Are We in an AI Bubble? | Macro Mondays: October 20, 2025

Key Concepts

• AI Bubble: The discussion around whether current valuations of AI companies are justified, particularly concerning their profitability.
• Unprofitable Tech Stocks: Companies that are not currently generating profits but are experiencing significant market gains, often driven by monetary policy and future potential.
• Monetary Policy Easing: Actions taken by central banks to increase the money supply and lower interest rates, typically to stimulate economic growth. This includes Quantitative Easing (QE) and ending Quantitative Tightening (QT).
• Dollar Liquidity: The availability of US dollars in the financial system, crucial for the functioning of commercial banks and other financial institutions.
• US-China Trade War: Ongoing trade disputes and tariff impositions between the United States and China, impacting global markets.
• Retail Investor Sentiment: The collective attitude and behavior of individual investors, often influenced by social media and news.
• South Korean Exports: A leading indicator for global trade and economic cycles due to South Korea's heavily trade-dependent economy.
• Volatility Shock: A sudden and significant increase in market price fluctuations, often triggered by unexpected events.
• Maniac Market: A market characterized by high volatility, broad trading ranges, and frequent discussions about market peaks.

Bitwise Investments: A Crypto Community Supporter

The video begins with a brief endorsement of Bitwise Investments, highlighting their extensive product offerings (over 30) and their success in the crypto space since 2017. A key differentiator emphasized is Bitwise's commitment to the crypto community: they donate a percentage of profits from their Bitcoin and Ethereum funds to developers who maintain these networks. Their philosophy is that "if the ecosystem wins, everyone should win," including the builders. Viewers are encouraged to visit bitwiseinvestments.com to explore their offerings.

Macro Mondays: Market Volatility and Outlook

This section introduces the hosts, Migos and Andreas Stino, for their weekly "Macro Mondays" show. They acknowledge skipping the previous week due to a bank holiday and note the significant market volatility over the past 14 days.

Market Outlook and Volatility

Andreas Stino expresses that despite recent turbulence, the market is looking "quite okay" today. He describes the past couple of weeks as a "roller coaster" and suggests that time away from the desk might have been beneficial for mental health. After analyzing data, he believes there are likely "six to nine months left of solid markets," but anticipates a "maniac market" with higher volatility and broader trading ranges.

Real Vision Pro Content and Disclaimer

The hosts remind viewers that this is a free show, and full access to Real Vision's trade portfolios, articles, and research requires upgrading to the Pro tier. They also highlight upcoming Pro content, including:

• Tomorrow: Raul and Kevin Kelly for "Insider Talks."
• Wednesday: Mike Alfred discussing Bitcoin miners.
• Thursday: Joe Bland for the "Micro Charting Macro Show."

A disclaimer is issued stating that while Real Vision aims for specificity and actionability in their analysis, trade ideas may not always be successful.

The AI Bubble Debate: Profitability vs. Potential

The discussion shifts to the ongoing debate about whether the market is experiencing an "AI bubble." The hosts reference a clip from the TV show "Silicon Valley" to illustrate the unconventional logic sometimes applied to tech company valuations, where a lack of revenue can be framed as a positive for future potential.

The "Silicon Valley" Perspective on Revenue

The clip humorously depicts a scenario where a character argues against pursuing revenue, stating, "If you show revenue, people will ask how much and it will never be enough." The logic presented is that pre-revenue companies are "potential pure plays" and that "it's not about how much you earn, it's about what you're worth." The example of Amazon losing money for years while its valuation soared is cited. The core argument is that for some tech companies, the goal is not incremental profit but a massive return on investment (ROI) achieved through a large exit or valuation.

Applying the Logic to the AI Cycle

Andreas agrees that this logic applies to the current AI cycle. He notes that unprofitable tech stocks have seen strong returns over the past three to four months, a pattern often observed during periods of eased monetary policy and cyclical upswings. He draws parallels to 2000/2020, where non-profitable tech outperformed profitable tech, especially during periods of easy monetary policy and economic recovery.

Monetary Policy and Economic Acceleration

The current environment, with a path towards easier monetary policy (near end of quantitative tightening) and a cyclical acceleration of the economy (indicated by trade data, forward-looking indicators, dollar, interest rates, and energy costs), supports this trend. Andreas believes the economy is still two to three months away from a cyclical uptake, with easing monetary policy coinciding with this acceleration. This creates an environment where "you can actually make money trading stuff that doesn't make money."

Quantum Computing as an Example

The quantum computing space is presented as a prime example. Companies in this sector are potentially 10-15 years away from profitability, yet trade at valuations like $20 billion, even with CEOs tempering expectations. Nvidia's CEO, Jensen Huang, is mentioned as pivoting to support the quantum space, both rhetorically and financially. Andreas believes there is still room for growth in this "non-profitable tech cycle," especially if monetary easing continues.

The Past Fortnight: Market Panic and Recovery

The hosts delve into the market turbulence of the past 10 days, specifically focusing on the sell-off that occurred last Friday.

The Trump Tweet and Volatility Shock

Initially, the sell-off was attributed to renewed fears over the US-China trade war following a tweet from Donald Trump. Andreas suggests this was a "volatility shock" that occurred because realized volatility had been "incredibly compressed" for six months. He criticizes the concept of 24/7 markets, arguing that it gives politicians like Trump opportunities to influence markets outside of trading hours. He points out that Trump's tweet on Friday was a "trial balloon" that was partially retracted by Sunday, and subsequent news from US-China negotiations has been encouraging, contributing to the market's recovery.

Crypto's Lagging Recovery and Unsubstantiated Rumors

While many markets have recovered, crypto has not. Migos shares his personal involvement in crypto and mentions unsubstantiated rumors circulating about Trump declaring a 0% capital gains tax on crypto and Xi Jinping legalizing and buying a large reserve of crypto. He admits to "grasping after straws" with these rumors.

Social Media Campaigns and Retail Sentiment

Andreas views these rumors as potentially part of a "social media campaign" that has been growing since late Friday. He notes the opposite pattern observed with quantum stocks, which have seen a "clear negative social media campaign." He emphasizes the importance of tracking such sentiment when trading markets with significant retail participation.

Bank of America Data: Retail vs. Institutional Buying

Data from Bank of America is presented, showing that while hedge funds and institutions have been selling tech equities for most of the year (especially since "liberation day"), private clients (high net worth individuals, smaller family offices, and retail clients) have been "buying the dip" consistently since March/April. This mirrors the "craziest recoveries in modern history" where retail investors have been active while institutions have not.

Parallels to 2020

This pattern is compared to 2020, a period of easy monetary policy and economic recovery, where retail investors led the charge, and institutions joined later. The hosts suggest that history is "rhyming" and that the current situation strongly resembles 2020-2021.

The Tariff Issue: Impact and Investor Concern

The discussion turns to the US-China trade war and its impact on the economy.

Tariff Revenue as a Percentage of GDP

A chart is presented showing the calculated impact of tariff revenue relative to the size of the economy. Andreas states that the shock effect is between 0.3% and 0.4% of GDP, which he describes as a "nothing burger" in the broader context. He compares this to budget negotiations, where such a percentage would be easily discussed.

Potential for Growth and Dialing Back Tariffs

While the impact could potentially grow to 0.5-0.6% as inventory cycles normalize, Andreas notes a "dial back on tariffs from the administration on a lot of specific areas" that is not being highlighted rhetorically. He does not expect the GDP shock to be significantly larger than what is currently observed and believes it has been "completely blown out of proportion." He also suggests it's a "cheap price for the political effects" Trump seeks.

Q4 Outlook and Crypto Positioning

The hosts summarize their outlook for Q4.

Bullish Outlook and Crypto Positioning

Andreas remains "quite bullish on the overall outlook" going into Q4, including crypto. He notes a "wash out" in leveraged positioning in the crypto space, which is typically a good time to buy. Sentiment is described as "incredibly bad." He observes that speculative activity has shifted from "altcoins" to "unprofitable tech" and drone technology, which has been a tailwind for them.

Positioning Data: Crypto vs. Equities

From a positioning perspective, crypto is now "much lighter" compared to equities, and compared to two months ago when it was the opposite. This supports the possibility of a "pretty decent rebound into year-end."

Retail Investor Psychology and Return Expectations

The discussion touches on the psychological features of retail-driven markets. Migos recalls a tweet about a $1,000 investment in Bitcoin yielding only $1,400 in six months, highlighting that for many retail investors, the "dream" of getting rich might not be realistic in Bitcoin at current levels, especially considering the drawdowns.

AI Space Correction and Global Economic Indicators

The conversation returns to the AI space and potential corrections.

Semiconductor Earnings and Asian Exports

Andreas notes that semiconductor earnings reports are upcoming, including Nvidia in mid-November. He points to "very compelling data from Asia on exports" as a positive sign for the global business cycle.

South Korean Export Data as a Leading Indicator

South Korean export numbers are highlighted as a key indicator because "80 or 90% of the Korean economy is based on trade." The data shows an acceleration in exports, which is typically the first sign of a global trade pickup. While not yet at typical year-over-year peaks, this acceleration is seen as positive for upcoming earnings seasons, especially in tech, and for global momentum.

Global Economy Not Peaked

Andreas believes that unless this trade statistic has peaked, the global economy has not peaked. He considers this a "very timely indicator" that leads the global cycle and predicts where the ISM (Institute for Supply Management) will be in two to three months.

Pessimism and the "Maniac Phase"

Despite the positive outlook, Andreas acknowledges the "sheer amount of pessimism" seen the previous week, including discussions of a "Black Monday" (which he argues was a misnomer given the relatively small drawdowns compared to historical events). He believes the bounce-back is a compelling signal that the market has not peaked and that a "maniac phase" might be ahead, where everyone chases the story because it's not a consensus view. He attributes the opposing views to labor market data and a persistent negative sentiment towards Trump's actions.

Interest Rate Discussions and Balance Sheet Actions

The hosts briefly touch upon the upcoming rate discussions.

Expected Rate Cut and Balance Sheet Actions

Andreas is confident that the Fed will cut rates this month. The bigger question is whether they will take action on the balance sheet. He believes they will, citing data showing spikes in the SOFR rate versus Fed Funds when dollar liquidity falls below certain thresholds. He notes that dollar liquidity is now below $5.9 trillion, which he considers a "pain threshold."

Fed's Response to Tight Liquidity

With the Treasury General Account (TGA) being rebuilt and no excess buffer left in the overnight reverse repo facility, the Fed faces a "sufficiently tied liquidity picture." This doesn't necessarily mean "bonanza QE" but rather a technical solution to add liquidity, possibly through a new program, which he expects to see this month.

Listener Question: Wild Spike Up in Q4?

A listener question from Alex Jensen asks if a "wild spike up in Q4" could happen, given the liquidations crash seen on Friday.

Volatility and All-Time Highs

Andreas confirms this possibility, stating that when volatility is at current levels (VIX at 25-28) while equities are near all-time highs (like the NASDAQ), it has historically occurred during melt-up phases, citing 1999 and 2020. He emphasizes that it's "incredibly rare" to peak during the first few observations of high volatility with equities at all-time highs.

The "Maniac Market" Ahead

He reiterates that the market is likely within six to nine months of peaking, but the journey will involve a "maniac market" with frequent discussions about whether the peak has arrived. He advises that participants will want to participate but will also be scared, leading to a constant debate about the market's direction.

Personal Investment Stance

Andreas states he is "personally fully invested" and believes it has been a good strategy to "pour oil on troubled waters" over the past week, both in and out of crypto. He believes "the best is ahead of us" but advises to "grow accustomed to a lot more wall" and discussions about market peaks.

Conclusion and Wrap-up

The hosts conclude the show, acknowledging the eventful past few weeks. They mention that geopolitical issues were not touched upon but will likely be discussed next week. Andreas thanks Migos and the viewers, and the show ends with music.