Title: The AI Boom Is Starting To Crack
Show: Joseph Carlson After Hours (YouTube)
Guest: Joseph Carlson (host; individual investor / The Investing Channel)
Date: 2026-06-26
URL: https://youtu.be/9oGFBJuIFuc
Length: ~28 min
Note: fillers (um/uh/you know/stutters) removed; wording otherwise verbatim. Timestamps from the YouTube transcript kept exactly. Bracketed line summarizes the off-ticker fail-of-the-week segment.

(00:00) Now we start things off today by looking at this dynamic playing out in the market. We know there's a big group of companies, the AI ones, the Nvidias and Microns, that have benefited dramatically from all of this AI capex spend. The spend so far has been funded by investors. And we can see the success of this in the numbers.
(00:16) For example, we have Micron that's up 15, in fact, 16% today as of now. We have a Qualtrim here noting that this was a blowout Q3 on AI memory. Micron's fiscal Q3 results showed revenue roughly quadrupling year over year with gross margins topping 81%. Now we've seen numbers like this so much throughout this AI capex cycle that you almost become numb to how good these numbers are.
(00:42) But if you really just stop and consider how good these numbers are, that they're actually real. Total revenue was up 74% sequentially and 346% year over year. $41 billion of revenue in a single quarter. That's a 345% increase year over year. Sequentially, it was a 74% increase. So even just quarter by quarter, this is growing at rates that we've never seen before.
(01:08) In fact, this is growing so fast that if we rewind to Nvidia 1 year ago, this is a faster growth rate. They're growing faster than Nvidia did in the past year and they're expected to grow faster next quarter than Nvidia did the following quarter last year. Meaning that right now Micron is literally a faster growing company than Nvidia was during their spike.
(01:29) Now of course all of this has resulted in a lot of happy Micron investors as well as adjacent industries. For example, we can look at ASML or the whole supply chain and this bodes well for all of it. We have more demand, higher prices, we have these companies earning more money. In fact, when we look through Micron's financials closely, we see it very apparent that the vast majority of gains, of all the revenue growth, all the earnings, all the free cash flow, all of that is due to pricing. Simply prices going up.
(01:54) They're not selling more product, they're not really inventing anything new. In fact, if you look at the exact math, over 90% of the gain in Micron's revenue and earnings and so forth is because price increases alone. Micron just has a list of products that they've had before, and big companies are willing to pay substantially more for those products.
(02:14) So, they're jacking up the price. Now, that's fine and that's great for the Micron investor, but there's one company that doesn't want to bear those costs, and that is Apple. Apple needs advanced memory for every one of their devices. And unlike all these other big tech companies funding all this expansion, willing to throw their free cash flow into the negative and have it hit their margins, Apple's not willing to do that.
(02:34) Apple raised its prices to Macs and iPads after Tim Cook said the soaring cost of memory and storage chips would force the company's hand. The company briefly took down its Apple online store earlier this morning as it typically does when announcing new products. When it came back online, the price tags for Mac computers rose by roughly 15 to 20%.
(02:55) And iPad prices rose 15 to 25%. If we look at these price increases, this is what they actually look like. This is what's on the website today. We have the iMac going up 15%. That's $200. We have the cheap one going up a full $100. That's their discount line. We have the MacBook Air $200, MacBook Pro.
(03:17) This is 18%, and then the Mac Studio is up a full 25%. So far, the iPhone prices have remained the same, but they've actually hinted that those are going to go up as well. Now, in an interview from the Wall Street Journal, Tim Cook blamed the price raises on Micron Technologies. Of course, they're saying, "Our input costs are going up, so they're forcing our hand."
(03:37) He said that the increases have become unavoidable because of the higher component costs. Quote, "There's less supply at a time when consumers want devices, and the memory guys are passing along huge price increases." So, Tim Cook's pointing the finger at Micron, saying that it's their fault they've increased prices so much, we just have to do this.
(03:55) And in fact, Apple timed this price increase on all their products the day that Micron had their earnings report or the day after. And that timing was intentional. It was to say, "Hey, right as they're bragging about how good their company's doing, we're going to have to raise our prices on all these customers."
(04:10) Therefore, tying the connection between the two. But now we have Micron taking a shot back at Apple, blaming them for it. They said in an interview Wednesday night, Micron chief business officer said the company couldn't make investments during the memory market's last downturn when Micron's gross profit went negative, in part because certain customers, they didn't directly call out Apple, but they're saying certain customers took advantage to pay rock-bottom prices.
(04:37) Quote, "We told a couple of customers who were being very aggressive with pricing at the time that this is not constructive." Now, while Tim Cook and Micron executives point fingers at each other and go back and forth, the bigger point here is that this is a meaningful crossover. We have so far AI being a voluntary purchase, something that people can sign up for a ChatGPT premium account or Gemini Pro.
(05:00) You can pay for AI through different products like Claude or Microsoft Copilot, but all of those are opt-in. They're simply people choosing to have the additional value of AI and then paying for it. What Apple's doing here is entirely different. This is a massive across-the-board price increase from the inflationary hardware costs of AI that's been directly funded by the hyperscalers.
(05:22) So, we have the hyperscalers, the effects of this now pouring out into the general economy. The biggest consumer tech company in the world just dramatically increased prices. This is also a very physically inflationary aspect. AI has both deflationary and inflationary aspects. On the software side and the service work side, theoretically, you should be able to get done a lot more work with less effort with AI, and that is inherently deflationary.
(05:48) But, at the same time, what we're seeing here is strictly inflationary. Apple's prices are going up 15 to 25% for the exact same product. That is a massive inflationary cost. Apple is one company that's unwilling to sacrifice their margins, even if it means fewer sales. So, while the prices are going up, Apple knows full well that this will put a drag on their unit volume sales.
(06:10) It'll put a drag on the entire tech sector. If customers are forced to pay substantially more just to buy an Apple device, then they may be less willing to pay or have less money to pay for AI services, for ChatGPT Pro, or Gemini Premium, or all the different services that these cloud hyperscalers are trying to price them at.
(06:29) Or, if just fewer people buy Apple devices, then it could slow down the entire tech sector. Fewer people upgrading devices, people less willing to invest more in technology in general, we could see a general slowdown as well. Now, investors don't like this. Apple's down 5%. That's a lot for Apple, especially even though it's down from its highs already.
(06:48) We have Amazon reacting to this as well. It's down 2.7%. We have Microsoft, which is already a relatively cheap stock based on its growth and its quality, down 3.72%. We have Meta down 2.21%. It seems as though investors woke up genuinely concerned about this entire cycle of spending endless amounts of money, and now they're seeing it impact consumers directly.
(07:11) No longer is it AI boom neatly tied in and concealed to investors directly. It is now broken out into the larger consumer category. And this could mark the first warning sign for this AI cycle. The first time investors could scratch their heads and go, "Maybe this won't last forever. Maybe consumers will pull back or push against this at some point or another."
(07:32) We'll have to wait and see how consumers continue to react, but as of now, this is the first major warning sign. Now, as we move on today, we have to mention Netflix. Netflix is at $71 per share. This is at a 52-week low. In fact, if we look at Netflix's stock price, it is down over the past year 44%. So, we're down 44% year-to-date, it's down 20%, and in the past 5 years, you can see that Netflix raced all the way up to $130, and now it's down roughly half of that.
(08:01) So, we are in a massive drawdown. It's at the very bottom of its 52-week lows, and Netflix stock continues to go down. Now, investors want to ask, "Why? Why is Netflix stock continuing to drop? Is it worth buying, or are there real problems here?" And I want to give you my perspective.
(08:19) Now, I've owned Netflix for quite some time. I've had it in the Story Fund, that's my secondary portfolio here. I've had Netflix as one of the biggest positions. There's a lot of negative opinions about this stock today. When I looked over the concerns for Netflix, and I read many comments of you and different people across social media, I want to summarize the three biggest concerns of this company.
(08:39) One of them is Netflix has given investors the impression that it is in desperate need of an acquisition to buy another company and to bolster their content library. The first big obvious sign of this was them bidding on Warner Bros. Discovery. Netflix described it as a nice-to-have, but not need-to-have.
(08:57) But regardless, they were willing to pay a lot for Warner Bros. Discovery to get that library. That was the first red flag that maybe Netflix's core business didn't have these key pieces of content that they wanted. Then they also just recently reportedly bid on Roku and on Lionsgate, two other content creators, and they didn't get either of them, or at least they walked away from either of them.
(09:21) In this case, it looked or it gave the impression that Netflix was even more desperate. Now that they didn't get Warner Bros. Discovery, now they're looking for all these different companies to try to buy anything. Desperate Netflix, right? So, that's the big concern number one, is that they are looking for an acquisition because they can't muster it on their own.
(09:39) The second thing is that Netflix hasn't had, or at least people say that they haven't had a big hit in a while. Remember when we went through the phase where we had Squid Game, we had Stranger Things, we had K-pop Demon Hunter. It seemed like these shows were all anybody could talk about. That's been about a year. We haven't had any massive hits on Netflix in some time.
(09:56) And so, when we haven't had that, it seems like other streaming services are becoming more competitive. We hear a lot of buzz about Apple TV and HBO shows. And it seems like investors are concerned that Netflix doesn't have any hit shows. And then I'd say the third thing that investors cite as a reason for Netflix stock going down is that the growth is decelerating.
(10:16) So, they were growing at 16 to 18%. Now, they're going to be growing at around 14%. If the business is getting slower growth and more mature, the multiple should come down. Now, I want to go through each of these. But, before I go through them, I want to preface that I don't believe any of these three reasons are the reason that Netflix stock is going down.
(10:37) In fact, I don't believe that they have much to do with Netflix's price action or the way that the stock is trading. I think that it's going down for entirely different reasons. But, I first want to just address these three specific claims, each one of them individually. First of all, Netflix's entire business, every single thing they do, is acquisition-based.
(10:57) Yes, they create content, but they create content by acquiring key talent, producers, actors, agreements with different smaller studios. And they also are a massive licenser of content. So, they go to different companies like HBO and Paramount and say, "Hey, that new movie that you made, how do we get that on Netflix for 6 months for our people?"
(11:28) Those are acquisitions. Netflix is always acquiring content. In fact, their entire skill set, their business model, is looking at potential deals for content, evaluating them to see how good it matches their customer base and the value for their members, and then seeing if it's worthy of buying for the price point.
(11:46) So, Netflix has been doing this all the time, all around the world with different production companies, different licenses, different companies all together, different actors, different stand-up comedians. They pay them and make deals, even different YouTubers that they've gone and said, "Hey, would you like to create content for Netflix?" All of these are acquisition-based to wrap all of this into a single membership.
(12:06) They're even doing it with game developers and so on and so forth. So, the idea that they're going to different studios and evaluating those as potential deals, like they went to Roku and took a look at it, looked under the hood, and they were interested in it, that's not a sign of desperation. In fact, that falls directly in line with their existing business model.
(12:26) That is what they do. They go look at things and see if it's interesting to them. Also, the reports were dramatically overstated by most people reporting on this news. For example, they did not bid on Roku, didn't make a bid, and Netflix even denied expressing real intent into Lionsgate.
(12:43) So, there was a report about that. Netflix said, "No, that's not really accurate." And that was that. So, the whole idea that Netflix is desperately in need for an acquisition, I don't believe is founded by the evidence. Netflix has tons of ways to invest and build their own content. They don't need to buy an existing library. Now, the second concern that they haven't had a big hit in a while, I think is more accurate.
(13:03) There hasn't been any standalone hit in some time. They had a live streaming of the Japanese baseball game that was the most live viewed event in Japan recently. That's a big marker. They're becoming successful in sports. We also have the new season of Bridgerton making huge numbers. Probably not too applicable to my audience, but that is a very big show.
(13:23) Regardless, I believe the big point that investors miss out on this one is that Netflix is highly diversified in its content and in its interest. They have tens of thousands of shows and series and movies. They have something for everyone. In fact, Netflix themselves routinely shows through the numbers that not any single show makes up for more than 1% of total watch time on Netflix.
(13:44) Not any more than 1%. That's different than Paramount or HBO. They only have a handful of shows. Does Netflix want big hits? Of course they do. But it's not necessary. It's not a must-have for their business model. It's similar, I would say, to like YouTube. YouTube is not dependent on any one creator. If Mr. Beast stopped making videos on YouTube, that would be a bummer, but it likely wouldn't even show up in the real revenue line for YouTube.
(14:03) It would be more of a rounding error overall. Because as big as Mr. Beast is, he's just not that big even on the platform YouTube with how massive the scale of YouTube actually is. And I would say that Netflix is very similar.
(14:21) There are big shows that happen once in a while, but those make up a very small portion of Netflix's overall catalog and their overall viewership. So, I think that they're far less dependent on these big wins that many investors are used to. And then the third thing, Netflix's growth is decelerating. While that's true, it's also well priced into the stock.
(14:44) Netflix is at a 21 PE ratio, expected to grow 14% revenue and increase operating margins. They're printing $12 billion of free cash flow. They're doing massive amounts of buybacks. The numbers back up a company trading at a low PE ratio. So, I don't believe they're in quite as desperate of a position as people make them out to be.
(15:02) But more to the point, I said that I don't think any of these reasons are the reason the stock is going down. And the biggest piece of evidence I would give for that is this chart right here. This is a comparison of Netflix and Spotify together. This is their price comparison. Do you notice something here? Netflix is in red and Spotify is in green.
(15:23) Every part of where they trade is nearly identical. Now, if all of these concerns is really the reason that Netflix stock is going down, then what is your explanation for Spotify? Spotify hasn't had a big glut in content and they haven't been trying to acquire anything. They've shown no desperation for new content.
(15:39) But Spotify has fallen just the same. In fact, Spotify has fallen even more than Netflix. I think the intuition here from investors is to always plug in some material fundamental reason a stock is falling. In some cases, stocks just fall. There's massive trading that goes on. There's big funds that pull money out of entire sectors and they put it into different sectors.
(15:57) Today, nobody really cares about Spotify or Netflix. They just don't want to own these companies. It's nothing to do with their growth rates or their hit rate with series or what percentage of subscribers are watching what. It really doesn't have a lot to do with that. They're just taking money out of Spotify and Netflix and putting it into Micron, putting it into ASML, putting it into every AI company that continues to go up 10% a day.
(16:20) That money has to come from somewhere. Investors are pulling money out of different parts of the market to fund the parts that they think are the most exciting. So, while I think that there is valid concerns for every company, when I look at Netflix, I do not see this fall as being a consequence of the latest fundamental developments.
(16:38) I think those are attempts for investors with good intuition wanting to try to explain this, but sometimes investors can learn the wrong lessons. I believe that Netflix is in a strong position. I think they're going to continue growing for long into the future. I think that they're evaluating businesses and opportunities just like they should be and that things aren't quite as bad or desperate as the media is trying to portray.
(17:00) Now, moving on, I have to go over the news that Meta is building a prediction market app. Now, this is notable for a couple reasons. One of them is that they announced that they're building a prediction market app 1 day after I went over a 20-minute segment on how bad I think prediction markets are, how bad for society they are, how I want to discourage people from using them in any way that I can, and in particular how deceiving and I believe illegal Polymarket's advertising campaign has been.
(17:26) That was a 20-minute segment in the previous episode if you missed it. If we look at the position sizing, Meta is a $145,000 position. I've invested nearly $180,000 in this company. It is my biggest loser today. I'm down 37%, but I haven't sold any of it. I've continued to buy this one as it's gone lower. Now, again, I hate prediction markets.
(17:47) Nothing about that's changed. The Meta news doesn't make me like prediction markets anymore. Every prediction market up until now uses real money. Whether it's crypto or cash, they're using money to bet on stocks, and people are obsessed with trying to get easy money. It's free money, right? That's what the advertising campaign says of Polymarket.
(18:04) Many creators saying that it's like getting money for free. In this case, Meta an employee from Meta was asked about this. He couldn't speak on the record or this individual could not speak on the record, but they said, and this is confirmed by CNBC, that the prediction market app would not use actual money to trade on the platform.
(18:22) A big contrast from other prediction markets where traders use cash to speculate on future events. The Times report said that Meta's app would instead rely on video game system point styles, but that money may be used on the app in the future. They're reportedly calling the app internally Arena.
(18:40) It would be a separate app from Meta's social media platforms Instagram and Facebook. Meta would seek to leverage its Facebook and Instagram user base to direct potential traders to the platform, the report said. Now, some people have asked me, am I going to sell Meta because of this news? Right now, the answer is no. I don't like what they're doing.
(18:56) I wish they would avoid prediction markets. I don't think we need more of it, but at the same time, there's many things that many of my companies do that I don't like. There's a lot of content on Netflix I don't like. With Meta themselves, the fact that there's kids using Facebook and Instagram, I don't like. I've expressed moral objections to that many times in the past, yet I still hold the company.
(19:15) So, there's judgment calls we have to make about all of these stocks. Some stocks I like almost everything they do. Costco is a shining example of that, but in many cases it's more nuanced. There's things that Amazon does that I don't like. I wish they'd do it differently. The same thing for Google and many other companies.
(19:31) So, we have to make judgment calls on where we draw the line with investing in these companies. Now, on the topic of Meta, when I look at this company, Meta now trades at a $1.38 trillion market cap, a 17 and 1/2 PE ratio. This is one of the stories of a company that's growing incredibly fast, has a huge moat, is not being disrupted by AI, is growing into multiple categories, including announcing that they're growing into video, and prediction markets now.
(19:56) They're just going everywhere laterally, and yet investors don't want to own this stock. And I believe a lot of the reason that Meta stock's doing so poorly is because of how it's covered in the news. Meta is a company that runs directly contrary to a lot of media outlets. They don't like them because Meta aggregates news, they show it in their app, and they make a lot of money doing that.
(20:16) So, naturally a lot of journalists don't like Meta. And you can see that in the way that these headlines get printed. For example, if we look back throughout the history of Meta, this is The Guardian back in 2012. Facebook buys Instagram for $1 billion, and everyone hates it. Obviously Instagram's worth hundreds of billions of dollars at this point, has billions of users, is one of the best acquisitions, if not the best of all time.
(20:38) We have here This is Facebook massively overpaid for WhatsApp. Another one here, will Facebook survive the shift to mobile? Questioning Mark Zuckerberg's ability to transition with the time. Facebook doesn't feel like it was designed for mobile. The desktop service is great, but Facebook on a phone can feel convoluted and unnatural.
(20:58) From The New York Times, this is back in 2011. Google introduces Facebook competitor, emphasizing privacy. Even going back before all of this, we had Yahoo trying to buy Facebook and many people criticizing Mark Zuckerberg for not selling to Yahoo. This is back in 2006 New York Times article saying that Mark Zuckerberg is a member of the Google generation, one too young to remember all the ambitions dashed and fortunes lost when the last dot com bubble ended.
(21:25) So, they're describing Mark Zuckerberg as being this naive kid. He doesn't know history and he's not willing to sell Facebook to Yahoo for billions of dollars. They acted, of course, like he was making an obvious mistake and obviously they were wrong. Remember the Cambridge Analytica scandal? This was supposed to be the thing that finally sunk Facebook. It was this big scandal.
(21:45) Most investors don't even care about it now, but it was the only thing that occupied the news whenever investors were looking at Facebook back in 2018. We have right here. This is, again, 2018. This is from The Guardian. "Teens are abandoning Facebook in dramatic number, study finds." And by the way, there's still studies finding that everyone's leaving Facebook.
(22:07) Nobody uses it anymore. The app's basically dead. So, what you're getting here from the media is that Meta is shrinking. Facebook is in decline. The younger generation don't want this platform anymore. In the first quarter of 2019, there was just over 2 billion people using a Facebook or Meta app every single day.
(22:27) 2 billion unique users. Today, that number is 3.56 billion. That's an additional 1 and 1/2 billion users since this article was printed saying that teens are abandoning Facebook. Finally, we get to a more recent one. This is just from 2022. "Is TikTok killing Instagram?" Overall, it seems clear that TikTok is gaining popularity at the expense of Instagram.
(22:48) But, what Meta actually did was looked at what TikTok was doing, built in similar types of tools within Instagram itself with Instagram Reels, and then grew Instagram Reels to one of the biggest social media applications in the world. Therefore, growing their revenue and growing their overall profits. Most of these articles had some semblance of truth to them.
(23:06) The concerns are very real and valid at the time, but Meta has grown nonetheless. And investors that paid attention too much to these articles and all the bearish narratives at the time missed out when the stock eventually recovered, when the financials grew. You can never guarantee success in the future, but what I know now is that the stock is growing very quickly.
(23:25) The fundamentals look very solid, the valuation is very low, and Mark Zuckerberg has a lot of flexibility. There's so much optionality baked into this platform, so many more ways to earn money that they haven't fully realized that I believe Meta still represents one of the best opportunities today. Now, moving on, we get to the fail of the week, but I have to make just a quick edit here.
(23:43) I don't usually do this, but I want to throw this in because I think it's very applicable to my opening monologue and major point in this episode, that the confined AI costs that investors were primarily funding have now broken full well into the consumer economy. We have not only Apple raising prices on all of their Apple devices, we have Microsoft now increasing prices of Xbox consoles due to soaring component costs.
(24:06) And these are huge price increases, a $100, $150 for the consoles. Microsoft says, quote, "Console storage and memory prices have increased by more than 2.5 times, and we expect another doubling by fall of 2027." So, I'm not going to belabor the point here, but I believe the floodgates are opened.
(24:25) Consumer prices for virtually every product are going to start going up, and we'll see what happens with that because I have some serious concerns about it. Now, let's go ahead and move on to the fail of the week, that a woman who went viral for taking a Knicks-themed trash can is no longer working with JP Morgan Chase.
(24:43) [Fail of the week segment — JP Morgan Chase director of community and industry engagement fired after going viral for taking a NYC trash can. No securities content.]
(27:43) That'll be it for this episode. If you want additional exclusive content, you can try out qualtrim.com.
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