When Will the AI Bubble Pop?

24:02You brought some charts. John, throw some up, please. Let's start with the S &P 500. How do you think the market is behaving on a technical basis, Joe? Okay. So this, well, this chart is an example of big, I'm trying to make a point of, you know, everyone has different timeframes, longer term, if their analogy is the last great invention was, you know, internet 95 to 99, if that's something we can compare it to. And I think this can be 2023 to, you know, let's say 2027 or 2028, let's just whatever. We don't even know what we're going to have for dinner tonight. So let's not worry about three years from now.

24:38But the point is I'm making, I really want to stress this point. So everyone's like, oh, you guys are bullish and bullish and bullish. There will be corrections along the way. And this chart was the S &P in 97. there was a Japanese Asian currency crisis. And there was actually like a mini crash. That's a daily chart. And this, so this reminds you for when everyone says, oh, 95 to 99, this chart and the next one in 98 is also like, this was long-term capital, Russian debt crisis and so forth when long-term capital blew up. And it wasn't until the Fed came and put together a rescue to bail out the levered hedge fund.

25:17That pullback doesn't look too dissimilar from the tariff. Right. But my point is, I remember being in eBay. I bought it at 50 and it went to 200. And it dropped back down to, I don't know, like 20 or 30 during this time. And then it went to 300. So there was insane, split adjusted and all that. But there was insane volatility where at the time, the Yahoos and all of these AOLs and all these stocks that were trading, they dropped like 30, 50 % in the summer. So I'm making a point that I think bigger picture, if you're longer term, I think we're still going higher. But if you trade individual stocks, there will be insane volatility along the way.

25:53You made the point just now about pullbacks. And I'm sorry that I said you hadn't been through it because you had. And it's a pet peeve of mine for people that pretend 2022 didn't exist. So forgive me, Shane. 2021 and 2022 were brutal for growth stocks. Right. NVIDIA fell by two-thirds. Yeah. Facebook fell by two-thirds. Yeah, all of them did. Amazon and Google both got cut in half. And we just pretend like that didn't happen. And guess what? Like I said, NVIDIA fell 35 % in April. Because they all came back. Right. So when they go from whatever meta goes from whatever it was, 400 to 100 back and even higher now, whatever the numbers were, you got to remember though, in the 90s, some of them did not come back.

26:33You know, like, so eventually you're going to get to a point where they're not going to go out of business. They're just going to like Intel and even Microsoft for what, 13 years? Like there's going to be a period where they're not going to go out of business. Of course, they're just going to flatline. I just think that it's not yet. So I agree. I fully agree with that sentiment because first off, like on the pullbacks, like the VIX had a 50 handle. That's substantial. That's scary. And I think the last two 50 handles are Yankee trading the terrific hissy fit. The reason it was man oriented, one, the other one was pure technical.

27:07It wasn't really based on something structurally going to have changed for a couple of years. But that event that he's talking about, that multi-year, maybe five to seven years of just lagging, that's going to happen once agentic AI has its chat GPT moments. Why do you say that? Because IT spend is so bloated. It's been so bloated past couple of years where every board of directors is telling the CEO, what are you doing to get ahead of AI? And it's causing the CTOs to overspend on just middleware that's not necessary. and it's been growing year after year. So as soon as agentic AI takes off, which AI agents, what that is, essentially replaces what humans do on the backend of a lot of these software companies, you're going to see that 20 % revenue growth that a lot of these software companies had, same with the hyperscale as consistent growth, start getting a little lagging because of that digestive period of like replacing labor force costs with just this one-time software of an AI agent.

28:03And now you have to figure out how else are you going to grow? So you're saying that when these models change the world on a consumer level and we all feel it, that will probably be the time where all the gains have been harvested? It's going to be on the enterprise level. I think consumer level won't be as impactful. I think it's going to be more of the middleware spend is going to diminish. And it's underappreciated how much software spend is really lifting the market right now. So who are some of the beneficiaries of the software spend right now? Are you talking about companies like Salesforce?

28:29and like sales. I think a lot of the CRMs, I think a lot of the DevOps are going to be the ones that are going to get affected by the AI. I call the AI tsunami. It's coming. It's going to hit the software space hard. The ones who are going to not just survive, but thrive are going to be the ones that data infrastructure players because data is going to explode. Like we talk about AI agents, like they're going to be working 24 seven. They're going to be doing tasks that dozens of people have taken and it's going to be constant workload. It's going to cause data to compound and compound. And beauty of data is like, I do a query today and tomorrow I have to build on top of the existing query only compounds and stacks onto each other so I think that you're seeing like meta for example like meta is going so hard right now or Zuckerberg is going so hard on making sure they don't lag in this AI race that he's spending 20 billion dollars on essentially a shadow acquihire of Alexander Wang the only reason he's doing that is because their training data is not where he wants it to be data labeling is a very big component of that.

29:30So in order to cut off the arm of OpenAI on Google, who was using scale AI, he's just going to bring all that talent in-house and have Alexander Wang lead his super intelligence team because he knows that if there, when there is going to be that AI tsunami, it might, if they're not going to be one of the leaders of that AI race, it might cause a 25 % haircut. And 25 % for meta is$500 billion. So him investing 20 billion just to get the leader of his super intelligence team or$100 million signing bonuses. I've heard those signing bonuses are insane. But it makes sense, though, because it's a drop in the bucket of the$500 billion at risk, potentially.

30:07It's a good point. It's a really good point. So, Joe, we had a Zweig bread thrust. Yeah. When's the last one triggered? That was April 25th. End of April, yeah. And that was about the bottom. And this by definition happens at bottoms because it's when you get this extreme reading bearish to extreme reading bullish. Pretty much, yeah. And that has historically been the bottom. Dietrich has this table, I don't know, 17 out of 17 times it's been higher a year later. It's so, yeah. And people can go to Investopedia or just Google what is why breath thrust is. It's basically - It's when you have the 10-day EMA of New York Stock Exchange advanced decline, move from below 0.4 to above zero.

30:47The amount doesn't matter. It's when you go from extremely oversold to extremely overbought. It's insane institutional buying in 10 days, basically. and why it's so marty zweig uh came up with this and i love you know his two best rules don't fight the fed don't fight the tape um legendary investor and he came up with this it's only happened 19 times since world war ii so that's a rare time and what's you know nothing of course is guaranteed but you can see going out six months 12 months later it's 19 for 19 or whatever 18 for 18 whatever the numbers are of being positive. And most of the time, outsized returns, maybe even more than double what the average of the market is.

31:28So something to keep in mind, it triggered end of - End of April. Yeah. Basically from that April 9th, 10th low, yeah, it's 10 trading days. So check this out. I've got a companion chart. Let's throw up chart from ChartKid. So Matt made this chart showing the rolling 59 trading day. Why 59? Because that's when the bottom happened. That's when the bottom happened in April. And since then, basically around when the breath rush triggered, the S &P is up 26%. And it's pretty rare that you've had this sort of 26 % change in 59 day period. Not a huge sample set, but the last five times it's happened, we've been higher.

32:09Yeah. We've been higher 12 months later. Right. And that's the whole point is, so again, that's kind of the theme of don't lose sight of the bigger picture. And that's part of the other reason I did this is because, you know, you have noise with the tariffs, you have noise with geopolitical, you have noise with the Fed, all of this stuff. And, you know, I remember somebody telling me after just a couple weekends ago, US bombs, Iran, oh my God, we're going to crash. We're going to zero. Everyone's going to die, blah, blah, blah. And I'm not putting that, I'm not like, that's not the point. It's, it's, I'm talking from a market analysis point of view.

32:41The market was super healthy. There's no distribution, meaning very little days of selling. That's why I'm saying there's something bigger going on here, which is the theme of AI. And I told you people way smarter than me are like, this is going to be bigger than the internet. He understands this way better than I do. I'm just saying, don't fight the tape. There's something bigger going on here. So let me ask you this. Sorry, hold on. I just want to finish on this part. So in a market like this, where God bless America. We are, we close today at all time highs. It is very difficult to ride a bull market.

33:15Yeah. Whether you're in indexes or even more so in individual stocks, you're not afraid. No. I'm guessing that you are not, not long right now. No, I'm fully invested, but I will be, I've been piecing out. I'm like not fully, fully, but I've been taking, I actively manage. So I do take some profits along the way. But new highs don't scare you is what I'm saying. No, no. There are stocks I would buy today. Yeah. It's technically very bullish in your eyes. Yeah. But - What could be more bullish? But no, but going off to the point of the durability of this bull market, though, if you told me entering this year that US or Trump would be able to attack Iran, the market wouldn't tank.

33:52Oil wouldn't spike. I beg, you're delusional. There's no way. That would be the closest thing we have to World War III. Why didn't we get there? It's because AI is still the main event. You're seeing these big tech companies throw billions of dollars. At Futurum, we believe the next couple of years is going to be multi-trillion dollars of spend in AI. That provides a very high floor on any kind of pullback in the market. Because right now, well, you probably know this. I don't, but I think S &P is trading at 25 times earnings. It's not ridiculous. It's not ridiculous. Okay. We just had, this is from Lizanne Saunders.

34:26Q2 saw the widest outperformance for growth over value dating back to the mid-90s. growth was up 19 % versus just 2.5 % for the S &P 500 value. Just a remarkable, remarkable run here. No? No, it makes sense though, because like, again, you guys might be correcting me on this, but it's the first time in stock market history, we have multiple super cycles happening at the same time. We have AI, we have quantum, we have robotics, electrification. Like this is the golden era of innovation where you have so many different themes that are going to be so disruptive in society, why go for the value? Like this is an era where you're going to find early disruptors that they might miss.

35:09Like 90 % might miss, but that 10 % will be life-changing. And historically, the greatest stock winners throughout history trade at 1.7, 1.8 times the S &P multiple, meaning the biggest winners throughout history will trade. So if the S &P is trading at 20 to 25, say round it up to two, it's going to be 40 to 50 times earnings. and people might say that's ridiculous, but what's one of the most loved, widely held stocks in the world is Apple. And not that long ago, Apple was trading at 72 times earnings before it went up 3 ,000%. My point is you get what you pay for. Big winners trade at a higher PE historically and then they grow into that PE.

35:49Pay up for quality. Yeah, no doubt. So one of the things that I think in older experienced investors tend to do is over-index too much on their formative years. And I think the dot-com boom and bust is like the poster child for this. So people would say, I've seen this movie before. We know how this ends. We saw the tech boom and bust. And listen, I'd say there's a decent chance that we are going to experience a bubble and a burst. I think that's probably table stakes, right? Yeah, I'm agreeing with that. I'm just saying not yet. 2028 is where I think it's going to be a good work. Okay, so 28.

36:20Nobody knows when it's going to come. Maybe it's here today. Who knows? But the point is, for a revolutionary technology, how could there not be a bubble? Of course there's going to be. There always is. Is the Railroad's had one, dot com? And this is supposed to be bigger than all of it. Yeah, so there will be a bubble. One thing that is different about this one, not to say that it won't end poorly because they all do eventually, is that the biggest, deepest pocketed investors are now supporting this cycle. I'm talking about Amazon and Microsoft and Meta who have an unlimited appetite for spend here on their R &D and their CapEx because they think that this is an existential threat.

36:58Right after that Zweig breath thrust, and we were still below the 200-day on the S &P and the NASDAQ, we gapped above that on exactly—because there's going to be growth scares and people worried about spend slowing and all that. But what happened at the end of April after the close? Microsoft and Meta, when everyone's like, we were waiting to see their spend, and they're like, yeah, screw you guys. We're still going. They came over the top and said, we are spending an insane amount on AI. And that's what gapped us above the 200-day because people are like, oh, there isn't the growth scare here.

37:28These guys are full steam ahead. That fear is always from Rand, though. Like, the deep-seek news. I forgot when that occurred. But that caused every tech semiconductor stock to tank. Because everyone's worried about, like, I want to hold in this bubble. I think Nvidia was down 11 % that day. Yeah. Because no one is ever going to buy their chips anymore. Hashtag sarcasm. It's ridiculous. But there'll be bumps along the way in growth scares. Digestive periods. Of course. Of course. That's why I'm making a point when people are like, oh, these guys are way too bullish. Yes, we're bullish, but I'm telling you, whether it's, again, DeepSeek or one-off news or tariffs, there might be even the whole point of this wide breadth thrust is it's six to 12 months now.

38:06So traditionally, August and September are two of the statistically worst months of the year. People go away, sell some stuff, and the market's a little bit weaker. We could have more tariff talks. We could have a fight with the Fed and all this stuff. But I think if we do get that drop, we got it the last two years, I think that's a viable dip. This notion that we're bullish or you're bullish, This is not us. The market is barred. The market's telling me. The market is at an all-time high. If your inclination is to be scared at an all-time high, you are not going to make money. At the end of the day, the big institutions control the markets.

38:38Period. End of sentence. My opinion, your opinion, anyone's, it doesn't matter. The big institutions, the big pension funds, mutual funds, hedge funds, they are buying and or selling, but they are trafficking in millions and millions and millions of shares. So what I try to do is do my best to interpret. it. When they are all dumping at the end of 2021, early 2022, when the Fed raised 500 basis points in a year, they've never done that in the history of the markets. They're all dumping ahead of that, but they don't do it in one day. They were consistently doing it all through January of 2022. When they're coming back in consistently, and some of them are underinvested, where you get these tariff headlines, you get these geopolitical headlines, they're like, we got to get involved.

39:20So when they're consistently buying and supporting the markets, That's what's telling me to stay bullish, not my opinion. Last thing on some broader market stuff before we really dive into some companies, which I'm excited to do. Eric Soda posted this, I think this was June 29th. So last week, he said, the surprise to me is that with the NASDAQ at a new high, only 10 % of the index of stocks are at a new 52-week high. They have a lot of room to run. So, Joe, I know you pay a lot of attention to internals and rotation. Yeah. And just on Tuesday, we saw a very unusual while the outperformance day of the equal weight, which was up 1.2 % while the S &P was down.

40:00This is the type of thing that you love to see in a bull market. It is not narrow at all. Sector rotation is the whatever the hallmark of a bull market, whatever that phrase is. Beginning of the month, beginning of the quarter, beginning of the fiscal year for certain, you know, government companies, whatever. So one day there was a lot of growth stocks. Even ARKK was down 2 % and the Russell was up over 1%. What I like is that it's not universally selling, it's sector rotation. So there's going to be some profit taking. And a bunch of growth stocks were down 5 % the beginning of July. And that's why I'm making the point, it's not going to go straight up.

40:35There's also another NASDAQ chart similar to the one you had with the compound. You said it's a rare thing. It made me think of it. There's a NASDAQ 100 chart that I put in there towards the end of like, Like, it's basically data going back to 1985. I don't know if you - John, chart 11, please. If you have it there. Yeah, this is similar to the one you were saying, which is, this is data from 1985 to present. And it's similar to the, it's very rare because the one you had, it only happened five or six times. This is when the NASDAQ 100, after it goes from down 20 % to a one-year high within three months.

41:06This means everybody was offsides. Yes. To being too bearish. Uh-oh, we were wrong. Everybody bought. Look at the times this has happened. It's come off of the 90-91 bear market. It came off of 98, off of the long-term capital. It technically wasn't a bear market, but it was a bear market in my view. From 2000 to 03, you had the dot-com, you had 9-11, you had a 36, pretty much a 36-month bear market. These are, you know, after 2009, after the financial crisis. So my point is, after COVID, these are like major bear markets and scares in the markets. And this just happened on June 24th. And again, nothing's guaranteed.

41:43It's just rare. A year later, the Qs are up 40 % on average. So pretty impressive. Let's get into the MAG7 and what might be the next batch. I've been sharing this chart with Josh for a while. We're talking about Apple divided by the S &P 500. And as far as I'm concerned, this ratio will never reach a new all-time high. Do you guys agree or disagree with that? I agree. Okay. Not only that, it is sitting at a very tenuous spot, multi-year support, and it just found support there again. I don't know if it holds for long or not, but Apple is probably not where you want to be if you are a growth investor.

42:29Wall Street wants to see growth. Again, period, end of sentence. Wall Street wants to see growth. If the market's going up and you're growing your company, for the most part, your stock's going to go up. Is Apple going out of business? No, that's not what I'm saying. I'm just saying it gets to the point where it's just slow and steady, single digits. And go ahead, if I mean to interrupt, but like, I just don't see any explosive growth from here. So I'm going to say flat out honesty about Apple. They're going to be here, but there is no world they're ever going to be a growth company again, ever.

42:58Yes, 2.4 billion devices out there. They should have been the leader of this ambient AI system trend that's going to be causing them to be this consumer AI winner. Do you think if they buy one of those AI companies they've been talking about, would that change your opinion? Because this is the honest point I was trying to get at. Talent doesn't want to work there. They have a culture problem. Big brains want to work at XAI. They want to work at MetaZuck. They want to work with Elon. They want to work at OpenAI with Sam. Nobody wants to work at Apple, this dinosaur company who they're comfortable being this cash cow.

43:30And their AirPod revenue is what? Four times the revenue of OpenAI's top line revenue. They're comfortable just being a services company. Is it too, can they change it or is it over? It's over. I think you're seeing them try to wave the white flag without verbalizing it of we're going to have open AI and we're going to have Anthropic partner up with us and sell our real estate to them and make that cash, again, low hanging fruit, but they couldn't solve it in-house because they don't have the talent to do so. It would have to be a major restructuring or a major acquisition that they could implement in to what are you going to do?

44:04Take your revenues up another three X from here? it's so my 10 my 10 hats the revenue is not growing no it's not it's it's a financial engineering company that's all it is but my 10 hat theory is in two three years they're not going to be at the point that the board of directors want them to be there is going to be a very splashy merger that i think that open ai's board is going to force upon potentially of an apple open ai merger where sam becomes the ceo of apple and that would be the 10 hat theory that i have of because I don't think Sam's going to go public. What about Microsoft? Why would they want that?

44:37That's the only hurdle. I think I'm waiting for that sign of like, open-end Microsoft's having this weird conversation back and forth. I think that's going to be much more of a breakup than what we see right now. But I think that there's going to have to be a massive acquisition for Apple to get a product-oriented CEO to run that company right now because Tim Cook isn't product-oriented. A few weeks ago, I showed Josh a chart of CapEx divided by revenue of, I think I was using Amazon, Microsoft, and Alphabet. And it was up and to the right. These companies are going all in. They are spending so much money, a percentage of their top line.

45:13I don't know if it's 30%. It's a huge number. Whereas Apple, it's going down and to the right. They're not doing anything. They're not spending any money. I mean, the natural derivative of what Apple should do is what's the next innovation of hardware? It's humanoids. That's what's going to be the North Star for Apple going forward. I haven't heard one thing about them trying to tackle that. Like why not, you spend$10 billion on a car that just fizzled out and it was just a science project in the labs, but you're not willing to spend billions of dollars. Like you're spending 600 billion on buying back stock.

45:44Just use 10 % of that 60 billion towards some kind of avenue to conquer humanoids. Because I'm talking poorly about Apple, Mac, Apple phone, AirPods. Like they have leverage. Use that leverage to create what the future physical AI world is going to be. Joe, when's the time you owned Apple? I don't remember. It's been a while, huh? I haven't owned it in a long, long time. I don't care to own it. I don't care to own it. I'm a growth manager. They're not growing, period. End of sentence. It's 30 times earnings. It's not even - It's bizarre. It's not exciting to me. Yeah. All right. So, John, chart 15, please.

46:17What we're looking at are each individual MAG7 stocks and their relative performance year-to-date versus the S &P 500. And what stands out to me very clearly is that it's NVIDIA, Microsoft, and Meta. in one category that are winning, that are beating the index, that are getting the benefit of all this growth that investors want. And then there's Apple down in the dumps, Tesla for a myriad of reasons, not doing well. Google, not great. And Amazon is sort of somewhere in the middle. Any opportunities of the companies that we just mentioned and the latter that are not in favor right now? Tesla. Why?

46:55First off, I think Tesla and Apple are experiencing macro causes. Tesla EV solar credits removed. Apple had that China, like you have to go away from China. So like there's a little nudge on that, but. So what's the bull case on Tesla? Bull case on Tesla is, again, everyone's worried about the car delivery numbers we just got yesterday. 389 estimates, they came in at 384. Why did it catch a bid? It's because it wasn't as bad as fear. Like the worst, lowest estimates were 350 ,000. They're not a car company anymore. But you don't care about cars. I'm getting right, I guess, right? Yeah, so I think the future, like why I'm bullish on Tesla, I own is still top 10 position.

47:30They are the only player building the AI network for mobility and robotics. Physical AI is the greatest ham in mankind history. It's the only one that could really replace. It can touch every part of the world and replace head counts at a scale that's never been done. What does physical AI mean exactly? Replicating a task that a human can do essentially in a non-digital form. So actual robots. Actual robots. And I think you're seeing all these videos are like, oh, figures doing this, like lifting this, lifting a string, putting it over here. They're a robotic leader. No, that's not how it works.

48:05General application of robotics is the only scalable approach. The only player to do that right now is Tesla. The timing is awful right now. Who knows how long this is going to take? It's going to be on the Elon Musk timeline. And what that means is you just never know because he just is hyper bullish. But I think there's inevitability that Tesla is going to conquer humanoids. They're going to solve autonomy. It could be in 10 years. It could be in five years. But just think about how transformative autonomy would be in the car industry. Every car is being sold in your gross margins one time. Now, if autonomy is actually solved, your car can be your freaking employee.

48:45You can make an ROI on your car, buy it, and it drives other people. there's a application component of it where you capture that node in a vehicle sale and then you can actually make an ROI on it that's underpriced in the autonomy angle it's going to take a while but I think that's that's the north star of Tesla and when it I think it's going to hit when it does it's going to be so transformative that buying it under two trillion dollars is going to be a deal because again caveats how many companies right now there are early disruptors in the stock market are at the same price they were at four years ago.

49:21I think I can maybe do a couple. I mean, the pushback is Tesla was, I mean, that was crazy. That was crazy, but they're also going through a narrative change. Narrative change. Yeah, that was a huge move that went on. Was it up 1 ,000 % in 2020? I think it was a 10-bagger. It was up, yeah, 800 or something. Yeah, yeah. Because I remember Cathie Wood at a 10 % position went up 800 % and it was half of her gain. So on the humanoid, is that like a hardware multiple though or no? No, no, it's as soon as here's an example, as soon as Elon solves humanoids, Amazon's going to buy thousands of them. All these companies are going to buy thousands of them because they don't care about solving the humanoids component because it's too CapEx.

50:00It's too complicated. They don't have the data feedback loop necessary to solve that issue. So as soon as they actually create that product, I'm just giving Amazon example. McDonald's is going to use them. That's another example, but every warehouse will use them and it's going to be acquired And that's why Amazon, for example, I'm a big Amazon bull top three position. I think their retail presence is going to become, provide them such an enablement on capturing all these growth themes. Like they don't care about creating their own drones or robots. As soon as there's a drone winner, they're just going to acquire all those drones.

50:32And it's going to be an immediate OpEx boom for them. Same with humanoids. As soon as Tesla sells the humanoids, it's going to be a major margin expansion opportunity in the retail side of the business because everyone has Amazon Prime. That's their moats. And they don't worry about investing to be having the in-house. They're just going to allow the retailer to enable them. But I think that a lot of people are going to wait in line to acquire these humanoids from Elon once they solve that. And who knows what the multiple is going to be on that, because it's going to be like an NVIDIA situation where their GPU is in such high demand that it's going to just cause them to have this 10 year boom, probably that they're going to benefit off.

51:09And who knows what multiples deserve when you have a 10 year supply and demand wonkiness and you're the only player in the shop.

51:45You're going to do a podcast one day with two robots sitting across from you. Yeah, maybe. I'm telling you. Joe, what names in this orb are you excited about? Like how low in market cap do you go? I can go low because, look, I agree with him that it's not just AI. I mean, even in the 90s, it wasn't just dot coms. There was, you know, fiber optics. It was cell phones, you know, Ericsson, Nokia, all this. So there's other themes going on right now. So I do like that, you know, energy data center is technically, you know, AI, but that there's huge growth there. And you have, again, people like Elon Musk and Larry Ellison, all these smart people saying like the demand, I mean, expect it to go, what, 1 % to 8 % of the energy grid for data centers and so forth.

52:32So energy is a theme. Space is a theme. You also have super smart people like Richard Branson and Musk and Bezos involved in space. Like, I think they're doing that for a reason. There's a lot of, but that's like 2027, 2028. So I'm okay with stuff outside of AI because there's just such, just sexy growth stories out there right now. So when you think about the next Mach 7, are we thinking about names like CrowdStrike and Uber? Or are you thinking like companies that like maybe aren't on our radar? Like what's that flying plane one? Is it Joby? Oh, Archer Aviation. Archer and Joby are both in the flying taxis.

53:07Is that real or were we just smoking dust? It's, I think what's real about it is Anderil, the private company. I think the defense component of like being above your head. I think, uh, the reason there's such an appetite for archer aviation is they're not just a hardware company. They have a software solution on top of that. It feels very much like a Palance here, like components and Anderil loves them. They pair up with each other all the time. What do these flying companies do? Uh, I mean, it's, it could be something like, I want to go to Brooklyn from here and just go, cuts through traffic.

53:38it's going to be a much bigger like defense component where like the old defense has been hardware superior supremacy that's a that's a uh mentality for a lot of like what defense has been like the trillion dollar budget just last year has been a towards like hardware dependency the future is going to be a digital battlefield and part of that component is yes cyber security it's gonna be a heavy component everyone's gonna be attacking each other uh through that route there's also going to be above your head the drone component of it there's going to be heavily vital for the arch aviation is a component of that.

54:11Another one is the Palantir is a decision engine on identifying where the threats are. That's vital as well. So I think this digital battlefield is a massive theme that provides somewhat of a offensive and a defensive component because during Q2, one of the strongest names in risk on environment was these new age of defense names, the Palantir's, CrowdStrikes, it's because geopolitical tensions is somewhat of a tailwind for them, unfortunately. But if you also want exposure in AI and all these growth themes, you also have to invest in them. So they have the benefit of both worlds. And I do believe that it might be very early because Archie Aviation is a$5 billion company.

54:49It's expensive, but they're being used heavily in the 2020 Olympics in LA. Like it's happening, the commercialization of that. Do you think about the economics of these businesses or is that like, and not to be disrespectful. Is that a distraction to you? No, no, no. It's not disrespectful. It's a real thing. Are the economics a distraction or are you just thinking about like that, that really is a distraction. I'm thinking about the explosive growth and the sort of like traditional valuation. It's just a sideshow at this point. So I think valuation becomes part of the calculus based on the maturity of the company and how big it grows.

55:19Like Palance here, I could care less a little when it was under 25 billion. Now at 300 billion. First off, I haven't added in Palance here since the the uncanny trade crisis when it hit$22. That was the last time I added. It's through the roof. I don't need to build a substantial position. But for an archery aviation, it's all about their moat and advantage, especially in the future world we're about to enter where this new age defense theme I'm talking about, EviTools is going to be a component of that. What is? EviTools. What is that? Essentially the electric vehicle flying jets. So like the Joby Aviations, the archery aviations.

55:51And they'll be electric, yeah. So that's a heavy component of this. in defense, but the retail for, you need to go to Long Island and take an hour and a half. It could take you 20 minutes. Same. They're doing it in Dubai now. Um, to, you know, but that's the retail side. There's also the, um, military component. So do we, do we genuinely think that there's going to be, um, cause a lot of the talk has been about these incumbents, the hyperscalers, they are so big and powerful and virtually indestructible. They are the new venture capitalists, whatever they see that's working, they just acquire.

56:25Is there going to be a company that gets to, I don't know,$2 trillion? That is, it could be on our radar or not. Like, is there going to be another Mag 7? I mean, I think Pound here is the closest thing to that next Mag 7. All right. What else? What are some other names? There's always themes that, you know, they rotate, you know, it went from Fang and then people dropped Netflix because they didn't like it. And meanwhile, Netflix has been a monster. Let me ask it better. So the year is 2039. Are we still talking about Microsoft and Meta the same way we are today? If not, who is going to be in that sort of category?

57:05I know it's impossible. No, I mean, I think whoever's... Don't say Palantir again. Palantir. No, I think it's going to be whoever solves agentic AI at scale. I think whoever can figure out how to orchestrate outcomes at scale is going to be one of the biggest second wave winners of AI. So who's in that category? It's private companies, though. They're all in an experimental phase right now. That's why it's so tricky. Yeah, and not just AI. I mean, one, I'm talking my book a little bit here with Rocket Lab. Oh, I love Rocket Lab. I mean, Rocket Lab, I wrote about it. I'm in from single digits. I wrote it publicly on my blog at$10.

57:40And if SpaceX just did their most recent funding round was$350 billion, and Rocket Labs at like 10 to 15. I'm not saying it's going to grow to that point, but Barron's called them the closest competitor, even ahead of Boeing, the closest competitor to SpaceX. And that's the thing where that demand - Why didn't you tell me about the stock? No, it's the FedEx of space. I've been a big Rocket Lab fan under five bucks. What a stock, oh my God. No, it's because Peter Beck is a - He's executing. He's the Steve Jobs of the space era. Everyone thinks about Elon, But Peter Beck is a freaking scientist.

58:17He knows how the rockets build inside and out. He's all in on it. And they used to just be a satellite launching company or a rocket launching company. They've morphed into a full-on space prime. They are becoming the space logistics company in the future. What are they doing in space? I mean, what are they doing in space? They have an electron rocket where they've done, I think, 230 successful launches. is now their new neutron rocket is going to compete with the Falcon 9, I believe, from SpaceX, meaning it can carry the bigger payloads, all this stuff for satellites. Again, I'm not as... I know, I know.

58:51I'm not trying to put you on the spot. But I'm just saying, like, they are, there is huge demand from companies, whether it's, you know, whether it's mostly, you know, bringing satellites up there and all this stuff, basically through just not only companies, but from governments that need, and the, what do you call it the, what's the word I'm looking for? The delay is like 12 to 24 months right now. So there are companies working on speeding that up. So that's the Holy grail in space is on demand launching right now. If you call rocket lab or SpaceX, yeah, we'll get you in in August of 2027. Like that's the other thing is there's, there's huge potential for growth.

59:27How about this? Let's flip this. What is overhyped garbage? What, what do we think is completely nonsensical. If I want to really stick my neck out, I think Salesforce has not proven to me to be the disruptor. Oh, stop it. I'm talking about like companies that like are in the$10 billion category. Oh, okay. Let's go there. Like companies that are getting the benefit of the doubt. Because I was talking with Josh. There's a lot of bullshit out there, right? That's a feature of a bearable market. But this is what's great is a lot of the companies we're talking about, you know, Joby and Archer and Rocket Lab.

1:00:01These are highly shorted companies. It's Palantir. A friend of mine plays poker and everyone at the poker game is short Palantir and Gore Week. That's all they talk about. I'm like, the big short just ruined these people because they're like, they can't stop shorting them. So that's the whole thing is the answer to your question is there's two sides to these trades because some of the stocks we're talking about. All right, you coward. I'll throw out some names. No, I'm just saying a lot of people are saying, you know, these stocks we're talking about are the ones that are not going to work out.

1:00:33But that's why we'll find out. There's two sides to these trends. I do think Corleaf might be the one name that's just bloated for capitalizing on the moment. They have a 27 billion backlog right now. No, that's the thing, but it's capitalizing on the - But went from 30 million to nine, almost a billion in sales in seven quarters. It's insane. I mean, that's, I've never seen growth like that. Why would you short that? Why would you short - I want to short it, but I think they're capitalizing on a moment right now where supply and demand is so off sides. And they're - It also could, yeah, with the float as well.

1:01:00Yeah, and they have one customer, essentially microsoft they have one supplier nvidia and they have one moment which is right now they're capitalizing on i think eventually supply and demand are going to even itself out who knows if you need a core weave once that happens that's the risk i call him the broker broker of the uh compute era business is booming but sometimes you never know though sometimes things shoot in advance of you know like you know the market trades dumb the market trades on what's going to happen, you know, six to 12 months from now. And even with companies, their earnings top, you know, two to three quarters, the stock tops two to three quarters before the earnings top.

1:01:36So Cisco topped in 2000 and they kept coming out with 50%. And everyone's like, why is the stock dropping? Because the market anticipates, it's smarter than us. It knows two to three quarters from now that stocks top two to three quarters before their earnings top. All right, let me, let me throw out two names that I know nothing about, like really and truly. So I'll ask you guys. Rigetti and Ionic. Names like that. IonQ? IonQ. Yeah, there's a bunch of those quantum computing. So is quantum computing real or is that just riding the stupid bull market wave? Didn't Jensen say it's like 10 years down the road?

1:02:10He actually just changed it to five recently. He went from 15 to 10 to five. But I think here's the issue with quantum. It's the only way to get captured to pure plays are very speculative names right now. So IonQ is, in my opinion, the most scalable approach to quantum because you can run their trapped ion technology in a room temperature environment. You don't have to go in sub zero like the rest, but it's highly risky still because I think in order for quantum to reach chat GBT moment, which I think Jensen's accurate, we're nowhere close to that. It's going to be essentially a science project that's going to be running at the expense of shareholders because right now, what ion q is worth 15 billion so you don't mess with like these i own i own you oh you do okay but i owned it when it was under 10 bucks now at 15 billion dollars i'm like i don't know if the chat gbc moment for quantum will happen in next by this end of this decade there is some risk and reward issue there nuclear is another one super super spec and space of course i think space quantum and nuclear are all three super super speculative that doesn't mean they're not going to work out they could be 10 baggers or they go to zero so joe i know you like to look at call buying.

1:03:17Why is that a signal? A lot of big institutions will, you know, sometimes getting into 300 ,000 shares, a million shares, whatever, just doing that on the open market is, you don't want to show your hand and, you know, all that stuff. So a lot of big institutions will get into positions through options. That's why I like to keep track of the big option trades. Like Carl Icon, when he got into that Netflix position, it was all through options. He bought in the money calls. Bill Ackman's done the same thing. Even when you've seen some of these activist investors that, you know, Nelson Peltz and some of these things, they get into them, starboard through, you'll see blocks of 2 ,000, 5 ,000 in the money calls, because then once they exercise, they just get assigned those shares.

1:04:07They don't have to really buy them on the open market. So I like to follow what they're doing. And for the past two or three months, it's been, I even have the list here, Amazon, Google, Arm, NVIDIA, Tesla, Vago, now, Palantir, even like Arm Holdings, they're buying June of, just go look at the open interest of June, 2027 calls. Like it's insane. They're buying like 10 million every day. So I'm not saying it's going to work out. I think these are big institutions that are playing for, and I wrote that in my piece, June of 2027, December of 2027. They're putting the huge footprints into these stocks.

1:04:43And who knows if this ends up surpassing what the average person could expect. These could end up being, if they're all going to go up because of their weighting on the averages, then the averages are going to go up as well. John, can we throw up chart 16? Shay, tell us about Futurum AI 15. What are we looking at here? Yeah, so again, I referenced that the biggest winners of the dot-com era wasn't just the first stage, like structural arteries. It was the second stage. This is who we believe will be the second stage winners of AI. So you have the control layer, which again, AMD, I love that they're catching a bit right now because a lot of people had the complete wrong narrative on AMD.

1:05:27Like everyone's like, oh, they have an NVIDIA problem, NVIDIA problem. Like, are you kidding me? The AI acceleration market is going to be$500 billion in the next three years. NVIDIA will capture 80 % of that. So they have$400 billion of that. What's the remaining? All AMD has to do is capture a sub 10 % share and that's$50 billion right there. That's substantial. So I think AMD is going to be using inference and as the massive tailwind for them to capture that sub 10 % share. And if you don't know what inference is, I mentioned that AI is intelligence. It's just called inference the tax on intelligence.

1:06:02So as much as you use, that's why once train data goes lower and lower, inference will explode because it's gonna be a lot more affordable to have these AI experiments. Another metaphor you wanna use is cars. Like during the deep sea pullback, training data was gonna go lower and it took everyone down with it because they're correlating training data. and AI when that's not the case. So if training data is like gas, gas becomes cheaper. Do you think there's gonna be more or less cars on the road? There's gonna be more cars on the road because going from point A to point B is gonna be much more affordable.

1:06:35Same thing happens in AI. So as training data gets lower and lower, inference will explode. And that's where you're seeing AMD be a major beneficiary of that. Seeing Micron of Memory being a beneficiary of that. The biggest beneficiary of that is actually Broadcom, their networking component. Every hyperscale we've talked about, uses Broadcom. I think Broadcom is actually going to be a top 10 company for the next like five to seven years. Maintain that status. A lot of people talk about Nvidia, TSM. That's a forgotten trillion market cap that people don't talk about as much. I call them Uncle Sam because remember that reference I made tax on AI?

1:07:08They are legitimately Uncle Sam. So the more people use AI workloads, they're going to benefit on the inference angle on that. So that's a control layer. Like the first layer of like, they're going to benefit from inference. The operating layer is what we're talking about for the software component. Everyone's talking about Palantir. I'm not going to get into that. We have ServiceNow. They're the IT management go-to. Bill has got his finger on the pulse on where the puck's heading. I have full confidence that - Bill Cosby, which - Bill McDermott. But Oracle, for example, databases. Everyone talks about, oh, Oracle is like a dead company, what, seven years ago.

1:07:46It was not going anywhere. This was the second win that caused the renaissance for them because all this data is going from left brain to right brain constantly. What do you have to do with that data? You have to have governance in place to make sure it handles it correctly. Nobody can do that besides Oracle. Their presence is unmatched and you're seeing their OCI just continue to drive this company into new highs. What's the story with IBM? We were talking about the stock earlier. My God, it's gotten a second wind. Some of these old tech names, and you know better than I do, They've just reinvented themselves or they're getting more into either services or the software layer that is helping margins as well.

1:08:22Well, they're so essential in the enterprise space that as soon as there's a revolutionary movement like AI, you're going to have to go through them. You can't take them out of your ecosystem. So that's why you're seeing the IBMs, Oracle, Cisco. Like we just talked about Cisco and blah, blah, blah, blah. It's at all-time highs now. So it's like they're all experiencing a renaissance, but grandpa's favorite picks are doing really well. But also the kids' picks, CrowdStrike, Cloudflare, Palantir, ServiceNow, They're also doing really well as well. Everyone's happy. Grandpa and the kids. All right.

1:08:54Maybe a good way to end this conversation is Jeremy Grantham's quarterly letter from 2017. Joe, why are we talking about this? I thought it was fascinating because, and your interview with him was awesome, by the way. I know when he was on. I just, from a value manager, because I'm not just this stubborn, only want to listen to growth people. I love listening to value people, whether it's Bill Miller, Grantham, people, again, super smart. They have a little bit of a more sober view. Yeah, because I want to hear the other side. And he basically was making the point when he, and I'm paraphrasing his letter, it just really resonated with me 10 years ago, is that when he got into the game and studied Benjamin Graham and all this stuff, the average PE of the S &P was around 13 or so, and it always kept reverting to the mean.

1:09:42but then if he stubbornly stuck with that, he would have ruined his entire career because one of those slides shows that pre, I think it was pre 19, I don't know. John, chart 21 please or 20? 97, I think it was. Are you talking about margins? No, the one before that, the average PE of the S &P. It's the first one. Okay, John, chart 19. It's the first one on the list there. Yeah, so talk through it, Joe. Yeah, basically he's saying that if he just, if he went with what was historical, it would have ruined his whole career. So pre-1997, the average P.E. was 14. Yeah. And if that was all you knew, and then you saw all of a sudden stocks are trading at 20 times, and now the average 1996 to today is 24 times, you would have been left in the dust.

1:10:25That's exactly his point. So when Paul Tudor Jones says you have to adapt, evolve, or die, I think the key word is adapt. And what I love about what Grantham did is he's like, look, if I was stubborn and only went with pre-1997 average P.E. And it always reverted back to that line. When it got below that, it was great value. When it got above that, well, something changed. Something changed. So from 96, 97 afterwards, you know, you're used to the P.E. being 14. It goes to almost 24. That's a substantial change. Well, here's what changed. John, next chart, please. And what changed was profit margin.

1:10:57Well, why did profit margin? One of the things he talks about, and this is an example with the Shiller P.E. and the equilibrium. brim. The next one though is profit margins is that corporate corporations got more efficient technology, technology things, you know, again, productivity. So profit margins was part of the reason he also gets into interest rates as well and leverage and birth rates. He gets, it's a pretty deep piece, but, um, the next slide on profit margins shows that we can justify that PEs are going to be higher because the profit margins are better. So you're going to get what you pay for.

1:11:30But this is what I'm getting at is that we might have this conversation 10 years from now and the average PE of the S &P could be 30 for the next 10 years. And someone will say, that is ridiculous. That's insane. That's not what I studied in my business school and my MBA says otherwise. But Grantham could have done the same thing if you told him a long time ago the PE was going to go from 14 to 25. He would have said that's ridiculous. You could see it go higher. So you absolutely could. Investing, the way that it was taught to the Grantham's generation is that we are investing not just in pieces of paper.

1:12:07We are actually investing in companies. And you have to look at the ratios because this is shorthand for if I'm buying the business, just flip the PE. It's an earnings yield. You have to earn some reasonable rate of return on your investment. The thing that nobody could have foreseen going forward was that the yield today of three was going to grow to five to six to seven because the earnings growth is so explosive. And the margins are sustainable and defensible. And not only that, they were accelerating. And so technology has had a high bar for the last 10 years. Fang was coined in what, 2017?

1:12:42Like it had been hot, but the bar just kept getting raised and they kept going over it and over it and over it. And where does it end? Obviously, who knows? I'm saying you have to be open-minded to change. You have to be able to adapt because if Grantham didn't adapt, he's like, I would have been smoked and he's viewed as one of the best value investors. In fact, one of the best investors ever. And I'm saying that it's not going to happen because someone's going to listen to this who's an old school value person say, you're saying the PE of the S &P is going to be at 28 or 30 for the next 10 years.

1:13:15I'm not saying it's going to. I'm saying if it does, don't sit there and fight the tape and fight the market. You have to be able to be open-minded. So Joe, when this bull market ends, I was about to say if and when, because it will end eventually. I'll be crying under my bed. And it might be at 27 or 28 or 34 or who the f*** knows. Right. You will, I know you will know what to do. I'm not saying that you're going to call the top, but you will see the change in character. You will see the distribution. you will see earnings declining and stocks falling soon. And eventually you will protect yourself.

1:13:44What are you going to do? And how are you going to know when we are approaching? And I know nobody could ask, but how are you going to know when like, we're like, all right, this is getting stupid. That's a great question. First off, I think there's gonna be multiple derivatives of AI. I think he mentioned it earlier on the show where like right now it's just enterprise AI. There's going to be a physical AI. There's going to be a gentic AI. There's going to be so many different derivatives that if this pocket is looking inflated, there's going to be a next pocket that's really being underappreciated because nobody knows the timing of that transition.

1:14:17So I think an example is like, if things get inflated, like let's just say it's 2030 and it's over 30 times earnings and a lot of these companies, all my holdings are like a palantir, for example. What am I going to do? I'm probably going to start becoming a little defensive with some maturity names. Like I'm going to be buying the Googles out there, the Amazon. You're going to buy Apple. Do you sell some if the position gets too big? Never. I never sell. But you know what? You're a young man. That's right. I have a healthy DCA plan. So, like, right now, I haven't bought in six weeks. I bought—I love to buy when the blood is in the water.

1:14:51Like, I love it when it's red. DCA with your stocks or with indices? With my portfolio. Stocks. So, like, I think when there's max FUD, like, when there's VIX at a 50 handle, I'd never like to have cash. I'm getting in. because I'm very confident in these themes long-term. There are structural shifts. But I know I'm underscoring a digestion period that's going to be multi-years. I don't think there's going to be like a 2022 pullback of 70, 60%. That was gnarly. I think there's going to be a dead five years. I think there's going to be a digestion period to let the multiples catch up to the stock price.

1:15:25I think during that digestion period is where you can really capitalize on maybe some other hot pockets that weren't getting the attention right now, like space. Or the winners might separate themselves. Yeah, winners and pretenders. Joe, do you think that this could end in a digestion period? Doesn't it have to end in a boom and a bust or not necessarily? It usually does with, you know, where you just get an acceleration period and your neighbor and the mailman and your neighbor's dog and everyone's making money. We're not there. I don't think we're there yet because, again, I'm not going by one poker game that my friend plays in, but when they're all like— Well, there is one poker game.

1:16:01When they're all shorting everything. When institutions are like, I don't like this. I'm not. And they're reluctant to get back in. And when everyone's like, bubble, bubble, bubble, you know, that whole line is a bubble's an asset class that goes up that you don't own. Because no one's saying it's a bubble if you own it. Sure. It's people. So it can go on again. Moves can go on much longer than we can expect. And if you do see a period where in 99, the Qs were up 92%, the NASDAQ 100 is up. That's an index. the average stock doubled. If something like that happens, then I'll be here telling you, you got to take profits.

1:16:36If you don't, then you're going to see it because I don't want people, if we do see an accelerated bull market that's really starts to accelerate, you know, as I say, you got to ring the register, take some profits along the way because otherwise you're going to ride it all the way up and ride it all the way down. Yeah. So you have to be able to manage risk if you're trading individual stocks. All right, Joe, you were phenomenal as always. Shay, excellent appearance as a first timer. Thanks for that. I appreciate it. It's awesome. Okay. Before we let you guys go, what are we looking forward to for the summer?

1:17:05It's July 4th weekend. What do you got? You got any good plans? Anything you're excited about? Flying back to LA tonight, probably going to Newport beach. That's usually the scene. My fiance's friends has a boat. They might be doing that. Are you from LA? Angelino. Yeah. Yeah. So going to be doing that and taking advantage of the time off because gotta say, I did six TV empiricons this week. Good for you. It's freaking disgusting in New York, Al. Like, oh my God. I added Uber 0.4 miles away because I didn't trust my sweat right now. I was like, I felt awful requesting an Uber, but that's how I did.

1:17:37Yeah, you got to do what you got to do. Humble brag, Andre Agassi agreed to do my podcast. How? What? Yeah. Wow. I ran into him and I, long story short, my friend, she pushed me. I'm like, I'm so nervous. He's a tennis icon. He was sitting there playing slots in Vegas. He's from Vegas. So Joe is very humble and modest, but I will say this. you are one of these weirdly connected people. I don't know how you do it. I don't know either. This is one I don't know. I've never met him. He's born and raised in Vegas. My friend - But you know what it is? I think you're very non-threatening. So I told Josh's story and he really made a funny point.

1:18:12I asked him, I just said, look, my friend, she pushed me to go say hi. I just said, I'm a big fan and I appreciate what you do for the community. He's given millions of dollars to schools and everything. And then I was like, well, while I'm here, I'm like, do you want to do my podcast? Justin Josh goes, she just went from, I don't want to bother you two. Can I have two hours of your time? And he said, look, I have other friends I have to do. But if you're a local and you have a studio here, I support you. Because that's where I record. You've been kind enough to do my podcast. And I got to get you on as well.

1:18:42But he's like, I'll do it later in the fall. I have to do some others. Because I have to do theirs before yours. And he did Andy Roddick's podcast just a couple weeks ago. Holy shit. Unbelievable. So anyways, something to look forward to. Joe, how do people find you on the interwebs? JoeFami.com at JFami. And the podcast is Joe's Happy Hour on YouTube, Spotify, Apple Podcasts. All right, Shay, you're blowing up. Where do people find you? Stock Savvy Shy on X, but also - Wait, say that one more time? Stock Savvy Shy. Stock Savvy Shy. Okay. I've been calling you Shay this whole time. It's all good.

1:19:12Okay. Where else? Futuramequities.com. That's a new research firm that was starting. into democratization of research for everyone. So follow the Twitter account, go on the website. We will launch a lot of future AI-15 lists. We're going to launch those lists every single month. Listen, your enthusiasm is palpable. I love to see it. So congrats on all your success so far. Thank you. Thank you. All right. That is it for us. Thank you, Duncan, John, for keeping you late on the Thursday afternoon. Am I the worst? You guys thought you were getting off this week, didn't you? Okay. Nicole, Daniel, the whole crew Thank you for watching We will see you next time