The AI Boom Is Headed For A Reckoning — ft. Aswath Damodaran

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New episodes Sundays, wherever you get your podcasts. Today's number, $1 million.

“That's how many dollars with a U-Yo cards were found in a Texas dumpster last week.”

Ed, true story, I am literally swimming in Pokemon cards, because my son listened to me

and swath's podcast, and his spending all of his money on Uber, Deliveru, and Pokemon cards. Not a joke, just an observation, just a little insight in my life. Ed, how are you? I'm doing well.

Deliveru, that's a name I forgot about. That's the English Door Dash. That's the Australian Door Dash. Deliveru. What's the ordering?

Why can mama and nondos? What are the heads? Oh, my gosh, you're very into it. If we're up to my son, he'd eat five guys three times a day. Unfortunately, he's actually pretty good at this Pokemon thing.

He's trading. He goes to these, it's, it'd be awesome, very impressed and proud. He'll take a train out to where, like, he throw airport, and there's some conference going on here there, he goes strapped with a ton of cards and a few hundred pounds in cash, and he trades cards, and then he comes home, and he sells them, and he uploads it to his

green lights so he can take Uber's everywhere and order all manner of food from different restaurants. And we'll get, we'll get a bang at the door and open it and it's like, code, and I'm going on. It's for him.

What is his own food now, and then I say, that's it, we are not paying for this. He's like, you're not paying for it. I sold a, a Godwood Chuck card this morning. So anyways, his economic independence is also getting in the way of, my ability to discipline him.

That's awesome. Good for him. Running the hedge fund. That sounds great. Guess where I'm going tomorrow.

Where are you going? I'm going to, pausing in Poland for a conference. It's a big deal. There's a huge conference there. What are you going to do there?

Speaking from money, but it's, here's a crazy stat. If Poland continues its growth for the next four years, it'll be a bigger economy than the UK. They've been one of the, one of the real winners from the war, Australia, it's the stock market has been a real winner of the war.

“If I'm remembering that correctly, I mean, I think that stock market is ripped.”

Paul's company is Poland. It's just sort of done everything right. You're right. They have been a big winner. It's fantastic, it's been a fantastic economy and success story.

Well, we have a big episode, exciting episode to get into today. We are talking with us whilst to motor in, in our very first live stream. But before we get into that, I just want to point out that it is 12 days until a property market's tour kicks off. We have a sold-out show in San Francisco on May 27, but you can still get tickets in LA.

Miami, Chicago, and New York City, where we will be finishing the tour off with the one in only Anthony Scaramucci, the mooch, who will be joining us on stage on June 2nd. I cannot wait.

I mean, the mooch just always, he's always a banger, always brings the energy and it's

going to be a lot of fun.

“So if you want to go see those shows, you can visit propertymarkets.org.com to get your tickets”

now.

into our episode. Welcome to our first ever property markets live stream.

We have an incredible episode for you today.

We are joined today by the man, the myth, the legend, the one and only, the dean of evaluation, our friend, Asworth Demoder, and we're doing another quarterly review and the great thing about this live stream is that we will be taking your questions, or at least Professor

“Demoder will be taking your questions. So if you want to drop a question, ask a question,”

drop it in the chat and then we will save some time at the end of this interview about 10 minutes and we will answer a few of those questions. But with that, let's get into the show. It is that time of the quarter. When we like to check in with one of the market voices, we trust most.

Late last year, he warned us that there was no place to hide in stocks.

We also met again in February, and we pointed out and he told us some of the catastrophic

risks that the market seems to be at least slightly ignoring, and now with the ongoing conflict with Iran, and with three major IPOs approaching, and with AI continuing to push stocks to now recognize, it seemed like the perfect time to bring back Professor Asworth Demoder and the Kirchner family chair in finance education and Professor of Finance at New York University Stone School of Business, Professor Demoder and thank you so much

for joining us again with so excited to get your update. Let's just start very broad here. I look at the S&P today when we last spoke on a multiple basis on a forward PE basis. It is lower than when we last spoke. However, it is also up almost 8% year-to-date, which is quite striking really when you

just look back at the first quarter that we've seen here, what has struck you about the

markets that we're seeing in 2026? There is the lens. I mean, I think that if nothing else markets seem to be showing that they can withstand shocks, that they would not have been able to withstand a decade to decades ago. So one of the things about markets is the first time you disagree with markets, you can

say markets are wrong, I'm right, and be okay with it. The second time around, you keep saying it, but the third of the fourth time you've got to stop and ask, what is it that's changed that I'm missing in markets? And I've been thinking a lot about that, because starting in March when we entered this new crisis with the conflict in Iran, I actually started estimating what's called an

equity risk agreement. It's a risk of risk in the market, like a temperature gauge for the market. And what astonished me in March at the height of the market, even the markets going down that month, was how measured markets were in response to the crisis.

“So I think the key word here is, markets seem to take whatever's thrown at them and come”

out on the other side in tech, and one side people might say, well, this is because markets don't see what's coming, and the other you got to stop and ask, maybe there's something that's changed that's allowing markets to do this. When you look at the conflicts in Iran, I mean, just when I look at it, my sense is this isn't coming to an end anytime soon, or at least they keep on saying, well, it's going to be

next week. It's going to be the week after that. We're going to get a deal. We're not going to get a deal, et cetera. Keep on going on and continually gas prices are rising up 30% since we launched this thing.

And it seems that this, I don't see how this is really going to change. And I guess I'm sort of waiting for that moment where it does have an impact, where it does impact consumer spending, where it does end up impacting stocks. But I guess that moment just isn't arriving.

“Do you think that moment will arrive or the markets pricing in that it won't?”

I think at the moment, if all that happens is gas prices stay at 450 or 5, the market, I think is okay with that. I think the catastrophic risk here is not that all gas prices stay higher than they were before the conflict, is whether they'll go even further up because there is that chance of that happening.

I think in many ways what the market seems to be building in is the economy can survive with gas prices being 450 or 5 depending on what part of the country you're in. That it might not be as robust as you thought it was three months ago, but it's okay. But I think the worry still remains that this crisis, well, it's in a slow boil at any point in time could become a fast boil at which point you could say what happens to earnings

now. And I think that's the part of the story that I find most interesting.

I've been tracking them on a weekly basis.

What those earnings forecast now are higher for next year and the year after. They lower by a little bit for this year, but in some strange ways, almost like analysts are projecting their earnings will get moved to next year and the year after because of this crisis and then they will actually go up as a result of the crisis. Now, you can accuse analysts of being overoptimistic and perhaps skewed in their thinking,

but the market seems to be able to deliver our earnings even in the midst of crises for the last 10 or 15 years.

“And I think that's what the market is building and it's ultimately markets are not affected”

by political crisis or economic crisis directly, they're affected by what they do to earnings. And at the moment, that's what I'm keeping my eyes on is a real damage being created to earnings and up to now we're not seeing the damage open forecast. That's what's good to see you.

I've never seen and maybe there's a historical precedent that I'm not aware of, but I've

never seen a number two become the number one as quickly as anthropic has become the number one. December, clear number one, open AI, April, clear number one, anthropic. In the private market, anthropic is now being valued $1 trillion. Would you buy that price?

What are your thoughts on the respective valuations of open AI and anthropic? I'm impressed by what anthropic has done. I mean, ultimately with LLM said the test is how quickly you pivot to having business applications that actually make money.

“And anthropic has been the quickest I think to pivot to actually creating something that”

people can use right away. Whether you're a banker, a lawyer, I think I've been very impressed with what they've done. I think a trillion is still asking for a lot. It depends on how much these applications pay off for anthropic over time.

But I think they're off the different LLM's there on the fastest growth trajectory in terms of being able to get applications going and money coming into the companies. I mean, these companies are still money burning machines. I think the question is, when would that cash burn start to decrease in anthropic seems to have the best trajectory to start to bring the cash burn down if not make it positive?

So you recently, you published a trillion's of dollars in beyond and put space access and transit value at 1.2 trillion.

So SpaceX, I think it's about 16 billion in revenues growing, 8 billion in EBITDA growing,

I think 24% a year. And then I look at anthropic and I understand it probably doesn't have the same votes as the SpaceX. But I look at anthropic, which is jump to 30 and I think it's headed towards 40 billion in ARR.

And it looks as if it might 10X again, it's been 10X every year. I would space access, be worth 1.2 trillion in your mind and anthropic, be only worth 1 trillion. It discerned how you value each of those sectors. I think it goes back to what you said at first, which is it's all about votes. I mean, these companies are all about future growth, future revenues, future margins.

And SpaceX has at least in two of its three business lines, clear votes. I'm not as impressed with the XAI part of SpaceX as some people are for some people. That's the excitement factor, because you can throw the trillions of dollars around much more easily. But if you look at the space launch business and the satellite internet business, SpaceX

has as much stronger modes than any of the other tech companies, because I can't think of very many companies that can compete with them, head to head in those spaces. So if you believe there's going to be growth in those spaces, I think SpaceX is going to have a dominant market share of those spaces.

“And that's what gives them the pathway to the 1.2 trillion.”

But the 1.2 trillion requires a lot of things to go right. I mean, I think if those things go right, then the 1.2 trillion plays out. I think anthropic has higher revenue growth in your term than SpaceX does. I mean, I think that's almost a given. The question is how the margins in this LLM based business will play out over time.

And I'm just, you know, I think that anthropic might be in the best shape of all of the LLM companies. But I think it's going to have to find a way to generate profit margins at our high and steady state. I mean, right now, they have the advantage, prove that an advantage to sustain itself

is the question. Taking the avatar back, I heard a very interesting comment that you might see, if AI becomes the, if you will, atmosphere where almost any company in the technology or information sector, which have traditionally traded at the highest multiples, has an existential risk

value of terminal value? In other words, is there just greater risk to all future cash flows amongst the companies

“that have traditionally traded at the highest multiples?”

I think it puts every corporate lifecycle at risk of shrinking. I mean, to meet terminal values about capturing what happens when you get to the end of your, what I say, your forecasting period. I mean, the 20th century company has stopped in your five attendants at forever and then

use that perpetual growth model and I've always been a little cautious about that with

tech companies. And I think what AI does is it takes every tech company and makes that forever into an even more difficult assumption to sustain, which effectively reduces terminal value because it means that instead of using forever using an extra five years or an extra 10 years after you get to the end of your forecasting period.

I think how it plays out in valuation would depend on what it was, what was, we don't know what the market was already building in before AI came along. We kind of tried to reverse engineer it, but I think that with AI, those assumptions about how long companies will last will have to come, will have to be addressed much more directly.

“And I think that's what you're seeing play out in the software space, right, for, you know,”

where where the existential threat is on the horizon, you have to start building into the pricing. Just going back, I thought, to the general market at large and the performance we've seen, and you pointed out correctly that the earnings growth that we're seeing is just phenomenal. And so, you know, when we look back at what's happened here, if we look at the back

we're looking into cages, it's sort of like, yeah, everything's going great.

But it also seems that it's basically all AI at this point that you have a market that

is increasingly dependent on the revenues of a handful of companies that are building data centers and the revenue is being kind of shared and arguably moving in a circle. Some of the similar dynamics that we were worried about last year. It seems that those dynamics are still the same. It's just that the numbers are way bigger.

And so I guess maybe that's fine. But I just wonder how resilient that earnings growth really is in your view. And do you worry that maybe it's two AI focused? It's two chips focused to the point that it's actually not as durable as perhaps we might think.

“I think that for the companies building the architecture of AI, you're absolutely right.”

In video companies, the chip companies, clearly benefit from the building. But for most of the other tech companies, AI's been an expense rather than an income stream. So you take the rest of the max, seven, it's true on the cloud business, you're benefiting a little bit from AI, but you look at how much they're spending on AI. Even if you just count the depreciation part of their capex, that by itself is putting

downward pressure and earnings rather than upward pressure. So I think AI is a big part of the growth story, it's still not a big part of the collective earnings story. It might be a big part of the earnings story for some companies. But if you look across the S&P 500, and look at the earnings, the S&P 500, AI is not

a net plus yet, I think to the S&P 500 earnings. But the fact that earnings are already up in the face of this much expenditure on the part of these other tech companies is I think impressing the market. We'll be right back off to the break, and by the way, we are heading out on tour at the end of the month.

So for more info and to get tickets to a show near you, head to profgmarkitstor.com. Support for the show comes from Zbiotics.

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Executives are being asked to justify AI-spend-manentris can show ROI.

Often without the right visibility, CFOs and CIOs are basically being told, make AI-payoff

and do so safely. The real challenge right now isn't adopting AI, it's understanding how it's being used and how to maximize the value from AI, that's exactly what Lairden is focused on. All right, so look, I use AI all the time. I have a second screen to o's up, it just has my LLM's on it, and if I get health information,

if I get a PowerPoint deck, a board deck, I upload it, and I start asking questions.

“And I believe that everybody needs to be somewhat fast out with AI.”

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Head to Lairden.com today and book a demo to start maximizing impact from AI. Hi, I'm Maria Sharipova, host of the Pretty Tough Podcast. Each episode, I sit down with high-achieving women to discuss the pursuit of excellence without apology. This week, journalist Dina USC, and now, along with her husband, Bob Eiger, owner of the Angel City FC Women's Soccer team.

Well, okay. I said, Bob, are you interested in doing this? And he said, absolutely.

“But I was definitely the driving force I think in the conviction about Angel City.”

Check out Pretty Tough. New episodes on Wednesdays. You can watch it on YouTube or listen in your favorite podcast app. We're back with property markets. I saw a pretty incredible chart showing the spending commitments across Microsoft, Oracle, Google, Amazon. I apologize. I'm looking at it on my phone right now. But when you look at open AI spending commitments and anthropics spending

commitments, and you put them together, for Microsoft, it makes up roughly half of their revenue backlog. For Oracle, it makes up more than half. For Google, it makes up 43% Amazon 51%. Which brings back these, again, to go back to these concerns that we're kind of dependent, at least the AI story is dependent on two few companies. You've got all of this revenue growth,

these incredible numbers, but ultimately it's two companies that are driving half of it.

A lot of people are quite concerned about this, and feel that maybe again, this is an indication that the revenue in the AI story isn't necessarily real or that we're kind of recycling the revenue that the VCs in the Nvidia's gave to open AI and anthropic. I meant it's coming back to them. Are you concerned about this? I know we've discussed this before, but we're kind of still in the same place. I think, you know, concern is always, I mean, when you're investing this much on a big bet,

I mean, let's face them, without the AI spending. We'd probably be looking at GDP growth, I don't know, in the negative, we'd very quickly start to push towards recession level growth. So I think that, you know, we need to be concerned collectively, I think we're probably overspending, because that's a history of this kind of boom. Now, the question is when will the bill come to you and how will it come to you? Because, you know, when you overspended some point in time,

“you have to start riding off things. So at least on a large subset of these companies,”

they'll be right off. When I wrote about Tim Cook's stepping down, one of the points I made is the other, the rest of the Mac 7, are making this insanely big bet on AI paying off, and if it does, they're going to look like heroes, and it doesn't, it's a lot of cleaning up to do, a lot of corporate governance issues that are going to come to the surface. So there is paying down the road, but for the moment, for these companies, being out of this game is not a

choice that they think they have. So some of this almost, it's almost like they're an autopilot.

then they're going to be held accountable, and markets are going to have to deal with the

“consequences. I think when we talk about earnings, so you look at the concentration of market”

cap in companies, there's also concentration in earnings coming from a relatively few companies. This is a top heavy market, not just in terms of market cap, but in terms of earnings as well.

So that's always a concern, when a few companies account for a big chunk of earnings,

all you need is a couple of them to have serious downturns, and you're going to see collective earnings go down. So I think that concern increases because of the concentration effect. When people talk about the dot com bubble, that was kind of a similar dynamic. Like there was so much momentum, so much excitement. The valuations of a handful of companies just exploded, they're share of the entire stock market and the index exploded, and then suddenly the music

stopped and you had this incredible drawdown. It was extremely painful for investors. I kind of thought that we were, we had moved on from that, that we didn't think that that was

going to happen anymore. Like investors lost you were very worried about this. I happen to see

the charts where it's like, look, it's the same as 2000, and then there was nothing, but it seems that in the last couple of weeks, that started to come back, and I personally, I'm starting to feel

“little worried about that myself again. I wonder if you feel the same way. I mean, I think every”

market crisis is different. That's part of the problem with trying to replay histories. You look at 2000, I learned from that. Let me bring the market learning is very transitory. You learn, and then it turns out that what you learn is not that useful in the next go around. My view is that there is going to be a correction. It's going to look nothing, like to 2001 correction. There will be a correction. It will be painful. Those will be the two common features, but what triggers it,

how it happens will be different. Part of the reason for that is the dot com boom was not built on the capx spending that AI was built on. It was built on expectations and hopes and web pages and websites and online activity. This time around, I think, the macroeconomic costs are going to be greater from a correction because this is carrying the macroeconomic a lot more than the dot com boom did. You didn't get the kind of investment into the economy that you got a lot of employment,

a lot of people in Silicon Valley getting jobs and high income. But this is more than that. You getting it across the country and the building of data centers people being employed in other power companies, the water being demanded. This collectively a lot more accounting for here, if there's a correction, then there wasn't the dot com boom. So that pain may be more widespread because in 2001, if we weren't in tech companies, you could sit back and not feel as much pain as they did,

because you felt you weren't affected. I don't think you'll have that luxury this time around. In other words, it will be worse. It'll be one more widespread. It'll be more market-wide. It won't be just a tech company correction. It'll be a correction across more sectors than you did that, and more of a macroeconomic hangover that you take a little longer to get through. When we last spoke, we were discussing some of the more systemic risks to the markets.

We were discussing, I think we were talking about the war. We were talking about potentially the AI story losing its momentum. I think we're also maybe talking about national debt, which also we

could get into. It's just surpassed 100% in the US for the first time since the end of the world,

of the Second World War. Where do they rank for you? When you think about how this market, if it were to unravel in a certain way, which one to you at this point is front of mind, most likely the most relevant. The war is the most immediate one, because one of the problems with the AI expectation boom being the disappointments is I'm not sure what form that takes right now. There is no number if you don't beat yourself, it's not working. One of the problems when you

don't have a good feedback loop on whether something is working, it takes a long time for people to wake up and say, oh my god, we invested too much in AI. I'm not even sure what form that correction will take. It will show up. The war though is going to be more immediate. So in terms of sequencing,

“the war is the immediate issue. I think that's what the market is going to be watching on a day-to-day”

basis. AI is more of a longer-term issue, where if there are disappointments they're going to come in, it's going to pile up. As a bunch of companies not being able to deliver what they thought they

to the bottom of my list, because Japan is 180% of GDP and it's had it for a long time.

debt by itself is not the issue if you have the economy to back it up. What gets debt written companies in trouble is if you have GDP shrinkage and the debt continues to grow, which it's a real possibility in the US, but it's going to be triggered by one of the other two things happening. Either the war or the AI breakdown creates an economic shrinkage, which then makes the debt into an even bigger problem. Speaking of a top heavy market, I don't think there's ever been a sector

that is accelerated as quickly in terms of valuations as a sector as chips in the last college 60 days, 10 years ago, 3% of the S&P as we sit here today at 17%. My understanding is the entire

sector as a whole is up 60% in just the last couple of months. Give us your sense, I was looking

at my current, and I looked at 160% or something since the beginning of the year, but I looked at a chart, and it looked as if the argument the bulls were making is that this might be the next in video just around, I guess, memory as opposed to processing power, thoughts on the chip

“sector and valuations within the sector. I think it goes back to the AI investment. The demand”

for chips is so high that at some point investors say, there's no way in video can even supply this much, even if even if the so I think part of the expand, because early on for the first two or three years, invaded it well and the rest of the chip stocks basically stagnated or actually declined. It's only in the last year that you've seen the rest of the chip business take off and part of it comes from this insane demand for chips out there. I think that to me, the bulk of

the run is done, so right now it's a question of consolidation in this market and cleaning up.

I mean, I was lucky enough to buy until I never anticipated the kind of build up that happened,

but I think much of the reason I've succeeded is nothing to do with picking the right company.

“It's being in the right place at the right time, the entire sector took off. But I think at this”

point, the question is whether the market can consolidate those gains, I think partly there is going to be a correction in some of those companies, because we've run up too much too quickly. But I think this is to reflect the chip demand is so intense that everybody can share in the spoils now, not just the one to win it, so the market was identified. Well, so just to double-click on that one, I'd love to get your views on Intel after year to date, it's tripled and over the past year,

it's a six-ax. What you think of Intel right now, and also I was looking at Chinese chip stocks. So our chip stocks, Intel's trading at 120 times or something, but a lot of the chip stocks including Nvidia are trading in kind of the load of mid-20s, whereas Chinese chip stocks are usually traded to high single digits. Thoughts on Intel and have you looked at the equivalent

“of the chip sector in China? I haven't looked at the chip sector in China, I mean, I think”

but one of the things I would check are the margins, I think in the chip companies in the US have seen their margins search as well, the Nvidia effect has started to ripple through the other chip companies, and I'd be interested to see what the margins look like for Chinese chip companies, maybe their business economics are different, because they're selling to a different set of companies, and maybe the margins are lower. But I think Intel's done things right in many ways,

since that shakeout three years ago, I think at that point when I wrote about them, I said, Intel's needs to bring its ambitions down, it's no longer going to be king of the hill, that's done. Now, because it got into trouble because it wanted to out in the chip design business, and it wanted to out TSMC in the foundry business, and it wasn't in position to do either. It overspent, it crashed, and I think it's found itself with more of a niche

portion of the market, and I think it's played the game really well, does it deserve to triple over the, I don't think so. I mean, I'm glad it hit because I'm a shareholder, but I think that when you look at the run-up, clearly there's some helium in this run-up, it's just being pushed up, because as I said, the sector is going up, you have only so many places you can put your money. Intel does have the advantage because of its U.S. base, and I think that given

that perception of it being a U.S. company, and you need U.S. chips to maintain that protection.

“So space X, anthropic, and open AI, all expected to IPO, we think at the end of this year,”

sometime, at least it's coming, the IPOs are coming. And when they do, the combined market cap of those IPOs will exceed the combined market cap of every single IPO from the dot com era, and also it'll reach half of the IPO value from every single IPO put together from the 50 years before that. So I mean, to me, it's like this is, this is the big moment for the market, these three IPOs. I just like to get your views on how that will change the complexion of this market,

how important they are, and also what you make of those IPOs themselves, these gigantic valuations, these companies that we don't really even know that much about. Open AI being a great example, I guess, what do you make of all three of them? Not only will they exceed the IPOs that I've ever been done, they exceed the market cap, so I've entire regions of the world. I mean, those three companies alone will be large in the market cap from 95% of the markets out there.

“Now, it's part of it. I think a trend that's been building up over the last 20 years of company”

staying private for longer, getting essentially the equivalent of public market investment. Fiddard is an investor in SpaceX, right? So you get the benefits of public market investment. You scale up while you're still a private business without any of the corporate governance constraints you might have as a public company. So my concern is these companies get so big as private businesses without any real pushback or oversight. It's only when they go public

that you start to recognize what their weaknesses are. So the IPO part I think will go fine.

I mean, basically, if the mood of the market stays the way it is, well, these companies are

going to go out, they get trillion dollar market caps, and the aftermath, then, will be once they become public companies, how will they deal with the earnings calls and the corporate governance challenges that will come with being public companies? And at that stage, you know, my concern with open AI, you know, we've talked about this before is, it's a corporate governance nightmare in terms of how the company's structured. I'm not even sure what the company will look like when

it goes public, and I don't know whether the case that's when it's way through the courts will

“be resolved by then. That's going to be an issue, I think, in how the IPO gets price. But I think”

that all three companies will have, in my view, they're offering will go fine. But in the aftermath, I think there will be challenges that these companies will have to face. And then we'll figure out whether these companies are positioned to state trillion dollar companies, or whether they'll see a fallback to more earthly levels in terms of market gap. We'll be right back and for even more markets content, sign up for a newsletter at profgmarkets.com.

Okay, so today, we're driving to Southern New Jersey and heading to a day-to-setter. A couple weeks ago, I've read a story in inj.com and it was all about how there's a day-to-setter going up inumberland, currently, the poorest, county in New Jersey. That's receiving some community pushback. And this is immediately got my attention, because day-to-setters are going up all across the country. I feel like we should be hearing politicians talk more about this,

but we haven't really heard a consensus. Our day-to-setters really are necessary evil. Let's

find out. This is technology we've never seen before. Right, experiment, we're going to experiment

down here and we're getting things. Right, and where the game is. Exactly. Exactly. One thing that happens in this country is there's no planning for the future. Is it benefiting people or is benefiting daily and the money that's going into their pockets? This is not about abstract politics. It's about people's everyday lives. That's this week on America, actually. Come plex and unprecedented the Spanish authorities are calling it.

Look aboard the Hanta or maybe Hanta virus, stricken Dutch cruise ship, disembarked in the canary islands this weekend, prompting the highest stakes game of where are they now, since maybe COVID. Some of the evacuees, American and French have since tested positive for the virus, and yet public health officials seem remarkably calm. We do have one individual who was taken to the

Possibly because this is not the one to freak out over. Today explain drops every week day after noon. This week on Network and Chill, we're diving into another edition of M.I. the Ashole Finance Edition. And trust me, these money dilemmas will have you questioning everything. I'm breaking down real stories from real people who are navigating financial situations that range from

mildly awkward to absolutely unhinged, and I'm giving you my unfiltered take on who's in the right and who needs a serious reality check. Because let's be real when it comes to mixing relationships

and finances, someone's always asking if they're the asshole. Learn how to set boundaries,

protect your wealth, and avoid becoming the villain in your own financial story. Listen, wherever you get your podcasts or watch on youtube.com/yourrichbf. We're back with property markets. What do you make of open-air's financials, or what little we know about open-air's financials? Specifically, I mean, we know they $2 billion in revenue in a month, and so I guess $24 to $25 billion. They are all currently, that number is often changing.

They shot for $13 billion in revenue last year, projecting to burn $25 billion in 2020.

“So it's like, we know a little bit, but not that much. Have you looked into like open-air's financials?”

Do you have thoughts on it from evaluation perspective? All of these companies, the financials

are opaque. You get basically leak numbers and brometh leak numbers, is these often paint

the best possible picture. So if you're worried about the leak numbers looking bad, their leak numbers, there should be the best of the numbers that are being leaked out there. I think that's the other thing that's going to come before the offering, the prospectus is going to be out. I would encourage people to go through the prospectus, not just in terms of income statements and balance sheets, but look through the footnotes, because these are companies where

you're going to see the start of trouble in the footnotes on, you know, the kind of employee stock that's been granted over time, who owns options in the company, when what will happen to these options are not on the offering. So I'm waiting for the SpaceX prospectus, which might be the

first to hit the market, because I am really interested in the details that we know nothing about

for the moment. I think open-air's numbers, you know, at the moment, all we know are these these numbers that essentially leak out here and there. And those leak numbers don't look great. That's, I mean, you're already seeing the comparison to the DropEx numbers and saying those don't look as good. So maybe there are other things we will find out in the prospectus that will affect how they get priced. From a pure business fundamental perspective, it seems to be a real question and a concern

of do these businesses even work. I mean, so far, I mean, open-air has a lot of usage. It's like a pretty ubiquitous product. Yes, it can grow some more, but they're still burning huge amounts of cash here. They're not expecting to hit a profit until 2030 into your point. That's probably

“pretty optimistic. That's what they're saying internally. I just wonder if you have any thoughts on”

like AI as a business. Because thus far, it's exciting. It's getting a lot of usage, but I'm not sure we can make the claim that it's been proven yet as an actual business. I agree. I mean, I think that the place it's closest to showing some proof of working isn't coding, where you actually do see jobs being lost. Unfortunately, the way you know AI is working is the rest of the economy starts to feel the pain of layoffs. If you see Goldman Sachs

operating with half of the manpower that they have today, we know AI is working, but we have another problem that we've got to deal with. So I think that right now you're right, it's more, I mean, it's driven almost by anecdotal evidence right now. User evidence, which is, hey, I mean, I'm on the mailing list for a lot of faculty emails that go back and forth and everybody's talking about how they got a paper written by AI and how it worked out. And when from the anecdotal

evidence is it's not the kind of evidence that can drive a business. That requires actual proof

“that it delivers those lower costs that started wood. And that's what we don't know yet”

in much of the market, much of the economy's more promise than actual delivery for the moment. I think the promise is based on substance. I'm not going to, and I've seen some of the

but I'm waiting to see what how it actually plays out in the face of probably regulatory pushback

and legal pushback because much of this work requires courts and governments accept AI generated work as the equivalent of person generated work. And my feeling is that the tech people don't quite understand the resistance they're going to run into because I've been in that space. It's incredibly inertia bound and it's not easy to replace traditional routes with new routes.

“Sometimes I wonder because I have these concerns generally, I mean, I think Scott and I are both”

very bullish on anthropic. I'm bullish on AI as a concept, but I do have these underlying concerns about does the business even make sense. And I sometimes wonder if I'm being like the guy in 99, 2000 who says Amazon's burning money. It doesn't work. It doesn't make sense. Like, because that was a real thing for a long time. And something that people were very worried about when it came to Amazon. I guess when you look at the comparison between, I guess, Amazon back then

in e-commerce and people saying that the business model doesn't make sense. Compared to today, are there equivalencies that you can draw? Is that not really the right thing to be focusing on does the, do the fundamentals make sense right now? I think with all of it on, I mean, I can go back to the 90s and remember the value. The question was, will customers overcome their traditional patterns? Will customers actually move from going into stores and buying clothes

and buying them online? It's an unknown. And clearly, we underestimated how quickly customers were adapted to an online space. Older people took a lot a little longer than younger people, even they came around. Same thing with right chair. I remember the initial question with right chairing is somebody over the age of 50 would actually call a car on their phone and be okay with it. They adapted very quickly. The question is, with businesses, which are the target

“tier, will the inertia be less or more? And I think it's going to vary depending on the”

business you're looking at. I mean, academia, I can tell you the inertia is going to be much

greater simply because of the way in which academia is always responded. But if you look at

a different business, you know, my role of thumb is the older the business usually with older employees. It'll take longer for them to adapt. And the reason coding has been so quick to kind of move with AI is younger people, younger businesses. So it'll be interesting to see if that hypothesis comes and to play the resistance is greater in sectors that have been around a long time with more status quo, more established practices. Three sort of headlines. I just love to get your

quick responses to it. And things in and is the open AI must case. It's a soap opera already. I mean, it's in many ways it's revealing sides to characters that I don't think they want to

“reveal in public. But I think we're discovering that, I mean, as we should always have known that”

these are human beings with their frailties and you give a human being with fraility, a billion

dollars to play with a two billion, a five billion, fifty billion. Those frailties are going to get good. I think that I have no, I mean, this is one of those cases where I hope both sides lose. I don't want to see a winner because I don't think either side has the high ground because I think the each has, I mean, I think must case a case that this started as a non-profit and that's some old man kind of hijacked it. And so a Sam Oldman, as a case that must probably would have

converted the non-profit into a fort profit at some point in time and that he just preempted the move. But I think it'll be a soap opera that continues. We're going to learn some, you know, some more on savory deep tales about the people involved. The current narrative, especially from the people who seem to understand these technologies, the most, is that AI is going to bring about a job apocalypse, a labor destruction. That's a tough one. I think that, I mean, I've been

reading a whole range of opinions on this. I know that there are people who point to the China destruction and what happened to labor and how the market adapted. I think that that we don't give, you know, economies and people, the, as much credit as we should for being adaptable. I think they are more adaptable. I think there will be jobs lost. I think some sectors are going to be much worse affected. But the overall job effect might might be smaller than we think, simply because

new job, I do believe that there will be new jobs created by AI. But I do think in the short term, we have to start thinking about the sectors where the job loss is going to be great and asking what next. No, maybe the kinds of people who be losing jobs will not be the kinds of people

jobs and given the history of job loss in the last go around, people might say, well, it was coming. And, you know, in a sense, it was deserve for some sectors to kind of feel the pain that other sectors

affect. And last one before we go to audience questions, the first apocalypse predicted was

higher education at the hands of AI. You don't need higher education anymore that there's AI and yet applications are up and we continue to have margin power and have increased tuition fast and inflation yet again this year. It thoughts on AI disrupting higher education. I'm starting to think that the apocalypse might come to the research side of education, once in the teaching side and maybe that will be the straw that breaks the back because we're discovering

that so many of the papers that get published are so mechanical and rude-driven that AI can do it. And if the research side gets broken, it kind of breaks the entire structure of higher education

at least in the US. We have people teaching only two or three classes and then giving the

“excuse, I write all these deeply impactful papers. So that's why I need the rest of the year off.”

So I'm looking at both at the research side potentially as the breaking point for academia because if the research side breaks, what excuse do you have? A teacher only two three classes and get the 70th year off as a sabbatical. So I think maybe the pain here will come in a very different pathway than the one that we have been talking about this for a long time. The teaching side, the inertia I think is so great that it's very difficult to move at the research side.

I think the shock effect of turning out 50 AI-driven papers that match up to academic every academic research paper is going to break the research side very quickly. Got it. I'm out of it. I can't come soon enough. Audience questions. Yes, let's get into a clear, miller-hour producer. How's the questions? What do you have for us? What is professor DeMotor and think about banks offloading data

center risk as reported by the FT on the third of May? Is there a realistic way for these investments

to pay off for the hybrid scalars? For context, the FT reported that groups including JP Morgan Chase, Morgan Stanley and SMBC are trying to find ways to distribute portions of data center-related deals to a broader range of investors. Lenders are exploring private deals to sell stakes in the debt, as well as so-called risk transfers to reduce exposure to big borrowers and free up capacity for more lending. So, Oslo, what do you think? By itself, it makes sense, right? Because if you have a lot of

debt to a particular segment of the economy, as a bank, you want to try to create some sharing of

“that risk. So, by itself, that doesn't bother me, but I think that it also means that if”

everybody's trying to do it at the same time, then the concern is what if there are people who don't want to share that risk? What if you just took on too much debt? And that's a potential problem for banks. I don't think it's going to break JP Morgan or it's, I think that if you have a small bank that's overexposed to this kind of debt, then I'd worry. So, maybe the regulators need to keep tabs on how much of the debt is going towards these data centers and figure out a way

to look at banks that are overexposed. That would still be my concern because the shuffling off is, I think, natural. Next question. I am in the military and we constantly discuss China's preparation for invading Taiwan. The expectation is they will be prepared to take over Taiwan by 2027. It will more likely be 2029 or later. What do you expect a major event like that to do to the global economy? How about the effects on the AI industry? And how could we

hedge against that event? You can't. I mean, that's the definition of a truly catastrophic event

“because I think that might be the expectation and segments of the military, but it's clearly not”

the expectation in the market because if that were the expectation, you'd see a very different market playing out now, not just in the US, but across the globe. But that would be an event where there's no hiding from. I mean, I don't see it anywhere around that. That seems to me to be a great example that you talk about where markets aren't pricing in the catastrophic risk. And this is what we talked about last time. I've also had a conversation with Daniel Yogan, who's one of the former

historians and oil and his view is that there is a disconnect between what the physical oil traders feel about what's happening in the straightaway moves versus what the futures trade is over a Wall Street feel about this issue. This seems like a great example. The military is very worried about this. The trade is aren't. Why should we trust the traders? Because the military at least the expectations people in the military don't have any money behind their expectations,

that don't. I mean, part of the reason I think markets get trusted more than experts. I'm going to combine these two from the audience could professor de motorine reflect on his comment a few months back about looking at collectibles and art as investments. Is he still

exploring those viable investments? And then second question, what percent cash would the professor

recommend investors should hold right now? The collectibles are not. I mean, I hope people

“didn't. I think that they're clearly investments to think about. But I also think I said do it only”

if you enjoy the art and the collectible you have. So if you don't like looking at paintings, don't buy paintings because you think they're a good part of your portfolio and hang them up around your house and cover them up because you don't like to look at them. Buy a painting because you enjoy it. Same thing with collectibles. It's baseball cards or if you truly enjoy collecting baseball cards and that's where you want to spend it time, go ahead and do it and add it to your

portfolio and make it part of your investments. But if you're not informed in those spaces, just send your money art because there's a collectible investment. I mean, these are investments with huge transactions costs, a lot of leakages and you're often trading with people who are more informed

than you are. And that's always the recipe for danger. So I would be careful about that. On the

question of how much cash is too much cash. I mean, I, you know, Ed and I talked about how I, you know,

“the cash holdings I haven't put fully a last time. I was very clear of, I think about what I was”

saying. I was saying, if I sell something now, I'm holding that cash as cash is putting it back into the market right away. I'm not selling things to get cash. So to me, the minute you do that, you're entering into the market timing space and the last couple of months, it's nothing else. Should I given us a warning? Why timing the market is so incredibly difficult to do? So I think that if you have a lot of cash coming in from something you've sold, then this might be the time you put

it into treasuries and earn four or four and a half percent, a pretty decent return. And also then thinking in order, in terms of when will you get back into the market because you leave it as cash, the danger is it stays as cash for a really long time. I took what you said very seriously about when we asked you a few months ago, what sector was undervalued or where would you put some money

you responded? For the first time I heard you pause and I could tell you were searching for a

sector because everything feels so expensive and you brought up the notion of collectibles. And based on that, I've invested in this hedge fund called Nolan, which is my youngest who now takes the train out to conferences and he's been buying a crazy amount of Pokemon cards. This is entirely true and he's super into it. He's AI uploads it, looks for ARB goes to events, trades. Anyways, this is your fault. We are swimming in Pokemon cards here at the House of Passworth.

I'm curious if you had any exposure to the Pokemon craze. Absolutely, my kids all collected Pokemon cards. Unfortunately, we threw them all away when we moved and I went to how much money

“we ended up throwing into the trash can that day. But I think that's exactly the kind of example”

of collectibles. You truly enjoy a collectible class and you want to make it part of your portfolio do so. But don't go do it, looking for collectibles like you invest in stocks, right? Put it, you know, this is not a passive place to be. All right, this is a perfect place to end. Would you characterize the markets as maturing in that they seem less volatile and reactive to daily insults or drama in the news? Is this a glimmer of hope for humanity?

If this is the glimmer of hope we're looking for, then we're in big trouble, I think. I mean, markets, I think are like, you know, essentially they've been punched, they're like a box or they've been punched so many times that they're not quite sure what's happening anymore. So I think in many ways, these markets are being driven by a very small subset of investors willing to put their money behind their bets because, I mean, at this point, they're just the

shocks have been so many. They just can't, they've stopped categorizing something that would have been a shock 10 years ago as a shock. So we've kind of refrained expectations as to what comprises really good news or really bad news. And that might be a problem in the future. I just want to follow up on that and propose that thesis and that is the market value subscription revenues, two to three X, what values transactional revenues. So if you own a company that makes

this money getting people into a movie theater or retail or transactional, what if you don't familiarly, whereas if you have a kind of like Netflix that subscription revenue trades in a much

revenue, what do I mean by that? Now every year the amount of passive funds or the amount of

capital and investments from stocks coming from passive ETFs and indices goes up. And effectively people invest through passively through 401ks and automatically no one tries to time the market is not based on vibes they just buy the whole market. Has effectively the market become a more durable means of capturing inflows because it's just passive and just money just flows in every

“month regardless of how people are feeling. I think that is part of it. The other part I think”

is because you know because market flows based on market gap, many the indices are market gap, it also feeds in the momentum effects, which is if you're winning you keep winning. But these things also turn the other way if you're losing you can also lose more so for for at least for much of the last 15 years momentum has been enough favor. So worry about when momentum change changes

“the same forces can push into the opposite direction. But the fact that money comes into these”

index funds does create more more predictability for the market. You don't have the institutional

investors basically in Boston in New York to start even market is over price. Let's pull our

money out. Institutional investors are basically lost control of the process. It's basically collections of not just individual investors but non-traditional institutional investors pushing the market and the rest of the institutional investors is just going along for the right.

“That's what the motor and is the Kirchner family chair and finance education and professor finance”

at NYU's Stone School of Business where he teaches corporate finance and valuation. You can read his research on his blog musings on the markets, Asworth. Thank you for joining us today. This was

a lot of fun into our audience. Thank you for tuning in for the very first live stream that was great.

I would love to do it again. We will see you next time. Appreciate your time Asworth. Thanks Asworth. Thank you. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carthy, our research team is Dan Chalon, Isabella Kinsel, Christina Donahue and Mia Solvario. Jake McPherson is our social producer. Drew Burroughs is our technical director and Catherine Dylan is our executive producer. Thank you for listening to Proftly Markets from Proftly

Media. If you'd like to join our next live stream and sign up for our sub-stack at ProftlyMedia.com. [Music]