The Great Rotation Is CRUSHING Software and Bitcoin

0:00Nick Shirley:Hello, everyone. Software stocks have been crashing, Bitcoin correlation has been rising, and we talked to the man behind the Minnesota fraud discovery. We're live today from the desk of Anthony Pompliano.

0:20Nick Shirley:Before we get into today's episode, I need your help. We currently have 44 ,553 subscribers on YouTube, but if you hit the subscribe button, we'll have one more. Go ahead and hit the button. Let's get into today's episode. All right, ladies and gentlemen, the main story for investors over the last few weeks, it's been the rapid sell-off in software stocks. To better understand why this has happened, I asked Sylvia, the AI-powered CFO that we built, to explain exactly what is happening and to dumb it down for people like me. So here's what she said. The sell-off, which is dubbed the Saspocalypse, great name, has wiped out over$1 trillion in market capitalization from software stocks since late January of this year.

0:57Nick Shirley:Now, the primary driver is a sudden and very intense fear that AI, particularly the emergence of all the autonomous AI agents, all of a sudden, people are getting very worried that they are going to cannibalize the traditional SaaS business model. Now, investors are worried that if AI tools can replace entire software workflows from coding to customer service to IT management, then the per seat subscription-based pricing model that has underpinned SaaS valuations for a decade, it's fundamentally threatened. It could be bad news on the horizon. Now, the iShares tech software ETF known as IGV, it has plunged roughly 20 % year to date.

1:32Nick Shirley:Major names have been hit very hard. Microsoft's down 28%, Oracle 55, Salesforce 30, and Adobe is down 27%. Now, adding fuel to the fire is a massive sector rotation as well. Capital is flooding out of legacy SaaS names and into AI infrastructure plays, value stocks, or industrials. Forward earnings multiples for software have compressed from roughly 39X to 21X, even though fundamentals have largely held up. Now, 100 % of reporting S &P 500 software firms have beat profit targets last quarter and 80 % exceeded revenue estimates. Companies like ServiceNow and AppLovin, they posted record earnings, but they still saw their shares punished as Wall Street has shifted its focus.

2:12Nick Shirley:They're going from current profitability to terminal value and essentially asking whether these incumbents can survive a world of autonomous AI agents. Now, these are fairly big promises that stock market bears are relying on for their investment thesis. It doesn't make sense that all software companies are suddenly significantly less valuable than just a few weeks ago. So Sylvia went on to explain that the key debate between this being an overreaction from investors or a structural turning point in the market. Sylvia said that bears argue that AI agents will commoditize software, compress margins, and erode installed bases.

2:44Nick Shirley:Some analysts at Bain and Forster note that CIOs are consolidating software budgets and redirecting spend towards AI tools, not expanding their SaaS footprints. But the bulls, the people who are really optimistic, they counter the deeply embedded system of record platforms, Salesforce, ServiceNow, and Intuit. They have sticky customer bases and recurring revenue that won't evaporate overnight. And so current valuations may actually present a compelling entry point. The sell-off is just temporary. The truth likely falls somewhere in between though. AI is gonna reshape the sector and it will be an indiscriminate nature of the sell-off is pricing many quality names as if their businesses are already in decline when the data doesn't yet support that conclusion.

3:24Nick Shirley:One of the questions that I personally have and I'm continuing to think about is the relationship between software stocks and Bitcoin. If software stocks are selling off because of the AI fears, then why would Bitcoin sell off at the same time? Are investors worried about Bitcoin in relationship to AI? Well, Sylvia explained the relationship well. She said that the correlation between Bitcoin and software stocks has surged to striking levels this year. As of February, Bitcoin's 30-day rolling correlation with IGV has hit 0.73. That's a remarkably high reading. Bitcoin's correlation with the NASDAQ 100 has similarly swung from negative 0.68 to plus 72.

4:01Nick Shirley:It's just been a few weeks. Meanwhile, its correlation with gold sits at a paltry 0.12. In practice, Bitcoin is trading like a high beta software stock, not a safe haven. The mechanism driving this linkage is institutional flow dynamics. It's not coming from fundamental overlap. Since spot Bitcoin ETFs launched in early 24, Bitcoin has been increasingly held within the same institutional portfolios as growth and tech equities. When a risk-off event hits, like the AI-driven software sell-off, then portfolio managers de-risk across the board. They sell both software stocks and Bitcoin simultaneously.

4:35Nick Shirley:The Bitcoin ETFs saw$272 million in daily outflows at the peak of the sell-off, and cumulative crypto product outflows reached 1.7 billion. Now, it's not a crypto-specific story. It's a broader risk-off regime where capital rotates out of growth assets and into gold, treasuries, and cash. Bitcoin as a risk-on asset held by the same institutions just gets caught in the undertow. The key nuance here, and what makes this particularly painful, is that Bitcoin exhibits a negative skew in its correlation. Bitcoin follows software stocks down more aggressively than it follows them up. So when IGV rallies, Bitcoin's reaction is muted.

5:10Nick Shirley:When IGV sells off, Bitcoin tends to amplify the move. that asymmetry is the worst of both worlds. Bitcoin captures the downside of tech correlation without fully participating in the upside. Stifle has even projected that Bitcoin could fall to$38 ,000, citing its correlation with the NASDAQ 100 as evidence that it now behaves like a levered tech bet. It's clear that the sell-offs are highly correlated right now. The most likely scenario where the correlation breaks down is if institutional investors stop treating Bitcoin as a growth or risk asset. As long as Bitcoin sits in the same sleeve of institutional portfolios as software stocks, and it's also governed by the same macro triggers, Fed policy, liquidity, risk appetite, et cetera, Bitcoin is going to keep trading like a levered tech bet.

5:52Nick Shirley:For this to change, a critical mass of Bitcoin's marginal buyers would need to shift from momentum chasing hedge funds and ETF-driven retail to structural price insensitive holders, mainly entities that buy and hold regardless of quarterly macro shifts. Now, the most plausible catalyst is sovereign adoption at scale. The US has already established a strategic Bitcoin reserve using seized assets. Countries like Brazil, El Salvador, and Bhutan, they're exploring or actively accumulating Bitcoin as a sovereign reserve as well. Central bank gold reserves have now surpassed foreign-held U.S. treasuries for the first time since 1996.

6:25Nick Shirley:Bill Clinton was president. And that could be a structural sovereign rotation that Bitcoin could eventually benefit from if it proves to be a credible neutral reserve asset. If major central banks, particularly China or Middle Eastern sovereign wealth funds, if they begin actively acquiring Bitcoin, that would create a massive base of price-insensitive demand that absorbs sell pressure during risk-off events, and it fundamentally dampens its equity correlation. This is essentially what has been happening with gold, so Bitcoin aspires to follow in the precious metals' footsteps. Any decoupling of Bitcoin from software stocks will be a multi-year process.

6:58Nick Shirley:It requires a gradual shift in Bitcoin holder base from speculative and institutional to sovereign and structural. A compression and volatility has to happen, in at least one crisis where Bitcoin doesn't sell off with everything else. The sovereign reserve trend is the most promising catalyst on the horizon. But as long as ETF-driven institutional flows dominate Bitcoin's marginal pricing, it's gonna continue to behave like a high beta extension of the growth in tech complex, especially during periods of stress. So one way to think about Bitcoin's current correlation is that the asset is a victim of its own success.

7:31Nick Shirley:We wanted mainstream adoption, and that's what we got. We accomplished our mission. But that mainstream adoption, especially by Wall Street, it brings side effects. The new correlation with software stocks is the most obvious one. And Bitcoin's going to be just fine. Don't get it twisted. I anticipate that Bitcoin's going to do very well in the future. But your challenge as an investor is to not get distracted. Avoid getting bored right now. I wish all of you the best of luck. Bitcoin's going to be choppy for a while, and that's okay. I recently had the opportunity to sit down with Nick Shirley.

8:02Nick Shirley:He's the man who discovered a lot of the fraud in Minnesota, and he has brought the fraud in government spending to the forefront of the national conversation. In this conversation, Nick and I break down what he's doing, how he's doing it, what he thinks about the fraud and how pervasive it actually is. Enjoy this conversation with Nick Shirley. All right, Nick, I thought a great place to start is you're known as like the guy who exposes fraud at this point. It feels like the fraud is both way worse than we thought and also crazier in terms of what people are doing to actually go and do this fraud.

8:32Nick Shirley:How bad do you think it is at the national level?

8:34Anthony Pompliano:nationally it's really bad it's in all 50 states but let's just take minnesota for example you have an entire network of fraudsters who have there's over 10 categories of fraud within just the welfare system for instance just a few are the daycares the non-emergency medical transportation companies the home health care and then you also have adult daycare so that's just four but then you have all these other ones that are intertwined in this fraud so these web connections if you look at a diagram, they'll go all over. And it's a map that they're going to have to track down and take down each one of these fraudsters.

9:08Anthony Pompliano:And then you see different types of fraud take place in other places like California, for instance. I was just there the other day and it's really bad.

9:16Nick Shirley:So in Minnesota, the daycare one, I think that's the one that people really kind of first were like, hey, if I didn't know who Nick Shirley was before, now I understand who this guy is. You went to California, you were looking at voter fraud there. Yes. What was going on in California?

9:27Anthony Pompliano:Yeah. So in California, you don't need an ID to vote. So essentially, I just wanted to go show people how easy it would be to vote illegally, how an election could potentially be rigged, and simply how easy it is to vote in California. So I went straight to the registrar of voters in San Diego. I said, okay, what does it take for me to vote? And the lady was like, oh, you fill out this form, you say this, you say who you are. And then when you come and vote, you sign your signature and then that gets scanned. I said, well, what happens if Richard Sherman wants to go and vote on behalf of somebody else?

9:59Anthony Pompliano:Or if someone wants to go and vote on behalf of Richard Sherman. She's like, well, why would somebody do that? I said, well, so like, she's like, they'd be lying. I'm like, okay, what if they don't care? And then she's like, well, then they'd be prosecuted. So there really is no way for you to know whether or not somebody is who they say they are when they go and vote. It's kind of crazy. Yes.

10:20Nick Shirley:What do you think? Do you have a sense of like how big the economic, you know, kind of pain here is? And the reason I think about this, I think from an investor standpoint, right, is we know that the government is spending way too much money to spend more than they make or they take in. And so the national debt is exploding. I think that when Trump came into office, his entire promise was, hey, I'm going to try to balance the budget. We obviously had the creation of Doge and they went to work. They got a ton of pushback for a variety of different reasons. But how much of that national debt is actually just fraud and waste and all these issues versus it's going to legitimate causes?

10:53Nick Shirley:Do you have an idea for that?

10:54Anthony Pompliano:It'd be very interesting to see how much of the budget could be balanced if they did eliminate all fraud. Because just Medicare alone, I mean, Dr. Oz has came out and said that there's$100 billion in Medicare fraud in locations like California and in Minnesota. That's just Medicare fraud. That's in two states. And so, and if you look at these budgets from a place like California, they have this thing called Medi-Cal. If you look at the budget, it goes up every single year by billions of dollars. And by no means are millions more people coming onto their programs. So they're exponentially growing these programs, receiving billions and billions of more money.

11:31Anthony Pompliano:Meanwhile, they're also pushing out billionaires in California. And so how are they getting this money and where's that money coming from? So there's a lot of things that are very interesting about this fraud that takes place because these budgets are increasing for programs like Medi-Cal, for instance. Meanwhile, while the population and the numbers aren't sufficient enough to receive those budget increases.

11:55Nick Shirley:What's interesting to me is in New York City, one of the things that people, I see them tweeting at you, I see them tweeting at a lot of people is this whole idea of like at-home healthcare professional. And I think when you look at the program from an academic standpoint, it's better for an outcomes basis to not have someone go to the hospital to get cared for by somebody who's a loved one or a friend, et cetera. It should be cheaper to be able to do that. But also, how do they know who's taking care of who and how do they prevent fraud? Like all these kind of trade-offs come up. Have you looked into any of that or kind of formed any thoughts in terms of that type of stuff?

12:29Anthony Pompliano:Well, it's so bad that a dog actually registered to become a Medicare provider here in the United States. The source from that is from the HHS in an interview I did with the deputy secretary of the HHS. So literally, a dog could register to become a Medicare provider. And it's happened. I mean, that's kind of crazy.

12:48Nick Shirley:It is crazy. And so when you look at it from a financial standpoint, these numbers, it almost feels like we're never going to know what the true number is. How do we fix it? I think you've done a great job of exposing it, but you're probably also some of the closest in terms of understanding the problem, meeting some of these people, et cetera. Do you have any thoughts in

13:06Anthony Pompliano:terms of how it could get fixed? Something I'm super proud about from my videos is that instant change was created within the government where the HHS actually went and froze the child care payments in Minnesota. And they said, we'll give you the money. Just send us proof of receipts that you actually need the money to this day. Not a single location has sent in proof of receipt for any funding. That's kind of crazy. So imagine if the federal government and state governments were said, okay, just send us your receipts and then we'll pay you. Yeah.

13:37Nick Shirley:How has all this changed your life? Like it seems, you know, when you and I first started talking, I think you lived a very different life than you do now. And so just like talk about like the personal impact, you know, both positive and negative on all the work you've been doing.

13:51Anthony Pompliano:So it's been great to see the response from people and to see the change that's created throughout the country. And with that, some stuff that you may not think about is just like the security level now. As far as you saw with Elon Musk, they tried to demonize him for trying to do doge and cut waste and fraud. And they burned his Teslas. They went after him. And with me, what they're trying to do is they're trying to paint me as somebody who I'm not, who I really am not. They call you far right. So they'll say all these crazy things. They'll call you delusional conspiracy theorist. They'll call you all these things to try and create this perception of somebody who you're really not.

14:29Anthony Pompliano:At the end of the day, I'm just somebody who's working on my own to expose fraud here in the United States because I see this corruption. I want to live in a country where I can say I did my best and I'm also helping my fellow American citizens. And so that's been something interesting to see how quick people can kind of just flip a switch on you for actually providing a huge service for the country because the fraudsters really do complain the loudest. How did you start creating the videos? Yes. So I've been making a video every single week for the past two years. I've posted a video consistently over 100 videos over the past two years.

15:03Anthony Pompliano:No, no, no. Before that.

15:04Nick Shirley:But didn't you make videos in high school or something?

15:05Anthony Pompliano:Yes. So I made videos in high school. I used to love YouTubers like Logan Paul, Casey Neistat, and always listen to people like Joe Rogan, Alex Jones. And I would always -

15:16Nick Shirley:Super far right. Super far right.

15:18Anthony Pompliano:Super far right. But so like I started watching like vloggers in high school, like Casey and Logan. And I said, well, this is fun. I could do this. I always grew up making videos with my older brothers. My older brother is actually a YouTuber as well. And so I just started making videos in high school. And then as I got older, I became more mature. and I started to get more interesting, more interested in to see how the world works. And then from there, I started making political videos, but I realized you actually can't make political videos as a small creator on YouTube, because if you put the word Trump in your video, if you question COVID or you question vaccines, they'll censor your video and you won't be able to get views.

15:54Anthony Pompliano:Therefore, you won't be able to make money. And then after that, I continued to make videos, took a two-year break to go do a service mission for my church, came back. I had learned Spanish on my mission and really dove into the political side of things with going to the Southern border and interviewing migrants as they came across the border.

16:14Nick Shirley:I remember seeing those videos. I didn't know it was you making them, but those were kind of crazy. Like people were hiding their faces. People didn't want to say where they were coming from. People didn't want to say where they were going. And some of it's like, look, some people just want personal privacy. That's fine. But the fact that it was like a very long line of people just walking across the border.

16:31Anthony Pompliano:Kind of nuts. Yes. I mean, I was shocked when I went there the first time. I had no idea what I was getting into. I went there by myself with a tripod and it was literally just me. And I'm interviewing these migrants as they come over. Some are ecstatic. Others are trying to hide away, get away from the camera. And then I'm there all by myself at the Southern border and some Border Patrol guy comes up to me. He's like, you know, there's a cartel war going on the other side of there. I said, what? Like these people are happy to be here. Like, yeah, they're getting dropped off by the cartel. And nobody really knew exactly what was happening because nobody could speak to the migrants.