Market Correction or AI Crash? Here's What's Happening

In this episode of Being Exponential, Luke Lango tackles the biggest macro and AI stories driving markets right now: the recent stock market selloff, the surprisingly strong jobs report, growing government interest in frontier AI companies, and the looming possibility of OpenAI and Anthropic IPOs.

We start by breaking down the latest market correction and why AI stocks, semiconductors, and high-growth tech names have come under pressure. Is this the beginning of a larger downturn, or simply a healthy reset after one of the strongest AI-driven rallies in history?

Next, we dive into the latest U.S. jobs report and what it means for the Federal Reserve, interest rates, Treasury yields, and liquidity. With employment remaining resilient, investors are reassessing the timing of future rate cuts—and the implications for AI, tech stocks, and the broader market.

We also explore a rapidly emerging trend: increasing government involvement in frontier AI models. As artificial intelligence becomes a national security priority, could the U.S. government ultimately take stakes in leading AI companies like OpenAI, Anthropic, xAI, and other frontier model developers?

Finally, we discuss the future of OpenAI and Anthropic IPOs. Could these become the most anticipated public offerings since Facebook, Alibaba, or even a future SpaceX IPO? Luke breaks down the investment implications, valuation questions, and why the AI race is increasingly becoming a battle for strategic dominance.

From AI stocks and Federal Reserve policy to OpenAI, Anthropic, jobs data, interest rates, and market volatility, this episode connects the dots across the most important themes shaping the future of investing.

🎧 Subscribe to Being Exponential with Luke Lango for weekly insights on AI investing, tech stocks, macroeconomics, and exponential technologies.

Transcript

SPEAKER_00 0:00

Hello and welcome to Being Exponential. All right, Luke. So the first thing we want to talk about is the elephant in the room. We've seen a major stock sell-off. Some people are pointing towards the not super strong Broadcom earnings report. We also have the jobs report, which we'll be talking about later in the episode. It was strong, so there's fears of rates rising. We even have Iran in the mix, Iran in the mix, creating some um volatility. So can you speak to us about this sell-off? Uh give us some insight there. Is it uh essentially a sale on the stocks that we like, or is this a the first crack in the AI pool thesis?

SPEAKER_01 0:39

Uh fundamentals can evolve, but as of right now, it is absolutely a tactical buying opportunity uh in AI stocks. That I don't think you know you mentioned Broadcom's earnings report. That wasn't it. Broadcom's earnings report was fantastic. Um we talked about in the other podcast um what you had almost 50% revenue growth, almost 80% semiconductor revenue growth, almost 140% AI semiconductor revenue growth, or maybe more than 140% AI semiconductor revenue growth, records uh in all three categories, $30 billion backlog. There is no weakness in there. There's no fucking mental weakness. So I am not seeing any signs of a slowdown in hyperscaler CapEx. I'm not seeing any signs of a slowdown in the AI infrastructure build-out. I follow every headline very, very, very closely. The fundamentals underlying this boom remain very strong. Spending is going up. Companies like Arista Networks are launching new products. Uh, Google and SpaceX are teaming up on new compute. There's more fundraising coming into the space. OpenAI just got their 122 billion, they just filed for an IPO. SpaceX is going to get that 75 billion they're getting in this IPO. Um, so there is fundamentally speaking, no signs of a slowdown emerging. Uh but, but, but, but you have to monitor the other fundamentals that could dictate where that spending goes. If left alone in a vacuum, that spending right now looks like it's going to keep going up. What could derail it? Iran. Um, I think as we were recording this podcast, a headline just hit that Iran shot down an Apache, US Apache helicopter over the Strait of Hormuz, and Trump is saying we have to respond. Okay, well, if we re-escalate over there and oil gets back above 110, 120, and inflation ignites to 5, 6% or higher, uh, that could derail the boom. So we have to watch for that. And it makes sense that stocks would sell off as the odds of that are going up. I would argue that the odds of that are still very low, and rising odds do not mean it's a done deal at all. Uh, and so I would think that it's still a buying opportunity, but we have to be aware of that. What else could derail the boom? Well, I think politics could derail the boom, but I don't think the midterms are going to do much there. I think it, you know, we get a balance of power. Uh, they split down the middle, even if if the left wins uh both chambers of Congress, I still think that that's gonna be okay because the legislative executive branch is still controlled by uh Republicans, and typically, or historically speaking, the stock market does best when you have a split government uh of that nature. So I don't think that risk is something we have to monitor until probably 2028-ish. Early 28. So I think we can kind of not ignore those two, but I don't think the reasons to not buy this dip. Uh and then the third big reason is just this kind of like over-euphoria in the markets right now. That a lot of people are worried that SpaceX at $1.75 trillion makes absolutely no sense. A lot of people are worried that uh that's going to be the top. A lot of people are worried about Jensen Wong, Nvidia CEO coming out and pumping AI stock after AI stock, calling Marvell the next trillion dollar company. And then after that, you know, Qualcomm's a great stock to buy and just all this stuff. So people are worried that there's this over-euphoria in the markets and they're selling into that over-euphoria. Okay. That risk feels a bit more tangible at the current moment, but my argument would be the fundamentals are strengthening in a manner that's supportive of that euphoria. Again, we are every fundamental announcement that I am seeing says, hey, we are going to get more AI spending. The AI infrastructure build out is accelerating, it is not decelerating, it is expanding, it is widening, it is not narrowing. And you want to buy into that. So I really don't see, again, talk about the ERISA networks, uh, new switch launch. We can talk about China, just there's a report that came out that China is going to spend uh nearly $300 billion over the next five years building its own national network of AI data centers. Now that's not really involved in, they're not going to use US uh companies, obviously, but the sovereign compute race is on, right? So that means the US is gonna spend more. There are these talks of the government taking stakes and open AI and anthropic. OpenAI obviously filed for that uh that IPO. Um, Nebius is investing 1.7 billion euros to build out capacity in the UK. AMD just announced plans to invest up to 2 billion euros or 2 billion pounds, sorry, over the next five years in the UK. Uh SKM uh plans to build a gigawatt scale AI cloud in South Korea. So, like all these things, they're just hitting day after day. So long as headlines keep hitting, I really don't see a reason to sell into this panic, but rather a reason to buy uh the dip in this panic.

SPEAKER_00 5:37

Gotcha. Now, I did want to uh mention another uh facet of maybe the sell-off, uh, but another uh facet of the current AI zeitgeist is a company like Uber, they ran out of their anthropic tokens. And uh one of the arguments there, along with you know, Uber running out of the cash for that, is that we haven't actually seen a uh a true profit or a true net positive with work that's done with AI in the economy. Uh, can could you speak to that a little bit?

SPEAKER_01 6:10

Yeah, I think those headlines are stupid. I think it's um the reality is that of course you're gonna blow your budget on the first. I mean, if a new toy comes around, okay, so you buy your kid a new toy, of course the kid is going to play with that toy nonstop every hour, every minute of every hour of every day. He's gonna want to play this new toy because it's an awesome toy. And then you're gonna be like, hey, we gotta gotta re- as a parent, we gotta reel this back. Like you can't, like, we don't want this to be an addiction. Well, that doesn't mean it's not a good toy, it just means that you kind of overdid it a little bit, and then you you dial it back, and then now you find the right amount of time to use that toy. That's this is a toy for corporations. That's what this is. This is a toy, this is their new toy, it's awesome. And so, yeah, they're just blowing their budget on it. Now companies are like, oh, wait, well, we can't spend $500 million a day on tokens, so we're not gonna token max, we're gonna token budget. But what they're gonna do is they're going to token budget, and then once their budgets are in in place, once the guardrails are in place, then they're gonna grow from there, and then it's sustainable growth thereafter. So it's kind of like that that adoption curve where you got that parabolic growth, you peaked out, you come down a little bit, and then you hit the durable growth phase. That's exactly where we're at. We're kind of coming down a little bit in that durable growth phase. So I think those headlines are pretty silly, pretty stupid. And I think that it's actually a sign of secular growth that this is now becoming institutionalized. The fact that Uber is now creating budgets for this is now a line item that's becoming institutionalized. It's becoming part of the budget, part of the workflow. So I think it's actually a bullish signal, not a bearish one. In terms of companies not seeing a net positive, everything I'm reading is that they are seeing a net positive. Um, you know, when you actually go through, you can read these surveys, and that's all people do, right? Is they read these surveys and they think, oh, 42% of companies are not seeing a blah, blah, blah, blah, whatever. No, don't do that. Read the conference calls. Look at what the public companies are reporting, read their conference calls and see what they're saying. Every single conference call I've gone through, whether software or hardware, whether consumer discretionary, consumer staples, whatever it is, they're all saying we're using AI to do X, Y, and Z and it's improving operations. Every single one of them. So I don't, I think those concerns are completely overblown. And then just look at yourself, too. Like my workflow has changed entirely because of AI. I'm sure yours has too, Brooke. And I'm sure a lot of people watching have as well. So just look in the mirror and understand that, yeah, AI is changing my life. So it's probably changing his life and her life and their life and that company's life. It's legitimate. Um, the concerns here are not that. The concerns here are is the stuff in Iran going to escalate and that's going to short circuit consumer spending, which is going to short circuit hyperscaler budget, which is going to short circuit uh the amount of money they can spend on uh the infrastructure billbout. That's a concern. Is politics going to short circuit it? That that's a concern. Um, are we too euphoric at the current moment? That that's a concern. So those are legitimate concerns. This this thing that AI is not showing up or not delivering the results, that's not a concern. That's I mean, that's just bare bullshit, honestly.

SPEAKER_00 9:08

Roger that I appreciate the insight there. Okay, now now considering line items, we uh we have to talk about government potential government stakes in anthropic and uh open AI. I know uh a couple months ago there was some beef between Anthropic and the government due to um privacy security concerns, but now that's changing as Anthropic has become the essentially top dog in terms of the uh AI IPO market. So uh could you speak on on those what those relations could look like in the future?

SPEAKER_01 9:39

Yeah, so this is the open AI comeback story. Um I love anthropic, I think Cloud is great, but there's been a vibe shift uh back to open AI in the last few weeks, I would say. That rate limits on Claude kind of got excessive. There's so many different model types, and in order to like conserve your tokens, you're going down to uh, you know, lower sonnet 4.6, or you're doing the low thinking, not the medium thinking, whatever the heck, right? The low effort, not the medium effort, you turn off thinking like people are doing everything they can to conserve tokens over there. They're kind of like, I'm kind of sick of this token conservation stuff. So they're going back to open AI, they're going back to ChatGPT, who now has 5.5, and you're like, whoa, this model's actually pretty good, and they're not as constraining on the token usage, or at least it doesn't appear so. Um, I've never been rate-limited on Chat GPT, I've been rate-limited so many times on Claude. And so I think there's a vibe shift going back to Chat GPT, absolutely. And then this new news that the government is thinking about taking stakes in Frontier AI labs. Well, they're not gonna take a stake in in SpaceX uh at a $1.75 trillion valuation post-IPO, because that's just not the government's that's not what they do. Um, they're not going to take a stake in anthropic because they don't get along. They're gonna take a stake in open AI. So when Trump comes out and says we've been talking to Frontier AI labs about taking a stake in them, what he really means, the interpretation there is we've been talking to Sam Altman and OpenAI about taking a stake in that company. And so I wouldn't be surprised that you know they just filed the S1 and then the IPO is probably gonna be in the fourth quarter of this year. I wouldn't be surprised between now and then the White House announces a big investment and or the government announces a big investment in open AI. Uh, they don't nationalize it, but it's this kind of industrial policy uh marriage. Uh, and that will significantly increase OpenAI's valuation, obviously, just like it has with all the other companies that the government is taking a stake in. And I think this is a big bullish development for all those pre-IPO plays on Open AI, like Suro Capital SSS. Um, I think that this is a very bullish development for plays like that. I'm still super bullish on anthropic, but I just think that open AI is the big winner of this new news that the White House is considering taking stakes in, Frontier AI labs, because they're not considering it in anthropic. They're not considering it in SpaceX, but they definitely are having discussions with Sam Alman.

SPEAKER_00 12:10

Yeah, I would look would like to talk about those IPOs a little bit more. So now we have the biggest IPOs of all time in SpaceX, Anthropic, and OpenAI. I believe a new term was created for these. I think they're called not unicorns, but kilocorns, because the evaluations are all over a trillion dollars. I believe so, with all three of them now. So uh could you could you dive into um those IPOs? You know, some of the talk we've heard before is that with IPOs like this, we might have a frothy market, but that that doesn't seem to be the case right now.

SPEAKER_01 12:43

Yeah, so you're gonna get SpaceX at 1.75. The betting markets are currently at OpenAI over 1.5, and Anthropic will be right around 1.5 too. So I think when all is said and done, that's 3 trillion, let's call it 2, that's $5 trillion uh in new valuation, new market cap, if you will, hitting the the public markets in the same year. Unprecedented, absolutely unprecedented. What does it say about the markets? Well, I think it's really important to note that IPOs very rarely mark the top. IPOs mark the start of the final few innings. The big IPOs in the dot com boom were in 98 and 99, they weren't in 2000. Smaller companies IPO'd on the heels of those Titans in 2000. But that's how IPOs work. The big dog, the big bulls, they come through the gates first. They open up the gates, and then you get a trickle of smaller ones after that. And by the last one, come by the time the last one comes through the gate, that's when the party is over. So we're actually getting what I think is a floodgates opening moment as opposed to a market top. That's what history would suggest at the very least. Um, and I also think fundamentally it makes a lot of sense because what are these these companies are gonna get this money? They are gonna get this money. You know, SpaceX is going to raise $75 billion, maybe more. Uh OpenAI is gonna raise billions, billions, Anthops gonna raise billions and billions. And what is that money gonna go? They're gonna raise that that cash, and that money is gonna go towards building more compute. So it makes sense. It's a floodgate opening moment for all these frontier AI labs to get all this money and then spend all that money on more compute, which means more networking, which means more memory, which means more uh chips, which means more uh fabrication and more EDA software and all of that stuff, more cooling equipment, more power, more gas turbines, more nuclear. So I just think that these IPOs are much more of a floodgate opening moment than they are a top moment. And I also believe that we're going to get through this choppiness. So we have to get through the SpaceX IPO. Once we get through that, fears will be eased that this is like a topping moment, and then you'll buyers will come back into the market. I think going into the IPO, if we're just kind of nervous, like, is this the top? Is this the top? Is this the top? And once it proves out to be not the top, buyers will come back in and then we'll see this rally resentment. That's kind of my two cents on it.

SPEAKER_00 15:08

Gotcha. Okay, appreciate that. All right, so uh let's round it off on our last topic here. We want to talk about the jobs report that came out last week. So we saw over a hundred and seventy thousand jobs um added and even upward provisions for the past couple of months. This kind of flies in the face of you know, the AI job apocalypse um news that's been happening. So, could you speak more on to that and then, you know, obviously how that affected the markets? We believe that was it was one of the reasons for the sell-off, right?

SPEAKER_01 15:37

Yeah, I mean, I think that they're because of that strong jobs report and other uh accompanying data, there has been a lot of talk recently about how AI may not actually take a lot of jobs because uh they say that AI isn't that useful uh relative to human labor replacement. Again, I think that's uh bare bullshit, but whatever, that's what they're saying. Uh AI is too expensive. That token matching stuff, again, I think that's bare bullshit, but whatever, that's what they're saying. AI is gonna create more work because of Jevin's paradox, also bare bullshit because uh Jevin's paradox just says it's gonna create more work, but if it creates more work for AI, who's gonna be the marginal superior supplier of that work? Is it gonna be AI or humans? It's gonna be AI because you decrease the cost of intelligence, you're gonna produce more work for intelligence. Who's better at doing intelligence work? AI or humans, AI. So it's gonna create an internal feedback loop for Jevon's paradox. So I just think that all the reasons people are stating that it's not going to don't really hold up water. And the fact that we're seeing strong jobs numbers is, you know, it it's just I think the the physical economy is strengthening because we have all these structural supply shortages and power and these structural supply shortages and memory and these structural supply shortages and networking and uh all these components, this physical layer, rare earths, minerals, all that stuff. But those supply shortages will last five to ten years and then they won't exist anymore. Once they don't exist anymore, that labor disappears, or that additional labor, marginal additional labor uh disappears. And then you're left with a world where AI is just so good it is taking jobs. And we are seeing AI taking jobs intelligence, right? Meta, block, Amazon, GitLab, they've all announced a lot of AI-driven layoffs. Uh Challenger, Gray, and Christmas, which is the outplacement firm, uh, they have their monthly job cuts report. And we just got that one last week. That report said that companies cut almost 100,000 jobs in May. That's the biggest May job cut number since May of 2020 at the start of the COVID pandemic. So job cuts are on the rise. Uh, the most cited reason for layoffs was AI. That accounted for about 40% of total job cuts in May. AI-driven job cuts are up to 88,000 this year, which is already up about 60% versus all of 2025. And we're only five months into, or at least in the Challenger report, we only have five months of data so far in 2026. So the first five months of 2026 have seen more AI, 60% more AI layoffs than all 12 months of 2025. So the AI layoffs are here. The fact that you're getting additional labor uh for the physical component of it, that won't last. This will last. Jevon's paradox meet Engels pause. And I think that the AI labor apocalypse is very much real, despite strong jobs reports right now. Those are temporary, in my opinion.

SPEAKER_00 18:26

Again, AI with AI. Uh, any any final remarks here for uh this particular episode, Luke?

SPEAKER_01 18:33

Uh I seldomly quote our president, but I will say don't be a pinician. Right? That's that's that's like his thing, don't be a pinnation or a pinican or whatever the heck you want. I don't know how to pronounce it because I never actually heard him say it, but I see him tweet it all the time. Don't be a pinician. Um, I'm I'm there. I I just fundamentally believe, you know, politics aside, I fundamentally believe that uh you don't need to panic right now. I follow this stuff as closely as about anybody out there. I haven't read a single announcement that makes me fundamentally bearish on the strength, the size, the scope, the speed, or the duration of the AI infrastructure build-out. Like at all, everything I'm reading is bullish. It's more money, more building, more products, more power, more this, more that. It's expansion into other uh bottlenecks, right? So I'm not seeing anything to say this thing's rolling over. There are risks to monitor, like I said, Iran, politics, things like that, but those risks are either far out politics or pretty well mitigated right now. Um, the Iran situation, to where I don't think you gotta you don't you don't factor that too much into the calculation. And then you look at some of the valuations, they're they're pretty compelling across the board in a lot of these infrastructure names. So I think the sell-off is a buying opportunity. I think we're at some pretty attractive technical levels right now. SMX, that van X semiconductor ETF, that 560 to 570 range, up to 580. That's a pretty good support level. I like 550 to 580, let's call it that 550 to 580 is a pretty good support level. I think that's an accumulation zone. I think we bought them somewhere in there and we rebound, and the rally continues once we get through the SpaceX IPO, which is reasonably so, creating top jitters right now. But we'll get through that. And once you get through that, the summer of AI will resume and AI stocks will keep on uh moving higher. Again, fundamentals can evolve and they can change, and I reserve the right to change my opinion if those fundamentals do change. But based on the current situation, the bulk of fundamental evidence strongly suggests the recent selling pressure in AI stocks is nothing more than jitters and a tactical buying opportunity for longer-term investors. My two cents.

SPEAKER_00 20:42

Much appreciated. All right, we'll end it there. Uh, once again, we will be taking your questions in a later episode. Make sure to like, comment, and subscribe. Uh, we thank you for watching. We'll see you uh next week.