Should You Bet on AI or Crypto? Plus, the SEC’s Tokenized Stock Overhaul

Jennifer Sanasie (0:00)

On today's Public Keys from the New York Stock Exchange, the Fed may be about to pull the trigger on the first rate hike in years. Should your money be in crypto or AI? And the SEC proposes the biggest overhaul of transfer agent rules in decade. I'm Jen Sanasie. Let's get into it.

Happy Monday, everyone. Crypto is in the green this morning. One of the few bright spots is global AI stock sell-off after Anthropic CEO, Dario Omede used a weekend essay to call for slowing AI development. Oil is also higher after Saudi Arabia shut a pipeline that bypasses the straight of Ormuz extending a rally that pushed US crude above $100 a barrel last week for the first time since May. Here to take a look at the macro picture is Lumida CEO and founder Ram Ahluwalia. Hey Ram.

Ram Ahluwalia (0:48)

Hi Jen.

Jennifer Sanasie (0:49)

What a day to come back to the markets. I just mentioned a bunch in my intro there, but I just like to start off with this question. What are you watching as we get into the week?

Ram Ahluwalia (0:59)

So I'm watching what happens with the rates this week, the FOMC. Markets are implying an 86% chance of a rate hike. That's one. Two, Anthropic CEO came out over the weekend saying we need to slow down AI.

Elon Musk and Sal Omlin agreed. That's led to a semis sell-off today. And third are midterms, policy, policy, policy.

Jennifer Sanasie (1:22)

Well, let's talk about that. Markets are expecting a 25 basis point rate hike on the 16th. Talk to me about what we can expect to happen. Should that rate hike come? How do you expect to see crypto perform? And then let's talk about some of those AI equities.

Ram Ahluwalia (1:36)

So my view is non-consensus. I actually don't think you're going to see a rate hike. And if that doesn't happen, markets are going to rally sharply. So the 86% probability implied by the CME Fed Fund Futures, it means that a lot of this risk has already been priced in. It's rare view mirror risk. So the asymmetry is actually the upside if we don't see rate hikes. It's hard for me to see Kevin Warsh, who was selected by Trump, on a campaign of we gotta lower rates. And don't forget, Kevin Warsh is talking about the productivity gains from AI.

That's what he spent 45 minutes of his Jackson Hole speech talking about. It's hard for me to see rate hikes happening.

Jennifer Sanasie (2:19)

Okay, you have the contrarian take. I mean, what's the market getting wrong here?

Ram Ahluwalia (2:24)

I think the market's looking at inflation. It's looking at oil prices are high. It's looking at the 10-year approaching 5 percent.

And Warsh has said in his first FOMC presser that the Fed needs to reestablish credibility, that the Fed has missed its inflation target for five years and running. And he's correct about that. But I don't think you're going to see a rate hike just before midterm elections.

Jennifer Sanasie (2:51)

Okay, no rate hike before midterm elections. I would assume that means no rate hike this year, then.

Ram Ahluwalia (2:56)

I don't think this year either. The oil prices are transient. Oil prices will come down again. The 10-year is probably going to top out around where it is now at 5%, just like it topped out in 2023

And I think if you're looking at rate-sensitive names and names that have sold off because oil prices have gone higher, like airlines and cruise lines, I think you can set up a really nice year-end rally owning those kinds of exposures.

Jennifer Sanasie (3:22)

All right. I want to get back to that, but let's talk about the AI news. We talked a little bit about the Anthropic CEO coming out over the weekend with that essay, other AI executives and leaders saying, we need to slow down development. We saw a little bit of a sell-off in AI equities this morning.

Talk to me about your view on AI as we move to the end of the year. Of course, a lot of concerns coming to light and affecting some of these companies.

Ram Ahluwalia (3:49)

It's a nothing burger. It creates an opportunity to buy semiconductors. The reason why is there's a story behind the story. Anthropic is going to release their S1 filing imminently, probably this week, and they've got to shift from grow at all costs to making money and profitability.

Their capex spending obligations are significant. What they're really guiding towards is setting up a raise rate beat dynamic. That's what public markets expect.

Private markets are about revenue at all costs. Public markets are about discipline. So I think that's what the bigger story is about.