Are you sucking wind from trying to keep up with AI and its impact? Take a breather and tune in to the Intelligence Shift, Morning Brew's new podcast with PWC. It bridges the gap between big picture AI concepts and what it actually means in practice. Host Dan Priest is joined by expert guest to discuss AI's role in sports, music, HR, and more. Any Intelligence Shift wherever you get your podcasts. Face your design, grab a serrated knife and start hacking away. But some gourds are such specimens they are better left alone, like the humongous pumpkin grown by Ron Wallace in Green Road Island. This week his pumpkin was certified by Guinness as the largest ever clocking in at 3156 pounds or nearly as much as a Honda CRV. Wallace told The New York Times he had a good feeling once he first planted the seed just six months ago saying the plant was spectacular from the beginning. I have fallen down a pumpkin growing rabbit hole recently. There's this account on Instagram called Pumpkin Easter where a grower documents her journey trying to grow these behemoths in Maine. It is so stressful. She is fighting off raccoons, the neighbor's cats throwing on tarps, throwing rainstorms, monitoring nitrogen and potassium levels in the soil. She names all of her giant fruit too and Seabiscuit was her giant pumpkin this year. It's just one prettiest pumpkin at a local pumpkin competition. Her giant marrow, which is actually a giant zucchini, was called a war admiral. That just set the North American record again, Neil. I am so deep in this world right now, so I love that it's getting more attention right now. It's hard to talk about it with anyone else though because if they're not clued into the subculture as well, you sound like a crazy person, but awesome to see that records are being broken. Especially in Rhode Island. Yeah, I guess it's a giant pumpkin growing powerhouse and I guess Maine is too, but New England rise up. Apparently, he had offers to weigh his pumpkin at a different competition with more prize money on the line, but he wanted to keep it local because he wanted to be around his grower first. He wanted to keep it local because it was so big and probably cost so much transport today. And now a word from our sponsor into it. If your finance team spends more time finding data than using it. If there's one entity here and one here and one here and one here. If scaling your business feels like starting over, you need the Intuit ERP. Intuit Enterprise Suite is the AI native ERP solution that's powerful, painless and proven. Intuit Enterprise Suite, the AI native ERP is here. From the makers of QuickBooks, learn more at Intuit.com/ERP. Like that recruiter on LinkedIn who won't stop hitting you up, inflation is looking mighty persistent. The Consumer Price Report dropped yesterday and painted a rough picture for September. Monthly inflation jumped 0.6% while annual inflation arrived hotter than expected at 3.7%, slightly above what economists predicted and well above the 2% level, the Fed targets. The biggest driver was, unsurprisingly, energy costs. Gasoline jumped nearly 10% accounting for about half of the entire monthly increase in the headline number. Remember that fuel oil story from last week, well, Northeasterners look away, fuel oil prices are now up 74% over the past year. Shelter use cars in apparel were other categories where things got more expensive, contributing to a rise in core inflation, which excludes food in energy costs. The fact that core inflation also came in hot worries economists because it shows you can't just place all the blame on the energy shock stemming from the war in Iran. Yes, high gas prices were a major contributor to inflation jumping the most since May, but rising prices in air fairs use cars, recreation and medical categories shows that the one-off shock is spreading its tentacles across the economy. All I's now turn to the Fed and its next meeting at the end of the month is this report the ammo it needs to keep raising rates to try and cool the economy off. The next meeting could swing either way, but a hike is almost certainly coming with market showing a 96% chance that the Fed will raise rates again before the years and meal not a report card that anyone wants to hang on their refrigerator. No, kind of like me in high school. The big takeaway from this report for me is wages are seriously falling behind inflation, taking a whack to Americans purchasing power. Inflation outpace wage growth for the sixth straight month and this gap was the biggest yet average hourly earnings for September were down 0.7% from a year before. Inflation was 3.7% wage growth was 3%. So if you're wondering why people say they're down on the economy, then this is it because they're bringing home less money because inflation is eating out their wages. Your real income, which is your income when adjusted for inflation is simply negative and it has been for six straight months. Remember to inflation is cumulative. Jonah Goldberg, the editor of the dispatch gave a good analogy. He said in a heat wave, if the temperature went up 10 degrees yesterday and five degrees today, you wouldn't say it got cooler. You'd say it is effing hot and getting hotter and then to bring it back to inflation. He said, nobody experiences the inflation rate. They experience the relationship between their wages and prices as you are mentioning. And if wages haven't gone up enough and prices haven't gone down at all, that is when you start to feel this really crummy outlook on the economy. One thing too that's contributing to inflation, not just energy costs, the AI build out as well. If you look at the specific categories that go into these AI data centers, chips, semi-conductors, that led to a 9.7% rise in the price of computers, peripherals and smart home assistance compared to a year ago. And Goldman Sachs actually estimated that the build out is responsible for nearly half a percentage point of the annual inflation rate. So even the thing that's propping up the economy is contributing to higher prices. Okay. We're going to head to the Fed as possibly our white knight to bring down inflation. What's going to happen at this next meeting in a couple of weeks is what everyone on Wall Street wants to know before this inflation report, there was a 20% chance that the Fed was going to hike rates. Remember back in September, they raised rates for the first time in three years to cool down hot inflation. So for this next meeting, before this report, there wasn't really a high expectation that they would raise rates again in October right before the midterm elections. However, we saw a huge shift in investor expectations about the Fed meeting right after this report dropped. It went from 20% to 50%. So now it's essentially a coin flip about whether Kevin Warsh and his buddies at the Fed are going to raise rates to cool down hot inflation that's been above 2% for more than five years now. Let's move on. A new point of leverage has emerged in the Ukraine Russia War. Elon Musk's Starlink. The New York Times reports that overnight Wednesday, the US appears to have throttled back Ukraine's usage of Starsheel, the military version of the satellite internet system, paid for and operated by the Pentagon. Starsheel is a huge component of Ukraine's military strategy, enabling everything from bombers to vehicles transporting troops. The restrictions, though, were felt most immediately and acutely by Ukraine's extensive network of drone operators who said their connectivity would unexpectedly drop off for anything traveling faster than 100 miles an hour. To make matters worse, Russia launched 39 ballistic missiles while Ukraine was dealing with Starsheel restrictions, targeting the country's energy infrastructure. The attack was the largest salvo of the entire war, according to the New York Times, and killed 12 people and led to nearly 600,000 without power. The restrictions on Starsheel come as Ukraine faces pressure from the Trump administration to stop its strikes on Russian oil refineries. As the White House tries to limit the rise in global diesel prices, lots of moving parts here, but this incident shows just how ingrained a militarized version of Starlink has become in this war and how any interruption in service can be very dangerous. The big unknown here was who made this call, who throttled Starsheel for these drones and other equipment going up to 100 miles per hour. I was waiting all day. I was refreshing Elon Musk's Twitter account, seeing whether he would respond. I don't recommend this to anyone, but appeared last night after I went to bed. He did respond, and he really passed the buck onto the White House. Musk said that Starsheel systems are owned and controlled by the U.S. government. Any limits on speed or usage are decided by the U.S. military and ultimately poached. So he's putting it on Trump, who has made his displeasure with Zelensky pretty clear over the past couple of days. This morning, it appears that some restrictions have been at least partially lifted. The former Ukrainian defense minister Mikhailo Fedorov thanked Elon Musk early this morning saying that we're seeing better connectivity at speeds up to 160 kilometers per hour and said that removing Starsheel's speed limit entirely is now critical for Ukraine's defense. So it seems like some of those curbs are being pulled back. They're thanking Musk, but Musk says that he had nothing to do with it in the first place because this Starsheel system, that's the military grade version of Starlink, is in the hands of the Pentagon in the White House. So it does open up a broader debate on whether you want to make an Elon Musk company, a U.S. company, central to your defenses as another country. The same sort of debate is playing out over in India. Elon Musk has been trying to get Starlink active and up and running in India for a long a time now, though, but he's saying that a lot of the countries existing, you know, billionaires are kind of controlling the telecom infrastructure they are.
and restricting him from bringing Starlink online. But India's government has cited national security concerns about allowing a foreign satellite operator into a sensitive industry like this. And so they're probably looking at what just happened in Ukraine saying that could very well be us if we let Starlink and Starshield into the hen house. - The problem for Ukraine is they are very friendly with Europe more so than the US at this point. But Europe does not have its own satellite champion to compete against Starlink. So they don't really have a choice. They have to use Starlink. That's the only option for them for remote connectivity in certain places to conduct this war and this defense against Russia. But you did see shares of the European satellite operator Yudelsat, which is wants to be a competitor to SpaceX and Starlink surge yesterday as maybe Europe tries to build out this this space satellite telecom infrastructure that they don't have currently. So they don't have to depend on the United States. And the whims of what Elon Musk says is the president and about whether they can conduct this war. So just shows how Elon Musk has really inserted himself in as a critical node in a lot of geopolitical issues. Moving on, Netflix announced its biggest layoff in years as the streamer contends with slowing growth and meager engagement. Yesterday, the company said it was cutting about 1,000 positions globally, around 6% of its staff with most of the layoffs coming in the product tech legal in HR divisions. That represents the biggest staffing reduction for Netflix since 2022. In an email to employees, Koseo's Greg Peters and Ted Cerandos wrote, "Our mission to and entertain the world is ambitious and delivering on it requires us to be disciplined about where we prioritize our people and resources." Netflix is certainly not entertaining Wall Street at the moment. It shares are down 40% over the past 12 months, even as the broader S&P 500 as it increased 17%. Investors are particularly concerned about Netflix's lack of blockbuster hits. When it was the last time he came into the office and everyone was talking about a new Netflix show or movie, yeah, it's been a lot more Apple recently. While Apple dominated the Emmys, Netflix came away with the fewest trophies in a decade. At a Bloomberg conference last month, Cerandos acknowledged things have been a slog. He said, "Overall, we're not growing as fast as I want us to and we're working on making that move faster." Those layoffs seem to be part of that strategy, but with shares falling again yesterday, it doesn't seem like Wall Street is convinced they're tackling the root of the problem. I can't help but think back to a Neil's number from a few weeks ago that show Netflix is struggling really hard to retain audiences across multiple seasons. Data from Bloomberg came out showing that pretty much every one of its popular shows loses a hefty chunk of its audience as you enter the second season. One piece, one of Netflix's most popular shows in 2023 lost 30% from the first second season. Beef lost more than 70%. The night agent was down 50% from one to two and then another 35% from two to three. So this is the effect that Netflix is struggling with. Yes, they probably have the best breath of content. Yes, there's something for everyone on Netflix, but no one really seems to care enough to stick around, which is why they're saying they have this engagement problem. And maybe it's a canary in the coal mine moment 'cause Netflix is still doing all right in terms of churn. They have the industry's lowest churn. No one's really cancelling their subscriptions as of now, but it is a warning sign if you can't get people to care about your shows for more than one year. I'm old enough to remember back in 2022 and Netflix was going through a similar slump they reported a negative growth. They reported a decline in subscriber numbers and their stock was in the dumps. They managed to turn it around. So it's never unwise to, it's never wise to write off Netflix. They rolled out a bunch of new initiatives. They did that password crackdown sharing with due subscriber numbers. They rolled out an advertising tier which got a lot more people hooked on, you know, a cheaper version of Netflix. The problem is YouTube, which is the biggest rival right now wasn't such a force then. And it is now YouTube is eating Netflix's lunch. Their share of US TV market reached an all time high of 14.2% in July while Netflix is dropped to 8%. So that's why you saw the stock fall yesterday. It's not a man, it doesn't seem like a matter of just streamlining operations and cutting costs here and there there is a greater existential crisis when it comes to YouTube taking over Netflix on being on your TV screen at home. - It seems like it's only hope now is sports and it does have a sports empire at this point. It's broadcasting NFL games on Christmas. It has boxing matches. It air matches of the women's world cup and it recently just signed a deal to air matches of the men's rules cup over in Spain. So that seems to be its version of password crackdown is, let's just move into live sports and get a bunch of things on TV that people we know want to watch in the moment. - That's expensive though. And when we talk about engagement numbers, why is that so important? It's because Netflix has rolled out this advertising tier and it wants advertising to make up a greater share of its revenue as opposed to subscriptions. But to sell ads you need to keep people engaged. Like that's what we try to do on this podcast is keep you here for the whole time and not have you drop off because we get paid through ads. And that's what Netflix is increasingly moving into. So that's why Wall Street investors are so concerned about these engagement numbers because you need to keep people on your platform. Two sell ads when people are jumping off the first season. And yeah, maybe they're not canceling their subscriptions but they're not sticking around the platform long enough to watch ads. That is a big problem for Netflix. - On that note, let's take a quick break and come back with news numbers right after this. - Every day shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard too. Vanguard investor choice makes it easy to set your proxy voting preference for your eligible Vanguard index funds. 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That's advertising.amazon.com/rising-stars. - Mental health is no laughing matter. Unlike parents, those little guys are hilarious. - Yes, but we're not talking about ferrets, we're talking about rula health. Rather than dealing with things later, they help you access quality, affordable mental health care with sessions costing an average of $15 with insurance. - They vet their provider's monitor outcomes and over 90% of patients report feeling better and making real progress. They help you find a therapist for your specific needs with provider specializing in over 90 conditions. - To get started, head to rula.com. That's r-u-l-a.com and take the first step. - Welcome to Niels Numbers, the segment where I share three stats in the week's news that will make you feel as accomplished as when you nail the temperature on a shower you've never encountered before on the first try. For my first number, Gen Z is moving in droves to a state that might surprise you, South Carolina. The home of Palmetto Trees and the Gamecocks saw a neck gain of 22,800 Gen Z adults, the most of any state in the country in 2024. Missouri was a distant second with a neck gain of 14,000 Gen Zs. The data come from the US Census Bureau analyzed by Lending Tree for the most recent year available, 2024. Lending Tree found that nearly a quarter of Gen Z moved across state borders last year, the highest share of any group, which makes sense because about four and 10 of them were traveling for college. And that might be where South Carolina's popularity comes from. The University of South Carolina in Columbia has exploded as a destination for out-of-state students. Last year, the school received almost 70,000 applications of which nearly 80% came from outside of South Carolina. And once they graduate, young professionals are eyeing South Carolina for its low cost of living, job opportunities and access to major cities. One of the fastest growing parts of the state is just over the border from Charlotte, North Carolina in towns that have effectively become suburbs for that financial hub. Whenever I see these stats of where Gen Z is flocking to, I also want to know where Gen Z is leaving. And the answer is almost always California, 58,000 Gen Z adults left. Again, it's by population. So California is the most populous state. So obviously, that raw number is going to be very high. But you look at some of the states with the biggest net losses. It is California, it is New Jersey, and it is Illinois. Those are the top three. So there's definitely a sun belt migration in root here. California, two Texas is actually the biggest migration around 19,000 Gen Z adults moved from California to Texas. So it's a story we've talked about a long time is the rise of the South. People are realizing that, hey, I can go to a state school in the South, have a great time in college. Not, you know, pay a lot of money and have bad weather up in the Northeast. So the fact that South Carolina is, you know, the biggest gainer here is not surprising whatsoever. >> I'm at this kid from Long Island this weekend, and he's a freshman at Clemson. And we were saying, wow, is, you know, what's going on with the Northeast to the South migration? Like, is this happening? And he goes, yeah, literally all of my friends go to college in the South and particularly University of New York.
of Florida. So South Carolina is one of the biggest gainers of young people because where they just want to go, they just want to go to college in the South, it does seem fun. All right, from my next number, it now costs more to ship oil from the U.S. to China, $80 million, then to book a standard launch on a SpaceX Falcon 9 rocket, which costs 74 million. The fact that it's cheaper to put something into space, then send some barrels of oil across the ocean, pointed out by gifts and ship brokers. So it's just outscramble the energy supply chain has become due to the war in Iran. Because of the chaos around Tormuz, there's a global tanker shortage that's caused shipping prices to go parabolic. According to brokerage SSY, prices for supertakers are the highest they've ever been even adjusting for inflation. Causing the shortage is a number of factors, including longer shipping journeys from how complex it is to get oil out of the Middle East. Bloomberg says that sometimes these trips take a week longer than they used to, stretching out the fleet available, also not helping Iran's attacks on ships that put them out of service. And the hooties and Yemen making like difficult to transit another key waterway, the Bob El Mandelbe straight. Overall, it's a fantastic time to be a shipping company and a horrible time if you need to hire one. I mean, put another way. So it costs 80 million to hire an oil tanker. It earlier this year, you could have bought a nearly identical tanker outright for $80 million. So it's cheaper now or it's more expensive now to rent one than it was to buy one. Part of the issue too is ships just got all in the wrong places when the energy shock hit when the war in Iran broke out. A lot of ships left the region looking for business other places around the globe. But if you need those ships back near the straight of Hormuz as traffic starts to pick up a little bit, takes a long time and that rearranging means that costs go up. The shipping industry as a whole is just interesting as well because it is a very small group of shipping magnets. That is a great word to describe these families because they control most of the global tanker feed and it's a few, you know, Greek shipping families, a few Norwegian shipping families and some South Korean billionaires as well. It's a very secretive group that is just reaping the rewards of such a capacity crunch right now that they are making a lot, a lot of money. I just wonder how much it costs to ship a 3000 pound pumpkin from Rhode Island to your house. I mean, I think you do it via somebody truck at this point. You don't do, you don't even get it on the water. Let's keep it on the road. I mean, you go in the Atlantic and float down on it. Yeah, you could hollow it out. Just row it down. All right. My last number is 28.1 miles, which is the distance driven by NASA's Perseverance rover on Mars. It may not sound like much here on Earth. Some of your commutes may be longer, but it is a new distance record for a vehicle in the solar system outside of our planet. On Sunday, the New York Times reports NASA confirmed that Perseverance zoom passed one of its predecessors' opportunity to make history. When Perseverance landed on Mars in 2021, its parachute contained the hidden message, dare mighty things. Turns out those mighty things involved inspecting a bunch of really old rocks. For most of its first year, Perseverance explored the Jazeiro crater where it touched down, then moved on to a nearby river delta to hunt for remnants of organic material. Now it's entered a new region looking at rocks that are about four billion years old. All this might sound like a lonely endeavor up there on Mars, but like Ryan Gosling, Perseverance had a space travel buddy. Ingenuity is a helicopter that accompanied Perseverance to Mars, hiding out under its belly and completed 72 flights until a rotor broke down in 2024. Looking ahead, there's no plans to slow down Perseverance's wanderlust, and NASA wants to extend its distance certification to over 62 miles. Rovers have come such a long way. If you go back to 1997 in Sejorner, the first robotic Mars rover ever, that traveled 341 feet over 12 weeks. Kind of stunk, honestly, and it had to be very precisely remotely operated by people back here on Earth. Now Perseverance uses self-driving technology so it can zip around without a human controlling its every move. I feel bad for it, though, because it feels bad for everyone. I do. I know. I'm an M-Fath, but so it's been collecting all these Martian rock samples with the intention of eventually returning them to Earth, but right now NASA's sample return mission has been canceled because of high cost. So imagine just toiling away up there, storing rock samples, drilling here and there, driving all around, and yet no one actually is going to take the sample. Is that not a little bit sad? It's not Wally. It doesn't have feelings. It's a literal robot. Imagine your whole existence, though, is just cut out from underneath you because of budget constraints. So I hope one day someone gets up there to collect your rock samples, Perseverance. Let's switch to the finish with some final headlines. The AI trade is turning from a money printer into a money shredder. Chip stocks have gotten absolutely hammered this week. The Philadelphia semiconductor index has fallen 12 percent over the past six trading sessions, wiping out 1.6 trillion in market value good for its longest losing streak since May of 2025. More than half the index has lost at least 10 percent with arm down 21 percent, applied materials down 16 and intel down 13 percent. Why the wipeout? Well, the hotter than expected inflation report raised expectations of a Fed rate hike, making it more expensive to finance the data center build out. Broadcom CEO HawkTan also sounded off on some of the inflated valuations for stocks, comparing some AI investors to casino gamblers this week, while warning that the industry could run into funding constraints. Plus, the dip buyers have gone missing. JP Morgan says that unlike previous corrections, retail investors aren't rushing in to buy this particular dip. The big question now is whether this is a healthy correction in the AI boom or a rethinking of if all this AI infrastructure is actually going to be worth it. Things started to get a little wobbly in the chip sector on Tuesday. Then the bottom completely fell out yesterday. The NASDAQ fell 1.9 percent. S&P 500 dropped 1.1 percent. Those are the indexes biggest one day declines since July. There was a lot of blame to point around, but one of the companies that is flashing a lot of warning bells. I probably mixed up some metaphors there is core weave, which buys in video GPUs and then wets them out. It's a very capital intensive business. It's called a neo cloud. They want public somewhat recently. Well, their debt is now trading below 80 cents on the dollars. That's typically distressed levels that cause Elon Musk to respond yikes. And now credit default swaps on the company. They're pricing in a more than 50 percent chance of default within the next five years. So if you're looking for if you use this phrase a lot, a canary in the coal mine for the AI data center trade. It's core weave, which is now trade whose debt is now trading in distress levels. We do. We do. It makes metaphors a lot warning. Watching warning bells in the coal mine while canaries are flying around. You got the point though. You got the point across. All right. Finally, the clip clop you hear when entering Central Park and the smell are officially on their way out. New York mayors are on mom. Donnie announced the horse carriage industry is coming to an end after securing enough votes from city hall. A bill is expected to pass next week and marks the demise of a more than 150 year old tradition popular among tourists, but derided by animal activists. The two previous mayors had attempted to shut down the Central Park horse carriages, but gave up after pushback from the industry and its supporters. A recent tragedy appears to have tipped the scales one in June and 18 year old Indian visitor died after jumping from a runaway carriage. Advocates for the horse carriages claim the ban will be devastating for people who work in the industry. Transport workers union international president John Samuelson said the bill has no meaningful economic relief for workers and that the council speaker used the tragic death of a tourist to contrive a public safety crisis. Yeah, it's always been sort of a tradition that has stopped this from going through the ban. That is build the blasio wanted to eliminate horse strong carriages. He said on my first day in office, I'm going to do it and then unions started finding back, but then also like Liam Neeson jumped in the phrase and had this very high profile media campaign defending the industry because it has shown up in so many iconic places of New York lore. I mean, a lot of movies, the bandwagon, you have Fred Astaire dancing in a carriage, you have home alone too, lost in New York, McCulloch and use the carriages to escape. So it has just been so ingrained in the New Yorkers psyche. And a famous Seinfeld episode. And a famous Seinfeld episode, I knew you would have one. But so yeah, there's the cultural argument against it and there's the, you know, economic that people have these livelihoods. But a lot of other, you know, modern New Yorkers are saying, this is inhumane for these horses. We don't need this anymore. That whatever cultural aspects it brought to the city is not outweighing the fact that these horses are under distress. That is all the time we have. Thanks so much for starting your morning with us and have a wonderful Thursday to share your thoughts on the episode or anything else. Send an email to
[email protected] or DM us on Instagram @NBDailyShow. Let's roll the credits. Emily Millarne is our supervising producer. Raymond Loot is our senior producer. Our producer is Olivia Graham and our associate producer is Olivia Lake, technical direction by Yucheno Vaogu back for a celebshot. Heron makeup is in desperate need of a Halloween couples costume and our show is a production of Morning Brew. Great show Daniel. Let's run it back tomorrow. Contentful in partnership with The Atlantic released their latest report that maps out the five questions marketing leaders need to answer to succeed in the agentic web era. The report helps marketing leaders figure out what they need to decide when it comes to defining AI's role within their team, the risk of deferral if no one makes a call, what success looks like, and the review cadence needed to stay on top. To see all the findings go to Contentful.com/MorningBrew.
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