Silver Went Parabolic — The Next Trade Is Still Forgotten

Uh, in Miami this week for a Bitcoin conference. So, let's go through this.

Um, week started off, uh, as a lot of these weeks seem to start off with, uh, uh, some issues involving Davos and Greenland, and that lasted for a day.

Uh, I am going to finally spend a lot more time on silver, copper, minerals. We've talked about, uh, this being a transition point for the physical world, but I am going to really start to focus the attention. I'm writing a piece on silver for next week. And most of that is inspired by what I've heard at this event, as people are trying to pick a top in, uh, commodities, or at least worried about the parabolic moves. At the same time, they're looking to short semiconductors, which have had a parabolic move, and buy software. That seems to be what everyone's doing. I'll cover all of that this week and kind of go through my thoughts, uh, on where we are in the AI trade, and especially for this year, on the themes of making money.

So, quickly, S&P flat for the week, despite the, uh, horrible start. Flat for the week for the Qs, flat for the week for small caps, and the Mag 7 up about 1%. Heading into earnings, uh, we did have, uh, the second largest sigma fall, uh, in the market in the last, you know, this is, uh, over the course of the last 18 months, uh, or sorry, last year. But the main point I think to say is that most of this occurred. It was a big move down, but it was also coming off of a, uh, a low V realized V time. So, year to date, now we're up 1%, but I just want to again highlight that we are being led by energy and materials. So, you're getting a lot of alpha there, and you can see tech near the bottom. Uh, you can see industrials, materials, and energy. Three of the best performing stocks. We are in the physical upgrade cycle. I expect this to continue. Um, this to me is a preview for the year. Regardless of any bounce we get in tech or any bounce in software, I think you need to be focusing on energy, materials, and industrials in different components of it. And I'll go through the areas.

Um, last 60 days in the S&P, uh, lowest rate of change since we broke out in May, which basically says the S&P is kind of spinning its wheels here for the last 60 days, 60 trading days, which is three months. Um, when we did get the move lower on Tuesday, uh, the turbulence model basically showed more signs of a bottom than than anything. Uh, but most importantly, I did get a few reach outs from people on what the turbulence model did and if there was anything there. And effectively, from the analysis, it was very consistent with you had no movement in credit whatsoever, measured on real time with HYG versus IF. Here are the junk spreads still sitting down there. Uh, as long as anything that happens with Trump is not economically important or earnings important, and nothing that was going on with Greenland to me was more than a directional shock to people. Uh, I think I would be on the side of using those events to find the names that you haven't been able to get into yet because they've moved against you.

Again, we had more people talking about rates. This will be a theme for me all year. Um, you know, since 2022, when ChatGPT was launched, basically tenure rates in the US have stayed between four and four and a half for the majority of the time. So, we're at 4.23, uh, as of Friday. Anyone focused at this being the big trade, when you're seeing things like Micron Technology and silver and all of this stuff, is just a waste of time to me. And again, I have no care whether tenure rates go to 4.75 or 3.75, uh, breaking out of this range. I think they're going to be stuck around this level. If I had to guess, we're going to see an upward move in rates, but I just don't think shorting bonds is a trade.

Michael Hartnett had a lot of good things out this week in terms of kind of the charts and things that I agree with. Uh, so I just wanted to highlight them, not because we're in agreement, but because I think these are important charts to keep in the back of your mind for what I think is going on. First thing is, is just the returns between small cap and large cap. As I've talked about, I expect small caps to be up significantly this year relative to large caps. You can see the inflows. You can see all this. This is the year where I think people are basically going to have a hard time making alpha the way they have in the past. And this is all related to the fact that I think we're at an inflection point in the AI trade. And I really think people are going to have to, uh, adapt, uh, in understanding what's happening as the MAG 7 and the deconglomeration takes hold. Uh, just again, AI is an important thing, and now we're getting kind of the first fear factor, I guess, uh, with where storms connect back to the grid. We'll see what happens, but I wanted to bring this up in case something goes on.

So, this is a visual that you're going to start seeing me spend more time on the entire year because I believe to make money from this point. This is the software boom. We have abundance. Um, everyone can try to pick a bottom in software. I view this as the same thing as people trying to predict when the equity market is going to collapse on the back of the debt. Uh, the ego that sets in with trying to go against something that has worked for 15 years that now has an insane amount of abundance in it. Uh, coding is abundant. Uh, apps are now being built in fast time. All of these things, which I'll go through as it goes. But just keep this in mind. This is about scarcity. Now, I, every investment, you have to go through and look for bottlenecks and decide whether this is going to be there over the next five years, and if it is, how much of has already been discounted. I think the data center scarcity side is known. Um, I think the next stage is really, as I'll go through, something that fits more into a different visual, which I'll highlight, which is the conversion from raw P, raw energy, so natural gas, solar, coal, whatever you want, into intelligence. There are two, two tracks of that, of that, uh, bottleneck, and I'll break them down. I've talked about them separately, but I have a visual to go through.

Uh, again, we start the economist finds a way to make sure that there's a bottom in the market, at least for a period of time, but the Donald Trump bare thing to start off the week. Uh, I do want to highlight a new drug for each patient. I'm going to highlight this now. This was a story in there. This is again going to be important to me when we get to the software side, and being in an age where now you're customizing. Uh, think of a new drug for each patient as different than Advil for everyone, or drugs that are made for everyone. Goes through an FD, everyone takes it. Um, customizing things specifically for a patient is going to be the trend, but customizing workflows specifically for businesses is going to be the solution that will disrupt software over as time goes on.

Uh, so the Greenland side, I talked about this a year ago. You're going to continue to hear me talk about this. We have a shortage of critical minerals. We are in an arms race around the world for AI. We're in an arms race for military supremacy. All of these things require critical minerals. In the past, we have talked about rare earths as a major factor in this. So, anyone that doesn't want to connect Greenland to critical minerals, and Greenland to the strategic implications of making sure that the other AI, uh, components with the military, China, Russia, Iran, they are involved in all this decision making. So, it's not just about the rare earths, it's also about security.

Same thing went for Venezuela. I had some people reach out to me here and say that people had said that it was ridiculous for me to post something about Venezuela's importance with crit critical minerals. I don't think people fully grasp this. 100% everything in the world is about securing the supply chains right now in the military, making sure that Iran and Russia, in particular, when it comes to the US, along with China, are in their hemisphere. Um, we are in a different war type situation with drones over tanks. We're in a different war situation with drones over ships, and making sure that bases are at a particular pace, and also that we have access to critical minerals because these will be in a shortage for a long, long time. And Howard Luck Lutnik confirmed it. He told reporters Venezuela possessed significant amounts of critical minerals and a great mining history that's gone rusty. He believed the Trump administration could fix. So again, the administration talks about it.

So for people that are not fully grasping this and talking about oil, we have abundance of energy. We have more fossil fuels than we need for the environment we're in. But we have shortages of, and this was announced by the White House, um, on January 14th, again, around critical minerals. This is a focal point. This will remain a focal point. Don't forget it. It's what stopped the tariff situation with the rare earths and China showing that they had this monopoly in exchange for the chips. That is our monopoly. So you also had Rio Tinto and Amazon collaborate to bring copper. So, basically, Amazon's in the copper mining business as of this week.

The silver chart. And yes, there will be a pullback. And it makes sense that we're just above 100. Uh, this was before the close on Friday, but I wanted to highlight the parabolic nature of this, which is these are impossible charts to buy. Where do you buy something that has already broken out? You had basically 14 years to buy silver, and in particular, up until about September, October, it really wasn't moving, and then this move occurred. So the question is, that being at this conference and hearing people talk about silver and thinking about it as a precious metal, I just want to make the connection. It is not a precious metal. It is directly related to the AI trade. It is an industrial metal. And more importantly, the fact that people think of this as something that is just representative of what gold has done, I think we have to dig deeper in this.

This is the overlay of Micron with silver. These are parabolic moves. These are the types of things that if you don't get in early, you have a hard time getting into. I posted this because Elon Musk during the holiday season posted about silver. This is not good. Silver is needed in many industrial processes. That's an understatement. It is huge in solar, in NPUs, in switch gear, in circuit breakers, data center, advanced packaging at chips, EVs, FSD, edge devices, drones, radar, electronic warfare, robotics, humanoids, and sensors. All of these are in S-curves. They're all happening at the same time, which is why I'm writing a paper because I want to make sure people realize, regardless of your belief in where silver should be, whether it should be 100 or 75, the mining stocks are going to continue to have a bid underneath these. This is not a cyclical move in silver. And that's the point of this. Forget buying into it at this point. It is price inelastic. It does not matter whether it's $300, $400, $500. It is such a small portion of data centers that it's a small portion of AI's. It is not huge in this, but it is necessary in this. So, it has become a critical part in drones. Uh, it is a critical part in a lot of different things. But when you're talking about drones versus tanks, massive amounts of drones versus very limited tanks, extremely high replacement rate. This is just showing the importance or the transition in silver for the military side. And this is just with drones. This doesn't include the other side of it. It does include the data centers and the places that it's necessary, uh, for NPUs and edge devices for humanoids. All of that's there. Uh, I'm just bringing this up because Cuba would be the, I guess, the last place where there's a Russia-China situation and where there's critical minerals. So, don't be surprised if Cuba becomes, uh, a story at some point this year as well.

Now, we did have Davos going on, and Nvidia and Jensen Huang spoke many, many times. I just wanted to highlight this thing that he said on Friday, which is the largest infrastructure buildout in US history or human history, with estimates pointing to $85 trillion of investment over the next 15 years, spanning energy, chips, data centers, and AI factories. The buildout is still in the early innings. The reason I bring up the silver thing, the reason I bring up the copper thing, we're at the very early stages. So, when I wrote the paper this year about us being at the transition point away from software and into hardware, we're at the very beginning stages of building AI factories. We're at the very beginning stages of having a shortage in energy, of needing the micron. That is why you're seeing these parabolic moves because we're in a commodity bull market, and where there's shortages, you buy as much as you can, particularly when they're price insensitive, uh, for the demand.

So, this came out, uh, Friday. Bernstein is showing what the copper shortage will look like. So, I want you to think back to Jensen Huang's thing, and he basically said for the next 15 years. So, I wrote my paper. This is 2026. Here's 15 years. This is the predicted shortage. This is not cyclical. This is not, okay, copper goes to a certain level and it's going to collapse. You have to think about that because that's the way these stocks have been priced, and that's the way they show up. So, right now, to show how much people doubt the non-cyclicality of miners, here is the move in basic resources in the, uh, Euro Stoxx. I want you to highlight, we're at the same level we were in the Great Financial Crisis. This is going much higher, and this will be, as I said, materials and energy will be the two best performing stocks this year. I said this the first week, it continues to be the case. And right now, earnings estimates, the analysts are still freaking out about cyclicality. This will be a long-term play. From a valuation basis, it's, they're not only rejecting kind of earnings estimates, we're at valuations which say you got a long ramp run rate into here. Even if nothing else happens, as long as silver stays around the same level, you can see where the money's going to go.

Now, I do believe this is the 1970s. Now, before you get into the inflation stuff, I'll get into that. But these are the types of things that Michael Hartnett put out that you want to be invested in. Look where tech is. So, we just entered a point where you wanted to be the opposite. You didn't want value. You wanted growth. Growth is here. It's still going to work, but it is way behind a lot of these. I completely agree with small cap, the value side, commodities, all of that. So, if you're a mutual fund sitting out there and your portfolio is weighted heavily towards growth, remember your current waitings. Yes, technology sector 33%, but when you add in the communication services, you're up at 43%. When you add Amazon and other things from the consumer discretionary side, you're basically at 50%. Energy, materials, 5%. No brainer. Get your money in these things.

We need, and we cannot convert raw energy into intelligence. So, we were using GPUs for the data center. That was for the training models, but we are now entering the AI factory world. That infrastructure buildout that Jensen Huang talks about. Who better to kind of say what's going on? Now, from a charting basis, you've got healthcare ready to break out. I've talked about the drug and the pharma side. You've got energy ready to break out of a big base, John Rog style. You have materials ready to break out of a John Rog big base style. And I highlighted the Euro Stoxx are even better. So, technically, this is not just an AI story. This is also the technical picture, the underweight picture, everything.

DRAM, another super spike. So, this is the old DRAM prices. This is overlaid with PMIs. Commodities, commodities, commodities, silver, copper, DAMS. You're going to have everything along those lines going higher. EM, a natural play on this. I'm going to spend a lot of time on EM. I'm going to spend a lot of time on Brazil today. EM is a natural place for this to be. They benefit a lot from what we're talking about, but in particular, commodities. I want to be long emerging markets. I wrote this in Brazil in June of last year. The dollar, to me, will be weakening on the back of the capital s, uh, the capital account surplus reversing because the Mag 7 will be underperforming. If materials do well, look at the material side in Europe versus the material side in the US. Compare them as a waiting in the portfolio, and you get very, very different things. Technology in the US, and particularly the Mag 7, if they're an underperformer, and large cap is an underperformer, you're going to have a massive move into the manufacturing and commodity stuff that's better for Europe. It leads to capital outflows. Uh, the next phase of artificial intelligence will be defined by hardware, power, materials, not software. I wrote this in June of last year. If you would have followed this with silver and everything and everything along those lines, and semis and Micron and all, all of this stuff, as opposed to software, you'd be doing very well since there.

And finally, a global push to secure critical minerals due to the trade war between China and the US, where Brazil is rising fast as a strategic supplier. Just think about the countries we're seeing and how much critical minerals are bringing up. This is a new story. Brazil breaking out. This is what it's done since I wrote that paper. It's up 30, 30% since there. I think it has a lot further to go. This is the relationship historically over the last 14 years between silver and EWZ. Obviously, there's a dollar component. There's a Brazil component, which gets back to commodities. Well, here's EWZ with the most recent thing of silver. If you're looking for lagards, get into Brazil. We just had one of the best performances on a weekly basis in EWZ relative to the S&P. Brazil is up in one of the best performing markets in the world right now.

Now, this is the negative side, and why I said earlier, do not worry about the inflation component. So, I just want to highlight, he put this as well. This is not going to happen. And the reason I can say this with certainty, or at least where I'm willing to put my, uh, uh, my, uh, my money on the line here, I highlighted this because I do expect a possibility that this could occur. This would take us back up to 4%. This to me is not going to happen because what we have right now is an employment situation which is weakening. So, wages are not growing. We have a housing affordability issue. So, house prices are going to be moving lower. They have been moving lower, and I think the Trump administration is focused on that. But most importantly, this happened because of oil, and this is the difference right now. We have an abundance of fossil fuels. So, in 1974, when everyone scared the hell and said we're going to have another rise of inflation, this is the price of, of oil per barrel. So, we went from 10 to 35 to get that second wave of inflation. So, you had the first wave here, and then you had the second wave. We are not getting that this time. So, if you think oil is going to go effectively from 60 to 180, then yeah, we're going to get inflation at those levels. If you believe that we have a surplus, it's fine.

This is the overlay of CPI year-over-year with that oil chart in those years. So, that was an oil thing. We have a very unique situation that is not about oil, but I do want to be long energy because we do need power. I do think oil has a floor because of how much the commodity stuff is booming and how much PMIs are going down. But if oil only goes to $70, you're still going to see XLE outperform. And again, I include this as software. Everyone is trying to pick the bottom in software, forget it. You can get a bounce. You can get a trade. You can go. That's an ego trade, as far as I'm concerned. You want to buy scarcity. We have problems with commodities. We have problems with power, electricity. There are plenty of ways to make money. The electricity thing will be deals that Chevron, Exxon, all of them will benefit. I don't want to be short this chart. This is a beautiful looking thing. And this is XLE over software or over IGV. That's the trade you want to have. I showed it is Chevron versus, um, uh, Salesforce.com last week.

So, back into the abundance scarcity, you want to be short abundance software. You want to be long everything associated with a buildout. This is the reason why, and I want to make sure that you guys can fully see this. Oh, you don't need to see me. Um, so this thing here is very simple. This is showing that we have plenty of energy. We're making it into intelligence. There are two tracks here where there are shortages. One is turning energy, the raw power into electricity. And that's where the turbines show up. That's where the switch gear shows up, the transformers. These are all bottlenecks. That is where the data center has been, and this is where trades have worked. On the other side, you have all of the advanced GPU. You have the high bandwidth memory. All of this has also been in a shortage. This is the place where scarcity exists. So, you are taking raw energy, which we have an abundant amount for, but it's the conversion process into intelligence where we have the issue that will remain the issue as we go forward. The place where you want to be is advanced GPUs. That's why I showed this packaging thing. That is a lot of names there. This right now becomes important as we get into edge devices. This here is really more for the cloud and the, because of the data centers. You're going to get into the AI factories, which are more for on-premise things, but I just wanted to bring that up because you want to invest in the shortages.

So, everyone wants to take the other side of this. It's in X every day. Everyone wants to short semis and be long software. They think this is a bubble. They look at it this way. I just wanted to show who wants to be long this chart. This is just that inverted. Whenever I see people kind of doing this, they're looking at it, and they're more comfortable shorting semis and, uh, versus and being long software as some trade, but nobody wants to catch a falling knife. And this just continues to go lower, and I think it will continue to go lower over the next five years with episodic shifts. This is software relative to the NDX. Again, who wants to buy stuff like this? Can we get one of these where it reaches a point and then it goes sideways? Sure. If that's the best trade you can come up with to try and pick the bottom of software, it's not worth it.

So, let me go through the reasons. I wrote a piece, "Why Buying Cheap Software is Now the New AI Bubble Trade." I fully believe in hearing people talk that people are fighting this, particularly people who are really good at coding, trying to tell me that Claude code isn't good enough and it won't work. I just want to like bring it out. If this is the best trade you can come up with with all these parabolic charts, I think you're in trouble. Go to energy, go to materials, go to some of the names that haven't yet broke out where the analysts are still not positive and they're treating this as a cyclical thing. A rerating is when stocks that have been priced at a certain multiple are about to go through a dramatic shift. I think that's going to happen in the drug sector, in the healthcare sector, and I think that's going to happen for sure in the materials and energy and industrial sector where people are scared of the next cyclical, uh, point where this will break down. And if oil doesn't go higher, I don't see anything that will stop copper and silver from being an issue. They are not going to create demand destruction, at least not for the AI trade. They will have impacts on phones. They will have impacts on autos. So will high bandwidth memory. But the issue comes in if it has a, uh, a 10% increase in the price of those things. It may be bad for inflation, but it's not going to have an impact on the deflationary components without oil going higher.

So, just another thing on the software side. Claude made the Wall Street Journal, uh, in terms of taking the world by storm, and this was all about the coders agreeing with it. Anthropic revenue is now racing again. They're the ones dominating on the enterprise side from the coding. VCs are piling in. They're going through, and I mean, they're going to have an IPO. Uh, agentic coding is accelerating app releases. This was from Code Two. There were two charts that went around. I just want to highlight how important this is from the competitive side. So, one of the areas on software that people have to recognize is that you can think that enterprise software is bulletproof, or that it's gotten cheap. Competition is rising by the day. It may not be able to directly have an impact today, but you are getting so many more apps, and as the models get better, this happens. So, this is the coding side of vibe coding. This is when vibe coding took over. For three years, we were having no app releases. And now all of a sudden, we're up at 60% year-over-year. It's been increasing. It's just a dramatic shift. And to ignore it would be a mistake. So, I took the other chart, you can see it here in terms of more the smoother one, which gets into the amount of, uh, apps released every month. I said, okay, now taking this, uh, agentic platform competition for SAS combined with reality of vibe coding, began what is the summary for the enterprise SAS model? And basically, it said, okay, we're agentic AI will directly change the workflow side. This is, uh, an existential tension. Enterprise SAS platforms, whether it's these names here, monetized by encoding best practice workflows, forcing standardization across teams. This is the other point, and this is where I'm going to get into this company GenSpark as we go through it, which is if you're doing standardization, and I had an issue with Salesforce.com when they came in, and the reason I had an issue is because a lot of the things that I wanted for what we did for fundraising, they could not be done in there. It wasn't part of it. So, we had to figure out a way to adapt it and add things that we wanted and get them into the database. So, they create a form which is fairly standardized for everyone to fit the majority of people. SAS is built with everyone in mind. Meaning, it does not fit 100% for anybody. The problem is, enterprise clients want their exact workflow automated. They aren't going to be satisfied with 80%. Because the person you just convinced them to fire was already doing 100%. That is the big issue. So, when people look at how is the productivity going to work, as I go through this, you're going to start to see the success by companies has been not through using the enterprise software, it's through agentic AI, and it's through having those things effectively be databases where the data is the value, but not the software. That is an important component of this, which is going to become more of a story as time goes on.

Now, this is the company GenSpark. So, it's talking about how GenSpark is competing with software. They either next raise after hitting 100 million in ARR. It's an agentic AI platform designed to handle complex real-world tasks without being rigid and predefined workflows. So, less control, more tools. Again, you go back. You want to have more flexibility and adaptability and not have to deal with something which is scripted. You want things that are adaptive, that are able to act, fail, recover, learn in real time, make changes, go through it. That's the power of AI agents. And maybe some of the incumbents can actually get there, but it is very challenging and very costly to spend the money to get these agentic flows from everything that I've seen to actually be able to customize to an individual. So, I find it very challenging, and I don't know how people are going to pay for it when they can just use the data which they own.

Um, I brought this new drug thing up because again, this is from the article with inside the Economist, which I referenced. Everything is going to be hyper-personalized. So, when you're thinking about the way people talk about software, we are in a new world where everything should be customized to your workflow. It should be customized to your body. You make traditional medicine. You make one drug like Advil for millions. Traditional software, one workflow for many companies. The new world of agentic, one solution per case. That is a very different thing for incumbents to be able to do. Enterprise software in the age of agentic platforms and vibe coding. Software supply, I showed you at the beginning, has exploded. Apps are going nuts. I build software. I can go through this. Custom beat standardized. The customization is the critical part. Workflows are no longer the moat. Value shifts from software to results. When you're trying to get revenue per employee higher, the critical thing is to replace people with customized workflows, not software. Software might make people more efficient, but it, it does not allow you to not hire as many people. So, the seat-based pricing breaks, revenue pressure precedes churn, discounting, longer sales cycles, and renewed friction appear before customers actually rip out the platforms. This is kind of one of the things I think you have to be all over these software companies and their earnings and really do a deep dive. This is not a valuation thing. Do not buy these for valuation. Buy these because you think the company is able to adapt and they're seeing success in terms of the revenue side that is actually growing because it is a lot of money, I think, for people to spend on this when their goal is ultimately to have people go through. The winning SAS model becomes agent-native. It's forcing enterprise SAS to evolve or accept structural value compression. That's in my opinion what's happening. What do incumbents need to do to survive? It's hard. I, I, I just don't see. They're basically saying, "Here's a system. Follow the process. Tell me the goal. I'll handle the rest." Again, I think this is a problem because the people don't really use AI that much. This doesn't make a lot of sense to them. But as someone who uses it all day long and watches it evolve, it gets better every single time. I don't see how software companies are going to be able to have update upgrades going constantly. Um, if you want an article to go read about why SAS might not be as safe as investors think, and I think Renee Selman does very good work, um, in terms of putting things out, and I think this was a very, let's say, balanced thing talking about they're selling off hard, investors are looking for places to go, value comes from trust, blah, blah, blah. Uh, when you go through it, the real risk isn't current AI capability, it's human misjudgment of exponential progress. This is really important. We instinctively model technology linearly, while it often involves multiplicatively exponential blindness. Examples. The main point of this is, as things are changing quickly, your brain doesn't allow you to believe that things are changing that quickly. And that every time that this happens, you want to go pick again, buy into the weakness. When exponential change happens, like silver and it goes to 300 and it goes to 400. Once it gets to 60, it's overbought. Then at 70, it's overbought. Then 100, it's overbought. Well, this is parabolic. Parabolic stays parabolic until it's not parabolic. But if the demand side is there and the shortage goes through, because we have a bunch of S-curves that didn't exist 15 years ago, because drones were not tanks, because there were no EVs that matter, because FSD wasn't a thing, because China and the US weren't in an AI arms race, blah, blah, blah. You get the picture.

All right. Um, you should go listen to these. They're all about 30 minutes. So, Jensen Huang spoke, interviewed by Larry Frink. Um, and he basically went through the things that I've already highlighted. I don't think there's anything there that's, uh, that's new. But I do think, uh, if you want to sit there and pause it and read it, it gets back into this. So, everything he said gets back into this chart. We're going to have shortages for a long time. They're not going to ease up. We cannot build the things we need. To get more silver takes a long time. To get more copper takes a long time. To get more gas turbine takes a long time. High bandwidth memory, we'll see how long that takes. China's already trying to do it. Um, I don't know what the right price is, but I do know at some point, whether it's Micron, SKH, High, Sandisk, they'll get to levers. Will they've built in enough of the next three years? The question is where that'll be. Uh, for silver and copper, it's going to take a lot longer than that, uh, just because I don't think it's there. The stocks which have rallied are going to rally more, but this is also going to spread into chemical names which have started to rally. The basic materials thing, you have to go, there's a cyclical discount in there, of which for the next 15 years, it's going to be like the software side was. It's not going to show up in profit margins. It's just going to show up in the consistency of earnings, which are going to be there because the prices are going to be higher.

So, from energy to intelligence, this is the physical stack underneath. And again, exactly what I highlighted. All of these things have shortages. All of these things are issues. That's where you want to focus your attention for the next, at least, decade. Uh, which is very different than the prior decade. Uh, all of these different components. So, as you go through this, just think about the fact that we are exactly in the hardware stage, and we're in the very early innings. And that's because ChatGPT and the data center buildout was the main story. Data centers are going to continue to get built, but we're now going to be putting intelligence into everything, and that's the difference between an AI factory, which is more about the inference side, and a training model, which is more about, uh, getting better AI models. So, uh, supply side constraint. He's describing the physical bottleneck of intelligence, which is where we're at. If the infrastructure is not built, intelligence simply cannot exist at scale. So, it has to be built, and the money will be spent to have it built.

I thought the most important, um, presentation with the most information was by Anthropic head, Dario Modi. And basically, again, to show you, I bring in the transcript. It's about 30 minutes. I run the hedge funds analyst skill on the transcript. It gives me about a, a 12-page output, giving me a bunch of different components. I'm not going to show it again for anyone who wants to get a presentation on this. I will show you, but it creates a PM research memo directly from that transcript. Goes through all of the things he says, and it leads into cognitive ability is doubling every four to 12 months. Concrete evidence point lead product team for Claude code hasn't written code manually in two months. Again, new information, all been written by Claude. Competitors have gone consumer-oriented. So, this is obviously directly related to OpenAI, and I think this was one of the more important things. While Anthropic focuses on enterprises, which are adopting now, right now, and they have the money and they have the productivity, the people that are focused on the consumer side are spending more money than the people, in this case, Anthropic, on the enterprise side. And what Dario was basically saying is, I think enterprise business described as more stable than consumer with better margins. So, the heavy spending, the aggressive spending is being done by OpenAI, and Anthropic is getting more likely of getting business and more stable because the adoption continues to grow. In terms of China competition for his business, I have almost never lost a deal to a Chinese model. So, as the enterprise stuff goes out, and as coding is gone, I find it very unlikely that anyone is going to compete at this point with with Anthropic. They have made this point, and I think that's important because right now, the valuation of the two companies, Anthropic is about a 50% discount to OpenAI. And I think OpenAI with new lows going on right now for Oracle, I think the OpenAI story could be an issue as, as the year goes on. Uh, at least for a scare, and at least for people questioning whether OpenAI is in trouble. Um, maybe they make some headway, uh, with their new model. I, I find it hard to believe that it's going to be that big of a differentiator, and maybe their product that Johnny Ives is involved in by the end of the year ends up being something. But for right now, I think it's very, very difficult. And he talks about it on the bubble risk. He separates the technological trajectory, meaning the models are getting better and better, and they're going to continue to get better and better. But on the enterprise deployment bottleneck, the technology is capable of is probably 10 times what the enterprises are able to deploy. This is going to be a major story as I finish this up for all of you out there running businesses that are trying to figure out how to incorporate it. You have to think about it from what the bigger picture is, and you have to get your employees to start using it immediately. And the question is, have you provided an environment that allows them to do that? That is where I'm spending most of my attention with people on at this point. The second and third order effects of what Dario said. There's an enterprise deployment bottleneck. The labor market disruption is happening and will continue to happen. Consumer AI commoditization. Uh, I agree. Most consumers still use it as a chatbot, and I don't know what they're going to pay more money for, makes it very difficult. The capital allocation stress. Again, companies are spending different amounts of money, and the question is, if you're getting models that are better, but your end client is a consumer, and they don't know how to monetize them, do we have a gap there between the models which are getting better, the compute which are spending tons of money on for the future? I think there's an air pocket here for some of these. Again, if OpenAI is not doing well, then I think you're going to have the entire ecosystem, which again, is just going to have to build in the risk that they're all going to run into overspending. Even though I don't believe it's going to be an issue, and this is not a bubble, I do believe that there will be questions and uncertainty over valuations for these companies unless they're showing the revenue side. And remember, part of the inability of of getting the capacity, uh, uh, the bottlenecks is to be able to get more cloud storage and more cloud dollars. And and if you've got capacity issues, which you still have for all of the big hyperscalers, I think this is going to be an issue. Um, the economic potential of AI is enormous, many trillions of dollars, blah, blah, blah. The key uncertainty is adoption speed, not capability. This is becoming a bigger and bigger thing. And I think his statement of AI is 10 times ahead what enterprises are currently able to deploy. The ability for the companies to adapt, which is where my business is really starting to, um, blossom, has become an issue. And you have to, if you want to catch up, as I get through this, I will show that about 12% of companies are being successful with adoption in a good way, meaning they're already seeing very, very strong positive returns. The gap in the numbers in terms of how much more successful they are versus the average is dramatic, and it's really hard to catch up, guys, if you don't use it every day. The best analogy I can give is a golf swing. If you think you can go learn golf by playing once a week, going to the range and hitting one bucket of balls, you, if you really want to get your game to a level that goes fast, you have to put in an enormous amount of reps and it has to be daily. Especially as you're older. And the problem is, very few people are doing that. Uh, I won't go through and read all the different, uh, timestamps here. Uh, I also won't go through this again. He's talking about the same thing, which is their focus on enterprise is winning.

So, the synthesis between Jensen and Dario. Jensen explains why intelligence is scarce. Dario explains why revenue is delayed. I think if you listen to these two, it's very difficult that we've got a hard ceiling on AI capabilities based on how much infrastructure we need to build to have it go forward. This is not just for better models because the models are going to get better from Blackwell. This is mainly for edge devices, for autos, uh, for getting, uh, AI factories built for, for these companies that have massive amounts of data, but it's all siloed and unstructured. And so adoption is the bottleneck on the AI monetization. And so I think you're going to have massive spending, which is good for commodities, hoarding, and everything. But I think in terms of seeing the companies pay lots of money to software companies or pay lots of money to the hype, to the AI model companies, I just, I think we're in an air gap here. And I think these companies are, they're priced differently. 30 PE companies for software and for things related to AI versus, uh, materials stocks, as I showed, they're just mispriced relative to each other for the stability of the earnings going forward.

Uh, Sacha Nadella spoke, and he basically continues to talk about the fact that there's going to have to be an agentic world. You can go listen to him. He did one with Allin. And while all this was going on, while all of the big leaders, uh, for the AI models, let's say the bigger companies, I'm not throwing Zuckerberg in there, but where was Sam Altman? Sending another signal. He needs more money. He also announced that they'll be having ads, which I agree, this is just another sign that they are desperate for money at this point. And even Demis, who spoke at Davos, said he was surprised that they've moved on ads. It definitely seems like a, a money grab. And DeepMind said it has no plans for that. So, the company that knows the value of ads better than ChatGPT is not going to follow their lead.

Elon spoke as well. Great interview again with Larry Frink. Um, key points he brought up, Tesla, SpaceX, XAI, and robotics around a single mission, maximizing the probability of future civilization. He talked about abundance. He talked about aging. He talked again about the true bottleneck being electrical power. I think the most important thing that Elon talked about, and the reason you have to keep listening to him, is we are in an age where we need the engineers to basically figure out how to deal with scale and vertical integration, which he's done. At the same time, I talked about this last year. This is the trigger point for me. I believe this is a major event. Tesla robo taxi is now driving in Austin with no safety monitor in the car. That is basically a humanoid on wheels. We have entered now this. We've entered the point. And if you're wondering, you're starting to get more and more of these. The first trip, $4.31. I saw one there where it was basically, you know, 20% of the cost of a Wimo regard or of an Uber. Regardless of what your thought process is, the reality is setting in. And it's not just the state of Texas with Austin and Elon basically.

believing that it's time. But then Lemonade announced that it will offer a 50% rate cut for drivers of Tesla vehicles when FSD is steering because it had data showed red. This is a really big deal because it means they're effectively allowing you basically to pay for the FSD yourself by having your insurance cut. So, just a a historic time for robo taxis and anyone who doubted this, of which the majority of people on the on the investment world that I've talked to over the course of the last year, they doubt Elon. They're not ready for what's happening. We're in the hardware stage. I think Tesla's stock will have a phenomenal year.

Now, Ray Kurszwell, the father of singularity in the modern era, uh gave an interview on moonshots. I highly recommend it. If you take what Ray Kurszswwell said about the future and Elon Musk, Ray Kurszwell is known for his predictions and first said AGI would arrive by 2029 and he said that in the 1980s so he's had a good track record of approximately when everything was happening. He's had some misses but when you're trying to forecast 10 to 20 years out um he has been amazing. So exponential AI acceleration is real and it's underway. AGI is imminent. Uh abundance is the dominant outcome. This gets into a lot of disruption which I've talked about. Abundance is the major theme. You want to right now short any company that suffers from abundance and to get to abundance we have a scarcity side. You want to invest in scarcity. Anything that you invest in is it scarce or is it abundant? Um energy not algorithms is the binding constraint. They agree on human AI integration is in inevitable. Robotics is the next major phase and it's beginning in 2026 or 2027. Think robo taxis. Think optimists. optimism not fatalism is the way to think about this. Uh so again I would just focus on the fact that two of the smarter minds on the future are in agreement.

Now data center projects this gets back again to another risk with the oracles the open AIS and all this stuff in terms of the data centers. You're going to be seeing this news happening more and more. 64 billion dollars of data center projects have been blocked or delayed amid local opposition. Uh this data center thing for people who are not paying attention to it is definitely becoming a much bigger story. Google warns grid connection delays are now the biggest threat to the data center expansion. Uh in Memphis, Elon Musk's supercomput is getting push back from the pollution that is happening nearby. This is a big one and amid rising local push back US status counteration. These are all stories within the last couple weeks.

Um, CEOs say AI is making work more efficient. This is from the AI daily brief. Uh, I've never shown this one. I listen to this podcast usually a few times a month. I think if you are a business leader in particular looking for how you're doing on adoption. I think this is really important um podcast to listen to. Uh here's the highlights. The uppart reviews new enterprise surveys from PI uh from PWC, workday and section and basically says that there's a widening gap between AI leaders and laggers. So the adoption thing is getting a headline that no one's adopting to it because if only 12% are adopting that means nobody's adopting. But when you go through the data and you realize that if you take the top 12% the gains they are seeing are dramatic. So if you're not using it, you're suffering and you're falling way behind. The biggest drivers of AI proficiency are leadership expectations followed by access to tools and a coherent AI strategy. ROI compounds with proficiency, reinforcing that enterprise integration problem, not an AI hype problem. And I could not agree more. It is staggering to me how little leadership allows their employees to use it, but they want the benefits that come. That is what the main story was in this. So the top 12% deploy AI the way previous generations deployed. AI is embedded directly into core workflows not layered on top of them. Again this is really important in terms of going through. AI sits inside operational systems. It has access to it. Firms with strong AI foundations are three times more likely. So basically you need to have an AI plan. You need to have an agentic plan.

How does this I just copied what I just showed you and brought it back into GenSpark. How does what I just got from the AI daily brief in terms of the outcome from results from surveys align with what GenSpark which I showed you earlier which is an agentic thing to compete with standardized software flows SAS flows. It aligns almost perfectly. The description shared is essentially a clean articulation of GenSpark's core philosophy, not marketing fluff here are the way that they line up and this is the most important thing. Loser forms, AI as tool, rigid workflows again gets into enterprise SAS, human rework, static models, efficiency tools. Everything here is about agents and it's about what GenSpark is basically saying. saying GenSpark is building a type of AI system that only the top 12% of companies have figured out how to deploy internally and trying to product size it.

Uh employees are three time 3.1 more likely to hire AI ready talent. Okay, this is why when the when my video series is launched and in particular most of the feedback I'm getting is starting to come from the parents and from college kids. You have to be I native. The only way you can be IIA native is to use it all day. If you work for a firm and they don't let you use it all day, you're becoming less relevant and it is hard to catch up. You are trying to compete with golfers who are practicing every day for four hours, 5 hours, 6 hours a day. You're trying to get good at golf by not having access to a golf club except when you're in your free time, which is much harder to do. That is why it is critical for people to be using this all day long. Schools, not letting kids use it all day long or telling them feing the fear of God into them, it doesn't help. So parents, students, continue to watch this, but also when the videos go up, I'll let you know. Uh I'm in the process hopefully very very soon. I say this every week, but every week that passes, we're one week closer to when this launch will happen.

Final part on Bitcoin. Bitcoin and crypto market structure bill will pass very soon. The question is not is the bill going to pass. It's still the question of what's going to be in it. Um I wanted to just bring up the fact that this has been a big theme at the crypto event. People have talked about why Bitcoin's not moving like silver. Bitcoin is a$ 1.8 trillion asset. Silver has added$ 1.5 trillion in market cap in 23 days. I bring this up because when this stuff moves, it moves. And if you wait for it, you end up not getting involved.

Um Brian Armstrong spoke about the Clarity Act. I'm not going to go through all the details, but he's saying the Genius Act was a clean bill that fostered uh innovation. This is the one that passed over the summer. The Clarity Act has become a vehicle for traditional banks to try and get out of some of the things that were in the Genius Act. I think the most important thing is just to get the regulatory framework. So, here's Bitcoin. Uh, now we've got a negative signal on the short-term side. I had said once we broke above 92, to me it was the buy side. Well, I've already been buying for all of this period here, including a little last week. It's gone down. The chart still looks horrible. Now, we've got a MACD sell signal on the daily. The weekly is about to cross. But the main point is in being here, we're just not getting any kind of lift that lasts. That will eventually change. And I just want to highlight in these final slides that number one, this is Ethereum versus Bitcoin. Ethereum to me is utility. Bitcoin is store value. The utility side is still doing well. As long as this chart looks this good, and again, we had a big rise up. Let's take this as five waves. We've got a 200 day moving average, which is pointed up. This is a good sign for the utility side which is the network effects which is stable coin. So the fact that Ethereum is doing well is good. Now if I want to have a comparison silver utility gold store of value. So it's not surprising that if we look back over the last year and a half until November silver verse gold was very correlated with Ethereum verse Bitcoin. They bottomed in April. Here's what's happened over the course of the last month. So, since November, silver's gone straight up. I bring this up because I do think we're going to have this type of move in crypto soon. Remember in Micron, I was able to buy a lot of Micron during this period in here. All of it. I just was buying it buying it because I believe that high bandwidth memory was going to be an issue. I feel the exact same way with Bitcoin. I actually bought some stock at the same level it was in 2018 before Micron went up from 70 to 400 in a period of less than 9 months. So you're left with another one. This is the basic resources stocks. Here's where we were in the summertime. Basically the same level we were in 2018 and now we've gone parabolic. Don't wait for the parabolic moves. Bitcoin and Ethereum and all of the crypto space will be there as well. And the reason for me is this is my proxy for Bitcoin. The orange line is Bitcoin. The white line is something I created as a proxy which involves all of the pieces to me that Bitcoin is involved with. It involves copper as the reflation side. It involves Q's as the innovation side and involves gold as the uh store value side. And you can see how strong a waiting of those is relative to Bitcoin. It will always move away from it, but eventually it follows the same path. And since I think gold, copper, and stocks are going to continue to move higher, I want to be in there. That's it for this week. Um, I will see you guys next.