It’s a Wave Not a Bubble, Nvidia Preview, Google’s I/O Highlights, Investing in Space Stocks

17:15Downtown Josh Brown:I think if you're a trader, you're risking 10 % and your stop goes below 200. And if there's some horrendous thing that happens and there's a gap that's worse than that, that's the actual risk that you're taking. But you probably would rather be long than short, than out right now. If you're a trader in these waters, what do you think about that?

17:40Michael Batnick:I would agree. Look at it. I think there's a risk for the gap down, but you know all gaps get filled. So no worries there. You know what the risk is.

17:47Downtown Josh Brown:You've got rising 50-day, rising 200-day, RSI 60, 63, not overbought.

17:55Michael Batnick:It could easily fall back into the range. Like, why not? It's been in a sideways range for basically a year. It could fall back. You know, sure it can. Anthropics first -

18:03Downtown Josh Brown:What's a higher likelihood, 200 or 250? 250.

18:08Michael Batnick:I mean, in my opinion, I don't know.

18:09Downtown Josh Brown:So I'm long. Obviously, I'm biased, but I don't say this every time they report. I genuinely think like if I had to – so I don't do this stuff. I don't bet on earnings. I don't have an edge on any particular quarter. But like if I had to choose, I would say 250 over 200, and it's closer to 200 by a point.

18:31Michael Batnick:The last time we did this was before Netflix reported and they fell 10 % the next day. So hopefully this one is a little bit different. Anthropic, getting back to Anthropic, their first dollar of revenue was in March 2023. Are you kidding me?

18:50Michael Batnick:McDonald's doesn't do$50 billion. Schwab doesn't do that much revenue.

18:54Downtown Josh Brown:There's no analog to it. And anyway, that's why NVIDIA launched and made a new record high, I don't know, a few days ago. Total returns from the March 30th low. NVIDIA is up 35%. It's up 20 % year to date. It's up 65 % over the last 12 months. It's up 132 % from the Liberation Day low, which was April of 25, a little more than a year ago. It is up 1 ,220 % since the launch of ChatGPT in November of 2022. And interestingly, it's actually the fifth poorest performing stock in the SMH semiconductor ETF year to date. Is that wild? It's the fifth worst. Give me that table.

19:45Michael Batnick:Fifth worst. Wow.

19:46Downtown Josh Brown:Thanks to Sean and ChartKit Matt. We're highlighting NVIDIA here up only 19.9 % at a 26 PE. As you can see, Intel is up. I mean, year to date, it's very arbitrary, but so what? Intel is up almost 200%. Micron 140, STMicro 135. OnSemi doubled, Marvell doubled, Arm doubled, Advanced Micro doubled. Texas Instruments up 75 % this year, because why not? So NVIDIA, Qualcomm are kind of laggards. And even Broadcom, it's up 22%. At a certain point, they just get too big to be number one on the list. And I think that's probably some of what's happening here. The stock is 13 % above its 50, 18 % above its 200-day.

20:40Downtown Josh Brown:The best argument for a pullback after reporting is just how extended the stock is above its moving averages.

20:49Michael Batnick:I don't think it's that extended. Assuming they report a great quarter.

20:53Downtown Josh Brown:You don't think so?

20:54Michael Batnick:I mean, it's not. Listen, it is above. It's not like that. It's not crazy.

21:00Downtown Josh Brown:RSI is 60. It's not crazy.

21:02Michael Batnick:It's not. All right. Anything else on this topic? Mike?

21:05Downtown Josh Brown:We got to get to the Alphabet IO conference, which was today. Did you catch any of what was announced? No. What did they say? These were the biggest things. There were a couple of surprises. They went all in on Agentic AI. Not a surprise. They're embedding Gemini across Search, Android, Gmail, YouTube, Workspace, and Chrome. and they're saying it's going to start performing tasks, not just answering questions. I'll let you know when I see it.

21:38Michael Batnick:I haven't used it for anything, have you? Are you using it? Gemini, you're using it, but you don't know you're using it.

21:45Downtown Josh Brown:So what do you mean? It's giving you auto summaries of emails before you open them.

21:49Michael Batnick:No, I'm not using that.

21:51Downtown Josh Brown:You are using it because it's default now. You're not asking for it. It's just doing it. You don't notice it. It's nudging you along toward – you probably clicked one of those consent things without remembering or reading it like everyone else. And as a result, it's putting Gemini to work all over your shit. You have no idea what's going on. And that's the way big tech does it. Gemini 3.5 Flash is the new default model. They didn't actually launch it. They announced it. There was a little bit of disappointment there. like it's coming. But a lot of times when Google announces something, it is simultaneously like ready.

22:34Downtown Josh Brown:It's launched. So they didn't quite have the thing ready. Gemini Omni seemed to have gotten the most attention of the demos. That's multimodal AI. So if you are asking for an image in writing or speaking to it and it's responding back to you in text. Multimodal is like, uh, is the holy grail for, for AI because the person often is saying things one way, but wants the result back in another. Um, what else did it? Oh, the holy shit moment was shifting from a chatbot AI that you're conversing with to an autonomous agent that's on all the time. This was like the, This was like the big thing. And it's funny because Microsoft gets shit for this, for shoving this always on agent in everyone's face with Copilot.

23:31Downtown Josh Brown:But for some reason, people love it that Google's doing it. So Google's AI is now proactively monitoring your email, expenses, schedules, calendar, the shopping that you do. It's not being prompted to get involved. It's just there in the background. And the idea is it's gonna be somewhat helpful to you along the way and maybe try not to be too intrusive. But the always on thing, I think, is the shift from like, let me log into my AI. It's just you're using AI when you're inside of a Google product. So those were those seem to be the big things that people noticed and were talking about the most.

24:10Michael Batnick:OK. All right. Thoughts. I'm excited for all of it.

24:15Downtown Josh Brown:Yeah. Do you care that it's reading your emails and no i don't care at all what am i doing in my email nothing right right i have nothing to hide um haven't we all grown up at this point in 2026 are people putting private shit in emails still like besides like confidential business things are people embarrassing and humiliating themselves in emails are we using racial slurs are we we've seen some shit i mean nothing. People doing like, like sex talk and emails. I get over it already. Yeah. They're reading your emails. This is, how do you not know that? How can you read adult on this earth and not understand that someday somebody is going to see everything that you emailed?

24:59Downtown Josh Brown:Surely people understand that by now. Am I overestimating the population?

25:06Michael Batnick:Well, I mean, when you say somebody is going to see your emails, like, I don't want my emails to be public, but I don't care if, I don't care if like it's. Your work emails, your work emails.

25:16Downtown Josh Brown:If a regulator comes in and says, give me access to all the emails, that's it. They're reading all your emails. Great. Read all my emails. If any bit, not you, anybody working on Wall Street, if there's a lawsuit against a mutual fund company and the lawyers compel discovery, every single email received or sent within that company is fair game. How could you literally not understand that by now? So I'm fine with the intrusion. Make my life easier. Read everything.

25:50Michael Batnick:All right. Gavin Baker, one of the most intelligent, in my opinion, analysts that I see covering tech, telecom, and chips spoke really eloquently on what he foresees. And he was an icon analyst. Matter of fact, let me not step on anything. Hit this clip, please.

26:10Downtown Josh Brown:Well, that's been true throughout history. And I'm sure there will eventually be a glut, but eventually is doing all the work in that sentence, not glut. But I would say based on every memory cycle we have had for the last 25 years, this is the time to be selling memory 100%. I was actually the micron analyst in the year 2000, like I remember going to their analyst day in Sun Valley. I'm a veteran of many, many memory cycles. And based on history, this is the time to sell. However, there's one cycle where you absolutely do not want to sell. and that's the cycle we had in the mid-90s which is the last true capacity cycle that i would argue we've had in memory and based on that cycle we may still be very early i listened to my friends alex and leon um who i thought did did a great job as did leslie earlier and i would just say i take the over on every number that they gave every single number as what i think you know They're conservative guys.

27:18Downtown Josh Brown:There's true capacity cycle. And I do think that these fundamental shortages are good for us as investors. The last thing anyone should want is a bubble. Bubbles are terrible. They're awful. They're terrible to invest through. The aftermath of them is even worse. We don't want a bubble. And unfortunately, also, the entire history of financial markets suggests whenever you have a profound new technology, whether it's AI, whether it's the internet, whether it's the PC, whether it's railroads, whether it's canals, you almost always get a bubble because markets are efficient. Investors understandably become excited about this new technology.

27:58Downtown Josh Brown:There's a Michael Mobison frames it as there's a breakdown in diversity. Everyone comes to believe in this. You get a bubble and then that bubble funds the build out that the new technology required. And that's exactly what happened with the internet.

28:14Michael Batnick:So I think this is the singular debate in the market right now is how sustainable this buildout is. How does this impact the hyperscalers, NVIDIA, Taiwan, the memory companies? And somebody said to Gavin, I hear what you're saying. Every telecom company that laid the fiber optic cables for the internet was saying the exact same thing that they have demand for as far as the eye. Yeah, they don't know.

28:42Downtown Josh Brown:The demand was fueled by the equity market. And when you couldn't go public anymore, there was no more money for fiber.

28:50Michael Batnick:So here's how Gavin responded to that. He said, absolutely true. I was meeting with those same teleco equipment guys regularly in 2000. Irrelevant to the point I was trying to make, back then the supply could largely keep up with demand because there was massive underutilized wafer capacity to come out of the Asian crisis that can ramp up quickly. I'm skipping forward. There is no comparable slack in the system today. Leading edge wafers and power are both structurally constrained. Couldn't have a bubble if you wanted.

29:19Downtown Josh Brown:Exactly.

29:20Michael Batnick:And neither can be turned on in a matter of months. And that's the core difference, in my opinion. And obviously, the largest buyers of compute will have no trouble servicing their debt anytime in the near future. Okay.

29:33Downtown Josh Brown:First of all, he's great. Should I watch that whole thing? I mean, that was the money shot. It's 25 minutes. Okay. Also, I think maybe a candidate for PRP. So I think there's – no, I think that heroin is repairable.

29:50Michael Batnick:So what are your thoughts on what he said? Because I think this is extremely important.

29:55Downtown Josh Brown:So he didn't get to this or maybe he did and I didn't watch the whole thing. but like the equity funding of that bubble was premised on daily IPOs. Every time a company went public, it raised$200 million,$300 million, whatever the number was, right? These companies were coming public with like a billion-dollar valuation when that used to be real money. And they would raise$100 million,$150 million,$200 million. Immediately, that money would go directly to Dell and Compaq, and they would buy servers from EMC, and they would buy hardware from Sun Microsystems, and they'd buy chips from Intel and software from Microsoft.

30:41Downtown Josh Brown:And then they started spending on the telecom related to that, and you would see Cisco, Sienna. And it was just like this daisy chain, but all of the funding from it was the IPO bubble. We don't have an IPO bubble. The funding for this is coming from internet 1.0 and 2.0 players that are redeploying cash flow. And rather than slowly build data centers over 20 years, they're building them now in the next five years because there's an urgency to the speed at standing these things up and upgrading them. So it's not the same. The other thing that was happening then was the Y2K scare. you literally had people thinking they had to buy brand new equipment because the stuff they bought in 1996 was going to crash when it was New Year's Eve.

31:32Downtown Josh Brown:And they only had two digits rather than four to represent the year. That was like an actual CapEx bubble based on a false assumption that planes would be falling out of the sky. It's just not analogous to now. What is analogous is the hunger amongst investors to all be in the same stocks. That's real. And so I don't want to say it's not a thing that could be destructive, but it's not a bubble. And I'm calling it, and I'm unveiling this for the first time this evening. I am telling you, it's a wave. Halo.

32:06Michael Batnick:It's a halo.

32:07Downtown Josh Brown:It's a wave, not a bubble. And I wrote down the way I would define these two things so that people understand what I mean. You have my attention. When people hear bubble, what happens to bubbles? They don't continue on. They pop, okay? This is the only way a bubble ends. A wave rises, crests, falls, and then could rise again a thousand times between what it gets from the middle of the Pacific to the shoreline where it's ultimately gonna crash and then pull back into the city, right? So if we think about this as a spending wave, the stuff that we're buying and building, it's not gonna go poof and disappear.

32:56Downtown Josh Brown:And the money funding it, that source of capital is also not gonna go poof and disappear. So yes, during every big CapEx cycle, I'm sure he got into railroad stuff. We don't have to do that again. Fiber optic boom stuff. We all understand. The infrastructure remains well after the companies go bankrupt. OK, we all understand that. These companies are not going bankrupt. That's one. Two, we know that the market can overshoot and that individual stocks could ultimately get to valuations that are stupid and that some companies we think are winners will turn out to be losers and completely disappear.

33:35Downtown Josh Brown:Nobody would dispute any of that stuff. However, the power infrastructure, the networking layers, the stacks of inference systems, all of this stuff, this is not stuff where in six months people are like, oh, I guess we didn't need it. Like, oh, well, I guess that was a waste. This will be used. The only question is the pace at which we need more and what the return on that spend is. Right now, there's a lot of subsidizing of AI use. There's a lot of open AI and anthropic.

34:09Michael Batnick:Yeah, anthropic, there's tons of money.

34:10Downtown Josh Brown:They're perfectly fine doing it because they need to get to the point where they own the opportunity. And ultimately the enterprises will pay for all this subsidizing of regular people. But we're not the people that come up with that and understand it. They understand it. And they've made the bet, we're going to do it anyway. So bubbles pop because demand evaporates. waves can rise and fall, but they do continue. It's very possible that we have an ebb and flow and that one year the wave is coming in faster than others. All of that could happen, but let's not act like this is a thing where it just all goes poof and it was all Beanie Babies and e-commerce companies that were unsustainable.

34:58Downtown Josh Brown:These are the biggest, most profitable companies on earth doing the spending. It's not companies that came public last week. And that's why I get tired of that 1999 analog. It's not that we can't have a stock market bubble again. It won't be analogous to this one.

35:15Michael Batnick:But it is the best we have, in fairness to people that are doing it like us. We're doing it right now.

35:20Downtown Josh Brown:What is the best we have?

35:21Michael Batnick:The 1999 bubble. It's the closest thing that we have to today.

35:25Downtown Josh Brown:Because tech stocks went up. Right. I mean, industrials were the tech stocks of their day. We will have a down market. We will have a bear market. We will have overshoots. And sure, we're going to have some high profile failures. But if we think about this as like a 20 year thing, we haven't even gotten to the robots yet. you want to be the person that's screaming bubble before the first humanoid robots that we train and have in the workplace and have as domestic servants in our homes and have sex with and all of the things that people are going to be doing with robots do we want to say bubble now before the robots?

36:06Downtown Josh Brown:that's what we're doing? that's not what I'm doing it's a wave it's not a bubble

36:12Michael Batnick:so one of the things that that he said in terms of like where we are in the cycle that I thought was super interesting is, give me a second, I'm trying to find it. Gavin said, all right, all we hear about, any podcast that you listen to, it's compute. We need more compute. We don't have enough compute, right? Gavin said, 10 basis points.

36:38Downtown Josh Brown:All my podcasts are about the Knicks right now. So I'm not listening to the same ones.

36:43Michael Batnick:10 basis points of the population are using these models i know and there are and there is a shortage of compute what happens when it's five percent so he said this shortage is the case against the bubble this is like the smoother for longer but barely anybody is even using this shit yet and already there's such a shortage so to think that this is going to end And yes, it will end, duh. But to think that we're close to the end is kind of wacky.

37:15Downtown Josh Brown:I just, look, I want to do it too. I want to be the guy that says bubble and then right on cue, the NASDAQ drops 50%. I would love to do that too. I just think that's so short-sighted when you consider all of the things that we can't even imagine that this infrastructure is about to enable. It's like now you want to do that? Right. Like right now? Are you sure?

37:43Michael Batnick:Imagine saying there's a bubble in smartphones when the iPhone launched or in 2008, 2009, saying there's a bubble in smartphones.

37:50Downtown Josh Brown:Yeah. Now, if you want to say NVIDIA eventually will sell at a 15 multiple, not 25 where it is now, okay. Like I'm not going to argue with you that that's what usually ends up happening in high tech. like the former growth names ultimately have a degraded multiple because, but again, they're about to report an 80 % profit jump this quarter. Now it's a bubble today, now here. So that's all I, so I'm thinking about it as a wave. Maybe I'm an, maybe I'm an asshole. We'll find out. I'm with you. I'm with you. Let's talk space. All right. Here's a real bubble, but I love it. I am starting to think that space is going to be the next, next, next, right?

38:42Downtown Josh Brown:Like the next thing that people really get excited about because the revenues are now there and the science – let me put it this way. the business side of the companies that are involved in space, the prowess of the business people in that area are catching up to the imagination of the scientists.

39:05Michael Batnick:Where is the revenue outside of Starlink?

39:10Downtown Josh Brown:Well, you say outside of Starlink, like it's not an incredibly big growth opportunity.

39:15Michael Batnick:No, I know it's massive. Is it$20 billion run rate? I know it's huge, but all right. So tell me the story. What's going on with these space companies?

39:21Downtown Josh Brown:I am not recommending stocks on the show today. I'm going to put three names in front of the audience and you. Just think about that, okay? Do me a favor. Don't – somebody's saying Rocket Lab in the chat. We did that already. I did that a couple of weeks ago. You can look it up. I think I did a pretty good job. Let's take a look at these three companies. They might be zeros or they might 10x, okay? Hit me. I'm ready. Intuitive machines. Ticker, please, Josh. But just to back up, the reason I'm doing this now, like why now? The SpaceX S1 filing could come as soon as tomorrow. In fact, if Elon wanted to be petty, he could drop it at the same time Jensen is about to report earnings.

40:08Downtown Josh Brown:Don't rule it out. Don't rule it out. If Elon wants the thunder, that's how he steals NVIDIA's thunder. He drops the SpaceX filing. Anyway, that's why I'm bringing this up right now, because these stocks are going to get another look. If SpaceX is as hot as everyone thinks it's going to be, everyone's going to be all over this sector. Intuitive Machines is LUNR as in Lunar. They are trying to become the first space prime. You know what a prime is in the defense world? There are like three of them, like Lockheed Martin. The prime is like the defense contractors that the US government has as like their go-to.

40:50Downtown Josh Brown:Intuitive Machines is building a space prime. Anything Space Force and or NASA needs, they're working on, including the lunar landers for the next mission to the moon. They're doing a lot of stuff here. In addition to being a moon contractor, put the chart up. they're winning tons of nasa awards for lunar logistics payload delivery communications infrastructure um this is basically does nasa build this stuff themselves or just pay companies like intuitive machines who are going to be able to build it at a more cost-effective rate because they are for-profit companies and not divisions of the government and obviously we know what the

41:33Michael Batnick:answer will probably be so this company this company did 187 million dollars worth of revenue when it reported a couple of weeks ago. That's up 3X basically from last year. So that's a lot of money.

41:45Downtown Josh Brown:Okay, just keep it on your radar, intuitive machines. AST Space Mobile. This Alphabet owns a huge chunk of this. This is low orbit satellites. I think they're called bluebirds or whatever. Basically, this is providing mobile phone coverage for areas where there are gaps. A lot of people have compared it to Starlink, but it's public right now. And you could see it's been a rock and roll stock. The ticker is ASTS. It's about 80 bucks. I don't know. Two years ago, it was$5.

42:18Michael Batnick:My God.

42:20Downtown Josh Brown:All right. They went from being a cool demo to an actual telecom infrastructure play. The FCC just approved direct to sell service using AT &T and Verizon Spectrum. So the major carriers are doing these satellite deals. and AST now has 1.2 billion in commits under contract already. And the more satellites they get into orbit, the better that they will be at providing this particular service. And people are looking at it as an alternative to Starlink. So again, we're watching.

42:58Michael Batnick:It's obviously trading off the back of Starlink. It's got a$26 billion market cap. and the revenue in the last quarter was$14.7 million. I know you said it's got a lot more in the pipeline.

43:10Downtown Josh Brown:You have to use your imagination. None of these companies can be fundamentally valued.

43:15Michael Batnick:But it's a$26 billion market cap. All right, keep going.

43:17Downtown Josh Brown:I'm not saying pull the trigger. I'm just saying these are the stocks that are getting people's attention and some of them will not work, stipulated. The last one, I actually traded this very poorly. I think I bought it at eight and sold it at 14. and now it's 38. Planet Labs. Google also owns a big piece of this. So just to back up, Google did an asset swap with this company, Planet Labs. Google had a satellite business and was like, here, you take it and we'll take equity in your company. And as a result, this company ultimately came public via SPAC and Alphabet came in and helped them do the pipe in order to get the thing public.

44:02Downtown Josh Brown:And they're still in it. They haven't sold out of it. Planet Labs is providing daily Earth imaging from orbit, and it's becoming a data provider to corporations and governments. People refer to it as the Google of the sky. Planet Labs is AI plus physical real world. So they're running AI inference on satellites using NVIDIA hardware, and the satellite itself is identifying objects, generating alerts, looking at what's happening in orbit, and talking to entities on Earth about what's happening on the surface of the Earth. This becomes more important when you have all kinds of aircraft flying around subspace, in space, rockets launching, planes flying, Planet Labs infrastructure and ability to transmit imagery and data makes it a really important player.

45:00Downtown Josh Brown:And I kind of like the Google of the sky concept. So not cheap. It already went up a lot. And I've talked about it here on the show prior to it going up, but I'm just bringing it back to people's attention. I wanted to show you the top space related ETFs. So ARK has a fund in this area It's called ARKX That's their space and defense innovation ETF It's got a billion dollars UFO is the Procure Space ETF That's 875 875 million Spear Alpha has something called SPRX 200 million And the Global X product Which is ORBX as in orbit looks like 22 million. So people have money in aerospace and they have money in defense, but not a lot of people are investing a ton of money into the space specific ETFs yet.

46:00Michael Batnick:Which one of these is like the purest play? Because I'm looking at ARCX for instance, and the biggest holding at 9 % is Rocket Lab. The second biggest is L3 Harris Technologies. The third biggest is AMD. I thought that's interesting. The sixth biggest, skipping ahead, is Deere. And then Amazon is right after that. What does Deere have to do with space? I'm sure they have something to do with it. Are they making the tractors? They're going to mine?

46:27Downtown Josh Brown:You know, she's not an indexer. Like, Kathy didn't, like, build an index. She's actively managing this, and she may know something about a specific company and their involvement with space that we don't know. So I wouldn't speak on that

46:42Michael Batnick:UFO has Sirius XM I guess that is sort of Satellite

46:48Downtown Josh Brown:Let's put up Let's put up the ARC Price chart I'm guessing this is being driven by Rocket Labs Man these names are going to the moon Well when SpaceX comes out People are going to Revisit What else trades in this area I'm going to show you. Here's the UFO ETF.

47:10Michael Batnick:I'm sorry. This is knowing nothing. This is trading on SpaceX hype.

47:13Downtown Josh Brown:Do not buy these. Probably. Probably. Stipulated. But I still think these stocks are going to get another look. Like, look at UFO. Are you kidding me? Good. I'm very happy for everybody that made money. I'm not trying to sound like a hater. Well, it's Rocket Lab. Rocket Lab is public now. And that thing has gone. That thing has absolutely gone. uh anyway just it's it's worth having these stocks on the radar just because we don't know a lot about them most of our audience does not know a lot about them even if you you research them and your conclusion is this is crazy i don't think any of these are actually going to become great businesses that's better than being totally ignorant of them and uh potentially missing out So just a public service.

48:03Michael Batnick:Okay, we'll do this one quick because we are going along here. So Adam Parker wrote what I thought was a really wise post. He said, we have noted many times over the last year that so many signals we analyze are behaving differently than in the past. So they decided to highlight 10 areas where investors might need to unlearn the past and relearn investment heuristics. We have been all over this since really the beginning of our learnings on Wall Street, that things change and they change. Our learings? It's so funny.

48:36Downtown Josh Brown:Our learings? Our learings on Wall Street. I don't know what that word means. The learing center? All right, continue. Nothing to do with you. Don't worry.

48:45Michael Batnick:There are experts on an earlier version of the world, and it's very easy to cite data of history and how things normally work. And guess what? There is no normally. Shit changes all of the time. And the things that used to work 100 % of the time, you can't take anything to the bank in this business. So maybe let's just go through them quickly. All right. Here's one. Here's actually, there's a great one. I will spend a minute on this. Adam says, to risk manage the giga caps, we took the equally, you know what? I don't even, all right. The top 10 stocks by market cap and compared this monthly performance to the equal weight returns to stocks, 11 through 20, and then they rebalance them.

49:25Michael Batnick:Basically, what this chart is showing you is that had you been overweight the largest names historically, and I'm using like the first 20 years of the century, basically, you would have underperformed only the biggest names. And then of course, that flipped dramatically. Chart off, please. Ned Davis has this awesome chart. Awesome, awesome, awesome chart that I I think I saw for the first time in, I don't know, 2015. And he basically, they compared the performance of had you bought, had you owned the largest stock in the index, like throughout history versus indexed itself. And only the largest stock was a horrible strategy.

50:02Michael Batnick:Like one of the - Until the last 10 years. One of the best ways to lose money, except for my entire career. Yeah. Like quite literally. Adam says, buy more junk than high quality. The median high quality stock has seen multiple contractions since 2020. This is not a framework that is particularly popular or people think is a winning strategy.

50:23Downtown Josh Brown:Yeah.

50:23Michael Batnick:I mean, there's so much in here.

50:25Downtown Josh Brown:Nobody wants to hear buy shittier companies. No. It's the opposite of intuitive, counterintuitive.

50:33Michael Batnick:Short interest works, especially in growth. This is a tragic but true. After the meme stock debacle hurt performance of short sellers, growth stocks with low short interest have massively outperformed growth stocks that are heavily shorted since 2020. Just when many allocators gave up on short sellers, its efficacy has been strong. Brutal.

50:57Downtown Josh Brown:Buybacks are working much better. Sean had the CapEx chart up. That was a good one.

51:00Michael Batnick:What's a CapEx one? Oh, okay. Let's end with this one. Okay. we know that CapEx is bad. Really? Really, really, really, do we? Because we were speaking about this last week on the show, the article in the journal. Yes. Historically, this has been a bad strategy. Look at this chart. So Adam says, we know that generally capital intensive businesses have lagged capital light businesses over time. Intuitive, makes sense. While there have been exceptions in energy, utilities, and cable. Keep going. Back on please for a second. I was reading that. It was a successful factory factor for nearly 20 years.

51:40Michael Batnick:Over the last few years, however, hyperscale. Okay. For 20 years and then boom. So things change. Keep that in mind.

51:49Downtown Josh Brown:Yeah. I think it's still early. The jury is out on the high CapEx thing. Because I would just point out we don't we we haven't nowhere else on this chart is there a capex spike like what we're

52:05Michael Batnick:in the midst of witnessing so i'm not takeaway the takeaway is that things change things change nothing is set in stone all right um speaking of things changing if you're worried i don't know if i actually believe this but let's just go with this for the segment what do you think about this premise. If you are truly worried that there is an AI bubble, do you buy the thing that has been most impacted by the bubble inflating, which is software?

52:31Downtown Josh Brown:That's what Michael Burry said. Okay.

52:34Michael Batnick:So let's get to it. So Matt made this chart that is an actual face blower. So please, everybody sit down. Matt is showing on the Y-axis is the S &P 500 software industry and the S &P 500 semi-industry starting in 1991. That's when the journey begins. And over time, they have risen pretty much in tandem in the early days. All right. They have gone, they have moved in lockstep. And then something started to change. And what started to change, of course, was ChachiBT. So October, 2025, no, no, no, no, no. Stay in the start. October 2025 is when the SaaSpocalypse begins and these names start getting re-rated aggressively lower.

53:22Michael Batnick:And February 2025 is when Citrini published his infamous piece. And here is where we are today. So a dramatic change of events. Next chart.

53:33Downtown Josh Brown:What is the Y-axis? That's the software index?

53:36Michael Batnick:Yes. It's the software index versus the semi-index. Oh, okay.

53:40Downtown Josh Brown:Got it. Got it. Got it.

53:41Michael Batnick:So it starts in 1991. All right. Matt has a chart showing the launch of ChatGPT. And on top, we're looking at the ratio of news articles that mention AI versus news articles that mention software. And of course, it went from basically not even parity. It was half to 6.4 times. And over the same time, the size of the semi-industry has gone parabolic. It used to be smaller. It's hard to believe. just three years ago, it was 0.6 times. And now it's 2.1 times.

54:15Downtown Josh Brown:Took over the whole NASDAQ. All that market cap shifted from software to semi. We are seeing an unprecedented, never before has this happened, daily spread of the performance

54:29Michael Batnick:of semiconductors versus software. We're looking at IGV versus SMH. And on average, you're seeing 47 basis points of outperformance of semis relative to software. It has never happened. They are completely displacing them. And then finally, let's conclude with this. These groups were never really correlated like one for one at all. I mean, it ebb and flowed. But now, the correlation is crashing. So when AI is catching a bid, software is selling off. And over the last couple of sessions for various different reasons, maybe the rubber band has stretched too far. Software stocks are catching a serious bid.

55:06Michael Batnick:So I would throw out as a not so crazy scenario, if you are truly worried that this is a CapEx super cycle bubble, that this is unsustainable, maybe the play paradoxically, maybe a software.

55:20Downtown Josh Brown:So ordinarily, when you see an industry under as much pressure as the software stocks are, the thing that you expect to be a natural product of that is a lot of M &A, where companies like pull their resources, they get together, they strengthen themselves by adding scale or whatever. Like it literally might work the opposite this time. Like the only thing worse for a software company that's struggling to convince its customers to stay versus go to an LLM, the only thing worse is like, and here's more services we want you to pay for because we just bought this other company. So I don't really know what gets these companies out of this doom loop, that sentiment doom loop, but it's not going to be consolidation.

56:12Downtown Josh Brown:Whereas in a lot of industries that are under pressure, that's actually what ends up happening is they take out capacity via M &A. I just, I don't think that's going to be the get out of the jail free card, but put that last chart up. This spread is bananas. Nuts. I mean, I wrote about unsustainable things this weekend. This on the surface seems unsustainable. I just don't know when the breaking point is. But it just seems like it's not possible for this to continue at this rate for much longer. Michael Burry saying he wants to buy the stocks that are losing because everybody is crowding into the AI darlings.

56:54which is literally opened up the segment talking about and he sort of has a point like in 1999 i

57:02Downtown Josh Brown:was a stockbroker and the only stocks we were selling to people were dot-com stocks because they didn't want to buy anything else right and there were all these other companies and you would look at their share prices and they would go down every day and the companies didn't do anything wrong they just weren't dot-com so they were losing market cap they were losing multiple they They're just losing investor interest. And that's Berkshire Hathaway and Pfizer and Kimberly Clark. And like you couldn't give those stocks away toward the top of the NASDAQ. It was almost like they were playing in two different leagues and they had nothing to do with each other.

57:39Downtown Josh Brown:You'd ask because the stock market went up. Nobody even thought that those other companies existed. I think Berkshire was cut in half leading up to the peak of the dot com. People, you couldn't give it away. You could not give it away. Anyway, Michael Burry did a thing talking about exactly that. I wanted to just give you some of the tickers he's buying. Hit me. Because he's comparing this to the late 1990s. And everybody is piling into AI themes. And that's at the expense of older industries and international stocks. That's what people are selling. so okay he added to Mercado Libre Latin American e-commerce giant in the mid 1500s now trading at a discount because it's international people only want US he boosted positions in Adobe boosted positions means he's already long and probably down a lot because that stock has not gone up in I don't know three years PayPal also just absolutely annihilated.

58:49Downtown Josh Brown:Zoetis. I don't follow it. I know it's the animal health company probably being ignored because it's not AI. Oh my God. And then he said he built a full-sized stake. I don't know what that means in Lululemon. His quote is... Why? Why? I'll tell you why. These stocks are part of the mass whale fail happening away from the main spectacle. Burry said in a Monday evening Substack post. In 1999, this happened too. The old economy and international stuff just got ditched in favor of the all-American bubble. So to answer your question -

59:27Michael Batnick:Lulu is getting rocked, the business.

59:29Downtown Josh Brown:I don't like this line of thinking. Like when the bubble in the AI darlings pops, the money is going to come back into these f***ing disasters. It's not guaranteed that it'll go that way.

59:42Michael Batnick:This is his deal. This is what he does.

59:44Downtown Josh Brown:So I'm not really surprised to hear him. He is a super contrarian that absolutely walks the walk.

59:51Michael Batnick:Yeah, very, very hard.

59:53Downtown Josh Brown:I don't know if it helps anybody.

59:55Michael Batnick:Well, he manages his own money now. He doesn't manage outside investors' money. But a lot of people listen to him.

1:00:03Downtown Josh Brown:It's really hard to do what he does. He's not on Substack to not have influence over other investors.

1:00:08Michael Batnick:Yeah.

1:00:09Downtown Josh Brown:So he may not manage their money now, but he definitely wants people to hear what he thinks. Everyone loves sharing their ideas. Okay. All right. Anyway, his conclusion is, yeah, you buy the shit that everyone is selling to buy the AI. We're going to do this thing about Trump's trades, like, comically. Can I give you my take on this? Can I give you my take on this?

1:00:29Michael Batnick:Who gives a shit? No. Listen, I'm not the biggest Trump guy. I don't think that he's, like, calling his financial advisor and doing this. I don't either. There's too many trades. It's crazy.

1:00:42Downtown Josh Brown:But still. Let me just give people the numbers. I don't care about this. Has no impact on me at all. Oh, take a stand, you coward. I'm taking a stand. It doesn't matter to me. I honestly don't care. I like this better than the guy who ran for vice president with Kamala who says he doesn't believe in the stock market. I'll take this.

1:01:06Michael Batnick:The polymarket shit, that stuff is illegal straight to jail.

1:01:10Downtown Josh Brown:And don't start the Maga Josh shit in the chat because you guys know better. Don't do it. President Trump disclosed more than 3 ,500 stock trades on his behalf in the first quarter. At least a million dollars each was purchased in shares of NVIDIA, Oracle, Microsoft, Boeing and more. People are up in arms because in some of these cases, these companies had business in front of Congress and or the White House, including the awarding of contracts and things that Trump got done with China, with Boeing, with NVIDIA. So that's what people are losing their marbles over.

1:01:48Michael Batnick:What if it's just a custom index and he's got like 40 different accounts?

1:01:52Downtown Josh Brown:That's actually what I think it is. and then occasionally somebody involved with managing his money is reading the news and seeing who he's saying nice things about and saying, oh, I'll buy some more NVIDIA. Is it weird for the president to own a million dollars worth of NVIDIA? It's the largest company in the world. Right. Now, if you tell me they're in the prediction markets making bets and then they're enacting these things, it's a different conversation.

1:02:18Michael Batnick:Gross, gross, gross.

1:02:20Downtown Josh Brown:Okay. I don't, so I don't view it that way. However, a lot of people did point out the sheer number of trades in one quarter is enormous. It's 60 trades per day. Well, hold on. But throw this chart up.

1:02:33Michael Batnick:This is weird. No trades in 2025, really? Like, this doesn't look great. This looks shady.

1:02:40Downtown Josh Brown:This looks shady. Like, no trading to 60 trades a day is wacky. Wacky.

1:02:48Michael Batnick:And he was controlling the market in the first quarter of the year. He had massive influence on a day-to-day basis.

1:02:57Downtown Josh Brown:It's possible there were plenty of trades in the fourth quarter and they just didn't report them. What are you going to do about it? How the f*** did you know? So we think that everything is being disclosed that people are doing. Is it likely to be the case? Probably not. Maybe it's like, ah, disclose the trades. Who cares? But we didn't disclose them last quarter. All right. What are you going to do? Like I sort of think it's like that. Anyway, I don't get energized by political stuff and I really don't get negatively or positively affected by what any of these people do. But it is notable that all of a sudden the president's personal accounts have gotten extremely active.

1:03:39Michael Batnick:How about this? I think we could all get behind this. If you are a politician, index funds.

1:03:45Downtown Josh Brown:That's it. Everyone seems to agree. Something like 90-something percent of the American public agrees. If you want to be a public servant. And it still hasn't happened. What does that tell you?

1:03:56Michael Batnick:Right. Exactly.

1:03:58Downtown Josh Brown:Now, they just disclose. We think they disclose. And the thing is, let's say they don't disclose and they're trading anyway. What is anyone going to do about it? If the Democrats do it, they'll close ranks and protect that person. and they'll find a way to make the judge on that case a Democratic activist and vice versa. If the Republicans are doing it, they'll say, oh, what's the big deal? This happens all the time. And the truth is nobody actually will care. And that's just like where it is right now. Everybody cares.

1:04:32Michael Batnick:Nothing's going to change.

1:04:32Downtown Josh Brown:Cares enough to do what?

1:04:34Michael Batnick:Change who they're voting for? I'm saying everybody that is voting thinks this is bullshit. Obviously. Obviously. Obviously.

1:04:43Downtown Josh Brown:And yet, it persists.

1:04:46Michael Batnick:All right. I'm going to quickly make the case. Listen, my stock list is down. I own two individual stocks right now. Most of my money is going to Porterhouse. I own IMAX and I own -

1:04:56Downtown Josh Brown:Playing it like Barry. Super concentrated.

1:04:59Michael Batnick:I own IMAX and I own NVIDIA. And IMAX is in a 23 % drawdown. Why is the stock down? I don't know. It's just selling off. I mean, it's gone up a lot. So positioning You took the words right out of my mouth Couldn't have said it better myself This is a premier brand I think the future is bright for this company I'm a shareholder And if you ever wanted to get in It's down 23 % My phone on 23 % I don't know But to me the longer term uptrend is still intact Even though it's below its 200 moving average

1:05:29Downtown Josh Brown:Okay Any catalysts that we should be aware of?

1:05:34Michael Batnick:Listen The thing is Everything is on the calendar Like literally

1:05:39Downtown Josh Brown:Everyone knows what the IMAX movies are going to be. We don't know what the grosses will be. Right, right.

1:05:43Michael Batnick:But so we'll see.

1:05:45Downtown Josh Brown:Okay.

1:05:45Michael Batnick:I'm bullish.

1:05:46Downtown Josh Brown:All right. Mystery chart time. And then we're going to get out of here. This is a stock. Oh, I saw this chart. Go ahead. This is a stock. I own it. It looks like a pre-epism.

1:05:57Michael Batnick:Oh, crowd strike. Good for you.

1:05:59Downtown Josh Brown:Look at you.

1:06:00Michael Batnick:Look at you. I saw the stock today. Good for you. Listen. Listen. I think. No. I know that you publicly recommend. or you recommend. You publicly talk about stocks that you own. Some have done worse than others and Uber and Toast have not been kind to you, but this is a stock you've owned forever and ever and it's a fucking grand slam. So I actually wanted to give you,

1:06:19Downtown Josh Brown:I wanted to give you some credit on this.

1:06:21Michael Batnick:Oh, thank you.

1:06:24Downtown Josh Brown:You, when the Saspocalypse virus finally caught up with the cybersecurity software stocks, you instantly said, oh, bullshit.

1:06:36Michael Batnick:I did buy.

1:06:37Downtown Josh Brown:I did. you said no that's where I draw the line these are not disrupted by AI these are going to have more work to do because of AI I agree with you but like

1:06:49Michael Batnick:throw that Trump icon so this is why look at the

1:06:51Downtown Josh Brown:SaaSpocalypse in March

1:06:53Michael Batnick:this is why you're better at some of the stuff than I am so I bought it literally at like I bought at$350 I sold the first rip back to$450 and went back back down to$360 that was violent dude I thought I was a genius and went back up to$450 I said, I'm an idiot. It went back down to 360. I said, I'm a genius. And this is why I am doing more porterhouse because this shit is hard. Like riding winners is brutally difficult. Look at that. Yeah.

1:07:19Downtown Josh Brown:Brutally difficult. I just won't sell it. Like you can't. And if that turns out to be like, oh, they actually did get disrupted. Corporations were very interested in like having their employees create their own shit on an LLM. I'm happy to be wrong about that.

1:07:40Michael Batnick:Yeah, yeah.

1:07:41Downtown Josh Brown:Because then I'll say, well, that's the dumbest thing I ever heard. I hope you get hacked a million times till Sunday. And I just, I couldn't picture it. But to your credit, you stepped in, you said, no way, this is nonsense. And that was the right call. And every one of these cyber stocks looks like that. All of them.

1:07:58Michael Batnick:Yeah, Palo Alto. Fortinet.

1:08:01Downtown Josh Brown:Fortinet made a huge move. They all look like that, as they should. more AI, more cyber threats, period. You cannot disentangle those two things from each other. And now we know based on stock price action. All right, that's it from us. I wanna let you guys know tomorrow is an all new edition of Animal Spirits with Michael and Ben. If you like this show, you'll love that show. Make sure you check it out. It's on the podcast app of your choice as soon as you wake up and it will hit the YouTube channel at 9 a.m. tomorrow right here on The Compound. Ask the Compound features Ben and Duncan taking your questions.

1:08:40Downtown Josh Brown:So if you want to talk to The Compound and ask a question, send an email. Askthecompoundshow at gmail.com and if we answer your question live on the show, I think we're sending out swag. So get your best personal finance and or investing questions in and you can be part of the show. And then at the end of the week, Michael and I shall return with an all new edition of the Compound and Friends. Thank you guys so much for joining us in the live chat. Shout out to public. Thanks to all the listeners and the viewers. We'll see you soon. Good night.

1:09:26Michael Batnick:Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.