AI Stocks Predictions

[19:42] I think the big risk to the market, which is huge, is Anthropic and Open AI, but that risk could be if it if I'm right, it could materialize a year from now.

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[0:07] I would give the bubble in AI less than a year to go and that's why I think pickle ball courts is a fairly sensible idea of how a lot of these data centers will end up being used.

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[21:54] the revenue from serious uses w which may be sustained over time looks like about 1/5 of the cost levels that these firms are caught up in. So I expect massive losses to come out of that and when the losses start to become obvious that's when people will panic and get out of the out of the bonds that are involved and so those you know the prices of the bonds will fall and the yields will rise for the the very wrong reasons of a bursting bubble.

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[13:28] While everybody's preoccupied with the semiconductors and AI stocks as the be-all and end-all. And ultimately, they'll lead the downside at some point because they were leaders in the last several years on the upside. They will invert and go the other way.

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[9:44] the semiconductors and AI stocks as the be-all and end-all. Uh I think they've seen their high, by the way.

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[19:20] I think eventually we're going to see the AI bubble, you know, this surge come to an end. High interest rates is not good for all this borrowing, all of this stuff uh for the data centers.

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[24:22] my fundamental view is that I want to I want to short AI you know I'm just not short at this moment but I will be looking for better levels to basically go in there and whack the market

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[26:36] You wrote the announced pace of capex buildout will begin decelerating in mid to late 2027. It will become very apparent by 2028 the deceleration phase is upon us.

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[0:18] The second derivative falls and then finally city falls. The first derivative that's game over. Now I think that's going to happen sometime in let's call it 27 early 28. And when that starts happening, then it's, you know, game over for everybody.

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[15:30] I would say that on balance you you you bet on the people and companies that benefit from AI. Insurance companies I'm understanding are using it very effectively to do what they do and reduce their their their costs.

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[16:27] there will be fallout and there will be a lot of companies that disappear and go bankrupt too. So um that's just part of build out of the new technology.

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[20:05] According to Morgan Stanley, they're looking at AI CapEx as being, you know, 1.2 trillion next year, which is double the estimate they had last year.

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[13:31] I think as we what people are mistaken for a rally in semiconductors in memory number one none of them have made new highs by the way most of them if you look at the charts which I sent you about 50 of them uh it's a dead cat bounce And I think what you're going to see, this is normal seasonality.

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[33:17] I'm of the camp that the answer will be yes. But it will take another 18 to 24 months. And there will be a point in time during that period where people stop believing that the return will come before the bill comes due and that will be the time to buy the AI trade

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[20:09] There's going to be a bust. Again, we only write the facts in the trends journal about how these big AI companies are deep in debt. They're not making money. A lot of them, they're losing money. China's going to lead the world in this.

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[27:28] I don't think it's replacing any jobs. I think the whole thing is a lie. I think it's a completely made up thing. I don't think it replaces jobs. I think don't think it will replace jobs.

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[10:48] we're going to eventually see a cluster of entrepreneurial errors when these data centers are not profitable uh you know going forward

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[29:49] I really do think that was the final blowoff of this AI bubble. Um, and that margin is is now that that that marginal buyer is now impaired. And so, we're not going to have Korean investors come back into the market. You're not going to have crypto bros come back into the market. You're not going to have situational awareness be able to lever up four to one again and put a quarter billion dollars into these stocks the way that they did over the last several months.

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[11:32] we're seeing that complex rollover now... I think we just rollover and end up in a more anemic type economy that is still driven by government spending and the AI narrative fades away

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[31:43] the last thing that the US economy needs right now is for the top of the K to stutter. Well, absolutely because it's a domino thing. If the top of the K is stuttering, it's because the the air is coming out of the AI bubble. So, the implications are twofold. One on consumption and another on the AI investment bubble.

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[29:01] my view on tech uh generally is not that the cycle is done, but that we've reached a point where the rate of change of capital spending growth is likely to slow. And my strongest evidence that that is likely to be the case is the performance of the four big spenders. So Google, Meta, Microsoft, and Amazon since they all reported curiously on the same day back April 29th and their stock prices just fell throughout the course of the quarter after raising capital spending.

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[42:49] we've got hundreds of billions, maybe trillions that are flowing into these data centers, okay? And whenever that much money flows into one area so quickly there are inevitably mistakes that are made... a dollar put into AI is not going to generate any dollars. In fact, it might all die and go to money heaven. Uh a lot of it's going to be wasted.

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[8:40] ultimately, we're seeing the exact same pattern unfold right now. And you can think of it this way, another sign that we're in this delusion phase, right? Is that everyone you talk to seems to be an expert... that is a red flag. When people are getting into the action, right? When that FOMO is taking hold, that fear of missing out, that is when your antenna should go up, and you should be worried about what's coming next because that typically means that we are at the peak.

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[4:56] It would be no surprise that we see a massive meltdown in a lot of these AI stocks. And again, we've got some big earnings coming out over the next couple of weeks that are going to be directly correlated to the AI space.

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[16:41] I think probably in the next five years most, almost all of the AI companies will be worth zero. There'll be a few survivors. There will be and then they'll do well. They'll do well. But the absolute majority will be worth nothing.

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[13:20] I would expect through the rest of earning season, through the next 6 weeks, we are going to hear that on every single earning call, every call.

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[41:37] I I I think AI is a huge bubble. I actually think a lot of the AI hype is even less justifiable than some of the dot-com nonsense regarding the in the late 1990s when people were registering domains and IPO'ing without having a single employee or any any cash flow at all.

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[12:26] there's these three things kind of conspiring all at once to basically I think hit the pause button on the capex and then throw in the other uh fourth factor. The power just isn't there to plug these data centers into. And so that's going to pause capex naturally because there's just not enough power to turn these things on.

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[37:22] stake out the AI infrastructure as if you would stake out the internet infrastructure in 98 or in 2002 and just build again build up your positions... And that is gonna go nonlinear. Yeah. and pick your spot. And that's going to be a 10 year, maybe 20 years, like the internet

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[8:17] when you have an industry or a series of stocks kind of go through a bubble type move where there's a ton of excitement and a stock goes up by hundreds of percent uh in a short period after it peaks. It tends to be about two and a half years that you go down until you make a new bottom.

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[19:18] I believe some of these companies will end up going bankrupt. I mean, Oracle has um their debt is two and a half times their sales from last year. It's just enormous amounts of debt that has been poured on into this market.

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[18:58] I think going forward from here the anything else trade is going to do better than the AI tech trade.

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[8:07] I'm still bullish on a lot of things. But I I want to explain myself and and that's why I'll get to the to the slide deck if that makes sense.

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[13:39] demand for compute is still going up. We don't even know, but let's say five or six times a year and and supply is just not staying not not not keeping up. And so, the question at some point it will and every time I talk to investors they're like, you know, when do you think that'll happen? It doesn't seem like it's happening anytime soon. But let's just say that we don't know when it's going to happen. It seems to us a ways out. That's why I think you just have to stay fully invested.

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[21:44] We haven't actually fostered off into the productivity side of that yet. That's probably another year out. So I'll probably update this in the next year or so

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[27:47] The AI stocks I think are just grossly overvalued. based on based on future earnings but may or may not come... we're going to get that scale back and that's going to affect the prices of um you know the companies that that that are you know building the data centers where it's a major part of their business. So I we've already started to see you look at Nvidia or um Microsoft or um Amazon all these companies their stock prices have come down 15 to 20% over the last month... I think we're going to continue to see that.

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[44:56] his boldest calls for a year from now — including a bursting AI bubble and Bitcoin below $20,000.

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[7:34] I don't think the capex to be honest with you is going to stop a slow down anytime soon uh year or next year.

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[15:28] I think this capex spend trend and boom is going to continue into 2027. And when these hyperscalers are announcing earnings, you know, later in July, I think they're all going to really reiterate reiterate their their capex intentions for 2027.

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[36:45] the way I see these models progressing over the next years that ultimately they're going to get commoditized because you know, they all the new models as they come out they kind of leapfrog each other.

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[24:06] if you're playing the infrastructure development trade, that's got another year, 18 months to it, maybe two years, but that's going to end. And that whole infrastructure side of the trade is going to go away, and you're going to have to move to the revenue generation side of of the trade.

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[12:14] We believe there's going to be a bust. They're doing everything artificially to prop this market up.

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[32:57] what I am petrified about is that we a lot of these stocks have not really reflected that they've assumed that the demand is based upon this three months that was just kind of a stupid aberration like I call it the token mirage. And that there's going to be a huge wakeup call when all of a sudden we realize that we mistook how much demand there was for this.

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[11:00] So, our AI thesis going into 2027 is it's still going strong. you know, I don't I don't see this as a March 2000 type of event. I think there are a lot of differences here where, you know, so I I think the dip we've seen over the past couple of days, you ought to be a buyer of it.

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[9:08] that also could mean that the your growth rates and the revenue that people are expecting might not be as fast as people expect. Might take a little more a little longer to assimilate it and for companies to justify those expenses

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[11:46] if there's a lot of like smaller players and there'll be a lot of other players sort of trying to hold on to the and grab hold of this rocket ship. Uh there will be uh you know, companies that aren't they don't survive.

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[14:12] I do think we're going to see the AI bubble, uh, you know, go south. You see it in certain areas like if you watch Bitcoin and and Mike Saylor at Strategy. He's kind of spiraling down.

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[35:14] I I do think that parts of AI are way ahead of themselves... I think the AI trade is heated. I think parts of it are bubbly and like like SpaceX.

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[29:24] I do feel like the AI stocks are extremely overheated right now and, you know, they're going to have a hard time living up to the immediate expectations that they're going to generate enormous cash flow.

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[2:28] What about AI? I said, AI is a bubble.

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[21:59] I'm actually pretty bullish on the AI sector um right now. And I still think that there's some room for those stocks to run.

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[28:34] Almost all of them, not counting Nvidia, but all the hyperscalers are now flat to negative cash flow, meaning they have they're if they want to keep spending the way they are, they need to borrow money. And we've seen them all do big fixed bond deals now, they're all coming to the equity market.

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[16:54] I think that the the the AI bubble and uh is is is about to burst here. I think that um the the the this parabolic rise in the semiconductors over the last basically 12 months is not healthy anymore. It's dangerous. We have seen the first cracks now last week.

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[22:45] we're seeing the same five things. explosive capex spending, sky-high valuations, market concentration amongst players, speculative fever, FOMO investing, and then the fifth is uncertainty in terms of the earnings delivery and the potential overbuild... I think it will be a shock to the market if all of a sudden we realize this isn't developing the valuations of some of these high-flyers which is pretty concentrated would have their wings clipped fairly substantially.

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[4:35] we're we're in the danger zone here in the next couple months. So the AI bubble we believe is going to burst.

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[12:10] the nine people that created AI were named the time person of the year around December 27th just passed and guess what's ready to happen to them? The same thing that happened to Bezos stock. Now was Bezos hugely successful? Yes. Did anybody that buy it before it and own it while it went down 85% did any of them stick around? The answer is no.

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[7:31] for right now, these things are, you know, probably going to be longer gold, longer government bonds, longer emerging markets, you know, and less long US AI stocks and semiconductors at this point.

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[10:14] We're not bearish on this on the space. uh we just think there's going to be a better opportunity to buy it in the summer or in the fall uh buy the AI trade. We're probably in the fourth or fifth inning of what will be a nine inning to overtime innings game.

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[19:10] I I'll mention to you that, you know, I I definitely think we're in a bubble. Doesn't mean it's going to break for for AI uh in the next 6 months, but it will break. And when it breaks, it'll be it'll be pretty catastrophic for the sector.

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[18:25] when I looked at capex cycle I found that they tend to last about 3 years on the way up and 3 years on the way down and right now we are in the very beginning of a new one. I actually see this hexic cycle having at least another one or two year to to go considering last year is the first year.

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[21:30] I think this continues to be perhaps the biggest misallocation of uh capital in the history of the world. Right now, the market doesn't care about it broadly speaking... the MAG 7's done well the last few weeks, but prior to that, it did poorly for 5 6 months. It made up that underperformance in a relatively short period of time. And I think we're soon going back to that.

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[15:16] It's almost inconceivable that there won't be a major pullback. Maybe that's not six Maybe that's six months from now. Maybe it's a year. Maybe it's a year and a half, but it will occur. Please be careful.

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[19:44] Yes, it's going to be deflationary, but definitely not in the short term. We still have huge capex. The capital of co the cost of capital with the capex deployment is very high. The demand for skilled labor associated with the deployment of capital and the buildout of infrastructure is demand, you know, is creating a huge demand on that limited talented skill set.

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[19:00] So I I I I believe that we are uh looking at a time of speculate excess that will give way to uh remorse and ironically enough uh the vindication of the u of the optimists who foresaw what will turn out to be a step forward and in u in uh human condition thanks to these inventions.

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[35:50] technology, AI, be very careful where you invest. They've gone up substantially and they are the ones who can be vulnerable to a decline.

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[18:47] all these glamour indust is is I've called it magic in the past. It's amazing what AI is the greatest thing since the industrial revolution. But we had other glamour sectors before 1920s for example anything related to flight airplanes airlines etc. the stock shot up. Okay. So uh it was basically straight line up and then came the crash and then from 1929 to 1932 airline sector went down 87%.

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[26:31] I don't think data center spending is going to continue at the radio ones

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[6:12] you're going to have big capex for 26 and 27 for sure and I think the reason Nvidia is so cheap is that people are like yeah but then it's going roll over um in and 28 and we just we just think this trend is so big. We just think that's very implausible. Um so we think these lines continue to go up.

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[29:25] Absolutely. Um and I think it's already starting to happen... that's going to eventually lead to I believe billion-dollar companies with one person. Um where certain people will be able to build a large product very fast that people want um and be able to kind of fulfill a niche to a million or a billion dollar valuation. So I definitely think it's going to be possible and we'll probably see more of that very soon.

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[34:16] China is going to take the lead in AI and these American companies that they've overinvested in are going to go bust. Not all of them, but many of them. And that's going to crash the markets even more.

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[6:34] I think it's going to be about 670 close to 700 billion from the hyperscalers in 2026 capex. So that's almost like it's approaching 2 and a.5% of GDP.

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[30:50] So there's going to be this giant buildout, $150 trillion dollars worth of buildout spread over however many two or three years.

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[3:44] I do think that the AI tech trade is exhausting itself. I think the bell is ringing here and Oracle is the one that rang the bell not with their last quarter when the stock fell sharply but after the spike in the previous quarter in the stock and that come down that was the bell ringing when it gave back all of those gains

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[0:02] We are going to have a huge huge problem meeting the needs of the expectations that the market has built in these AI stocks. And the moment when people realize it's not happening or certainly close, that's when it will cave.

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[26:52] I think the second half of the year is probably going to be a very good one... the whole game here as many people know um is the AI game right if you are looking to be long things that's the place to be long things that benefit from AI

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