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In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium and Lou Whiteman, along with Motley Fool analyst Emily Flippen, discuss:
Tech crashing.What we’re watching.Netflix earnings.History of tech.Gemini delayed.Radar stocks.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 July 17, 2026.
Travis Hoium: A new AI model is crashing the market. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Lou Whiteman and Emily Flippen. Guys, we got to talk about the topic of the market, at least over the past 48 hours or so. That is tech stocks dropping like a rock. This is everything that was on fire, Emily, over the past six months, over the past maybe 18 months. Now they've suddenly fallen back to Earth. We're talking about memory, we're talking about equipment makers. There's a number of different catalysts here. This could be the AI model Kimi that has come out of China. It could also be earnings season. When you're seeing these stocks fall, what is in your mind as an investor?
Emily Flippen: The first thing that comes to mind is trying to understand what is the core driving principles that's resulting in a sell-off that we're seeing across the board. Trying to reconcile Netflix and Micron, you're probably scratching your head thinking to yourself, what do these companies have in common? The short answer is, they're very popular with retail investors. In fact, if you look across the board, a lot of the stocks that are down massively are very popular with retail investors. We've seen a lot of people flood into companies, whether that be for fear of missing out, whether that be just part of the hype cycle. As we start to get earnings from these businesses, as people's fear starts to grow, then you have people who never really had a thesis in the first place for buying in start to panic.
When you buy into a company without a real thesis for why you're holding that business, hopefully for the long term, then it's really easy to panic whenever the market starts to sell off. I think the across the board selling off that we're seeing, it can be a result for Micron of memory shortages, for Netflix, as a result of earnings, for IBM. Good Lord, who knows as a result of IBM, whether it be internal struggles or a sell off in the software industry in general, but all of these things are different dynamics, all being driven by the same core principles, which is I'm an investor, and I'm afraid. I'll tell you what, the market is made up of humans. It's made of people who make emotional decision. I think I see personally a lot of emotional decision making happening this week.
Lou Whiteman: It's fine, we never notice it on the way up. Micron is down, how much percent, but they're also trading where they did in early June. IBM is at its worst day in history, and it fell back to where it was in May. We take it for granted on the way up, and then we panic about it on the way down. It's not healthy investing. It's not fun. It's why I don't have any hair. But I think it's separate to the core principles of fine good companies and stick with them. This is just the market marketing. This is day to day fluctuation. Like I say, it's a ton of fun on the way up, and it's a ton of despair on the way down. Trying to normalize and maybe not get too caught up in it on the way up, and not get too caught up in it or lay down is probably the way to go. But hey, you tell my emotions that because that's not easy.
Emily Flippen: There's actually a lot of good psychological evidence to your point, Lou, that shows investors feel losses twice as worse as they benefit from gains. If the stock goes up 20%, that's great. You feel good about that, but you actually feel twice on average, worse when a stock goes down 20%. You feel those losses a lot more. It's understandable if a lot of people are listening to us today feeling really afraid, feeling literal pain from what's happening in their portfolios.
Lou Whiteman: If you think about, by definition, like if I buy a stock, the stock goes up, I'm not really affected by that. Like, that's why I bought it. But then when it goes down, I think on a deep psychological level, we are wired to notice fear more, but also just common sense. It's like this isn't going to script. We are now having a moment where things aren't going to script.
Travis Hoium: There's a lot of threads that we can pull on here. I want to get to things like leverage in the market and some of that short-term dynamic that we've seen with options. I know there's a ton of leverage in South Korea, for example, which is impacting some of those memory stocks. But, Emily, you talked about earnings. One of the things that I have noticed with a lot of the commentary among that retail investing crowd, those are the people that we are talking to on a day-to-day basis is you see an earnings report from a Netflix or from a Micron, and you go this earnings report was really good. Why is the stock down?
I think this is a reminder of one, the market is a forward-looking mechanism. The market is thinking about what is the world going to look like 6-18 months from now? But taking an even longer-term view is where the winds come in, The Motley Fool style of investing, of long-term investing. There are lots of people who are thinking about the next month or the next quarter. The market is thinking about the next 6-18 months. Very few people have the ability to think about the next 5-10 years unless you're investing your own money. That's where there is Alpha to be had, but if you're doing then you have to read those quarterly reports in a little bit different way.
Emily Flippen: That's why some of the data I actually saw come out earlier this month was particularly heartbreaking to me, Travis. FINRA reported that there was more than $500 million in new margin, new debt, margin accounts, mostly driven by retail investors at banks across the United States. That's a massive increase. There's a lot of reasons for that. Obviously, inflation is high. The value of our market is higher. All of these things can push up the average balance of a margin account. But also, most importantly, we've expanded the amount of financial securities that retail investors have access to, options trading being a really big one. More and more people, in my personal experience, just speaking anecdotally, tend to view investing like gambling. Those two things are very different in my mind.
What you're doing as a retail investors, if you're trading on margin, if you're putting up stop-loss orders, if you're participating in the prediction market, or trying to buy individual stocks, the same way you would a betting account, then that is a concern because your No. 1 advantage as a retail investor, as an individual person is that you are beholden to nobody but yourself, which means you can have as long term a view as you want. Banks and other financial institutions systematically have shorter-term views because they’re held to shareholders or stakeholders, and that’s part of that equation.
Travis Hoium: If you're running a fund, somebody can pull their money out of your fund. You’ve got to outperform this quarter this month, or I'm going to take my money out and put it elsewhere.
Emily Flippen: Why would you, as a retail investor, as somebody just listening to this podcast, take away what is your number one biggest asset, which is your long-term view, and start to trade based off of short-term noise? It's how you set yourself up for failure. How you set yourself up for success is by taking the broader points. In fact, this short-term trading usually offers buying opportunities for investors who are prudent enough to hold through these downturns.
Lou Whiteman: Morgan Housel is, I think, saying this the best, that your advantage is playing your game, and that's what Emily is talking about. By default, I don't give analysts a hard time when they miss because their job is to look three months into the future. My job is to try to find companies that are strong enough that whatever may come in the near term, that they will survive and thrive long term. The one I love to point out is all the banks sold off when Silicon Valley Bank went down. A lot of self-recommendations or hold recommendations were issued. That made sense because the next 3-6 months were going to be really nasty for the banks, and that is what those holds or sells were reflecting. But I don't have to worry about 3-6 months. I can say this is a good institution that's going to be around, I think, for the next 50 years. It was a buying opportunity for me, even if they were correctly calling it a sell for near-term momentum. That's the mindset that I think works. But again, this sounds so good on paper. Then a stock that you just bought is down 20% the next day, and it's much harder to execute on.
Travis Hoium: Speaking of stocks that are down, when we come back, we're going to talk about Netflix and why shares were down double digits early this morning. You're listening to Motley Fool Hidden Gems investing.
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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. One of the big earnings reports for this week, and we've got a ton that's coming over the next two weeks, but Netflix caught a lot of investors off guard. Stock was down double digits early this morning. We're recording on Friday morning, down about 8.6% as we're recording right now. Emily, as you look at the numbers, is there any major red flags here, or is this just Netflix becoming the bigger, more mature company that has to deal with regular big company stuff that they all do?
Emily Flippen: How about a third option, which is, I think the reaction. Now maybe I'm overstating it. I think the reaction has nothing to do with its maturity or the numbers it was reported. I think it has a lot to do with the commentary management provided about what investors should be looking at. We saw a very similar reaction just over two years ago when Netflix reported first quarter earnings, I believe in 2024, and despite the fact that the results were good, the stock was down because they said that they were going to stop reporting their paid subscriber numbers. Everybody panicked and was like, crap, we've been using that as a barometer for success. Now you're telling us not to look at it, presumably, to make up for what will be poor subscriber numbers. Netflix, of course, has done well over the course of the past couple of years. It didn't really make a difference. But one thing they said this quarter, I think, could be causing the same market reaction, which is that they're going to no longer be reporting at least not to the same frequency, their engagement metrics. Again, the market is presuming here, are you trying to cover up poor engagement?
Travis Hoium: Does this also coincide with the Nielsen data is the one that I always think is interesting. Nielsen has said Netflix's market share of TV time is either flat or maybe even declining, depending on the month you're looking at it, and YouTube is the one that's taking share.
Emily Flippen: Exactly. The market is extrapolating this and saying, we've been using engagement now as our barometer. It looks like engagements going down. You're giving us less information. In Netflix's defense, part of the logical reasoning, I think, they're providing for this is that competitors, to your point, like YouTube, don't actually report a lot of this stuff. Use third-party data, and you can get an idea for it, but it's not like Alphabet or Google is out here telling us all the details about the most successful YouTube shows on their platform. They don't necessarily need to. I think Netflix is looking at itself and saying, why are we jumping through all these hoops just to be judged by investors when our success, in this case, they want people to look at revenue and operating profit should speak for itself.
But I have to say, as an investor, just on a personal level, I like Netflix. I think Netflix will probably be fine. I have to roll my eyes because I went back to that 2024 letter, where they explained that they were taking away subscriber numbers, and one of the things they said investors should look at in exchange was engagement metrics. They said, "Success in streaming starts with engagement. The more they watch, the more they stick around, they recommend Netflix more often, and place a higher value on the service. This is more information than any of our competitors provide, and we expect to provide even more over time." Within the period of two years, they have once again changed the goalposts here for investors, and that irritates me.
Lou Whiteman: Emily Flippen, bringing receipts.
Travis Hoium: That was sick.
Emily Flippen: They put it out there for everyone to read. You expect us to read it. I'm reading it.
Travis Hoium: Usually, if you're going to do that, you got to take that letter down before you have the new conference call.
Lou Whiteman: You know what's great, too, is because the whole issue here is short attention span, and Emily says, I have a attention span here. But look, moving the goalposts is really annoying. I think Emily, like you said, there's probably a reason that they are, and maybe it's a lesson for all of us that CEOs say what works at the moment, which I guess we should know. But to that point, when someone tells you who they are, believe them. Netflix has been screaming from the top of the mountain for a while, things are changing.
I almost think the problem isn't them, it's us. It's investors, because we are just inevitably going to be slow to realize that things have changed and change our own expectations. Last year, they tried to buy WBD. I heard so many times, they don't need it. It's a want, not a need. Well, this is the smartest management team in streaming, I would say. They don't strike me as the type that are doing something on a whim. I think they were saying, this could really help our business. Our business is changing. They apparently kicked the tires on Roku. These are not signs that business is as normal is working the way it used to.
The latest where we had reports just this week that they're thinking about bringing back free trials. As a rule, companies that had free trials and then got rid of free trials and then bring back free trials, that's probably a sign that they have to bring back free trials. We’re moving the goalposts, yes, but the reality is the Netflix of now is a more mature company, it isn’t growing the way it used to be, and it’s on us, the investor base, to realize that. I don't want a victim-blame here because, but really, this is a great franchise. I still think the best management team, I think they'll figure it out, but just the company of before is not the company of today, and I think that is what we have to recognize.
Emily Flippen: Can I draw attention to one thing that also graded my gears? It sounds like I'm such a Netflix bear. I promise I'm not, I'm pretty neutral on the company today. But I will say they have been expanding a lot of their offerings to your point, Lou. I think they’ve been trying to acquire some opportunity here, but they’ve also been changing the platform, especially with things like gaming. They have been pushing this at users. I know because I'm on one of those active users.
Lou Whiteman: It's so annoying, isn't it?
Emily Flippen: It is annoying. But here's the thing, if that was being successful, what did you expect to get an update from management, and when I read through their letter, there's virtually no commentary around their pushing to gaming. There's a lot of commentary around live sports, live events, and how that's driving sign-ups. That's great, I really appreciated that color because that's obviously costing them a lot of money up front to get these deals. But obviously, gaming isn't working, so what's the plan there? I want an update for management, I don't have that.
Lou Whiteman: Reid and Ted, if you're watching, we actually went on the Netflix one day to watch something, got caught up in this FIFA game that we couldn't get out of with our Roku remote. We just ended up watching something on Peacock instead, so learn.
Travis Hoium: The strange thing, I appreciate the push into sports because I think that could be potentially a big thing, allows the media to a higher price point. But the fact that Netflix is I think, fumble that, they had the Christmas game last year in my local team, the Vikings was on. I don't usually watch football games live because we have YouTube TV. I have kids, we're eating dinner at the time the game was on. By the time I turned it on, I couldn't find it because it just vanished into thin air. That seems like the thing that's going on with Netflix is they would just lost sight of who they are, which is the company that was leaning into abundance. You can watch anything here at any time. Now, if you're looking for that abundance maybe YouTube is the better place to go.
The other question that I wanted just pose to you guys a little bit is, is Netflix having an identity crisis in what they're supposed to be for the consumer? When I say this, I’m taking this a little bit from my personal experience, but we have kids, and they do not have free rein of Netflix. Netflix has a lot of garbage on it. There's a lot of good content, and this is the problem with having a million shows. They also don’t have free rein of YouTube, but they do have free rein of Disney+. They can go on there and find a number of great shows to watch. Where do you fit in a world of YouTube, which is everything, and Disney Plus, which is maybe more of a spook or an HBO Max, which is going to be high-end content, or Apple TV? Emily, is this like they don't quite know where they fit in that world because they used to be everything and now everybody's specializing.
Emily Flippen: Well, the competitive landscape has certainly changed, and to your point about their own confusion about what's next for them. You can draw straight to comparison with businesses like YouTube versus Netflix, where a Netflix, they sell you an ad tier. Again, I mentioned I'm on the ad tier. I pay a monthly subscription fee to access the ad tier in a very inflationary environment where Netflix has raised prices, and everything else in my life costs a lot more, too. There's also a lot more competitive streaming services that also try to charge me to access their ad tier. I pay all this on a monthly basis without even having full rein over the content that I'm watching without seeing ads.
Now compare that to a proposition for YouTube, I pay nothing to go onto YouTube. Now, I have to watch a few ads when I get on there, but that's the same experience that I have on all of my other streaming services, and YouTube is free. I do think some of the engagement we're seeing, yes, there's a difference in quality content and directionally like the type of audience that Netflix is targeting, all of that is up for discussion, but I would say the bigger dynamic we're seeing is probably cost-cutting broadly, especially here in the United States, but even globally, in the face of higher inflation, lower wages where people cannot afford to have 500 streaming services, they instead go to what is quite literally the free option. Maybe that's the reason why Netflix is bringing back free trials is because they're recognizing that they have to be more competitive with free platforms like YouTube. I wouldn't be surprised if at some point in the future, Netflix just installs more ads and makes their ad tier free in order to attract better engagement.
Lou Whiteman: Maybe so. Travis, to me, your story is just back to this point where it isn't the Netflix of old. I think that what they have to do is have enough compelling content that I think what the ad tier here is what, 8.99 now or something, that I just have it on inertia. Again, I think they're well capable of that.
Travis Hoium: Their turn is still really low. I think it's 3%, industry is pleading.
Lou Whiteman: But again, as investors, we can have this company, and we can enjoy it, and it can be a good company, but it's not going to be the growth story it was. That just takes it full circle for me. They are what they are. They aren't just conqueror of all worlds, the way we thought a few years ago. It's still a well-run company that can make money.
Travis Hoium: It's going to be really interesting to see what they do in the future, especially as a company like NBCUniversal, which happens to have theme parks is now spun off, maybe acquired by somebody at some point in the future. That could be a really interesting asset if they were interested in Warner Brothers Discovery. When we come back, we are going to talk about how fast the world is moving these days. You're listening to Motley Fool Hidden Gems Investing.
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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. In this section, we like to have a little bit of fun with investing. I want to bring history into this once again, give a little bit of a quiz. But the idea here is to show how fast things are moving these days, why? What seems really obvious in 2026 may seem completely antiquated by 2027 or 2028. But let's go back and look at how slow things happened years and decades ago. Let's start with the auto industry. Emily, do you know when the first Model T was produced?
Emily Flippen: I know I have to go back a long time here because I have to ask you, Travis, Model T, that was Ford, right?
Travis Hoium: Ford, yes.
Emily Flippen: First vehicle. Gosh, my dad is a U.S. history professor. This is going to be especially embarrassing, but I'm going to ask.
Travis Hoium: I'm not going to send him this episode, are you?
Emily Flippen: Certainly not. You would be ashamed. I'm going to say, I assume it's the early 1910.
Travis Hoium: Pretty close. Lou?
Lou Whiteman: One dollar. Now, I'll go 1905. I don't know.
Travis Hoium: 1908, so Emily takes this one. It's so interesting how not a lot has changed about the four wheels, the engine, obviously, the vehicles have gotten better. But that industry has not just fundamentally been disrupted. Since then, you could maybe argue something like Tesla coming in with a more vertically integrated business model. But the next major disruption, I would argue would be Uber. Lou, when was the first Uber ride? I'm going to actually demand a month here, as well.
Lou Whiteman: Gosh, da da da da, January, because they started at the beginning of the year of 2011.
Travis Hoium: Emily?
Emily Flippen: I want to say I'm at a disadvantage here because I'm pretty sure I wasn't even of legal driving age when Uber [inaudible] first.
Travis Hoium: Perfect. You can see what matters more here.
Emily Flippen: But I'm going to go maybe a bit earlier than what Lou is expecting. I remember using the app when I went to college in China in 2013. If I was catching on to it by 2013, then I'd assume it was at least around for a while. I'm going to do a one dollar on Lou. I'm going to say January of 2009.
Travis Hoium: Emily, you are very close. March of 2009 is the correct answer. One of the first apps on the App Store, I think that was when the second iPhone came out, right? That would have been 2008. I don't know the exact date of that, but that was really the thing that pushed them into developing that. It was Uber cab, originally. That brings us to autonomous vehicles because we went 100 years from the first mass market vehicle to the first ride-sharing app that caught on, and it caught on extremely fast. But the first autonomous ride with no driver, there was a safety driver at this point. Emily was in what year? If you have a month, I will give you bonus points.
Emily Flippen: I think it's probably much earlier than people expect. If we're talking about Uber and 2009-ish. I want to say it's maybe 2014, 2015, with a safety driver on existing roads. You said a month right, Travis? Let's go with May 2014.
Lou Whiteman: That's really close. I want to do just June 2014 to do that to you. I'll say May 2015. It's right around there somewhere, though.
Travis Hoium: Maybe, maybe I missed this caveat. The first commercial ride was December 2018. They were doing testing rides with safety drivers, but there was no one who could actually physically get in one unless you were working for Waymo, and that was the Waymo One. Let's go to computing. Lou has got a good memory here. When was the first Apple computer, the Apple I?
Lou Whiteman: I can go back to when I was in school for this. God [inaudible]
Travis Hoium: It looks like the Apple II.
Lou Whiteman: You're right. Apple I late ‘70s, '70, '78.
Emily Flippen: There's no way. It was that early.
Lou Whiteman: Wasn't it? It was.
Emily Flippen: My gosh. Well, I going to have to take the over on that. I think it was probably in the ‘80s. What's one day past what Lou picked? No, I'll go somewhere in 1980.
Travis Hoium: Emily takes a dollar. Lou, you are too late. It was 1976. The Apple II came out in 1977. Now, here's a question. This is really going to tell you how much you know about the history of computers. I'm going to say, when was the first Windows operating system computer? I will accept one of two answers.
Lou Whiteman: Who's this for?
Travis Hoium: Lou.
Lou Whiteman: Emily, for the record, I couldn't drive then if that makes you feel better. Windows originally came, I was in middle school. I'm going to say 1986.
Emily Flippen: Again, I'm embarrassing my family here. My husband works in cybersecurity, and he's a Linux developer. I'm trying to cross-reference what I know about what Windows took from Linux when Linux was developed. Remind me again what Lou picks some where in the 1980s.
Lou Whiteman: It's '86, I think, mid-80s.
Emily Flippen: Just to save myself embarrassment, 1989.
Travis Hoium: The first Windows-branded operating system was 1985. But the other answer I would have accepted was the original Microsoft operating system, which was Lou?
Lou Whiteman: DOS.
Travis Hoium: DOS. In 1981, the company that they acquired when Bill Gates promised IBM that they had an operating system that was in the works, and he lied through his teeth and created the company that we know today.
Emily Flippen: These questions feel a little bit like age discrimination.
Travis Hoium: But the fascinating thing here is this was between the 1970s, and I would argue even today, it's still the same companies who are dominating a lot of these spaces. Apple, Microsoft. Quickly, first iPod, Lou?
Lou Whiteman: God, this I don't know. Gosh, 1999.
Travis Hoium: 2001, Emily, you got to know this. When was the first iPhone?
Emily Flippen: You think I know that? When I was never cool enough to have an iPhone, or are you kidding me, I had a flip phone through all of high school? I'm going to say 2009.
Travis Hoium: 2007. I think it was earlier.
Lou Whiteman: It killed my Palm Pre.
Travis Hoium: Remember Uber launched in 2009. There was a bunch of different. I have friends who still love the Palm.
Lou Whiteman: I want the Palm Pre back.
Travis Hoium: The Internet is, I think, one of the most fascinating, partly because The Motley Fool grew up on the Internet. I believe it was 1994, that was started on the message boards and AOL. When did Prodigy launch its first dial-up service, Lou?
Lou Whiteman: Prodigy. We were a CompuServe family, so I don't know about that.
Emily Flippen: What is Prodigy and CompuServe?
Travis Hoium: This is before Netflix. This is before AOL launched. This was the first time I got on the Internet.
Lou Whiteman: Do you know if Prodigy was before CompuServe Vic or AOL? It was, wasn't it?
Travis Hoium: It was before AOL.
Lou Whiteman: I'm going to say 1985 again. That's just going to be my go-to answer for all these.
Emily Flippen: You're not going to let me embarrass myself any further.
Lou Whiteman: Embarrassed for Sofia.
Travis Hoium: It was 1988. I don't know exactly when we had it, but we had this for a few months. The interesting thing was, it was extremely slow. The first dial-up service, and it was extremely slow, very limited information. The interesting thing going back and looking at this was they were trying to figure out what the business model was. There was no putting credit cards on the Internet at that point. There was no, you know, SaaS business model, so you had a limit of 30 personal messages a month. I was just different.
Lou Whiteman: It was owned by AT&T? I think it was or something like that.
Travis Hoium: Maybe it was later on. Emily, when did Netscape launch?
Emily Flippen: If I'm comparing to Prodigy, I'm going to assume in mid 1990s. Let's say 1995.
Travis Hoium: 1994. Lou, this one is for you. I have a two-part question. When was AOL founded America Online founded as a company, and when was it actually named America Online?
Lou Whiteman: It was quantum computer service before that.
Travis Hoium: That's a good memory.
Lou Whiteman: I'm going to keep doing this. I'm going to say 1985.
Travis Hoium: Wait. Is that going to be for them?
Lou Whiteman: It was 1985. It was founded as Quantum Computer service, and then later renamed as America Online.
Travis Hoium: It's renamed in early ‘90s.
Lou Whiteman: 1991. It's just that one it was so interesting how influential they were, but it was one of these stories of a company that started doing something completely different from what they ended up being known for.
Travis Hoium: Nice little lesson here, Emily is? Just guess ‘85 for everything.
Emily Flippen: Got it.
Travis Hoium: A lot that happened in 1985. Let's run through these quickly payments because I think it's interesting how fast this has changed. Emily, the first check was written.
Emily Flippen: I would assume 1930s maybe.
Travis Hoium: Goes back about 2000 years.
Emily Flippen: My God.
Travis Hoium: A little bit of a trick question there. Lou, first credit card.
Lou Whiteman: It was probably a QU back then. Is that? The first credit card was the Bank of America card, which became Visa. I don't know. The ‘50s.
Travis Hoium: Your memory is really good on this. The Bank of America card was 1958, but that actually dates back to travel air travel cards. Deltas of the world, the Uniteds of the World, have been in the credit card business since 1934, goes all the way back to then, and then a few of these were consolidated into a diners club in 1950.
Lou Whiteman: That's where that came from.
Travis Hoium: But, Emily, the first digital transaction online happened in what year? If bonus points for the company, which you know that took the money. I know so many people said, Amazon would fail because people would never put their credit card attached to an online purchase. That had to be the late 1990s, I would imagine, so I'm not to go with Amazon in 1999. Lou, do you have a different guess?
Lou Whiteman: I would guess earlier that there was some weird payment 1985, I think.
Travis Hoium: I think my credit card, my underage credit card was online by 1999. 1994, and the company, I actually have a screenshot of the website that I'll share with you guys was Pizza Hut. Pizza Hut. Put your name.
Emily Flippen: What happen in Pizza Hut.
Lou Whiteman: Isn't that, too, the famous Bitcoin story where someone bought a pizza?
Travis Hoium: It was a pizza. I was going to ask you, the first blockchain transaction was 2009. That was the last one. But it's funny that pizza is the first thing that people want to buy online. When we come back, we're going to get a little bit into what's happening with Gemini and the new model from China. You’re listening to Motley Fool Hidden Gems Investing.
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Travis Hoium: As always, people on the program may have 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. All personal finance content follows The 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.
Our final topic before we get to the stocks on our radar is Alphabet stock was down this week after Gemini said that they were delaying Gemini 3.5 Pro. Interesting that the stock is down. We also have this new model coming from China that's supposedly really good, Emily. Is this something or just the noise that we've been talking about in the market?
Emily Flippen: Unfortunately, I do think it's something, and I have to say it was only a couple of weeks ago that I think I'm on video, saying in reference to Alphabet losing a lot of their top AI leaders and engineers to companies like OpenAI, Anthropic. I said, I don't think this is a big deal. They don't need the most cutting-edge model. It's only a big deal, if say, I don't know, the Gemini Pro 3.5 launch is delayed, and here we are. Do think maybe there's something happening under the hood here, but I would challenge the assumption and say, CheerPoint, we see a lot of models coming online that are either open-sourced or highly competitive. Companies are spending billions of dollars trying to get the next best model. Does Google even need to be competing here? Maybe we should just call it a loss at this point.
Travis Hoium: Lou, isn't this a distribution game for them?
Lou Whiteman: So far it has been, and they've been really good at it. They have the consumer. But yet come to Emily's point, what if it doesn't matter? I asked Gemini. Gemini said, there's 2.5 million open source models right now, and hey, Gemini should know, right? Not all of them are good. Not all of them are safe. Not all of them have value. But we focus on these frontier models, and what if they're just science projects? What if they have some value, and especially with coders, and so that's why they're all the emphasis. But for most of the business and consumer enterprises, these free things are good enough. Now, that's scary, given all the spending, so I don't know if that's good news for Google, but I sort of wonder here. It's like, maybe we're focusing on the wrong thing.
Emily Flippen: I personally vows Google would let other companies spend the money to try to have the best frontier model, but I will say, so far, the data shows that actually open source models really aren't taking massive portions of enterprise spend, even versus their more expensive competitors. There's a lot of reasons for that maybe because a lot of the better open source models are coming out of China, and there could be security risks there. But companies that, add AI into their tech stack are generally sticking with these closed paid models, thinking that they're more reliable, they have better API access, operational things, including security that just make it more feasible. Now, that could change, but right now, we're not actually seeing open source AI models take away from the majority of enterprise spend, which is where the real big bucks are.
Travis Hoium: Emily, do you think that the thing to look at would be, is there pressure on these models from a cost standpoint, though? That seems like the elephant in the room is these prices are going up for a lot of these models, especially on the frontier. But if companies start cutting back and going, Hey, we got to spend less on AI, then the option is we'll do this cheaper model.
Emily Flippen: Yes. Much more on the throttling on that cost side, but I will say it's more likely that you move down to a cheaper model probably provided by a closed system moving to an entirely open source system. I'm not the chief technology officer at a company, though, so they can make the choices for themselves. But the security risks and the closed access, we have seen this play across software. There's always been open source alternatives for paid software, but enterprises still generally pay for software. I would imagine the same is true for AI models.
Travis Hoium: A lot of things I'm going to be looking for during conference calls during earning season. Like, what is that AI spend? Are you seeing ROI from it? Because that could potentially be the pressure on some of these AI companies as we go throughout the year. Let's end with stocks on our radar, and we're going to bring in Bart Shannon from behind the glass. Emily, what you got this week?
Emily Flippen: This week, I'm looking at Uber, of course, the ticker is U-B-E-R. I imagine everybody knows it, but it's on my radar this week because they're making a relatively large acquisition just under $15 billion of a Germany based-delivery company called Delivery Hero. They already had an economic interest, so it's not entirely surprising to the market, but the reason why it's on my radar is because it kind of seems like the food delivery land grab is over between the acquisitions that DoorDash has made over the course of this year, plus this acquisition from Uber, their investment into Southeast Asian grab, as well, further diversifying their exposure. It seems like a lot of these smaller players are their intention is really, to get scooped up. Their larger competitors that have built up scale. It's really hard to be profitable in the food delivery market, but DoorDash and Uber are continuing to show that they are the leaders when it comes to food delivery and profitability, I think is a smart acquisition from Uber. Bart, are you a Uber Eats user?
Bart Shannon: I am an Uber Eats user. But I'm also cheap, so I use it sparingly.
Travis Hoium: I happen to be a DoorDash user here, but I use Uber for rides. The whole Unified app thing, I almost fall on Lou's case here that unifying all these apps is not necessarily going to be the way to go. But I don't know, maybe geographically, it's going to work out for Uber. Lou, what do you got this week?
Lou Whiteman: Bart, I'm looking at TransDigm, Ticker TDG, and they're an aerospace parts supplier that for more than two decades now has somehow managed to generate software like 50% plus margins. The stock has been a huge winner over the years, up 5,000% in 15 years, largely by acquiring companies with patented parts that are hard to compete with and just charging airlines what they want for. This week, though, TransDigm called off its latest deal, a $960 million acquisition because the Department of Justice concluded it would create a monopoly on certain parts needed for the F-16. Pentagon wasn't happy about that. This is a real shift in tone from regulators, and it does make TransDigm's path forward harder. The stock traded off as a result, near 52-week low. I note that most of TransDigm's oversized profits through the years have come from commercial. Delta Airlines doesn't care if they need a part. I think the company's now sitting on about $10 billion in firepower to either find new deals or if the DOJ really does cut them off, we turn, I don't know, maybe like one seventh of their market cap to shareholders. TransDigm at a 52-week low historically has been a time to look at it, give them the track record. I'm intrigued.
Travis Hoium: Bart, what do you think about TransDigm as an option? I have thoughts on TransDigm. It's their name. It sounds like it would be the evil Mind Control corporation in the David Cronenberg movie. But then again, maybe that's a plus. It could be. You have one stock that's going on your watch list. You pick TransDigm or Uber.
Bart Shannon: I'm going Uber.
Travis Hoium: I think probably a good pick. TransDigm. Let's just change the name to something a little bit more fun. That's all the time we have for today, thanks to Lou and Emily and Bart behind the glass and Travis Hoium. We'll see you here tomorrow.
