The Compound and Friends

Episode: Only One Thing Can Stop the AI Crash, Worst Drawdowns, Blue Owl vs Apollo

Date: November 19, 2025
Hosts: Downtown Josh Brown (A), Michael Batnick (B)

Overview

This episode dives into the tumultuous state of the stock market, particularly regarding the recent steep declines in AI-centric names. Josh Brown and Michael Batnick debate whether we're seeing an "AI crash," unpack the unique factors shaping this correction, and discuss the market’s renewed skepticism about AI’s financial promise. They also tackle the wild world of leveraged ETFs and meme stocks, unpack the drawdowns in both public and private credit, and compare the business models and communication strategies of Blue Owl and Apollo. The episode is peppered with memorable quotes, vivid data points, and the show’s trademark blend of irreverence and candid market wisdom.

Key Discussion Points & Insights

1. Setting the Stage: Market Volatility and the “AI Crash”

[06:29 - 11:08]

• VIX Spikes, "AI Crash?"

  • The VIX hit 25 amid surging volatility. Some major AI-themed stocks (Meta: -27%; Oracle: -30%) have seen rapid declines, but the hosts disagree on whether “crash” is the right term.
  • Brown: “If I just…said they were down 30% in a matter of weeks, you would say that sounds crashy.” [07:09]
  • Batnick: “Let’s not split hairs. It’s ugly. Okay. We could argue crash, not crash. Whatever…this is calling into question a lot of the things that we believed two weeks ago.” [07:27]

• What’s Really Changing?

  • The hosts note it wasn’t a demand shock that broke the narrative, but the cost and financing of AI investments.
  • Brown: “It’s rarely the thing you’re worried about. It’s always something else that you probably would not have conceived of in advance.” [09:04]

• Market Psychology: Wall of Worry

  • Batnick: “Although nobody likes to see their stocks go down, myself included. We need this. You need to build a wall of worry to climb to new heights. It can’t just be announcement, boom, 35% to Oracle. That’s not sustainable.” [10:13]

2. Skepticism Rises: AI Bubble, Analytic Downgrades, and Fundamentals

[12:09 - 18:23]

• Fund Manager Survey & Skepticism

  • Record numbers of fund managers now believe companies are over-investing in AI CapEx, flipping from historical norms.
  • Crowd still “bullish” (64%) but more than 50% think AI stocks are in a bubble—though few are actually selling.
  • Brown: “All the shorts are just people that tweet.” [14:28]

• Redburn Rothschild Downgrade

  • Microsoft and Amazon both downgraded to neutral: “It takes six times more capital to generate the same economic value with Gen AI as it did during the build out of the early cloud era.” [15:26]
  • Earnings payback on GenAI is much slower; $1 of AI infra is only generating $0.20 of net present value.
  • Batnick pushes back: “It is way too early to look at the unit economics of these businesses. We have no idea what they’re going to turn into or what they’re going to become.” [16:50]

3. Nvidia: "Only One Thing Can Stop the AI Crash” [Josh’s Thesis]

[18:23 - 24:41]

• Nvidia’s Earnings as the Deciding Factor

  • Brown: “A lot of investors think that Nvidia is the thing that can stop the AI crash…If anyone or any thing or any event could put a pin in this and calm everybody down, it’s a blockbuster number for Nvidia with amazing guidance and the typical Jensen Wang optimism.” [18:29]

• Current Setup is Doubtful

  • Batnick: “This is by far the weakest setup or the weakest price action going into [Nvidia’s] earnings over the last couple of years.” [23:48]
  • Brown: “If this thing does drop 10% overnight, I’m buying the snot out of it in the after hours. I’m telling you right now." [24:14]

• Recent Moves & "Leverage Mania"

  • Major Nvidia stakeholders (Peter Thiel, Masayoshi Son) have sold their shares.
  • The double-leveraged Nvidia ETF (NVDL) assets have shrunk despite Nvidia’s stellar YTD price gain. “They cooled off on it…That peaked in December of last year. …In fact, [investors] just really didn't.” [25:13],[25:30]

4. Drawdowns & Losses: AI and Market Breadth

[25:28 - 27:47]

• Semiconductors: Historic Runs, Now Correction

  • Philadelphia Semiconductor Index in a 10-20% drawdown after skyrocketing in months prior.
  • “Semis added a trillion dollars in market cap in the past five days…And that was literally the top.” [26:16]

• Perspective on Correction

  • Even after the sharp declines, the context is a massive run-up.
  • Brown: “A little bit of...context...even with the scary headline..." [26:56]

5. AI Cloud Economics & “The Bill Comes Due”

[29:12 - 34:41]

• Google/Alphabet and the Varied AI Take

  • Loop Capital upgrades Alphabet; “AI cannibalization fears were overstated.”
  • Contrast with the Redburn’s take: “Who knows anything.”

• Raymond James Forecast

  • Projects AI cloud revenue to increase ninefold in five years—but the price tag is staggering.
  • Brown: “JP Morgan’s model projects $5 trillion in AI infrastructure. To justify that, AI products would need to deliver $650 billion in revenue a year—over 150% of Apple’s annual revenue.” [33:14]
  • Batnick: “Who’s the six hundred and fifty?” Brown: “JP Morgan. So just to put that number in perspective…”

• **Brown: “What’s changed is not the fundamentals of the AI race…What's really changed is the way we're thinking about the bill.” [34:12]

6. Retail Mania: Dip Buying and ‘Squid Game’ Leverage

[34:42 - 43:30]

• Retail Flows: Buying the Dip

  • Citadel: Last week saw the “fifth strongest retail dip buying in the past two years.”
  • Brown: “Retail buys the dip really quickly and with tons of conviction. I just don’t think they do it on the third week.” [35:54]

• Leverage-Fueled Risk-Taking, Especially from Asia

  • FT: South Korean traders have doubled their US stock holdings, hunting high-risk meme names and using extreme leverage.
  • Batnick: “This is wild. …They are having a party.” [36:38]

• Leveraged ETFS: The New Vegas

  • Many double-leveraged, single-stock ETFs (e.g., MicroStrategy, Super Micro) have seen 90%+ drawdowns—yet hundreds of millions remain invested.
  • Brown: “This is like walking into Vegas…‘Here’s $4 million. Let’s play.’” [39:13]
  • Batnick: “People are gambling their balls off…Dude, it’s Squid Game. Were you not paying attention?” [40:00], [39:45]

• Regulatory Risk Discussed

  • Brown: “I think if you get a regime change at regulatory bodies…a lot of this stuff is going to get drug back out onto the carpet.” [43:30]

7. Private Credit: Blue Owl vs. Apollo – Who’s the Grown Up?

[44:22 - 55:12]

• Apollo’s Confidence, Blue Owl “Clown Show”

  • Apollo’s CEO admits opportunity set is “less attractive” as rates fall—grown up, candid answers.
  • Blue Owl’s Mark Lipschultz offers defensive and “nasty” responses regarding their falling BDC, now in a 38%+ drawdown.
  • Batnick: “All of the smoke they’re inhaling, they deserve. …Is it an overreaction? Maybe. We’ll find out. But they’re in the thick of it.” [55:12]

• Merging Private and Public Credit Funds

  • Blue Owl proposes merging its private credit fund into its public BDC amidst surging redemptions.
  • Brown: “Don’t have a vehicle set up where the thing you’re counting on is that some schmuck financial advisor didn’t sell this to people as low risk because it’s bonds. Because I know they did.” [56:41]

• Yield Illusions

  • OBDC BDC is offering a supposed 12-13% yield—but Batnick warns, “With these…you can annualize it, but you shouldn’t, because you’re just making shit up.” [54:56]

8. Broad Market Drawdowns & Lessons

[57:18 - 62:56]

• Earnings Season “Woodshed”

  • Batnick: “The companies that are missing earnings…are just getting taken out to the woodshed.” [57:18]

• Largest Market Cap Losses Since Highs

  • Nvidia: $594B, Meta: $469B, Microsoft: $349B, Amazon: $328B, Oracle: $300B, and several others have lost over $100B each in market cap. [58:06]

• Non-S&P Highflyers: The Pain is Sharper

  • Stocks like Strategy, Atlassian, Circle, HubSpot: all in 50%-70% drawdowns.
  • Brown: “No one taps you on the shoulder and tells you when to walk out of the party. Of course not, if anything, you’re adding more money to those strategies." [61:19]

• Bear Market Dynamics

  • Batnick: “When these things get going to the downside…you could go to the dentist and it’s down 14% on no news. …The next day is down another 14%.” [62:00]

9. Bottoming, Setup, and Buys

[62:56 - End]

• Market “Clearing the Decks”

  • Batnick: “There has been so much enthusiasm in the market. And this is a clearing of the decks, a reset." [62:56]

• Looking Ahead

  • “I think we see higher prices before the end of the year or at least early in Q1.” [64:05]

• Buys of the Week

  • Batnick: “I bought Meta today. …I'm comfortable holding it. If it gets murdered, I'll buy more…I'm also bought Oracle. Never owned Oracle my entire life. I sold Disney and I bought Oracle.” [64:31], [65:51]
  • Brown: "I like the purchase here. …We've learned so many times what happens when everybody gets bearish on Zuckerberg." [65:06]

Notable Quotes

• On What Breaks the AI Mania:

  • “It’s rarely the thing you’re worried about. …It’s always something else that you probably would not have conceived of in advance.” — Josh Brown [09:04]

• On Retail Risk-Taking:

  • “People are gambling their balls off. …Dude, it’s Squid Game. Were you not paying attention?” — Michael Batnick [39:45], [40:00]

• On Double-Leveraged Products:

  • “This is like walking into Vegas…‘Here’s $4 million. Let’s play.’” — Josh Brown [39:13]

• On Market Correction:

  • “You need to build a wall of worry to climb to new heights. …It can’t just be announcement, boom, 35% to Oracle. That’s not sustainable.” — Michael Batnick [10:13]

• On Blue Owl's Defensive Stance:

  • “The difference in the answer and the tone between what he said and Mark Rowan said could not be more dissimilar. It was defensive. It was nasty. It was, ‘Investors don’t understand.’”— Michael Batnick [46:33]

• On BDC Risks:

  • “Don’t have a vehicle set up where the thing you’re counting on is that some schmuck financial advisor didn’t sell this to people as low risk because it’s bonds. Because I know they did.” — Josh Brown [56:41]

Memorable Moments & Segments

• [18:29] Brown’s argument: “A blockbuster Nvidia earnings is the only thing that can stop the AI crash.”
• [26:16] “Semis added a trillion dollars in market cap in the past five days. …That was literally the top.”
• [33:14] $650B/year AI revenue needed to justify capex. “That’s more than 150% of Apple’s annual revenue. OpenAI is only at $20B.”
• [39:45] “It’s Squid Game. …People are gambling their balls off.”
• [47:52] Blue Owl’s handling of BDC redemptions called “clown of the week” behavior.

Timestamps for Key Segments

• [06:29] AI crash debate and VIX spike
• [12:09] Fund manager survey and skepticism
• [15:26] Redburn Rothschild downgrades on AI economics
• [18:29] Nvidia as the lynchpin for the “AI crash”
• [24:41] “Leverage mania” and ETF craziness
• [29:12] Google’s AI business, conflicting analyst takes
• [33:14] JP Morgan’s $5T AI infrastructure math
• [34:42] Retail mania, Asian dip-buying, meme stocks
• [39:13] Double-leveraged ETF horror show
• [44:22] Private credit faceoff: Blue Owl vs. Apollo
• [54:56] BDC yields – what’s real, what’s not
• [57:18] “Woodshed” earnings season: Big-cap drawdowns
• [64:31] Batnick: I bought Meta and Oracle

Tone and Style

The episode maintains a fast, irreverent, and banter-heavy rhythm, combining market expertise with blunt takes, humor, and an emphasis on lessons learned the hard way. Both hosts have strong opinions but aren’t afraid to challenge each other or admit uncertainty—making for a lively and relatable take on serious financial turbulence.

For Listeners in a Hurry: Top 3 Takeaways

1. The “AI Crash” isn’t driven by demand disappointment, but by escalating capex, depreciation, and questionable returns—Nvidia earnings loom as a possible market turning point.
2. Retail and institutional leverage has reached spectacular (and sometimes reckless) proportions, magnifying both upside and drawdown—especially in single-stock levered ETFs and meme names.
3. Private credit, particularly Blue Owl, is in the hot seat over liquidity and transparency, while Apollo’s straight-talk approach wins more respect. AI-exposed BDCs face not just rate risk but scrutiny over loan quality as well.