The Compound and Friends - Jensen's robots, Zuckerberg bends the knee, AI is the economy

Episode Date: January 8, 2025

On this TCAF Tuesday, hear an all-new episode of What Are Your Thoughts with Josh Brown and Michael Batnick as they talk AI, eye-catching charts, MuskCoin, the alchemists, Jensen Huang Keynote, and more! This episode is sponsored by Public and Rocket Money! Visit: http://Public.com/WAYT and lock in a 6% or higher yield with a Bond Account.  Cancel your unwanted subscriptions today by visiting: http://rocketmoney.com/compound   Sign up for The Compound Newsletter and never miss out! https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Public Disclosure: All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC.  A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The 6%+ yield is the average, annualized yield to worst (YTW) across all ten bonds in the Bond Account, before fees, as of 12/13/2024. A bond’s yield is a function of its market price, which can fluctuate; therefore, a bond’s YTW is not “locked in” until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See our Fee Schedule. *Terms and Conditions apply. Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by public dot com and our friends at 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. Who doesn't want to lower their bills? Honestly, it's twenty twenty five. This is the time of year you should be checking out rocket money and looking at all these things that you're paying for, some of which you don't even know you're paying for. Some you forgot. See all of those subscriptions

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$740 per year per member when using all of the app's premium features. Go to rocketmoney.com slash compound today. All right. We have so much going on tonight. We're getting into this really deep conversation about the ways in which the AI spending boom is starting to show up in GDP. Did you know, I sound like the kid from Jerry Maguire,

did you know the human head weighs eight pounds, Jerry? Did you know that if we hit 7% of GDP on AI-related spending this year, we will eclipse the amount of money being spent on housing in 2005 at the peak of that bubble. So things are about to go absolutely crazy. And I think we're on this story relatively early, the degree to which GDP growth is now being powered by AI spend.

So I really want you to catch the show. We do a whole thing about Jensen Wang's keynote speech at CES last night. Some Zuckerberg stuff. There's a lot here. You're going to love it. It's Michael. It's me. What else do you want? All right. I'm sending you over right now. Fellas, make it happen. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz 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 positions in the securities discussed in this podcast. All right, all right. All the gangsters are here tonight. Chat is going crazy. Everybody's excited. It's another all new edition of What Are Your Thoughts? I'm your host, downtown Josh Brown, here with my co-host as always, Mr. Michael Batnick. Michael, say hello.

First one of the year. Welcome back. Is it? We didn't do one last week. Oh. All right. Whatever. Mandeep Singh is in the house. Welcome back. We didn't do one last week? Oh. Alright, whatever. Mandeep Singh is in the house. Magnus is here.

Making a ruckus in the chat. Soren has his glass of wine. His wife is at yoga. Let's go. I agree. Random Trends. I see you. Matthew Stevick, Georgie D. All the- I told you. Kelly SF is here. all the gangsters.

All right. Fat Andy? Fat Andy is here. Now you're just making people up. All right. We have so much to do tonight. I know I say that all the time, but my God, we are fully loaded and I'm really amped about the show.

I do want to mention our fabulous sponsor, the folks at Public. Public.com and the Public Trading app. Michael, what can we say about Public? What can't you say about Public? Listen. Well, I'll try. All right. There's too much money in money market funds.

How about that? Seven Trill? You see the 30 year hit a high today? Yeah, what are people thinking? Psycho high? Ten year ripping. Listen, get your money out of money. Okay. Controversial.

Get your money out of money into bonds. You could do it very easily on public. You could build a corporate bond portfolio, click, click, clickety clack, whatever you want, the investment grade, the blue chips, the good stuff. Yeah. You could do everything in public. the blue chips, the good stuff. Yeah. It's easy. You could do everything in public, crypto, bonds, options, stocks, the bond account Michael mentioned. Public is really easy to fund also.

So I have an account there. I can move money in and out really quickly. This has been paid for by Public Investing. Full disclosures and podcast description go to public.com W A Y T to see what you can do with your money on the public app. Okay. This is like a very heavy tech AI, but I feel like it really has to be a oil. Did you see it in videos close today or they're just the day? That's a disgusting looking crazy reversal. Not what you want to see. My take on that is they bought the stock into CES and they sold it immediately after.

Not everything has to have a reason. Okay? Yeah. Well, that's my reason. Okay. Let's start with AI basically has now become the economy, by which I mean there is virtually no part of the economy not Currently being affected by AI this is going to become more so but even more interestingly is that AI Spending is now starting to show up in a major way in

Economic growth like US GDP growth is is now being pushed and pulled by what's happening with AI related spending. So I want to share some stuff. I got a couple of charts from Skanda Armanath, who is at Employ America. He did a sort of op-ed column thing for Bloomberg's odd lots. And I just thought it was fascinating to see the degree to which AI spending is now actually affecting the economy. This is what Skanda said,

if you focus on the expenditures for software, technology, hardware, industrial equipment, and data center structures at the heart of the boom, you're looking at nearly 6% of US GDP as of Q3 24. That number is likely to rise further. If so, we would surpass the share of GDP that the tech industrial telecom boom of the late 90s reached at its peak back in 2000. Put this first chart up, please, John.

Thank you. Do you know? So you see what's going on here? Yeah, I see what's going on. Please tell the audience. Okay. The blue line toward the top is the final demand for software and information technology and industrial equipment.

The green line is data center structures for the current AI tech boom. The pink line is the late 90s tech boom. You can see that we're neck and neck. That purple line is interesting to me. That's residential fixed investment. You could see that purple line peaked at just shy of 7% of GDP. All right. So that's what we're headed, dude. All these previous booms led to terrible boss.

I want to say all of them. I'm talking to, but still, the last two were not great. Okay. Skanda continues, if recent and upcoming months to be banner ones for capital expenditures as mega cap tech firms have been guiding, we're likely to see it show up in the relevant GDP components with a little bit of a lag. At close to 7% of the US economy at the end of 2025, it's plausible and arguably likely that the AI

boom would be on a par with the share of the US economy housing investment represented at its 2005 peak. So 20 years ago, housing became 7% of GDP. Nothing to see here. I got another chart. The fact that AI's relevant share of the US economy is growing doesn't mean things are going poorly or that they're going well. It just means that its significance in the US economy is rising and so too is its cyclical relevance. The business cycle and the AI spend are blurring into each other, in other words.

What you're looking at here, data center structures, and this is now headed into an area where it's becoming as significant as the dot com spending was and basically became the business cycle in the 90s and 2000s. Last one. So much of the rise in IT relevant GDP segments up until this point has been subtle. The fact that information technology spending went through a one-time level shift up during the pandemic means it's now back at a share of US GDP not seen since the 1990s. This is going to punch through though. You would agree with that, right?

Yeah, it's going. It's breaking. It's a break. Like it's I know this is like information technology spend that it's not a stock, but it's literally breaking out. So shout to Scanda. This was a really great piece. It's at Bloomberg.com.

And I don't think, so this is one of my conclusions. Tell me what you think. I don't think that people who follow the economy for a living have quite caught on to this idea yet that this is the thing that's driving everything. They see it in the stock market. Obviously, these stocks are the stock market at this point. I don't think that they've connected the dots and they understand this spending boom is

now basically half of GDP growth and it's almost 7% of the whole pie. What do you think about that statement? Do you think they get it or not? No, but I think they will because this will be seen and disseminated wide and fast. And I never thought about their influence on the overall economy because I'm not an economist. I'm a stock marketist. So I've been looking at this through the lens of Nvidia and the Max Heaven and all that good stuff. Time to start thinking about it in terms of stock market. DFT had a piece.

We missed this at the end of the year. We were off. They interviewed the CEO of Broadcom, Hock Tan. Does he have a coin? He does not yet. He's not Hock Tua. Big tech spending frenzy on artificial intelligence will continue until the end of the decade, says the head of Broadcom. All right, I thought it was about to end, which has soared to a...

Haktan, Broadcom's chief executive, told the Financial Times, listen to this one, his clients in Silicon Valley are drawing up AI infrastructure investment plans spanning three to five years in a very big hurry. Quote, they are investing full tilt. This is a 70-year-old man talking. They will stop investing when they run out of money or when shareholders put a stop to this. End quote.

Why is that bullish but sounds ominous? What would make the shareholders put a stop to this when the stock market crashes? Another word, is that kind of what he's saying? The party goes on until shareholders say it's over? Getting nervous. That's a crazy quote, right? Yeah, I don't like this. I don't like this one bit.

They will stop when they run out of money? What? Like this really better be the year where the needle starts to move in a serious way. Because I don't think shareholders are gonna give them an infinite runway. I just don't. I think there's gonna be a hiccup too,

but I actually, we're gonna do a lot more on AI when we talk about Jensen Wang's keynote, which we'll do in a minute. So put a pin, Michael, take over. All right. Our friend Sam Rowe, and I had this in the doc before Sam wrote something very nice about us. So this is not a quid pro quo.

Okay. Sam wrote something nice about us on LinkedIn. All right. So he did a thing, 22 eye catching charts as we consider what's next on the stock market. And I wanted to pull a few of them and talk about them and get your thoughts. All right, this is a great one. I never saw this before. It makes sense intuitively, but in terms of where we might be going, it's important to

think about the fact that valuation almost never contracts in periods of above average EPS growth and accommodative monetary policy. So we're looking at the forward 12 month PE rate of change in above average EPS growth and a comedy of Fed policy environments. Now, caveat, caveat. Wow. 34 actually, 34 periods. It's actually higher than I thought it would have been. I would have thought it was like five, but 34 periods. So I guess, again, all markets are snowflake. No two are exactly alike. So we are on the higher side of a forward PE, but this is generally not a bad thing. Some of these conversations we've had on TCaf bleed together. Was it Nick Colas who like affirmed this idea?

Yes. He said people pay up more for stocks while earnings are growing. So it's a weird feature of markets where when you have earnings growth, you also get multiple expansion. Yeah, it's a double. And when earnings are contracting, you get multiple compression. Like one doesn't balance the other out. They actually exacerbate each other, which is what creates bull markets

and bear markets. So I've never seen this data. This is Morgan Stanley, it looks like. That's a really important concept because I think there are a lot of people who want to say things that make them sound smart, like, yeah, we're going to have 8% earnings growth this year, but we'll probably have a 10% shrinkage in the multiple, and therefore the market will be like flattish.

Of course it could happen, but historically that's not what actually happens. So long as earnings continue to grow. All right. A few more and I'm, I'm looking forward to the doc later because I've got some more companion charts later, but next one. Okay. We've shared this in the past, but it's worth sharing again because it's just so freaking important.

What we're looking at are three things to support higher valuations all else equal, and it's not equal. We're looking at the S&P 500, nonfinancials, net debt over equity from 1986 to today, and we've got much lower financial leverage than the 90s and the 2000s. That's the first chart. The second chart shows that we've got a higher quality composition of the index than we had previously. We're looking at the percentage of B plus or better quality weighted stocks.

So that's been on the rise. This is an unsung feature of the bull market, how high quality the leadership has been. Correct. And lastly, we speak about, oh, you had an eight multiple on stocks in the 1980s. Yeah, because 80% of the market was manufacturing and it was a bear market and inflation. What do you expect the multiple to be? So what is that? Like literally, all right, it's called, I don't know, 65, 70% of the stocks in 1980

were actually manufacturer companies. And that share of the stocks in 1980 were actually manufacturer companies and that share of the pie has gotten smaller and smaller. And what's taken over? Asset light, asset light, innovation, exactly. Media, communications. You know, this is one of the things that you and I have been really right on. It's why we threw out the Cape ratio 11 years ago. I just read a blog post I wrote in 2014, walking away from Cape Town or something, leaving

Cape Town. It was 3,000 words of just horrendous sarcasm from me. But we got this one right. There's no reason why you should expect an average market multiple in the 2018s and 2020s to match the 70s. You think about the makeup of the S&P then. You're talking about companies that are literally pulling rocks out of the ground and breaking them. Yeah, come on now. Use your head. So is 22 the right multiple? No, I won't go that far. Is 10? Is that we're going to anchor to eight times earnings as the bottom for a market correction?

Grow up. All right. Here's more non-stock market data breakouts going on. This is a bit of a face blower. We're looking at productivity. So we're looking at the revenue per worker for S&P 500 companies. And I'm kind of shocked. In fact, I'm not kind of shocked. That doesn't make any sense. I am shocked that over the last, I don't know, almost

20 years this has gone sideways. I would have expected this to be trending much higher but given what we think AI is going to do, this should break out. It better. I think it's going to and you know, look at this consolidation period. I'm saying is that, is that 20 years of, of a stagnant productivity growth, dude, draw some Fibonacci's on that. That's why didn't block. Why didn't block? Why didn't blockchain give us the sort of productivity growth that it should have? I don't know how to answer that.

What are you kidding? Okay. I don't know. Um, sometimes. Yeah. Next chart. Uh, this is from Sam Stov don't know. Sometimes. Yeah. Next chart. This is from Sam Stovall over at CFRA. We had him on a couple of weeks ago.

The S&P 500 endured declines in excess of 5% in nearly 90% of all first years of presidential terms since 1949, averaging 17.5%. Oh, I don't like that last one. That's high, 17.5%. Now, again. Averaging. Again, a lot of these averages occurred in 1973 or

before, so really who gives a shit. But nevertheless, I guess what he's trying to say is like everything else, there's volatility every year, almost every year, 2017 aside, a few others aside, we'll get a pullback. Please give me a 17% pullback. I will go wild in the stock market down 17%. Will you go ham? No, I really will though. I'll go, please give it to me. I'll take it.

I'm ready. Give it to me early in the year or two. That's when it's most useful. I don't like it at the end of the year. I'll get ready. All right, over to you. All right, did you watch the Jensen Hwang keynote? I did.

I watched that 12 minute thing. It doesn't mean anything to me. It's not speaking my language. I don't understand the second of it. A lot of gigabytes or whatever. I'm going to do my job here. I'm not a technologist. I think what I've done successfully

with this story over the last 11 years is relay the aspects of it that are relevant to people investing money. And I think this is one of those once in a generation stories that comes along that even if you're like a classically trained investment analyst and you're focused on discounted cash flow stuff, like even if that's the case, you really have to pull the lens back and think about the big picture. And the reason why is we are inventing trillion-dollar categories. I honestly think you have to go back to the assembly line and electricity to find something

comparable. And this might end up outdoing the birth of the internet. Like, fine, maybe it is, maybe it is, but you still need to understand it. Otherwise, you're trying to have a conversation with the world in terms of like the way that you express your investment opinions and you don't understand what's happening in the world. So, I want to go a little bit deep here and I want to get some of your thoughts on these ideas. The important thing to keep in mind to start this off, every one of the themes that Jensen

Hwang hit upon in his roughly 90 minute keynote at CES 2025 in Las Vegas last night, every one of these themes represents a multi-trillion dollar total addressable market. themes represents a multi-trillion dollar total addressable market. He is not doing a heart like a heart monitor for your Apple watch. That is not what's going on here. Okay. Let me give you an example. There are currently 30 million people who have the job software engineer all over the world. 30 million. 30 million. Every one of these 30 million software engineers, if they don't already, is going to have an AI assistant speeding them up, correcting their mistakes,

and taking on the drudgery aspects of their jobs. How much money and time is being saved as a result of that? And what is all that worth? You're talking about a trillion dollar opportunity. This is not the future. This is happening now. This is right this minute. What that does to speed up the process of innovation,

lower the cost of doing business, it can't come up with a number. That's how big it is. In the near future, this year, all you're going to hear about is agentic AI. So what I just described is kind of co-piloty. This is a step further. We're all going to have agents working for us all day and all night, 24 hours a day. We are going to be setting tasks for our agents. Some of this will be in a business context. Later on, it'll be a consumer in a personal context.

And Apple will play a role there. But the bottom line is, this is gonna be the story of 2025. How employees can be armed with helpers, agents carrying out tasks for them. The worst example people use, oh, an agent's got to book your flight and plan your vacation. Actually, I think that's a terrible idea, and that might be five years from now. I actually don't think people are going to give control of their credit card to a bot.

I don't think that's 2025. Okay? Ignore and travel. Think about how picky people are. What hotel room, what part of the, what kind of view they want, where on the plane they like to sit. That's horrendously complex.

Much simpler things that occur in the course of your work, you're gonna have your own bots, an army of bots to do your bidding. And your bots are gonna talk to other people's bots. And this is a really key part of this. This is not a situation where your AI assistant, your agent, is dealing with like your neighbor down the street. It's dealing with your neighbor down the street's agent.

So again, not coming soon, happening right now. This is the 2025 technology theme. So Jensen talked about that. But what I was more fascinated about was what he thinks is going to be going on next year and the year after, which is physical AI. And that's what I want to focus on today. Let's put this first picture up. All of these robots to the left and right of Jensen Wang actually exist right now. These are robots from manufacturers all over the world that are running the purpose-built robotics chips that Nvidia is churning out.

Many of them are running on CUDA software and many of them have multiple chips in them, but this is the TAM that I think is the mother of all TAMs. This is the one that literally changes the world. Jensen Wang said, Chardof, Jensen Wang said that robotics has a chat GPT moment, quote, right around the corner. And when it happens, this industry could be bigger than any other industry in the world. This could be bigger than automobiles. This could be bigger than healthcare. This could be bigger than anything.

Humanoid robots that are equipped to be part of our society. It's not a greenfield situation where we have to change the surroundings around us and all our buildings and infrastructure. These robots are being built to live in the world that we already currently inhabit. Physical AI as a multi-trillion dollar TAM is underappreciated, I think, right now by Wall Street. I think by the end of this year, it's going to be the hottest investment. Who's going to be the winner? I think there are going to be a lot of winners early because everyone's just going to want to throw money at something. So Nvidia is an obvious winner already.

Tesla is an obvious winner already. I think you're going to have the ETF. You look at the ETFs, the components in them, people are going to buy all these stocks. I think it's about to get nuts. We haven't really had a bubble outside of- This is the one. I know there's some quantum computing stocks that are going vertical, but there's not been 30 of them. You know what I mean? All right. I just bought the worst stock that I've bought in the last two years. Please hold.

And I could get- What is it? All right. So I could get killed in this stock and please remember, we don't do financial advice on podcasts or YouTube. Do not follow me into any stock that I mentioned. It's too late. I'm in. Let's go. You're already going to buy it?

Okay. All right. Most of us, Michael, will probably at the end of our lives be cared for. What is the ticker, sir? Let me get to it. Let me get to it. Most of us will probably be cared for by robot nurses and even robot doctors. There are already robots doing surgery. This is not controversial, but that's like in 10 years. Here's what's going to happen this year. We now have a human being driving a two-ton car to deliver a one-pound burrito via UberEats.

It's the most ridiculous shit imaginable. It costs $2 to move an item from China to the United States to sell it in Walmart. It costs $10 to deliver someone lunch around the corner. The economics of last mile delivery make absolutely no sense and we've got to bring AI and robotics into the picture. Dude, enough with the Ted talk. Give me the god damn ticker. We're almost there. I want to show you a picture. John. Oh, shit.

Okay. This is you in Los Angeles being accosted by this thing. I'm telling you, it followed you down the street. Now I know it was delivering to a house nearby, but we're walking around LA. This thing like chased you down the street. And we were huffing and puffing. Yes. You and I were floored by this. Were we not? Yes.

Like what the hell is that? And this is not that long ago. When even was this? This is April. Is this April? Yeah. All right. It is barely profitable and societally unsustainable

to have people driving cars around to deliver food. This is where everything's going. This is a publicly traded company. It's a company called Serv Robotics. The ticker is S-E-R-V. So you can shut the f*** up now for a second. This, all right, so basically I've known about this company for a while because it was spun out of Uber.

Uber acquired Postmates and Postmates had this little subsidiary, Serv Robotics. They spun it out. It's its own publicly traded company. I think March of 24, it started trading. It's got a ridiculous trading history, which we'll get into. But basically, they have 100 of the robots that chased you down the street. There are 100 of these things rolling around LA right now,

from Koreatown to Beverly Hills. They're all over the place. Each one of these robots has its own name. The one that chased you if you zoom in on that photo is called Liana, just in case you were curious. These things are delivering pizzas and salads and sandwiches. And again, your girlfriend is named Liana, but they all have their own identity. Serve is the company putting them on the streets on behalf of their customers, which includes

7-Eleven, Uber Eats, and they've got a pilot going with several other large restaurant chains. Is this economically viable not knowing anything? It just seems ridiculous. No. And that's why I'm going to lose all my money in this stock. They have zero revenue. They did less than $5 dollars in revenue over over the last

Market caps not four billion now. Let me give you the sex chart on here are the largest shareholders in video owns 8.4% they bought the stock in a transaction Uber owns 12% which they've retained after spinning it out as its own company. This company's been working with Nvidia for about, the CEO said seven or eight years in the development of these robots, which are level four autonomous. Every one of these has Nvidia, level four, which means they can levitate. Every one of these things has Nvidia equipment inside. And Uber signed a multi-year contract to get up to 2,000 of these robots on the street by the end

of 2025 for Uber Eats deliveries, not just in Los Angeles, but you'll see these in other cities within the next few months. The company is doing the opposite of what Uber did. They're asking permission. They're talking with these cities before just rolling these things out, and they're getting a very positive reception. These are low emissions. It's not cars driving around in a rush to make deliveries.

People get used to them. At first, people kick them. They push them over, they take selfies in front of them. After six months it's like just normal to see. And this is where last mile delivery is headed. So chart on. This is the stock since inception, came public, crushed everybody immediately. That July spike is when Nvidia took a stake. That whole rally kind of dissipated.

And then this week, they announced that they raised $80 million in capital from institutional investors. I think it was a pipe. They now have $167 million in capital raised last year. So even though there's no revenue, obviously no earnings, they are capitalized to meet that Uber contract of 2000 rolling robots. And that's what they're going to use the cash to build. I point this out to you, Michael, because this is a chart off. This is physical AI. I don't know if this stock could go to $5. It could go to $50. I don't know.

Again, nobody do anything that I'm doing. I take big risks. But my point is, physical AI to me is way more exciting than anything else Nvidia had to say. We are going to be sharing our streets, our factories, our schools and hospitals, our places of work with robots, both humanoid and non humanoid, uh, and non humanoid like, uh, Liana, who is asking, why don't you call? Why don't you visit? Uh, she, she misses you. When is this? Now. So right now there's a hundred of them on the street right now. No, no, no. But like one of the, the humanoid's coming.

They said they're going to deliver, oh, the humanoids. Kim Kardashian is basically dating one. I don't know if you follow her on Instagram. Elon sent one of those humanoid Tesla robots to her house. So it's now. I don't think it's like profitable for anyone. You're going to have to wait for that. These companies have raised enough money that they don't give a shit. They're not telling Wall Street, we're going to pay you a dividend.

Like they're, this is a land grab now. Now the goal is to get these things everywhere and use AI to make them better and update them continually. And, uh, a lot of the presentation that Jensen gave last night was talking about the more these things are out there, the better their geospatial senses are and the more useful they become. And we're in it now. So if you ask me what's going to be the bubble, yes, AI, but like AI-powered robotics.

This is the one. People are going to lose their minds over these stocks. I don't have 10 predictions for this year. This is my prediction. By the end of this year, the dominant growth investing theme in US stocks is going to be robotics. And it could actually go global. What are your thoughts?

What are your thoughts? The show is what are your thoughts? Yeah, I mean, do you want a robot? Do I want a robot? F*** yeah, I want a robot. Yeah. What kind of robot do you want? Do you want a humanoid? I just want my, what's that?

I just want my, the thing that's supposed to spin and dust your floors. The Roomba. The Roomba. That's a piece of shit. I just want my Roomba to charge. Can Roomba. That's a piece of shit. I just want my Roomba to charge. Can it just charge? That's a very 1.0. It works kind of when it charges.

I just want that. I just want my house to be cleaned. You have all hardwood floors on your first floor, right? Right. Yeah. Look, I don't think you need AI to vacuum your floors. That's kind of like 25-year-old technology. This is next, next,

next level. This is instructing a robot. We have a slide of the thing. I don't know what else I want a robot to do besides for the obvious. All right. So let me show you. Can you read? Can you read that? Pick up the piece of toast from the toaster and place it on the white plate to the right of the toaster. Come on, man. You get your own bread. My tongue will not take the toast out of the toaster and place it on the white plate to the right of the toaster. All right, come on man, you get your own bread. Am I telling a robot to take the toast out of the toaster? No, this is at an industrial scale in a restaurant setting. So I want you to think about this.

All of those words in that instruction, the words are converted into tokens. The tokens go into NVIDIA's foundational model and become instructions for the machine. The images that the robot sees also are converted into tokens. And it's the combination of image tokens and word tokens married together that inform, using AI, the robot of what it's supposed to do and what it should look like.

All right, Bill Nye, it's enough. Who cares? When the robots come, I'll use them. What do you mean who cares? This is it. This is for the next 20 years. This is the only thing that's gonna matter. Great. I can't think of anything that'll matter more.

Do you remember the, do you remember Oto Kato? The robot that could shell 300 avocados in a minute. Do you remember that? You ever see the social media? Ordo-cato? Ordo-cato. You ever see that on social media? It's like three years ago.

They invented a robot that could take like 30 pounds of avocados, take the skins off and get them ready. And Chipotle was like testing that robot out in its kitchens. You don't remember this? I'm looking right now. Okay. That's wild.

All right. So the guy that invented that is working at this company, Serve. And in addition to the rolling delivery robots, he is now inventing kitchen robots like the AutoCado, which he created while working at Miso Robotics, another company. This is the next year of investing. This is robot, robot, robot, robot. How do they take the skin of the, wow.

It's AI, I don't know. That's how. There were a lot of other announcements that were made that we're not gonna cover here. It's not just robotics. It was a lot of graphic stuff and rendering images and ray tracing and shading. Let's go P-E infinity.

Let's just keep going. I'm just going to tell you, if you're an Nvidia long, whatever the stock price did today or whatever it does tomorrow, I don't think the people that are really grasping what's happening here are terribly concerned about stock price volatility. OK. I would agree.

That's how I would cap this segment off. Well done. Well done. All right. here or are terribly concerned about stock price volatility. That's how I would cap this segment off. Well done. Well done. All right. Let's talk about must coin. So Conor Sen tweeted, Tesla rallied like crazy post-election when their underlying businesses sucked.

It's basically a trillion dollar must coin. So there's an article in Bloomberg, which I forgot to read, but the headline was Tesla's annual EV sales dropped for the first time in over a decade. There's an article in Bloomberg, which I forgot to read, but the headline was Tesla's annual EV sales dropped for the first time in over a decade. To corroborate that, we've got a tweet from our friend, Ekonomik. Check this out. Jake says, from a fundamental perspective, one of these does not look like the others. What we're looking at are the Mag-7 stocks.

We're looking at the price change in 2024. We're looking at the percentage of the S&P 500 moving 2024. So how much of the index was it responsible for? And finally, we're looking at 2025 earnings per share revisions in calendar year 2024. And what really stands out here is the revisions to the earnings that we're looking at for Tesla. Everything else is positive. NVIDIA wildly so, Metanext, Tesla, negative 44% and the stock was up as of this tweet,

63% in 2024. So to Kano's point, yeah, a trillion dollar must coin. The genius of the Tesla story is that nothing matters about today's fundamentals because next year blank is coming out. So it might be because if there's robotics, we're gonna be a big buyer. If you own Tesla, you don't give a shit

how many cars they sold this year. The cars are, you know what it's like? You know what it's like? You know how Chris eats oysters everywhere we go? He won't stop eating oysters. He won't stop eating oysters. He won't stop eating oysters and nobody wants it. It's constantly platters of oysters. He's not eating an oyster.

You know what he's eating? An experience. Lemons and garlic and hot sauce and butter. It's a delivery system. The cars at Tesla are a delivery system for futuristic technology. And so this is the actual data from Bloomberg. They sold 1.79 million vehicles last year, which was less than what they delivered in 2023. Crazy. And the stock rallied anyway because nobody cares.

Nobody cares. It's not a car stock. It's a stock that uses the sales of cars in order to advance things like full self-driving and solar charging and humanoid robots and things that people are much more excited about. The biggest, most successful story stock of all time. What would even be number two? Oh, no, no, this is it.

You're exactly right. And that's not an insult. It's the opposite. No, it's in its own category. Yeah, it's a one on one. They have auto analysts covering this stock. It's a joke. It's a joke.

The people covering Ford are covering Tesla. Right. I mean, so the disconnect between the investor audience for Elon Musk versus the sell sides estimates on how many fucking cars this guy's gonna sell. The Venn diagram of people that own Tesla and Ford is zero. No overlap whatsoever. Wacky prediction. This will continue. Let's get wacky. This will continue. This will not stop just because 2024 is over. It won't stop just because the election is over.

We'll continue. We'll continue. The ability of Tesla stock to be entirely divorced from its quarterly earnings growth or vehicle delivery. Yeah. And on the flip side, you could see a recovery in the business and you could see the stock get killed. Yeah, because it's not the thing.

Yeah. It's not the thing. The biggest risk for Tesla shareholders in 2025 is the bromance with Trump. It won't gradually come to an end. It'll be something cracks it. I don't know what that would be, but I'm saying like if I'm long the stock, that's the thing I don't want to see. I almost don't care what their monthly auto sales are.

All right. Jumping from Musk to Mark Zuckerberg, did you watch this thing? I did. I did. I did. Big deal. I think it sort of is. It is. deal. It's I think it sort of is I think it's Mark Zuckerberg was the first social media CEO,

big tech CEO to like, do a do a thing after January 6, which by the way is only how many years ago is that now? Three years? 2021. Okay, four years ago. He was the first one to jump and write this like 400 word essay on why what Trump did was wrong. And I don't know if Sheryl go to the mint to it or if the board said you have to speak out because so much this misinformation about the election has been spreading on Facebook. But he very forcefully spoke out against Donald Trump and misinformation forcefully spoke out against Donald Trump and misinformation and telling people the election was stolen. And we're only a couple of years later and he has very seriously bent the knee. He's very shrewd.

This is good timing. Is he shrewd? I think so. It's like they're not even trying to hide it. So he does this thing where they're firing all the fact checkers. They're only going to focus on keeping drugs and illegal activity out of people's apps.

And for the rest, anyone could say whatever they want because they've gone too far the other way in censoring people's speech. I think that's societal. I think for Mark Zuckerberg's biggest risk five years ago was not censoring people enough because the left and woke-ism was like the order of the day. Well, he sees which way the wind is blowing. The pendulum is all the way on the other side.

Walmart just threw out its DEI policies. McDonald's announced today, no more of this stuff. Like, nobody wants to risk the wrath of the right now. And nobody wants to provoke. And I promise you, that meeting with Trump and Zuckerberg was probably like, I swear to God, if I see you censoring my people, and if you try to censor me, I will turn that f***ing hideaway you built in Hawaii into a god damn goat rodeo.

I will run a NASCAR event on your cattle ranch in Hawaii. And the kid got the message. So he did this thing today about how they're not gonna police anybody and censorship is too far away from Facebook's original roots. And it reminds me of what Bezos did at the post and hated or love it, this is the world now. Well, the censorship just sounds impossible in general.

Of course it's gonna get politicized. What are you censoring and what are you not? I agree, I'm not saying what are you not? I agree. I'm not saying what they've been doing is good. I'm just saying throwing in the towel completely maybe was the only move. I don't think it'll hurt him, honestly. I don't think the stock prices have affected.

Why would it hurt him? No, I don't think it would. I think it would have five years ago. I think there would have been boycotts. I think there would have been people in the streets, delete the app campaigns. That side of the political spectrum is out of gas. They got nothing.

You are the incoming chair of the FCC due to Jack Nicholson gif to this video. Put this video up though. Can we play this, John? I think they've come a long way, Metta, Facebook. I think they've come a long way. I watched, Facebook. I think they've come a long way. I watched it. The man was very impressive.

I watched it. Actually, I watched it on Fox. I'm not allowed to say that. Say it. Do you think he's directly responding to the threats that you have made to him in the past? Probably. Yeah, probably. All right.

So do you think that he's reacting to the threats you've made against him in the past? And Trump says probably. How about definitely? How about definitely? And by the way, Elon is like sort of Zuckerberg's biggest frenemy in the tech world. And I think Mark wants in on the winning side here. I think this was the most salient point of what he said, Zuckerberg, that is. He said, after Trump first got elected in 2016, the legacy media wrote nonstop about

how misinformation was a threat to democracy. We tried in good faith to address those concerns without becoming the arbiters of truth, but the fact checkers have just been too politically biased and have destroyed more trust than they've created, especially in the US. True. It's true. More than that, we have specific information about how true it's been. And one of the more obvious examples was suppressing any news or social sharing on the laptop story. And the laptop story turned out to be real.

on the laptop story. And the laptop story turned out to be real. It looked like Russian misinformation at first. So I don't blame the people who were trying to suppress it because it looked like it was a thing thrown into the mix to affect the election, but it actually turned out to have been true. And you couldn't share that news on social media and you couldn't share it, definitely not on Facebook.

And that's like an example of like, well, the left is worried about misinformation, but they're also in part causing misinformation through their willingness to censor anybody saying anything negative around elections. So I guess from Zuckerberg's perspective, it's like, I can't make it either side happy simultaneously. Maybe I'll just make nobody happy and I'll just get out of the business of trying to tell people, like try to be the arbiter of the truth. So I thought Kyla had a really good take on this.

She said, reducing content moderation while scaling AI content could be incredibly profitable, especially because politics is another content vertical for engagement, as he points out. The anti-censorship narrative is great because it frames itself well with the cultural momentum around free speech and lends itself to a broader lens of a culture war victory while being very interesting strategic play that creates a lot of space for that AI-generated content to do super well. They've made it very clear that's where they're headed with their emphasis on engagement and entertainment

via influencer bots. AI-generated content is optimizable, controllable, which advertisers love. Cheaper, the perfect endless scroll content machine. The focus on authenticity narrative here is allowing the synthetic replacement. Pretty smart way to announce it. So she's saying that he used this political cover

to announce this, which is obviously for the benefit of Metta. And I thought it was smart. And I thought she was gonna point that out. Oh, not political cover. Like he took an opportunity to make it like something that is political, but in reality, it's actually good business.

Yes. Yeah. And you know what? People be mad for two days and then some celebrity will say the C word on a red carpet somewhere and everyone will forget about it. Yeah. And I don't think it's going to harm Zuckerberg.

It'll destroy society as we know it, but that's already in progress. Yeah, society. Okay. That's already a done deal. So. All right. I loved- Michael, the future is just robots doing everything and people saying horrible racist shit on metal all day because they have nothing but time on their hands. And when life gets hard-

That's the future that I want to see. For the humanoids, are they going to resort to ayahuasca and microdosing? No, they'll be fine. We will not. All right. So Michael Sembalist over at JP Morgan wrote his piece, The Outlook for 2025. He called it The Alchemists, deregulation, deportations, tariffs, tax cuts, cost cutting crypto, oil and gas, medical freedom and agency purges.

What could possibly go wrong? This guy is the guy. He's just incredibly impressive. He goes wide and he goes deep. So I wanted to point out some of the charts that I thought were the most, that caught my eye. Chart on, chart on please. The FTC versus M&A, look at this freaking chart.

We're looking at completed deals, deals that have been withdrawn and deals that are pending and the lean economy regime, you know, put a rope around the neck of these companies as far as their ability to complete deals. Just nothing. Does this reverse all the way? I don't know. I mean, listen, the all the way was a manic period for markets. But yeah, this will go back to the average.

I think it's going to feel like it's going all the way, at least in year one. Like everything's back on the table. Yeah, buy it. And all you have to do is like write a check to like one of Trump's super PACs or now they're all funding the inauguration. All you have to do is have him not hate you and you probably can get it done. And I think you're gonna see a lot of shit go down this year. I actually think M&A comes back harder than IPOs.

Yeah, I agree. We were saying that last week. That's a prediction. All right, this is a good one. China joining the WTO coincides with highly negative US inflection points. He's looking at US, let's start on top left, US manufacturing job losses, bad.

Let's just say what this is for the people that. So China was granted approval to join the World Trade Organization. This is something that got a lot of momentum under Clinton. And then in, I think, 2001, it became official. And that coincided with a decade or more of stagnant wage growth for the middle class and all kinds of unforeseen consequences as China made everything cheaply, sold it cheaply, and flooded the world with goods that we used to make here. It really hit middle America very hard. So destroyed manufacturing, destroyed labor.

I mean, look at labor share of corporate profits. This is not some coincidence. I mean, this is pretty dramatic. Look at the suicide rate. Yeah, poverty rates, suicide rates, just really, really a lot of awful things. And listen, there's other things that have been baked into the pie.

It's not just that, but it's a big part of the story. Matter of fact, I forget who it was who was like, you ever noticed that in movies, there's never the Chinese are never the villains. Well, you can't. Right. Okay. Okay. Can't. However, not a movie, not a movie, but season two of Linus, they go after the Chinese big time. I thought that was very interesting. Wait till the twist ending where actually America is bad and the Chinese are good. I would say, yeah, well, so if you think about Star Wars, they insert characters of Chinese heritage

because you've got to put that representation on the movie poster. There's one exhibitor in China called Wanda, I think owns 30 or 40% of all the screens. There's no question that if they're putting content on their screens where Chinese people are the villains, that movie's getting pulled and somebody's going to jail. And so is the studio. Right, now if you're Disney, which owns Marvel,

and you have Iron Man 3 coming out, and they want to use the famous Iron Man nemesis, the Mandarin. Well the Mandarin now has to be a British man in a wig and a costume who's pretending to maybe be sort of Asian, definitely not Chinese. If you actually go back to the comics from the 70s and 80s, the Mandarin is full on a Chinese villain. And it's just you Tom Cruise had to have the Taiwan flag pulled off of his bomber jacket for the new for the new Top Gun that existed in

the first movie. Very prominently featured Taiwanese flag gone. And actually there is no gone. And actually there is no, there is no nation as the stated villain in Top Gun 2. It's sort of maybe sort of Russian-ish. I thought it was somebody. It is nobody. They will not tell you. Right. So that this is a, you're right. This is obviously a consequence of how addicted to Chinese consumption, even though the Chinese barely watch our movies anymore. Yeah, they're turning away from Hollywood. But it's just so interesting, like unintended consequences. That chart is exhibit A. All right. This is the chart.

This is the chart. Don't talk to me about expensive stocks without showing me this chart. We're looking at the free cash flow margins by decade for the 10 largest stocks from 1950 to today. Thank you for your service, Michael Semblist. This has gone up and to the right, and this is part of the story of the rising caper issue over time.

Look at these companies, people. How dumb do you have to be to not understand this? This is not a justification for the stock market going up every day forever. It's valuations. They should be higher. Come on. This is why value has underperformed growth for 20 years.

Yeah. Because the companies that are growing also have great margins. They're not all tech stocks. Put Costco in that group. So not permanent and saying that you should pay whatever price and these are go up 20% cake or forever, but like there's a reason. Market people are not dumb. All right.

Here's another one supporting that. The S&P 500 tech net profit margins versus the rest of the market. Again, there's tech and there's the rest of the market. You have the S&P 500 X tech versus tech and then earnings per share growth. You've got mag seven and then you've got the rest. And so the rest of the market just isn't growing. Just period, full stop. Yeah. If you're wondering why the leadership is what it is, there's the chart. Okay. And then we're going to end on Semblist did something on Doge. Don't need to spend a lot of time here,

but what does the federal government spend money on? So we're looking at the percentage of GDP with the ratio of entitlements to non-defense discretionary. And Semblist said this on our show, the non-defense discretionary spending, there's just not a lot to cut. And unless you're going to cut entitlements, and you're not going to, let's be honest,

it's going to be the Doge project is going to be difficult to see to fruition. Federal employment, next chart please, federal employment of 3 million people is at its lowest level as a share of US employment in 85 years. That stood out to me. Now, local government, oh my God, I mean, there's a lot of government employees, but the federal has already been cut pretty dramatically. Yeah, I think part of his a lot of government employees, but the federal has already been cut pretty dramatically. Yeah, I think like part of his outlook is like Doge is not really going to do much. No, Doge is not going to doge. Right.

So if like one of your bull feces for 2025 is like this radical change in government efficiency, LOL. Good luck with that. All right. I'm going to make the case for, you know what? There was a lot of, I felt good about this. Over the past, let's say in Q3 and Q4, I don't like making the case for individual stocks

that just keep going up and up and up. Like it's just like, whatever, I'm gonna recommend the stock that's up 16% in six weeks. Now we're talking. I had all sorts of things to recommend, but the thing- Oh, you got pullbacks you're saying now. The place that I landed is, let's buy the dip. So I own these three financial companies, S&P Global,

Intercontinental Exchange, that's the New York Stock Exchange, and Blackstone. And there's a million charts that look like this. And I- How far up their highs are they? Like I'm eyeballing it. Not a lot. Five, seven.

Yeah, not a lot, but enough. If you've had dry powder and you're waiting, forget about these in particular. There's a lot of stocks that are giving you a much healthier entry today than they were four months ago. So take that opportunity. S&P Global is probably, I'm just guessing, I don't really know, but one-to-one how the stock market does is how they do. They're collecting index fees from asset managers. So the more the markets go up, the higher those index fees are. And it's like, I don't know, why not just buy the S&P?

What do you like about the company? It's a monopoly. Is it though? I mean, kind of. Who are they competing with? Russell? No offense. Footsie Russell? Come on. It's S&P and everybody else. All right. So that, all right. And you know how I know? That's easy to understand. Is it though? I mean kind of. Who are they competing with? Russell? No offense. Footsie Russell?

Come on. It's us competing with everybody else. All right. So that, all right. And you know how I know? That's easy to understand. We're doing business with them. Okay.

I want to be an owner of the company. All right. I like it. I have a mystery chart for you. Go ahead. And before I do the mystery chart, I want to tell you guys we are coming to Naples, Florida in February. Hell yeah, we are. And we're going to do a live podcast. I thinkples, Florida in February. Hell yeah, we are.

And we're going to do a live podcast. I think it's Thursday, February, here it is, Thursday, February 20th. We just put the ticket site up at noon today. And I'm told we sold out of half the tickets. Look at my chest fro. Yeah, Nicole tells me these tickets are going to go quick. She's got people trying to buy more than two tickets.

We're limiting people to two, so you can bring a guest. Capacity is not. It's small. Yeah. We're in a theater. We can't have like 500 people at this. So if you wanna come out and meet us and see us, we have Brian Belsky, who's going to be our special guest

for a live taping of The Compound and Friends on the west coast of Florida. This is your shot. who's going to be our special guest for a live taping of the Compound and Friends on the west coast of Florida. This is your shot. We would love to see there. I think Nicole's going to drop a link in the chat or beneath the show of how you can get your tickets. And hopefully you don't miss out.

We would love to see you. All right. Here's my mystery chart. Let's get mysterious. All right. This is a stop. This is a food stock. I'm showing you the percentage return because of a point that I want to make later. But I'll just tell you, if you eyeball this, you can see this is a relatively young publicly

traded company. It's been around for about 10 years. And it was a pandemic loser and then a post pandemic darling and then a I don't know what we call 2022. What is that crash called? The efficiency crash? I don't know. This got hammered with all the less than profitable stocks and now it's fought its way all the way back to a new all time record high.

And again, food. Is this Shake Shack? Hit it. Look at you. Round of applause for Michael. Dude, that was not easy to do because I'm not even giving you the price. I'm giving you the percentage returns chart off, please. How did you get it?

I look at a lot of stocks. Okay. Let's put up. I want to show you two charts. What I'm showing you here is the quarterly revenue. So it's about $316 million last quarter. They're now on like a $1.2 billion annual run rate. And you can see that they have doubled revenue since the last time the stock price was here in 2021. That's a pretty remarkable feat to have doubled revenue in just a couple of years. So the stock is actually much cheaper now at 132 than it was when it got to 130 three years ago. Next chart. It's just another way of saying the same thing.

This is price to sales on a trailing 12 month basis. The last time Shake Shack traded at these levels, it was almost nine times sales. And today it's about four and a half times sales. So, I'm a long-term shareholder here. I don't really trade it, but I really like the situation this stock is in. It's getting up there in market cap to the point where it could start joining some indices.

Maybe mid cap 600. How much? No, it's didn't we have the market cap on that last chart? I think it's five. No, that's price to sales. I'll tell you right now. Why charts? Why charts?

Of course, why charts? Where else? Market cap, $5.286 billion. That's real. So it's starting to get some respect. We talked about it before. They hired away the CEO who built Papa John's to a 5,000 unit chain. Probably those units. Rob Lynch, and he's gonna help them scale this thing and get margins where they need to be.

And I'm pretty excited as a shareholder to see this at an all time high. Okay, that's it from us this week. I wanted to remind you guys, tomorrow is Wednesday, all new episode of Animal Spirits. Mike and Ben actually taped together in New York City this week. So that's going to be a lot of fun.

I can't wait to hear it. New compound and friends at the end of the week as well. So stick around, keep it locked and we'll talk to you soon. Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ridholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ridholtzwealth.com. Don't forget to check us out at youtube.com slash The Compound RWM. Make sure to leave a rating and review on your favorite podcasting app.

If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.