Your Gains Are at Risk: What Albert Lu Would Hold Before the Next Drop

Albert Lu (0:00)

The stock market can draw down quite rapidly, but that didn't mean you made money. In fact, a lot of people lost money. Our plan is to participate, to ride this mega trend, but not chase it.

Maggie Lake (0:16)

What do investors need to do to protect their money in a volatile market? To discuss, I'm joined by Albert Lu, President of Luma Financial. Hi, Albert, it's great to see you.

Albert Lu (0:26)

Maggie, thanks for having me.

Maggie Lake (0:27)

We're so excited that you're part of the Wealthion Network. We have a lot to talk about. Let's talk markets. I'm hearing from a lot of investors who feel very anxious about the big swings we've seen in equities. What's your take on what's driving this volatility?

Albert Lu (0:41)

Well, I think you have to start with the elections we had last week, Maggie, and I don't think the result of the elections per se was a surprise. I think we expect the Democrats to take the majority in both the House and the Senate, and that is typical of these midterm elections. What we didn't expect was the market reaction, especially with regards to the AI build out. And leading up to it, I think a lot of people, a lot of pundits were talking about the election as kind of a clearing event, maybe a speed bump, something that we had to get through, but once we got through it, we could resume our course, the upward course in the AI narrative. And that didn't happen. We cleared the event.

Wednesday was kind of like a wily coyote moment where we were just suspended in midair. And then Thursday came the big plunge.

Maggie Lake (1:35)

Yeah. When you talk about the amount of money that was wiped out of the stock market of equities, I mean, no wonder we have this sort of feeling of anxiety. And you're right. I think the other sort of sense I'm getting from talking to people is, what's the next shoe to drop, right? Like now we feel like we saw that.

We're seeing a bit of a rebound, but is it your sense that that was the kind of rinse that was needed getting the froth out of the market? Or are you more concerned that this is maybe an early warning sign and an indication that we're moving into maybe a new phase when it comes to at least tech and AI?

Albert Lu (2:15)

I would say more the latter than the former. I think it's an indication of how fragile the narrative really is. I mean, even before last week, the semiconductors were in retreat already. People were already re-examining the semiconductors with a closer look to where this is going. And I think what happened last week just highlights how little it takes to derail the narrative. Because we don't have a case where the government is slamming on the brakes.

You know, you have the governor of Texas, for example, saying like she just wants to put a moratorium on sort of new approvals, meaning the existing construction continues. And they just want to make sure that the infrastructure is in place. So it's not even slamming on the brakes, yet that is enough to throw a wrench into the narrative.

Maggie Lake (3:12)

We asked the experts closest to the real economy to make sense of it. People who build, mine, and power real assets and put their own capital behind them. Then we connect the dots and tell you what it means for your money. Wealthion. Yeah, maybe underscoring how it was sort of so priced for perfection. But it's concerning because these are names, these are equities that are throughout folks' portfolios.

The exposure to tech seems like it's incredibly high. Is it that high?

How much of a problem is this? If we see this market start to turn, how exposed are people? Are they still overexposed to tech, which is what we were hearing earlier in the year? Or have you seen a little bit more diversification that put your mind at ease a little?

Albert Lu (4:06)

No. I mean, we're exposed to a high degree, Maggie. I mean, most of the earnings growth, most of the CapEx spend has come from the sector. A lot of it has come from just a handful of companies.

The AI story itself is very concentrated. You have basically two private companies, OpenAI and Anthropic, accounting for most of the demand for compute now. I've heard private reports that say that around half of Nvidia GPUs aren't even stalled in working data centers.

So this is a story that's really concentrated in a few big players, and there is a lack of transparency, which I think is concerning. The Anthropic, the pending IPO is perhaps going to help a little bit, and we've had some leaked reports and whatnot that had informed us as to how much money they're losing. In the case of OpenAI, it's tens of billions a year. So no, we are very concentrated in tech, in semiconductors, and in the OpenAI, and Anthropic future that they're trying to build.