Chapter 1: What is the significance of the AI bubble in 2025?
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Scott is still on vacation, but we are back in action and we are kicking off the year with the one and only Josh Brown, co-founder and CEO of Ritholtz. Josh, welcome back to the show. It's great to see you. Great to see you.
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Chapter 2: How did market trends change in late 2025?
I apologize for dressing like the great and powerful Oz. I didn't pick up on it until I saw myself on a video screen. That's the energy I came into the year with. I love it. You're looking good. How was your holiday? How was your new year? So sick. Oh, yeah? So great. You know what? I've been in Florida for two weeks. I have a tan. You look good.
The weather sucks here, predictably, but it's not even bothering me. I just had an amazing couple of weeks for the holidays, and I feel good. Ready for 26. Ready to rumble. Ready for 2026. Okay. Well, let's get right into it. A lot of questions I want to ask you. We haven't had you on since the summer, and a lot has happened since then. We had the government shut down. We had rate cuts.
We had this AI bubble story, which kind of got huge. A lot of people were talking about it. Yeah. Just as you look back on 2025 and what's happened since we lost Boke, just a pretty general question, what have been your biggest takeaways? I think the key thing was not getting too negative in November when Oracle was blowing up.
Chapter 3: What predictions does Josh Brown have for the markets in 2026?
And it seemed like this was going to be like this comeuppance for all the data center spend. And all of a sudden, like, the floor was about to fall out from under all of us. And, like, if you fell prey to that narrative, which obviously a lot of people – so there's two categories. There are people that fell prey to it because –
They are just nervous by nature or they tend to fall for all of those types of like bouts of negativity. But then there's another camp of people that really did want it to fall apart. They wanted it to crash. And You know, some of that is like political. Some of that is people who missed out on the AI trade for the last three years.
But like whatever, you just had this huge chorus of people warning you, like this is the next year 2000 and it's dot com point, you know, 2.0. But I think the key to this year was not falling prey to it. And if you were able to stay the course, like we're talking right now, the Dow is going to have its first close, I think, today above 49,000.
And the NASDAQ looks incredible, you know, through the end of last year and now into the first week of this year. And I think it's really it's tough sometimes when everyone is screaming bubble, bubble, bubble. It's really tough to like, you know, stay the course and stick to your guns. But that that really was the key to the to the fourth quarter.
Which part of those bubble fears do you take issue with? Because we were talking about it a lot on this podcast, and there were several moments which I think were substantial and they were legitimately concerning. I think the biggest one was probably what we saw on Brad Gerstner's podcast,
where they asked Sam Altman about the revenue and the amount that they're going to spend, the fact they want to spend $1.5 trillion. They've got $13 billion in revenue. And then we saw kind of the worst response we've ever seen from a CEO, the CEO of a company on which a lot of the momentum in the market really depends on. So, you know, we weren't saying it was doomsday on this podcast.
We were trying to be rational about it. But it was something that we were... worried about or that we thought was at least significant. I guess from your view, which part of the bubble story was wrong or misguided? Well, no, we still may end up having a bubble, but I look at price and I look at, I look at valuation.
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Chapter 4: Why should young investors welcome market corrections?
I look at all the things that classically you're supposed to look at. And the stock market just was not, uh, going along with the story that this is all coming to an end. If you looked at the way semiconductor stocks were acting, they just, they were not giving into that narrative. And if you like, I, so I'm one of the people that comes on the show with you and, uh,
you know, my big, my big thing that I try to get across when I can, what I'm trying to convey is that prices are more important than opinions and prices represent the sum total of people who actually manage money and are voting with their money. So again, I think there's a lot of wishcasting. A lot of people want to see open AI in the private market somehow like burst into flames. Um,
a lot of people want to see Larry Ellison and Oracle have a come up. That's wish casting. It's people saying they think that's going to happen, but what they're really saying is, I want this to happen. And if you were looking away from Oracle CDS prices, which I don't think are particularly important, but if you were looking at actual share prices for NVIDIA,
and Broadcom and Corning, which makes the fiber optics for all the data centers. And you were looking at, you know, you definitely saw stocks come down, but you did not see stocks plunging, stocks crashing. That's not how the real money was betting. And, Here we are just a couple of weeks out of that, and most of those stocks have recovered. The SMH looks amazing.
I think 86% of the names in the SMH semiconductor ETF are above their 50-day moving average. That didn't take long. So I think it's really important when you hear people pounding on, you know, with a wooden spoon on a pan, talking about bubble, ask yourself, why are they doing it? Are they in the content business? Okay, they're doing it for attention. They're doing it for clicks. I get that.
There's nothing wrong with that. Everyone's got to make a living. Are they money managers who are overweight, small cap value, underweight tech? Okay, I get that too. They're wish casting.
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Chapter 5: What factors will drive earnings growth in 2026?
They want these stocks to blow up so they can call their clients and say, you see, I was right. I'm not a schmuck. I told you that I told you so. So there's a lot of that going on.
Obviously people on financial television, it's high ratings when stocks like Oracle blow up and then the next one and the next, they want that domino effect because this is when people are paying the maximum amount of attention to financial media.
So there are a lot of people who have a vested interest in seeing this thing go badly and maybe it will, but I think it becomes really important to say, all right, who's talking about this that's actually invested? Who's talking about this that literally has money on the line, reputation on the line, that has skin in the game? I want to listen to those people.
Not that they can't be wrong, but my God, I need a counterbalance to all the chicken littles and all the people saying the end is nigh because without that counterbalance, you're just listening to people who are wish-casting. What I would say in pushback is, you know, you're describing a dynamic where there are certain people who have a vested interest in things going down.
But on the flip side, there's also people who have a vested interest in things going up. And everyone has vested interests. Everyone has things that they want or internal biases. They want things to go right. Maybe they want things to go wrong. And I think to your point, it is so important to figure out how to kind of weed through that. My point is, when in doubt, follow price.
When in doubt, trust what the markets are saying about the price of a stock. Pay less attention to what people say and more attention to what they do. Fair enough. I think that's definitely true. On OpenAI as an example. So I feel like we need to kind of bucket these companies into two buckets, basically. Totally true. Where you do have...
many of these AI-related stocks, which I think are growing pretty healthily and they're managing their balance sheets well and everything looks pretty good. And then I think there are other companies like OpenAI, which I honestly, I mean, maybe I'm one of those wooden spoon banging against the drum, but I don't look at what OpenAI is doing from a financial management perspective.
And I don't think it inspires much confidence in me personally. And the trouble is,
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Chapter 6: How do interest rates impact market predictions?
I can't follow the price because it's private. So I actually don't know what the price of OpenAI is. But if I had to guess, based on what we're seeing in the public markets, I would probably look at Oracle as a proxy for what's going on with OpenAI. And it's not looking very good. So in that sense... OpenAI doesn't seem to be the best reflection of what is happening in AI right now.
I have so much other stuff I want to ask you, but I am just interested in this topic. Would you agree that we need to divide it up? I think you're exactly right. It's a very unique situation where one of the most important chess pieces is not on the board. It's a highly, highly unique situation. I've likened it in other venues. I've explained it as Kaiser Soze in The Usual Suspects.
Sam Altman limping off. It's the main character in the movie. It's the thing that animates the actions of everyone else in the movie. And he doesn't show up until the last one minute of the film. In old Hollywood, they used to call it the MacGuffin. So the Maltese Falcon, what is the Maltese Falcon? It's a stupid statue, but it's the MacGuffin.
It's the thing that sets everything else in the movie in motion. Open AI share price is not tradable. Now, of course, there are people who are invested in it, but even if they, on a Monday, they're bullish, on a Tuesday, they're bearish, they don't have the liquidity to... change their mind and act on that price in the way that we have in the public market.
To which I would respond to you, I'd say you're exactly right. Thank God for public markets, number one, because yes, there is a lot of concern about open AI, and we saw it viscerally in the prices of the companies that were deemed to be, quote, OpenAI dependent. The companies that OpenAI is spending the most money on their services and Oracle sort of became like an avatar for that.
But let me ask you a question. Anthropic, one of the biggest players in AI, also private,
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Chapter 7: What role does deficit spending play in the economy?
Anthropic spends about $5 billion annually that we know of on the AWS cloud to support its business. Anthropic is actually ahead of OpenAI in enterprise. They're selling to thousands of the largest organizations and corporations around the world. We don't have a share price for that one either. You think Anthropic is in as big of a drawdown from its high as the public share price of Oracle is?
Probably not. Amazon actually consolidates some of the profit from Anthropic is doing as a very large shareholder of the company. We think that that business is gangbusters. So yes, you have to bucket these things, but then you also have to realize narratives in AI are shifting overnight. Seven months ago, the talk around Alphabet is that they're finished. They're done.
They're going to get murdered by OpenAI and other LLMs. People are going to start their searches on Perplexity and Claude and ChatGPT and completely bypass the Google experience. And then Google goes up 65% on the year, becomes the best performing of the Mag7. And all of a sudden, it's Google's world and the rest of us live in it. That shift didn't take three years. It took like three months.
So the narratives and the banging on pots and pans has to give way to the primacy of price. What are people actually betting on with real money versus who is wishcasting and just hoping the guy they don't like... goes down for the count, right? Oh, I don't trust Sam or I hate Elon. It's so important to focus on price more than ever, not to try to sit here and parse 50 different people's opinions.
That game is almost impossible. The real game is, okay, fine, but what are the buyers doing? What are the sellers doing? We'll be right back after the break. And if you're enjoying the show so far, be sure to give Prof G Markets a follow wherever you get your podcasts. Thank you so much for having me.
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Chapter 8: What advice does Josh Brown give to young investors?
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Based on everything you've told us here and what you've seen in 2025, let's look ahead to 2026. We've been having a lot of different commentators on telling us their predictions for the year. We've gotten kind of a range of opinions. What are your predictions for markets this year? Are you bullish on 2026? Are you bearish? And why?
So we're money managers, not sell side analysts and not chief strategists. So we don't have price targets. We don't have our own internal earnings expectation. What we do for clients is we rationalize the risks they're taking with data. We try to give them the historical context that we think is more important than the
the prediction of the, of the, of the month or of the day these days, because we're in the January where everyone's making their year end predictions. But this is what I would share with you. The only questions that matter for this year, number one, will the fundamentals continue to justify an above average price earnings multiple? That's it. That's the question.
You either answer that yes, no, maybe, or let's say yes, no, I don't know. So of course, like obviously I don't know, but I think the answer is yes. Why do I think the answer is yes? Well, the first earnings season we'll have is Q4. We'll start getting these reports in February. And here are the consensus estimates. You tell me what you think when I'm done.
Wall Street thinks the S&P will deliver an 8.6% earnings growth quarter versus Q4 of 2024, okay? They think the technology sector, which is obviously the most important sector for earnings growth and also for market capitalization, will do 25.8% earnings growth. That's an eye-popping number. If they do 24% or 27% or anywhere in that vicinity,
Wouldn't you agree that that would support a 21 multiple on the overall S&P, given how important those companies are to market cap? That's what I would say. You're not getting that across the whole S&P. You're getting that in tech. And a lot of that's coming from semiconductors. OK, fine. But the number is the number. We don't put asterisks on any other year. for the S&P 500.
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