those companies I mentioned, are paying a dividend of more than 3%, too. Truist is up near 5%. There's some catalysts here. Lower rate environments tend to be good for banks because they can reprice deposits lower faster than they have to reprice loans. In the case of Truist and some of these others, there's also a lot of COVID era, ultra loans that are coming up for refinancing. That should boost margins. I think there's just a lot of opportunities in these banks.
Travis Hoium: Is the risk here that the economy is worse than at least the market is indicating, and so defaults on things like auto loans maybe not houses, more traditional loans are going to be maybe a little bit higher than you would like. Look, when interest rates go down, the reason they go down is because the economy is not great, so it's a little bit of a double edged sword.
Lou Whiteman: Absolutely. I'm taking a long term approach. If I can lock in a 5% dividend yield now, I think the companies can survive a downturn and you get that dividend yield that you bought in at today for the next 10, 20, 50 years, if you want.
Travis Hoium: Jon, what are you seeing that's overlooked right now?
Jon Quast: I'm looking at the restaurant space as a whole. Many of those stocks have dropped in 2025, and that's what caught my interest. Now, I get it. There's definitely things going on in the restaurant industry. It seems like consumers have less money to spend. It seems like the fast food places are starting to get into a little bit of value pricing wars. But when I see a whole space that is starting to trade down, that means let's go poking around to see which of the best companies are unjustly selling off with their peers. Here's one that I have really liked since it went public from a business perspective, but the valuation has never made any sense to me, and that is Mediterranean chain CAVA. It really is a great business. When you look at it, it has great average unit volumes. Same store sales consistently tick up. The restaurant level operating profit is often quite strong. As of this taping, it's down about 60% from its all time high. That's its largest drawdown since going public. It trades at about 50 times earnings. Now, we know that 50 times earnings sounds expensive, but this is a company that is still gearing up for a lot of long term growth. And this is actually the lowest the valuation has been since it went public. I'm not necessarily saying that the bottom is in for CAVA. I think that it could still be in for a couple of rough quarters as the trends slow down and investors wait through that. But thinking about it long term, I think that the valuation is making a lot more sense here if people are interested in buying CAVA stock today.
Travis Hoium: Do you think there's a possibility that some of these fast casual lump CAVA in there have been overbuilt. One of the interesting trends over the past quarter or two has been people are sitting down to eat more. Maybe that's partially because, I remember driving through at McDonald's when we were traveling, and it was like $50 to feed the family I was like, what in the world is going on here? I might as well go sit down and eat a burger to spend an extra 20 bucks. But is that a risk here? Is that this middle is being hollowed out because the value that used to be there isn't always there. It just seems like the numbers are hard to splice right now.
Jon Quast: I think that's definitely the case with some. I think if you look at the fast casual burger space, think Shake Shack, for example, I think that's a little bit less competitively advantaged as something like a CAVA, which is really somewhat more unique in the market. I won't say it's completely unique, but that Greek Mediterranean focus, that's not something that you get at any restaurant. I think there is more room for a CAVA expansion.
Travis Hoium: That is the space where I'm going to start digging around here, as well. I think there's some deals somewhere. When we come back, we are going to play a little game called higher or lower. We're going to see what Lou and Jon think a bunch of stocks are going to be moving over the next year, you're listening to Motley Fool Money.
Welcome back to Motley Fool Money. Today, we want to play a little game called higher or Lower. This is simple. I just want to know if Lou and Jon think the market and some stocks we're going to talk about are going to be higher or lower a year from now. I want a little bit of context. I want to know what you're ultimately bullish on, where you're seeing opportunities and where you're seeing risks. Lou, let's start with the market. The S&P 500, you mentioned earlier, we are at relatively high price to earnings multiples. Do you think the S&P 500, a year from now is going to be higher or lower?
Lou Whiteman: I'm going to go ahead and cheat before we even start. I will answer your question. Can't push. I'm not going to push. I will say lower, but I have a stronger conviction that it won't be dramatically higher or lower than I do which direction it'll go. I think we're going to be range bound for a while now. I think that's these competing pressures. I don't think we're going to just see crazy movement either direction. But if I had to guess, I would guess red, not green.
Jon Quast: I'm going to have to take the other side of that, Lou. I'm going to say the S&P 500 will be up a year from now. Multiple reasons for that. First the GDP, we're already seeing some pretty good numbers coming out from that this year, and it seems like things are almost heating up, if anything. That's interesting. Interest rates are likely to head lower in the next year. That's often something that can push stocks a little bit higher still. Look, if you look over the long term, it is always the safe bet to bet that the S&P 500 will be higher over the next year.
Travis Hoium: The odds are definitely in Jon's favor here. Jon, one thing I want to push on is interest rates are going lower when it comes to the Fed. I think that's probably true. But the interesting thing is, since they announced that they were cutting the Fed funds rate by 25 basis points or a quarter of a percentage point, the ten year, which is really what things like mortgages, car loans are based on is actually up. Do you think that's going to reverse, and the market's going to go, You know what? Rates are going to stay lower for longer, so maybe this ten year I'll go from 4.2 where it is today to 3.5 or something like that, and that will end up being a tail.
Jon Quast: Travis, I would say that the lowering of the interest rates, to your point, obviously, you're correct. I would say my point was more general to the position that the Fed is taking. It's a little bit more of an easing environment. We see this in multiple ways, not just interest rates. M two money supply is also heading higher again. Normally, this does have a little bit of inflationary pressure. Yet, again, the Fed's in a tough spot, trying to juggle inflation and growth. But overall, I would say the trends are pointing to definitely more of a investment speculation market than more cautious.
Travis Hoium: The sentiment would definitely have to change to be lower. We'll see. That can change really quickly, but the odds are in Jon's favor in this one. Lou, I want to go to one that I have a lot of questions about right now. We mentioned them earlier. Oracle. Oracle has just took out $18 billion worth of debt. That would put them at about $120 billion worth of debt. They also still have to build out all of these data centers that are going to be serving $300 billion worth of performance obligations for Oracle. They've got to pay for TikTok. There's a lot going on with Oracle, but it is one of the hottest stocks this year. Is it going to be higher or lower 12 months from now?
Lou Whiteman: Up 92% in the last six months. That's a pretty good six months. What we've seen with not NVIDIA, not the suppliers, but the AI consumers, so to speak, right now, is that there is a hot stock and everyone else, and the hot stocks tend not to stay that way forever. All roundabout way of saying it's going to be red. I don't know if it's going to give up on 92%. It still end up being a great three years, but I'm going to take the under from here.
Jon Quast: That's so interesting. I'm going to have to disagree with Lou again. Listen, if you had asked me the three year outlook, I don't know what I'd answer. If you'd asked me the five year outlook, I might guess down, but over the one year, one of the biggest drivers of a stock over a single year is how investors feel about it. Oracle just forecasted some of the most incredible backlog growth numbers that I've ever seen in my entire investing life, if it comes close to delivering on those.
Travis Hoium: We're not actually going to know in the next 12 months to be fair, because a lot of those performance obligations started in 2027.
Jon Quast: As far as delivering on those performance obligations, but we could theoretically see some of those backlog numbers even climb higher still in the next year. I think this is something that can keep investors pretty excited about Oracle over the next year, so I would bet higher.
Travis Hoium: A stock that has not had quite as much excitement is Starbucks. They announced some layoffs recently. Jon is Starbucks going to be higher or lower a year from now?
Jon Quast: I guess lower. Again, if you'd ask me the five year, I would say higher. But over the next year, I still think that Brian Nichol. Look, they brought him in for a reason. Brian Nichol is a great operator, and Starbucks needs some things fixed in operations. I think he needs a little bit more time to cook in the kitchen if they're going to make the changes that they need to make. I think that it persists for a little bit longer than investors want it. I would guess over the next year, Starbucks, I don't think will be down dramatically, but I think it will drift lower.
Lou Whiteman: I'll take Glass half full here. Jon's right, but the market is forward looking, and I think Brian Nichol, just even what was announced this week with the 900 layoffs and trimming the stores, he is being proactive. I think the market will even if the job isn't done, I agree. The job won't be done in a year, but I think that if we see signs of progress, the market will react positively. Stocks been pretty beaten down, so I think investors are looking for good news and they will lean into good news It'll be great.
Travis Hoium: Are commodity prices something that you're worried about with coffee and the potential for more import tariffs on coffee, I know that that's been floated in the countries that a lot of coffee comes from, may or may not be subject to some tariffs. Lou, is that a worry?
Lou Whiteman: Yes, but Starbucks, A, that hits everybody, and Starbucks is better positioned to handle it with its scale than some. Again, I think the stock is going to move on the success that Nichols has, and I think there will be signs of success within a year, even if coffee prices do go.
Jon Quast: How about this for signs of Life, Lou? It's going to sound like I'm talking out of both sides of my mouth. But I don't really go to Starbucks all that often, not like I did in my 20s. I was there maybe six months ago, and it was stone cold dead in there. Now, I've been a couple of times since, and you could not get a seat in my local Starbucks. It was just booming and people were buying coffee and staying awhile, and that's exactly what Nichol wants to see. He wants to see this return to back out Starbucks used to be, where it was a place where you didn't just get coffee, you went and you hung out for a while. It was a coffee house that you wanted to be in that's what he wants to get back to. That's why he's cutting some of these stores is because it doesn't really fit in with that vibe that he wants to have. I would say that anecdotally, I'm seeing some of those signs of life. Maybe you're right, Lou. Maybe we see this sooner than later in the numbers and the stock responds accordingly.
Travis Hoium: The question is, is there a vibe shift at Starbucks? That will be interesting to watch. The next stock I want to know about a lot going on. We could make this an AI stock. You can make this a media stock. Alphabet, Jon, Alphabet's had a really nice run the last few weeks. Now getting a little bit more expensive, not trading in the teens, price to earnings multiple. It's more like the mid 20s. But our share is going to be higher or lower a year from now.
Jon Quast: I would say that Alphabet is also heading higher. Now, part of that is, if you're going to bet the market is going higher, you're pretty much going to bet that alphabet is going higher, as well, considering that Alphabet is so much of the S&P 500. But, man, what a great collection of businesses. You have the advertising component, you have search, you have YouTube, but you also have this just sleeping giant. Maybe it's not so sleeping anymore, but when it comes to artificial intelligence, it's really doing a lot of things well. As I pointed out earlier in the show, that is an area advertising where I see that artificial intelligence can really make a difference. I think that you pair Alphabet's AI chops with the distribution that it has with YouTube and other things. I think that is a really powerful thing to keep the business going in the right direction.
Lou Whiteman: I'm just going to think of this as Oracle versus Alphabet for the purposes, and I'm much more optimistic Alphabet can run from here than Oracle. I'm going to say green just as the opposite of Oracle. You're right, Travis. They finally turned it on, I think unfairly beaten down for a while. A lot of those headwinds are gone, so I do think alphabet can go higher. I love that you're not making me say how much higher, though.
Travis Hoium: Multiples are going to be a big deal with them, and we'll see how much the Cloud business can grow, but the fact that it looks like Apple's talking to them about using Gemini. Meta is talking about them about using Gemini. They're looking to be in a pretty good position in AI, which a lot of people didn't think even six months ago. Let's talk about a stack that we've danced around a little bit. The company that Brian Nichol used to run another company in Fast Casual Chipotle, Lou, well, they had some negative comps in the most recent quarter. Stock has come down a bit, but is it going to be higher or lower a year from now?
Lou Whiteman: The same logic as Starbucks. I'm going to say it will be higher. I'll be honest with you, though, I'm not excited as an investor. I think we're coming off the bottom. I don't know if I see this as being a market beater over the next few years. I'm not all that enthusiastic, but if I had to guess one direction or the other, I would say that there's probably signs of life, again, like with Starbucks and a bounce.
Jon Quast: I don't know what it is with me and Lou disagreeing today, but I'm going to say lower for Chipotle over the next year, and my reasoning for that is pretty similar to Starbucks, although perhaps a added twist. You look at Chipotle's restaurant level profit margins. They have been at an all time high, and I don't know if anyone in the restaurant business matches them, let alone beats them. Now struggling with traffic a little bit, getting into more of a discount fast, casual fast food environment. If you start not having the same pricing power that you had, those restaurant level profit margins necessarily come down. Look, Chipotle has room to do that because the margins are already so high to begin with. I think that it's still something that they have to work through. They have to win the customers back and they have to make sure that they're competing on price. I think this is a little bit of a headwind for Chipotle in the near term. Long term, I still think the business has a lot of promise.
Travis Hoium: Some mixed reactions there, which I like that because there's a lot to think about in this market. You can make a bullish case, you can make a bearish case. We'll see where things play out. I think the holiday season is going to be really important for a lot of these companies. When we come back, we are going to get an update on what's going on at Meta. They are spending billions and billions of dollars and now finally introducing a new app that actually looks compelling. We'll touch on that when we come back. You're listening to Motley Fool.
Welcome back to Motley Fool Money. As always, people on the program may have interest in the stocks that 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. All personal finance content follows Motley Fool's editorial standards, and is not approved by advertisers, advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. One of the interesting companies in AI and Tech in general right now is meta platforms. Mark Zuckerberg is spending billions of dollars on talent in GPUs, but there's rumors that they may be looking at using Gemini to help make their ads a little bit more effective. They introduced the Meta AI app yesterday, which is basically shorts or TikTok, but just AI generated videos. Jon, I'm having a hard time figuring out if Meta is falling behind or leaping ahead. What's your reaction from all this?
Jon Quast: I think that the question you have to answer is, where is the value in AI? Is it in developing the models or is it in using them to your advantage? I think that the strong argument is that the long term value is not in developing the models themselves. In which case, by all means, go to Gemini and use that. Microsoft CEO Satya Nadella says that as these models get more sophisticated, they're going to be commoditized. That's not really where the value would be in that scenario. Look, Meta got some of the best AI minds that money could buy, and now it's figuring out what to build. It's actually doing a good job when it comes to advertising and using AI to its advantage there. I don't think that Meta is necessarily falling behind. I think that it is using the models to its advantage.
Travis Hoium: A lot of those people that they hired are working on products. They're not just researchers. It's an interesting distinction. They were paying a lot of money. It wasn't know, the researchers coming from OpenAI. It was people who have developed things like copilot, who they're paying a lot of money to. But Lou, what are your thoughts on where Meta is headed today?
Lou Whiteman: I said earlier in the show that I think the opportunity in AI is some of the users, and I was more thinking about business processes, but I think it's smart. Like, Jon said, I do think that the models are all in a race to the same thing. Meta is trying to figure out how to use it. Look, Meta is talking about a lot of different things using their technology for government work, for business work, but right now it is mostly just an AI version of these sticky consumer apps that we I don't want to use the word love, but we all know. Maybe that's their place, and it makes sense for them to at least start there. I think the real money is getting to those other places that they're talking about, and I'm a little skeptical that Meta will be the one leading the way with government AI and business to business AI, things like that. I think in a way, they're ahead with their core audience, but I don't know if the end of the day, that's going to make them one of the big winners here versus I think just the business to business opportunities are going to be so much more lucrative over time.
Travis Hoium: Is the better play the hyperscalers or the companies who own the eyeballs, Lou?
Lou Whiteman: I love the eyeballs, because if we're going toward just commoditization, it's who's able to funnel those tools to users to use them, whether or not you're talking, again, consumer or commercial, it could be Microsoft with just having copilot on everything right now if you use office, I think that that is the competitive advantage, not.
Travis Hoium: The interesting thing for Meta, I think, if you look back at their history over the past 21 years, is they started with peer to peer. You're talking to your family. Then when you get, you go to the feed, then you get disruption from TikTok, and you know what we need to give people the content that's going to keep them engaged. That's not necessarily from within their network. We're going to pull in all this other content. Now we're just going all the way to AI content. It's not real content at all. It's just made by computers. What a transition. I don't know if you should give Mark Zuckerberg credit for making that evolution or think that this is dystopian, but maybe somewhere in the middle. We'd like to end the show with stocks on our radar. I'm going to be the one making the call. What's going on my watch list. Lou, I'm going to have you start. What is on your radar this week?
Lou Whiteman: I'm looking at Consulting giant Accenture. Ticker ACN. They released fourth quarter earnings this week, and they were pretty. They beat on the top and bottom line, which is good, but those were reduced expectations. Revenue was only up 7% year over year. They set initial guidance for their new fiscal year, which is starting now, at a lackluster 2- 5% revenue growth. That's not great. This is a company facing real headwinds, both from federal spending in the wake of the Doge effort, and corporate customers who are currently gun shy about committing to new products. Stock is down 30% year to date, but I do think these headwinds are temporary. AI bookings doubled year over year, and the company is beginning to turn those bookings into revenue. AI revenue has tripled. They also boosted their dividend by 10% giving us a reason to wait. For those of the long term focus, Accenture is really looking interesting to me.
Travis Hoium: Jon, what is on your RDR this week?
Jon Quast: I'm going to go with Shift4 payments. That's Ticker symbol F-O-U-R. This is a financial technology company. It processes payments. It has software for businesses, and it's usually deployed at very large venues and restaurants. Think NFL stadiums. That would be a customer for Shift4 The downside, if you want to call it a downside to the big venue strategy, is that you can get a lot of volume, but your take rate on those transactions might actually go down. But the benefits outweigh that, in my opinion. When it wins a single customer, it's normally a very efficient go to market strategy. It doesn't have to spend a ton on sales and marketing. They also tend to be very reliable customers, and so they stick around for a long time. It's grown at a greater than 20% growth rate for a very long time, very consistent amount of time. It's still growing. It just acquired Global blue to address more international markets, and it's trading at less than 15 times its forward earning estimates. Now, to me, you look at its track record, we look at the valuation and how fast it's still growing. That is a steel.
Travis Hoium: The payments business has been a tough business, but it is a growing business. Is there something that differentiates them from Toast and Square and Adian and all these other companies that seem to do a lot of the same things?
Jon Quast: I can feed you the company line, and that's that its software is built for customers such as these, whereas some of the other players are built for smaller players. That's a consideration that some of these companies use when they're looking for a financial technology partner.
Travis Hoium: Maybe there's just going to be a whole bunch of niches in this business, but we'll see. I like where Jon's going with Shift4. I've had this in my purview for a little while, but I need to dig a little bit deeper, so I will put Shift4 on my watch list. For Lou Whiteman, Jon Quast, our production leader, Bart Shannon, and the entire Motley Fool team, I'm Travis Hoium. Thanks for listening to Motley Fool Money. We'll see you here tomorrow.
