Apple is the first $3 trillion company. Should I care?

Sascha: [00:00:03] Welcome to The Dive podcast. It asks whoever said business news needs to be all business. I'm Sascha Kelly, your host, and today it's one of my favourite episodes. Style's where I'm packing three short, sharp headlines that stopped us in our tracks this week. So what are we talking about today? First, Shane, a company that's famous for its scale and speed. It produces 70 times the amount of product of H&M. They've just announced an IPO. We're also talking about John McEnroe, who might be joining you in your living room for every Wimbledon match this season. Thanks to the power of AI, a company has made history by reaching the $3 trillion club. Congratulations to Apple. It's Wednesday, the 5th of July. And today, I want to know just more about these breaking headlines. To talk about this today, I'm joined by my colleague and the co-founder of Equity Mates. It's Bryce Leske. Bryce, welcome back to The Dive. Long time between drinks. 

Bryce: [00:01:05] Well. Yes, With Darcy out of the equation, I've got to give Ren some respite. So I'm glad to be back. Back in the hot seat. 

Sascha: [00:01:14] Hot seat of the day. Look, let's start with the trillion dollar headline. Apple has reached a $3 trillion valuation. That is massive. 

Audio Clip: [00:01:24] And of course, Apple. We do officially now have. For the first time since January 22, a market cap above $3 trillion. That's a nice 1% gain. 

Bryce: [00:01:35] Who doesn't want to talk about a $3 trillion company.

Sascha: [00:01:38] Yet to peel back the curtains of Equity Mates HQ. Alec And you were really divided. You thought it was the biggest story of the day. Alec thought 3 trillion was arbitrary. I mean, it is just a number. It's a massive number, though. Why did you think it matters?

Bryce: [00:01:54] Well, let's just rephrase it. I don't think it was the story of the day, but it's definitely a story worth talking about. When's the last time a company hit $3 trillion? Never. Exactly. This is the past. This is the first time in our history we've seen a company hit that mark. But I just think it's just fascinating to see. You know, we often forget that Apple was started almost 50 years ago. I think it's 47 years old. And, you know, you've read The Ride of a Lifetime with Bob Iger and you've got a bit of insight into Steve Jobs. But it's a pretty interesting story. You know, it almost went bankrupt. They kicked Steve Jobs out. He came back and saved the company with the launch of the iPhone and the rest is history. Really. It's just been a phenomenal journey. And I think it's a company that has incredible brand loyalty and continues to create such amazing products that seem to be just released at the perfect time. And I think we've spoken before on the show about the Vision Pro and what that might do. But yeah, it's been a fascinating story to watch. So we're talking about.

Sascha: [00:02:57] Yeah, you talked about their brand loyalty, but they're also the first company to not only reach 3 trillion, but 1 trillion. They did that back in 2018 and 2 trillion in 2020. They've done all of this in five years. What's the story? How has that massive growth happened? 

Bryce: [00:03:15] I know. And I just look back at 2009 when I was sitting in class in year 12 and someone got the very first iPhone, Jordan Stewart, with his name sitting next to me, pulled it out. And I didn't invest. I didn't invest way back then. It was right in front of me, the opportunity. 

Sascha: [00:03:29] So interesting you say that because I remember the first time I saw an iPod, I was in a band because I was a nerd. And the tuba player next to me, he had an iPod and listened to it on break. And I was just blown and I was like, What is that? So yeah, pretty cool. 

Bryce: [00:03:49] Well, we've both been in the same boat then, but let's rewind back to 2018, when Apple was the biggest tech company in the world. They were launching new versions of MacBook, the iPad and iPhones. They also launched the HomePod Smart speaker. Now that one hasn't done so well, I don't think that one. It really rings a bell to a lot of people these days. But in 2018, they brought in $265 billion in revenue and just shy of $60 billion in profit. In August 2008, that's when they crossed the $1 trillion mark. 

Audio Clip: [00:04:21] Historical first yesterday as Apple, maker of MacBooks and the iPhone, of course, became the first public US company to be valued at $1,000,000,000,000. 

Bryce: [00:04:30] And we just launched Equity Mates a year earlier. And I remember it was one of the first memes that I did on our Instagram account. 

Sascha: [00:04:36] So many memories, Bryce. 

Bryce: [00:04:39] In 2019, Apple announced its pivot to services. Now, this is essentially the catch all term for Apple's subscription business. You know that iCloud, Apple TV plus Apple News, Apple Music, Apple Pay. 

Audio Clip: [00:04:54] This is your music, This is your email. This is the Web. And this is a call on your iPhone.

Bryce: [00:05:04] And the thinking was simple. Almost everyone in the world has a smartphone. It would be near impossible to double the number of smartphones that it sells, but there were plenty of ways that it can monetise existing smartphone users, which was by delivering them music, news, entertainment and allowing them to pay. So this was a way that they really increased their revenue from each smartphone user. And from that point, Apple went gangbusters. In the first quarter of 2019, they brought in 10.8 billion in services revenue alone, and in 2020 they crossed the $2 trillion market cap. 

Bryce: [00:05:43] 90 minutes into the trading session and Apple has become the first company in US history to hit $2 trillion. 

Bryce: [00:05:51] But then Sascha sales kept growing in 2022, they bring in just shy of $400 billion in revenue with a staggering $100 billion in profit, incredibly profitable. And then this year they announced that Apple Vision Pro and Services revenue in Q1 23 was up to $20 billion. Basically, they've doubled in four years. And then here we are in 2023, they've crossed the $3 trillion mark. The stock is up 53% since the start of the year alone. And we've seen some of the biggest investors Warren Buffett has been along. USTA and supporter of Apple and has made an incredible amount of money. So the question for me is where do we go from here? And there's also rumours that they are on track to become the first company to reach $1 trillion in revenue in the next five years. So unbelievable. If that happens, we will definitely be doing a podcast on that. 

Sascha: [00:06:47] Yeah, it will be no fight inside the Equity Mates office if that happens. So there's now six companies worth more than $1,000,000,000,000. 

Bryce: [00:06:56] There are. So Apple is at the 3 trillion, but then in the $2 trillion club, also an incredible feat is Microsoft and then Saudi Aramco. They're the state based and also publicly listed Saudi Arabia oil company, the largest oil company in the world. And then in the $1 trillion club, you've got Alphabet, the parent of Google, Amazon and Nvidia, which has rocketed up given the AI hype that we're in at the moment. So yeah, six companies all with $1 trillion market cap or more. 

Sascha: [00:07:28] So Bryce, I mean I wouldn't put much water in our predictions, but it is always fun. Who do you think is going to be number seven?

Bryce: [00:07:36] Well I mean you can't go past where you can go past, but Tesla is one of those stocks that if it gets the right amount of momentum and hype behind it, it can jump up pretty quickly. But keeping on the Musk theme, space X is one that is doing some amazing things and really does have an opportunity to create a lot of value over a long period of time. So I'd definitely be keeping an eye on that one. 

Sascha: [00:07:57] All right. Well, let's move on to story number two. I did do a bit of taser the John McEnroe, but basically Wimbledon this week, which has kicked off in London, have found a way to incorporate AI into their broadcasting. What has happened here? 

Audio Clip: [00:08:13] HAMILTON Planning to use AI commentary during this year's tournament. 

Bryce: [00:08:18] Yeah, it's pretty nuts. The hype continues. Generative AI commentary is now coming to sports commentary. Tennis is going to be the first sport to trial it. It's just wild. 

Sascha: [00:08:29] Okay, let's pause for a second. Generative AI is what powers ChatGPT. So is it similar? Has AI been trained to just watch millions of hours of tennis and listen to tennis commentators and now just replicate it? Is that what's going on?

Bryce: [00:08:45] Yeah, well, pretty much in a nutshell. So IBM's AI has been trained to watch tennis and then commentate based on the key repetitive features that you see within a game. So think about what shots have been played. Some of the key statistics that are coming out of the game definitely don't expect any expert insight or unique perspectives though. That is definitely left up to the real life commentators at this stage. Instead, the AI is going to narrate what is actually happening on court. And to be fair, Sascha, I think, you know, it's going to be highly entertaining. But Kevin Farah, head of IBM's Sports Partnerships, said the commentary is being generated from the stats, forehand, backhand, etc. And we had tennis specialists on the team, so we drew on them in terms of the language it will use. So I guess getting the terminology correct so that it certainly relates properly to the game, but I guess it's not going to be anything more than and we had a forehand from Federer backhand down the line and that's an ace. So for people familiar with sports games like FIFA and Madden and NBA, too, it feels like a slightly more advanced version of the commentary that you hear on those computer games. At this stage. 

Sascha: [00:09:56] It's not like Wimbledon's been without commentary, though, for the past however many decades. How are they actually going to use it in this specific example? 

Bryce: [00:10:06] Yeah, this isn't going to be a replacement for existing commentators. They're going to use the AI to produce tennis commentary for all video highlights during the Wimbledon tournament. So think about all of the outside courts that don't have commentators. This is a great opportunity that, you know, now they will. IBM's marketing and commercial director Usama al Kassab, said the innovation will help fans gain even more insight into the singles draw and access commentary on a wider variety of matches. 

Sascha: [00:10:36] Well, this is definitely the question that I've been most interested in, Bryce, and that is, are they going to draw on a particular voice? I mean, I mentioned in the intro, John McEnroe. 

Audio Clip: [00:10:47] You can't be serious, man. You cannot be serious. 

Sascha: [00:10:50] It's pretty much one of the most iconic commentators of all of all sports, let alone just tennis. Could I basically just have him on repeat for the whole season at Wimbledon? Is that what I've been doing? 

Bryce: [00:11:02] That would be epic. But no, according to Kevin Farah, who is the head of IBM's sports partnerships, he said it's not a real voice, it's not based on a specific person. But we were having a joke in the office. It would be funny if you could not only select the voice, but also select the type of commentary like I want a really aggressive or I want a really biased commentator towards Federer, so who knows where it could go anywhere. 

Sascha: [00:11:28] What I can say. Bryce is wasted here. I think we should be working in the think tanks because we've got all the ideas. Look, let's take a quick break here, and then we're going to come back with our third story, all about Shane's IPO. Welcome back to The Dive. I'm your host, Sascha Kelly. I'm here joined by my colleague Bruce Lasky. And we're talking about three short, sharp and interesting headlines that caught our eye this week. Before I get back into it with Bryce, our quick favourite for me, it's going to take you literally 30 seconds. Can you send this to a friend if you enjoy The Dive? If we're part of your routine, it really is a small thing from you. A massive deal to us. Hassle your friends, get them on board, Get them in The Dive club. Thank you so much in advance for doing that. Anyway, Bryce, back to our third story. China's Shein has filed for an IPO. 

Audio Clip: [00:12:19] Hi, guys. Welcome back to my channel. So come back to another video. This one is a shame. We are doing a Shien haul and I got a bunch of stuff so I'm very happy to show you guys what I got.

Sascha: [00:12:34] For those of us who aren't on Tiktok, that's definitely where I see all my Shein content. Or if you're not a big online shopper or have a teenager who's talking about Shein Hauls in your life, who is this company? 

Bryce: [00:12:47] So Shein is a Chinese company, Sascha, that over the past few years has become the biggest player in fast fashion. It firstly really came to prominence during COVID when everyone was online and then has since really benefited from the presence that it has got on TikTok. Now let's just have a look at some of the numbers here to get a real insight into Shein's scale, because it is enormous. In 2022, they did $24 billion in revenue. They had a $100 billion valuation in a funding round last year as well, 2022. They have 28% market share in the US fast fashion market, 6000 factories it works with in China and 600,000 items on site for sale at any time.

Sascha: [00:13:38] That's massive.

Bryce: [00:13:40] So it actually started as a site that sold wedding dresses back in 2008. And then in 2015, the business shifted its focus to fast fashion. It became a platform for garment factories in China to directly reach a global audience of consumers. And it offered the world cheap clothes. And we mean incredibly cheap. Shein is the second most downloaded shopping app in the US. According to UBC Evidence Lab, Shein has more followers on Tik Tok than any other apparel retail brand and is the most Google searched apparel retailer in the US, according to UBS data and according to Reuters, the fast fashion giant has officially registered with the US regulators, paving the way for one of the largest ever public offers from a Chinese company on the US stock market. 

Sascha: [00:14:27] Yeah, I know my social media. There's heaps and heaps of accounts that do you know of my Shein Haul trying on what seems like hundreds of clothes, but the business model is an interesting one. They're pretty unique in the fashion industry, aren't they? 

Bryce: [00:14:42] They are. There's a reason they're in fast fashion and because shein is all about speed. The fast fashion industry was really pioneered in the late 1980s and early 2000 by the likes of H&M, Zara and Forever 21 stores we're all familiar with. But they became notable for how quickly they were swapping lines to keep things new in their stores. The business of fashion estimates that H&M produces 4414 styles per year. 

Audio Clip: [00:15:09] They master the process of taking expensive clothes that were on the catwalk and mass producing them in as little as three weeks. Fashion had never been this cheap and accessible before. 

Bryce: [00:15:21] Now, that in and of itself is incredible. If you think about 4400 styles across 365 days. But Shein has taken that to a new level. The business of fashion estimates that Shein put out 314,877 new styles of clothing per year. 

Sascha: [00:15:41] Bryce, that's almost a thousand new styles a day for someone to wear.

Bryce: [00:15:44] It is ridiculous, Sascha, that with their network of garment factories, new designs can take as little as three days to produce. Just put that in perspective. That's going from idea to production and on shop floor in three days because they have over 6000 factories working for them in China. So their business model is speed. 

Sascha: [00:16:07] I don't think we're missing saying that with that kind of speed and volume. Fashion is one of the biggest polluters in the world. That's brought them under scrutiny, hasn't it? 

Bryce: [00:16:19] That's right. Along with Shein's colossal success comes obviously mounting criticism. So it's under fire for producing extremely high volumes of garments, which reports say contribute to overcrowded landfills. A 2022 Bloomberg report found that Shein garments contained cotton sourced from Xinjiang, where human rights groups accused China of forced labour and other human rights. Abuse against the Weavers and a bipartisan group of US lawmakers has pressured the SEC to investigate Sheen's treatment of the weekend Muslim minority in China's Xinjiang region. The bipartisan group has also lobbied to throw out any potential IPO filing from Shein. But Shein has reportedly told the media it does not use manufacturers in Xinjiang. So this is obviously going to continue the more that they pump out. We know fast fashion as an industry is continuously under a lot of pressure from just the environmental impact it has. But the scale of this company is truly unbelievable. 

Sascha: [00:17:15] Amazing. Now Bryce, sounds like we've got a couple there that we're going to revisit when Apple finally cracks the $4 trillion mark. 

Bryce: [00:17:23] Yes, 100 trillion in revenue.

Sascha: [00:17:26] And when Shein does eventually IPO, it sounds like it's not going to be the straightforward word that they imagine. Let's leave it there for today. Here's a reminder. Let us know what you think of this format. If you'd like to hear more of the three short, sharp stories, then get in touch with all those links in the show notes below. But Bryce, thanks so much for joining me today. Until next time, let's make sure it's not so long. 

Bryce: [00:17:48] Absolute pleasure. Thank you, Sascha.