"There is tremendous amounts of money sitting on the sidelines. There is enormous M&A activity. The greatest thinkers in the corporate world are saying that it is cheaper to buy than to build. This says to me that the stock market still has value in it. We're a long way from expensive," said Milton Ezrati, senior economist and market strategist for money management giant, Lord Abbett.
NEW YORK – Goldman Sachs is signaling a significant shift in the artificial intelligence (AI) stock landscape, cautioning that the freewheeling, broad-based rally of the past few years is likely over. In a new note, Goldman Sachs US equity strategist Ryan Hammond warns that the market is entering a more discerning phase, where investors will demand tangible evidence of AI's impact on a company's bottom line before committing capital. This marks a departure from earlier stages of the AI boom, which were driven more by hype and infrastructure plays.
The memo, issued on Friday, paints a picture of investor fatigue and a growing sense of skepticism. "Our discussions with investors and recent equity performance reveal limited appetite for companies with potential AI-enabled revenues as investors grapple with whether AI is a threat or opportunity for many companies," Hammond wrote. This sentiment is a far cry from the euphoria that propelled the so-called "Magnificent Seven" and other AI-related stocks to historic highs.
The Evolution of the AI Trade: From Hype to Reality
Goldman Sachs has previously outlined a multi-phase framework for the AI trade, and this latest note suggests the market is transitioning into the most critical phase yet.
Winners and Losers Emerge
A key distinction of this new phase is the likely increase in market dispersion. While the earlier phases lifted a wide range of stocks, Phase 3 will be far more selective. "Unlike Phase 2, there will likely be winners and losers within Phase 3," Hammond stated. This is because not all companies will be equally successful at implementing and monetizing AI. For some, AI may prove to be a costly, long-term research and development project with a low return on investment. For others, it may cannibalize existing business models or introduce new competitive threats.
This dynamic presents a new challenge for investors. The "buy the sector" mentality of the last few years may prove to be a losing strategy. Instead, stock-picking will become paramount. Investors will need to conduct rigorous due diligence, analyzing a company's ability to integrate AI into its core operations, its intellectual property, and its long-term strategy for revenue generation.
Investor Skepticism and the Search for ROI
The shift in investor sentiment is not without reason. Despite the unprecedented capital pouring into AI, many companies are still in the early stages of figuring out how to turn that investment into profit. The cost of training and running large language models remains high, and the "killer apps" that will generate massive, sustained revenue have yet to materialize in many sectors.
For example, while some pharmaceutical companies are using AI to accelerate drug discovery, the long-term earnings impact is still speculative. Similarly, while banks are employing AI for fraud detection and risk analysis, these are often efficiency gains rather than new, large-scale revenue streams. As Hammond's note suggests, the market is no longer content with the promise of "potential AI-enabled revenues." It wants to see the money.
The Road Ahead
So, what does this mean for the market? While the Goldman Sachs note is a near-term warning, it is not a long-term bearish call on AI itself. The technology is undoubtedly transformative, with the potential to boost productivity and reshape entire industries. However, the path to profitability will not be a straight line for every company.
The smart money will likely be on companies that have a clear, demonstrable path to monetization. This could include software companies that are successfully embedding AI into their products, providing a clear value proposition to customers. It may also include traditional businesses that are using AI to create a sustainable competitive advantage, such as a retailer using AI to optimize its supply chain and reduce costs, or a media company using it to generate more effective content.
The coming months will be a test of which companies have a solid business plan for AI and which were simply riding the hype cycle. For investors, the era of easy, passive returns on AI stocks is over. The next chapter will require a more disciplined, evidence-based approach to investing, one that separates the technological marvels from the profitable businesses. The alarm bell has been rung, and the market is about to get a lot choosier.
Mad Hedge Technology Letter
September 5, 2025
Fiat Lux
Featured Trade:
(HUMANOIDS TO THE RESCUE OR NOT)
(TSLA), (LLM), (AI)
Dr. Doom Nouriel Roubini needs to lay off the fear porn – I’m not taking the bait this time. Sorry Roubs!
Roubini is sounding the alarm bells on humanoid robots, but I think it is more of a case of fear-mongering than anything else.
After all, like most economists, Roubini isn’t a trader, and he is an academic who sits behind the scenes and goes after those juicy sound bites that the media need to publish stories.
He wasn’t taking profits in great tech trades like when I captured profits on Amazon just the other day.
His idea goes like this…
He thinks the big breakthrough right now is the evolution of humanoid robots that essentially follow individual workers on the factory floor, on a construction site, and even a chef in a restaurant, or a housekeeper. It's terrifying, but it's happening in the next literally year or two.
For this level of transformation in one year, I believe the percentage chance of this coming to fruition is less than 2%.
My understanding of the humanoids is that the software will take 10 years to figure out the nuances.
Roubini — known as Dr. Doom for his bleak economic forecasts — said human jobs would be lost to humanoids.
Instead, an LLM (large language model) learns about everything in the world, the entire internet follows your job or my job or anybody else's job in a few months, then learns everything that a construction worker, factory worker, or any other service worker can do, and then can replace them. And I think that it's going to be a revolution — it's going to affect blue-collar jobs like we've never, ever seen before.
The humanoid robot market could reach $7 trillion by 2050, Citi research recently found. Those robots — such as Tesla's (TSLA) Optimus — may be able to do everything from cleaning your home to folding your laundry. The robots could create job loss as routine tasks get automated.
There is a higher likelihood that this humanoid from Tesla will be used as a staging to convince investors to buy more tech stocks.
Tech companies have a huge problem on their hands, and there hasn’t been a lot of great brain activity to find a real solution.
Venture capitalists have been lamenting the lack of real innovation in tech products like Mark Andreessen and Peter Thiel.
The humanoid is here to get investors to buy more tech stocks in companies that aren’t innovating.
Tech companies are cutting staff to beat earnings, and that isn’t a sign of top-notch growth.
Investors need to separate the fluff from reality.
The reality is that big tech companies still make enormous amounts of profit but have failed miserably in finding something new.
Apple CEO Tim Cook is still figuring out what to do next after selling the iPhone to Chinese people.
The humanoid operating on AI software might give tech stocks an extra 6-month cushion before investors pull the rug.
Enjoy the bull market while it lasts. I executed and profited from a bullish trade in Nvidia just recently, which is part of the AI story.
AI stocks will go higher and humanoid stocks will too – not because they will make money, but because investors still buy the hype.
“I have more concerns about potential risks and vulnerabilities than most people.” – Said Nouriel Roubini
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
(SKEPTICAL INVESTORS MAY SEE THE MARKETS TREND HIGHER)
September 5, 2025
Hello everyone
What’s next for the markets?
More upside ahead?
One hundred days have passed since the S&P500 reached its post “liberation day” closing low.
So, how would you describe the gains since then: incredible, astounding, amazing, eye-watering, irrational, annoying. I could go on, but you get the picture.
The index is up 29% inside that time frame. Since 1950, there have been just four instances in which the S&P500 has seen a larger return over a 100-day rolling period, according to several investment bank analysts.
It is no surprise to anyone to find the tech sector in the lead during this time. Over the past 100 days, the S&P500 tech sector has rallied more than 48% as investors have bought into the AI trade. Communication services and consumer discretionary stocks are also up more than 30% during the same period.
Spurring this recovery along is the expectation of Federal Reserve rate cuts, and some progress – albeit turbulent – on the global trade front.
Challenges are staring at the markets, but thus far, the market has overcome or bypassed every obstacle in its way.
Carson Group’s Ryan Detrick, as well as Tom Lee, from Fundstrat, investment banks, UBS, & Goldman Sachs (GS) and Jeremy Seigal all argue the market can move higher.
Detrick notes that the S&P500 averages 8.1% gain six months after a strong 100-day performance. One year out, that average increase expands to 12.9%.
AMAZON (AMZN)
The stock surged strongly on Thursday – around 3% - making it one of the S&P 500’s best-performing stocks of the day.
Over the past month, the stock has rebounded around 10%. Several catalysts are responsible for this:
# Its relationship with the rapidly growing Anthropic – an artificial intelligence startup backed by the e-commerce giant.
# expansion of its same-day grocery delivery offerings.
# newly minted deal for its satellite internet business.
Barclays sees a deep gold mine in Amazon’s deep-rooted relationship with Anthropic. The start-up trains its flagship generative AI Claude models primarily on Amazon Web Services, using Amazon’s Trainium and Inferentia chips for training and inference, respectively.
Some analysts believe Amazon could see significant upside in the fourth quarter. Anthropic could be pre-training its Claude 5 model by then, which would contribute to AWS growth.
I expect many of you made some good money (or are making good profits, if you are still holding these) on the AMZN options I recommended in early June, when the stock was sitting at $205.71.
AMZN 2015/225 with Oct. 17 expiry
and
AMZN 210/220 with Oct 17 expiry
I was even more aggressive in my personal account and took out a 220/230 option spread trade.
Took profits. On to the next trade.
THE TRAJECTORY OF GOLD
Gold at $4,000/ounce could be a reality by 2026.
Uncertainty and macro events are driving gold prices:
Trump’s actions are threatening Fed independence, and as Goldman analysts note, this could result in higher inflation, lower stock and long-dated bond prices, not to mention an erosion of the U.S. dollar’s status as the global reserve currency.
Gold futures gained 4.9% from Trump’s nomination of Stephen Miran on August 7 to fill a vacancy on the Federal Reserve Board. And the shiny metal gained 5.8% after Trump threatened to fire Fed Governor Lisa Cook on August 22 through to Tuesday.
Trump has made it clear that he wants to consolidate a majority on the Fed board so he can lower interest rates.
MY CORNER
Wallaby with joey in my front yard.
And a lone kookaburra sitting on a fence post.
Cheers
Jacquie
Global Market Comments
September 5, 2025
Fiat Lux
Featured Trade:
(APPLE LONG-TERM LEAPS),
(AAPL)
Trade Alert - (AAPL) – BUY
BUY the Apple (AAPL) December 2026 $230-$240 at-the-money vertical Bull Call spread LEAPS at $5.50 or best
Opening Trade
9-5-2025
expiration date: December 18, 2026
Number of Contracts = 1 contract
With Apple about to announce its next-generation iPhone 17 on Sunday, which is AI-enabled, this is a good time to dive into a long-term Apple LEAPS.
You hear a lot of incredible stories in Silicon Valley.
An electronic compact disc is coming that can deliver perfect sound and movies. Have you heard of the Internet? Compaq is offering a computer that will sit on your laptop! Do you have any idea how Google is going to make money? Steve Jobs is building a smartphone! Is he out of his mind? Elon Musk is building an electric car with a 250-mile range. Hey, I heard about this thing called “artificial intelligence.”
So I listened very carefully the other day when a friend of mine told me he had scored the real estate deal of the century.
His house had sat on the market like dead wood for a year and a half, priced at $4.0 million. It was a very nice 5,000 square foot Italian villa-type home with a huge garden and a fantastic 360-degree view.
Then out of the blue, a cash buyer said he wanted to rent the house for a year for the spectacular over-the-market rent of $20,000 a month, plus all utilities. Then, he offered to pay 10% over the asking price, or $4.4 million to buy the house outright, and would pay $400,000 in cash for the option to do so, payable immediately.
My friend, puzzled but ecstatic, asked why he was going about buying a home in this way. The buyer answered that he had some stock options from his company that he didn’t want to cash in for a year. His profession? He had a PhD in artificial intelligence.
That set the alarm bells off in my head.
I pulled out a paper map of the San Francisco Bay Area and drew a circle around the house within one hour driving time to reduce the number of potential candidates. Then I called a seasoned technical analyst and asked him which big California stock had a chart that was just about to break out to the upside. He didn’t hesitate.
Apple!
It all makes so much sense. Apple is one company behind in artificial intelligence that has the most money to do something about it. All they have to do is buy a ready-made AI company like Perplexity, and it will be out front. The shares will race to $260. I then calculated how high Apple shares would have to rise to justify the enormous premium for my friend’s house. I hit bang on $260.
I am therefore buying the Apple (AAPL) December 2026 $230-$240 at-the-money vertical Bull Call spread LEAPS at $5.50 or best
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
These LEAPS are illiquid, so you are going to have to play around with prices to get a position. Start at $5.00, then increase to $5.50, $5.60, $5.70, and so on. Don’t pay more than $7.00, or these will get expensive. It is easier to do this on days when the stock market is down.
This is a bet that Apple (APPL) will not fall below $240 by the December 18, 2026, option expiration in 15 months. Apple shares have to rise only 70 cents in 15 months to hit the upper strike in this LEAPS.
To learn more about the company, please click here to visit their website.
Notice that the day-to-day volatility of LEAPS prices is minuscule, less than 10%, since the time value is so great and you have a long position simultaneously offset by a short one.
This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month, just entering new orders every day. I know this can be tedious, but getting screwed by overpaying for a position is even more tedious.
Look at the math below, and you will see that a 70-cent rise in (AAPL) shares will generate an 82% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 117:1. LEAPS stand for Long Term Equity Anticipation Securities.
(AAPL) doesn’t even have to get to a new all-time high of $260 to make the max profit in this position, which it will probably do in weeks, if not months. It only has to get back to $240, where it traded in March before the meltdown.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
Here are the specific trades you need to execute this position:
Buy 1 December 2026 (AAPL) $230 calls at………….………$38.00
Sell short 1 December 2026 (AAPL) $240 calls at…………$32.50
Net Cost:………………………….………..………….…...................$5.50
Potential Profit: $10.00 - $5.50 = $4.50
(1 X 100 X $4.50) = $450 or 82% in 15 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
Mad Hedge Biotech and Healthcare Letter
September 4, 2025
Fiat Lux
Featured Trade:
(SHEAR GENIUS)
(INCY), (NVS), (SNY), (MRK)