omg what's happening

So, I've decided to just lean into the

whole orange thing and I'll make sure

not to shave and then just keep running

so I become more and more orange on a

daily basis. I hope you enjoy the

transformation over the summer and maybe

by the end of the summer I'll actually

be a full-time bull. That said, this

morning in the alpha report, we

speculated that market calm would

continue mostly unlocking potential

all-time highs for some momentum names

like Cloud

Coreweave uh and Tempest. Although I was

wrong about Cubits potentially coming

back. Aqua was also on my list of four.

So 75% hit on those that might momentum

today. Uh and those that momentum

momentum hard. But while I was looking

at potential momentum movers, I was also

looking at fundamentals because I like

to look at those things separately, but

sometimes there's overlap. And so while

I was looking at Coreeave, I went down a

little bit of an Nvidia and AMD rabbit

hole. and it led me to consider my

fundamental bare thesis regarding

something that seems relatively

unrelated. But in this video, you're

going to see how there could potentially

be a very very clear link. See, uh, one

of the reasons I've been a little bit of

a poopy dupy bear, uh, is because since

about the summer of last year, we've,

uh, seen a a dramatic acceleration in

the already accelerating path of the 27w

week unemployed figure. This is old

news. We're not going to spend a lot of

time on this. I I respect your time, so

we're going to keep it fast. Okay. Basic

bottom line is if you look throughout

history, the darn thing basically never

goes up unless there's a recession. See

up recession? This time it started

during a recession. Sometimes it starts

at the end of a recession. Sometimes it

even goes up after the recession or it

peaks after the recession. It sort of

starts in the second half of a recession

leading a lot of people to say, "Well,

we're already in a recession and so this

will all get graded in like a really

long recession. Uh, and the true peak of

this unemployed period, long-term

unemployed period will come in the next

recession. Sort of like this right here,

right? this 2019 rise and then oh it's

COVID or over here you get a little bit

of a rise in 2017 or sorry 2007 and boom

oh it's the 2008 financial crisis right

it's some form of crisis catalyst that

ends up leading to some layoffs and this

is typically true with the exception of

very brief moments in time where you get

these little mountains like 1995 over

here you got a little bit of brief

nothing like this uptrend we have over

here or in 74 or 63 okay big deal so

basically historically It would make

sense if we went back and maybe painted

honestly 22 on as some sort of longer

extended rolling recession culminated by

some massive shock at the end. But is

there a potential that this time is

different? Understanding that the phrase

this time is different is usually

associated with no. Uh that said, is

there a potential that this time could

be different and there is a different

explanation for why long-term

unemployment would rise on on on sort of

a structural basis. And the answer to

this is yes, there there is another

reason for this. You this morning I was

on a walk with Lauren and we were

discussing how it's very likely that

when Jack and Max, my seven and

nineyear-old, enter the labor force,

they're not going to be able to enter

the labor force uh and and sort of work

their way up anymore inside of any role

that could really be replaced by

artificial intelligence. Now, that will

be possible likely for a very long

period of time because I think general

purpose robotics doing general purpose

service jobs, it's going to take an

extremely long period of time, but think

about it. You need people to bring your

food to you. I mean, I know robots can

do this, but generally like the food

service at a table at the side of a

busy, you know, street where you've got

a restaurant, somebody to pull your

waverunner out for you, a lifeguard, uh,

you know, lifeguard augmented with AI.

Now, there's an idea. Who's got an app

for that? you know, Palanteer is gonna

beat that one. Uh, but the point is, uh,

construction jobs, right? Anything

anything physical is probably the last

frontier where things really get, uh,

innovated away. Uh, but what we thought

is what you'd probably end up seeing,

and we've talked about this on the

channel as well over the last few years,

is really a rise in the long-term rate

of unemployed because as people lose

their jobs, they just can't get jobs

again because they're being replaced by

artificial intelligence. Uh, and and

then those replacement jobs just aren't

available at other companies because

other companies are like, "Well, yeah, I

don't I don't need your skill. You've

already been replaced." And this is

where we see these articles like here's

one. IBM slashes around 8,000 jobs

primarily from its HR division thanks to

artificial intelligence. You know, this

is just a recent piece here, but we get

posts like this on almost a daily basis.

Uh, I mean, when I got back, I even saw

a, you know, a cover of, um, an Atlantic

story, and I know people like bagging on

the mainstream media, and that's fine,

but, uh, you know, AI is breaking

entrylevel jobs that Gen Z workers need

to launch their careers, LinkedIn

executive warrants. Yeah, fair. Because

that's sort of where you sort of gain

your experience and then you could go on

and actually be an executive somewhere

else. Like somebody doesn't get a job as

a CEO off the street with no experience,

but if they've had previous executive

level seuite experience, it's a lot

easier for them to get in. Well, how do

you get that first set of experience?

Well, often you work your way up at a

company. But if those opportunities get

replaced by AI, somehow you have to

either know somebody to get in or you

got to figure something else out or you

know, and while you're trying to figure

something else out, where does, you

know, where do you end up? Well, you end

up potentially in this figure right

here, this longerterm unemployed figure.

So, is it possible that this chart has

actually just been rising since the

advent of frankly GPT? Uh, and the

answer is yes. In fact, if you pin this

over here, it represents uh roughly the

beginning of 2023 when we started seeing

the longerterm trend of unemployment

rise. Now, this is actually really

interesting for uh for the bears out

there, uh you know, speaking also to

myself uh when it comes to this

unemployment chart because I I see it as

as a warning this chart. It's this is

not good. Historically, this is a very

bad chart. But again, could this time be

different uh this data point? Well, yes,

because it is possible and this is kind

of weird, but it's definitely possible.

It is possible that growth is being

driven uh by not just artificial

intelligence but by the wealthier cohort

of spenders or corporations. So wealthy

companies think you know Fortune 500,

MAG7 whatever uh wealthier sort of 1%

individuals they spend more and let's

say their contribution to GDP is

positive 2%. And poorer individuals uh

are spending you know on net 1% less

towards GDP. Well, so now let's say if

GDP is going to be 2%. But you get a 2%

boost from all the rich spending and

then a minus 1% drag, you're still at

3%. Or, you know, you could also make

the argument that maybe we're only at

1%. Minus one because of the poor

spending in the toilet and delinquencies

rising and pain at poor levels, but then

the wealthier cohort adding two back in

and oh wow, you're at 2.2% which is

exactly where the Atlanta Fed real GDP

estimate is now. So really AI is kind of

the perfect boogeyman explanation for

this. So in other words, the rise in the

longer term unemployed chart may be a

symptom of growth rather than weakness,

which would be the exact opposite of

what has traditionally been

true. Crazy. Something that would

otherwise be an indicator of problems

could actually just be a symptom of the

growth that we're seeing in our economy.

scary for those who are losing their

jobs, scary for bears relying on this

indicator, but also kind of good for

America broadly. Anyway, speaking of

America broadly, then there's also the

question of how much damage tariffs are

doing. Uh there is uh this talk right

now that if you analyze how much tariff

revenue we are making, we are making

about $255 billion in tariff revenue.

The question though is how much more how

much greater is that from normal

and what kind of damage is that going to

cause to the economy? Well, I'm about to

give you some examples of exactly what

kind of damage that could cause. But

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know Kevin sent you. Okay, so here's the

scope. Look, previously we collected

about $85 billion from tariffs. Now,

we're collecting on an annual runway 200

run rate $255 billion. That could

obviously go down if trade shrinks

because of that. But let's just say it

doesn't and we collect 174 million a

billion dollars more in tariffs uh in

tax revenue every single year. Now let's

say the damage of that $170 billion in

tariffs is twice as impactful. So we are

hurting our economy by $340 billion.

Okay, that's about 1% of GDP. So once

again, if we're growing at 3% and we

damage our economy with 1% tariffs, then

we're at 2%.

or if we're at 22, which is where the

Atlanta Fed thinks we are now, then

we're at one two. Big deal. Still

positive. Again, potentially because of

the AI factors, but also the fact that,

you know, tariffs just aren't that big

of a deal at 10 to 18% or whatever. So,

we'll see where they sit now. As long as

they don't get substantially worse,

could actually be quite solvable and and

investable, maybe. Which that then begs

the question of all right then, are

Nvidia and AMD a screaming deal right

now? And could one of these double or

potentially both of them? And that's

actually an important segment in what

we've got to talk about here because

yes, while I'm a big fan of diversifying

away from artificial intelligence, if

you want to invest in artificial

intelligence, these might be some

opportunities. So, we'll talk about the

numbers on these. And when I talk about

diversifying away from AI, you got to

think what kind of jobs are still going

to maintain. Well, we talked about this

physical uh labor style service jobs at

least until robots take over the world.

And I also think real estate and

development, fixing up a fixer upper,

you know, we find it, we use AI to to

find deals, but like actually fixing it

up, hiring people, contractors,

coordinating work, and then of course

actually developing properties from

scratch. All of these things matter.

They're things that we have to work

with. So this leaves me with an analysis

on Nvidia and AMD to consider. So Nvidia

and AMD uh recently have been selling

for in my opinion below where they they

should be selling for. There are

probably some reasons for that. I think

there is fear in Wall Street that their

growth rates are going to be revised

down and that the stocks are already

discounting uh a lot of the value of

these revisions down uh either because

of uh tariffs or China or you know a

slowdown in AI or whatever. But what we

really have to understand when it comes

to these companies is where they're

valued now uh for options purposes.

Their volatility is super low right now.

But when it comes to their valuations, I

like to use a PEG ratio based analysis.

Now, some people use this in a very

different way. So, I'm going to explain

the way I do it versus what other people

do. Other people will say, "Well, Kevin,

Nvidia has a PEG ratio of under one

right now, which suggests it's a

screaming buy." Okay, but does it? Well,

let's analyze it. Well, if you take

Nvidia's price, 135 bucks, divide their

earnings per share for January 2026 into

it. I don't like using the trailing 12

months. Divide that in, what do you get?

30.9. Okay. What is their next four

years of growth expected to be? 15.9.

So, PE ratio 30.9 divided by 15.9, what

do you get? 1.94. That's the PEG ratio

that I think Nvidia sits at now. Now, I

personally think their growth rate will

be closer to maybe 12 or 10% over the

next four years, but that's fine. If you

compare them obviously to the growth

rate that's already happened in the

past, which Wall Street doesn't care

about, then yes, you will get a PEG

ratio under one. So, I always like to

use a consistent PEG ratio, look at the

end of the year's earnings per share

ahead of us, and then four years of

growth thereafter. That's how I get my

PEG ratio. So, in my opinion, for a

service business at a 26-9, sort of a

justifiable PEG ratio, Nvidia could be

$185 company and AMD could be a 254

uh well, sorry, let me make sure I said

that correctly. Nvidia could be a

$185 stock. Okay, now talking about the

market cap, what the stock price could

be $185 and AMD could be $254 because

their PEG ratio is only 1.21. And I

think both of them belong somewhere

around 2.6.

69 because that's generally where I

price software companies. And when I do

my PEG ratios like this, I'm able to

consistently compare across different

industries uh and various different

companies. For example, when I look at

Tesla, I think that Tesla's a little bit

pricey right now. Mostly because if I

look at Tesla, first of all, they're a

manufacturer. Like they actually

manufacture their own products, whereas

Nvidia and AMD do not. you know AMD for

example doubling down on uh UA link in

their consortium partnership with Dell

and others to compete against Nvidia's

Infinavan uh these are not products

they're manufacturing they're designing

them into the uh you know infrastructure

for these companies uh for the data

centers mostly and there's all this fear

about walled gardens like oh Nvidia is

going to wald garden us like Apple so we

need to diversify our technology

whatever it just bodess well for AMD but

I think the whole industry grows And

people are going to take what they can

get for a meaningful time in the future

until AI hits a wall. But look at Tesla

for example. It closed today at 360.

It's actually impressive that it broke

out over the U 347 level. And uh the

earnings per share that are projected

for Tesla, they're actually pretty darn

good right now because earnings are

expected to be so bad this year at just

193. So take 360 divided by 1.93 for the

year. Tesla's technically right now

trading for a 186 PE ratio, but Wall

Street broadly thinks they're going to

return to substantial growth next year

at 50% growth, 32% growth, 33% growth,

and 49.7% growth. These are some of the

highest expectations that I've seen for

Tesla's growth in a very long period of

time. This has always averaged like 28

to 32%. And now if I divide this by

four, I get 41% growth. That's a lot.

The problem is I have to now divide it

by the price, right? The PE ratio. So

186 divided by 41. This sucker's trading

for a 4.5 peg. That's insane. So if I do

41 times growth and I take uh 193 on EPS

and I do a 167 peg ratio, you know, we

should be

at about a buck 32. So $132 per share on

a simply auto manufacturer and energy

business EPS POV including EPS growth

rates in the future. So already

including the next four years of growth

rates assumed by Wall Street in earnings

per share which does discount some

earnings for Optimus, robo taxis,

semi-truckss and all of that. So in

other words, it's extremely expensive.

And when I compare the three companies,

this is a tool that I like doing. Now,

don't get me wrong, I still like Tesla.

I still like my Cybert truck. Uh, you

know, I I just think the valuation is a

little kooky right now and full of a

little bit of opium, which is great

because it makes people a lot of money.

And I think it's a great opportunity to

sort of diversify or set some trailing

stops, right? Like milk it while it's

going up and then stop out 20% on your

way out so you build up some cash. Like

what's wrong with that? So anyway, uh

that said, Nvidia obviously has earnings

tomorrow. Uh oh, what bottom line of

that is that sort of lets me adjust what

I think things are worth. But if we look

at Nvidia's earnings tomorrow, you know,

we're expecting earnings per share of 87

uh uh per share. So call it 88 cents of

adjusted EPS. Uh non-adjusted, we're at

about 79 cents, revenue 43.3 billion,

net income of 21.6. Nvidia typically

beats. I mean, we're talking seven out

of eight to eight out of eight times. So

basically always they always beat. It's

just a matter of how much and then what

they say about Blackwell.

I mean, honestly, Nvidia's been on a

little bit of a of a downtrend for a

while. Maybe these earnings will finally

be the earnings that let them break out.

And if they break out, they'll break out

to 164. Take a look at this. Look at

this ceiling you've got right here.

Reject basically, you know, this

downtrend kind of continues. You know,

you could draw this probably a little

bit more cleanly, but whatever. You get

the idea here. This is sort of the

channel. That's what I drew is the sort

of channel that you're in right here.

And I think you could break out of this

and get to 164, which is uh that's a fib

extension.

So yeah, that could be very interesting

for Nvidia. 164 would could be a

reasonable target afterwards, you know,

unless they have some kind of like

bearish topic regarding growth or

whatever. But I don't know. I I guess

maybe I'm just not seeing that

bearishness. I do see competition from,

you know, AMD. Uh and you could directly

see that competition because some data

centers are now concerned that Nvidia is

going to sort of walled garden them in

like Apple

does. That's actually led to a rise in

AMD's UA link. Uh this is a consortium

by like Dell and AMD and others to

basically compete with Nvidia's

Infiniband. Basically wiring your data

center with Nvidia components and

switches and everything. So like

everything is married together and

really happy and it's all the same

product, the same company. It's all

unified. Uh kind of like ubiquity. Uh

well, you know, there have been some

walled garden concerns and that's what's

given AMD a little bit of a rise here.

And so, you know, AMD's been ramping up

their MI 350. Uh you know, that's going

to be especially important here now

because of all the Chinese comp, you

know, complaints about, oh no, we're not

going to be able to sell some of our

Chinese products to China. Yeah,

whatever. Uh like they'll be fine. So, I

think right now the only thing that's

kind of keeping AMD and Nvidia stock

growth down, like how much they're

returning year to date, is fear that

their growth will be revised down. I

think the stocks are kind of already

discounting that off the pegs because

like I don't think I said it, but you

know, at 169 justifiable for Nvidia,

you're at like 185 current Wall Street

estimates, right? Mine a little lower.

Uh$ 269 for AMD, you can be a

$254 company or stock, right? So like

that's a

double. That's nice. So it it's looking

good. You know, I think some of the

China tariff fears have already been

priced in. So basically, you have these

two massive price or cash cows. The

fears about discounted growth and

tariffs, I think, are kind of already

built into the stock. And I mean, it

would really have to take hitting like a

wall or something to get to get, in my

opinion, these these stocks to just

perform really poorly over the next few

years. But it's possible that they do,

you know, should that wall hit. I I mean

I guess we'll get a little bit more

color tomorrow, but I mean I'm wearing

my Jensen jacket because Jensen is not

the guy who's going to tell you bad

news. That said, that doesn't mean the

stock's going to go up. Last time Nvidia

had earnings

was February 26th and the stock went

straight down right after that. Now, in

fairness, that was also in the leadup to

Liberation Day. So, a lot of things went

down over that period of time. We were

in a little bit of a bearish downtrend.

So, who knows? Anyway, that's what I got

for y'all today. Thanks so much for

watching. We'll see you in the next one.

Goodbye.