Episode 85 | Geopolitics, AI, and Where the Market Goes Next

In Episode 85 of “Market News with Rodney Lake,” Professor Lake, Director of the GW Investment Institute, delivers a broad market update, discussing how geopolitical tensions in the Middle East, interest rate expectations, and mixed jobs data are contributing to market volatility while major indexes remain roughly flat year-to-date. He also explores how AI is reshaping hiring, corporate strategy, and competition among major technology companies and discusses the long-term growth potential of companies like Nvidia. Likewise, Lake argues that future economic growth may be driven by energy expansion, AI, and the space industry, which could allow leading technology companies to become significantly larger over time despite current market uncertainty.

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started. Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. We're coming to you from the George Washington University School of Business.
Duquès Hall, Duquès family studio. This is a GW Investment Institute podcast, not investment advice. Entertainment and educational purposes only. All right. So today's podcast we're going to have an overview of what's going on, a true market check in the market news with Rodney Lake style set up where we're going to go over a little bit of everything.
Because by the way, there's a ton of stuff going on now, this will date the episode, but because things are changing so quickly in the markets, I think it's worth noting, time stamping it. So, this is March 10th, 2026. And what's the biggest news, since one of our last updates? Well, probably that there's a war going on in Iran now.
So I think that that obviously is something that people are very focused on. And the markets have been up and down in reaction to those things. And and so we won't speak specifically about, you know, the updates from the Defense Department. You should watch the news for that. But the market has been reacting in an up and down manner.
You've seen oil go over 100. Now come back down, and, you know, checking in on WTI right now, you know, it's been over $100 and has come back down and the president has made comments, about it and so, but now you're back down to $84, for example. But it got as high as almost $120 a barrel.
And so that that is and that's for the, you know, the front month delivery. So they call it. But if you go out further, that has been, you know, has already had been down already or has been lower rather. And so that's something that's worth noting. Now, the overall market. So let's do a check in on, you know, what's kind of a year to date numbers on some of these, or some of the, you know, indexes right now.
And so if you look at, for example, let's let's first start with the S&P 500, which is, you know, the biggest index of them all. And so the market has been, you know, up and down, in, in reaction to this. But if you look at okay, let's do a year to date through March 10th. And so it's not quite the first quarter yet here.
But you know, the year to date number is kind of flattish, almost. It's it's minus, 4.5% here. And so it's a, you know, 45 basis points down. So kind of flattish for the year so far. And if you consider all of the up and down would say, well, maybe that's not bad, maybe that's not great. But certainly, it's nothing to write home about for return wise.
And so let's check in on the Nasdaq, which is, which is tech heavy, on the year to date numbers there. So if you go to that, the year to date numbers, you know, down actually. And so this is minus 195. So not fantastic year so far for the Nasdaq. Slightly better for the S&P 500. And those are the two big indexes that we talk about all the time.
Now, some of that has been off of the recent news and what's going on, in the markets relative to what's happening in the Middle East and relative to what's specifically happening with Iran. Now, let's check on specifically what's happening today. This is ultra focus, which we don't typically do. And we certainly remember don't like talking about short term type of, you know, gains or losses or anything of that kind because it can be random.
Now, this is in specific mention to what's happening, in the Middle East. So again, March 10th here and today the market is up. And so you had a lot of pressure, over the last few days on the downside. And you had a bounce yesterday. You have another bounce, today. And the Nasdaq is up 58 basis points and the S&P is up 39 basis points.
So I think the market is really trying to figure out at what level does it stabilize? What level is properly pricing and the risk associated with what's happening in Iran? Now again, watch the specific news. This is not a Defense Department update, but from what the Defense Department has been saying is that the the attacks, from the US and having to air, you know, primacy, and also, the level of tax coming the other way, we have been increasing, from the US side, and it's been decreasing from the Israeli side so that that's something or it's not the Israeli side increasing from the U.S and Israeli side and decreasing
from the Iranian side. So if you look at those metrics, it feels like the market's trying to figure out, well, what's happening now. Obviously, blanket statement here. We're not, you know, promoting any of this and suggesting, you know, that we're, you know, pro-war or anything like that just to be super clear at the top of the show here, but we're just trying to understand how the market is reacting to this.
This is an investment show. Just by the way. That's what I said. Watch the Defense Department. But we're just trying to understand, what's going on. So we're not, our sympathies go out to the servicemen and women, especially those that have paid the ultimate price. And to the people involved in this conflict, that said, back to the business part is, you know, the market's reaction to all of this is has been very uneven.
And we're trying to figure out day to day, what's happening with respect to that. Now, you know, interest rates seem like they're going to stay, you know, where they are. If you if you look at what's the prediction for interest rates, they're probably not going to come down. And if you looked at the jobs data and, you know, we've had very uneven jobs data.
So the recent jobs data is far more negative than, than people had anticipated in the prior was far more positive. So you average those out. You get something like, well, probably baseline. And then when we talk about AI, which is a big topic, and we talk about that all the time, but people are trying to figure out, okay, well, is some of this reduction, in the jobs market really the fact that people are not hiring, because they're replacing people, with, with AI.
And I think that continues to be a refrain, at least that's set in the market. Now, is that actually happening? Well, you had one data point, that they said if you listen to block, they announced, ticker is XYZ. We don't own shares in that company at the investment tool in any of our portfolios.
We used to but, you know, they, they announced actually fairly good earnings, good profitability, but they have they had 10,000 people and they said they were going to layoff 40% of the workforce. So about 4000 people. So that's quite a lot of people relative, obviously to the set up, not a lot of people relative to the overall job market.
But if you look at a specific company that says they said specifically that, you know, AI was effectively going to replace that work. And they were looking to use more tools, to promote that even further. Their AI and AI forward, you know, I encourage you to check it out now, whether that's the, you know, exactly the case or not, or it was convenient to do that or or maybe they had too many people to start with.
Right. Jack Dorsey runs back. Maybe they just had too many people, at the 10,000. And this was a way to do it, or this was a way to rationalize it. You know, I don't talk to Jack Dorsey, on the regular, so I don't know, what's in his mind about this, anything more that's publicly available. So, you know, we'll take it for what's in the in the public market there that at least I think this creates pressure.
So when you look at the jobs data and you factor in a data point like that, or you at least think about that, that that's a challenge. Now, on the other side of that, you're seeing that places like Anthropic are hiring, you know, more, software engineers, as an example. So does it mean that the, the nature and the, the distribution of those jobs are going to change?
Very likely the AI will influence that. How does that happen and over what time period? I think it's very challenging to tell, but you can definitely see and again, we've talked about this on other episodes that the companies that are playing to win in the AI game, deploying lots of capital. Remember thinking about Alphabet and Amazon and Microsoft, Nvidia of course, excuse me.
And and Tesla. So you're looking at these companies that are deploying real world AI in some cases. And certainly on the software side. And then you have the frontier models like ChatGPT, Grok, Gemini, and anthropic cloud model. You know, who's going to dominate. You know, certainly there is a there's a mix now trying to understand how how the market, plays out.
Now, how is that is translating to into the overall market. Some of the companies that have been under a lot of pressure are companies like Salesforce. And you've had Marc Benioff on saying that he's seen this before, this the SAS apocalypse that keeps coming. That's never come. But there is pressure on those companies. There's pressure on companies like Salesforce, like Adobe, for example.
And Adobe has been hit pretty hard. So how are companies like that? And we own, some of these companies. And I think we have to really think through, how that's going to work. And, you know, what's the what's the end game for all of that? Are they going to incorporate it more? Is it going to be, really displace them?
I think that's the challenging part. As an investor, business person, analyst, I think it's very challenging for us to really, think that completely through, it and not really have, it's very, you know, I think unclear at this point. What's that going to look like? Because you can't just play it forward, or at least I don't think so.
You can't just play it forward and say, well, look, this is where they are. This is what's going to happen to them. These companies, if they have good management teams, which many of them do, the software companies, they're not going to just stand still. They're not going to do nothing about it. They can reposition. And I think one of the things and we've mentioned this, likely before in other episodes, one thing that is, I think consistently underestimated is the impact of a high quality management team on a business and a business that's changing rapidly.
So I think as a business person, analyst, investor, you should all be thinking about and I'm thinking about, well, what are the management teams that we should be really looking at and thinking about? Well, how are they going to reposition this company now, for example, when we talk about Apple and and certainly I've talked about Apple being slow in the game of AI.
Well, and we'll mention a little bit of Apple news as well here. Maybe, you know, it's been the right position that they've waited. They have not spent all this money building their own AI frontier model and and building out data centers and otherwise. And they've set back and now they're partnering with Gemini. And that's the way to do it.
They keep their customer base. They keep their services revenue. They keep their ecosystem going. They released the iPhone 17, which I have, and it's done better than expected. And it's difficult to it was difficult even until recently, to anticipate how well that that's been working as far as the iPhone 17, turned out. And we'll we don't necessarily know now, but maybe this is a viable strategy for them from here forward to include AI in their ecosystem.
Now they've recently released some additional hardware. So you got the the upgraded M5 chips and now you have this MacBook neo, which is a fairly interesting for the low cost entry model. 599 maybe coming after some of the Chromebooks. So I think that's interesting to watch for Apple. But they've definitely taken a different strategy than I would say some of their mag seven peers.
Now talking about, mag seven, it would be hard to have an episode of Market News with Rodney, like general, without talking about our top holding again, not investment advice, which is Nvidia. And Nvidia still looks like it's in the driver's seat. Now, Nvidia's share price has been all over the place. And you know, they announced earnings and people thought, well, maybe they should have been better.
But they're still very good. So and if you look at Nvidia, again it's March 10th. It's at 185. And, and what's the year to date here. It's down 56 basis points. 0.56% here. A dollar basically then more than a dollar. And so but if you look at the one year number, it still remains quite positive, up 73%.
And and if you look at what's the PE ratio for this, the forward PE ratio is in the 20s. And so it's hard to look at Nvidia and say like well the forward PE ratio on Nvidia in the forward PE ratio on the market are it's only slightly more expensive in Nvidia. So the quality of the business is not, you know, is not that much better than the average business in the S&P 500.
I think it's very challenging to say that now there are lots of risks associated with, trying to understand where Nvidia is going to be in five years, much less ten years, but let's say five years. In the market, caps are already $4.5 trillion. So it's already a very large company. And so the double from here you go to a market cap of, nearly 10 trillion.
Now, one of the things that Jensen Huang has said was CEO and I think fantastic CEO overall. But fantastic CEO for Nvidia and specifically here is that people need to get rid of this idea of how big companies can get in. And I agree with that. And I think this is something that people need to put aside and say, well, you know, you hear this saying that that trees don't grow out of the sky.
But it doesn't mean we just, you know, maybe if you haven't seen a really big tree, if you haven't seen a sequoia before, while redwood, maybe you know the idea, you know that, you know, you've only seen maple trees. You've never seen a sequoia. Well, really throw you off, as far as, like, how to how big a tree can get.
And so I do think, and maybe that's not a great analogy, but in any case, the whole point is, and by the way, these companies are not limited by, by this, you know, physical nature either they can get even bigger and, you know, you could say, as long as the economy continues to grow and certainly as you grow around a few vectors and, which I mentioned, if you're growing on the energy front, what you need to supply all of these things, you're growing on, the AI front, which you need to drive all of this and certainly that's the business that Nvidia is in, in the business that a lot
of these companies are in. And I think the other vector to think about, and we've talked about it on the show, but I'm going to bring it back is the space industry and the data centers and space. And I think you really get to a position where that you're driving a level of compute, that's possible, at a scale that we haven't thought of, which could then drive GDP way higher, especially when you include, as part of the AI, the real world piece.
And so if you're thinking about the vectors energy and if so, if you get lots more solar, on the terrestrial here and on the ground, plus you have solar in space for the data centers. So you're getting towards sort of, you know, several orders of magnitude increase in the energy production, and then associated with AI, which is that second piece or depending on what if you want to put first or second, then you include it in that AI pieces, that real world piece if you include robotics in that when you start driving robotics, then you're not GDP per capita, right?
You're not you're no longer bound by that because you have, lots of robotics. So then when you talk about, well, how big some can some of these companies get? Well, they're not really bound by the same metrics that we're traditionally, that we traditionally used to think of, GDP and the nation in the size of an economy based on the number of people, in this per capita setup.
Because really you have AI plus robotics and, and then you incorporate the energy and then you incorporate, a different place where you can really access, you know, I mean, quite unlimited, but vast amounts of energy and certainly much higher number there than we used to. In space, 24/7 365 when you have solar in space, the GDP numbers can be way bigger.
And so that was a long way to say that Nvidia could easily be a $10 trillion company. Nvidia could easily be, a $20 trillion company. If you start to make progress on some of those metrics towards building an economy that relies on really abundant energy and very low cost AI, both software and real world, and, this idea that you can get some of that done, in low-Earth orbit and possibly beyond, SpaceX is talking about, you know, moving there, you know, sort of center of gravity, so to speak, towards, the moon rather than Mars, to build a base on the moon.
And so you could certainly launch things from the moon into Earth's orbit far easier than you can do it from, from Earth as far as the gravity, and what it takes to get something into orbit. So things will change. And I think that's something that we have to think about now, the rate of change in the pace of change and how those things are done, I think it's difficult to know.
But I do think if you start thinking on those three terms, think about as a business person, investor, and analyst, you know, think about energy, think about AI and think about the space industry. And I think if you think in these terms, it can also help provide context around where, where the market is going and where some of these companies are going.
So for example, if you think back to Nvidia, Nvidia's chips are going to be in these data centers in space. Right. So they're hardening their chips. And we already have lots of satellites in orbit doing all sorts of things. So the idea that, you know, you can't do that, I think is, is it's already been done now specific to the GPUs, there's already been one tested for sure for Nvidia.
But I think you have to harden those chips against radiation and degradation. And obviously you can't service those things easily. And so you have to really or maybe not at all. So you have to really think about that. And I think that changes a little bit of the dynamic. However, when you think along these three vectors again, energy AI space industry, I think your concept of how big the economy can get changes.
And then when you say, well, how does some of these companies fit into that? Well, these companies can be much larger than they are now. So again, Nvidia today, $4.5 trillion could in Nvidia be 10 trillion, 20 trillion I think. So especially as you start to unlock those categories, and you get lower cost deployment, to space, which again, again gives you access to this giant fusion reactor in the sky called the sun.
But that's also you can also put panels, on Earth, to collect those. They get more efficient. Excuse me. So I do think that this concept of being limited to by prior thinking, I think, is something that you have to really, consider and also try to manage yourself. Excuse me.
Taking a sip of water here. All right, so back to the overall market. So where where are we? You know, obviously it's been up and down, for the year. And I think it's been very challenging giving, excuse me, all the things that have been happening, year to date. And so if you really think through all the challenges that, that we've had, all the uncertainty and people love to say, well, the markets are uncertain, they're always uncertain, by the way, that that is the nature of the markets.
I think they're doing relatively okay. And if you look at the fundamentals for the economy, they seem to be relatively okay. Now, we do need to stay tuned for what's happening. On the jobs data, I do think you got to pay close attention to how AI is impacting that jobs data and how that's going to flow through in the market over the next couple of months, over the next couple of years.
So I think it's super important for us, to keep that front of mind, keep that, at the center of what we're at, what we're doing, certainly for our students who are on spring break right now. Our stock pictures will be coming up here at the end of the semester for our Phillips Fund. We're going to see the models for the Quant Fund.
So we're super excited about that. But there's so much happening. It's an exciting time to be following the markets and exciting time, to be in the market. Certainly an exciting time to be learning about the markets. I always encourage our students, you know, this is a great time of AI happening. It's a jump ball. Go out there and learn as much as you can about what's happening with AI, how you can apply that to the investment world, how you can better understand these companies.
So it's a super exciting time to be in the market. Be thinking about the market, being an investor, being a learner, and being an analyst. So I encourage all of you to do the same thing. And with that, that'll wrap this episode of Market News with Rodney Lake and we’ll see you back on the next one.
Thank you.
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