Podcast Summary: Excess Returns

Episode: Disbelief Is the Real Risk: Gene Munster and Doug Clinton on Why the AI Bubble is Just Getting Started
Date: January 18, 2026
Host(s): Jack Forehand, Justin Carbonneau, Matt Zeigler
Guests: Gene Munster (Deepwater Management), Doug Clinton (Intelligent Alpha)

Episode Overview

This episode is a deep dive into the current and future state of artificial intelligence (AI) as an investment theme, addressing whether we are in—or even anywhere near—an “AI bubble.” Gene Munster and Doug Clinton return to discuss their annual predictions for the technology sector, share insights from Deepwater’s 2026 outlook, and debate where the true risks and opportunities lie for both public and private market investors. Major discussion points include the durability of AI-driven growth, the coming surge in capital expenditures, the fate of "Mag 7" big tech stocks, the path of smaller tech disruptors, the impact of energy markets, and the race for leadership in autonomous vehicles.

Key Discussion Points & Insights

The AI Bull Market: Where Are We in the Cycle?

• Doug Clinton on the State of the Bubble

  • Still believes AI is in a multi-year bull cycle, not at its peak
  • “I think we probably still have, I think, another two or three years in this sort of AI bull market cycle before things get really insane. I know some people think things are already really insane. I think if you actually look at the numbers though, for the most part, a lot of these companies, they are supported by fundamentals.” ([04:57])
  • Current rapid growth is underpinned by robust fundamentals, especially data center buildout supporting the chip sector; growth on the software side is still emerging

• Gene Munster on Early-Stage Opportunity

  • "We still believe we are earlier than most investors would would assess at this point... the probability that there is upside to some of these smaller companies... is higher.“ ([01:17])

Deepwater’s 2026 Predictions (and the Rationale Behind Them)

1. NASDAQ Will End 2026 Up More Than 10%, Driven by AI

• Despite higher expectations due to recent outsized returns, a 10% gain is still ambitious
• Fundamental Support:
  • Mid-teens earnings growth projected for key indices, with valuation multiples not excessively high ([08:12])
  • “Hold that multiple and you get mid-teens growth in earnings, that supports your plus 10% hurdle.” —Doug ([08:12])
• Skepticism about capex and asset-heavy transition is healthy, preventing “flashy red lights” typical of bubbles—though Doug predicts that skepticism will eventually fade ([10:08])

2. Small Cap Tech Will Outperform Mag 7 (Large Cap) Tech

• Drivers:
  • Mean reversion after massive Mag 7 outperformance
  • Law of large numbers: smaller firms’ relative growth rates are higher, and the AI cycle is still relatively early
  • Rate cuts: Expected to benefit equities, especially riskier small cap names ([11:52])
• Deepwater’s Loup ETF (focused on sub-$500B tech) saw outperformance vs. Mag 7 in 2025 ([15:19])
• Investment Approach:
  • Focus on the ability of small caps to become “platform” companies—those with the potential for an ecosystem effect, compounding scale ([16:38])

3. Hyperscaler AI Capex Growth Will Exceed 50%

• Not a “One-Upmanship” Prediction:
  • Meta and other giants are forecasting >50% y/y capex growth; the "follower effect" means all hyperscalers must match pace or risk being left behind ([19:19])
  • “If you're not spending appropriately, you may fall behind and that could have a very bad outcome for you. And if you do end up cutting...the benefit isn't that great so you kind of need to run it whoever is running at the fastest.” —Gene ([19:19])
  • Jensen Huang (Nvidia CEO) commentary at CES: buildout is likely to exceed even ambitious current targets ([21:00])

4. Mag 7 Shift from ‘Asset Light’ to ‘Infrastructure Owners’

• Mag 7s are pivoting from pure software/IP business models to embracing infrastructure ownership (e.g., custom chips, data centers), enabling cost reduction and unique capabilities ([26:07])
  • “I think we're in a different season now where there's a lot more value in the current season to owning the infrastructure...” —Doug ([26:07])
  • Google’s cloud boost from partnering with Apple on Siri is cited as a concrete recent example ([28:14])

5. Top Private AI Companies Will Break Their Silence and Go Public Before 2027

• The team admits this prediction is likely to be proven wrong, as OpenAI and others are actively preparing to IPO
  • Private capital is reaching its absorption limit, pushing late-stage leaders toward public markets ([29:45])

6. Apple’s Redemption Arc: New, Well-Received Siri by April 30, 2026

• Apple is widely expected to finally modernize Siri, potentially making it a “killer app.” Gene predicts that if Apple can deliver a new Siri that is “well received” (i.e., users talk about it with friends), the stock will surge; if not, it will drop ([34:37])
  • “When you use the new Siri, you're going to tell a friend about it and that's an incredibly high bar. If, if they deliver on that, Apple shares are going up and if they don't, the stock's going down.” —Gene ([34:37])
• Recent Apple–Google deal and Google's parallel product launches underscore the arms race in personal digital assistants ([37:02], [37:45])

7. Apple Will Be the Top Performing Mag 7 Stock in H1 2026; Alphabet in H2 2026

• Apple: If it “proves” AI competence with new Siri, likely to see multiple expansion ([40:22])
• Alphabet: Projected to benefit from higher search revenues, increased ad integration in AI products, and ongoing AI prowess ([41:49])
  • Doug’s Intelligent Alpha AI model favors Amazon as a H1 play due to AWS momentum, but he concedes Alphabet’s AI narrative is powerful for full-year leadership ([42:27])

8. Cost Leadership Will Be a Major Advantage in AI

• Both the consumer-facing and enterprise sides will favor the low-cost model provider, with Google currently leading that race ([44:08])
  • “Being a low cost provider essentially is just what enables your margin and enables...you know, your tier at twenty dollars versus a hundred versus two hundred might compete against your competitors.” —Doug ([44:08])
  • Gene notes Google is already distributing strong free AI products as on-ramps to paid services ([46:11])

9. Nuclear & Energy Infrastructure is an Underappreciated AI Play

• Massive data center growth will make nuclear and renewables critical
• Nuclear will likely be a "basket approach" for investors, with regulatory overhangs and natural gas remaining important near-term ([48:10])
  • “Nuclear is going to be a huge part of the energy solution going forward. But it's hard for us, not being experts there to sort of pick what's the right one.” —Doug ([48:10])
  • Gene references battery recycling (Redwood Materials) as an innovative approach to powering data centers ([49:36])

10. Autonomous Vehicles: Tesla & Waymo in the Lead

• Tesla Robo Taxis:

  • Tesla’s autonomous fleet will be in ~five cities by end of 2026—less than the most bullish forecasts, but still significant ([50:59])
  • Widespread adoption ("everywhere") may be a decade away—2028-2035 timeframe ([52:35])
  • Full autonomy is approaching, but overall ride-share market penetration remains very low for now
  • Tesla likely to miss its originally forecasted delivery numbers, but long-term bull case is rooted in its leadership in “physical AI” (autonomy, robotics) ([54:46])
  • “If you say something positive about Tesla you have to like be drinking the Kool Aid and if you say something negative you're a hater and just want to like that's not what we're trying to accomplish here... I believe that a company that is a leader in physical AI, it should be greater than a trillion and a half dollar market cap.” —Gene ([54:46])

• Waymo Dominance (for Now):

  • Predicted to reach 1 million weekly paid rides by end-2026 ([56:56])
  • Currently holds overwhelming US robo-taxi share; Tesla’s install base and potential could shift the market

Notable Quotes & Memorable Moments

“Disbelief is the real risk.”
—Repeated by both Doug and Gene throughout, referring to the danger of underestimating the AI opportunity and being left behind ([01:35])

“If you're not spending appropriately, you may fall behind and that could have a very bad outcome for you. And if you do end up cutting, if you end up being right...the benefit isn't that great so you kind of need to run it whoever is running at the fastest.”
—Gene Munster, regarding hyperscaler capex ([19:19])

“There's a lot more value in thinking than there is in networking. Going back to your fiber example, we think there's more value in thinking...”
—Gene Munster ([23:50])

"It is a different regime than we're used to over the past 20, 30 years. But I think the companies that get that right and figure out how to extract maximal economic value—and I feel pretty comfortable that the Mag 7 are experts at that—I think those will be the companies that continue to do well."
—Doug Clinton ([26:07])

“When you use the new Siri, you're going to tell a friend about it and that's an incredibly high bar. If they deliver on that, Apple shares are going up and if they don't, the stock's going down. It's pretty straightforward.”
—Gene Munster ([34:37])

“I think by 28 you're going to see the majority of Tesla users finding some way… at least autonomy. That's not your question. You're talking about robo taxis being everywhere... by that measure everywhere, we're probably like 2035.”
—Gene Munster ([52:35])

Timestamps for Key Segments

• [04:57] — The coming AI bubble: Are we close?
• [06:38] — Nasdaq 2026 outlook and fundamentals
• [11:52] — Why small cap tech will outperform
• [19:19] — Hyperscaler capex and the “winner-take-all” AI arms race
• [26:07] — Mag 7 companies: the new value in infrastructure
• [29:03] — Why top private AI companies may go public sooner than expected
• [34:37] — Apple’s “kill-or-be-killed” Siri relaunch
• [40:22] — Apple and Alphabet: Projected top-performing Mag 7 stocks
• [44:08] — Role of cost structure in the AI platform wars
• [48:10] — Nuclear and natural gas as AI infrastructure plays
• [50:59] — The timeline for Tesla robo-taxis and autonomous vehicles
• [56:56] — Waymo’s scale and future potential

Tone, Style, and Takeaways

Gene Munster and Doug Clinton speak in a candid, measured but optimistic tone, balancing bold predictions with humility about “getting things wrong.” The discussion is analytical, data-driven, and focused on connecting trends to practical investment implications—especially for long-term tech investors. The episode avoids hype, instead emphasizing the real risk of “disbelief” or underestimating the epochal shift AI represents.

Conclusion

Listeners gain a sophisticated tour of tech investing in 2026, with deep context around AI’s trajectory, the durability of big tech, and the shifting opportunities in both small caps and infrastructure. The "real risk," as the hosts repeat, is dismissing the transformative potential of AI and missing multi-year opportunities that still lie ahead.