Can the AI trade survive without Jensen?

Jensen Huang resigned—what does it mean for the AI trade? [0:44]
Why every investor should follow Taiwan Semiconductor (TSM) [6:40]
The biggest factor for Nvidia going forward isn’t the CEO [7:40]
What should you do with NVDA on Huang’s exit? [11:51]
Bank of America: Is AI entering “dot-com bubble” territory? [15:33]
Bitcoin is no longer scalable [19:34]
A dangerous environment for the housing market [32:12]
OpenAI is capturing more total addressable market [36:34]
AI is taking control of search and marketing [41:51]

Frank Curzio 00:00

What’s going on? Today is Thursday, November 12. I’m Frank Curzio, [the Wall Street Unplugged host?], so I bring the headlines and say what’s really moving these markets. Daniel Creech is not with us today. He’s on another vacation, and he always busts his chops. He’s in Arizona right now, so all you have is me. This is usually a Q&A, but we’re getting tons of questions on Jensen Huang and Nvidia, and what to do with that stock. We’re also getting questions on Bitcoin, because yesterday we said we’d have a big segment on it. I think Bitcoin is going to go a lot lower. It’s down six straight days, and I don’t know what it’s doing today. And we have a couple of other questions, including some on OpenAI. Instead of going question by question, there were so many on those topics that I’m just going to cover them. I don’t know if you saw it today, but Jensen Huang stepped down. It’s 100% of the news flow on every channel, whether it’s financial or not. He stepped down as CEO before the board met. The board was going to meet to determine that.

Frank Curzio 00:55

No surprise there. In the past 24 hours you saw Kalshi [?] surge when the second affair story was released. I’m sure the guy has a girl, a side piece, whatever you want to call it, in probably every country he visits by the time all this is over. So it just creates a lot of uncertainty. I don’t know how many countries he visits, 40, 50 a year. The guy’s always happy, energetic, optimistic, but now he’s not too happy, because he has stepped down from the company he created, built and co-founded. Which is pretty crazy. Before I get into what you should do with this: CFO Colette Kress, who worked at Microsoft and Cisco and has been with Nvidia 13 years, has been named interim CEO. Obviously it’s dominating the news. It’s a huge story. And my two cents is that it’s the right move.

Frank Curzio 01:48

It’s not just about affairs. It’s about the uncertainty that would keep coming up more and more. And I’m the unluckiest person on the planet. I told you on the podcast on Friday that I recommended two stocks. One was Micron, which went up 17% in the week. The other, Nvidia, was down about 14% for us. We had made money on Nvidia before with my Alpha subscribers. The very next day after I recommended it, this news came out. What are the odds of that? It’s like getting struck by lightning twice. It doesn’t get worse than that. I recommended it because it’s dirt cheap, even before the selloff, with massive growth and innovation, everything. So now that you see this, what’s changed? Well, the stock is down probably 15%.

Frank Curzio 02:40

It was down a lot more. It opened down, I think, 13.5%, and then you saw a lot of buying come in, because the stock was already down anticipating this news. Like I said, 24 hours ago Kalshi [?] had the odds skyrocketing that this was going to happen. And I like the fact that he didn’t wait for the board. Every meeting this guy has had in the past five years that has ties to China is going to be questioned. Every woman he had a meeting with in the past five years is going to be scrutinized. So when you remove a big overhang from the stock, it’s huge, because it’s pricing in that this was going to happen. If you’re looking at what could happen next, there’s a lot of stuff with Megaspeed, and the spy, the woman who seems to be a China spy. That’s what’s being reported. There’s an affiliate of the company called Speed Matrix [?], which bought $5 billion worth of Nvidia chips. I don’t know how that’s going to factor in.

Frank Curzio 03:26

Our government may decide to hold some of these orders. Remember, Nvidia grew sales year over year by 70% last quarter. When are they reporting next quarter, Joe? This week?

Joe 03:36

The 17th.

Frank Curzio 03:37

Next Tuesday they’re reporting, their Q3, I believe. But last quarter, when they reported in August, Nvidia said they grew sales 70% year over year, and they would have been able to report 100% if they had the capacity. So it’s just massive demand. Maybe some of these contracts will be scrutinized, but with the massive demand they have to fill, I’m not too worried about the fundamentals. They have all the engineers there. Yes, Jensen was amazing at knowing all these CEOs and getting people together to work together. He was one of the few CEOs in technology who said, “Why don’t we just partner with everyone? We’ll create the software, CUDA, along with the greatest hardware in existence.” Once customers build these stacks and build them up, it’s almost impossible to knock that down or start from scratch. It creates a moat around this company, which is light years ahead of everyone else with the technology.

Frank Curzio 04:32

In terms of the Justice Department and those deals, I don’t see it as a big deal. Nvidia generates less than 1% of its total data center revenue from China, and that revenue comes from older chips, the H200 products, under government licenses. That Hopper architecture is from 2022. Since then the company launched Blackwell in late 2024, and it’s producing its newest chip architecture, Vera Rubin, which already has $20 billion in orders placed by customers. And when I look at the fundamentals of this company, we’re talking about 70%-plus growth over the next 12 months, at $700 billion in revenue. You’ll see some stories saying that some of these companies have subsidiaries of subsidiaries and might bypass a couple of things and get some of these chips into China. We haven’t really seen that.

Frank Curzio 05:23

There’s a Reuters story from last week, which is surprising, saying that China did not accept the new orders for Nvidia’s old chips. They halted that order last week, so I don’t know if they knew what was coming or not, which is weird. But when I look at this company and see earnings expected to grow nearly 100% over the next 12 months, and Jensen saying he would have grown revenue 100% if they had the capacity, I think a potential loss in orders just from the government is going to be very limited when you’re looking at $700 billion in revenue. Maybe it’s 10% of that. And remember, we’re looking at a stock that just declined. Joe, throw up a chart there of a month ago. The stock was $220 a month ago, and now we’re at $165. It actually hit $150 today when it opened. Then you saw massive buying by big institutions coming in on this dip. When you remove the uncertainty… yes, there will be more stories coming out, but if he stayed, more women coming out and more affairs and all this nonsense would have dominated the news.

Frank Curzio 06:25

It would have crushed the company, and I think this is the right move. When I look at the future of the markets, at the best company in the best industry, where the five top hyperscalers are spending $1.3 trillion on AI infrastructure, you have Taiwan Semi, and I said this yesterday, that just came out and said sales grew. That’s the leading indicator. All the chip sales for all the major companies go through there; that’s where they manufacture them. They get the orders first and ship them to Nvidia, and Nvidia ships them to its customers, or maybe they ship directly to the customers. If you’re going to see a downturn in this business, you’re going to see it there first. That’s why you always want to look at Taiwan Semi. And they just came out and said sales grew 17%. Not year over year, not quarter over quarter, but month over month, from last month.

Frank Curzio 07:10

You would think that with this massive selloff that’s not possible, right? And I’m going to describe how big this selloff is, because we haven’t seen anything like it since the dot-com bubble. Bank of America put out a great report, and I’m going to share that chart later. You’re seeing spending increase, yet these stocks are getting absolutely hammered, which is a big disconnect. And Taiwan Semi said they plan to increase their CapEx by 15% more than what they outlined a month ago, because of the massive demand they can see. So what now? They’re looking to hire a permanent CEO. I think they’re going to hire Johny Srouji [?], Apple’s hardware chief, if I had to guess. That would be the right hire. I said this to my Alpha members this morning, and I heard it from great people, people who went directly to Elon Musk, a lot of sources.

Frank Curzio 08:10

The most important thing in making a great company is the supply chain. It’s the most important thing for success for all hardware companies and for retail companies. That’s why you look at Costco and Walmart. Even during COVID, it took Target a year and a half to get rid of all its inventory from the COVID period, after the huge spike in demand. It killed so many retail companies. It took one quarter for Walmart, which crashed the most it’s ever crashed, to figure it out, because they had the best supply chain; they understand it. Same with SpaceX when it comes to building satellites. Speaking of Tesla, there’s still today no American company that can scale EVs. They don’t know how to. That’s why they all pulled back, because of the supply chain.

Frank Curzio 09:00

So you have all the engineers, all the technology and all the innovation there, but the most important part is getting products to customers on time. When you look at Apple’s hardware chief, with hundreds of millions [?] of iPhones, I don’t think you realize how difficult that is, with Foxconn and Taiwan Semi and everything they do, plus new iPads and the new iPhone, constantly, every year. It’s incredible that they get it right so often. You don’t see massive inventory concerns. They get it right. They could also promote Ian Buck, the vice president of accelerated computing at Nvidia. That would make sense. I don’t know too much about him, but a lot of people believe that could happen. When you look at successors, people thought Steve Jobs could never be replaced, and then you have Tim Cook. By the way, I think it was Trump who came out and said Tim Cook should take that job.

Frank Curzio 09:51

I don’t want Tim Cook in that job. I think that would be a negative. He’s not really an AI guy. You could say the same thing about the supply guy, Johny Srouji [?], but he’s more in charge of Apple’s hardware. With Tim Cook, I think it would be a negative, especially since Apple missed the whole AI boom. Again, that’s turned out to be good because of the CapEx. But I think you’re going to see Apple’s stock fall pretty soon. It’s trading at 38 times [core?] earnings, with margin concerns in terms of memory and slower sales in so many different divisions within China. I’m surprised that so much money has gotten in there, but money’s got to flow someplace. We covered that yesterday; that was Apple. On replacing CEOs: people said Steve Jobs could never be replaced, or Bill Gates, and Microsoft had a couple of CEOs before they got Satya Nadella, who’s unbelievable.

Frank Curzio 10:44

But to be fair, those successions were planned. This one’s not, so it’s going to take some time and there’s a little uncertainty. But you have someone at the helm who has been there 13 years, a CFO, very, very smart, with a background at Microsoft and Cisco. Brilliant. But you’ve got to hire a CEO. A lot of the negativity, a lot of the uncertainty, has come out of the stock. Jensen knew this, and it would be hard for that board to even vote, since it’s a different board. It’s not a traditional board like you see at every other major company in the world, the Fortune 500, especially the biggest, where you have boards of CEOs of former companies. This is a board of people you won’t really know, guys who were in the stock that he raised, that he made their net wealth, and did everything for them.

Frank Curzio 11:34

That’s not easy to do. I don’t care who you are; business is business and personal is personal. But when you sit in a room with people you basically made wealthy, look at what you did for their families, their lives, their legacy, and they’re going to say, “We’re going to get rid of you”… I like the fact that Jensen Huang just said, “This is the decision that has to be made,” and left before that happened. Now, more importantly, what should you do with the stock? If you don’t own it, buy it here. You’re probably going to see downgrades, so I would take a half position. That’s what we did in our newsletter, and we’ll probably build the other half on the way down. We didn’t get a chance to buy because it was down 13.5% and now it’s down less than 5%. You’re probably going to see a few downgrades in the coming days. Analysts already lowered their price targets. There are 35 or 36 analysts covering the stock, and the lowest price target I see right now is $180.

Frank Curzio 12:20

That’s the low, from the person who hates this stock the most: $180. Most targets are above $300. Some were cut by $50 to $100; they took out that premium. I think Citi cut to $200 maybe. But you have the stock at $165, and it was just at $150. So build a position in this name. This morning you saw the smart money come in. There’s going to be a little more uncertainty going forward, but Nvidia still has the best technology in the world, holding close to 75% market share in AI data center chips and hardware. That isn’t going to change anytime soon. It’s trading at 13 times forward earnings. Thirteen times. The S&P 500 trades around 18 times. S&P earnings are projected to grow around 16%; these guys are growing at 100%. They have contracts signed for chips already made, Vera Rubin, for the next two years. All the engineers are still in place. Everyone’s there.

Frank Curzio 13:18

He owns, I believe, 3% of the stock. I’m sure he’ll still be influential behind the scenes, talking to people and CEOs, because he has such a big position. This is his life. I think he’s allowed to talk to CEOs, and that could put a muzzle on things, with him saying “everything’s good, everything’s going well” and helping groom the next person. That’s what I would do if I were them. I’d want to talk to Jensen pretty much every week, if not every day. But when you look at the fundamentals of one of the greatest companies in the world, it’s giving you this opportunity. I’ve seen it before. I’ve seen so many companies get annihilated on certain news stories, but a lot of this stuff is going to go away. It’s not going to hurt sales too much. And it’s the greatest company in the world, so the list of CEOs they could hire is so long. You could probably see the CEO of one of the larger chip companies.

Frank Curzio 14:08

Imagine going to Nvidia from where you are. It’s a great option. Plus you’re going to get options on a stock trading at, I think, a 12 or 13 multiple, the low end in terms of valuation. You’re going to get a great pay package tied to your stock. So the list of great people they can get is very long, and they’ll do a good job. This is a company that’s dirt cheap right now: the greatest AI company in the world, with technology that’s years ahead of the competition. So I would be buying. I would establish a position here. We have a position. Yes, it’s down. I didn’t add the other half because I think over the next couple of days, tomorrow, Monday, Tuesday, I might see a couple of downgrades, and we have to see the earnings come out. We’ll get a lot more clarity there. And being transparent with everything they’re doing, and answering the questions people want answered, like who they’re thinking of hiring or who’s on that list, will help.

Frank Curzio 14:56

I don’t know if they’ll actually say that. They probably won’t. But they could just say, “We’re very active in that. None of the awards have been canceled. We’re talking directly with the government. Everything’s good right now.” They know what they need to address on the conference call. They know the risks and what people are concerned about, and they have a few days until next week’s call to address a lot of this. I will say this, though. It’s not just Nvidia, and again, you can’t get more unlucky than me, buying it the day before. The biggest company in the world, the cheapest valuation, the fastest growing, a steal, a layup. The very next day they announce this about the CEO. You don’t get more unlucky than that. Joe, part of that chart is from Bank of America. I want to show you another confirmation of why I’m bullish. It’s not just the massive buybacks, $1.5 trillion, where the lockup is ending. It’s not just the valuations we saw yesterday.

Frank Curzio 15:43

I covered so many stories with OpenAI: $10 billion in sales, which is 50% month over month. Anthropic, an $81 billion run rate. They just said they got stronger demand for their IPO, which is probably going to come out at a $1.2 to $1.5 trillion valuation. And TSMC’s numbers, from the last 24 to 48 hours, show the demand is all intact here. When you look at this chart, it’s from Bank of America from yesterday. It says: “Rotation from tech into defensives has now stretched to multi-decade record levels and may be at risk of reversing,” meaning massive buying. It’s so underowned that these algorithms, these AI programs from multi-billion-dollar hedge funds, get everyone selling, selling, selling and asking questions later. We see this all the time. We saw it during the credit crisis, when I said that 18% of S&P 500 companies traded below 10 [times earnings?]. That low was 666.

Frank Curzio 16:36

It should never have gotten there. That’s why we saw a massive gain over the next year, and then it led to a prolonged bull market of over a decade. You see these overreactions on the positive side and on the negative side. And when you’re looking at these levels, with people saying “we’re closer to the dot-com bubble here,” that’s insane. Let me put that in perspective. When it comes to the dot-com bubble, things weren’t just bad, they were absolutely horrible. We had housing prices down 25%, the market down 35%, unemployment almost at 10%, if I remember correctly. That’s when all these new bank laws came into place, to make sure those three things don’t happen at the same time. The banking system, the world financial system, was on the verge of collapsing with the housing crisis. [Note: Frank is describing the 2008 credit crisis here.]

Frank Curzio 17:33

That was at stake. The selloff you’re seeing today is being compared to the last time we saw a dot-com bubble. And what do we have today? Massive, massive demand for AI. Not all companies; we know that a lot of these neocloud companies are going from tier one to tier three. We’re seeing that with a lot of these Bitcoin miners, and we’re going to cover Bitcoin in a second [?]. But not all of them. The financing is a big part of this, but you still see massive demand. It should not compare to a time when we were worried that every bank was going under. If the government had done nothing, that’s what would have happened. Everybody hates that the government bailed them out, but if not, we’d still have 30% unemployment today. We’d probably have ceased to be a country, the US. It was the biggest nightmare you could ever see.

Frank Curzio 18:19

If you don’t remember the credit crisis, it’s unbelievable. It was that dire. So should we be selling off at the same rate? No, absolutely not. So there’s a lot of opportunity right now. You should have cash on the sidelines if you listen to us, even the Alpha members. We got hit with a couple of AI names in our portfolio like everybody else, but we did sell a lot of stocks over the past couple of months, saying this earnings season was going to be a disaster. It’s hard for companies to issue positive reports with rates going through the roof and oil prices surging over the past couple of months. You needed those reports to support the 30%-plus earnings growth we saw year over year. A lot of companies are going to decline 15 to 20%, which will give you an opportunity to purchase really great names, and we’re there, especially within a lot of these large caps. This rotation is pretty crazy.

Frank Curzio 19:07

We’ll be monitoring Nvidia. I think it comes down maybe a little more, you see some downgrades, but I’m going to add the other half position in our newsletter after I see that, to improve our cost basis. We’ll probably only be down about 5 or 6% in the stock. And then, holding this for a year, just close your eyes and forget about the news. I think this thing is going to $250 a year from now. Pretty easy. You’re buying the biggest stock in the world at the cheapest valuation, one of the fastest-growing companies on the planet in terms of revenue. The story I was going to cover was Bitcoin. I was going to do it yesterday and didn’t get a chance to, because we highlighted so many stocks in the AI boom that you should be buying. I would watch out for Bitcoin. I’m not just saying that because the Democrats won the midterms and they hate crypto. They tried to destroy crypto, and then what did the crypto bros do?

Frank Curzio 19:53

All the major companies decided to fund Trump, which arguably won him the presidency. It was the biggest donation he got from anyone. You could say maybe it’s not that, but it is. If you look at Bitcoin, I think it’s down six or seven straight days, at the $71,000 level. Joe, put up a month chart first. Holy cow, that’s a massive move. Now put up three months. You’re looking at it approaching $90,000 and then coming down tremendously. And I think Bitcoin is going to come down a lot further. When you’re looking at all these neocloud companies, they were once Bitcoin miners. That’s called tier one. What they do is own the energy, and it costs a lot, plus chips, Nvidia chips, to run the code to generate Bitcoin. There are companies that do that, and it’s very, very expensive.

Frank Curzio 20:44

It’s a business model that’s unsustainable and unscalable. For example, I sell subscriptions here. There’s a number, say 100 subscriptions at whatever the price, where I break even, and every one I sell over that is a huge profit for us. I can scale that. With Bitcoin, to produce it you have to spend more money. You can’t just sit there and say, “These operations are great.” You have to buy faster chips, or other people will get more Bitcoin because they have faster chips than you. You have to upgrade computers. Electricity prices are through the roof, so you pay more for electricity. You have to open more facilities and build more servers. On top of that, every four years there’s a halving event where everything gets cut in half, which is hard for Bitcoin, and your profits go lower.

Frank Curzio 21:32

So it’s an unsustainable business model. And since they were sitting on this energy when AI took off, they said, “Holy cow, our energy is actually worth about 20 times more than it is for Bitcoin.” And this is a sustainable model, where the biggest companies in the world, the hyperscalers, with billions and billions on their balance sheets, are going to die for this electricity and sign contracts with us. So let’s switch from tier one to tier three. That costs money to do, but they have the energy, and we’re in dire need of energy. So what happened in the past month or two? Interest rates went higher. A lot of these guys took on contracts for the future. Then the hyperscalers came in and said, “We have contracts with these people, but let’s just buy out all the supplies for the next two to three years, when no one can get supplies. A lot of these contracts may not get filled, and then these neocloud companies will have to come back to us, and we can dictate the terms and prices and sign much better terms for us.”

Frank Curzio 22:26

That makes a lot of sense. Some of them do have contracts, but the customers are going back to them because they want collateral. You saw that at Oracle. It started with Oracle and then SpaceX. The credit default swaps, which are like insurance on the debt, started skyrocketing for these companies. So now you look at the neocloud companies with these contracts: they have to raise a ton of money to build this stuff, hundreds of billions of dollars. They’re having trouble financing, and that’s why you’re seeing some of these names down 70% or 80% even though they have massive contracts. It’s interesting, because right now, in the middle of switching, they’re still generating a lot of Bitcoin. They’re Bitcoin miners, which generates lots of cash flow. They’re in dire need of capital, and the easiest way to raise money, at really no cost to them because they’re already Bitcoin miners, is to sell the Bitcoin on their balance sheet.

Frank Curzio 23:17

I know people are saying, “Frank, it’s such a tiny percentage of what they own.” But they keep producing more and more. And no one else is really entering this business, because unless you’re in it already with everything set up, it’s almost impossible to make a profit. My guess is that it’s probably $55,000 to $60,000 for some of these guys to be profitable. Maybe it’s a bit lower, but to start new it’s probably more like $90,000 to $95,000. There’s proof of this; you can look at the balance sheets of different companies, and they say the all-in costs are around $90,000 for some of these operations. If you look at Riot [?], a big name in the space that just reported earnings: it produced 1,637 Bitcoin last quarter, which at current prices is about $120 million.

Frank Curzio 24:03

But they sold over 20,000 Bitcoin for about $1.5 billion to fund their data center development. Riot [?] has $28 billion… wait, what’s the market cap for Riot? Hold on, Joe. What is that? Six what?

Joe 24:21

6.9.

Frank Curzio 24:22

Seven billion. So it’s sitting at a $7 billion market cap, and it has $28 billion in contracts in its pipeline, which is insane. Normally, if you sign contracts like that, you should be trading at 7, 8, 9, 10 times sales, depending on your growth. But they have to build all this stuff. So it’s trading at a valuation that’s insane given $28 billion in contracts. Why so big? Because they own a lot of energy, which will lead, they say, to $1.8 billion in annual rent once they build these facilities. Go down a little more. I don’t know what the revenue is right now. What’s the revenue on this company? Revenue is $675 million, and $1.8 billion annually is coming in for the foreseeable future once they build this stuff, in three to four years. That’s why I said the government should fund this. It’s a great investment for developers if they come in at a lower rate compared to funding Social Security and everything else, the post office and healthcare, which get annihilated.

Frank Curzio 25:16

Different story. These companies need funding, and the easiest way to add cash to their balance sheet is to sell their Bitcoin. That’s what Riot [?] did; it sold a lot of its Bitcoin. They keep producing and they keep selling. There’s a lot of selling pressure. What do we know about Bitcoin? A lot of people buy it and hold it forever. They don’t really trade it. This is constant selling, on top of the Democrats, who are likely going to come after this industry. They did already, and they hated it, and now they’ve won the midterms. It makes sense, and it’s a little scary. Look at Mara, another big player in this space. Put up Mara, Joe. It produced 13,600 Bitcoin last quarter, about $1 billion [?]. This is another company with massive contracts. What’s their revenue? This is a small company, $3 billion [market cap?].

Frank Curzio 26:10

Again, it owns a lot of electricity, but it’s trading at less than half… [unclear: the market cap versus revenue comparison]. Its revenue is higher than Riot’s [?], so probably not as big contracts; I didn’t look. The point is that Mara is selling a lot of Bitcoin from its balance sheet. They’re still generating Bitcoin, and the Bitcoin they get, they turn around and sell immediately. That pushes selling pressure onto Bitcoin when you don’t really have a lot of buyers. The Bitcoin bulls will point out that neocloud companies own a very small percentage of it. But Mara is at nearly 40,000 and needs to raise billions. SpaceX is at 20,000 [?]. And funds like 21 Capital and Strive Asset Management own 90,000 combined [?]. That’s a lot of Bitcoin. Does it make sense to hold it on the balance sheet? They’re likely selling; I would think they’re better off selling their Bitcoin at current prices and using that cash to lend out for data center development.

Frank Curzio 27:02

And you’re seeing it. Private equity is doing everything it can to get some dry powder, because they want to fund this as much as they can. In two and a half to three years you’re going to see the money coming in. The power is there, the amount spent on CapEx is there, everything is there. But you want to have collateral, because sometimes three or four years out we’ve seen trends reverse. We’re not seeing that based on everything we see now in terms of spending. Everyone is still increasing. We could be in the third or fourth inning; nobody knows about AI, because you can’t see the end of how big this market could be. It could be 20 times the size it is right now. We don’t know. That’s why you have to be in it. If you’re not in it and not spending as one of these hyperscalers, you risk losing a trillion in market cap, which we’ve seen. We saw it with Google, until Gemini 3.5 came out.

Frank Curzio 27:48

They were late to the party. We saw Microsoft pull back, a trillion back and forth in terms of valuation if you fall behind. Think about Anthropic and OpenAI, two trillion-dollar companies where that technology could have been inside one of the hyperscalers, $3 trillion in value right there. So it’s a big deal for these guys to spend, because you can’t get left behind in this growth market where you can’t see how big it’s going to be. Everybody knows it’s going to be big. Are we in the first inning, third inning, fifth inning? I would say more like the second or third. So these hedge funds can generate 12 to 15% on this capital by lending it out. I just think you’ve got to worry about Bitcoin here. You’re going to see this constant selling from these neocloud companies. What’s the story on Bitcoin? What’s the catalyst that’s so exciting? Even when you look long term, and the government’s not going to be in favor with the midterms, very smart people I’ve followed over the past couple of months have been saying this.

Frank Curzio 28:50

They’re worried about quantum computing. Quantum computers could kill Bitcoin. It’s a big deal. What’s the thesis for Bitcoin? I want to own it because it’s a hard asset. Fiat currencies all end up going under, and there’s constant money printing. No matter who’s in charge of the US or anywhere else, it’s always going to continue, whether Republican or Democrat: spend, spend, spend. No one’s going to cut back, because if you cut back you get a slower economy. Everyone votes with their wallet, like they did on the affordability issue this time. That’s why Democrats won. No president is going to cut that spending, because you’ll lose your job. So you’re going to see this constant spending. You’re never going to see anyone say, “We’ve got to worry about that $40 trillion.” We worried when it was $20 trillion, $25 trillion, $30 trillion during COVID. Now it’s $40 trillion and going higher and higher. At this level of interest rates, the interest payments alone are above a trillion.

Frank Curzio 29:39

That’s what you’re looking at, interest payments only, which is insane. So when you look at a hard asset, it makes sense. The ability to send money, being censorship-resistant, makes sense. A huge part of the thesis is that you own an asset that’s very difficult for any government to take away from you. But quantum changes that. Quantum could crack the private keys. We’re not there yet, but that’s scary, in a world where we just saw $6 billion get hacked in seconds off one of the biggest Bitcoin platforms in the world, Binance [?]. And even when that doesn’t happen, we’ve all seen it with Coinbase: if you have an account there, you’ve probably received 500 texts saying, “Your Coinbase account, verify this.” And you say, “What are you talking about? I haven’t looked at my Coinbase account.” Because they were hacked. They already have the information.

Frank Curzio 30:29

With AI and quantum, a few years away, it doesn’t matter. Bitcoin is a buy-and-hold-forever asset, like people view gold, and quantum is a significant threat to it. If you can crack these codes, maybe you could steal this Bitcoin, and there’s no one there. So much for decentralized platforms: there’s nobody to say, “I lost my money, how do I get it back?” They’ll say, “Sorry, we told you not to buy Bitcoin.” That puts a dent in it as well. There are a lot of negatives here, not just short term, with the Democrats coming in and the constant selling pressure from these neocloud companies, who need money to fund their growth for tier three data centers. I don’t see that stopping. I see Bitcoin coming down a lot lower here. So just be careful. I don’t think anyone is really talking about that. I know I have a lot of Bitcoin followers, really good people, and I’m going to get lots of emails.

Frank Curzio 31:18

[email protected] [?], keep them coming, or my X account, @FrankCurzio [?]. But just be careful with Bitcoin here, guys. I see it going a lot lower from here for a while. That’s the reason why I don’t write a crypto newsletter now, which we had for three or four years. We did very well on it, but then there was a nine-month stretch where everything got annihilated. We said, “Look, it’s going to get a lot worse,” and it did, and we pulled that newsletter. My job is really to protect my investors. I’m not going to recommend something that’s going to automatically go down. I know people got upset and said, “You canceled this newsletter.” We took care of everyone. We said, “Okay, cancel the newsletter, but you’re going to have access to all of our products and services, which created the Alpha membership.” We always take care of customers if we ever do that. If I have a product I think isn’t going to make money for me, I’m not going to force it down your throat and make money off it. It’s just not what I do. That’s why I’ve been doing this for 30 years.

Frank Curzio 32:03

I just don’t mistreat my customers, and I never will. But I just see a lot more hard times with Bitcoin. If Bitcoin goes down, you’re probably going to see the rest of the industry go down as well. Now, a few stories I want to mention, since everything’s being dominated by Jensen Huang and Nvidia. Existing home sales. I’ve been talking about the collapse in the housing market for a while, and I don’t think people understand it. I think individuals understand it; I don’t think economists do, and I don’t think it’s being mentioned enough. In some areas, and I have a lot of real estate agents who listen to this, my own house has been on the market for nine months. We just lowered the price. I’m in one of the nicest neighborhoods, over on Cross Street from Tim Tebow, with a brand new golf course and an exclusive special membership. It’s a really nice house that I built in 2020. I got lucky doing it in the right neighborhood, and I’m having trouble selling it.

Frank Curzio 32:54

I’m not trying to sell it at a crazy premium valuation. I’m selling it for what the average home price is. There’s not a lot of demand even in this neighborhood, and it’s very hard to get into this neighborhood. But that’s my personal experience. I’m hearing of houses that have been on the market for two years. You’re not really seeing it in prices, because there are still supply issues, so prices aren’t coming down all that much. But existing home sales fell 5.5% in October, which was just reported. That’s from last month, not year over year; I think year over year it’s down 9%. Rates really spiked. That’s the lowest level since the subprime crisis. When the market collapsed 35%, you had home prices crash over 25%, unemployment went to nearly 10%, and our entire global financial system collapsed. That’s where we’re at when it comes to existing home sales.

Frank Curzio 33:45

And that’s pretty crazy, because there’s so much equity in these homes. About 70% [?] of homeowners have mortgage rates below 3.5%, whatever the number is, so even refinancing is tough. How do you get the equity out of a house when you’d be financing at a much higher rate? It’s tougher. Or you sell and maybe scale down, but you’re having trouble getting equity out of homes, which is a big source of future sales and revenue in the economy. So you’re shutting that off right now. I think when I look at that component, it’s very dangerous. We need to find ways to provide better rates for people who own homes. If you have the same net worth and the highest credit rating, why are you paying so much on your interest rate? There has to be something that can be done there, because right now the housing market is frozen, and now we have a Fed that’s going to raise rates.

Frank Curzio 34:39

I think that will result in long-term rates coming down. The Fed controls short-term rates; raising them will slow the economy and address inflation. When it does, you’ll probably see the 10-year come back below 5%. Even at 4.5%, that’s in direct control of the mortgage rate. When mortgage rates went above 6%, the housing market froze. Now we’re at 7, 7.2. I think we had 7.4 or 7.5. It’s just unaffordable. You cannot afford a house right now, with higher electricity prices and higher prices across the board. This is a massive story, and I just feel like it’s not getting a lot of attention. In terms of home builders, furniture, everything: when you build a new house and all the things you buy, you’re basically counting 200 publicly traded companies’ worth of stuff. A lot of that revenue is going to come down for a lot of companies.

Frank Curzio 35:25

So it’s not the whole market, just an area of the market you have to worry about, especially if you have a lot of sales tied to housing. It’s going to get a lot worse before it gets better. It’s really crazy out there. If you’re a real estate agent in certain areas… I talk to people in probably 30 or 35 different states. Over the past couple of years, if I met three people, one of them felt like a real estate agent. I think everybody became a real estate agent because it was so easy to sell houses. Different story now. If you’re in this market and you’ve been doing it for a long time, I’d love to hear from you to validate a lot of this, because I feel like people are not talking about this story. Everybody knows about it. If you own a house, you have a friend who’s trying to sell their house at a certain price in certain areas. Florida and Texas used to be huge, but now even Florida, and I live in Florida, you’re not even seeing a lot of houses come off the market right now.

Frank Curzio 36:16

So I’m curious to hear from you guys who have updated stats. Email [email protected] [?]. That’s what this is about, networking. This whole podcast, everything in the Curzio One membership, is about networking, bringing people together to get the right information quicker and faster. That’s how we make money, based on stock picks off of that. One more story before I go. My mouth gets dry because I’m talking so much. Where’s Daniel? I need Daniel to take over a little. I think this is amazing news, and it’s from OpenAI. I think this is their Muse moment [?], like Meta’s, when Muse changed the landscape of Meta and Meta stock took off. They announced Business in ChatGPT, in a beta version, and this is something you’ve got to listen to. Google has dominated this industry for decades. They control 90%-plus of search, capturing all the data, your personal information, everything you’re thinking about, what you purchase, everything through search.

Frank Curzio 37:16

Think about what you search for. Say you’re looking at a drug you might want to take, if you broke an ankle and you don’t want painkillers, what are some of the options? What doctors you plan to see, what stocks you’re researching, and so on. I don’t even use a lot of my old systems anymore, because I use AI systems. The Capital IQs and FactSets just aggregated data and pulled it from every place; now they have AI. These guys charge $20,000, $30,000, $40,000 for these systems, and a lot of this can be done by AI. That’s why a lot of those research companies have gotten hammered. Your research, your trip, your hotel, everything is online, and Google captures a lot of this.

Frank Curzio 38:02

And they take the data, totally disregard your privacy, which we all know, and sell access to your personal information to every advertiser. Those advertisers can nail down their target market tremendously, which is why Google has been so great compared to running a commercial on cable, where you have no idea who’s watching. These are people you can monitor who are actually looking. That makes it almost impossible for traditional media, TV and radio, to compete. Google conditioned companies to obsess over their search listings and pay for keywords for over 20 years, and made an absolute fortune. Now enter ChatGPT. It has 1.2 billion people on the platform, receiving 2.5 billion prompts a day. That’s about one sixth of Google’s size. Now they’re allowing businesses, through their business hub, to see how people are engaging with their company through ChatGPT. So it’s conversations, not keywords.

Frank Curzio 39:03

The company can use agents that ChatGPT builds for them to have conversations in real time with people asking questions about their products. What does that mean? It’s a big difference. It’s a reset of this industry. Say I enter, “What are the best sneakers to play pickleball in?” ChatGPT searches its database to determine which sneakers had the highest customer satisfaction based on conversations. That customer query could now go directly to, say, Nike, and Nike can see it. A Nike sales agent, a real person, not agentic AI, could get on the phone with them and have a conversation with the next customer in real time, off the ChatGPT platform, which I find amazing. It’s more direct. Say someone is searching for my product, my Alpha product, right now, and I’m able to call them and say, “Hey, I noticed you’re searching.”

Frank Curzio 40:01

“Do you have any questions? I’m Frank Curzio. I have that product.” Think about the chances of me selling that person compared to not being able to call them. It’s remarkable. You’re talking about not even increasing your total market, but your return on ad spend, which is what everybody looks at when they advertise. Those numbers are going to skyrocket. It’s going to be great. So ChatGPT is not just making money from people using the platform; it’s also making money from building sales agents for these companies. And they’re providing a much better service to their clients, because it significantly improves the target market, since the data comes from conversations, not keywords. More importantly, what’s the one thing we all hate about these companies? It’s when you’re thinking about something… By the way, if you did the new Apple update, be careful. Just Google it, or not Google, you can go to ChatGPT now, or go into TikTok or whatever.

Frank Curzio 40:54

There are three features in that update that basically say, “We’re going to put all of your Apple devices where we can hear you and take your information.” So much for Apple being on the customer’s side with all the privacy talk. It’s all nonsense. When it comes to money, they can make a fortune the more they know about you. The privacy issue is what we all hate. Google and Meta own your life and your data. We saw that with YouTube: if you had the wrong opinion, you got suppressed. During COVID we got suppressed for saying things like, “This doesn’t impact kids. Don’t worry about it. Not everyone needs a shot, just people over 65.” We’re not [?] anti-vax. My mom got the shot. But we got suppressed. They own it. They can pull you off Meta. They can stop you even on Substack: if I put all my newsletters on Substack and I say the wrong thing, they press a button. They own all your data.

Frank Curzio 41:39

This is different with ChatGPT. It’s addressing a major concern people have and providing a better service, where it’s conversations, not keywords. I thought that was a really big deal. And if you don’t think it’s a big deal, pull up this chart, y’all. This is a month chart. We have Alphabet and Meta, who are in the same boat, and then we have Amazon and Microsoft. Notice the moves in Amazon and Microsoft over the past month. Joe, what are the top two moves?

Joe 42:10

Three percent… negative.

Frank Curzio 42:11

Amazon up 3%, Microsoft down 1%. Now look at where Meta and Google are over the past month, as ChatGPT was rolling out this service. There were a lot of news stories about it, and now it’s officially rolled out in beta. Look at the collapse in these companies. Why is that? Usually these companies move in tandem, and sometimes you’ll see one sell off if it falls behind in AI, then figures it out and comes back. That’s what we’ve seen over the past two years. This is the past month. Microsoft and Google are down, what, 13 to 15% each [?]. These are all hyperscalers in the same AI business. Why are they down so much? Because when you control the area of marketing, digital marketing and search, and now it’s being threatened, that presents a huge problem. A 15% decline in market caps… What’s Alphabet’s market cap, Joe?

Frank Curzio 43:03

It was $4 trillion. So you’re seeing hundreds of billions, if not $300 or $400 billion, removed from these market caps, because it’s a big deal. Now they have to restructure their companies. This is why technology is great and why capitalism is great: competition comes in, things get cheaper, people use it, and whoever has the best service, the best products and the best pricing wins out. That’s why these companies have to spend so much money on AI. It’s ever changing. If you fall behind, you’re in trouble. This is threatening their core markets at Alphabet and Meta right now. Meta is down 15%, even though Muse really resulted in this stock taking off and coming back. But this is just the past month, and this is kind of under the radar: what ChatGPT is doing for businesses.

Frank Curzio 43:56

This is incredible. Not only creating agents for you, but the fact that you can see who’s having those conversations and then call those people and talk to them offline, off ChatGPT. If you get that right, that’s huge. Imagine being able to talk to everyone who is 100% interested in your product, instead of the 80 or 90% of the emails you send out that don’t get opened, and all the work on open rates, targeting, changing headlines and looking at keywords. These are people who are actually searching, and you’re going to see them now. The privacy concerns are addressed more, too, so you’re removing that overhang, which is really cool. That’s a game changer. And you’re seeing ChatGPT, which showed slower growth, though not last quarter, return to growth. They’re raising money at, I think, a $1.2 trillion valuation right now.

Frank Curzio 44:46

People are buying that, and then they’re probably going to go public early next year. Let’s see if the AI trade holds up and does well. That could result in the largest IPO ever, bigger than Anthropic and SpaceX, which those three are definitely the clear leaders. So, a very interesting story. You should pay attention, especially if you’re a business. You should probably try this out. It’s really cool. So, a lot covered today. The big story with Jensen. Bitcoin: it sounds like I was negative on a lot of stuff, but not so much. It was very positive yesterday. I love the markets and I love a lot of AI names. I think there’s a lot of opportunity there. A lot of these names have sold off tremendously, and you’re going to see more of those names go into our Alpha portfolio. I think that’s it, Joe. We covered everything today. A lot of stuff. Pretty cool. Questions, comments, feel free to email me at [email protected] [?]. That’s it for me. Daniel will be back next week.

Frank Curzio 45:34

I’ll see you then. Take care.

Announcer 45:37

Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.

Curzio Research publishes market commentary for informational and educational purposes. The opinions expressed and market conditions when the content is published may change. It is not personalized investment advice or an offer to buy or sell securities. Investing involves risk, including possible loss of principal. Do your own research and consult a qualified investment professional before making investment decisions.

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