I see a current market that has a flavor or the 1) dotcom (Significant overvaluation with record Market Concentration and AI is a huge segment of the public and private capital markets and has it tentacles all over the place) and 2) the GFC. When I read for the most recent fiscal year OpenAI reported $5.5B in ARR, BUT a NET LOSS of $5.0 Billion (Source: https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-annualized-revenue-fueled-by-chatgpt-growth.html), it tells me they can Blitzscale all they want it is not ever a profitable business model. Throw on the cost of chips & other equipment, Huge Datacenters, electricity costs to power it, cost of talent, etc., I do not think OpenAI will ever remotely approach profitability. It is like WeWorks, it only sounds more intelligent and scientific! The entie AI and Tech run started with the introduction of ChatGTP, which is based on large language models. If you ever have the time, read how Apple Scientists recently stated in a study LLM's will never achieve AGI as they cannot reason or understand (Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://ml-site.cdn-apple.com/papers/the-illusion-of-thinking.pdf) & MIT/Harvard/U of Chicago Study recently came to the same conclusion (Source: https://x.com/GaryMarcus/status/1938629881820323940) The only AI plays making money are the Picks & Shovel companies (NVDA, AVGO, etc.,) If fundamental analysis ever returns to the market, the AI companies (99% based on Large Language Models) like OpenAI will have a hard time continually raising more and more capital at ever more frequent time intervals at 35x revenue and the spending on the picks and shovels will then see a massive slowdown. Let's see how the AI market and the overall market (as nobody can convice me this market is not being driven almost solely on the hopes and dreams of AI) performs. I have no clue when the timing is, but the facts are right there for investors to see. But, I think we have a market full of grifters being led by an administration full of grifters encouraging and even helping to finance their grifting (i.e. Stargate, the Middle East Tour with Jensen and the boys.) Funny to see Elleson (ORCL) first back Theranos and now he is supporting Scam Altman's OpenAI along with Masayoshi Son as MSFT and Nadelli is stepping away from further funding OpenAI & is trying to find a way out of the mess it started by seeding OpenAI. Just think of all the trillions of dollars spent on AI over the past several years. At somepoint, perhaps the financing of AI, datatcenters and the entire infrastructure around it will be viewed like CLOs in 08. Thus, this is why I think today we living in the worst of worst - the Dotcom & GFC combined. Throw on top of that the Federal Government and the Federal Reserve already shot their loads on the GFC & Covid bailouts in a much lower lower Interest rate environment with smaller deficits and balance sheets. In addition, I think we are likely in an inflationary era and the 4-decade bond bull market has died! Given the BBB looking to pass, who is going to give our Goverment the financing in the years ahead and at what rate. Just read the recent Reuters article (every country plans on quite significantly moving reserves away from the dollar to Gold, the Euro and even China) summarizing the findings of last week's Official Monetary and Financial Institutions Forum (OMFIF) study (https://www.reuters.com/world/china/central-banks-eye-gold-euro-yuan-dollar-dominance-wanes-2025-06-24/). If Trump is truthful in his late Friday comments saying he wants FF Rate at 1% ASAP and will not hire a Powell replacement without that promise and other countries are going to see Trump as pretty close to a true MMTer. When the grifting and market BS stops and we return to true fundamental analysis I have no clue, but the ending will be worse than GFC - bold (perhaps crazy) call, but that is how I read it and I stand behind it. I am not saying AI is useless, it can be a good search engine or user aide, I am saying the TAM is like 10% of what the financial markets are currently pricing into their valuations. I know most will think I am high or something, but these are my viewpoints I just do not know how to time it, so I wait in astonishment for the true story to get accepted. Perhaps a recession is needed for investors to take the blinders off? No clue, but I do know what is taking place is the furthest thing from Fundamental Analysis. True Fundamental Analyts (like myself) are either clipping coupons or getting their face ripped off during this outright madness and disconnct of massive proportions!
Thanks Russel. "The problem with investing in the blitzscalers here is entirely political as I can not find a problem with their business models. The create a lot of share holder value, but relatively little taxation revenue. This continues to reduce the tax base, while adding to wealth inequality"
Question: I am guessing you are comparing the tax paid by companies generating profit vs growth companies paying little or no taxes. What about the capital gain taxes on share price appreciation on growth companies?
Do you have the data to back this up or is it a qualitative opinion of yours?
I guess we need to compare: taxes paid on capital gain vs taxes paid by companies making profit (either in aggregate or on a per company basis).
Back in the dot com bubble - we saw many ipos and the use of stock as compensation. In this boom, generally seen stock buybacks - and many companies staying private. Also the largest tech companies pay no tax overseas - something the Trump administration is fighting to keep.
This isn't at all what Coreweave stock price tells me. Instead it tells me 3 things:
- tiny float
- large short interest (no borrow available even at 100%+ rates)
- investment bankers management who know how to game the system
The same thing played out in Canadian weed stocks, Beyond Meat, etc.
If investors believed the Coreweave story, they would have raised a lot more with the IPO (the fact they decided to proceed during that time is a tell also). We shall see which is more right soon enough when the lock up expires in September (my expectation - sales by management followed by equity offering).
So far as Palantir is concerned - the story with it and other megacaps is largely about index funds and passive bid. With palantir (and in fact Tesla before it) it is especially apparent when you mark the date it was included in the S&P on the stock chart.
There have definitely been squeezes in the market - GME and AMC in 2021, and VOW3 back in 2008 stand out. But you could have argued that Tesla was a squeeze using the argument above, and that would probably be wrong.
Palantir as a squeeze does not feel right... seems in line with other winning defence stocks like RHM GY .
As a rule, I try not to start any analysis with "the market is wrong". It worked in 2007, because the analysis started with the "rating agencies are wrong" which was correct - and "AIG are morons" which was correct. And then followed up with, "AIG is going bust" - so all logically consistent.
The closest thing I can find to "market is wrong" is US treasuries... and luckily that also starts with the "rating agencies are wrong" type of analysis too.
Palantir's BoD member literally bragged about the squeeze from index inclusion on twitter (later deleting his post). It also halved in a month earlier this year and is now back at ATH, was that a fundamental repricing?
Stocks with hundreds of billions market cap regularly go up or down 5-10% per day on no news, are you seriously suggesting that "markets are efficient"? What is the market right about when Shiba Inu has a $6.7bn (down from $20bn) market cap?
Market is right or wrong is a pretty meaningless question unless an overwhelming majority of buyers/sellers are informed market participants entering their trades on the basis of fundamental research.
I do think that we are approaching a point where passive flows might balance and then start turning negative (as inflows grow with income, while outflows grow with market cap) and we will find out whether Nasdaq is a real risk-free asset.
I would have assumed the rising inter]est rates would have killed off speculative fervour - and it did. See ARKK.
The problem with Palantir is that we know it has capture the client (DOD) and will now make money forever - and in line with other Blitzscalers has ramped up scale to make sure there is no competition.
Palantir will get into trouble with the rest of the market if and when the US government has to practice some austerity... which is both a political, economic and financial question
Commodities like platinum and palladium are starting to melt-up as happened right before the 2000 bear spread to the whole market. It looks like dotcom to me, with 2020 an echo of 1998 in commodities. The cycle is stretched because of the stimulus. USA ran balanced budgets in the late 1990s instead of the worst deficits outside of wartime.
Great note Russell. The perspective that "there is nothing new under the sun" (which was stated a couple thousand years ago in the bible) is always contested during times like these, with the argument being that it is "different this time". Who knows really, and to your point below, it doesn't matter until it matters. That said, having navigated as a manager through the internet bubble, the GFC, the European Debt Crisis, COVID, and the 2022 collapse of digital asset class, underlying market structure is every bit as fragile today as it was at those and other major turning points. The market is a shell game, with all eyes on the S&P... meanwhile, we are being pickpocketed by fragility. It's always the same.
Recessions tend to clean things out... but without spiking oil prices, the chances of a recession seem low here... and I think market is reflecting that
I see a current market that has a flavor or the 1) dotcom (Significant overvaluation with record Market Concentration and AI is a huge segment of the public and private capital markets and has it tentacles all over the place) and 2) the GFC. When I read for the most recent fiscal year OpenAI reported $5.5B in ARR, BUT a NET LOSS of $5.0 Billion (Source: https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-annualized-revenue-fueled-by-chatgpt-growth.html), it tells me they can Blitzscale all they want it is not ever a profitable business model. Throw on the cost of chips & other equipment, Huge Datacenters, electricity costs to power it, cost of talent, etc., I do not think OpenAI will ever remotely approach profitability. It is like WeWorks, it only sounds more intelligent and scientific! The entie AI and Tech run started with the introduction of ChatGTP, which is based on large language models. If you ever have the time, read how Apple Scientists recently stated in a study LLM's will never achieve AGI as they cannot reason or understand (Source: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://ml-site.cdn-apple.com/papers/the-illusion-of-thinking.pdf) & MIT/Harvard/U of Chicago Study recently came to the same conclusion (Source: https://x.com/GaryMarcus/status/1938629881820323940) The only AI plays making money are the Picks & Shovel companies (NVDA, AVGO, etc.,) If fundamental analysis ever returns to the market, the AI companies (99% based on Large Language Models) like OpenAI will have a hard time continually raising more and more capital at ever more frequent time intervals at 35x revenue and the spending on the picks and shovels will then see a massive slowdown. Let's see how the AI market and the overall market (as nobody can convice me this market is not being driven almost solely on the hopes and dreams of AI) performs. I have no clue when the timing is, but the facts are right there for investors to see. But, I think we have a market full of grifters being led by an administration full of grifters encouraging and even helping to finance their grifting (i.e. Stargate, the Middle East Tour with Jensen and the boys.) Funny to see Elleson (ORCL) first back Theranos and now he is supporting Scam Altman's OpenAI along with Masayoshi Son as MSFT and Nadelli is stepping away from further funding OpenAI & is trying to find a way out of the mess it started by seeding OpenAI. Just think of all the trillions of dollars spent on AI over the past several years. At somepoint, perhaps the financing of AI, datatcenters and the entire infrastructure around it will be viewed like CLOs in 08. Thus, this is why I think today we living in the worst of worst - the Dotcom & GFC combined. Throw on top of that the Federal Government and the Federal Reserve already shot their loads on the GFC & Covid bailouts in a much lower lower Interest rate environment with smaller deficits and balance sheets. In addition, I think we are likely in an inflationary era and the 4-decade bond bull market has died! Given the BBB looking to pass, who is going to give our Goverment the financing in the years ahead and at what rate. Just read the recent Reuters article (every country plans on quite significantly moving reserves away from the dollar to Gold, the Euro and even China) summarizing the findings of last week's Official Monetary and Financial Institutions Forum (OMFIF) study (https://www.reuters.com/world/china/central-banks-eye-gold-euro-yuan-dollar-dominance-wanes-2025-06-24/). If Trump is truthful in his late Friday comments saying he wants FF Rate at 1% ASAP and will not hire a Powell replacement without that promise and other countries are going to see Trump as pretty close to a true MMTer. When the grifting and market BS stops and we return to true fundamental analysis I have no clue, but the ending will be worse than GFC - bold (perhaps crazy) call, but that is how I read it and I stand behind it. I am not saying AI is useless, it can be a good search engine or user aide, I am saying the TAM is like 10% of what the financial markets are currently pricing into their valuations. I know most will think I am high or something, but these are my viewpoints I just do not know how to time it, so I wait in astonishment for the true story to get accepted. Perhaps a recession is needed for investors to take the blinders off? No clue, but I do know what is taking place is the furthest thing from Fundamental Analysis. True Fundamental Analyts (like myself) are either clipping coupons or getting their face ripped off during this outright madness and disconnct of massive proportions!
a - congratulations on winning the prize for longest comment ever posted on my substack!
b - timing could be now - who knows - we had a sell off and rally to break bears hearts?
c - nothing lasts forever!
Thanks Russel. "The problem with investing in the blitzscalers here is entirely political as I can not find a problem with their business models. The create a lot of share holder value, but relatively little taxation revenue. This continues to reduce the tax base, while adding to wealth inequality"
Question: I am guessing you are comparing the tax paid by companies generating profit vs growth companies paying little or no taxes. What about the capital gain taxes on share price appreciation on growth companies?
Do you have the data to back this up or is it a qualitative opinion of yours?
I guess we need to compare: taxes paid on capital gain vs taxes paid by companies making profit (either in aggregate or on a per company basis).
What do you think?
Back in the dot com bubble - we saw many ipos and the use of stock as compensation. In this boom, generally seen stock buybacks - and many companies staying private. Also the largest tech companies pay no tax overseas - something the Trump administration is fighting to keep.
This isn't at all what Coreweave stock price tells me. Instead it tells me 3 things:
- tiny float
- large short interest (no borrow available even at 100%+ rates)
- investment bankers management who know how to game the system
The same thing played out in Canadian weed stocks, Beyond Meat, etc.
If investors believed the Coreweave story, they would have raised a lot more with the IPO (the fact they decided to proceed during that time is a tell also). We shall see which is more right soon enough when the lock up expires in September (my expectation - sales by management followed by equity offering).
So far as Palantir is concerned - the story with it and other megacaps is largely about index funds and passive bid. With palantir (and in fact Tesla before it) it is especially apparent when you mark the date it was included in the S&P on the stock chart.
There have definitely been squeezes in the market - GME and AMC in 2021, and VOW3 back in 2008 stand out. But you could have argued that Tesla was a squeeze using the argument above, and that would probably be wrong.
Palantir as a squeeze does not feel right... seems in line with other winning defence stocks like RHM GY .
As a rule, I try not to start any analysis with "the market is wrong". It worked in 2007, because the analysis started with the "rating agencies are wrong" which was correct - and "AIG are morons" which was correct. And then followed up with, "AIG is going bust" - so all logically consistent.
The closest thing I can find to "market is wrong" is US treasuries... and luckily that also starts with the "rating agencies are wrong" type of analysis too.
Palantir's BoD member literally bragged about the squeeze from index inclusion on twitter (later deleting his post). It also halved in a month earlier this year and is now back at ATH, was that a fundamental repricing?
Stocks with hundreds of billions market cap regularly go up or down 5-10% per day on no news, are you seriously suggesting that "markets are efficient"? What is the market right about when Shiba Inu has a $6.7bn (down from $20bn) market cap?
Market is right or wrong is a pretty meaningless question unless an overwhelming majority of buyers/sellers are informed market participants entering their trades on the basis of fundamental research.
I do think that we are approaching a point where passive flows might balance and then start turning negative (as inflows grow with income, while outflows grow with market cap) and we will find out whether Nasdaq is a real risk-free asset.
I would have assumed the rising inter]est rates would have killed off speculative fervour - and it did. See ARKK.
The problem with Palantir is that we know it has capture the client (DOD) and will now make money forever - and in line with other Blitzscalers has ramped up scale to make sure there is no competition.
Palantir will get into trouble with the rest of the market if and when the US government has to practice some austerity... which is both a political, economic and financial question
Commodities like platinum and palladium are starting to melt-up as happened right before the 2000 bear spread to the whole market. It looks like dotcom to me, with 2020 an echo of 1998 in commodities. The cycle is stretched because of the stimulus. USA ran balanced budgets in the late 1990s instead of the worst deficits outside of wartime.
Indeed - all true. But only matters when it matters....
Great note Russell. The perspective that "there is nothing new under the sun" (which was stated a couple thousand years ago in the bible) is always contested during times like these, with the argument being that it is "different this time". Who knows really, and to your point below, it doesn't matter until it matters. That said, having navigated as a manager through the internet bubble, the GFC, the European Debt Crisis, COVID, and the 2022 collapse of digital asset class, underlying market structure is every bit as fragile today as it was at those and other major turning points. The market is a shell game, with all eyes on the S&P... meanwhile, we are being pickpocketed by fragility. It's always the same.
Recessions tend to clean things out... but without spiking oil prices, the chances of a recession seem low here... and I think market is reflecting that