What Exactly Is The Market Telling Tech To Do? — With Josh Brown

27:44Wealthfront brokerage is not a bank. Rate is subject to change. Promo terms and conditions apply. For more information, see the episode description. Capital One's tech team isn't just talking about multi-agentic AI. They already deployed one. It's called Chat Concierge, and it's simplifying car shopping. Using self-reflection and layered reasoning with live API checks, it doesn't just help buyers find a car they love. It helps schedule a test drive, get pre-approved for financing, and estimate trade in value. Advanced, intuitive, and deployed. That's how they stack. That's technology at Capital One.

28:26And we're back here on Big Technology Podcast with Josh Brown, CEO of Ritholtz Wealth Management, co-host of The Compound and Friends with Michael Batnick. Where else can people find your stuff, Josh? Well, I used to write a lot more than I do now, but the blog is the reformedbroker.com. And maybe I'll get back to writing at some point, but like, I'm kind of like, I'm kind of focused on building the business and I can only do so much media. And I think I've just kind of defaulted to doing a lot more television and podcasts and such. But you know, things, things could change, but that's the primary way to catch my stuff these days is audio and video.

29:07Yeah. And like I said before the break, Compound and Friends, staple for me. I'm in the gym. I'm cooking. I'm walking somewhere. I'm listening to Compound and Friends. I'm in the car. I'm listening to Compound and Friends. I'm watching CNBC. There's a great chance that Josh is on also. And I always turn the volume on. So just putting it out there. Joining me for the hour today, right here at Post 9, Josh Brown, Stephanie Link, and Jim Labenthal. Let's check the markets. We've been in the red. I'm on less than people think just a couple of times a week, but it's a lot of fun. Awesome. So I thought for the second half, we could like I tease that we would go through some of these battles.

29:43Let's definitely do that. I wrote like a little bit of I would call maybe provocative thesis about each one of the tech companies. Maybe I could just like read it to you and kind of get your your take on it. So let's start with Facebook or Meta if you prefer Meta. I wrote doing everything right in the market size, but pretty weak in its future business and vulnerable in its core. Do you think they'll change the name back to Facebook? I keep saying they should just change it to AI at this point, like or meta AI. Is that what they're going to do? They're going to keep chasing the next buzzword and keep changing the name?

30:20Well, I have I have this later on for you, but I think that the AI stuff, at least in the near term, is definitely more real in the metaverse. Um, but maybe, maybe, I mean, metaverse, isn't metaverse such like a zero interest rate name? Like once you have a 5 % interest rate, it's awful. I hated it when they did it and it made sense when they did it and I still hated it. And now it just looks, now it just looks goofy. Yeah. I don't know. Do you know what, wait, do you know any Facebook people that say I work at meta? No, uh, actually, I know they do. They, they all have taken to it. Yeah. I mean, they call themselves meta mates.

30:54Oh really? What if they rebranded as Instagram? it's a good it's an interesting idea but do you want to rebrand as a company that is sort of second in the market next to tiktok i don't know i would rebrand from a position of strength yeah so i don't i really don't know what they should do but uh the it might be one of the all-time worst name changes in corporate history i would have to think about that but it's it's pretty bad there may be Who knows? Maybe with like what's happening, the reputation that TikTok is getting and what's happening with Twitter, having some nostalgia for old social media.

31:32I mean, I have to say that Mark Zuckerberg probably looks a lot better now than he did two years ago. And there might be some nostalgia for Facebook, even if not many people are using it in the same way that they did beforehand. Maybe go back to Facebook. If TikTok gets banned in the United States, the no-brainer is to rebrand his Instagram. Yeah, but do you think TikTok is going to get banned? No. No. I think it'll get subsidiary and handed over to American ownership. And the Chinese will content themselves with a really, really big royalty revenue stream. And I think that's how it'll end up going.

32:08Yeah, I'm with you on that. If it gets there. I mean, maybe it just... The US government, when it comes to tech, has a habit of just letting things continue as they are. But this is a little different, but I don't know. There's all this talk, but if this is a pressing threat, where's the action? And because there's no action yet, it just doesn't seem like what's going to be that compelling event. Well, you know what? The American public is not clamoring for this to happen. And that's the missing ingredient. Politicians do things to get reelected. And so if if their own internal operations are taking polls and seeing what their constituents think and there's not a lot of energy behind, you know, there's not a lot of fervor to go after TikTok, then they'll just stop and they'll go chase whatever the next issue is.

32:54So I think you're right. Yeah, there was an article in The Washington Post last week talking about how the Democrats are worried that they're vulnerable because of this potential crackdown on TikTok. Well, the other side is cracking down on Mickey Mouse. So maybe it's a push. Yeah. All right. Well, we'll see. Also, like, I don't know. It just, well, this is, again, gets to the government's role in the private sector. So, but when you bring in national security and that's one thing. But I've always felt that there needs to be an egregious foul on TikToks and for something like this to get done.

33:27Well, I guess I guess we'll have to see then. Right. Some kind of some kind of leak where we find out, you know, what they're actually doing with TikTok specifically. And if it if it pisses enough people off, maybe. But for right now, it doesn't feel like putting a lot of time and energy into banning TikTok is going to be a winning strategy for either party for any particular reason. Correct. And definitely not for Facebook either, at least in my opinion. So let's talk about Apple. So I wrote that Apple is somewhat vulnerable with inflation. There was a 40 % decline in laptop purchases. They're about to push a risky mixed reality device without a clear roadmap.

34:11Who knows if people are going to upgrade iPhones in the same degree as they were beforehand. Now the company has been pretty invulnerable, but maybe there's some vulnerability there. What do you think? Well, the stock is off its all-time high, but I think the important thing to remember is that Apple is one of the greatest cash machines ever built. And the ability to buy back stock, pay a dividend, engage in R &D, enter a new market, they do it all. It's one of these companies that has just been able to walk and chew gum. And look, there have been periods where they've looked very vulnerable, and they've figured it out.

34:49even just in the Tim Cook era. So like until they really miss, until they really launch something that falls flat, I think it would be a mistake to bet that that's what's going to happen. It hasn't been a successful bet so far. So Apple has this, speaking of like doing everything right from a financial standpoint, they have this new Apple, I think it's a savings account or Apple Card or something of that nature where you put your money with Apple and you get like 4 % back. What would you tell your clients about that? I was going to say the odds of that even showing up on, you know, in terms of like moving the needle for Apple or zero.

35:27So it's part of their services business. That's where that gets bundled into. And the services business is just massive. And, you know, I don't think that's a big picture. I don't think that's terribly important. it is interesting and it could open the door to more financial services. But I think the big picture is the installed user base and the overall growth in services revenue and what they can then do with all that cash flowing in. And it doesn't feel like it's on the verge of changing. Probably the biggest risk there is TSMC and China, Taiwan, and some kind of event that limits their ability to access the chips they need.

36:14If you ask me, what's Apple's Achilles heel? It's something geopolitical where they're asked to bow down to China in some way. They refuse. They're kicked out of the country from selling iPhones there or some kind of disruption to chip supply because of China, Taiwan like that. And by the way, that China, Taiwan story and Taiwan sent me in particular, I would say that's the Achilles heel of the entire global economy right now. Like that's, that is, that is the one that's because if you thought supply chain shortages were bad last year, you know, any kind of geopolitical event in that part of the world, you, you will see an economy literally like off a cliff if something goes wrong there.

37:00So but I think that's Apple's probably biggest point of risk. And you see it. You see all the effort to build their own chips. You see all the effort for Taiwan Semi to start building in places like Mexico and Wisconsin. Like everybody sees this. It's not it's not exactly visionary for me to say this, but like I'd worry way more about that than a lot of the other concerns about Apple. We just had Congressman Ro Khanna on the show last week who was fresh off a visit to Taiwan. and again this is also fairly known but it was interesting to hear from him where you know he was behind this scenario how long does it take to get these chips in the u.s as opposed to being manufactured in taiwan and the answer is a decade so it's sort of a you know 10 years of being sort of you know fingers crossed hopefully nothing happens it's a long time right you have to start you have to start somewhere i guess um you had to plant the at some point.

37:55But yeah, look, I think a lot of interesting things can come from this economically if we, in a cost-effective way, can start producing this stuff here. But we're nowhere near close to that. And all of these companies that make up our stock market, Apple, NVIDIA, there's a huge amount of vulnerability to that one part of the world and all of the things that supplies and nothing we do in Congress or on the ground in the Western hemisphere is going to change that right now. Okay. Let's do Google. I wrote risking its core business by not being ahead of the chat bot wave. So I don't, did you read the Bloomberg story, uh, yesterday about the interviewed all the people that I did?

38:43I mean, I'm a shareholder in alphabet and that's terrifying. They really seem to not know what the hell they want to do. So in response to that article coming out, which I'm sure freaked them out, they came out and said that they're going to merge their two AI entities, one of them being Google Brain, which is homegrown, and the other being what is called DeepMind, which they acquired. So now they're going to smash those two things together and make a more concerted effort to have a competitive product out there in the market. Right now, they don't. I was playing with Bard and it was giving me false information that I was very easily able to verify was false using Google search.

39:24So it's extremely problematic that their AI product is a piece of shit, but it is. And chat GPT is not so amazing. Like it's, you know, let's call it what it is. It's a prediction engine for language. You know, I mean, it's amazing in that the usership of it has exploded overnight, like 100 million users out of nowhere. That's the amazing part of it. Not the tech. The tech is going to be blowing our minds six months from now, a year from now, now that we're all playing with it. Now we're first going to be amazed, right? Right. But like Google not even being able to compete with this rudimentary version of chat GPT, which is a not for profit foundation that has a, you know, a profit seeking department within it.

40:18And then you have the third most valuable company in the world, like trying to play catch up with that. It's really astonishing what's going on here. Yeah, it's fascinating. There's a line from that Bloomberg article that I was looking for, and I found it where in February they're testing it. And someone writes, Google employee writes, Bard is worse than useless. Please do not launch. That was the line where I looked and I was like, oh, boy. But one thing I'll say, Google has never played defense before. Right. Google has spent the entirety of its life on offense since coming public. So they came public in like 2004.

40:55before they were after the initial wave of dot coms came and went so they had like all of those like uh all of those examples of what to do and what not to do to follow and they immediately took like 85 market share and then they had it the entire time without really any challenge whatsoever even bing uh yahoo committed suicide like they just they they never had to defend their turf. So it'll be interesting to watch them try to do it. Maybe they will. So my personal opinion is that you're not going to see Bing be 10 % of search, maybe ever, because Google will get their act together before something like that could happen.

41:43And they'll figure out how to incorporate some of the BARD stuff or some other AI stuff into what it is so that they keep their user base, but they're going to have to fight for it because they don't have it all for themselves anymore. Absolutely. And they have the capabilities, so they can definitely try to counterpunch. So that'll be really fun. They have the expertise. They just, you know, they have to strategically think this through. And what's the irony is that a lot of the people working on AI for open AI could have been at Google. They kind of had an exodus from their AI initiatives because the CEO was being too cautious and he was spending too much time listening to all these in-house ethicists and all these people trying to throttle the AI.

42:31And then Microsoft just comes along, drops a check on Altman and says, do what you want to do. We're on board. We'll say all the nice things in public about ethics, but like, let's go. And, you know, maybe that's where Google has to get to. It's terrifying for the rest of us because we don't know what the ramifications are for that. But that's kind of where it seems to be sitting right now. So let's, let's talk about Microsoft now that you brought it up. So for Microsoft, I have well positioned for every trend, cloud AI enterprise technology. Bye. I mean, it seems that way. This is the stock that I think fell the least out of the group from its highs during the October lows for tech last year.

43:16And very quickly regained a lot of the market share that it lost. Fundamentally, it doesn't appear as though the business has lost a beat and definitely still has the confidence of Wall Street. So this is like one of those trades where while it's working, just enjoy it. Nobody seems to be looking at anything Microsoft is doing critically in terms of like, this ain't going to work or they're behind the eight ball. I think right now, Microsoft is probably the name out of this group that people are least concerned about. And it's fascinating because the company for a decade had a lost decade, terrible leadership was stuck in the mud.

43:57And then I think the energy to move them from the desktop operating system of Windows to cloud just showed them that sometimes it's okay to rip everything up and start again, which is what all these companies need to be able to do. And that's probably, I mean, the same person that did that, Satya was the head of server and tools, which had all that money coming in. Well, there's two things that people should know about Microsoft's last decade. One of those things is that earnings actually grew. Right. So Steve Ballmer, all-time worst timing. Bill Gates gives him the reins, I think, in the year 2000.

44:35so he he inherits the the reins at the all-time high price for tech stocks so almost no matter what he did he was not going to be able to say the stock price grew by x percent over my tenure so that's a little bit it's a little bit unfair to him and his legacy although he did some you know clumsy stupid stuff that have become memes and we all we all know he laughed at the iphone He launched the Zune. We know. But earnings grew while he was there. And they grew, I think, faster than they did for the overall stock market. So it's not like he was eating crayons. But he had that unfortunate timing of where the stock was priced when he took over.

45:16But then I think the best thing you could say is that he knew himself when it was time to walk away and let somebody else have a turn. Because he's still the second or third largest shareholder and always will be. And so he correctly recognized, it turns out I'm not the guy. So I think when we look back, we'll give him more credit and he'll be less of a punchline than maybe he was at one point. But Microsoft now – oh, the second thing I wanted to say, Wall Street didn't really understand the degree to which there were employees at every government and every Fortune 500 company and every large multinational company all over the world.

46:03Wall Street didn't fully understand the fact that these companies had employees who were Microsoft certified and were never going to change things over to Linux or Apple. So when cloud came along as a business, it was, I mean, AWS, yeah, but it was really Microsoft's business to lose because you're going to these companies and you're asking them to move things from internally to the cloud. If you have at least a Microsoft cloud environment, all of those Microsoft certified IT professionals working at these companies could get on board with that. They didn't look at that like, oh, shit, this is going to replace the need for me.

46:50They looked at it like job security. And that's one of the most unsung aspects of the cloud migration and why Microsoft was able to preserve its lead and then grow it. And again, that's something that's also not going to change anytime soon. There is an entrenchment in cloud that I think continues to help companies like Microsoft. Which could be very interesting as they go and try to sell AI into companies as well. Yeah, I think it's an enduring advantage that they will enjoy for a long time to come. And it's behavioral. Because again, who's making these decisions? It's people at companies that have a vested interest in staying with Microsoft.

47:36Okay, let's talk about Amazon. Amazon is a very interesting position. and i i have um this is what i wrote cloud ceo in a moment where the retail business needs the most attention rough in the short term good position in the long term well i don't know if this guy's going to be the ceo a year from now really okay so tell me why i could see i could see bezos coming back really why they all do that because he's too young to be done too much of his fortune is at risk based on the decisions of someone else. They all come back. Howard Schultz came back three times already. Right. Like it's, it's to me.

48:16So this, I'm a shareholder in Amazon. Here's why I like this situation. Either Jassy like gets the confidence of the street and the stock heads back to one 50 or Bezos comes in and it happens anyway. But like, look, just watch what, watch what's going on with Bob Iger at Disney. and then ask yourself, do I think Jeff Bezos is paying attention to that? He definitely is. Yeah. Okay. So they all come back. I think he's coming back. Or I'll be shocked to the upside because Jassy figures it out. But I feel like either way, this company will get back on its horse and will get its momentum back. It's just a matter of time.

49:00So NVIDIA is a very interesting one. For them, I just wrote, get on board and ride the AI train. The only way that you can really buy it right now is if you just don't care about the valuation. Because it's the most expensive large cap stock in America, I would say. Worth more than ever. Yeah. And it's 60 times earnings. Do you know how much stuff – I'm long the stock. Okay. The thing is, I own it for so long and from such a low cost basis. And I've trimmed it on the way up. so I just don't feel as at risk as I probably am. But like a new position right now because you're chasing AI, I would advise against that.

49:39There will be a disruption in the stock market at some point this year, there is every year, where they're going to hit these high beta names hard. And maybe that's the time to not be fearful and take advantage of a big drawdown in NVIDIA. I could be wrong. You had an analyst this week, double upgrade the stock, go from a sell to a buy. And his mea culpa, a guy from HSBC, he's basically saying, look, I was focused too much on the enterprise and data center slowdown and I missed the chase that would be on for AI chips. And that's really the most important part of the story, it turns out. So his target is like 355.

50:22So yeah, he went from a target of 175, which is substantially below where the stock is trading to 355 which is substantially above so i think there's a lot of that um you've got retail uh people obsessed with quote playing ai and nvidia is the most obvious way to do it their chips have 80 something percent of the ai chip market and you know it's quote the analyst again they're getting ten thousand dollars for the a100 chip right they're getting twenty thousand dollars for the h100 chip which is the one that's so powerful the government won't let them sell it to china yeah so that that pricing power and the volume of these chips that are going to be needed for this ai revolution that combination is insane so who else makes ai gpus that are suitable for ai there are other players but But NVIDIA is so far ahead, both in its ability to produce the chips and the chips capability that it's just hard to see a scenario where NVIDIA doesn't keep winning and keep this market.

51:33So that's why it's trading. So people are like, oh, it's so expensive. And I say, well, don't you think there's a reason? Do you think the market is that stupid that it's not aware how highly valued or how high of a multiple it's paying? The market is aware. There's a reason. It's not out of nowhere. It's not, right? So that push and pull is difficult. There are some investors on Wall Street who just that's part of their process. They don't care how great the story is. They don't get off on the technical aspects of what a company is making. They just will not invest at this valuation no matter what.

52:10We watched this happen with Tesla. you had you know traditional investors who had to like invent new metrics in order to justify buying the stock and then the stock at its maximum valuation gets added to the s &p 500 and you know they didn't want to do that you know the the the index committee at standard and pours was like uh s &p dow jones indexes you know they were like this is this is a trillion dollar stock and it's not in the index and now they're profitable i guess we have to add it right so in every era there is one stock that just defies the investor community and i think nvidia has become that stock for this era it was probably tesla last time right now it's this is this is the stock that it's it's almost like um it's almost like a religious uh dispute at this point interesting Okay, two more before we have to jump.

53:11We could do it quickly. Tesla, I say, would double if Elon sold Twitter? I don't know, because that last quarter that they reported this week, they're starting to look more and more like a traditional automaker. And if that's how they're going to start to get valued, there's a lot more room to go lower. I do agree that Twitter thing is not doing them any favors. And I don't know how much longer he's going to continue. being as hands-on as he is and as vocal as he is. But, you know, listen, this is what happens when you buy into a cult of personality. Right. You got to take the good with the bad.

53:50This is the bad. Yeah. Last one. Bitcoin will never reach$64 ,000 a coin again. No way. You said that? You want to die on that hill? That's the provocative thesis I'm throwing at you. So you think it's going to go above? I think there's nothing I think there's nothing intellectual to be said about the future price of Bitcoin my personal opinion it's all feelings and ideas and concepts I had a guy on my podcast Rick Edelman say he thinks it's $150 ,000 by 2025 and I said why and he said they haven't it's just math and I said oh alright I guess I understand I still don't but I guess I get it I love hearing you talk about Bitcoin, Josh.

54:37It's always funny to hear your perspective. I don't have a very – if you told me next month it'll be$20 ,000 or$40 ,000, I could believe either case. Right, which is why I think just your agnosticism about it and I think that you're approaching it in the right way, which is that there's no fundamentals here. So who knows? I got it right. I got a wallet for the lottery tickets. Josh Brown, thanks so much for joining Oh, so great to be with you, Alex Thank you And that'll do it for us here on Big Technology Podcast Thank you so much, Josh Brown, for coming on It's always great to speak with you And I love listening to your compound and friends show So I hope we can do it again soon Thanks to Nate Gowatny for handling the audio Thanks to LinkedIn for having me as part of your podcast network Thanks to all of you, the listeners For coming back week after week If you're liking the show, as I mentioned please give it a rating and review on apple podcasts and spotify those go a long way really appreciate some people who've done it recently i want to shout out in particular we've got some good ones recently uh thank you ws77 weekly deep dive into all things tech an absolute must if you need to listen to deep insightful discussions on tech especially in the era we're in can't pass by a week without it thank you ws77 thank you to calct big tech made conversational.

56:02The podcast features the most high profile guests from the tech community. They and Alex with its few love that a host that lets experts talk and take the lead. Simple yet strategic questions break down what few truly understand. I read the likely tech outlets as my primer, then come here to learn more about specific topics that I want to better understand. Like the latest AI fueled news feeds, listen to completely different points of views among engineers who create products. This podcast is pretty special. Thank you very much to the two of you. And thanks to everybody who's rated among, you know, the many who have.

56:38And I can't thank you enough. You really do help the podcast. And we've been on a roll lately getting great guests. And you are a large part of the reason why. So thank you for that. All right, that'll do it for us here on this week's edition of Big Technology Podcast. We will be back on Friday. That is going to be live on LinkedIn. in and then we'll have it on the feed shortly afterwards breaking down the week's news and we'll see who comes on next week we're going to have a special guest next week so stay tuned for that on the flagship interview all right that will do it for us here we will see you next time on big technology podcast