← The Pomp Podcast
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- [00:01]
Podcast Sponsor
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- [00:56]
Jordy Visser
And as we go forward, I'm going to say it again. The AI mid cycle slowdown is basically the peak in the easy money of AI. And so if the money starts filtering back towards the other direction, I've laid out a pretty bullish case for Bitcoin if you haven't got it. If we're overestimating the inflation side and productivity is coming, if we're overestimating the hawkishness of the Fed from what War said, and at the same time the AI trade is not going to lose its earnings growth. It's just going to make it more difficult for institutions to stay long at the way they have in the past. Then all of a sudden the, the lower volatility of bitcoin will probably lead in if we get above the 200 day moving average. With everything that I just said, which is up, up north of 70 at this point, I do think that that's going to be the beginning of the next phase of crypto and the next phase of AI. We'll see if it happens in the second half of the year. I think it will.
- [01:44]
Matt
What's going on guys? Today we've got a great conversation with Jordy Visser.
- [01:47]
It's fourth of July, so he's here to explain to us what's going on in the AI trade, why he thinks that the mid cycle slowdown is something you should pay attention to. He also des maybe some of the easy trades are gone and things are going to get a little bit harder from here. And then we talk about Bitcoin and why he's getting excited about Bitcoin once again. And then, of course, we go through a whole bunch of macroeconomic data points and he tries to unpack, why exactly are some people ignoring these data points and how is he thinking about investing in his portfolio? All of that and much more in today's conversation with Jordy Visser.
- [02:17]
All right, Jordy, happy 4th of July.
- [02:19]
Little 4th of July edition here with
- [02:22]
the American flag hat.
- [02:24]
Let's start with bitcoin. You know, a lot of people think bitcoin is one of the most American assets you could have, but bitcoin's not been doing very well. And it seems like people are starting to kind of give up a little bit online. What's your take? Is that actually a good sign that you need people to give up to get to the bottom of a bear market?
- [02:39]
Jordy Visser
Well, first of all, I think give up is an understatement. It's very hard to find people jumping into it. So if you kind of took a poll of 100 people that have never been in Bitcoin, 100 of them will say, I have no interest. If you've had people that have been involved at this point, I would say at least 60 to 70% are questioning any involvement they've had. And so you've got kind of hardcore people that are still in there. I'll just. I'll give you my take in terms of this. This has been a bad year for bitcoin with a lot of headwinds, starting with software, which we talked about a lot at the beginning of the year, and how it got lumped in with everything that was built on code. Once the software stuff kind of bottomed, you got into the. What you said, which is complete agreement. A country like Korea, which was part of the energy for bitcoin, moved everything into basically memory. And we've seen massive leverage and margin debt and everything else. So bitcoin, which was always kind of the place you'd go to if you wanted to trade beta relative to tech, well, that ended and everyone now has beta in tech, where you can get 10 baggers in the span of a year. But then one other part that I don't think people fully embraced as the last leg, and I talked about it briefly last week with this whole debasement unwind, where it got lumped in with gold and silver. The rationale behind that, which is starting to become more interesting to me, and I'm seeing some technical signs finally with divergences, which I'll finish this off with. But I think the debasement trade unwind, there is a direct relationship here between something we talked about a lot and something I was concerned about for really the last five, six weeks, but then last week talked about that I'm not as concerned about anymore. Was this inflation uptick, particularly in core pce, core CPI with energy going higher. Well, obviously energy prices have collapsed. We've seen fertilizer, so you're going to get a negative CPI print most likely for the June number already for July we have a negative number, but I still hear a lot of people going out to macro clients talking about poor core PCE still being elevated. Then you get war in the second that we went from the Fed effective rate, which is about 3.6. We crossed over that for the December rate of end of the year, meaning they had rate hikes built in. That was when bitcoin had the last leg lower. I think we've hit the peak of that. I really do. You know, this is where the debate's going to come in. I am much more negative in my opinion on the jobs market getting better. And I think that is the difference. I listened to Darius Dale, who you've had on recently and who's a friend of the show and someone I respect, but I respect knowing what he's saying because I know his clients are responding to it because he's had such a good call on things and he was. I just listened to him post something yesterday where he talked about wage inflation and I think that's where he and I disagree. Right now I don't see the labor market as improving other than the fact that we've had more jobs. Some of this is related to the World cup, but on the parts related to AI, there is no bounce whatsoever. The business side, the insurance side, all of that stuff. And I think we people are underestimating the next part of AI, which is the application layer, the infrastructure side is going to slow down. So I'm just going to tell people technically we've got some nice divergences. Finally, we made new lows in bitcoin, not just from the lows from a couple weeks ago, but also the lows from back in February and it held in there. We've seen a lot of selling in the Bitcoin ETFs, so I'm more interested in paying attention now. Like I've said, until it gets above the 200 day, I don't think it's worthwhile for people to play on the other side. But I do think the narrative is old and now I've been able to find something where if the wage side doesn't improve, meaning if we don't get a big change and we get some, I think any weakness now that starts to show up from AI agents I think is going to be a positive for Bitcoin.
- [06:59]
Matt
Now when we watch, you know, bitcoin selling off like this, it's coming at the exact same time that the Mag 7 have suffered to start the year. And then on top of that, we're now getting lots of debate in some of the AI names that people have been wondering, you know, how sustainable is it? Can this actually drive the returns or the roi? Do you start to see even though there's divergence maybe from some of the things that used to be correlated, are there new correlations that are starting to build or that you're watching where you're saying, look, maybe actually some of these assets are just rotating around in people's portfolio and they're looking at Bitcoin and you maybe some certain AI stocks or something as proxies for each other now.
- [07:35]
Jordy Visser
Well, this is where the story gets very good for Bitcoin. So about four weeks ago, I talked and I started doing videos on the AI mid cycle slowdown. I don't think people really listened to me. I don't think they really cared. But these names have been hit pretty hard and they're going through a slowdown. The reason they're going through a slowdown, these headwinds are never going away. So let me rephrase that. These headwinds are never going away. So I think people have to adjust their expectations. And this goes for Korea, this goes for Micron, this goes for everything. We talked about Micron having blowout numbers last week. Stock is down a decent amount since that report. That was the high. When you sell off on great news, that is not a good sign and you have to dig a little deep. The reason these headwinds or these, that we're at a point is the headwinds are real. The government shut down one of the models. The Korean models are catching up. We're at a stage where the governments are getting more involved. This is a headwind that people have to understand if governments are getting more involved with companies. Sam Altman proposed a 5% stake to the, to the, the White House. I, I think we're getting back into what Bitcoin was meant to represent, which is when the government gets too involved in the capital markets, in the fiat system, in the ability to make money in these things, which is what happens when you shut down the models, when you slow down on the data center side, we are absolutely having problems getting data centers in. This is again about politics. You've got a lot of people spending a lot of money in these elections. On the Social Democrats side, they are doing everything they can on the Republican side, and on the tech side, they're doing everything they can. We are at a point now where I think people have to realize that AI is a disruptive force and the models from here only get better. So what I was talking about in the first quarter, we're not gonna see that easy trade again. It's not coming. And so the benefits are gonna be to the companies that are able to use the agentix side and get their margins up. And we're starting to see healthcare stocks and financial stocks start to outperform the market. And that's why we're seeing this rotation, because tech has been the big winner. The infrastructure has been the big winner. I still think over the next five years, you're gonna get great returns in these things. Cause to build that is going to happen. It's just not gonna be as easy. And I think that's good for Bitcoin.
- [09:57]
Matt
What do you think was happening behind the scenes for Sam Altman and Open AI to be floating 5% stake in the government?
- [10:04]
Podcast Sponsor
Right.
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Matt
Or for the government? Like, it feels like that's not out of the blue. And so is that like the US Government actually wanting to have the quote, unquote people, the citizens, participate in the AI Boom? Is that a US China competition thing? Is this a regulatory capture, you know, approach from somebody like an OpenAI? What's driving that?
- [10:26]
Jordy Visser
Honestly, I think you've got Dario and Anthropic on one side, and they've made their point very clear that their dealings with the government have not been good. They're not donors to it. They're involved with some of the opposing forces in terms of the politics. Greg Brockman has donated a lot of money to the Trump campaign and to everything on the Republican side, from what I've read. So you've got these kind of two diverging forces. Here's the thing I'll say about all this for everyone. Again, these headwinds are real. OpenAI obviously came under some pressure for the spending. We saw Meta announce that they're going to become a compute company after spending billions of dollars on people. And the silliest thing I may have ever heard in terms of a way a company just pivots left and right. Meta. We're not Meta. We're going to spend tons of money on this. Now we're going to become a data center compute because SpaceX did it. I think all of these things show the same thing. The headwinds are coming and whether they're from politics that are getting involved and you're trying to have an edge on this because it is important or on the other side your investors are getting involved in saying you're spending too much money. I just think people have to recognize we are at the very early innings of the AI buildout. We are at the very early innings of the benefits we're going to see from AI. But we are past the anything goes period, which was probably for only about six months. I know it feels longer, but eight months ago people thought it was absolutely a bubble and these were hallucinations. Now we know the models are too good. And so you've reached a point where I think the government has to be involved. And the model companies are getting, I think they're starting to realize they have to work with the government or be in trouble.
- [12:08]
Matt
So we obviously saw them with Mythos and Fable. The Chinese open source models have really started to drive adoption. You can go look online and people are talking about, hey, we stopped using some centralized American model for this open source model. It's significantly decreased our cost and we're not worried about security or safety because we're just self hosting the model models for sales. Now another aspect of this is with the open source models, well, what is the model telling you and is it, you know, telling socialist ideas or communist type ideas to your users or how exactly was it trained? What was the source material? All of that stuff I think people are trying to figure out and don't yet quite know. But there is a very small, yet maybe exciting aspect of American open source models. So Nvidia started to play here. There's a couple of other players. Do you give any importance or credence to American open source or is this pretty much American Closed Source vs Global Open Source?
- [13:05]
Jordy Visser
Now American open source is going to be there. I mean, I, I think, I think Nvidia's model, I believe it's Nematron, is already high enough on the scale for it to be useful. But also remember, any of the frontier model companies could release one of their older models tomorrow and it would be good. I think this is, I think people are getting a little bit too dramatic on things like the token index. I think they're probably getting a little too dramatic on how much the open source is going to win. The main story is going to be that along this path, companies are going to have to figure out a way to keep their costs down. There's no way around it. It's just too expensive to use the most expensive models. But this was always going to happen. It's just another recognition that six months ago there was not much adoption. I listened to Alex Cantrowitz interview Greg Brockman and I thought it was a great interview. I really highly recommend people listen to it. Greg is very smart but he talked enterprise adoption where it was six months ago and six months ago it was just get me anything I need to catch up. Well, that's why we've, they've overspent and now what their business is is find me ways to turn it into roic. Like if I'm going to invest this money in, in getting open AI, you got to find some way to make this, make me money so I can get some profit margins. And he said this is accelerating and their business is exploding on this front. The reason I bring that up is the token usage is going to just continue to grow. He talked about and this is what makes the meta comment so ridiculous. And for people that follow these things and get involved, I mean it is honestly insane. I spend my life listening to this stuff. There is not enough compute. So if these guys say they have excess compute when they've done tons of major deals this year to secure more capacity, this honestly is just a way for them to get some cash flow in the door and make the investors think that they could always do this to put some floor on the stock. There's no doubt in my mind but that doesn't mean they should see multiple things expansion. So I think the model situation with the open source US will have open source models. The risk is that foreign company countries who've been shut off from fable and been shut off from others, will they move to Chinese models which are way better than the US models at this point. So there's a gap in time and there's a gap in capabilities Right now
- [15:25]
Matt
if you were Mark Zuckerberg, what would you do? Would you continue to invest capex for your own internal consumption and compute needs? Would you move to more of like this like neo cloud type approach? Would you split and use some internal and rent some for the cash flow? How would you play it?
- [15:42]
Jordy Visser
So I, I don't even. And anyone, I think who, who gives suggestions on this, they have a lot to lose. So you know, I think if you want to use something why don't, why doesn't Mark Zuckerberg go put 20% of his money into Bitcoin because he has no need to. He has more money than he'll ever need, so he doesn't need to try to make money. The reason I bring that up in this story is with AI and with AGI sitting right around the corner, I don't know the right answer for any of these companies. So I understand why they're flailing all over the place. I mean, Microsoft is flailing. Oracle had a big rally, it dumped all the way back to Lowe's. Again, we're in a point where the uncertainty going forward is extreme. And I think that is the part that we've recognized is that with all of these headwinds, the same uncertainty we saw in the first part of the year, we're sort of software companies got hit. We're now seeing it with the infrastructure names because people are questioning whether the build out will happen, what will go on. And I think with Meta, it's just there's no answer to the question that you gave. And I think the investors are like, we don't know. And whatever Mark says, he says one thing, we're going to go out and spend billions of dollars on talent to play catch up. Well, that clearly didn't work. Maybe they have something behind the scenes, but I think when they do things like the data center sign, it's a bad sign to me that you're just kind of throwing stuff against the wall. The one thing we've learned with AI and we certainly learned it with OpenAI, if you make any kind of a breakthrough, you do have the chance to catch up. So there's a lot more talk. And I say this every week that we get on here. I use Codex more than Claude at this point. I absolutely do. And the reason is because I'm not throttled as much. So I talk to a lot of people. That's not the same case, but the more that enterprises are using it, they don't have as much compute. And I think that's where OpenAI has made the catch up is they overspend already. Anthropic's trying to play catch up, but OpenAI has enough compute right now. Mark doesn't have anything ready right now. He doesn't. There's no models and the data centers aren't finished yet, so.
- [17:44]
Matt
All right, folks, I'm gonna take a little break from this episode right here to tell you something about figure markets. Now, I think figure's super interesting. I've been an investor in this business for a very long time from the private market to now they've gone public, they've built a very cool business. And I think what's most interesting here is they of two sides to a marketplace. If you've got bitcoin and you want liquidity but you don't want to sell the bitcoin, you want to keep the upside and just take a loan out against it. Figure now offers these crypto backed loans. They charge about 8.91% interest, that's 9.9% APR and you can borrow up to 50% of the Bitcoin that you give over to them. And so when you do that you're unlocking capital but you're not triggering taxes or giving up the bitcoin exposure. Now on the other side of this marketplace is somebody who's got cash and they want to get yield. And on that case you can actually go and you can use what's called the democratized prime product and it's allowing you to earn up to 9% APY. What's cool about is they pay you hourly, it's backed by real world assets and there's no yield games or this like token inflation that is susceptible in the crypto industry. So if you have bitcoin and you want to borrow against it, go check out figure. If you've got cash and you want to earn Yield up to 9% APY, you should also go check out Figure. They've been a great partner to me. I'm a very happy investor in the business. Go check them out at figure markets co Pompomp or click on the link in the Description and that's FigureMarkets Co pompomp.
- [19:08]
We've seen a lot of technological breakthroughs recently. Some of it's on the power generation side. We just saw a nuclear company partner in some form or fashion with Nvidia etched just kind of came out of stealth and they've got a whole bunch of innovation around what they're building. How much of that innovation is going to hit the market in the next 12, 24 months and we'll have a material impact here versus it took Nvidia 30 plus years to really become a household name and drive. You know the value that they ultimately were able to is this around the new tech, especially the hardware and chips. Is this stuff short term or do you look at it much more long term term?
- [19:48]
Jordy Visser
It's long term. There's no way to solve the compute problem from I mean I can talk to a gazillion people and listen to as many podcasts and I try to cherry Pick the ones with smart people. The OLM podcast with Gavin Baker this past weekend was great. There's just we're short compute. I don't care who you talk to, there's no solution to that problem. Because right now to say that we don't have enough computer, we don't know what the demand is. And again, I try to use these numbers, but this is the reality. I keep hearing from everyone that demand is insatiable on the amount of demand that we have. So the only way I could say it is if you have one McDonald's restaurant and it says a billion served. Okay, great. Over how many years did that take to get to a billion served? If there was a line of a billion people outside of any McDonald's right now, how long would it take them to go through it? You can't just snap your finger with this stuff and get it so everyone can come up with oh, there'll be more efficiencies. Oh, we can't be in the third inning. Oh, blah blah. Unless everyone I'm listening to is completely wrong. We are so early in the stage. In fact, Brockman said right now 10 million users are using agentic systems. 10 million. We have billions of people that will be using agentic systems. Billions. We are barely in this no matter what. So everyone just needs to woe down because once it gets easy, I mean this is the reason why you can't have Siri on your phone do everything that you need. At some point you will get that we are still ways away. So all these energy solutions, they're just making sure that we don't stop progress. But they're not going to make us be able to satisfy everyone's demand needs.
- [21:34]
Matt
If you look in your crystal ball, this mid cycle slowdown, how bad is it? How long does it last? How does maybe the rest of this year play out in your eyes?
- [21:44]
Jordy Visser
I think we've done last week on the video I just showed that there were three different types of consolidations and that's what we're in. We're in a consolidation of a bull market with inside the AI thematic trade. They can be short and sharp, meaning they could have a scary 20%, 30% correction in the names in a day or two. During really strong bull markets where the market earnings are going up so much, that's less likely. They could have a very tight, quiet consol. Well, when, when something like micron goes from 60 to 1200 in the span of 15 months, that's also not likely for it to stay around 1200 for the next three months and allow everyone to kind of stay in their trade and then just ride it higher. I think the, the third one that I highlighted is the one we're in. I'm gonna go through it again this week and that's where you have more volatility, where you just kind of go up and down in a much wider range. So let's take Micron as just an example here. The 50 day moving average as of today is somewhere around 840. It made a high of above 1200. So let's just say 1240 to 840. I mean that's a big range. We're talking somewhere around 50% of the price from where it was at 840. I think we'll eventually get to the 50 day moving average on most of these names. It'll either happen through a combination of falling and then bouncing back or by time continuing to go forward to let's say the next earnings period in July and then gradually go higher. The one thing I feel very strongly about is that the earnings, earnings for these companies are still going to be great. That's the underlying cushion that they have. That's why I feel very strongly to say this is about multiple compression. This is about making sure people are not able to ride a trend for free. There has to be some volatility to shake people out. So that's the way I think it'll play out for the next three months. But I think by the time we get the fourth quarter of this year, these stocks will be making new all time highs for sure.
- [23:41]
Matt
Now we've seen the S and P in the first half of the year up 10%. NASDAQ have up 20%. What's your take? We just continue to go up into the right throughout the rest of the year and AI is a big driver of that. Or will we get more divergence and maybe some of these indexes actually won't perform as well even if the AI stocks do?
- [23:58]
Jordy Visser
Yeah, I'm kind of torn between this. I think it really comes down to the hyperscalers. They've been the biggest drag on the market. The S and P finished the first half of the year up about seven and a half, 8% I believe. Now I think it was closer to 10. Actually by the time we got those two big days in, I think the week before it was around seven and a half. But then we've had a pullback back so far this week. We've underperformed Korea, we've underperformed Japan, we had even just barely performed with Europe. I'm going to guess that because I expect a broadening out. We're already starting to see it in the healthcare stocks and the insurance stocks and the bank stocks. I think that's what's going to happen is I think you're going to see a broadening out into other places. The hyperscalers will probably be able to hang in the lows here, even though. So I just don't see them having much upside. And as long as that's the case, I would expect another 10% by the end of the year. In the S and P, I don't see anything on the horizon other than these headwinds becoming very political. I do think the midterms are probably going to be a negative for AI in general, particularly after the recent elections where Mamdani candidates were doing so well. I think there's an anti AI situation. I don't think it's going to matter. And I think once we get to that period, we should see inflation have come down. And if that's the case and we don't have to worry about the Fed, and if we don't have to worry about the Fed and we start to see the dollar at least be on the weaker side again, I think we can be in a better position for all assets for the final four two months of the year.
- [25:34]
Matt
What are you looking for in the second half of the year? There's specific milestones that you're either excited about or worried about.
- [25:41]
Jordy Visser
Well, it's really. It still comes down to the earnings. I mean, the Wall Street Journal had a good article just highlighting how unique the first quarter was. So people have lowered, let's say, their belief in earnings. And that's because there's been two factors that have juiced earnings which will continue to juice them on one side for at least this year, but then the other one will run out after the second quarter. So just so we go through them, the first one is the reality that you get to spread your expenses for the hyperscalers over the course of the next five years. So the money you're spending, you only have to hit against your earnings a little bit over the next five years. Gives you time to get your roic. But for the nvidias and the people receiving the money, you get obviously a huge boost because their revenues jump up and that comes in. So there's a little bit of an accounting mismatch on this, which in my mind, because I believe that the profit margins will remain robust and will get better but slowly you'll get the roic. It'll keep earnings at a higher level, but the margins probably won't expand as much as we saw there. The second thing is that a lot of these companies, because they were owners in Anthropic, OpenAI and SpaceX and they have to take Mark to markets on them, well, they get a big boost in their, in their earnings. It's not in their operating earnings, but it's definitely in their earnings. That'll run out too. I don't think those companies, now that they've all been marked higher, are going to go that much. But you could see Anthropic, when it goes public, it could trade $3 million, $3 trillion. There's no reason why it can't, even if it didn't stay up there after we saw what we saw with SpaceX. So regardless, I think that means that the benefit or what I'm looking for milestones is that we actually see a broadening out. If you go read what Travelers said in their earnings report and you go through it, it's an insurance company, it's boring, it doesn't really matter. They're really starting to talk about AI in a bigger way. I've talked about Eli Lilly on this. Those are two healthcare example or two companies just in general, one in the insurance side, one on the healthcare side. I think people need to start realizing that the benefits from AI really come with the agentix side. And we only had the realization of the AI agent side in the first three months of this year, the first six months. As Greg Brockman said, he's seeing massive adoption and now OpenAI is getting heavily involved in showing them how they can have real impact. He said the second half of the year is going to be a big game changer in terms of the AI agents and particularly looking a year backwards, I think people, people need to start to build that into their, their estimations and I, I think that's what's going to happen. So I think there's a bit underneath the market and there's no AI bubble. It's the productivity boom that's going to start to show up.
- [28:27]
Matt
What I find really interesting is take Claude artifacts, you know, as an example or, or something like that, where people are now starting to take these agents and put them into their company workflows. There's a lot of debate as to are you actually giving the information to the models and they're just going to go compete with you. At the same time, I think there's a lot of People saying, hey, this is going to make us more productive. And so how do see this like, agentic component? If you were running a company, you had, you know, a thousand employees and your employees were saying, hey, this is going to make me more effective, you were seeing the revenue growth. What would your evaluation be as to whether you let the major LLMs into, you know, the kind of hen house? Right. Do you do it or do you worry about it? How do you look at that?
- [29:08]
Jordy Visser
I mean, I think they've gone through this in a way that aside from the risks that come from from the cloud as not being as safe, they'll be using. I mean, they'll be using, for example, aws and AWS will have their own security around it. And that's one of the reasons why when people go, well, Amazon told on Myth, well, no, they want to make sure their job is security. If a company like Coca Cola or Eli Lilly or whatever is using their cloud and they believe that Mythos is something that is an issue, they want to make sure that everything is tied up. That one of the key things that came out in the insurance side was how Mythos is actually a big positive. And I hadn't thought about this. We hear about the vulnerabilities, but if companies like Travelers, which sells insurance, and part of the thing they want to check is, do you have risk inside your your company? Well, now they can have Mythos go check everything. So it's not just is the company paying for it, the insurance companies and the consultants side, the Marsh McClellands, all of that stuff they can now get involved with. Well, how do you deal with this from a policy perspective? I just don't think people have fully thought. And the reason is because it moves so fast. It was a year ago that people were still bothering me about hallucinations. You barely hear hallucinations now because we're talking about the models with 140/ IQ. So I just think as we go through this, companies will feel more secure because they are going to have the Amazon and everything as a defense. That being said, the amount of times being mentioned about cyber risk for smaller businesses, I do think there's going to be a market shock within the next year where we might come in in a day and the market could be down 10% globally because there was a hacking into a major bank or a major place. And whether it was IP that was stolen or whether it was, you know, private information that's going to be released, I just think we're going to have that and people are just going to have to deal with it. But I think those types of things continue to make it where if you're running a portfolio where you, you can't handle volatility, I wouldn't have too much money in the market because I think it is going to be volatile. I think you're going to get paid over time. But I do think that there's going to be a lot of shockwaves and that the easy part of AI is over and the model capabilities have just gotten too, too good.
- [31:32]
Matt
There's been a lot of talk of, for many of these cyber security reasons etc, the US government coming in, regulating, approving not only the models getting released, but who they get released to, who the customers are. You know, there's many levels to the regulation. At the same time, somebody like a Bill Gurley, many others are saying, wait a second, this means that China or, you know, whatever model, whether it's open source or another geography, they're going to get this massive advantage because we're essentially shooting ourselves in the foot. Which side are you on on the debate?
- [32:02]
Jordy Visser
I, I, there's no way that the Chinese open source models aren't going to hurt it, it, it has to. I, I, I've kind of thought about this from the way that I think about everything over the next five years. So humanoids are coming and part of the reason that that gets brought up in the conversation is you can't have humanoids without having having superintelligence. Well, we're going to have super intelligence in five years and we're going to have humanoids in five years and that combination is going to change the equation again. So as much as I want to believe that open source is going to hurt or help, I just kind of look at it as the total revenues of the S&P 500. A fairly high percentage of them come from overseas. I forget where the number is now, but let's assume it's 40%. It's somewhere around there. That's a lot of revenues, meaning the US is selling into all of these countries and almost everything that we're selling is services and software and things along those lines. Now the hyperscalers have a huge part of it. So do I think open source and LLMs are going to be critical towards maybe keeping that. I don't see any of the other countries as being in a position where they can honestly use the Chinese open source models in the way that they want. They're going to need the US for something. And if we learned a lesson last Year. Everyone's interconnected already to say that, okay, you have our open source, we're shutting it down. The only two countries in the world that seem to be at a stalemate of how to deal with things is China and the U.S. the U.S. was throwing tariffs on this, threatening invasions, all kind of stuff. And we ended up just kind of getting through the tariffs. And then the Supreme Court said, no, there are no tariffs. So I think this is going to be a very similar thing. I really do. Because I don't believe that there's a time where AI gets so good that everything just ends. I'm going to continue to lean that the frontier models are being built to solve the world's greatest challenges. That that is basically the Manhattan Project for every single great problem you want. If you go listen to that Greg Brockman interview and you fast forward all the way to the final 10 minutes, he starts talking about cancer. He starts talking about people being able to solve this and what has already happened, happened. And he said, this will be the standard. So if you haven't listened to me or don't believe me in terms of, like, the ability to have to not die from disease, he doesn't do it from the Dario way. He does it from the it's already happening way. And so I don't think open source should be the, you know, the place that people debate. I think for Bill Gurley, he's a VC guy, I think you're going to start to see capitalists and the capitalist system. And this is the reason why I got involved in bitcoin in the first place. I think you're going to see major people start to question what AI means for the capitalist system and for their money. I really do believe it. And this is the reason why I continue to focus my attention on outside the system. So to sum it up, if Bill Gurley and people like Bill Gurley are saying, well, China, open source will always win, I kind of agree with it, but not in the way that that means China wins. It means that small businesses win, that entrepreneurs win, and that the places that have the most money don't win. And that's kind of the way that I see it happening, is that there's a distribution of economics that happens. And that's the reason why I think people are going to look for a place to be outside the system and protect their net worth. And I don't think it's the government taxes. I think it's AI you were banging
- [35:46]
Matt
the drum on Micron memory, et cetera, back sub $100 micron. Now, it seems like everyone is talking about this. There's everything from inference to, you know, podcasts, and. And we recently saw the president tweet about Micron. We have seen Gavin Baker, you know, kind of beat the drum as well. You wrote a paper this week on the importance of memory, and kind of this belief that even though everyone knows this is important and it's a bottleneck, it is not going to be solved, seems to be the consensus. Can you just elaborate on. On that?
- [36:20]
Jordy Visser
Yeah, I. I just wanted to make sure people realize that memory is the most important thing. And I used a book that I don't think we've talked about, and I don't mention too many books because I don't. I don't read.
- [36:31]
Podcast Sponsor
Really?
- [36:31]
Matt
You read a book? You read a book?
- [36:33]
Jordy Visser
I. I've read. I've read a decent amount of books in my. In my lifetime, but not, not recently. But Moonwalking with Einstein is a fantastic book, and I wanted to bring it up because I was always fat. I get fascinated by little nuggets. But knowing philosophers were able to memorize speeches that would take four hours, no teleprompter, and they could do the whole speech, and they did it through this. Well, I'll use the technique, the way it's called in Moonwalking with Einstein, which is the memory palace, which is somewhat similar to the way we all remember songs that we haven't heard since we were 10. And then all of a sudden it comes on the radio and we know every single word. But you and I could ask each other what we spoke about on this, and we'll have no idea tomorrow. So how does a song stay in your brain? Brain and memory is critical for the IQ to continue to go up. Like, you have to have more memory, because at some point, you're going back and forth, you're connecting dots, and the only way your IQ is going to go up is the ability to retrieve things quickly and go through this. So I wanted to, number one, write a paper that just highlighted to people that watching the way Micron and SK Hynix and Samsung trade is very, very important to what's happening in AI it's going to be a shortage for a long, long time. We're just tipping the scales. Number two, I wanted to make sure that as people go through this, they realize we are entering the age where this IQ and this memory is getting us to a point where magic is going to start happening. And that was the point of kind of connecting it back to moonwalking with Einstein. So I just think that for people that are trying to understand AI and understand what's going on and realize that memory is not a bubble, memory is an insatiable need. And eventually we'll get more efficiencies in algorithms. We'll eventually build more memory. My point is, I think from this point on, people should expect normal type memory returns of maybe 30 to 40% a year and not 30 to 40% a week. And that's why we're starting to see the gyrations. That's all it was.
- [38:38]
Matt
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- [40:49]
Now, given that it is July 4th, it's the 250th birthday day of the country, I think people are very excited and there's a lot of patriotism. But also there's another side of this which is like the future of AI is going to have a material impact on financial markets, on people's individual portfolios and on what the economy in society looks like, you know, over the next 10 to 20 years. We talk a lot of about the software side and I think rightfully so, but you mentioned earlier kind of the physical AI, the robotic side, and I think that that is probably going to be one of the where the average American first starts to see this stuff. What do you envision over the next 10 or 20 years? Is this like, you know, technological utopia where we're all in self driving cars and humanoids are walking our dogs and you know, every factory is completely automated or is there some like messy middle between that vision and where we are today that you think is much more likely and then like what the ramifications are for investors as they're trying to navigate, you know, what are the next trends that maybe aren't as popular today but will become popular over the next 10 years? Years?
- [41:58]
Jordy Visser
No, this is going to explode over the next five years. And anyone that doesn't believe that is in the same hole they were with AI hallucinations. So let's just first put it into terms with the Chinese. What do people think is a bigger risk right now? The Chinese models are only six months behind our models. And yes, most of this is through copying them through distillation and then then doing some changes. But the reality is their models are as good, their robotic situation is far, far, far advanced over us now. Not necessarily the capabilities, but the production numbers, the ability for society to embrace them and want them and use them. China just in the last couple months announced that. And I forget which company is, they have 140 different humanoid robotics companies there and they're now releasing one than $5,000. So again, how are we going to win a war if the Chinese are embracing robotics and humanoids and we're not. So for anyone out there that doesn't believe this also won't be a military situation, believe Elon Musk when he says there will be millions of them certainly within the next decade. But the concept of them building themselves is already happening and that doesn't mean again them going out and putting the parts together. It means them doing what humans do right now to create them. And that's already being done and testing Tesla and other shops that are going through this. So the scaling out of humanoids is going to happen. But I want to bring this back to it's already happening in society. We already have a car that has done flying car that's done trips from the west side of Manhattan to jfk. That's already happening. There's drones already working in Florida going in front of the police to go to situations we're going to have, have ambulances like all of these things. The first place it's going to happen is in places where people won't fight it because it's an emergency situation for crime where someone's getting hurt, for an ambulance where someone's getting hurt. Full self driving will happen. The human eyes inside our home will take a lot longer to go because those have to be perfect to go through. But again this gets back into being able to solve something on a computer textually is nothing compared to the compute necessary for humanoid to be making good decisions. For anyone who's been in one of the older Teslas, which I have and has used the full self driving, I would never let my hands off it for very long. In Maine these roads are not on the map perfectly every things they're, the bikes are all over the place. Like I, I just wouldn't do it. And the newer models, I'm sure it's much, much better. And as I get another car and I get the new models, I'll go through it. But I think for people not to realize that this is coming, it's going to be a big part of our lives and it's why they should never fade. The hardware situation, the hardware build out the parts is the place to be. Memory is part of that. The infrastructure part is part, part of it. This is going to be a $90 trillion build out and I think you want to be focused on a bull market in stocks because that build out is going to have the money that's going to be spent to do those things.
- [45:16]
Matt
One of the aspects that has really I think gotten further been forgotten in the AI conversation is the impact of the Fed. And we've been doing all of this with, you know, somewhat elevated interest rates. And so if Warsh does come in and start cutting rates and driving all kinds of money into the market, that should provide cheaper capital to these companies to then go and use that to build out some of this stuff. And like there's a flywheel there. The question just is like, what would the inflationary aspect be? What would the pain or the trade off oil prices have come down? What's just your general sense right now on war, inflation and then the ability for macroeconomics to help or hurt these AI companies?
- [46:05]
Jordy Visser
Well, first of all, I think people completely overreacted last week to Warsh's first statement. And I'll just say I like looking at the movements and things and I think the way the media and especially people in the macro world talked about it like, oh, it was hawkish. You just didn't get a big enough move in anything to say anything happened. There wasn't some massive move where it was a reset where he said this is going to happen. In fact, he said, I want less guidance from the Fed. I don't want to be coming out there and trying to sell stop volatility. I think it's important for us to get back to monetary policy being the way that we're moving things, because that is the only way that we're going to be able to get a change in what's happened. So I think one of the messages that he said is that he would love to reduce the balance sheet. Now I personally don't see how that's going to be possible. And he did admit in an interview this week on a panel where he said, said it took us 18 years to get into this balance sheet. We're not going to get out of it in 18 weeks with the implication being that this is going to be a slow moving thing. And he said, we are not going to shock the market. We will give them plenty of time to know that this is going to happen. But at the same point he wants rates to be lower. And the reason he wants rates to be lower is because he knows that they have an impact on housing, they have an impact on people that maybe don't own assets and still need to borrow money. And so, so all of these things fit into a Fed that probably will be much different than the past. And I think the market has to adjust to It. But the most important thing that he said both last week and also this week, which I want people to understand. I very seldom meet any macro person, any macro person who understands artificial intelligence. And when I say understand it, I mean uses it every day for hours a day. And the reason that's important, important if I say this a hundred times, I'll end up saying it a million times in my lifetime for every 100 times I say it in a day. If you're not using the model, if you're not understanding how powerful it is, how can you possibly understand the impact it's going to have on productivity? It is productivity that is the most important change that is going to go on. And it has already started and it's showing up and I know don't even think GDP is properly measured. So we're at a point where what Kevin Moore says is I don't know what a AI is going to do. But in this weekly, this interview, which anyone can get the transcript from YouTube and I'll go through it this weekend, he literally said we are at the beginning of his exponential change in AI. He's admitting I don't know what that means in productivity. But I do know that the history of Gal Greenspan, when one of these technologies come is, is not to overreact to the inflation data today. That is the message that I heard. Now that does not just go with oil. And I think this is the mistake people are making. He's also talking about core inflation. If he believes that AI is going to take down core inflation, he talks about the job market and he talks about it in a way that it may hurt jobs today, which I agree with more than it will in a couple years because the displacement takes time. People lose their job and then you gotta go find another job to get hired. But, but if you're fired as an accountant and all the accounting jobs are leaving, what do you go become? You can't become an electrician quickly. Could you do it in a year? Yeah. Could you become a nurse in a year? So there's a time factor and I think what he was saying is he expects the labor market to remain on the weaker side. He expects the inflation data to lag. What will actually happen because of AI? And I think that's what people have to read the part on is what is his view on AI and productivity? And then finally he wants these task forces to go question, question the way inflation is measured. And he's someone that has talked about median inflation. Core inflation is going higher, but median Inflation has not gone up. And the reason is there's a lot of stuff happening in AI, like memory that is having kind of a one time impact that will eventually come back down. And will the insurance companies, if they're starting to benefit, will the healthcare companies, if they're starting to benefit specifically on the insurance side, be able to lower the cost of insurance, which we all know has gone up exponentially? I just think there's a lot of changes coming and he wants to be more forward looking and not sit there and take every tick as being the way to do it, everything. So I'm going to say that the Fed is going to remain on hold despite everyone building all this stuff in. And I actually have liked reading what Warsh has said. I think he's going to be a much necessary person in an age of AI.
- [50:52]
Matt
One of the things I've been thinking a lot about is we talk a lot about individual companies, et cetera, but the Nasdaq, let's just look at numbers over the last couple of time periods. So year to date, it's up about 16% as of today, over the last five years it's up somewhere in the ballpark of about 100% or so. If you look at, you know, last month, it's down about 5%. And so you can go and kind of pick these different time frames. But if I said to someone, hey, you can deliver 15, 20% return every year, year after year, why do I go invest in a private venture capital fund who may or may not put up that money? You know, that those types of returns, like I lock my capital up and be illiquid. Why go pick individual names if I can deliver returns that are going to beat most hedge funds? You know, for example, how are you thinking about index exposures versus actually going and buying individual names? Or how do you think maybe people who are watching or listening to this should think about it?
- [51:49]
Jordy Visser
Well, again, one of, one of the themes that I've tried to help with my subscribers on has been the situation that all these, including the Nasdaq, it's, it's a modified cap weight. So it's not 100% cap weight. They, they do have limitations, but I do think Nvidia is still a very large portion of it at this point. So it's been pulled back by Nvidia, but it has a lot of names that have benefited from AI. So on the S&P 500 again, as of today, you're probably up about 8, 8 little bit percent, maybe a little bit less. 8 and change is my guess, which is a little surprising given the fact that earnings are up as much as they are. But I think in the case of the S and P, it is a cap weighted index and you suffer with cap weightings in the fact that you're heavily weighted towards the winners of the prior 15 years and you're underweight the losers. Well, if the semiconductors are winning and they were not the winners and the hyperscalers are losing, then you're suffering in that that side. I still believe stocks are going to outperform bonds for at least the next couple years until AGI starts to become a little bit more scary. I still believe that commodities are going to be a big necessary including silver. And I still believe that bitcoin is going to be the best performer out of all of them once we get to the point that the negatives of AI start to become apparent. And I think they're becoming apparent right now. If the best you can get from the s and P500 is just a guess or the or Qs is 15% a year, well, that's the world that bitcoin thrives in. If you can get 100 to 1000%, which is the world we've been living in for retail, which is the energy of bitcoin, well then bitcoin's going to suffer. I think that world's going away. And more importantly for people that are invested in private credit, in private debt, which wealthy people are in real estate, I think gradually over time, especially, especially when the S P starts to run into some, some bigger resistance. The volatility now is in the equity market. I've shown this repeatedly. Remember when bitcoin was such an extreme volatile position? Well now when bitcoin has a big down day, it's down one and a half percent. So it's moving on a 30 volume. Not even a 30 volume. Using that, I'm telling you right now, the tech momentum index the last 60 days is an 85 volume. That's higher than any time over the last 25 years, including the dot com bubble. Now a momentum index like that is long short. So that has the winners of tech over the losers of tech. Well, that's the way most hedge funds run their book. When you have an 80 volatility, that prevents you from having much of a position in that because you'd be hitting your drawdown limits very quickly if you had that trade on. This is what's happening in the equity market. And this is not something that people should minimize. In fact, I'VE shown that over the last year year it's been a megaphone, meaning we're making higher and higher and higher volatility bands as we move forward and that's going to make it more difficult for people to be long stocks. The sharp ratios are going down. And as we go forward, I'm going to say it again. The AI mid cycle slowdown is basically the peak and the easy money of AI. And so if the money starts filtering back towards the other direction, I've laid out a pretty bullish case for bitcoin if elongated. Got it. If we're overestimating the inflation side and productivity is coming, if we're overestimating the hawkishness of the Fed from what War said and at the same time the AI trade is not going to lose its earnings growth. It's just going to make it more difficult for institutions to stay long at the way they have in the past. Then all of a sudden the lower volatility of bitcoin will probably lead in. If we get above the 200 day moving average with everything that I just said, which is up, up north of 70 at this point, I do think that that's going to be the beginning of the next phase of crypto and the next phase of AI. We'll see if it happens in the second half of the year. I think it will.
- [55:42]
Matt
I love it. That's a great place for us to end. Anyone who has not yet, please go and subscribe to Jordy's YouTube channel. He does a fantastic job there. And also go check out 22v. He writes a bunch of research that I, I read every single time in public publishes. So go check it out. And Jordy, I hope you Enjoy a great 4th of July in Maine and we'll do this again next weekend.
- [56:05]
Jordy Visser
Same to you, bud. I'll see you next week. Same to you, Matt.