Are We in an AI Bubble? | Macro Mondays: October 20, 2025 || Andreas Steno and Mikkel Rosenvold

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2:41Hello all there. Welcome to another edition of Macro Mondays. My name is Mikl Olsenvall and I'm joined as usual by Andreas Steno, my co-host. Andreas, we skipped the show last week due to the bank holiday. Quite a lot of stuff to talk about over the last 14 days here, I'd say. We'll get around to the crazy volatility markets right now, look at earnings, etc. So, Andreas, just how are you feeling today? We'll get back to the last 14 days. Things are looking quite okay today. It's an okay day. It's been a rollercoaster, to say the least, over the past couple of weeks. And you spent time in an actual rollercoaster in Paris in Disneyland over the past couple of weeks.

3:21So I actually think it was good for your mental health to stay away from the desk last week. At least I kept staring at the volatility in many of the names that we've been involved in, asking myself over and over whether this was it for the cycle. But I've spent a lot of time looking into the data on this cycle. And I actually think that it's quite likely that we have six, nine months left of solid markets. But it will be a bit more, let me put it like this. it will be a maniac market from here. I think that's likely with higher volatility, larger trading ranges and all of that. But we'll get back to that.

3:58Yeah, absolutely. Interesting stuff. I can tell you as much, Mickey Mouse, he isn't long suey. Judging from the look on his face last week, he was way too happy to be completely long crypto. So anyway, remember guys, this is our free show at Real Vision, our free weekly show. To get full access to all our trade portfolio or articles or research, you have to upgrade to the pro tier. That also gives you access to a lot of the other great content. We've got a particularly packed week this week on Real Vision. Tomorrow at 11 ET, we have Raul and Kevin Kelly joining for this month's Insider Talks. At Wednesday, we have Mike Alfred joining to talk about Bitcoin miners.

4:37And on Thursday, we have the charting macro show with Joe Bland. And a lot of, of course, our usual flagship reports and portfolio updates to look out for. So all good reasons to join the approach here to get full value and full access to the Real Vision community. Andreas, before we get to the laugh of the week, we just need to remind everyone that particularly perhaps in these times, while we try to be very, very specific and actionable in all our investment analysis, our trade ideas, they might be... Sometimes it may be good, sometimes it may be shit. Yes, and that is also true, perhaps, for General Gattuso's football teams these days.

5:23Enough about that, Andreas. I want to start in a discussion that's been ongoing amidst all this market turbulence, and that is, are we in an AI bubble? And we have some charts to show some points on this, because a lot of the talk, Andreas, seems to be going on about, are these companies actually making money? The question is, is that really the right question to ask? So let's have an input from the great show called Silicon Valley here on companies making money. Richard, one potential issue. Our hosting fees could become a challenge as we scale. Right, but we can offset a lot of that once we get a few customers and start a subscription revenue model.

6:06What? Revenue? No, no, no, no, no, no, no, no revenue. I'll call you back. What? Why would you go after revenue? Because to make money? No. If you show revenue, people will ask how much and it will never be enough. The company that was the 100Xer, the 1000Xer becomes the 2X dog. But if you have no revenue, you can say you're pre-revenue. You're a potential pure play. It's not about how much you earn. It's about what you're worth. And who's worth the most? Companies that lose money. Pinterest, Snapchat, no revenue. Amazon has lost money every fucking quarter for the last 20 fucking years and that Bezos motherfucker is the king.

6:43The king. There's no revenue. No one wants to see revenue. Go. Oh, uh, I just thought that mainly the goal of companies is to make money. Yeah, no, no, no, that's not how it works. I don't want to make a little bit of money every day. I want to make a fuck ton of money all at once. ROI. ROI. You know what that stands for? Uh, return on... Return on investment. Nope. Radio on internet. So, Andreas, is the point of business to make money? That's a big question to ask here. But does some of this logic apply to where we are in this AI cycle, do you think? Well, it certainly does. If you look at returns in unprofitable tech stocks versus profitable tech stocks, to take that example, we've had a very solid cycle, say, over the past three or four months in unprofitable tech stocks, maybe even since May.

7:40And it's typically something we see when the monetary policy is eased into a cyclical upswing. Think year 2000, maybe 1999 rather. Think year 2020, when we got a very easy monetary policy on the back of the pandemic, while the economy was actually recovering during the reopening phase. we had very, very strong returns in non-profitable tech during those time periods and better returns than in the Mac 7, for example. That especially applies for the 2020 scenario. So I think it's fair to assume that we're in such kind of an environment right now. We've obviously had some brief volatility around that narrative in the past seven to ten days.

8:32But we're also clearly on a path towards easier monetary policy. We got the news last week that we're close to an end to the quantitative tightening. And even if this is not a straightforward signal that we'll get quantitative easing next, let me just stress that it's not. It's still one step in that direction. We're talking about narrow dollar liquidity that is sufficiently tight to the Federal Reserve to do something about it. And all of this happens amidst what appears to be a cyclical acceleration of the economy. And I still think that remains the case if you look at everything from trade data globally to forward-looking indicators based on the dollar and interest rates and energy costs and stuff like that.

9:17It still looks like we're two or three months away from what appears to be a cyclical uptake, and we get easing into that. So in this kind of environment, you can actually make money trading stuff that doesn't make money, if you know what I mean. And that is the interesting schism. I think the best example for this year is the whole quantum space. They're probably 10, 15 years away from making money. if they're going to make money at all. We don't know at this stage. We've obviously had some interesting remarks relative to this quantum trend, for example, by Jensen, the NVIDIA CEO. And he's pivoting a little bit towards actually supporting the quantum space, both rhetorically and with money now.

10:07But these companies trade at$20 billion valuations even if their CEOs go on air every week stating, you know, tone down the expectations, we're 10 years away from a breakthrough, so on and so forth. So yes, it does really apply to this cycle, but I don't think it's the end of the cycle. You know, I still think there's more left in this non-profitable tech cycle, especially if I'm right on the monetary easing. Well, that's encouraging, Andreas. Let's just try and understand this past fortnight or past 10 days, if we zoom back to last Friday, as usual, things happen whenever we are home from office, European time, European evenings, especially on Fridays.

10:55Initially, it seemed to me that this sell-off, this market panic was driven by renewed fears over the US-China trade war. Trump obviously tweeted and et cetera. Was that a little bit naive? Can it be isolated as an effect of that? or what do you think happened last Friday? Well, I guess the conditions weren't there for a value at risk shock. Realized volatility has been incredibly compressed six months running. And when you have such compressed volatility picture, you don't need a lot to shake up things. And that was basically what happened. I mean, the positivity was basically back already on Monday, right?

11:38And I think, and I've stressed this before, I think it's an issue for the whole notion that it's a good idea to have 24-7 markets, that you do not allow a politician like Donald Trump a window of opportunity where markets are not open. because essentially what happened that weekend was obviously it was kind of a trial balloon, that tweet on a Friday, you know, threatening China with tariffs again. And then already on Sunday, we got that half pivot on the first message, right? And now we've basically received mainly encouraging news from the negotiations between the US and China on this topic for a week running.

12:18Probably also the reason why the market has recovered as well as it has. so sure it was a volatility shock driven by this tweet from Trump and I can only stress this I don't think it's a good idea to have 24-7 markets as long as you have due politics as important as they are right now because when will you actually communicate something to the market without shaking things up which is something you need to do every now and then especially when you communicate and negotiate out in the open as they do here Interesting. So, I mean, we have mostly recovered in many areas, not quite in crypto, though.

12:57I'm very, very deep in crypto myself. You know that, Andreas. And I was clinging. We can bring up these. This is the hot take of the week. These rumors that appeared yesterday of Trump declaring a 0 % capital gains tax on all crypto and Xi Jinping legalizing and buying a huge reserve. Usually when it's all capitals, it's bullshit. not necessarily when coming from Trump. I know he's big into that, but still. I was grasping after straws like this, Andreas, to see. But does this tell you anything more fundamental about Bitcoin and how they're trading at the moment? So let me just stress that these are completely unsubstantiated rumors.

13:43So it seems like there is some sort of social media campaign going on. And as far as I can judge from the Reddit sentiment trackers and the Twitter sentiment trackers that we've set up, it seems like it is something that's been growing since late Friday through Saturday, Sunday this weekend.

14:05I'm a cynical guy by the end of the day, and I think there is something going on when you see such a Sony campaign. It could either be a large fund interested in getting some traction on something. We've, by the way, seen the exact opposite pattern around the quantum stocks. We've seen a very, very clear negative SoMe campaign against those. So something is certainly going on in relation to the retail SoMe sentiment around crypto versus some of these meme stocks. and you know it's very very important to track stuff like this when you trade markets with a lot of retail players involved i'd like to show some data from from bank of america last week on this exact topic because when you look at the equity space and maybe in particular the technology equity space we've seen hedge funds selling and institutional selling for most of the year especially since Liberation Day.

15:06We've seen some buying from those players over the course of September and October, but not really in size compared to what we've been used to. But so-called private clients, so high net worth individuals, maybe smaller family offices and retail clients, they've been buying the dip every time they've had the chance since March and April this year, which is very, very interesting, right? we're talking about one of the craziest recoveries in modern history of US assets and essentially the retail crowd has been on top of that while institutions haven't that's it yeah this is this is something that we've seen before I think 2020 was a good example of this as well so once again a lot of this reminds me of this very easy monetary policy set up that we had in 2020 while the economy was actually recovering.

16:04And then ultimately, we got the institutions on board relatively late in that cycle. And then you started seeing the outflows from the retail crowd into 2022, right? So history doesn't necessarily repeat itself, but it rhymes, that good old Mark Twain quote. And I think it rhymes a lot here again. I've said through most of this year that it reminds me a lot about what happened in 2020, 2021. And I think we can continue to get evidence of that through this year as well. Interesting. So let's just zoom into the terrorism issue. We don't know exactly what's going on between Trump and China. We are getting some signals that they are going to find some kind of deal.

16:49I don't know if we should hinge too much on this November 1st deadline, but how big of an issue is this still? Because it seems like there's a lot of, perhaps, especially as you demonstrated here with institutional investors, still a lot of nervousness around the impact of the economy. You posted this chart of the overall effect of the tariff revenue. So how worried should you be about this going into Q4 as an investor? Yeah, so this chart is calculated on the back of the actual tariffs intake. So basically, I look at the tariffs of revenue and then compare it to the size of the economy. And we're talking about a shock effect of between 0.3 % and 0.4 % of GDP, which is, in a broader context, pretty much a nothing burger.

17:42You've been a bureaucrat yourself, maybe being involved in budget negotiations in the Danish Ministry of Finance. and 0.3 % of the gross domestic product, that's something you can easily bring up for a discussion during the annual budgeting process. So it's not like it's the biggie that it felt like six months ago. You know, if you've ever wished you could ask me a question, any question, 24-7, well, now you can. The Raoul Pal bot is my AI assistant trained on all of my insights, macro research, macro views, even wine and travel knowledge. The RowlBot is available for everybody who subscribes to either Connect, Alpha, or Pro.

18:25It can really change your life. You get me as your mentor 24-7. The link's in the description. I think you're going to love it. Of course, this could still grow in size. we could also get to maybe 0.5, 0.6 when part of the front running of the whole inventory cycle before the tariffs is over. That's likely. But at the same time, we actually see on a trend basis a dial back on tariffs from the administration. On a lot of specific areas, we've seen a U-turn, which is not something that they've highlighted in any way rhetorically because that would obviously be almost a defeat in a rhetorical sense.

19:17So they're dialing back on some of the very specific sectorial tariffs beneath the hood. So I actually don't expect this GDP shock to be much larger than what we see already. And if the overall effect is say 0.3 % or 0.4 % of the economy, it is a nothing burger. and at least it doesn't warrant the amount of attention that it's been given since April. It's completely blown out of proportion. No, it's a cheap price for the political effects that Trump wants out of this. So I think that's absolutely an acceptable price from a political perspective, everything else set aside. So just to sum up, after these crazy weeks here, you're still quite bullish on the overall outlook going into Q4.

20:06Does that include crypto as well? Yeah, I mean, looking at positioning, right? We've obviously seen a washout in the leverage positioning in the crypto space. That is typically a decent time to buy. The sentiment is incredibly bad as far as I can judge. And, you know, we've... I think some guys, you know, replied to one of my tweets saying, okay, there is actually an old season ongoing. It's just a rapid hood and it's an equity space. And I used to think that was quite telling because we've seen a lot of the speculative activity moving from some of the old coins into unprofitable tech, drone technology, some of the themes that we were very early on this year.

20:54That's obviously been a tailwind for us, especially for me. I'm typically more active in equities than in crypto. Also, if you look at my portfolio privately, And you don't get a new cycle without new characteristics, and that's been one of the characteristics of this cycle. So yes, both my gut feeling and my quantitative data would suggest that the positioning is much lighter in crypto now compared to equities versus what happened two months ago where it was the other way around. So from a positioning perspective, it backs up the... the possibility of a pretty decent rebound into year-end here.

21:36And I still consider that pretty likely. Pretty tough, Andreas. So very, very interesting in this positioning also, since a lot of it is retail-driven. It might be some different psychological features in play here about what level of risk, what level of returns are you looking for? You might remember that tweet. It keeps popping up in my head. We had it on the show, I think, two or three weeks ago. about this guy who tweeted, okay, so if I put$1 ,000 into Bitcoin, the absolute best case is that I get$1 ,400 in half a year's time. That's not making me rich. And that logic, it kind of stuck with me because obviously it's absurd, but it kind of stuck with me because many retail investors are chasing the dream essentially.

22:23And perhaps that dream isn't really realistic in Bitcoin right now, at least not to an extent where it justifies these drawdowns in the minds of many of these retail investors. It's an interesting characteristic to follow, Andreas. I just wanted to highlight a little bit more. And obviously, you can go with a pro-tier subscription and go check out your macro portfolio, Andreas. Still doing great, even despite these sell-offs these past weeks. Are you in any way worried about, we talked about a little bit in the beginning, that we might see some correction in AI space or how far that might go? Well, it kind of depends on what you mean with AI here.

23:07If you look at the semiconductor space, we'll have a load of earnings reports coming up over the next three or four weeks, obviously concluding with NVIDIA mid-November. But we've seen very compelling data from Asia on exports. and for those of you who don't track these week-to-week changes, month-to-month changes in exports from Asia to the US, we're talking about very, very tech-heavy export numbers. Maybe you could bring the South Korean numbers on the screen here because it's one of the signs that I've been looking for in order to turn up beat on the overall global business cycle because it's so important for the business side where the trade flows.

23:54And it certainly does now. These numbers from South Korea, they're based on the trade report that was released early October. We get some preliminary data this week for the month of October. And obviously, there is a risk that we see hiccups again now that the US and China are back at the negotiations table. But the point here is that we do actually see export acceleration from Asia, which is typically the first sign of a trade pickup globally, especially Korea, since I think 80 or 90 % of the Korean economy is based on trade. So it's the economy to look at if you want to get early clues on whether global trade is accelerating or not.

24:38And as you can see, we're accelerating, but we're far from the typical year-over-year peaks, which would be 20-plus percentage points higher than now. So to me, this is, first of all, a positive for the upcoming earnings season, especially in tech. It's also positive for the global momentum and something that you could certainly use as a bellwether for the broader return profile. Well, I tend to think that it's pretty simple unless this trade statistic has peaked. The global economy has not peaked yet. This is a very timely indicator since it's released just after the month end. It's a lead on the global cycle.

25:19So basically, this will tell you where the ISM is in two or three months and so on and so forth. So I have a very comfortable outlook. and I have a high conviction that this is not the peak. And, you know, the sheer amount of pessimism seen last week, you know, it even went viral whether we'd get a Black Monday last Monday. And, you know, those of you who don't recall it, I wasn't even born. I think it was a drawdown of 23 % in the main index in the US, 22 point something. And I think we had a drawdown of plus minus 3 % when it was worse last week. So it's by a factor of 10 wrong to call it a Black Monday.

26:05It felt like a Black Friday in parts of the crypto space. You can have a look at our discussions on the real mission platform for the deep dive into why the liquidity dried up and so on and so forth. But the bounce back that we've seen is to me a compelling signal that we haven't peaked yet. We may even have the maniac phase ahead of us where everyone starts chasing this story because it's not a consensus story that the economy is accelerating. Everyone's got the opposite view. First of all, due to the labor market data that we've seen over the past couple of months. Secondly, there's still this, I hate using that term, the Trump derangement syndrome, but there's still this notion that, okay, everything that he's doing towards his trade counterparts, everything that he's saying in public, it's got to be a sentiment shocker.

27:02It's got to be bad for the economy. And it's just not really showing up, right? I even saw the economist almost excusing to their audience for their lack of accuracy this year in projections for the US economy. And then they gave the word to their economic editor, their chief economist. And then he said, but now is the time. Now it's coming. So they just keep moving the goalposts on this drawdown due to Trump. It was a big sentiment shock, but by the end of the day, as I showed you, it's an 0.3%, 0.4 % shock to the economy, which is when you're growing three, three and a half, not really worthwhile all of the time that we've spent on it.

27:47So why don't we just close down this discussion as well, Michael, on tariffs? Because I think we spend too much time on it, to be honest. I agree completely. But when you get those shocks that seem to be initiated by it, it's hard not to. So that also closes the talk, I suppose, Andreas. I know your answer to this, but also closes the feverish talks of an emergency cut going into this because that's not going to happen. But we're only about a week away from the rate discussion. Am I right? Yes. Does this volatility market, does this cement the rate cut that we're expecting or doesn't it change anything?

28:29I mean, they'll cut rates this month. No doubt. The big question now is whether they'll do something on the balance sheet already this month. And my take is essentially yes. I still don't think that we've had a consensus formed on this topic, on the balance sheet for this month. But if you look at the data from last week, we're typically seeing spikes in the SOFR rate versus Fed funds when we're below paying thresholds for the narrow dollar liquidity. So basically the dollar liquidity that is available for the commercial banking system and funds, etc. So we're now below$5.9 trillion, which is my data, basically the pain threshold.