Raspberry Pi’s London IPO & Mistral’s $640M Funding Round

Scott shares his thoughts on why Raspberry Pi chose to list on the London Stock Exchange and what its debut means for the UK market. Then Scott and Ed break down Mistral’s new funding round and discuss whether its valuation is deserved. They also take a look at the healthcare tech firm, Tempus AI, and consider if the company is participating in AI-washing. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 0:29Scott Galloway?

  Today's number 1493. That's the year Christopher Columbus landed on the island of St. Bart's and named it after his brother Bartolomeo. True story. My wife said to me, you know, sex is so much better on vacation. And I thought, that's not the postcard I wanted.

• 0:59Scott Galloway?

  Welcome to Prop G Markets. Today, we're discussing London's IPO market and Mistral's latest funding round. But first, where are you, Ed?

• 1:09Ed Elson?

  I'm in St. Bart's. It's pretty good. It's pretty nice out here. I got here yesterday. You know, it's all right. We got, we got the, the private villa and it's got a private pool and it's got, you know, there's a private chef. So we had breakfast in the morning. Things are okay is what I'd say.

• 1:27Scott Galloway?

  So first off, I'm the only one that's allowed to be cynical here. How many of you are there in St. Bart's right now? How many from the Prop G media team went to St. Bart's?

• 1:34Ed Elson?

  Six.

• 1:35Scott Galloway?

  And you're staying at my favorite place, La Serena. I even picked out the villa for you. Where are you guys going to dinner tonight?

• 1:41Ed Elson?

  I'm not quite sure. I think we're going to.

• 1:43Scott Galloway?

  Typical man. You've left it up to the women to handle everything, right?

• 1:46Ed Elson?

  Sorry. I'm not sure. Oh, there we go.

• 1:49Scott Galloway?

  Love that sound. You're really leaning into this. Good for you. All right. You're having a glass of champagne. Good for you. This is, you're easing into the St. Bart lifestyle.

• 2:01Ed Elson?

  How are you doing? What? You're, you're back at home?

• 2:03Scott Galloway?

  Yeah, I'm in London. My life is not nearly as, as romantic as yours. It's, although I'm going to the south of France tomorrow, which I'm excited about.

• 2:12Ed Elson?

  That's right. You're going to Cannes.

• 2:13Scott Galloway?

  That's right. Going to Cannes. Excited about that. Although. I think I've lost some brand equity. I can't get invited to the iHeart party at the Ducap with Lenny Kravitz. I called, I know, I sat next to the CEO of iHeart Media last year and I emailed him and he kind of sent me a polite response, but still I haven't had that invite yet. So I think I've lost some brand equity. I don't know what's going on here. I don't. Anyways, I can't get into the hot parties anymore. I did get invited to Spotify, but I'm not.

• 2:42Ed Elson?

  Is the iHeart party really that hot? Lenny Kravitz is gonna be there?

• 2:45Scott Galloway?

  Yeah, well, it's at the Hotel Ducap and I'm staying there and Lenny Kravitz is playing. And so it'll be like being a prisoner at Alcatraz if I don't get invited because supposedly the prisoners of Alcatraz, when the wind was a certain way, they could hear people parting in the wharf, which was supposedly torturous for them because they got to hear what life was like for people who are free. So if I'm in my hotel room at the Hotel Ducap and I hear, you know, I start hearing Lenny Kravitz play his, you know, his three songs, then I'm gonna, I'm gonna be very upset. I'm gonna stop listening to iHeart Radio.

• 3:16Ed Elson?

  Is that how you feel right now with us? I mean, we're having a pretty good time here.

• 3:19Scott Galloway?

  No, I like you guys. I want you to have fun. And not only that, I know that I like that everyone knows that you're down there. I think it makes us seem well. By the way, in case you're still wondering, we're still recruiting for a writer, a senior writer for No Mercy No Malice. So if you want to go to St. Bart's next year, come join, come join Prop G. Anyways, enough of that. Get to the news.

• 3:40Ed Elson?

  Okay, let's start with our weekly review of market vitals.

• 3:49Ed Elson?

  The S and P 500 closed above 5,400 for the first time ever. The dollar was flat, Bitcoin declined, and the yield on 10-year Treasury has dropped. Shifting to the headlines. The Consumer Price Index showed inflation cooled again in May with prices up just 3.3% from a year earlier. That's flat month over month and down slightly from April. Meanwhile, the Federal Reserve held interest rates steady, though many Fed officials are expecting at least one cut by the end of 2024. OpenAI hired the former CEO of Nextdoor as its new chief financial officer. As the company's first CFO in two years, Sarah Fryer will help the company grow its global business and invest in further AI research. The company also hired the former SVP of Product at Twitter, Kevin Weil,

• 4:30Ed Elson?

  as its new Chief Product Officer. Oracle's stock rose 13% to reach an all time high, despite reporting fourth quarter earnings that were below analyst expectations. While the company missed slightly on revenue, the stock surged on account of new deals with Google Cloud, Microsoft Azure and OpenAI. And finally, Tesla shareholders voted again on Elon Musk's $56 billion pay package and the move to reincorporate in Texas. They're actually voting right now as we record this podcast, so we don't know the results yet, but the stock rose 6% this morning after Musk said he expects to win the vote. Scott, your thoughts?

• 5:05Scott Galloway?

  I think it's great that inflation cooled. I've always, as somebody who likes to think they know a little bit about economic history, inflation is more dangerous than invading army. I mean, unless you're, you know, part of the village that gets invaded, but revolutions oftentimes can be reverse engineered to inflation. I look at what's happened here in the UK and basically they have inflation and lower productivity. So let's figure out a way to make less money and have all of our goods go up in price, which translates to, you know, a worse standard of living. And that's when every household gets angry and wants chaos and change. It's the first time in almost two years that the CPI didn't climb. The annual core rate of inflation came down to 3.4%, the lowest since April of 2021. And the report keeps

• 5:48Scott Galloway?

  hopes of a potential September rate cut alive. I am sick of talking about rate cuts. I just don't care. The OpenAI, you know, OpenAI seems to be kind of professionalizing, if you will. The former CEO, before her position at Nextdoor, Sarah Frye served as CFO of Square and previously worked at Goldman Sachs and McKinsey. So she's obviously very qualified. And hiring Frye potentially signals that OpenAI could be thinking about an IPO. She's sort of the, she's someone who comes in who has credibility in the street and says, okay, this is how you go public. And Sam, you know, do not talk about X, Y, and Z. Talk about this and can kind of, that those skills are very important. And the difference between a well managed IPO for this company would be tens of billions of dollars in market capitalization. And so she is going

• 6:32Scott Galloway?

  to make a shit ton of money. She'll be there just in time to get a shit ton of options before they go public. So this, they literally had their pick of anybody to be the CFO of this company.

• 6:43Ed Elson?

  By the way, do you see how much money they're generating now? The information just reported on this. Sam Altman revealed the revenue, the ARR for the company. You see this?

• 6:51Scott Galloway?

  I didn't. What did it say?

• 6:52Ed Elson?

  Three and a half billion dollars a year. That is their run rate right now, which is more than double than what they were at six months ago. And just to put that into perspective, Anthropic, which is arguably their number one competitor, they're at 100 million and then Cohere is at 22 million. So it's like 100 million, 22 million versus three and a half billion. The OpenAI business is 35 times larger than their next biggest rival. Like they're just completely running away with it at this point.

• 7:20Scott Galloway?

  Probably the more impressive thing is, you said they've grown, their revenue's doubled in the last six months.

• 7:25Ed Elson?

  Right.

• 7:25Scott Galloway?

  Yeah, that's pretty, that's pretty impressive. Now, the question is, what was the last round of funding? I'd be curious to see what the multiple on revenues in terms of valuation.

• 7:34Ed Elson?

  Yeah, I think it was the $86 billion, but that's still, that would still put them on the low end compared to all of these, all of these other ridiculous AI startups. So I mean, they'll probably have another round soon.

• 7:44Scott Galloway?

  I would agree. I would, I would bet that that, if it's three and a half billion and there was at 80, what is that about a 25 times revenues? That's actually cheap for the AI sector. And you're right, they seem to be running away with it. It's interesting because all of the noise around how dysfunctional it is and board members leaving and Sam, you know, using Scarjo's voice, it's all, it's all noise. It's not news. The real news is the things you're focusing on and that is their revenues and what's going on there. But good for them. It does sound, that's an observation I didn't even thought of. They're clearly putting on their best dress for an IPO. Oracle, it's really interesting. Larry Ellison deserves a lot of credit here because there's a bunch of companies that

• 8:26Scott Galloway?

  are kind of getting hit hard for not making the transition to AI. I think Salesforce is seen as someone who hasn't made that transition, although their stock is done fairly well. It's a great company. I don't know if IBM is like that, but Oracle has positioned themselves as, hey, don't forget about us. And they have made real big investments here. By the way, Oracle's in my 401k, so I'm rich. Now you're rich. Finally.

• 8:54Scott Galloway?

  Their their shares up 13%. That's the biggest single day increase since December of 2021. People are excited about their partnership with Google, which will make its database available on Google Cloud. It's their second big deal in terms of AI. The company signed a similar agreement with Microsoft in 2023. And the company also reported strong revenue guidance and they've signed more than 30 AI sales contracts worth more than $12.5 billion. So Oracle and Dell have both positioned themselves in the front of the AI wave. They've done a great job showing that elephants can dance, if you will. And other legacy tech companies such as IBM and Cisco have not made that transition. If you look at total stock returns from 2020 to 2022, Oracle has a 59% return, Dell's

• 9:35Scott Galloway?

  55, IBM 26, Cisco's only 7%, so it's underperformed the market. It's just pretty, pretty impressive what they've been able to pull off. I think Larry Ellison is going to go down as one of the more measured success stories in tech.

• 9:49Ed Elson?

  Don't you think what they're doing right, though, is kind of just their storytelling? I mean, I feel like this is just more evidence that the Wall Street is basically refusing to listen to anything that doesn't have the word AI in it. Because you look at these earnings, these were pretty bad earnings. Like, they missed on the top line, they missed on the bottom line, they had a 7% revenue growth. Like, it's not a good quarter, but it's this story about AI that they've told and about the the potential pipeline of future AI contracts that got everyone so excited. And it basically made all of the other numbers irrelevant. And then you compare that to Salesforce, which you brought up and which we discussed a few weeks ago. They had higher than expected earnings on the bottom line.

• 10:32Ed Elson?

  They had 11% revenue growth, so it's significantly higher than Oracle. But at the same time, they had a pretty weak AI story and they just didn't convince Wall Street that they're going to be on the front lines with Microsoft, with Nvidia, with Google. And what do you know, the stock fell nearly 20%. So it feels like You know, Wall Street is kind of sending us a message here, which is, we only care about AI.

• 10:55Scott Galloway?

  I think that's really insightful, Ed, because just as you said it, it struck me that what I would want to know is that, so supposedly Oracle has signed 30 AI sales contracts worth more than 12 and a half billion. I'd want to know the complexion of those contracts, and that is if they just signed up 30 new database contracts, similar to what they always sign up, but they're calling it AI. I mean, you would hope that analysts would have something called, I'd love to produce this, an AI washing index. And that is, everyone's claiming that all of the revenue now is coming from AI, just because, all right, they, you know, whatever it is, it has an AI component to it. And so there is trying to separate the wheat from the chaff here, or the bullshit from, you know, the, just kind of ball, if you will.

• 11:40Scott Galloway?

  But it all, it all distills down to the same thing. And that is the core competence in terms of a CEO is the same core competence you would hope for your kids and that you want to inculcate into your children. And that is not an understanding of accounting, it's not leadership skills, or ethics, or sustainability, or whatever bullshit we can come up with to try and get people high paying positions in universities, so they have no accountability. It's storytelling. And that is, when I read that investor letter from 1997 by Jeff Bezos, I thought, I want to buy stock. When I hear Ted Sarandos or Reed Hastings speak, I think, I want to buy stock.

• 12:17Scott Galloway?

  These guys just have an ability to get on an earnings call and be very straightforward and yet visionary at the same time, and just instill so much confidence where you think, you know, I'm not sure I even understood what he's saying, but I just want to buy stock. The way it used to work was, okay, you're in tech hardware, you're in mainframe computing. Those companies trade between 12 and 14 times EBITDA, and if we like Bob more than Lisa, Bob gets 14, Lisa gets 12. And then things just went fucking haywire, and it seemed like a lot of companies that were sort of, when you really peeled back the curtain, were pretty similar. But one told a much better story. So storytelling has become really the core competence for. Growth firms, because their ability to get the markets excited about what they're

• 13:00Scott Galloway?

  doing such that they could pull forward cheap capital, reinvest more capital than their peers, such that they could pull the future forward and run away with it, see above Amazon and Netflix, has become the core competence. So there's got to be at some point, someone's ability to go, what's real and what isn't. And then the retort to that would be, well, storytelling is real. And if you can raise cheap capital, if you can raise capital cheaper than your competitor, you can pull the future forward and make the promise, turn the promise into performance. But to your point, it sounds like people who teach communications or investor relations should probably look pretty closely at the Salesforce and the Oracle earnings calls and say, what went right and what went wrong?

• 13:41Ed Elson?

  Shall we discuss this Tesla shareholder vote?

• 13:44Scott Galloway?

  Yeah, I guess we're recording on a Thursday. It's Thursday at 6:30 here, only because I'm planning to go to Maison Astelle tonight and get fucked up. So I'm watching the clock. My understanding is that both of these things are going to pass, that the shareholders are going to approve them. Is that correct? Is that what you've heard so far today?

• 14:02Ed Elson?

  That's what Elon's been saying.

• 14:04Scott Galloway?

  Okay. But does anyone know if it's true?

• 14:06Ed Elson?

  Yeah, I believe him on this one. I think it would be a weird thing to lie about. He'd look very stupid. And we'll know by the end of the day, by the time this podcast comes out, you know, the vote will be in.

• 14:16Scott Galloway?

  So look, the shareholders get to decide. It's been a bit of a soap opera. I'm kind of, I'm only slightly less sick about talking about this unless, you know, unless we want to talk about paramount.

• 14:27Ed Elson?

  Jesus Christ, make it go away.

• 14:29Scott Galloway?

  I just want them to get on with it.

• 14:31Ed Elson?

  Yeah, I think, I mean, I can't say anything with certainty how the vote will go. I think what I can say with certainty is that whether or not it's yes or no, this vote is basically meaningless because

• 14:47Ed Elson?

  Here's what will happen if the vote is approved. It'll go back to the Delaware Court of Chancery. It'll go back to Chancellor McCormick, who will open up that briefing. And she's going to be like, hold on, I adjudicated this case before. Actually, I looked at this case basically two months ago. I made my decision very clear. The answer is no. And I feel like what Tesla is forgetting is that if you read her opinion, she actually didn't care whether the shareholders were fully informed or not. Granted, she said they probably weren't, but it had actually no bearing on her actual decision. You know, she believed that the package was inequitable and that as a court of equity, she also believed that she had the power to rescind it.

• 15:32Ed Elson?

  And that was it. And now here we are again, and we've got the same case on her desk. So nothing's going to change here. And, you know, we discussed this with my uncle, Charles Elson, a few weeks ago. And he said the same thing, you know, he's like, this isn't about informed versus uninformed. This is just about is, was it equitable or was it inequitable? And she's already decided it's the latter. So, you know, they can appeal the decision. That might go somewhere, but this vote, this being their argument, oh no, we looked at it again and we still think it's equitable. It's just, it's just a nonstarter for her, for Chancellor McCormick. I just don't think this is going to go anywhere.

• 16:11Ed Elson?

  We'll be right back after the break with a look at a new IPO in London.

• 16:24Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 16:59Ed Elson?

  We're back with Prof G Markets. The London Stock Exchange got a boost last week from a surprising new entrant, Raspberry Pi. Raspberry Pi makes low-cost computers that are about the size of a credit card. They run an open-source operating system, and for more than a decade, hobbyists have customized them for things like streaming media, hosting servers, and learning to code. They're also used in manufacturing for things like inventory management or production line automation. Today, the industrial market makes up more than 70% of the company's sales. At its pricing, Raspberry Pi was valued at about £542 million, or nearly $700 million, and shares soared 38% on the first day of trading. So Scott, we recently discussed how the London Stock Exchange has been struggling

• 17:44Ed Elson?

  to attract IPOs, specifically tech IPOs, but it's attracted this company, and Shein, which we've also been discussing, is set to list in London too. So how do you think this IPO of this Raspberry Pi computer company will affect the broader IPO market in London?

• 18:01Scott Galloway?

  It's a big deal because it could change the world's outlook on the London Stock Exchange from the exchange of last resort to a player here. The total capitalization of London listed equities fell from 4.3 trillion in 2007 to about 3 trillion, so it's actually gone down about 40%. And over the same period, the value of US stocks has almost tripled to 53 trillion in the US. Raspberry Pi, it's great for the exchange because it's sort of a cool little company that had options to list on other exchanges, and they've started trading with a three-day conditional dealing period, during which trading was restricted to institutional investors. Maybe you can speak more about what this sort of conditional period means?

• 18:44Ed Elson?

  Yeah, I didn't realize this, I had never heard of it, but basically if you IPO in the UK, there's this three-day period where your shares are trading, but they're only available for trading among institutions. And what's particularly interesting is that those shares are reserved, but you don't officially own them until the three-day conditional dealing period ends, which means that if you're a company and you decide to IPO and you're in the conditional dealing period, you can just cancel the IPO if you're not getting the demand that you're liking. In other words... The London Stock Exchange basically lets you do a test run before the real thing. The thing I would ask to you is, you know, why do you think that they do this?

• 19:27Ed Elson?

  Like, and what does this say about the UK market versus the US? That they'd say, oh yeah, we're going to give you three days to sort of test it out among institutions. But once it's up, you know, then you then you're doing the real deal.

• 19:40Scott Galloway?

  Well, I mean, I don't, I don't know if this is the reason for it, but so the IPO market is rigged. Essentially, at prices, the bankers say this is a branding opportunity. You want to create positive momentum, so price it 10, 20, 30% below where we think it's going to open. And then the investment banks get to give basically free money to their institutional clients as sort of a quid pro quo for doing all their business through JP Morgan or Morgan Stanley or Goldman Sachs. But the retail investors who don't have access to the IPO buy in at the first trade, which is sometimes much higher. Now technically it could go down a broken IPO, but it usually doesn't. And sometimes, as in the case of Airbnb, it opens, it priced at 68. That's what institutions got to buy the shares for.

• 20:23Scott Galloway?

  And it opened at, I think, at 150, which is where retail investors got to buy it for the first time. So a guy named Bill Hambrick came up with this auction model back, I think it was like 10, 20 years ago, probably 20 years ago, where the IPO would be, they would basically pair the trade. And that is people would bid, buyers and sellers would bid in a Dutch auction until the market demand was sated at the number of shares. So it was sort of priced exactly at where the first trade would be, right? And that was a means of ensuring that the company got the maximum amount of capital for the same dilution. And that did not survive because it ends up the ecosystem, the biggest players, the institutions, the investment banks really liked a rigged market.

• 21:08Scott Galloway?

  That retail investors kind of got screwed. So I wonder if this is, I don't know the answer to this, but this is, is this an attempt to say, look, retail investors are going to get to pay about the same number as institutional? And also give the company an out if they don't like where the, where that number ended up being. I don't understand if this is nothing but more lax rulings for the company? Or an attempt to have retail investors pay the same number as institutional?

• 21:36Ed Elson?

  Yes, it's not totally clear to me either.

• 21:37Scott Galloway?

  Tune in next week for more shit we don't know. That's why you tune into Prop G. But what about this? No fucking idea, Ed. How same parts?

• 21:49Ed Elson?

  I don't know.

• 21:52Scott Galloway?

  There you go.

• 21:53Ed Elson?

  I'm sure you'll have a response to this. So the CEO, this guy, Eben Upton, was talking about his decision to list in London. He said, quote, "This was not a patriotic decision. We did take a look at New York, but we realized that for a company of our scale, the London market is probably a better home." He went on to say, quote, "Many of the stories people tell about the differences between the US and the UK, particularly this sort of magical multiple arbitrage, don't seem to be real." Which I find interesting because it's almost, it's almost like it's a jab at us, who have been basically saying exactly that, that, you know, if you're listing in the US, you're getting a little bit of a valuation jump, and that isn't true in the UK.

• 22:36Ed Elson?

  And the reason that we say that is because we just look at the numbers. But apparently, the CEO isn't worried about that. He isn't worried about this multiple arbitrage issue. So I'm just wondering what you think of his comments. Do you agree with his point? And do you think maybe he's finding some other value in listing in London versus New York?

• 22:57Scott Galloway?

  I don't know, because it might be. So we've pointed out that, that stocks that trade on the NYC and the NASDAQ traded whatever it was, 20, an average multiple of 26, and all the other exchanges is around 13. Now, that might be a self fulfilling prophecy, and that is the best companies list on those exchanges. It also might be much more heavily weighted towards tech, which traded a much higher multiple, whereas the companies that list on these other exchanges, probably more manufacturing or services heavy, which don't trade at as high multiples. So it might be a function of the type of company, as opposed to just that this company's ran the gauntlet here, so it deserves a higher multiple. I don't know. But I think this is really good for competition. I'm glad the LSE is getting some love.

• 23:39Scott Galloway?

  The biggest beneficiary here, in my view, is Shein, because everything about Shein going public, potentially on the LSE, has been about, oh, the exchange of last resort, and they couldn't go public in the US. Well, this is sort of creating some cloud cover and some kind of... Some juju, some mojo, some sex appeal, some pixie dust across the LSE where good companies, innovative companies are choosing this exchange. So a company with whatever there's, I don't know what the market cap is going to be here. I can't imagine it's going to be more than a few billion dollars. That's one thing, but the, the cloud cover and the umbrella brand increasing in value

• 24:19Scott Galloway?

  of the LSE, when Shein goes out at a 70, 80, 90 billion dollar valuation, if that makes the LSE and de facto Shein trade up, you know, five, 10% more, you're talking about seven to $10 billion. In other words, Shein, the best thing, no one is happier about Raspberry Pi going public on the LSE and having it being a good thing than Shein right now. Because what it says is no, the LSE isn't the exchange of last resort. The good companies are going public here. Investors should look at it and it's not a hold your nose and, and, and buy it because it's on the LSE. In other words, Raspberry Pi, a little bit turns listing on the LSE from a bug to a feature.

• 25:02Ed Elson?

  And you're happy, right? You're, you're invested in Shein or you're going to invest?

• 25:06Scott Galloway?

  I'm not as happy as if I was in St. Bart's, but I'm still pretty happy. Yeah, I've invested in Shein and I've got, I'm trying to find, I don't have any inside information, but I've been a investor and so I've been waiting for the prospectus to come out. I think they confidentially filed on the LSE, but the numbers that I've seen and the information are that it did 30 billion last year. It's going to do, I think, 42 this year. So it's growing 40, I mean, the numbers are just staggering here and it's also profitable. And if you look at their competitors, H and M or Zara, they traded ridic, you know, really healthy multiples and it looks like this company, should it maintain its growth, is going to surpass Amazon next year in terms of retail barrel sales. And then the year after that surpassed Walmart and probably have higher net margins.

• 25:51Scott Galloway?

  So anything that creates cloud cover for positive reception, I'm down with and excited about. So yeah, I hope it, I hope it goes well.

• 26:00Ed Elson?

  We'll be right back after the break with a look at the hottest new AI startup in France.

• 26:14Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 26:49Ed Elson?

  We're back with Prof G Markets. French AI startup Mistral secured $640 million in new funding at a $6 billion valuation. That's triple its valuation from December and the company was founded just 14 months ago. The realm was led by General Catalyst and included participation from Andreessen Horowitz as well as Nvidia and Salesforce. So Scott, Mistral is now sitting on $1 billion in total funding. Do you think it has any chance of taking on the likes of OpenAI and possibly the other AI juggernauts?

• 27:22Scott Galloway?

  Well, I hope so, but according to what you just said, it sounds like ChatGPT is soaking up or hoovering up all the revenue, but I would imagine that the EU, not only companies, but EU regulators are really ready to be supportive of a big tech or an AI company that's on the continent. I think they are kind of sick of sending all of their capital overseas to, you know, land at SFO International and then just stay there. So I think that this company probably has, and I've heard it's a good company, I've heard the interesting technology. The French actually have a very strong background. I mean, everyone knows that they have an incredible background in luxury. When you're born in France, you're just like, at the age of three, you're rearranging your blanket and asking for Hermes blankets and you just, you know, the kids like have a rattle

• 28:06Scott Galloway?

  that it is porcelain and then when they throw up their peas on their, on their bib, it's designed better and it just looks more seamless somehow. There's something about the French, they just get beauty. I mean, I'll go to Cannes and I'll, I'll go to these dinners and I'll be like, What like, who picked out these linens? These linens are beautiful. There's something in the water there, the DNA. Anyway.

• 28:26Ed Elson?

  That's what we were doing last night. We were looking at the wine glasses. We were like, these glasses are so light. They're so beautiful.

• 28:31Scott Galloway?

  Right. In French, same parts. There you go.

• 28:34Ed Elson?

  It's unbelievable.

• 28:34Scott Galloway?

  The genetic or the DNA or the business of luxury has been the gift that is kept on giving in France. The wealthiest man in Europe is Bernard Arnault, who immediately pieced out to Belgium for tax avoidance. But still Chanel, Hermes, you know, Vuitton, not is Vuitton? Yeah, Vuitton is Dior. I mean, they just, they just have such Chloe. They have such amazing brands. Clarence, you know, they have such incredible staggering. Anyway, what they don't get enough credit for is they actually have a fantastic schools in engineering and Dassault makes an incredible plane. Daddy wants a Falcon 9X. Anyways, they make, they have actually a very strong background in engineering and this is coming through.

• 29:18Scott Galloway?

  And I hope, I would love to see Europe, you know, kind of punch above its weight class or not even that, start punching at its weight class in terms of tech startups. There's Soloness out of Germany, which is an amazing software company. There's some fintech companies here in the UK that are doing pretty well or okay, I should say. So I hope this is a, I hope this is a win. I'm a huge fan of General Catalyst. I'm a bit pissed off they didn't call me and say, hey, Scott, you live in Europe and you're super special and partying in Cannes. Do you want to invest? Didn't get that call, Ed. Didn't get that call. Also, did I tell you I haven't been invited to the fucking I heart party with Lenny Kravitz?

• 29:56Ed Elson?

  Why are you so upset about that? Who cares?

• 29:58Scott Galloway?

  Pissed off. I'm gonna, I'm gonna be staying at the goddamn hotel. How embarrassing is that? I'm either with my boys and I'm like, Dad, it's a party in Cannes. I thought you were a big deal here. Yeah, man, no, no, let's, let's order room service. Anyways, but Mistral, this needs to be a healthier ecosystem. It needs to have more competition. I hope that it does well. I'm kind of curious. We need to do a deep dive here and say, what is its, what is its point of differentiation as all of these things begin to look like the same goddamn company?

• 30:26Ed Elson?

  Yeah, I mean. If you look at the cap table, the lead investor was General Catalyst, which is an American firm. Other investors include Andreessen Horowitz and Lightspeed. There are several other VCs, most of them are American. Most interesting, though, to me, is the corporate investor list. So you've got Salesforce, Samsung, Cisco, IBM, ServiceNow, Nvidia, and Microsoft. So basically, every single big tech company who, in my view, if this were like 20 years ago, I think Mistral would be trying to compete with those companies. I don't think they'd be taking their money and giving them equity. And you mentioned

• 31:08Ed Elson?

  this issue of diversity. We need more competition. I feel like this all goes back to the antitrust issue, which we've been discussing. And that is, it feels like big tech has a new monopolization strategy. It used to be that you bought your competitors. But then Lina Khan came in, she sort of cracked down, and the FTC said, no, no more of that. Now it feels like the strategy for big tech is invest in your competitors. Because by investing, you establish a level of power, you get some control, you also get a share in the upside. And crucially, as it appears, you don't get regulated. I mean, we haven't seen any intervention from

• 31:47Ed Elson?

  the FTC or the DOJ on any of these corporate investments. But it feels like it's a stone's throw away from just buying out your competition. I don't see how it's that much different. So what are your thoughts on this? I mean, am I right to be concerned by the fact that big tech and the Mag 7 is basically spread out across the cap tables of every single significant AI startup in the world right now? It's not just America. It's Mistral too, this French company that you'd think is French, but the entire investor base are just the same Americans. Is this not kind of a problem?

• 32:21Scott Galloway?

  The way I would describe it is that if you're a young man looking to lose your virginity and live in Kentucky, you should go to a family reunion. In other words, there's a lot of incest here. And that is, is that wrong? No. Is that wrong? Literally, we'll hear from a dozen people from Kentucky. I'm going to find out people I didn't even know were from Kentucky or from Kentucky and that it was inappropriate. People were upset about what we said about Austin. People were saying I was being rude to Austin for saying I don't want to live there. Yeah, just wait, it gets a lot worse. Just so you know, half my emails are people telling me what I should not have said and how, you know, their cousin suffers from some syndrome that I've... Anyways, like, you've pointed this out. This industry is just way too incestuous and has too many overlapping paths to one

• 33:06Scott Galloway?

  another. It's smart for them. Nvidia wants to have a really robust ecosystem. The last thing they want is a small number of players bidding on their chips. What they want is a ton of... They want a huge customer base. So for them, it makes a shit ton of sense for them to take, okay, 5% of their market... 3% of their market cap would be $100 billion and do everything they can to try and foment, fund, and catalyze a super robust AI ecosystem where not only AI becomes bigger and bigger, but there's a variety of future customers all needing these GPUs. Also, just from a customer standpoint, again, I just think regulators and European companies,

• 33:48Scott Galloway?

  at some point, I mean, one of the reasons I'm going to get geopolitical here, one of the most hopeful things about the conflict in the Middle East right now, the war, is that the Kingdom of Saudi Arabia actually coordinated with Jordan to help shoot down the projectiles coming from Iran. I realize there's a reach, but I will bring it home. And that is, the Kingdom wants to normalize relations with Israel. And I think part of the motivation for normalizing relations is like, we're sick of getting on planes and sending money out of the region to San Francisco for all of our tech. Israel has a ton of great tech. They're close to us. We seem to get along. You know, we're sick of being... I think everybody's getting sick of sending money back to the, you know, you want to

• 34:32Scott Galloway?

  talk about real, at least metaphorically, colonization? It's American tech companies that have basically turned every company in the world into their colony, sending resources back to Britain from India. And India is every company in the world, sending money to some company that's a bike ride from... SFO International Airport, I probably took that metaphor a little too far. But anyways, this is, I think that a lot of European companies have missed. It just offers a competent product that's in shooting distance or spitting distance of these other guys. I think a lot of European companies, maybe under the auspices of not having to pay additional taxes or whatever, that the EU regulators might place on non-European based tech.

• 35:16Scott Galloway?

  I think this, this makes a lot of sense. I think the investors here are smart to get into this thing because any competent AI company on the continent, it's the largest economy in the world, the EU. And I think a lot of European companies and regulators would really like to be able to put their money into a European tech company as opposed to getting invited to listen to Sam Altman give us hushed tone concerns around AI. I think they're, I think they're kind of sick of these guys, but anyways, we'll see.

• 35:44Ed Elson?

  Slight change of subject, but we should talk about this new company, Tempest AI, that's going public. It's a healthcare company, but it's also supposedly an AI company at the same time. So that they're aiming to raise $400 million. They're targeting a $6.1 billion valuation. And they're this precision medicine company that quote, "uses AI to make laboratory tests more accurate, tailored and personal." Now, the reason I bring this up in this conversation is because until about six months ago, this company was called Tempest. And today it's called Tempest AI.

• 36:26Ed Elson?

  So they just tacked AI onto the end of the name and now they're going public. And Mia looked at their S1, she found that they mentioned AI 220 times in the S1 filing. And meanwhile, as a percentage of revenue, AI makes up, wait for it, 2% of the business. I'm going to go ahead and assume that you and I agree that there is a very strong stench of BS coming from this IPO, this Tempus AI IPO. But, you know, as it relates to the broader market, what do you think this IPO and this company says about the rest of the AI market right now?

• 37:04Scott Galloway?

  First off, I, I like this company.

• 37:06Ed Elson?

  Oh.

• 37:07Scott Galloway?

  I actually emailed the CEO, he's the former CEO of.

• 37:10Ed Elson?

  Okay, so I've just been shitting on it.

• 37:12Scott Galloway?

  That's fine. You're, you're, that's why people come here. They want a no mercy, no malice view of this shit. Here, I mean, that's why people love prop G dot AI. There's a lot to like here. Healthcare and AI, that just feels like champagne and cocaine, right? I've always thought that healthcare is the most fertile place for disruption and the fist of stone for, uh, coming for it might be AI. It's a real company. A lot of, a lot of healthcare companies use the product. They have real revenues. They've been growing really fast. Having said that, to your view, is it AI washing? That's the bottom line, right? It's not, I mean, the stat is crazy. They mentioned AI 220 times and yet AI accounts for less than 2% of its revenue.

• 37:57Scott Galloway?

  So this is going to be a very interesting IPO to watch because what it's going to indicate is just how frothy the froth is. And if this company goes out and say goes up 20, 50, 100% on the first trade, then we know that the party is still going. And by the way, they might be able to take that cheap capital and get better at AI and go from 2% to 20%. So again, see above storytelling. Or if the market prices this thing and it doesn't have a first day pop and maybe within a few days it's a broken IPO, it might signal a top. It might signal that, okay, the halcyon days of, you know, anything that says AI are

• 38:38Scott Galloway?

  over and that people, people are sort of, at some point, people are going to get very cynical around this stuff, right?

• 38:45Ed Elson?

  I'm already getting just so sick of it myself.

• 38:47Scott Galloway?

  Yeah. I can imagine where at some point AI starts to have the same stench as SPAC, right? It's like, okay. Enough already, or you weren't around, but Williams Sonoma was one of my first clients as a strategy consultant. And they were very seriously considering changing the name to WilliamsSonoma.com. And there were a lot of companies thinking about dot com and they added and all the, they used to run commercials with nothing, but just the name and then dot com.

• 39:15Ed Elson?

  Given your experience there, what do you think was the right move? I mean, do you approve of a company tacking AI onto the end of it? Is it actually potentially a good thing for the business? Would Williams Sonoma have benefited from going the Amazon route and calling themselves, you know, WilliamsSonoma.com, Amazon.com?

• 39:34Scott Galloway?

  It went further than that. And I think the statute of limitations are over. This was, Jesus, this was 30 years ago. Let me see, I was 26, I'm 49 now, so it was 23 years ago.

• 39:45Scott Galloway?

  But I remember being in meetings with bankers and the bankers were trying to convince Howard and his team, and they invited me into these meetings to spin out the dot com business. They wanted to take WilliamsSonoma.com and spin it into a different business. And of course Howard goes, that's makes no fucking sense. And the banker's like, we get 10 times revenues for this business as opposed to your stores. He was like, yeah, but how do I get my store managers to participate? And he was just sort of, he was not easily impressed by financial engineering. He was, I think that's one of the things that made him a great CEO. So if you look back, if history is any guide, there aren't that many companies that were able to get so much cheap cash. Well, I guess, I mean, Amazon, it was Amazon.com. Eventually they sold, they dropped the dot com.

• 40:29Scott Galloway?

  But Amazon, there was, there was a there there. They were really selling all their shit online. The other companies that tried to pull a fast one and say, oh, we're an internet company that weren't really an internet company. Like that shit blew up pretty fast. It just, the whole thing just started collapsing on itself. Now, the companies that made it through that valley of death, Amazon and a bunch of others, ended up being, you know, worth a ton of money. The question is, when is that valley of death or that shakeout going to happen? And I would bet that it's, you're just seeing symptoms everywhere. Now, does that mean it happens in three or six months or in two or three years? I don't know, it kind of feels like 98 to me. I think we're full froth and we've still got some running distance here.

• 41:12Scott Galloway?

  But these cycles tend to, the cycles tend to get shorter and shorter. Or we tend to cycle through, cycle through the cycle more rapidly, if you will. But I think you're going to see, I just think you're going to see an enormous fallout. And, and Tempest, bringing back to Tempest, this will be a bit of a bellwether for where we are in the quote unquote AI hype cycle.

• 41:35Ed Elson?

  Yeah. So you think that the top is not already in?

• 41:38Scott Galloway?

  I think, I, let me put it this way, the way I would say it is the bell is in, we have visual on the bell. This stuff's just getting kind of so out of control that we can see the bell now. Is it going to be rung in three months or two years? We'll see, but there's no way we can sustain these valuations across a bunch of companies that quite frankly are just sort of David Copperfielding their business strategy by saying, "Look over here, we're AI," and then stuffing an analog rabbit into a hat. That was pretty good.

• 42:09Ed Elson?

  That was good. I think I'd argue that the bell for me was Jensen Huang signing a woman's chest. I think that I'm going to call that as my top.

• 42:17Scott Galloway?

  That was the bell? That might be the image.

• 42:22Ed Elson?

  All right, let's take a look at the week ahead. We'll see US retail sales and existing home sales for May. Scott, do you have any predictions for us?

• 42:30Scott Galloway?

  Well, I'm just super excited, or I'm super excited. As much as I hate it and as stupid as the Vision Pro was for Apple, Apple's intelligence is that smart. Apple is the best managed brand in the world. And in just a stroke of genius, they said, okay, AI is starting to smell like Teen Spirit. If Teen Spirit was drama and people fired and rehired and catastrophizing, it'll save the world, no, it'll destroy the world. And I think that they just said, no, we want to own this, make it our own, make it more friendly, make it less, make it less Skynet or weirdness. Let's just call it Apple Intelligence. My prediction is big a flop as the Apple Vision Pro is, Apple Intelligence will be that big a hit.

• 43:11Scott Galloway?

  That was a mouthful. Go drink rosé, Ed. Take care of everybody. Realize that the reason you're there is because you work for someone who is both talented and generous, remembers what it was like to be a young person with not a lot of money, although you are overpaid. But I want you guys to have a wonderful time. Eat fromage. Eat fromage. I want you to wear a thong, scare some people. There's, there's actually a nude beach at, what is it? I think it's at, where's that nude beach? It's on, oh God, what the fuck is the name of that? Anyways, you'll find it. You'll find it. Anyways, HR nightmare. Your boss telling you to find a nude beach. Call HR.

• 43:54Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavas and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Ray Dalio.

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