The Pomp Podcast - Bitcoin & AI: The Final Push Before the Biggest Bull Run Yet? | Jordi Visser

Starting point is 00:00:00 What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Are you bullish on Bitcoin towards the end of the year? so bitcoin fits in with this theme and and i want to equate because i get a lot of outreach

Starting point is 00:01:02 from people so bitcoin's been kind of stuck here for a period of time bitcoin is the purest ai trade as ai goes through the complete disruption of all businesses and the only method the moat that's left at the end of the day is a store of value that is in the digital economy gold will continue to have its strength, but at the same point, Bitcoin fits in. So whenever the AI trade reaches a profit-taking mode where retail gets hurt, I think everyone should expect it. What's up, guys? Bang, bang. I'm obviously not Anthony Pompliano, but we are here with Jordy Visser. Anthony is away today, but we want to make sure we bring you the best content possible. And we know why you're here on Saturday anyways. It's for Jordy, not for Anthony.

Starting point is 00:01:44 So Jordy, let's get right into it. Fed interest rate cut happened. What is the sentiment in the market. And where do we see it going? Are you a Yankees fan? I am. OK, so you know who Wally Pip is? I do. All right. This is your big chance to replace your brother. So you got to make this really worthwhile. OK, you're the Lou Gehrig of this show now. So you're sitting in the seat. I just want to make sure you realize you have this opportunity now. All right. Fed rate cut. The economic data is good. I don't think people are worried at this point about a rate cut in October at this point. We're still above 80 percent. The rate cut happened. Everyone was positioned for it. All year, we've kind of had these events occur where retail, not the

Starting point is 00:02:30 institutional side, because the institutional side is still fairly worried about AI. And there's been enough signs this week for people to be worried. Retail has been dominating the market this year, we talked about last week with your brother and i and i think there were signs which i highlighted in the video last week that all of the retail favorites a lot of the meme stocks crypto everything it had just a really rapid rise leading into the fed rate cut and so when you get an event like this everyone was talking about sell the news the market really hasn't fallen much we've just had three days of weakness going into today but i do think retail as a whole was a little euphoric going in you saw a pullback i don't think it has much to do with the fed and getting through that

Starting point is 00:03:15 i think we started this week off with more ai fears from the institutional side and i think they've kind of triggered the you know the need for retail to look for the next catalyst so that's all that's really gone on bessie even said it was priced in 25 bps 25 was was priced in but i i do do think people should take one thing into context as we go through this. Corrections are going to happen because the market is being driven by one investment theme. And until we start to see the PMIs widen out, broaden out, which I think will happen, as I've said repeatedly over the course of the next year, the S&P 500 is being driven by about 10% of the stocks. They're all related to the supply chain of AI. So whenever the AI theme, let's say, runs into profit-taking mode for a

Starting point is 00:04:02 period of time. And retail has been all over the AI theme. They've been all over Palantir. They've been all over NVIDIA, Micron, all of these names. Once you reach a point where profit taking is just normal, I think you're going to see the entire space come down because there's really nothing positive for people to hang their hats on outside of AI at this point. Got it. Are you bullish on Bitcoin towards the end of the year? So Bitcoin fits in with this theme. And I want to equate because I get a lot of outreach from people. So Bitcoin's been kind of stuck here for a period of time. I've said repeatedly that for me, Bitcoin is the purest AI trade. As AI goes through the complete disruption of all businesses, and the only moat that's left at the end of the day

Starting point is 00:04:46 is a store of value that is in the digital economy. Gold will continue to have its strength, but at the same point, Bitcoin fits in. So whenever the AI trade reaches a profit-taking mode where retail gets hurt i think everyone should expect bitcoin to get to go down it's not just bitcoin it's solana it's ethereum there's been a lot of speculation in the bitcoin miners i think we just reached a point where again we've sold off the ai trade is still in the very early stages despite all the fears that come out so it makes sense for people for bitcoin to have corrections and i just want to remind people nvidia is up over a thousand percent since chat gpt's launch during that time period which is less than three years we're almost at the three-year

Starting point is 00:05:29 anniversary of chad gpt's launch you've had five corrections of 20 or more in nvidia before it went up back up to all-time highs bitcoin's going to be the same thing so you can take nvidia you can take bitcoin you can kind of put them together as there and i think people should start realizing that that is the reality is that we're in a situation right now where as nvidia goes as the ai trade goes bitcoin to some degree is going to be part of that as well how do you think about uh nvidia and all these other ai companies and bitcoin as well but using traditional metrics so obviously people generally try to value companies on a p e ratio basis and and all these other things uh can you do that in the ai trades or is it too much um is it a bubble like like what are

Starting point is 00:06:10 we doing and how do we evaluate evaluate these companies first of all nvidia and almost all semiconductors, in my opinion, are way too cheap based on where earnings will be two, three years from now. One of the hard things about valuing companies is the growth rate that you're going to see. What NVIDIA proved to be up a thousand percent and still have PEs being too cheap three years from now is that their earnings grew rapidly. And the only way your earnings grow that rapidly is to have exponential growth. Exponential growth is what is driving AI. So I think the problem is for people, it's really hard for the human brain to comprehend something that's never happened before in time. There's never been a $4 trillion company on its way to $10 trillion. There's never

Starting point is 00:06:53 been the kind of growth that we've seen from a company because eventually the law of diminishing returns does kick in historically. That's not the case now. So I think this week in particular, we started getting the chatter that, oh, NVIDIA is just like Cisco back in 1999 to 2000. And this is not even close to the same thing, in my opinion, because of where AI is, which is still in the very, very early innings. We still have a demand greater than supply problem that is evident. And anyone can tell you that. But if the sell side street isn't doing it, if X isn't doing it, just go ask ChatGPT, what are the signs that would happen when the supply of GPUs is greater than the demand? you wouldn't be using vo3 for eight seconds and then be cut off chat gpt wouldn't have a governor

Starting point is 00:07:42 on deep research the way it does now relative to what it was three months ago i could go on and on there wouldn't be bottlenecks in high bandwidth memory in terms of microns reporting everything would be different and this is all in front of humanoids this is all in front of robo taxis this is all in front of the next stage of ai so i just think for people that are going through this remember exponential growth which is what we're seeing means exponential changes in certain companies, businesses that are tied to AI. And if you don't want exponential growth or you want to fade something, go fade forward. I love that. September is normally a down month. October is normally an up month for stocks. Do you see this trend continuing into October this year?

Starting point is 00:08:22 Well, so far this month, I think as of yesterday, even with Bitcoin being down where it was, I think it's still flattish for the month. I think stocks are up for the month. So I'm not sure September is going to finish down for the month. But I do think as we get through kind of the shutdown fears, which are now starting to percolate a little bit more, and for people who, you know, we haven't really been together on this weekly during a real shutdown, there's got to be at least a 30, 40% chance of a one week to longer shutdown in the government, just based on how polarized things are. A lot of times this thing gets solved right at the very And so I wouldn't be surprised. But historically, it just doesn't matter for markets. But the fear

Starting point is 00:09:07 factor is there. I think the more important event is happening at the end of October. And this is where I would expect that people are going to start to get more positive. The first thing is we still have the possibility of another Fed rate cut. The economy is fine. We just came out with a GDP of 3.8 percent. And now the GDP now is above 3.3. And that was before the personal spending numbers came out better than expected today. At the end of the month, Donald Trump will be headed out to the APEC summit. President Xi will be at the APEC summit. I believe that China and the U.S. are headed towards a deal, a structure that will allow them to be working together and not decoupling. I still think people believe decoupling is a possibility. And I think there's a chance

Starting point is 00:09:52 here that a deal between China and the U.S. would get rid of, you know, hostility fears that are out there and kind of get people to resolve that maybe for the next few years of Donald Trump's presidency, China and the U.S. will coexist, as I've said, in mediation before a divorce that will happen at some point. But that just means the world can grow and we don't have to worry about kind of tail risks that would come through. I think that would be a trigger point in the next catalyst for the market as we go into the final couple months of the year. Do you see that that would settle a lot of the uncertainty in the market? I think the uncertainty, as I went through my weekly video last week, has been coming down. I mean, FactSet did a great job of just highlighting

Starting point is 00:10:35 in the earnings calls from companies, which I think is a great way to measure this, the uncertainty for them on things like tariffs, the uncertainty for them on inflation. Those things have been coming down. And it's the rate of change. So we were at incredibly high levels in the second quarter, it's coming down and they're also making money. For most of the consumer confidence levels, they're still very, very concerned. And I think that has a lot to do with the way the media has portrayed the fact that there's still, oh my God, they're coming. The tariffs, we haven't seen the impact yet. Everyone's going to be in trouble. Inflation is going to go higher. And at the same time, people are worried about their jobs. They're worried about their jobs, partly because of the

Starting point is 00:11:13 tariffs, but mainly because of AI at this point. I think it's not going to resolve those two fears, but I do think for the marketplace, it will get rid of the fears that are in there from the company level. And every time that we see a second derivative or a rate of change in things like uncertainty, tariffs, inflation, things like that, it comes down. That's the other element that I think people have to start to be, you know, you're always looking for the place where the smarter, sharper pencils on the hedge fund world are worried about. And people are still worried that the inflation data could tick higher. There's a lot of people calling this a policy mistake. My belief is that the labor market is going to remain on the weaker

Starting point is 00:11:49 side, that we're going to have this problem that's going to be persistent for the next 12 months, even with PMIs going higher. I think the impact from AI is real, not necessarily in firing, but in this subdued labor market. And if you have a subdued later market, you really need inflation to tick up dramatically based on what the Fed said. And if we don't see that, I think the mistake people are making is that rate cuts are coming more because of labor less less fears about inflation what do you see happening inside these organizations with ai and replacing some of their employees uh obviously that's going to be a big driver of the economy going forward uh but just having having a more efficient essentially machine that doesn't shut off and can do the work uh how

Starting point is 00:12:31 do you like how are these companies thinking about it and what's happening inside these organizations I spend my life trying to crowdsource news and information that's happening real time. And over the course of the last two weeks, what has become more and more evident to me is this pressure that is happening from AI into jobs. You've had Zoom. You've had Fiverr. now for people who don't know what fiverr is um fiverr is a company that outsources labor around the world mainly with the technology bent to it so if you wanted a coder if you wanted someone to build a website for you if you wanted to do something and you needed help to kind of deal with the coding or any of the technology you'd call fiber and fiverr would supply

Starting point is 00:13:19 very cheap labor and it could be pakistan vietnam all around the globe they just announced they're laying off people and that the people that they want have to be using AI in, in, in a very efficient way. So when it, when a cheap labor place is already saying that they need to reduce zoom is reducing Bosch, a big company that's more on the industrial side also said they're reducing, but it was this story I heard. And I don't remember what podcast it was, but they referenced Merkur. Merkur is a private company with a 22-year-old founder. Their ARR is now up to $500 million in a very short amount of time. So your brother and I have talked about stories like Replit, like Cursor, and how fast they've grown because of AI. Well, this is a company with a

Starting point is 00:14:11 22-year-old founder who's now thinking of raising money at a $10 billion valuation. And what they do, and everyone should spend time just understanding because I'm not going to give it the completeness that it needs. But for everyone who's read about hallucinations, what this company is doing is actually helping create specialized LLM models. So let's assume you're a legal firm and you want to have a model that understands all of the jargon and everything about law? Well, for it to get all that information and the nuances is very difficult. So you get hallucinations that comes through. We've heard about some of the most famous solutions or hallucinations have come from the legal side. So what Merkur does is Merkur takes experts and they

Starting point is 00:14:58 pay people $250,000. That lawyer or those lawyers come in and what they do is they basically go in and do what's called reinforcement learning human feedback. And they go through and they're providing details on certain problems on how they would handle it. So it's learning from the experts. So think of it as a company that is taking human expertise from experts. They're paying them a lot of money. So think of it as one year of them just doing this over and over again. That makes the model smarter and smarter. Okay, so how are they have such a big valuation? Who's paying them? Is it the legal firms? No, it's the hyperscalers. So their major clients are meta. They're open AI. And as you go through this, you start realizing, oh my God, we're not only just going to have

Starting point is 00:15:42 general LLMs the way we use them as chatbots, every single vertical is going to have a vertical LLM. So think healthcare, think finance, think legal. This is what's coming. So when you read about Merkur, they're all about AI agents. And so to the point of, is the pressure happening internally? What's going to go on? The next two years are about the rise of AI agents in a very, very big way.

Starting point is 00:16:05 It has already started. you're not going to see the numbers show up in open AI because or Microsoft or any of these places but what will happen is it will show up in cloud revenue and so you're going to start to get this this is why the demand for more capacity is there AI agents take more inference they take more thinking it needs more capacity so at a time when we don't have enough capacity for video generation the AI agents are coming on the back of it and this is something that again the total compensation of the world is somewhere between 50 and 60 trillion dollars of employees the total economy of the world is about 100 trillion so 50 to 60 trillion of the 100 trillion dollar economy

Starting point is 00:16:44 is showing up in compensation which means there's an incentive for these companies to find ways to reduce that compensation to get the productivity gains we're entering that phase now and that's why for everyone who's listening to ai's a bubble their open ai is buying from this and that we're in the very, very early innings of this. And what people are writing about is honestly stuff that they can't possibly believe what they're saying. Today's episode is brought to you by Figure. They're the largest non-bank mortgage lender in the United States with over $15 billion unlocked on their lending platform. They've just lowered rates on their Bitcoin and Ethereum-backed loans to 8.91%, improving their already industry-low fixed rate 50% LTV loans. They keep building as

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Starting point is 00:18:07 with Figure today. I agree. I know a lawyer here in New York, and they have said that internally they have their own LLM because they are not allowed to put any personal or sensitive information on outside LLMs. But it seems like every company is trying to do this. The CEO of Anthropic actually recently said that white collar jobs are more likely to be disrupted than anything else uh do you agree with that so for the near term until we get into humanoids and robo taxis uh yeah um and let me go dario modi he talked about this i think last week in an axios interview in washington dc he's talked about this for a while um one of the things and the reasons this is important is Sam Altman saying it, Dario Modai saying it, the people that are directly related to the models,

Starting point is 00:18:54 and trust me, guys, the models they've released are not the best models they have. So they already know where things stand in terms of the agentic world. They have information that we don't have. And so when they're all saying, and this is the crowdsourcing side, if the smartest people are saying, you're going to see job reductions and the acceleration of AI is compounding at such a fast pace, which is what Dario Modai specifically talked about in the Axios interview, we don't have enough capacity. So if a Bloomberg writer or a Wall Street Journal writer or someone on X says, see, this is it. This is just like Cisco. You literally have to look at yourself and go, how is that an intelligent response compared to listening to Dario Modai?

Starting point is 00:19:35 And these guys, yes, they have vested interests in this. But so far, every single time, as I mentioned with NVIDIA that people doubt the compounding power of this, it shows up. And so again, if you just go into ChatGPD and say, what would be the signs that we've reached a point that the capacity has met demand, it will give you seven reasons, none of which we've gotten to. So when you're talking about the law firms, when you're talking about this, and you're talking about Dario Modi, I really do think rather than focus on firing people, I think the pressure and the fear factor that people will have on jobs is going to remain. And I think that's where the Fed is going to err. Because if you talk to me about where inflation is today and the compounding

Starting point is 00:20:15 part of the jobs market, and there's one more thing that I didn't mention, and this is something anyone can bring up. September 9th, I believe, there was a letter sent to the Secretary of Labor. You can go find it online. If you just type in Secretary of Labor, letter from 40 economists. These economists were from a bunch of different places, think tanks, but also the major universities, but also included Ben Bernanke and Janet Yellen. And inside of this, it was saying to the Secretary of Labor, is the government prepared for the impact of AI on the labor market going forward? Everyone should go read this. This is basically, in my opinion, really smart economists who have now done enough work. This includes Eric Brynjolfsson,

Starting point is 00:21:00 who did the report out of Stanford, about what is coming in the next few years. to worry about transitory inflation from tariffs, as opposed to the impact that AI is going to have on the job market over the course of the next two years. And that is before the robo-taxis hurt transportation jobs. That is before humanoids hurt the physical labor jobs and everything along those lines. I think people have to start paying attention that rates need to come down and that we're going to have this very uneven situation where you can have 3% growth, but you're not having labor creation that hasn't happened before in the history of this country can white-collar jobs and just uh general people can they do anything to stop this disruption or is it it's

Starting point is 00:21:41 inevitable and you know you will be replaced okay so here's the good news so for all the parents out there and i'm a parent and my youngest is a sophomore in college you need to get your kids using and comfortable with AI. There is a job for everyone who's able to use AI. This is the major problem with the people going out there and saying it's a bubble. It actually gets people to not use it because they think they have time. You don't have time to catch up to this. If you use it every day in every aspect of your life, and that is really what it takes. I think I'm going to start spending time trying to help people with this through videos because I use it all day long. it is a phenomenal tool for learning anything that you want to learn. So if you're going to

Starting point is 00:22:31 school and you're trying to be a specialist, bad decision. You need to be a generalist. You need to be an entrepreneur. You have to be able to build things. You have to be able to use AI to learn different things. It allows you to be a polymath and have all of these different skills, connect dots back to a story. It's one of the reasons that I've had such a good time in being able to do this, but also sharing this in this weekly, is that I'm learning things every single day that I didn't know. I didn't know what an NPU was. And now I spend my time talking about it. Gas turbines, the shortage that have happened, asking the question, hey, if demand of AI is here and supply is here and we're accelerating at such a fast pace, what is the base case for

Starting point is 00:23:13 electricity usage relative to what we thought three months ago since the hyperscalers have taking up their CapEx. By asking that question and then digging deeper and deeper and realizing that gas turbines cannot be built based on ChatGPT's analysis in time for the demand that's coming, well, as an investor, that means you can go look in other places. Okay, what could replace a gas turbine? What will we need for electricity? So I think for people sitting at home, the more you use it, and I don't mean in ChatGPT, I mean all of them, they're all free, the bottom service, use all of them try different things cook with it um do look up things that you didn't understand do research on baseball players that maybe you didn't know the more that you ask the question

Starting point is 00:23:57 and get in the habit that you have the smartest person you've ever met there to answer questions across every domain it makes you smarter just by being around them and i think that's what people should be doing and i think it'll help them prepare the startup world is growing rapidly I think your brother sees that. I think you see that. That is where the energy is. And that's where people that are below the age of 50 should be erring to is if they work for a big company, those big companies are preventing you from actually keeping up. So if you do lose your job for any reason, go to Coursera, take a bunch of courses on how to get comfortable using LLMs at the same time they're using them, and then move off into another place and start building

Starting point is 00:24:39 your own stuff and then go out and look for a job and say, I know how to use AI. I've been using it for the last six months. You will blow people away with what you're able to do with it. I've been shocked that I think this is the fastest change for technology in my lifetime. Things in AI are just moving so quickly. There's new models out all the time. And to your point of keeping up and staying on top of it, it's almost like a full-time job sometimes. It is. And again, I don't think of AI as technology. I really do view it as a person that is really, really smart and can answer questions and have a conversation with me. And that's why I appreciate the fact of putting on my AirPods and just walking around the park,

Starting point is 00:25:21 having a conversation, either on a topic that I wasn't planning to have a conversation, a topic I had been thinking about, or I bring up a thread for anyone who likes to hear podcasts that I've listened to. This morning, I listened to the BG2 podcast, which came out with Jensen Yuan. If you want to go listen to the person who knows the most about the future of AI rather than a Goldman Sachs or Morgan Stanley report, go listen to that. And once you listen to it for an hour and 40 minutes, you will have a better idea of what's going on. But if you take that thread of the transcript and then you go walk around the park now you have a conversation with it you're going to learn more and more as you go through it this week nvidia invested 100 billion

Starting point is 00:26:03 in open ai i'm sure you've seen the meme nvidia or nvidia gives open ai money open ai gives oracle money and it's this 100 billion dollars being spent over and over again uh what are your thoughts on nvidia investing 100 billion into open ai um the day before it was announced i listened to a podcast with Dylan Patel from Semi Analysis on A16Z. Everyone can go listen to that one. He literally said on there, the question thrown to him was, what is NVIDIA going to do with its cash, its free cash? And he said, yeah, they have $300 billion. He literally said on the podcast, what they really should be doing is giving that money to an open AI because their biggest issue is going to be the fact that we don't have enough capacity. We need to build out the infrastructure.

Starting point is 00:26:54 And so I think the problem is for people, they view it as kind of this, oh, you're there's you're the bigger getting bigger. They're forcing people out. There's this whole thing of I'll take my revenues given to you and then you'll give me revenues back. The reality is we're in a very concentrated world. And who's going to be able to grow the capacity? It's one of the reasons why I say when everyone talks about humanoids, don't bet against Elon Musk and his ability to scale. NVIDIA has scaled. Semiconductor companies that are trying to compete with NVIDIA, that only works if NVIDIA isn't continually making new chips, which they're making new chips every year. Those chips are more efficient. He goes through that on the podcast. Now, again, there

Starting point is 00:27:35 won't be, there will always be times where these stocks fall. There'll always be times where people panic. But the reality is just because they invested $100 billion in trying to make sure that open AI has the ability of going out the capacity necessary with the power, electricity and the compute to be able to buy the chips that fund it. I get what people are kind of looking at here. But again, there's nothing to compare this to, in my opinion. And at the same time that NVIDIA gave a bunch of money, Oracle raised 18 billion dollars because their orders were so big that they need to raise money. And so there was a headline in Bloomberg yesterday saying tech companies are out there borrowing tons and tons of money. So the reality is people are going to

Starting point is 00:28:17 be scared along this entire way because of the size of the numbers and the few players that are involved. I think it's time to go focus on the smaller companies that are going to benefit because now we're getting into this PMI side because the numbers are so big that actually matters to the economy on a very, very big scale. That makes sense. CapEx seems to be something that all these tech companies are thinking about. Even Elon or Mark Zuckerberg, excuse me, I think last week or this week said that they may misspend a couple of hundred billion dollars on AI just to get a little bit of market share. Do you think all this CapEx is warranted and how should companies and individuals kind of be thinking about spending all this money to basically like keep up with the

Starting point is 00:28:53 race? So let's separate two things because number one, there will absolutely be some companies that should not have spent the amount of money. If you don't create the models that people use, just like any other business. Has Ford spent money that they lost to Tesla? Yes. I mean, they tried to get in the EV race. They've tried to do this. There will be companies that make misallocation of resource. Let's separate that and just say, yes, there will be companies that don't win. And your job as an investor is to figure it out. Now, if the mag seven keep going higher, it doesn't matter if one of them goes down 30%, if the other six are going up 25%. If you believe in AI, I think you're going to be fine.

Starting point is 00:29:35 Now, if you wanted confirmation of this, and this is kind of one of the things that I talked about this week with people, go to China. Now, let's separate the U.S. So if everyone believes the U.S. is a bubble and these companies are a bubble, then why is China spending equal amounts of money? And I say equal amounts because I want to make sure people hear this. Last year, China spent close to $1 trillion on the build out of clean energy. it contributed in terms of their growth rate because of how much they did from the year before,

Starting point is 00:30:07 about 10% of their GDP. This is really important for people to understand is that in China, we talk about how they've been building out their power needs. Well, that's coming from the government side. On our side, we're having to do this at the private sector side. So the numbers have to be huge. Alibaba raised their CapEx this week. They talked about the fact that they need capacity to be 10 times where it is by 2030 for ASI. So Alibaba, and you can go read the story yourself. It's Eddie Wu talked about this. So if China believes the same thing, and when you listen to Jensen Yuan, he goes, hey, guys, this is actually about the capacity needed for the rebuilding of all computers in the world to be connected to AI. And I really want people to

Starting point is 00:30:54 understand that like we've gone from the 1970s with the beginning of the PC revolution, the launch of it and the PC, you know, time person of the year 1982 being the personal computer to where we are today. We now have to take all the infrastructure that was built on CPUs and we need to replace all of it with GPUs. It needs to be AI centric. All the PCs, all the phones. I just purchased my first phone, I think in four years, because I decided that there was enough AI intelligence on the Apple iPhone after reading all the reviews. It's not an AI device, an edge device at this point. But I do believe there's enough going on that I want to start using the beginning technology

Starting point is 00:31:35 of AI. I realized this when I didn't get the iPhone at the very start. And I waited with the BlackBerry until it got further ahead. And it took me a while to get used to kind of using it and getting my brain ready on. So I said, all right, I'm going to buy one. I'm going to pay the, I think it cost me 1,800 bucks for the phone, which is probably the reason why I hadn't bought one in the past. But I think it's time now to be up. China's confirming, Jensen Yuang said, all devices have to be, have an AI brain in them. All cars do. All washing

Starting point is 00:32:02 machines do. All autos, or all humanoids do. That's a lot of brains. That's a lot of GPUs. That's a lot of capacity that's still to come. We are in the very, very early stages of this. We have not gotten through the first or second inning yet in kind of the progression. And so I think for everyone paying attention that gets caught up in these things, there's a trading element, which is when things go too far, the doubts are always going to be there because of how concentrated it is and how much this looks legitimately like a bubble because it does look like one. But that's where you go back and you listen to, OK, Jensen Yuang says every country in

Starting point is 00:32:41 the world needs to upgrade their infrastructure. Not every person, every country. This is literally something that's different, as he said on the podcast, than the atomic bomb. Not every country needs to have the atomic bomb. They depend on the U.S. They depend on some other ally to kind of have this technology in the event to protect them. if you want to be relevant in the world, you have to have AI edge devices. You have to have the capacity to have AI. So every country needs this. This is not a U S China thing, but those two countries are telling you how much supply is necessary and how much capacity is necessary. We don't have it right now. Yeah. And I agree. And I think that a lot of development countries, this is their opportunity, right? If they're like, Hey, if we can be on the forefront

Starting point is 00:33:23 of all this stuff, like we have that ability. Uh, but side note on Apple, I am, uh, embarrassed a bit for apple for being such a large company being worth you know three four trillion dollars and siri being so bad i completely agree i mean i i i the only thing i use it for is um alarms and kind of timers when i'm cooking other than that i still don't use it that much i i do use i do use it for texting i do use it for phone calls occasionally but honestly is that where we've come to is that that's the best kind of tools and it doesn't work all the time so i use chat gpt every single day for conversations i use it for verbal learnings when i go on my walks i use it to have conversations about books about podcasts until ai siri gets there but i do think

Starting point is 00:34:10 it's important to get used to how these edge devices are going to work and i'm not saying apple's going to win in the end because i think they have a very hard road without having their own llm in the long term but for the time being to get used to how you can be more efficient even on your phone, I think it's important. This episode is brought to you by BitLayer. BitLayer is taking Bitcoin beyond just a store of value. For the first time, you can put your Bitcoin to work, earning yield while staying true to its core principles of security and decentralization. BitLayer is making Bitcoin DeFi a reality. Learn more at x.com slash BitLayer Labs. Again, that's x.com slash BitLayer Labs. Hi, I'm Matt Hogan, CIO of crypto asset manager Bitwise.

Starting point is 00:34:53 Look, crypto can be confusing. There's so much noise and the space changes so quickly. That's why every week I write a five-minute memo on the biggest stories impacting crypto in plain English. Why is Bitcoin up or down? What are people missing? Where should investors look next? Get the lowdown every week. Sign up to get the weekly CIO memo delivered straight to your inbox.

Starting point is 00:35:17 Go to bitwiseinvestments.com slash CIO memo. That's bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. That makes sense. Google recently invested $3 billion in Cypher mining. What's your reaction to that? Well, this continues the path that we've seen. I mean, I think, let me put it this way.

Starting point is 00:35:41 If we take the merging between AI and Bitcoin mining, this has been a big year for it. first of all, the whole core weave thing when it came out kind of got a little bit of enthusiasm. It was followed up by Circle in terms of the stablecoin side. But I think over the course of the last six weeks, we finally got the traditional finance people looking at the relationship between all electricity, all power, and kind of where the Bitcoin miners fit into this and this linkage between this. I do want to say this again and again and again. The world is built on code. If there's one thing that Jensen Huang did say that gets back to your emerging market side which i think is important into the the bitcoin miner the whole relationship and how

Starting point is 00:36:21 these guys are looking for any capacity they can find jensen uang said this is the ability for kind of taking companies that had a huge advantage and allowing any person in the world to have the same superpower and that superpower is to turn an idea into an application that can can make money. So any child who can speak the English language and come up with an idea can speak into a phone and have an app built. They can connect Stripe to it and they can start collecting revenue on it if it's a good idea. They have to figure ways to promote it. All of this stuff can now be done because coding has become ubiquitous. And I think that gets important to Bitcoin, Bitcoin miners, the relationship with AI. It's all code. At the end of the day,

Starting point is 00:37:12 we've we're merging the digital economy and this is the reason why i started to go with there's the macro world there's the ai world which is basically dominating the macro world through gdp through labor through everything and then you've got bitcoin over here which is the eventuality and the eventuality is ai is going to disrupt everything in the traditional finance world slowly but continuously is there anyone who doesn't believe forget the views on on elon musk Is there anyone who believes that a car company like Ford, GM, or any of them can compete with Tesla if their full self-driving works? The scale that he's built, the fact that he already has massive battery production, he's got humanoids behind it. Think about what he's been able to create, and he has his own LLM in terms of XAI.

Starting point is 00:38:06 how can a car company compete with that in the event that he makes the inevitable progress so if you think about an old traditional ford which is really the beginning of the industrial revolution in many ways compared to where we are in ai and take tesla and view it and i said this on my most recent video it is not a car company it is an ai company and if people don't see that That disruption that happens from Elon Musk and his vision that he put out 20 years ago in terms of what it meant to sell the first car, the Roadster, then turn it into more affordable cars, have those cars be collecting data with the eyeballs or the cameras, get those cameras into the AI thing.

Starting point is 00:38:47 He built XAI in two years. I just think we're in a world where when people get through it, they realize Bitcoin is a moat where people believe in it as investment. And the more that AI is accelerating, eventually it will cannibalize the entire kind of fiat system of which the mags haven't a part of the fiat system gdp for q2 was revised to 3.8 percent uh that's obviously much higher than the expected 3.3 percent are we going to continue to see this economic boom obviously you seem very bullish on the ai um and then do the expectations get revised moving forward to kind of match what is now expected given ai's uh advancement all right

Starting point is 00:39:26 so first of all before people get all um and if your brother is here to be doing this too so i I got to kind of woe things back a little bit. Most of the Q2 surprise is the fact that Q1 was a negative number. So the tariffs had a lot of front loading of imports and then no imports needed after. So you end up with a situation where if you have a ton of imports as a country and no exports, your GDP goes down. Then in the second quarter, when you don't import anything, okay, great. So now you've exported a ton. And so trade ends up being this back and forth. If you take the first two quarters, we're under 2% for the first half of the year. Not a great number. Don't care. Consumption is still 70% of the economy.

Starting point is 00:40:12 We don't have labor growth right now. So we do have 4.5% still, or 4 to 4.5% wage growth, which is great. We have extreme high net worth across the U.S. in terms of the net worth of people's assets. So the spending will be fine. But if labor is not good, I don't think the economy can possibly run away with things. So I'm a little bit more, I don't want to say skeptical. I just think people should be believing that nominal GDP is going to remain in the four and a half to five percent range now for the last quarter again it came out at six but in the first quarter it came out to average in that same range i had inflation could bounce around and if inflation ticks higher for a quarter and i'll give you the reasons why because i do think that we're going to have more

Starting point is 00:41:05 volatile inflation than we are more volatile gdp you will get falls back to one percent gdp and with no labor growth people will see a recession's coming then we'll have an acceleration back the other direction when inflation comes back down, and we'll get closer to three. I think in the end, we're going to stay around the two to two and a half percent level of real GDP, which is just nominal GDP, less inflation. The reason I say inflation is going to be a little bit more volatile is because of the PMIs. So I want to make sure I again make this clear, and I've had to explain PMIs before. PMIs stand for the Purchasing Manufacturing Index. It's a business cycle thing that gets with the manufacturing side of the economy.

Starting point is 00:41:47 So when you have software booming, you don't need a tremendous amount of manufacturing. When you have consumption being really good, the manufacturing shows up for the things that people are buying. So we really haven't had a PMI cycle that's had durability based on commodity needs. And we haven't had one

Starting point is 00:42:04 where oil prices have kind of tracked higher. I think that is what is going to be the case over the next year. So if I'm wrong about something and we're sitting here a year from now and Anthony goes, what were you wrong from last year? The thing that I would be willing that I'm going to say, we don't have enough power or compute for the capacity of AI. The compute side, we're going to make the chips that'll help the PMIs. And that's going to start to spread because

Starting point is 00:42:28 we're going to start to get demand for new phones. We're going to get new autos because again, we're going to have AI in these. So there's going to be an upgrade cycle. We haven't seen an upgrade cycle for this in a long, long time, but you're going to want to have AI in your car and you're going to want to have autonomous driving. You're going to want to have AI in your phone. And so we're going to have an upgrade cycle. That's good for manufacturing. At the same time, we have to build up data centers and we have to build out some solution to the fact that we have a shortage of gas turbines. So I feel very, very comfortable, despite people not believing it, that over the course of a year, and it will take a year because to turn on the engines and to get this whole thing

Starting point is 00:43:04 moving, it's not something that's overnight. Manufacturing takes more time. You need to actually see the demand come in. That's why I do the videos to just highlight people, the leading indicators i think we're going to get it but i think people should realize that what comes with higher pmis historically and i think it'll be the same case is higher energy prices the weakness of technology is you need more power to get more power in the technology and so i think oil prices are going to surprise on the higher side i don't think we're going to see an oil spike because this is not it's more natural gas it's more batteries it's more solar it's more this but underneath it through generators and through PMIs going higher, I do think you're going to see oil track higher.

Starting point is 00:43:44 Gas at the pump has been around 320 for most of this year after falling. If gas at the pump was at four right now, we'd be seeing headline inflation at 4%. At 4% inflation, GDP with a 4.5% to 5% nominal is close to zero. So that's what people I think have to get used to. I think next year will be about another year where AI dominates, power is involved. And to hedge out that risk and to be involved, I think with your AI trades, you need to have energy stocks, energy stocks, energy stocks. What should investors be looking at in terms of metrics or indicators kind of for future growth? Should it be GDP inflation? Should it be something more specific of construction of data centers, right? Like how should investors be looking and like what

Starting point is 00:44:25 indicators should they be looking at to hopefully, you know, everyone's playing this game of predict the future? Given how stable nominal GDP has been, there are two variables that I'm going to go the other direction on. So nominal GDP, again, has been four and a half to five percent since we settled down after COVID. Until that changes, I don't think it matters. Now, wages are growing at the same level. Here's what I would focus on. Number one, if you start seeing oil break above 70 i think you need to start preparing for some risks that are happening that the next recession risk could pop in because again inflation could go higher number two if the labor market does something i don't think it's going to do if all of a sudden jobless claims start going higher which

Starting point is 00:45:11 has not happened yet that means we're going from a hiring problem to a firing problem if we start getting into a firing problem that's a little bit different and then you could start to see consumption fall off i don't think either of those scenarios are likely as as much as i think ai is pressuring jobs and will i want to make sure people realize i do not think in any way shape or form over the next five years the amount of people working in the economy will change dramatically so if we don't have immigration the population because we we've got more people leaving the labor force and entering it every year right now it's about 300 000. um i just think the the amount of people that are employed is going to be around the same level in five years which

Starting point is 00:45:54 means we're not going to have too much hiring we're not going to have too much firing we'll just have the demographic roll off and so even though i think ai will hurt people there's still endless amounts of jobs that people could take in the gig economy and stuff like that it's not going to be the jobs they want which is why i keep telling people if you're worried about your job right now and you think it's going to happen at some point. Before that day occurs, in your spare time, start preparing by using AI and just start with a simple question. Here's what I'm good at. I want you to figure out what I can do over the course of the next month learning from you regularly. Can you put together a program for me on learning about how to prepare this specialty

Starting point is 00:46:38 into the AI world. Where can I, where can I do this? And I think you have to start with the simple question of taking the skills you've already identified because everyone who's worked in any business, I don't care the job, they have some skills. The question is, can they become a consultant and can they outsource this using AI where they have five clients as opposed to one, if a business can hire you and you can do five times the work, could you figure it out how to do the same work in the back office, in wherever. But now you have five clients paying you one fifth of what you were making. Then you're making the same money, but you're working at home and you don't have to deal with worrying about it. And then you're not as sensitive. If you lose one job,

Starting point is 00:47:17 okay, great. You lost 20% pay. Go fill that job. So I think that's the way people have to think about is this consulting side of using AI and then going in and saying, hey, I can replace the job that I had at your firm. They got rid of me. I went off and did AI. It's a very good story And it's much better, I think, for people to try that than to sit there and just wait for it to happen. Yeah, that makes a lot of sense. We recently saw the U.S. government invest in private companies. We saw it with Intel, and I think we saw it with a lithium company this week as well. What are your thoughts around the public getting involved in these private businesses,

Starting point is 00:47:51 and specifically the AI businesses and the infrastructure side of AI? All right. Number one, as you're reading stories about AI bubble and how this thing is going to end a certain way, the government has put money into MP Materials. That's a rare earth company. We don't have enough rare earth. We need rare earth and AI for, we need rare earth for AI. We need AI for the military and for everything going on in our race against China. So that's the first thing that says, maybe there's not an AI bubble because the government's out there who has all of the AI people coming in saying, we need to build our own rare earth processing site here. Number two, they make a big investment in intel okay we've got a problem here where taiwan semi controls most of

Starting point is 00:48:35 the world semiconductors and in particular the ones that we need as a fab we need to have fabs built here well first we'll try to get taiwan semi to build one here great but now we can't let intel go under because that's our one big fab company here so let's get nvidia to invest in there let's get the government so number two the compute so rare earth compute and then with lithium, it's very simple. We need batteries for all military devices, all edge devices. So when I mentioned NPUs, NPUs need batteries, meaning neural processing units, the brain with inside machines, the brains with inside any kind of hardware that we're going to use, whether it's a phone or whether it's a computer or a drone or a humanoid or a car, we need to have battery

Starting point is 00:49:18 technology in there as well. So by them making an investment there, think about where it is as opposed to going through this. Is there really an AI bubble or is this the early innings when the government is going, we need more compute, we'll go into Intel. We need rare earths, we'll go into MP materials, and we need more battery technology. And I mentioned last week, China just made a huge investment in more battery technology. And as I said earlier, they spent a trillion dollars. So Microsoft, Oracle, all these companies are the ones spending money on nuclear plants and all this stuff. In China, they don't do that. They just go, here guys, here's a trillion dollars. We need tons of solar. We need tons of batteries. The U.S. government is starting to do things that,

Starting point is 00:49:58 again, are nudging the private sector to put more investment in by sending a signal that we need more of this. So for investors out there, retail traders that are looking, again, we're going to be in a little bit of a mode here where people are worried about AI because of what happened this week. The reality is the government's sending the same signal as Jensen Huang is, which is we don't have enough capacity. We're in a race for national security. This is a global thing. it's not just us it's every country the world that wants us to race on this they're going to help fund this we need to get moving on it that makes sense uh let's end on this what models and tools are you using now to evaluate everything that's going on obviously you mentioned chat

Starting point is 00:50:34 cbt and perplexity and some of the other tools are there specific ones that you like uh or that you are using that maybe you think are a little bit under the radar um and not as many people are taking advantage of them i wouldn't say under the radar here's what i would say you mentioned perplexity you mentioned chat gpt i also use claude i also use grok i also use gemini grok is more specific for me at this point on sentiment and kind of the ex-posts when i'm looking at stocks but i think since a lot of the people that are watching this have taken control of of their finances i will just give an example that i kind of already referenced year. If everyone takes the time to listen to the BG2 podcast, it's an hour and 40 minutes.

Starting point is 00:51:20 Before you listen to it, go into ChatGPT, or I'm sorry, go to YouTube, go to the video. So if you type in BG2 pod, it'll come up and then click on the one with Jensen Yuang. In the upper right-hand corner, there'll be a transcript button. If not, just go into the more category below, find the transcript. Normally for these videos, there's a button you press. It looks like ChatGPT. And when you press it, it takes the transcript, it puts it into ChatGPT. So if you do that, it will summarize it for you. Once you've summarized it, go listen. The reason I want you to summarize it first is I want you to have it in a chat context window. Go for a walk, listen to the entire podcast, or listen to it while you're still on your computer. When you get to a point that you

Starting point is 00:52:05 don't understand something he said, pause it, go into the chat window. And then in that context window, type in, he mentioned, and I can't remember, I'm not going to come up with something right now, but he mentioned X, Y, Z. Can you give me details on that, please? Once it starts to give up details, your job is now to go into a rabbit hole to learn more and more about it. And eventually you get through asking questions to it, just like you were with a professor. But at the very end, what I want you to do is go, okay, give me a list of five companies that should benefit from this other than NVIDIA. When those five companies show up in your chat context window, go to perplexity and then go into perplexity, which is the one I use to look for earnings commentary and say,

Starting point is 00:52:50 in the most recent earnings commentary, did this company mention AI demand and how they're benefiting from it. If it was something related to assisted driving or edge computing, ask it, did they mention in their earnings call that they're already seeing demand from edge computing? Mention Oracle had huge capacity issues. Does this company benefit in there? Once you've done that, then you can ask it, okay, how's the stock been trading? Is this a PI sensitive name? You start building out a theme on that the same way a sell side analyst would. Now you have an idea that you can monitor and you can make your own decision on. This is the way that I find trading ideas. I take a theme from a podcast that maybe I haven't heard before, something that

Starting point is 00:53:34 Jensen said is coming now. I go cross-reference it with a bunch of different places. I go, look, one other example, just so people have something they can do at home. Teradyne is a stock that I've heard of, never really got involved with them ever. I was going through the Semiconductor index this week. And I went into Perplexity and say, hey, give me a semiconductor that had a big jump this week. I like to find names that are up in a week that the market's down. So I go in and Teradyne came up and I go look and I saw it was up more than 10% on Monday. So I go look, why was, I asked Perplexity, why was this stock up so much on Monday? It got an upgrade from Susquehanna. They took it with a price target, taking it from 130 to 200. I went, oh, that's a big price target

Starting point is 00:54:20 change? What specifically did they talk about? And you start to see what this analyst, you're just cherry picking off an event. And if the analyst upgrades it and the stock doesn't jump, it's not going to show up. So what you're getting, and this is the thing that I believe has happened time and time again, if a stock jumps 10% and the analyst has just raised something on it, the question is, it didn't just report earnings. Why is the stock gapping higher 10% purely from an earnings upgrade? But then as you start to realize it, I start to see, oh my gosh, clearly demand is out above supply at this point. So there must be people trying to accumulate a position at this point. Let me go see if there's a theme here. And there was a theme here. And I

Starting point is 00:55:05 can safely say now that I'm going to use it in my video this week. So just two examples for the people trading at home, the more time that you don't spend doing this type of stuff, listening to podcasts, coming up with an idea, going to the transcript, having a conversation, and then going to the LLMs, that is the way I use it every single day. And I'm just telling you, this is a great way of having a normalizing effect. And most hedge funds are still reading the research reports that they get from the analysts. That is not the way, in my opinion, to deal in the modern world. Awesome. All right. Thanks, Shorty, for doing this. Really appreciate it. All right, Wally.

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