When Will the AI Bubble Pop?

Summary

Podcast Summary: "When Will the AI Bubble Pop?"

Podcast Information:

• Title: The Compound and Friends
• Host/Author: The Compound
• Description: Join Downtown Josh Brown, Michael Batnick, and a rotation of their friends every Tuesday and Friday for expert insight and hot takes on the latest in business and investing.
• Episode: When Will the AI Bubble Pop?
• Release Date: July 4, 2025

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Introduction of Guests

The episode features regular hosts Downtown Josh Brown and Michael Batnick, alongside special guests Joe Fami, Portfolio Manager at Capital LLC and founder of JoeFamily.com, and Shea Balor, Chief Market Strategist at Futurum Equities and host of the "Daily RIP" from Stocktwits.

Josh Brown [05:10]: "I'm very excited to be joined by my good friend Joe Fami and my new friend Shea Balor."

AI-Driven Bull Market Overview

The conversation kicks off with Joe Fami discussing the current bull market, which he attributes to the rise of artificial intelligence (AI). He posits that the AI revolution, much like previous technological advancements such as the Internet and railroads, is a primary driver of sustained market growth.

Joe Fami [07:29]: "I believe we started a new bull market in late 22, early 23... powered by AI."

He emphasizes that AI is not just a product but a characteristic that enhances productivity across all industries, drawing parallels to past innovations that have revolutionized markets.

Technical Analysis and Market Behavior

Michael Batnick and Joe Fami delve into technical market indicators, referencing the "Zweig Breadth Thrust," a rare bullish signal that has historically predicted significant market gains. They discuss recent market movements, including pullbacks and volatility, and analyze how institutional actions influence market trends.

Joe Fami [24:11]: "When everyone says bubble, bubble, bubble, you have to take profits along the way because otherwise you're gonna ride it all the way up and ride it all the way down."

Josh Brown highlights Liz Ann Saunders' observation that only 10% of NASDAQ stocks are at new 52-week highs, suggesting significant room for growth and diversity within the market.

Valuation Metrics and Growth Stocks

The discussion shifts to evaluating growth stocks in the AI era. Michael Batnick introduces the "Rule 40 Score," combining revenue growth and adjusted free cash flow margins to identify companies with sustainable competitive advantages.

Michael Batnick [20:44]: "The Rule 40 score... it means you have some kind of competitive advantage."

Joe Fami echoes the sentiment, focusing on technical indicators over traditional valuation metrics, and underscores the importance of following institutional investments as a signal of confidence.

The Mag 7 and Future Candidates

A significant portion of the conversation centers on the "Mag 7"—a group of seven standout growth stocks—and potential successors. Palantir emerges as a key player, praised for its unique position in the AI landscape and its potential to lead the next wave of AI-driven growth.

Research Highlight [23:37]: "Palantir just scored an 80 plus recently. They're doubling the terminal goal for every enterprise out there."

Batnick and Fami discuss other potential high-growth companies like Rocket Lab and Archer Aviation, which are poised to benefit from advancements in AI, space exploration, and robotics.

Michael Batnick [47:45]: "When Elon solves Humanoids, companies like Amazon will acquire thousands of them... immediate margin expansion opportunities."

Risks and Potential Bubble Pop

While optimistic, the hosts acknowledge the inevitability of a market correction or bubble pop. They compare the current AI-driven market to past bubbles, stressing the importance of adaptability and risk management.

Joe Fami [75:09]: "Moves can go on much longer than we can expect... you gotta ring the register, take some profits along the way."

Michael Batnick suggests that the AI revolution's multiple layers—enterprise AI, physical AI, agentic AI—may delay the bubble pop by spreading its impact across different sectors.

Michael Batnick [73:23]: "There will be multiple derivatives of AI... data infrastructure players are going to benefit from inference."

Final Thoughts and Future Outlook

Concluding the episode, the hosts emphasize the transformative potential of AI and related technologies. They advocate for staying bullish yet vigilant, leveraging technical indicators and institutional behaviors to navigate the evolving market landscape.

Josh Brown [38:28]: "The market is bullish... if your inclination is to be scared at an all-time high, you are not going to make money."

Joe Fami and Michael Batnick reiterate the significance of structural shifts driven by AI, encouraging investors to remain open-minded and adaptable to seize emerging opportunities.

Joe Fami [76:46]: "If you own it, it's people. So it can go on again."

Notable Quotes

• Josh Brown [05:10]: "Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast."
• Joe Fami [07:29]: "The whole point is late 2022, early 2023 new bull market powered by AI."
• Michael Batnick [20:44]: "The Rule 40 score... it means you have some kind of competitive advantage."
• Joe Fami [24:11]: "You have to ring the register, take some profits along the way..."
• Michael Batnick [47:45]: "When Elon solves Humanoids, companies like Amazon will acquire thousands of them..."
• Michael Batnick [73:23]: "There will be multiple derivatives of AI... data infrastructure players are going to benefit from inference."
• Josh Brown [38:28]: "The market is bullish... if your inclination is to be scared at an all-time high, you are not going to make money."

Conclusion

The episode "When Will the AI Bubble Pop?" offers a comprehensive analysis of the current AI-driven bull market, blending technical insights with strategic investment perspectives. The hosts and guests provide a balanced view, acknowledging both the immense growth potential fueled by AI and the inherent risks of market volatility. For investors, the key takeaway is to stay informed, remain adaptable, and leverage both historical trends and technical indicators to navigate the evolving financial landscape.

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Note: This summary captures the essence of the podcast episode, focusing on the key discussions around AI's impact on the market, growth stock evaluation, technical analysis, and risk management. It omits advertisements, introductions, and casual banter to provide a focused overview for those who haven't listened to the full episode.

Transcript

[Josh Brown]

So can we play? Can we hit play? Do I have to do that, John? No, I can do that right now. Yeah. John, proud of you.

[Michael Batnick]

That's why we're going off the charts.

[Joe Fami]

Up with Joe Fami. He's the Portfolio Manager Capital LLC.

[Michael Batnick]

He's also the founder of Joe Family.com.

[Joe Fami]

Education because he's got a unique take on this situation.

[Michael Batnick]

When you look back, we've had a.

[Joe Fami]

Bull market and all things going back to late 2022, early 2020 rate. You can argue about my start date and I'm like, it's pretty grateful and great because that's when Video, the backbone.

[Michael Batnick]

Of artificial intelligence, delivered one of the.

[Joe Fami]

Greatest earnings report I've ever seen. And aside from a detour earlier this year, the stocks never really look back.

[Michael Batnick]

We know that in terms of money.

[Joe Fami]

Making potential, AI is more of an.

[Michael Batnick]

Enterprise technology than a consumer technology. But farming points out the chat CBT.

[Joe Fami]

Was still the fastest application users.

[Josh Brown]

So this was. This was.

[Joe Fami]

I don't need to do the podcast if you play this whole thing.

[Josh Brown]

So did you notice that he went from the. He went from family to fy and back and forth.

[Joe Fami]

FY four different ways. Fami, fi, family, Flappy, Samsonite, fudgy, everything. It was great.

[Josh Brown]

Dude, that. That is. There's millions of people that see that.

[Joe Fami]

I was. It was beyond great.

[Josh Brown]

Did your phone blow up?

[Joe Fami]

My phone never blows up.

[Josh Brown]

No one calls me.

[Joe Fami]

No, I got some emails. It was good, though.

[Michael Batnick]

When was that clip like?

[Joe Fami]

Last week.

[Michael Batnick]

Oh, nice.

[Josh Brown]

So I've never met you, have you guys?

[Michael Batnick]

Actually, no, we met because you beat me in the stock twitch board.

[Josh Brown]

Oh.

[Michael Batnick]

Creator of the year. I was one of the nominees. I thought you were gonna do it right here, stacked in the middle.

[Josh Brown]

How was my. How was my mini standing up? It was good.

[Michael Batnick]

Did you wing it?

[Joe Fami]

He beat you in what?

[Michael Batnick]

The stock Twitch Career of the year. It was between me.

[Josh Brown]

It was two on one. It wasn't fair. Josh, I want to tell you. So we're going to see comedy tonight. I did well. I did like 30 seconds of stand up.

[Joe Fami]

You did stand up.

[Josh Brown]

I mean, 30 seconds. Was it good?

[Michael Batnick]

It was good, but I mean, that night was really rauchy, the comedy.

[Josh Brown]

My routine was a little racy.

[Joe Fami]

It was a.

[Michael Batnick]

It fit the theme.

[Josh Brown]

Thank you.

[Michael Batnick]

That's the thing. It did fit the theme.

[Joe Fami]

That's awesome. Did you ever do open mic?

[Josh Brown]

No.

[Joe Fami]

Really?

[Josh Brown]

No. I did 30 seconds.

[Joe Fami]

I've been dying to do that, but.

[Josh Brown]

I'd go, I'll tell you.

[Joe Fami]

Could you do five to ten minutes of stand up.

[Josh Brown]

I think. I mean, you could tell stories. Yeah, I could. Yeah, I think I could.

[Joe Fami]

You could make it funny.

[Josh Brown]

All right, so I am very excited for this. Josh is probably. What time is it in Italy? He's probably drunk on Cavatelli right now.

[Michael Batnick]

I'm so jealous.

[Josh Brown]

9. Yeah, he's definitely drunk on Cavatelli. So, you guys, is this mine here.

[Joe Fami]

Or is that his?

[Michael Batnick]

That's yours.

[Joe Fami]

Okay, you know what? The cord was going.

[Josh Brown]

Are we quickly clacking? Are we ready or not yet? If you're ready. Yeah. Let's go. Let's go. Let's get the headphones on and get your.

[Joe Fami]

Do we do a sound check?

[Josh Brown]

No, we're good. Joe, you always have raw dog out with us. No computer.

[Joe Fami]

Why do I need a computer? This is my computer.

[Josh Brown]

Usa. Usa. Thank you, guys. Let's go.

[Joe Fami]

Do I have to smile again?

[Josh Brown]

Yes. Pretend like we're friends.

[Joe Fami]

Pretend like we're friends.

[Michael Batnick]

98, 90.

[Josh Brown]

198.

[Joe Fami]

198.

[Josh Brown]

Okay.

[Joe Fami]

198. Wow. This is like Billy Joel at Madison Square Garden.

[Josh Brown]

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is brought to you by our sponsors at Betterment Advisor Solutions. If you happen to be thinking, there's gotta be a better way to grow my Ria, you're not alone. With Betterment Advisor Solutions, we do the heavy lifting so you can focus on what matters most. Your clients. From improved service that makes asset transition smoother to fast paper free onboarding that delights clients. On day one, we've built a digital first platform designed to streamline your operations and make life easier. Now, if you're thinking, wow, they take the paper out of paperwork, then you'd be right. Grow your RIA your way with Betterment Advisor Solutions. Learn more at betterment.com advisors. Investing involves risk performance not guaranteed. Today's show is brought to you by Rocket Money. Rocket Money is a personal finance app that helps find and cancel your unwanted subscriptions, monitors your spending, and helps lower your bills so you can grow your savings. I've said this before, and I'll say it again. One of my favorite things to see in my inbox is refund detected. Boom. Hit the app. What's this? Oh, returns. Love to see it. Money back. Rocket Money's dashboard gives you a clear view of your expenses across all of your accounts. Rocket Money has over 5 million users and has saved a total of $500 million in canceled subscriptions, saving members up to $740 a year when they use all of the app's premium features. Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to Rocket Money.com compound today. That's Rocket Money.com/compound RocketMoney.com compound.

[Joe Fami]

Welcome to.

[Michael Batnick]

The compound and friends. All opinions expressed by Josh Brown, Michael.

[Josh Brown]

Batnick and their cast mates are solely.

[Michael Batnick]

Their own opinions and do not reflect the opinion of Redholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain.

[Josh Brown]

Positions in the securities discussed in this podcast. I'm very excited to be joined by my good friend Joe Fami and my new friend Shea Balor. Everybody here knows Joe, but for new listeners, Joe is a Portfolio Manager at Zor Capital, a New York based investment advisory firm. Joe has 127 years of trading and research experience and that has appeared on cnbc, Yahoo Finance, Wall Street Weekly and more. And Shea is the Chief Market Strategist at Futurum equities, an investor intelligence and research platform and is a host of the Daily RIP from our good friends at stocktwits with Katy Perry and Bruni. Shout out to all the people at stocktwits. For those of you who don't know what stocktwits is, it's a social media platform for traders and investors. Gentlemen, welcome.

[Joe Fami]

Thanks for having us.

[Michael Batnick]

Thanks for having us.

[Josh Brown]

So I appreciate you guys being here. It is the third and also Daniel, Duncan, Nicole, John, this is they are not happy to be here. It is Thursday afternoon.

[Michael Batnick]

They're awesome before July 4th.

[Josh Brown]

They're like Josh is off. Are you kidding me? We're really doing a show. We're doing a show. The audience shows up for us so we show up for them. I'm excited to have both of you on today because there is a lot of overlap in the pond that you fish in. Joe, I know you're a big eater.

[Joe Fami]

It's a big pond.

[Josh Brown]

So you both are invested or interested in growth stocks. You particularly hyper growth stocks. But you come at this from a very different perspective so I am excited to get your guys views. Thank you very much for being here.

[Joe Fami]

Thanks for having us. Exciting.

[Michael Batnick]

I will say I feel like a little substitute teacher during fifth period before summer break. But it's all good.

[Josh Brown]

It's all good.

[Joe Fami]

We could be the Tom Brady, you know, the six round pick before the holiday weekend that no one expected to be anyways.

[Josh Brown]

So okay, let's talk about the bull market. Joe, you wrote a research Note we just alluded to it. Kramer took some of your stuff. I know that you take a longer view, a shorter view. You're very aware of the fact that there are risks and the market doesn't go straight up. But you like to zoom out and not get shaken out by all of the wiggles and gyrations of the market.

[Joe Fami]

I try.

[Josh Brown]

Where do you think we are in the cycle?

[Joe Fami]

I'm saying we're about year two of a four to five year bull market. That's where I think we are. So I the reason I titled the piece, don't lose track of the bigger picture because I believe we started a new bull market in late 22, early 23. I say May of 23 and I'm saying that because it's a bull market driven by AI. And that's when Nvidia reported the greatest quarter in the history of the markets. Some people say October of 22 because that's the actual low. That's when ChatGPT came out. Who cares? It's all semantics. The whole point is late 2022, early 2023 new bull market powered by AI. Historically, I'm a market nerd geek. I love studying history. Historically, bull markets are powered by inventions and innovations that revolutionize our lives. Go back to railroads, airlines, television, PCs, drug discoveries, the Internet. You get the point. The what do the new discovery or the new invention that's revolutionizing our lives is AI. What do all of those discoveries have in common? They help produce, they help increase productivity. So railroads you got from New York to LA a lot faster than you did walking, obviously. So you have a lot of people way smarter than me. And I know that's a huge sample size. They're saying that AI is going to be bigger than the Internet. It's going to help increase productivity. Marc Andreessen is a perfect example. Go look at his piece he wrote a couple years ago called why AI will Change the World. You have a lot of people saying that. And I'm saying that's when the AI, which has been around for a while, but where it really started to pick up in early 2023 with Nvidia, the true market AI leader. And my whole point of the piece is that this is going to go on for a while. Very similar to the 95 to 99 period. However, there's a huge, huge factor in this. There will be correction, shakeouts, pullbacks.

[Josh Brown]

Just had one.

[Joe Fami]

And you could argue the recent tariff one was an example of one.

[Josh Brown]

Yeah. Shay, you, I think you are newer to investing than Joe is older than him. How do you view? So I know that you have a very unique style. You are probably less concerned with a lot of the broader where are we in the cycle? Interest rates, who cares? You are focused on companies that are absolutely changing the world. So do you care about where we are in the proverbial cycle?

[Michael Batnick]

No, because first off history is in rhyme but often repeats like going off of what Joe is saying about the dot com era. If you go back in history during that revolution, what was the hidden gems of that era? It wasn't the IBM's of rise in AT&T. These firms are building the structural arteries of the Internet. But the first phase it felt like these are going to be the biggest companies in the world. The hidden gems of that era were the online marketplaces that were built on top of them, the Googles, the Amazons. So right now we're it's still in that first stage of AI. All the attention is on the Mag 7, the Nvidia is up there, the hardware servers, compute, et cetera. The biggest winners of this era won't be those names, although Nvidia, it's hard to say they're not the biggest winners. Going from 200 million to 4 trillion is wild. But you're getting signs of like what the second stage of AI winners are going to look like and how explosive it's going to be because we have Palantir. Palantir is the first company that proved if you build on top of all this AI hardware how disruptive it could be on so many different industries. So right now Palantir, I got in very early a couple of years ago, I saw the vision of like I think they're going to stage two a winner. First one, there's me multiple now a $300 billion company, but there's going to be a couple of them. So when we got this pullback recently in Q2 of this year, I'm like I was laughing because the way AI investment works when they spend billions of billions of dollars, you can't just turn the switch off and then pause until this tear for resolved itself. Like this business spending paralysis we experienced, it wasn't going to be terminal because AI investing does not work that way. It was going to have to continue or all the cost that you did already originally was going to be sunk. That's not the way that enterprises work. So I think that Q2 was a gift because we're still on the path towards that second wave of AI which hasn't really happened yet. I Believe that as soon as agentic AI has its chatgpt moment, that's where you see multiple stage two AI winners. Not just the palantirs, cloudflares, etc. There's going to be a lot more companies are going to be going from small mid cap to all of a sudden they're a mega cap company.

[Josh Brown]

All right, so Joe Bespoke has been on this beat for a while, showing ChatGPT. The launch of ChatGPT in November of 2022, overlaying that with Netscape and the, the, you know, whatever, two lines matching, who cares? But they do track. They're both going up to the right. And it sets the stage that maybe we are not necessarily in the 8th or 9th inning of this bull market. It is a little bit hard for investors, myself included, to think that we are in like the early innings of a new bull market. Because I think that people think we've compounded. The S and P has compounded at 15% for like the better part of the last 13, 15 years. You're telling me that like we're now just experiencing a leg up how?

[Joe Fami]

A couple of things. One thing I've learned from 127 years of doing this is moves go on in the markets way longer than we can expect. So just when you think something can't go higher, it usually does. And just when you think something can't go lower, it usually does. So moves can go on longer than we expect. I'll tell you a really quick story. I have a friend of mine who was a famous hedge fund manager when CMGI, the Internet incubator in the 90s, it went from one split adjusted one to 120. And he said, this is a zero. This is my biggest short position. This is a zero. And he was dead right. You know what the problem was? It went to 360 split adjusted before it went to zero. So that's an example of moves can go on much longer than we can expect. The second thing I was going to say is that we just came off of two bear markets from COVID and in 2020 and 2022. So when you're saying like this is.

[Josh Brown]

Just three bear markets, what do you call the first quarter or technically, I.

[Joe Fami]

Think I think it was bear market. Like I know you're going by the.

[Josh Brown]

Stupid Nvidia fell 35%. Yeah, it was a quick bear market.

[Joe Fami]

Yeah, I think the tariff scare was kind of a bear market, just quicker. Average bear market's about nine months, 27%, but that's average Sometimes shorter, sometimes longer. But you had Covid. You had 2022 when the Fed was raising rates and then this tariff scare. So when you're saying, like, we're just getting started, we've come off of like three really huge corrections in the past four years.

[Josh Brown]

Yeah, we lose sight of that very often. When you look at the returns, it's like, well, they were hard. They were hard. It wasn't just straight up into the right. So she. I should have asked you this earlier before we get too deep into the conversation. Who the hell are you? I see you on the. On the Internet, on Twitter. You're doing great things. You're going deep in these companies. But. But where. How do you. Where did you come from? What is your background? What are you doing here? Yeah, seriously, how'd you get on the show?

[Michael Batnick]

I feel like I just want a reality DD show. And just got all of a sudden. No, because my buddy actually hit me up this week. He's like, last time I talked to you, you were working corporate strategy as a director. Now you're on TV six times a week, like, so that. So essentially I started as a corporate strategy director at a Fortune 10 company. And my whole career has been digesting large sets of data and creating a narrative for C Suite because they don't have time to do what. Exactly what needs to be done. So my interest has always been in investing. I did on the side. 2020 happened. I became a fin follower. I was like, I don't like legacy media anymore. I think this is much more alpha and it's much more exciting. And you saw the explosive nature of 2020, 2021. It's like I got hooked. And then I started using all my skill sets I Learned in the W2 world into my investing. And I was like, I think there's a niche on Fintwood, for example, of something I can offer. It's usually data vomit or too much noise, not enough signal. So I was like, I'll try it out. Especially my fiance girlfriend at the time, fiance now she was sick of me talking about. I was like, that's a good outlet. Maybe I'll try it out. And that was two years ago. Now it's turned into all this.

[Josh Brown]

I'm now you talking to your fiance about stocks. I'm sure you love that.

[Michael Batnick]

Of course she stuck around. She's an art. She's an artist too.

[Josh Brown]

Yeah. That's awesome for her. So what's. So what's Futurum? You just started this.

[Michael Batnick]

Yeah. So Futurum is essentially There is exactly what Rob Hill is doing for brokerages, taking down that wall democratizing how to invest. There still has not been done that for the research side, institutional research. There is a massive paywall on that. And there's a reason for it. It's because they're closer to the access, closer to the signal of decision makers. They want to maintain that kind of defensible moat. Futurum has a B2B angle. And Daniel Newman, the part CEO and founder of Futurum, he knows the next derivative of institutional research has to be retail. So he's willing to take that risk of being the first to disrupt that institutional wall and democratize research. So now you have Robinhood democratizing how to invest. Now we're trying to democratize what to know before you invest. Those two are part of the calculus I think is going to be pretty explosive in this era where I don't know, JP Morgan released something recently that 60% of investors essentially are retail. And retail is becoming such a heavy component that of the market where you're seeing Robinhood, they're almost $100 billion company.

[Josh Brown]

Bigger than, bigger than Apollo.

[Michael Batnick]

Insane.

[Josh Brown]

Seriously.

[Michael Batnick]

And Palantir was almost bigger than Oracle at the time like just a couple six months ago. Like you're seeing how much weight retail has and it's impossible if you're still.

[Josh Brown]

Dismissing the retailers, investors, the dumb money. You're the dumb money.

[Michael Batnick]

No institutions went on the sidelines April 7th. Where was the bottom Right.

[Joe Fami]

Same week they puked into the lows.

[Josh Brown]

Yeah.

[Joe Fami]

And they've still slowly getting back.

[Michael Batnick]

And that's why there's real move on this V shaped recovery. Because there' trillions of dollars that need to be liquidated into the markets from that sideline reaction that they had two months ago.

[Josh Brown]

So let me ask how. Because you've never been through and I wasn't alive. I mean I wasn't an investor during the dot com bust either. But you've haven't been on the other side of the excitement going the other way. And the multiples going from 130 times sales down to 3. How do you think about risk when you're looking at these companies? Because I know you are not. You don't care as much about the, the, the valuations or the ratios. That's you know. But how do you think about downside risk?

[Michael Batnick]

I actually disagree. I think I experienced it in 2021. I think that's that bubble that we experienced. Like I agree that was pretty successive. So I think that my learning lesson from that era Was you have to invest in companies with emotes a competitive advantage. Do they have a network effect? Do you have a product that's scalable? Do they have an ecosystem that locks you in? I think a lot of like it is a great example. A lot of software companies, it's tomato, tomato. You have to really invest in a company right now that has a defensible monopoly or a duopoly and let the market make rise 20, 25% a year and just take it with you. So I think right now, like I used to factor in fundamentals actually part of my equation of being an investor, which companies to invest in. Now I'm like I want to pick the companies that have a monopoly in early sector growth themes with plenty of Runway. Nobody knows the ceiling on AI yet. All they know is it's going to be impactful. And going back of what Joe's saying, every revolution it's been product oriented. In my opinion, AI isn't a product, it's a characteristic. It's providing intelligence. And because it's not a product, it's a characteristic of what the world's going to become. That's highly scalable across every industry. Everything you do will be touched by AI going forward. You can't say that about really.com era. Maybe you could because everything's website, but not really. There's still brick and mortars out there. You can't say that about the cloud era. So this is the first of its kind in my opinion where scalability of it is unmatched. It's never been done before.

[Josh Brown]

So on the fundamental side, for Amazon as an example in the arts when they were hemorrhaging money, net income was clearly the wrong metric to look at. It was free cash flow.

[Joe Fami]

Yeah.

[Josh Brown]

And that opened people's eyes into how to maybe think differently about these hyper growth stocks. What do you think is the new sort of metric for these AI companies that are rewriting the laws, the fundamentals of business? Do you think that there are new metrics? Not to sound like so toppy. Oh my God. But are there other things that we should be thinking about outside the traditional business valuation metrics?

[Joe Fami]

It's a good question. Like eyeballs in the late 90s. I mean you're right. I mean Amazon was cash flow positive in 03. Everyone was shorting and saying they're not making money, they're not making money. They were, they were just reinvesting, you know, so metrics I don't, I like to use a lot of technicals because I think if you know, areas where the institutions are going to support the markets, then that's. I figured they have the teams and the resources that really. Where they've done their due diligence and their, you know, the fundamental work where they can see where this could go three, five, ten years from now. So I kind of want to follow what they do, but that's a really good question. If there's like something on a balance sheet or something, you know, sometimes it's intangible. That's why the word value is not just pe. There's value in businesses as values and brands. So it's really hard to think of something specific besides right now. There's just a lot of explosive growth.

[Josh Brown]

So, Shay, I know you're not just. You're not really a chart guy, are you, per se.

[Michael Batnick]

I think you have to wear both hats at times. But.

[Josh Brown]

But you're a business dude.

[Michael Batnick]

I'm a business dude. To go off of. Like, to answer your question, I do think for growth, there's a specific rule that I like to follow that communicates the Rule 40 score. You can combine the revenue growth plus the adjusted free cash flow margins. It's very difficult for an organization to have a 40 plus score. If you do, that means you have some kind of competitive advantage because anyone can grow 40% and lose money. It's really difficult to balance being profitable on an adjusted basis and growing top line 20%. So I think going forward you're going to see the cannibalization of the software or growth tech space by seeing the imbalance of how many companies are going to be qualifying for that Rule 40 score. Like it's, it's ridiculous. But Palantir just scored an 80 plus recently. They're 2xing the terminal goal for every enterprise out there. That proves to me they have a moat. Another characteristic is crowdstrike. Crowdstrike pre outage were a part of the unicorn status at a 65/score. Now they, during the outage hangover and they have to give some credits is affecting the margins, but they're still qualifying. Even when they stopped the world from working for a couple of hours, they still qualify. So I think the Rule 40 score is kind of where the eyeballs need to be of. Do they have an advantage? Are they going to capitalize on AI and maintain that status?

[Josh Brown]

John, don't chart a team, please. We're going, we're stepping deeper into the doc. But you keep mentioning Palantir. So Julian Klimochko tweeted a chart showing the enterprise value to next 12, next 12 month revenue multiple on one plot and then against revenue growth. And for the most part, everything clusters around the regression line. But there's this one gigantic outlier and that's Palantir. And so if you were to just look at some of these traditional metrics, I think you might miss a lot of the underlying story. Is that what you're saying?

[Michael Batnick]

Yeah, absolutely. I mean for Palantir, for example, like I'm not giving the green light, like buy it right now at whatever it's at, 200 times earnings. But I think for Palantir though, it's all about, let's go on the business front. So you see all these multi trillion dollars of investments towards LLMs, large language models. The only way to bring these LMS into the real world is through Palantir. That's the only way. Right now they have a kind of a monopoly in that status. So all this LM arm race, that's why Palantir continues catching a bid. Because they're right, they're making the case on why you need Palantir. Like, if you're investing this much in lms, you're eventually going to have to adopt ontology and what Palantir's offerings are. And there is a thesis out there that they're growing 40%. There's a world that can grow 50%. If unfortunately the way that world's heading towards, you're going to need more defense, especially on the government side. So the commercial side is booming right now. If the government side picks back up, especially with the recent NATO deal they announced a couple months ago, Europe is going to start adopting Palantir as well. That governments have, their business can really pick back up to 50%. And then at that point it might be a Rule 40 score of 90 plus, which has never been done in the software space.

[Josh Brown]

Yeah, this is pretty lazy thinking, but I just be curious your reaction when you think about a company like Palantir, the fact that it wanted to come public. It's been around for like couple years.

[Michael Batnick]

Like three or four years ago.

[Josh Brown]

Yeah, it's, it's already got has a bigger market cap than Coca Cola.

[Joe Fami]

Now I know the businesses don't bet against the CIA. That's it done.

[Josh Brown]

Yeah. Okay. Simple enough. All right, Joe, let's get back to some of the technicals that you're looking at in the market. You brought some charts, John, Throw some up, please. Let's start with the S&P 500. How do you think the market is behaving on A technical basis, Joe.

[Joe Fami]

Okay, so this, well, this chart is an example of big. I'm trying to make a point of, you know, everyone has different time frames longer term. If their analogy is the last great invention was, you know, Internet 95 to 99, if that's something we can compare it to. And I think this can be 2023 to, you know, let's say 2027 or 2028. Let's just whatever. We don't even know what we're gonna have for dinner tonight. So let's not worry about three years from now. But the point is I'm making, I really wanna stress this point. So everyone's like, oh, you guys are bullish and bullish and bullish. There will be corrections along the way. And this chart was the S and P. In 97 there was a Japanese Asian currency crisis and there was actually like a mini crash. That's a daily chart. So this reminds you when everyone says, oh, 95 to 99, this chart and the next one in 98 is also like this was long term capital, Russian debt crisis and so forth when long term capital blew up. And it wasn't until the Fed came and put together a rescue to bail out the levered hedge fund.

[Josh Brown]

That pullback doesn't look too dissimilar from the tariff.

[Joe Fami]

Right. But my point is, I remember being in ebay, I bought it at 50 and it went to 200 and it dropped back down to I don't know, like 20 or 30 during this time and then it went to 300. So there was insane split adjusted and all that. But there was like insane volatility where at the time the yahoos and all of these AOLs and all these stocks are trading, they dropped like 30, 50% in the summer. So I'm making a point that I think bigger picture, if you're longer term, I think we're still going higher. But if you trade individual stocks, there will be insane volatility along the way.

[Josh Brown]

You made the point just now about pullbacks. And I'm sorry that I said you hadn't been through it because you had. And it's a pet peeve of mine for people that pretend 2222 didn't exist. So forgive me, Shay, 2021 and 2022 were brutal for growth stocks.

[Joe Fami]

Right?

[Josh Brown]

Nvidia fell by 2/3.

[Joe Fami]

Yeah.

[Josh Brown]

Facebook fell by 2/3. Yeah.

[Joe Fami]

All of them did.

[Josh Brown]

Amazon, not Microsoft, Amazon and Google both got cut in half. And we just pretend like that didn't happen. And guess what? Like I said, Nvidia fell 35% in.

[Joe Fami]

April because they all came back.

[Josh Brown]

Right.

[Joe Fami]

So when they go from whatever meta goes from whatever it was 400 to 100 back and even higher now whatever the numbers were, you gotta remember though, in the 90s some of them did not come back. You know, like so eventually you're gonna get to a point where they're not gonna go out of business, they're just gonna like intel and even Microsoft for what, 13 years. Like there's gonna be a period where they're not gonna go out of business. Of course they're just gonna flatline. I just think that it's not yet.

[Michael Batnick]

So I agree, I fully agree with that sentiment because first off, like on the pullbacks, like The Vix had a 50 handle.

[Josh Brown]

Hmm.

[Michael Batnick]

That's substantial. That's substantial.

[Joe Fami]

Scary.

[Michael Batnick]

And I think the last 250 handles are Yankee trade in the terrific Hissy fit 3 it was man oriented one, the other was pure technical. It wasn't really based on something structurally going to have changed for a couple years. But that event that he's talking about, that multi year, maybe five to seven years of just lagging, that's going to Happen Once Agentic AI has its ChatGPT moments.

[Josh Brown]

Why do you say that?

[Michael Batnick]

Because it spend is so bloated. It's been so bloated past couple years where every board of directors is telling the CEO what are you doing to get ahead of AI? And it's causing the CTOs to overspend on just middleware that's not necessary. And it's been growing year after year. So as soon as agentic AI takes off, which AI agents, what that is essentially replaces what humans do on the back end of a lot of these software companies. You're going to see that 20% revenue growth that a lot of these software companies had. Same with the hyperscalers. Consistent growth start getting a little lagging because of that digestive period of like replacing human labor force costs with just this one time software of an AI agent. And now you have to figure out how else are you going to grow.

[Josh Brown]

So you're saying that when these models change the world on a consumer level and we all feel it, that will probably be the time where all the gains have been harvested.

[Michael Batnick]

It's going to be on the enterprise level. I think consumer level won't be as impactful. I think it's going to be more of the middleware spend is going to diminish and it's underappreciated how much software spends really taking lifting the market right now.

[Josh Brown]

So who are some of the beneficiaries of the software spend right now? You talk about like companies like Salesforce and like Sales.

[Michael Batnick]

I think a lot of the CRMs, I think a lot of the DevOps are going to be the ones that are going to get affected by the. I call the AI tsunami. It's coming. It's going to hit the software space hard. The ones who are going to not just survive but thrive are going to be the ones that the data infrastructure players, because data is going to explode. Like we talk about AI agents. Like they're going to be working 24 7, they're going to be doing tasks that dozens of people will have taken and it's going to be constant workload. It's going to cause data to compound and compound. And beauty of data is like I do a query today and tomorrow I have to build on top of the existing query. Only compounds and stacks onto each other. So I think that you're seeing like Meta, for example, like Meta is going so hard right now, or Zuckerberg is going so hard on making sure they don't lag in this AI race that he's spending $20 billion on essentially a shadow aqua hire of Alexander Wang. The only reason he's doing that is because their training data is not where he wants it to be. Data labeling is a very big component of that. So in order to cut off the arm of OpenAI Google who was using Scale AI, he's just going to bring all that talent in house and have Alexander Wang lead a super intelligence team because he knows that if there, when there is going to be that AI tsunami, it might. If they're not going to be one of the leaders of that AI race, it might cause a 25% haircut. And 25% for Meta is $500 billion. So him investing 20 billion just to get the leader of his super intelligence team or $100 million signing bonuses.

[Joe Fami]

I've heard those signing bonuses are insane.

[Michael Batnick]

But it makes sense though, because it's a drop in the bucket of the 500 billion at risk, potentially.

[Joe Fami]

It's a good point.

[Josh Brown]

So good point. Joe. We had a zweig breadthrust.

[Joe Fami]

Yeah.

[Josh Brown]

When, when, when's the last one triggered? That was April 25th.

[Joe Fami]

End of April. Yeah.

[Josh Brown]

And that was about the bottom. And this is this, this by definition happens at bottoms because it's when you get this extreme reading. Bearish to extreme reading. Bullish.

[Joe Fami]

Pretty much, yeah.

[Josh Brown]

And that has historically been the bottom. Dietrich has his table. I don't know, 17 out of 17 times it's been higher.

[Joe Fami]

A year later it's so yeah. And people can go to Investopedia or just Google. What a Zweig breadth.

[Josh Brown]

So basically you have the 10 day EMA of New York Stock Exchange advanced decline move from below 0.4 to above 0. The moment doesn't matter. It's when you go from extremely oversold.

[Joe Fami]

To extremely overbought institutional buying in 10 days, basically. So Marty Zweig came up with this and I love his two best rules. Don't fight the Fed, don't fight the tape. Legendary investor. And he came up with this. It's only happened 19 times since World War II. So that's a rare time. And what's, you know, nothing of course is guaranteed but you can see going out six months, 12 months later it's 19 for 19 or whatever, 18 for 18, whatever the numbers are of being positive. And most of the time outsized returns maybe even more than double what the average of the market is. So something to keep in mind. It triggered end of end of April. Yeah. Basically from that April 9th, 10th low. Yeah. It's 10 trading days.

[Josh Brown]

So check this out. I've got a, I've got a companion chart. Let's throw up chart 6 from. From chart kid. So Matt made this chart showing the rolling 59 trading day. Why 59? Because that's when the bottom happened. That's when the bottom happened in April and since then basically around when the bread thrust triggered the S and p is up 26%. And it's pretty rare that you've had this sort of 26% change in 59 day period. Not a huge sample set. But the last five times it's happened, we've been hired, we've been hired 12 months later.

[Joe Fami]

Right. And that's the whole point is. So again that's kind of the theme of don't lose sight of the bigger picture. And that's part of the other reason I did this is because, you know, you have noise with the tariffs, you have noise with geopolitical, you have noise with the Fed, all of this stuff. And you know, I remember somebody telling me after just a couple weekends ago, US bombs Iran, oh my God, we're gonna crash, we're going to zero, everyone's gonna die, blah blah, blah. And I'm not putting that, I'm not like that's not the point. I'm talking from a market analysis point of view. The market was super healthy. There's no distribution, meaning very little days of selling. That's why I'm saying there's something bigger going on here, which is the theme of AI. And I told you people way smarter than me are like this is gonna be bigger than the Internet. He understands this way better than I do. I'm just saying don't fight the tape. There's something bigger going on here.

[Josh Brown]

So let me ask you this. Sorry, hold on, I just want to finish on this, on this part. So in a market like this where God bless America. We are we close today at all time Highs.

[Joe Fami]

Yeah.

[Josh Brown]

It is very difficult to ride a bull market.

[Joe Fami]

Yeah.

[Josh Brown]

Whether you're in indexes or even more so in individual stocks. You're not afraid?

[Joe Fami]

No.

[Josh Brown]

I'm guessing that you are not. Not long.

[Joe Fami]

Right now, no, I'm fully invested. But I will be. I've been piecing out. I'm like not fully fully, but I've been taking. I actively manage. So I do take some profits along the way.

[Josh Brown]

But new highs don't scare you is what I'm saying.

[Joe Fami]

No, no. There are stocks I would buy today. Yeah.

[Michael Batnick]

It's technically very bullish. New eyes.

[Josh Brown]

Yeah, but what could be more bullish?

[Michael Batnick]

No, but going off of the point of the durability of this bull market though. If you told me entering this year that US or Trump would be able to attack Iran, the market wouldn't tank, oil wouldn't spike. I beg. You're delusional. There's no way that that would be the closest thing we have to World War iii. Why didn't we get there? It's because AI is still the main event. You're seeing these big tech companies throw billions of dollars at futurum. We believe the next couple years is going to be multi trillion dollars of spend in AI. That provides a very high floor on any kind of pullback in the market. Because right now you probably know this, I don't, but I think S and P at 25 times earnings, it's not ridiculous.

[Josh Brown]

It's not ridiculous. Okay, we just had this from Liz Ann Saunders. Q2 saw the widest outperformance for growth over value dating back to the mid-90s. Growth was up 19% versus just 2 1/2% for the S&P 500 value. Just a remarkable, remarkable run here.

[Michael Batnick]

No, no, it makes sense though because like again you guys might be correct me on this, but it's the first time in stock market history we have multiple super cycles happening at the same time. We have AI, we have quantum, we have robotics, electrification. Like this is the time, this is the golden era of innovation where you have so many different themes that are going to be so disruptive in society. Why go for the value? Like this is an era where you're going to find early disruptors that they might miss, 90% might miss, but that 10% will be life changing.

[Joe Fami]

And historically the greatest stock winners throughout history trade at 1.7, 1.8 times the S and P multiple meaning the biggest winners throughout history will trade. So if the S and P is trading at 20 to 25, say rounded up to 2, it's going to be 40 to 50 times earnings. And people might say that's ridiculous. But what's one of the most loved widely held stocks in the world is Apple. And not that long ago Apple was trading at 72 times earnings before it went up 3,000%. My point is you get what you pay for. Big winners trade at a higher PE historically and then they grow into that pe.

[Michael Batnick]

Pay up for quality.

[Josh Brown]

Yeah, no doubt. So one of the things that I think older experienced investors tend to do is over index too much on their formative years. And I think the dot com boom and bust is like the poster child for this. So people would say I've seen this movie before, we know how this ends. We saw the tech boom and bust. And listen, I'd say there's a decent chance that we are going to experience a bubble and a burst. I think that's probably table stakes, right? Yeah, that's got to be.

[Joe Fami]

I'm agreeing with that. I'm just saying not yet.

[Michael Batnick]

Yeah, 20, 28 is where I think is going to be a good one.

[Josh Brown]

Okay, so 28, whoever knows? Nobody knows when it's going to come. Maybe it's here today, who knows. But the point is for a revolutionary technology, how could there not be a bubble? Of course there's going to be.

[Joe Fami]

There are places the railroads had one the dot com. This is supposed to be bigger than all of it.

[Josh Brown]

Yeah. So there will be a bub. One thing that is different about this one, not to say that it won't end poorly because they all do eventually, is that the biggest, deepest pocketed investors are now supporting this cycle. I'm talking about Amazon and Microsoft and Metta who have an unlimited appetite for spend here on their R and D and their capex because they think that this is an existential threat.

[Joe Fami]

Right after that zweig, breadth, thrust and we were still below the 200 day on the S&P and the NASDAQ. We gapped above that on exactly. Because there's going to be Growth scares and people worried about spend slowing and all that. But what happened at the end of April after the close Microsoft and Meta, when everyone's like, we were waiting to see their spend and they're like, yeah, screw you guys. They came over the top and said, we are spending an insane amount on AI. And that's what gapped us above the 200 day. Because people are like, oh, there isn't the growth scare here. These guys are full steam ahead.

[Michael Batnick]

That fear is always, always from Rando. Like the deep Seq news. I forgot when that occurred, but that caused every tech semiconductor stock to tank because everyone's worried about, like, I want to hold in this bubble, but cnfetti.

[Josh Brown]

Was down 11% that day.

[Joe Fami]

Yeah, because no one is ever gonna buy their chips anymore. Hashtag Sark.

[Michael Batnick]

It's ridiculous.

[Joe Fami]

Like there'll be bumps along the way in growth digestion periods of course go down. That's why I'm making a point when people are like, oh, these guys are way too bullish. Yes, we're bullish. But I'm telling you, whether it's again, deep seek or one off news or tariffs, there might be even. The whole point of the Zweig breadth Thrust is it's six to 12 months now. So traditionally August and September are two of the statistically worst months of the year. People go away, sell some stuff and the market's a little bit weaker. We could have more tariff talks, we could have a fight with the Fed and all this stuff. But I think if we do get that drop, we got it the last two years, I think that's a viable dip.

[Josh Brown]

This notion that we're bullish or you're bullish, this is not us. The market is bullish.

[Joe Fami]

The market's telling me the market is.

[Josh Brown]

At an all time high. If your inclination is to be scared at an all time high, you are not going to make money.

[Joe Fami]

At the end of the day, the big institutions control the markets. Period, End of sentence. My opinion, your opinion, anyone's opinion, doesn't matter. The big institutions, the big pension funds, mutual funds, hedge funds, they're buying. They are buying and or selling, but they are trafficking in millions and millions and millions of shares. So what I try to do is do my best to interpret. When they are all dumping at the end of 2021, early 2022, when the Fed raised 500 basis points in a year, they've never done that in the history of the markets. They're all dumping ahead of that, but they don't do it in one day. They were consistently doing it all through January of 2022 when they're coming back in consistently and some of them are underinvested. Where you get these tariff headlines, you get these geopolitical headlines. They're like, we gotta get involved. So when they're consistently buying and supporting the markets, that's what's telling me to stay bullish, not my opinion.

[Josh Brown]

Last thing on some broader market stuff before we really dive into some companies, which I'm excited to do. Eric Sota posted this. I think this was June 29th. So last week he said the surprise to me is that with the NASDAQ at a new high, only 10% of the index of stocks are at a new 52 week high. They have a lot of room to run. So Joe, I know you pay a lot of attention to internals and rotation and just on Tuesday we saw a very unusual. While the outperformance day of the equal weight, which was up 1.2% while the SP was down. This is the type of thing that you love to see in a bull market. It is not narrow at all.

[Joe Fami]

Sector rotation is the, whatever the hallmark of a bull market, whatever that phrase is, beginning of the month, beginning of the quarter, beginning of the fiscal year for certain. You know, government companies, whatever. So one day there was a lot of growth stocks. Even arkk was down 2% and the Russell was up over 1%. What I like is that it's not universally selling, it's sector rotation. So there's gonna be some profit taking and a bunch of growth stocks were down 5% the beginning of July. And that's why I'm making the point it's not gonna go straight up. There's also another NASDAQ chart similar to the one you had with the compound. You said it's a rare thing. It made me think of it. There's a NASDAQ 100 chart that I put in there towards the end of like it's basically data going back to 1985. I don't know if you have.

[Josh Brown]

John, chart 11 please, if you have it there.

[Joe Fami]

Yeah, this is similar to the one you were saying, which is. This is data from 1985 to present. And it's similar to the. It's very rare because the one you had only happened five or six times. This is when the NASDAQ 100 after it goes from down 20% to a one year high within three months.

[Josh Brown]

This means everybody was offsides.

[Joe Fami]

Yes.

[Josh Brown]

To being too bearish. Uh oh, we were wrong. Everybody bought it.

[Joe Fami]

Look at the Times this has happened, it's come off of the 1991 bear market. It came off of 98, off of the long term capital. It technically wasn't a bear market, but it was a bear market in my view. From 2000 to 03 you had the.com, you had 9, 11, you had a 36, pretty much a 36 month bear market. These are, you know, after 2009, after the financial crisis. So my point is after Covid, these are like major bear markets and scares in the markets. And this just happened on June 24th and again, nothing's guaranteed, it's just rare. A year later the qs are up 40% on average. So pretty impressive.

[Josh Brown]

Let's get into the Mag 7 and what might be the next batch. I've been sharing this chart with Josh for a while. We're talking about Apple divided by the S&P 500. And as far as I'm concerned, this ratio will never reach a new all time high. Do you guys agree or disagree with that?

[Joe Fami]

I agree.

[Josh Brown]

Okay. Not only that, it is sitting at a very tenuous spot. Multi year support and it just found support there. Again, I don't know if it holds for long or not, but Apple is probably not where you want to be if you are a growth investor.

[Joe Fami]

Wall street wants to see growth again, period, end of sentence. Wall street wants to see growth. If the market's going up and you're growing your company, for the most part your stock's going to go up. Is Apple going out of business? No, that's not what I'm saying. I'm just saying it gets to the point where it's just slow and steady single digits and, and go ahead, if I mean to interrupt, but like I just don't see any explosive growth from here.

[Michael Batnick]

So I'm going to say it flat out honestly about Apple. They're going to be here, but there is no world they're ever going to be a growth company again. Ever. Yes, 2.4 billion devices out there. They should have been the leader of this ambient AI assistant trend that's going to be causing them to be this consumer AI winner.

[Joe Fami]

Do you think if they buy one of those AI companies they've been talking.

[Michael Batnick]

About, they have to.

[Joe Fami]

Would that change your opinion?

[Michael Batnick]

Because this is the honest point that I was trying to get at. Talent doesn't want to work there. They have a culture problem. Big brains want to work at Xai, they want to work at Mad Zuck, they want to work with Elon, they want to work at OpenAI with Sam. Nobody wants to work at Apple, this dinosaur company who they're comfortable being this cash cow and their AirPod revenue is what, four times the revenue of OpenAI's top line revenue that they're comfortable just being a services company.

[Josh Brown]

Is it, could they change it or is it over?

[Michael Batnick]

It's over. I think you're seeing them try to wave the white flag without verbalizing it of we're gonna have OpenAI and we're gonna have Anthropic partner up with us and sell our real estate to them and make that cash again low hanging fruit. But they couldn't solve it within house because they don't have the talent.

[Joe Fami]

It would have to be a major restructuring or a major acquisition that they could implement in to. What are you gonna do? Take, take your revenues up another 3x from here.

[Michael Batnick]

So my tent, my 10 hats.

[Josh Brown]

The revenue's not growing.

[Michael Batnick]

No, it's not. It's a financial engineering company. That's all it is. But my tin hat theory is in two, three years they're not going to be at the point that the board of directors want them to be. There is going to be a very splashy merger that I think that OpenAI's board is going to force upon potentially of an Apple OpenAI merger where Sam becomes a CEO of Apple. And that would be the tin ad theory that I have of because I don't think Sam's going to go public.

[Josh Brown]

What about Microsoft? Why would they want that?

[Michael Batnick]

That's the only hurdle I think I'm waiting for that sign of like the open air. Microsoft is having this weird conversation back and forth. Like I think that's going to be much more of a breakup than what we see right now. But I think that there's going to have to be a massive acquisition for Apple to get a product oriented CEO to run that company right now because Tim Cook isn't product oriented.

[Josh Brown]

A few weeks ago I showed Josh a chart of capex divided by revenue of. I think I was using Amazon, Microsoft and Alphabet and it was up and to the right. These companies are going all in. They are spending so much money a percentage of their top line. I don't know if it's 30%. It's a huge number. Whereas Apple, it's going down.

[Joe Fami]

R and D is lower down and to the right.

[Josh Brown]

They're not doing anything so they're not spending any money.

[Michael Batnick]

I mean the natural derivative of what Apple should do is what's the next innovation of hardware? It's Humanoids. That's what's gonna be the North Star for Apple going forward. I haven't heard one thing about them trying to tackle that. Like why not? You spend $10 billion on a car that just fizzled out and it was just a science project in the labs, but you're not willing to spend billions of dollars like you're spending 600 billion on buying back stock. Just use 10% of that 60 billion towards some kind of avenue to conquer humanoids. Because I'm talking poorly about Apple, a Mac, Apple phone, AirPods like they have leverage. Use that leverage to create what the future physical AI world is going to be.

[Josh Brown]

Joe, when's the time you owned Apple?

[Joe Fami]

I don't remember.

[Josh Brown]

It's been a while.

[Joe Fami]

I haven't owned it in a long, long time. I don't care to own it. I don't care. I'm a growth manager. They're not growing period.

[Michael Batnick]

End it's 30 times earnings. Like it's not even.

[Joe Fami]

It's not exciting to me.

[Josh Brown]

Yeah. All right, so John, chart 15 please. What we're looking at are each individual MAG7 stocks and their relative performance year to date versus the S&P 500. And what stands out to me very clearly is that it's Nvidia, Microsoft and Meta in one category that are winning, that are beating the index, that are getting the benefit of all this growth that investors want. And then there's Apple down in the dumps. Tesla for a myriad of reasons not doing well. Google not great and Amazon is sort of somewhere in the middle. Any opportunities of the companies that we just mentioned and the latter that are, that are not in favor right now.

[Michael Batnick]

Tesla.

[Josh Brown]

Why?

[Michael Batnick]

First off, I think Tesla and Apple are experiencing macro causes. Tesla EV solar credits removed. Apple had that China like you have to go away from China. So like there's a little nudge on.

[Josh Brown]

That but so what's the bulk case on Tesla?

[Michael Batnick]

Bull case on Tesla is again everyone's worried about the car delivery numbers we just got yesterday.389 estimates that came at 3 84. Why did it catch a bid is because there it wasn't as bad as fear. I think the worst, lower lowest estimates are 350,000. They're not a car company anymore.

[Josh Brown]

But you don't care about cars. I'm getting right. Okay.

[Michael Batnick]

Yeah. So I think the future like why I'm bullish on Tesla own IT still top 10 position. They are the only player building the AI network for mobility and robotics. Physical AI is the greatest ham in mankind history. It's the only One that could really replace. It can touch every part of the world and replace headcounts at a scale that's never been done.

[Josh Brown]

What does physical AI mean exactly?

[Michael Batnick]

Physical automation. Replicating a task that human can do essentially in, in, in a non digital form.

[Josh Brown]

So actual robots.

[Michael Batnick]

Actual robots. And I think you're seeing all these videos are like, oh, figures. Doing this, like lifting this, lifting a string, putting over here. They're a robotic leader. No, that's not how it works. General application of robotics is the only scalable approach. The only player to do that right now is Tesla. The timing is awful right now. Who knows how long this can take. It's going to be on the Elon Musk timeline. And what that means is you just never know because he just is hyper bullish. But I think there's inevitability that Tesla is going to conquer humanoids. They're going to solve autonomy. It could be in 10 years, it could be in five years. But the. Just think about how transformative autonomy would be in the car industry. Everyone, every car is being sold in your gross margins one time. Now if autonomy is actually solved, your car can be your freaking employee. You can make an ROI on your car, acquire, buy it, and it drives other people. There's a application component of it where you capture that node in that vehicle sale and then you can actually make an ROI on it. That's underpriced in the autonomy angle. It's going to take a while, but I think that's, that's the North Star of Tesla. And when it, I think it's going to hit, when it does, it's going to be so transformative that buying it under $2 trillion is going to be a deal. Because again, caveats. How many companies right now that are early disruptors in the stock market are at the same price they were at four years ago? I think me, I can maybe do a couple.

[Josh Brown]

I mean, the cat. The pushback is Tesla was, I mean that was crazy.

[Michael Batnick]

That was crazy. But they're also going through a narrative train, narrative change.

[Joe Fami]

That was a huge move that it went on.

[Josh Brown]

Was it up a thousand percent in 2020? It was, I think it was a 10 bagger.

[Joe Fami]

It was up, yeah, 800 or something. Yeah, yeah, because I remember Cathie wood at a 10% position went up 800% and it was half of her gain.

[Josh Brown]

So on the humanoid. Is that like a hardware multiple though, or, or.

[Michael Batnick]

No, no, it's. As soon as, here's an example. As soon as Elon solves Humanoids. Amazon's going to buy thousands of them. All these companies are going to buy thousands of them because they don't care about solving the humanoids component because it's too capex, it's too complicated. They don't have the data feedback loop necessary to solve that issue. So as soon as they actually create that product, I'm just giving Amazon example. McDonald's is going to use them, that's another example. But every warehouse will use them and it's going to be acquired and that's why Amazon, for example, I'm a big Amazon bull top three position. I think their retail presence is going to become provide them such an enablement on capturing all these growth themes. Like they don't care about creating their own drones or robots. As soon as there's a drone winner, there's an acquire all those drones and it's going to be an immediate opex boom for them. Same with Humanoids. As soon as Tesla sells the Humanoids it's going to be a major margin expansion opportunity in the retail side of the business because everyone has Amazon prime, that's their moats and they don't worry about investing to be having in house, they're just going to allow the retailer to enable them. But I think that a lot of people are going to wait in line to acquire these humanoids from Elon once they solve that and who knows what the multiple is going to be on that because it's going to be like an Nvidia situation where their GPU is in such high demand that it's going to just cause them to have this 10 year boom probably that they're going to benefit off and who knows what multiples deserved. When you have a 10 year supply and demand wonkiness and you're the only player in the shop, you're going to.

[Joe Fami]

Do a podcast one day with two robots sitting across from you maybe.

[Josh Brown]

I'm telling you Joe, what names in this orb are you excited about? How low in market cap do you go?

[Joe Fami]

I can go low because look, I agree with him that it's not just AI. I mean even in the 90s there wasn't just dot coms, there was, you know, fiber optics, it was cell phones, you know, Ericsson, Nokia, all this like so there's other themes going on right now. So I do like that, you know, energy Data center is technically, you know, AI, but that there's huge growth there and you've again people like Elon Musk and Larry Ellison, all these smart people saying the demand I mean expect it to go what, 1%, 8% of the energy grid for data centers and so forth. So energy's a theme, space is a theme. You also have super smart people like Richard Branson and Musk and Bezos involved in space. I think they're doing that for a reason. There's a lot of. But that's like 2027, 2028. So I'm okay with stuff outside of AI because there's just such, just sexy growth stories out there right now.

[Josh Brown]

So when you think about the next Max 7, are we thinking about names like CrowdStrike and Uber or are you thinking like companies that like maybe aren't on our radar? Like what's that flying plane one that is a Joby. The.

[Michael Batnick]

Oh, Archer Aviation.

[Joe Fami]

Archer and Joby are both in this. The flying taxis flying.

[Josh Brown]

Is that real or are we just smoking dust?

[Michael Batnick]

I think what's real about it is Anduril, the private company. I think the defense component of like being above your head, I think the reason there's such an appetite for Archer Aviation is they're not just a hardware company. They have a software solution on top of that. It feels very much like a Palantir like components and Androl loves them. They pair up with each other all the time.

[Josh Brown]

What do these flying companies do?

[Michael Batnick]

I mean it's. It could be something like I want to go to Brooklyn from here and just go cuts through a traffic. It's going to be a much bigger defense component. Where the old defense has been hardware supremacy. That's a mentality for a lot of what defense has been. The trillion dollar budget just last year has been towards hardware dependency. The future is going to be a digital battlefield and part of that component is yes, cybersecurity. It's going to be a heavy component. Everyone's going to be attacking each other through that route. There's also going to be above your head. The drone component of it that's going to be heavily vital for the arch Aviation is a component of that. Another one is the Palantirs, the decision engine on identifying where the threats are. That's vital as well. So I think this digital battlefield is a massive theme that provides somewhat of an offensive and a defensive component because during Q2 one of the strongest names in risk on environment was these new age defense names. The Palantir is crowd strikes is because geopolitical tensions is somewhat of a tailwind for them unfortunately. But if you also want exposure and AI and all these growth themes, you also have to invest in them. So they have the benefit of both worlds. And I do believe that it might be very early because Archer aviation is a $5 billion company. It's expensive, but they're being used heavily in the 2020 Olympics in L A. Like it's happening. The commercialization of.

[Josh Brown]

Do you think about the economics of these businesses or is that like an. Not to be disrespectful? Is that a distraction?

[Michael Batnick]

It's not just a real thing, the.

[Josh Brown]

Economics a distraction or are you just thinking about like that. That really is a distraction. I'm thinking about the explosive growth and the sort of like traditional valuation. It's just a sideshow at this point.

[Michael Batnick]

So I think valuation becomes part of the calculus based on the maturity of the company and how big it grows, like pounds here. I could care less. A little when I was under 25 billion. Now 300 billion. First off, I haven't added in Palantir since the Yankee trade crisis when it hit $22. That was the last time I added. I. It's through the roof. I don't need to build a substantial position. But friggin Archer Aviation, it's all about their moat and advantage. Especially in the future world we're about to enter where this new age defense theme I'm talking about Evitols is going to be a component of that. What is EVA tolls?

[Josh Brown]

What is that?

[Michael Batnick]

Electric, essentially the flying electric vehicle, flying jets above. So like the joby aviations, the arch aviations.

[Joe Fami]

And they'll be electric. Yeah, so.

[Michael Batnick]

So that's. That's a heavy component.

[Joe Fami]

Just defense. But the retail for. You need to go to Long island and take an hour and a half, take you 20 minutes. Same. They're doing it in Dubai now to, you know. But that's the retail side. There's also the military component.

[Josh Brown]

So all its components. Do we. Do we genuinely think that there is going to be. Because a lot of the talk has been about these incumbents, the hyperscalers. They are so big and powerful and virtually indestructible. They are the new venture capitalists. Whatever they see that's working, they just acquire. Is there going to be a company that gets to, I don't know, $2 trillion? That is. It could be on our radar or not. Like is there going to be another Mag7?

[Michael Batnick]

I mean I think Palantir is the closest thing to that next max.

[Josh Brown]

All right, what else? What are the.

[Joe Fami]

There's always themes that, you know, to rotate. You know, it went from Fang and then people dropped Netflix because they didn't like it. And Meanwhile, Netflix has been a monster.

[Josh Brown]

Let me ask.

[Joe Fami]

There's always gonna be.

[Josh Brown]

Let me ask it better.

[Joe Fami]

Yeah.

[Josh Brown]

So the year is 2039. Are we still talking about Microsoft and Meta the same way we are today? If not, who is gonna be in that sort of category? I know it's impossible.

[Michael Batnick]

No, I mean I, I think whoever's.

[Josh Brown]

Don't say Palantir again on the Palantir.

[Michael Batnick]

No, I think it's going to be whoever solves agentic AI at scale. I think whoever can figure out how to orchestrate outcomes at scale is going to be one of the biggest second wave winners of AI.

[Josh Brown]

All right, so who's it, so who's, who's in that category?

[Michael Batnick]

I think it's private companies though. That's they're all experimental phase right now. That's why it's so tricky.

[Joe Fami]

Yeah, and it's not just AI. I mean one, I'm talking my book a little bit here with Rocket Lab.

[Michael Batnick]

Oh, I love Rocket Lab.

[Joe Fami]

I mean Rocket Lab. I wrote about it. I'm in from single digits. I wrote it publicly on my blog at $10. And if SpaceX just did, their most recent funding round was 350 billion and Rocket Labs at like 10 to 15. I'm not saying it's going to grow to that point, but Barron's called them the closest competitor, even ahead of Boeing the closest competitor to SpaceX. And that's the thing where that demand is.

[Josh Brown]

Why didn't he tell me about the stock?

[Michael Batnick]

No, it's the fed. It's the FedEx of space. I've been a big Rock Lab fan. Under five bucks.

[Josh Brown]

What a stock. Oh my God.

[Michael Batnick]

No, it's because Peter Beck is a.

[Joe Fami]

He'S, he's, he's executing.

[Michael Batnick]

He's the Steve Jobs of the space era. Everyone thinks about Elon, but Peter Beck is a freaking scientist. Like he knows how the rockets built inside and out. He's all in on it. And they, they used to just be a satellite launching company or like a rocket launching company. They've morphed into a full on space prime. They are becoming the space logistics company in the future.

[Josh Brown]

What are they doing in space?

[Joe Fami]

I mean they have an electron rocket where they've done I think 230 successful launches. Now their new neutron rocket is going to with the Falcon 9, I believe from SpaceX, meaning it can carry the bigger payloads. All this stuff for satellites. Again, I'm not as.

[Josh Brown]

I know, I know, I'm not trying to put you on the spot, but.

[Joe Fami]

I'm just Saying like they are. There is huge demand from companies, whether it's, you know, whether it's mostly, you know, bringing satellites up there and all this stuff, basically through just not only companies, but from governments that need. And the. What do you call it? The. What's the word I'm looking for? The delay is like 12 to 24 months right now. So there are companies working on speeding that up. So that's the holy grail in space is on demand launching right now. If you call rocket lab or SpaceX. Yeah, we'll get you in in August of 2027. Like, that's the other thing is there's. There's huge potential for growth.

[Josh Brown]

All right, how about this? Let's flip this. What is overhyped garbage. What. What do we think is completely nonsensical.

[Michael Batnick]

If I want to really stick my neck out, I think Salesforce has not proven to me to be.

[Josh Brown]

Oh, stop it. I'm talking about like, companies that, like, are in the $10 billion category.

[Michael Batnick]

Oh, okay.

[Josh Brown]

Let's go there. Like companies that are getting the benefit of the doubt. Because I was talking with Josh. There's a lot of bullshit out there, right? That's a feature of a bit of a bull market.

[Joe Fami]

But this is what's great is a lot of the companies we're talking about, you know, Joby and Archer and Rocket Lab, these are highly shorted companies. Palantir, a friend of mine plays poker and everyone at the poker game is short. Palantir and Gore Week. That's all they talk about. I'm like, the big short just ruin these people because they're like, they, they, they can't stop shorting them. So that's the whole thing is you're. The answer to your question is there's two sides to these trades because some of the stocks we're talking about.

[Josh Brown]

All right, you coward. I'll throw out some names.

[Michael Batnick]

No, I mean, no, no.

[Joe Fami]

I'm just saying a lot of people are saying, you know, these stocks we're talking about are the ones that are not going to work out. But that's why you will find out there's two sides to these trades.

[Michael Batnick]

I do think, Cor, we've might be the one name that just bloated for.

[Joe Fami]

Capitalizing on the moment 27 billion, like backlog right now.

[Michael Batnick]

No, that's the thing.

[Joe Fami]

But it's capitalizing on from 30 million to nine. Almost a billion in sales in seven quarters. It's insane. I mean, that's. I've never seen growth like that.

[Josh Brown]

Why would you short that? Why would you.

[Michael Batnick]

I wouldn't. Shorter. But I think they're capitalizing on a moment right now where supply and demand so often sides and they're.

[Joe Fami]

It also could. Yeah. With, with the float as well.

[Michael Batnick]

Yeah. And they have one customer essentially Microsoft. They have one supplier, Nvidia and they have one moment which is right now they're capitalizing on. I think eventually supply and demand are going to even itself out. Who knows if you need a core weave once that happens, that's the risk. I call them the broker broker of the compute era.

[Josh Brown]

Business is booming.

[Joe Fami]

But sometimes.

[Michael Batnick]

Exactly. You never know though.

[Joe Fami]

Sometimes things shoot in advance of you know, ex like you know, the market dumb. The market trades on what's going to happen, you know, six to 12 months from now. And even with companies their earnings top, you know, two to three quarter the stock tops two to three quarters before the earnings top. So Cisco topped in 2000 and they kept coming out with 50% and everyone's like why is the stock dropping? Because the market anticipates it's smarter than us. It knows two to three quarters from now that stocks top two to three quarters before their earnings top.

[Josh Brown]

All right, let me, let me throw two names that I know nothing about like really and truly. So I'll ask you guys, Rigetti and Ionic, like names like that IonQ. IonQ.

[Joe Fami]

Yeah, there's a bunch of those. Quantum computing.

[Josh Brown]

So is that, is quantum computing real or is that just riding the stupid bull market wave?

[Joe Fami]

Didn't Jensen say it's like 10 years down the road?

[Michael Batnick]

He actually just changed to five recently. He went from 15 to 10 to five. But I think here's the issue with Quantum. It's the only way to get captured to pure. Plays are very speculative names right now. So Ionq is in my opinion the most scalable approach to Quantum because you can run their trapped ion technology in a room a room temperature environments. You don't have to go in sub zero like the rest. But it's highly risky still because I think you in order for Quantum to reach chat GBT moment which I think Jensen's accurate, we're nowhere close to that. It's going to be essentially a science project that's going to be running at the expense of shareholders because right now what ionq is worth 15 billion.

[Josh Brown]

So you don't mess with like these.

[Michael Batnick]

I own Ionq.

[Josh Brown]

Oh you do? Okay.

[Michael Batnick]

But I owned it when it was under 10 bucks. Now at $15 billion, I'm like I don't know if the chat GPT moment for quantum will happen in next by this end of this decade. There is some risk and reward issue there.

[Joe Fami]

Nuclear is another one. Super, super spec and space of course, I think space, quantum and nuclear are all three super super speculative. That doesn't mean they're not going to work out. They could be 10 baggers or they go to zero.

[Josh Brown]

So Joe, I know you like to look at call buying. Why is that a signal?

[Joe Fami]

A lot of big institutions will, you know, sometimes getting into 300,000 shares, a million shares, whatever. Just doing that on the open market is, it's you don't want to show your hand and you know all that stuff. So a lot of big institutions will get into positions through options. That's why I like to keep track of the big option trades. Like Carl Icahn when he got into that Netflix position it was all through options. He bought in the money calls. Bill Ackman's done the same thing. Even when you've seen some of these activist investors that Nelson Peltz and some of these things they get into them starboard through you'll see blocks of 2,000, 5,000 in the money calls because then once they exercise they just get assigned those shares. They don't have to really buy them on the open market. So I like to follow what they're doing and for the past two or three months it's been, I even have the list here. Amazon, Google, arm, Nvidia, Tesla, Vago, now Palantir, even like ARM holdings they buying June of just go look at the open interest of June 2027 calls like it's insane. They're buying like 10 million every day. So I'm not saying it's going to work out. I think these are big institutions that are playing for and I wrote that in my piece June of 2027, December of 2027. They're putting the huge footprints into these stocks and who knows if this, if this ends up surpassing what the average person could expect. These could end up being. If they're all going to go up because of their weighting on the averages, then the averages are going to go up as well.

[Josh Brown]

John, can we throw up chart 16? Shay, tell us about Futurum AI 15. What are we looking at here?

[Michael Batnick]

Yeah, so again like I referenced that the biggest winners of the dot com era wasn't just the first stage like structural arteries, it was the second stage. This is who we believe will be the second stage winners of AI. So you have the control control layer which again amd I love that they're catching a bit right now because a lot of people had the complete wrong narrative on amd. Like everyone's like, oh, they have an Nvidia problem. Nvidia problem. Like, are you kidding me? The AI acceleration market is going to be $500 billion in the next three years. Nvidia will capture 80% of that. So they have $400 billion of that. What's the remaining? All AMD has to do is capture a sub 10% share and that's $50 billion right there. That's substantial. So I think AMD is going to be using inference as the massive tailwind for them to capture that sub 10% share. And if you don't know what inference is, I, I mentioned that AI's intelligence, let's just call it inference attacks on intelligence. So as much as you use. That's why once trained data goes lower and lower, inference will explode because it's gonna be a lot more affordable to have these AI experiments. Another metaphor you wanna use is cars. Like during the deep sea pullback, training data was gonna go lower and it took everyone down with it because they were correlating training data and AI when that's not the case. So if training data is like gas, gas becomes cheaper. Do you think there's going to be more or less cars on the road? There's going to be more cars on the road because going from point A to point B is going to be much more affordable. Same thing happens in AI. So as train data gets lower and lower, inference will explode. And that's where you're seeing AMD be a major beneficiary of that. Seeing Micron with memory being beneficiary of that. The biggest beneficiary of that is actually Broadcom, their networking component. Every hyperscale we've talked about uses Broadcom. I think Broadcom is actually going to be a top 10 company for next like 5 to 7 years. Maintain that status. A lot of people talk about Nvidia tsm.

[Joe Fami]

That's, that's a forgotten trillion market cap that people don't talk about as much.

[Michael Batnick]

They're Uncle Sam. I call them Uncle Sam because remember that reference I made tax on AI? They are legitimately Uncle Sam. So the more people use AI workloads, they're going to benefit on the inference angle on that. So that's a control layer like those heart like the first layer of like they're going to benefit from inference. The operating layer is what we're talking about for the software component everyone's talking about palantir I'm not going to get into that. We have servers now they're the IT management go to Bill is got his finger on the pulse on where the puck's heading. I have full confidence that Bill Cosby which filming chairman but Oracle for example databases everyone talks about. Oh Oracle was like a debt company what seven years ago is not going anywhere. This was the second win that caused the renaissance for them because all this data is going from left brain to right brain constantly. What do you have to do with that data? You have to have governance in place to make sure it handles it correctly. Nobody can do that besides Oracle. Their presence is unmatched and you're seeing their OCI just continue to drive this company to new highs.

[Josh Brown]

What's the story with IBM? We were talking about the stock earlier. My God, it's gotten a second wind.

[Joe Fami]

Some of some of these old tech names and you know better than I do they've just reinvented themselves and or they're getting more into either services or the software layer that is helping margins as well.

[Michael Batnick]

Well they're so central in the enterprise space that as soon as there's a revolutionary movement like AI you're going to have to go through them. You can't take them out of your ecosystem. So that's why you're seeing the IBM's Oracle, Cisco like we just talked about Cisco and it's at all time highs now. Yeah so it's like they're all experiencing a renaissance but grandpa's favorite picks are doing really well. But also the kids picks CrowdStrike, Cloudflare, Palantir, serves down they're also doing really well as well.

[Joe Fami]

Everyone's happy, Grandpa and the kids.

[Josh Brown]

All right, maybe a good way to end this conversation is Jeremy Grantham's quarterly letter from 2017. Joe, why are we talking about this?

[Joe Fami]

I thought it was fascinating because and your interview with him was awesome by the way when he was on from a value manager Because I'm not just the stubborn only want to listen to growth people. I love listening to value people whether it's Bill Miller Grantham people again super smart.

[Josh Brown]

They have a little bit of a more sober view.

[Joe Fami]

Yeah. Because I want to hear the other side and he basically was making the point when he and I'm paraphrasing his letter it just really resonated with me 10 years ago is that when he got into the game and studied Benjamin Graham and all this stuff the average PE of the S&P was around 13 or so and it always kept reverting to the mean. But then if he stubbornly stuck with that, he would have ruined his entire career. Because one of those slides shows that pre. I think it was pre 19. I don't.

[Josh Brown]

John, chart 21, please.

[Joe Fami]

7. I think it was.

[Josh Brown]

Are you talking about margins?

[Joe Fami]

No, the one before that. The average PE of the S and P. It's the first one.

[Josh Brown]

Okay.

[Joe Fami]

John, chart 19, the first one on the list there.

[Josh Brown]

Yeah. So talk through it, Joe.

[Joe Fami]

Yeah. Basically he's saying that if he just. If he went with what was historical, it would have ruined his whole career.

[Josh Brown]

So pre1997, the average PE was 14. And if that was all you knew and then you saw, all of a sudden, stocks are trading at 20 times, and now the average 1996 stock today is 24 times, you would have been left in the dust.

[Joe Fami]

That's exactly his point. So when Paul Tudor Jones says, you have to adapt, evolve or die, I think the key word is adapt. And what I love about what Grantham did is he's like, look, if I was stubborn and only went with pre1997, average PE, and it always reverted back to that line. When it got below that, it was great value. When it got above that, well, something changed. Something changed. So from 96, 97 afterwards, you know, you're used to the PE being 14. It goes to almost 24. That's a substantial change.

[Josh Brown]

Well, here's what changed. Next chart, please.

[Joe Fami]

And what changed was profit margins.

[Josh Brown]

Well, why did profit margins.

[Joe Fami]

One of the things he talks about, and this is an example with the Shiller PE and the equilibrium. The next one, though, is profit margins, is that corporate corporations got more efficient technology. Technology things, you know, again, productivity. So profit margins was part of the reason. He also gets into interest rates as well, and leverage and birth rates. It's a pretty deep piece. But the next slide on profit margins shows that we can justify that. PEs are going to be higher because the profit margins are better. So you're going to get what you pay for. But this is what I'm getting at, is that we might have this conversation 10 years from now, and the average PE of the S and p could be 30 for the next 10 years. And someone will say, that is ridiculous. That's insane. That's not what I studied in my business school, and my MBA says otherwise. But Grantham could have done the same thing. If you told him a long time ago the PE was going to go from 14 to 25, you would have said, that's ridiculous. You could see it go higher.

[Josh Brown]

So you absolutely could. Investing the way that it was taught to the Grantham's generation is that we are investing not just in pieces of paper, we are actually investing in companies. And you have to look at the ratios because this is shorthand for if I'm buying the business, just flip the pe. It's an earnings yield. You have to earn some reasonable rate of return on your investment. The thing that people couldn't, nobody could have foreseen going forward was that the Yield today of 3 was going to grow to 5 to 6 to 7 because the earnings growth is so explosive and the margins are sustainable and defensible. And not only that, they were extremely accelerating. And so technology has had a high bar for the last 10 years. Fang was coined in what, 2017. Like it had been hot, but the bar just kept getting raised and they kept going over it and over it and over it. And where does it end? Obviously, who knows?

[Joe Fami]

I'm saying you have to be open.

[Josh Brown]

Minded, open minded to change.

[Joe Fami]

You have to be able to adapt. Because if Grantham didn't adapt, he's like, I would have been smoked. And he's viewed as one of the best value investors, in fact, one of the best investors ever. And I'm saying that it's not going to happen because someone's going to listen to this who's an old school value person, say you're saying the PE of the S and P is going to be at 28 or 30 for the next 10 years. I'm not saying it's going to, I'm saying if it does, don't sit there and fight the tape and fight the market. You have to be able to be open minded.

[Josh Brown]

So, Joe, when this bull market ends, I was about to say if and when because it will end eventually crying under my bed. And it might be in 27 or 28 or 34 or who the knows, right? You will, I know. You will know what to do. Now, I'm not saying that you're going to call the top, but you will see the change in character. You will see the distribution, you will see earnings declining and stocks falling.

[Joe Fami]

Soon you will protect all of that stuff. Yeah.

[Josh Brown]

What are you going to do and how are you going to know when we are approaching and I know nobody could, but how are you going to know when we're like, all right, this is getting stupid bit.

[Michael Batnick]

That's a great question. First off, I think there's going to be multiple derivatives of AI. I think he mentioned it earlier on the show where like right now it's just enterprise AI. There's going to be a physical AI, there's going to be agentic AI, there's going to be so many different derivatives that if this pop pocket is looking inflated, there's going to be a next pocket that's really being underappreciated because nobody knows the timing of that transition. So I think an example is like, if things get inflated, like let's just say it's 20, 30 and it's over 30 times earnings and a lot of these companies, there's more. All my holdings are like a Palantir, for example. What am I going to do? I'm probably going to start becoming a little defensive with some maturity names like I'm going to be buying the Googles out there, the Amazon.

[Josh Brown]

You're going to buy Apple.

[Joe Fami]

Do you, do you sell some if the position gets too big?

[Michael Batnick]

I never sell.

[Josh Brown]

But you know what, you're a young man, like, that's right.

[Michael Batnick]

But I also have a healthy, I have a healthy DCA plan. So like right now I haven't bought in six weeks. I'm this. I bought. I love to buy when the blood is in the water. Like Lovely wins.

[Joe Fami]

Right, with your stocks or within this industry, with my portfolio stocks.

[Michael Batnick]

So like I think when there's Max Fud, like when there's Vixes at 50 handle, I'd never like to have cash. I'm getting, I'm getting in because I'm very confident in these themes long term. There are structural shifts, but I know I, I underscore, I'm underscoring a digestion period that's going to be multi years. I don't think there's going to be like a 2022 pullback of 70, 60%.

[Josh Brown]

That was gnarly.

[Michael Batnick]

I think there's going to be a dead five years. I think there's going to be a digestion period to let the multiples catch up to the stock price. I think during that digestion period is where you can really capitalize on maybe some other hot pockets that weren't getting the attention right now, like space or.

[Joe Fami]

The winners might separate themselves.

[Michael Batnick]

Yeah, winners might. Winners and pretenders.

[Josh Brown]

But like Joe, do you think that this could end in a digestion period? Doesn't it have to end in a boom, in a bust or. Not necessarily.

[Joe Fami]

It usually does with, you know, where you just get an acceleration period and your neighbor and the mailman and your neighbor's dog and everyone's making money.

[Josh Brown]

We're not there.

[Joe Fami]

I Don't think we're there yet, because again, I'm not going by one poker game that my friend plays in. But when they're all like, well, there.

[Josh Brown]

Is one poker game.

[Joe Fami]

When they're all shorting everything, when institutions are like, I don't like this. I'm not. And they're reluctant to get back in. And when everyone's like, bubble, bubble, bubble. You know, that whole line is a bubbles and asset class that goes up that you don't own. Because no one's saying it's a bubble. If you own it.

[Josh Brown]

Sure.

[Joe Fami]

It's people. So it can go on again. Moves can go on much longer than we can expect. And if you do see a period where in 99, the QS were up 92%, the NASDAQ 100 was up, that's an index. The average stock doubled. If something like that happens, then I'll be here telling you, you gotta take profits. If you don't, then you're gonna see it. Cause I don't want people. If we do see an accelerated bull market, that's really starts to accelerate, you know, as I say, you gotta ring the register, take some profits along the way, because otherwise you're gonna ride it all the way up and ride it all the way down.

[Josh Brown]

Yeah.

[Joe Fami]

So you have to be able to manage risk if you're trading individual stocks.

[Josh Brown]

All right. Joe, you are phenomenal as always. Shay, excellent appearance as a. As a first timer.

[Joe Fami]

Thank you.

[Michael Batnick]

Thanks for having me. I appreciate it.

[Joe Fami]

Having me. Awesome.

[Josh Brown]

Okay, before we let you guys go, what are we looking forward to for the summer? It's July 4th weekend. What do you got any good plans?

[Michael Batnick]

Anything you're excited about flying back to LA tonight? Probably go to Newport Beach. That's usually the scene. My fiance's friends has a boat there, might be doing that.

[Josh Brown]

Are you from la?

[Michael Batnick]

Angelino?

[Josh Brown]

Yeah.

[Michael Batnick]

Yeah. So going to be doing that and taking advantage of the time off because gotta say, I did six TV in persons this week.

[Josh Brown]

Good for you.

[Michael Batnick]

It's freaking disgusting in New York, out like, oh, my God, I had an Uber 0.4 miles away because I didn't trust my sweat right now. Like, I was like, I felt awful requesting Uber, but that's good.

[Joe Fami]

Humble brag. Andre Agassi agreed to do my podcast.

[Josh Brown]

How? What?

[Joe Fami]

Yeah.

[Michael Batnick]

Wow.

[Joe Fami]

I ran into him and I. Long story short, I. My friend, she pushed me. I'm like, I'm so nervous. He's a tennis icon. He was sitting there playing slots in Vegas. He's from Vegas.

[Josh Brown]

He's There. Joe is very humble and modest. But I will say this, you are one of these weirdly connected people. I don't know how you do it.

[Joe Fami]

I don't know either. This is one I don't know. I've never met him. He's born and raised in Vegas, my friend.

[Josh Brown]

But you know what it is? I think you're very non threatening.

[Joe Fami]

So I told Josh this story and he really made a funny point. I asked him, I just said, look, my friend, she pushed me to go say hi. I just said, I'm a big fan and I appreciate what you do for the community. He's given millions of dollars to schools and everything. And then I was like, well, while I'm here, I'm like, do you want to do my podcast? And Josh goes, she just went from I don't want to bother you to can I have two hours of your time? And he said, look, I have other people friends I have to do, but if you're local and you know, you have a studio here, I support you. And because that's where I record where you've been kind enough to do my podcast and I got to get you on as well. But he's like, I'll do it later in the fall. I have to do some others because I have to do theirs before yours. And he did Andy Roddick's podcast just a couple weeks ago.

[Josh Brown]

Holy shit. Unbelievable.

[Joe Fami]

So anyways, something to look forward to.

[Josh Brown]

Joe, how do people find you on.

[Joe Fami]

The interwebs joefami.chi and the podcast is Joe's Happy Hour on YouTube, Spotify, Apple Podcasts.

[Josh Brown]

All right, Shay, you're blowing up. Where do people find you?

[Michael Batnick]

Stock savvy shy on X. But also.

[Josh Brown]

Wait, say that one more time.

[Michael Batnick]

Stock savvy shy.

[Josh Brown]

Stock savvy shy. Okay. I've been calling you Shay this whole time.

[Michael Batnick]

It's all good.

[Josh Brown]

Okay, where else?

[Michael Batnick]

Futurum equities dot com. That's a new research firm that were starting the democratization of research for everyone. So follow the Twitter account, go on the website. We will launch a lot of feature AI15 lists. We're going to launch those lists every single month.

[Josh Brown]

Listen, your enthusiasm is palpable. I love to say it. So congrats on all your success so far.

[Michael Batnick]

Thank you. Thank you.

[Josh Brown]

All right, that is it for us. Thank you, Duncan, John, for keeping you late on the Thursday afternoon. Am I the worst? You guys thought you were getting off this week, didn't you? Okay, Nicole, Daniel, the whole crew, thank you for watching. We will see you next time. All right, fellas?

[Michael Batnick]

Yeah.