Meta's AI Moment: What a Potential ChatGPT Rival Means for the Broader AI Race

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

Justin Klein (0:16)

Good afternoon, fellow investors, and welcome back to another edition of InvestTalk. This is our Friday, September 25th, 2026 edition. We're excited for this hour with you a lot to discuss, as we power towards the midterm elections that are just a handful of weeks away. There's so much to unpack with higher interest rates, with what's going on in the AI space, how the politics of the next six weeks are going to play into market expectations going forward, all of that.

So we have a lot to discuss this hour, and we are excited, or I'm excited, for this discussion. So whatever's on your mind, please reach out, 888-99 chart is how you get through and ask your question on today's show. Now, quick heads up, the data is, the date is getting closer, less than a month away.

October 24th, Saturday, you're invited to join myself, Luke, the rest of the KPP team, and some guest experts for our in-person InvestTalk Retirement Summit. The special event is free of charge, but seating is limited, so pre-register now at investtalk.com. Now, in just a bit, I'm going to talk about today's Mark performance, as always, in random show topics. But first, let's tackle this caller question now.

SPEAKER_3 (1:35)

Hi. I wanted to ask you about, take your symbol SYF, Synchrony Financial, to stock well with Washington for a while, and it has recently pulled back. Do you think it's a good time to buy?

Is it affected by the recent rate hikes? Well, rate hike, I should say. I'll be listening to your answer on your show, and thanks for all you do. Bye.

Justin Klein (1:56)

All right. Looking at Synchrony Financial, a name that we own for clients to have for some time. It has pulled back as the financial sector as a whole has weakened over the past month, but it's still making a series of higher highs and higher lows. That's the positive here. Earnings for this year are expected to be 9.36, except from 9.28 last year, and 10.36 expected in earnings next year, up about 11%.

Now, what do they do? Well, they're in the credit card business. Basically, think of all your Home Depot credit card and your credit card linked to whatever retailer you frequent. Well, they run it. So, Lauren Decor, Lowe's, Sam's Club, et cetera. They run Care Credit. There's just a lot of credit cards that bear the back end, lending, and processing of it. So, that's why they make their money off of those customers. The retailer doesn't have to run a credit card business.

Their free cash flow is $9.7 billion on a $23 billion market cap. Very minimal debt, only about $1.5 billion in net debt on its balance sheet. So, what is it doing with all that cash flow? Well, it's paying a little bit of a dividend, and it also buys back its shares at a pretty rapid clip. So, it's over the past, let's see, since 2016, they've gone from 833 million shares outstanding to 325 million shares outstanding. That's pretty good.

In just eight years, you've retired over half of your debt. They continue to take that cash flow and push earnings per share higher by buying back shares. And the return on equity is 21%, very solid business. And so we like Synchrony, SYF, one of our favorites within the financial services space. Thanks for the call. Yesterday, we had a great show. I talked about quantum computing. Is it a real investment or is it just hype? We also answered a listener question on Smithfield Foods. If you haven't missed it, go check it out. Best way to get every show is to follow InvestTalk wherever you get your podcast. Now, I have a lot of ground to cover over the next 45 minutes or so, and time permitting, we'll get to all of it. Our main point will be about Meta's AI moment.

What a potential ChatGPT rival means for the broader AI race. Meta's new Muse AI is being compared to a ChatGPT breakthrough moment, potentially reshuffling the competitive landscape in generative AI and putting pressure on rivals across the industry. But there are some beneficiaries, like cloud infrastructure. So we'll look at that and much, much more, including some other topics, like how is the housing market going to handle these 7 plus percent mortgage rates? And then where is the danger zone for markets when it comes to the bond market sell off? Yeah, 5.2 on the 10-year is highest we've seen in 20-something years. Or was it 17 years? I think it was 2004, if I remember correctly. Something like that. But clearly, it's the highest level we've seen post-financial crisis. So how does that feed into markets? And at what level, once again, does it break things?