The AI Bubble is about to Collapse [URGENT Black Monday WARNING].

oh boy I think I may have found the

market crash please don't look at uip

path or

Salesforce okay we need to look it's

it's bad and we need to explain what's

going on and what this could mean for

the broader Market especially if you're

looking at trading tomorrow because

let's just say while C3 AI might be up

8.7% on the day you're still dragging

like an anchor around the bottom that

just hit a tiny little Pebble in terms

of your stock actually going up yikes UI

path on the other hand is like an anchor

that just fell into the Mariana Trench

down 29% with Salesforce also down 15%

though Salesforce at least had a little

bit more of a recovery in 2023 so what

the hell happened what is going on and

how the heck do we trade this because

well frankly I like trading as you know

this is my account I'll do a quick shout

out on this so we can move on we got a

coupon code expiring Friday for the

course on building your wealth uh our

pnl for today well over the last 5 days

is about 149,000 the account's up to

2114 and if we go to the trades for just

today we're at about 67k on trades today

so if you want those Buy sell alerts

make sure you're part of the stocks and

psychology of money group link down

below we got a coupon code expiring

Friday and even though I try to send

alerts and uh hope to make money it

can't guarantee that I can keep this

going uh or you'll be able to make it

money now with that said what just

happened with Salesforce yes this is a

big deal Salesforce is down about 16% on

the same day that Nvidia hit its

all-time highs and Dell also hit its

all-time Highs at what point during the

trading day I had Dell call options that

ended up more than 2 and a half Xing

running into the close like Dell is

exploding which is really exciting if

you're playing calls or speculating on

the stock but what I'm really worried

about is exactly what I just said that

it's speculation remember only about 2%

of Dell's Revenue actually comes from

artificial intelligence yet because they

got a shout out from Nvidia their stock

basically doubled that's insane and

going into this we know that artificial

intelligence software companies are

probably one of the riskiest bets in

this market except here you're going to

learn about exactly what's going on now

before the earnings that we got to today

we already knew that there were some

problems brewing in AI stable diffusion

for example the company that makes those

you know text to image Generations that

Coca-Cola featured in some of their

advertisements is at least according to

the information running out of money and

potentially unable to cover its debts

despite having Skyhigh valuations uh in

the billions of dollars range right at

the beginning of the AI Euphoria we saw

last year well what's changing what's

going on at these companies well for

Salesforce and uip path both of them

missed on their forecasts but it was

their commentary that actually led me to

be a little bit more concerned that we

could actually be starting to see the

turn in the artificial intelligence

Revolution now don't get me wrong I'm

exposed to stocks like Nvidia and I

don't want to see Nvidia tank in fact

when Nvidia goes up it's a pretty Dam

easy trade to play especially when you

trade some of the adjacents like super

micro computer or Dell or some of the

others the problem though is once we

start getting an AI software collapse

Nvidia will eventually follow this is

sort of my outline and then I'll tell

you some of the things that I saw today

well and heard in the earnings call I

listen to every word of the Salesforce

earnings call for example and I've been

studying what's been going on with the

earnings of these other companies here's

how the AI sector collapses and tanks

the entire well stock market which

wouldn't be great first in my opinion as

like phase one is software revenues

don't actually materialize or grow the

way people hope in other words people

think software revenues are going to

explode because of artificial

intelligence but what actually happens

is you create it's like so much easier

to create software that there's a lot

more competition what you actually have

to do is create a pricing War as

everybody implements their chat bot and

we're not really seeing like a new wave

of AI right we're like getting these

incremental improvements on AI so

everybody gets a new chatbot cool now

everybody has one so competition goes up

and potentially you have even more

chatbots so what you've really done is

lowered software pricing rather than

increased software pricing yikes that's

kind of exactly the opposite of what you

would have expected but that's kind of

how the market works the market usually

does the opposite of what you think is

going to happen because what you think

is going to happen is already priced in

that's one of the lessons of the stock

market but anyway once you get a bunch

of competitors in the software space

software basically becomes a commodity

software stocks then start collapsing

first like we just saw with UI path down

29.6% Salesforce down 15% that's like

$40 billion that Salesforce just poof

went to that's like elon's stock comp

plan just poof evaporated Into Thin Air

now Chip designers like Nvidia might end

up holding up at first since Nvidia

doesn't really care where the chips go

whether it's you know one software

provider like a Microsoft or a 100

different providers like Microsoft and

99 other startups it really doesn't

matter as long as the total addressable

Market of software gets addressed by

however many companies it is NVIDIA

still benefits as a provider of the tool

that can provide that compute great so

Nvidia holds up but eventually you get a

lot more software competition that then

continues to press down pricing and

without a new leap in AI technology yes

we can compute this the same stuff

faster but without a leap in like

artificial general intelligence or

something Beyond just chat Bots what

usually will happen is you'll start to

see chip orders slow at first slowly and

then suddenly starts slow then it

happens suddenly it's kind of like why

is Amazon going you know what we're

going to wait on getting the uh uh any

more h100 chips we're just going to wait

for Blackwell that's an early warning

that some of these software companies

aren't actually seeing as much of an

explosion in demand as would have maybe

otherwise been expected in fact when

Nvidia said that it could have been a

massive red flag for what happened with

Salesforce and

uipath which at least Salesforce has

their products on Amazon servers

something to keep in mind now at least

some of their products after chip orders

slow chips supply shortages start to

evaporate when shortages evaporate right

pricing stabilizes for new Chips but not

only does pricing stabilize for new

Chips old chip pricing plummets who

remembers this during covid you were

like paying uh people were literally

flipping graphic cards from their

computers for a premium during covid

because everybody wanted to mine uh you

know basically ethereum frankly or or uh

various different cryptocurrencies

though a lot of them were using ASX a

lot of them were also using gpus and so

people were literally flipping chips

from their computers and uninstalling

graphic cards just to make a buck uh

knowing that eventually chip prices

would stabilize and come down again and

then old chip prices would collapse well

that's exactly what happened then the

plummet of pricing leads new potential

chip customers to say maybe we're not

going to stock up as much on chips

because we don't want our balance sheet

to get destroyed then all of a sudden

margins go back to normal at companies

like Nvidia and EPS growth potentially

ends up turning negative and then the

stocks tank that all takes a while to

come through and remember when I say

that uh there's this balance sheet fear

what I'm really saying is you've got

this

potential uh for hey if we buy 35,000

h100s at a value of I mean let's just do

it really quick let's just say $35 just

to keep the math simple sorry yeah $

35,000 at $35 to keep the math simple

that would be $1.2

million and if let's say all of a sudden

that the price of each chip collapses to

$7,000 for an h100 well all of a sudden

you basically lost uh somewhere around

what is that 7 divided by 35 you lost

about 80% of the value of that asset

that was sitting on your balance

sheet that's not good now all of a

sudden you see this balance sheet

expense and then all of a sudden you're

having to create markdowns on your

balance sheet that makes companies look

bad so that also in addition to negative

EPS growth leads companies to fall so

this is a real real risk but now what

did we actually hear from

Salesforce okay so now you have an

overview right so you have an overview

of what happened in the stocks first

then how does the whole AI World

collapse and then what's actually

happening at Salesforce okay ready for

this operating income expectations for

q1 came in 70 basis points lower than

expected big deal not a big deal at all

it's like literally who cares operating

margin as expected fine Q two revenue

forecast came in 1.3% lower than

expected huh okay that's interesting I

mean that's not that big of a Miss why

is the stock down 15% okay subscription

revenue forecast Revis down slightly to

less than 10% growth for the company

really why would the company be growing

less with all of these AI tools that's

really weird we should be growing faster

not slower why are we growing slower

with AI I thought we were going to grow

faster with AI ah and that is the

problem that is exactly the problem so

what did Salesforce tell us well first

they bagged on chat bots in fact

multiple times they bagged on chat Bots

they bagged on chat Bots and said hey

you know Commodities uh like chat Bots

or well chat Bots are going to become

Commodities everybody's going to have

one what makes us different is that our

chat Bots understand your company's data

and I'm like okay all right wait so your

sales pitches chat Bots are a commodity

but your commodity is better got it

Salesforce okay interesting then they

gave some example they said they're

seeing good demand their customers are

excited talked about Air India they

talked about crowd strike okay a lot of

exciting references talked about how

they're saving 20,000 hours every month

in programming work thanks to artificial

intelligence and we we now provide

personalized summaries thanks to AI in

slack bro summaries ston should be up

right then we get to the real color

which is there's continued pressure in

Professional Services customers are

delaying or slowing their projects but

we're seeing a strong demand for data

but only after we make pricing and

packaging changes ah interesting so in

other words there's continued pressure

in Professional Services and customers

aren't really buying your stuff so

you're reducing the price and when you

reduce price then people when you reduce

prices then people are interested it

again interesting okay well how has

Revenue growth been the last two years

Revenue has been consistent Revenue

growth has been consistent the last two

years but customers are really looking

for shorter duration projects but we are

benefiting from price change over the

last year ah yes okay got it more

cutting customers don't want to do the

big AI projects cuz they're like we

already got out chatbot we got it for

free whatever uh then an analyst

literally and and I was like basically

screaming this is like competition right

this is a sign that there's so much

software competition that prices are

coming down which is the beginning of

the AI collaps and an analyst replies

and says hey well what about crowding in

the field and and Mark Benny off and the

team they're like w it just takes

companies a lot of time to adjust and

integrate remember customers can

leverage data and uh in the meantime

they literally did what I'm about to say

okay and I'm like I literally wrote on

EAC I'm like this is so cheesy I

literally wrote this down but anyway

they say and I'm paraphrasing a little

bit you could listen to the earnings

call but I'll just give you the

paraphrase on it they're

like did you take advantage of Kevin's

coupon code expiring this Friday 11:59

p.m. prices are going up they're going

straight up this year not going to get

in for a cheaper price okay sorry I had

to do that no they they literally

said in the meantime uh so they were

talking about mergers and Acquisitions

and they're like ah we're going to be

cautious you know we don't want to

cannibalize our existing customers and

I'm like okay that's interesting so

you're not actually enthusiastic about

sort of adding features because you're

worried about losing revenue from some

of your customers if you add too many

products interesting and then right

after they say that Mark Ben is like

look at our amazing cash flow maybe only

a few other companies have ever

delivered cash flow like this the

numbers are pretty epic I wrote down

this is turning

cheesy I'm like yes it is true the

Salesforce cash flow numbers are very

very good I will give them that the cash

flow is delicious $6.2 billion in three

months they've got a PEG ratio of 2.09

like the valuation isn't kooky assuming

that they can grow earnings per share

11% over the next few years but I'm not

concerned about that I'm concerned about

EPS growth actually turning negative

because they need a cut cut cut cut cut

cut cut because they can't keep selling

this AI crap cuz people are tired of the

AI crap it's like I get it I can

generate an image now and I have a chat

poot so how do we keep delivering the

numbers then says Mark Benny off ah yes

what we're going to do is we're going to

have a quote deeper inspection of the

pipeline that's not like a colonoscopy

that's actually just a fancy way of

saying we're going to put more pressure

on our sales staff to make sure they

just keep calling people over and over

and over again to make sure they close

deals then they literally went into

ripping on open AI for ripping off

newspapers and now striking deals with

them they were begging on chat

GPT probably because Einstein sucks and

they have to oh I said it I'm

sorry anyway um I think this is a huge

red flag that AI is basically creating

substantial software deflation now you

look at C3 Ai and you're like oh but

Kevin they're up 8% that's true but like

21% of their revenue comes from the

federal

government that's cool like so does

paler that's great but there are now so

many choices that I actually think all

of these software companies and their

Moes are actually getting diluted and so

sure congratulations c3i your Revenue

went up 19% your gross profit went up

88.5% what does that tell me you had to

reduce prices or your costs went

up your sales expenses went up 22%

Revenue went up 19% that means it took

you more to actually get that money at a

lower margin and your net losses widened

yeah you've got a strong balance sheet

from when you uh ipoed but still

it's not great then literally this

morning on the course member live stream

somebody asked me hey Kevin what do you

think about or maybe it was in the

public live stream I can't remember

which one it was remember if you're a

course member you get all the course

member live stream analyses as well but

somebody asked I think it was a course

member hey can we analyze UI path and

I'm like all right so here's the thing

with uip path they create automation

tools before artificial intelligence

that's great that's a wonderful thing

like people want automation tools that's

great and they're willing to pay for

that my concern though this morning

morning when I was analyzing uipath was

does AI help or hurt them because see AI

could maybe help them make more

automation tools but if everybody else

can just as easily now make those

automation tools what do you need uip

path for oopsy doopsy apparently the

answer is yeah uipath gets

hurt so who might be the biggest winner

here well maybe companies like Microsoft

Amazon Nvidia for a time being

but what happens when this process

really rolls over in other words and

again software pricing collapses we have

not seen that in like the last decade

and a half I mean quite frankly since

the.com bubble software margins have

really actually held up pretty strong

that's why software companies sell for a

2.6 is PEG ratio software margins are

higher profitability is higher stock

based compensation is higher everybody

wants to be in software but if everybody

wants to be in

software and uh now everybody's

leveraging artificial

intelligence to make more software

faster with less coding work than the

moat at companies I hate to say it

because I'm invested in company like

paler but the Moe at companies like

paler or UI path or sales force or

whatever starts to go

down that's not not great so when that

moat goes down you get EPS negative

growth in other words rapid growth after

covid makes sense 2020 yay rapid growth

2021 yay rapid growth 2022 o we're going

to lay off a little bit 2023 AI yay

rapid growth 2024 oh growth is

flattening so all of a sudden you you

kind of have this like

Skyrocket a little bit of a slowing in

22 Skyrocket due to Ai and then all of a

sudden it's like uh uhoh what EPS growth

is flat wait EPS growth is now a

negative oh no it's now it's now really

negative oh my

God stock valuations go through the roof

and then they collapse much like Black

Monday now Black Monday is actually a

really interesting reference because if

you look at Black Monday Black Monday

one of the reasons and people speculate

over what really caused Black Monday but

Black Monday was deemed to have

basically occurred because people were

all of a sudden highly concerned about

stock valuations again uh and thinking

that things were too overvalued now

something else that I thought was really

interesting and I got this from uh a

team member I want you to see this this

is crazy so this should be bullish so I

want to sort of balance balance the

negativity with uh bullishness just a

little bit so I'm going to go throw this

picture up on screen

uh okay let's get that picture

up uh okay here we go oh sorry that was

the p&l for today sorry and I did trade

with a little bit more than I usually

trade with today so my percent return

today was a little weaker because I

traded with a a larger chunk but it

still went pretty well make sure you get

those Buy sell alerts if you're not part

of it yet stocks and site look at this

on screen here this is crazy this is a

JP Morgan piece where they basically

show that in the first 100 days if the

S&P 500 was over 10% it basically always

ended the year positive well it did the

full year always ended the year positive

and in every single instance the S&P

ended over

14% Higher by the end of the year

compared to the prior year in many cases

here 20% 30% 45% with the exception of

1987 where the market was up 19% at the

beginning of the year and only up 2% at

the end of the year wow what happened in

1987 ah Black Monday happened you had a

liquidity crisis and you had a fear that

the stock market had just become

overvalued so am I saying that we could

have a black Mar a Monday style market

crash well yeah at some point in the

future that'll happen and I'll probably

be trading it it'll be really

entertaining could also be very scary

depending on which way you're trading if

you're buying puts he might be really

happy but anyway uh yeah it's really

interesting that the one time on their

sheet that you don't actually get as

high of an end of the year is a year

that you're worried about valuations and

this is coming at the same time that

we're talking about uh-oh can Nvidia

really keep up the market this much

longer and realistically the order is

can sof for revenues prop up the market

for this long and then will those

continue to translate to Nvidia earnings

and when does that bubble pop let me

know what you think in the comments down

below and if you have questions on those

courses on building your wealth make

sure to email us at staff atme kevin.com

why not advertise these things that you

told us here I feel like nobody else

knows about this we'll we'll try a

little advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin P there financial analyst and

YouTube but meet Kevin always great to

get your

take even though I'm a licensed

financial adviser licensed real estate

broker and becoming a stock broker this

video is not personalized advice for you

it is not tax legal or otherwise

personalized advice tailored to you this

video provides generalized perspective

information and commentary any

third-party content I show shall not be

deemed endorsed by me this video is not

and shall never be deemed reasonably

sufficient information for the purposes

of evaluating a security or investment

decision any links or promoted products

are either paid affiliations or products

or Services we may benefit from I also

personally operate an actively managed

ETF I may personally hold or otherwise

hold long or short positions in various

Securities potentially including those

mentioned in this video however I have

no relationship to any issuer other than

house act nor am I presently acting as a

market maker make sure if you're

considering investing in house act to

always read the PPM at house hack.com