Get Ready For A.I.-Mageddon | Fred Hickey

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Think you have what it takes?

**Fred Hickey** (0:43)
The economic modeling, if there was any, to begin with, is disintegrating as we go forward here, it's seeming.
And I think it means that we have massive oversupply of overcapacity, massive malinvestment here of data centers that are being built. The problem is that when you get great bubbles like this, as we saw in 2000, the earnings will collapse as they did in 2000, and then our expectations will collapse, and then the stocks will fall apart.

**Adam Taggart** (1:26)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. AI Link stocks account for a record 45% of the S&P 500's total market capitalization, and they drive nearly all of the gains it's had for the year so far. And note that I said that's the S&P, the general market. These companies make up an even higher percentage, nearly 70% of the NASDAQ 100's market cap. Will this new AI-powered tech renaissance continue powering the indices higher for years to come, or is this extreme dependence of the markets on a single sector a major vulnerability, putting all of our hopes into a handful of companies that may not be able to keep growing at the meteoric rates that Wall Street is expecting?
For answers, we're fortunate today to speak with Fred Hickey, editor of the highly respected newsletter The High Tech Strategist, which Fred has been publishing since 1987
Fred, thanks so much for joining us today.

**Fred Hickey** (2:24)
A pleasure to be here.

**Adam Taggart** (2:26)
Pleasure to have you back here, Fred. You're one of those guys I just get asked pretty much every week by the audience, hey, is Fred Hickey ever coming back? In fact, somebody asked me about 10 minutes before we hopped on this recording here, and I was really happy to tell them that I was about to talk to you.
So Fred, I love talking to you because you're such a smart guy in general, but you've been covering the tech industry for decades, going on what, 40 years at this time?

**Fred Hickey** (2:57)
Actually, I started, let's see, 47 years now. I've been following it, but I've been writing about it for 39

**Adam Taggart** (3:05)
Oh my goodness.

**Fred Hickey** (3:06)
47 years. I've been an active investor in tech for 47 years. Okay.

**Adam Taggart** (3:10)
So you've had a front row seat to the show for many almost half a century.
I know from watching your work and having talked to you in the past, as transformative as AI may be for the future, you've got a pretty healthy skepticism about at least current expectations for the sector. While I've been waiting to get you back in the program, the expectations have just been ratcheting higher and higher and higher. As I mentioned, the sector is almost like you've got an Arctic sled with 10 dogs on it, and one dog weighs about 1,000 pounds and all the other dogs are chihuahuas, which might be great in terms of your rate of speed, this dog sled can take you. But if anything happens to that big dog, you're in a lot of trouble out there. I want to talk a lot about your latest thoughts about AI and where things are going there. If we can maybe just before then, just start with a more general question. When you look at the general markets right now, what is your current assessment of what's driving them and any other key defining themes?

**Fred Hickey** (4:24)
Well, I'm in complete agreement with Jeremy Grantham that we're in the greatest stock bubble in US history. And he thinks you're going to have a great crash, as stocks are going to decline 70 percent or more. I'm not sure that will happen, but I agree with him that this is the greatest bubble. But it's more than just the greatest stock bubble, there's also an earnings bubble. And that's something I've never seen before.