One of the forgotten risks to AI is the energy capacity situation in the United States.
Many people forget that AI will require immense energy with a horde of energy-guzzling data centers to facilitate the next tech revolution.
Many consumers have come to realize how the cost of energy has skyrocketed lately.
There is an increasingly real chance that Silicon Valley might not be able to afford AI simply because the costs of energy will deem the AI concept unworthy.
Green energy hasn’t developed as fast as many experts once thought, and the United States is still very much dependent on fossil fuels to facilitate tech and business in general.
A pressing question that is popping up is whether the United States can deliver the energy capacity that AI chips demand.
The question is hard to dissect because the situation is always changing.
Numbers need to make sense, just like how builders build when they think they can sell their houses and apartments for a profit to the end buyer.
The military conflict in Eastern Europe has forced German manufacturing to deindustrialize, because producing without cheap Russian energy is loss worthy. AI could follow a similar pattern.
The data grid will become strained, but by how much is the next most important matter.
A ChatGPT query, on average, requires almost 10 times as much electricity to process as a Google search does.
The rise of generative AI coincides with a heightening of other factors increasing energy demand, from the electrification of transportation and infrastructure to the on-shoring of US manufacturing. Adding yet another acute demand: AI systems need power all the time.
Critics of AI fanaticism point to potential wastefulness and this could end up morphing into a government regulatory quagmire like so many industries that are overburdened by government agency overreach.
If, in the case, the energy demands spiral out of control with everyone going the AI route with every country building AI data centers, the exploding costs will mean that tech won’t be able to profit from AI as quickly as it wants.
Many analysts are already raising the flag to if all these billions poured into AI investments will really pan out or not. AI isn’t free to produce but shares of it are priced as such.
Much of this hot money is migrating into companies that haven’t proven anything or never even turned a profit. Look at OpenAI, it started out as a non-profit.
The issue I have is that generative AI is priced to have zero pushback on its revenue trajectory, and I do believe that is wrong.
When there is a pullback, it will be deep and sharp, even if not long.
I believe that would be a healthy event for AI because the stock shares of AI have gone parabolic when there isn’t much meaningful follow-through to the underlying business models.
On top of that, generative AI is programmed to be ultra-left-leaning on the social spectrum, which could cause conflict down the road.
In short, ride up the momentum until the wave crashes, but watch out for the canary in the coal mine, which will bring attention to a deep dip in AI shares.
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If history is our guide, what boomed in the last decade may not shine quite so brightly going forward.
Two questions for you.
What are you focused on in the market right now?
And
Where are you not looking in the market right now?
Yes, Bitcoin has done well this past decade, but will it hold a steady path in the future?After reaching the near-term target of ~$125-$150, Bitcoin may pause, turn lower/consolidate, and catch its breath for a while.
Let’s look at history – it’s a great guide.
Each Decade shows a different story behind sector dominance and why the landscape changed.
1960s: U.S. Stock Dominated
Blue-chip U.S. stocks, led by a group called the “Nifty Fifty” companies like IBM, Coca-Cola, and McDonald’s, were considered unbeatable.Investors believed these growth giants could do no wrong.
But something changed.
The 1970s brought high inflation and a brutal recession.Many of these stocks lost half their value and underperformed that decade.
1970s: Gold Sparkled
Amid economic uncertainty and soaring inflation, gold prices surged by over 1,400%.It was the safe haven everyone wanted.
And then came…
…the 1980s.Inflation cooled and economies stabilized.Gold prices fell nearly 50 per cent, and gold underperformed.
1980s: Japan shines
Japanese stocks soared, making Japan the second-largest economy in the world.Real estate and stock prices seemed unstoppable.
But by the early 1990s, the bubble burst, leading to decades of economic stagnation now known as Japan’s “Lost Decades.”
1990s: The Tech Boom
Technology stocks, especially on the Nasdaq, exploded higher thanks to the Internet revolution.
Fast forward to 2000 – the dot-com bubble popped and wiped out a trillion in market value.
2000s: Emerging markets and commodities
China’s rise and a commodities Supercycle made emerging markets and raw materials the big winners.
However, they put in a lacklustre performance for much of the 2010s as Big Tech took over.
2010s: Bitcoin and Big Tech
Bitcoin grew by over 9 million per cent from its early days.Stocks like Amazon, Apple, and Microsoft also delivered spectacular returns.
But today, these giants face regulatory pressures, slower growth, and increasing competition.
The winners of yesterday may not be the future play.
Don’t chase.
Let history be our guide.The best place to invest over the next 10 years probably isn’t where the last boom happened.
And why is that?
Because by the time something becomes “obvious,” it’s often already fully priced into the market.Growth slows, risks rise, and the easy gains vanish.
Think about it.
Let’s revisit 2000.
If you bought tech stocks then, it took 15 years just to break even.
Winners take their turn according to the macro environment.
The macro environment is not fixed.
It’s always changing.
Each decade brings a new mix of:
Inflation (rising or falling prices)
Interest rates (low or high)
Business cycles (booms and recessions)
And different assets perform better or worse depending on these conditions.
For example:
When interest rates are low and growth is strong, like in the 2010s, the Nasdaq and growth stocks thrive.Cheap money fuels innovation and expansion.
But in a world of higher inflation and rising interest rates, the game changes.Growth stocks struggle because borrowing costs rise, and future profits are worth less today.
So, where should we be looking?
Energy stocks tend to shine in tougher environments.
Rising inflation boosts the price of oil, gas, and other resources.
Higher rates and slower growth make hard assets like energy and commodities more valuable.
So, here’s the story in a nutshell.
When Nasdaq does well, energy often lags.
When energy outperforms, growth stocks usually struggle.
Energy sector vs. the Nasdaq
The hidden opportunities: where are they now?
Real opportunities often lie in the quiet corners, the sectors or regions no one is talking about yet.
While the media spotlight shines on tech and crypto, energy has been pretty much ignored, and that’s a strong argument, I believe, why it could be one of the biggest outperformers over the next decade.
Since the 2008 Global Financial Crisis, the energy sector has been one of the worst places to invest.
The S&P 500 Energy Index has lost over 40 per cent from its 2008 highs.
For the past 17 years, energy stocks have either fallen or gone nowhere, even as tech boomed.
But this underperformance has set the stage for a powerful comeback.
Today, the energy sector offers:
Lower valuations than tech stocks.
High dividend yields rewarding patient investors.
Tight supply, after years of underinvestment in new oil and gas projects.
Rising global demand, not just from emerging economies but from something new: AI.
AI needs energy and lots of it.
Right now, Artificial Intelligence (AI) is the story that’s devouring all the oxygen/space in the media and investment world.
AI is changing industries, creating new opportunities and driving massive infrastructure builds.
But many people/investors have a blind spot when it comes to AI.
And that blind spot is critical to AI.
We are talking about the enormous amount of energy required to run AI.
Data centres that power AI models are energy-hungry giants.
Training a single large AI model can consume as much energy as 100 homes use in a year
Demand for electricity to fuel AI and cloud computing could triple by the early 2030s.
The energy supply – it’s a problem on the horizon, which is moving closer as the months/years go by.
AI is the future.But energy is the foundation.
Without affordable, ample energy, the AI revolution could stall and that’s why energy investments could be the biggest surprise winners of the next decade.
We need to be thinking in cycles.
Consider Woodside Energy for a moment.
In 2008, Woodside Energy was booming, and the energy sector had enjoyed a 20-year bull run.
Woodside was one of the stars of the Australian Stock Exchange (ASX).
Now pause and imagine this: someone says to you that Woodside is about to enter a 17-year bear market.
Would you listen, or would you think the person had a screw loose somewhere?
Check out the chart here, and you’ll see what I’m saying. Woodside stock spent the next decade and a half mostly going sideways or down, even while companies like After Pay, Atlassian, and other tech favourites soared.
The reason.
The cycle had changed.
The macro backdrop moved from a commodity-driven boom to a low-interest rate, tech-fuelled environment.
Focus on the cycles first, not the company.
The lesson: think forward, not backward.
Go to the unloved, ignored corner of the market – these are the sectors that present the greatest opportunities.Arrive there right before the world realizes it needs them again.
Enjoy the cycle journey.
QI CORNER
And speaking of cycles, this seems like a good time to share Ryan’s view of Small Caps here.
Ryan Lemand, Founder & CEO/PhD in Finance
In the US, small caps have never been this cheap relative to tech — ever.
This chart shows the ratio of the Russell 2000 (IWM) to the Nasdaq 100 (QQQ). And the message is loud and clear: the gap between small-cap America and mega-cap tech is now at historic extremes.
From the early 2000s peak to today, it’s been a relentless decline — a 25-year erosion of relative value, innovation capital, and investor attention. We’re now flirting with levels not seen in decades, as small caps trade like an afterthought in an AI-dominated world.
But here’s the question:
Is this a permanent reset, or a setup for a massive reversal?
Because history has a habit of rewarding what’s been left behind — especially when monetary cycles turn, inflation bites, or growth broadens beyond the top five tickers.
This isn’t just a chart — it’s a flashing signal.
Reversion is not dead. It’s just waiting for a catalyst.
My mother lives in Pakistan, my daughter in Greece, and I have a ski chalet in Peru.
What’s more, I have strategy luncheons planned for Australia, Thailand, and Turkey.
At least these would be my conclusions after looking at a map prepared by my esteemed former employer, The Economist magazine in London, of the United States, renaming each state with its international equivalent in GDP.
There are other tongue-in-cheek comparisons to be made.
Texas is portrayed as Russia, which makes sense, since both are big oil exporters. Ditto for Alaska, which is represented by Oman.
As for Hawaii? It is renamed Croatia. Now that would really give the former president birth certificate problems!
I worked for this august publication for a decade during the seventies and have been reading the best business magazine in the world for over four decades. They never cease to inform, entertain, and titillate.
An April 1 issue once did a full-page survey on a fictitious country off the coast of India called San Serif.
It noted that if the West Coast kept eroding, and the East Coast continued silting up, the country would eventually run into the subcontinent, creating serious geopolitical problems.
It wasn’t until someone figured out that the country, the prime minister, and every town on the map were named after a type font that the hoax was uncovered.
This was way back, in the pre-Microsoft Word era, when no one outside the London typesetters’ union knew what “Times Roman” meant.
https://www.madhedgefundtrader.com/wp-content/uploads/2023/03/gdpmap.png478756Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2025-05-14 09:02:222025-05-14 09:29:52A Different View of the US
“Kamikaze missions are rarely successful, least of all for the pilots,” said Robert Gibbs, former White House Press Secretary.
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When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.Read more
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Last week, while hiking the Tahoe Rim Trail with my 50-pound pack (doctor’s orders), I received a call from a returning Mad Hedge Concierge subscriber who was in a particularly foul mood. Following the advice of another “expert” I won’t mention, he had dumped all his biotech holdings after Vertex’s Q1 earnings miss.
“Aren’t pharmaceutical stocks headed straight to the basement with all this talk about drug price controls?” he asked.
I paused for a moment as a mountain biker weaved across the trail, cutting me off. Then I gave him my response, which I’ll share with you now.
Vertex Pharmaceuticals (VRTX) reported decent Q1 earnings recently, despite falling short of analyst estimates for both revenue and earnings. The stock dropped 4% on the news – a classic overreaction to what was actually a strong underlying report.
As a long-term investor, what matters most isn’t whether a company beats quarterly estimates by a penny or two, but the general direction in which corporate earnings are headed. And Vertex’s trajectory is decidedly upward.
After digesting the Q1 results and updating my earnings model, I project Vertex’s revenue to grow from $11.02 billion in 2024 to approximately $19.32 billion by 2030 – a healthy 75% increase that justifies the stock’s current premium valuation of 28× forward earnings.
Let’s break down how Vertex gets there.
Vertex’s CF drug portfolio is the bedrock upon which the company’s diversification strategy is built.
Alyftrek, which received regulatory clearance late last year, offers notable advantages to CF patients compared to Vertex’s core drugs. For instance, Alyftrek needs to be taken just once daily, compared to other drugs that require twice-daily dosing. This offers much-needed convenience for CF patients, which I believe will drive strong adoption rates.
From a clinical perspective, while Alyftrek hasn’t demonstrated superiority to Trikafta, significant improvements in CFTR function have been noted. With Trikafta patent-protected through 2037, Vertex has ample time to maintain its CF market leadership while diversifying into new markets.
For 2030, I project CF drug revenue of $13.02 billion, representing a modest but reliable 2.5% CAGR. This is deliberately conservative – I’d rather under-promise and over-deliver when it comes to biotech projections.
And Vertex’s growth drivers go beyond their CF pipeline.
Their diversification efforts are most visible in their pain management portfolio. The FDA approval of Journavx for acute pain marks the beginning of a new era for the company.
This is no small market opportunity. The acute pain management market was valued at over $44 billion in 2024.
Being conservative, let’s assume Journavx’s total addressable market is $40 billion, and project the company to secure a 4% share after five full years on the market. This yields $1.6 billion in 2030 revenue.
My estimates are actually pretty modest compared to many Wall Street analysts. Some project Journavx to bring in $2 billion in revenue from acute pain treatment by 2030, but I’ve learned through decades of following biotech that it’s better to be pleasantly surprised than bitterly disappointed.
Vertex also has Suzetrigine for diabetic peripheral neuropathy in Phase 3 studies, with commercialization expected by 2027. If the company secures even a 7% share of this $7 billion market, we’re looking at another $500 million in 2030 revenue.
Overall, I expect the pain management drug portfolio to contribute $2.1 billion in revenue by 2030.
Another promising area is their kidney disease portfolio. Povetacicept, Vertex’s novel treatment for IgA nephropathy, is currently in Phase 3 interim analysis with expected commercialization in 2027. The company plans to target approximately 300,000 IgA nephropathy patients in the U.S. and EU alone.
Assuming Vertex secures a 25% share of this market (valued at approximately $3 billion by 2030), I project $750 million in revenue by 2030. The key advantages here are the lack of significant competition and Povetacicept’s strong clinical profile.
Povetacicept is also in trials for primary membranous nephropathy, with pivotal development beginning later this year. By 2030, I project this indication to add another $200 million in revenue.
I’m also projecting Inaxaplin to obtain regulatory approval for the treatment of APOL1-mediated kidney disease by 2028.
With a target patient count of 250,000 and an annual price of $100,000 (which is conservative for rare disease treatments), if Vertex onboards just 10,000 patients by 2030, that’s another $1 billion in revenue.
From this lineup, I expect Vertex to generate $1.95 billion in revenue in 2030.
Equally impressive is their gene therapy portfolio. Casgevy, Vertex’s gene therapy for sickle cell disease/beta thalassemia, is already being launched globally. With a patient count of around 60,000 in the U.S. and EU alone, I project $1.5 billion in revenue by 2030.
With the potential launch of Zimislecel for Type 1 diabetes in 2027, I estimate an additional $750 million in 2030 revenue, assuming an annual treatment cost of $250,000 with a target of 3,000 patients (out of a total addressable market of 60,000).
Overall, from the gene therapy portfolio, I expect a revenue of approximately $2.25 billion by 2030.
Adding up these various revenue streams, my total revenue estimate for Vertex in 2030 comes to $19.32 billion – marking a 75% increase from 2024.
At an adjusted operating margin of 42.5% (comparable to Q1 2025 and lower than the historical average of over 50%) and an effective tax rate of 21%, Vertex should report net income of $6.42 billion in 2030.
For comparison, in 2024, the company reported a GAAP net loss of $535.6 million (due to one-time charges), but the year before, a net profit of $3.61 billion.
Vertex’s Q1 performance may not have been ideal, but it masks the long-term opportunity facing the company.
There’s no denying the uncertainty associated with the pharmaceutical industry, but I’m convinced Vertex is headed toward substantially higher revenue and earnings by 2030 as its diversification efforts yield results.
Valued at around 28 times next-year earnings, VRTX remains an attractive investment given its category leadership in CF and strategic diversification into several high-growth, niche markets.
That means a $600+ stock price by 2030 is well within reach.
When I finished explaining all this to my disgruntled subscriber, there was a long silence on the other end of the line. Finally, he said, “So you’re telling me I should buy it back?”
“Not yet,” I replied. “Let it settle a bit more. I’ll let you know when.”
With that, I had to hang up as a family of black bears appeared on the trail ahead of me. Some things just can’t wait – like getting out of the way of hungry bears or buying into a pharmaceutical company that’s redefining multiple treatment categories.
Where is a park ranger when you need one?
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Occasionally, I get a call from Concierge members asking what to do when their short positions or options are assigned or called away. The answer was very simple: fall down on your knees and thank your lucky stars. You have just made the maximum possible profit for your position instantly.
We have the good fortune to have One spread left that is deep in the money going into the May 16 option expiration in 3 days. It is the:
(GLD) 5/$275-$285 call spread
In the run up to every options expiration, which is the third Friday of every month, there is a possibility that any short options positions you have may get assigned or called away.
Most of you have short option positions, although you may not realize it. When you buy an in-the-money vertical option debit spread, it contains two elements: a long option and a short option.
The short options can get “assigned,” or “called away” at any time, as it is owned by a third party, the one you initially sold the put option to when you initiated the position.
You have to be careful here because the inexperienced can blow their newfound windfall if they take the wrong action, so here’s how to handle it correctly.
Let’s say you get an email from your broker telling you that your call options have been assigned away. I’ll use the example of the in-the-money SPDR Gold Shares SPDR (GLD) May $200-$205 vertical BULL CALL debit spread, which you bought at $4.55 or best.
For what the broker had done, in effect, it allowed you to get out of your call spread position at the maximum profit point, 8 trading days before the May 17 expiration date. In other words, what you bought for $4.55 on April 30 is now worth $5.00!
All have to do is call your broker and instruct them to exercise your long position in your (GLD) May 200 calls to close out your short position in the (GLD) May $205 calls.
This is a perfectly hedged position, with both options having the same expiration date, the same number of contracts in the same stock, so there is no risk. The name, number of shares, and number of contracts are all identical, so you have no net exposure at all.
Calls are the right to buy shares at a fixed price before a fixed date, and one option contract is exercisable into 100 shares.
To say it another way, you bought the (GLD) at $200 and sold it at $205, paid $4.55 for the right to do so for 13 days, so your profit is $0.45 cents, or ($0.45 X 100 shares X 25 contracts) = $1,125. Not bad for a 13-day defined, limited risk play.
Sounds like a good trade to me.
Call-aways most often happen in the run-up to a dividend payout. If you can collect a full monthly or quarterly dividend the day before the stock registration dates by calling away someone’s short option position, why not? In fact, a whole industry of these kinds of strategies has arisen in recent years in response to the enormous growth of the options market.
(GLD) and most tech stocks don’t pay dividends, so call aways are rare.
Weird stuff like this happens in the run-up to options expirations like we have coming.
A call owner may need to buy a long (GLD) position after the close, and exercising his long May 205 call is the only way to execute it.
Adequate shares may not be available in the market, or maybe a limit order didn’t get done by the market close.
There are thousands of algorithms out there that may arrive at some twisted logic that the calls need to be exercised.
Many require a rebalancing of hedges at the close every day, which can be achieved through option exercises.
And yes, options even get exercised by accident. There are still a few humans left in this market to make mistakes.
And here’s another possible outcome in this process.
Your broker will call you to notify you of an option called away, and then give you the wrong advice on what to do about it. They’ll tell you to take delivery of your long stock and then post additional margin to cover the risk.
Or they will tell you to sell your remaining long option position at whatever price you can get, wiping out most, if not all, of your great profit. This generates the maximum commission for your broker.
Either that, or you can just sell your shares on the following Monday and take on a ton of risk over the weekend. This generates oodles of commission for the brokers but impoverishes you.
There may not even be an evil motive behind the bad advice. Brokers are not investing a lot in training staff these days. It doesn’t pay. In fact, I think I’m the last one they really trained 50 years ago.
Avarice could have been an explanation here, but I think stupidity and poor training, and low wages are much more likely.
Brokers have so many legal ways to steal money that they don’t need to resort to the illegal kind.
This exercise process is now fully automated at most brokers, but it never hurts to follow up with a phone call if you get an exercise notice. Mistakes do happen.
Some may also send you a link to a video on what to do about all this.
If any of you are the slightest bit worried or confused by all of this, come out of your position RIGHT NOW at a small profit! You should never be worried or confused about any position tying up YOUR money.
Professionals do these things all day long, and exercises become second nature, just another cost of doing business.
If you do this long enough, eventually you get hit. I bet you don’t.
Calling All Options!
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