The market’s skeptical right now for three reasons; and I think they’re all wrong.
It was skeptical on AI and earnings for long. Most companies beat and AI is delivering above expectations, we’ve been over this. It’s now skeptical on AI itself, not that it won’t work - which used to be fear number one, but that it would work too well and become dangerous, which is the latest narrative. And it’s skeptical on rates, worried the Fed hikes this week.
None of it changes what I’m doing. Here’s why and what I’m actually buying.
AGI is Here, The World is Doomed
This is coming from the frontier CEOs themselves, with random posts on X coupled with some interviews where they talk about how advanced models are and how important it is to be more reasonable.
What. A. Load. Of. Crap.
I don’t mean to say that they are wrong and there are no dangers with AI. There are, just like with any new technology. But that they would become reasonable now just for the sake of humanity is certainly not true. This is excellent PR, and they certainly have many reasons to do this - some I can speculate on. But certainly not the ones they claim.
As for this kind of dramatic claims… There’d be lots to say about them as well, but while Dario and Sam have a great PR, this was terrible PR as the current view of AI by populations isn’t really positive lately between electrical consumption and job cuts.
Hopefully Jensen and Karp are here to bring some critical thinking to the table as this kind of claims bring nothing - whether they are true or not. So let’s do some ourselves.
First, research never stops. It never has. The Manhattan Project didn’t slow down for danger, it sped up, because otherwise someone else would have made nuclear fission work first. China won’t slow down. There’s no world where everyone agrees to halt AI, not before something bad happens. You build it before your rival does. That’s how everything has always worked, even if we don’t like it…
If we didn't have adversaries, I would be very in favor of pausing this technology completely, but we do.
A. Karp, Palantir CEO, CNBC interview
Second, these CEOs spent years hyping AI. Their approval’s tanking and they need political cover to keep building. Sounding careful is the move after telling the world that AI will cut 50% of blue collar jobs. They haven’t decided to slow down, they just try to look like it.
Third, it doesn’t even matter. The money isn’t in more intelligence anymore. Current models are enough to unlock trillions of value if used properly. This is the next step, optimizing them, not training more frontier models. Do you really believe they’d slow down monetization? Never. They need cash, and they’ll find it whatever the cost, they just know they don’t need to go further in training to generate it.
Quiet research, PR stunts, pivot to optimization. Not a slowdown, a reprioritization at best with some good optics and added soft power to lobby. Cherry on top. If the market is stupid enough to read this as “AI spending is over and AI services are done”, we’ll be given so very juicy gifts.
Because the truth is that use-case optimized models will flourish and generate an accelerating demand for compute which requires more hardware and data centers to be met.
Nothing changed.
Let’s see how the market reacts to those positions because at the end of the day, we only make money if the market agrees with us. Being bullish in a downtrend won’t make returns. But understanding the mechanics behind will allow us to take advantage of a market’s overreaction.
It might not happen. But if it does, I’ll be buying.
The Fed Hikes
The market’s now pricing a hike this week after a hot MoM core CPI, Warsh removing guidance and some members publicly stating they’d advocate for a hike.
The Fed’s mandate is to react, not anticipate. One hot MoM print after months of “good” data and no yearly acceleration doesn’t seem enough to hike. The market will price the worst every time, which puts us in a pretty comfortable spot.
Bad news will confirm pricing. We’re there already. Good news on the contrary would be completely unexpected. The market isn’t ready for no hike.
Here’s What I’m Doing
The market is giving us good names at good prices. And I continue to do the boring thing: buy strong setups on support, ahead of data everyone’s dreading. Because those are the best risk reward on the market, winning big if I were right and losing small otherwise.
Below: my new positions and three other actionable setups. Healthcare, hardware and software. Strong sectors, great companies and strong price action.
