🎭 Netflix’s curtain call

With only a few months to go before the eagerly anticipated final season of “Stranger Things” is released, Netflix has a talent retention problem.

Over the last few days, rumors have circulated that the Duffer Brothers — who have overseen their hit sci-fi series grow from a still large ~$6 million budget per episode newcomer in 2016 to a whopping ~$30 million per episode phenomenon by its fourth season — are signing a major deal to make exclusive film and television content with recently merged media group Paramount Skydance.

• According to reports, the Duffer Brothers have been put off by Netflix’s hard-line theatrical release policy, since the streamer often avoids giving tentpole movies significant time in cinemas before launching on the platform.

• The approach has already been a point of contention with other Hollywood heavyweights.

• Losing two of the biggest fish in its original content talent pool could be a knock in an area where Netflix is already struggling to find success: making high-budget blockbusters that draw praise from fans and critics alike.

It doesn’t feel like a coincidence that the exact same week Netflix loses the Duffers over theatrical release issues, the company announces that, sure, Guillermo del Toro’s “Frankenstein” movie can get a tiny little limited theatrical release, if you insist. 

The Takeaway

Few of the streamer’s high-budget movies have garnered much acclaim from audiences, nor overly positive reviews from critics (with the notable exception of Martin Scorsese’s Oscar-nominated epic “The Irishman”). The platform’s priciest original production, “The Electric State,” had an eye-watering budget of $320 million yet was also the worst critically received on the list. Whether or not Netflix is able to continue to convince creators to shoot what are essentially TV movies will have a big impact on its ability to compete with increasingly sturdy competition. 

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As the old saying goes, it takes money to make money, and Big Tech companies are having no issues spending bucketloads of cash to fund their AI super-ambitions: Amazon, Meta, Microsoft, and Google spent nearly $90 billion on capex last quarter, and investors largely seem to be very happy with this outsized spending.

There is one outlier that’s worrying Wall Street, however: the amount being spent on talent. Mark Zuckerberg’s Meta especially has been throwing seven- to nine-figure compensation packages at AI experts as it attempts to poach employees, including reportedly floating a $200 million package to snatch away one top OpenAI worker.

The thing to note is what’s wrapped up in a “compensation package” and the three-letter acronym that’s raising alarms: SBC.

• That stands for stock-based compensation, and during Meta’s latest earnings call, it was already a concern. After AI capex spend, employee compensation is expected to be the “next largest driver of expense growth in 2026,” CFO Susan Li said, even as overall headcount declined at Meta.

• SBC labor costs in particular are up at Broadcom and Microsoft as well, Morgan Stanley reports, which calls it a trend that investors should be paying attention to, warning of “shareholder dilution.”

Ultimately, this trend is creating a strange situation where companies are spending more on people now to hopefully spend less on headcount later, as AI adoption fosters a reduction in workforce.

The Takeaway

In the AI arms race, every company can throw money at data centers and chips, but there are only a few AI superstars with the skill set to take all that investment and win the race for artificial general intelligence. And stock-based compensation gives these highly valued employees some serious skin in the game, as if they do produce an AI breakthrough, the company’s stock will rise — and so will their own fortunes. 

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Per yearly figures from the Census Bureau’s Current Population Survey, domestic migration rates are hovering near all-time recorded lows, with just 7.9% of Americans switching towns or cities last year. There are a lot of reasons people move, as noted when we charted where Americans moved to and from in 2023, but there are a couple of obvious reasons as to why people are staying put these days, too.

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• Dayforce was the top performer in the S&P 500 after Bloomberg reported that private equity giant Thoma Bravo is in advanced talks to acquire the HR software provider

• TeraWulf rose on news that Google’s stake in the bitcoin mining infrastructure company increased to 14% from 8%

• First Solar and Sunrun shone as fresh IRS guidance largely preserves 2030 tax credits for the industry

• Novo Nordisk shot up after its blockbuster weight-loss shot Wegovy was approved by the FDA to treat liver disease

• Tech bull Dan Ives freshened up his list of favorite AI stocks with these new additions

• Why Nvidia and AMD’s unusual agreement with the Trump administration might survive any legal challenges

• Why Tesla’s regulatory credit revenue — and profit — will likely plummet next quarter

• ARK Invest’s flagship fund enjoyed its second-best week of inflows ever and doubled a few positions

• Nvidia is adding more power to its cloud gaming platform