Chapter 1: What is the main topic discussed in this episode?
Welcome back to the Rundown, interview edition. Today, we are talking to a returning guest, Jason Ware. Jason is the Chief Investment Officer at Albion Financial. And in today's episode, we take a look back at Q1 and discuss the state of the markets heading into Q2.
We covered a lot of topics on today's episode, including the Iran war, oil prices, the software sell-off, and why Jason is still bullish on big tech going forward. I think you guys will really enjoy this one, so let's get into it. Jason Ware, welcome back to the rundown.
Good to be with you guys. Thanks for having me.
Of course, man. You're a returning guest. And the last time we talked, I was just looking back at it.
Chapter 2: What market dynamics are affecting the S&P 500 currently?
It was Christmas Eve of 2025, end of Q4. And I feel like that was forever ago because back then the markets were at all-time highs. Everything was more jolly. Now the vibes are a little bit different, I would say. Obviously, there's the war going on. Oil prices at four-year highs. Tech stocks getting wrecked every day. But yet... the S and P is like within 3% of all time highs.
So really weird market dynamics right now. I'm just kind of curious. What do you make of what's happening right now?
Yeah. So there's, there's so much we could unpack. I mean, that's such a broad question. Like, what do we make of what's going on right now? Well, my goodness, like we don't have enough time to go over all that, but I think the way, go ahead, go ahead. No, please.
Chapter 3: How has the software selloff impacted investor sentiment?
I was going to ask you like, Ooh, What do you make of the volatility or I guess in your career, have you like experienced this kind of chaos? When's the last time you've experienced this kind of chaos and volatility?
One year ago, we had tariffs, remember? I mean, literally today is April 9th. This was the day that Trump backed off of Liberation Day and the market was up almost 10%. So, you know, I mean, this... it wasn't that long ago that we experienced this kind of volatility and volatility is just part of the journey when you invest in stocks.
Sometimes it's more volatile, other times it's less volatile, but bouncing around and having a bit of a bumpy ride is what one should expect. So look, volatility is, we like to say that it's the toll, it's the cost, it's the price that investors have to pay to get premium returns over bonds and cash. And so it's why we get paid more in stocks.
But to answer your question about the volatility we're experiencing so far this year, I think You know, we can sum that up pretty cleanly in the war, right?
Chapter 4: What are the implications of AI on software companies?
I mean, I think stocks were largely behaving themselves up until the end of February. And since then, we've had a lot of uncertainty because of the war, in particular because of the impact on energy prices, fertilizer costs, helium, you name it. And so that... position, that posture going into the year.
You talked about you and I got together on Christmas Eve and things felt a lot more jolly, to use a festive term. And so everyone kind of came into 26 with this notion of like the economy's good, earnings are good. The Fed's on our side. We're going to get a more dovish Fed chair coming in. What could possibly go wrong? And well, of course, war in Iran is what
went wrong and we've experienced volatility since, but I will say it's interesting. I mean, we're only two and a half percent off of the highs, right? We've had a pretty strong snapback over the last few days. And so, yeah, some volatility, but you know, it's not too bad.
But even before the war, the main story before the war was this rotation out of the Mac 7, rotation out of software, and into more of the energy sector and things like that. The energy sector was the best performing sector even before the war. So I guess I'm kind of surprised.
I think the conventional wisdom was if the magnificent seven stocks take a hit, that's going to bring down the entire market with them. That didn't happen. In fact, everything was fine until the war, which added increased volatility. Do you think that's going to continue in Q2?
I will say it feels like the rotation – and we talked about this at the end of December. I feel like the rotation away from technology – into other parts of the market, the broadening out, if you will. It feels like it has more legs this time than it has in the past. But I don't think that means that the Mag 7 or the Splendid 6, as I call them, because we don't own Tesla.
You know, you can have Broadcom. We own Broadcom.
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Chapter 5: What factors are contributing to the volatility in the market?
So, you know, maybe we're back to the Mag 7. I don't know. But I feel like that rotation away from tech has been more enduring. But we're looking at some really interesting valuations now. I mean, I think the sell-off in the Mag 7 – we got earnings going up for the mag seven, we have price going down.
So now we have these really interesting valuations and PE multiples that I think, you know, starting with new money here today, I'm more bullish on tech and mag seven than I was at the end of December, simply for the reason of valuation. So I wouldn't be surprised to see a bit of a catch up here in that tech trade.
I mean, one company that just seems to bleed every day is Microsoft. I think it's had its worst quarter in Q1 since 2008. That's never a good company. And I just don't know. Why does the market hate Microsoft so much? I feel like the CEO, Satya Nadella, has lost his aura. The company is growing, but the market is just rejecting whatever is coming out of there. What do you make of all that?
Yeah, I think it's two things. A, I think they've been caught up in the software trade, which I don't agree with. We own Microsoft. I think that is over-extrapolating, throwing the baby out with the bathwater, whatever aphorism you want to use. But I think A, it's software.
And then B, I think what used to be an asset for them, which was this close relationship with Sam Altman and OpenAI, has become kind of a liability. And so the stock has re-rated based on those two things. If you look at the growth in Azure, the cloud business, which of course is very important, it's been tracking at a very impressive pace.
But I think the acceleration of cloud, investors want to see more there than they've been able to deliver on. And I think when you look at valuation, the stock at the highs was trading at 32, 33 times. And that was just too high of a PE multiple relative to those two or three things that have investors a little bit more guarded.
Yeah, I mean, the relationship with OpenAI, that just has not worked out, right? And I think they know that now. I mean, I think they've started pivoting. I think they started to pivot, what, two years ago whenever OpenAI had that drama with Sam Altman being removed. And they never really, you know, they don't really have their own model. Copilot, I don't know, like the numbers are probably fine.
Yeah, that's the other piece, Copilot.
Yeah, I mean, it's just not well received. And I think most folks in the enterprise are just saying it's sort of like AI slop for the enterprise.
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Chapter 6: How do current geopolitical events influence market trends?
They're full on bear market, I would say Salesforce, ServiceNow, Adobe, name it. All these are at 52 week lows. Yeah. I guess there is a genuine freak out that AI is going to result in less seats moving forward. And like these enterprise clients are going to just start vibe coding their own CRMs.
I mean, which is all just nonsense.
Exactly. I just it doesn't make any sense to me. I keep buying the dip. I get burned every day. And now I've just kind of like I'm just I don't know what to do.
You're just in them. Now you've got to do the whole like hodl. I guess that's like the equity markets version of crypto where like when you get whacked really hard, you just have to like double down on your conviction and say, I'm in them forever. And I think there are some software stocks that are going to be disrupted and disintermediated.
I think there are others that are going to be just fine. In fact, this probably opens up and unlocks new TAM for them. So I think if you own software as a group, if you own IEGV or whatever, I think you'll be fine long-term. You own some, it's just like the nature of diversification. You own some good ones, you own some bad ones.
And when you add up the pluses and minuses directionally, I think software has a bright future despite the concerns about AI just ripping through software. And then I think as a stock picker, you know, you want to go through and make sure that
The companies that you own have an established presence in the software markets in which they operate and they have, you know, the data and the compliance tailwinds and the brand and, you know, software is more than just code.
We like to say there are certainly some, if you're running like a thin wrapper, you're like this application layer where it's just easy to kind of like come in and, you know, use AI to, uh, not necessarily rip and replace, but to augment it in a way where maybe the spend is less or the economics are less favorable. Okay, fair enough.
And there are certainly some software companies out there that fit that profile. But again, I think the established ones like, you know, we own Salesforce, we've owned Salesforce for some time, and we're still bullish on Salesforce. Microsoft's enterprise software is not going anywhere, despite how bad Copilot might be, despite how, you know, the narrative among, you know,
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Chapter 7: What is the outlook for big tech stocks moving forward?
And so I think that's been lost in the conversation around like, you know, the software trade, but right now investors are shooting first and asking questions later. And that probably continues for the short term, but at some point it'll bottom.
Even the sexy names like Figma, right? I mean, you just, I mean, they're also just getting wrecked and that's still part of the same software story. And I think the vibe really shifted when like, you know, back in like October of last year, November of last year, a press release would come out. Right. And like, Oh, open AI is partnering with,
etsy and then like all the stocks would be up double digits and now claude comes out with any sort of tool that like has to do with an industry and that industry just gets wiped out like just bloodbath the next day was it i will say one of the more um ironic things uh you know when i look at like this whole idea of like that anthropic and claude is going to wipe out software is if you look at
Anthropic as a company, as an enterprise, they're using these tools. They themselves have not vibe coded Salesforce out of the stack or Microsoft out of their enterprise stack. I think when they did the presentation of three or four weeks ago, they were using Slack.
It's like, okay, if Anthropic itself is not vibe coding new software, then I don't think the small business down the street is going to start doing that. There's just no way.
Do you think it just comes down to AI potentially reducing headcount at these companies, right? Maybe that's what the fear is. These companies are going to replace junior employees and new hires with software, which means less seats for Microsoft down the line.
Yeah, and I think that's fair. But that, in my mind, is firmly discounted when you look at Salesforce trading at 14 times earnings. This thing is never traded at a PE below 30 until we got in this whole like software is going to be eaten by AI narrative. And so, yeah, okay. I take that at its face and say, yeah, there's going to be a slowdown in some of the seat-based economics.
I think over time, that's gonna be overwhelmed by the hybrid approach that software companies are gonna take, some seat-based sales and then some consumption-based. I mean, if you look at, I'm talking about a book here though, if you look at Salesforce, I mean, they've been out in front of this.
AgentForce, they've been doing that for a couple of years and Benioff's been pushing that since like the fall of 2024. And so you hear like some analysts say, well, but the enterprise software companies that don't have an agentic strategy are going to be toast, maybe. But, you know, ServiceNow and Salesforce and a lot of these folks, they do have a strategy for agentic and they are pushing that.
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Chapter 8: How will the new Fed chair affect interest rates and inflation?
And again, at 14 times earnings, like how much seat-based compression is in that valuation? A ton, way too much in my opinion.
I agree. I agree with you. And that's why I'm really curious to see what the earning season is going to be like coming up. Because, you know, how is the market going to react? These companies are going to put up massive numbers. And if it still goes down, like when stocks go down off of good news, that's when things get worrisome for me.
Speaking of a company who's actually looking to bounce back here is Meta. I mean, they, you know, this week they showed off their latest AI model. What's it called? MuseSpark.
Used to be Avocado, and now it's MuseSpark, yeah.
MuseSpark, right. And it's the first one to come out of their super intelligence lab. Stock popped, what, 6% or something like that? And it's actually up 20% from its lows from a couple weeks ago following the court cases that they lost in California. So the street is seeming to kind of come back on Meta here. How do you see Meta's AI strategy playing out?
Yeah, I mean, it's somewhat confusing because I will say that they're spending a ton of money, right? Like when Amazon spends a ton of money or Microsoft spends a ton of money or Google spends a ton of money, you know, there's been this concern on the street for a couple of years now about ROI on AI. Say that fast, like five times, you know? Yeah.
And my pushback has always been we're seeing ROI in largest hyperscalers. Like when they spend a dollar on expanding their cloud capacity, that dollar shows up immediately in new AI workload demand. Meta's got a different situation because they're not a classic hyperscaler, right? They're building their own AI system.
llm model super intelligence whatever you want to call this thing and in in my mind it's like it's unclear why they're willing to spend hundreds of billions of dollars to sort of be a me too in the llm space like i think they even said it when they launched new spark they said it's comparable with chat gpt it's com it's on par with claude and it's like spending a lot of money for an on par
um, me to LLM and to what end? Cause you're not a hyperscale. You're not seeing like this immediate one-to-one demand in terms of revenue. And so in my mind, it has to be about improving their, their ad product at the end of the day, but we're already seeing improvement in the ad product based on just like the algorithmic approach to AI and meta. So I will say we are underweight meta. We own it.
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