Motley Fool Hidden Gems Investing - Is the AI Bubble About to Burst? Plus, Apple Bets on Doorbells

Episode Date: October 7, 2026

Travis Hoium, Lou Whiteman, and Jon Quast debate whether the AI boom is becoming a bubble and what could eventually cause it to burst. They also look at how investors can position portfolios when AI valuations look stretched and massive spending continues. Then, the team breaks down Google’s multibillion-dollar nuclear power deal with Constellation Energy and the enormous energy demands coming from data centers. Finally, they discuss Apple’s latest push into the smart home and whether doorbells, cameras, and a new home hub can move the needle. They discuss: - AI Bubble Risks - Investing Beyond AI - Google’s nuclear deal - Nuclear Power Constraints - Apple’s Smart Home - LG’s End Game Companies discussed: Micron Technology (MU), Alphabet (GOOGL), Constellation Energy (CEG), Microsoft (MSFT), Apple (AAPL), LG Electronics (066570.KS), Amazon (AMZN), ADT (ADT). Host: Travis Hoium Guests: Lou Whiteman, Jon Quast Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

is the AI bubble here. Molly Fool and Gems Investing starts now. Welcome to Molly Foolin' Jems Investing. I'm joined today by Lou Whiteman and John Quast. Guys, we try not to talk about the AI bubble all that much here, at least on the shows that I'm hosting, because I think it's one of those topics that you could talk about it absolutely every day. And one day you'll be right, but most days you're going to be wrong.

But Ray Dalio had an interview that recently came out where he was talking about how this is going to burst, relatively soon. Higher interest rates are going to be one of the catalysts for that potential bursting of the bubble. And John, the thing that sticks out to me, as I've thought about this, I like to think about what are the sustainable business models that are coming out of the AI industry. It doesn't seem like there's a lot of them, despite the fact that we're spending several trillion dollars.

But the thing that really sticks out is that we keep taking out more and more debt. And it's like every single company, even the hyperscalers are taking out more and more debt. Eventually, that might be problematic, but would you think about what Dahlio had to say? Ah, yes, Ray Dahlio. Listen, he's an incredibly smart person, and I do like listening to him. At the same time, he was talking about bubbles before AI was even a thing. So he would be talking about a stock market bubble regardless of what was happening right now. In fact, he has been, so that's why I feel really good about saying that. And to put this into perspective, little bit. What did he say? He did not say we're at a place where this is getting close to a

bubble bursting. He said, we're close to a point where an AI bubble could burst. We're at the step before being close to a potential bursting. So I feel like he's really... We're at the point before the point that matters. Exactly. So to quote Aragorn from Lord of the Rings, I mean, it may be coming one day, but it is not this day. Lou, does that resonate with you? I think this is one one of those things where it seems like the risk factors are getting bigger and bigger. We just learned over the last 24 hours that SpaceX is looking for another $40 billion in debt. Everybody almost at this point is taking out debt to buy GPUs. Is that just okay until it's not okay?

For the record, Bridgewater is long a lot of things. So I don't know if I, DeLio, I don't think he's a perma bear, but he does. Yeah, he's been saying this a while. here's the thing. And like John said, I don't disagree with anything Dahlio said. I think the scenario he lays out is likely to happen. The question is timing. Ray could have said this six months ago. He did. He could have said it a year ago. In fact, he did. He could be saying this six months from now. So as investors, I don't see this as signal, but I do think, like, look, we need to think of the world in terms of pendulums. This, like everything else, will not last forever. It doesn't mean avoid. It doesn't mean go short. but it means set positions accordingly. Look, we are closer now than we were to inevitably the music slowing or stopping. I don't really think debt is what gets us right now. I would push back, and I don't think Ray was really saying that, but I would push back

if he says that now. I think debt is manageable until it isn't. And again, when does the isn't happen? Not yet. So, Lou, how are you positioning yourself? How do you think about what? positions am I going to avoid? Where am I going to look for opportunities? Because I think that's ultimately the question that we should always be asking right now is you're right. There's probably,

I've heard a lot of really smart people say, of course, this is a bubble. And that doesn't mean that it's not, you know, 1997 and we have another three years left of this. But what I always think about is, do you want to be running in front of the bubble? Do you want to be, you know, buying the most hype names in not know whether it's 1997 or early in two. where you're going to suddenly be sitting on a company that you thought was phenomenal. JDS Unifase was mine back in those days that ended up being a complete disaster. So how do you think about positioning yourself in a moment like this, both from a risk and an opportunity side?

My core belief in investing is there's always value somewhere. And I am always trying to find that value. I don't find individual AI stocks by and large all that appealing right now. I think the run has happened. I don't want to be buying individual names right now, maybe with exceptions as things maybe get cheaper. But look, here's the great thing. There are so many great opportunities right now I see outside of AI for my individual

money. I talked about banks, but banks are just ridiculously cheap. And you can also use that concentration in the S&P 500 to your advantage. I have a lot of index funds, a lot of those sorts of vehicles, to the extent that the AI trade keeps working, having all of that concentration in the S&P 500 works to your advantage because you are getting oversized exposure to that. I'm sort of letting it ride, like let the market ride AI hire for me and look for individual opportunities outside of this where I can see, I think I see better pricing.

Does that resonate with you, John? I want to go back to something that you were kind of alluding to there. when does a bubble pop? And to go back to Dahlio's framework, he really kind of cites three primary catalysts, and he says that you do need a catalyst. A bubble can inflate, inflate, but unless you have a catalyst for popping it,

a pin, so to speak, then nothing really happens. And he cites three things. He cites rising interest rates as a potential, like generally speaking, not necessarily right now, but generally speaking, rising interest rates,

stock issuance, and a sudden need to convert wealth. So think of Elon Musk, for example, a trillionaire, but he doesn't have a trillion dollars, right? That's tied up wealth. If you needed to convert that wealth into cash by liquidating some assets, then that's another thing that can pop a bubble. So a lot of people retiring, that would be one of the things that potential happen to it. You are pulling money out of the market because you're retiring. Exactly. That would be one definite way that it would trigger something converting wealth into cash. I will say that that's not the one that Dahlio himself,

in making his case, making his argument is the one he's highlighting. In fact, he's highlighting a potential wealth tax as one of the things that would trigger this. Now, just to be clear, this is him making his argument, making his case, and this is one of his main things that he's bringing to the table. It's not happening until next election cycle at the earliest as far as I'm concerned. So this is not something that is imminent. So I actually don't see anything to scary about this bubble right now if it is a bubble. I mean, you look at something like Micron. Micron is now generating more operating profit than Apple. To me, that's very different than some of the dot-com names back at the peak of the previous bubble. Yeah, we'll see where

this goes. We definitely want to keep this on people's radar because the risks are different than they were three years ago, five years ago. And so, you know, some sort of correction may make sense at some point in the future. When we come back, we're going to talk about Google's new nuclear deal. We'll do that in the moment. Welcome back to the show. Google made another big announcement over the past day or so that they're buying more nuclear power this time from Constellation Energy. John, the details are getting pretty wild, just the commitment these companies are making to this AI buildup and the energy behind it. And that's where we kind of are in this bottleneck conversation is where in the world is all this energy going to come from.

20-year power purchase agreement with Constellation Energy is going to add an incremental 890 million, or sorry, 890 megawatts of new nuclear reactor capacity, $4.3 billion worth of investment. Nuclear seems like it's hot again for investors. Yeah, and this is absolutely the way to go if you are Google or if really anyone, you're right, we do need a lot more power. Maybe I'm biased. I do have nuclear people in the family. but to me, this is the way to go.

You have an existing infrastructure, and you can generate more power from that infrastructure. Uprating a nuclear plant, to me, makes a ton of sense, especially if you're looking to get it deployed quickly. Now, I will say that this is a huge move, and yet, in the grand scheme of what we're talking about and what we're projecting, maybe not as big as we need it to be.

So according to Bloomberg, N-E-F, we may need something on the magnitude of 100 gigawatts of power for new data centers between now and 2035. So if we supplied a record amount of, or hooked up a record amount of new data centers over the next, you know, 10 years, even at a record pace, we would still fall short. So the 100, let's say that 100 gigawatts is about right. I have no idea if it's right or not, but Bloomberg Nef says maybe it is. the Google deal is for less than 1% of that.

And you might say, well, John, that's only right now. But it's not because signing the deal now, maybe that gets uprated and into generating that power that they've contracted by the end of 2032. So this is really more of a decade news item than a right now news item. And it's still not enough. Yeah, Lou, the big thing here seems like there's this retrofitting piece. So there's these nuclear plants like three mile island from a, how to deal with Microsoft a few years ago. That was one of the first big ones.

Building new power plants is a whole other thing. But John's right. The demand when you start to look out three, four, five years is absolutely crazy. So it wouldn't be shocking to see more of these deals happen. I guess it wouldn't be. Well, it would be shocking because we're running out of capacity for retrofitting. That's the thing. It's like most of these times have been done.

Right. It's funny because this is both the bull case and the bear case for nuclear. I think all in one thing. It makes all the sense in the world to take the existing infrastructure and keep it going or to build it up where we can. I have nothing else. People who think about this, but just the infrastructure, the power lines, the grid going into these things are already established. Even that takes time on new construction. So yes, this should and will continue until we are maxed down on capacity. But I think we're also seeing just how insanely complicated it is to, I mean, it's going to take years to do. do this. So don't talk to me about Greenfield anytime soon. There's a long way towards

nukes actually like new construction and actually getting going. You know, that it's interesting because yeah, do all these deals, make it happen, but also realize that I still am not convinced that given the complexities of just kind of keeping existing things going or building them up, how again are we going to get a new maybe trillion dollar plant? Yeah, and Lou, I know down in your neck of the woods, you may actually be paying for the Vogel expansion. That took 15 years to develop. I remember writing about that back in the mid-2010s. You know, Obama was still president at this point when a lot of that was financed.

It didn't open, or at least part of it didn't open until 2024. So the timelines on some of these nuclear deals in particular can span decades. That does seem like a real challenge. Here's the other little subtle thing, I think, as investors we should realize here, and I think we knew this already. Forget this brief period where these data centers are being subsidized, where there were communities and everybody was, you know, competing. Google's paying its own way here. The Google is making this work. That's the way it should be, and that's the way it is from here.

Back to our earlier conversation about all the expenses, there was a belief briefly that maybe communities, would cover some of this and taxes and there'd be ways to get this back. That train is left the station. Yeah, probably for the best, for the political, potential political backlash to some of these AI data centers and stuff like that. If it's not a added cost,

maybe even a little bit of benefit to people, that should be a good thing. When we come back, we're going to talk about Apple making doorbells. We're on that in a moment. Reaching your audience on Spotify with display ads is easy. Use your existing creative and launch your first campaign in minutes with Spotify Ads Manager.

We're getting towards the end of the year, but it sounds like Apple has one more big announcement to make. Bloomberg's Mark German is reporting the company is going to be introducing some sort of home hub. But now what came out recently, Lou, was doorbells, indoor and outdoor cameras, all kinds of other devices that are going to connect into this smart home device. What's interesting is we've been here before.

Apple introduced the home app, which I still have. have on my phone, I still don't know exactly what I'm supposed to do with it. That was almost exactly a decade ago from today. Can they actually do this? Can they actually get into the smart home with the help of other companies manufacturing the products? Because the big thing is that LG is going to make some of this stuff. Now you've suddenly going from being completely vertically integrated in phones to, hey, we need a bunch of partners here in the smart home. Can they do it? We were promised cars and TVs and all sorts of things and we're getting doorbells. So how

about that, right? Welcome, and I mean, we've discussed this before, welcome to the age of incrementalism, all right? No, these are not the next big thing. Steve Jobs would not be going on stage and like a doorbell, especially since everyone else has had this for a decade. But I think it makes sense for both sides because it is just kind of building out product lists and ecosystems without too much risk and without too much CAPEX. I don't think Apple or L sees this as a huge hit or a iPhone-like device. But I do think increasingly, you know, kind of controlling or kind of the walled garden of the consumer relationship, if Apple can expand that or try again, as you say, to expand that to kind of home automation, things like that, it makes sense for them to be there. And I think it makes sense for LG to kind of nibble out beyond home appliances and trying with a good partner and a good brand, LG on its own is not going to sell a lot of doorbells versus Amazon or Google with Apple. I think they will sell a lot. So I think it's kind of

a nothing for investors for both companies, but I think it makes sense for both of them. What do you think, John? Yeah, I think that if you're thinking of this as a big move and a big announcement, then it doesn't make sense for either side, quite honestly. I mean, you look at Apple, so it's going to move towards a new and improved AI smart home, but what does Apple actually bring to the table? If LG is keeping the branding on the devices themselves, the AI models, Apple is partnered with Google's Gemini. So there's a hub device maybe,

but it's going to be a higher price point, I'm sure, than either Amazon or Google. So that's going to be a hard sell, especially if you already have that deployed in your home. And then you can maybe sell some, subscriptions if you're Apple, which that's good, but do you actually open yourself up to a brand new consumer base to sell those subscriptions? I don't really know if you do. Yeah, you're going to run security systems, yeah. But then you go back to LG. I mean, if you think that this is the next big thing,

okay, so you're keeping the low margin hardware and seeding more of the high margin subscription to Apple, but you already have your own service that you could sell. So yeah, if it's a big thing, it makes sense for neither company. If it's a small thing, it makes sense for both. Yeah, this one's going to be really interesting because they've been talking about the Home Hub for a very long time. This almost seems like I'll ask gasp effort.

If they can't make something that's going to make, be compelling to me, to be honest, we have a ton of Apple devices in the house, but we're using SimplySafe. You could use ADT. There's a bunch of different suppliers out there. And those devices are pretty cheap. That's where it's sort of a head scratcher to me is,

I think Simplysay, for right now has a 65% off deal. You can get cameras for, you know, $50, $75. That just doesn't seem like a price point that is very Apple-like. So I don't even know if this ends up in their stores. But we'll learn more next week. So I'm sure we'll be back to talk about that. As always, people on the program may have interest in the stocks they talk about and the Monty Fool may have formal recommendations for or against. So don't buy our sell stocks based solely on what you hear. All personal finance content follows the Monly Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only.

To see our full advertising disclosure, please check out our show notes. For Lou Whiteman, John Kost and Dan Boyd behind the glass, I'm Travis Hoyam. Thanks for listening. We'll see you here tomorrow.