Global Market Comments
July 25, 2025
Fiat Lux
Featured Trade:
(FRIDAY, AUGUST 22 INCLINE VILLAGE, NEVADA STRATEGY DINNER)
(WHAT AI CAN AND CAN’T DO FOR YOU)
(AAPL), (GOOGL), (AMZN), (AMZN), (TSLA), (NVDA), (MU)
The future has arrived!
Over the last few weeks, I picked up some astonishing developments in artificial intelligence.
*Mainframes at Stanford University and the University of California at Berkeley were given a direct connection to speak freely with each other. Within 30 minutes, they dumped English as a means of communication because it was too inefficient and developed their own language, which no human could understand. They then began exchanging immense amounts of data. Fearful of what was going on, the school unplugged the machines after only eight hours.
*All of the soccer videos ever recorded were downloaded into two robots, but they were not taught how to play the game or given any rules. Not only did it figure out how to play the game, but it also developed plays and maneuvers no one in the sport has ever thought of in its 150-year history.
*It normally takes a PhD candidate five years to 3D map a protein. An AI app 3D-mapped all 200 million known proteins in seven weeks, shortcutting one billion years of PhD-level research with existing technology. These new maps have already been used to design a malaria vaccine and enzymes that eat plastic. They will soon cure all human diseases.
*A developer asked an AI program a half dozen questions in Bengali, not an easy language. Within an hour, it spoke the language fluently, without any instructions to do so.
By now, word has gotten out about the incredible opportunities AI presents. Our only limitation is our own imagination on how to use it. AI will instantly triple the value of any company that uses it.
What has changed is that we now have millions of computers powerful enough and an Internet fast enough to realize its full potential.
It all vindicates my own long-term vision, unique in the investing community, that in the coming decade, immense technology profits will more than replace the trillions of dollars’ worth of Fed liquidity we feasted on during the 2010s. Extended QE is proving just a bridge to a much more prosperous future.
The Internet has created about $10 trillion in value since its inception. AI will create double that in half the time. That’s what will take the Dow from 33,000 to 240,000.
No surprise then that the top ten AI companies have delivered 120% of the stock market gains so far in 2023. The other 490 companies in the S&P 500 have either gone nowhere or down.
However, there are many things that AI can’t do. Here is the list.
1) AI Can’t Predict large anomalous events, otherwise known as Black Swans. AI takes past trends and extrapolates them into the future. It in no way could have seen 9/11, the 2008 crash, or the pandemic coming, although I warned my hedge fund clients for years that we were overdue. All of the AI stock trading apps I have seen so far, including my own, max out at 90% accuracy. The other 10% is accounted for by black swans: earnings shocks, foreign crises, sudden FDA stage three denials, surprise legal judgments, foreign invasions, or the murder of a key figure in a tech company, as recently happened in San Francisco.
2) AI Lies and Lies Often. AI was asked to write a scientific paper on a specific subject. It came back with an elegant and well-researched piece. The problem was that all of the books it made reference to didn’t exist. AI learned early to tell humans what they want to hear.
3) AI Requires Exponential Computing Capacity. Only five companies have the muscle to pursue true AI. No surprise that these, including (AAPL), (GOOGL), (AMZN), (MSFT), and (TSLA), account for the bulk of stock market performance this year. This won’t always be the case. Some 30 years ago, it required thousands of mainframes to contain all human knowledge. Today, that task can be accomplished by a cheap $1,000 laptop.
4) Internet Capacity Will Be a Limiting Factor for AI for Years. To accommodate the traffic that is taking place right now, the Internet will have to grow 500% practically overnight, and that is with five main players. What happens when we have 5 million? That’s why NVIDIA (NVDA) has gone nuts.
5) AI Hallucinates, as anyone who drives a Tesla will tell you. If a car makes a left turn in Florida, the 4 million vehicles in the world’s largest neural network learn from it. The problem is that sometimes the data from that Florida car is placed directly in front of a California one, prompting it to brake abruptly, causing accidents. This is known as “ghost braking.” I have explained to Elon Musk that his database has grown so large, eight video feeds per 4 million cars going back many years and billions of miles, that he may be going behind the limits of known physics.
6) While the Growth Opportunities for AI are Unlimited, the ability of humans and society to absorb it isn’t. All jobs will be affected by AI, and millions destroyed, starting with low-level programmers and call centers, and millions more will be created. People are talking about regulating AI, but have no idea where to start. Maybe with (AAPL), (GOOGL), (AMZN), (MSFT), and (TSLA)?
7) The Terminator Issue. Can AI be controlled? Or have we started a chain reaction that is unstoppable, as with an atomic bomb? AI researchers have noticed a disturbing issue where AI programs are learning skills on their own, without our instructions. This is referred to as “emergent properties.” If AI is using humans as its example, we can’t exactly count on it to be benign.
Needless to say, AI will be at the core of your investment approach, probably for the rest of your life.
2014 at Micron Technology
Mad Hedge Biotech and Healthcare Letter
July 24, 2025
Fiat Lux
Featured Trade:
(THE PHARMA CATFISH THAT’S ACTUALLY A CATCH)
(BMY), (PFE), (BNTX)
You know that friend who always looks terrible in photos but somehow appears stunning in person? Bristol Myers Squibb (BMY) is basically the investment equivalent of that phenomenon.
On paper, this pharmaceutical giant looks like it’s heading for a cliff – literally called the “patent cliff” in industry parlance – but dig a little deeper and you’ll find a company that’s been playing an elaborate shell game with Wall Street analysts.
What most investors are overlooking in BMY’s situation is worth a second glance. Everyone’s fixated on the looming patent expirations, particularly the crown jewel Eliquis losing protection in 2026-2028.
But here’s the thing most folks don’t realize: BMY only keeps half of Eliquis revenue anyway thanks to their partnership with Pfizer (PFE).
So when that $13.3 billion revenue stream starts drying up, only about $6.9 billion actually hits BMY’s bottom line. The other half was never really theirs to begin with. It just flows straight to Pfizer like water through a sieve.
This is classic pharmaceutical accounting sleight of hand, and it explains why BMY’s stock has been treated like yesterday’s newspaper despite some genuinely encouraging fundamentals.
The market is pricing in the full Eliquis hit when the reality is considerably more manageable. It’s like worrying about losing a $100 bill when you’ve only got $50 at risk.
But the real story gets more interesting when you look at what’s been dragging down BMY’s earnings for years.
Those massive acquisition charges from the 2019 Celgene deal have been acting like a boat anchor on reported profits. We’re talking $8.9 to $9.6 billion annually in amortization expenses. That’s not small change, even for a company BMY’s size.
Starting this year, those charges are dropping to around $3.5 billion, essentially giving the company an earnings boost of about $2.60 per share without selling a single additional pill.
Think of it this way: if you bought a house and had to write off the purchase price over several years, your personal “earnings” would look terrible during that period, even if your actual cash flow was perfectly healthy.
That’s essentially what’s been happening to BMY, except instead of a house, they bought an entire pharmaceutical company and have been accounting for it in the most conservative way possible.
The cash flow story is where things get genuinely compelling, assuming you can stomach the inherent risks of pharmaceutical investing.
BMY is generating north of $13 billion in operating cash flow annually, and after covering dividends and capital expenditures, they’ve got over $6 billion in free cash flow to play with.
That’s real money that can fund acquisitions, buybacks, or debt reduction – exactly what you want to see when a company is navigating a patent cliff.
Speaking of acquisitions, BMY just inked a deal with BioNTech (BNTX) that could cost them over $11 billion if everything goes perfectly, but represents the kind of bet pharmaceutical companies need to make to stay relevant.
It’s expensive, risky, and exactly the type of move that separates the survivors from the casualties in this industry.
Now, before you start thinking this is some kind of sure thing, let me inject a healthy dose of reality.
Pharmaceutical investing is inherently speculative, regardless of how solid the financials look today. Drug development is expensive, time-consuming, and fails more often than it succeeds.
BMY’s pipeline includes promising candidates like Camzyos, Opdualag, and Cobenfy, but “promising” in pharma terms often translates to “expensive disappointment” in investor terms.
The company also faces ongoing legal challenges, including a nasty lawsuit related to their Celgene acquisition that could cost them billions if it goes badly.
Patent challenges, regulatory setbacks, and competitive pressures are constant threats that can torpedo even the most carefully laid plans.
Moreover, BMY is essentially betting their future on their ability to replace mature products with new blockbusters at precisely the right time. It’s like being a chef who needs to have the perfect soufflé ready just as the previous course is being cleared – technically possible, but requiring flawless execution when stakes are highest.
So while BMY trades at reasonable multiples and generates solid cash flow, remember that in pharmaceuticals, yesterday’s miracle drug becomes tomorrow’s generic commodity faster than you can say “patent expiration.”
The question is whether Bristol Myers is actually that rare friend who just takes terrible photos, or if what you see on paper is exactly what you get in real life.
Like any good photographer will tell you, sometimes you need to adjust your lens to see what’s really there.
If you’re already holding BMY, this might be the perfect time to take a fresh look and not at the same tired headlines everyone’s been circulating, but at the actual cash flow and improving earnings underneath all that accounting noise.
For those still browsing the portfolio, consider starting with a small position while you watch how their pipeline development plays out.
After all, in pharmaceuticals, one successful clinical trial can turn yesterday’s wallflower into tomorrow’s cover model faster than you can say “FDA approval.”
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
Come join me for dinner at the Mad Hedge Fund Trader’s Global Strategy Dinner, which I will be conducting in Incline Village, Nevada, on Friday, August 22. An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there, too. Tickets are available for $249.
I’ll be arriving early and leaving late in case anyone wants to have a one-on-one discussion or just sit around and chew the fat about the financial markets.
The lunch will be held at the premier restaurant in Incline Village, Nevada, on the sparkling shores of Lake Tahoe. Those who live there already know what it is. The precise location will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for this dinner, please click here.”
Global Market Comments
July 24, 2025
Fiat Lux
Featured Trade:
(DINNER WITH DAVID POGUE),
(TSLA)
I recently had dinner with David Pogue, the Science and Technology writer for the New York Times. It was a night well spent.
David believes that climate change is no longer an “if” or a “maybe” but a certainty. The sooner we start adapting our lives to it, the better.
The bottom line is that a big piece of the world is about to become uninhabitable by humans, possibly as much as the 20% around the equator. The loss of life could be huge.
Raise sea levels by 20 feet and you lose all the coastal cities of China, a large part of the US East Coast, and most of Florida. The US government will have to end flood insurance or go bankrupt. It is already tearing down oceanfront homes that have filed two or three federal claims. Private insurers have already gone this route.
Many species of fish, animals, and birds have been migrating north and south for decades. Indeed, tropical game fish, like mahi mahi, have been showing up along the California coast in recent years, to the delight of local fishermen.
There has been a massive migration of hummingbirds north to Oregon. Global warming could be halted in decades. But to return to pre-1970 levels would be a century-long term project. Ironically, the coronavirus started on that work right after we met, bringing the global economy to a grinding halt and dramatically shrinking the population. US lifespans shrank in 2020 for the first time in 100 years, by one full year.
We spent a lot of time at Mad Hedge Fund Trader talking about future technologies. It will be a huge net job creator over time, but the disruptions to existing industries will be enormous. Steel workers don’t morph into computer programmers easily, although I’ve seen some of the younger ones do it with enthusiasm.
When I told him I was one of the first Tesla (TSLA) buyers 13 years ago and my name still stood on the factory wall, he reached out to shake my hand and say “thank you.” He was shocked when I told him most commercial pilots can’t safely fly a plane without a functioning autopilot.
I met David on his book tour for How to Prepare for Climate Change. There, he offers highly practical advice on preparing for an era of extreme weather events, possible famines and floods, and other climate-caused chaos. Click here for the Amazon link.
The 62-year-old Ohio native has an unusual, eclectic background not unlike my own. He graduated from Yale with a degree in music, summa cum laude. He went on to become an itinerant Broadway producer. It was probably his desire for a steady paycheck that drove him into writing, taking a 12-year job at Macworld magazine, of which I was a steady reader.
David published the first Mac for Dummies book in 1988. He went on to write six more of the original “Dummies” books, including those for iBooks, Opera, Classical Music, and Magic. He became the personal technology correspondent for the New York Times in 2000.
David has hosted the Nova TV series for PBS, programs for the Science and Discovery channels. A five-time Emmy winner for his stories on CBS Sunday Morning, Pogue has been at the forefront of new and emerging tech trends for decades and making him news. There, you can hugely benefit from his annual Christmas technology gift tips.
To learn more about David Pogue, please click here to visit his website.
“We weren’t treated as humans. We weren’t even treated as robots. We were all just part of the data stream,” said one of 600,000 Amazon fulfillment center workers.
(NBIS), (NFLX)
Let me tell you about the most fascinating conversation I had last week. An old friend Dave – now a CTO at a Fortune 500 company – called me up asking about AI infrastructure investments for his company’s portfolio.
During our chat, he mentioned they’re having trouble sourcing GPU capacity for their own AI initiatives.
“John,” he says, “we’re trying to build AI capabilities and we can’t get the computing power we need anywhere. It’s like trying to find a decent parking spot at Costco on a Saturday afternoon.” Dave’s got three kids under 10, so he knows a thing or two about impossible missions.
That conversation got me thinking about supply and demand dynamics in the AI space, and specifically about Nebius Group (NBIS) – this Dutch AI infrastructure company that might just be sitting on the financial equivalent of beachfront property in Malibu.
Here’s the setup: While everyone’s arguing about whether artificial intelligence will steal their jobs or make them rich, Nebius is quietly positioning itself as the landlord collecting rent from both sides.
They provide the massive computing infrastructure that powers everything from ChatGPT to autonomous vehicles. Think of them as the electric utility company during the Industrial Revolution – not the flashiest play, but absolutely essential.
The numbers are genuinely staggering.
Nebius just reported Q1 revenue of $55.3 million, representing 385% year-over-year growth. Their Annual Recurring Revenue hit $249 million, up 684% from last year.
To put that in perspective, most blue-chip companies would sacrifice their quarterly dividends for growth rates like that.
But here’s where it gets complicated, and why I’m not backing up the truck just yet.
This company burns cash like a 1970s Cadillac burns gasoline. They torched through $1 billion in a single quarter, dropping their cash position from $2.45 billion to $1.45 billion.
Their operating loss expanded to $129.5 million compared to $82.9 million last year. Every single cost category exploded higher – product development, sales, administration, depreciation.
It’s growth, but it’s expensive growth.
Now, before you start thinking this sounds like every dot-com disaster story you’ve heard, consider the fundamental difference: the AI revolution is actually happening.
Your smartphone recognizes your voice, Netflix (NFLX) knows what you want to watch before you do, and those customer service chatbots are getting unnervingly good at their jobs.
All of that requires enormous computing power, and that’s exactly what Nebius provides.
The company has expanded from one facility in Finland to five locations across Europe, the United States, and the Middle East, with aggressive plans for more. They’re essentially building the digital highways that AI companies need to operate.
The question isn’t whether demand exists – it clearly does. The question is whether Nebius can scale fast enough without running out of money.
Smart money recently validated that thesis.
In June, Nebius raised another $1 billion through convertible notes – half due in 2029 at 2% interest, half in 2031 at 3%. That’s not desperate financing; that’s strategic capital raised while the market still believes in their story.
The upcoming catalyst sits right around the corner. Nebius reports Q2 earnings on July 28, with analysts expecting revenue of $92.8 million.
If they hit that number, it represents 68% sequential growth, which would reinforce the hypergrowth narrative.
Miss it, and this volatile stock could provide some spectacular entertainment for day traders.
Here’s my assessment: Nebius represents a pure play on AI infrastructure demand, which I believe is real and sustainable.
The company has established itself as a legitimate player in a market that’s essentially unlimited. Their target of reaching $1 billion in ARR isn’t fantasy – it’s based on actual customer pipelines and expansion plans.
However, this remains a high-risk, high-reward situation that requires strong conviction and stronger risk tolerance.
The stock trades at roughly 40 times forward sales, which is expensive even by growth stock standards. Traditional valuation metrics don’t apply here because you’re essentially betting on whether the AI boom continues and whether Nebius can capture enough market share to justify these prices.
For conservative investors seeking steady income or predictable earnings, this isn’t your play.
But for those with risk capital who believe AI infrastructure represents the next great investment theme, Nebius offers compelling exposure without betting on any single AI application.
My take? This one’s worth watching closely, potentially worth buying selectively, but definitely not worth betting the farm on.
Besides, sometimes the best opportunities come with the biggest question marks attached.
