The AI Trade Is BACK ON! New Catalysts Could Spark A Return RALLY

0:00War has broken out in the Middle East, bombs, drones and missiles, they are criss-crossing the region, the strata who moves is closed, oil prices keep pushing higher, the private credit cracks at home have turned into a tsunami of fear of paralyzing Wall Street, and Apollo's John Zito, the big boss. He just issued a warning about private equity valuations. To say there's chaos in corners across financial markets, that would be a complete understatement. Yet, investors are pouring capital into their favorite trade, AI stocks, baby. The rapid allocation back into these high-flying equities has as much to do with the macro environment as it does with the underlying stocks themselves. On the macro front, investors are coming to terms with the idea that a war in Iran, it's going to have a very little to no impact on software technology companies. Could various forms of electricity needed for data centers get more expensive? Sure, maybe. But that's still a very small impact on the behemoth corporations that are printing cash and a pace that we have never seen in human history. These companies are giants, and they don't seem to be slowing down.

1:02We can also see that the company's specific announcements that are driving increased investor demand continue as well. Meta is reportedly going to lay off 20% of their workforce, and the stock jumped more than 2% yesterday. In video, jump 1.6% after CEO Jensen Huang announced new components at their conference, and then he said that the company expects to do $1 trillion in revenue, just from its newest chip by the end of 2027. $1 trillion is a very, very, very big number. Take a listen to what he said. I'm here to tell you that right now, where I stand, a few short months after GTC DC, one year after last GTC, right here where I stand, I see through 2027 at least $1 trillion.

2:07Now does it make any sense? And that's what I'm going to spend the rest of the time talking about. In fact, we are going to be short. I am certain computing demand will be much higher than that. And there's a reason for that. So the first thing is, we did a lot of work in the last year. Of course, as you know, 2025 was NVIDIA's year of inference. We wanted to make sure that not only were we good at training and post-training, that we were incredibly good at every single phase of AI, so that the investments that were made, and our infrastructure, could scale out for as long as they would like to use it. And the useful life of NVIDIA's infrastructure would be long, and therefore the cost would be incredibly low. The longer you could use it, the lower the cost. There's no question in my mind. NVIDIA systems are the lowest cost infrastructure you could get for AI infrastructure in the world. And so the first part was last year was all about AI for inference.

3:09And it drove this inflection point. And simultaneously, we were very pleased last year that Anthropic has come to NVIDIA. That MSL, meta-SL, has chosen NVIDIA. And meanwhile, meanwhile, as a collection, as a group, this represents one-third of the world's AI compute, open source models. Open source models have reached near the frontier, and it is literally everywhere. Now Tesla and Micron were both up on the day as well, but they made separate announcements about various production facilities that each company is building. Both of those production facilities are related to AI chips and memory. The news was fast and furious all day, but investors were prepared with plenty of dry powder as they poured capital back into the darlings of the stock market. And I wouldn't expect the stock market to start underperforming today. Corsian Group's Ryan Dietrich points out that St. Patrick's Day, you know, the Green Day. And historically, the seventh best performing day of the year.

4:12Just look at all the green in this chart right here. But the structural bull market in equities has some investors wondering what could happen in other areas of the market, is geopolitical uncertainty persist. Brian Sasi writes that according to the Bank of America Fund Manager survey, it appears that smart money is raising cash, which means they're selling assets, and they're not expecting much of the economy moving forward. But all this raising of cash by fund managers, it's probably just another opportunity for smart, sophisticated, good looking retail investors to buy the dip. Creative Planning's Peter Malook reminds us over the last 75 years. The average entry year market drop is 14%. If you are overly stressed out about the current 5% drawdown, the stock market may not be for you. Downside volatility is the price investors pay for the long-term outperformance. Basically, if you can't handle the heat, get out of the kitchen. If you're hoping the Federal Reserve is going to bail out the market with significant rate cuts, well, that's what they should have been doing for the last couple of months.

5:12But Bob Elliott highlights that history shows us a Fed cut is unlikely. He writes that there is a lot of hope that the Fed will cut further in response to this oil shock to support growth. But even a quick look at history shows that best the Fed pauses, and at worse, they hike coming to fight inflation. Now, the increasing complexity of the current situation is institutional investors on their back foot. They're taking punch after punch after punch in the chin. They may be pouring cash into AI stocks, but otherwise, they're playing defense. It is hard to take big risks when the market is gyrating in this way. You don't want to go tell your LPs how you screwed up their returns by trying to be the hero. It's much easier to simply take what the market gives you. And then you just claim, well, geopolitical volatility drove my portfolio down with the rest of the market. Individual investors, though, they're in a different situation. This is where sophisticated, good looking retail investors shine. They take big risks. They buy the dip volatility is their friend. They're hunting for opportunities when everyone else is scared. You got to love the cowboy nature, the people with real skin in the game.

6:16They're putting their own personal money at risk, not LPs, and they're trying to better their personal financial situation. Remember, there are two types of investors in the world, those who run away from risk and those who run towards it. And this week is a perfect example of how the difference shows up in the market. But regardless of what side of the equation that you're on, investors are trying to figure out how big can these AI companies get? Is it a bubble? Will the bubble pop? And also, when will the war in Iran end? We've got government officials like Kevin Hassett going on CNBC this morning to explain the economic destruction in Iran as one of the many ways to generate support for the military operation in the Middle East, take a listen to what he had to say. But the fact is that the U.S. economy is fundamentally sound and that if it were to be extended, it wouldn't really disrupt the U.S. economy very much at all. It would hurt consumers and we'd have to think about, you know, if that continued, what we would have to do about that. But that's like really the last of our concerns right now because we're very confident that

7:17this thing is going ahead as scheduled. Now time's going to tell if this strategy works. But investors are starting to get comfortable with the fact that we have already seen the worst of the damage in the stock sell off. For example, Ed Yardini said, we were expecting a 10 to 15% correction in the S&P 500. But the 5% decline from January 27th record highs through Friday's close might be the extent of the damage. Now have we seen the extent of the drawdown or is there a lot of optimism ahead? Frankly, I don't know. I don't have a crystal ball. I'm just like you and trying to figure it out. But what I do know is the answer to that question is going to be pinned on two things. What happens with the AI companies? And will the price of oil continue to go higher as the Iran conflict continues? My best guess is actually that a lot of the damage has been done because psychologically investors, they braced for impact. If we're going to go drop bombs in another country, if we're going to close the street, if global oil production is going to slow and the training and logistics of oil all around

8:21the world is not going to flow as freely, then obviously we should see inflation explode higher. We should see stock sell off aggressively and there should be carnage in everyone's portfolio. But we're only down two or three percent. And those that were predicting all of the doom and gloom, they've been wrong. But if investors were bracing for really, really, really bad outcomes, but after two or three weeks, they simply saw a little bite, a little small negative impact that my guess is, they build confidence, they reach in their pockets, they pull out some cash, they're going to throw it in the market, stocks will go back up and everyone is going to remember. Buying the dip has been an amazing strategy for a decade plus. There's no reason why that's probably going to change right now. It's different today's show. Thank you guys so much for watching. Please remember to subscribe on YouTube and I'll see you guys live tomorrow from the desk and we'll see you guys in the next video.