Walmart Stands Tall in a Rocky Retail Environment

In this podcast, Motley Fool contributors Travis Hoium, Jon Quast, and Matt Frankel discuss:

• Retail earnings reports and takeaways for investors.
• Walmart's strength.
• Opendoor's pop.
• The return of SPACs.
• Meta's new AI strategy.

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A full transcript is below.

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This podcast was recorded on August 22, 2025.

Travis Hoium: Retail earnings are in, and once again, Walmart is standing tall. Motley Fool Money starts now.

Welcome to Motley Fool Money. I'm Travis Hoium, joined by Jon Quast and Matt Frankel. Today, we're going to cover Meta's latest AI news, but we're going to start with the big news of the week affecting consumers, investors, and maybe even the Fed, and that is retail earnings. We got earnings from Target, Walmart, Home Depot, T.J.Maxx, Lowe's, and BJ's, just to name a few of the big retailers in the US. To say it was a mixed bag was an understatement. Let's start with the macro, Jon. What stood out to you from the week in retail?

Jon Quast: Well, Travis, thinking about it from a macro perspective, I really see that consumers are pretty picky right now. This came out on the Lowe's conference call, surprisingly enough. Lowe's says that there is 50 billion in deferred home maintenance right now, according to some third party reports, and so to me, that's an indication that for whatever reason, consumers are spending only on the essentials and deferring what they can. We see this across the board in so many places, a place like T.J.Maxx, right now, they buy close out merchandise. Management says that they're getting some great deals right now. What we're seeing happening is some of these retailers are not able to move inventory like they'd like to. Somebody like T.J.Maxx can come in, so really, it's important for these retail companies to manage their inventory effectively.

Travis Hoium: Matt, one of the companies that just seems to be crushing it quarter after quarter is Walmart. We saw some pretty poor numbers from Target, but Walmart looked pretty good once again, and that seems to be the biggest takeaway of the week.

Matt Frankel: This isn't totally surprising. If you remember back to the second quarter, this is when Deliberation Day tariff announcement happened. Consumer uncertainty reached a peak in the second quarter, I would say, and when that happens, Walmart thrives. People start to cut back. They want bargains. Walmart's grew their same store sales by almost 5% year over year. Target had negative same store sales for comparison. Walmart has a really strong history of performing well when consumers cut back. It was actually the number 1 S&P 500 stock in the 2008 market crash, and for that reason, people were looking for bargains.

Travis Hoium: How do these companies differentiate themselves? I think those two are really the most striking right now. Is that Target seems to be struggling. They did announce a new CEO. They pick somebody internal, so it doesn't seem like there's going to be any major changes there. Walmart seems to continue plugging away. The interesting comparison is to some of the restaurants which we've heard about from the last couple of weeks. People are not trading down in restaurants. In fact, some of those fast casuals are actually doing pretty poorly, and people are deciding to go sit down at restaurants if they're going to spend the money to go out. The opposite seems to be happening in retail where discounts and looking for deals is the name of the game. Matt, what do you think?

Matt Frankel: No, it's definitely all about discounts. We've seen some other higher end retailers. If we look back to even the first quarter, companies like Lululemon, Abercrombie and Fitch were all lowering full year sales forecasts. Pretty much, that was a big trend among what I would call discretionary retailers, and we're definitely seeing. Some of them haven't reported yet. I would not be surprised to see the same happen in the second quarter.

Travis Hoium: Jon e-commerce continues to be a trend, although it's not necessarily the trend that it was 10 or 15 years ago, but companies like Home Depot, which I've ordered a few things online, got them delivered from Home Depot. I thought it was a great experience, but that is now at least a small driver of the business.

Jon Quast: Home Depot's e-commerce was up 12% in the most recent quarter. You have Lowe's up almost 8%, T.J.Maxx said it's e-commerce was up Walmart and Target. In this world, we're always chasing this shiny new thing, but I think it's good to remember that even trends that seem they're played out are still real trends, and so this e-commerce trend in retail still has legs, and you start thinking through what that means. It means growth in logistics. It means growth in digital advertising. There's plenty of opportunity here for investors if they look to these old trends.

Matt Frankel: Walmart particularly was impressive here. Their e-commerce sales were up 25% year every year. delivery sales were up 50%. They're doing a great job of not just e-commerce, but general omnichannel retail, and that's been a big, big driver of growth for that company speaking of Walmart surprises.

Travis Hoium: Having the option to deliver groceries along with a few domestic items is always great as we primarily use target, but Walmart, Target, they're going to be probably in a pretty good position long term. We do have to talk a little bit about tariffs. This was something that I was really listening for in the conference calls. I don't know if we heard it as much as I thought maybe we would. We have a little bit of clarity on what some of those rates are going to be. Companies are starting to talk about increasing prices. But Matt, was that a big part of the story, or was it just sort of an overhang that we're getting used to now?

Matt Frankel: You're right that we didn't hear that much, and I don't know if it's because the management teams really don't know, or because they're just trying to download it.

Travis Hoium: Maybe they don't want to talk about it. They don't want to put a target on their own backs.

Matt Frankel: But, we are seeing some impact. Walmart actually was one of the biggest ones that actually commented on it, and they said that middle and low income households have been the most sensitive, really only in discretionary categories, and they're being strategic, like, speeding up imports before tariffs kick in. Walmart imports about one third of its products, Target imports about one half of what it sells, so there is some impact here, but like I said, I'm not sure if the management team really knows what it is yet.

Travis Hoium: Jon, what do you think?

Jon Quast: It should go without saying, but I'll say it anyway. Every single retail company has different exposure to the tariffs, and therefore, they're feeling the pressure differently. Home Depot and Lowe's, they didn't even talk about it in the prepared remarks of their earnings calls. I think that shows how big of a deal it is to them. You look at somebody like Walmart, as Matt mentioned, not really that big of an issue when two thirds of its products are domestic. Of the companies that we're talking about today, it seems Target does have the highest exposure to tariffs, the highest exposure to China, and so unsurprisingly, it's the one struggling the most with profitability.

Travis Hoium: It seems like discounters are winning right now, but there is a huge spectrum of retailers of product companies. One of the things I think we heard, correct me if I'm wrong here, is that the wealthier consumers are doing relatively well while more budget conscious consumers are starting to trade down. Is that a fair way to look at this, Matt?

Matt Frankel: Walmart even reported no noticeable change in consumer spending, but that's because Walmart's a discount retailer. That hasn't been the case all year for higher end retailers, and even things that people could put off, like you mentioned Jon mentioned Lowe's and Home Depot are reporting, a lot of deferred home maintenance, for example. There's a quote that I love from Stephen Tanger, who's the head of an outlet mall company, says, In great times, people like a bargain, and in tough times people need a bargain. And I'd always bet on the need when it comes to times like where it's uncertain.

Travis Hoium: I read a report from the Chamber of Commerce that noted that consumers are increasingly enjoying a treasure hunt in thrift stores and close out retailers. I think that shows why T.J.Maxx actually reported a solid financial report. Its last go round. It seems expectations for Dollar General are modestly climbing, and one retailer that we haven't mentioned yet is Ollie's bargain Outlet that symbol OLLI. It reports next week, but its last report was encouraging, so I'd say, keep an eye on that one, and it seems like discount is winning.

Travis Hoium: Let's get some overall looks at what you guys are thinking, because the other thing that's hanging over us, I think the Fed Jerome Powell is actually doing his annual Jackson Hole speech as we're recording, so we don't know exactly what he said. But we've gotten a feel from earnings from banks who said that everything is going fine from retail companies who say that, you know what, people are starting to trade down from restaurants who are saying that consumer spending is changing a little bit. Add all this together, Matt, and what's your takeaway from earnings season and the future of the consumer? Is it good? Is it bad or is it just murky?

Matt Frankel: I'd say it's murky. It's more uncertain than anything right now. Like you mentioned banks, they're generally reporting strong asset quality, but loan growth is really weak, deposit growth is really weak.. There's a mixed bag in a lot of these areas. I'm not sure if any sector just had a fantastic earning season. For me, it's a little bit murky at this point, and the second half of the year is going to be interesting.

Travis Hoium: What do you think, Jon?

Jon Quast: I don't know who said it first, Travis, but never bet against the American consumer. That's my long term view here.

Travis Hoium: That's probably a good takeaway. They do continue to spend, and I will, as well, with young kids that seem to always want some more stuff. I do want to know what your guys' favorite retail stocks are today, but I'm going to get to that in a game that I like to call Would you Rather? We'll do that in just a bit. You're listening to Motley Fool Money. Trading at Schwab is now powered by Ameritrade, giving you even more specialized support than ever before. like access to the trade desk, our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance, no problem. Get 24/7 professional answers and live help and access support by phone, email, and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab.com.trading.

Welcome back to Motley Fool Money. Shares of Opendoor have been some of the hottest on the market recently. Shares are still down about 90% from their peak, but they're up 500% since the end of June. Matt, what in the world is going on with Opendoor?

Matt Frankel: Well, if you remember the term meme stock, it kind of applies to Opendoor now. A pretty notable hedgefund manager named Eric Jackson, admittedly, he has a pretty spotty track record of picking these home runs, but if you're looking for home runs, who doesn't have a spotty track record, he did call Carvana's 100X move, which is really his big claim to fame, posted on his X account, and in a series of posts, hundreds of them over the past couple of months, that Opendoor is his next 100 X idea. He posted it when the stock was at about 82 cents, s o and it's about 350 today. That implies about an $82 price target, when when he called Carvana, it's not surprising that people are taking this seriously.

Travis Hoium: These are really turnaround stories. This is not just, I understand the fundamentals better than you. Carvana was in serious trouble. Opendoor, depending on the day, seems to be they could be closing their doors, an 82 cent stock is not one that investors typically have a lot of confidence in.

Matt Frankel: No, and they had just announced a reverse split before all this started, and they ended up retracting it. It's not a successful business. It's never been, you know, consistently profitable. It made money in 2021 real estate boom, but that was really it. Now, the idea here is that there's some AI story, some data story, because, is there really there there? Because another one name that keeps coming up is Zillow. Was in Opendoor's business, buying and selling homes. They have, I would think, more data than almost anybody, and they said, "You know what? This is too hard of a business." But can Opendoor actually get it right? Or is this going to be another booming bus cycle?

Matt Frankel: There were really two parts to the thesis. One, you mentioned correctly that Zillow exited iBuying, Redfin exited iBuying, Zillow actually did the worst out of all of them when it came to that. Opendoor really is the only national player left, and you mentioned the AI part of the thesis, which is really the big one. Opendoor has completed 200,000 real estate transactions on its own. No other company has done that. That gives it a lot of data and not just to create a better version of this estimate from Zillow which is really one thing that they could do.

Travis Hoium: Do you think they could actually make a better estimate? I think that's an interesting take, is that, Opendoor could do it better because they're in the process or what's the thought process there?

Matt Frankel: Well, they have a lot of transaction level data that Zillow doesn't. Zillow see what a home sells for, what the new person buys it for. Opendoor sees things like how specific repair is translated to better sales prices and things like that. A lot of different data points.

Travis Hoium: Jon, an $82 price target seems high, but even at today's price, that would be a pretty nice gain. What are your thoughts on this being the next Carvana?

Jon Quast: Jackson's price target here of $82, this has a couple of assumptions baked in. First, he's assuming that it gets to 10 billion in revenue and that the market will value it at nearly six times sales. Now, I feel like those are pretty generous assumptions. If the market is going to value Opendoor at six times sales, I would expect it to have better profit margins and, in fact, attractive profit margins compared to what it has right now. The problem is, I'm not convinced that iBuying its business model can actually get there. iBuying needs two things. It needs quick turnover, and it needs good deals. I think that if you're in a market where you're getting good deals, you're not turning over your inventory fast enough. I feel like it's a really difficult place for Opendoor to be. I'm not sure it gets to 10 billion in revenue. I'm not sure if the market values it at six times sales.

Travis Hoium: This is one of those businesses I really want to like. I liked Zillow when they got into iBuying, because in theory, it makes a lot of sense, but then Jon touched on it. You get into the actual nitty gritty of the individual transactions, and you end up buying homes you don't necessarily want to buy. It just becomes really complicated, nobody's proven the ability to actually make it profitable long term. But Opendoor was one of the hottest stocks when they came public because they were a SPAC. It seems like SPACs are back. Chamath Palihapitiya released another SPAC called the American Exceptionalism Acquisition A, which, as you would expect, is a Cayman Islands company. I looked through their filing. The Cayman Islands are mentioned 238 times, and America or any derivative of America is mentioned 43 times. I think that's a fun data point if you are betting on American exceptionalism with this SPAC. But, Matt, are we back in a SPAC boom?

Matt Frankel: I'm hoping we don't get to the 2021 type of SPAC boom, the worst thing you can hear in investing is this time is different. I used to do the SPAC show, and at one point, there were 17, 18 a day going onto the market. I don't think we're going to get back to that, but it is a legitimate way for companies to go public. When it's done right. The question is, are they going to do it right this time?

Travis Hoium: That really is the question and Chamath's track record is hit or miss. I know that I've bought into a few of these over time. Virgin Galactic was a big winner for me before the SPAC boom. Then I've proceeded to lose a whole bunch of money on that. SoFi is another one. But Matt, what would make this time different for the SPAC boom, if this is actually going to be a little bit more sustainable?

Matt Frankel: Well, you mentioned his record. He's launched ten SPACs altogether, and for long-term investors, I would give him a one out of 10. SoFi is the only one that's really made anyone any money. We can talk all about the other ones like Virgin Galactic, which is down 98% from its initial price, which I don't have to tell you that if you invested in. Again, the worst thing you could say is this time is different, but he's making some tweaks to make this feel like it's not just a money grab for the insiders. There's no warrants, which was a big staple of SPACs last time. The founder shares, which is a nice way of saying that the sponsor essentially gets 20% of the SPAC for free, is actually being bumped up to 30% in Chamath's favor. But in order for him to cash it out, the stock needs to rise by 50% or more after he finds a deal target and the deal closes. It's meant to align his interests with shareholders a little bit more than it was last time, which really wasn't aligned at all.

Travis Hoium: Jon, do those changes actually change the incentives enough for you?

Jon Quast: I was ready to write this off completely, Travis, and these incentives are drastically different. I think it was Charlie Munger who said, Show me the incentive, and I'll show you the outcome. Too many SPACs failed because the incentives weren't in favor of retail investors. It was all in favor of the insiders. This one gives Chamath some credit. This is very drastically different, especially with no warrants. With the vesting period, it has to increase in value before his shares can vest. You know what? I'm going to keep an open mind with this one. This is very radically different from what we've seen before.

Travis Hoium: The devil's always in the details. The detail here is, what in the world is the target? What do you think he's going to be going after?

Jon Quast: That is a great question. He was talking about needing unlimited energy in the United States. If you read between the lines, maybe he's looking at fighter robots for the US military, and he says he's looking for a great company at a great valuation. These seem like very futuristic ideas and not so much a current reality idea, and so it seems unlikely to me that you're going to have a business that is at a great valuation. You're probably going to have more of an idea of a business that he's going to take public, not so much something that's already fully operational.

Travis Hoium: The challenge with SPACs is that you can make these grandiose predictions about what the future is going to look like, and we only find out in the future, 4, 5, 6 years down the road, like we are with those original SPACs, whether they live up to them, and a lot of them really haven't. Next up, we are going to play, Would You Rather you're listening to Motley Fool Money.

Welcome back to Motley Fool Money. At this point in the show, we like to play a game, and I'm going to play "Would You Rather" with Jon and Matt. Pretty simple game. I'm going to give you two stocks. Which one would you rather own in your portfolio? Let's start with the retail trend that we talked about a little earlier. Walmart is a much hotter stock than Target, but it's trading for 39 times earnings. Target is trading for 11 times earnings. Jon, would you rather own shares of Walmart or Target?

Jon Quast: I'd rather own shares of Target, and my answer is predicated on an assumption. That assumption is that Target is not a Kmart. I believe that Target is going to find a way through this. It's going to stay one of those top retailers for a long, long time. As you look at Target, one of the only things that's growing right now are its digital businesses. Things like its subscription services, its third-party marketplace, I think that those can continue to gain traction and provide just an incremental boost to its profitability, and so that's why I like it at 11 times earnings. If I'm wrong at worst-case scenario, you get a huge retailer at 10 times earnings and a 4% dividend yield.

Matt Frankel: I'd agree with Jon. I'll go with Target as well on this one. I think the new management is going to get it right. They've identified the problem pretty early on. They're being proactive about it. I do think they're going to do all the right things to keep Target relevant. They're not another Kmart. They've coexisted with Walmart for a long time already.

Travis Hoium: One of the things I want to hear from some of these companies is how they're bringing autonomy into the business. You look at something like Target, but Walmart could be the same case, where you're having autonomous vehicles all over the place. Why aren't we just filling those, and my groceries can be sitting in my driveway when I wake up in the morning? Jon, we have the boxes, these are big box retailers, that's still a point of leverage, whether you're looking at Target, which is going to be a little bit more urban or Walmart, which is going to be a little bit more rural, that still seems to be like an untapped market, a lot like these digital services you're talking about.

Jon Quast: Generally speaking, I would say that autonomy is good for any retail business because you can drive a little bit of incremental profit from these huge operations. I think that's more of a perhaps a 10-year boost to profitability, not so much in the 3-5 year range.

Travis Hoium: It's probably fair. I would like the future to be here a little sooner, though. Let's stay in retail and look at Home Depot and Lowe's. Home Depot trading at a premium, but not all that much of a premium, 27 times earnings. Lowe's is at 21 times earnings. Matt, would you rather own shares of Home Depot or Lowe's?

Matt Frankel: I'm going to go with Home Depot here. Even with the premium valuation, I think Home Depot's done a much better job of Omnichannel, much better job of getting professional customers. Lowe's playing catch-up with that with their recent acquisition with getting, like, the contractor crowd to be customers there. I just think Home Depot's done a better job of executing, and that's worth something.

Jon Quast: Yeah, I can't disagree too much with Matt here. Home Depot just so reliable over the years. But I would go with Lowe's here at 21 times earnings just because I think it can continue to close its profit margin gap with Home Depot. Home Depot historically had better margins, but I think Lowe's can still slowly and surely chip away at that, and for that reason, I think it may have more earnings upside.

Travis Hoium: These two have been such an interesting comparison over the past 20 years or so. Even just my own shopping. Look, I would prefer to shop at a Lowe's. I never go to Lowe's. I always go to Home Depot. So, Jon, is this just momentum that allows Home Depot to be that center of gravity for home improvement, for contractors? It just seems like there's something that they're doing a little better. I can't always put my finger on it, but from an investment perspective, this has been the better stock for really, since these companies went public.

Jon Quast: Yeah, I think that's just right, Travis. It is hard to put your finger on exactly what Home Depot does that's so much better than Lowe's. I guess that's why I say, why bet on the guy who's already won rather than bet on the guy who can improve and close the gap? Man, they're always across the street from each other. They're not that different, so I just feel like Lowe's has opportunity.

Travis Hoium: We're going to have one more retail comparison here. Let's stay with discount companies T.J.Maxx and Costco, a little bit different business model here with the membership model at Costco. But, Jon, T.J.Maxx is trading for 31 times earnings. This has actually been a phenomenal stock over the long term. Costco, another huge winner for investors, long term at 56 times earnings. Which one would you rather have in your portfolio?

Jon Quast: I'd prefer to have T.J.Maxx, and that said, Costco is a top-tier company. But ultimately, single-digit growth at 56 times earnings is just too steep for me. Look, as you mentioned, T.J.Maxx, stock is up over 150% in the last five years, beating the S&P 500. It's really putting up some solid operating results. Of these two companies, yeah, I think that T.J.Maxx is going to be better for investors from here.

Matt Frankel: In full disclosure, this is a category I wish I didn't have to pick one. But T.J.Maxx, I'd have to go with. Just from a risk reward standpoint, I see a lot more upside potential from here than with Costco to justify that multiple.

Matt Frankel: I mean, I'd go with T.J.Maxx if I had to pick one, but I'd choose Walmart or Target before either of them.

Travis Hoium: Since 1990, T.J.Maxx stock is up 28,000%. Just phenomenal results for a company that, when I was being dragged to T.J.Maxx in the early '90s, I should have told my parents to just buy their stock instead of buying whatever thing I wanted to buy. Let's go to a tech comparison. These two are in an interesting position because they're both investing a ton of money in artificial intelligence. They have a little bit different strategies, but they do seem to have a bright future, whether we're looking at AI or just their core businesses. Meta Platforms, aka Facebook, trading for 27 times earnings, or Alphabet at 21 times earnings. Matt, which one would you rather have in your portfolio?

Matt Frankel: Alphabet. It's the best value of the Magnificent 7. It's a high margin business, tons of cash generation, tons of cash on the balance sheet. Google Cloud has so much potential, and it trades like a value stock, 21 times earnings is less than the S&P 500 average for one of the best companies in the world.

Jon Quast: Man, I can't disagree with what Matt is saying too much. This one, for me, was the hardest of all the would you rather that you put before us here, Travis. But I'm going to go Meta, and the simple reason I'm going to go Meta is because Mark Zuckerberg is so willing to swing for the fences when it comes to a big idea. Now, granted that hasn't worked out with things like the Metaverse, we'll see if it works out with AI. But when a business is already rock solid, taking a swing for the fences with something new is something that I appreciate as an investor.

Travis Hoium: Jon, his reputation among investors has really improved over the past few years. I think there's a good reason for that. There's a lot of operational improvements. But you're talking about swinging for the fences. The last swing for the fences was the Metaverse. I don't even know what the number is, $15, $20 billion a year. They burned on that, nothing to show for it. The VR business hasn't done much of anything. AI came out of that. But if you go back to the original business, was Facebook, that's more than 20 years ago. Instagram, they acquired. They've obviously built a business around it, but has Zuckerberg shown that he is somebody that you can trust spending tens of billions, potentially hundreds of billions of dollars, investing in this next big thing? Has he earned it because he is one of the richest people in the world and most successful tech entrepreneurs?

Jon Quast: Yes. It's hard to answer that. The other bets haven't worked out so much. It does seem like, maybe we're being a little bit too loose with our money, but as I said before, this is a company that is still thinking about shareholders, paying that dividend, repurchasing shares. It's printing money like crazy. You know what? You have a responsibility when it comes to the rest of that cash. If you're willing to spend it to grow the business, even at this scale, that's something that I'm willing to give them the benefit of the doubt.

Travis Hoium: Final would you rather is on holding or on running as they're popular becoming called right now by investors, ticker symbol is ONON, if you're interested in that one, versus Nike, NKE. On is trading for 4.2 times sales. We're using sales here instead of earnings because On is not optimizing for their earnings or net income yet because they are still a very high growth company. Nike, on the other hand, is in a turnaround. They're trading for 2.5 times sales. On is trading at a premium, but not a massive premium. Matt, I want to start with you. Which one would you rather have in your portfolio?

Matt Frankel: I go with On. It's like a Peter Lynch invest in what you know type thing. I noticed at the gym, more and more people are wearing On shoes than ever before. Nike is very much in turnaround, and they're trying to win back their cool factor. That's one thing that's really hard to do. Think of it in the '90s when we were growing up, how cool Nike shoes were, they got away from that, they're in turnaround. I take On because it's a high growth company, and their product's cool.

Jon Quast: I agree with Matt. I would also take On stock here, and for two reasons. One, growth. Its growth is better now, and its long-term growth potential is more promising, I think, than Nike. Two, its profit margins are better, and so you look at the gross margin, On is over 60%, Nike around 40%. I think that it deserves a higher sales multiple, that it does, but I also think that it's going to pay off better for investors. It's hard to invest in a turnaround such as Nike. You have to have a lot of faith, even at 2.5 times sales. That's not necessarily a great valuation for Nike if it doesn't dramatically turn things around.

Travis Hoium: The one thing I took away from On's conference call is their comments about tariffs are very different from most companies. They just simply say, "You know what? We're going to raise our prices. We've got a premium consumer, they're going to pay it." That's exactly what's happened. It will be interesting to see what happens to those two companies because I think there's a lot of debate and a lot of big investors betting on Nike. Next up, we're going to talk about stocks on our radar, you're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about, The Motley Fool Money have formal recommendations for or against, so don't buy or sell stocks solely based on what you hear. All personal finance content follows Motley Fool editorial standards that is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Meta platforms has been an AI story for a couple of years now, and Mark Zuckerberg was actually scooping up A1 hundreds when Nvidia was writing them off right before the ChatGPT moment. But Meta is now at something of a crossroads. They've spent billions of dollars acquiring talent. But then the news this week was that they had some hiring freeze. Jon, what is going on here? Is this growing pains, or is this actually a change of directions just in the last few weeks with Meta?

Jon Quast: No, I don't think it's a change of direction at all. To me, I liken it to a sports team. If you had a brand new sports expansion team in a league, let's say that the owner goes out there and spends all the money he has, spares no expense to acquire the biggest and brightest names in that game. You're going to bring them in-house, but then you're going to say, who's playing for this team? You're going to let those minds that you brought into the room have some time to get organized and develop a plan, develop a team identity. Who do we want to be? I think that's what's going on with Meta here. It spent its money to bring in the talent to form the team, but now it still needs to spend some time and develop a strategy.

Travis Hoium: They've also been spending a lot of money on data centers, chips, all of that stuff that all these big hyperscalers are buying. But their CAPEX isn't quite as big as companies like Microsoft, Amazon. Alphabet, $65, $70 billion is what they're expecting to spend this year, and they can use a lot of that internally to make their core products better. The interesting announcement this week, Jon, was that they said that they were going to spend $10 billion with Google Cloud, GCP, over the next six years. At least putting some of that off on Google, is that a notable shift in their spending patterns? What does it mean for Google and Alphabet?

Jon Quast: Whether or not it's a shift, I can't say, but I think it's a brilliant move because here's the thing, Google has a third party Cloud service. So no matter what, Google has to spend on AI to stay relevant in this space, or you give up your Cloud service. That's just how it is. Meta on the other hand, doesn't have a third party Cloud service, and so it's trying to figure out where it's going with AI. It can actually use Google as it builds out the infrastructure and push the envelope with what it's doing with AI, and then as it develops a strategy, it can bring things in-house. That's what I see going on here.

Travis Hoium: Matt, this could potentially allow Google to be the overflow, turn that instead of having that fixed cost CAPEX into a variable cost in the future. Is that the right way to think about this for Meta? Is that the right thing to do? Because a lot of these companies are vertically integrating. They seem to be at least going a little bit of a different direction.

Matt Frankel: One good thing I can say about Meta is they definitely seem to be adaptable when it comes to their AI strategy. You mentioned the hiring freeze. One of the things I found most interesting is that they internally label one of their AI teams as the TBD team. Maybe they're giving people, in some cases, nine figure signing bonuses, and not giving them a job to do.

Travis Hoium: This is taking the hire good people and leave them alone thing to another level when you're paying them that much money.

Matt Frankel: To not give them a job, then, so the pause makes sense. The $10 billion deal with Google Cloud, it gives credibility to that narrative that they are, in fact, taking a pause, it's not a shift in their strategy. They're still investing heavily in AI, but they just want to make sure everyone's getting their value out of all these new hires.

Travis Hoium: Matt, is this a win-win for Meta and Google?

Matt Frankel: Yeah, it's not as much of a needle mover for Google, $10 billion over a six year deal, which is what this is. It's not nothing, but for a multi-trillion dollar company, it's not that big of a deal. I think it's definitely a bigger win for Meta. It shows that their AI strategy is proceeding as they want it.

Travis Hoium: Google Cloud is doing $49 billion in revenue right now, so I think it's notable. They can count OpenAI as a customer as well. We like to end the show with stocks on our radar and get some thoughts from Dan Boyd behind the glass. Matt, you're up first. What's on your radar this week?

Matt Frankel: One that's a little out of character for me, NXP Semiconductor, but it's not as out of character as it seems because it's trading like a value stock. It trades for less than 18 times forward earnings. This is a business with stellar margins. They are a big chip maker, especially in the automotive industry where 60% of their revenue comes from. Autonomous vehicle industry, which is a big driver of chip demand is expected to grow at a roughly 30% annualized rate through at least the end of the decade. This is trading as a value stock. It has a great dividend, almost 2% dividend yield on top of being a cheap stock. I'm looking for chip exposure in my portfolio, and being the value investor of the group, this is where I think I'm going to get it.

Travis Hoium: Dan, what do you think of NXP Semiconductors?

Dan Boyd: Motley Fool Money listeners know that I love dividend stock, Travis and Matt, but here's the thing, I was looking up this company, and I read that their name is an abbreviation of next experience, and they've capitalized the N of next and the XP in experience, and I just think that's dumb.

Travis Hoium: Deep thoughts from Dan behind the glass. Jon, which stock is on your radar this week?

Jon Quast: If Dan likes dividends, then I've got one for you. Dollar General, symbol DG. It reports its next earnings on August 28th, and it goes back to what we were talking about earlier. It seems like the discount retail is where the consumers are going right now. I think that plays into Dollar General's favor, but more than that, it trades at 21 times earnings right now, which is cheaper than the market average. But if you look at its profit margins, they're actually down right now for some self-inflicted mistakes. It took on too much inventory in 2023. Its sales stalled out., and so it's had to mark down merchandise to bring its inventory back down. It's down about 12% now. I think that we're getting back to a place where it's optimized for its inventory. I think we're pushing past that headwinds. I think its profit margins are poised to bounce back, and so with a sales boost on the horizon from shifting consumer behavior, I think that Dollar General is in a good spot.

Travis Hoium: Dan, do you have questions about Dollar General?

Dan Boyd: Well, Dollar General, love me some cheap stuff, who doesn't, but interestingly enough, Dollar General used to be a big sponsor for Joe Gibbs Racing and NASCAR. Joe Gibbs, of course, won two Super Bowls with the Washington football team, my favorite football team, so I'm feeling pretty good about them right now, gang.

Travis Hoium: Dan, you have two very different companies NXP Semiconductor and Dollar General. Which one is going to end up on your watchlist?

Dan Boyd: I'm not going to lie Travis, I'm a simple man. I do understand discount retailing, I don't understand semiconductor production, so we're going to go Dollar General.

Travis Hoium: That is probably the right call right now given how complicated it is in the semiconductor space. NXP does have to deal with a little company called Nvidia as well, but Matt, that's one I want to dig into a little bit more over the next few weeks. Or Jon Quast, Matt Frankel, and our production magician Dan Boyd, and the entire Motley Fool team, I am Travis Hoium. Thank you for listening to Motley Fool Money. We'll see you here tomorrow.

Dan Boyd has positions in Amazon, Costco Wholesale, and Zillow Group. Jon Quast has positions in Dollar General. Matt Frankel has positions in Amazon and SoFi Technologies. Travis Hoium has positions in Alphabet, SoFi Technologies, Virgin Galactic, and Zillow Group. The Motley Fool has positions in and recommends Alphabet, Amazon, Costco Wholesale, Home Depot, Lululemon Athletica Inc., Meta Platforms, Nike, Nvidia, TJX Companies, Target, Walmart, and Zillow Group. The Motley Fool recommends Abercrombie & Fitch, Lowe's Companies, NXP Semiconductors, and Ollie's Bargain Outlet. The Motley Fool has a disclosure policy.