00:00 Speaker a
What you and I were talking about this morning, and what Laura Martin of Needham pointed out, is the relative spending of these different companies? CAPEX. And I think the point she makes about meta, which is a particularly neutral equivalent rating, is that if you look at what's suited to selling. In other words, how much do these companies spend compared to their size and revenue? The meta is much higher than the other metas. And she really questioned the rationale for meta in that respect. Well, that noise has become much quieter in terms of meta, right? But, as you know, it's interesting that she still develops that point.
01:44 Speaker b
Yes, and I just raised the market capitalization of Meta. Well, they'll continue to spend as I said with the data center and the people they're building this data center. It's like they overlay it with the outline of Manhattan, and it occupy a big chunk of the city itself. Obviously they are not planning to land in Manhattan. It will be somewhere in the country. I think it's in Tennessee or around. Well, their market capitalization is currently at 1.96 trillion. Microsoft seemed to show that they would be a little slower with their maintenance, but Meta says, we're all going to do. Well, we're open source you know. So it appears to indicate that sourcing all of the AI models in the future is not open. And as far as hardware goes, there is clearly a consumer business. They continue to lay out these. But you are right. If you look, it looks a bit disproportionate when you see that Microsoft is powered by these data centers and uses them with thousands of people and businesses with consumers. And the meta is to provide that service to advertisers, but they are just ordinary people on the reels and scrolling, I don't know. Well, that feels strange.
04:43 Speaker a
Yes, yes. And then, Brent, let's go back to you about this. We think you're back. perhaps. Hopefully. There he is. There he is. Well, we were talking about how one of your peers grew up on the street. Does it have anything to do with you?
05:47 Brent
No, because they are in the consumer world and they are monetizing this. Given what happened, the number of heads in meta actually decreases from the peak. And they generate accelerated revenue and profits despite all of these investments with people who are low. So, what does that tell you about AI? It's working. They performed a 9% ad price increase in the quarter, but that's because of AI. So I think the K-Pex numbers I think are completely exaggerated. And last night we sourced a CAPEX number for the industry. Last week we added Google, Meta and Microsoft to $5 billion. And what I say is that you are looking at this in numbers. Microsoft accelerates Azure and improves sales margins. Any food CFO Microsoft has provided improved operating profit margins over the past two years in the face of AI. Meta has found that by accelerating revenue growth and improving margins, there are fewer heads and AI is the cause. So the point is like you care about what you are spending, as long as your booking and revenue growth and margins are high, and that's what's happening. So I think I understand that II has the number one question that we can get from our investors. Just like they put these railway tracks in, we don't know when the ROI will be coming. That's not true. I can see the ROI today. The numbers are very clear. And if they and people listen, you're listening. Everyone said this. The AI margin is higher than the cloud. What does it teach you? So again, I don't know II, I don't know what II will turn out, you know, more crystal clear. Accelerate in the face of revenue, margins, buildings, all of these investments. By the way, we are literally at the beginning of this wave. We are not the end of it. And again, III think it takes time for this to happen in many of the past cycles we've been doing. The cloud took a long time. The internet took a while. We went through these cycles. This cycle is happening faster. Incidentally, every CEO from JP Morgan to Mettronic CEO to United Airlines CEO will pass through you. As all CEOs, including our own CEOs, we are all asked to embrace AI at Jeffries. Otherwise, there will be great consequences. result. So I don't think this is a problem. I think it's clear that it's rewarding and you're already seeing it in numbers.
