Ed Yardeni: Air is coming out of the AI bubble without the bubble bursting

REVENUE, STEEP LOSSES AND SOME MOUNTING RISKS. THE IPO, A CRUCIAL TEST FOR THE AI SECTOR. COULD IT BECOME A DEFINING TEST OF INVESTOR APPETITE FOR AI? WE WILL EXPLORE THAT. IN FACT, THAT'S WHERE WE START TODAY, INCLUDING THE MARKETS AND YOUR MONEY STOCKS ARE HIGHER WITH ANTHROPIC IPO REVIVING THE AI TRADE. YOU'VE GOT THE CHIPS MEMORY. EVEN THE NEO CLOUDS ARE NOW IN THE GREEN. THEY SHRUGGED OFF THAT WARNING FROM ELON MUSK THAT MORE THAN 200 COMPANIES IN THE SPACE COULD FACE, QUOTE, GUPPY LEVEL DEATH. BUT TAKE A LOOK AT THIS CHART FROM BESPOKE. THE RED DOTS MARK THE DAYS WHEN THE S&P 500 FELL AT LEAST 1%, EVEN AS MORE STOCKS ROSE THAN DECLINED. SEVEN OF THE 13 SUCH DAYS SINCE 1990 CAME IN 99 AND 2000. IN OTHER WORDS, IS THIS A PATTERN THAT'S SHOWING UP AGAIN AT THE SIGN OF A TOP? A WARNING SIGN THAT THE BUBBLE COULD BE CLOSE TO BURSTING? LET'S ASK OUR GUESTS. ED YARDENI IS PRESIDENT AT YARDENI RESEARCH, AND ARI WALD IS OPPENHEIMER'S HEAD OF TECHNICAL ANALYSIS. IT'S KIND OF A CHART QUESTION, ARI. SO I'LL START OFF WITH YOU. WHAT DO YOU MAKE OF IT? >> WELL, THE BUBBLE BURST. YOU KNOW, WE'VE WE'VE ARGUED. WHY SHOULD WE EXPECT A BUBBLE LIKE COLLAPSE WITHOUT BUBBLE LIKE RETURNS? BUT MAKING THE CASE OF SECULAR BULLS STILL INTACT. BUT I THINK WITHIN THAT, THEY CALL THEM THESE INTERVENING CYCLES FOR A REASON THERE. AND WE ARE KIND OF WORRIED ABOUT SOME BREAKDOWNS THAT WE'RE SEEING IN TERMS OF INTERNAL BREADTH. I THINK THE KEY POSITIVE IS THAT RISK IS OVERSOLD. I THINK THAT WE'RE STILL SET UP FOR THAT YEAR END RALLY. WHAT DOES THAT RALLY LOOK LIKE? IS IT GOING TO BE UNDERMINED BY LOWER HIGHS IN THE SMALL CAP INDEXES AND LEADERSHIP AND CREDIT, AND COULD SET UP FOR A RESET YEAR IN 2027? BUT AGAIN, WITHIN THE CONTEXT. >> OF HOW LONG HAS IT BEEN SINCE WE HAD A 10% PULLBACK. IT'S A. >> LONG TIME, I THINK, IN. >> ANYTHING THIS. >> YEAR'S SECOND QUARTER THERE. >> DO WE HAVE ONE THIS YEAR BACK IN. >> I WOULD THINK MARCH, APRIL. >> MARCH, APRIL. >> OKAY. SO WE'VE HAD ONE. >> YEAH. >> SHOULD SHOULD WE. IS THAT I MEAN, I'M JUST TRYING TO PUT INTO CONTEXT BECAUSE I LIKE YOUR OPENING LINE. IF WE'RE GOING TO WAIT, SAY IT AGAIN. WE SHOULD HAVE BUBBLE LIKE RETURNS. HOW DO YOU SAY? >> WELL, WE HAVE TO HAVE BUBBLE LIKE GAINS. >> THE STEADINESS OF THE LONG TERM ADVANCE IS UNDERAPPRECIATED. BY WALL STREET. WE HAVE THE COMPARISONS OF THE LATE 1990S. WE DON'T SEE IT IN OUR WORK. >> ED, JUMP IN HERE. >> WELL, EVERYBODY IS. >> EXPECTING A BUBBLE OR HAS BEEN SAYING IT'S A BUBBLE. SO IT'S FROM A CONTRARIAN PERSPECTIVE, WHICH I LIKE EVERY NOW AND THEN, I DON'T WORRY ABOUT IT. I THINK AIR IS COMING OUT OF THE BUBBLE WITHOUT THE BUBBLE BURSTING, WHICH IS THE BEST SOLUTION TO ALL THESE CONCERNS? I THINK THE FACT THAT THE CREDIT MARKETS, PARTICULARLY THE BOND MARKET, IS STARTING TO ACTUALLY BE VERY DISCRIMINATING IN TERMS OF WHICH BOND SHOULD HAVE WHAT RATING. I THINK THEY'RE MOVING EVEN FASTER THAN THE RATING AGENCIES. AND THAT'S A GOOD THING. IF THE BOND MARKET IS GOING TO REGULATE THE AVAILABILITY OF CAPITAL TO THE AI TRADE, I THINK WE'RE IN GOOD SHAPE. SO WE SHOULD GO BACK TO THE TOP, WHERE WE REFERENCED ELON MUSK'S TWEET OVER THE WEEKEND ABOUT GUPPY LIKE RETURNS FOR 90% OF THE AUDIENCE THAT DIDN'T SEE THAT. IT'S PROBABLY VERY CONFUSING. WHAT HE DID WAS HE PUT OUT A TWEET EFFECTIVELY SHOWING SOME OF THE NAMES OF COMPANIES THAT I ASSUME BECAUSE AGAIN, I DON'T WANT TO SPEAK FOR ELON MUSK THAT HE ASSUMED OR WAS SUGGESTING WERE SOME KIND OF BUBBLE LIKE FISH THAT WERE SOON TO BE DECEASED OR AT LEAST WOUNDED. I'M NOT EXACTLY SURE HOW TO READ IT. HOW DO YOU READ IT AND WHAT DO YOU MAKE OF HIS COMMENTS? WELL, LOOK, I THINK EVERY TECHNOLOGICAL REVOLUTION, EVERY INDUSTRIAL REVOLUTION, ALWAYS HAS LOTS OF CAPITAL POURING IN WILLY NILLY. JUST VERY EXCITED ABOUT THE CONCEPT. AND THEN YOU HAVE WAY TOO MUCH COMPETITION. AND THEN SOME. THE COMPANIES START TO FOLD AND BORROWERS START TO FIND THAT THEIR LENDERS ARE BECOMING MUCH MORE CAUTIOUS ABOUT LENDING TO THEM. SO AGAIN, I, I THINK THERE WILL BE SOME FAILURES HERE, BUT THIS IS AN ECOSYSTEM, SORT OF A BAND OF BROTHERS AND SISTERS WHERE THEY'RE ALL GOING TO BAIL EACH OTHER OUT. YOU KNOW, ANTHROPIC IS GOING TO GO PUBLIC. THEY'LL HAVE A LOT OF CASH. AND IF THEY NEED TO HELP OUT A NEO CLOUD, THEY'LL DO IT. YEAH. LET'S TALK ABOUT RETURN ON AI INVESTMENT. BECAUSE, ARI, DESPITE ALL THE MASSIVE SPENDING AND HYPE, APOLLO INVESTMENTS, TORSTEN SLOK OUT WITH A NEW REPORT SUGGESTING THAT COMPANIES ARE NOT YET SEEING ANY CLEAR PAYOFF FROM ALL THE AI SPENDING AND MAY LOOK FOR CHEAPER WAYS TO ACCESS AI. IT IS AN INTERESTING THOUGHT PIECE, BUT I WONDER IF IT COULD ALSO IMPACT SPENDING IF HE'S RIGHT ABOUT HOW COMPANIES ARE THINKING, SO WHAT GOOD COULD THAT DO? I GUESS, ARI, TO THE MACRO MARKETS, IF SOME OF THOSE COMPANIES DO EITHER TO ED'S POINT, DEFLATE OR POP OR WHATEVER WORD YOU WANT TO USE? >> YEAH, WE'RE NOT A TECH COMPANY, BUT WE HAVE A TECH GUY THAT DOES EVERYTHING FOR US, AND HE USES CLAUDE ALL THE TIME. AND HE S