The Four AI Gates Investors Need To Watch

AI is sucking up the oxygen in markets, but the real question for investors is simpler and tougher: what has to go right for trillions in spending to turn into durable profits? We sit down with Steve Gattuso, CIO at Courier Capital and longtime CFA leader, to map the “AI gates” we’re watching so we can tell the difference between real progress and a story that’s getting ahead of itself.

We dig into the first gate, funding, because even the most profitable hyperscalers may not be able to self-fund capital expenditures at today’s scale without issuing debt, selling stock, or slowing buybacks. From there we move to bottlenecks: chips, materials, engineers, data center construction, power generation, grid upgrades, and even local resistance to new builds. These constraints don’t just affect tech stocks, they ripple through utilities, energy, industrials, and the broader economy, with real implications for short-term inflation and long-term productivity.

Then we tackle the gates that decide who wins: returns on invested capital and willingness to pay. Token costs, enterprise budgets, and consumer price sensitivity can make or break business models, and that uncertainty matters even more when index concentration is high and so many 401(k)s sit inside market cap-weighted funds. We close with a grounded take on timing, risk, and how we think about options hedging as “insurance” when markets price perfection.

If this helped you think more clearly about AI investing, subscribe, share it with a fellow investor, and leave a review. What’s your biggest AI risk: funding, bottlenecks, profitability, or demand?

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Transcript

Welcome And Why AI Dominates

Steve Davenport 0:26

Hello, everybody, and welcome to Skeptic's Guide to Investing. Clem Miller and I are here with our friend from the CFA, Mrs. Steve Gattuso. Steve is the chief investment officer at Courier Capital, a very active CFA member, and a mentor to a great team at Canisius in the CFA Research Challenge. So Steve focuses a lot of his research on government debt and debt in general and how it affects the economy. But today we're going to focus on AI. What are the AI gates or points that we need to discuss so that we can tell when it is going forward well or it is starting to stumble? And then how does that impact the overall economy, investors in the indexes, and just how do we compare this bubble to say the 2000 bubble? So, Steve, welcome. And , I don't think we could have picked a better time because I think there's, you know, while there are bonds going off in the Ukraine and Iran, it seems like the market just wants to talk about one thing, and that's AI. How do you feel about where we are in the market and where we are with AI?

Steve Gattuso 1:49

Yeah, AI has definitely been the dominant theme in markets, not so much in the economy right now, so it's just not having that impact, at least from an implementation standpoint. Where it's having the impact is from a GDP standpoint, and the fact that with a faltering or struggling cons er with inflation,

AI Hype Versus Real Economy

Steve Gattuso 2:13

it's the business investment of AI that's propping up GDP to where it was just upgraded this past first quarter of 2026 to 2.1%. So right now that's driving the economy in terms of the implementation spending, not the actual AI application, if you will. So with all of this, there's there's a lot of there's a lot of riding on AI right now. And I'm thinking currently that markets are a little bit too fixated on AI and the effects and benefits it's gonna have, and the timing of those effects and benefits. Uh, is AI real? Yes, it is real. Uh, but it isn't going to be implemented tomorrow, for one thing. And there's a lot of constraints that would have to be dealt with. The other thing about AI, which separates, you know, a lot of people always look to what they're familiar with. So everyone loves to use the term bubble, and everyone looks back when you say bubble to the dot-com era of the late 90s and the early 2000s. This is different. Uh, it's different in a couple ways. Uh, the AI is real just like the internet was real, but the dot-com bubble proved that the internet and its impact wasn't happening tomorrow. It took some time to develop, and there's winners and losers out of all of it. So the difference here is that where those dot-com type of companies didn't make money, in some cases didn't even have revenue, the hyperscalers are very profitable, and they are they do have a lot of money to throw at this. So it's not like we're investing in pets.com because this is you know Google and this is you know Amazon. These are real companies that are making money. So there is some distinguishment there. But having said that, I think the market is over its skis in terms of expectations and impact. Uh, and to me, I'm looking at the AI and taking a step back and saying, okay, where can this fall down? Because I think the market is kind of pricing this for perfection. Uh, you know, currently, depending on projections that you look at, for this year alone, the hyperscalers are expected to spend $650 to $700 billion on AI. That is roughly 2% of GDP. And the last time, I read this somewhere, last time we had a theme that was invested that took up that much of GDP was the Louisiana Purchase. So that's kind of the scale from an economic standpoint that we're looking at this in. So there's a lot riding on it. And I always sit and ask, what can go wrong? Or where can it be delayed? Or, you know, what kind of hurdles do we have to get through? Uh, and that's where I've come up with these gates that that I'm watching. Uh, the first one is funding all of that. So projections are by the hyperscalers, not only are they spending 700 billion this year, but roughly the same amount or more for the next two or three years. So you're talking about a couple of trillion dollars, you know, up to three being spent on this theme of AI.

Gate One Funding Trillions

Steve Gattuso 5:51

And what's interesting about this theme as well is that it crosses sectors. Everyone connects it to technology only, to IT. And yes, if you're looking at Google, okay, or if you're looking at IBM or Microsoft, yeah, those are your traditional, you know, a couple of those are tech companies. But it also goes into communication services, something like Meta. It also goes into construction, like with something like Caterpillar and building data centers out. It goes to power and utilities that are necessary to power the data center. So this definitely crosses themes, even or crosses sectors, even something like cooling, where carrier and train are affected. So this is interesting to look at it as a theme instead of just sectors or companies. So what's the first gate? To me, it's the funding. Uh, $650 billion, as much free cash flow as companies like Google and Amazon and Apple generate, even they don't have the money to self-fund this kind of investment AI. And you're seeing that being played out right now in the fact that Amazon just floated $25 billion of bonds to fund the AI. Uh, we had Google come up with another equity offering to dilute current shareholders again to raise money to spend on AI. And even part of what I'll put in the bucket of funding is everyone's worried about what happens with jobs once AI is applied. I'm saying don't look at it being applied, it's already affecting jobs in the funding and implementation because you saw Microsoft just laid off employees this week. There's been a n ber of layoffs and hirings that they didn't go forward with, other all of these companies, because they're funding their AI. So you're already seeing job impacts, and it's the fact that there's not too many layoffs, but there's certainly people that are not being hired that would have been, like programmers, etc., , because they're saving the money to spend on AI implementation. So when you start to see Google and Amazon and these money makers hand over fist saying we don't have enough money to do the CapEx that we're talking about, and they're going out to the capital markets to raise funds either through debt or equity, you got a funding issue you got to worry about. To me, the canary and the coal mine are companies like Oracle who don't have that kind of free cash flow. Where are they going to get the money to spend on CapEx? So funding is the first gate. And you're starting to see, again, a few cracks in that foundation. The next thing I see is as a gate, is even if you have all the money in the world to throw at this, there are bottlenecks and constraints, whether they be h an or material, that are going to prevent things like data centers from being built out at the scale that is being projected in terms of timing. Uh, there's

Gate Two Bottlenecks And Pushback

Steve Gattuso 9:19

only so much copper and al that we have access to to build out the data centers. There's only so many engineers that are available to design the data centers. So I think we also have , as a second gate, bottlenecks and constraints, whether they be h an or material. Um, you're even seeing, and I'll throw this in that bucket too, regulatory issues. You know, you're getting a lot of NIMBY's right now, not in my backyard, right? People don't want the data centers. So now is that gonna slow things down? I think it was Maine a couple weeks ago that said no data centers in our state. Um, so once you start to see this kind of resistance, that's gonna slow things down a little bit more in terms of build-out. So I think you've got that as a gate. Uh, did you want me to go on? Or no, I'll go on. No, I'd like to then we can talk about it. Um I think the third gate is the fact that we're not gonna have everybody being a winner. There's gonna be winners and there's gonna be losers. Not everyone's gonna win in this. So there's gonna be a shakeout, and that shakeout's gonna come from who's gonna be profitable. If we're spending trillions and billions of dollars at a company level or even at

Gates Three And Four Returns

Steve Gattuso 10:45

a you know whole economy level, there's got to be a return on that. So when you know Google and Amazon and Microsoft talk about spending all these billions of dollars on AI, what is the realistic return on that? That's a lot of money to be throwing in a project, and you're gonna have to have you know positive net present value on this. And is it gonna be the same as the weighted average cost of capital, or is it gonna be even be the same as the project you have in place now? So the question becomes what's the effect of profitability on these companies, which is gonna help with that shakeout and the winners and the losers. You know, if if there's companies that spend a lot of money and they just don't see the return because they're in the wrong spot, , that's gonna be an existential issue for some of these companies, most likely. You know, think Oracle again. Um and in order to be profitable, the last gate I see is you've got to have people wanting to spend money on it. And the question is, who's gonna pay for all these tokens? Understand, I understand that the cost of tokens are supposed to come down, but if I separate this into enterprise application and personal use application, I'll take the personal use application first. You know, you and and I'll take a simple example. You and I have Google available to us for free. We can go Google something anytime we want to search for it. Are you going to want to pay to upgrade that to a Claude search or a Gemini search if you have to pay for it? Most, I'd say most personal use of AI, n ber one, it's coming to it for free right now. And n ber two, I don't think many people would be willing to pay for that. Um, I have one friend of mine who did the lowest-tiered version of paid chat GTT, and he gets an allotment of tokens per month. He used up the allotment in the first nine days. He said, I'm not paying for anymore. So I think you've you've got that issue too. Not to mention, as a side note, the the ethical use of that is you know how much power generation is required to do a simple search on Google versus how much power generation is required to do that same search and using an AI tool, right? A large language model. It's a much greater power usage. So I'm not sure if your average person has enough need for AI as just personal use to want to pay for it. When you talk about enterprise, I can see the cost justification there. If I'm a pharmaceutical and I can cut my research time down by a year for a new drug by paying for AI, I'm gonna pay for it. But you're even seeing some resistance now in the cost of AI. If we remember a couple of months ago, Uber said that they were gonna limit the use of AI tokens in their employees because they're just spending too much money on it. So I think you know that's gonna be an industry by industry, company by company thing is how much are you gonna be willing to pay for AI in use by your employees? Um, because that's gonna be, you know, an expense once it goes that way for these companies. Hey, if it reduces headcount and it can justify it that way, I get it. You know, if I only need three programmers instead of five because AI saves me the cost of two, I'm willing to spend some money on it. But I think someone like Uber, I don't even know what they use AI for. So it's gonna be interesting to see who's gonna be willing to pay both on an enterprise and a personal level and who's not. So those are my four gates that I'm kind of watching in terms of the implementation, application, and timing of AI.

Steve Davenport 15:14

Yeah, I mean, I I just can't get past the first item, which is capital. Um, to me, that n ber, McKinsey estimated that by 2030, the capital investment for AI is going to be 5.2 trillion. And so, as you said, if you invest 5.2 trillion and you're a hyperscaler or you, you know, your expected growth rate is not like a utility where you just have to cover the 4% to 5%. Your expected

Capital Scale Inflation And Streaming Parallel

Steve Davenport 15:46

return on that is not going to be normal, it's going to be supernormal. So we say, okay, how do we get to you know a 20% return, a trillion dollars? Um, you know, you have to add up a lot of users at $13.99 a month.

Steve Gattuso 16:04

Exactly.

Steve Davenport 16:05

And so to me, you know, when you compare it to the railroads, you compare it to the internet, you compare it to the highway system, and that capital investment is greater than all those combined. I look at it and say, what do we even invest? Like, then we look at it and say, okay, I'm making a capital investment, and I'm gonna probably instigate layoffs that are gonna have an impact that's negative on the economy. I'm going to have a shakeout, which means that some of these companies aren't going to do very well, and that's gonna have a negative impact on the economy. Exactly. And I look at the first instance of this being the driverless car and say, this is a tremendous change. If we had driverless cabs, what would that mean? It would mean hundreds and hundreds of thousands of layoffs, and the people would not necessarily be like, oh, okay, he's a programmer, he's capable, he can go do something. Like, what are the backups for for people who are driving taxis? It's not like there's, you know, hey, I really love those driving skills, I can use them over here in my testing, you know, , full speed software on you know, gaming. Exactly. There just isn't. And so as governments and as organizations, I look at our national debt and I say, can we afford to have these layoffs? Can we afford to, you know, have this impact on the economy? Because I know from our past talks that we we don't have a lot of extra room now that rates are four percent or a half percent. I mean, is AI gonna be deflationary or inflationary? Because that's to me, if it's an inflationary item, then maybe we we somehow spend our way out of this. But if it's deflationary, then how do you know that lowers our rates for some of these things, but it also means the economy's really gonna be slow.

Steve Gattuso 18:22

Yeah, in in the short term, recent news have proven that it's inflationary. You look at what's happening with Micron, they can charge anything they want for their chips, and the hyperscalers are paying for it because that's one of the bottlenecks, right? That I talked about. That's gate two, the bottleneck. Um, and you know, we just saw last week that Apple is raising the price by $200 on their iPads, and the price increase is coming on the iPhone, all because the chips are more expensive. And we saw the Microsoft increase the price of Xbox for the same reason. So, right now, in the short term, it's inflationary because all this money is being thrown at it, and people like Micron can charge what they want for their chips. Uh, long term, who knows? We don't know yet. Um, and I think there's a societal issue that you brought up too is what's gonna happen from an employment perspective in lower skilled employee you know people, citizens, where are they gonna go? Um so there's been talk of universal basic income and everything, but that's a more that's a longer-term problem. It's it's the same. And you're right, it's it's the scale of this right now. I I draw a comparison a little bit to streaming. Before COVID, streaming was an industry where everyone was getting into it, they didn't care what they spent, spend all the money you want on content. The subscription fees weren't very much because they just wanted eyeballs on their on their product, they wanted subscriber n bers up, and then COVID kind of extended that a little bit because we were all sitting home, we had nothing to do but watch streaming services. But after COVID, the streamers said, hmm, we spent a lot of money on this. We need to make money on it too. So what they started doing was charging more. Think about Netflix, right? Charging more for the product and increasing the price rapidly to make that money. They started tiering the services as well, , which was what we see already in in AI tokens. And they started cutting back on the capex, which was content creation, because they couldn't spend that much money on it. I think that's kind of where we are a little bit with AI. Right now we're in that phase where they're spending money on it and no one's asking questions. We have yet to get to the point where they'll they'll look at it and say, hmm, we spend a lot of money on this. How are we going to make it back? How are we gonna make a return on it? So at a you know, it's a much different scale, but I I see a parallel to the streamers. And eventually, like we're seeing right now, there's consolidation in the streamers because there were winners and losers, and you know, it it some of them are struggling. So I I kind of see that same pattern right now.

Clem Miller 21:10

So Steve, , Steve and Steve. Uh I got four things I I wrote down here as you were talking, Steve, , that covers a little bit of territory, but I'll just go through them. So, first of all, you know, it seems to me that over time this power issue is going to be resolved because we're gonna see increasing power efficiency. Uh you already

Buybacks Slow Dilution Rises

Clem Miller 21:42

saw what was happening or what is happening in China with DeepSeq, you know, creating greater power efficiencies for AI. So I have a feeling, you know, maybe maybe it's maybe it's too optimistic to say that the power issue will be resolved anytime soon, but I think there's going to be a lot of effort made by industry to try to resolve power efficiencies. That's the first thing I wanted to say. Uh second thing I wanted to say is that on this whole issue of is it inflationary or deflationary, I just wanted to note that Kevin Warsh is on record as saying he thinks it's deflationary. Um now I know that comes from a long range of research about innovation, right? Which says that innovation overall is deflationary. So we'll see if that also plays out with AI. Uh the third thing I wanted to mention was that and you What you said about stock dilution got me to thinking. You know, a lot of the returns on companies like Apple, you know, companies that have not, Google that have not been paying dividends, right? Uh, well, Apple has paid dividends, but a lot of companies in that space either pay you know little in dividends or they pay no dividends at all. But a lot of this the return to investors has been through stock buybacks. Right. And so if companies are moving from a stock buyback regime to a stock shared dilution, dilution, not dilute, maybe dilution is the right word, to a shared dilution regime, , that's gonna that's not gonna help investors. It's gonna hurt investors. Right. And then the fourth thing I wanted to mention is that you know, all of this increase in the market cap of these top 10, top 12 you know, mega cap tech invest stocks is not good for passive investing as a whole. Right? Right. Uh so passive investors, you know, those who are investing in the SPY or the QQQ, , you know, these guys are gonna, these investors are gonna get hurt big time if that if these stocks start to fall. And so I think there's a there's a role here for active investing in you know in the whole sphere. And I don't necessarily mean active investing only in tech. I mean active investing sort of across the board. Right.

Steve Gattuso 24:23

So no, I I agree with all four of those, and I'll quickly address each of them. The the power, I agree with you that that'll be solved, but it's gonna take some of that investment money that we're talking about, , because you're going to either, you know, let's say it's nuclear, you're gonna have to invest and build these nuclear plants, right, for power, or whatever the source is. Um getting back to what Steve said a moment ago, there's gonna be a government spend involved here as well, , because you got to upgrade the infrastructure necessary to transmit all this power, , is another thing. And bringing that back to inflation a little bit in the short term, again, as utility companies have to spend money on these, that increases power rates to cons ers. Uh, so again, short term, and just like everything else you mentioned, whether it was railroad or you know, internet, in the beginning, there was a large one-time investment that was necessary to eventually become deflationary. Um, and I think that's where we are with AI. And whether it's power, whether it's the data center builds, there's this massive initial outlay to set up the infrastructure altogether for that to happen. So that kind of plays into you know your second point. Is it deflationary? Yeah, probably eventually, but at least not right now. Um and then your third point, what were you talking about again? The third point? Uh dilution, the dilution. Yeah, that was their first source of money for the CapEx, is that they slowed down the buybacks, and even that wasn't enough. So now that's where they're going to the capital markets through debt or equity saying we need more money. Um, so yeah, the buybacks have certainly slowed down. Um, and that was their first source of self-funding. Um, they found that wasn't enough. And then the the fourth piece is interesting too, because most people are investing in indices through their 401k and probably aren't even aware of the concentration issues they have. So I agree with you where that's where a professional employing the concepts of diversification and understanding correlations a bit would certainly help. Is it going to save anybody from side skirting this whole thing? No, everyone's going to be impacted, but it will certainly be an incremental help to be active.

Steve Davenport 27:00

Yeah. I mean, one of the items that I keep going back to is this investment in capital. And so one of the interesting items that I don't think anybody is addressing is this idea that these chips need to be replaced every two or three years. When we built the internet, when we built the highways, when we built the railroad, we didn't have to rebuild them in two or three years.

unknown 27:21

Right.

Steve Davenport 27:22

So when we talk about the capital outlays and going to 2030, I think it misses the fact that there's going to be a continual capital outlay that's going to be required to maintain the top. Like right now, we have, and this is an internet, you know, a six-month lead on China and in AI development of our bots. And I'm like, okay, I don't know if it's six months, I don't know if it's seven months. But all I'm saying is, how do we continue to have that advantage? Because once we don't have the advantage, you know, we're going to have to break down the walls and say, hey, company A, I'm located in, you know, Indonesia. I'm not going to worry about China and I'm going to take their, you know, and then does that mean that all of their systems are suddenly compromised? Because is there going to be a little trailer on some of those AI chips that's going to, hey, you know, this this query, you know, impacts the defense capabilities of China. It's, you know, they're they're asking questions about our capability. And I look at that cash flow question, and someone always told me, go go to the cash. When you want to really see what's happening, see what they're spending on and how they're spending. So I look at this and I think that this could be much bigger than what happened in 2000. In 2000, it was a technology sector growth and explosion. And now we've seen an explosion in utilities, and explode, you know, we've seen energy and all these other spaces going up. And then I look at the top 10 names and say, okay, the top 10 names represent $45 trillion in market cap. So if they go down 20%, that's $9 trillion in value that's going to come out of index funds, individual holdings, people in other industries besides tech. So this is really a much more broadly invested decision that all of these companies have made. And I understand they have good cash flows, but the way that you change that is to put money into something that doesn't have a good return. And I've yet to see people tell me here's the return we're going to get from individuals, here's the return we're going to get from corporations. Show me what we're going to do, and then I'll say, okay, I think you're investing better with your capital. Then, you know, Google, you're doing a better job than, you know, I like I like your bot better. And but all this talk, all this emphasis on AI, it isn't really, in my mind, doing us much good. Do you both do you agree?

Steve Gattuso 30:19

Right. And you know, there's so many things we've touched upon here so far that we can drill down into, , that being one of them as well. Uh, and I see this in our discussion here as kind of just an overview, an awareness, if you will, not exactly, you know, drilling down a little bit more. But you're exactly right. And in what you brought up, whether it was the railroads, whether it was the highways, , you know, at least those two, those were physical investments. Once you lay down a railroad, it's there forever. You got to maintain it, but it's there. Same thing with a road, right? You maintain it, it's there. Um, but you're right, with the intellectual capital in what is AI, , you know, it goes back to some physical when you're talking about chips and stuff, but you're right, it can't it requires constant evolution, constant reinvestment for the next generation of technology. So you're right, there is a kind of a vicious cycle around that way.

Steve Davenport 31:17

And then my last thing is about the investor, because we're really trying to help improve and educate the investor, actually. So I look at this and say, are the investors today in 2025 and six, are they better prepared to evaluate AI than the people in 2008 were to evaluate a housing crisis, or in 2000 were to evaluate the internet? I I don't know if the, and this is, you know, I look at investor education and I say it starts with the media,

Investor Readiness Index Concentration Risk

Steve Davenport 31:49

because the media is talking to the investor every day. Is the media doing a better job of evaluating the risks and rewards of AI than the media did in 2000? I mean, what do you think? Do you think we're smarter as investors? I mean, I think you're probably smarter and Clem's probably smarter than they were in 2000 because they have 25 years worth of. But I'm saying the average Joe who has an accountant Ramin Otter has an account at Schwab, are they better prepared by today's world than they were in 2000 for this?

Steve Gattuso 32:28

No, and I think in some cases you can argue maybe worse, because social media and not only mainstream media, social media has promoted the sound bite and the themes, and now AI is everywhere, right? I gotta be invested in AI. I don't know what it is, but I gotta be invested in it because I hear it all over the place. I think that creates some hype in it, to be honest. So I think you can make an arg ent that we're in a worse situation than we are now, especially when you consider the financial literacy of the average American. Um, so that that's one thing as far as that goes. Um, the other thing that goes with it, where I think the situation is a little bit worse, is that with the proliferation of target date funds in 401ks, we've got a lot more assets swimming in index products right now than we did even 25 years ago. Um, so I think the impact is even greater. And you ask your average person in their 401k sitting in a target day fund, that's one ticker. They have no idea what is underneath that, not at the asset level in terms of asset class, not at the sector level, and certainly not at the individual company level.

Steve Davenport 33:47

Yeah, that's what I really worry about, is that people are gonna see their accounts, you know, blasted if there's a 20% decline or 30% decline in these things, which wouldn't be unusual for a correction. No, exactly. Because we've gotten so concentrated, right? It's it's gonna have a much broader. And then people, you know, I I I don't know, can can we make an arg ent that indexes aren't safe as a fiduciary? You you know, are we gonna still say, like we did with fixed income, that yeah, I know you're not keeping up with inflation, but we still think you should invest in fixed income. Should we still invest in indexes the same way?

Steve Gattuso 34:27

I think you know, it depends on the index, of course, but everyone puts this special moniker on an index, as we know, and but the average investor doesn't. Any index is just a committee of people sitting around table and saying, Yeah, we're gonna include that one and we're gonna exclude that one. Look at SpaceX, right? All the hype around that, that's not a profitable company right now. We know that all of its stock price is predicated on future revenues and earnings, yet it's gonna be added to NASDAQ. So if the index is built with proper safeguards, it's a little bit better, but it can't help, you know, any market cap-weighted index is going to have that vulnerability that you've got concentration issues, and we haven't had concentration issues in the SP 500, like we've got right now, in terms of the concentration of percentage of the index on so few companies. So I do think that creates risk. Do most people understand that risk? No. Um, does your your average fiduciary advisor understand that risk? Most likely, yes. But now, you know, like I've seen, you're under the pressure of the client to say, hey, how come I'm not more invested in AI? Because look at the returns so far. So again, you get back to the hype and you get back to the the media, and people feel they need to have that same representation as the end.

Steve Davenport 36:01

I think we have time for one more question or topic, and this is, I know, kind of conjecture, but when you look at this and you look at tops in markets and you look at different variables of how many times the GDP of the US, the market cap of the companies represent, and the buffet measures, and some of these other measures, I mean, does this look like something that's gonna last for three months, six months, twelve months? I mean, I'm trying to help protect clients

Hedging Timing The Bubble And Wrap

Steve Davenport 36:33

and I'm using options, and I need you two guys to tell me, Steve, if you buy protection through September, January, or next June, your your puts are gonna make money and you're gonna be a very successful advisor because you protected your clients from a big downside. Can you guys just give me the if you can't give me the easy answer on the podcast, can you just text me the information so that I can you know use you as the the source of my you know great ideas?

Steve Gattuso 37:08

Yeah, yeah. I mean, I use that in client accounts as well in a case-by-case basis for protection, and I explain to them as buying insurance. I don't know when your house is going to start on fire, but you still have insurance on the house in case it starts on fire. Um so I you know I look at it from that perspective. Timing it out, as we all know, is a kind of a fool's errand, right? We just don't know. Um you weren't supposed to call me a fool.

Steve Davenport 37:37

I think you just say a spurious.

Steve Gattuso 37:41

I didn't say you were a fool, I just said that is a fool's errand and trying to time it up. Um, I think you look at signs, right? Is to me, is as long as the hyperscalers or the next couple years have the money to spend on this, then it's hard to say it's going to retract in the time that they're spending the money on it. So I'd say in the short term, , you know, nothing dramatic in terms of the reckoning of it, but as we know, this is all volatile. They we've seen what happened in 2022, we saw what happened last year, we saw what happened this year. If I do have option strategies on individual companies in my client portfolios, there's going to be a time where I'm going to be in the black on that option. Now, as long as I'm actively managing that, I could sell it, reap that reward, reset the option, right? And pocket some money. So there'll be times for that. But if you're saying, is this going to be the time when you know the home market goes down 20% and stays there because we finally come to a realization AI, that's going to be tough.

Steve Davenport 38:54

Do you have a time frame from what do you think of this bubble, or how do you look at it?

Clem Miller 39:01

I think it's going to be a gradual deflation of the bubble. I don't think it's going to be a big burst. And I think part of that has to do with the the power efficiencies that I was talking about. Um right now, clearly the market's looking super long term, and I think that will retract some as more information becomes available. And I think that's what's going to lead to the deflation of the bubble. But I'm not thinking that we're gonna see any big burst of the bubble. Right. Yeah, I I just I think I think overall this expansion is just getting people don't even talk about expansion being long on the tooth anymore because the expansion's been so long. Um but I I I think that you know, I think we're sort of overdue for some large drop in the market, and that's why I from from whatever reason, whether it's AI or something else. And and so that's why I'm a little bit more conservative right now.

Speaker 2 40:16

At some point, there has to be a mean reversion. And we've gone too far too long, like you say, with extraordinary returns on the positive side. Correct.

Steve Davenport 40:29

Yeah, I mean, I want to give you the last words, Steve. Do you have anything else to say before we sign off?

Steve Gattuso 40:34

Um just that this is a good topic to bring awareness on because again, I think the hype it's not exactly tulip mania yet, but it it's heading in that direction. So I think to be fair and balanced, bringing up the risks with this is an appropriate thing to do. And , you know, glad to talk in the future here about any implications or deep dive on any of the topics that we talked about here, but I think this it deserves more exploration.

Steve Davenport 41:03

Thanks, Phoebe. I appreciate your insights and Clem, as always, enjoyed. Listeners, please let us know what you like and don't like. Give us a th bs up, make some recommendations and ideas you'd like us to cover. Um, but otherwise, have a great weekend, everybody, and thanks for listening to Skeptic's Guide to Investing.

Steve Gattuso 41:23

Always a pleasure to join you guys.

Steve Davenport 41:25

Thanks. Thanks, Steve. Bye.