Transcription
There's a lot to go through. You can see it in the uh the list here. Take a look. You guys read it on your own. And I'm just going to start going fast.
Uh finished up September. It's the best September in 15 years for S&P. So again, everyone who wanted to sell the Fed news and basically sell coming out of the summertime, uh you don't hear any more of the 10 listed fears of tariffs and inflation and stagflation and Fed making policy mistakes and earnings and recessions and everything else. So we're moving on.
Uh and I think now people are focused on the fact of the facts of what's happening. S&P was up 1% last week. Russell was up 1.8. Led again. Uh we've got VA moving down. We've got junk spreads at alltime tights. Uh bond vault keeps coming in. It's affecting mortgage spreads. So you got the housing boost coming from the spreads coming in. I expect, as I've said, for that to continue with the White House. Uh and not just bond V, but you've also got FXV coming down. So everything is getting stabilized, and we still have now a 95% chance of a cut in October. And uh close to 100% for December at this point.
Uh Hartnett, who's been calling this a bubble for a while, this is one way to get around saying it's a bubble as a negative headline. Uh market bubbles only burst when central banks tighten and there's no sign of that. So, uh this was in the Block Works Forward guidance weekly podcast uh last week. I've shown you how rate cuts have been a positive when you're not in a recession. This is another way of looking at it. Uh something that's only happened once in 40 years, which is the only time the Fed cut without falling earnings. In this case, it's doubledigit earnings. Uh I give these guys a shout out because this is pretty much the only macro podcast I listen to at this point each week. I listen to AI podcasts. I listen to power podcasts. A whole bunch of different things, but I've pretty much given up on the macro podcast because I don't need to hear what people are saying. And that usually is a sign that people have given up on the bearish side. So, when the sentiment gets up to higher levels, which I think is definitely going to happen over the next four months, uh it'll be worthwhile. But these guys are the ones that I would recommend you guys listen to on a weekly basis.
Uh sentiment, don't care what anyone says. This is what I hear from people as well. Uh, and I thought this line was perfect. We're getting plenty of push back from traders as we continue to highlight investor. All I get is push back from people who are still worried about an AI bubble. So for the people who've made money, they're obviously on top of it, but it's still an incredibly high percentage that are negative. Retail, on the other hand, continues to push things. So this is the retail favorite index blowing out again last week. Uh Jared Kubin, another good person to follow in this, does a lot of uh really smart stuff out there, particularly on the factor side. Uh equities, retail continues to be buying uh ETF buyers in 1383 of the 185 days.
Uh and so what you're left with is this, and I brought Micron up. I've spent a lot of time talking about Micron this year. It's been a nice position for me. Uh and institutional people have a hard time buying stuff like this. retail doesn't, quant doesn't, but institutions and also analysts that maybe had a sell rating on it here. There's just no way for them to turn at this point. And these charts are everywhere.
Uh I had a meeting this week and uh it was a great meeting. Guys are very smart, but they said that they had experts coming in on high bandwidth memory and that there would be an over supply situation next year. And I I could not believe it. Um, it's different than the work that I do and I'm not a bottoms up person. This is just purely from a top- down basis of focusing on AI where all the demand is today and where it'll be a year from now. And I found it unbelievable. But then I started thinking about how this would be a good way to use AI and show you guys how when these analysts come in the door, you can use it for this. I was told this week by experts uh are suggesting high bandwidth memories probably will be larger than demand next year. This is common belief. uh I found credible discussion that some animalists expected blah blah blah. So then you go to the next one. So the question for me regarding the experts, there are so many areas of growth in demand. Doesn't an expert need to understand the breadth of the demand side more than supply? Historically, was HBM driven mainly by a sector or two where demand was fairly linear? This is an incredibly important part of this. We are in exponential demand. There has not been a time that you can go find where you can find exponential demand. That's why the numbers look so big. That's why it feels like a bubble. Why experts risk under uh demand? Linearity bias. This is so important because most demand is related to nominal GDP, the overall spending. So, if you're way above it, like think about the revenues of the MAG 7. They're way above nominal GDP, but only by 1.6 times. They're growing revenue at 10. The S&P 493 is growing revenue closer to four. Nominal GDP is five. So you get a a point here where you got to focus on where it is. But then there's another thing. It creates this beautiful heat map for me on all of the areas of demand for high bandwidth memory. A lot of these like this has never happened before. This has never happened before. We've never needed a defense reboot the way we're going to need this time. So how can any semianalist say with certainty unless they're focusing across verticals what's going on? That is the reason why I do this podcast. That is the reason why you have to understand that these markets are moving in this exponential chart function because Micron was trading at singledigit pees for most of the year uh and is still off future uh future uh numbers. I still think they're off because of the certainty of what is to come. So data centers is one side but when you spread it out it's more. SK Heinex, same boat up.
Um, I just put this in here because this was a news item this week and again I'm gonna keep saying it. I think a deal with China and the US if it does occur as I expect at the apex summit where they announce some kind of bargain. Do not underestimate that that could be the trigger point for the true bubble or the true point where everyone is forced into the market because I do view it as a much bigger event than most people and I think people are sleeping on the wheel at the importance uh overall ADP came out can't minimize this last four five months 6 months whatever you want to take this matches up with what's happening across there we also as we go through this so if I go this is not the GDP but I've shown chart parts like this. But this had other new data. So we have new new highs for job for the uh the job differential in terms of the the conference board worsened again. We had the Jolts quits rate came back down here. This is the unemployment rate up here. This is temp hiring here. And then this one here we had earnings from paychecks. We had ADP out. This is the human resource gicks level three sector relative to the S&P breaking also to new lows. There is no hiring going on. Here's the challenger. People look at the stupid number that comes out in Bloomberg. They give you a lot of data. Announced hiring plans for September. This is the retail time period. 117. That's a drop off of 75% from last year. Bigger from the year before. Look at these numbers. 2017 on. We have no hiring plans going on from people. We also had with inside the uh the jolts number we get job openings and then you do a ratio relative to people not uh people looking for work but unemployed. We broke through one. So there's more people looking for work for the first time. That's the white line here. It broke above one. That's the unemployment rate tracking it. So the labor market continues to be on the weaker side.
And Walmart came out this week says he can't think of a single job that won't be changed by AI. Walmart is not projecting largecale layoffs or hiring sprees, but rather a period of considerable transition. Uh, AI is going to change literally every job. Maybe there's a job in the world that AI won't change, but I haven't thought of it. Walmart has already deployed AI agents. This is going to become a bigger story, guys. I've talked about it. I'm going to show you a lot of stuff that was released this week. Same thing. Asurers cutting staff is cutting plans to hire What's the difference between those two? One's a fact, one's the one to keep people from going crazy. Advanced AI is becoming a part of everything we do. This is a censure. The reason these uh Oh, and then you have Amazon basically saying the same thing uh back in June. The reason I brought up all three of them, in case you didn't know, here are the top four largest private employers in the United States of America. Walmart, Amazon, Asenture, all of them saying the same thing.
Google announced job cuts. They didn't announce them. They kind of slipped it through on September Monday of this past week and they were in the cloud division. Google cloud is currently Alphabet's fastest growing major revenue segment. Uh they've mentioned on their earnings calls that they have significant capacity constraints inside that division. Uh the employees were not happy and professors everybody is struggling to get jobs. This is a leading uh professor out of UC Berkeley. People hate colleges now. They don't believe the college education is worth what it was. We're now down to 35% see it as very important. I could not agree more, especially as we go into AI. Every minute that you were in a classroom, you're wasting time not using artificial intelligence. You are learning how to memorize things which have zero value and have now been completely commoditized. The social side is still worth money, but the time wasted in the classrooms because the education system has not embraced artificial intelligence. Uh even though all the kids are cheating at this point and the schools don't know what to do.
All right. The middle age are no longer the most miserable. Youth is miserable. And I think everyone knows that. And in New York City, young voters showed up for Zoran Mandani. We have a big election coming up. And I think people should start paying attention to what's happening in the country at the youth side because of the inability to get jobs and how it is feeling. This is a social situation that is going to be an important macro thing because Donald Trump proposes new stimulus checks of up to $2,000 for Americans. This is the whole point of Bitcoin. This is the whole point of the disruption, not just of AI, which is not something new. Machine learning has been around for a long time. The disruption started with the MAG7. Every single dollar of mag 7 growth means less jobs for people. That is the reality of innovation in Joseph Shumpernner and creative destruction. Trump may declare a national housing emergency. What to know? Again, we're going to have to print money and give people money to offset the concentration of wealth that's happening and the concentration of jobs.
Measuring the performance of our models on real world tests. You really should read this. This is a new GDP val new evaluation at openout. what measures the value that they're seeing across jobs. They go through a variety of jobs and they're measuring what AI can already do. I showed you the thing with Mker last week um a benchmark on AI frontier models and basically the doing work and measuring what their ability to do already is. Um two critical findings towards a shift uh latest models master exceeded the performance of skilled human experts in approximately 50% of the cases. Again, this is today. These findings strongly suggest we're on the cusp of major changes in knowledgebased industries. The primary impact is not necessarily job elimination, but rather task displacement and job design. So, if you are leadership at any company and do not have an AI plan, can you survive from the competition using AI? No. Basically, if you're not moving ahead with AI, every day that you lag behind, you are falling behind at a pace that is unprecedented. This cannot be ignored. This cannot be something that you don't have a plan in. You need people like me to come in and help out to be able who spend their entire life using it, but also training people on it. It's an important part at this. This is why I started to do this as a job because I could not believe how important it was for this for individual workers. They have to do the same thing. You have to get control of your future career. There will be tons of job opportunities coming out of this. It's going to be the augmentation, but you have to be able to use it. And a lot of places prevent you from using it. So, you must use it on your own.
We're back in the bubble thing again. Uh the AI boom is unsustainable unless tech spending goes parabolic. Tech spending is parabolic. I don't even know what people are talking about in terms of a bubble from an investment standpoint. I thought this was a good thing to highlight. Uh the number of IPOs by year. This this is how many IPOs we've had during Chat GBT. Nothing. Here's what we had during the dot bubble. This was what I referenced in a paper this week. IPOs are a great way to go through it. By the way, most of those IPOs are in crypto this year, particularly the ones that have done well. Uh Moonshots, another great episode. They go through the AI bubble from an expert perspective. And again, if anyone knows AI bubbles, those guys do because they're all of the age that they were part of running businesses, end of the dotcom bubble. That's where they made their money. Uh, and they went through and they had a great discussion on it. They obviously said there was no uh.com bubble. Uh, they talked about the supply and demand, uh, which I think is really important in terms of going through uh, for for you guys on the semiconductor side, which I've spent all this time. But they go through how it's not a bubble bubble and they go through all of the different reasons. Listen to it on your own. I'm not going to take uh take you through it. But these quotes, I think in terms of the the discussion, you can go through the scarcity side, the fact that demand is way way way ahead of supply and there's actually no way to get the supply and they talk about that there is no way to get the supply necessary for the amount of products that would be rolling out today. the power is now the only thing stopping the products from coming out. The compute is not an issue at this point uh in terms of it being available. Uh that may change but right now there's plenty of compute. The issue is the demand the power side but one thing is important which I think everyone needs to understand and this is it the latency between capex and returns in the internet era was years. With AI, the payback is immediate. And that's what you're starting to see is that you're going you're already having revenue growth. So the latency between the investments and the revenue growth is there. It may not be big enough, but you're already seeing it. Where in the case of when the buildout happened, you had to wait for it. This is going much, much faster. And it's the speed of expansion, the scope of the disruption, all of these different components get to be really important when you're going through this. And so you have to think about how quickly this stuff is moving.
That being said, I just want to make sure it's clear. There are going to be horrible investments and they're not just going to be uh by the VC world in terms of investing. That goes on. How many actual companies do the VCs invest in that turn out to be great. So Jeff Bezos called it an industrial bubble. Investors don't usually give a team of six people a couple billion dollars. The size is massive. They have no product. It is different, but that's because of the speed that's gone on. David Solomon said a lot of capital being invested in our AI will turn out not not deliver returns. Completely agree with these guys. There is no doubt that there is uh money flowing into things, but that's because the opportunity is so big and that's what ends up going on.
Uh Jared also highlighted this. This was a great kind of push back from someone who's well respected with inside the AI world as a researcher. Um, as a researcher at Frontier Lab, I'm often surprised by how unaware of current AI progress public discussions are. I could not agree more. I've been in meetings and I've been on podcasts where people have just called it a talking parrot. I I'm I'm in shock at some of the things that I hear when I'm in these meetings by people saying it still hallucinates all this stuff. If you don't use it, you will not have a job. There's no other way around it. It is disrupting everything. think it's a tsunami of progress and it's a tool that can do what human beings do. So whatever you do thinking wise it can do already. IQ's up to 150 and by the time the next 6 months come through it'll be way above that and then 6 months after it will be above. So what he does in this failing to understand the exponential again the current discourse around AI progress and a supposed bubble reminds me a lot of the early weeks of the COVID pandemic. So he's using the mathematic side of how quickly things got out of control. Public commentators kept treating it as a remote possibility or localized phenomenon. He goes through the actual data in here to show the progression that's happening by the time period that it is still on the same line of what it can do. And that's why I said every six months you're going to have new models coming out there. The same thing goes for the evaluations in terms of what they're doing parody with an industry expert. And basically it said it may sound oversimplistic but making predictions by extrapolating straight lines on graphs is is likely to give you a better model of the future than most experts even better than most domain experts. So it's actually still going in a mathematical way that you can forecast going out and that's one of the reasons why the demand just continues to go.
So Anthropic released 4.5 its latest bid for AI agents and coding supremacy. I used it. I'm going to show a demo of something I did related to Pterodine. Sora 2 was released the video side. So this is kind of the VO3 for OpenAI. OpenAI also released Pulse which I've used all week. A smarter AI for everyday productivity. What if your assistant didn't just wait for your question but anticipated your needs delivering personalized insights before you even asked. So basically it's a virtual assistant that knows what you're knows who you are, what you're doing. Pulse's daily briefing feature does research overnight while you're asleep on anything that you have in your chats. So when I get up in the morning, it's got all the things that you guys are seeing here. It's got the latest updates. It's got stories. If you want, you can connect it to your Gmail, to your calendar to get what's going on in the morning. The AI agent world is here. Signals theification of AI is real, not speculative. demonstrates that OpenAI is actively working towards systems that act autonomously and not just respond. This is incritically important for margins and it's critically important for jobs. They also announced we're taking the first steps towards agentic commerce in chatpt connecting to Shopify and Etsy. Remember Shopify offered or put stable coins on there. You can see what's happening. The crypto world merging with the AI world. We've got Chat GPT now com converging with Shopify to do shopping with inside your chatbot. And you can pay with stable coins for this proactive argument. Proactive meaning it's now reaching out to you of what you want, what you need, everything along those lines, but in a place that you are and it's actually reaching out as opposed to you have to go to Amazon and then you look, do you need to buy this now? Whatever. it actually knows what's going on and and it's not just an ad that pops up in front of you. Uh for the proactive argument use of the week release of OpenAI and Shopify Etsy the pulse release details behind the set three. So I go through what all of them mean and basically when you get through this you end up in a situation where how pulse aligns and accelerates with everything. So I wanted to just show the synergies with chat GPT's commerce to check out ambitions what the role of pulse is. It's a stepping stone. It helps open AAI start getting users into the eye that chat GPT can do things for you without waiting. It is no longer just a chatbot. So this used to take a long time to do. Think about when Amazon went from a bookstore into everything that it is today. That took a long time. The reason they can do this fast is because they already have close to a billion if not a billion users. And so which companies will take revenue sh which companies will this approach from open AI take revenue share from from Google and ads and shopping Amazon Meta. Think about what I've said repeatedly that AI will cannibalize everything. So, OpenAI, which is not a public company yet and is not part of the S&P 500, is already at a size and a scale big enough to compete with the MAG 7. There will be many, many, many competitors for them. It won't just be OpenAI because once Open AI can do it, a kid in Brazil can build a business that can have the opensource version doing the exact same thing. Once they have AI agents, they can build their own app in Indonesia, in Pakistan, in all these places where the Mag 7 have had global dominance. This will be a revenue take away from those companies. And that is the reason why I keep saying Bitcoin is the only digital company. It's not a company, but it's the only thing with a moat now with AI rising.
Claude sign of 4.5. Let's just go through this how this moves things into the proactive narrative. Claude 4.5 does the exact same thing. Again, it's allowing for more agentic world. You have to spend the time on realizing how fast this is moving. Hitachi shares were up 10%. Open AI to collaborate on energy, artificial intelligence, and other areas. Open AAI is releasing things, spending money, making deals. I don't see how this doesn't end badly. uh personally. Uh so again, I'm very uh very realistic on this. I think the revenue side is going to be very difficult relative to the spend. When you're spending that much money and you're trying to drive in revenues, maybe you can thread the needle, but to me, it's more likely that those companies, which will grow rapidly over the course of the next three years, I just don't see how they don't run into issues. Corweave Inc's a 14 billion meta deal for the AI demand again.
Okay, so now this gets into Pterodine. This is really meant for the retail traders, but it's also meant for hedge fund people running the business. It's also meant for anyone who does investments at a bottoms up basis. Uh, this isn't claude just 4.5. This came out this week. You're this is my prompt, okay? I'm not going to read every single thing. I'm trying to do this with Pterodine. Explain how Pterodine makes money. Break it down. You can see this. Analyze the whole thing. Now, summarize the last four. So I'm not going to show you the output from the one I just went through. I'll go through something that is more interesting to me. By the way, this is multiple pages of work. So this is work that would have taken to do I don't know how many hours, days, whatever. Summarize the last four earnings calls for each call. Do the key messages, the analyst questions, blah blah blah blah blah. Let's just go through some of it. Three biggest policy developments between 24 second quarter 25. It goes through the highlights. All of this takes seconds. And again, I'm not showing you even 150th of the output that came out. Uh I kept asking it new prompt saying, "Okay, now summarize it into the critical questions." But a lot of this stuff it just did on its own. Talks about the surge that happened in why it happened. Called this the inflection point in the Q2 earnings. I remember I talked about it uh probably last week. I think it was the first time. I think I talked about on pump the week before. I can't remember exactly but you can go through. We're now competing for merchant GPUs. We now have an opportunity to compete for merchant GPU testing a market we've been excluded from for 20 years. It is 20 times two times larger than the VI compute which is where the bulk of their business is. So new opportunities that becomes one of the questions they go through it. These are all things from the earnings report in terms of uh the earn most recent earnings call. Now it shows you the shifts in tone in terms of each component. Optimistic, confident, bullish, cautious because of the tariffs, then very bullish, you can go through all this. Does this all its own? I didn't I all I did was give it the um the prompts that you guys saw. And then I asked some questions. So the verdict most important earnings call in years. Terodine finally delivered the AI inflection plus a TAM expansion. Uh the bull case is now much stronger. What I didn't do in this thing which I would have is gone through the specific channels from a top- down basis that I believe are going to accelerate. The one thing that AI does not have yet is the ability to look at the things that are coming. So it can only go out and figure out what's been written out there and that's why it could do for Micron what it did with Micron. But if I would have said what's going to happen to Teratime because there's an upgrade cycle coming in phones and computers next year then it'll build that and it'll also go through it.
Finally for the technical piece I've shown this to some hedge funds. I have an algorithm that I created. All I have to do is take this chart from Bloomberg, copy it. This is a 5-year chart of Teratine. I just paste it in and then it does all this work and it gives me a total score on this with anything above 70 as in the you should be buying it side. Uh the pattern is good. I'm an Elliot wave person. That's in there. It does all this stuff. I set up the the prompt. It's a very long prompt. It weights these on each component. So, imagine if you had a person that was a good trend following uh analyst, someone who's good with candlestick or chart patterns like bases like John Rogue, candlestick patterns, Elliot wave, this I put them all together and I get a waiting on it. And so if it's all lining up some way, that's a better way to do it.
Because of all that stuff and because of the outreach I've had from so many people, uh, from the consulting side, the stuff that I do for people out of my own business, not for 22V, I am going to start putting stuff up on the website, uh, which will be things that if people want them, they can get. It'll be a combination of ideas around themes combined with some of the technical analysis side. So on any of the themes that I've mentioned in the past, I'll probably have one a month related to a the AI side, but then in addition, I'm going to be doing a bunch of training videos that will be on there as well to show people how you can do this on a longer format.
Uh, I did want to show this because I have a a view towards next year uh with where we are that I think people need to think about. So I do believe small caps are going to have rally. I do believe PMIs are going to go up sharply next year and I think people need to focus on the way their portfolio looks. I think next year is going to be a year against large caps. Not because large caps won't still do well, but large caps have done exceptionally well because of the AI trade. The problem is for a lot of these companies, particularly the ones that you see here, these are all big spenders and a lot of them have bottlenecks already. The question is for like a Seaman's Energy and for a GEV, their gas turbine situation leaves them in an issue. How can you be trading at a multiple if you can't grow things because you can't produce relative to the demand? It's not that these stocks are going to go down, but I think there's an issue.
So, here's the Morgan Stanley uh power AI power index, which is the orange line. The problem is you can see how correlated it is to an equal weight of these eight names. This is the concentration factor. For everyone who's massively long these names, I think you have to be worried about what I'm about to show because I can already see it happening. This is everywhere. who makes the data center. Everyone knows these names by now. If they don't know them, they own them in a basket or they've come out and done the bottoms work. Everyone knows that these guys are going to benefit from the data center. The question is, do have they hit bottleneck side. If you want to go read a research report that goes through the data center buildout and at least gets the emphasis on how big it is, how much is going and look for some other names that they haven't listed here. This Catrini Stargate, they did a field trip there. They have a ton of photos. I highly recommend it. I spent time on it. It just shows the massive dollars that are going. This is what you want to invest in for things where you're looking for big big movements. And that's where I think the small cap stocks, as I'm going to show, are going to see a lot of these because of the size of the mega caps relative to the size of where they're going to have to go into. I've been told by many people that have traveled out in the Midwest, they are seeing small businesses where lights are being turned on. Their big issue is, can they get the people in? Can they do this? But they are going to see demand go up for all kinds of widgets that are going to be part of the data center and the utility buildout. So far it's been the mega cap stocks. They've got shortages. So where's the rest of it going to come? The gas turbine situation is one of the most important themes for next year in terms of spreading into small caps in my opinion. So it's not about GPUs anymore. It's all about power.
This is from a Google employee working on data centers. So this is all you need. power, lack of available power, reliable power has become the biggest bottleneck for us. Uh, they basically talk about the fact they don't have the issue. Supply chain GPUs, which we all want to get GPUs do, we have our own internal TPUs, but GPUs from Nvidia, either we buy them or we can rent them from Coree. All of the winners, that's already there. That's not a big constraint. After CO supply chain was a big one, but now this is all about power. Unfortunately, they all need power. So, you have to do all your research on power. And I'm going to start showing this. I spent the entire week on Power podcast. So, you can go listen to this one. This is with the former Microsoft head of energy. Uh, as we've covered in other recent episodes, the growth of data centers and the massive amount of power they require is reshaping the energy landscape. Today, I want to zero in specific challenge at the heart of all of it, the Watt Bit spread. He's the person that created that line. I think you should listen to it because of this gas turbine shortage risk new energy crunch. I completely agree. I think this is the biggest risk for next year. Everyone has been focused on using natural gas, including the administration. It is very obvious to me in reading everything and doing my work on AI that we're going to get turbines out every year. That's great. But AI demand is going faster. And since the demand is going faster, we have to figure a way to deal with it. the uniqueness of AI power demand, the scale and acceleration, supply constraints. It's not just gas turbines, it's transformers. Supply cannot fix flex quickly, creating bottlenecks. This is something that I think is critical. It's where I spent all of my prompts this week. Every single time you ask someone in the energy side how to get to the demand side, meaning, hey, here's our supply uh stuff for oil. Okay, what what's oil demand? Well, that's spread across the globe and that's nominal GDP. This is moving faster than nominal GDP. But it is controlled by the grid and it is controlled by the hyperscalers. They flip it on, they flip it down. And electricity is completely different. When gasoline goes higher at the pump, then consumers stop spending. In the case of AI, they have unlimited demand at this point. So we have a problem here and it's putting in uh a systemic impact on grid stability and efficiency. So all the hybrid solutions, this is a unique situation. It has to be about grid stability and efficiency. So you have to learn more about what this means and this where these podcasts become important. This creates a new power negotiation dynamic. Hyperscalers are quasi utilities shaping investment there. hybrid solutions with shortages in traditional infrastructure like the ones we mentioned. You need hybrid solutions and they are built around flexible demand response including Bitcoin mining. This is the beginning of something I'm going to say time and time again. AI purest AI trade is Bitcoin. Bitcoin is energy. It has an energy component. There's a mining component. They were the first digital people to build out these centers. They are experts in this field and they actually serve a very very big purpose when combined with batteries and with renewables which is going to have to be one of the solutions. Accelerated renewable integration paired with storage. That's what this side is. Energy efficiency optimization at the hardware chip and infrastructure cooling power levels. You This is a a much more complex thing than I think people are fully ground. This is not just go out and buy an energy stock. This is not just go out and buy uh natural gas or oil or coal. It's much much deeper and it involves grid capacity and flexibility. It is critical to the whole solution and everything that I've spent on. So expand on the fastest to deploy wind, solar, and storage first. So if speed is the issue, these are the ones despite the one big beautiful bill that you want to continue to focus on. I'm going to go through what those names did this week. Battery storage. do your work on battery storage critical to the whole thing. Batteries are needed for flexibility. I will go through the Bitcoin mining side later. How important is flexibility? Flexibility is critical, arguably as important as raw megawatts for meeting AI's electricity. Flexibility means the ability of handling when the loads when they're going up and down because you're competing with retail and commercial along with AI that is there. So, think of it as there's AI demand which is ramping up dramatically. You've got consumer and commercial which is not ramping up dramatically but is always there. But then you get these supply shocks and then you have Bitcoin which is always in there on there but is like a virtual battery where it can turn stuff down when all of a sudden it goes through. And most importantly for the financial side of renewables they help the financial side like a restaurant. So, I want you to remember as I get into the Bitcoin mining later, if you ran a restaurant, you're paying expenses and some of those expenses continue even when you're not serving food. Where Bitcoin mining fits in is during those night times when the restaurant is closed, they're making money and making it more profitable for people to run the business. That's how they help renewables and anything that goes through. So, for everyone who's been on the ESG side and has gone against Bitcoin and Bitcoin mining, you've reached a point where you are going to have to get rid of your bias, just like I said with Tesla, and you're going to have to realize without the problem of having a flexible load. Peaker plants, gas peaker plants where you need transformers and gas turbines, they're expensive, they take time, they're not going to be available. So, for everyone who wanted renewables, guess what? Bitcoin is going to help you be more renewable.
So, what's been happening? First, solar makes new yearly high, new one-year highs. Fuel cell breaking out. This is all in the last month. Plug, Fluence, Battery, EOS, one I've mentioned. I got to show you this one because I think I first mentioned it on here about 50% ago. Um, all battery players, all things people were involved in at some point. They obviously didn't want to be involved in them anymore. And the reason was because they had disappointed. These were all left for dead for a variety of reasons. The issue is if these guys are going to be a major part of what's necessary for the data center. And you saw the numbers that were being spent. Here's the market cap of these companies. They're in the Russell. If you go through what led the Russell on Friday, these companies did. Look what they are. One month performance. This is how Alpha's created. This is how retail jumps on these themes. Here's lit this uh this battery uh sorry lithium battery the whole thing. Now I just want to make sure because this one's been asked for me because I showed it last week or two weeks ago. Most of the companies in here are Chinese. So just remember with lit it is not even though you can buy it in the US it's not a uh it's not US stocks for the most part.
Okay. Now we've got a podcast again I think you guys should listen to. This was on the Ben and Mark podcast which is an A6 16Z uh but it's Ben and Mark is the podcast. Androl CEO China has scale. Can America catch up? This is all on the problem related to manufacturing in the US. But from a military standpoint, this goes into the China US side. I think this is important information for everyone to understand. If the US, China, if Taiwan, China was to invade Taiwan, the war games show us the US exhausting key uh munitions in six to eight days with two to three years to build stock. They talk about this and I this is so important for so many things. First of all, anyone who doubts that we are going to build up manufacturing and PMIs are going to go higher, I I I just don't think you're paying attention to what's happening. This is not just reshoring for reshoring saints. This is reshoring for national security and the government is showing everything it can. Bought a lithium put made an investment in a lithium company. Announced another critical mineral um investment on Friday. Uh already invested in MP that's rare earth already invested in Intel. All of those companies are necessary for modern military but also for AI in some framework. So all of them they're completely aligned. So, like I showed you in the data center, you need batteries. Well, you need batteries for humanoids. You need batteries for drones. Everything is related to the same thing. And all of the choke points on supply, they're all from China. They control it. China's 20 years ahead of manufacturing autonomy. The US edges software. So, we have to spill speed this up significantly. This is not a small thing.
So, here's what's happened. The government announces an investment in in LAC. Goes up to five and change. Now, it's doubled from there. Here are the lithium names. Again, look at the size of them. That just shows how little money we've spent doing this. I didn't hear of this stock until this week until someone who called me and said, "Have you heard of this?" Here's another one. Antimony. Um, they put a $250 million. They got a contract win. You go read about it. It's all about munitions for the military.
Simple way to look at this. If I was going to bet and I had to pick one thing that three years from now, consumer staples market cap is 3.3 trillion. Here is the energy market cap of the S&P 500. Here is the utility. These two combined will be bigger than this. Utilities will probably be bigger than this. If you want to go look at what utilities relative to consumer staples looks like on a 34year chart, utility bills are going higher. Power is needed. It's all on the grid. Prices are going higher. There's no way to solve this. And consumer staples is being disrupted by Ompic and a whole bunch of other things which are only going to get worse with AI. If you want to be long AI, you get long utilities. You want to be short AI or AI disruption, get short anything related to the consumer, but in particular consumer staples.
Russell 2000. I've talked about small cats. I get push back on this one. Uh John Ro put this out. We are basically and we did break out finally of a 4year point. All right. Now, these are the weekly charts. I want to show you the monthly because he's showing these patterns how this thing trades and how when it finally breaks out, it's a big thing. Now, if you take the breakout points here, here, here, and now here, PMI, PMI, PMI, and here we are. PMIs are going higher, guys. You can argue as much as you want. You can focus on the monthly numbers. All that matters is six months from now. The stock market discounts what's going to happen. But so does 91% of central banks are cutting rates. Here's the overlay with the PMIs. If you're not playing for PMIs to go higher, I don't get it. Here's the best PMI trade you can have on Bitcoin. Why traditional finance will finally connect Bitcoin to AI. So, I've said and I've given up trying to explain to people why I'm heavily invested in Bitcoin, why it's the purest AI trade, why it will continue to compound and is actually going to accelerate soon and it will be the thing that takes away from this.
So, labor market pressures we went through at the beginning. So, you get social unrest, you get more people that are looking for a new system. That's what socialism equals. That's what anything equals. That's what throwing out the incumbents equals. you will continue to have it, but it's getting worse as AI agents come in and there's nothing that they can do to stop it from a corporate perspective because profit margins are being used against that and that drives a bigger gap in the ability for people to afford things because that means the wealthy are getting wealthier and we will not tax them. So, we're trying to build up manufacturing and do handouts. So, we're figuring everything we can. That is the major thing behind it. That has what started Bitcoin. That will happen. the mega caps are going to be under pressure. I can already see it happening and I think the spending is going to be an issue at some point here because I don't think they're going to see the same size of revenues. But more importantly, if the power thing becomes a major issue, they're still spending money, but they can't release new products that can bring in money. That is an issue. They need the power.
The dollar weakness. I'm not going to go through this this week, but I will say dollar strength started after the Nikai peaked and it happened and US exceptionalism is all about coding. I've said this to people on the phone. The dollar has equaled coding dominance. Coding is now ubiquitous. The dollar will weaken going forward. Not because of the macro reasons, not because of all the garbage that I hear that people actually think and believe in a linear world where GDP is not a statistic that matters. in a world of massive disruption where AI is going. The problem with the
The dollar is the US has the most waiting towards coding in the markets. So, it's more of a disruption even though the profit margins are growing. So, I think it'll underperform the rest of the world.
But as the rest of the world is a better place to put your money purely from the basis of what I showed you in small caps which is they're tiny and they are going to be making money from AI. You're actually in a point where there's just a rebalancing around the globe which is the democratization of AI. AI is connected to energy which is connected to Bitcoin and the mining side. And then you've got the network effects which are going to start. You've got stable coins. I showed you that before. But then tokenization's coming next year and that is the big boy.
Bitcoin was up 10 and a half% last week. Here is what you're looking at over the last 5 years. Seasonality. October up 22%. November up 13. Here you go. These are your next seven months. See if seasonality plays out. But sell in May and go away has been actually a Bitcoin story.
Uh I wrote this paper last week. Bubbles lift everyone. Concentration leaves most behind. AI investment into all this will leave as always uh losers. But to focus on in a bubble, you're not making money from that. The concentration is what's happening. There's very few winners. I think it'll spread out next year because again, they need the energy side. They need the building side. They need manufacturing side. That stuff's been left for dead. Those names will go from $3 to $20. They will create a tremendous amount of alpha for people if they do the work. uh they're small which makes it difficult but I'm just telling you it's a lot easier for people to go look in there at this point than go look at Micron at $200 and believe that that's going to continue to produce the alpha that it's produced this year. Concentration leaves most behind and that is positive for Bitcoin. Immad on that moonshots podcast if you want to see what a bubble looks like just look for the next few years in digital assets. I could not agree more. That will show you completely what a bubble looks like. Generative AI is the proper thing. this one will be insane.
He's saying that because of the network effects. He's saying that because tokenization is going to open up. We are changing the financial guard rails of the world with crypto. This is as important as anything that has happened. Tokenization is going to bring so many changes to the way the world works. It's a disruptive force. It will get people speculating. Think about what's happening gambling in this country. Think about what's happening with the prediction markets which are related to crypto. This is just the beginning.
The story is simple. Trump said America can grow its way out of the debt. What it really means is debasement. Shutdowns highlight the erosion of trust in US institutions. Bitcoin is the pressure valve. That's not bearish S&P. It's bearish dollar. Goldman Sachs. We're at the point now where Bitcoin is becoming part of the traditional finance world. We're going to be dealing with this. How to improve inflation targets without inciting the bond vigilantes. That's already happening. But yes, inflation is going to air on the higher side and they're going to continue to cut rates because the job market will be weak from AI. So you get it both ways.
Uh the technical side from John Rog here are the stocks which are growing in size because of the uh the issuance that's come out this year for uh many of these. You've got a bunch of the the miners on here. Four, for those of you who don't know, is John's perfect score, and you can measure which ones are going up. They just continued to get better. So these are ones that went from a three to a four. I would just go spend time because I think the Bitcoin side is going.
How Bitcoin mining stabilize the grid. Save Texans$18 billions of dollars. Crypto mining can enhance. Let me go. Investment in renewable energy production and curb overall carbon emissions under suitable conditions. Blah blah blah. You guys can go read it. This is what happened. And this is basically the story of December of 2022. This is really important. If you go back to the issues that happen in Spain, the issues I hear getting close in other places as AI demand grows everywhere in the world, grid stability becomes an issue because renewables are intermittent, you get a grid stability problem where if there's an event like what happened in Texas, which was a wintertime event, which causes problems and it sends everything up and it causes blackouts or it causes them to not have the power to have pipes freeze and everything else, it becomes a major issue. So, Bitcoin mining is now becoming part of the solution for the first time as people realize this. And I think that all AI companies and all uh utilities and grid optimization is going to start to follow what happened in Urkott and the importance. At a minimum, go listen to this podcast and go get more details on that exact scenario.
I'm not going to read the whole thing. Please expand on what is discussed with regards to Bitcoin miners, batteries, and AI demand. Again, I gave you kind of an analogy with a restaurant. Um, Bitcoin miners give you flexible priced demand. They turn cheap or stranded electrons. So, again, that overnight example, when prices are low, they're doing stuff. And then when prices get high, they come off of the grid. The way that they help by being on there all the time is they make it more profitable for the companies that are producing the power. So, you can see where this is important mainly if two things are occurring. One, we're getting to the point of running out of capacity. The Texas event was a one-off event. If it happened once every 3 years, Bitcoin miners don't have it. If we're getting to the point because of AI demand that we're there all the time, that makes the risk of having blackouts much higher. That makes the value of them go higher. If at the same time we don't have turbines and we need to do more or higher percentage of the intermittent renewables, you can see where their value is. So for everyone again who doesn't realize Bitcoin miners will be viewed positively for the environment because they actually are going to drive more demand towards renewables because of their ability of handling the intermittent side and being a virtual battery. So, the real value of Bitcoin miners grows at the grid becomes vulnerable and wholesale electricity prices are rising. Like I said, exactly like the PGM uh auctions. That was a question I asked. And then it goes through. Exactly. That's the way to connect the dots. Let's unpack it clearly.
Again, this is the way I use it. If you guys want training on this, reach out to 22V. They can find out how. I'm trying to move my consulting business to some degree to help people. I'm there. It's just trying to find out how we can do it. But this is a way for people to figure out how they can get through these themes in a course of two days the way an analyst would, but in a way far with far more breath from both a top- down basis and then go through a bottoms up basis like I showed with Pterodine. And then you can spend the time taking podcast and going through it and saying what ideas are coming out of here that people that are not consensus with people. Um connection to batteries, the grid optimization, improving power, project economics, Bitcoin miners are flexible demand. Again, that's the critical thing. They raised the the load floor in the week hours because Texas needs everything. More gas, wind, solar, batteries. It is a massive place to look at as to what's happening in AI because they are the demand capital. They've done an amazing job with URKT. You should go spend time on it. It's one of the reasons why people are migrating there is because they've been doing so much on this. So again, the gas turbine matters and it goes through as to what it is. And if you thought this was an issue, just remember, and if you go read this article, just type this in to Perplexity, Hong Kong Economic Journal, go read how China has done now the exact same thing. And remember, they attacked the mining industry 3, four years ago. Well, now they're using the miners for exactly the same reason.
All right, guys. That's it for this week. Um, thanks for everyone reaching out. I look forward to going through it. Go to 22V, stay on the website, keep looking. Uh, reach out. We're trying to make sure that any retail person that we couldn't do something with since the demand was so high and people want trade ideas, they also want training on AI, not just for them, but for their kids. Reach out there. We'll get stuff on the website as soon as we can. Uh, and I'm looking forward to spending more time with you guys, even if it's just virtually. See you. Bye.