Excess Returns Podcast — "The Existential Spending Battle: Adrian Helfert on What You’re Missing in the AI Arms Race"

Date: December 21, 2025
Guest: Adrian Helfert (Westwood)
Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

Episode Overview

This episode features Adrian Helfert, head of multi-asset portfolio management at Westwood, in a wide-ranging conversation about how AI is reshaping investment, the risks of existential-level corporate spending on tech, market structure, diversification, and why the traditional 60/40 portfolio may be due for an update. The discussion is a mix of big-picture macro insights and practical views on portfolio construction, all delivered with a candid, investor-focused tone.

Key Discussion Points & Insights

1. The Existential AI Spending Battle

• Hype and Risks:

  • Current AI-driven growth is creating both immense opportunity and significant risk of over-extrapolation.
  • Helfert warns:

    "Be careful not to extrapolate out near term exponential growth in revenues and earnings profile to infinity because that's more unlikely to occur. ... We're not there yet as far as the irrational exuberance, but we're getting close. It's almost a risk factor now, as much of it as an opportunity." (00:58)

• Winners, Losers, and Tech’s Dominance:

  • Despite consensus that today’s tech titans will remain, Helfert argues there are real existential threats:

    "We may see an existential problem with a company that you think is an absolute household name and will never go away at this point." (01:59, 25:01)

• Spending Numbers:

  • Citing jaw-dropping estimates of $6–8 trillion on global AI/data centers by 2030, Helfert frames the spend in context of potential productivity gains.

    "Until 2030 it's estimated that we're going to spend something like $6 trillion on data center spend and probably another $2 trillion on AI optimization spend. ... If that productivity gain gives us over five years 20% productivity gain, that's a $10 trillion addition." (11:22–12:26)

2. Portfolio Construction: Capital Appreciation, Event (Opportunity) Risk, and Income

• Bucketing Approach:

  • Westwood explicitly divides investments by capital appreciation, event risk (think M&A/LBO), and income.

    "It’s important because as an analyst, as a portfolio manager, it gives you... a focus on what the real return driver is — why do I hold the security?" (04:01–04:15)

• Covered Call Overlay:

  • Covered calls are used for yield enhancement, particularly in their Income Opportunity fund and new ETF, sometimes turning a low-yield stock like Google into a high-income play:

    "If you can take advantage of implied volatility and sell covered calls into the market ... upwards of 6 to 7% yield." (06:32)

3. Valuations, Market Structure, and Economic Shifts

• Tech as Economy, Not Just Sector:

  • Helfert notes that tech is now the economy, not just a dominant sector — and this affects index concentration.

    "Technology is, it's not only the market, it's the economy now... and you can't put that genie back in the bottle." (21:27)

• Market Concentration:

  • Not currently worried by concentration, but expects eventually other sectors must catch up for tech’s ROI to materialize.

    "At a minimum, I think we have to hit a peak at some point and you need to see consumption come from these other areas that will benefit." (22:28)

• Market Broadening:

  • Broadening is necessary for the sustainability of tech returns — look for margin expansion, earnings realization, and innovation in smaller companies and non-tech sectors.

    "I do see a broadening potential for we're going to use this innovation in order to generate new revenue lines, new margin expansion..." (27:19)

4. AI as Investment Factor & Disruptor

• Native vs Non-native AI Companies:

  • AI-native firms (built from scratch with AI) could disrupt legacy competitors. Evaluating AI integration is now both an opportunity and a risk factor.

    "It's almost a risk factor now, as much of it as an opportunity. I want to make sure that some standard company isn't falling behind..." (18:16)

• Investors on AI:

  • Every investor must consider how their holdings may be impacted, positively or negatively, by AI adoption — or lack thereof.

• AI in Investment Process:

  • AI is a tool but not a replacement for human analysis:

    "People that aren't using AI... are truly missing out. ... But ... human subjectivity still rules the day." (20:22–20:30)

5. The Issue of Growth, Duration, and Interest Rates

• Growth Stocks & Rates:

  • Contrary to typical “higher-rates-hurt-growth-stocks” wisdom, recent market behavior suggests that it's the expectation of near-term growth, not just duration and discount rate mechanics, that's driving multiples now.

    "We're ... pricing more of the short-term growth ... not helping. I mean, the other thing as well is that when interest rates rise ... it's going to come as a component of one of two things. Likely one is growth." (28:37–29:38)

• Rules of Thumb Can Fail:

  "Often when we see these rules of thumb in investing, they're almost too easy... it doesn't end up working out that way." (30:00)

6. Views on International Diversification

• International as a Tactical Lever:

  • Useful but not always advantageous — recent years have favored US exceptionalism.

    "Is it always a benefit? It is not ... But it's a great tactical tool in the toolbox." (31:55)

• Emerging Markets, China, and Tech Race:

  • EMs may benefit via manufacturing and tech adoption, but China’s heavy index weight makes the tech race critical for global allocation strategies.

7. Macro & Recession Indicators: Why the 2020s Are Different

• Failed Indicators:

  • Classic recession signposts (yield curve, SAHM rule) didn’t work in recent years.

    "They're not working. The SAHM rule is not working. The interest ... curve rule is not working this time around... we've never seen a recession where corporate profits are growing at a substantial rate." (35:47–36:25)

• Monetary Policy—The Easing Tool:

  • Higher rates afford the Fed more ammunition to fight downturns; probability of US recession seen as low near term.

• Recession Frequency:

  • Fewer modern recessions may mean the next is bigger if/when it comes.

    "I worry that just means the next one's going to be bigger." (41:05)

8. Inflation and the Fed’s Balancing Act

• Dual Mandate:

  • Helfert worries that the Fed is increasingly skewed to employment over price stability.

    "I hope the Federal Reserve ... still think[s] of, even if we see lower inflation, 2.7% core PCE ... is still above their mandate. And I want them to be cautious as a respect." (43:04)

• Tech as Disinflationary Force:

  • Believes ongoing innovation could keep inflation subdued.

9. Beyond the 60/40: Tactical & Alternative Portfolio Construction

• 60/40 Is Not Enough:

  • Static allocation is insufficient; successful investors must be tactical and consider private assets, convertibles, and other exposures.

    "The standard 60:40 ... is not going to produce your best outcome. Being tactical and understanding ... is very important for value capture." (49:41–50:07)

• Private Assets’ Growing Role:

  • Private mid/largcap companies (e.g., SpaceX) now capture large swaths of value before going public; private asset allocations should be thoughtfully included.

• How Westwood Goes Tactical:

  • Focus on multi-year, fundamentally driven tactical tilts; avoids overreliance on technicals.

    "We're looking at multi year movements around, moving the deck chairs ... as we see that ecosystem start to mature as well, it's going to lead to value capture across different parts of the ecosystem..." (53:57–54:45)

10. The New Enhanced Income Opportunity ETF (YLBW)

• Active, Multi-Asset Income Focus:

  • Combines strategic stock and bond selection with an active covered call overlay to enhance income and shorten duration.

    "We're really excited about this ... we're generating exceptional amounts of income ... that also reduce the risk..." (56:46–58:45)

• Why Unique?

  • Not a simple covered call fund: integrates asset allocation, tactical sector/factor shifts, and actively managed calls for both risk reduction and upside.

Notable Quotes & Memorable Moments

• On AI Spending Risks:

  "They think there's going to be a clear winner here and they're spending massive amounts of money. ... if they're not that winner ... there could be risks to some of them." (25:06)

• On Tech as the Economy:

  "It's the market, and it's the economy now ... you can't put that genie back in the bottle." (21:27)

• On Human Analysis vs AI:

  "Those ... saying 'I'm going to completely adapt and ... deploy [AI],' good luck to them ... because human subjectivity still rules the day." (20:27)

• On Rules of Thumb:

  "When we see these rules of thumb in investing, they're almost too easy ... it doesn't end up working out that way..." (30:00)

• On Price Discovery & Innovation:

  "The inefficiencies around price discovery and ... opportunities ... are only going to increase as a result of all this technological innovation ... it's going to assist those that know how to ask the questions ... Human subjectivity is really going to help us." (62:13–63:28)

Timestamps of Key Segments

• 00:58: The danger of extrapolating AI-driven growth
• 03:41: Adrian explains Westwood's capital appreciation, event risk, and income buckets
• 06:32: Covered-call overlay for yield and its impact
• 11:22–12:26: AI/data center spending and the productivity math
• 18:16: AI as a required risk factor in investing today
• 21:27: Market concentration, tech dominance, and sector balance
• 28:37: Growth stocks, long duration, and why higher rates aren't always bad for growth
• 31:55: International diversification—benefits and current limitations
• 35:47: Why classic recession signals failed this cycle
• 41:05: Fewer recessions mean bigger ones?
• 49:41: 60/40 portfolios: why tactical and private assets matter now
• 56:46: Launch and explanation of Westwood’s Enhanced Income Opportunity ETF (YLBW)
• 62:13: Adrian’s contrarian view: increased price discovery and inefficiency thanks to AI innovation

Summary Takeaway

Adrian Helfert delivers a nuanced view of today’s market, arguing that while AI and tech are undeniably transforming both the economy and portfolio construction, these trends come with existential risks and require a more flexible, tactical, and diversified investment approach. He stresses the importance of not relying on outdated rules or static allocations, incorporating new tools like covered calls and private assets, and—above all—maintaining human analytical judgment in an increasingly AI-assisted world.