The Death of AI Has Been Greatly Exaggerated | WAYT?

0:16 >> All right. Here we are again. I'm head to toe denim today. >> Yeah, what's going on farmer Joe? >> Full on Canadian tuxedo. No, I'm not. Guys, what's up? Welcome to what are your thoughts? America's favorite investing live stream. My name is Downtown Josh Brown first time viewers. Thank you for stopping by my co-host as always Mr. Michael Batnick. Michael say hello. >> Hold on. You know what? Hello. Back up. What's on your legs?

0:48 >> Oh. >> Okay. All right. >> Yeah, relax. Relax. >> >> Jonathan Novy, we have an advisor Jonathan Novy. Chris reminded me. He does the talks. >> Only. Only. So he's >> So he's like dark denim shirt, light denim coat. >> Yes. >> Denim jeans. >> Yep. Yep. >> Denim shoes? No, that's that's not a thing. >> You know what would be dope though? Like a denim bucket hat. To top it top the whole thing off. Shout to Novy.

1:17 >> All right. Let me say some quick hellos in the chat and then we'll get down to business. Jackie Jim Ratt is here. She has announced it in the third person. She came in the chat and said Jackie's a Jim Ratt is here. I love that energy. >> Same. >> Cliff is here. King Chudley the VII. Wonder what stock price they're using for the stock base compensation at Anthropic. A million dollars a share King. who else is in the house? Chapons is here. Anyone else completely ignoring the midterms? We'll get to that in a second my guy.

1:51 >> I feel like I'm looking like the I look like a vampire from Blade II. I don't know if it's is it the light or my screen is super bright? You got daylight savings on all a clump. >> But you have a little color you have a little color, it's been nice out. I know you've been walking. >> I have been. Thank you. >> look You don't look vampiric to me. All right, we have a sponsor tonight before we get into it. who's sponsoring the show?

2:11 >> It's Fidelity. Maybe you've heard of them. That's this message is brought to you by Fidelity Investments. When timing is everything, you need powerful tools and research that can meet you in the moment. With the all-new Fidelity Trader Plus platform, your charts and preferences show up consistently synced up across all your devices so you can act fast whenever and wherever you're trading. You can save an order on your desktop at home, get a mobile alert when you're at work, and complete the trade with the Fidelity app without starting over. And with a downloadable Fidelity Trader Plus desktop platform, you have more control with multi-monitor views, enhanced tools and customization options, and integrated screen share with Fidelity Trading Specialists. Try Fidelity's most powerful trading platform yet at fidelity.com/traderplus.

2:53 Fidelity Investments and The Compound are not affiliated. Views, opinions, products, services, and strategies discussed are not endorsed or promoted by Fidelity Investments. Fidelity Brokerage Services LLC, member NYSE, SIPC. >> Well done. What a What a read. What a read. You really I mean, you really took our breath our collective breath away with that. >> Thanks. >> people People in the chat saying you look more like Powder than a vampire. I don't know how many people know that movie or get the reference.

3:19 >> I've heard that. >> joke I made that joke to you 12 years ago. >> That It's not even It's not even funny. I've heard that many times. I've never seen the movie and I never will. >> A A friend of mine who I guess he's like on Twitter, he's like, "Yo, they're saying that you were wrong about Amazon and your hair looks bad and you need to take the fat shot." >> >> I >> Thanks. Thanks for letting me know.

3:43 >> This is either yesterday or the day before. So, I said, "Send me the >> Who's this JC Lutz? >> Send me those No, send me those tweets." He goes, "No, no, it's one guy. It's all one tweet." >> >> First of all, >> Well, your hair looks great. Amazon is back. >> My hair looks great. Amazon recovered the Amazon is ripped 19 points off the low, so go yourself. >> What was the third point? >> I need to take the fat shot. Thank you.

4:13 >> he's got you there. >> Appreciate it. He has got me there. All right. Toast reported tonight. it's actually a great report, so of course the stock is down a dollar and a half, but we've talked about it a bunch on the show, so I just feel like we should nod to it before we get to the official run down. Shawn was nice enough to crank out a couple of illustrative charts. For those that are unaware, Toast is becoming rapidly becoming the most important platform in the hospitality industry for payments and vertical software for the owners of not only restaurants now, but take out businesses, retail stores, and they just launched a gas station vertical.

4:58 It's not just a US business, it is international. Let's put up this first chart. After hours, little bit of a round trip. So I listen, I don't I don't get like carried away with these types of after hours reactions. The one thing I can tell you is I almost never >> dumbest chart I've ever seen. I mean, come on, what are we doing? What are we doing here? >> Well, I asked I asked for I asked for it. I asked for it. this one's more important. Let's put up the earnings per share.

5:26 So like they're almost doubling their earnings per share GAAP earnings year over year. And the ARR numbers are really impressive. I think they're at two and a half billion dollar quarterly run rate, which would be like 10 billion dollars in annually recurring revenue. put up the next one, free cash flow. So pretty like, you know, it's not a steady stair step. Like it doesn't look like a hyper scalar, but they they fixed some of the issues from two quarters ago when the stock got crushed back down to the low 20s. Here's the ARR number I was talking about.

6:06 This is So, this is the the annualized If this company can hit that $10 billion goal over the long term and they can continue to progress at this rate, like I I just feel like the the market cap is too small for the size of the business. I know people aren't excited about SaaS and they are decidedly unexcited about vertical SaaS, which is what Toast is. but they sort of own this vertical. They have competitors like Clover, which is owned by Fiserv.

6:43 >> Fiserv actually reported I don't know if I'm guessing they had a good quarter. The stock was up 14% or so today. >> Yeah, and then the other one is Block, which is Square, which I I guess is a competitor, but I don't know. >> They just reported. >> Everywhere you go is Everywhere you go is Toast, and the revenue growth is here. They are now they're telling the street tonight they're at 189,000 global locations that are using Toast for at least one thing, most likely payments.

7:13 And then the other part of the business is once they have you as a payments customer then they're cross-selling you all these other horizontal services that you would need to to run your business. So, anyway, I guess the message is nothing because the stock's not doing much, but I remain long, and I still think this is a great long-term opportunity. So, that's my spiel on Toast. All right. Michael, why aren't we covering the midterms? Or focusing on the midterms?

7:44 >> Because we're doing it on Thursday. >> Okay, that's a really good answer. We have an amazing guest who's going to come on and break down everything that the stock market and bond markets are reacting to after we get the results. I guess tonight we'll get some results. And then some of these things are going to be contested. >> I know also when when when do we cover the midterms? I mean, this is very much not our beat.

8:08 >> You know, there's a lot of people talking about like what's on the ballot. And they think like data centers are on the ballot. And I would just say you could count the number of people that put on their shoes and went to the polls to vote specifically on data centers on like maybe two hands. Nobody gives a about that. It's not I know it's like on the ballot and in Texas it's a battleground issue, but like in real life this is just affordability. This No one else is voting really on on anything else in some parts of the country.

8:42 And then yeah, there's a little bit of Israel stuff and there's a little bit of migrant stuff. >> All right, that's enough politics. We'll do We'll do some on Thursday. >> our guest on the Compound and Friends last week Old Bay put out a note today. And I'll sum it up with what he said. There's He looked at the NDX relative performance based on whether or not the Democrat or the Republican was surging in any particular contest, especially Texas.

9:10 There's nothing there. the outcome of the midterms unlikely to have a profound implication on the AI CapEx story. And if you if you watch the show, you know he thinks that's really the only story that matters and so do I. and this is Alex's quote. this is the Barclays equity equity tactical strategy group. So, as we all stay up late digesting the state-by-state outcomes, keep in mind current drivers of equity risk largely sit outside the realm of tonight's events and Iran for that matter in my view.

9:43 Narratives around the core equity thematics of AI revenue versus AI financing are not exclusively conditional on whether the chambers the chambers of Congress flip blue. Unless we are staring at extreme outcomes of aggressive blue sweeps reflecting reflective of a dramatic shift in voter sentiment. So, that's I don't think what's going to happen and I think that's why you and I are not doing a whole segment on the implications of the the midterms.

10:14 >> Well, I would be out of things to say in 2 seconds if we were. All right, we have so much to get to. Can we get to more >> Mhm. >> All right, so more importantly in the after hours we heard from AMD and we got good numbers. >> Yep. >> Thank god it's trading up and >> Stock traded up into the the number today, too. >> It was up 9% in the after hours. I don't know what's doing right this second, but third quarter earnings grew revenue revenue grew 45% year-over-year.

10:39 >> beast. >> Look at Look at this data center revenue number, which is basically the business at this point. It's what only only thing anybody cares about. yeah, that's pretty good. That's pretty good. >> So it's 4.5 billion in the in the data center segment. That's versus four. Okay. >> So So everybody watching knows sees it on their screen in their brokerage accounts that the AI trade has been under pressure. We'll take it. We'll take it.

11:07 All right. >> semis specifically within the AI trade. the DRAM ETF was in like a a 40% drawdown today from its high as recently as today. The the SMH is in a 20 24% drawdown from its high like John, can you find the chart >> of SMH above the 200-day moving average. It's a little bit later in the show. it it it had a it's four there. Attaboy. Fourth longest streak of the last decade plus above the 200-day moving average. It's over for now Well, not for now. It is over. It It closed below the 200-day moving average.

11:45 >> So this this this welcome news is happening at a opportune time. What did you think of Apple's earnings call? Did you Did you >> were I thought they were good, not great. And I thought the stock's reaction was an adult reaction. I don't I don't know that the the people who were buying Apple this quarter were playing the earnings of this quarter. I think the people that have been buying Apple have a different motivation. They're looking for the stability of earnings, not any one particular quarter's growth.

12:18 And I think they're willing to make the bet that Apple is going to maintain its recent momentum in product under John Ternus. And I don't think they heard anything last night that would have changed their minds, and that's why you didn't see the stock have a horrible reaction ala Alphabet or Meta or some of the other Mac 7 casualties of this earning season. Let's do Let's do the numbers. >> So, I think Apple stock gap down 5% or something like that. For an Apple close down only 2%. It's had a great one. I mean, the stock the market's reaction is literally who cares? It's >> Dude, this thing was this thing was 300 a few months ago.

12:58 >> Yeah, no, it's it's a one >> given much back, and I think that was an adult reaction. >> So, two things weighing on it. Again, weighing whatever down 2%, but services revenue growth is slowing down. Now, again, it's a it's a humongous number, but nevertheless, the market generally does not like this, and it definitely definitely doesn't like the next chart. Gross margin coming down, and their estimates coming down. They spoke a lot a lot on the call about demand for memory, and how they're managing that because the prices are going up, and they're staying up.

13:33 >> Okay. Here's the good news. By the time they're reporting Q4, and then Q1 in the first half of next year, they're already lapping these obscenely high costs for memory. And while that's not necessarily still like like a good thing, the comps are not quite as severe in terms of their cost. The problem that to your point, like at what point does this hold them back from being able to sell as many units as they ordinarily would have absent the the shock. like they announced the new MacBook with a touchscreen.

14:15 >> Yes. >> That's like a $900 increase over the prior Who the is buying that? Like I don't I don't know that people want to buy that. >> So they had a record quarter for iPhones. So they've been able to absorb but consumers have been able to absorb these higher prices but how much more can they push it? >> Right. And I I think that's that's the thing that's holding Apple but look, we we have been on the right side of Apple.

14:39 we did a show >> not. You I have not. You have been. >> All right. On this show, we did a whole episode where the title is why Apple's going to 400 and the stock was 310, 312 while we were talking. And I went back and watched the segment. And all the things we said were the things. It was like the transition to new management, more of a product focus, back to hardware innovation, being in a better position to weather the higher cost of components than a lot of people think they are. and just this idea of it serving as a data center hedge within the XLK. Like pretty much everything else in the XLK is live or die on today's data center euphoria or panic. Apple really stands alone outside of that.

15:32 >> If you're a large growth manager and you don't want to be involved in Google anymore or Meta but you need to replace it with a market cap equivalent of that. >> can you buy? Where else are you going? Nvidia is what I'm saying. >> No. >> No, I mean wish you would. >> >> let's do Palantir. I was I was surprised that Palantir's got down. >> did it again. He's He executed. >> Unbelievable. This What's that?

15:59 >> He executed. Once again. >> Yeah, I did I did I did not listen to the call but we do have some charts. their rule of 40 keeps accelerating. Chart Kid broke it down. The combined that we're looking at revenue growth as well as operating margin and it's nothing short of remarkable. And the question the Well, maybe the question has been answered but the questions maybe a year or so ago was well, it's just like a government contractor. I'm bought Nope, not anymore. Next chart.

16:26 Look at the Look at Q3 2025 on the left-hand side to today. So, obviously, yes, US government has grown dramatically, but US commercial, so non-government, has now surpassed it. And look at the next chart. Look at Look at this growth. I mean, holy Like holy This is really a holy >> Wait, go back to the first chart. So, for the people listening, not watching, No, I'm sorry. Didn't I Yeah. For the people listening, not watching, a year ago, the commercial revenues at Palantir, which is like Fortune 500 customers, type customers, was was 397 million, and now it's 984 million. So, it's almost a full triple in their commercial business, and the commercial business is now larger than the government contracting business, which is 953.

17:23 And again, this is in one quarter. >> One year. >> but over over the course of one year, but I'm saying inside of this Q3 period. So, that's it for Right. For anyone who was writing this off as it's basically a tech defense contractor, well, maybe that was the story. It's not the story today. what was that last chart that you had up? So, this is commercial revenues on the left, and the revenue growth expressed in percentage terms on the right. It's 148% commercial revenue growth year-over-year. How many companies are doing anything like this? None? One?

18:03 I I mean, these are These are pretty impressive. Now, people will say, "Oh, it can't sustain." Okay, fine, but they're doing it right now. >> >> I get it. Like not a Like yeah, eventually, the Atlantic Ocean will run dry, and it'll be it'll be a dust bowl, but like between now and then they're doing it. They're doing the thing. So, what What are your thoughts on the stock price reaction, Palantir? >> I was surprised at the initial reaction and not surprised that it took a lot of it back. So, it gapped down it was nine down 9% after hours last night. and it finished the day down 1 and 1/2%. So, >> Do you think that either this or Apple could follow Amazon and take back the entire it could follow what Amazon did and take back the entire loss once like the adults get a chance to process what's really going on?

18:52 >> A- Amazon followed the same script. It was basically flat the next day. It fell 9% in the after hours, rallied all day, and it open open down 9%. Rallied all day and was only down 1%. So, Palantir >> They They opened at Amazon at 231, which is where people were commenting on me personally. because I said I liked it the day before. Within 2 days it's 250. >> Yeah, so can Palantir do the same thing? Yeah, for sure.

19:20 >> I Would you be surprised if Would you be surprised to see Palantir trading at 190 tomorrow? >> >> I wouldn't be at all. You would be? >> That that's aggressive. >> From 175? >> Yeah, it's a that's a huge move. I mean I mean it was 208 2 weeks ago. >> It was It was 208 2 weeks ago. >> All right, so if Uber flays plants tomorrow, if Uber opens below 60 I'll buy the stock.

19:47 >> Uber has fallen six out of the last seven earnings reports. It is one of the worst rides in the market. like just to be long this stock. It almost doesn't matter what their results are. The even even when the stock has a great report and it's up >> good reports. >> The Right. And no, I'm saying the reaction is good. >> Oh, they said >> Like it'll It'll go up 7%. They end up over the next 5 days, they sell the whole thing off. Like because in the end they are narratively challenged.

20:22 >> Yeah, it's tough. >> they are putting out a ton of press releases about partnerships with autonomous taxi companies, but people do not see them on the streets. And Waymo is full speed ahead, and it almost does not matter what Uber says. Even if you get a good one-day pop, which from these levels is I I would say almost likely, what do you have? A day to sell it? Two days to sell it? Cuz you're not going to report earnings the next day, and the next day so then you're back in the news vacuum where people are like, "Oh, Uber's fucked." I also I also think Dara's communication strategy needs to change like it's like, "Oh, we report earnings, and then I sit with Andrew Ross Sorkin, and I'm like so calm and serene."

21:15 And then like that it's not working, dude. You got to get on Joe Rogan and talk about robots, you son of a Let's go. You got to talk about autonomous taxis as much as Elon does. Nobody Nobody cares that you're talking to Andrew Ross Sorkin. You do it every every quarter. The stock always goes down. >> Yeah. let's keep it moving. >> know. >> All right. Let's talk about the blown-up stocks. So, Adam Parker has a has 19 stocks last week that were down more than 10% and big names.

21:46 Reddit, ServiceNow, F5, Intel, Twilio, HPQ, Marvell, FICO, Datadog, Coinbase, Google. I mean, a lot. Like names that people own. Robinhood. >> It's disastrous. >> Okay. So, >> Last week Last week was which was was like a a slaughterhouse. >> Allow me >> Communications. >> Allow me to blow your face off your right off your torso. So, there is I think this feeling that that this has been like a horrendous year for individual stocks.

22:22 And I'm not minimizing. Listen, if you bought SanDisk 3 weeks ago, it hurts.

23:48 >> All of them. I I don't even know what What is one that hasn't? Say it off the top of your head. Is it just Apple? >> Yeah, it's Apple. It's What are the other names? It's Nvidia. >> Nvidia hasn't had a 20% drawdown this year? >> I don't think so. I don't know. There's like There's like There's like >> Cisco, maybe, was What What else was there? I can't even remember. It doesn't matter. >> Broadcom.

24:12 >> >> I think Broadcom did it. Oh, here it is. Apple, Teledyne, NetApp, Nvidia, and Cisco. Oh, Nvidia was down 19.4. Cisco was down 19.6. So, actually, Nvidia might have done it, but whatever. That's That's Basically, every tech stock has had a bear market this year. >> So, is the message Are you saying as bad as like last week felt felt for people that own individual stocks and some of the other weeks this year that have been It's like none of this None of this is cataclysmic historically. This is just like what the the tech stocks do.

24:47 >> And I'll do you one better. Not only is every stock not falling, even though it might feel that way, especially when Intel fell 30%, Reddit fell 30%, Amazon >> Yeah, that's a that's a big Intel. >> bad No, it was it was bad. Okay. But actually, look at this chart from Duality Research. We're looking at a 21-day moving average of daily advancers in the S&P 500, and it's we just had the highest reading of 2026.

25:14 So, we showed that chart of RSP divided by SPY. It just ripped. Doesn't really feel great because these are like a lot of these names nobody owns. >> The non the non-XLK S&P names. >> Yeah, nobody owns them. >> Like comp Right. Companies that are like so off the beaten track from the whole AI theme. I mean, that's So, we're we're going to talk a little bit about We're going to talk a little bit about some of these stocks, I think, in the next segment. But yeah, I think that's a a good message. It's like you have a lot of stocks that are ripping while this AI stuff gets volatile, but like if people don't own these stocks or nobody in the media is talking about them, you start to like lose perspective and you think like everything's crashing.

25:56 >> Correct. >> So, just not sure. The S&P 500 equal weight index outpaced the S&P top 20, so the mega mega caps, by the widest margin since 2009. Holy >> Yeah. >> Nobody knows this. Cuz And nobody owns these tiny little stocks. >> This is the Actually, this is such a great conversation because this is like how does the market feel versus what is the market actually doing? >> Feels horrible, but it's fine. >> Whenever one's favorite stocks are falling like knives and people feel like they're walking into land mines on every earnings report. The market feels much worse than what the median stock in the index is actually experiencing.

26:41 >> Okay. So, >> that's key. >> I want to highlight one more thing. So, the Nasdaq, a lot of people, technicians always point this out, the Nasdaq just printed a an outside month, which is technically bearish, right? It got higher than the previous high, closed lower than the previous low. >> All right, so >> golfing candle. >> Yeah, not awesome. Not awesome. Not not what you want to see. I'm so glad that this guy, Steve Depp or Deppy, I don't know how you pronounce his last name, put some data behind this.

27:10 >> I believe it's Depp Hardu. >> Okay, that's right, actually. You nailed it. So, what happens when the Nasdaq composite records a bearish outside reversal month from a new all-time high? All right? New all-time high. And there's 1 2 3 4 5 6 7 8, I don't know, there's 10 of these. Not a million, but whatever. That's what we got. We got 10. The index never closed lower 7 months out. So, not exactly end of the world-ish.

27:40 >> Don't tell Don't tell the professional technicians. >> Not exactly end of the world-ish. So, thank you, Steve, for quantifying that. I just want to talk briefly before we move on about one stock that got kicked in the teeth, and it's Alphabet. Alphabet is now in a 30% drawdown. It's basically in on in line with the power of sell-off and and the COVID sell-off. Like, it's bad. >> This is so bad, and it's so big. Like, that one day >> It's it's bad.

28:07 >> It lost 500 billion in market cap in a day. >> Okay. So, >> abnormal. >> So, here's why, in my opinion. Search and YouTube both missed. Not great. Okay? So, like, those are the big ones. But, interestingly, show John, throw up the chart with the red line, the red bar. So, Google search year-to-date is having its best first 9 months since 2021. So, it is kicking ass. Now, I don't know if it's because it's raising prices or whatever. I don't know like the the the the click count and all that sort of but it's scary because >> no, no. No, no, wait, wait. Pause there.

28:45 Everyone know Everyone knows why. It's not a mystery. The monetization rate on AI results or AI mode versus traditional search is lower. So, that That's it. The monetization is not as good on AI mode when you go into the search box and you say, "I actually just want the result. I don't want links to click." They don't make as much money. >> But, Google just had its best first 9 months in a long, long time. >> Okay, but we don't care about the first and we don't care about the first 9 months. We care about this quarter and next and next quarter.

29:22 >> And quarterly free cash flow is getting worse. >> Well, this is by choice. This is by This is by choice. They're They're doing this on purpose. >> But, the big thing is if Oh, so Alex Kantrowitz interviewed the Was it the I can't remember who He interviewed somebody at OpenAI. It's on his Substack and you can listen to the podcast. And they said that OpenAI is now doing 20% of the search that Google is. >> Yeah.

29:50 >> If AI becomes Not becomes, it is. Forget about becomes. AI is a threat to Google. I understand that they have their own product, but the search If the search business If there is a in the armor, I do not want to own that stock. I don't care if it's down 30% from its highs. >> Well, this is the thing. People like, "Well, they're still dominant." Yeah, but >> That's not how the stock market works. >> market share.

30:15 >> Netflix is still dominant. It doesn't work that way. >> Right, exactly. They had 95% market share in search for 10 years. And it was the most profitable advertising product in history other than whatever Meta is doing. And so, they would still be dominant for the next 20 years, but that number it's >> Yeah, that number could fall 2% and the stock the stock could go down 50%. >> That's right. That's right. Number one. Number two, the runway 19 to 15 to 12.

30:49 I don't know if that's a Fibonacci sequence. I don't know if we're doing please a reverse prime numbers. If you tell me the next search print is single digits, then this ain't over. And I'm going to tell you the most interesting part about this. Somebody go rewind the tape. Find us in the summer of 2025 lamenting the fact that Google is is about to become the first major casualty of AI because of search moving to the LLMs.

31:24 And then looking like this is me, looking like an idiot. I sold Google at 180. >> I did the same. >> to It went to 400. >> Yeah, that was whatever it did. >> But here's the thing. Was I actually right in the end? >> No, stop. >> What do you mean no? >> No, I >> >> That is a trader. That is a trader. >> But >> Well, that's all I was saying. >> I was worried about this like everybody else. It was short-term wrong, but what if it's long-term right? Do you I'm not saying was I right to sell?

31:58 >> No, I I was wrong to sell. All right, so so so the stock gap down whatever. >> anecdotally go to the last 10 things that you typed into Claude or or ChatGPT. >> I don't use Google anymore. >> That's not I'm trying to say. Just you one person anecdotally, the last 10 things ask yourself, out of these 10 things 1 year ago, how many of these things would have been put into a Google search box?

32:25 >> All of them. >> Is it nine? >> Yeah. So anyway, the stock gap down fell down and then we're now 3 days removed from the earnings report, okay? We mentioned Apple closed at the highest today. Palantir Amazon and all that. Google hold on Google is down three days since there's no bounce. Why did why did YouTube miss? Maybe the same reason why Netflix is missing obviously Netflix is competing with YouTube but it's because of reels and Instagram it's because of reels and tiktok.

32:53 That's like that's that's it. >> It's crazy it's it's crazy. >> they can't >> much it's just too much everything. >> can't compete with the with the short-term with the short-term clips or the short clips they can't compete. >> They tried to do and they and they've actually nobody's saying this but I'll say it they actually failed. YouTube's obviously unbelievable success. I don't mean the whole business failed. They tried that YouTube red which now they call YouTube premium which was going to be like elevated like like content like like the good stuff.

33:28 it didn't it didn't really work it didn't go anywhere. they don't Right well that's that's the point. >> there's there's a gap >> There was a gap at Google down at 215. >> Where do you want to buy the stock? Where do you want to buy the stock? >> 23% lower. I would buy a truck of if it got to 213 or 215. If it got to that gap from September of 2025 that's 20-ish plus 22% lower I would be very happy to buy a lot there.

33:57 >> I got to take a look at this hold on. Hold on. Okay. What is the significance of 215? >> That is the gap from the September That is the gap from September 2025. >> You're looking at GOOG you're looking at GOOG GOOG >> Yes. >> And you're going back to Google you're going back you're going back to last September? >> Yes. >> all right I like I like this 270 I like this 270 area for a shorter term for a shorter term bounce.

34:36 It's 278. >> I mean whatever. >> 279. that was the well well hear me out for a second, okay? That was the low in March. That was the That was the panic lows in March, and the bounce off of that level was extremely decisive. This stock traded from 270 in March, by May, it was 400. I want I want it I want to give it one more day in the 270s, a a a quiet day, and then I think I would use that 270 as my stop. I'd risk seven I'd risk seven points to make 50 points.

35:13 >> Fine. I don't think it's going to happen because earnings was four sessions ago, and it hasn't bounced even for a second. >> But, I'm okay with that. I don't think it deserves to bounce. I Like I don't I don't think Not only the numbers >> deserve to bounce? >> I'm I'm looking to see if it holds. I'm looking to see if it I'm looking to see if it holds the 52-week low. That's all. >> Okay. All right.

35:39 >> Dozie, but Dozie, you'll find that in 5 seconds. It'll happen in 5 seconds. >> Halo. Let's talk about Halo. >> Is Halo back, Michael? >> Well, Berkshire Hathaway's at an all-time high, so, yes. >> Sort of think it is. >> Mhm. >> All right. Let me share with you. This is Tony Pasquariello writing this weekend after the tech earnings debacle week. despite a handful of cloud businesses that are compounding huge growth rates on huge denominators, Q3 results will be remembered as a disappointment. Alongside the never-ending debates on returns, capital, and free cash flow, to my eye, this was the central issue for the moment, anyway.

36:17 At a time when hyperscaler CapEx intentions are not slowing down, a few of the big guns missed somewhere in the core of their business. Nailed it. skipping ahead. Coming into this week >> on. I'm sorry. I'm sorry. Where did Where did Microsoft miss? Where did Amazon miss? >> I think Meta, I think some of Meta, and >> Meta and Google. >> and Google. >> Okay. >> All right. So, handful could be two. Coming into this week, my general view was the bull market should continue in '27, but it would pack less punch. This is Tony Pasquariello who's on the trading desk, Goldman Sachs. Everybody who's everybody reads his note.

36:59 there's not much debate that S&P earnings have been superb. At the same time, however, it increasingly appears that earnings growth has peaked. And Adam Parker is saying the same thing. In addition, relative to the last few reporting cycles, the rate of upgrades to forward estimates has clearly slowed. This is an excellent >> Yeah, they're both saying it and they're looking at the same data. One chart for the road, though. The past 3 weeks has been very tough on US mega cap tech. For example, the fourth largest company in the index had its single worst day ever as a public company, that's Google. At the same time, note the broader trend in S&P XAI. So, this is a Goldman Sachs basket.

37:44 This is literally Halo, but the Goldman version. Making a record high, the S&P XAI stocks, which is what Halo is about. >> The money has to go somewhere, does it not? >> So, is Halo back? >> 500 billion 500 billion gets erased in the after hours in Google and poof, it shows up in Target. >> All right, here's the ETF that, full disclosure, I'm an advisor on. the ticker is LO HA. This is the Roundhill Halo ETF that they launched earlier this year. So, I'm not cherry-picking the dates. This is literally inception, the fund launched in May.

38:27 there's some separation happening here, handsome. What do you think about that? You see the See the orange line not doing what the purple line is doing? >> We We have yet to really give an opinion on what's been happening. >> IS HALO BACK? >> I love it. I love what's happening in the stock market. I think this is so bullish. You have next 12 months earning estimates unrelenting up into the right. You have multiples coming down.

38:53 You have growth rates that are pretty damn good, and you have all a gigantic wall of worry. People are really really worried, and I think it's awesome for the sustainability of a bull market. >> Anecdotally, I want to point out I don't agree that they're worried. I think they were worried. And now I think >> What do you What do you mean? You don't think people are worried about the AI trade? >> No, no, no, no. I don't mean it that way.

39:18 I think people actively despise the AI investing. I did Scott Galloway's show last week with Ed Elson. It got a thousand comments on YouTube. I swear to God, I have never seen such utter disgust, disrespect, not toward me, or a little bit toward me, but like just toward AI. >> Yeah, people hate it. >> They hate it. Like you you wouldn't believe it. A thousand comments. Scott's a scumbag. Ed's a scumbag. Josh's scumbag because we're even talking I'm not we're not We're not even bullish, really. We're just talking about AI, the revulsion, and I think they have a young audience.

40:05 Our audience is super upbeat for the most part. Like it's a very different Their audience is so furiously angry about it's a bubble that's going to lose people money. They don't like the the companies are going to profit off laying people off. They don't like what the data centers are like they Like look at these comments. It's It's unbelievable. >> Back up. What's your point? >> I don't think it's just worry about the stock prices. I think the AI story now has sort of become like this just lightning rod for like everything that people are feeling.

40:39 I think they think data centers are pushing up the price of gas. Like I don't even know what I don't even fully understand what So while earlier we were saying it's not really on the ballot, like I don't think the elections are turning based on it, it is very much on people's minds 24/7, and nobody other than Silicon Valley has anything good to say. >> I You know why? Because it's absorbing all of people's anxieties. Like a lot of the that people feel about their own lives is an easy thing to point to and be like, this is it. Like, why am I even trying anymore? Like, I hated capitalism already, and now it's Now they're just taking everything.

41:17 >> I think it's like worse than fracking. Like, I remember the fracking stuff. >> So much worse. >> I feel like it's so much It's so much worse. >> All right, but but just just to bring it back to where we >> at our Look at our live comments. These are I'm not going to say who's saying these things, but these are like how people really feel. If you are a scumbag investor that is full of greed, you like AI.

41:41 Oh. Okay, I got I got What are you doing here? >> >> So, the whole The whole stock market is is AI. Listen, the God forbid there's any nuance to anything. It's not all good, and it's not all bad. There's going to be some incredible breakthroughs. People's lives are going to be saved. Self-driving is great. Like, the drug discoveries. Like, there's some awesome coming. and also, a lot of the anxiety is real because it is impact is and will impact the labor market. People's jobs will be lost. Like, all that is not not true. The anxiety is real. But, I just want to say this. Just zooming back out to what we talk about, and where this is going is the bubble over, blah blah blah, whatever.

42:17 Andy Jassy, so Amazon, the CEO of Amazon, said last week, "AI is the biggest transformation of our lifetime." I know you're sick of hearing people say that, but he's talking about AWS. He said, "If the idea of being able to grow 39% with a $184 billion annual run rate, and to grow 40% a year on top of that in each of the next 2 years, and ultimately end up as a trillion-dollar plus business, we're talking about AWS."

42:45 And end up as a trillion-dollar plus business. So, he was saying like, "Yeah, listen, I wished I wished the buildout I wish we could spread it over 25 years, but that's not what's happening. It's moving really fast, and yeah, it's expensive. Okay, if AWS is getting to a trillion-dollar run rate, what do you think the S&P is going to be? A lot higher or a lot lower? >> I think it And like mathematically, it would have to be higher if if you assume they're going to do that profitably.

43:07 >> So, I think it's hard to get really too bearish right now, even though I understand that people are pissed off. I get it. all right, sticking with this theme. The the the capex spend is getting bonkers, and investors do not like it right now. They're not into it. >> Well, they're not rewarding these companies for it. I'll tell you that. >> So, Amazon is spending 37% of their revenue. Meta is up to 54%. Alphabet, Microsoft, the next chart shows the composite. We're at 40 43%, and thank god for Apple that Apple's not playing this game, cuz investors are still chill with Apple, but dude, this is top line, and even Apple is getting pressured. So, we mentioned earlier that like the the memory costs are staggering.

43:49 The Wall Street Journal reported that Apple is expected to spend $25 billion on flash storage this year for about the same amount it bought for 6 billion a year ago. >> Yeah. >> It went from 6 billion to 25 billion for the same Tim Cook called escalating memory chip prices. He said it's a 100-year flood. >> Yeah, I think I think we will end up with more memory on the market somehow. The Chinese the Koreans, they're they're not just >> The Chinese.

44:21 >> Well, the No, they are like actively working on bringing more memory for their for their own benefit. Like, you know, it's a it's I I just I can't imagine it stays this way. I understand for the next couple of years, but >> Why did the memory stocks get whacked off to the extent that they did? We were talking with Alex last week. I'm I really think it's positioning. I think there's just too much leverage. >> trading on margin, 100%. It's it's double and double ETFs and options, and there's more going on than just the fundamentals.

44:50 >> I understand that it's pricing in like the peak that that's never going to be worse than this or better than this and I I get that. That's why it traded four times earnings, but I think a lot of the unwind that I think a lot of the narrative that we're seeing is price driven, not fundamentally driven and it's a it was a lot of leverage, a lot of piling in. >> Dude, what went on in the Kospi this summer was downright chaotic.

45:09 >> Yeah. >> Like this is an entire country stock market caught up in like two or three tickers and people they had to pass new rules about trading and leverage. People absolutely lost their minds and the thing to keep in mind is you turn on CNBC or you open up your brokerage app and you look at stock prices, just always remember what you're seeing is an equation with three variables. What are today's fundamentals?

45:40 What is the sentiment toward the the the companies? And then what are people guessing about future fundamentals that are unknowable? And it's some combination of those three things that's dictating the prices. And then if you have a lot of leverage layered on top, it's another variable that is equally unknowable, which is like which people have to sell or who's being forced to buy in the case of a short squeeze. And it's like then you could throw the fundamentals out the window.

46:10 And so this idea that we could just like glance at the screen and get like the vibe check of like the state of the AI trade at any given moment in time, it's it's It's it's a it's a mirage. >> And it's also ping-ponging. It's ping-ponging back and forth every other week. Jo- Josh, just take a quick victory lap. I know we did this already, but about this Apple stuff. Like you you were 100% right about Apple becoming the hedge. So there's some good data from Yahoo Finance about this.

46:35 >> Probably means time to sell cuz now everybody's now everybody's saying it's it's the it's the hedge. All right. Put the first chart up. >> Yeah. Is this coming from Jared Blikre? I don't know how to pronounce his name. I like the guy. >> How do you spell it? >> B L I K R E. I like the guy. He's doing really great. >> That's true. >> Yeah. But Bliker? >> Is the R silent? Is it Blake?

47:03 >> I believe the R is pronounced like a Q. because he is Macedonian. All right, anyway, I like the guy. He's a good writer and I think he's covering the market in a really intelligent way for Yahoo Finance. this is Apple turning into a hedge. So, what you're seeing here is the share of days Apple stock rose while the socks, which is the Philly Semiconductor Index, fell by 2% or more. And this is by year. So, this is every year. And this year 65% of the time when the socks is down 2% or more, Apple is higher. What does that tell you? It is literally exactly what we said was going to happen. Apple is like the anti-AI large-cap tech trade. Put up the second one.

47:54 Apple's CapEx almost It almost can't be seen on the chart. It's so small. So, this is CapEx over over the last four quarters. like the I guess the the the difference over the last four quarters, Apple's has grown by 10 billion. Amazon has grown by 215 billion. >> And they said it now it's going to be meaningfully higher next year. >> yeah, so I look, I I thought we got this one right and there's a whole video on it from whenever, September. If anybody wants to >> But before we move on to the to the next topic, Bespoke had an interesting chart.

48:32 Google searches for AI bubble exploded in the last week of October to more than twice the previous all-time highs. Would you consider that a warning sign or a contrarian signal? And honestly, I I don't know. I mean, I'll tell you I'll tell you in 6 months. >> No, it's it's not a contrarian signal cuz people have been saying bubble the whole time. How do you time that? People are saying bubble 3 years ago. >> No, no, no. Shut up.

48:53 >> the first time in video a trillion dollar market cap, people said bubble. >> Literal literal Google searches, not like not squishy stuff. Exploded. >> Wake me up when we can see the open AI searches, too, cuz now those are 20%. >> so so next topic. >> What do we have? >> anything else you had. >> Are we doing >> this is a good segue. This is a good segue to hedging. >> All right. Oh, I want to do the Kevin Warsh thing.

49:19 Just a quote. React to this. >> -huh. >> It's in the Wall Street Journal on October 28th. Quote, "There was a narrative for a while, maybe even in this room, over the course of the last several press conferences, that tighter monetary policy is, quote, not going to have any effect on AI because the returns that investors are expecting are so different." Warsh said. Quote, "I was skeptical of that view.

49:49 Interest rates get in the cracks. Interest rates affect, directly or indirectly, almost everything." End quote. What are your thoughts? >> So that certainly was the narrative. >> Not anymore. >> Until it wasn't. >> Yeah. >> And 2 weeks ago, when the neo clouds really fell out of bed. Last week we played the clip from the CEO of of Nebius saying that certain certain debt is just closed. Just certain funding is just not available anymore. And so it took everything down with it.

50:30 but I don't know >> in the cracks being the interesting part. Like the the the the neo clouds, which I have more on later in the show, that's what he means. That's what's in the cracks. >> So I don't I don't know that it is affect I don't know that interest rates today, certainly not overnight rates. And I know everything is priced off of that, I suppose. I don't think interest rates today are impacting the hyper scalers. I think it's a lot of other that's that's impacting the price.

50:55 >> I would just say it's a It's part of the story. And maybe it's the most unexpected part if you were to rewind back to January. Was anyone worried about interest rates impacting the financing costs for all these >> do a 180. Let me do a quick 180. Let me just Let me just take the other side of what I just said 15 seconds ago. Here's where it's impacting it. Here's where it's impacting. Listen, hand up. Yeah, hand up. I'm man enough to disagree with myself.

51:20 >> It's a live stream. It's you're allowed to not agree with what you just said. >> Okay. So, here's where it's making a real impact. Higher cost of capital. Actually, you know what? We're not going to We're not going to issue more debt. We're actually going to We're going to do some dilution. We're going to raise some money through through equity. >> Yeah, that's an impact. Equity sales, that's an impact. >> that's an obvious impact. Stock The stock market does not like that.

51:43 >> All right. Wall Street Wall Street Journal, everyone This is a big article on Sunday, I think, or Saturday. Everyone's looking for insurance against their AI bets. And I would just say not something you typically say at the top of a bubble. So, take that for what it's worth. The title of the article is AI investors are racing to get insurance on the biggest market bet in history. Okay, so I sort of like that that's the way people are thinking now. It's All right, we're going to make these huge bets on CapEx and credit and blah blah blah.

52:17 Let's also have some protection on. >> I love the headline. But the substance of the article, they're buying puts on Coreweave. Like >> Chart on. You're right. >> I mean >> And not that many, it should be many. This is priced in The Y axis is is thousand of contracts. So, 900 800,000 contracts traded on Coreweave put options. I guess that's over the last 2 weeks or so.

52:47 >> Okay. So, as you've been saying all year, in a bull market a bull market takes out its own trash. >> Yeah. I like that. I think that's good. Would you rather see put options? Would you rather Would you rather see 800,000 put options on Coreweave? I know I wouldn't. And then the article talks to a whole bunch of people at like Jump Trading and Susquehanna who are creating basically like using options, creating insurance for various investors and traders and companies.

53:17 again, you don't typically see things like that this in a in a in an active bubble. It's all It's all It's a fair statement, right? >> Yeah. okay. last thing before we do make the case of mystery charts. So, Aswath Damodaran came out with his inputs and of course it's a model and every model is but whatever. his model said that he values he values Anthropic's equity at 1.475 trillion. Again, >> About where About where everyone else values it?

53:49 >> It's not precise, but what I thought was interesting is you can see the guestimated market cap on Hyperliquid. There is a ton of volume, like I think 20 million in the last 24 hours. Whatever it is, it's it's a ton of money being traded. look at this. So, Anthropic, they have they have it pegged at 1.77 trillion. And they have OpenAI at 1.4 trillion. >> Or >> So, if they >> roughly what the Wall Street Journal is saying according to investors.

54:23 >> And so, if they if they if the IPL price at 1.1.5 trillion, yeah, there would be a pop. I mean, at least that's what is being implied today. So, Matt Levine was writing about this today. He said, "The perps are" We're talking about the the perpetual futures on Hyperliquid. He said, "The perps are in a sense just a recreational prediction market on the price of the stock, not a derivative instrument tied to the price of the stock by arbitrage mechanisms.

54:48 But, a really important thing we have learned about finance in the last few years is that prediction markets are pretty accurate. That is, if you have a platform where people can make real money bets on some outcome, their bets will tend to give a pretty accurate and well-calibrated estimate of the actual outcome." End quote. And it was pretty damn right about SpaceX, and it was pretty right about Cerebrus, and I know that's only two, but we don't have a million a million of these in the history. I think I think this is >> of guessing at where the open's going to be?

55:14 >> Where the market cap is. This is a pretty good approximation of where the market is today. 1.77 and 1.4. >> I guess the only thing I want to know is how deep and how wide these prediction markets are and whether or not they can be actively manipulated by somebody with a vested interest. And if you tell me it's millions of people trading, then I'm okay with that. >> The open interest is a hundred million dollars. There's 31 million dollars in 24-hour volume. 31 million dollars.

55:42 >> Then then I'm then I then I am satisfied with that statement. >> And >> And and guess what? It's not it's not morons trading this. Like the it's it's it's it's Susquehanna, it's Jane Street, it's professionals that are trading this. >> I agree. >> let's let's keep it moving. Make the case. >> Well, do they Anthropic chart? >> >> Chart Kid Matt did this. People are pissed at I sh- I shared this. People are mad about this, too.

56:08 What do you think people said when I put when I posted it? >> well, well, they have 800 billion dollars in commitments. I don't know. What did they say? >> Yeah, that's No, they have a trillion dollars in commitments. Who cares how much cash they have? So, we're showing Chart Kid Matt of exhibit A is showing actually Anthropic has more cash on its balance sheet than any of the mag sevens other than Alphabet at 131 billion.

56:34 >> Cuz guess what? >> People are saying money raised is not the same as cash flow generated, and we know that. >> genius. Well, guess what? There will be more money raised, right? Maybe another hundred billion dollars that's going to be on the balance sheet. And I think what's impressive is that everybody says the cost of compute they're burning cash they're burning cash they're burning they lost 80 billion dollars. No, they didn't. That's impressive. They have they're doing a lot better job managing the cash than I would have thought. I know that they have a lot of commitments. Everybody knows that. I thought this was impressive.

57:06 >> All right, that brings me to make the case. Here's what I have to say to all the internet tough guys and all the Substack bears that are rooting for the collapse of the human race and everyone else that is somewhere along the spectrum of skeptical to rabid dog. Do yourself a huge favor. If you're so sure and how this is all going to turn out if you if you you know it in your bones that this is 1999 about to turn the clock over to the year 2000 and we are going to see a historic collapse in the stock market or in AI stocks or both.

57:57 What are you so mad about? You're about to become a billionaire. Look at you. Start picking out Start picking out interiors on that Lamborghini Urus. How do you pronounce it? Is it Oris? >> I don't even know. >> The Lamborghini SUV that's ugly as that that everyone in Miami has. Is it a Urus? >> I don't know. >> Start picking out interior leathers and wood grain in your Lamborghini Urus because you're about to be a billionaire. And I'll show you how.

58:29 There's There's an ETF sponsored by Roundhill called the Neo the Roundhill Neoclassical ETF. I can't believe they launched this and I love those guys, but they did. NCLD NCOLD So much talking. So much conviction. So much fury. Do yourself a favor. The next best thing to con to convincing everybody that you're a genius, which you know, I get it. I want people to think I'm smart, too. The next best thing is prove it.

59:03 Become a billionaire. If OpenAI is a Ponzi scheme and Anthropic can't raise the money and the data centers are faking their depreciation and blah blah blah. Don't just talk about it. Here you go. And it cuz an opinion is not a position. Opinion will make you reputation capital, not dollars. So, let's see your position. Here, put this chart up. This is 44% below its high already. It's only $84 million in AUM. So, you might need options against this or something.

59:37 This is what you want to bet against? You want to If you want to be a billionaire, and you could you could potentially be right. I I don't know what's going to happen. Here you go. Very simple. Let me tell you what's in this Frankenstein. The number one asset is US Treasuries. Sounds safe, right? BUT, IT'S NOT. They're using the Treasuries notionally to take risks in non-public companies that are themselves neo clouds.

60:11 They're buying into swap contracts that give them exposure to neo clouds that aren't even publicly traded yet. That's how all in this is on the neo cloud concept. And then the stocks it owns, swaps on Nebius, swaps on CoreWeave. It owns IREN common straight up. Hut 8 and Galaxy, which I think are crypto data centers, I don't even know. Then it's got all these mid-cap things like Riot and Cipher and other things that people have lost a lot of money on.

60:42 And then it's got penny stocks, too, like White Fiber and CleanSpark and all kinds of meme These should fundamentally be zero if the AI bubble camp ends up being right. And they could be. So, what are you so mad about? This thing This thing This ETF, I guess, if all of its components are worthless or faking their numbers or involved in some sort of Ponzi, and And it's 2008 in tech, here you go.

61:17 Take this and turn it into a billion dollars. You're smart people. You know how to do that stuff. You know how to trade options and build, I guess, like leap positions. I don't know. Whatever you want to do. Pick out your Urus. Pick out the interior. And what's the problem? It's It's sitting here all for the taking. So, that's the case that I'm making. Like, if you're so angry about AI that you're in people's YouTube streams, people's YouTube comment centers being mad at them just for talking about the ticker symbols, don't, you know, don't don't waste it on the moment. The opportunity of a lifetime is right in front of you. Let's see. Let's see if you Let's see if you have the guts. what do you think about that?

62:05 >> sure. >> No, seriously. Great opportunity, right? >> >> It's sitting right here. I might short some of this thing. >> Core Weave is in a 60% drawdown. >> Yeah, but it's a Ponzi scheme, I thought. >> Is it go Is it going to zero? I don't know. I don't know. I don't think it is. I don't know anything about the stock. I really don't. >> I've been reliably told that the whole thing is a house of cards that is being secretly funded by Nvidia.

62:37 And it's musical chairs. And when the music stops, everybody's dead. That's what I've been told. >> All right. Snark aside, I do wonder, if you are bearish >> snarky. I don't own these stocks. I don't own Core Weave. You couldn't pay me. >> If you wanted to bet against the AI trade, would that genuinely be your pick? >> Oh, yeah. >> If the AI trade If we have a bear market because of AI, what do you think they're going to do to these stocks?

63:06 >> Yeah. >> They're going to go to $2. Some of them will be bankrupt. >> All right. let me let me show you what I'm trying to look at out here. this is a JC special. And you're not going to guess this, but I'm going to try my best to give you like No, it's it's it's cuz it's not a stock, it's a ratio chart. But I'm going to try and make it easy. It is it is one style box versus another. And obviously, that's a major major major reversal.

63:34 >> Wait, one style box versus another? Okay. quality versus momentum? >> close enough. It's large value versus large growth. >> not close enough. This is This is totally different world. >> directionally right. Whatever. Quality, momentum, value, growth, it's directionally right. That's that's a hell of a chart. >> Yeah, these never last. >> What do you mean? >> These They never last. >> Yeah, no, I agree with you. John, >> Like it'll like it'll go it'll run it'll run for 6 weeks to 6 months and then and then Nvidia goes to 300 and then everyone's like, I can't believe I bought those stupid stocks.

64:12 >> I pretty much agree with you. John, do I do I have one more? Similar value outperformed growth by the large Oh my god, I didn't realize it was this extreme. 1993. Wow. >> So, you said you love the market when it's doing it. Me, too. >> It's great. Humble pie for all of us. >> It's great. >> Yeah. I like that it's not so easy. Oh, just buy AI. I I like it. So. All right.

64:39 Guys, thank you so much for joining us. We appreciate you. We miss you when we're not here. for those of you who have not yet thrown a like on this video, very important that you do that. And by all means, if you had fun and you learned something new, feel free to leave us a comment. A nice comment. I'm not I'm not Tomorrow is Wednesday, all new animal spirits with Michael and Ben. We'll do Ask the Compound later on, where we answer your questions live on the show, Ben and Duncan. And you can get a question to us by emailing Ask the Compound Show at gmail.com. If we use one of your questions on the show, you are getting merch mailed out to you. Here's the koala telling you to subscribe, hit that koala. Make sure you're subscribed and we'll see you at the end of the week for a whole new edition of the Compound and Friends. Keep it locked. We'll talk to you soon. Thanks again.

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