0:00 spk_0
All right, I just finished up a great conversation with the team at Robinhood and all things markets. Look, bottom line is thatThis is an important time for markets. They’re trading near record highs. We’ve got a SpaceX IPO, a potential anthropic IPO, a potential open AI IPO. And this is a big moment, not for just institutional investors, but also you all retail investors out there that are going to get allocations to some of the most game-changing companies in the entire world. I asked the Robinhood team all about it.The Robin Hood Brain Trust of Stephanie Guild, Robinhood CIO and, uh, Steven, uh, Quirk, the Robinhood chief brokerage officer. Uh, look, I, I didn’t write anything down on here. Uh, I’ve talked to you both in the past. I would just love your thoughts right now on this market. Stephanie, I’ll start with you. Even though I talk to you all the time and I haven’t talked to Steve in a while, I’m starting with you, Stephanie, like, take us inside your head at this very important moment for the markets.
1:04 spk_1
Um, you know, it’s been like for the last few weeks I’ve been looking at the market and, and just particular names and thinking like, is there a point at which this just gets overheated, and, you know, this might be Monday morning quarterbacking now, um, but it, I, I don’t think there’s anything fundamentally broken in the market.Um, in terms of like, yes, we have some risks, interest rates are higher, we still have a conflict happening in the Middle East. Oil prices are still high, and I actually think we’ll go higher. So you do have headwinds, but I, I still think the fundamental story of AI and the margin expansion that we can eventually get from it, um, the productivity gains that we can get from it are true.Um, but I think we’re gonna end up having these periods where of consolidation becauseAI fundamentally is an intersection between how fast can the physical world move relative to the agentic world, and the physical market and and commodities and um building things, building data centers like that, that doesn’t happen overnight, um, and requires interest rates and a good market, um, and so, and funding, lots of funding, um, so I, I thinkYou know, there you’re gonna have periods of consolidation before you can continue to, to, to ramp from here. What,
2:25 spk_0
whatviewers don’t see right now is underneath this camera there’s a screen, so I see all, I see both of you in my box, and I’m wondering, uh, off the jump, I mean, Stephanie, amazing comments as always, uh, I love the, uh, market take. How have us three like co-authored some like market commentary on the markets like just watching us three, it’s like it just seems like so overdue.Uh, for us to do something or put pen to paper or AI agent to paper, uh, we could take that offline. But Steve, your thoughts on the markets here?
2:52 spk_2
Yeah, I think Steph summed it up pretty well. I think that that liquidity is a really important point, and you know, CEO, we have very large IPOs that are.Um, you know, that are looking to come out in the very near future, and I think there’s a lot of liquidity that’s going to be needed to support those. And, um, to Steph’s point, like there, we’ve, we’ve, we’ve given a pass, the market, when I say we, the market has given a pass to all the players here in the AI space, both the infrastructure and the direct AI space for capital expenditures without really saying, hey, we want to see productivity cause it’s gonna take time.But eventually, you know, this is gonna, the rubber is gonna have to meet the road. And I think, you know, um, customers and people, market participants are going to, they, they’re gonna get to a point where they’re gonna say, I don’t know if I can support this anymore. And so, it’s not a surprise to me that we have had a pullback. Uh, the question is, you know, how much of a pullback will it be? I actually think it’s kind of healthy, you know, if I, if we look at things historically to have this pullback.The things that have been interesting to me is like if I just look at the VIX level, there’s been, there’s been no panic even when we’ve had these sell-offs. It’s been, it’s been pretty calm and um and that to me is sometimes troubling.
4:15 spk_0
Steve, where are you, man? That I, I always tell Stephanie she always has the best backdrop of anybody that I talked to. Like, where are you? Yeah, I got a neon sign.
4:22 spk_2
I got.
4:23 spk_0
Yeah, that is, that is odd. That’s a hell of a setup, man.
4:27 spk_2
You, you gotta come and visit us sometime. We have an office of about 120 people here in Chicago, right in the loop. Yeah,
4:33 spk_0
no, that is a hat tip to you, Stephanie. You still got him, but you know, he’s, he’s gaining on you a little bit. Um, you know, this is a special moment like I mentioned at the top with these, you know, these IPOs. Um, how do you think the market?is going to handle Stephanie, this this supply of really hyped companies coming to market from a stock issuance perspective.
4:53 spk_1
I mean, it always depends on the company, right? And, and what their story is and how fully valued they is, they are, um, but theI am worried about the supply. Like I, I think you’re, you know, you’ve seen it in the bond market a little bit, and they’ve been, um, and it’s been working where the hyper scalers are borrowing, and they’re borrowing not just in the US, but they’re borrowing abroad abroad as well, um, to kind of spread across what they need in terms of funding, and I think what worried me more, and it’s not so much the IPOs coming, cause these are companies that are actually making real revenue, and time will tell where their valuation should sit.Um, but the, the space that index indices might have to make, and then also the fact that, you know, Google wants to issue Meta came out right after them and said they want to issue, like those are the things that actually worry me a little more because the market hasn’t been trained on that, at least not for a long time, like the market has been trained on the hyper scales.Buying back shares, not issuing shares, um, and so that’s the, the piece that I think actually can, um, create these consolidation moments, more so than necessarily the IPO market, although, of course, you know, you, you have some kind of natural buying, uh, when they when they end up in, in an index that people uh invest in.
6:13 spk_0
And Steve, of course, this comes at a time whereWe’re seeing a big change in, in what the hyperscalers are doing, you know, Stephanie mentioned it there too. They’re investing aggressively to build out AI infrastructure, spending billions of dollars. Uh, that is a change compared to, let’s say, even 2345 years ago. These were asset-like companies, strong earnings, strong margins. Well, now all these companies are, their business models are changing, Steve, and they’re still trading at, uh, growth-oriented multiples. Like, is that a, is that a setup for more gains for these companies?Because to me it doesn’t, it doesn’t sound like it’s more games.
6:47 spk_2
Not, I mean, you wouldn’t think so, but again, I, we keep talking about the past that they’re getting on, on these capital expenditures. Um, but I want, I want to hit on a point that Stephanie brought up cause I think it’s a really important point. This whole ecosystem is heavily incentivized to make sure that these, especially these large IPOs go out successfully.You know, smoothly, because there’s a lot. Well, first of all, after the first one, there’s two other large ones coming right after, but then there’s also a lot of other people that are looking, um, to raise capital. And if, if this isn’t done in an effective and smooth manner, it’s going to jeopardize that. It’ll jeopardize listings, it’ll jeopardize all these other things. So, I think we as an industry are, are heavily incentive to make sure that these, uh, these are successful.That doesn’t mean they’re going to be successful, you know, the amount of liquidity that’s necessary to support these and everything else that’s, that’s, um, that’s happening from capital standpoint, um, it’s, it’s, these are, these are scenarios we haven’t seen before. Like it, it, we’ve never seen IPOs this size, we’ve never seen a series of them coming this quickly, and then firms like Google and others that are looking to raise the same period of time.Um,On the positive side, it seems like to this, to this point, the demand has indicated that there’s no shortage of capital willing to, to be put to work here. But I guess at some point we’re gonna findout.
8:27 spk_0
Steve, what, what’s your biggest concern just from a market structure perspective, let’s say with the SpaceX IPO.
8:35 spk_2
Uh, well, I always have the big kid. I’m, I’m too old, so I always have concerns that we repeat what we did and, you know, with a firm that used to be called Facebook.
8:47 spk_0
I remember that. What was it was 2012, and then the stock
8:50 spk_2
that was very, that was, that was very messy, um, and I don’t, you know, I, yeah, I, I’m.I’m hopeful that that’s not gonna be repeated, and I don’t, I don’t anticipate it would. Uh, my concern is always, I always start my concerns with our 27 million customers. Uh, my concern is that they, you know, that this isn’t a bad experience for them and that it’s gonna deter them from wanting to participate in other IPOs. Um, so that, again, I, as I said earlier, I think we’re all incentive to make sure that this is, uh, this goes offsmoothly.
9:23 spk_0
You know, I didn’t mention at the top, uh, Stephanie, that this is.Of course, a big moment for the employees at a SpaceX, uh, and OpenAI anthropic, theoretically, if they do come public, employees, their investors, those early supporters, but it is very much a big moment for the retail investor all across theworld.
9:40 spk_1
Yeah, I mean, if you, especially if you look at like our, our customer base, um, and the, the Robin Hood Investor index, the largest position in the index for some time has been Tesla, and I, and it’s not just because of the products that they produce, right? It’s also because of the belief in Elon and what he has in his future, and SpaceX is, I’d say just as a part of that, like I, I’ve never, you know, what other IPO.I don’t know if I’ve ever seen where so much of the retail, uh, customer base has ripped the S1 apart and, and talked about it on X, like, we’re going to Mars, we’re, you know, these, these are the metrics that he has, and so I, I do believe it’s just as much part of the overall belief that our customer base has and, and Elon and, and what he does, um, as, as everything, you
10:32 spk_0
know, it’s interesting, Stefan, it’s not that it’s not like the company’s getting a pass, butThey’re uh SpaceX losing gobs of money. OpenAI, uh, I imagine is still losing money. Same deal with anthropic. Why isn’t it a big, more of a big deal that these companies are losing money? It wasn’t too long ago, a couple of years ago, we were really scrutinizing a lot of software companies, tech companies for losing gobs of money, and their valuations were penalized. It doesn’t seem to be the case anymore, or at least right now.
11:00 spk_1
I mean, I think the, the market can think ahead to the future and when they could be profitable. I mean, if you’re investing in a private company, you’re that’s what you’re doing. You’re saying, OK, you’ll be profitable by 1 year, assuming Y growth rates, and if it’s believable, thenYou know, they then it it’s believed, it’s believed, right? And they get the valuation that they do, and the company itself does make money. I mean, I think the acquisition of X brings down their overall revenue, but the core business um was more profitable, and I think that the vision along with that.Is what is getting the pass, um, but we’ll see, right? Like over time, I, the market always ends up where it should be, um, but I think, you know, the belief sometimes carries, uh, in advance of that.
11:51 spk_0
Steve, uh, as a seasoned veteran such as yourself, when that SpaceX perspective dropped, and in the days since, how do you tear that apart to assess and understand the company? Well,
12:01 spk_2
Ithink Steph brought it up that thing’s been scrutinized more than anything, I mean,By, uh, by many market participants, all you have to do is, is, is listen and watch and hear everything that’s there, but I think what the, the point that Steph brought up, especially since there’s such large retail participation, and she mentioned it as vision, it’s a story, it’s a story, and there is a history, you know, with Elon.You know, with stories and his success in some aspects of that, and I think people are just believers. Um, yeah, I always said this, it’s, it’s very funny, um.When you look at really engaged retail market participants.They, they have a level of optimism that I think is above and beyond a lot of people, um, and so they’re looking for a positive story, um, and something that they believe in, and they want to participate in it. They feel like they’re participating in by investing in that, and I think that’s really powerful. It’s what makes these capital markets so interesting.
13:04 spk_0
Steve, uh, of course, SpaceX really, um,Wants to make the retail investor feel part of this, and that’s, of course, keeping it with, I think the DNA of Elon Musk and what he’s trying to do with social media following, you name it. Does that fundamentally change how IPOs come to market? I mean, I can’t tell you how many executives I talk of public companies that, um, have been public for many, many years. They care less about the retail investor, you know, I’m just gonna say it right now, they just do. Uh, I firmly disagree with that, but this is, I think, bringing a new dynamic to light where a lot of these big companies, they need to start paying more attention.To the retail investor and start giving a damn about them. Well,
13:40 spk_2
I think it’s changed, it’s actually changed since we started our IPO product, IPO Axis in 21. We’ve done over 50 IPOs and we used to scratch and claw to get a puny allocation because to your point, customer or sorry, these issuers and, and, um, and underwriters just didn’t think that retail participation was necessary. I think we’ve come a long way.This is, this is the, a really a big acceleration of it, but we’ve come a long way with these uh companies because a lot of them now do understand. First of all, all they have to do is look at the percentage of equity trading, of option trading, of crypto trading, of fixed income trading that is being done by pure retail. It’s gone up pretty dramatically and continues to grow.Second thing I would say is these people, as I said earlier, they’re just fans of the company. They’re not flipping these stocks. They’re not looking for quick gains. They are true passionate believers of the products, services, and the company, and the leaders of the company. So, I, I think that the realization has hit many of these, uh, companies that are now looking to go public, that, um, the way to really endear yourself to these, to the, to the market is byUm, being, having good participation by retail. And again, Vlad’s been making this point. One of the reasons why, um, I think there is some angst around the AI, the whole AI ecosystem is because they haven’t participated in it. All they’ve heard is it’s gonna take my job and I’m not making any money on it. So, why would I be excited about that? Whereas if you give me an opportunity to participate,And have more of an agency in the whole ecosystem, I’m gonna view it far more favorably, which I think they all want.
15:35 spk_0
Yeah, when I talked to Vlad, I’ve, I applaud him every single time, um, what he’s done with the earnings call, the Robin Hood earnings call. I think he held it outdoors last time. I love how he’s democratized the earnings call. We’re starting to see some other companies get on board with that. It is long, long overdue. These earnings calls have to change. You can’t just hop onto these earnings calls and read prepared remarks for 35 minutes and take no, uh, retail investor questions. It’s just absurd.Um, but Stefan, this brings up a good point also what Steve just mentioned here too. The retail investors changed, and this notion that because there’s more retail investors involved with the SpaceX, uh, eventually with anthropic and an opening eye, that we’re gonna see more volatility, because you’re gonna see retail investors trading in and out based on what they hear on X. I mean, do you agree with that assessment?
16:16 spk_1
I think we’ll actually fundamentally I think we’ll have more volatility for a multitude of reasons. One is that we do have more types of investors across the ecosystem of investment opportunities, um, you know, not just in stocks, butIn other areas too. I think it’s also because we have a higher interest rate environment. Um, I think you have access to information and research faster than you ever could have for everybody. Like, I think that’s what AI, you know, the internet did it starting in the early 2000s. AI is doing it even more compounding that now.Um, and I think that means people get the story quickly and absorb it into the price quickly, and then once you reach a point, maybe like you did last week with Broadcom’s earnings where they were great, but they met expectations, you know, they met kind of heightened expectations, and then the stock fell. So I actually think like there’s just a uh a more volatility because of that, not necessarily because of who’s participating, but to Steve’s point, like,The participation and to your point actually too, that it’s long overdue, like labor share of income, you just go back, like labor share of income has been not enough since the early 2000s, and this is the way for labor to participate in their productivity. So that they should definitely be paying attention to you.
17:39 spk_0
Stephanie I’m most interested in.In this, um, this view, you know, we SpaceX comes to market, for example. What is that, and now investors are lured into a SpaceX and this latest Elon story and everything they may achieve over the next 5, 1015 years. What does it mean for the interest to own Fang stocks, the interest to own the Mag 7? Are those stocks used as a source of funds to buy into a SpaceX, and then eventually an open AI and an anthropic?
18:09 spk_1
My personal take is that they should be, um, I think these are companies that, uh, you know, they’re, they’re large, but they’re not necessarily where the future is. I think that’s why, um, index investing itself is a little bit backward looking.Uh, because it, you know, it’s, it’s kind of, again, based on what happened over the last decade, rather than where the cash is going and where the cap is going and where the, the growth is, um, and so I, I do think that that should to me would be a natural place to make room because BS is gonna, it is gonna be very big.Um, in, in the indices as well, uh, rather than taking from some of the places that maybe are smaller in a market cap perspective, but are, um, seeing, you know, really part of the future of our country.
18:56 spk_0
Steven, then you know we’re we’re spending all this time on, on, uh, AI and if I’m the CEO of a healthcare company, like, I don’t know, you know, I can’t tell you how many people tell me healthcare is a great opportunity. I mean, it isn’t, and I’m suddenly supposed to be attracted to a di Neil in a healthcare company, 3, 4%, who cares? Uh, when I have a company launching rockets out in space and dominating the internet and all things models, like if you are not, if you are not in the AI game, like what, what the hell happens to your stock?
19:23 spk_2
Well, I think everybody’s in the AI game. A healthcare stock, they are going to use AI to help productivity and to help, uh, development of cures, and they’re already doing it. So I think everybody is participating in it. It’s just in, in what magnitude? How much is it impacting your individual stock, butI think it’s, it’s probably more interesting to be looking at different sector sectors or individual names and saying, man, if they could really crack the code, um, using some of these new technologies, what could it do for their stock? So in my mind, it creates some really cool and interesting opportunities.
20:05 spk_0
Steve, out of all the things that we could lose sleep over, do you lose sleep over the fact that there’s so, there’s such a high concentration in the S&P 500 of essentially 7 companies?
20:16 spk_2
Um, I don’t think it’s healthy. I don’t think it’s, um, you know, I, I, there’s been so much written about it. Um, I just don’t know that it’sIt’s kind of the antithesis of what you’re supposed to be getting, like we, we preach diversification, we preach these, these broad-based ETFs and indices, so that you have this diversification, and I, I, you know, I, I’m glad there’s a lot written about it, so people realize that they really don’t have the diversification that they think they have, and if they really want it, they probably have to explore alternatives.
20:51 spk_0
In the last few minutes that I, I have with you both here, I mean, time flies, we’re having fun. Uh, I would love to get your thoughts on this one. Steph, I’ll start with you, giving Steve, I guess, more time to think about how he’s gonna come at this. Uh, my question to you is, if there’s going to be a summer surprise in the markets, where does it come from and why?
21:08 spk_1
I, yeah, my answer to this is not, um, it’s probably not a surprise. I think the thing that I, I struggle with is that like it seems to be hiding in plain sight, which is the fact that I think it’sA rational thing that oil could get to 150, 160, like, I know, you know, there’s there’s things happening in the Middle East, but the fact that we haven’t seen that is because we have been going into our reserves across the world, um, and I thinkNow if you end up having, you have a situation, you can end up coming to a period where there’s really isn’t enough reserves to go around, and, you know, there’ll be a rebuilding and probably a a way where countries start trying to build up their reserves.Over time to protect themselves from some of the risks that they had to endure during this time period. And so I, I actually think it’s like, if you talk to any of the oil guys, they, they’ve been shouting from the rooftops since February, you know, in February about this, butThere and no one seems to be listening, which nobody cares, but they should. It’s a, it’s a lonely place to be, but I, I’ve been listening and I kind of believe in it. So you know, we have an allocation to energy in our portfolios as a hedge anyway because AI uses energy too. So you know, but I, I’m just, I’m, I’m kind of like, why isn’t anyone care about this? So I, I wouldn’t be surprised if it’s some one day people really start caring
22:29 spk_0
about that. All right, she’s got dibs on the oil surprise. What say you?
22:33 spk_2
No, no, no, but I just said like she mentioned it, but I think it, I, I would not underestimate. Listen, you all.Every one of these countries, every one of these, uh, every, everybody just went through this shock, where, where inventories were put in jeopardy. The first thing they’re gonna do is build those inventories. So this isn’t like when that happens, and it, when you do get that, if you do get that price appreciation, it’s not gonna come down quickly cause they’re gonna make sure that these inventories are, are able to support.Them in times of turmoil. So, I, I think that’s another element that’s gonna be big. I think the other thing is just rates. Rates are telling you what, what this market is thinking, and, um, we’re gonna have to rationalize that at some point here. And so, I think, you know, there’s been a lot of talk about it. There’s a lot of talk about what we’re gonna do. Are we gonna cut? No, we’re not gonna cut, we’re gonna raise, are we gonna raise? We’re not gonna raise. I mean, the rates are kind of telling you, well, you know, in a forward manner, what, what’s happening andYou know, those two can’t be disconnected. They can be connected for periods of time, but as I think you said earlier, Stephanie, uh, things always rationalize out in the market, you know, it might take a little longer than you think, but it gets to the point where it should be.
23:48 spk_0
Well, Steve, that, that was actually my summer surprise. It is the new Federal Reserve chair. Uh, you don’t hear a lot of people, you hear people actually writing stories about Kevin Warsh and what he has done in the past, thoughts and cots, butLike, we have a new Fed chair, and the market is assuming that he’s just going to be like the old Fed chair and let’s all focus on the SpaceX IPO, Steve, but like, I, I think the market’s forgetting we have a new Fed chair.
24:12 spk_2
And we don’t know his behavior. Like,
24:14 spk_0
I mean,
24:15 spk_2
we know his, we know his history. We know, you know, why he was put in place and what the anticipation is, but, um, until we see some action, and look, he doesn’t act alone. So, you know, there’s a lot of other people there that are gonna be, um, expressing opinions and they already have been.
24:33 spk_0
And Stephanie, if, if, if oil hits 150, 160, I am.I am super curious on how a Fed chair Cameron Warsh will respond to that, if at all. Could be just a comment, could be action, we, we, we have no idea.
24:46 spk_1
Uh no, I mean, the last time we had like a, you know, a huge uh lack of supply and, and higher uh oil prices was, you know, if you think back into the 70s and the the time, I think it was uh President Burns, he didn’t um or Fed.Chair Burns, I should say, he didn’t do anything. He actually actively did nothing because he said that this was something that the Fed couldn’t control, which is kind of true, like the Fed is better at controlling demand side inflation, not supply side inflation inflation, so it, it could, he could be the same because, you know, they, they definitely don’t want to raise rates. I think they want to try not to, but they might have to.
25:26 spk_2
We’re gonna successor did a lot, yeah,
25:30 spk_1
yeah, yeah, true, yeah,
25:32 spk_0
um, we’re gonna leave it there, guys. Uh, I wanna thank you both. You always make a lot of time for Yahoo Finance. It feels like my IQ just went up 10 points listening to you both on all things stocks, so I do appreciate it. And, uh, if I don’t talk to you again soon, have a great summer and let’s go, uh, let’s go SpaceX. Let’s
25:47 spk_1
go next.
25:49 spk_0
Knicks too. Yes, yes. All right, thank you, Steven Steph. I appreciate it. Thank you. All right, that’s it for the latest episode of Power Players.
