China’s AI Is Causing Market CHAOS But Here’s Why That’s Actually A GOOD Thing!

the show, Zach Abraham from Bulwart Capital Management. And as of the recording of this program, we saw some crazy swings in the stock market as a result of China's AI which is apparently very competitive and cheaper than the United States open AI, and that sent stocks like scrambling and then everything's sort of leveled out, which is why we wanted to talk to you today, Zach, about what, like, what should the reaction of a regular person be when

it comes to their portfolio and they see these kinds of swings, Should they be fearful of tech stocks or not?

stocks that are extraordinarily expensive. Okay, so if you look at Nvidia, like a stock like in Vidio, it's getting hit one of the hardest today, great company, but it has so much optimism built into the price of that stock that even the smallest little adjustment to those forward looking earnings projections they change massively and the stock has to sell off, So generally speaking, I don't think there's

a big thing. Here's the problem, though, the problem is because of the way people have been invested, they are more exposed to these kinds of stocks than they have ever been exposed to any kind of stock. So let's just say they have an SMP five hundred ETF for mutual fund. Okay, probably somewhere in theybor to forty to fifty percent of their holdings are companies like in Vidia and Marvel and you know, these tech based companies. And

then what's scary in general about this market? You know, I look at a company like Apple, Apple's up over four percent. That's just as stupid to me as what you see going on the others. Meaning, this is what scares me about this market. This market, regardless of what's going on in the underlying economy, this market is just

completely divorced from anything financial. Right, So, like, if you look at Apple today, it's up four percent, that's about one hundred and fifty or one hundred and sixty billion dollar increase of their market cap because AI chips that they don't sell are going to go for less what it and it's just one day, right, you can't take one day too seriously exactly. But these are examples of

how ridiculous this entire market really is. And one of the things that we've been telling people is, look, whether you're going to get hit right now or whether it's coming later. The one thing I can tell you is you are the most loaded up in the most expensive and most overrepresented sector in history. So should you have exposure to it? Yes? Should you have as much as

you probably do? No, not even close. And and it even gets exacerbated because not only people will own these ETFs and mutual funds that are way over represented by this kind of stuff. On top of it, a lot of them have bought these stocks along the way. So we'll take in, you know, we'll take in portfolios all the time that are sixty seventy percent in those companies, right,

and it's just it's just way too much. Now on the flip side, you're going to see a bunch of things get hit today again, like some of the uranium companies that we own have sold off hard. How does that really correlate to AI chips? It doesn't. But again, in a stupid market that is working so and I you know, I don't know what else to call it. It's just detached from reality. We said, look, a lot

of this stuff's gonna have to sell off. When it does, a lot of the really good, cheap, really solid, fundamental stuff will sell off too. Why because why not? Right? So we actually see this over the short term, if you own a lot of that stuff, I think that you know who knows. I mean these stocks are still so expensive that you know, you look at companyike in video, in Vidia could drop fifty percent and still be historically expensive, right, I mean it's down sixteen percent today, So yeah, I

think people need to be careful. But this just gets to the risks that we're seeing out there, which we see so many great opportunities. But the problem is is tech is dominated for so long that it has become the vast majority of everybody's portfolio. Should you have exposure to it? Yes, But diversity is a good thing. Right now?

So again, not saying the whole bottom is gonna fall out tomorrow, but there's two things that are gonna happen. Those stocks have made the majority of the gains that they're gonna make over the next five decent, meaning those stocks are not going to continue their performance over the next five to seven that they have over the previous ten. They're just not okay either well they either they won't or those companies will all be larger than the size

of the entire US economy. I'm gonna bet that's not gonna happen, okay. And so the other big issue, though, like we've said before, it's not so much well it is. It's not just a problem what you're exposed to, it's what you're not, right, that's the other problem. Not only are you forty percent exposed to this sector, but what else are you not exposed to?

to Europe. And oh, by the way, they're also paying a twelve percent annual dividend, right, And so you're looking at stuff like that, You're like, man, why am I going to mess with something like Nvidia twenty five or thirty times revenue when I'm sitting here buying these wonderful companies that are paying me twelve percent. You know, there's there's just so much better.

I gotta get rid of all my tech stalks. Yeah, but you're you're not suggesting like when you see a headline like that, dump everything and run for the hills, you still should be exposed. Maybe, just not a crazy amount, is what I'm understanding.

nine lows. Right, I might not be the best price out there, but I'm sitting there going, Man, if this thing's only fifteen percent off the O nine lows, I'm probably safe. Right, There's probably not a lot of fluff in it. For instance, if you're buying these kinds of stocks, these AI and tech type stocks right now, it's like buying a house in two thousand and seven, right, I mean, you're just buying these things priced to perfection. It doesn't

guarantee a collapse. These things have been expensive for a long time. But what it does say is again today should be a good reminder to people, this is why you need to make sure you have a portfolio. And guys, this cycle has gone on so long that it's to the point when we get clients that bring portfolios in, it is a rare event that you have a portfolio that is properly diversified. It's shocking even people that have somebody else managing their money. Right. So, then, to get

to your point, all of this is about. This is not about the failure of AI. This is not about America losing pace in the AI. This is about a Chinese firm used several lower quality or not the most expensive chips that in Vidia makes. They used stuff that was two or three generations old, so way cheaper, and they got outstanding results, which calls into question all of the tens and hundreds of billions of dollars that we thought so many of these tech companies were going to

have to spend on these chips. Now, personally, I think the market is overreacting. What's hard about it, though, is the market has already way over reacted to the upside of AI sow reality in here. I don't really know, but for the majority of these companies, today is a perfect example of why we've just said, we don't buy stuff that that's insane, that's that insanely expensive, because it's impossible to know what it's really worth.

not just about fear and risk, but it's also about opportunity. Right, if we're buying things that are overpriced, it means that we're not buying things that aren't right. There's opportunity costs to investments. So we just want to show them some of that stuff, show them what we think the risks are out there, and then also show them what we think there's some unbelievable potential investments that people are ignoring the best way to do that is go to Know

your Risk radio dot com, Bulworkapitalmanagement dot com. Sign up there.

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