Title: Dan Niles: Why Cash Makes Sense, Even as the AI Boom Continues Show: Global Money Talk (host: Ty) Guest: Dan Niles — Niles Investment Management, founder & portfolio manager Date: 2026-09-04 URL: https://youtu.be/BzVoaQ9doTU Length: 39:56 Note: YouTube auto-transcript; (mm:ss) cues real. Recorded before the market reaction to Broadcom's report (which came "after the close" during the taping) and before the September 16th FOMC. Verbal fillers (um / uh / "you know" interjections) removed and stutters/false starts collapsed; auto-transcript name manglings corrected (Warsh, SK Hynix, Strait of Hormuz, agentic, OpenClaw, Larry Page, NIMBY, COVID, Anthropic) plus obvious mishearings (bond "route"→rout, "reigns"→reins, "irk the eye"→ire, "about the burst"→about to burst, "cast"→task). Wording otherwise verbatim; no paraphrase, reordering or additions. Note: the opening (00:00–00:58) is the channel's teaser/intro montage, repeated later in the interview. At 06:40 he says "if a quarter point cut" while arguing a quarter-point hike won't kill data-center demand — kept as spoken.
00:00 economy is a lot more fragile than what we think. 40% of US households don't own stock. They don't have a home. Sustained inflation at these levels for 65 months is super painful because they don't have stocks going up or home prices going up to help offset that because inflation also inflates stock prices and home prices.
00:22 And so from my perspective, yeah, the Fed should raise rates if a quarter point cut. Do you think that's really going to kill it? If you do, then this AI thing is not real. So, it's hard for me to believe we've reached a fundamental peak when we're seven months into people trying to figure out how to use agentic.
00:35 So, that's why I think we have at least another year of solid growth ahead of us. But today, we're very excited to be speaking again with Dan Niles, the technology and market analyst famous for his legendary calls on technology and dramatic market turns. Dan believes that the Fed will hike in September. Then, it's the right move with inflation above target for 65 months and a stock market that needs a healthy pause.
00:58 Fed hikes, high oil and gas prices, and a bond rout are torpedoes in the water that will make the coming weeks potentially very risky for stocks. He reminds us that in recent history, the quarter leading up to midterm elections have seen an average drawdown of 10% in the broad market. Tune in and watch to the end to hear where he thinks traders and investors should take shelter and his fresh insights into the path of AI.
01:22 Dan, welcome back. We had you on the show in May and it's a few months but it seems like an age since that so many things are happening. So let's start with Chair Warsh. His speech on Friday was I guess kind of a big surprise really flipped the expectations on their head. Now if I recall correctly in May we didn't think he wanted to raise rates despite his reputation as a hawk.
01:47 So has he changed his mind or is he speaking loudly and carrying a whiffle bat? [laughter] I'm a big believer in listen to what they say and that tells you where the head is at at the time. And so we've seen this before where you say one thing to get appointed or you say this is what I'm thinking and this happens to me as well, right? You're thinking one thing at a point in time and then you get more data and then you have to change your mind.
02:20 And so for whatever set of reasons at this point, if you listen to what he said, he said we've had 65 months of sustained elevated inflation and the responsibility for that sits squarely with the central bank. And so I think it's about as clear as you can have it what he's thinking about.
02:44 And then when you think about the Fed meetings, you have one on September 16th. You have the next one after that on October 28th, but then you have the midterm elections on November 3rd, which is just a few days after that one in late October. So, I don't think he can raise there because he doesn't want to irk the ire of the White House.
03:07 And so I think you default to he's going to raise this next week when he gets a chance. Or not next week but the week after, on September 16th when he gets the chance. And so that's how I'm thinking about it. And I think that puts a lot of pressure on the stock market because it's not just the US that's raising rates, right? Japan is going to raise as well.
03:33 The UK, a lot of the central banks are dealing with elevated levels of inflation and to some degree it's also to deal with the fact that people's inflation expectations seem to be creeping higher as well. So I think you put all those things together. I'm a big believer in a simple phrase, which I put out a post on this when I saw his speech, I called it don't fight the Fed, and if the Fed's raising you don't want to fight it. I really can't argue with that.
04:03 One thing I was surprised with was that he mentioned that the economy is practically at full employment. I know unemployment U3 is 4.1%. But surely I would think he's probably too smart to not understand that figure. And I think he may change the emphasis on it once these committees come back, that's a number where the denominator is people actively looking for work and you look at labor force participation trending lower than it has been for a while. Is
04:39 there a little bit of a policy error here in terms of inflation, can he really affect inflation with a rate hike? And an employment picture may not be as rosy as he thinks or as it looks I should say. >> I mean the employment picture is pretty rosy. You can always cut the numbers and find something that doesn't agree but normal unemployment is closer to 6% and change. You're down near four.
05:03 It's really a great economy. And so I think if you're raising a quarter of a point, if that's going to damage the economy, we got a lot bigger problems because the economy is a lot more fragile than what we think. And my view is very simple. 40% of US households don't own stocks. They don't have a home.
05:30 For those 40% who can least afford it, sustained inflation at these levels for 65 months is super painful because they don't have stocks going up or home prices going up to help offset that because inflation also inflates stock prices and home prices. They don't have that. They're looking at what it's costing to heat their homes, feed their family, fill up the gas tank, and it's killing them.
05:56 And so from my perspective, yeah, the Fed should raise rates because those are the people you should care about the most. >> One of the sort of pillars of certainly economic growth or parts of the economy that's unbelievably strong is data centers. But data centers are now getting actually bipartisan political pushback whether it's justified or not.
06:21 If you raise rates and that pillar is starting to get a little shaky because of regulations or people doing the NIMBY thing, once again, is this a concern? Is he thinking about it? >> Yeah, I mean, he's thinking about it, but here's the thing. You listen to what the bulls say about data centers.
06:40 Do you really, if a quarter point cut, do you think that's really going to kill it? If you do, then this AI thing is not real, and the people who've been calling for a bubble are 100% right. But I don't think that's the case. And you're always going to see these pauses on your way higher. I mean, you saw it during the internet buildout.
07:01 Cisco had a couple of 30% selloffs on their way to being up like 4,000% from the end of 94 to its peak in March of 2000. And so these pauses are healthy. And so it's good that we have in my mind this pause in data center expansion because it'll also give these companies a chance to sit down and go, well, with some of these new ways of doing things, do I really need as much square footage as I thought or was I really building because the other guy is saying they're going to spend this much and so I feel like I can't. Larry Page had this saying, I'd
07:40 rather go bankrupt than lose this race. >> I didn't remember that but I get it. And so if you have that kind of mentality, you want a little bit of thoughtfulness in the room versus, oh, this company said they're going to expand by 80%, so I'm going to do it by 90.
07:59 And then the next guy's like, well, then I got to do it by 100. And you end up with this race to the bottom. And so I'm actually glad it's doing this. I always view markets when they go straight up as very problematic, for your Korean listeners that got wiped out because they were on leverage or buying levered ETFs on Samsung and Hynix.
08:18 That wouldn't have happened if you'd had a pause in this rally before this because that's what gets, I always say people and markets fluctuate between fear and greed and people got incredibly greedy between March and June of this last year and unfortunately you have people out there that are promoting these things and not talking about the risks and that's why you had this massive sell-off that happened from the end of June through the end of July that wiped out and hurt a lot of hardworking people that unfortunately
08:56 got sucked into this. So, I think it's good that we have this few months between now and midterm elections in early November to kind of reflect, throw a little bit of cold water on the trade for now and we'll see where things are because things change pretty rapidly. As I told somebody the other day, I said, "Look, go back and read the Cisco press release from May of 2001.
09:23 " And in that press release, that earnings release, they talked about how bookings went from up 70% year-over-year to down 30% year-over-year in just several months. Just several months. Up 70 to down 30. And I think we can all agree the internet didn't stop growing in 2001 or 2002, but because you had been up in such a big bubble in the stock market because NASDAQ was up 86% in 1999 was up another 24% to start 2000.
09:57 That's part of the reason why NASDAQ went down 78% over 2 and 1/2 years. And so these pauses are good because these massive collapses is where you end up seeing people getting into trouble and Situational Awareness and them having to be taken out because they were running at four times leverage is just a very high-profile example of that.
10:23 Do you feel that this could be one and done, and they're not giving forward guidance anymore, or do you see a sort of a series of hikes? Probably not in October as you rightly say that would probably cause an air strike at the Fed. But do you think there's more than one in the pipeline? >> I mean, who knows, right? I think there could be for one simple reason.
10:49 I think about the Iran situation and I go, "President Trump seems to have ruled out military action other than retaliation." And I know that keeps changing and you get tweets here and there, but the bottom line is the polling numbers right now for the Republican party is horrible. And just by looking at history, if oil prices are up a lot, if gasoline prices are up a lot, the sitting party gets killed in the midterms.
11:18 And if you go all the way back to the Iran hostage situation, Iran held those hostages for 444 days despite financial sanctions. They released them just a couple of hours into President Ronald Reagan being sworn into office because Carter had gotten absolutely killed in the polls. It was something like 489 votes for Reagan to 49.
11:46 And so from my perspective, I actually believe that this Strait of Hormuz situation is going to continue to be a problem till at least the midterms are done. Because if Iran can continue having this being a problem, voters can say they vote on all kinds of issues, but at the end of the day, they vote on their pocketbook and can they feed their family and fill their car.
12:11 And right now, those two things are difficult. So, if you then go back and say, "All right, well, if oil prices stay elevated for a long period of time, then that's probably going to continue to seep into inflation. And if data center growth seems like it's going to hang in there, which it seems to be, that puts upward pressure right for now on inflation as well, just because of all the resources that that data center buildout, not only in the US now, but globally is sucking up.
12:42 And so I don't have to worry about do I think there's a series of hikes or not. The data comes in, you see how the market reacts to the data, and then you can adjust as you go. But it wouldn't surprise me if there's more than one rate hike coming because at the end of the day, as Warsh said himself, inflation has been above their 2% target for 65 months and it's sustained.
13:08 >> So we have payrolls coming up and CPI coming up just ahead of the meeting. Do you think if there's another weak payrolls report and sort of mild inoffensive or perhaps lower inflation that that could still change for September meeting or does that look sort of set in stone to you? >> You have 65 months of bad data.
13:30 I don't think one month is going to do it. >> So it seems like, if I put some words in your mouth, there's torpedoes in the water for the market in terms of a Fed rate hike perhaps more than one. We have oil prices high. Looks like they're going to stay high because I think you're right that the Iranians might reprise what they did to Carter, they'll do to Trump in the midterms.
13:56 The other one that may be harder to solve is I know long-term yields have been backing up, but over the past few weeks the narrative has really gotten very strong that we have high inflation and we have too much crowding out. There's AI trying to fund themselves in the long end of the curve and the governments are as well and so interest rates in the back end have to go a lot higher.
14:24 That narrative really seems to have seized the headlines over the past few weeks. Is that something, if we get inflation and oil prices down, that will help or is that the beginning of something much more difficult to tackle? >> Well, you left out in my mind the most important part. You've got government debt levels just skyrocketing.
14:44 You have the US running a 6% deficit, which is the highest deficit outside of a major war. And on top of that, you have 40 trillion of debt in the US against 30 some odd trillion, 33 trillion in GDP. And it's not just in the United States. It's everywhere, right? Japan's got the highest bond yields in multiple decades.
15:10 The UK, I think, it's the highest in multiple decades. And so you started this process during the global financial crisis where people just started to stimulate and run big deficits, which is fine because you needed to do that. But they never really backed off of that. And then when COVID hit, that was stimulus on steroids.
15:36 And unfortunately, that never got pulled back as fast as it should have either, which is why in 2021 and 2022, you ended up with the fastest inflation since the 1970s. And so I think that fiscal irresponsibility by both parties in the United States, but then really countries around the globe has led to these massive debt piles in governments all over the world.
16:07 And then you throw on everything you just mentioned, the data centers, etc., and you have where we are today. And unfortunately, you're not going to fix these deficits until you're kind of forced to because people unfortunately I feel like during COVID got used to a lot of free stuff. And when people get used to certain things, it's hard to tell them, well, no, we have to be a little bit more austere because they look at the stock market, they go, well, the stock market's fine, so why can't I keep
16:42 getting my free stuff? And people have kind of forgotten about the fact that all this free stuff led to the fastest inflation in 40 years not that many years ago. But unfortunately, I feel like we've gotten to the point where you need a crisis to have governments do what they need to do and to have the population accept that because this is a very cynical view, but politicians, no matter which country they are, they only have one goal.
17:12 That's to get reelected. It's not necessarily in my mind in any country to do what's in the best interest of the country because it's a job for a lot of these people as well. And so they just want to get reelected. And if people are swinging to the fact of, hey, we want free everything, then the politicians that are going to be successful will promise them free everything and not worry about what it's going to cost.
17:39 The deficit's going to run up and that's just a movement it seems like in the United States in a big way which is why you have the democratic socialists gaining so many seats and that's also not good for big business because from their own platforms they say big business is bad and so that's not good for the stock market when you kind of work your way forward to what does that mean for investments. There's multiple things that can cause problems.
18:13 But it starts with the deficits that governments are running and the way the political winds are blowing that looks like it's only going to go up, not down. >> Oh, yeah. I'm going to [clears throat] change a saying that if you rob Peter and pay Paul, I'll say if you borrow from Peter and pay Paul, you're pretty much guaranteed the support of Paul, which sounds like how democracies have been working.
18:36 So, given all these >> I love that. I'm going to have to use that phrase going forward, but you're >> 100% >> absolutely with or without attribution is fine with me. So given all these things, I know it's difficult to ask for this, but your outlook, a range for the S&P 500 from now till the election. >> Yeah.
18:55 Well, I'm not going to give you a range in that way, but what I will tell you is this. From 1990, and I put something out and so your viewers can go to my website on Twitter and see it there, and it's got all the statistics, but the simplified version is from 1990 through the end of 2025 between the end of July and November 9th, which covers all the midterm elections.
19:25 The average drawdown is typically 5% from peak to trough. So, wherever the peak is, it'll have a normal correction around 5%. In midterm election years, that drawdown is 10%. And actually, I'm saying that wrong. It's 10% drawdown in midterm election years, it's only 5% in non-midterm election years.
19:52 So, the drawdown is double what it normally is. >> So, that's kind of how I'm thinking about the And now that's, by the way, that's the median. And there's obviously outliers on both sides, but that also covers the Gulf War in 1990, which there's some similarities here obviously to that.
20:16 Let's shift gears a little bit. Let's talk about AI. The last time you were on the show, the ARR for Anthropic was $45 billion in May from N [inaudible] billion I think at the end of last year and now it's 70 billion, or might have even been higher now. Do you see this growth continuing, this ARR, or is it going to plateau at some stage especially with some of these open-weight models that are nearly as good as the frontier models and a heck of a lot
20:50 cheaper. >> Yeah. Part of the reason I got negative, because I put out a note on June 20th and said, "Hey, I'm worried about a speed bump here on the AI trade," and it turned out to be one heck of a speed bump from there to the end of July, was because of what you were seeing with not only companies trying to control their AI bills, but what you just said, which is open-weight models.
21:12 Now, if you look at it from the end of May through today, the cost for a million tokens has gone down by more than 50% from the end of May to now. So, you go, "Oh my god, that's horrible." But that's just the cost. The number of tokens being produced has gone up by more than two and a half times. So, that's more than offset that drop.
21:42 And if you look at the biggest cloud platforms in the world, so Amazon Web Services, Microsoft's Azure and Google Cloud Platform, if you look at the growth rates for the cloud businesses that they have, they were growing 35% in the March quarter and that accelerated to 43% year-over-year growth in the June quarter.
22:09 But even more importantly to me was the profitability of that business actually improved by operating margins expanding by 2% as well. And similarly you cited the Anthropic ARR which is interesting and obviously those are huge numbers but to me what's more impactful is the fact that they actually generated profits. Now, they're saying it's adjusted profit, so we don't know what's in that adjustment, which always drives me crazy, but they say they got to profitability in the June quarter as well.
22:45 And so, because one of the big question marks has obviously been, yes, these companies are growing fast, but you've got Google hitting the debt markets and the equity markets. They went cash flow negative for the first time since they went public. If you have to fund this stuff with debt, that's scary.
23:05 But if you've got people like Anthropic getting more profitable, then that has to make you feel better about the sustainability of this even when ultimately this bubble does end up breaking because I think there are two things. If you believe AI is one of the world's life-changing technologies, much like canals or railroads or radio, TV, or internet, then you have to believe that there's a lot of companies that have the view that Larry Page has, which is I'd rather go bankrupt than lose this race because they know if they win the
23:41 race, they're going to make a lot of money. Which then by definition means when you ultimately start to plateau this a little bit and the growth rates start to slow down, you're going to have the bubble break and you're going to have a lot of companies in big trouble because some companies are going to go bankrupt.
24:02 And so, but you can make a lot of money if that ultimate peak is a couple of years out and you have a lot more growth still in front of you. >> You said on the show last time something that really resonated with me and I thought a lot about it and how really insightful it was, and you said that you thought that Google or Gemini could be really the big winner out of this whole AI thing, sort of Larry Page, I want to win this race. With what we've discussed with some of these models that are nearly as good as frontier models, it's almost
24:35 as if China has shifted the battlefield from frontier models where they're particularly strong to, if these models become sort of commoditized, maybe you have really good models for medical research or defense or security but for everybody else, and you're seeing it now that for a basic task you want to use the Chinese AI because the token usage is so much cheaper. Is the battle going to move to sort of who can provide the cheapest compute or perhaps if compute becomes commoditized who can provide the cheapest energy.
25:11 Both of which I mean the Chinese can probably outmanufacture everybody else. I don't know if they can outmanufacture the Koreans in high bandwidth memory at least in the short to medium term, but looks like they move the battlefield to a place where they can be really really strong. >> Well, on the energy front, there's no question the Chinese are winning because they can decide, hey, we're going to put a nuclear reactor here and that's where it's going to go.
25:39 There's no community, there's no politicians. The central government decides this is what we're going to do and that's what happens. Obviously that's why we've got these issues around data centers because midterm elections are coming up and politicians are going, "Oh, well, if I support that, it looks like I'll get voted out of office.
25:56 So now I have to go from supporting it to putting it on ice or being against it." [clears throat] So on the energy front, that's clearly true. I think on the model front, the Chinese focused on, hey, they couldn't get the latest and greatest chips from Nvidia. So, they had to get smart and go, I always say necessity is the mother of invention.
26:17 And so, they were like, well, how do we do better algorithms? How do we cut the cost without just throwing more hardware at the problem? And so, they've done a really good job with low-cost models. But the US companies, I think you're going to see this Gemini Flash when it comes out from Google.
26:31 It's going to be pretty darn good in terms of low-cost token production as well. And so I don't think you're going to see the US companies fall that far behind. It's just the US is obviously at the lead with Anthropic, OpenAI in terms of the frontier models, but I think you're going to have models at the lower end that are pretty darn good, too.
26:51 So I'm not that concerned about that. What you are going to see though is that companies early on were just throwing frontier models at everything, right? They were throwing frontier models at summarize my emails. Like you can't do that. That's too expensive. And I always like to say, you're going to the corner store to get milk.
27:12 A Ford will work just as well as a Ferrari, right? And you don't want the Ferrari to go to the corner store to get milk. And I think 90% of the time people will use a Ford. They'll use the low-end models because you don't need the Ferrari. But for that top 10%, 5% of use cases, you're still going to want the best models that money can get your hands on.
27:40 And that's why you've seen since the end of May the token cost per million go down by 50%. But the good news is you saw the number of tokens being produced go up by more than two and a half times. And you've seen profitability improve and so this is working the way it should. Right? That's the way technologies always worked.
28:04 Costs come down, volumes go up because more people can afford it and hopefully profits expand with it in a healthy market. >> So in terms of their ability to produce some of this high bandwidth memory that's really the province of Korea, in some ways you could say Korea might have overtaken the Japanese like the Japanese overtook the Americans.
28:31 Do you see China overtaking them at some stage in the near future? >> Yes. Because for one simple reason it is a national priority. It wasn't a national priority for Japan or Korea in the same way. With China, they got cut off from United States chips. And so they look at this and they say we can't afford to have that happen in the future.
28:56 So we need to have our own supply of chips. And that means high bandwidth memory amongst a whole variety of other chips. And so the government is going to massively push this because for them having their own reliable source of chip supply is as important as having a battleship or an aircraft carrier. It's a national defense issue.
29:20 And so yes, I 100% believe that China will have chips. Now, is it going to be the leading edge? No. But you don't need that. When Japan entered the market in the 1970s and dominated in the 80s, theirs wasn't leading edge either. When Korea started in the '90s, theirs wasn't leading edge to start either.
29:42 And so with China, you had CXMT go public already. You're going to have YMTC go public shortly. All of that will help them raise even more capital. And they have a natural end market for this, too. Because don't forget, China consumes roughly 20% of the world's PCs and 20% of the world's smartphones. And so they can at least get to 20% share, no problem, and have a domestic market for all the chips they produce.
30:10 They don't have to count on selling it to the United States or other parts of the world. >> I want to talk a little bit about Apple, and Tim Cook has just given up the reins after a tremendous run. They might not have produced really anything new but the revenue and the stock price has been tremendous.
30:32 Now, were they smart not to invest the scores and hundreds of billions of dollars in capex and say, you know what, we'll go ahead and use Google's tool. What are they using the money that they saved to do something else? Was this a smart strategic play? And how do you see Apple going forward? >> Yeah, I'm not sure they planned it this way, but it worked out well.
30:54 Because don't forget in 2024 they said hey we're going to have an AI model out and it's going to be great and now we're still waiting and next week we should finally get that but even then that AI on Siri on the iPhone will only be available in the United States and maybe it's going to change but what they told us most recently it's only going to be in the US, it's only going to be English and it's beta, right? So you're still waiting.
31:25 So, I'm glad we have a product guy now as the CEO of Apple because part of the reason why the stock's done so well is the multiple has expanded a lot. And then don't forget the first years when Tim Cook took over, he was still living off of all the great products that Steve Jobs had in the pipeline that were coming out.
31:44 So for right now it has worked out very well for Apple because they also chose to partner with I think the best AI company out there when you look at the whole ecosystem which is Google. And so instead of spending hundreds of billions of dollars, the rumor is that they're spending like a couple of billion dollars to license Gemini for the iPhone from Google, working with Google to get these out there.
32:12 And so on the margin, that's why the stock has done so well this year. It's not that they're killing it with products because obviously Samsung and that ecosystem has had AI enabled phones out forever and foldable phones as well. I think Samsung introduced, I think it was in 2019 if I remember correctly, and so for the rest of us like myself who've been waiting and waiting for a foldable phone, we'll finally be able to get one
32:39 now, what is it, 7 years later than those that were on the Android ecosystem. That's a long way. So I think Apple is late but they have such a strong ecosystem that for people like me it's hard to get off, it's hard to get on to Android when you've been an Apple user and you have a whole ecosystem of products tied up into that and so there's a lot of built-in stickiness.
33:12 And so I think you're going to get a huge upgrade cycle sometime next year when you do get this out of beta. You do have Chinese versions of this in the native language and all across the world. And then hopefully a much better product line that comes out. And so that's how I'm thinking about it.
33:33 And as you rightly said, they're not burning cash flow because they're saying, "Hey, Google, you go spend the $200 billion. We'll license it from you for a couple of billion." And I think that's worked out very well. >> Sometimes it's better to be lucky than good, right? >> Lucky than smart. Sometimes it works. >> You can beat smart, but you can't beat lucky.
33:53 And if you play any sport, you know that for sure. So if this coming quarter, circling all the way back, if this next quarter could be pretty dicey with a median drawdown of 10%, where should investors be hiding or where should they shelter? >> I mean cash is always not a bad option. And by cash I mean you can put your cash in a money market fund and get some pretty good yields.
34:18 And that's part of the reason why the stock market's struggling. If you're a Japanese investor, you haven't been able to buy Japanese bonds, you could argue, in three decades and now you can actually get a somewhat reasonable yield just given where inflation is in that market and it's pretty safe. And by the way that's the math that everybody's doing around the world and so I think for right now if valuations weren't as high as they are across the globe then it'd be a different picture.
34:50 But you've got some very high valuation levels if you look at it relative to GDP or normalized earnings because these companies are all over-earning to some degree. We don't have a multiple bubble to some degree but we do have an earnings bubble, right? Having memory companies having operating margins of 80% is not normal and trust me I firmly believe that once China ramps, gets to their ambitions in the memory markets, those margins will go back to below the average and so you do have a lot of risks in the market
35:35 and for a long time cash hasn't been necessarily a viable alternative except for periods of time. You can go back to obviously 2022 when you were getting killed in bonds and stocks and that was again a good time to be sitting in cash and money market funds. And now the good news is money market funds have a pretty solid yield no matter what country you're in.
36:01 And that's not a bad place to just hang out and see how things go because there's a lot of risks between now and midterms in early November in the US. >> So you've said before that AI is a bubble but it's not about to burst. Seems like that's still probably true, but for the next quarter you don't mind so much earning some decent yield on the sidelines.
36:21 >> Yeah, because I thought we were going to have a speed bump at the end of June. Semis got crushed from the end of June to the end of July. And then I thought we had hopefully gotten to a bottom and so for me you don't know, and the example I would give is when I was on the sell side, and you mentioned this in my intro, one of my I guess defining moments was downgrading all the stocks I covered in 2000, but when I did that I didn't think NASDAQ would go down 78% from peak to trough but that's what
36:57 ended up happening over two and a half years. So, I'm humble enough to know that stocks go up way more than you ever imagined possible, right? I remember Volkswagen quadrupling in two days during the global financial crisis because of a short squeeze and becoming the most valuable company in the world. And obviously, recently we had GameStop, right? And what happened there? But they can also go down way more than you ever imagined possible as well.
37:31 And you don't know where the peak is. I don't think it's right now because as we talked about earlier, I think agentic, which you could argue got formalized with OpenClaw on January 30th. January 30th is not that long ago. What's that? 7 months. >> Feels long though with how fast the market's moving. >> Yeah.
37:51 So, I go, we're seven months into this. And so it's hard for me to believe we've reached a fundamental peak when we're 7 months into people trying to figure out how to use agentic. So that's why I think we have at least another year of solid growth ahead of us. But there are a lot of very smart people who think that this bubble is about to break and it's about to break now.
38:13 And they're pointing at things like you brought up earlier which is hey token costs have gone down 50% from the end of May. If they stay on that pace and token usage doesn't go up, we could have a real problem. And the data centers, if you can't put the chips somewhere, you could have, I mean your viewers will probably see what's happened with Broadcom, which reported after the close, but the numbers were nowhere near what people thought they would be.
38:39 And so that stock's going to go down probably tomorrow, unless something is changing on the conference call as you and I are talking. And so we'll have to see how this shakes out. But that's why for me I don't pretend to be smarter than the market. I want to respect the market and go, hey, I think there's a good chance we get a more than double normal drawdown with these risks in front of me.
39:07 The only safe thing right now is sitting in cash because part of the reason we're worried about the stock market is because bonds are selling off. So, it's hard to say, hey, you should go sit in bonds, which is the other obvious choice. And so then that gets you to cash and money markets, which is liquid and there's nothing wrong with that.
39:28 >> Well Dan, thank you so much for your time and your insights today. I look forward to our next call and to see how the firmament has changed in the intervening months. Thank you so much. >> Thank you so much Ty. Appreciate it. [music]