Focused Compounding Ep 475. AI Capex, NFLX/WBD Deal, and the FISV/LRN Meltdown
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Dec 7, 2025 In this insightful discussion, investment professional Jeff Gannon dives into the implications of Berkshire Hathaway's Alphabet purchase and the challenges of AI revenue models. He elaborates on the contentious Netflix-WBD deal, assessing its regulatory hurdles and strategic ramifications. Gannon also examines the recent sell-off of Fiserv amid rising credit risks, along with the current state of the housing market and its impact on homebuilders. His analysis connects these themes through the lens of capital cycles and the evolution of technology in various sectors.
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AI Turns Big Tech Into Capex Machines
- Large tech firms now require massive ongoing capex to compete in AI, changing their cash flow profiles.
- That shifts valuations toward enterprise-value-to-free-cash-flow concerns rather than simple market-cap metrics.
AI Spending Is Circular And Overhyped
- Announced AI funding and partnerships often create circular capital flows that may never fully materialize.
- Raising huge sums doesn't guarantee spending, so GDP and capex effects may be overstated long term.
Deal Risk Lives In Financing And Regulators
- The Netflix–Warner deal hinges on regulatory and financing risks more than headline price.
- Large cash components and reverse breakup fees make closing materially uncertain despite high valuations.