The Compound and Friends: Why AI Momentum Stocks Got Killed, OpenAI's Confidential IPO Filing, Apple Launches Siri AI
On this episode of What Are Your Thoughts, Downtown Josh Brown and Michael Batnick
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The Compound and Friends: Why AI Momentum Stocks Got Killed, OpenAI's Confidential IPO Filing, Apple Launches Siri AI
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Show notes (from RSS)
On this episode of What Are Your Thoughts, Downtown Josh Brown and Michael Batnick break down the market's "Blood Red Friday" selloff, Apple's AI relaunch, and OpenAI's blockbuster IPO filing.
They discuss the rapidly shifting AI narrative, whether Apple's new Siri and AI-powered devices can drive hardware sales, and why OpenAI's path to a trillion-dollar valuation isn't as straightforward as it seems.
Plus, a healthy correction or something more, the latest on SpaceX, data vs. stocks, Michael's case for hotels over restaurants, a mystery chart from Josh, and much more!
This episode is sponsored by Betterment Advisor Solutions. Learn more at https://betterment.com/advisors
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Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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Transcript
Josh Brown: All right, we're here.
Michael Batnick: He's back.
Josh Brown: I see some concern because we came on at 5:01. Some concern in the chat. Let's see. Georgie D. Says my wife gets mad at me when the show runs over. We're gonna, we're gonna stop at six on the dot. I swear. I swear to you. George Washington asks, Where's J.C. not tonight. Not tonight. Mamba teacher. Nixon, five. Yeah, I guess so. I guess so. So many celebrities at the Garden last night. I saw Michael Bloomberg.
Michael Batnick: Did you see somebody jumped into Bloomberg? Was it Jose Alvarado? I think it was Jose.
Josh Brown: Yeah.
Michael Batnick: He.
Josh Brown: He like ran into, ran him over in the stands. But he. And then I saw, I guess it looked like Michael Bloomberg's grandson was like, are you okay? Are you okay? He's like, yeah, I'm fine. Was like, who else? Eli Manning sitting next to Derek Jeter. This is like unbelievable for New Yorkers.
Michael Batnick: Even like the A listers were relegated. Like Chris Rock wasn't in the front row. It's like, sorry, dude. Like we have Jay Z there.
Josh Brown: I drew up a play for the Knicks for game four. I'll share it here. Maybe they'll hear it and they'll use it. So I want Mikhail Bridges taking the ball up. Okay? And then basically what I want is Fat Joe to kick Tracy Morgan right in the crotch, making him vomit all over the sideline. Wemby slips in it like a banana peel and cat cuts to the hoop. What do you.
Michael Batnick: You know what? I was about to cut you off. I'm glad I did it. That's true.
Josh Brown: Yeah. Let him, let him cook.
Michael Batnick: I love it.
Josh Brown: I love it. All right. The president was there last night and the mayor. The president sat in Jim Dolan's box. The mayor claims he had $1,000 ticket to stand. I don't know how I feel.
Michael Batnick: There was no $1,000 tickets.
Josh Brown: Yeah. So I know that.
Michael Batnick: Not alone.
Josh Brown: I know that I'm hearing in the chat Josh's PRP is out of control.
Michael Batnick: It is still low key, dude. It really is.
Josh Brown: It really is.
Michael Batnick: You are prping like there's no tomorrow.
Josh Brown: I'm having a renaissance. All right, guys, welcome to what are your thoughts? The world's greatest investing livestream. We do this Every Tuesday at 5pm for first time listeners. My name is downtown Josh Brown here with my co host, Michael Batnik. As always, Michael, say hi.
Michael Batnick: What's up, guys?
Josh Brown: All right, we have a packed show tonight. Tons of stuff going on. But first, a word from our sponsor, Betterment Advisor Solutions.
Michael Batnick: That's Right. Josh, every RA knows attention. You don't want to turn people away. You don't want to require the high minimums. And you want to help clients who are just getting started. Because that's where the long term relationships begin. But here's the truth. Those simple accounts, they take a lot of work. Account opening, trading, rebalancing. And before long, your staff and back office are underwater and trying to stay afloat. That's why established reas are turning to Betterment Advisor Solutions. It's the platform built for segmenting your book and streamlining those smaller and simpler accounts. The onboarding experience is automated and paperless. The portfolio management is streamlined and tax efficient. The client experience is consistent and exceptional. Explore what segmentation you can do for your firm today. Low your operational lift, but keep your standard of service high. All with Betterment Advisor Solutions, your biggest regret will be not doing it sooner. Learn more at betterment.com/advisors.
Josh Brown: 10 out of 10 read. Michael, why don't you take it away?
Michael Batnick: All right, we're going to start with Friday. Friday was a deep shade of red, like really ugly. And what happened was the biggest winners of the year, and we've been talking about it all year, the biggest winners are winning in a big league way. They got hit the hardest. And Sherwood Media has this beautiful chart illustrating this. So what we're looking at is the year to date return. Okay. Versus Friday's return. And SanDisk, of course, is the winner of the year, up over 500%. Even after the decline, it got smacked. All of the, all of the AI winners, really. Dell, Western, Dig Micron, you name it, they got smacked. And you know what? It's okay. I think it's okay. It was, it was definitely a needed little slap on the wrist.
Josh Brown: Could you put that back up? You know who it's not okay for? So these little stocks that start with a. What are these things? Aaoi Axiz.
Michael Batnick: What?
Josh Brown: A X T I. I'm sorry. It's like an eye chart. Aehr the people that bought these things right at the top. That's what's not okay for. Cause. Yeah. People that are like, wait, what do I own? And we know a lot of the buyers in these stocks, the primary reason they're buying them is because they're going up.
Michael Batnick: Sure.
Josh Brown: And that's the date. You know, that's, that's part of, that's part of the game. If that's the game that you're going to play, that's how that game sometimes comes to an end.
Michael Batnick: What was interesting about the sell off is that I did see despite there being a lot of deep dark red on the screen and the big names, the big winners, there was also a lot of green. So I asked chart kid said, hey, this think something's funny going on, why don't you throw up a scatter plot? So he did and sure enough it was a huge outlier. So what we're looking at on this scatter plot is the one day return on the Y axis, okay. And on the X axis is the percentage of stocks advancing. And this follows a pretty, pretty tight pattern for the most part where the best of days, right, you're up 4%. Basically every stock participates, you're down 5%. Basically every stock is, is red. Okay. On June 5th, the index was down 2.6%. But we've really never seen anything like this because 48% of the index was actually positive. And what you saw on Friday and what we're going to talk about today, or what happened today is rotation money went to different areas. And that has been the story of not just the recent bull market but of like the decade long bull market has been the money going from place to place.
Josh Brown: Right. And I think Santoli was on TV today, he made this point of like the torque of these rotations huge, has never been stronger.
Michael Batnick: Yeah.
Josh Brown: And I, so part of me feels like some of the selling in the big momentum year to date winners maybe is people getting ready to buy SpaceX in the aftermarket at the end of the this week. But a lot of it has to be algorithmic. A lot of it has to be people who are up huge in these trades, up 100, 200%. Part of the risk management is if this thing has a negative 5% day, I want, I want out of the position and everyone running that same playbook at the same time with software is what produces a moment like what you're describing, that.
Michael Batnick: And so it's the pot shops all in on the same trade and the retail traders all in on the same trade which produces an event like Friday. So Staples outperform Tech. The biggest single day spread since October 2000.
Josh Brown: Now I have more, plus 9%. I have more versus XLK.
Michael Batnick: I have more on this later in the show. So basically tech was down 6%, Staples or up 3. Something along those lines maybe a six and a half, two and a half, but whatever. Look at this downtrend man. Like this, this rubber band was stretched so far. Tech has been outperforming Staples pretty consistently, literally since 2017, almost uninterrupted.
Josh Brown: So I had Nick Kolis and Jessica Rabe on the channel yesterday. A lot of you guys listening or watching now were able to catch that. And they did this thing where they looked at rolling 50 day returns of the XLK versus the S& P. And they said, what has gone on in the last 50 days? And remember, this is inclusive of the march Iran war, sell off in the last 50 days was a six standard deviation event. I think tech outperformed the S and P by 29% over that. Here it is. Gee, great job. Great job, John and Duncan. I mean, look at the extreme of this extremity or the extremity of this extreme. Because what ends up happening is like, you know, it's too much at a certain point. But is that at four standard deviations or at five or at six? Oh, it was at six. That was where it was too much. And nobody knows when that moment's gonna come, but it is gonna come. And so I asked them, is Friday, like really meaningful the way that sort of petered out? Like, is that something that is going to be a blip, like deep seek when we look back in three months? Or will this have been like a meaningful moment? And Nick's comment was, of course, we can't know for sure.
Michael Batnick: What did he suspect?
Josh Brown: Did he. Well, he said, I don't ignore reversals of six standard deviation moves.
Michael Batnick: Okay, okay, fair.
Josh Brown: Take it up with him.
Michael Batnick: No, no, no, fair. All right, so I wanted to talk to you about this story last week. So this is now stale. It's May 27, which is like two trading months ago, right?
Josh Brown: Eight years ago.
Michael Batnick: Yeah, basically. But I. But it's important and I'm glad that I still have it on the screen. So Robinhood lets customers use AI to trade stocks and make credit card purchases. And this Du Mollished, chart off, please. This demolished Schwab Raymond James lpl. I asked you, whoa, why are these stocks? I looked up and they were down 11%. I said, what's happening? You sent me this. So, okay, the narratives turn so fast. Two weeks ago when this was published, we were still in AI is going to kill everything mode. That's the market that we were in, Right? And then software had a really powerful balance, like a really meaningful balance. And it was like, oh, I guess like software.
Josh Brown: So I have an asterisk on that.
Michael Batnick: Let me finish. And then I was like, well, maybe software isn't that after all. And now on Friday, it was like, oh, the labor market is accelerating. Like, that's really weird. So now we should sell the stocks that we were loaded up on because the Fed is going to have to hike and maybe AI isn't killing the job market. So it's not as effective as it might be. And therefore it's like not. The story is not. The story is stretched. Let's sell them. The point is we are spinning. There is a lot of indecision and indecisiveness when you have the 9% down. Days like we saw a monster intraday reversal today. There is clearly so much, so much. There's a gigantic chasm between what people think is reality and what is reality. And we're doing this every day.
Josh Brown: I asked Sean on Friday, we write the best stocks in the market column. So I'm looking at a blood red tape. And I said, well, what's up? Like on our list? And he said, it makes no sense because presumably the market's falling. They're worried about interest rates going up or not coming down. Real estate.
Michael Batnick: Real estate's ripping.
Josh Brown: We wrote up Simon Property Group and Prologis. Both of them made 52 week highs today and both broke out today. We wrote those up this morning. And to your point, the chasm, people are looking at what's going on on the screen and then racing to come up with a narrative. And so the narrative on real estate is everybody's worried about AI disruption. Meanwhile, companies are hiring faster than ever, therefore more human bodies. Therefore, real estate should remain a good investment. Therefore I buy prologis, which is becoming a data center landlord after having been an E commerce landlord four years ago during the pandemic, and Simon, which is a proxy for people shopping. I don't know. They both broke the out.
Michael Batnick: What do you think I sell Green is New York commercial real estate. Office space.
Josh Brown: Well, that's. That one I didn't even look at. I'm just talking about the ones that are on our list. But I think this like ad hoc. Well, what's going down? Let me come up for the story, with the story for why and then what's going up? Let me come up with that story. Okay, great. But tomorrow again, we might be in a new rotation and you could take that story and you can line a birdcage with it because it's not gonna be worth anything.
Michael Batnick: Yeah.
Josh Brown: And so I think just respecting the rotations, understanding that you're gonna get caught up in a few of them, it doesn't necessitate taking action or reacting. I think it's important in this market and it's hard for people to do
Michael Batnick: dude, that is such a key point because I feel the impulse myself in a big way. And everybody does. We're all human beings. But when you see this type of thing, the tendency to. All right, I got to get rid of this and then buy that because this isn't working today. That is a gravitational force. Let's do some other stuff on what got killed Friday and what the follow through was on today's reversal. So this scatter plot is great. Sean made this, we're looking at. And this is. He made this at like 2:30. So a little bit dated because it was. There was a big bounce, but here we go. So there was a very tight correlation between what got whacked off on Friday and today. Look at this.
Josh Brown: Yeah, it's the same stocks.
Michael Batnick: It's the same stocks.
Josh Brown: For people that are listening, it's AMD, Dell, Sienna. It's the, it's the AI ancillary trades on AI CapEx. It's not, we're not talking about hyperscalers, we're talking about the companies that sell them stuff. And yeah, that's the scene of the crime. Vix 20 and a half today at its worst.
Michael Batnick: No, no, no, 23 was 23. Okay, so what's the difference?
Josh Brown: It reversed it by 3:00 clock this afternoon, as it always does.
Michael Batnick: I have one chart for the bears. No, I have two. All right, the ratio of S&P 500 momentum versus low volume stocks is nearing the tech bubble peaks. This is the unwind. And this is a real good one. This is a real good one. This is, this is meaty, Josh. So Berkshire, I don't know if you realize this, but the extent of the underperformance over the past year is something like we haven't seen since the top in 2000.
Josh Brown: So I want this stock.
Michael Batnick: Over the past year, Berkshire has underperformed the s P by 26. But I'll do you one better. So this, this, this bounce, by the way, in April. So in April the spread was 48 freaking percent, dude. I didn't realize it was that big. It was 48% in April. And this just goes to obviously what everybody wants, AI and what's powering it and what nobody wants, which is an insurance conglomerate.
Josh Brown: Can I ask you a question from the chat?
Michael Batnick: Please.
Josh Brown: Erudolph says one data point that I have not heard anyone address is that Thursday of last week was the first day of the end of the PDT rule, which has to change the dynamics.
Michael Batnick: I don't even know what that is.
Josh Brown: Okay, the pattern Day trader rule was officially eliminated. This is such a Trump era thing. So when I was a branch manager at a broker dealer, we had a pattern day trader list. So we had certain accounts where on a regular basis they were repeatedly placing trades, unwinding those trades in the same day. And if they weren't coded correctly or whatever, they reached some sort of an extreme. These people got marked as pattern day traders, which meant there was an additional hurdle to get their trades executed. Somebody had to sign off on it. I mean, this is 20 years ago. But they eliminated the pattern day trading rule. So permanently removing the requirement to maintain $25,000 in a margin account that's now been replaced by a real time risk based. I'm reading this Intraday margin system, the upshot traders now face fewer barriers to intraday trading, though specific brokerage implementation dates may vary. So as a FINRA rule that was in place Until June of 2026, any customer who executed four or more day trades within five rolling business days using margin were heavily restricted unless they maintained $25,000 account balance. So of course in the modern era, we got to get rid of that. Anything that stops gambling is obviously something that we have to take care of. So I don't know. It's a good question. Do you think there's enough pattern day traders who had their none of that size, their activity released and that that changed the way things were acting?
Michael Batnick: No. If the restriction is a $25,000 balance and that's been relaxed, that's, that's not moving. Billions and billions of dollars, 10 million
Josh Brown: customers of brokerage firms.
Michael Batnick: I don't know. Perhaps I would reject that, but I don't know. All right, let's. I'm good. I'm good to move on. I have more stuff in the doc later to revisit this topic. You want to do the Apple stuff?
Josh Brown: Yeah. So Apple. Let me get a, Let me get a quote on where Apple closed. It was pretty ugly today. Bear with me.
Michael Batnick: It was down 3.6%.
Josh Brown: Bear with me. The pattern day trader rule is holding my quotes back. Yeah, down almost.
Michael Batnick: You have male pattern day trader. You're a male pattern day trader. It didn't really balance with everything else at the close.
Josh Brown: Yeah, down 4%. It stayed there. Anyway, I think there was a lot of enthusiasm going into this announcement because the stock price was making record highs. Got up to, I want to say 315. 320ish. Was that, was that level? 315?
Michael Batnick: Yeah.
Josh Brown: All right. 290 in an instant. And so they had their WWDC conference, which is always very closely watched. This year in particular, everybody knew that they were going to release their rerelease, their AI strategy and a lot of actual products that they plan to deliver this year. And I guess the only way to put it is the street was underwhelmed and investors were underwhelmed, or at least underwhelmed relative to the rally in the stock going into it. I did want to play a clip from the presentation itself, John.
Michael Batnick: Let's take a closer look, starting with how Siri is a much more capable assistant.
Josh Brown: I want to get right into it and show you a few things that
Michael Batnick: you can now do with Siri in your day to day.
Josh Brown: Let's start with something simple but super useful.
Michael Batnick: Say you've heard about a local concert. When's that? Suki Waterhouse show in sf? Siri can draw on current world knowledge to ground its answers to your questions. Okay, looks like the concert is on July 26th.
Josh Brown: How can I get tickets?
Michael Batnick: Okay, you have to enter a lottery to get the tickets. Remind me to sign up when the lottery opens. Okay, got a reminder now. Let's hear one of her new singles.
Josh Brown: I don't know. We can't play that. All right, what? He's what? So if you're listening, not watching what's happening on the screen of the phone as he talks to it, it is responding to his commands or his questions in almost real time. I did notice he's talking while the thing is like buffering. And maybe that was by design, so there wouldn't be that big of a gap between the command or the prompt and the response, but it is interoperable. Siri is working with multiple apps as he's asking it to do things. It's pulling up ticket information, it's pulling up dates, it's instructing the calendar to set reminders, and then it's going right into playing a song by. Who is that?
Michael Batnick: I don't know who that is.
Josh Brown: Suki Waterhouse. I thought I was hip. I thought I was with it. Apparently I'm not. But the point is, it's not multiple conversations with Siri. It's all happening inside of one interaction. This is the beginning of a gentic Siri. This is the thing that they should have done 10 years ago. Quite frankly, I didn't know that it needed AI, but like, historically that would have been five different. Hey, Siri's to get to. Right? And so now it's all happening within one conversation. And Siri remembers what Was the step previous. You don't have to reiterate everything that you. Okay, so I don't know that that should blow anyone's doors off, obviously, cuz it didn't. But I do think that people will get accustomed to using it and it will prevent people from going to a third party chatbot for a lot of things. Once it just becomes like the obvious no fuss way to get information or talk to your apps and tell your apps to do things. What are your thoughts?
Michael Batnick: This is not. I'm stealing a thought from Ben Thompson. The next level of this is instead of set a reminder on my calendar, please enter the lottery for me.
Josh Brown: They're not there.
Michael Batnick: Go the final distance.
Josh Brown: That's right.
Michael Batnick: So Siri is such a piece of garbage. John, throw up my conversation that I had with the boys. It's a little bit. Here we go. All right. So I said I know I'm I. So I. This is Siri. Okay. I use. I used a talk to text. I know I'm beating the drum to death, but half man spelled halfman. H A F E M A N. That's what it heard. But Hafman was so bleep bleep good. How bad is Apple? How the bleep do you hear? And I'm literally talking, cursing.
Josh Brown: You're cursing at Siri.
Michael Batnick: I'm talking.
Josh Brown: What kind of animal.
Michael Batnick: Let me finish. I said how do you hear half space man and write half man spelled half man again? And why does man have two ends spelled ends? Lol. I said N not end. This thing is such a giant turd. It just doesn't work that at. Can I stop you consistently.
Josh Brown: What? They launched last night is not available till September. So you. You're using 2015 technology.
Michael Batnick: No, I understand.
Josh Brown: Dude, they say that they're. But they.
Michael Batnick: 2015, come on.
Josh Brown: Yeah, but they say all of those little translation related things are going to be fixed.
Michael Batnick: That's heinous.
Josh Brown: No, we. Everyone agrees. Nobody would say otherwise. But what they released is not even available yet. So you know that's old Siri.
Michael Batnick: Let me tell you one other idea. Robin said, hey, what's Ryan's number? This happens all the time where you ask a friend for another friend's contact. Why do I then have to go into my contact list? Hit the number, hit the info, hit the share, hit the create. Why can't Apple's Siri intelligence respond? These are your three app. This is the three Ryan's in your contact. Which one would you like to send to Robin?
Josh Brown: I completely agree. That's like such basic and it's because they haven't, they haven't done it yet.
Michael Batnick: Like, come on man.
Josh Brown: Here are some reactions. Let's see. WWDC 2026 is Apple's AI credibility test. Apple does not need to win AI by having the biggest model or the loudest demo. It needs to make AI trusted, useful and invisible across the ecosystem. So they did an entire panel session during the presentation with multiple Apple people specifically diving into privacy and the fact that none of this stuff was going to take place in a cloud somewhere. This is like on device. This is very important. This is like on device stuff so that if you're talking about personal information with Siri, it's not like there is some data center in Arizona that's just like randomly running that information through it. And that's what I think makes this so hard. Apple has always been the king of privacy and they're trying to not innovate so fast that they break that trust. I think it's a huge part of the Apple story and I think it explains a lot of the delay. They apparently are willing to move faster though than they used to because they fired their head of AI and they brought in this guy, Mike Rockwell. And Mike Rockwell is the guy that built the Vision Pro, which was a commercial failure. But within Apple they deem it to be a massive technological success. Like it was a very difficult project and he delivered it. He had been lobbying to take over AI internally for a long time and they finally handed it to him and that's a really big development. The other thing, I wanted to share this with you. Wearables are going to be a very big deal for Apple going forward. Obviously AirPods were a smash hit. The watch became a hit, although it wasn't at first. People forget this here. Apple is accelerating development of three new wearable devices. Companies ramping up work on smart glasses, a pendant that could be pinned to a shirt or worn as a necklace. And AirPods with expanded AI capabilities. All three are being built around the Siri digital assistant which will rely on visual context. The glasses. So Meta works with Ray Ban. Google works with Warby Parker. Apple, after talking with third party companies, has made the decision to manufacture the glasses themselves in house. I think that's meaningful. The early prototypes connect via a cable to a standalone battery pack and an iPhone. But the newer versions have components embedded right into the frame. They'll use high end materials, acrylic elements to give the glasses a premium feel. And basically the glasses will have two camera lenses, one for High resolution imagery and another dedicated to computer vision. And they learned that from Vision Pro. So basically, they want to be able to give the device environmental context, help people interpret their surroundings, measure distance between objects, and they want people to wear the glasses all day as an AI companion. The glasses are going to rely on the phone for processing. So a lot of the heavy lifting is still going to happen on the phone. But the glasses will keep you from having to pull your phone out of your pocket. They will tell you things onboard your face. This is really the start of augmented reality and walking down the street and having AI talk to you and tell you what's going on, or vice versa. Let me ask you this question. Would you wear the glasses?
Michael Batnick: Not only would I wear the glasses, I will wear the glasses. And I think the glasses are going to be a massive hit. I think it's going to be a new. I do.
Josh Brown: Okay, I'm all in. So let's talk. Let's talk pendant real quick.
Michael Batnick: Hold on, hold on. Here's my one thing on the glasses. So you go to a sporting event. I was on the next game last night. Or you're going. You're on a. Wherever you are. So if I could wear the glasses of the Knicks game. And somehow in the future, there is a way for, for this machine to catalog and pull the best clips of the game, the best highlights and deliver it to me for future use or whatever. It's just like, I think all of that is coming and I think it's going to be really freaking cool.
Josh Brown: Here are the problematic elements. Again, back to Apple's focus historically on trust. Somebody wearing the glasses says, that girl is super hot. Hey, Siri, take a snapshot. Save that for me.
Michael Batnick: Yeah, it's an issue. I mean, there's a lot of issues. I don't know. I have no, I have no. Obviously I haven't spent this and I
Josh Brown: don't even want to go further than that. Like pedophile shit. Like, I don't even want to. Okay. The pendant. So OpenAI is working on this and others will too. This is something either pinned to your shirt or worn on a chain with a hole through the device so that it could be supported like an amulet or like a medallion.
Michael Batnick: And what is that going to do?
Josh Brown: It's gonna have a camera on it. So you're not wearing glasses, but you've got this thing pinned to your chest.
Michael Batnick: Okay.
Josh Brown: And it's looking at everything that's in front of you and it's listening and possibly you're tapping it Like Star Trek and giving it instructions that it then sends to apps on your phone. Would you rather wear the pin or the glasses?
Michael Batnick: I think. Well, knowing nothing.
Josh Brown: The size of an air. It's the size of an airtag.
Michael Batnick: I would say the glasses, I think, but we'll see.
Josh Brown: Okay. I think I'm a necklace guy in this situation because I already wear glasses.
Michael Batnick: Yeah.
Josh Brown: You know, 18 hours a day. I have sunglasses on.
Michael Batnick: Listen, it's. It's all, it's all exciting. I don't want to be a hater. Like what they showed in the video. I don't really care about the stock price reaction.
Josh Brown: Well, they didn't show any of these devices.
Michael Batnick: No, I know.
Josh Brown: I'm just like part of it.
Michael Batnick: Even, even the, the beginning of the. Hey, Siri, what's going on? Put on my calendar. Like, yeah, that's cool. It's useful. I will certainly adopt that.
Josh Brown: I agree with you. Hey, Siri, when is the pre sale?
Michael Batnick: Let's.
Josh Brown: Let's use something I actually want to go to. You know, Rush is on tour again.
Michael Batnick: Okay.
Josh Brown: They're gonna play four shows in msg. They have a new drummer. She's an absolute animal. There are clips of her all over social media. Cause they played their first show last night.
Michael Batnick: Will Paul Rudd, Will Paul Rod be in the audience?
Josh Brown: I would assume this is gonna be a very big show. Okay. Hey, Siri, when are the Rush dates at msg? They give you the dates. Okay, great. On which of those days am I planning to be in Manhattan? You'll be in Manhattan for show two. Buy me tickets. I need four or I need 100 section. Buy four tickets. Text Michael Batnik and Justin Frankel and, and Adam and let them know we're going. Yeah, like that's the right.
Michael Batnick: Yes.
Josh Brown: Okay. We're not there, but so they. We don't have it. Until we have it. I don't think the stock price is going to rally on this shit.
Michael Batnick: Well, here's the bottom line. So the real, the only thing that matters are they going to sell more devices as a result of this.
Josh Brown: 100% agree, and I think they will.
Michael Batnick: I don't know what moves the needle. Everyone's already there. But it's cool, man.
Josh Brown: It's, it's, it's when you see your friend interacting with his Siri and getting done.
Michael Batnick: Yeah, I gotta have it.
Josh Brown: Yeah. Or somebody you like in a meeting with and you're like, whoa, what the hell is going on here?
Michael Batnick: Yeah.
Josh Brown: Oh, that's just my agentic, Siri.
Michael Batnick: That's cool. That's cool.
Josh Brown: Yeah, you're gonna want it. Okay.
Michael Batnick: All right. More on, more on the question. I want to talk about this. I've said this before, and it's really true. And you mentioned this earlier when I said it's no big deal. Where you're like, well, it is a big deal if you bought at the top. True. A correction only feels healthy when it's other people's stocks. Right? So I, I understand that if, if you bought the nasty ETF two weeks ago when we spoke about it, whatever, and now you're down 20%. Yeah. It doesn't feel so healthy. It actually feels pretty, Pretty nauseating. I get it. So let's go through some of the shit that's happened. So the quantum computing names fell 13% in five sessions. Look at the one that these names are on. Okay.
Josh Brown: Just like straight up, there's a quantum computing. Of course there is.
Michael Batnick: Well, no, there's multiple ones this qtm. So shout to Wisdom Tree. This was the defiance one. Had like AMD and other stuff in there. This is the real shit. The space ETFs fell 20% very quickly. The degen Dow. Look at, look at this. Like, yeah, rolled over pretty aggressively. So here. So here's the deal. I think corrections like this are healthy for a million reasons, but even just for, like, we get lulled into complacency when you've had such a long bull market. And I don't mean like the last, like 10 years. I just mean like, like since the March lows, right? We, we have like a false sense of security. And sometimes we, as human beings, we fly too close to the sun and we need to be reminded. Oh, like I was overexposed. Whoops. Like, I did it again. It happens. And I was writing this morning about the correction. The Vix was at 22, closed at 19. RSP was 1.5%, the equal of its all time high. Spoiler alert. It's 70, 74 basis points of its all time high.
Josh Brown: And to me, nothing.
Michael Batnick: There's two things happening here. One, there is a slap in the wrist of a very crowded trade, though. Up this chart from TAT's own Cumulative Sector ETF low since the March 30 low. It's only tech. Literally, it's only tech. Tech has taken in 30 billion and everything else has had this. It's the whole thing. So I have two more charts and then I will. I will.
Josh Brown: That is a killer. That is a killer chart.
Michael Batnick: It's unreal.
Josh Brown: So every dollar since March 30th that's come into the market has come into a tech ETF on a net basis.
Michael Batnick: All of it.
Josh Brown: Holy shit.
Michael Batnick: All right, the five. I'm going to skip one chart, John, then we'll get back to this one. The 5 day outperformance of the S&P 500 vs S&P 500 XAI is the biggest on record. Zerohedge tweeted this. Just a massive, massive unwind. We haven't seen anything like this in the last five years. And where did the money go? It went into, oh, healthcare for example. Healthcare's best five day relative rally since 2000 freaking 9. So the money is rotating. But if I were to throw another bone to the, to the bears of well, are we going trade off? Are we going to look back and say that Friday was actually a meaningful reversal day? Maybe not tomorrow, but like in the grand scheme of things, I would point to this chart. Record outperformance of low volume versus the NASDAQ 100. So here's what we're looking at.
Josh Brown: If you're listening, the bottom pane is what matters. Well, well.
Michael Batnick: Right, well, they both matter. So on Friday, on Friday, the low volume index outperformed the NASDAQ 100 by 6%. We haven't seen that level of outperformance since the dot com bubble imploded. And outside of that there's really only been three other dots. There was a random one in 1987, well, not random, there was one in the GFC. But all of the other red dots occur in the run up and the unwind of the dot com bubble. And I'm not going to just sweep that under the rug. I'm not saying that this is the top, dun, dun dun. But you know, it's, it's not nothing.
Josh Brown: You know what the animal spirits do though in this market? So they rotate into health care and they start buying biotechs. Like that's not risk off. So the low volume thing is risk. I mean that's obviously meaningful, but. So I'm trying not to make too much of Friday because I just know the mentality of the modern investor is a gambler and they'll just, whatever, all right, what's going up? I'll just buy that. Like they'll do that shit. And the game goes on, the rules change. Or it's a new game is the better way to put it. But the casino never closes.
Michael Batnick: That's right. Well said. We need evidence that there's a top. And by evidence I don't mean one down day I mean there is a series of lower highs and obviously we're not there yet. We might be there in four weeks, I have no idea. But you have to give the bulls a benefit of the doubt. And the thing that I keep coming back to is like my North Star for where we are in this market. And I understand that Micron is up 800%. I get all that. The AI story is in its infancy, as hard as that is to believe, which is a great segue to the OpenAI stuff, the S1.
Josh Brown: It's just too much wealth has been and is about to be created in stocks for us to say a one day crash in memory stocks and AI names is like the end of it. The, the end of this.
Michael Batnick: I'd be surprised.
Josh Brown: Yeah, I just, I, I can't get there mentally. I mean, you know, could be wrong. Just somebody asked me my opinion like was that was a blow off top. It was a blow off top and 100 stocks, but the casino is still open. Speaking of Casino, OpenAI filed confidentially, which is interesting in and of itself. It's S1 with the SEC around May 22nd and we all just found that out. The filing was confirmed publicly by the company on June 8th. So here's what we know so far and then I want to get your reaction. Obviously Goldman, Morgan Stanley, JP Morgan are co running the deal. September 2026 is the target window. They really want to beat Anthropic to the door, which I understand given the size of these things, and neither of them wants to be third after SpaceX, which is this week. Right. Okay. Analysts are expecting a trillion, the current private valuation. A trillion before X Alibaba's 2014 listing, which at that time was the largest IPO ever. The current valuation is 852 billion. Anthropic filed for their IPO on June 1st and the valuation talk was 965 billion. So you can bet that OpenAI wants to top 965 billion. That's where the trillion plus comes from. The revenue growth here we know is incredible. 2 billion in annualized revenue at the end of 2023. 25 billion as of February. That's a 12.5% increase. 12.5 times, excuse me, increase in two years. The losses are growing just as fast. The company lost $1.22 for every dollar that they earned in the quarter. 2026. Projected GAAP losses of 26 billion. Cash burned 25 billion for the year. Gross margins 33% in 2025. That is not what investors are typically putting multiples on stocks like this for the good news is the Elon Musk lawsuit is out of the way. The filing happened two days after the jury dismissed Elon's lawsuit where he accused them of stealing a charity and turning it into a for profit company. He lost. It came a week after the Anthropic filing. So this is a race. One other thing that people are noting is that the Trump administration is extremely IPO friendly. They want this to happen. They view this as a wealth creation event and another sign that the US Is the hottest country in the world, blah, blah, blah. So very, very little doubt about whether or not if they want to do it, they'll be able to do it. I did make a couple of charts here. Just put this first one up. I just want to show you OpenAI versus Anthropic. Just on those metrics that I rattled off. We won't go through them again. But the key one that I want you to look at is that 95% of ChatGPT users, of which there are 900 million weekly.
Michael Batnick: Man.
Josh Brown: Wow. Are free. Anthropic. 80% of their users are enterprise, including eight of the top companies of the top 10 companies in the world. They have 1,000 companies paying them more than a million dollars a year. These are very different businesses. I told you. OpenAI is losing $1.22 for every dollar earned. That is not the case at Anthropic. Next chart. This is the revenue run rate for both and you can see a clear acceleration of Anthropic versus OpenAI since the start of this year. Like the curve just. The curve just went plaid.
Michael Batnick: Yeah. You know what's weird about. About how Anthropic accounts for their revenue? It's not taking anything away from what they're doing because they legitimately did blow past OpenAI. But Anthropic. So I asked Claude how they book it. Anthropic books that channel revenue on a gross basis. So it's sold through cloud marketplaces. It counts the total end customer spend as its revenue, and then it records what it pays to the cloud platform as an expense, which is a little bit weird, but it's kosher. Like that's. You're allowed to do it that way. OpenAI does it the other way. They only account for the revenue that they're actually getting and not distributing. So the gap is not quite that wide. But look where it was at the beginning of the year, it was very wide and OpenAI just zoom, whoosh, past them.
Josh Brown: Which one is more traditional for an Enterprise software company.
Michael Batnick: I don't know. I don't. I don't know. I would, I'm making this up. I would guess that OpenAI is the more conservative way to report. I don't know why you would do it the other way, but that's how, that's what Anthropic chose to do.
Josh Brown: They were able to raise $60 billion with their eyes closed last week. Nobody even heard a word about it.
Michael Batnick: They could raise whatever they wanted. They raised a Series H and then announced the S1 the next day.
Josh Brown: The first quarter operating profit in anthropic happened in Q2 of this year. 559 million was what was reported. You can't find anything. You can't find anything like that. They were at an $87 million run rate two years earlier. They have 1,000 customers spending a million dollars annually. Name a large corporation, they're probably a customer. Claude Code, they say, crossed a billion in annualized revenue within six months of launch. They're talking about gross margins of 40%. Two years ago it was negative 94%. So they're already at a crazy level of profitability based on their own numbers. We don't know if that will be sustainable because they also spend a lot of money. But having businesses as customers versus individuals, I think is a very big difference. I just think it's a cleaner, easier story for institutional investors. Although that doesn't seem to be stopping any money being raised. OpenAI raised $120 billion this year already, on top of money they raised last year, the year before, the year before that. So it's, I mean, it's. We're talking about three, including SpaceX, of the biggest companies ever to go public. They might be 1, 2, and 3 by the time this is over. And what an incredible moment for the capital markets if these things actually happen and nobody gets. Nobody gets killed.
Michael Batnick: It's really exciting.
Josh Brown: I think it's pretty crazy.
Michael Batnick: I was talk, I was talking with Ben about this today. If there were to be a quote that we would look back on in five or 10 years and be embarrassed like you dumb asses. You really didn't see the top coming. It would be this one. I believe Morgan Stanley said that SpaceX can reach the number. So stupid. I forget what. It doesn't matter what it was like 3 trillion. $33 trillion in revenue by 2040. 30 trillion in revenue. Did you see that quote?
Josh Brown: Yeah.
Michael Batnick: Literally 3 trillion in revenue.
Josh Brown: Sure, sure. Why not? Okay. Goldman Sachs calls you. We are the lead underwriter in SpaceX. OpenAI and Anthropic. Pick one. We'll hand you 1,000 shares.
Michael Batnick: How long do I have to hold it for?
Josh Brown: Or I shouldn't say the amount of shares. We'll give you $100,000 worth of any of these three. The lockup period is one year and then you can sell all of it or you can keep it forever. Which of those three do you want?
Michael Batnick: Well, definitely not OpenAI.
Josh Brown: Definitely not. Are you sure?
Michael Batnick: Yes, I am sure. I'm not sure. I'm not sure that that will be the right answer in a year from now.
Josh Brown: No, obviously.
Michael Batnick: But I'm sure that's my answer today. No hesitation.
Josh Brown: All right, chat. We want to hear what you guys think. Nicole's going to, Nicole's going to keep her eye out and at the end of the show we'll, I mean, we're, I don't know if we're doing a
Michael Batnick: poll, so I would, I, I would buy Claude today if I had to, if I had to choose. But I do think that SpaceX can be, I think it can be a $10 trillion company as, as cracky as that.
Josh Brown: Okay, so, all right, so I gave you a one year holding period if you had to hold for 10 years. Does SpaceX become obvious?
Michael Batnick: I think so.
Josh Brown: Anyone going to, Is anyone going to catch them in 10 years? I say no, I think so.
Michael Batnick: Only because what they're doing there, I don't know who their competitor is. Right. Like there's OpenAI and anthropic and XAI and Grok and there's other stuff like I don't know what the mode is there compared to what SpaceX has already built. They're so far ahead of the competition.
Josh Brown: So, all right, but, so then let me, so then let me tease this out. If you, if that's your take, like if it's a 10 year hold, I'll take Space X IPO, which I think I agree with. Just buy it in the aftermarket. Then you're holding over 10 years anyway. Yeah, so that's why I think the IPO is gonna work, because I think that's the conclusion a lot of people reach is this might be the dumbest of dumbass prices that I'm about to pay, but whatever, I'm gonna hold it for 10 years anyway. If enough people have that mentality, and I think they will, I think there'll be support for this.
Michael Batnick: Well, guess what?
Josh Brown: I could end up looking like an idiot on Friday. But that's what I think.
Michael Batnick: They've engineered the stock to go up. I Don't know if it's going to work, but they are doing everything they can to be thoughtful about the amount of supply that is being unlocked. And I don't know unless we could move off this, I don't know that the, the weird unlock that they're doing is better than the one is worse than the 180 day cliff where it's just like. That seems very strange too. I actually kind of think that what they're doing is.
Josh Brown: I like this better.
Michael Batnick: I like this better. I think it's. I think it's a worthy experiment.
Josh Brown: I think this. So we just talked about this with the last big IPO cerebras that was the test run and it's too early to know anything because nobody's been unlocked. But that was the first time they did a five week unlock. Now when you do a direct listing, which there were some technology companies in the last few years that did a direct listing. Spotify, I think Spotify is a big one. Bunch of software companies did this because they had already raised enough money in the private market that they didn't need to sell new shares. What they needed was the liquidity of the market. So what they did was they just listed no lockup in that case. So they were free and clear to sell day one. They had to because there were no shares being made available to anybody else. So that is the difference here. This is obviously not a direct listing. This is a gigantic $75 billion share sale. In the case of SpaceX, we. One other thing I did with Nick and Jessica, they took the average IPO return from 1997, 1999 and 2025. Modern era 2025 is like 29%. 1999 was like 70%.
Michael Batnick: What does that mean?
Josh Brown: They overlaid it on the price that SpaceX is going to go public, which is $135 a share. They said, here's how you're gonna know if it's 1999. Does this thing open at a close at a 70% premium on the first day?
Michael Batnick: I really hope you're.
Josh Brown: Then you're in a bubble, then you're in 1999. Right. If it's closer to that 29% average of 2025, then we're still in that environment. I thought that was interesting.
Michael Batnick: I agree. But this is important for the listeners. The amount of stock that was listed for these companies in 1999 versus the amount that SpaceX is listing today or the amount of. It's 3% of the float. Like it's, it's A, it's a tiny amount, so they're, they're trying to get it to pop. So it's not apples to apples. All right, I want to make the case for, for something. A couple of weeks ago, we were taught, you made, you made the very astute observation that looking to consumer discretionary stocks as a read on the consumer.
Josh Brown: That was a great conversation.
Michael Batnick: There's, there's better ways to do it because it can get really sloppy really fast. So you could look at the dollar stores or whatever. And so like right now, I think it's in vogue to look at the restaurants and it's like, holy shit, how bad is the consumer? So this chart from Consensus Media shows the, the same store sales growth for all of the, all of the names. Right? And it's, it's all over the place. Like, but there's been a lot of, like, dark red public.
Josh Brown: These are public restaurants. Yeah.
Michael Batnick: So Chipotle, Pizza Hut, ihop, Portillo. It's like whatever, all them Popeyes. And if you look at the, all the way in the right hand. And I mean, there's just a lot of stress here. But the point is this. Forget about even where we are today. Look how, look how rapidly this is changing. Is this a read on the consumer? I don't know. Chart off. Guess what? There's a lot of inputs that go into a restaurant. There's labor, there's inflation, there's inputs, there's a consumer, there's preferences, there's location, there's valuations. It's such a, it's such an idiosyncratic story that to look at the restaurants and conclude something about this consumer, I just think it's bad. It's just not a great idea. Same thing. Same thing with the dollar stores. It could, it can mean anything. So I think that sometimes it's just better to look at the data. So, for example, look at this chart from, from, from Goldman Sachs. We're looking at alternative measures of nominal consumer, consumer spending growth. It's right here. You've got retail control, you've got, you've got Costco. Like, you have just, just look at this. Spending data is a much more effective input. And finally, I would conclude that if you're looking at the restaurants or if you're looking at the dollar store. Shut off, please. Or if you're looking at Target or Walmart or Costco, at least today, like, I'm not saying in general, I'm saying right now you might be looking at the wrong thing, because what I'm looking At to determine the health of the consumer. At least the health of the consumer that is powering the bull market is hotels. Why there's not 100 million hotels with. There's a few hotels. There's two that are in the S and P. It's Marriott and it's. Which one is bigger? It's Hilton.
Josh Brown: Hilton is public.
Michael Batnick: No, it's. And Hyatt I believe is in the Russell 1000. Okay, look at these charts. Tell me about the state of the consumer. Is the consumer spending money? Is the consumer that matters to the stock market spending money? The answer is yes.
Josh Brown: Right, well, so this is the upwardly mobile top 50% of the distribution. This is that customer. People in the bottom 50% are not very often booking hotels. Certainly in the bottom 20% they're not going on vacations like that. So that is really a read on what I refer to as stock market Americans. Yes, stock market Americans have not had a post Covid travel hangover. They just kept going like there's no tomorrow. And everywhere you go, I mean, I just stayed at the craziest hotel I've ever been to in my life. So I stayed at the Amangiri. 36 guest rooms on the whole property. They were all there. Like there is no hotel. There is no hotel chain and there is no specific property that's in a desirable location that is seeing anything less than 92% occupancy or whatever the latest numbers are. And that's a great point. I'd way rather look at that and take the temperature of the consumer that the stock market cares about, aka the stock market American versus look at a chart of Shake Shack, Wendy's, McDonald's tell you shit, Shake Shack blew up. It's in a 60% drawdown because they guided lower based on napkin costs, paper costs and beef costs. That tells you zero about the state of the consumer. That tells you they're not handling their, their, their goods inflation very well.
Michael Batnick: It also tells you that GLP ones are a real, real thing. They're having.
Josh Brown: That's a whole other layer. They're having a point.
Michael Batnick: So are you a message chart for me?
Josh Brown: I do. Put it up. Look at this piece of shit.
Michael Batnick: Okay.
Josh Brown: What is it?
Michael Batnick: Bitcoin.
Josh Brown: How did you know? Because of my enthusiasm for presenting it to you.
Michael Batnick: I look at charts all day long.
Josh Brown: I own this and I still want it to go to zero. I actually, I actually think we could be seeing a false breakdown here and we might get a rip higher because I haven't seen people this despondent over bitcoin since the last time it was in a 50% drawdown.
Michael Batnick: It's black, dude. But. But now it's happening in the context of rising asset prices. It's really bad.
Josh Brown: Chart back on. This is the SpaceX IPO. Talk me out of it.
Michael Batnick: I don't know. You're big on this. I'm just always skeptical. I don't know. You could be right. I can't prove you wrong.
Josh Brown: I'm probably wrong because gold also looks pretty bad and silver and a lot of the things that people were into all at the same time are all seem to be like losing favor. And I wish I could tell you there was some fundamental thing that I knew about. But bitcoin in a 50% drawdown with the NASDAQ at all times. Remember people used to say, oh, it's just one trade. And bitcoin is tech, and bitcoin trades with software. And, well, software bounced hard, bro. Like cybersecurity software bounced. Oracle bounced. This went lower.
Michael Batnick: Yeah, that's bad.
Josh Brown: I do think a lot of the gamblers in this shit are people that want to gamble on these IPOs. I do think that there is something to that, but I don't think that could explain a $2 trillion asset class getting cut in half. I don't. The other thing I read was that all these scams, like Trump crypto stuff, where the Trump fans got cleaned out, there's just been negative sentiment on digital currencies and digital assets in general this year.
Michael Batnick: Sailors selling.
Josh Brown: Sailors selling, like MicroStrategy blew people up. I just. It's another crypto winter. In the middle of summer, it's cold.
Michael Batnick: So it's cold out there.
Josh Brown: It's cold out there. All right, guys, thank you so much for watching. Thank you for listening. I want to give a shout out to all the people that join us in the live chat on YouTube. We appreciate you. You help us make the show and we look forward to seeing you next week. Tomorrow is Wednesday. All new animal spirits coming at you. Michael and Ben, my personal favorite podcast. We'll also do Ask the Compound this week and we'll finish the week with an all new edition of the Compound and Friends. And yes, I'm coming back. I do want to see some applause in the chat for the episode Michael hosted solo last week with Skanda and Neil Dutta. I thought that was awesome.
Michael Batnick: Thank you.
Josh Brown: I could have looked great. I could have listened to it twice. They're great. You were great. Great topic. Anyone curious about the state of the US Economy? If you missed the comment on Friends on Friday, catch up before this week. It was an amazing show. All right, that's it from us. We'll talk to you soon. Thanks again. Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as, and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.