Market Emergency just disclosed‼️
Summary
Jeremy provides a sobering analysis of the current state of the AI market, focusing on the rising cost of debt and questionable accounting practices. Jeremy highlights that Oracle's stock has collapsed 45% since June, driven by credit default swap (CDS) spreads that have surged past 200 basis points—levels exceeding the 2008 financial crisis. Jeremy argues that Oracle's massive $100 billion debt load and its recent downgrade to BBB- status make it a high-risk investment. Similarly, Jeremy points to SpaceX's skyrocketing CDS spreads as a sign of investor anxiety regarding the company's aggressive borrowing for AI hardware.
Jeremy also discusses recent revelations concerning OpenAI, noting that its annualized revenue was reported $20 billion lower than previously estimated due to accounting differences. Jeremy warns that if AI leaders like OpenAI and Anthropic cannot sustain high valuations or raise sufficient capital, the entire infrastructure spend benefiting chipmakers could slow down significantly. Jeremy emphasizes that he avoids speculative AI trades, preferring companies with proven business models like Meta and Amazon, which he has held for years.
Finally, Jeremy reacts to perspectives from Wall Street figures like Ray Dalio and Jim Bianco. Jeremy agrees with Dalio that there is "bubbish" activity in the market, even if Jeremy finds Dalio's long-term sentiment overly bearish. Jeremy notes that the bond market's shift to 5% yields represents a "new normal" that will pressure companies needing to refinance debt by 2027. Jeremy identifies Apple as the most stable mega-cap stock because it avoids the risky AI spending race and maintains a massive cash balance.
Mentioned Stocks
Reasoning: Jeremy states that Amazon is a multi-year hold for him, primarily due to its e-commerce business. Jeremy mentions that while AWS benefits from AI, the core reason for his positive outlook is the overall business model and longevity.
Reasoning: Jeremy argues that Meta has a great business model that he has supported since 2018. Jeremy emphasizes that he holds Meta for its fundamental business strength rather than as a speculative play on the AI trade.
Reasoning: Jeremy labels AMD as the 'golden child' of the stock market and expresses confidence in the company's performance over the next 2-3 years. Jeremy maintains a personal position in the stock despite general market volatility in the tech sector.
Reasoning: Jeremy describes Apple as the 'cleanest story' among big tech stocks because it is not overleveraged and does not have the same risky AI infrastructure spending concerns. Jeremy states that Apple's ability to generate massive cash flow and benefit from high interest rates on its cash balance makes it highly attractive to institutional investors.
Reasoning: Jeremy notes that Oracle's stock has crashed 45% and its credit default swaps are blowing out at levels worse than the 2008 financial crisis. Jeremy argues that the company is overloaded with over $100 billion in debt and its BBB- rating puts it just above junk status, making it a dangerous investment.