SPEAKER_01 0:00

Eric, uh the dynamic duo is back after what three weeks in a row, I think, where we had solo episodes. We are we are finally back. Mom and dad have made up, and and we're we're now doing the podcast again together. Um, it's good to see you. I I missed I missed you on the podcast. Um, how have things been?

SPEAKER_00 0:18

Well, absolutely nothing has changed, Austin. Luckily, well, we're gone. Uh no, no big developments at all in the AI world. Of course, this is the way that works. You know, we had scheduled multiple interviews uh for this time because the idea has been we were gonna do the deep dive in robotics. We'd have a couple interviews about some topics we've been interested in, such as how uh AI is going to impact the energy market with Doomberg. That was a very popular podcast we heard a lot about. And then we also had one with a drone expert, uh, Seneca. And then we're gonna come back and kind of digest. But uh what we've seen the past few weeks is we we now have the market uh for AI stocks. It has now actually gone below where it was in summer. So we've gotten a lot of questions, and and we're gonna do our best to answer those. I think we'll probably break this up into two parts. Today we'll talk about high level, we'll talk about earnings season, what we're seeing, the reactions, and we'll also talk about the AI market in general. With the stock market selling off, is there something actually structurally broken here? Or is this more an example of um kind of narrative chasing price and the fact that the AI market continues to be in good shape, but with the stock market selling off, uh, you know, that's going to create a lot of negativity. So we'll film that this week. And I put out some questions, uh, people, people responding what they wanted to see on Twitter. And the the largest thing I got back was people would like a portfolio review, which we had done in spring. And they would like to do that just with all the developments we've had throughout the year and with the market. Um, probably, you know, it's just better opportunities out there with some of the recent price action we've seen. So I'm I'm gonna get to that, but I want to do it proper justice. I'm still not feeling great today. So I think I probably got 30 minutes in me, Austin. You know, I'm I'm probably throwing like a uh 60 mile per hour fastball. I'm kind of like the kid in rookie of the year. I'm I'm throwing the softball up, hoping, hope.

SPEAKER_01 2:20

I I Eric, I Eric, I I can't imagine what might have taken the wind out of your sales. You know, we've got Intel down 26%, uh, Reddit, which is not in the portfolio, but they're down 24%, Amazon down 11%, Google's down 12%, Sand is down 14, SemTech down 10, applied up to electronics, last I checked, was down nine, and ServiceNow, which was a quick winner, is down 27. So, you know, not to make light of the pain out there, you know, to our listeners, um, I am invested in almost all of these names. I know you are invested in most, if not all of them, maybe spare credit through the portfolio. This is not an easy time to be an investor. We don't want to make light of that. So if we're doing a shorter episode, it's not that we don't feel the pain, it's just that, you know, as Eric said, we want to make sure that we give justice to the moment. And if we're doing a portfolio review, we don't want to do it, you know, in a shallow way. So we know there's a lot of pain out there right now. We know investors want to hear about these specific positions and get a portfolio review. We will do that and we and we will give them the answers we're looking for. We feel the pain along there with you. I will also just note um this is not a uh this is not an official portfolio recommendation, but some of the names on this list I actually picked up shares in today. I plan to buy more over the next week. I'm I'm enjoying this downdraft. Certainly doesn't mean it's the bottom, but I I like the pricing today a lot more than we had a couple months ago. Uh and as painful as this moment might be, we sort of have the biggest watershed moment in in AI that occurred right before this, which was Anthropics S1 filing, which we have not been able to do an episode with. But this is this is a very uh there's there's a lot going on, and we know that. We know our uh listeners are looking for answers. Now that we've got some of our interviews booked, you know, I think it'll be a lot more um the standard format, you and me, hour-long episodes right around the corner.

SPEAKER_00 4:00

Yeah, and maybe let's start. Let's just talk about earnings, and then we'll talk about the broader kind of technology market. So uh Austin, is is there any companies you want to start with, or should I just start digging into what we've been seeing this week?

SPEAKER_01 4:14

Well, yeah, I'm I want to understand this contrast because it seemed like earnings actually started off pretty well. And then I I guess maybe was a Google sort of set off the alarm bells and then things started to collapse, right? So I think we saw strong reports from Vertiv, right? Beaten Rays. Um, we saw G Vernova still has a really strong backlog. So it seemed like everything was continuing, and then Google sort of, you know, set off this explosive moment. So can you talk about that sort of early strong start and then what has happened

Earnings Season Starts Strong

SPEAKER_01 4:40

in the last 72 hours?

SPEAKER_00 4:42

Yeah. And so since we haven't had an episode that's been, you know, we've had the interviews, we had the robotics, we haven't had something touching on kind of topical market conditions in a few weeks. What we've seen throughout October is a relatively persistent sell-off across uh the entire technology space, but specifically out-of-risk assets. In the last podcast we had done, I had noted while the macro background looked absolutely atrocious right now. Uh, most of the stocks were kind of reaching their highs. And what we've seen is, again, kind of a reaction to that, where interest rates uh continuing to rise, a lot of pressure coming from things like uh persistent inflation and also energy prices, that has filtered into a rotation out of risk assets broadly, which is hitting across the AI space. It's it's led to a lot of tension, especially in areas like neo clouds that are relying on financing, which again has become far murkier across recent months. But as far as earnings season started, as you mentioned, many of the initial reports were very strong here. On I think it was Tuesday morning this week, we had a series of infrastructure companies, including Vertiv, Amphenol, G Vernova. They all reported, and the results across the board were essentially either beats and raises or giving guidance that significantly exceeded expectations. A lot of talk about strong backlog growth. Another company we had earlier this week that's not in the portfolio, but I've talked about a lot on own personally, Celestica, which had outstanding earnings and the stock boomed after that. But as you noted, the tone around earnings season really changed with Alphabet, the parent company of Google reporting. I think that was on Wednesday night. And then we saw ServiceNow uh report alongside them, and they dropped more than 20% the next day. Amazon last night, and Intel, which is which is one of the biggest legards. So let's let's dig into just a little bit of the specific

Intel Plummets After Earnings

SPEAKER_00 6:46

earnings here. Uh Intel, I think they're down. I mean, Austin, you could look up, but I think it's 25 or 30 percent today. 25.

SPEAKER_01 6:54

I think that's yeah, um, 25 when I when I hit the buy button.

SPEAKER_00 6:57

Yeah, and the thing with Intel, when we recommended them, we were very clear about they are a long-term bet on the belief that the U.S. is going to need a strong foundry leader, and that's going to be a necessity. That's their long-term play. Their near-term play is going to be a tailwind that CPUs uh are going to be in hot demand for years to come because of the rise of agentic AI, which which leads to a lot of usage for CPUs. Now, the risk, as as we mentioned at the time, Intel is just a perennial loser, right? This is a stock that with semiconductors booming across this entire century, they just such a loser. Such a loser. Intel is the new Marvel, right? Uh well, it is just this has been their history. And they have our hope was they have new leadership, and this is going to create an ability to turn the ship around. But again, this is a big ship. If if this was a cruise ship, you know, it would it would be a mile-long cruise ship. You know, it's it's not nimble like small companies. It's it's got a massive employee base, it's going to need to turn around a lot of mentality. And what we saw this latest quarter is when their their last quarter is fine, but their guidance is significantly below expectations. Uh, that's not only a sales issue, it's also that their margins are going to be declining. And Austin, what this really comes down to, it's PC revenue. The server story is strong. Their data center revenue remains strong. Next quarter, it's it's gonna be about 8.4 billion. That's versus expectations of 7.7. Where we're looking at is client, which houses PC revenue. That's 6.3 billion next quarter from what they're guiding to versus expectations of 8.4. That's an absolutely massive miss. So the bottom line here is we knew the biggest risk of Intel, they have tailwinds. They've got two tailwinds, right? They've got the massive tailwind around agentic AI, and that's going to increase demand for their CPUs. Then they have a second tailwind that there's going to need to be a domestic foundry option and they're in the right position for that. But you know, it just comes back to execution. And what we're seeing right now is the fact that they weren't properly prepared for some of the headwinds that are going to be impacting PC revenues. As again, PCs are facing a lot of challenges with the fact that memory's gotten so expensive, which leads to less demand. And Intel just simply they didn't execute well. So this is this is a little bit of an Intel story. I I don't really see anything that speaks to the larger AI demand situation. Then let's look at Amazon and Google. Those are other companies that you talked about. You know, for both of these companies, the good side was data center revenue.

SPEAKER_01 9:50

Wait a minute. I'm sorry, I I know we're trying to move through this one quickly, but your Intel point that, you know, this is more of an Intel story, the moment today is affecting basically every other chipmaker, right? I think Global Foundry is down 9%, AMD was down 11 or 12%. So if this is mostly an Intel execution story, should we be looking at the other affected chipmakers here? Not necessarily for the AI portfolio. I'm not asking you to make a call now, but does that mean we should be looking at these other chipmakers who are getting caught up in the downdraft of Intel's poor execution and maybe getting them on sale instead?

SPEAKER_00 10:22

Well, and and the point I was gonna tie it to these three companies together is Intel data center revenue actually looks exceptional. This is just it is them misreading the PC situation and not putting in proper planning to it. Because again, to create a shift in total demand for their product line, these are things that are planned on six, seven, eight, nine months ago. And they they already got slapped once in a prior quarter for essentially not forecasting where demand was moving towards basically data center server revenues and CPUs. Everyone thought that they would have enough time and they still haven't prepared properly. When we look at Amazon, why are they getting slapped

Amazon and Google Fall After Earnings

SPEAKER_00 11:05

today? Well, their ad revenue missed. Um, that was a big issue, and their e-commerce was weak, but Amazon Web Services actually beat expectations. And then we look at Google, why were they slapped? Google, well, well, cloud was in in an incredible quarter. It's gonna pass search revenue. Correct. So their cloud revenue grew 103%. It's far and away the star of the show. Right. And and and their weakness comes down to the fact that search is is has held up admirably, but it is starting to show some signs that it's getting chipped into. The the economics are getting chipped into by AI. So Austin, if you put these three together, all three of these companies actually showed strength from AI itself, right? Amazon Web Services be Google Cloud is is uh growing at more than 100%, and Intel's data center business looks great. It's an execution issue related to their PC division. Arguably, you could say why all these companies missed is because AI is successful. Search is missing because of AI. Amazon is struggling because of, you know, you have the beginning of moments like agents, and you also have things like ads getting cut into by the way that consumer shopping is changing and Intel, right? Again, it it is a story where their data center revenue is great. They just haven't allocated enough demand to it. So all of the headlines today are are essentially look at these terrible prints from these companies, look at these earnings. It's starting to show weakness in AI. The reality is the AI portion of everything they've done has actually been great. And then, yes, you see this sell-off in broadly in chips that I don't know if it's because of a misread of the headlines or if it's just because people are getting out of tech in general. So the high beta, the momentum stocks are gonna get sold out first. But whether or not something's actually been bad here is, you know, it's a little bit of not doing proper analysis. It's it's a surface level headline that doesn't necessarily stand up to the rigor and reality of what we're seeing.

SPEAKER_01 13:16

Uh well, thank you for that. And and I do not want to get stuck on this point, but I do think it's important because there's a major narrative and tone shift in the last week. So I um if I'm trying to be charitable to the bears here, I don't agree with this, but they might say that weakness in search is the cash flow generator that will allow Google or Alphabet to continue investing in AI. So if I'm trying to be charitable, I could say, well, the weakness in their core businesses actually could translate into greater financing, you know, concerns or more expensive financing on the AI build-out side. But but I but but I that's not necessarily the view that I hold. I'm just trying to steel man it, as they say.

SPEAKER_00 13:54

Well, and I would say, you know, again, if if you'd like to sell off Google, that's that's a perfectly viable concept, right? Because again, I I think search was at 19% last quarter, dropped to 12% this quarter. It's becoming really apparent that search is no longer a differentiated product. It's just a flash LLM. It's a really fast LLM with incredible distribution. You know, the story for Google is going to be are they Microsoft in 2012? Because that the fear for Microsoft at the time, when it was really bottoming, it was it was at the end of the Steve Ballmer era, was they've got Windows and they've got Office, but they're not going to be defensible and able to grow into the future. And what happened was there was some truth to that. Windows is now effectively a bit of a rounding error for Microsoft's results, which is crazy. But they were able, they had a lot of growth to servers at that time, and cloud computing was just beginning. It was just becoming a driver. So what they were managed to do is they managed to switch office, especially to being something that was cloud-based. They were able to head that off. And and even though it was no longer the driver, they got so much growth from these other areas that Microsoft ended up growing, you know, I don't know where it is, it's something like 10 to 15 fold from that moment. Google is going to have a similar situation. Search is going to continue to be eroded, but at the same time, it's going to morph into their broader AI suite. So they're going to have an ability to shift it in much the same way that Office became a cloud product. And at the same time, you brought this up earlier, but Google Cloud is now on a trend line to surpass the revenue for search by the end of 2027. It's not going to necessarily have the same margins, but it has pretty strong margins. You know, Austin, you look at Amazon, they did something kind of extraordinary this last quarter that they actually gave essentially guidance for AWS in 2027 and 2028. Um, that is remarkable. Normally it's it's a quarter ahead, but they're sold they're solely and and that's why they can. And and this is partially too. We we look at we look at the carnage that's happening in the market right now. And again, this is this is very much framed around uncertainty around AI. But if you go in and you read commentary from these conference calls and what's going on this earnings season, well, you hear from the hyperscalers. Amazon's saying they are close to sold out through 2028. Um, it used to be you'd hear from only memory companies around this race to secure supply that last into 2028, 2029, 2030. But now you're hearing it from across the supply chain. I mentioned Celestica earlier, which um, you know, is going to be a company in the networking space. They're saying they're very confident in 2028 and are having conversations in 2029, 2030. So I think the broad market question right now is is AI going to peak in 2027 and then flatline or come down. I think that's a little bit of a base expectation that a lot of investors have. And I I talk about the zone of uncertainty that we get into. That when we started the podcast, it was kind of well, AI is strong this year, but 2026, I don't know about that. Then it was 2027, and we talked about how the zone kept shifting into 2028. Now we're seeing it shift into 2029. You know, it just keeps moving back with growth ahead of it. And that's what I'm looking at this earnings season is that, well, again, if you are basing how you feel about AI off stock prices, it looks like the worst moment yet for AI. It looks like something, some shoes about to drop, something's around the corner. But if you are looking at what the actual companies are saying, in many ways, the confidence is as high as I've ever seen it. And the timeline continues extending, uh, once again, pushing things out to where you know a lot of the discussions are no

AI Concerns vs. Macro Concerns

SPEAKER_00 18:05

longer 2027 or 2028, but into 2029, 2030. And again, that's that's very bullish for stocks within the AI trade itself.

SPEAKER_01 18:15

Yeah, and you know, this is the AI investor podcast, so I'm not going to make it about ad revenue, but if people are owning Google for the ad revenue, which was the thesis for a long time and now it's you know a hybrid investment, um, Google's or Alphabet's loss here looks to be Meta's gain, right? So I actually didn't realize this, but meta ad revenue and Google search revenue are now neck and neck in the most recent quarter, but uh both about 63 billion. But Google's is growing 12% below expectations. Meanwhile, Meta is still growing 26%, which is crazy. Um and just anecdotally, you know, you and I know some advertisers in this space. Some of the groups that I've talked to have said yes, like increasing, we used to be, you know, a Google Meta shop, and increasingly more of their spend is just going to Meta. So if that was part of your thesis for owning Google, was you know less about the AI and more about ad spend, you know, maybe, maybe Meta still looks extremely strong here. But let's stick on Meta and bring it back to AI because what you're talking about is all of the information behind the scenes that that backs all this, that's been uh about AI specifically, is still looking very positive. Meta just increased their CapEx estimates again on AI spend. And that has been the leading indicator for a lot of the best investments you've made, which is okay, CapEx is continuing to increase, and that's going to flow downstream to you know the chips, the build out, the interconnects, whatever. So we are still seeing that thesis play out. This is weakness in other aspects of the business that might be masking or distracting from the core AI strength. Is that fair?

SPEAKER_00 19:41

Yeah, yeah, I I I would say that that's that's uh pretty fair. You know, it is just it comes back to again. I I think uh where narrative is largely follows what's happening in price. And what I've seen generally, Austin, is is from the companies at the front making decisions. This has been a pretty positive earnings season where we are seeing the weakness is probably some follow-through from again, it it is general economic conditions. When you look at ads, which was a disappointment for Amazon and many ways for Google itself. I mean, search, it's it's partially search being something that doesn't have the differentiation that What's has, but it's also a follow-through on the the overall ad market. You know, again, this is this is probably some broader economic weakness that we're seeing. Uh, you know, we've seen for a long time consumer sentiment very short, but the economy powers through, largely due to business investment centered around AI and and and where these stocks are mostly falling is is largely in relation to, again, that that economic weakness, concerns about macro picture and how that filters into decisions from large institutions where they are wanting, I I would imagine, to get out of AI or lessen their exposure to it because the perceived risk from this sector. So again, it's it's it's less about anything I've seen from the specifics within these reports, and and I believe more flowing down from kind of once again the broader mark macro environment.

SPEAKER_01 21:19

Yeah, I would agree with that. And you know, right before we talked about this at the in

Anthropic's S1 Drops

SPEAKER_01 21:23

at the opening, right before these earnings dropped and people were given a chance to you know, sort of find fault in otherwise strong businesses, we had Anthropics S1, which I mean, there's like no shortage of positive information to find here. And that is not a commentary on the valuation, right? Like the like this is a this it in many ways, this could be like a SpaceX story where the the company is incredible and growing unbelievably fast. And that can equally be true, and maybe you know who knows where they go public and what the valuation is. But but the bottom line in the point we're trying to make is that the anthropic S1 shows some absolutely ungodly positive numbers if if you're looking for things to be excited about in the AI. Industry. So net revenue retention, um, 900%. Never seen that before in my entire life. Revenue growth rate up 1300%. They're doing 16 billion in the first half of 26. Um, they posted a big uh filing loss, but that's largely driven to like a 70 uh 70 billion dollar adjustment. And the company is like, depending how you squint and look at it, actually, you know, marginally profitable or shockingly not losing as much as I expected. So, like my impression looking at the anthropic numbers are it was actually a lot stronger than I thought I would see. You know, I thought I'd see much bigger operating losses, and I didn't. So I don't know how you felt going through the S1. And if you had any you know thoughts on what you know, how that should be affecting the narrative here, or people quickly lost sight of that. So what what what were your reactions when you saw the filing?

SPEAKER_00 22:50

Yeah, so I I think there's a few things that have been from Anthropic itself weighing on the broader market because again, we've we've seen a rotation out of risk, but there's there's been some specific moments this month as well that led to an acceleration uh selling, one of which was some ARR figures from Anthropic itself. So so we could kind of break that down. The big picture when we look at was anthropic now has its S1 out, but when their ARR figures were released, um they were a little bit below buy-side expectations. And there's also a concern that revenue growth had flatlined in recent months. So the the big picture here is going to be there's two scenarios. Um, and we'll look at both from a bowl and bear perspective. The first was that AI, the big story of why so much revenue has been added this year, is is really that AI got really good at coding, and that's that's led to a lot of the revenue growth this year. And the bear case, looking at some of those anthropic figures, will have been that low-hanging fruit's gone, right? The the companies who are largely supported by venture capital funding embraced this very quickly. And these these model companies, Anthropic and OpenAI, they ate the TAM, the total addressable market, from kind of coding very quickly. And that fueled growth. But as that we move beyond the low-hanging fruit, and um it needs to be Fortune 500 companies adopting it, they're not gonna have as fast of adoption, which is gonna lead to these companies being uh dis you know, disappointment. And the second scenario that we would have from this is um, you know, why there's a slowdown at Anthropic. I had a couple people ask questions about uh if if the slowdown was related to open models taking market share. Um, but what we've seen in recent weeks, Austin, and we can put it on screen if anyone's watching the video, that third-party data from OpenRouter shows that anthropic usage has exploded since the end of September. And the reason why is they released Opus 5.5. So here's the bottom line when we're looking at things. I I think, yes, anthropic has been a a bit of an anchor across the whole. In in some ways, it's a proxy for the entire AI trade itself, right? So when people are negative on it, it's going to bring down the entire uh broader AI infrastructure trade. But you can look at specific data points, or you can think about a big picture here. And the big picture that I continue to look at, if we look at third-party benchmarks, like you can look at like Val's RSI index. The prediction is that Anthropic will achieve RSI between March and July of next year, and they continue to be on that trend line. So that's somewhere six to nine months from now. And the front end of that prediction is when RSI will be at parity with researchers in the AI space. And at the end of that, at the end of next summer, early next fall, that's when RSI will yield substantial improvements beyond what researchers can contribute, uh, which will lead to a significant acceleration if compute is available, right? So Austin, this is this is partially why these companies are so rapidly buying compute, is they see this scenario coming where you're going to have this massive acceleration picture next year, and it you're only going to be able to take advantage of it if you conserve inference on it, right? So I got a question. This one was from, I think it's Kiulo uh on Twitter. I had asked for questions, and he said, is Frontier Lab revenue falling short of expectations a concern, a concern, or is demand shifting to open models? And and the the answer to that, when we look at this anthropic S1 and some of the debate around it, um, I think yes, we were seeing some demand shift towards models, but we're gonna continue to see a process where as new models come out to these these companies, we're going to see relatively large shifts in market share. Uh, with with open AI releasing Astra, they took a significant amount of incremental revenue that was that was coming into AI over the summer. And that allowed them to, in many ways, catch up with Anthropic. But now that Anthropics release Open Five Opus 5.5, they are seeing a significant acceleration in tokens. So Austin, it's I I've talked about the Roarshock test in people who follow AI. Um, and and we saw earlier this month. Anthropic's revenue figures were slightly below what the buy side was expecting. And and on one side of it, you see a sign of the AI mark in trouble, or you see that as a function less about the overall market and more about them just being about to release a new model, right? Where my opinion lands on this, we've seen the massive acceleration from Anthropic in October. I agree with you. Their S1 was very good, it was probably above expectations. It was hard to find concerns. They're painted as this company that's just wasting hundreds of billions of dollars by people like Ed Zitron. The reality is they burned something like $10 billion across their history. That is much better than expectations were. Some of the incremental revenue coming into AI was going increasingly to open source and uh open AI. But again, we've seen this situation uh reverse. And and second, one of the big concerns is fears of AI spending slowing down. Once again, it's it's kind of a roarshock test in how you look at the market. Uh if if if you're a bear, you look at it as adoption of coding and and and a lot of the revenue attached to coding. It was mostly going to VC funded companies, and that growth rate can't continue because it's a circular financing thing where AI is only bought by VC companies and the party's gonna end. Or Austin, again, the other way you'd look at it is you know, adoption that's still so low in the S P 500 means that there's still an incredible total addressable market out there. One of the figures from Anthropics S1 was that Fortune 500 customers paying $100,000 a year averaged uh under 0.1% of their total expenses. So right now, the total expense from Fortune 500 companies for AI is is less than 0.1%. And and this is I know I know I'm kind of on a soapbox here, but but this is the end of the day. You're either going to granularly look at statistics that end up needing a lot of context around them. Anthropic slightly being below an AAR figure that was expected, which led to a lot of the sell-off in early October. Well, there's a lot of context there. You need to look at open models, you need to look at open AI, you need to look at whether or not they're going to accelerate soon because of a new model. So you're going to have panics around these isolate figures. The real question is what are the capabilities of AI? How are they increasing? Is it still on trend line? And if that's the case, that's where you maintain that bullishness, right? We are not cheerleaders in the sense that we we will we will talk about a technology if if we truly believe in it, but we are not blindly doing that, right? And everything that I've seen in AI has been truly impressive. I uh where AI is this year blows me away. Austin, some of the people around us, and you can talk about this as well. I'm starting to see them, the people who are the early adopters of agentic AI in our business, they are now capable of doing the work that previously it feels like they are as valuable as a hundred people. We just had our company meeting last week, and and we said to all of our employees, we need to adopt a systems-level thinking. How we work is just radically changed in the past 12 months. And I think the reality is when you see this firsthand, when you work with it, it's very obvious. But most people, again, their experience is still rooted in the AI experience from 2024, 2025. It's using a chat window and getting results back. AI in the agentic era has come so much further, it's so much more powerful. And there's a lot of times that you want to make fun of people in Silicon Valley where they're seeing something and they're saying, oh, well, you know, it's just the rest of the world hasn't caught up and it's going to be the biggest thing ever. And and and with AI, I think there is actually something real here. That if you are using AI at the bleeding edge of its capabilities, you have seen something that truly changes how you see the technology itself. So again, I see people like Ed Zitron, he was on with Jon Stewart this week. And and you know, it's this fawning interview of you know him making all the same points he's made. By his own admission, he stopped using models. So this is a person who's been wrong about everything, still gets platformed by the media constantly, and he doesn't even use AI. So a lot of these critics, it's either that you need to be willfully obtuse because you don't know what she said, or you're willfully obtuse because you've been wrong for years and you can't turn your back. So I know this started with Anthropics S1. I've taken any number of directions.

SPEAKER_01 33:06

That was an

Reasons for Concern and Reasons for Optimism

SPEAKER_01 33:07

incredible soapbox. That was an incredible soapbox. Yeah, listeners, I hope it's good to have Eric back. I love that moment, and that is why you are the AI investor. But you're totally right. I I agree with every word of it. It was beautifully stated, and um, it's just you need to be able to look at the way this industry is fundamentally changing and experience the capabilities to appreciate the the TAM that we have still yet to mine here. I mean, this is still like the beginning of the first inning. Um, Eric, we had opened this episode talking a little bit about some of the questions that we had got from listeners. Do you want to go through some of those in the time we have to turn?

SPEAKER_00 33:41

I think I I've kind of woven a few in. The the biggest question was essentially people just wanted to hear, is something actually going on in the market, right? And and I hope I've been able to give a little bit of my point on that. I I think there is definitely a narrative throughout the media. People want AI to be a bubble, right? And and they want it to be a bubble for several reasons.

SPEAKER_01 34:05

They're not invested in it and they don't want to have missed it, right? The sour do not underestimate the power of sour grapes in investing. Nobody wants a stock to go down more than the person who didn't buy it.

SPEAKER_00 34:16

Well, and also it's just it's it's the fact that we saw dot-com, and you know, people people want to have this almost pattern recognition. You know, it even for us, owning an investing website. If if you post an article that is uh why the stock market's gonna gain 20% or put stock market crash in a headline, the stock market crash is gonna get 20 times more readers, right? There is just a lot of people wanting to always believe in this kind of narrative around a stock market crash. But what we've said since the beginning, Austin, is, and we've said this since 2024, AI, it's going to be up and to the right. We we truly believe the path and what we've seen, and and we'll continue to evaluate our opinions as we get new information. But it certainly seems like this technology is going to be the biggest in the history. And it's not going to be up and to the right, though, in a straight line. There's going to be gullies and points of irrational enthusiasm, you know, and what we saw in April of this year was some irrational enthusiasm coming out into the market. Just there's a lot of excitement. What we're in right now is a trough around it. But when I look, again, I am not trying to get overly granular on one figure that's that's going to be a smoking gun or whatever. I am looking, is AI on a trend line with progress? And if it is, what is the future economic impact to the world? What is it actually going to be able to achieve? And if anything, I think people who say AI hasn't advanced or there haven't been any advancements in the past two years, it's just BS. It's just flat out BS. If you are actually using, once again, agentic AI, my biggest fear, my biggest insecurity is the fact I host an AI investor podcast and I'm watching how incredible people around me are doing with AI tools. And the fact that I am not utilizing this as well because I see what they're able to build and how incredible it is. So again, it's it's just you need to keep your eye on the ball. You need to, what is the important big picture? And when we look at recent weeks, sentiment getting extremely negative. Is there actually something that has fundamentally changed about this market? No. In fact, I think we are seeing a sell-off at the time that AI's capabilities are the highest that they've ever been, and and much of the recent progress, which is kind of a perverse thing. Now, again, when when I've talked about concerns I have, I haven't seen as many concerns about AI itself and its capabilities falling behind a trend line. I am most concerned that it is too capable, as I've known before, and we are going to see something like a major cyber attack that would lead to um legislation or or a lot of pausing on AI development. Um that that concerns me more than some of these other areas. And and the geopolitical angle, I do appreciate the fact that if if we do have things like um a recessionary environment and and interest rate soar, that is going to put the brakes. So, you know, it's it's not that AI stocks shouldn't see falls at times where the broader economy is performing poorly. It is just for anyone out there, I I know I'm starting to repeat myself here, but for anyone out there, if if you're looking at the market right now and you're getting spooked because of how the market is reacting, what is happening in reality, what is happening at the labs and the companies buying AI, it is just as good as it was four months ago when AI stocks were rallying. The the overall picture of industry progress is exactly the same. It is just sentiment built around it. So as we get to the next question, I said I will do more on the uh future podcast. I just want to pay this um a lot of attention and and and give a dedicated form to it. We'll set up how we feel about the market today and what we are seeing. And in our next podcast, we will put some specifics down. We'll talk about specific segments, how we feel about them right now. Companies, you know, like Intel today, it's selling off. And maybe this will prove to be an overreaction time, but you know, this is deserved. Sometimes companies get whacked and there is some deservedness to it. A big part of Intel's thesis is the fact that their leadership is far more capable, is going to be able to execute this next plan. A conference call like last night does not engender much confidence in Intel's leadership team. So there are some stocks that are getting sold off, and and there is sometimes merit to that. But again, there are some companies that you know are are getting thrown out, the baby with the bathwater right now. And and that's going to be an opportunity for us to probably increase our exposure to them. And increasingly, too, as AI gets more capable in a broader amount of areas, allow us to continue diversifying as we've talked about, right? So we we we went through robotics in our latest episode. I believe there's been some really impressive breakthroughs in robotics even the past month or two that um increases my bullishness in that particular space and will allow us to continue getting um more broad exposure there.

SPEAKER_01 39:41

Well, Eric, thank you so much. Uh we we will leave it at that, except for one thing. I'm gonna put you on the spot. I think I know the answer. I'm not asking for specific names, but this is the AI Investor Podcast. In this environment, are you a net buyer? Are you planning on putting money to work? Yes. Absolutely. Okay, it is the same. And I have and for our listeners, I'm sure we will share some names in the next episode, but but you know, we we believe it's important not just to comment on the market, but to tell you what we are actually doing with our money. So we are buyers in this environment. I bought some shares of a couple companies today. I'm seeing ASML off 30%. So if anybody doesn't have exposure to that, maybe it's something you want to look at. Again, not a portfolio recommendation, just talking about some of the opportunities out there that we're seeing. Some of the SaaS Pocalypse Rebound companies are might be giving you a second look here. Um, I've been looking a lot at block, you know that. So I might be adding some to my block position. I think Meta is very interesting right now. Um, they just continue to puke money. And, you know, they're again, you're getting a little bit of a little bit of a discount there. So I know our listeners are here for the AI investor portfolio. I'm sure we will share some names in the next episode. I am just sharing with you, um, our listeners, some of the names that have caught my eye in this sell-off and where I'm probably going to be putting some money to work until Eric gives me some better names.

SPEAKER_00 40:52

Well, and I think again, next week, too, what we'll do is we will review different aspects. I got some questions about specifics, such as memory companies. We will talk about specific portions of the portfolio, and then we'll also provide some new buys as well. And I did get some notes of about allocation. We will make sure to spend time discussing allocation as well. We we haven't abandoned wanting to talk about allocation at all. So we we'll focus on that next week. Okay.

SPEAKER_01 41:19

Uh well, Eric, thank you so much for your time. It is really good to be back with you. I'm looking forward to our episode next week. I know listeners are as well. Dear listeners, we know this environment is not easy. We are right there with you shedding money. But as we have said many times, this is the price of admission. If it was easy, everybody would do it. Um, so this is part of it, you know. So we we we know that it's not easy out there right now, but uh, we're right there with you. And listeners, thank you for your time. If you care to leave some questions for our next episode, please leave them on YouTube, Spotify, maybe reach out to Eric on Twitter uh if there are specific things you want to see us cover next week. Uh and until then, we'll see you next time.