#1028 - How to Navigate the AI Trends with Raoul, Imran Lakha, & David Mattin | AI, Apple & Google

29:11But the only problem with doing that is you're only going to get your premium. So if the stock does rip 30 % in a week like it did, then, yeah, you got a little bit of premium, but you didn't actually participate in that much of the move. So you've got to kind of be aware of what you're doing and what the upside of your trade is. So, yes, the high probability trade was to sell optionality that was expensive and was going to reset lower on earnings. but if you actually believe Tesla was going to rip that hard that fast then with the premium that you're collecting you would have wanted to then buy a cool spread or something spend that premium on some upside participation and that would have been the winner of a trade in hindsight for that for that particular event to catch the bottom in Tesla because vol was elevated you're doing you're doing essentially a long delta i.e a trade that gets you long Tesla for your net seller of vol in that trade.

30:02And the vol got hit, obviously, because of learning. Yeah, and that's a nice way of adding to your position. If you've got conviction, it's been selling off. That kind of way is just a nice way of participating. You've got the upside. You can then flip into the stock, and you then just keep going. So you've got it. Yeah, the beauty about options is you can restructure those as you go along based on the conditions of the vol surface. So when the vol is super elevated, you're going to do a short vol trade, and you're but you're buying the stock essentially by selling puts and buying cool spreads when you get the rally and you get the vol reset and you've cashed in on some of that short vol position you can now look forward and say okay the entire curve has shifted down i'm going to take some of the money that i've made and then roll it into longer dated upside that has reset lower by five or ten vol points and now i've essentially got myself into a free trade for the next six months if this thing builds some momentum and the thing that we do options insight is we monitor how the skews moving around and what the signal is inside that to get a feel for what the option players are doing.

31:04And when we were heading down to the lows, there was very much a put skew on Tesla. I think it got as high as like six, seven vol points for puts trading above calls, whereas that has completely flipped around the other way now after the rally that we've had since earnings and since they came out with that potential approval in China. So now we're running at a call premium on the skew. So it's showing you that the options market is now repricing where the tail is on Tesla from the downside to potentially it going a lot higher. Imran, what is the options market telling you about Apple? Because we're expecting their earnings.

31:36What's been happening with Apple? Yeah, so Apple's interesting. And this is something me and David were talking about, because I think Apple is the forgotten tech name because it didn't have the AI story. It was doing all this nonsense on EVs, and now it's suddenly pivoted. And it's been left behind. So they've got this conference coming up in June that I keep banging on about to all my subscribers. and it's like i don't think the earnings is the event i think the conference is the event and actually there's an inverted massively inverted curve on auctions where may bowl is obviously pricing in some four or five percent move on earnings but you look at june bowl that captures that conference where they're going to unveil their kind of ai strategy or whatever that's not pricing any bowl premium at all so for me the the no-brainer trade on apple is to buy may june call calendars, where you buy June calls and you fund them with May calls.

32:26The May Bowl is going to get annihilated tomorrow. And whatever the stock does, whether it goes up or down, that May Bowl is going down. But the June Bowl probably holds a bit of a bid for what will become an event that the market will wake up to in a couple of weeks. So I think this is a perfect example. And I kind of see what you guys are doing with the exponential is now because i'm gonna i'm gonna ask you david now given the setup oh wow also headline coming across apple announces largest ever 110 billion dollar share buy buyback um so we'll see what that has to used to be tech bought back shares and people said you don't know what you're gonna do with the money that's not a good sign when shouldn't they be pumping that back into their ai amazing thing they're gonna unveil david or is that just because they have so much money they can afford so much money they've got yeah i mean i used to yeah i used to write years and years ago about how apple had just sort of basically an infinite pile of money so much they didn't know how to repatriate it and it just sort of stretched to the moon 7 000 times but the but the the um yeah the event in june and imran is totally right i mean the event in june is is going to be huge you know the markets might may have slightly forgotten about apple but you You know, tech people haven't.

33:40Apple is notorious for being a perfectionist company. It doesn't necessarily put a high priority on being first, but it puts a high priority on perfection and perfecting the customer experience. And everyone inside technology, and again, Raoul and I have talked about it endlessly, have been waiting for Apple to make their big AI move. They've built out incredible AI capability at the edge on their devices, on their phones, on their laptops across the last two, three years. The chips on those devices are hugely powerful. They're made by TSMC, leading edge process nodes. They can do AI on device.

34:18What are they going to do with it? And the big thinking, of course, is there's going to be some kind of huge upgrade to Siri. I mean, calling it an upgrade to Siri is really to diminish it. Essentially, a virtual companion fueled by a large language model, the kind of AI wizard that we've all been dreaming about that knows everything about you, you know, can talk to you as your counselor, your friend, your guide, all of that. So I will be putting Imran on speed. In fact, I'll be going to Imran's house. We'll be like putting it on the big screen. You know, as soon as that, as soon as that, as soon as he's on the stage, Tim Cook's on the stage, we'll let everyone know what's going on because it's going to be huge.

34:57And the word on the street is that the AI announcements will come this June. That's why everyone's so excited. Except it's not reflected in the options market. No, the vol market. Yeah, the vol market is pricing nothing on that part of the curve. Very little. It's so small that it's not even worth talking about. So we've got, it's going to be, AI has not been on the news flow recently, but between the open AI event and the Apple event, it's going to be AI-tastic all over again. And everyone's going to have their jaw to the floor yet again. And people have forgotten this because news flow is so brutal.

35:33It's so crypto. I mean, the other one who's out today will be Coinbase. I think it's out already, but I don't have it in front of me, but somebody in the chat. I always say this. If you're watching on YouTube, you got to get on the RV chat. There is a huge amount of information, which is why you keep seeing me look down at the screen. And I'm not going to get to all this good stuff. But there's so many good both comments, commentary and questions. But somebody did say they thought it came out. I haven't seen it yet, but Coinbase is in the exponential portfolio as well. Stuart said they beat on revenues trading down after hours, but I'm not sure that was a few minutes ago.

36:03So I'm not sure if we need to update that. Thank you, Stuart. I don't know where he saw that though. So check it yourself. That's been one of the best performers in the portfolio as well, Coinbase. It's a great company. The quality of people there are astonishing. Their monopolistic power is huge. If you think OpenAI is monopolistic power, well, Coinbase is monopolistic power in crypto. So really interesting company as well. I just want to flag a couple of the themes that are coming up. And we have a specific question for you. because I think that these are all things that you talk about in the exponentialist, which again is a product on the marketplace.

36:45And Nick is asking, how does the energy requirement needed to run the AI systems factor into your view? Do you see energy names as a play on the AI transition? I think David are proud. I'm going to ask, I'm going to start with this one. is even Elon Musk has said the need for electricity, Sam Altman said, everybody said, we don't have enough electricity to run the kind of machinery that we need to run to do this. I don't take that as necessarily a fossil fuel bullish scenario because I think that if you see what is happening in Europe and elsewhere, I think there is a massive push to run the energy from different sources because it's geopolitically difficult with oil.

37:35People don't like the volatilists of the oil market. In Europe, we're seeing obviously the massive drive towards solar and wind and geothermal. In the US, both Amazon and Microsoft are already moving towards nuclear, which David's talked about a lot. So yeah, I mean, David spends a lot of his time thinking and talking about what it means for energy. I think, generally speaking, there's a much bigger revolution that's going to be happening outside of just the fossil fuel revolution. David, do you want to talk a little bit? Yeah, I think, David, you are, I saw one of your posts, you are looking at this energy part, aren't you?

38:17This is something that you're touching on in the exponentialism. Yes, yes, hugely. I mean, one of the big sort of foundational models for understanding that we built inside the exponentialist is this idea of a foundation layer to the exponential age. And the foundation layer is made of energy, compute, data, and intelligence. We say that machine intelligence becomes foundational in the decades ahead. And energy and intelligence fall into this really powerful sort of symbiotic flywheel type relationship where more energy is going to allow for more AI. And because more AI will allow us to manage a very complex energy network, it will allow for more energy and round and round it goes.

39:05So yes, energy is a huge part of the machine intelligence story that the question is right to raise the question of where's the energy going to come from? Because just like Raoul said, you know, again, people are all in agreement that the energy demands on compute, you know, And then the vast amount of so-called AI inferencing that's coming, you know, using these models, making calls to these models, like when you write a prompt to chat GPT, that's going to be absolutely huge. I mean, again, just like Raoul, you know, it's habitual for me to sort of try to live in the future. So I look to where this is going.

39:43I don't think where this is going is, you know, fossil fuels. I think where it's going is a basket of renewables and nuclear. And I did a big piece of work on nuclear for GMI. I don't know, what was it, Raoul, a couple of months ago. And you see, again, as Raoul said, the really interesting symbiotic relationships growing between big tech and nuclear. You know, you have Amazon essentially buying a data center right next to a big nuclear plant, and they're going to use the plant to fuel the data center. You have OpenAI's relationship with Helion, which is all about fusion energy, the next step of nuclear energy.

40:22So, yeah, that's a huge emerging story. And you've got a really flourishing ecosystem now of nuclear startups. Nuclear has been in the doldrums, as we all know, for 30 years. But now you have small modular reactors. They look like sort of big shipping containers. You bury them under the ground. Microsoft and Alphabet and Amazon Web Services, all of that, They want to get these small modular reactors, bury them in the ground next to the data center and fuel it that way. That's what they're going to do. That's where this is heading. So again, it's a huge story. I think this is so important because you have to be looking at the future so that you don't make mistakes or misjudgments.

41:02It's all probability. There's no guarantee. But misjudgments about making these connections. That was such a smart question to ask, by the way, because we have had some people in this sort of, you know, let's call it medium term, not the day trade, but a medium term say, oh, OK, well, it's going to be an energy suck. We know that. So energy is a good way to do it as a proxy. But this is the important thing about sort of keeping up with what's happening with the future, because it's not it's not maybe that's not the case. So that's so important for that narrative, that focus. You know, it doesn't mean energy stocks don't go up because we're going to be through the business cycle.

41:41As the business cycle goes up, there's more industrial manufacturing, stuff goes up. Will you make more money owning oil or carbon allowances in the EU? You'll make more money owning carbon allowances. Will you make more money potentially out of uranium than owning oil? You'll probably make more money out of uranium. That's how you've got to think of this stuff, is, you know, where are the opportunities like? Nobody likes solar right now. Okay, well, that's interesting because we're at the bottom of the business cycle. So all we're going to see is demand is coming. So if you're looking for value stuff, look at all the solar stuff that got beaten up.

42:14Maybe it's going to outperform some of the oil stuff, which is more looked upon by most investors. So that's how I think about it. It's not a negative oil comment. It's just like, we're in this to make money. Yeah, where's the opportunity? Where is the opportunity? Where's the relative opportunity? one thing versus another because you always want to choose the fastest asset in a particular theme that you're in. If not, you're just doing yourself a disservice. Now, if you can't manage the volatility, well, that's where Imran comes in. Imran can help manage the volatility of running these faster races.

42:54And that's why his Option Insight service is so good because it gives you these kinds of understanding about using options to manage risk or to take risk. And that's why we're trying to put this whole thing together here, because look, we think this through in more depth than pretty much anybody else in any other research service, but it's still approachable. And we brought Imran on to make it applicable to those who don't just like I said it and forget it, because actually a lot of people love the adrenaline of trading and tech stocks can be quite far, right? You know what's really interesting about what you guys were just talking about in terms of oil relative to things like uranium, and you didn't touch on copper.

43:36But again, the vol market gives you clues. So for example, recently, copper vol, uranium vol, they've all been very elevated relative. And guess what the cheapest vol is across all of commodities right now? Oil. So it's almost like oil is kind of in the doldrums and it is not really reacting. and I was surprised by this because even on the geopolitical scare that we had between Israel and Iran you had gold going to the moon but oil wasn't really ripping in with any velocity and the oil volt was actually staying quite suppressed so it's funny there's these little clues that you get in the volt market where the action really is and right now copper is going somewhat parabolic because people are talking about the green energy side of that and also the fact that China is having a bit of an uptick now as well.

44:21And generally when China goes, copper goes, right? So, yeah, that's why I think people want to have a look through that options lens because there are clues there as to where the outsize moves and where the big sort of more medium term trends are going to come. And that's the other thing about the exponentialists is there's a fourth part of this, which is Julian Bittle helping with the... Gosh, we almost forgot to mention Julian. in. Yeah. And he does the whole technology cycle. So it's a stripped down version of the business cycle analysis we do for ProMacro and for the macro investing tool, specifically around technology and crypto, which form the basis of what the exponentialist is around.

45:04So we kind of extrapolate all the noise that you don't need to know. Because if you are interested in the technology and the exponentialist, you don't really care what's happening to value stocks or what's happening to the oil market or what's happening to that. What you're interested in is, how do I leverage this technology bet the best way. And that's understanding where you are in the cycle. And that also reduces risk. So as the technology cycle eventually turns over at the end of 2025, early 26, we'll make decisions about do we take some of these stocks out of the portfolio or do we unleash Imran to figure a way of keeping them in the portfolio because we don't think it's going to, it could be a year of down 20 % sideways trading, in which case maybe there's other things to do and that's why i really love getting the four of us together because look this is a very exciting area nobody's covering this stuff in the same way uh we think it's very very important and most importantly i actually think we got six years before we have no idea what's about to happen because of the economic singularity and this six years is the six years to make all our money and if we don't i think we're going to go into a world where we have no understanding what it's about I think Ryle just likes to say that on the show, so I almost fall over and die every time he does.

46:22I mean, I don't know if I've - I'm just saying, yeah. I'm going to explain this a little bit to people. I feel so good. Because this is wildly important. I've explained to many people that GDP growth is driven by population growth, productivity growth, and debt growth. Debt growth stopped in 2008. It's now just repayments of old debts. population growth is slowing down or shrinking across the entire western world plus southeast asia plus china so we've got slowing growth we've got massive debts that's the big problem we're in and they've been debasing currency to deal with it but we have ai which is infinite human mind knowledge david writes about this a lot it's going to be knowledge is going to be like water.

47:12It's going to be free and ubiquitous. The robots, whether it's Optimus, whether it's Figure, whether it's whatever else Amazon is using, are going to be everywhere. A Tesla, after all, is just a robot, a car robot with AI in it. What that means is you have infinite population growth in an economy. Infinite population growth means what the hell does that mean to GDP growth? And if you lower the cost of electricity that we talked about earlier, you increase productivity growth. So you start to get bananas outcomes with the economy. What happens when AGI comes, the all-seeing, all-knowing AI? What are financial markets at that point.

48:04Surely the AGI just wins all financial markets. What job does Imran, myself, David have in that world? We don't. What does it mean for your investments? What does it mean to run a company when everybody can just copy your business using an AI or an AGI instantaneously? When you could say, hey, look at this website, repeat that, it'll do it. Why do we even need humans to make the decisions when you just give the AI the role, hey, you're an AGI, figure out how to make money. It's so complicated, and this is coming really fast. By 2030, I think we're coming into a world that nobody understands, and economic models will not work anymore.

48:50I don't even know what money is in a world of infinite abundance. Now, I'm not saying 2030 is a doom date. It'll be a process by which we get there. But by 2030, things are going to start feeling really, really weird. And we won't know why the economy is growing so fast, but jobs aren't growing. Why the economy is growing so fast, but something's not happening right with companies. Why do things feel dislocated? This is what is to come. And I think we've got six years to make as much money as possible so we can just observe it from the beach drinking a cocktail and not try and scrap it out. Now, I can see Maggie's already thinking, shit, what about my kids?

49:31And that's what her face has written. What is shit? What about my kids? As is Imran's. Point to it, Imran's are young enough. They'll figure it out. And Maggie - Proceed carefully here, Raoul. Well, he's only got very young kids. All I'm saying is your kids, Maggie, will - be at the epicenter of the storm? No, I don't think they will be. I think we're at the epicenter of the storm. Wait, I totally didn't do that, but Raoul just froze. I think kids grew up digitally. Wait, this is so funny. Is it just me? No, Raoul's freezing. You're freezing, Raoul, and I'm not pushing a button to mute you. I'm totally not doing that.

50:18I'm back now, right? You are. your kids are digital. They come from a digital world. They are more adaptable than we all are. We're more under threat than your kids or your kids Imran who will just grow up knowing nothing different. So I don't worry about that. It's the swathe of Gen Xers who kind of get lost out in the cracks here. and the older millennials who can't really adapt anymore. It's not going to feel good. On the other hand, the economy is going to be booming. And maybe the stock market's booming. But in the interim, this six years, we can all make money out of this, whether it's crypto, whether it's technology.

51:10There's going to be a way to make an extraordinary amount of money out of the biggest technological change in all humanity. So let's just do that. We can worry about tomorrow, tomorrow. I'd rather worry about it on the beach than worry about it in some cubicle office at an insurance company in Ohio. I have many thoughts about this, but I'm going to reserve a lot of them right now. But I will say that someone just asked me on a Zoom that I was doing why I agreed to work at Real Vision. And I said, because the world is changing and I want to make sure I know everything I can about it. Because that's the only way, right?

51:56Ignorance isn't a choice in my book. It never has been. So what we do is provide a lot of food for thought across every one of the topics we touch. So we dumped a lot on you today. Options, more important than ever. Imran has not only his own company, he's on the Academy. and is on programs across RV. David lives in the future and thankfully I think is a bit more optimistic than Raul. This is why he hasn't got any hair. He lives in the future. He hasn't got any hair because he's seen what's happening. He's seen what's happening, but he always makes me feel better. But very seriously, if you want to go down the rabbit hole and really think about what Raul just said and the changes that might be coming and what you need to understand about that and then sort of what it means from a chart point of view and what it means for volatility and how you can protect yourself.

52:51I think that's what you guys are doing with the exponentialists. Is that right, David? Yeah, absolutely. You know, we always said that, look, yes, the exponentialist is about technology investing and we want to profit from these incredible technology journeys that we see unfolding around us. But it's broader than that too. It's about how do we navigate this as a professional? How do we navigate this as a human being? And, you know, there are just simple, simple beliefs at the heart of that. We are heading to some kind of economic singularity. There is a great enweirdening of the economy that is going to unfold once we have, you know, armies of humanoid robots and near infinite knowledge workers with AI.

53:36how quickly do we get there? It feels we're being fast forwarded into that future. No one can know precisely, but we're heading towards it. But knowledge is empowerment. If you can spend the next six years, of course, we want to profit from this journey, but spend the next six years building your understanding, thinking deeply about where it's heading, what it means for you and your children. Societies and human beings are fantastically adaptable. There's going to be lots that is amazing about the world we're heading towards. And what's so exciting for me about the exponentialist is we can build a community grounded in that belief.

54:15It is happening. So let's seize this moment. Let's profit from it. Let's understand it. Let's empower ourselves inside it. Because like we said, when we launched, the alternative is you try and sort of turn away and hold back the ocean. You're not going to be able to. David, here's the question. What do you tell your kids? Or what do you tell your wife about your kids? How old are they first? They're 10 now. Yeah. Two 10-year-old boys. And like I'm always saying, at the end of this long journey with technology, what is left? What's left is human connection. The only thing that a machine can't do is, well, in the end, at the end of this long story with technology, is be a human being.

54:59And we will always want human beings to be human beings for us, to see us, truly see us, to commune with us. We'll always want the creative outputs of human beings. How does it feel to be alive going through this journey as a human being with others? So I try to instill in them adaptability, creativity, the importance of providing things of value to others. And I really encourage them to, they do incredible things with ChatGPT already. This is going to be about how can you educate yourself with how can you use these AI tools to supercharge yourself? You know, so they've played a lot with chat GPT.

55:42You know, one of them's really interested in coding. He's taught him he's teaching himself. You know, I can't really teach him. I code a tiny bit, not much. He's teaching himself to code with chat GPT. And you can see the acceleration. And look, is he going to use that coding in 20 years? Probably not because there's going to be an AI that will do it, but he's going to use that capability to take these tools and supercharge himself. So adaptability, creativity, the importance of human relationships and familiarize yourself with these AI tools. That's because I get asked this question more often than any other question when I go inside organizations and speak.

56:21You know, when I go to McKinsey or I go to Disney or whatever it is and talk to them about AI, they listen to the professional stuff. And then when the questions come, it's all, what should I tell my children? And that's what I tell them. And I just want to, because we're almost out of time, I just want to link this back to, so Rao, you always say this, and we talk about it a lot internally, but the mission we have is to provide the knowledge, the tools, and the network to give yourself the best financial life you can. And this is the kind of knowledge we're talking about. And you can get it at whatever level you want at Real Vision, or you can go to the marketplace and have this kind of really go down the rabbit hole deep dive about these very heavy issues that we're talking about and optimize protecting yourself when you need to sort of trade and invest around it to make the money.

57:15I think that's really important for people to understand. about the knowledge thing don't forget we pioneered the use on a financial site of having a chatbot there's the real vision bot there that is chat gpt three three and a half that's skewed towards finance to help people i mean it's there for you the tools are there and you know i see a lot of questions always in the comment section what does he mean by reverse repo and today there's like three people replying to that saying just use the chat bot it'll give you everything the knowledge is there use the knowledge we've given you the knowledge tools and network the network is the human bit yeah that dave talked about community the so we are social creatures by nature and yes we socialize on online but we'll also socialize in person that's the future of humanity is as david says to be humans and to get different opinions right not everyone agrees with Rao.

58:15Maybe I may not agree with some of the things he said today. We'll see. I'm going to think about it. But the important thing is it's testing where the difference of opinion is, is sometimes where the real value is and where you can help figure out what's right for you in your framework. So it's amazing. Every time I have you exponential as dudes on, it blows my mind and gives me so much to think about. And now I'm going to go tell everybody I know the things that we need to be thinking about as parents. I'm going to go in the RVIP Slack because we're talking about creating a parents channel. Clearly, we have to do that.

58:48But it was a really fantastic conversation. Thank you guys so much for coming on and sharing it. I think it's a good time when there's all of this stuff in the headlines for us to take a deep breath and think about where we need to hone our skills. Fantastic. Good to see you all. And you can find the Exponentialist in the marketplace, along with Imran's services there as well, Option Insights, also the macro investing tool, everything else. So just go and check it out. So you can pick what you're ready to hit, but you can get all of it on RV and we'll help you along the journey if you want to leg up to some of this other stuff.

59:20So it's great. This was a treat. Thanks so much. I may have to go have a cocktail now. I don't know, but I hope you all have a good night and we'll be back here tomorrow. Take care and good luck out there, everybody. If you want to participate in the upside of crypto, but don't have the time or the inclination to go truly down the rabbit hole, then Real Vision crypto might just be for you. New from Real Vision, an RV crypto subscription gets you access to a trading basket complete with risk management strategy, technical analysis updates, private Discord channel, monthly drinks online, and more.

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