The Compound and Friends
00:40:29 · Josh Brown, Michael Batnick
[00:40:29] S0: I don't think it's just worry about the stock prices. I think the AI story now has sort of become like this just lightning rod for everything that people are feeling. I think they think data centers are pushing up the price of gas. I don't even know what... I don't even fully understand what... So while earlier we were saying it's not really on the ballot, I don't think the elections are turning based on it. It is very much on people's minds twenty four seven and nobody other than Silicon Valley has anything good to say. [00:41:04] S1: You know why? Because it's absorbing all of people's anxieties. Like, a lot of the shit that people feel about their own lives is an easy thing to point to and be like, this is it. Like, why am I even trying anymore? I hated capitalism already, and now it's fucking... Now they're just taking everything. [00:41:18] S0: I think it's, like, worse than fracking. Like, I remember the fracking stuff. [00:41:22] S1: So much worse. I feel so much worse. [00:41:24] S0: It's so [00:41:25] S1: much worse. Alright. But but just just to bring it back to [00:41:28] S0: Hold on. Look at our look at our live comments. These are... I'm not gonna say who's saying these things, but these are, like, how people really feel. If you are a scumbag investor that is full of greed, you like AI. Okay? I get I get... What are you doing here? [00:41:47] S1: So It's the whole the whole stock [00:41:49] S0: market is AI.
00:41:49 · Josh Brown, Michael Batnick
[00:41:49] S0: market is AI. [00:41:50] S1: Listen. God forbid there's any nuance to anything. It's not all good and it's not all bad. There's going to be some incredible breakthroughs. People's lives are gonna be safe. Self driving is great. Like, the drug discovery is like, there's some awesome shit coming. And, also, a lot of the anxiety is real because it is impact... It is and will impact the labor market. People's jobs will be lost. Like, all that shit is not not true. The anxiety is real. But I just wanna say this, just zooming back out to what we talk about and where this is going. Is the bubble over? Blah blah blah. Whatever. Andy Jassy, so Amazon, the CEO of Amazon, said last week, AI is the biggest transformation of our lifetime. I know you're sick of hearing people say that, but he's talking about AWS. He said if the idea of being able to grow 39% with a 184,000,000,000 annual run rate and to grow 40% a year on top of that in each of the next two years and ultimately end up as a trillion dollar plus business, We're talking about AWS ending up as a trillion dollar plus business. So he would say like, yeah, listen. I wish I wish the build out... I wish we could spread it over twenty five years, but that's not what's happening. It's moving really fast. And, yeah, it's expensive. Okay. If AWS is getting to a trillion dollar run rate, what do you think the S and P is gonna be? A lot higher or a lot lower? [00:43:03] S0: I think it... Like, mathematically, it would have to be higher if if you assume they're gonna do that profitably.
00:43:03 · Josh Brown, Michael Batnick
[00:43:03] S0: I think it... Like, mathematically, it would have to be higher if if you assume they're gonna do that profitably. [00:43:09] S1: So I think it's hard to get really too bearish right now, even though I understand that people are pissed off. I get it. Alright, sticking with this theme. The CapEx spend is getting bonkers and investors do not like it right now. They're not into it. Look at chart. These companies [00:43:24] S0: for it. I'll tell you that. [00:43:25] S1: So Amazon is spending 37% of their revenue. Meta is up to 54%. Alphabet, Microsoft, the next chart shows the composite. We're at 4043%. And thank God for Apple that Apple's not playing this game, because investors are still chill with Apple. But, dude, this is top line, and even Apple is getting pressured. So we mentioned earlier that, like, the the memory costs are staggering. The Wall Street Journal reported that Apple is expected to spend $25,000,000,000 in flash storage this year for about the same amount it bought for 6,000,000,000 a year ago. [00:44:01] S0: Yeah. [00:44:01] S1: It went from 6,000,000,000 to 25,000,000,000 for the same shit. Tim Cook called escalating memory chip prices. He says it's a one hundred year flood. [00:44:11] S0: Yeah. I think we will end up with more memory on the market somehow. The Chinese, the Koreans, they're not just... The Chinese. No, they are actively working on bringing more memory for their own benefit. I can't imagine it stays this way. So I understand why do the for the next couple of years, but
00:44:11 · Josh Brown, Michael Batnick
[00:44:11] S0: Yeah. I think we will end up with more memory on the market somehow. The Chinese, the Koreans, they're not just... The Chinese. No, they are actively working on bringing more memory for their own benefit. I can't imagine it stays this way. So I understand why do the for the next couple of years, but [00:44:36] S1: Why did the memory stocks get whacked off to the extent that they did? We were talking with Alex last week. I really think it's positioning. I think there's just too much Yeah, [00:44:43] S0: people trading on margin, 100%. Like double ETFs and options, and there's more going on than just the fundamentals. [00:44:51] S1: I understand that it's pricing in like the peak that that's never going be worse than this or better than this. And I get that. That's why I traded four times earnings, but I think a lot of the unwind that I think a lot of the narrative that we're seeing is price driven, not fundamentally driven. And it was a lot of leverage, a lot of piling in.
00:44:51 · Michael Batnick, Josh Brown
[00:44:51] S1: I understand that it's pricing in like the peak that that's never going be worse than this or better than this. And I get that. That's why I traded four times earnings, but I think a lot of the unwind that I think a lot of the narrative that we're seeing is price driven, not fundamentally driven. And it was a lot of leverage, a lot of piling in. [00:45:06] S0: Dude, what went on in the KOSPI this summer was downright chaotic. This is an entire country stock market caught up in two or three tickers. And people they had to pass new rules about trading and leverage. People absolutely lost their minds. And the thing to keep in mind is you turn on CNBC or you open up your brokerage app and you look at stock prices, just always remember what you're seeing is an equation with three variables. What are today's fundamentals? What is the sentiment toward the companies? And then what are people guessing about future fundamentals that are unknowable? And it's some combination of those three things that's dictating the prices. And then if you have a lot of leverage layered on top, it's another variable that is equally unknowable, which is which people have to sell or who's being forced to buy in the case of a short squeeze. And it's like, then you could throw the fundamentals out the window. And so this idea that we could just glance at the screen and get the vibe check of the state of the AI trade at any given moment in time, it's bullshit. It's a mirage.
00:45:06 · Josh Brown, Michael Batnick
[00:45:06] S0: Dude, what went on in the KOSPI this summer was downright chaotic. This is an entire country stock market caught up in two or three tickers. And people they had to pass new rules about trading and leverage. People absolutely lost their minds. And the thing to keep in mind is you turn on CNBC or you open up your brokerage app and you look at stock prices, just always remember what you're seeing is an equation with three variables. What are today's fundamentals? What is the sentiment toward the companies? And then what are people guessing about future fundamentals that are unknowable? And it's some combination of those three things that's dictating the prices. And then if you have a lot of leverage layered on top, it's another variable that is equally unknowable, which is which people have to sell or who's being forced to buy in the case of a short squeeze. And it's like, then you could throw the fundamentals out the window. And so this idea that we could just glance at the screen and get the vibe check of the state of the AI trade at any given moment in time, it's bullshit. It's a mirage. [00:46:24] S1: It's also ping ponging. It's ping ponging back and Josh, forth the other just take a quick victory lap. I know we did this already, but about this Apple stuff. You were 100% right about Apple becoming the edge. So there's some good data from Yahoo Finance about this. [00:46:36] S0: Probably means time to sell because now everybody's saying it's the hedge. All right. Put the Oh, first that's chart a [00:46:45] S1: great chart.