QQQs +66bps as China/US vibes were good (Lutnick at 3pm said talks were going “really, really well). Meetings could wrap up tonight or tomorrow. Yields were roughly flat as investors awaited CPI print tomorrow morning as Fed expects held steady at 44bps.
Just wanted to call out another HR call in TMTB Chat where reader “K.” called out INOD as being hurt by the META + Scale AI tie up when INOD was only down 3%. - stock finished -11%.
I know there are a lot of you buyside lurkers out there in the chat - I’d encourage you all to participate and join in (less asking why XYZ is up/down and more back and forth discussion or call outs like the above). TMTB has become a real asset with some great calls from readers over the past few weeks - will only get better if we get more participation.
Let’s get to the recap…
INTERNET
GOOGL +1.45% helped by better Ad checks at UBS and OpenAI/GCP deal: It is a win for Google's cloud unit, which will supply additional computing capacity to OpenAI's existing infrastructure for training and running its AI models. Did GCP win the deal on pricing? Possibly, but Altman was at Mizuho today frustrated with lack of his ability to get capacity so OAI could also be willing to pay up for extra capacity. Unclear what this means for GCP margins imo…The other speculation I heard was this was bare metal from CRWV, meaning the extra compute OAI is now booking through GCP will actually run on physical GPU servers that CRWV owns and operates but which are racked inside or cross-connected to GOOGL’s DC fabric
…speaking of margins, near the end of the day TheInformation reported that Google Offers Buyouts to Employees in Search and Ads Unit…Good move imo…My sense is that GOOGL is sensing they are in a sweet spot where AI is ramping quick enough to more than offset search declines and they need to press the pedal to gain as much mkt share as possible while they are in a position of relative strength - so my sense is these cost savings will be reinvesting in marketing/advertising for Gemini…
I sent Sam Altman notes from Mizuho conference yesterday - it was interesting in one comment he touted OAI’s clean ad-free interface, which means likely not coming any time soon
META +1.2% as they made $15B bet to own nearly half of Scale AI as Scale AI’s Star CEO Alexander Wang will be working closely with Zuck. The transaction suggests AI spending will stay elevated: management only weeks ago raised 2025 cap-ex guidance to $64-72 billion, up from $60-65 billion, and implies little room for “spend pause” narrative. Scale AI forecasts revenue to double to $2B this year.
Cleveland also followed Edgewater yesterday calling out better ad trends in May. UBS was also positive revising up #s for May.
Tariff safe havens underperformed as China/US tariff cibes got better: NFLX -2%; SPOT -1%…DUOL -2.4% continues to underperform despite a positive MS note talking up the bull case as 3p data tracking below…MELI -2% another one where 3p tracking below and suffering from ramping competition narrative.
PINS +3% as Cleveland said performance+ Adoption is ramping and boosting ROI - also some positive checks from UBS calling out 15% y/y spend in Q2 vs. original forecast of 9%
ETSY - 3%: if you missed it yesterday, we recommended taking profits on this one and giving thanks - was a nice trade and easy money made. Could keep a small rider on or not…
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