Everything Is the AI Bet: You Won’t Believe How Much Vanishes If It All Breaks

This video is all about how much damage will it do if AI breaks? And the answer is a lot. So, strap in. >> Back in May, Micron and SK Hynix, two memory chip companies, produced 17% of the entire global stock market's return for the month. Not 17% of the chip sector, 17% of everything. Every listed company in every country added together. That's from a report by Acadian Asset Management. The global market they're measuring is the MSCI All Country World Index. >> That's a banger stat, though. I feel like we didn't give that enough attention. >> No, it it's wild that when you start looking at the world market, everything is the AI bet. >> Mhm. >> Th- This is the the background part of this. Everything is the AI bet. The very thing that he's going to walk people through is there's no escape. And given that there's no escape, what on earth do you do? >> Thousands of stocks across dozens of countries, and Micron and SK Hynix are about 1% of it. So, for every dollar the global market rose in May, about 17 cents of it came from just those two stocks. This raises the awkward question. If two chip stocks that most people on the street have never heard of, it's not like it's Apple and Google, can haul the entire planet's equity markets upwards, what happens to your portfolio on the way back down? So, today we're going to look at how exposed ordinary investors are to the AI trade, why the usual places to hide may not be working anymore, and roughly how much money would disappear if the whole thing fell apart. Now, let me clarify something up front, as we're going to spend a while looking at what happens if this all goes wrong. There's no consensus that it is going to all go wrong. Plenty of smart people think that we're standing at the start of an enormous boom, that AI is a real technology that's going to reshape the economy and eventually more than justify the money being poured into it. And they might well be right. In fact, you have to assume that most of the people involved believe exactly that because it's the only thing that explains what they're doing. >> Okay, he's wrong about that. It is not the only thing that explains what they're doing. I think that they do believe that they're right, there's no doubt, but if you ask them why they believe that they're right. And I'm not talking about the the top of the top of the top guys that, you know, are managing billions of dollars. These are guys with huge teams that do an insane amount of research, have a stated philosophy and principle into why they invest. And so they'll be able to they'll be able to explain like why are we accepting a much higher cap Cape ratio, why we're accepting price earnings ratios that are very different. They'll they'll have a reason for it. But the average investor, I assure you, is doing everything based on emotion. Remember, the human brain is not optimized for logic, the human brain is optimized for feeling. You cannot get yourself to make a decision. This is literal. I don't mean this figuratively or as an exaggeration. You literally cannot make a decision if the the emotion centers of your brain have been sufficiently damaged. People need the emotion to push them forward. Now, the vast majority of humanity on the vast majority of the decisions they make are not using logic in any part of the chain except at the end if ever. Where they're making their decisions is it it's vibes, it feels right. And when you understand what is happening in the market right now, the entire world is making one bet on AI. You almost can't get out of it because AI is sucking in all of the money. Once people understand money isn't um it's not like it you can't make more, we make more all the time. But there is a finite amount of money at any one time slashing around the system. So when something is an an absolute hoover for that capital, it affects everything else. It affects what companies are making money. It affects who can raise money. It affects who can get loans. It affects attention and excitement. All of these things end up impacting what companies survive and which companies fail. So they are just sucking up all this money. And so even if you're trying to get into something ancillary, everything right now is cascading some way off of that. You You're spending money on squishies. You're spending money on squishies because there's money floating around the system based on all the people making money off AI. That's almost literally true. That one's a little tongue in cheek, but yo, we're very very close to that. So you get all of this being sucked up. It creates all of this cultural attention. Creates all of this energy. There's this narrative around AI. People are reasoning emotionally. They get caught up in the emotion. And so they start doing things that they're not doing because they have a a first principle set of logic that they built up and they've got a really tight explainable investment hypothesis. It's just uh it can only go up. So that that is the very thing that scares the life out of me. And he's going to cover this more, so I'll wait till we get to that part to talk about, you know, the historical loop that repeats here. But there's a historical loop. And it requires that people not be being logical. It requires that they are acting emotionally. >> This is why investors are putting money in at these valuations. It's why the tech CEOs are committing hundreds of billions of dollars to data centers. No one spends like this unless they're convinced that the payoff is going to be huge. >> False. They spend like that because there's that that is the major reason. I don't I don't want to take that away from him. But uh the reality is that people get caught up in the momentum where you'll have a fund, look at Michael Burry, dissolved his fund. Now, why did he dissolve it? Why not just tell the people that um he's got the capital from that he's investing on behalf of? Why not just tell them, "Hey guys, bear with me. Uh I have a different thesis in this. You'll see it'll play out over time." What ends up happening is people like that get fired, people take their money away, they uh get their reputations hurt, and so um when you see somebody like Michael Burry say, "I no longer understand what the market is valuing," which is a paraphrase, but is very close to a quote, and then dissolve the fund and get out, it's because they understand how people will get sucked into investing in things that don't match their strategy because the people that are investing money with them, many of whom are just reasoning by emotion, are pressuring them, are going to hold them accountable to missing out on the dollars in the short term, totally getting rid of their risk profile. Like, by way of full disclosure about what I'm doing, I'm de-risking right now. I'm not like, "Yo, this is going to last forever." It might. No one should do something just because I'm doing it, but my response is very similar to a Michael Burry, where it's like, "I can't follow the logic that people are following." I see the sweep of emotion, but I can't follow the logic. So, please don't think that even like the investing class that really know what they're doing aren't under a lot of emotional pressure to capture the gains that everybody else is capturing. >> The optimists, to be really clear, aren't a fringe. They are the majority. >> True. >> And their optimism is the reason all of this exists in the first place. >> True. >> So, I'm not here to tell you the crash is coming. Nobody knows that, and anyone who says that they do is guessing. >> Facts. Facts. Facts. Remember, no e- even a Ray Dalio, who's spent an ungodly amount of money building out all the like war games of how this could go, has all the history in the universe fed into AI, plus it's like a thousand researchers. I mean, it's it's really a lot. Even he at the end of the day admits, "I think I'm right, but how do I know I'm right?" His entire method of investing is predicated on I cannot see the future clearly. >> In fact, later on we'll look at some of the confident but wrong predictions from the past. What this video is about is trying to estimate the downside risk. If the bulls are right, everything works out fine and we'll all look back and wonder what all the fuss was about. But, if the bears are right, even if some of this turns out to be a bubble, it's worth looking at the estimates of how much is actually at stake. Particularly >> Spoiler alert. The number is scary. We'll get there, but holy Jesus. >> When the party's still on. So, diversification, it's the one thing in finance everybody agrees is a good idea. Investors treat the word like a magical incantation, one which can protect them from market crashes, inflation, and poor decision-making. You spread your money across lots of different things so that when one of them blows up, the others keep your return steady. It's the closest the industry has to a free lunch. >> Okay, so on that I will remind myself and everybody else that actually isn't uh true in reality. It certainly is that people use that like an incantation, but Warren Buffett summed it up the best and he said, um diversification is insurance against ignorance. So, basically, the only reason you diversify is because you're too dumb to place concentrated bets and that is true. So, every time you hear me talk about you've got to diversify against the um economic forces that are at play, what I am tacitly admitting is I'm too dumb, too undereducated, uh I lack uh too much I I lack information on where this is all likely to go and therefore I'm not willing to place like these really concentrated bets. But somebody like Warren Buffett is willing to place a small number of concentrated bets. I forget what the number is but I'm almost certain it's less than 20. It might be less than 10. Warren Buffett has made the vast vast vast vast vast majority of his wealth off of a very small handful of trades and that is true for most people. It's you're going to get a bunch of like minor blips, wins, losses, you know, across the board but it's going to be one or two gigantic things that end up covering everything else. And so um I think diversification is wise for even I mean hedge funds it's in the name but I think diversification is wise because so few people are ever going to have enough money to see even small enough fraction of where this could go to place concentrated bets. And so if you're not in that elite class with all the researchers trading on AI through fiber optic cable that's as close to the trading desk as possible so that your trades get ahead of everybody else's. Like if you don't understand how Jane Street could front run you and do some of the crazy they do like you should diversify. So that becomes it it it is out of ignorance. Embrace your ignorance, diversify across economic forces. That's way to play the game. But the big guys they're trying to concentrate their bets. >> And for most of history it has worked. A couple of years ago the big worry amongst those who worry for a living was sector concentration in the S&P 500. The worry that seven companies the magnificent seven had grown so large that the index everyone thought of as the American stock market was really just seven tech stocks in a trench coat. >> We should really be looking at antitrust. I haven't looked at this closely. Maybe there's nothing to do, but God, I doubt it. There's got to be something, man. Letting companies get that big is very risky at a lot of levels. >> The concern has since grown. It's no longer seven stocks that we have to worry about, but a whole sector, and a sector which famously doesn't stay in its lane. AI started out looking like a handful of tech giants, and it's worked its way into nearly everything. And I don't just mean the companies pretending to use it. The obvious ones are the chip makers, but it's also the utilities as data centers need huge amounts of power. So, a company whose job it is to keep the lights on in Ohio is now partially an AI stock, or at least its valuation is tied to the idea that data centers will soon become huge customers. It's real estate, too, because someone has to own the warehouses full of servers. And it's construction, as there's a huge boom in data center construction across the United States. The AI trade now employs electricians, and lots of them. Then, there's the money that the boom has already made. A few weeks ago, SpaceX went public, turning around 4,400 of its employees into millionaires overnight, including 400 of them who are now worth more than a hundred million dollars each. The people whose job it is to sell things to the rich noticed this immediately. Estate agents in California and Texas reported a wave of inquiries about new homes. Private jet firms report extra business from those who wanted to celebrate the IPO with a trip somewhere. >> This is the most terrifying part of the K-shaped economy is right now for some people the economy is absolutely on fire. And the fact that you have this sort of deranging effect of this is the best thing ever. Like, oh my god, I've never seen anything like this. Uh and then other people being like, yo, uh I can't make ends meet. This sucks. I can't afford a house. Like, what the is going on? Um it's rough. But, the way that money flows is important to map out because when you have these big events, you're actually getting money to start um dispersing back through the economy. Now, it's going to stay largely in areas where um you're servicing only one class of people. So, if your service like, if your job or your neighborhood is servicing the middle class and the middle class is struggling, then this isn't going to help you at all. But, if you're in an industry that services the wealthy, now this is another boom period. The catch is that boom period starts making its way through the economy through the stock markets. So, you'll get companies that don't seem like they're taking a win from AI, but in reality, that win, while it seems divorced on paper from AI, is actually just the money that people are making in AI working through the system. So, if the AI dries up, that money dries up, those companies go down as well in lockstep with AI instead of normally being decoupled. >> Apparently, the single most popular purchase after an event like this is a luxury watch because as one watch dealer explained it, the share certificate sits in a brokerage account where nobody can see it, but the watch goes on your wrist. >> We'll get right back to the show in a second, but right now I want to tell you about a $6 million government problem. The Department of Defense needs soldiers to perform at their cognitive peak even under extreme conditions. Sleep deprivation, high stress, life or death decisions. They needed a solution that wasn't stimulants because stimulants create a crash, also can be very jittery. So, they funded a $6 million research contract to find something better. What they found was ketones. That research became ketone IQ, and now anyone can use [music] it. Your brain runs on ketones more efficiently than anything else. They cross the blood-brain barrier and fuel your neurons directly. It's not caffeine, there's no sugar, and so there's no crash. I take half a shot before interviews to stay sharp and locked in longer. Go to ketone.com/impact for 30% off your subscription order, or visit your local Target to get your first shot free. That's ketone.com/impact. Now, let's get back to the show. Welcome to Humaning 101. If people don't have a way to flex and to show other people what they're doing, um they they stop caring about the thing. So, people have to find some way to show other people. It is an utterly fascinating glimpse into ourselves. >> Which is a nice way of describing the urge to let strangers know how well everything's been going for you. The point is that the wealth doesn't stay with the AI workers. It disperses out into the whole economy, to estate agents, watch dealers, pilots, interior designers, the people who installed a wine cellar, and the people who stock it. All of them now care about the AI trade, whether they put it this way or not. Your florist may have a position in Nvidia. She just doesn't call it that. SpaceX, of course, was just the opening act. Anthropic is expected to go public in October at a valuation of between $1 trillion and $2 trillion. >> That is going to be a big milestone. We're going to see what actually happens because you've got Anthropic and OpenAI that both want to go public, and I think that >> [snorts] >> I think that we're going to have a liquidity problem. And this is where, again, going back to capital flows, what is that capital flow going to look like? Because if the stock like um if SpaceX drops enough, that money basically gets trapped in the stock market because we've destroyed that value and until the numbers come back up, people are unlikely to liquidate at those losses and be able to go back into the next one. And if they got margin called and literally got wiped out, then that money just isn't there for them to go into the next big thing. And so, there's only so many times that you can rally the cash to the next big thing. If we see that they get there, you know, I mean, they're anywhere approaching $2 trillion at Anthropic with their IPO and it happens in the near future, that's a sign that there's still really strong belief, people are still really into this. If we get all the way through uh Anthropic and OpenAI, that would be a huge signal. But I have a feeling that we're going to see a little bit of softening, but we'll see. >> And OpenAI's in this Q2. Employees don't all have to wait for the IPO, either. According to the FT, OpenAI recently completed a near $7 billion tender offer, buying back shares from employees. So, the watches, the jet charters, and the new homes near the office don't have to wait for the bell to ring at Nasdaq. The money is already spilling out into the economy as we speak, one $7 billion buyback at a time. >> That's incredible. >> Which you get out of the way of AI or are we all stuck in a possible boom and bust cycle? 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And I've been staring and I haven't found a blink yet. >> That's amazing. >> Really? >> [laughter] >> I I think this is part of Patrick's charm. >> That's why I didn't look there real quick cuz my sister was like, "Ha ha ha." And I looked like, wait, I still have to see the blink. I'm sorry about >> know if he's ever blinked in any video ever. >> [laughter] >> I'm looking at it and I haven't I haven't seen one yet. >> His wife is still waiting for that first blink. >> [laughter] >> Like >> God bless Patrick. >> It'll come around. >> him as a total package. Like he's he's really got it all. >> Yeah. >> the look of a banker, the absolute just bone-dry wit, uh the the whole look, the just staring you in the eye for all of eternity vibe. >> 10 out of 10 out of 10. >> 10 out of 10. >> No notes. [laughter] Patrick, you're amazing. >> pushing prices up. What you're paying for is quality. If you want a smarter way to shop for clothes that actually fit, >> I can't ever call it out. I can't ever call >> Damn you. >> [laughter] >> Damn you. >> Click the link in the description. Tailor Store is offering my viewers 25% off their first order with the link and discount code in the description. Custom clothes at a price that actually makes sense. Okay, so let's say you were worried about AI investment and bought small-cap US stocks instead. Well, you're doing quite well. The Russell 2000 had its best first half since 1991, up around 22%. >> God. >> You might take that as a sign that small ordinary American businesses are booming. In reality, 16 of the 50 best performers in the index are semiconductor and chip equipment firms. >> Wow. >> Companies like MaxLinear and Aeroflex systems are up 250 and 380% respectively this year. You didn't dodge the AI boom, you bought the companies that sell it cables and testing gear. Or maybe you're a sensible value investor. You don't touch overpriced growth stocks. You bought the Russell 1000 value index, and right now you feel pretty clever because value is up about 20% this year, while the growth index has actually fallen. Value investing, it seems, is back. The reason your value fund did so well this year is that until recently, it was packed with high-flying semiconductor stocks. >> All right, this is why you always want to get below the headline. If you just look at and say, "Oh, these are going up." and you don't understand the mechanism behind the scenes what just happened, he's going to walk through the the timing of these sales is absolutely crazy. Um but whenever something happens, whether good, bad, you want to figure out why did this thing happen because that is going to be far more informative than the headline. >> Until recently, it was packed with high-flying semiconductor stocks. Micron, AMD, Western Digital, which had been on an enormous tear. Then, in late June, the index providers did their annual rebalance. They moved those chip stocks out of the value index and into the growth index, and moved Amazon, Apple, and Microsoft the other way into value. And the timing was, by complete accident, absolutely perfect. The chips got sold right at the top of their run, just before they rolled over, and the value index picked up the big tech names right as they were touching their lows. Nobody made any big decisions here. A calendar reminder did it. A value fund manager quoted in the Wall Street Journal could only stand back and admire how it had worked. It was like the index got so lucky, he said. It caught that blow-off top in momentum and then sold it right before they rolled over, which I imagine is a slightly painful thing to say out loud if your actual job is picking value stocks and a mechanical rebalance just did a better job than you. >> Listen, getting the timing right is next to impossible. You can have the right thesis, you can be doing your hedge fund running magical mojo, but the reality is that even if you understand the way people are thinking, where this is all going to go, you get the technologies, you understand the story behind the founders, you understand their balance sheet, all of that, you're actually playing a game of psychology with the investors, and that psychology is being driven by emotion. And so, getting the timing right becomes the hard part. So, listen, I'm sure the calendar gets it wrong all the time, and so you've got to take the good with the bad, uh but it is wild. And nobody should ever When when you do something right, and this drives my wife crazy. So, I have made us a in this market, please give me no credit, as I tell my wife, uh I've made us a ton of money investing. Absolute ton of money, ridiculous. And she'll be like, "Oh my god, like you're so good at this." I'm like, "Stop. Immediately stop. Th- This is a question of, first of all, the market is insane right now, and um just get out of your own way is the right answer. And then there are going to be times that the market is way way way down and I'm going to look like a buffoon. And so if you celebrate me too hard now, I've got to take the lumps when it really goes down. And the reality is this is just a time game. Be be in the market, diversified across economic forces. I'm way too ignorant. Do not clap for me. So everybody should come to the market with a massive amount of humility because we might be up now, but ooh buddy, nothing lasts forever. And again, this doesn't mean that there's a inevitable crash coming, but it does mean nothing is an only up phenomenon. Even if by the way, this is all just None of this is real. You're just keeping pace with a declining dollar. Don't forget there's always that behind the scenes robbing you of your investing genius. >> So as a value investor, you did well twice over. You made money on the chips and sold them at the top. The only small catch is where it left you. Your sensible value portfolio is now stuffed with Amazon, Apple, and Microsoft, three of the biggest tech companies on Earth and quite possibly the exact stocks you bought a value fund to avoid owning. You escaped the AI trade and landed in what was effectively the AI trade wearing a false mustache. So if you're stuck in this trade, whether you want to be in it or not, the obvious question to ask is how much money are we talking about? If the AI bubble deflates, how much wealth is likely to be wiped out? >> All right, if you're standing, now's the time to sit. >> Well, let's start with the economist Dean Baker who runs a website called the AI bubble monitor, which sounds like a relaxing website to check over your morning coffee right next to the weather report. Baker's arithmetic goes like this. The total US stock market is worth around 80% if price to earnings ratios simply drifted back to their long-run average, not a crash, just a return to normal valuations. That would erase something like $40 of stock market wealth, which he notes averages out to nearly $300,000 per US household. Now, we need to be careful with the per household figure like that as it's an average and averages can be sneaky. Stock ownership in America is wildly lopsided. The richest 10% of households own something like 90% of the shares. So, if Elon Musk lost, say, $200 billion from SpaceX and your neighbor lost 4,000, the average loss is a very impressive number that describes almost nobody. The typical household would lose far less for the simple reason that the typical household doesn't have $300,000 in stocks to lose in the first place. So, let's get some other opinions. Gita Gopinath, the former chief economist at the IMF, reckons a dot-com style correction today would destroy about $20 trillion of American >> Okay. So, so far we've had 40 trillion. Now, we've got 20 trillion, okay? Seems much more reasonable, but we're going to get a comp here in a minute. >> wealth plus another $15 trillion in wealth held by foreigners. >> [snorts] >> That American 20 trillion is roughly 70% of US GDP. Consultants at Oliver Wyman ran their own version and landed near $33 of value wiped out. Again, more than the entire US economy produces in a year. And then, for a number that puts those estimates in perspective. When the actual dot-com bubble burst, it destroyed about $6 trillion of equity value. So, >> You'll notice nobody's offering you a number anywhere near that. So, the dot-com bubble, the thing that when you start trying to map out and benchmark different things that could happen inside of the stock market, you're going to look at what happened in the railways in like whatever the 1860s or something. You're going to look at obviously the 1929 crash. You're going to look at the what happened in the 60s and 70s. You're going to look at the dot-com bubble and it's so much smaller than what people are predicting now. Now, these are just predictions. Nobody knows that that's actually what's going to happen. But, yo, when you've got all your predictions that are like so much bigger than that, now you're in trouble. >> The mainstream estimates for this one run somewhere between five and six times the size of the crash many of us still reach for as a cautionary tale. So, three different methods that all land in the tens of trillions of dollars. We can at least agree on the order of magnitude of the potential hole. Now, you might reasonably say, "So what? It's paper wealth anyhow. If your retirement account falls by a hundred thousand >> He just blinked. We got it. We got it, Chad. >> than you did yesterday. That is true, but it matters anyway. And it matters more now than it used to. According to Goldman Sachs and the Federal Reserve, stocks overtook real estate as the single biggest component of American household wealth this year. >> I'm not going to lie. I like that something is overtaking the home. I think that one of the danger zones that we've run into with people not being able to afford homes is everybody thinks that my house has to go up in value. This is going to be the thing that I leave with my kids. And when we over index on houses being the thing that people put their money into, we run into this problem. They turn into a voting block and they don't want to see the the value of their house stay flat. They really don't want to see it go down. They want an only up phenomenon and they will vote for anybody that's going to promise that. And that's where we choke out housing. So, I get it. I don't expect that to be a popular opinion. But man-o-man, that in and of itself is not necessarily bad. Um it it is a high risk that people can get into the stock market thinking short-term. That I think is problematic. But the mere fact that this has overtaken the housing market is it's complicated because right now the housing market is terrible. So, this is not a sign of anything good. It's not like we started producing the houses that we need to drive the cost down. But it will, I think, help break the mentality that a house must always go up in price. >> To your point, I have an anecdotal example. One of my old neighbors, he was the Airbnb king. He had five, six, seven properties, whatever like that. He hit me up. He was like, "Drew, you know you and your family like real estate invest. Like I have a property I'm trying to get rid of. Like, you know, do you want to get in?" I was like, "Yeah, maybe. It depends, you know, it's a trust. I got to figure out what's going on." And then I was like, "Where's the property?" He was like, "Houston." And I just like laughed. I was like, "Oh, the historic flat market that doesn't price up." He did a fix and flip and got stuck with it now. And it was just funny like, "Oh, you just expect like because you've seen it in Miami and Phoenix all these explosions." He's like, "Oh, Houston is going to grow." And it's been 2% up, but that's because they're building so much. So, it it hurts, quote-unquote, the housing investor, but at the onset the community there is able to afford houses. So, it's that push and pull. >> We have to, as a culture, make that trade-off. Have to. >> For the first time since the Second World War, for most of modern history, the average family's net worth was mostly their house. So, a stock market crash was mainly a rich person's problem. That is no longer the case. The stock market is now where the median household's wealth actually lives, which means a crash today reaches into the middle of the country in a way that it didn't in 2000. That's then where the wealth effect comes in. When people log into their brokerage accounts and see a big number, they feel rich and they spend more. The nicer car, the kitchen, the holiday. The research rule of thumb is that for every hundred dollars of paper stock wealth, people spend about three real dollars in the actual economy. It may not sound like much until you multiply it by tens of trillions of dollars. And the whole thing runs in reverse, too, just as reliably. If 30-odd trillion dollars of household wealth were to evaporate, people would drastically slash their spending. The new kitchen gets canceled, the contractor loses his job, the car salesman has a dreadful quarter, the dealership lays someone off. The damage cascades out from the stock market into the real economy without a single bank having to fail. It just requires people to feel a bit poorer. >> All right. Now, here's the bad news. You've already started seeing reports coming out of places like Walmart that people are spending less now. And I think if you track that back, what's going on is people have really just tried to power through the post-COVID uh problems that we've been seeing, the you know, call it 30% rise in the cost of everything without wages keeping pace. And instead of immediately reversing course and people starting to be austere in their own lives, people just took on debt. Uh people spent savings. But of course, that was eventually going to run out. What we're seeing is that's running out now. And so while you've got people on the top of the cave doing great, still spending money, they're they're the only people left spending money, um you're seeing middle class and people in the working class are all pulling back and pulling back pretty hard. So we've hit some sort of hard wall with the amount of savings or the ability to bring on debt that people had. And so that's before the bubble burst. So you want to be in a position where let's say that, you know, we're coming up towards the everybody's questioning the bubble but it's 2019 where people have started saving money, uh that's going to be the time where something like this would be easier. It's not going to be easy, but it'd be easier to absorb some of it so that it could play out a little bit more like the 2000 dot com burst, uh which hurt, obviously, anybody that needed their money in the short term, hurt uh people that were retirees, but it didn't have that kind of massive shock wave through the economy that this would potentially have. Um so that is important to keep in mind as well. >> The problem for anyone who thinks they're safely on the sidelines is that AI is now propping up whole chunks of the non-AI economy. Harvard's Jason Furman calculated that AI-related infrastructure spending accounted for something like 90% of America's economic growth in the first half of last year. >> That's insane. That is insane. As a nation, we just cannot allow that kind of concentration. Like it's crazy. Uh what exactly we do about it is a way bigger question that is certainly outside of what we're going to talk about right now. We'll get back to the show in a second, but first, a word for anyone who travels for work. When I'm on the road, traveling for a shoot or meetings, whatever, I'm still running the company from wherever I land. So logging into my accounts from a hotel room is a must. I'm still going to be answering messages at the airport, but those networks are wide open. And as someone who's been hacked, I can tell you this is terrible. Anyone sitting on that same Wi-Fi can see what you're doing. And when you run a company, it's not just your data on the line, it's your team's, your customers, everyone who trusts you. This is what Surfshark [music] is built for. Surfshark encrypts your connection the second you're on public Wi-Fi, your activity is locked down [music] and far harder to track. Your logins, your accounts, your company's data, it's all [music] protected. Go to surfshark.com/tomb b or use code tomb b for four extra months of Surfshark. Go to surfshark.com/tomb b and use code tomb b for four extra months. Now, let's get back to the show. But this is where getting into something like the Hamiltonian economics that Bessen is trying to drag us into, um, is a must. You've got to start returning other industries that make physical things that aren't beholden to AI. Have to. >> More conservative estimates put it at around a quarter. Either way, an enormous share of recent economic growth is simply just data center construction. So, think about who depends on that spending continuing. >> Think about what happens if America turns against data centers, which we're already seeing in massive numbers. Every time I utter the word data center, I feel, uh, that Ryan is going to bend his neck around an object to to stare at me. It it is, uh, already become, yeah. >> [laughter] >> It's already becoming like a thing that you can't talk about. So, um, the fact that so much of the jobs and economic growth is all hinging on a thing that Americans are rapidly turning against, ooh, buddy. >> It isn't just Nvidia shareholders, it's the electricians we talked about at the top of the video, it's the construction crews pouring the concrete, it's the firms that make the air conditioning units that stop the servers from cooking themselves. It's the people running the cables, manufacturing the transformers, and driving the trucks, even the astronauts installing them in outer space. If [snorts] AI capital spending slows, all of those people see their income slow with it. And not one of them needs to have ever bought a single share of anything. The Nobel laureate Joseph Stiglitz puts the grim vision plainly. A crash like this would land at the same moment AI starts displacing workers. So, a lot of households could get hit twice at once. Their savings falling while their jobs get less secure. >> Okay, so this is a complicated issue. There's no doubt that AI is going to um cause some people to lose otherwise secure jobs. However, right now, this may not hold forever, but right now it's following the same pattern that every major technological revolution has followed before it, which is ultimately it ends up creating more jobs than it destroys. But that doesn't help the people who aren't going to be able to adapt to the new world. It aggressively helps young people uh because young people will be just the this is the job market. These are the things that we do. Just like when the internet came along and social media came along and suddenly content creator was a thing and that created I can't even imagine how many more jobs for editors, cinematographers than existed ever before in human history. I mean, it had to be a staggering number. There will be new jobs that are created that we can't really anticipate right now. Um so, it'll be a shift away from people that are say north of 35 down to people that are just coming out of high school and college that'll be far more adapted to the new technology. Um so, take it for what it's worth. Also, I think more people are going to be able to start their own companies and do things that weren't previously possible. So, it isn't It's not like, oh, this is a done deal. Eventually, we're going to hit a point AI is going to come in and it's going to wipe everybody out, especially if we hit a pause button and we don't get to super intelligence. Super intelligence is where AI is better than us at everything. At that point, forget it. AI is not a tool anymore. It's just going to do everything and all you can do is hope for a world of abundance. Um but yeah, that one I will say don't don't necessarily take the doom and gloom. It's something called Jevons paradox, where the cheaper something becomes, uh the more of it people use. Um so, yes, coal replaced a lot of old jobs, but it created a lot more new jobs because people wanted to use the coal for more and more things. >> He put it, the breaking of any bubble is really bad in the short term for the macro economy, which from a Nobel economist is practically a scream. Now, if your mind is going to 2008 at this point, you might be worrying a bit too much. The big banks are in much better shape than they were back then. They hold far more capital. They've got real liquidity buffers and they get stress tested every year. There's no reason to expect a repeat of Lehman Brothers. But, the reason it isn't a banking story is that we made the banks safer. And when you make one part of the financial system safer, the risky lending doesn't necessarily stop. It just moves somewhere else with fewer rules. A few weeks ago, the Wall Street >> way, that's an important lesson about markets. You can try to clamp down on a lot of this stuff, but if there is a desire for it, people are going to find a way to it, especially when you start talking about financial instruments. Uh so, yeah, this is all getting into the private credit stuff. He He never ends up talking about Blue Owl. He's going to get a bit into private credit in a second. Um but that that is a whole universe unto itself. And understanding how money moves into private credit, understanding how the respiratory system of the global economy is the euro dollar. You have to understand all of that stuff, how that money system works, to understand why risks might be hiding in places that nobody's able to model out properly, but it doesn't mean the risks aren't there. >> published an analysis with the wonderful title, "Why Big Tech's AI Spending Is $3 Trillion Higher Than It Seems." They reported that every quarter the big tech companies proudly report their capital spending on AI. The data centers, the chips, all of it. That reported figure across the whole group is about $600 billion over the last year. Here's the problem, though. The journal went through the footnotes of these companies' filings and found roughly $3 trillion of additional AI commitments that don't appear on the balance sheet at all. Five times the capex everyone's been staring at. These are things like long-term leases on data centers and locked-in purchase commitments for chips, computing power, and energy. Money that the companies are absolutely on the hook to spend, tucked away in the footnotes rather than sitting on the balance sheet where you might think you would find it. >> Yeah, so I covered this in one of my um reactions before. The reality is that these guys are disclosing everything that they need to disclose, but the problem is they put them in these really boring um you know, papers. Uh they're in the footnotes, people aren't looking at that stuff because again, people are not reasoning their way to these positions uh purely intellectually. They're getting here by uh emotional means, but um this is why in this debate about what is the depreciation cycle for the assets, it really becomes a very meaningful question that has to be answered. Um I won't go through the whole thing, but um you had Nvidia putting out basically insurance against their chips going down in value over time, which is basically an insurance play against their claims that you get 5 to 6 years versus the 2 to 3 that people like Michael Burry are saying, uh they're mis-clocking these in their um reports. Because of that, there's a lot more losses than people are being honest about. Uh and the interesting thing about what Nvidia put out was that they can show that in the first 6 years that chips are still holding their value. The part of the reason for that though is that there's more demand for AI currently um than we have the build-out for, but once we have all of the build-out that's already been green-lit but hasn't come online yet, what's that going to do to that value? Is it then just going to really plummet? So, they were willing to back 25% but that was it, only 25%. So, it's like I think there are a lot of question marks there that are going to have profound impacts. So, um the story obviously is going to be far more complicated than people are going to be able to give you. If you lose sight of that, I think it gets easier to get caught up in the emotion, so beware. >> Alphabet alone has over $800 billion of this type of purchase commitment. Analysts have started calling it an AI spending iceberg. The enormous part above the water turns out to be the small part. None of this is technically hidden and none of it is illegal. It's all disclosed if you happen to be the sort of person who reads footnotes. But, it means that the true scale of what these companies have promised to spend is far bigger than the headline numbers suggest and every dollar of it rests on the assumption that the AI revenues will eventually turn up to pay for it. The market has started to notice. The cost of insuring big techs debt against default has hit record highs recently. And when the companies at the center of all this start to strain, the pressure travels to wherever the lending happened, which brings us to private credit. Over the past few years, private credit funds, lightly regulated outfits that lend directly to companies outside the traditional banking system, have poured money into the AI and software world. This is now something like a two to three trillion-dollar market and it has started to creak. The Financial Times reported this month that troubled loans at the 20 largest listed private credit funds have climbed to their highest level since 2017. Fitch says private credit defaults hit a record in July. One large fund reported that 7% of its entire loan book was in trouble. The co-head of one of the big lenders told investors more or less that the denial phase is over. Now, we have to be fair, many people think that this is overblown, too, pointing out that the default rates we're talking about are still low in absolute terms. >> It's true, but one of the most important things that people can be looking at in the AI game is is the rate of growth slowing. So, like if you look at China, China is still growing, but their rate of growth is declining. And so when you start looking at the housing crisis there and you see that it's having an impact on the overall growth rate, you've got things trending in the wrong direction. It doesn't always mean that something breaks instantly and oh, we only have a problem down the road. It's like no, no, no, this is telling you the direction of travel. The fact that the the private credit industry is um on unsteady footing, let's say. Nobody knows how big the problem is, nobody knows if it's going to keep getting worse, but you have people that are now saying, "I want my money back. You promised me I could get my money back, and now you're denying to give me my money back." Now, in a bank, we call that a bank run, and that is catastrophic. It will often end the bank. The bank goes out of business. And what's happening is in the private credit funds, they're just saying, "No. Hey, I know we told you we would give you your money back, but we're not going to." And because of the light regulations, they're able to get away with this. So, this is where it's like, "Yes, what you're saying is true." Uh that if investors can get their money back, those investors on that investment, meaning if they get some portion of it back, those investors on that investment will probably simply limp away from the deal, but it's an indication that we're running out of places to get good debt, and we have started reaching into places where it's too high risk of debt. And if you remember 2008, that was the exact problem. So, we've taken the banks are the ones doing the um loans that are too risky, and now we've just moved it to private credit, but it certainly feels like the same phenomenon. >> And if the lenders recover most of their money, the actual losses are still small. So, there's no catastrophe today. The worry, however, isn't the current number, it's the direction the numbers moving in, and the fact that private credit is deliberately hard to see into. In a lightly regulated, opaque corner of finance, nobody quite knows who's holding the risky loans until something goes wrong and everyone finds out at the same time. We ran this exact experiment in 2008 with a different set of acronyms, and it didn't go especially well. We're now re-running the experiment, presumably to confirm that the result replicates. Now, whenever you point any of this stuff out, someone always turns up in the comments within about 90 seconds to say that none of this matters because AI is a real technology that's going to change the world, and they may well be right. There might be huge productivity gains in the pipeline. Businesses, just to be clear, already find AI really useful. But, here's the uncomfortable thing. A technology being real and useful and world-changing still does absolutely nothing to protect you if you initially overpaid for the stock. Good businesses and good investments are totally different things. >> Preach. Preach. Everybody has to like burn that into your soul. Uh you can have a great business with a terrible stock price that you bought in at. It goes down. Uh it ends up re-getting to that number, but not till 20 years later. Or you ended up getting liquidated on the way down. And so, yeah, it ends up being great for somebody else who buys low and sells high. But, the reality is because people invest emotionally, the vast majority of people buy high and sell low. Or they just get liquidated. So, yeah, separate the two things. >> The Bank for International Settlements put out a report recently comparing the current AI build-out to the British railway mania of the 1840s. And they weren't being flattering. Trains were obviously a real and transformative technology. They changed the world, how people traveled, how goods moved, where people lived. Investors in the 1840s who understood how important this technology was got extremely excited and did exactly what investors always do, which is to take a good idea and overdo it. Hundreds of new railway lines were proposed, and the money involved was staggering. By 1850, cumulative investment in railways had reached close to half of Britain's entire GDP. The snag was that in all the excitement, companies started laying down expensive railway track to tiny villages that turned out to contain almost no passengers. Amazing engineering, but nobody on the platform, which as a business model has some well-documented weaknesses. By 1850, railway shares had lost about 2/3 of their value. The tracks remained in place, the trains ran, the technology went on to power a century of British industrial dominance, but the people who paid for it were wiped out. The railways changed the world, the railway investors changed their spending habits. This pattern is what the BIS is worried about. According to their research, relative to where each boom started, the AI build-out has already grown faster than the railway mania, faster than the electrification boom of the 1920s, and faster than the dot-com bubble. On their chart, it's the steepest line of the lot. Those earlier manias tended to break around year five, and then drag their economies into a recession. We're currently at year three, so there's plenty of time left to go. For a more recent example, we can look at the dot-com bubble. The internet, once again, was real. No one's claiming that it turned out to be a fad. And at the time, telecom companies were so certain that the future would need infinite bandwidth that they borrowed huge sums of money and laid tens of millions of miles of fiber optic cable across the country. So much of it sat unused for years afterwards that the industry gave it a name, dark fiber. They built the road system for the modern internet roughly a decade before there was enough traffic to justify it. >> That That's the question about what's happening now. So, do we need all the data centers? Nobody's saying we don't need data centers. Well, people are debating whether we should want data centers, but if if you're going to have AI, you're going to have to have the data centers, um, and that isn't the question. The question is in the race for AI supremacy, these companies trying to beat each other, everybody trying to get their dollars in, um, because people can just see like whoever wins this race, like, oh my god, this is going to be insanely lucrative. And so they're all pouring their money in. Now, just like in the streaming wars, what we end up seeing is these guys clash and collide. We as the user, we end up getting a lot out of it, but at the end of the day, they're not all going to survive. It is a terrible business model for them to be burning that much cash for that long. Only so many people are going to be able to survive that. Now, you have that going on in AI, you have this historical pattern that repeats, but on top of that, you're in a position now where AI is so integrated into the entire economy, even globally, that you're in this position where if it goes down, it's not just like a bunch of investors find out that they're not as smart as they thought they were. You're in a position where you drag the entire economy into a recession or depression. And so if we're already on unstable financial footing, which I think there is an extraordinarily strong case to make, cuz again, don't be confused by the K, some people on top doing well, the overall economy is not in a great place. So given that, if you're already experiencing recession-esque economics, and then you layer this on top of it, now it's like, whoa, the size of the blast radius could get extreme. >> Most of them went bankrupt waiting for the eventual revenues. When that bubble burst, the S&P 500 fell by about half, and the Nasdaq lost nearly 80%. But here's the part that really matters for anyone who thinks they can outsmart this by simply buying the eventual winner. Even if you picked correctly, even if you identified the single best company of the entire era, it could still ruin your decade. Amazon is the obvious example of a winner that you could have picked. Amazon survived the crash and became one of the most valuable companies in human history, but its stock still fell about 90% when the bubble burst. If you bought at the peak in 1999, you were absolutely right about the future of online commerce, and you then would have had to wait until 2009 to get back to break even on your investment. Being right cost you a decade. Jeff Bezos' own letter to shareholders about that year opened with a single word, "Ouch." [clears throat] It's worth noting that there are very few people who would have bought just Amazon, either. In the typical tech investor's portfolio in 1999, along with Amazon was a basket of stocks like pets.com that all went to zero, diluting their long-term returns significantly. >> All right, this is what we're talking about. If you really want to win in the stock market, you have to, one, bet against the consensus and be right, and two, it's going to need to be a concentrated bet. Now, that is not my advice. My advice is the exact opposite of that, but nonetheless, if you had bet on Amazon alone, then yes, when you recovered, you would have been laughing all the way to the bank. But if you put all your money into the stock market and in '99, and then it crashes and you were spread out across a bunch of things, well, now you're taking all your lumps cuz some of those companies are just going to cease to exist, and so Amazon, over a long enough period of time, is likely to pull you out of whatever hole you were in because it became so valuable, but the vast majority of people, one, they just they can't stomach waiting that 10 or 20 years in some cases for those companies to come back, and so they sell, and then they're so scared that they don't double down on the one that's showing signs that it's going to come back out of this. And so they end up doing what? They buy high, they sell low. This is just how that mechanism works. >> For investors, the hard part isn't believing in the technology. It's picking which specific company is going to win while you're standing inside the bubble. If you cast your mind back to the late '90s and you're convinced the internet is the future and you're right about that and you started looking for a company that will own internet search, the obvious choice at the time might have been Infoseek or Lycos or Altavista or Excite, the biggest, best-funded search leaders that had become household names. Every one of them is now a trivia question. The company that eventually won, Google, barely existed during the bubble and only came to prominence in the early 2000s after the bubble had burst. It's very easy looking backwards to assume today's winners were always destined to win, but history is fairly blunt on this topic. Being first to build a transformative technology mostly just makes you a very expensive rough draft for whatever shows up later and actually makes the money. >> saying this, but >> you take any of this as a signal to sell everything you own to buy canned food and guns, I want to give you the other warning, too. As calling the top on tech is a game people have been losing for quite some time, too. Back in April >> This is a great point. So, had Raoul Pal on the show recently and so I was laying out, okay, here are the things that I'm worried about and you know, I'm rebalancing my portfolio and Raoul had a stroke and he was like, "Listen, this is the mistake that everybody ends up making and they end up missing out on all the wealth creation." And now while he and I disagree on that, I think it is a wise time to start rebalancing, not a time to exit. That's certainly not my strategy, but a time to go from a more aggressive posture to something that's more protective. I think it's wise, but everybody should do what they think is right. That certainly is not me giving you financial advice. So but understanding that if you exit out of the system entirely, you could miss years and years and years of gains. So it it is a game where you have to be so careful cuz you can lose sitting on the sidelines because of inflation, and then you can lose by being in the game because you over index and get it wrong or even just get the timing wrong. >> 2022, The New York Times ran a piece called The Tech Bubble That Never Burst. It laid out a full decade of famous investors sounding the alarm on tech and being wrong over and over again. In 2011, the entrepreneur Steve Blank announced we were in a second internet bubble and that the signals are loud and clear. In 2014, the VC investor Marc Andreessen warned that high burn startups would, and he wrote this in all caps, vaporize. In 2015, Mark Cuban declared that this bubble was worse than the tech bubble of 2000. In 2016, the veteran investor Jim Breyer saw blood in the water, predicting that 90% of unicorns would be repriced or die. And in 2021, Jeremy Grantham, a legendary investor who has correctly called some of history's great bubbles, promised that this one too would burst in due time. The bit I love though is that The New York Times published that article in April 2022, which was more or less the exact month that tech stocks began one of their worst declines in a generation. The Nasdaq fell by about a third that year. So the definitive piece on doom mongers always being wrong came out at almost the precise moment the doom mongers were briefly right. And that is the whole problem in one story. The bears are usually early, frequently wrong, and then occasionally with no warning, they're right. And by that point most people have stopped listening, which is exactly why this video isn't a prediction, and why sell everything is not the lesson. >> Okay, so this is why I talk so endlessly about building your thinking up from first principles. So the reason to listen or not listen to somebody is not because you think they're right in that moment. It's because they're giving you an indicator of what their belief system is, which then allows you to take a broader spectrum look at what are the conceivable ways to interpret what I'm seeing before me. The vast majority of what we interact with can't be really determined to be fact or not fact, either because it's asking you to see into the future, in which case it will become fact, but you're going to have to make a decision before you get there, or it's just this isn't really a thing that's anything other than interpretation because I'm betting on or against human psychology, which woo, is it is still a thing inside of a deterministic universe, but boy oh boy is emotion hard to map. So what you want to be doing is saying, "Okay, hold on a second. It's useful to hear what they think, but what I'm trying to do is figure out the base assumptions that are driving their thinking. That way have to get lost in the cloud of their emotions. I can go ask, "Are their base assumptions actually true?" And so which of their base assumptions can I connect to actually ground reality? And that is why I listen to bears, I listen to bulls. I'm trying to figure out what they're both thinking. I'm trying to find their arguments, and then I'm trying to go, "Okay, I believe this part of the bear case, I believe this part of the bull case, and so in the wash, how does that all come out? What do I think the direction of travel is?" So again, first principles will come to your aid at all times. >> In fact, if you had bought at the highs in 1999 or right before the credit crunch or right before COVID and just held on till now, you will have done just fine. And the problem with selling early or even selling in a timely manner is that it's very difficult to time rebuying. So, if nobody can time this, the lesson is something much more boring than that. Jason Zweig wrote a column in The Wall Street Journal a little while back making the case that if you actually want to get some distance from the AI trade, one place to look is Europe. He was not especially flattering about it. He called the continent, and I'm quoting here, an open-air museum of aging populations and arthritic economies, which is a rough sentence to read if you live in Europe and would make for a fairly grim tourism campaign. But, the unflattering is sort of the whole point. European stocks are cheap precisely because so few people are excited about them. Tech is only about 10% of the European index versus nearly half of the S&P 500. And value investors are looking there exactly because the excitement and the high prices that come with it simply hasn't arrived. Instead of AI and Mars colonization, the index is mostly banks, industrial manufacturers, and health care companies. The sort that generate steady cash and pay you a dividend of around 3% while you wait. And to be fair to Europe, this isn't just buy the boring stuff and hope for the best. Zweig quotes a fund manager at Fidelity who describes the 3% dividend as the ballast you'd look for if the AI story fails to meet expectations. The idea being that if the S&P 500 falls, European stocks will probably fall less simply because there's less speculative price build-up to unwind. A port in the storm, as he puts it. >> I think that's a really interesting point. So, for anybody that is looking to um where am I going to go? How am I going to deal with this? Realizing if I'm right in what I said at the very beginning, which is this is largely about emotion, you've got this gigantic gigantic hoover that's sucking in all the capital, that's bringing a ton of tension to it attention to it. It's um getting people very excited. People are buying into the narrative. If all of that is right, then if you want to hedge against it, you're not necessarily going to exit it entirely because you never know how much it could be years of excitement that's still left, which could translate into a ton of money. But, if you want to have a hedge against it, then you're looking for something that's the opposite. What is the thing that's a good business? Like it's really solid, it's actually happening, and it doesn't have the excitement premium. It doesn't have all the attention and the energy. Now, it's going to require you to do more work, but it also means that if you can find a gem that's a real, true, solid business, uh you're not going to have that premium to unwind, as he said, when things if things um get shaky, you're going to be somewhere that's slightly more immune to that phenomenon because it isn't already put into its price. >> Another manager who I spoke to argues the ossified Europe stereotype is out of date. That big European companies are reforming and cutting costs faster than she's seen in her entire career. So, the case isn't that these are sad, dusty companies, it's the low investor expectations leave room for upside surprises, which is roughly the opposite of what you get when you buy the most exciting stock in the world at 40 times earnings. Now, I should be clear that Zweig is not predicting a crash in his column, either. He goes out of his way to say the fears about US market concentration are probably overblown, that history doesn't show that a few giant stocks lead to bad returns, and that if you're already globally diversified, you might not need to do anything at all. His suggestion is simply to add a little European exposure at the margin, not to run for the hills, which fits the whole spirit of this video. The point was never to tell you that the sky is falling. It's that if you've somehow ended up with everything you own riding on a single trade, it's worth knowing that there are other rooms in the building. And that brings us back to the magic word from the start of the video, diversification. People often think diversification means owning 50 different technology stocks that all go up together. >> [laughter] >> I still can't believe that's real. >> Is that literally how he laughs? >> You you were not trolled. That's a real video. I had to look it up. I was like, there's no way that guy is real. He's real. Yeah, that was the whole guy at the center of that massive scandal. >> I thought it was Beavis and Butt-Head for a second. >> Oh [laughter] my god, it's crazy. Almost worse in some ways. >> That's just piling in in a bull market. As Zweig puts it, if all of your assets go up at the same time, they're also likely to go down at the same time, which is the thing you were trying to avoid. Real diversification means deliberately owning things that don't all fall over on the same afternoon. >> Uncorrelated. >> Which in practice means holding some assets you feel faintly embarrassed about. While your neighbor is at the barbecue talking about his SpaceX allocation and his Nvidia call options, you have to admit that a meaningful chunk of your net worth is riding on the dependable performance of a Swiss pharmaceutical company and a Scottish water utility. It's not a story that gets you invited back. But, the boring assets are the ones still standing when the exciting ones aren't. And that's the real lesson here because long-term investing isn't supposed to be exciting. When you look back through financial history, the most thrilling trade of any given era is very often the one that goes on to ruin the people who piled into it. In the early 1970s, the Nifty Fifty were the 50 blue chip American stocks that you could supposedly buy and hold forever, right up until they lost most of their value in the 1973 to '74 crash. By the end of the 1980s, the Japanese stock market was widely regarded as the unstoppable future of the global economy. Then it spent the next three decades going essentially nowhere. An investor who bought Japan at the peak in 1989 waited more than 30 years just to get back to break even. >> And let me be very clear. You were waiting for 30 years for inflation to catch up. You weren't uh it's not like, "Oh my god, these stocks are now hot again." It It is So much of the gains in the stock market are actually an illusion. It is simply the dollar losing value. Same with the yen. >> And as we've already discussed, the Nasdaq needed about 15 years to climb back to where it stood in the year 2000. None of these were stupid bets at the time. They were the consensus. They were the exciting, obvious, everybody already knows it trade, which is precisely what made them so dangerous. So, this is where we land. You don't have to attend every party. You don't have to put your whole net worth into the hottest corner of the market because it's what everyone is talking about and someone on the internet told you it only goes up. The AI boom may well work out to be as good as advertised. A lot of serious people think it will, and they might be right. But, this technology is real, and these stocks are a good investment at these prices are two completely different statements. And a good chunk of financial history is just people confusing the first one for the second. The point of investing for retirement isn't to have interesting things to say at dinner parties. It's to eventually retire. If you found this video interesting, >> All right. My man, Patrick Boyle. You guys, if you haven't subscribed to him, do. You will love it. Uh he's absolutely fantastic. He puts out a ton of great content. Um yeah, this one is wild. Listen, I get it. This is a huge moment. I hope you guys are in the stock market in a wise way, and that you've been able to ride uh this run-up as well. I hope now, while things are still going well, you start thinking about whether or not you want to do anything different. Um I that is a decision everybody has to make for themselves, but uh there's no doubt for me, this is a moment to um take some of my wins, rebalance portfolio. I'm still in the market. I'm still exposed to AI. I'm not running and hiding in the hills, uh but I am shifting my posture a bit. Um so, yeah. Hopefully, you guys got value out of that. I know I'm obsessed with looking at what's going on with the AI market right now. All right, everybody. Have a wonderful weekend. We'll see you guys on Monday. Love you bunches. Until next time, my friends. Be legendary. Take care. Peace. If you like this conversation, check out this episode to learn more. China and the US are almost certainly going to end up in war precisely because China is declining. Their decline makes our collision inevitable. Now, the crazy thing is that actually stands in opposition to what