The energy in this room is outrageously. Anything you want to get off your chest before I start? I couldn't have scripted about it, I'd be on the track. It's crazy.
It's crazy. Uh, can you feel this right now? I'm ready, bro. It's not always free-board to translate those inputs into what the stock price is going to move.
100%. It's not binary. And that's my speech. And then it's a plus letter to market crashes.
I think that is it. I think we could stop paying taxes because the robots are the ones that are the cats. And then what? Wait.
It's almost like asking me in 1996 whether or not we're going to be in a bubble in 2000. If half the stocks can even keep up with Treasuries, there's something similar here. This is the trick, I think, of investing that when you study history you understand all the risks, all the headlines, all the problems that can go wrong, and your downside risks, well what if they don't? You don't advise this shit?
I only like the beginning songs. I like when a rally feels like it's in the face of challenges. Very common in my search engine. This just shows the evolution of how the economy goes.
I've had so many friends kill their careers buying you those. Pay attention because we will see this again. This is not like a one in done. This happens again and again and again.
Maybe call us a bit like, what the f*** is going on? I don't want to hear it. The first go round here, that's a nice fun idea. I live in silence for my career and you guys were the first place where I met.
And it's certainly been fun to be on the show with you guys. You guys are the best. You're here to talk about stocks. Give yourselves a round of applause.
Let's get it. That's what I want to go back to. My cost. This podcast is brought to you by DBMF, the world's largest managed futures ETF.
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Great job, Queen! Give it up! Go on front! Alright, I gotta tell you, you guys are literally the best podcast audience in the world.
Give yourselves one more round of applause. Thank you guys so much. Thank you. I appreciate it.
I'm working hard on the hair. Alright. You guys, for those of you who don't know, this is one of, if not the top investing podcast in the world. Thanks to you, all of your efforts in sharing and liking and telling your friends and tuning in each week.
And we love you for it. We are so lucky today to have two of the all-time great guests that we have ever had on the show. Repeat guests. The fans ask for them all the time, every time they come on.
The show does ridiculous numbers. Ladies and gentlemen, please say hello. Dan Ives is a partner and senior managing director at York for Lives and Co. The merchant bank he co-founded in July with York Ville Securities which combines investment banking, equity research, institutional trading and principal investments with a focus on AI.
Most of you know Dan from his prior eight years as Global Head of Tech Research at Wedbush. Give it up for Dan. Celebrating the 12th anniversary today of the founding of Fundstrat. We have Tom Lee, co-founder and head of research, Chief Investment Officer at Fundstrat Capital, where he's also lead portfolio manager of the Granny Shops ETF Suite.
Welcome to Tom. Guys, I'm super excited to be here with you all today. I think there are some major topics that have roiled the, let's call it the commentary layer of the markets and have worked their way into prices as well. The first place I want to start, we should definitely talk about the macro situation.
We have a Fed meeting on top. The market is now convinced we'll get a 25 basis point rate hike based on the options market, a futures market at least. In the interim, we've got the heads of some of the largest AI companies and the President of the United States in open disagreement about the danger or safety of this technology. It is one of the biggest CAPX waves in dollar terms, the biggest in the history of the United States.
It seems like it's a pretty major macro moment. Tom, let's start with you. Where do you think we stand? How should we be thinking about what's happening here?
There is a wall of worry that you're describing and prices have reacted, especially the rate hike, because obviously nobody likes a Fed to tighten. But I think this is setting up for a really bullish moment because we know pessimism is high and we know earnings are in good shape. If the Fed delivers the hike, which is like a 90% probability, it probably takes out future hikes because the markets relieve the Fed's doing something. I think the probability of a massive rally starting tomorrow is really high.
Tomorrow? Okay. What time? Yeah.
2.15. Tom, maybe 2.16 after worst, I hiked. I hiked on a hill. Tom, the bear is up in Sherpa and for a while as they do.
I don't like to mock or poke because that's just karma asking for it. I don't like to do that. But zooming out to where we are today. These are all of the challenges that's been thrown at the market.
Starting with the straight up her moves being closed and continuing to be closed with oil spiking. That was supposed to be a Black Swan event. Equity is look past it as earnings expectations kept rising and delivering. Still, Taris, persistent inflation.
You had the AI slash situational awareness unwind. The 10-year-at-5% of the Fed hiking. Housing market is still shut down. And now Frontier AI models talking about the slowdown over the weekend.
As you mentioned, people were expecting Armageddon. Well, guess what? Semi's, which were, I guess, the only thing holding up the market, not true. But they're now in a 20% drawdown.
19%. So you got that. And yet, despite all of this and pessimism, the S&P is 2.6% off of its all-time high. How can this be viewed?
How can this be viewed as anything other than incredibly bullish? Am I in the market bulletproof given all of those bullets that have been fired at it? Yeah. I think what people forget is people tend to look at the stock market as, oh, it's up a lot from five years ago.
And a lot of people just bought it without thinking. But they're not thinking about companies are using technology. They adapted to all those Black Swans and cut costs. And then the market's only up 10%.
So the market got cheaper. And I think that's the perspective is that we're trusting our money with these CEOs that are proven that they're blue chip because they're not just sitting and telling the board everything's fine. They're like in crisis mode and cutting costs all the time. Yeah.
And your coverage universe has stocks in it that, frankly, have announced some of the most insanely profitable quarters in American history, not just over the last three years, but just the last quarter alone. Do superlatives don't even do justice to the magnitude of how much money companies are making. And yet, to Tom's point, valuations are actually contracting. What are you telling people that ask you about that?
Well, for the first time in 30 years, the US is way ahead of China when it comes to tech. And that's something in this AI revolution that, and we'll go into the anthropic issue in a second, but that is something that's still underestimated by investors. Demand is supply right now for chips is called 13 to 1. When you start with the one, like there's an order for your 13 orders for everyone shipped.
Exactly. And that's why a lot of times the bears from the 14th floor of the New York City office building talk about negative valuation. But when you see in Taiwan, you see in Korea, like we do, what's actually happening, you know, you're not going to have true equilibrium probably to early 2029 at this pace. And for every dollar spent on catbacks, there's a five to six dollar multiplier across the rest of the attack.
That's why look at software, look at infrastructure, look at cybersecurity. And it's just a very important moment that the times point, I think investors are underestimating earnings by probably 25, 30% next few years. It sounds crazy to say we're underestimating earnings, but that actually has been the story of the last few quarters. The numbers are coming in so far ahead of what anyone expected.
And it's not just happening in five or six companies. It's a phenomenon that I think most of the NASDAQ 100, a lot of the S&P 500 by market cap. How sustainable is that? Is the reason we're seeing contracting valuations because people look at it and say, too hot, too good to be true.
No way this can continue. When I think memory stocks are kind of front and center there, if you look at my crown, I get in terms of where these stocks are trading. But ultimately, quarter by quarter, these companies are going to continue to prove out that this is, we still believe this bull market is young. I mean, we're going to have a multi-year tech bull market ahead of us.
And we'll go through white knuckle moments like this weekend or circular financing or whatever it may be, macro issues, oil, whatever you want. But it comes down to tech is going to lead this market higher because of where the spending is. You have 12 to 1,500 data centers are going to be built next five, six years. Even if you assume politicalization, 10%, 15% get voted down, that is just starting in terms of an innovation boom that's happening in this country.
Tom, do you think it's as early as Dan seems to? Well, you know, you're never going to top when people want P to be low and earnings are going up unless it's a true, deep cyclical. And you know, the US economy is the opposite of a deep cyclical sector, right? Like we are kind of a low volatility economy now, so the multiple should be going up a lot.
Tom, I know that we are all very excited for the bull market to resume tomorrow. 2.15. Okay, wait, at 2.16. But what do you think is the most legitimate, the most credible bear case that you hear?
Well, I think two things will kill a bull market. One is a bona fide bubble. And a bubble could happen if one day everyone says there's only one AI model we want to use. And then like, Kapex goes to zero.
But the other is monetary policy intervention. The Fed, 80% of the time is the reason a bull market ends. So I think if the Fed genuinely felt the economy was overheated and inflation pressures were unhinged and there was risk of a debt bubble, they would pull the switch. So with that in mind, we do have, I wouldn't say record debt issuance, but higher debt issuance than we've seen since the start of the buyback era, which I guess started in 2012.
So we've had basically 15 years of companies shrinking their float. Now, of course, we have the opposite. Selling stock to the public, massive IPO is where before there were almost none. And crowding out treasury sales, if you can believe that, with tons of issuance in the bond market, could that partially be that bear case starting to materialize?
Or is that too pessimistic a view? A debt bubble takes place when there is, quote, return free risk. Like the cost of money is so low that bad projects are getting funded. What we're seeing today is data center cost of money is going up.
The market is already putting a break on everything. So we're not able to get to a debt bubble. I would just say, when you say one of the biggest risks, it's the grandstanding politicalization that's happening on the data center side because every data center that gets voted down, China wins. There's no debate.
And part of the problem is while these politicians, many, you know, who I've met, you don't want politicians that have flip phones and blackberries determining your technology innovation in this country. And I think that, to me, is the thing that I'm most worried about relative to... You're worried about protests that spill over into canceled projects. Because the reality is that the jobs are going to be created in this innovation boom that were happening in this country.
Because there's so much in my career, like, I'll be in Taiwan or fly land. You'll see in Taiwan at 18 hours a day, they're building fabs, taking a bathroom break after 14 hours. And then I land a Newark airport. There's a fist-fired Dunkin' Donuts.
And you're wondering why we're 17th in math. And now you finally start to actually see the US is ahead of China when it comes to tech. I don't want to see politicians with talking points and grand, cut the knees off of tech in this innovation boom. In what way are we ahead of China?
I know Chachi PT got to 100 million users very fast, and now, of course, it's a billion. I know Claude is somewhat neck and neck, maybe stronger on the enterprise, not a strong consumer, but fairly close. Gemini, of course, instant adoption because Google put it at the top of 12 of its products. That part I know.
But you also know the Chinese have allowed these open-weight models to proliferate. We could debate how open-weight they really are, given Beijing's grip on the scene. I also know Baidu is not sitting around eating glue and all the Chinese players have their own entrance into the race. How do you definitively make the statement?
We are ahead. Are the models better? Or is the monetization further along? How would you explain that?
There's one chip in the world, if you want the AI revolution, that's got father-bad Jensen's. So it's on the Senate. And when you look on the Senate, they're two to three years ahead of China. Their third rate chip is still probably year ahead of where Huawei is, just to keep in perspective.
Then you look at it from a hyperscale perspective, where Amazon, where Alphabet, where Microsoft is, it's not even in the same category, what you see in terms of big tech in China. Then from a model perspective, anthropic and open AI, you can't even compare those models to where we are in China from an open-source perspective where there's deep secret others. China is ahead of us when it comes to robotics and energy. But the problem is that if you don't sell chips in the China and Jensen knows as well, who ultimately starts in there with China.
If you slow down model development, again, on the this weekend, anthropic open AI, who wins, it's China because they're not slowing down. So I want to pick that up, Tom, and come to you. As a portfolio manager, a CIO, an investor, I guess it was on Saturday. Right there in college football.
I literally ran in the middle of it. Perfect timing. So everyone's minding their own business, watching college football, barbecuing at the beach, and Dario Amadeh, founder of anthropic, drops a blog post, basically saying there is an emergency. I have seen things in my own labs that I am worried about.
I've seen things happen at other labs that I'm worried about. And what we need to do as a society is immediately take steps to introduce outside observers into my company and other frontier labs. And we need to slow down this breakneck pace of development because if we don't, something's going to break. Superagents will hack us, et cetera.
So immediately he earns the support of half the people listening because they already think that. The other half of the people, I won't say who, seem to have the attitude, look, if we're all going to die, goddamn it, we're going to die from American AI. None of that commie crap. I want to be killed by the US and AI.
So the other half says it's a hoax, ignore it, don't worry about it. How do you react to that when you hear that news? It's overdue actually because every industry that grows always grows ahead of regulation. There's this notion of SRO, self-regulatory organizations, and AI has zero today.
And it's coming at a time when communities are protesting AI, there's like 38 anti-AI groups and there's more Torrins on data centers. So to me, it's smart to say, let's self-regulate one. And now we're acknowledging that we got issues so we can talk to the communities. It's not any different than wireless when people talk about the power emitted by phones.
They tried to ban the cell towers. It was federal legislation eventually. Correct. That stopped that argument.
That's right. When I was covering wireless phones used to transmit at one watt. Now it's 25 milliwatts because they were like, you're going to get brain cancer. Imagine if the FDA shut down the cell unit because they didn't cut power.
It's not that different than limiting AI. We have multiple political battles over AI. One of them is resource use. Obviously there's a lot of water, a lot of electricity.
I know there's all sorts of arguments about why it matters, why it doesn't. But that's one vector. Another vector is some of the founders of the largest AI companies have been a little bit loose. Getting in front of podcast mics, making statements like 50% of all white collar jobs will disappear by 2030.
They walk them back eventually or they moderate their tone but people don't unhear things. That's one vector, the job loss. The third of course is just this idea of a massive hack that could, the next 1929 stock market crash or plain swollen from the sky. Things that we heard during the Y2K panic.
It's the combined force of all of those that I think makes it so that you probably write. It's long overdue that the industry didn't have some sort of response. But you seem to think the response is non-genuine. They're saying, okay, we need to calm down almost as though they're preempting other people from saying it.
Yeah, I think of it as it's 800 billion a year as the CAPX and it's going to go to 1.1. I don't think it's going to go to 400. It's really their want people to buy into this idea of like if I keep spending 800 billion a year, we can help the community. And by the way, we understand all your fears.
I think it's a very smart move. And of course, as you know, every CEO knows today, they can make public statements to influence politicians and voters, not just shareholders. Dan, is it's marketing? Look, I mean, part of it is like you needed to have a step in the right direction on safety.
No one denies that. But the reality is, Dario and self-in-law, these tech companies, they created this PR nightmare themselves. If you tell the American public, you're going to lose your job to 50% white collar or whatever. And then the electricity bills are going to go high or they're not having celebrations when they build data centers in your backyard.
You don't have to be Stephen Hawkins to figure that out. And part of the problem is that some of it is like when you get to the penthouse, then you stop the elevator so others can't come up. So there is a regulatory capture piece. And that's why it comes down to like meta.
You think they're slowing down? Look at how software stocks are performing because everyone recognizes. And throughout the open AI, they've had a huge lead. If you show up, who do you think went?
Software companies will narrow the gap. And I think Tom brings up great points, but you also have to separate between China's not slowing down. See, this is the reality. Yeah, actually, China, like, yeah, to Dan's point, there's a big element at SIOP, like where all this anti-data centers stuff might just be China influencing public opinion here.
But if you, this is, if the US slows down, China wins. There's not even a debate on that. And that's why I just believe like this weekend, you saw everyone back and forth going, it's a huge debate. But the reality is, and I think Jensen had great commentary and the Dell had great commentary because I think what they're basically saying, which is true, and George McRough-Truck as well, like, you can't put the genie back in the bottle.
The innovation boom is happening. And at this point, you don't want politicians to basically put a halt on innovation because that would be the best that ever happened to Beijing. What does China winning mean? Exactly.
It means it means on chips, on models, on infrastructure, on robotics, all the technology that's going to be built in AI. If you slow down, they accelerate with Beijing putting gasoline into that. They're not slowing down at all. And that's why right now, the reality is, is that I understand what Dario did, but I think there's an unintended consequence is about what he talked about.
And then the average American consumer gets scared, some sci-fi movie, the robots are going to attack. Well, but also like Dan's got a good point in China winning because remember, people were lying like recursive loops. China controlling these models will make these recursive loops will make you dumb. Or they'll lead you to wrong conclusions.
It's a kind of mind control. So I think it's important. You guys have a view on the timing. So personally, I don't think it's coincidental that Mark Zuckerberg dropped muse as a free-to-use open weight model on, I guess it was Thursday or Friday.
And within two days, there was this emergency. Whoa, whoa, whoa, we need to slow down. Is that too much of a conspiracy theory or do you guys think there's something to it? I think it's there's something to that concept along with just rising competition.
The anthropic researcher who was there for five weeks or six weeks, you know, obviously everything that that created. But the reality is that this is not just anthropic open AI and everyone else. Every other, it's the startups. It's the big tech companies that are going to narrow the gap.
And that's why this is not controlled by Dario and anthropic. And I think that message was loud and clear from Jensen. Do you think that we're going to be talking about this a month from now? Or are we going to be like, hey, remember when they said they were going to slow down?
That was stupid. Was that before the IPO or after they? I think you're going to talk about it. You'll hear it nonstop going into the midterms or should the political debate because it goes right into the big debate we're going to see in data centers.
But the reality is that it's words versus action. And when you spend time in the bell lane, we both have, you come out there being like, these are not people that I want controlling our innovation. And I think that's the biggest risk that that regulatory in the politics starts to halt. I don't know if you think there's a high likelihood of legislation even being proposed to tackle this issue between now and the end of the year.
Or are they too busy still trying to pass the clarity act, which was first proposed three years ago for Donald Trump's second term? How long does this sort of thing take to work itself through the pipeline? Yeah. I mean, can you imagine the bill?
It's like, hey, I can't be that good. Like that's the law. I mean, I think it's me tough. I don't know, I mean, I think it's smart to debate all these things.
But as you know, it's like regulators understand they're behind. I think it's just, it's going to have to be self-regulated. Like, and that's what they're proposing, right? We evaluate each other's model.
They don't want the government sitting in the middle of that. Well, time out. So time made a very important point there about the self-regulation versus. Immediately following the publishing of that op-ed to your point, Sam Altman came out on X and basically said, yeah, we agree.
We'll do the same thing. And then Elon Musk, like, I think he put a heart on it. So those are the three frontier models. Is there a fourth beyond DeepMind Gemini?
But the reality is in carp talks about all the time, Palantir, sovereign AI, because the biggest risk to the models is sovereign AI. I'm going to control my data. I'm not going to have the models. And that's why, like, Nvidia, Palantir, and many others talk about sovereign AI.
That continues to be the big debate versus the model. Because more and more explain that. Because you're going to have hundreds of models. Like, when we're here at Future Proven, probably it goes all the way down to Newport by then.
Like, you're going to have hundreds of models. The models will eventually become commoditized. Sovereign AI is basically sovereign data is that I'm going to have control on my data as a company. I'm not just going to let the model companies get that access because then you could argue there's risk ultimately to your business model depending on where that goes.
So corporations will train their own model with their own data that is not available to other models. And that's a risk to the general AI. And they'll try to corrupt public data, right? I mean, competition is make public data less trustworthy.
Exactly. So, Elon Musk is not exactly known for being a scaredy cat. What do you think his motivation is in saying, yeah, we actually do need to slow down? Because the reality is that Musk knows from a model perspective, they're way behind anthropic and open AI.
So they need to slow down so he can catch up. This is like one of those things where, yeah, there's like Musk has talked about the concept of safety. And he's been consistent with that. But the reality is in anthropic and open AI are so far ahead.
No one can really catch them unless there's a regulatory capture type of moment. And that speaks to, and that's part of the issue is that on the weekend when that happened, everyone's like, oh, it's going to be a black month. Black Monday stocks are going to get crushed. But the reality is like we're going to look out a month from now.
And I view these as opportunities, relatives and stocks selling off on this moment. So, some of these are down 19% from their high. Nvidia just keeps reporting miraculous quarter after another. And the stock cannot really get out of the mud.
What is it going to take for investors to get excited about these stocks again? Time are we going to see new all-time highs for the semis in 2026? Yeah, I think, you know, if one wanted to think about Nvidia and its model evolving and it has a low PE, that was Apple's story, right? Because no one gave him credit for the App Store and the fact that they control basically all the real estate.
And then one day Apple's multiple doubles. I think it is. Anyone who owns Invasion Take Comfort, I mean, you're paying 16 times and you're paying 50 times to buy Costco and 48 times to buy Walmart. And the market is going to flip it someday because, you know, if Nvidia charged a membership fee, the multiple would go to 50, right?
That doesn't scare you at all. That the market is discounting so much. You think the market has it wrong? But there's a whole history of stocks that get re-rated because it's reluctant.
Like, many people have not made money in AI. You know, I talked to fund managers that have underweight or zero exposure to AI because they thought it was a bubble. But like, it's very difficult to say this is a bubble because it's a structural story. There's a pair of players have called 10 of the last two downturns.
So, this will be, so I think the institutional world still has a lot more room to buy, more AI and to buy IPOs. And so, and it's then it's at Family Offices. I mean, anthropic and opening are creating wealth, but it's a narrow number of people that actually invested in that. I want to pivot to one of the bigger stories from earlier this year that had a pretty surprising outcome.
All four of us were at Future Proof, Citywide in Miami, which is almost exactly six months ago. And at that time in March, the biggest story in the stock market was the SaaS Pocalypse. Some of the largest publicly traded companies in America, including Salesforce, Microsoft, virtually every software company you could think of, were in drawdowns that were anywhere between 20 and 60%. I should add, not one of them had missed the earnings quarter or had anything fundamental happen to their business.
I have never seen such a sudden sentiment de-wiscing in a group as large as these stocks were. Now we're six months past that. And it looks like the market has realized, oh, wait a minute, we may have gone overboard. I would love to hear just an update on how you guys feel about that idea that the LLMs are basically going to displace some of the most important publicly traded companies in the world.
I would say, and I thought at the time, in my whole career, it's the most head-scratching I've ever seen. You said that in real time. No, I said that in real time. Because the narrative, it was a false fictional narrative that was a bad fairy tale, because anyone that talked to any CIO or any user and understanding where the models were going, I'm not saying that an adult being an intuit, they don't have structural issues because AI.
But to view that it was going to wipe out service now, it was going to wipe out Salesforce, Palantir and Thropic was going to eat their lunch. That was almost like bad comedy, the concept of it. And I think it just shows in this market, narratives create the opportunities. Go back to like anyone that was in RSA's security, conference cybersecurity.
Like that was like in April. And Thropic releases right around then, like, okay, cyber security, we're putting out a solution, stocks are in cross, I'm with George from CrowdStrike, and I'm like, the space is done. Dude, there might not even be an RSA security conference next year. Now we'll get CrowdStrike.
I'm just saying like narratives create the opportunity. The three largest cyber security stocks, CrowdStrike, Fortinet, Palo Alto, are all up 100% plus on the year. So that didn't take long for that narrative to take root and then just take root. And then just be completely uprooted.
Yeah, I mean, one, I think investors now understand software stocks are downstream beneficiaries of AI. You know, they're not victims of a boogie man. But the idea like fire ready aim, like people pushing a button and basically taking their allocation to zero, that's gotten easy. I mean, remember what COVID did and people hit the kill switch.
Every time the Fed says they're going to hike someone's two sides of the entire street. Yeah, okay. And Josh, it's one of those, it's like the use cases. Now, as you can do, as time to the second, third, fourth derivative, it's software.
Look at Snowflake, look at what's starting to play. I think that's very important to use case that. Do you guys think that we're ever going to get the robot trade, like for real for real? Is that what's going to take the S&P higher?
When does that come? What does that look like? Well, you know, well, one, there are actually already robot use cases today because self driving. We have one making coffee right there.
Yeah. Did you see it? I think it's at Franklin's booth. Okay.
So that's good use case. Everyone likes coffee. We have to be careful that robot could kill us. Yes, that's true.
I have to make the coffee kill everybody that stops me. But, you know, I think it's a big deal because it's probably the opportunity to really create productivity in economy. And imagine in the future, like robots will have bring stone masonry back. So like your home looks like a loop and they stone carve and wood carve.
So I think it's a real multiplier. Is robotics a big enough time to be the next next thing that, you know, the Dow is at 50,000? Like what takes the Dow to 250,000, which I know sounds outrageous, but it's quite durable. We tend to have those every 20 years or so.
Is that is it better? Is it space? From a macro perspective, robots could be a huge economic multiplier because remember historically the economy is labor and productivity is output and productivity is a result of capital. Okay.
So it's only two units, two levers to pull. If you add robots, you actually have a third productive output unit that may not consume people or capital. So we could actually, an economy that solves robots could grow without inflation. Like in other words, a Fed could let seven percent GDP grow happen and actually it could rejuvenate Japan because now there's robots will be economic consumers and tax paying units.
This is going to solve like government deficits. So it's it might be an ideal scenario. Imagine like robots create their economy and humans just get the dividends, right? But also, I think it's physical AI is a broader set in terms of autonomous technology.
Yeah. And I think there's a bit because you could argue physical AI will be bigger from a from a cap expense than anything we've already seen. What is physical AI? Physical AI is I mean, you can talk about robots, but it's really it's right of you as like autonomous technology.
It's like eventually we're going to see more and more use cases on the robotics side. But physical AI to me is a golden goose like autonomous true autonomous technology. I believe will be one of the biggest technology innovations that we ever see. That speaks to where Tesla is and everything that they're doing and why so much of when it comes to robotaxi and the whole vision.
Yeah. Well, but just keep in mind, if it's physical AI, but it's you they're replacing human jobs. It's negative to the economy. If it's robots creating their own economy, then it grows the economy.
So it won't just be physically. Yeah, because actually that would replace jobs and the economy would shrink a whole ecosystem built around robotics where the needs of the robots become an input to over a GDP. That's the only way to grow the economy because if robots are just replacing jobs, then the apocalypse is correct. And for Nvidia and Jensen talks about this physical AI in that sense robot that that's kind of the holy grail.
Is Tesla the primary way besides an ETF? Like if someone were looking for like, what is the stock that has the highest likelihood of making me money in the robotic autonomous future? It's like Tesla and everyone else, right? Yeah, I don't know.
Or is it video SpaceX? But then it's my view at some point by the end of next year, those companies merge. Like it might have been Tesla and SpaceX. How would that work?
I mean, look, obviously that's going to be the big question, but for most, that's the golden vision that Tesla and SpaceX are under one hood, not just from a data perspective, but in terms of all the AI technology that they're building, that ultimately becomes one company. The biggest company in the world. Yeah, and I view it, I would say it's over an 80% chance by the end of next year that Tesla and SpaceX ultimately merge. One other narrative that I think has shifted, at least for me it's from the ads I was talking to, Mark Newton, your technical analyst.
Do consumer discretionary stocks matter anymore? And I say this because we were talking last week on the show, if you look at a ratio of the equal weight consumer discretionary ETF, and you divide that by the equal weight S&P 500, that line has been going down forever. It continues to make new lows. So people go, oh, look at TJ Maxx, or Vostores, or what?
It doesn't matter. It doesn't matter? Yeah, I mean, the problem with consumer discretionary, because I'm going to give you a strategist understanding is, do you know, historically consumer discretionary is what you call the catch all sector. So you define a stock as an industrial, a tech, healthcare company, staples, and whatever it is not anything is consumer discretionary.
So what you're highlighting is the uncategorized companies is actually just shrinking. You know what I mean? Because consumer discretionary spending hasn't changed, but now it's like your iPhone spent, and that's in tech. And it's like you go to Costco, that's actually now in consumer staples.
So that's really why discretionary is shrinking. I mean, Delta is a consumer discretionary stock if you think about it, right? Like that is obviously discretionary spending. Yeah, and but in theory, like Delta actually might should probably be considered an oil trading company, because they like own a refiner and they trade oil, and that's a source of their profits.
Like, so I don't even know what Delta is. Is it a transport? Is it an industrial? Honestly, I don't know.
They're probably like a membership company, which is a transport. Right. I mean, they're like a membership. They like want you to try to get Delta diamonds.
So like you just use Delta, but yeah. That's like a Marriott, Hilton, Hyatt. They don't even own the properties. They're a points company.
They're marketing and membership, and somebody else owns the real estate. And make your choice clouds. Yeah. Okay.
What are you guys excited about in the near future or for 2027? What are some of the things that we haven't brought up that you actually are bullish about? I mean, I will say that in this conversation with AI and then physical AI and robots, it is not lost upon the financial industry that this is a huge deal because remember half like in the real world, there's economy and then you have to represent it on a financial ledger. So literally always everything happens in the real world.
Half of it happens in the financial world. And the financial industry knows they're not equipped to deal with robots because robots have micro payments. They could be fraud. They don't know who sends instructions.
So there's a real innovation taking place in the financial services world. Actually, a lot of it is going to be built on blockchain. I mean, as you know, Robin Hood thinks the entire system settles on blockchains and BlackRock and JP Morgan, you know, now sees blockchain as a future. So I think financial industry is going through a huge revolution in a good way.
There, I think the best companies are going to turn into technology stocks. I think the P.E. of like the big financial services companies will start being valued more like tech companies. I think they need to be valued like that today because today on January 1, JP Morgan already knows like 70% of his earnings without even like opening a branch.
I mean, what companies have that visibility, maybe Costco will cost go trades at 50 times. So I think the financial industry is actually a big winner of AI and tech. There are multiples go up. But of course that means crypto is a huge winner because that's really where all this is going to take place.
Yeah, you take on but I think you just said. No, I mean, I think to further his point, utility companies energy. When you think about the AI and the build out, we are we're in the early stages. It's going to be an innovation boom in the United States.
And I you know, we talked about for the next revolution, about US and China, they're not like Middle East, Europe. The whole point is it's a two horse race us and them. And what's what I still think it's very underappreciated the boom that's about to happen in this country. I'm not just talking about five tech companies.
It's the spread. It's the innovation. It's the jobs that I ultimately believe more jobs will be created than taken away when it's all said and done because of the innovation boom that's going to happen, especially for so many young people from engineers to so many, you know, other sort of industries. That to me and that was spread across the market.
In the time we have left, what do you guys think? Can we do some tickers with the fellas? Sounds good. All right.
Let's do a few. Love to just get, you know, not a research report, but like what people need to know about the stocks that they're involved with. Let's start with Apple. This is a company that we heard for two years doesn't understand AI is behind doesn't have a strategy, etc, etc.
The stock is probably the closest to a record high of all of the mag seven names and that lack of a CapEx budget for data centers or its own LLM seems now to look at the top of the market. Now to look more like an advantage than a deficit. What are your thoughts on Apple? I mean, I think 20% of the world is going to access AI through an Apple device.
The install base, you talk about Apple in early days, like in terms of not getting the valuation because of services and App Store. I think it's something that's investors are just going to start to appreciate is the consumer AI revolution takes hold how Apple is going to be able to monetize. And I think turn is obviously taking, you know, taking over for the Hall of Famer Cook. It's going to be an innovation and it's going to be AI enabled devices in a consumer AI world.
And I think that's something where Apple now is going to be front and center in terms of how many consumers are going to access AI. Here's one for you. One of the coolest things that's happened over the last three years. All the tech stocks from my youth became the hottest stocks in the market again.
The ones that are still alive. Cisco and Dell have seen their market caps triple or. Yeah, you click Bezos, right? Yes.
Sienna is still out there running around, Corning. I'm guessing you and I are same generation. I'm guessing that's a lot of fun for you to watch also. Are you surprised by how popular the hardware box makers have become?
Well, which is our servers. You know, for many years, technology experts and tech investors always said a company that's on the A shelf when they miss numbers and they fall to D they never come back. So there was this idea that, hey, Cisco is dead. It's never going to come back.
And many years ago already a lot of stocks were getting rejuvenated. You know, so I think it's what's proven is what we understand to be a moat is actually much more than a 12 month horizon because all these companies are describing have an embedded customer base and they actually have real estate and they're already in the right places. You know, I mean, like advantages that can't happen like today if you're trying to create a new wire frame, you know, bare metal company to do data centers, you can't do so these are it's good for the stock market because the stock market, you know, 30% of the return come from in the S&P comes from companies that didn't exist 10 years ago, but the majority of the return comes from all these stocks too. Yeah.
So that's why someone doesn't think you can get to S&P 16000, you know, 80% of what will get us there is already in your portfolio. I mean, look, I just, I continue to view what car this is one of your favorite. This is one of your favorites. I mean, it's gone from a teenager or elementary school to, you know, obviously going on its way to $200.
I think it's something investors massively under appreciate how advanced their technology is and obviously start off in the government. But what they're doing on the enterprise world, it's changed the enterprise. It's changed the sales cycle. And I think this is going to be a name that's really going to transform the way enterprises spend.
But if you compare the market cap to any metric, investors are appreciating it. I think it's a true. I mean, I view it as like, this is a stock that could appreciate four or five X from here over the next three to four years given the cash flow. That's an extra one because to me, it's a trillion dollar name because it's about the free cash flow that investors, you know, they underestimate it and then all of a sudden it will actually start to, it's not that expensive in a free cash flow perspective.
I think pound tiers are good example. You talk about Dell, Rito, Francisco, this is just the start of just so many more of these companies find that next gear. This last one, and Tropic, we think comes public in October. What's your take on what we should expect?
Will it open well? Will it be a trillion and a half to trillion? Like what kind of guidance are you giving people to ask you about? And Rob, is it a granny shot?
And Tropic is going to be tough to qualify as a granny shot. Too hard. Yeah. I mean, you know, the labs models, frontier models, you know, they're all racing because they think there's only going to be one that wins, right?
So everyone else is going to be Google in search. Right? Yeah. Yeah.
They're all self to one. And then that's it. So I mean, it's a race. I'm sure people are going to need to own both.
I mean, that's kind of how I would play it. But, you know, if it's value five trillion, it's the same argument, why it's value of trillion. So like, we just won't win. And Antropic is a transformational name.
That's really, they're going to transition from a model player to a really an enterprise player. And that's, that's essentially why, you know, you see them building that enterprise sales force the way they are. So, right? Look, I think we are still early days.
Like we've told that this is a 1997 moment, not a 1999, 2000 moment. I want to do one more thing. Michael, you have the clicker? Okay.
We're going to make an announcement. For those of you who like to travel and want to come to New York, we're going to tell you guys, scan this QR code. We are extremely excited to be introducing a new event. This will be in December, New York.
Rather than getting this right or wrong, December, New York, what's it date? December 8th in New York. The compound is coming to Broadway. Get that around.
Hey, everybody needs an excuse to come to New York around that time of year. Hopefully we can be your excuse. I'm super excited to let you guys know you were the first to hear about this. If you want to be able to get tickets because it's a big theater, but not that big.
The best way to make sure you do that, subscribe to the Compound Insider. We're going to give the Compound Insider folks the first heads up as those tickets become available. And we're super excited to see anyone there that wants to come out and support us as we take our show to a pretty big stage. And again, it's all thanks to all of you guys.
I want to say a huge thank you to our guests today, two of the greatest ever to do it. Ladies and gentlemen, Dan Ives, one time. Dan. Hi, Wayne.
Guys, I'd be happy to have all of our listeners, all of our viewers. You're so great every time you come out, we appreciate it. Congratulations on all of your ventures. And thank you so much for your insights and your wisdom.
Thank you guys. Thank you so much. We'll see you soon. For most of the history of professional sports, there was a wall between the game and gambling.
Then suddenly it was everywhere. Ontario is all in on sports back every moment more with fans. But that wasn't supposed to include the players themselves. For after sports, John Tae Porter is under NBA investigation.
Athletes are the perfect gamblers. Understood. The Big Bet. Available now on Spotify.