Is The Bull Market Over?!

0:28Hello, everyone. I need your help. We currently have 39 ,934 subscribers, but my goal is to get to 1 million of them. So go ahead and hit the subscribe button. Help me help you help me. And let's get into today's show. The market is crashing. The bears are celebrating and investors, they're scared. But Warren Pye says we may have bottomed, so everyone calm down. He says that there were convincing signs of a bottom at the end of last week. Inverse ETF volume as a percentage of total spiked up to 43%. Outside of Liberation Day, that's the highest percentage in more than two years, and 40 % has marked the bottom of most corrections.

1:05Then, I went on Fox Business. Michael Lee was on, and he thinks we bottomed as well. Listen to what he had to say. I think we just went through a real big sell-off in the AI trade and Bitcoin because of plumbing in the financial markets, right? So first you had the dollar index go from 96 to roughly 101 from the middle of September to the end of October. then you already had problems in the repo market with the government shutdown. The Treasury general account went from approximately$600 billion to$1.1 trillion. That's a lot of money out of excess reserves in the economy. And so we are six days away from quantitative tightening to go to quantitative easing, as well as hundreds of billions of dollars being pumped back into the reserves.

1:44So that first was a rug pull on Bitcoin, and then it cascaded to non-profitable tech, high PE tech, moderate PE tech, and then the rest of the market. I think we put in a bottom on Friday. And I think some of these data center plays got absolutely destroyed for no reason. And so that's two for two. They think that we bottomed. Mr. Derivatives on X, he says that SPY last week was the third highest weekly volume since May of 22. QQQ last week was the third highest volume weekly since June of 2022. What happened to the first and second highest weekly volume days? Mark the bottom, baby. And he says he's just the messenger.

2:19But it's not just the S &P. It's also Bitcoin as well. OnChain College on X said that Friday's capitulation was worse than any single day of the 2022 Bitcoin bear market. He says that it was comparable to the summer of 2021. China went ahead and banned mining. March of 2020, COVID, and the 2018 bear market bottom capitulations. And that's all from a short-term holder selling in loss standpoint. So whether you're looking at stocks or you're looking at Bitcoin, there's a lot of data that suggests the market is bottomed, the local drawdown is over, the bears can go back into hibernation, and investors, you can remember, we're in a global bull market, baby, and I think that things are going much higher.

3:01All right, ladies and gentlemen, yesterday, Google became the fourth company in history to hit a$4 trillion market cap. That's trillion with a T. That's a lot of zeros. They joined NVIDIA, Apple, and Microsoft in this rare club of companies. If you remember, NVIDIA became the first company ever to reach$4 trillion in July of this year. Microsoft quickly followed them and they crossed over the same threshold in intraday trading on July 31st. There was only one problem. Microsoft closed that day below the $4 trillion mark. And so people said it don't count. So then they had to come back and the milestone got surpassed again last month.

3:35But now all of a sudden people are saying, well, Apple, they also crossed the$4 trillion milestone in late October. So that gave us three companies above$4 trillion. Add in Google, we now have four. And so that means we didn't see a single company cross the$4 trillion market cap in all of human history, but suddenly we have had four companies do it in the last five months. Welcome to the new world of business and finance. The winners, they're worth way more than you thought, and the losers, they become irrelevant faster than you thought possible. So we must ask ourselves, what is driving the meteoric growth for these large tech companies.

4:10$4 trillion is a massive number. Well, there's a few drivers of valuation, in my opinion. First, these companies are producing insane amounts of revenue. Apple, $416 billion. Google,$385 billion. NVIDIA,$130 billion. And Microsoft's revenue is$281 billion a year. These numbers are ridiculous. They're like video games. Multi-trillion dollar companies growing double-digit percentages year over year. And of course, NVIDIA as the standout, It doubled over the last 12 months, a$4 trillion company doubling in 12 months. But it's not just a story of top-line revenue growth. These four companies are also producing real free cash flow too.

4:50Apple,$98 billion. Google,$73 billion. NVIDIA,$60 billion. And Microsoft's free cash flow is$78 billion a year. Now, that's a lot of free cash flow. And investors, they obviously look at a lot of data points to measure a company's value. But nothing is more important than free cash flow. And these companies, all four of them are delivering on that metric. This free cash flow is being used to do three big things. First, buyback shares. Second, pay dividends. And third, they are making substantial CapEx investments in AI infrastructure. The first two uses of free cash flow, buybacks and dividends, those are self-explanatory.

5:25But it's the third one that has everyone's attention. Google, as an example, is projected to spend around$90 billion on CapEx. A significant portion of that is going to go to AI infrastructure because they're going to invest in their cloud, in search, and in YouTube. Microsoft, they're going to spend$80 billion. And their big focus is on AI data centers and cloud infrastructure. They want to train their models. But they're also going to deploy AI and cloud applications as well. But it's Apple. Apple is actually going to take a very different approach than those first two companies. They plan to only spend$12 billion on CapEx.

5:56And the majority of it is going to go to first-party AI data center infrastructure and proprietary silicon. But a big reason why Apple spends so much less on CapEx is that their decision is to use a hybrid model. They're going to partner with third-party cloud providers for large compute demands. And then finally, NVIDIA, the granddaddy of them all. They don't spend CapEx on data centers or other traditional AI infrastructure. Instead, NVIDIA is the big winner, the big recipient of all the CapEx spend by these other large companies. Analysts believe that NVIDIA is going to capture 25 to 35 % of all AI-related infrastructure spending globally, $405 billion.

6:32So this brings us back to the fact that four different companies have become$4 trillion companies in the last five months. That is only possible because of the large addressable market of artificial intelligence. If you evaluate these companies through the rearview mirror of history, you may be worried about their future prospects. You're going to claim things are expensive, or you're going to question the future durability of their demand. It's all rational looking through the rearview mirror. But if you evaluate these companies as the winners of the largest addressable market of our lifetime, then you're going to realize it's much more likely that each of these four companies are undervalued relative to their future financial performance.

7:07Take humanoid robots as a single example. Wall Street banks, you know, the smart money, they see the industry growing into a multi-trillion dollar juggernaut over the next 25 years. That includes a compound annual growth rate of 40 to 100 % for the foreseeable future. Now, companies are gonna have to innovate on hardware and software to make those projections become a reality. I do think the companies can do that. And it's noteworthy because humanoid robots, it's a net new industry. It didn't previously exist. So that means that trillions of dollars in economic value, it's up for grabs. Who's going to get it?

7:39And who do you think is going to capture some of it? Well, I think it's going to be the largest, fastest growing and most innovative companies in the world. There's going to be plenty of startups that come out of nowhere and create brand new businesses. Good for them. We need that innovation. But one thing that we have learned from the AI boom is that incumbents are very well positioned to benefit from this innovation period. And then there is obviously this net new demand or this U.S. government support for the industry. And in turn, that support for the industry is actually support for these large cap tech companies.

8:10AI czar David Sachs tweeted yesterday, according to today's Wall Street Journal, AI related investment accounts for 50 % of GDP growth, a reversal would risk recession. We can't afford to go backwards. And then Energy Secretary Chris Wright, he said in a TV interview yesterday that the administration's new Genesis mission, which was announced, It's an all-in national effort to take the power of AI and pair it with the 40 ,000 outstanding scientists and engineers at our national labs. So just take a second to think about this. You've got a massive addressable market, you've got tons of free cashflow, you've got a government-driven tailwind, and you've got monetary policy that's easy.

8:47What do you think is gonna happen? You think stocks are just gonna U-turn and all of a sudden enter into a decade-long recession? We're headed towards some big bear market? Give me a break. The era of$4 trillion companies is here. Eventually, we're going to have$10 trillion companies. No one is going to be able to stop this from happening. These companies are big, they're profitable, they're growing, and they're innovating. That is a cocktail for bigger profits and bigger valuations. $4 trillion today, that seems like a big number. But in the future, we're going to look back fondly of this moment because the companies are going to be worth$10 trillion.

9:24and everyone who is questioning their future prospects, they're gonna look really, really dumb. Starlink has gotta be one of the coolest pieces of technology that anyone has created in the last 20 years. They put satellites up in the air and they beam the internet down onto earth. How cool is it that everyone eventually is gonna be able to get cell phone service or the internet by simply having a supercomputer that sits in their pocket? But it's not just gonna be SpaceX and their Starlink product that's in the market. Amazon and Jeff Bezos, they seem to be locked in some sort of competition with Elon and SpaceX.

9:56And so Amazon has now unveiled its Starlink terminal competitor. They're calling it Amazon Leo Ultra. Long name. We'll see if the product works. Sawyer Merritt points out it's a full duplex phased array technology. It's weatherproof and it has an integrated heat sink into the device. You can mount it on a pole. It's got an enterprise grade terminal and it's coming out next year. Now, Amazon Leo, which is formerly known as Project Coupere, if you look in the news. It has 150 satellites in orbit already, and the initial network testing is already underway. Amazon has not shared the pricing for the terminal yet, but who cares how much it costs?

10:31What we are about to watch is a showdown between two of the world's richest men, Elon Musk and Jeff Bezos. And these guys, they want to dominate space. They want to beam the internet down to your phone or your computer, and they want to make sure that everyone gets online. I was on Fox Business this morning, and I was asked about Bitcoin, artificial intelligence, and tech innovation. I tend to think that everyone is underestimating what's happening right now. Here's how I explain how I see the world. I think that we're living through this massive economic boom, and so everyone who's scared doesn't understand what's happening.

11:05Technologists are problem solvers, and we're facing many problems in our society. And so everywhere you look, whether it's Bitcoin, AI, reusable rockets, drones, humanoid robots, all of this stuff is going to make our lives better, right? If we want to address affordability, and that's where we're seeing a lot of the political kind of fallout, or we want to just simply get people more prosperity. You have to use technology to do that. Bitcoin is the single best piece of technology to protect your purchasing power over long periods of time. Over the last decade, Bitcoin is up 240x. There's lots of volatility along the way.

11:35There's lots of drawdowns. But ultimately, if you put$1 in Bitcoin versus$1 in treasuries or any other asset, Bitcoin has outperformed. And I think that's going to continue over a long period of time. And that's true of other areas as well. So things like AI data center buildouts, If you use software to automate, automation equals efficiency, efficiency equals productivity, productivity equals profits. You're seeing companies that now we have four U.S. companies that are worth$4 trillion. Unbelievable. Incredible. But if you look, they have free cash flow. They're growing incredibly quick. NVIDIA doubled in the last year.

12:05That's right. A$4 trillion company that's doubling. And people are saying, hey, I don't know if this company is worth it. I think there's a very strong argument that all of these companies are undervalued over the next decade because people don't understand exponential growth. And what we're seeing with this technology is that not only is it solving these problems, but it's doing it faster and in a much more profitable way than we've ever seen in anything in our lifetime. And so I think it's very hard for investors to understand what's happening. But ultimately, technologists are problem solvers.

12:30You solve these problems, I think you're going to create billions and billions of dollars of profits. So what are the metrics that you want to look at to value these companies? I mean, even if you look at NVIDIA at 176 right now, right? I mean, you're talking about, what, 28 times earnings? It's not overblown. Or is it 29 times earnings? I mean, the bottom line is it's pretty much right in line with much of the market. There are many consumer staple companies or retailers that trade at higher multiples than NVIDIA does. So, again, you go back and you look at this, and I think what actually is happening is that people don't want to believe that this could be true.

12:59They're looking at these companies and they're saying it almost sounds too good to be true, and therefore I need to find something to nitpick. But it's like getting a Ferrari delivered and you saying, you know what, the shade of red is a little off. I wish that it was like, you still got a Ferrari, right? And so I think with NVIDIA, what you're seeing is, you know, the stock's down 3 % because a random customer says, oh, we're going to go with a competitor's chip. 3 % sell off in a$4 trillion company because one single company said we may go with a different chip. What you're seeing is you're seeing a lot of emotion in these stocks.

13:29But if you, again, zoom out and look, they're building solutions to these problems. These problems have trillions of dollars of market cap at the end of the rainbow. And so if you want to invest capital, do you want to invest it in the past or do you want to invest in the future? And technology is the place where that is where the market's going. And I think that's where profits are going to end up. I'm not always right, but something tells me that when everyone seems to be questioning the consensus narrative, that means that someone is going to end up on the wrong side of the equation. And my guess is that the technologists, the problem solvers, the entrepreneurs, I'll bet on those people all day long.

14:03History is very kind to them because they tend to be some group that can figure out what is the problem, what is the solution, and where are the profits. So far, as we've talked about today, we've been talking about for months, these companies, they are producing more efficient solutions, they're producing productivity, and ultimately they're producing profits. If there's profits, that means these companies are gonna be worth a lot more in the future. That's it for today. Thank you guys so much for watching. Remember, we are so close to 40 ,000 subscribers on YouTube. Please hit the subscribe button and I'll see you guys live tomorrow from the desk of Anthony Pompliano.