'Deadly Combination' Triggered For Stocks, 'Bitcoin Is Finished' Warns Economist | David Woo
Summary
AI Breakdown: Guest argues the AI trade is stalling as markets now punish higher AI capex, signaling doubts about ROI and hyperscalers’ spending discipline.
Hyperscalers & Capex: Amazon’s larger-than-expected capex and similar moves at Google are seen as market-share defense (prisoner’s dilemma) rather than value creation, pressuring AMZN and GOOGL.
Software Risk: New AI agents (e.g., Anthropic) spook application software/SaaS, reinforcing a bearish stance on the Application Software sub-industry and broader tech.
Semiconductors: Memory-driven PC cost inflation and weaker PC demand create headwinds for AMD and especially INTC, while the semiconductor cycle looks stretched.
Digital Ads: OpenAI’s move into ads targets Google’s core revenue, prompting a costly ad war; the guest expects value destruction across Digital Advertising rather than clear winners, weighing on GOOGL.
Gold Thesis: Despite short-term downside with equities, the guest remains bullish on Gold as the only true portfolio hedge, expecting central bank buying to support prices at lower levels.
Macro & Rates: Lower growth and higher real rates, plus a more constrained Fed, are seen as a bearish setup for risk assets and the broader Information Technology complex.
Regional Allocation: The guest is long India, citing strong growth, underperformance versus AI-heavy markets, and improving trade ties, positioning India as a preferred regional exposure.
Transcript
something changed and I'll tell you exactly what changed. Lower growth and higher rates, you know, that that's a deadly combination for the stock market. The fact that we've seen a breakdown is a clearest sign that the market finally gets the joke. Are we back in that area where bad news is good news and good news is just nobody cares. Volatility is picking up across the board today on the 12th of February as stocks. The S&P 500 is down 1%. The NASDAQ's down 1.5%. Gold's down 2 and a.5% which is a lot for the yellow metal in one trading day. Bitcoin is down 1% back down to $65,000. And uh we're going to find out what's next. Is this the end of the AI trade? Are markets rotating into another asset? What's going to survive the coming storm? David Woo is joining us today. He's returning to give us his outlook for what's next for the markets and the economy. David Woo is the founder of David Woo Unbound. Check out his channel and his work links down below. And previously, he was head of global rates in FX and emerging markets at the Bank of America. Dave, welcome back to the show. Last time we spoke, you were short the NASDAQ where you maintained a bearish position. Um, it's since basically traded sideways, a lot of volatility in the precious metals, which we can talk about, but are you selling stocks right now? Uh, we're at almost 7,000 points on the S&P not too long ago. It's now back down to 6,800. and people are concerned about uncertainty ahead. What's your take? >> Yeah, I'm definitely a seller. I think here I mean still I think last week for me was a huge week. I mean in a sense that I sort of feel that something changed and I'll tell you exactly what changed. If you think about this, right? I mean we've been trading AI for much of the last three years, right? Since Chachi DP was launched, whatever it was in November 2022, the market has been trading AI. I mean sure I mean recently people have been rotating out of AI into consumer discretionary staples or industrials but generally speaking we're trading AI one with the other right I mean the point here is this in most of the last three years okay the AI trade has been driven by one thing which is AI capex right I mean higher AI capex higher the AI trade you know that was the one correlation that was basically was definitive. That was the hallmark of the entire AI trade which was on the assumption and there were two assumptions underpinning this whole this this positive correlation between the AI trade AI capex which is the idea that investors said well you know listen surely the hyperscalers know better about the monetiz monetizability of of AI than everybody else. And two, people figure that you know what the more money that you know these companies going to be investing in AI is because you know they see higher expected return on investment. So all that is great and well and so on so forth until basically this earning season because everything's changed. I don't have to tell you the big story for me the biggest story of the last month is the fact that investors have decided to punish okay higher AI capex spending whether it's Microsoft Amazon Google F what when whenever a company came up with a bigger okay basically increase in guidance in terms of capback spending the stock basically got smashed and I think this is very very important this breakdown in the AI trade AI capex correlation signals a fundamental I think reassessment by the market about what AI is all about and then it's something that I talked about in my last interview with you which I think so far it's been validated which is telling me the market understands that if companies are spending more on AI capex it may be because everything that goes into building a data center is getting more expensive. So from that point of view first of all the fact that they're spending more doesn't mean that they're going to be getting more. In fact, they could very well be getting less. The second thing is that markets starting to understand that the encapex spending made by the hyperskillers is not out of greed but out of fear. Actually, it's not that they necessarily see a pot of gold at the end of the rainbow, but rather they think if there is a pot of gold there that, you know, they will be a big loser unless they're the first one to get there. So from that point of view, I think the I think the way the market has been trading tells me that you know the AI trade is in trouble especially given the fact I don't to tell you I mean since October the AI trade has gone nowhere. NASDAQ has been flat and in fact actually this has actually happened three other times since the I mean what since 2020 which is after a surge the market goes high sideway for a while and guess what in all three instances you know the AI trade blew up or rather NASDAQ corrected you know and then so from that point of view I sort of feel like you know the market is in trouble because and it's difficult for the market to go higher and if it cannot go higher [laughter] it can only go lower. Why is it difficult for what we're going into now? >> Difficult for the market to go higher because earnings are going to be reduced. Why? Valuations are stretched. Why? >> If you look at actually just the earnings story, I mean, if you think about the even if you just look at the combined, we haven't got the Nvidia numbers yet. But if you look at the other magnificent seven, if you look at the earnings growth year on year and it take a four quarter moving average just to smooth out the volatility, guess what? It's slowing. It's been slowing for a while. So from that point of view, not only the momentum behind the AI trade is slowing, but earnings growth is slowing. And I just told you if higher capex doesn't do the trick, if markets now sees higher capex as a problem for AI trade, then guess what? What are you going to be trading on? Because there is no question that revenue is not picking up. And this is the big story. The big story what we discover now is that you know what the fact that open AI wants to now basically show ads in charge GPT something that sin said that he hated the idea that he hated only two years ago tells me that clearly open AAI is struggling to ramp up pay subscription that's the bottom line the bottom line here is that you know what the revenue growth at these places remain very slow and you know Because guess what? Because the free version of AI is getting better and better. And there is no better free version of AI than guess what the AI mode in Google search which practically does everything you most people need from AI anyway. So I think from that point of view this is going to get very interesting because actually open AAI by going by starting to show ads you know this is what started this week right that's the big story this week that open AAI is starting to show ads in chat GBT this is going to that means that they're now going after the advertising revenue of Google which accounts for 70% 70 to 75% of Google's basically total revenue but what do you think Google is going to Google is going to say, you know what, let's make the free version of AI even better, which is going to further cannibalize the ability of open AI to actually pick up subscription. So, what I'm telling you is that the coming battle over digital ads is going to be a big AI killer because nobody's going to make any money, which has been my premise all along. >> Before we continue with the video, I want to talk about a very interesting gold company. 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Learn more about the company by clicking on the link in the description down below or scan the QR code here. Interesting. Maybe there could just be a simple market rotation right now happening. This is an article from CNBC part published last week. David market rotation investors are buying sorry are selling 21st century innovators to buy 19th century businesses. Basically the summary of this video with this article rather is that there's a rotation from high-tech companies into materials industrials and miners. And if we take a look at what's been happening with the I uh IYM, which is the uh shares materials ETF, that's up about well, let's just take a year to date. That's up 19% year to date versus the NASDAQ's negative 2.28. And let's just compare GDX, which is the Van Gold Miners ETF. I don't have to tell you how well gold's done. That's up another 18% as well. And you know markets are up but uh some markets more than others and this is one example. David what do you think about this rotation? >> I think let me tell you this this rotation in my view is definitely I I think it's literally like I I I I'm fading it as well and I'll tell you why. Okay. What is the rotation? the rotation that we've you know if you look at the best performing sectors and assets year to date what we're talking about small cap Russell 2000 high yield credit okay you're looking at whatever copper industrial metals you're looking at um em equities they've done extremely well I mean let me tell you this all these sectors all these markets are what I call early cycle winners right these happen to be very high beta growth proxies that tend to do well at the beginning of an economic expansion. Let me tell you, we can debate where we are in econ in in in in the business cycle right now. The only question is how late we are in the cycle. So why are people suddenly piling into early cycle winners? I think there's only one very straightforward explanation because everybody thinks that Donald Trump because we're approaching a midterm election that Trump is going to throw the kitchen sink at the economy and we're going to get more stimulus. What the market doesn't get and perhaps only slowly now is that you know what yeah worsh is second Trump's second choice. You know why? Why did Trump go with worsh in the end as opposed to hassid? Because Trump understands that he cannot bend the Federal Reserve to his will. And why is that? Because Trump's greatest fear, what keeps him up at night from sleeping is the possibility that that that co I mean that Jerome Pal might end up staying on at the Fed after his chairmanship expires in May. In fact, my bet remains that actually there's a very good chance that Jerome Pal is going to stay on even, you know, with a war. And I think this the point here is this. Just think about this for a moment. Pal if he were to he his his governorship does not expire until 2028. He has a free option. He could leave after one month, three months, six months. He's not in a hurry. Moreover, he knows that the day he leaves, Trump is going to replace him with a super dove. In other words, do you think Pal wants to go into the history book as the chairman of the Federal Reserve who handed over the key of the Federal Reserve to Donald Trump? Are you kidding me? So, what I'm telling you is that I think what is going on here is that the market is starting to re realize that you know what Trump is not going to be able to get his way as has been widely expected. You know, I because he's facing constraint at the Fed, he's also facing constraint at the Supreme Court. The fact is that the Supreme Court so far has not ruled on the legality of his tariffs and for all I know the Supreme Court might decide to sit on it for the next three months and then what which will basically make it impossible the Fed for for Trump to go down the path of sending out a $2,000 you know whatever free rebate to every American. So what I'm saying is that the market, the growth sensitive markets have done very well this year because people have figured that Donald Trump is going to once again do what he always does which is to basically deliver more stimulus and then the economy is going to surprise to the upside. And I think the market doesn't get is that Trump is facing enormous constraints both visa v the Fed as well as the Supreme Court and increasingly possibly even in Congress because you you just saw that the six Republicans voted with Democrats to actually to overturn his tariff against Canada. So this is the reality then I think the market is overestimating what Trump is going to be able to do in 2026. >> Well, if it's overturned, isn't that good news for the market? We we're see we have a president now. >> A president uh literally like uh meaning we have an event that shows us that we have look he doesn't have unilateral power to do whatever he wants and so maybe trade barriers will be reduced not increased this year. What do you think? I think listen I mean first of all the fact that they voted you know basically you know that this bill passed Congress I mean it's it's you know listen it's going to it's going to get through the Senate and the House by the way okay to repeal the the [laughter] tariff on Canada but Trump is going to veto it. I mean let me tell you this because I mean in order to override Trump's veto you need two-th3 majority in the Senate which is unlikely. So from that point of view he just tells you that the whole thing is a mess. The whole thing is a mess to the extent that Trump is not gonna what the the most important thing is again the only fiscal stimulus can Trump can [snorts] possibly do in 2026 is again say wow you know I collected thou $200 billion in tariff revenue last year I'm now going to send it to I'm going to send a $2,000 check to everybody making less than $75,000. Let me tell you this, given the congressional vote yesterday, it's becoming extremely clear that this is never going to go anywhere. This will never take off. So from that point of view, the important thing is to know is not that so much that the tariff is going to get cancelled, but rather that the scope for additional stimulus this year is one big zero at the moment. >> Well, let me just give you some economic data. Starting with ISM manufacturing, PMI jumped at 52.6. This is the first expansionary reading in two years above 50 is expansionary. Uh perhaps perhaps that is a leading indicator for an economic economic expansion. >> I I you know listen I I think you know that's one number but I I don't disagree. I think you know like you know it's been depressed for some time. So like inventory has been drawn down. So naturally you would expect at the start of the year that orders are going up. And by the way, what this what makes this very interesting is what happens tomorrow with the CPI data because you know as the Fed has been telling us and we've been hearing from industry observers which is that a lot of companies are going to take advantage of January to raise prices and then you raise prices when you restock inventory. So it is very likely in my view it's very plausible that the strong new orders uptick in ISM manufacturing could very well reflect you know essentially the restocking and guess what repricing of um based on the tariffs. So I actually think that you know I think maybe this is what's happening today which is the market the stock market is down today because people are a bit nervous about the CPI number tomorrow and I think you know and then we could actually see an increased sign of pass through of uh tariff into US inflation which will be deadly for the stock market obviously >> stock market doesn't seem to care about the fact that the jobs market just had a huge landmark number 130,000 jobs added in January beating expectations across the yet stocks are down. Are we back in an area where bad news is good news and good news is just nobody cares? >> No, I I think it's even that it because the makeup I mean I listen I I I want to see strong numbers believe me you know but if I look at yesterday's number it's a total joke, right? So what it says is this. So all of last year the US economy created 185,000 185,000 jobs but in January we picked basically created 135,000 jobs. I mean so that in itself so what happened in January that all of a sudden you saw the surge moreover out of the 135 85,000 jobs came from health care right and then on top of that of the 85,000 jobs 50,000 of those jobs are basically people essentially the uh caretakers for elderly people which are probably not very high paying jobs to begin with but what it basically says is that this is a pretty sick economy sick economy in the sense that you You're talking about a lot of people being hired to look after elderly people who are sick who need basic care of and that is not this does not you know give you any sense of the sort of a dynamic nature of this. Yeah, we know that you know elderly people like 80% of US household wealth is held by people over the age of 55 and that's what's going on. So the stock market went up last year. House prices up as a result like older people who are, you know, going to retirement are hiring more people to look after them. That's what's going really going on. There hasn't been much else. >> And the fact is that manufacturing employment, just look at the manufacturing employment. It looks terrible. >> Take a look at what Peter Navaro, Trade Adviser, has to say about the jobs market. He said this before the report came out this week. By the way, >> note the jobs report's going to come out tomorrow. Yeah, >> we have to revise our expectations down significantly for what a monthly job number should look like. When we were letting in 2 million illegal aliens, it just they're coming in coming in. We had to produce 200,000 jobs a month for steady state. And by the way, all of the jobs that we were creating in Biden years were going to illegals. Americans were going to the unemployment lines. That's totally reversed. And now 50,000 a month is going to be more like what we need. So, Wall Street, when this stuff comes out, they can't they can't rain on that parade. They have to adjust for the fact that we're deporting millions of illegals. >> That's a good >> Okay. What do you think about that? >> I think what he's actually saying is about the most bearish basically story for the entire US stock market. Because think about it this way, right? What is basically saying is that you know what, even though the economy is not producing that many jobs, the labor market is actually very tight. You know, job is a driver of economic growth. We're not going to get that much growth, but guess what? The unemployment is going to be low. So, as a result, the Fed is actually not going to be able to cut rates. What is it basically saying is that real rates are going to be higher as a result of the deportation by Donald J. Trump. And that's what it means. So, what it basically means that we're going to that's what it actually means. It just means that if you're going to have if you're going to have, you know, fewer illegals entering the US and more people actually being deported and two and a half million people left the countries last year, the illegals, what it basically means is that you're not going to get a lot of growth, but at the same time, you're not going to basically there's not going to be so much slack in economy that will allow the Fed to justify cutting rates. So lower growth and higher rates, you know, that that's a deadly combination for the stock market. No. Well, what do you think the Fed's going to do? How how dovish or hawkish is Worsh actually going to be? People have been saying that he's probably the most hawkish of all the other Fed nomination candidates. Listen, I I think again I think Trump appointed Walsh in order to pressure Jerome Pal to leave after his tenure expires. But my view is that Jerome Pow is not an idiot. He does not want to turn the key over to Trump and he knows that as soon as he leaves he's going to be replaced by a super dove which will give the Trump appointees a majority on the board. So to begin with this is what secondly I would even argue if I were worse I don't even really want you know pal to leave either. Actually this is a great irony. You know what? If I were worse, I actually want Pal to stay because if Pal were to leave, you know, I'm going to be getting a phone call every day from Trump saying that why haven't you already cut rates? But if Pal were to stay on, you know, if you're worse, you could always blame it on Pal saying that well, the guy is still sticking around. There's not much I can do. So, the bottom line here is this. I think Worsh actually I think we might end up with a situation where both Worsh and Val end up staying and that actually overall the Fed actually takes on a more hawkish bias. But let me just tell you this. I have I I happen to have a lot of respect for Worsh only because Worsh has been one of the most consistent person who's been jocking for this job for the last 20 years which is that he believes okay that you know when the Fed engages in QE forever when it blows up its balance sheet it loses its independence by definition because the more you blow up your balance sheet the more you know politicians expect you to buy more government bonds down the That's the reason why Wars is completely against okay big balance sheet because he actually does believe in Fed independence. So I think the market doesn't get it. What this guy wants he's want a smaller Fed balance sheet and he's willing to lower short-term interest rates to offset any increase in long-term real interest rates. And I think from that point of view that makes a lot of sense to me but that's definitely not bullish for the stock market. There's been rumors that uh I I read a line that uh Kevin Worsh may actually double down on bond purchases, especially mortgage back securities. That is basically QE. The the Fed already starting December announced, I think a $40 billion a month program, something like that. >> Uh I mean that that is probably more significant. Yeah, go ahead. >> I think the only thing worse might do, he's just going to say, well, you know, listen, in the future, he doesn't want to buy any treasuries. you you could consider buying mortgage bonds but you'll be buying fewer treasuries but I think it's even there is very unlikely right away yeah if we go into if the AI bubble burst and the AI crashes and we go into massive recession sure I mean anybody I mean whether it's Bors or anybody else we'll be going back to doing QE because there will be nothing else but in that kind of situation I imagine you'd be buying more NBS than buying US treasuries and I imagine in the first basically get-go you'll be buying more short data stuff as opposed to long data So I think it's such you know it's one of these things that you know like right now it's it's you know who knows what you know who knows what what is going to happen because again I mean like you know war just like everybody else. I I don't want to sit here and speculate. What I know is that he is not going to do Trump from bidding in so far that he's not going to come in and start cutting rates not only because he's not that guy but also because he is just one guy. He has the same vote as anybody else. And then I think you know and I think from that point of view I think the market needs to be very very careful not to think that the Fed is going to I mean that the Fed is definitely you know like if anything the more the Fed the more that the Trump pushes the more the Fed is going to be holding back and this is what the market again I think the market gives Trump too much credit. I agree last year he got his way on a lot of different things but 2026 in my view is a very different proposition. Okay, I want to talk about gold and then finish off on uh the stock market one more time. There's a lot of AI news that I want to just get your uh well, a few AI news that I want to get your take on. This is uh a video that you published on your own channel, David Wu Bound. Again, please check out David Wubound. He's got a great YouTube channel. Uh you commented uh on the 1st of February when this video came out or January 31st rather that gold is the only true portfolio hedge in the post rule post rulebased order era. Okay, gold's up to it went up to $5,500 at one point. It's down 20%. So, uh, comment on that view. Uh, do you still hold that view after the correction on February 3rd? >> Absolutely. I hold that I I I hold that view, you know, very strongly. In fact, because I mean, there's a sort of the the short-term part and there's the long-term part. The short-term part is very simple. You know, by the way, because one of the re I mean, you know, if you look at and I think we talked about this the last time we spoke, which is that the only gold correlation that has not broken down over the past year is the gold equity correlation, right? Like it's pretty amazing over the past year. It's like, well, higher stocks means higher gold prices. Why is that? Because you know what? Because to me it basically shows the increased involvement of the retail investor okay in the market and retail investor what do they buy? They buy stocks and they buy gold. So from that point of view as gold I mean as stocks went up you know they were you know they had more money to spend they felt wealthier they bought more gold. And I think from that point of view, I think if if the stock market does crash, I I do think gold could very well go down with stocks in the short term simply because margin calls, that kind of thing. That's just going to be the nature of the beast. However, I have no doubt that central banks will be coming and scooping up gold at, you know, at, you know, at at at lower levels possibly, but definitely that's what's going to actually happen. By the way, you know what the most interesting story I've heard all month is? The fact that the CEO of Amundi, Amundi is like the Black Rockck of Europe. CEO [laughter] came out and said they're going to start reducing their holdings of US assets in 2026. That to me is amazing. That is like wow. That's like, you know, Larry Fing coming out saying that we're going to be basically buying gold, a lot of gold. It's the same thing because what I'm saying to you is that the this is the first recognition by one of the most important persons in Europe when it comes to European investments because I don't tell you a third of US treasuries are held by foreigners in Europe like what 60% of their you know of European pension funds their assets sitting in the US. You know, if Amundi decides to go down this path, believe me, a lot of other European investors are going to be heading the same direction. And the reason why they're doing this is because they think this is the end of the rulebased order. They think that if Trump tomorrow wants to basically take Greenland, the next day they Trump can basically default on all US treasuries owed to foreign investors. So as a result, what is going on here is that people I mean what people don't realize is the is is the damage the extent of the damage to confidence that's actually happened over the last six weeks as a result of a confluence of geopolitical events that has really I think you know now it's no longer going to be the Chinese buying gold dollar. I think the Europeans are going to be following their lead actually shortly after. >> Let me let me just ask you this from a I guess chart perspective. Let's say I know nothing about gold. I'm just looking at the charts. I know nothing about the geopolitics and the fundamentals that may drive the gold price higher. And I'm just looking at what gold has done in the past. And in the past two bull cycles when gold has peaked in 2011 and 1980, gold has fallen very shortly after by the order of 20 to 40% flatline then fell another 50 to 60%. Uh that's just the pattern of the last two bull cycles. It's doing exactly the first part of this uh pattern here, which is to fall 20%. Um, and it's repeating what it's it looks like it's doing in 1980 and then 2011. And so my question is, why would you invest in an asset? We're looking to investing into a that's looking at repeating um another 60% fall, which is what happened the last two times. >> Wouldn't be, as I said, I wouldn't be buying gold here, >> okay? Okay, >> for the same reason because I said before like gold is trading with stocks. If stocks go down, so will gold. However, I do think that at a certain point I I I would say 4,000 >> or even 4,000 I think four five 4,500 is and I've said this, you know, Bloomberg recently 4,500 I think gold becomes very attractive. I think you know level to basically get back into. I think you know if you know and it's certainly between 4,000 and 4,000 B I'll be very very surprised if gold gets below 4,000. Okay that that that's my view because at the end of the day the way we got to think about this is very simple. Okay now if you think about this right at the start this is why the whole rulebased order you know if if indeed we are you know the rulebased [laughter] basically international order era is ending. What does that really mean? Because before the rulebased international order was firmly established, let's just say, let's just take it, you know, the beginning of the 1960s, 60% of central bank holdings were in gold. Reserve holdings in gold. >> Yeah. >> Right now, you're talking about 15%. If it would just go back to like, you know, halfway there, I mean, gold is going to be much higher. This is what I'm saying to you that you know I I think you know this is what it really I think comes down to which is that I I think you know unless you I mean yeah I mean it's not even unless because I'm fairly certain that the rulebased order is dead is dead as do as the do right now because I think you know it it is very clear that Trump is doubling down and um and that's what it is. >> Do you have similar views on Bitcoin? >> Yeah I Bitcoin I mean I think Bitcoin is finished. I mean, you know, listen, let me just put it this way. Actually, I'm going to say it's finished. I do think Trump is going to throw I think, you know, listen, and I've been saying this for a while that Trump doesn't give a damn about Bitcoin. He cares mainly about stable coins and he got the genius act through. You know, the way he looks at stable coin is that stable coin is a digital extension of the US dollar. So in that sense promoting stable coin pegged to the US dollar is like promoting US dollar hedgeimony. It's obvious for the president of the United States. At the same time you know stable coins have to be backed by US treasuries. So stable coin also become a potential huge buyer of US treasuries. So this is why Trump Trump cares about stable coin for the same reason he doesn't give a damn about Bitcoin. The only question now is when will Trump throw a lifeline to Bitcoin? That's the only question. I don't think it's at this level. I think it's probably closer to 50,000. So, I will be looking to take profit on my short Bitcoin position probably around 55. >> Let's finish off on some tech news like I mentioned earlier. Now, here is something interesting that popped up recently. Anthropic. Okay. Anthropic's new AI tool sends shutters through the software stocks. Uh this was early February. Wiping out basically billions and not trillions in market cap and software stocks. Right. Claude co-orker is meant to be like an AI colleague with the ability to read files, organize folders, and draft documents on your behalf. Uh, this essentially will wipe out a lot of other software services overnight. Um, I I guess the question is among tech and software, there's probably a mini rotation happening now. Which side would you be on? Listen, I do think like you know like I think on the software side I I don't like any of them by the way but I do think that you know I mean obviously a lot of people have said the same thing which is that oh you know you cannot wipe out all of software you know SAS basically vendors like overnight >> and then you know you know like [laughter] businesses not all businesses are willing to basically trying to reinvent the wheel right because what they're suggesting is that Enthropic is going to help you okay essentially rebuild your entire software structure so that you don't no longer have to pay monthly fees to the guys you're basically >> I understand that from a fundamental perspective I understand what you're trying to say but I think investors are not really taking it that way see like like this paragraph for example juryy's still out whether or not AI is going to wipe out you know the software industry but investors were spooked on Tuesday early February selling off shares in legal and financial software so as soon as as soon as something like this comes out people's first instinct is to sell and I'm looking at this news and I'm thinking well I don't know what's next I don't know what what next what AI agent is going to be released next and I don't know which industry is going to be affected next. Why don't just sell everything? I think maybe the mentality of of people right now. >> That's my view. This is why I'm I'm a short NASDAQ. I mean that that's a great because I'm short everything. Okay. The the entire tech universe. So like from that point of view like I'm not taking I I don't want to take any sector risk right now. Do I think that oh wow you want to belong the chip makers because they're the enablers and so on so forth. I I think actually when the music stops I think there'll be no place to hide and that that is very clear to me. >> Going back to earnings though like we're seeing AMD for example uh last week it beat earnings expectations. It's still down 17% after a pretty good revenue report. Why? I think you know I think a lot of people are starting to realize first of all the competition is intensifying which is basically a [clears throat] margin issue and I think Reuben is a very good I mean by the way you know like you remember AMD and Intel you know a very very big part of the business is still selling basically processors for PCs and guess what that business is getting completely screwed by what by AI because what AI is doing is driving up the prices of memory chips And then all the you you're asking you know right now I I'm actually being told basically I was just at a computer store yesterday. The guy was telling me you got to basically buy a new computer right now before prices go through the roof because given how much you know RAM prices memory prices have gone up year to date. They're saying now that 45% of the cost of making a PC is now actually the memory price. And this is going to be deadly. That means they're going to be selling fewer PCs, which is going to obviously be bad news for the likes of Intel and AMD. And this is this is a I think a very important reason why why these stocks basically are starting to struggle. I especially don't like Intel. >> And then finally, I want to talk about AI capex. Uh some would say that AI capex has been the primary driver of valuations um uh in the last year and uh you know companies investing in each other. So, Amazon just announced a $200 billion capex project or expenditure this year. Uh the the analysts were expecting only 146 billion. So, that is beating expectations. It expects uh capex to continue to climb higher this year. Does it aggressively invest in data centers and other infrastructure to meet a surge in AI demand? That's what the article says. David, are they going to realize a high enough ROI to justify this? >> Of course not. because it it has nothing to do with ROI. Right now, this is the reality. The reality of these guys, whether it's Microsoft or Google or Amazon, they're investing in AI and data centers only because if if each individual company feels like if they were to pull back, that would simply allow the others to increase their market share, which they cannot afford to do. This is a classic prisoners dilemma problem. This is why this whole entire investment thing is not about ROI. It's about essentially market share. And as a result, this is why the market is starting to wake up to the real. That's what I said at the very outset of the interview. The fact that we've seen a breakdown in terms of the correlation between the AI trade and you know AI capex is a clear sign that the market finally gets the joke that more capex doesn't necessarily mean basically higher return on investment. In fact, it probably means the opposite. So because they're still investing though that probably means they'll prop up other companies stocks for perhaps their own stocks. Can we look at it that way? >> I don't think their own stock. I mean because now like people realize that well if these guys if these companies don't care about ROI and they're pouring all this money that may not have any generate any returns down the road the stock is going to go down. That that much is very clear. Meaning I mean Amazon is a great story. I mean they revise up their capex basically forecast and the stock I absolutely hammer and I think the market understands that now. Yeah. This is the reason why people are piling into uh Micron my Samsung highex the high memory chips guys because they say oh well you know you know let's at least basically make money some other ways but I do think that at this point you know I I don't know if this music won't stop you know as Chuck Prince famously said back in 2007 just before the subprime crisis erupted that well as long as the m music is playing you still have to go on dancing. I don't know what's going to cause the music to stop, but all I know is that when it does, there will be no place to hide. And especially if you look at the the semiconductor cycle in in 3 months time, this will be the longest semiconductor cycle ever in US history. And that is very worrying. >> But uh finally, do you think Chinese tech companies are anywhere close to posing a risk for US companies from an investor's perspective in the sense that there will considerably start eating up market share? I'm not even talking about just deepseek, right? That's old news. I'm talking about overall consumers in the US will start using more Chinese companies away from US ones. Is are we there yet? >> I think we're getting very close. In fact, last week there was a major report that of all players, Dell computer is now talking to the Chinese about sourcing their DRAM chips from China. That is fascinating because right now because of the shortage in capacity a Samsung highex micron you know prices have dro I told you it's going through the roof and there's just not enough of it to go around in the world and this is why Dell is now going to the Chinese and say would you be willing to sell me some chips and this is actually going to allow the Chinese to break into this area that the Chinese have probably a very decent chance of break into. By the way, you know, right now out of the top five basically memory chip makers, one of them is already Chinese. And then at the rate at which the Chinese are throwing money into expanding their u their capacity, I think it's reasonable to think that maybe within maybe within two to three years, maybe half of them will be Chinese. And this is going to get very interesting because this is one area the Chinese can definitely dominate. It's much easier than uh than AI chips. Okay. From that point of view. >> All right. So, your highest confidence trade for the next couple months, >> sell NASDAQ. Okay. I'm long NAS I'm short NASDAQ and long Nifty50. I love the India story. I think India is an amazing story. It's the fastest growing economy in the world. The stock market has been the worst performing in 2025. You know, we just got a trade deal between the US and India. I'm very bullish on India. So, I love the story of India also because India has lost out to the AI trade. all the Asia money has been pouring into South Korea, Taiwan chasing after the AI trade, that's why India's underperformed. So this is why for me if you really believe that the AI trade, you know, is um is if if not about to burst at least are stalling, I would think that India is a great way to position for for for this um stalling AI trade. >> Okay, excellent. David, thank you so much. Tell us where we can find your work. >> So yeah, so first of all, I just want to say I've got a book coming out. I mean they'll be published in the US next month on March 31st. Mary Goround broke down is a novel about globalization and um it's gotten amazing basically reviews already and endorsement by some of the biggest names. You know it's really my attempt at trying to make globalization accessible to everybody regardless their levels. So it's more than just about investing is a way to look at the world and then I want to sort of take the whole debate about globalization directly to the general public. So check that out. you know, you the book is already available for pre-order on Amazon, on Walmart, you know, um you know, Barnes & Noble, but you have you do have to basically buy it in the US. Right now, it's only for distribution in the US. We're negotiating with several other countries right now about book rights and maybe even movie rights, but um check that out if you're interested in my investment strategy, of course. Check out my YouTube channel or for that matter my um my retail um website uh davidbound.com. >> Okay, we'll put the links down below. So, make sure to follow David Woo and David Woo Inbound. Pleasure to host you once more, David. Welcome back and hope to see you again soon. Take care for now. >> Great. Thank you, David. >> Thank you for watching. Don't forget to like and subscribe.
'Deadly Combination' Triggered For Stocks, 'Bitcoin Is Finished' Warns Economist | David Woo
Summary
Transcript
something changed and I'll tell you exactly what changed. Lower growth and higher rates, you know, that that's a deadly combination for the stock market. The fact that we've seen a breakdown is a clearest sign that the market finally gets the joke. Are we back in that area where bad news is good news and good news is just nobody cares. Volatility is picking up across the board today on the 12th of February as stocks. The S&P 500 is down 1%. The NASDAQ's down 1.5%. Gold's down 2 and a.5% which is a lot for the yellow metal in one trading day. Bitcoin is down 1% back down to $65,000. And uh we're going to find out what's next. Is this the end of the AI trade? Are markets rotating into another asset? What's going to survive the coming storm? David Woo is joining us today. He's returning to give us his outlook for what's next for the markets and the economy. David Woo is the founder of David Woo Unbound. Check out his channel and his work links down below. And previously, he was head of global rates in FX and emerging markets at the Bank of America. Dave, welcome back to the show. Last time we spoke, you were short the NASDAQ where you maintained a bearish position. Um, it's since basically traded sideways, a lot of volatility in the precious metals, which we can talk about, but are you selling stocks right now? Uh, we're at almost 7,000 points on the S&P not too long ago. It's now back down to 6,800. and people are concerned about uncertainty ahead. What's your take? >> Yeah, I'm definitely a seller. I think here I mean still I think last week for me was a huge week. I mean in a sense that I sort of feel that something changed and I'll tell you exactly what changed. If you think about this, right? I mean we've been trading AI for much of the last three years, right? Since Chachi DP was launched, whatever it was in November 2022, the market has been trading AI. I mean sure I mean recently people have been rotating out of AI into consumer discretionary staples or industrials but generally speaking we're trading AI one with the other right I mean the point here is this in most of the last three years okay the AI trade has been driven by one thing which is AI capex right I mean higher AI capex higher the AI trade you know that was the one correlation that was basically was definitive. That was the hallmark of the entire AI trade which was on the assumption and there were two assumptions underpinning this whole this this positive correlation between the AI trade AI capex which is the idea that investors said well you know listen surely the hyperscalers know better about the monetiz monetizability of of AI than everybody else. And two, people figure that you know what the more money that you know these companies going to be investing in AI is because you know they see higher expected return on investment. So all that is great and well and so on so forth until basically this earning season because everything's changed. I don't have to tell you the big story for me the biggest story of the last month is the fact that investors have decided to punish okay higher AI capex spending whether it's Microsoft Amazon Google F what when whenever a company came up with a bigger okay basically increase in guidance in terms of capback spending the stock basically got smashed and I think this is very very important this breakdown in the AI trade AI capex correlation signals a fundamental I think reassessment by the market about what AI is all about and then it's something that I talked about in my last interview with you which I think so far it's been validated which is telling me the market understands that if companies are spending more on AI capex it may be because everything that goes into building a data center is getting more expensive. So from that point of view first of all the fact that they're spending more doesn't mean that they're going to be getting more. In fact, they could very well be getting less. The second thing is that markets starting to understand that the encapex spending made by the hyperskillers is not out of greed but out of fear. Actually, it's not that they necessarily see a pot of gold at the end of the rainbow, but rather they think if there is a pot of gold there that, you know, they will be a big loser unless they're the first one to get there. So from that point of view, I think the I think the way the market has been trading tells me that you know the AI trade is in trouble especially given the fact I don't to tell you I mean since October the AI trade has gone nowhere. NASDAQ has been flat and in fact actually this has actually happened three other times since the I mean what since 2020 which is after a surge the market goes high sideway for a while and guess what in all three instances you know the AI trade blew up or rather NASDAQ corrected you know and then so from that point of view I sort of feel like you know the market is in trouble because and it's difficult for the market to go higher and if it cannot go higher [laughter] it can only go lower. Why is it difficult for what we're going into now? >> Difficult for the market to go higher because earnings are going to be reduced. Why? Valuations are stretched. Why? >> If you look at actually just the earnings story, I mean, if you think about the even if you just look at the combined, we haven't got the Nvidia numbers yet. But if you look at the other magnificent seven, if you look at the earnings growth year on year and it take a four quarter moving average just to smooth out the volatility, guess what? It's slowing. It's been slowing for a while. So from that point of view, not only the momentum behind the AI trade is slowing, but earnings growth is slowing. And I just told you if higher capex doesn't do the trick, if markets now sees higher capex as a problem for AI trade, then guess what? What are you going to be trading on? Because there is no question that revenue is not picking up. And this is the big story. The big story what we discover now is that you know what the fact that open AI wants to now basically show ads in charge GPT something that sin said that he hated the idea that he hated only two years ago tells me that clearly open AAI is struggling to ramp up pay subscription that's the bottom line the bottom line here is that you know what the revenue growth at these places remain very slow and you know Because guess what? Because the free version of AI is getting better and better. And there is no better free version of AI than guess what the AI mode in Google search which practically does everything you most people need from AI anyway. So I think from that point of view this is going to get very interesting because actually open AAI by going by starting to show ads you know this is what started this week right that's the big story this week that open AAI is starting to show ads in chat GBT this is going to that means that they're now going after the advertising revenue of Google which accounts for 70% 70 to 75% of Google's basically total revenue but what do you think Google is going to Google is going to say, you know what, let's make the free version of AI even better, which is going to further cannibalize the ability of open AI to actually pick up subscription. So, what I'm telling you is that the coming battle over digital ads is going to be a big AI killer because nobody's going to make any money, which has been my premise all along. >> Before we continue with the video, I want to talk about a very interesting gold company. 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Learn more about the company by clicking on the link in the description down below or scan the QR code here. Interesting. Maybe there could just be a simple market rotation right now happening. This is an article from CNBC part published last week. David market rotation investors are buying sorry are selling 21st century innovators to buy 19th century businesses. Basically the summary of this video with this article rather is that there's a rotation from high-tech companies into materials industrials and miners. And if we take a look at what's been happening with the I uh IYM, which is the uh shares materials ETF, that's up about well, let's just take a year to date. That's up 19% year to date versus the NASDAQ's negative 2.28. And let's just compare GDX, which is the Van Gold Miners ETF. I don't have to tell you how well gold's done. That's up another 18% as well. And you know markets are up but uh some markets more than others and this is one example. David what do you think about this rotation? >> I think let me tell you this this rotation in my view is definitely I I think it's literally like I I I I'm fading it as well and I'll tell you why. Okay. What is the rotation? the rotation that we've you know if you look at the best performing sectors and assets year to date what we're talking about small cap Russell 2000 high yield credit okay you're looking at whatever copper industrial metals you're looking at um em equities they've done extremely well I mean let me tell you this all these sectors all these markets are what I call early cycle winners right these happen to be very high beta growth proxies that tend to do well at the beginning of an economic expansion. Let me tell you, we can debate where we are in econ in in in in the business cycle right now. The only question is how late we are in the cycle. So why are people suddenly piling into early cycle winners? I think there's only one very straightforward explanation because everybody thinks that Donald Trump because we're approaching a midterm election that Trump is going to throw the kitchen sink at the economy and we're going to get more stimulus. What the market doesn't get and perhaps only slowly now is that you know what yeah worsh is second Trump's second choice. You know why? Why did Trump go with worsh in the end as opposed to hassid? Because Trump understands that he cannot bend the Federal Reserve to his will. And why is that? Because Trump's greatest fear, what keeps him up at night from sleeping is the possibility that that that co I mean that Jerome Pal might end up staying on at the Fed after his chairmanship expires in May. In fact, my bet remains that actually there's a very good chance that Jerome Pal is going to stay on even, you know, with a war. And I think this the point here is this. Just think about this for a moment. Pal if he were to he his his governorship does not expire until 2028. He has a free option. He could leave after one month, three months, six months. He's not in a hurry. Moreover, he knows that the day he leaves, Trump is going to replace him with a super dove. In other words, do you think Pal wants to go into the history book as the chairman of the Federal Reserve who handed over the key of the Federal Reserve to Donald Trump? Are you kidding me? So, what I'm telling you is that I think what is going on here is that the market is starting to re realize that you know what Trump is not going to be able to get his way as has been widely expected. You know, I because he's facing constraint at the Fed, he's also facing constraint at the Supreme Court. The fact is that the Supreme Court so far has not ruled on the legality of his tariffs and for all I know the Supreme Court might decide to sit on it for the next three months and then what which will basically make it impossible the Fed for for Trump to go down the path of sending out a $2,000 you know whatever free rebate to every American. So what I'm saying is that the market, the growth sensitive markets have done very well this year because people have figured that Donald Trump is going to once again do what he always does which is to basically deliver more stimulus and then the economy is going to surprise to the upside. And I think the market doesn't get is that Trump is facing enormous constraints both visa v the Fed as well as the Supreme Court and increasingly possibly even in Congress because you you just saw that the six Republicans voted with Democrats to actually to overturn his tariff against Canada. So this is the reality then I think the market is overestimating what Trump is going to be able to do in 2026. >> Well, if it's overturned, isn't that good news for the market? We we're see we have a president now. >> A president uh literally like uh meaning we have an event that shows us that we have look he doesn't have unilateral power to do whatever he wants and so maybe trade barriers will be reduced not increased this year. What do you think? I think listen I mean first of all the fact that they voted you know basically you know that this bill passed Congress I mean it's it's you know listen it's going to it's going to get through the Senate and the House by the way okay to repeal the the [laughter] tariff on Canada but Trump is going to veto it. I mean let me tell you this because I mean in order to override Trump's veto you need two-th3 majority in the Senate which is unlikely. So from that point of view he just tells you that the whole thing is a mess. The whole thing is a mess to the extent that Trump is not gonna what the the most important thing is again the only fiscal stimulus can Trump can [snorts] possibly do in 2026 is again say wow you know I collected thou $200 billion in tariff revenue last year I'm now going to send it to I'm going to send a $2,000 check to everybody making less than $75,000. Let me tell you this, given the congressional vote yesterday, it's becoming extremely clear that this is never going to go anywhere. This will never take off. So from that point of view, the important thing is to know is not that so much that the tariff is going to get cancelled, but rather that the scope for additional stimulus this year is one big zero at the moment. >> Well, let me just give you some economic data. Starting with ISM manufacturing, PMI jumped at 52.6. This is the first expansionary reading in two years above 50 is expansionary. Uh perhaps perhaps that is a leading indicator for an economic economic expansion. >> I I you know listen I I think you know that's one number but I I don't disagree. I think you know like you know it's been depressed for some time. So like inventory has been drawn down. So naturally you would expect at the start of the year that orders are going up. And by the way, what this what makes this very interesting is what happens tomorrow with the CPI data because you know as the Fed has been telling us and we've been hearing from industry observers which is that a lot of companies are going to take advantage of January to raise prices and then you raise prices when you restock inventory. So it is very likely in my view it's very plausible that the strong new orders uptick in ISM manufacturing could very well reflect you know essentially the restocking and guess what repricing of um based on the tariffs. So I actually think that you know I think maybe this is what's happening today which is the market the stock market is down today because people are a bit nervous about the CPI number tomorrow and I think you know and then we could actually see an increased sign of pass through of uh tariff into US inflation which will be deadly for the stock market obviously >> stock market doesn't seem to care about the fact that the jobs market just had a huge landmark number 130,000 jobs added in January beating expectations across the yet stocks are down. Are we back in an area where bad news is good news and good news is just nobody cares? >> No, I I think it's even that it because the makeup I mean I listen I I I want to see strong numbers believe me you know but if I look at yesterday's number it's a total joke, right? So what it says is this. So all of last year the US economy created 185,000 185,000 jobs but in January we picked basically created 135,000 jobs. I mean so that in itself so what happened in January that all of a sudden you saw the surge moreover out of the 135 85,000 jobs came from health care right and then on top of that of the 85,000 jobs 50,000 of those jobs are basically people essentially the uh caretakers for elderly people which are probably not very high paying jobs to begin with but what it basically says is that this is a pretty sick economy sick economy in the sense that you You're talking about a lot of people being hired to look after elderly people who are sick who need basic care of and that is not this does not you know give you any sense of the sort of a dynamic nature of this. Yeah, we know that you know elderly people like 80% of US household wealth is held by people over the age of 55 and that's what's going on. So the stock market went up last year. House prices up as a result like older people who are, you know, going to retirement are hiring more people to look after them. That's what's going really going on. There hasn't been much else. >> And the fact is that manufacturing employment, just look at the manufacturing employment. It looks terrible. >> Take a look at what Peter Navaro, Trade Adviser, has to say about the jobs market. He said this before the report came out this week. By the way, >> note the jobs report's going to come out tomorrow. Yeah, >> we have to revise our expectations down significantly for what a monthly job number should look like. When we were letting in 2 million illegal aliens, it just they're coming in coming in. We had to produce 200,000 jobs a month for steady state. And by the way, all of the jobs that we were creating in Biden years were going to illegals. Americans were going to the unemployment lines. That's totally reversed. And now 50,000 a month is going to be more like what we need. So, Wall Street, when this stuff comes out, they can't they can't rain on that parade. They have to adjust for the fact that we're deporting millions of illegals. >> That's a good >> Okay. What do you think about that? >> I think what he's actually saying is about the most bearish basically story for the entire US stock market. Because think about it this way, right? What is basically saying is that you know what, even though the economy is not producing that many jobs, the labor market is actually very tight. You know, job is a driver of economic growth. We're not going to get that much growth, but guess what? The unemployment is going to be low. So, as a result, the Fed is actually not going to be able to cut rates. What is it basically saying is that real rates are going to be higher as a result of the deportation by Donald J. Trump. And that's what it means. So, what it basically means that we're going to that's what it actually means. It just means that if you're going to have if you're going to have, you know, fewer illegals entering the US and more people actually being deported and two and a half million people left the countries last year, the illegals, what it basically means is that you're not going to get a lot of growth, but at the same time, you're not going to basically there's not going to be so much slack in economy that will allow the Fed to justify cutting rates. So lower growth and higher rates, you know, that that's a deadly combination for the stock market. No. Well, what do you think the Fed's going to do? How how dovish or hawkish is Worsh actually going to be? People have been saying that he's probably the most hawkish of all the other Fed nomination candidates. Listen, I I think again I think Trump appointed Walsh in order to pressure Jerome Pal to leave after his tenure expires. But my view is that Jerome Pow is not an idiot. He does not want to turn the key over to Trump and he knows that as soon as he leaves he's going to be replaced by a super dove which will give the Trump appointees a majority on the board. So to begin with this is what secondly I would even argue if I were worse I don't even really want you know pal to leave either. Actually this is a great irony. You know what? If I were worse, I actually want Pal to stay because if Pal were to leave, you know, I'm going to be getting a phone call every day from Trump saying that why haven't you already cut rates? But if Pal were to stay on, you know, if you're worse, you could always blame it on Pal saying that well, the guy is still sticking around. There's not much I can do. So, the bottom line here is this. I think Worsh actually I think we might end up with a situation where both Worsh and Val end up staying and that actually overall the Fed actually takes on a more hawkish bias. But let me just tell you this. I have I I happen to have a lot of respect for Worsh only because Worsh has been one of the most consistent person who's been jocking for this job for the last 20 years which is that he believes okay that you know when the Fed engages in QE forever when it blows up its balance sheet it loses its independence by definition because the more you blow up your balance sheet the more you know politicians expect you to buy more government bonds down the That's the reason why Wars is completely against okay big balance sheet because he actually does believe in Fed independence. So I think the market doesn't get it. What this guy wants he's want a smaller Fed balance sheet and he's willing to lower short-term interest rates to offset any increase in long-term real interest rates. And I think from that point of view that makes a lot of sense to me but that's definitely not bullish for the stock market. There's been rumors that uh I I read a line that uh Kevin Worsh may actually double down on bond purchases, especially mortgage back securities. That is basically QE. The the Fed already starting December announced, I think a $40 billion a month program, something like that. >> Uh I mean that that is probably more significant. Yeah, go ahead. >> I think the only thing worse might do, he's just going to say, well, you know, listen, in the future, he doesn't want to buy any treasuries. you you could consider buying mortgage bonds but you'll be buying fewer treasuries but I think it's even there is very unlikely right away yeah if we go into if the AI bubble burst and the AI crashes and we go into massive recession sure I mean anybody I mean whether it's Bors or anybody else we'll be going back to doing QE because there will be nothing else but in that kind of situation I imagine you'd be buying more NBS than buying US treasuries and I imagine in the first basically get-go you'll be buying more short data stuff as opposed to long data So I think it's such you know it's one of these things that you know like right now it's it's you know who knows what you know who knows what what is going to happen because again I mean like you know war just like everybody else. I I don't want to sit here and speculate. What I know is that he is not going to do Trump from bidding in so far that he's not going to come in and start cutting rates not only because he's not that guy but also because he is just one guy. He has the same vote as anybody else. And then I think you know and I think from that point of view I think the market needs to be very very careful not to think that the Fed is going to I mean that the Fed is definitely you know like if anything the more the Fed the more that the Trump pushes the more the Fed is going to be holding back and this is what the market again I think the market gives Trump too much credit. I agree last year he got his way on a lot of different things but 2026 in my view is a very different proposition. Okay, I want to talk about gold and then finish off on uh the stock market one more time. There's a lot of AI news that I want to just get your uh well, a few AI news that I want to get your take on. This is uh a video that you published on your own channel, David Wu Bound. Again, please check out David Wubound. He's got a great YouTube channel. Uh you commented uh on the 1st of February when this video came out or January 31st rather that gold is the only true portfolio hedge in the post rule post rulebased order era. Okay, gold's up to it went up to $5,500 at one point. It's down 20%. So, uh, comment on that view. Uh, do you still hold that view after the correction on February 3rd? >> Absolutely. I hold that I I I hold that view, you know, very strongly. In fact, because I mean, there's a sort of the the short-term part and there's the long-term part. The short-term part is very simple. You know, by the way, because one of the re I mean, you know, if you look at and I think we talked about this the last time we spoke, which is that the only gold correlation that has not broken down over the past year is the gold equity correlation, right? Like it's pretty amazing over the past year. It's like, well, higher stocks means higher gold prices. Why is that? Because you know what? Because to me it basically shows the increased involvement of the retail investor okay in the market and retail investor what do they buy? They buy stocks and they buy gold. So from that point of view as gold I mean as stocks went up you know they were you know they had more money to spend they felt wealthier they bought more gold. And I think from that point of view, I think if if the stock market does crash, I I do think gold could very well go down with stocks in the short term simply because margin calls, that kind of thing. That's just going to be the nature of the beast. However, I have no doubt that central banks will be coming and scooping up gold at, you know, at, you know, at at at lower levels possibly, but definitely that's what's going to actually happen. By the way, you know what the most interesting story I've heard all month is? The fact that the CEO of Amundi, Amundi is like the Black Rockck of Europe. CEO [laughter] came out and said they're going to start reducing their holdings of US assets in 2026. That to me is amazing. That is like wow. That's like, you know, Larry Fing coming out saying that we're going to be basically buying gold, a lot of gold. It's the same thing because what I'm saying to you is that the this is the first recognition by one of the most important persons in Europe when it comes to European investments because I don't tell you a third of US treasuries are held by foreigners in Europe like what 60% of their you know of European pension funds their assets sitting in the US. You know, if Amundi decides to go down this path, believe me, a lot of other European investors are going to be heading the same direction. And the reason why they're doing this is because they think this is the end of the rulebased order. They think that if Trump tomorrow wants to basically take Greenland, the next day they Trump can basically default on all US treasuries owed to foreign investors. So as a result, what is going on here is that people I mean what people don't realize is the is is the damage the extent of the damage to confidence that's actually happened over the last six weeks as a result of a confluence of geopolitical events that has really I think you know now it's no longer going to be the Chinese buying gold dollar. I think the Europeans are going to be following their lead actually shortly after. >> Let me let me just ask you this from a I guess chart perspective. Let's say I know nothing about gold. I'm just looking at the charts. I know nothing about the geopolitics and the fundamentals that may drive the gold price higher. And I'm just looking at what gold has done in the past. And in the past two bull cycles when gold has peaked in 2011 and 1980, gold has fallen very shortly after by the order of 20 to 40% flatline then fell another 50 to 60%. Uh that's just the pattern of the last two bull cycles. It's doing exactly the first part of this uh pattern here, which is to fall 20%. Um, and it's repeating what it's it looks like it's doing in 1980 and then 2011. And so my question is, why would you invest in an asset? We're looking to investing into a that's looking at repeating um another 60% fall, which is what happened the last two times. >> Wouldn't be, as I said, I wouldn't be buying gold here, >> okay? Okay, >> for the same reason because I said before like gold is trading with stocks. If stocks go down, so will gold. However, I do think that at a certain point I I I would say 4,000 >> or even 4,000 I think four five 4,500 is and I've said this, you know, Bloomberg recently 4,500 I think gold becomes very attractive. I think you know level to basically get back into. I think you know if you know and it's certainly between 4,000 and 4,000 B I'll be very very surprised if gold gets below 4,000. Okay that that that's my view because at the end of the day the way we got to think about this is very simple. Okay now if you think about this right at the start this is why the whole rulebased order you know if if indeed we are you know the rulebased [laughter] basically international order era is ending. What does that really mean? Because before the rulebased international order was firmly established, let's just say, let's just take it, you know, the beginning of the 1960s, 60% of central bank holdings were in gold. Reserve holdings in gold. >> Yeah. >> Right now, you're talking about 15%. If it would just go back to like, you know, halfway there, I mean, gold is going to be much higher. This is what I'm saying to you that you know I I think you know this is what it really I think comes down to which is that I I think you know unless you I mean yeah I mean it's not even unless because I'm fairly certain that the rulebased order is dead is dead as do as the do right now because I think you know it it is very clear that Trump is doubling down and um and that's what it is. >> Do you have similar views on Bitcoin? >> Yeah I Bitcoin I mean I think Bitcoin is finished. I mean, you know, listen, let me just put it this way. Actually, I'm going to say it's finished. I do think Trump is going to throw I think, you know, listen, and I've been saying this for a while that Trump doesn't give a damn about Bitcoin. He cares mainly about stable coins and he got the genius act through. You know, the way he looks at stable coin is that stable coin is a digital extension of the US dollar. So in that sense promoting stable coin pegged to the US dollar is like promoting US dollar hedgeimony. It's obvious for the president of the United States. At the same time you know stable coins have to be backed by US treasuries. So stable coin also become a potential huge buyer of US treasuries. So this is why Trump Trump cares about stable coin for the same reason he doesn't give a damn about Bitcoin. The only question now is when will Trump throw a lifeline to Bitcoin? That's the only question. I don't think it's at this level. I think it's probably closer to 50,000. So, I will be looking to take profit on my short Bitcoin position probably around 55. >> Let's finish off on some tech news like I mentioned earlier. Now, here is something interesting that popped up recently. Anthropic. Okay. Anthropic's new AI tool sends shutters through the software stocks. Uh this was early February. Wiping out basically billions and not trillions in market cap and software stocks. Right. Claude co-orker is meant to be like an AI colleague with the ability to read files, organize folders, and draft documents on your behalf. Uh, this essentially will wipe out a lot of other software services overnight. Um, I I guess the question is among tech and software, there's probably a mini rotation happening now. Which side would you be on? Listen, I do think like you know like I think on the software side I I don't like any of them by the way but I do think that you know I mean obviously a lot of people have said the same thing which is that oh you know you cannot wipe out all of software you know SAS basically vendors like overnight >> and then you know you know like [laughter] businesses not all businesses are willing to basically trying to reinvent the wheel right because what they're suggesting is that Enthropic is going to help you okay essentially rebuild your entire software structure so that you don't no longer have to pay monthly fees to the guys you're basically >> I understand that from a fundamental perspective I understand what you're trying to say but I think investors are not really taking it that way see like like this paragraph for example juryy's still out whether or not AI is going to wipe out you know the software industry but investors were spooked on Tuesday early February selling off shares in legal and financial software so as soon as as soon as something like this comes out people's first instinct is to sell and I'm looking at this news and I'm thinking well I don't know what's next I don't know what what next what AI agent is going to be released next and I don't know which industry is going to be affected next. Why don't just sell everything? I think maybe the mentality of of people right now. >> That's my view. This is why I'm I'm a short NASDAQ. I mean that that's a great because I'm short everything. Okay. The the entire tech universe. So like from that point of view like I'm not taking I I don't want to take any sector risk right now. Do I think that oh wow you want to belong the chip makers because they're the enablers and so on so forth. I I think actually when the music stops I think there'll be no place to hide and that that is very clear to me. >> Going back to earnings though like we're seeing AMD for example uh last week it beat earnings expectations. It's still down 17% after a pretty good revenue report. Why? I think you know I think a lot of people are starting to realize first of all the competition is intensifying which is basically a [clears throat] margin issue and I think Reuben is a very good I mean by the way you know like you remember AMD and Intel you know a very very big part of the business is still selling basically processors for PCs and guess what that business is getting completely screwed by what by AI because what AI is doing is driving up the prices of memory chips And then all the you you're asking you know right now I I'm actually being told basically I was just at a computer store yesterday. The guy was telling me you got to basically buy a new computer right now before prices go through the roof because given how much you know RAM prices memory prices have gone up year to date. They're saying now that 45% of the cost of making a PC is now actually the memory price. And this is going to be deadly. That means they're going to be selling fewer PCs, which is going to obviously be bad news for the likes of Intel and AMD. And this is this is a I think a very important reason why why these stocks basically are starting to struggle. I especially don't like Intel. >> And then finally, I want to talk about AI capex. Uh some would say that AI capex has been the primary driver of valuations um uh in the last year and uh you know companies investing in each other. So, Amazon just announced a $200 billion capex project or expenditure this year. Uh the the analysts were expecting only 146 billion. So, that is beating expectations. It expects uh capex to continue to climb higher this year. Does it aggressively invest in data centers and other infrastructure to meet a surge in AI demand? That's what the article says. David, are they going to realize a high enough ROI to justify this? >> Of course not. because it it has nothing to do with ROI. Right now, this is the reality. The reality of these guys, whether it's Microsoft or Google or Amazon, they're investing in AI and data centers only because if if each individual company feels like if they were to pull back, that would simply allow the others to increase their market share, which they cannot afford to do. This is a classic prisoners dilemma problem. This is why this whole entire investment thing is not about ROI. It's about essentially market share. And as a result, this is why the market is starting to wake up to the real. That's what I said at the very outset of the interview. The fact that we've seen a breakdown in terms of the correlation between the AI trade and you know AI capex is a clear sign that the market finally gets the joke that more capex doesn't necessarily mean basically higher return on investment. In fact, it probably means the opposite. So because they're still investing though that probably means they'll prop up other companies stocks for perhaps their own stocks. Can we look at it that way? >> I don't think their own stock. I mean because now like people realize that well if these guys if these companies don't care about ROI and they're pouring all this money that may not have any generate any returns down the road the stock is going to go down. That that much is very clear. Meaning I mean Amazon is a great story. I mean they revise up their capex basically forecast and the stock I absolutely hammer and I think the market understands that now. Yeah. This is the reason why people are piling into uh Micron my Samsung highex the high memory chips guys because they say oh well you know you know let's at least basically make money some other ways but I do think that at this point you know I I don't know if this music won't stop you know as Chuck Prince famously said back in 2007 just before the subprime crisis erupted that well as long as the m music is playing you still have to go on dancing. I don't know what's going to cause the music to stop, but all I know is that when it does, there will be no place to hide. And especially if you look at the the semiconductor cycle in in 3 months time, this will be the longest semiconductor cycle ever in US history. And that is very worrying. >> But uh finally, do you think Chinese tech companies are anywhere close to posing a risk for US companies from an investor's perspective in the sense that there will considerably start eating up market share? I'm not even talking about just deepseek, right? That's old news. I'm talking about overall consumers in the US will start using more Chinese companies away from US ones. Is are we there yet? >> I think we're getting very close. In fact, last week there was a major report that of all players, Dell computer is now talking to the Chinese about sourcing their DRAM chips from China. That is fascinating because right now because of the shortage in capacity a Samsung highex micron you know prices have dro I told you it's going through the roof and there's just not enough of it to go around in the world and this is why Dell is now going to the Chinese and say would you be willing to sell me some chips and this is actually going to allow the Chinese to break into this area that the Chinese have probably a very decent chance of break into. By the way, you know, right now out of the top five basically memory chip makers, one of them is already Chinese. And then at the rate at which the Chinese are throwing money into expanding their u their capacity, I think it's reasonable to think that maybe within maybe within two to three years, maybe half of them will be Chinese. And this is going to get very interesting because this is one area the Chinese can definitely dominate. It's much easier than uh than AI chips. Okay. From that point of view. >> All right. So, your highest confidence trade for the next couple months, >> sell NASDAQ. Okay. I'm long NAS I'm short NASDAQ and long Nifty50. I love the India story. I think India is an amazing story. It's the fastest growing economy in the world. The stock market has been the worst performing in 2025. You know, we just got a trade deal between the US and India. I'm very bullish on India. So, I love the story of India also because India has lost out to the AI trade. all the Asia money has been pouring into South Korea, Taiwan chasing after the AI trade, that's why India's underperformed. So this is why for me if you really believe that the AI trade, you know, is um is if if not about to burst at least are stalling, I would think that India is a great way to position for for for this um stalling AI trade. >> Okay, excellent. David, thank you so much. Tell us where we can find your work. >> So yeah, so first of all, I just want to say I've got a book coming out. I mean they'll be published in the US next month on March 31st. Mary Goround broke down is a novel about globalization and um it's gotten amazing basically reviews already and endorsement by some of the biggest names. You know it's really my attempt at trying to make globalization accessible to everybody regardless their levels. So it's more than just about investing is a way to look at the world and then I want to sort of take the whole debate about globalization directly to the general public. So check that out. you know, you the book is already available for pre-order on Amazon, on Walmart, you know, um you know, Barnes & Noble, but you have you do have to basically buy it in the US. Right now, it's only for distribution in the US. We're negotiating with several other countries right now about book rights and maybe even movie rights, but um check that out if you're interested in my investment strategy, of course. Check out my YouTube channel or for that matter my um my retail um website uh davidbound.com. >> Okay, we'll put the links down below. So, make sure to follow David Woo and David Woo Inbound. Pleasure to host you once more, David. Welcome back and hope to see you again soon. Take care for now. >> Great. Thank you, David. >> Thank you for watching. Don't forget to like and subscribe.