Play the AI boom with alternative assets, will Walmart be the next $1 trillion company?

Key Concepts

• AI & Alternative Investments: Exploring investment opportunities beyond traditional tech stocks, focusing on infrastructure, private equity, private credit, and real estate as avenues to capitalize on the AI boom.
• Evergreen Alternatives: Alternative investments accessible to a wider range of investors, with approximately $500 billion currently available.
• Hyperscalers: Large-scale data center operators (e.g., Amazon, Google, Microsoft) driving demand for power infrastructure.
• Private vs. Public Markets: Differences in speed, regulation, and access to capital, impacting investment strategies.
• Deal Environment (Private Equity): Anticipated strong activity in mergers and acquisitions, potentially reaching a trillion-dollar IPO year.
• Basis Points: A unit of measurement used in finance to describe the percentage difference in yields or interest rates (100 basis points = 1%).
• Agentic Commerce: Utilizing AI to automate and personalize the shopping experience.
• Housing Starts: A measure of new residential construction, indicating the health of the housing market.
• Zoning Laws: Local regulations dictating land use, often hindering housing density and affordability.
• ADUs (Accessory Dwelling Units): Secondary housing units on existing properties, offering a potential solution to housing shortages.

Infrastructure: Powering the AI Revolution

The discussion began with a focus on infrastructure as a “cleaner” and less crowded way to invest in the AI theme. The core argument is that the rapid development of AI is heavily constrained by the availability of electricity and robust power infrastructure. Private infrastructure funds are uniquely positioned to address this challenge by operating the electricity generation and transmission networks necessary for data centers.

Aaron Mulvihill highlighted the advantages of private infrastructure managers over public utilities, citing their agility, reduced regulatory burdens, lower operating costs, and ability to quickly forge deals with AI companies (hyperscalers) needing immediate power solutions. This contrasts with the slower, more transparent processes of public companies focused on long-term development projects.

Private Equity: A Booming Deal Environment

The conversation shifted to private equity, with expectations of a strong deal-making year in 2024. Mulvihill pointed to several favorable factors: declining financing costs, a supportive regulatory environment, and a large number of private equity-owned companies ready for sale or IPO. He specifically mentioned the potential for the first trillion-dollar IPO, driven by the growth of private, venture capital-backed AI companies. These companies, currently inaccessible to public market investors, are creating value in the private market, with public investors entering at a later stage. He contrasted this with 2025, where similar positive factors were offset by tariffs, market jitters, and a government shutdown.

Private Credit: Navigating Risk and Reward

Private credit was discussed as another alternative investment avenue. While yields are decreasing with the anticipated interest rate cuts (three cuts in 2023, potentially two more in 2024), a premium of 200-250 basis points remains compared to public market credit. Mulvihill acknowledged the heightened risks associated with higher premiums, emphasizing the importance of selective investment strategies.

Real Estate: A Supply and Demand Imbalance

JP Morgan Asset Management has upgraded its outlook on real estate, attributing this to a fundamental supply and demand imbalance. Housing construction is insufficient to meet demand, and commercial real estate prices, particularly office spaces, remain below pre-COVID levels. The shift towards hybrid work models is impacting office valuations, while hospitality and logistics sectors are showing improvement. This presents a favorable entry point for investors, with lower valuations and healthy rental income.

Options Trading & Market Rotation (David Bull & Jared Blickery Segment)

David Bull Bay discussed options strategies for navigating the current market rotation. He noted a shift from growth stocks (including some AI) to cyclical sectors like materials, energy, and industrials. He advocated for using options to ride this wave, particularly buying calls on the XLF (Financial Select Sector SPDR Fund) due to low volatility heading into earnings season. He also detailed a specific Bank of America trade involving call spreads and butterflies, capitalizing on existing options positioning.

Jared Blickery highlighted record highs in the Dow and S&P 500, with materials leading the gains. He noted strong performance in the semiconductor industry, despite Nvidia’s slight dip.

Walmart & Housing Affordability (Michael Lasser & Daryl Farweather Segments)

Michael Lasser discussed Walmart’s potential to become a trillion-dollar company, citing its successful investments in e-commerce and consistent performance in a volatile retail environment. He emphasized the importance of execution and continued innovation, particularly in areas like artificial intelligence and Agentic Commerce.

Daryl Farweather addressed the housing affordability crisis, attributing it to a fundamental supply shortage. She supported policies to override local zoning laws and encourage denser housing construction. She also discussed the impact of President Trump’s proposals, suggesting that banning institutional investors from buying single-family homes would likely be ineffective. She highlighted Florida’s weakening housing market and the potential for growth in the Great Lakes region.

Notable Quotes

• Aaron Mulvihill: “There is more than one way to access the AI theme and certainly alternative investments is one way to do it.”
• Aaron Mulvihill: “Private infrastructure and private companies in general can act very quickly. They don't have the regulatory burdens often that public companies have.”
• Michael Lasser: “There's two things that have changed that have resulted in this really good financial performance and stock price performance for Walmart. Number one is the company had invested significantly throughout much of the 2010s in areas like e-commerce…and it is starting to see a magnificent payoff on those investments.”
• Daryl Farweather: “We have not been building enough homes for everybody who wants one. And we're at about a 4 million home hole that we have to build ourselves out of.”

Logical Connections

The segments flowed logically from broader investment themes (AI and alternatives) to specific asset classes (infrastructure, private equity, credit, real estate). The discussion then transitioned to tactical trading strategies (options) and finally addressed macroeconomic issues impacting key sectors (retail and housing). The segments on Walmart and housing affordability provided real-world examples of the challenges and opportunities discussed earlier.

Synthesis/Conclusion

The overarching takeaway is that while the AI narrative continues to drive market enthusiasm, investors should explore alternative avenues to capitalize on this trend. Infrastructure, private equity, private credit, and real estate offer unique opportunities with potentially lower risk profiles. Strategic options trading can enhance returns in a shifting market landscape. Addressing fundamental issues like housing supply and regulatory hurdles is crucial for long-term economic stability and investment success. Diversification and a nuanced understanding of market dynamics are key to navigating the current economic environment.