Why the AI Bubble Hasn’t Popped — ft. Josh Brown

Ed Elson is joined by Josh Brown, co-founder and CEO of Ritholtz, to unpack his biggest takeaways from markets in 2025 and what he expects in the year ahead. Josh also shares what he thinks will move markets in 2026, why he believes earnings growth will hold up, and why young investors should actually welcome a market correction. Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The new LinkedIn Hiring Pro can't undo your last hire. The human postponer. They were the master of one phrase. I'll circle back on that. But three months later, you are the one doing all their work and wondering how big that circle is. But LinkedIn Hiring Pro can take the hiring load off your plate. By automating the hiring busywork from the initial job post to scheduling interviews. Hire right the first time with LinkedIn Hiring Pro. Post a free job today at LinkedIn.com/quality.

• 0:31Speaker 01

  Low energy, unfocused, foggy? You might be dehydrated. Gatorade Zero Powders have been scientifically designed to help improve hydration balance in the body. With a clinically proven electrolyte blend and no artificial colors or flavors. Great tasting hydration, no matter where you're going. Shop now online or at retailers nationwide. Gatorade: Hydrates Better Than Water. Is it in you? Symptoms noted are signs of mild to moderate dehydration. Consult a healthcare professional if symptoms persist.

• 1:00Speaker 02

  Welcome to Sephora.

• 1:01Speaker 03

  I'm looking for a perfume that's not too perfumey?

• 1:06Speaker 02

  I got you.

• 1:06Speaker 04

  Serum moisturizer or moisturizer syrup?

• 1:10Speaker 02

  Let's get into layering.

• 1:11Speaker 03

  My concealer is making me look worse?

• 1:14Speaker 02

  Sounds like the wrong shade. Let's get you matched.

• 1:18Speaker 00

  There's only one store that really gets what you're going for. Get beauty from people who get beauty. Only at Sephora.

• 1:25Speaker 02

  Hi, I, uh... Let's get you a basket.

• 1:29Ed Elson?

  Today's number, 54. That is the percentage of men who have some form of facial hair, up from 42% 10 years ago. According to surveys, most men don't actually like their beard at first, but then it grows on them.

• 1:47Ed Elson?

  Okay.

• 1:48Josh Brown?

  Oh, I was supposed to... Oh my god.

• 1:51Ed Elson?

  No, if you don't find it funny, then that's just what we do, so...

• 1:55Josh Brown?

  I did, but it was a delayed reaction. I did find it funny.

• 2:02Speaker 07

  Markets are bigger than us.

• 2:03Josh Brown?

  What you have here is a structural change in the world's distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

• 2:11Ed Elson?

  Welcome to Prof G Markets. 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.

• 2:28Josh Brown?

  Great to see you. 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 what I'm, that's the energy I came into the year with.

• 2:40Ed Elson?

  I love it. You're looking good. How was your, how was your holiday? How was your new year?

• 2:45Josh Brown?

  So sick.

• 2:46Ed Elson?

  Oh, yeah.

• 2:46Josh Brown?

  So great. You know what? I've been in Florida for two weeks. I have a tan.

• 2:51Ed Elson?

  You look good.

• 2:51Josh Brown?

  The weather sucks here predictably, but like it's not even bothering me. I just, I had an amazing couple of weeks for the holidays and I feel good, ready for 26.

• 3:02Ed Elson?

  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 shutdown. We had rate cuts. We had this AI bubble story, which kind of got huge. A lot of people were talking about it. Just as you look back on 2025 and what's happened since we last spoke, just a pretty general question. What have been your biggest takeaways?

• 3:38Josh Brown?

  I think the key thing was not getting too negative in November when Oracle was blowing up and it seemed like this was going to be like this, 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, 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.

• 4:19Josh Brown?

  Um, and you know, some of that is like political, some of that is people who missed out on on the AI trade for the last three years, but like, whatever, you just had this huge chorus of um, 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, uh, 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.

• 5:03Josh Brown?

  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.

• 5:12Ed Elson?

  Which part of those bubble fears do you take issue with? Cause you know, you know, 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 Gerson's podcast. Where they asked Sam Altman about the the revenue and the amount that they're going to spend, the fact they want to spend one and a half trillion dollars. They've got 13 billion dollars 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 uh, in the market really depends on. So, you know, we, we weren't saying it was doomsday on this podcast. We were trying to be rational about it.

• 5:57Ed Elson?

  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?

• 6:10Josh Brown?

  Well, no, we still may end up having a bubble, but um, I look at price. I look at, I look at valuation. 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 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.

• 6:50Josh Brown?

  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 wish casting. A lot of people want to see OpenAI in the private market somehow like burst into flames. A lot of people want to see Larry Ellison and Oracle have a, have a come up. And it's like a lot of, 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's CDS prices, which I don't think are particularly important. Um, but if you were looking at actual share prices for Nvidia and Broadcom and Corning,

• 7:34Josh Brown?

  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, I think it's really important when you hear people pounding on, you know, with a, with a wooden spoon on a pan, talking about bubble. Ask yourself, why are they doing it? Are they in the content business?

• 8:17Josh Brown?

  Okay, they're doing it for attention. They're doing it for clicks. I get that. That's, there's nothing wrong with that. Everyone's got to make a living. Um, are they money managers who are overweight small-cap value, underweight tech? Okay, I get that too. They're wish casting. 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, I told you that, I told you so. Um, so there's a lot of that going on. Um, obviously people on financial television, it's high ratings when stocks like Oracle. Will 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.

• 9:00Josh Brown?

  So there are a lot of people who have a vested interest in seeing this thing go badly. And maybe it will, but I, 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.

• 9:37Ed Elson?

  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.

• 9:50Josh Brown?

  Yes.

• 9:51Ed Elson?

  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.

• 10:06Josh Brown?

  My point is when in doubt, follow price.

• 10:09Ed Elson?

  When in doubt, trust what the markets are saying about the, the price of a stock.

• 10:16Josh Brown?

  Pay less attention to what people say and more attention to what they do.

• 10:20Ed Elson?

  Fair enough. I, I, I think that's definitely true on OpenAI as an example. So I, I feel like we need to kind of bucket these companies into, into two buckets, basically.

• 10:31Josh Brown?

  Totally true.

• 10:32Ed Elson?

  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, 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. 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.

• 11:18Ed Elson?

  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?

• 11:34Josh Brown?

  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 highly, highly unique situation. I've likened it in other venues. I've explained it as Kaiser Soze in The Usual Suspects.

• 11:56Ed Elson?

  Sam Altman limping off.

• 11:59Josh Brown?

  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 the 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. OpenAI's 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.

• 12:42Josh Brown?

  Thank God for public markets, number one. Because, yes, there is a lot of concern about OpenAI. And we saw it viscerally in the prices of the companies that were deemed to be, quote, OpenAI dependent, 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, 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.

• 13:25Josh Brown?

  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.

• 14:09Josh Brown?

  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 wish casting and just hoping the guy they don't like goes down for the count? Right?

• 14:54Josh Brown?

  Oh, I don't trust Sam, or I hate Elon, or 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?

• 15:12Ed Elson?

  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.

• 15:28Speaker 00

  The new LinkedIn Hiring Pro can't undo your last hire. The no show. Who set you back because they didn't show up on day one? Or day two, or ever again? And now your product launch is delayed because you're talking to alien abduction podcasters to track them down. But LinkedIn Hiring Pro can help make sure your next hire sticks. In fact, businesses who use LinkedIn are 24% less likely to reopen a role in the next 12 months. Hire right the first time with LinkedIn Hiring Pro. Post a free job today at LinkedIn.com/quality.

• 16:00Speaker 08

  Low energy, unfocused, foggy? You might be dehydrated. Whether it's hot yoga, over 100-degree weather, or too much sun. Gator Light, with a specialized blend of five electrolytes, was scientifically designed to help move fluids into the body faster for rapid rehydration. Shop now at retailers nationwide. Gator Light: Hydrates Faster Than Water. Is it in you? Symptoms noted are signs of mild to moderate dehydration. Consult a healthcare professional if symptoms persist.

• 16:29Speaker 02

  Welcome to Sephora.

• 16:30Speaker 03

  I'm looking for a perfume that's not too perfumey?

• 16:34Speaker 02

  I got you.

• 16:35Speaker 04

  Serum moisturizer, or moisturizer serum.

• 16:39Speaker 02

  Let's get into layering.

• 16:40Speaker 03

  My concealer is making me look worse?

• 16:43Speaker 02

  Sounds like the wrong shade. Let's get you matched.

• 16:47Speaker 09

  There's only one store that really gets what you're going for. Get beauty from people who get beauty. Only at Sephora.

• 16:54Speaker 10

  Hi, I...

• 16:55Speaker 02

  Let's get you a basket.

• 17:03Ed Elson?

  We're back with Profty Markets. 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?

• 17:29Josh Brown?

  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 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.

• 18:13Josh Brown?

  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 and P will deliver an 8.6% earnings growth quarter versus Q4 of 2024. Okay? They think that technology sector, which is obviously the most important sector for earnings growth and also for market capitalization, will do 25.8% earnings growth.

• 18:58Josh Brown?

  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 and P? Given how important those companies are to market cap? I that's what I would say. Um, you're not getting that across the whole S and P. You're getting that in tech and a lot of that's coming from semiconductors. Okay, fine. But the number is the number. We don't put asterisks on any other year for the S and P 500. Why would we all of a sudden put an asterisk now? Here are the full year 2026 consensus estimates for sectors. The big sectors that matter. Uh, Wall Street thinks industrials will do 13.1% earnings growth.

• 19:44Josh Brown?

  They think technology would do 29.7.

• 19:48Josh Brown?

  Thirty percent earn, not revenue, earnings growth for twenty six. Again, if they even get close. But here's what's really fascinating. Financials, ten point four percent for twenty twenty six. Disque- consumer discretionary, huge sector. Amazon's in that sector. Um, Tesla, for some reason, is in that sector. Eleven point seven percent. Um, communication services, that's Alphabet, Meta, uh, Netflix, et cetera. Seven point two percent. So like, i- if, uh, healthcare, eight and a half. Utilities, eight point seven. That's become a de facto AI trade. So the consensus thinks the S and P five hundred will grow earnings

• 20:29Josh Brown?

  once again for all of calendar twenty twenty six by fourteen point six percent. So with a typical beat rate, it'll probably be more like fifteen, sixteen percent. If you think the market delivers that, twenty one times earnings is justifiable. And so, it doesn't mean we'll get another, you know, eighteen, twenty percent return on the S and P, but at the very least, we should have a lot of winners in the market. Sixteen stocks of the S and P doubled last year. These aren't obscure bizarre stocks no one's ever heard of. Some very big stocks doubled last year. All sorts of stocks went up thirty, forty, fifty, sixty percent. And I want you to remember, the stock market wasn't cheap a year ago

• 21:11Josh Brown?

  at this time. So, the earnings growth has to deliver. So the, the real question that we need to answer is, will it? Yes. I think it will. And, there's a chance that that's wrong. You could have some sort of an exogenous shock that changes everything. So you have to just be like, okay with that. That's the risk that we're all taking. Because, just for fun, go read the January two thousand twenty year ahead outlooks from Wall Street. How many of them were talking about coronavirus? Zero. Hundreds of outlooks, zero. And that obviously changed everything. Stock market ended up going up, by the way. Um, but, I'm just making the point, like, the thing that

• 21:56Josh Brown?

  could alter the course of fifteen percent earnings growth this year is not really the thing that any of us could put our finger on. Now, a lot of people would say, oh, it's going to be the AI data centers. They're going to slow down. There's going to be another oracle, blah, blah, blah. Okay, possible. Um, but right now that's just not, I wouldn't say that's sort of like what should be anyone's base case. That all of a sudden, all this money that these companies have spent, they're going to say, you know what? Forget it. It's, it's just unlikely to me. So that, that's where I am on, on 26.

• 22:29Ed Elson?

  I think that makes a lot of sense and I, I appreciate, I think it's a really good framework. Let's just focus on the fundamentals. Are the fundamentals going to grow in 2026? And a lot of indicators would say, yes, they will. Beyond just the numbers itself, that itself that Wall Street is projecting, but the fact that we do have interest rates coming down, the fact that we're going to see more deficit spending. Having said that, on the AI front, I think one of the questions that I'm thinking about and that a lot of people are thinking about is we've seen all of this unbelievable spending and as you say it, it is mostly coming from the semiconductor industry. That's sort of where the action is happening and that's what's kind of

• 23:13Ed Elson?

  driving, driving growth at this point. But I think the question then becomes, will we see the ROI on those chip and data center investments? Like, is it the case that all of the money that Meta is spending on the data centers and that Alphabet's spending on the data center, all the money that they're spending on these chips? Are we going to see that reflected? Are they going to get a real return on their investment in the what I would say, the real economy, which is the consumer economy? And for that, we kind of have to look at companies like Anthropic. We have to look at companies like OpenAI. And we have to figure out how much are people actually willing to spend for this stuff?

• 23:58Josh Brown?

  Palantir is your tell. Okay, Amazon is your tell. Alphabet. This is where the spending is literally happening. Corporations are not buying GPUs. Amazon and, and, right, like, Amazon, Alphabet, Microsoft are buying GPUs, Meta. And why are they buying them? Because their customers want to be able to do more with their data. And that's how that, that works. So, um, you watch the data centers. I think, I, I think everyone is, so that's not like a big revelation. You watch the Palantirs, the Accentures, um, you listen to their commentary.

• 24:41Josh Brown?

  Those are the companies that are actually assisting, um, large enterprises with like, okay, great, AI, AI, AI. What do I actually do with it? How, like, how does it help me beat earnings, uh, you know, next quarter? Well, here's a project that you could work on right now. So, like, that's, that's where the rubber meets the road is in that part of the market. Um, look, I think you look at the performance in sectors that have nothing to do with AI over the last year, and you've seen like different sectors waking up. Biotech had an unbelievable comeback in 2025. What has materially changed in biotech?

• 25:22Josh Brown?

  Nothing other than the use of AI is probably a huge efficiency driver in, uh, phase one, two, and three clinical trials. It probably speeds up a lot of the things that have slowed those companies down in the drug discovery, uh, realm. That's the way Wall Street is starting to price in the AI opportunity in, in healthcare. Look at the financials. Same thing, fraud detection, cybersecurity, like, AI becomes a force multiplier in things that they're already spending money on. If they could spend money more efficiently. And the last thing, and I know we're gonna get to this, but, um,

• 26:00Josh Brown?

  At CES, Nvidia was able to show that they have done in one year what took Tesla eight years to automate an automobile so that it could drive through the city of San Francisco without a human touching any of the steering wheel, gear shift, brake, acceleration. Again, that's eight years of Tesla experimenting on the road. Nvidia has an off-the-shelf solution for every OEM in the world to turn their automobiles with a few sensors and

• 26:39Josh Brown?

  a software package and a chip package into an autonomous car. You know Nvidia works with? Volvo, Mercedes-Benz, GM, Toyota, Jaguar Land Rover. All of them are going to have access to minimum level two autonomous driving via Nvidia. They'll be able to catch up to Tesla like within a year, 18 months. Now, you think about, you say, what's the ROI? Are you fucking kidding me? The ROI for these types of projects, and we're not even getting into robots, which is probably a late 2020s story, like robots as like an ROI driver

• 27:21Josh Brown?

  is probably 27, 28, 29. But like, that is what the street is pricing in when it says it's willing to pay 22 times for the top 500 companies in the United States. That's the mentality right now. It's not what's the ROI, it's oh my god, I can't even imagine how big the ROI could be. It's all moving so fast. My dreams can't even keep up with the things that they're announcing. It's a very exciting time to be an investor. Not to lose your head, it'd be a different, if I said to you, the S and P's 45 times earnings, like it's the year 2000, all right, it's a different conversation, but that's not what's

• 28:02Josh Brown?

  going on right now. I wish it were, it'd be more fun to talk about. It'd be a slam dunk bubble. We could all be short and get rich. It's just not that easy.

• 28:11Ed Elson?

  Yeah, I think the other, the other piece of it is... The timing of all of this, it's sort of like, what is our timeframe for when we're going to see that ROI and what are Wall Street's expectations for when that is all going to come through? And I think that kind of defines whether we see an implosion, whether we see a correction or some sort of crash or we don't. I'm with you. The ROI is going to show up at some point in some way, and it'll be in a very big way.

• 28:39Josh Brown?

  Would you right now, here's a thought exercise. I take away your LLM usage from your day. You're not a corporation, you're not a government, you're an individual. I say to you, no LLM for the next 30 days. What's your experience like relative to what you've just spent the last two years doing? It sucks. You're not going to stop paying for it. And then if I say, okay, you could have it back, but the only way you could have it back is you have to pay three times more than you were paying.

• 29:11Ed Elson?

  That's the question. I'm not sure. I'm not sure. That's what I want to know.

• 29:14Josh Brown?

  Oh, I'm fairly sure. If I took it away from you for 30 days and then said, you could have it back, but ChatGPT+ is no longer 20, it's 40 or 60, you're probably paying it.

• 29:27Ed Elson?

  I think I probably am, I think. But that to me is the big question. It's like, and that's what the, I guess, as a sort of naturally maybe risk averse person, which is not a good thing, by the way. It's way better to be risk on risky. It's a better strategy in general. But I guess my point is, and what I, what I want to know is, what is that price?

• 29:50Josh Brown?

  Right.

• 29:51Ed Elson?

  And I want to see it in the numbers. Like, what are people actually willing to pay? What is this thing really worth? And can we see that happening? And I guess my response, I just, I don't quite know. And that's why I feel, and I think probably others feel a little bit more hesitation this year, is that we, we don't fully know yet.

• 30:14Ed Elson?

  We we kind of are getting a sense, we're beginning to get a sense, we're beginning to see the ROI begin to get reflected in the numbers, but we haven't fully realized it.

• 30:24Josh Brown?

  I think there's already been a behavioral transformation that cannot be reversed. And I think that most knowledge economy workers have already very heavily incorporated AI tools into their daily workflows in ways that they might not even be aware that they've done because of the ways in which Alphabet has sort of inserted this stuff into all the services that we already use. There's AI all over Gmail, there's AI all over Docs and Drive and I just and then you think about like for people that are heavily working in tech, doing things like coding, no one's coding without a co-pilot at this point. So I think there's been a behavioral change that's irreversible.

• 31:08Josh Brown?

  And I think that that grounds this AI spending story, at least in something that's like a baseline.

• 31:15Ed Elson?

  Yes.

• 31:15Josh Brown?

  Okay, so that's really, that's important. And Ed, you could not have said that in 1999. You could not have said that because nobody was actually making money on the internet.

• 31:29Ed Elson?

  Right.

• 31:29Josh Brown?

  And it's funny, the first use case where people actually were willing to surrender a credit card number to any internet company was the purchase of online pornography.

• 31:43Ed Elson?

  Ugh.

• 31:43Josh Brown?

  Like pornography is probably the thing that got AOL to profitability. Like honestly, it's that, it's, it's, it's the thing that made the internet like a going concern. It was the only revenue.

• 31:55Ed Elson?

  It's what's going to get OpenAI to profitability, right?

• 31:58Josh Brown?

  Perhaps, but I, I think this is very different from that. I think this is like, it's already proliferated through corporate America. And then just regular people in the way that they look for information. Like my wife and her friends take pictures of things and ask ChatGPT, how much does this cost? Or does this look like I should take my son to the doctor or, right? Like, it's just, it's become, it's become ingrained behaviorally already. So we need to stop thinking about this as something that's about to abruptly end. And then I think you're asking the right question. It's like, okay, but what is it really worth? I don't know that there's one answer that makes sense for everybody,

• 32:41Josh Brown?

  but I agree it's the right question.

• 32:46Ed Elson?

  We'll be right back and for even more markets content, sign up for our newsletter at profgymarkets.com/subscribe.

• 33:00Speaker 11

  Here's your report.

• 33:01Speaker 12

  Oh, thanks, Jane. I wish I could hire someone just like you.

• 33:04Speaker 11

  Try LinkedIn Hiring Pro. It's more than a job board. It's like the recruiter you always wished you had. Hiring Pro uses real time insights to match your role to LinkedIn's unique network of professionals and delivers a shortlist of best fit candidates. You'll spend less time sorting applicants and more time talking to the right people.

• 33:21Speaker 12

  Let's do it. You're irreplaceable, Jane, but another you would be great.

• 33:25Speaker 11

  Hire right the first time. Post your job for free on LinkedIn today at LinkedIn.com/quality.

• 33:31Speaker 13

  Energía baja, falta de concentración, nebla mental. You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 34:00Speaker 02

  Welcome to Sephora.

• 34:01Speaker 03

  I'm looking for a perfume that's not too perfumey.

• 34:06Speaker 02

  I got you.

• 34:06Speaker 04

  Syrup moisturizer or moisturizer syrup.

• 34:10Speaker 02

  Let's get into layering.

• 34:11Speaker 03

  My concealer is making me look worse.

• 34:14Speaker 02

  Sounds like the wrong shade. Let's get you matched.

• 34:18Speaker 09

  There's only one store that really gets what you're going for. Get beauty from people who get beauty, only at Sephora.

• 34:25Speaker 02

  Hi, I...

• 34:27Speaker 03

  Let's get you a basket.

• 34:34Ed Elson?

  We're back with Prof G Markets. AI was a huge narrative driver in 2025. Based on this conversation, with that thinking about what's going to happen in 2026, I think it's probably going to be a huge driver of the narrative in 2026 as well. What else are you thinking about going into 2026? Aside from AI, what are the big stories? What are the big shifts that are going to really drive the market this year?

• 34:59Josh Brown?

  Well, it's profit margins and we hit record levels of profit margins this year. And I think we'll do it again next year. And that is mostly an AI story. So I hate to like recursively keep coming back. I think that's really it. It's so big, dude, it's so, it's so big.

• 35:17Ed Elson?

  Yes.

• 35:17Josh Brown?

  The most incredible thing for next year is to see the S and P 493 stocks, not the Mag 7, start beating earnings and crediting all these AI investments they're making. That's it. Like, that's the whole, that's the whole ballgame. And I think that's what we're going to get.

• 35:35Ed Elson?

  What about interest rates? Are you focused on what we're going to see from the Federal Reserve? I mean, obviously Trump's going to pick his new Fed chair in May. Does that matter to you?

• 35:45Josh Brown?

  Not really. There are years in which the Fed is the queen on the chessboard. I think the Fed this year is a bishop at best. I just, I don't think anywhere near as impactful. If we get one interest rate or three interest rates, I'm not sure that that materially means a whole hell of a lot. One of the things we've learned over the last couple of years, which I know you and I have discussed, is that high interest rates actually served as a form of stimulus for the top 20% of the country. People's bank accounts were gushing income in ways that they hadn't experienced in 15 years. There's just no evidence that what the system needs right now is a lot of rate cuts.

• 36:26Josh Brown?

  There's also no evidence for any reason why we should expect to see rate hikes. So I think there will be a transition at the Fed. I don't think it'll be fire and brimstone. I don't think the new guy walks in with a mandate from the White House to take rates to zero. Um, I, I just, I think the most interesting thing happening at the Fed right now is what they're doing with very short-term repo markets, just, you know, doing their best to maintain liquidity. Maybe that sort of becomes a story if we have a liquidity air pocket, but outside of that, I would not have the Fed on my bingo card as being a particularly notable player in what's to come this year.

• 37:05Ed Elson?

  What about deficit spending? We've got the big, beautiful bill, which is kind of gonna go into effect this year. It's gonna add nearly half a trillion dollars in some form of fiscal support. I assume that's just gonna show up in earnings. Are you thinking about that? Do you think that will be a significant driver this year in markets as well?

• 37:24Josh Brown?

  No, I think the def- the deficit is just something that you put on your list of risks to the market every year. If you're a chief strategist or a chief economist, you just like, it's like an automatic. It's almost like putting, uh, China invades Taiwan. Like, it's just like one of those, like, just pencil it in.

• 37:41Ed Elson?

  Well, I, sorry, I, I mean in a, in a positive sense, that this is just more money. We're just injecting more money into the system, and so perhaps it will be a good thing.

• 37:51Josh Brown?

  The risk there is it's inflationary. Um, but the prevailing trend right now, um, in the stuff that really matters and, and, uh, my colleague, uh, Callie Cox, who's actually, uh, out, out of the picture on maternity leave, uh, recently, but like, the big, like, her big concept that she tries to get across to people, uh, our investors is just like, look, there are blips in inflation for individual items, but the prevailing trend is lower, uh, less exacerbated issues in the labor markets, lower wage growth, lower commodity prices. Filled up my car this morning at three, you know, a three-handle for, uh, premium, uh, gasoline.

• 38:34Josh Brown?

  Um, rents are coming in, home prices are moderating. We do have, it's not at the speed the Fed would have liked, but we do have moderating, uh, inflation. All of that stimulus that you referenced, all of that spending, all the infrastructure, is there a risk there that all of a sudden the inflation picture moderates at a slower pace or starts to scare people to the upside? Sure. It's definitely something that we can worry about. I wouldn't use that as a reason to not invest. Um, you know, it's it's on the list, low on the list, but it's on the list.

• 39:12Ed Elson?

  Josh Brown sounds very bullish is what I would say.

• 39:15Josh Brown?

  But I always am. It's not it.

• 39:17Ed Elson?

  You always are. And I think I think, I mean, it seems as though your view going into 2026 is kind of stay the course more of the same.

• 39:29Ed Elson?

  Which, you know, is exactly what you kind of told us last year, and that's exactly how you were rewarded for it. I mean, we had a great year.

• 39:38Josh Brown?

  I'd love to show up and say we're at a turning point. I know. I'm in the content game also, but I I'm doing. I'm doing this a long time. I've been bullish forever. My clients have been rewarded for that. There are bear markets along the way. 2022 was not fun. We did our jobs as wealth managers in 2022. We had massive stocks like Meta and Amazon in 50, 70% drawdowns like that does happen. It's part of the experience of investing. Our our approach is not to try to predict those moments. It's to help people get through them. Because what's on the other side is even higher prices, even more profitability,

• 40:21Josh Brown?

  even better outcomes for people who are willing to bear risk. This is what we do, and I think we're the best in the world at it. We are not the best in the world at calling turning points like that. I can't get, I wish I could. I can't deliver that for you.

• 40:35Ed Elson?

  What would be your advice to young investors right now? Uh, I mean, and I I would just couch this in the fact that we've had, for example, Aswath Damodaran, who we had on on our podcast earlier this or earlier this year, last year, it was the end of last year.

• 40:52Ed Elson?

  And it was one of the most strikingly bearish pods we've recorded where he was very, I mean, and this is not a person who loves to sound the alarm on stuff. I mean, he is a very calm, composed, measured investor. He tells everyone what what he. He's doing and you can track his investments on his website. But he said that he is looking at selling and getting into collectibles because he thinks that everything is is overvalued. Now, I don't know where he stands on things right now. This was, this was, you know, some time ago, but just given what everything we're seeing, all the,

• 41:33Ed Elson?

  all the opinions out there, what would be your advice to investors, especially young investors, going into 2026 right now? How should you think about investing?

• 41:42Josh Brown?

  Do not get into collectibles.

• 41:45Josh Brown?

  Aswath is brilliant. He's the dean of valuation, they call him. I understand. He's, he's looking at present valuations and he's looking historically and he's, it's accurate. When you buy at high valuations, prospective returns are lower. It's like an iron law of, of finance. The problem is, um, we have seen a consistent ratcheting up of multiples over the last 10 years and companies have found ways to deliver higher than expected profits. And, uh, this could be yet another one of those years. So I think the, the key thing for young investors is to pray for downside in the stock market, to remember that they are forced investors,

• 42:30Josh Brown?

  force savers. If you are in your twenties or thirties, you have decades that you are forced to take a portion of your paycheck every two weeks and add it into a 401k. If you know that today, are you rooting for all time highs? Are you mad? Have you lost perspective on like time and space? You want lower prices if you're young. So I have clients in their twenties, I have clients in their eighties. My clients in their eighties want higher prices. No shit. They're cashing their investments out now and living off the money today. My clients in their twenties, we have conditioned them, don't root for record highs, root for 20% corrections and then call me and

• 43:12Josh Brown?

  tell me how you're going to get me more money into your account or I'll call you. So you must, if you're in your twenties and thirties, stop rooting for record highs. I know it feels good. I know it's endorphins. Look what a genius I am. I bought Tesla at 300. It's 340. Yeah, yeah, yeah, I get it. That's what you're rooting for. But you shouldn't be. What you really should be rooting for is a lost decade. A, it'll hurt your parents. So I know you'll you'll get that shade in Freud.

• 43:43Josh Brown?

  But B, you will be accumulating shares in the greatest corporations known to mankind at discounted levels from where they once sold. And when you're buying low, eventually the market goes back to its old highs. You don't get back to even, you slingshot ahead of where you otherwise would have been. So if you're listening to this, you're a young investor, you're not an old, rich man like Scott Galloway. Stop rooting for record highs. Root for corrections, root for lost decades. Cause that makes you a lot more money over the preponderance of your investing career, which is decades long. Mine is too. I am an older gentleman.

• 44:28Josh Brown?

  I am a forced buyer of stocks. I'm 48 years old, if you could believe that. I I can't touch my own 401k. Till I'm 65, 70 years old, I won't be withdrawing to my IRAs until the last minute. So I'm a buyer of stocks. I all time highs are great for me. They make me look like a genius to my clients. But the reality is I'd rather buy low. So it's it's a mindset shift. It's not about predicting what's gonna happen.

• 44:56Ed Elson?

  Career advice going into 2026 for these young investors, these young professionals. You know, you've had so much success in so many different arenas. I watch you on CNBC all the time crushing it. I listen to your podcast. I love it. You're a great writer. You're a great investor. What would be your your words of wisdom for young people, young working professionals heading into 2026? What should they be focused on?

• 45:24Josh Brown?

  All right. So I've heard a lot of very accomplished, people more accomplished than I am answer this question. I've heard people give commencement speeches. I've heard I've heard the professor. My opinion is figure out how to solve the problems of wealthy people.

• 45:41Josh Brown?

  It's this cut it and that could be as simple as like everyone mocks, oh, you're an art history major. Good luck with all your student debt. Hey, moron. What do you think all these trillionaires are going to be doing with their money? They're going to be collecting priceless works of art and they have no taste. You see how Jeff Bezos celebrates his birthday on, on, on a yacht with people waving sparklers? They're Philistines. They're, they're, imagine having a hundred billion dollars and that's how you celebrate your birthday on fucking Instagram? Okay. Cater to wealthy people. Solve their problems. Make yourself indispensable to

• 46:26Josh Brown?

  large corporations, small business owners, people with means, people who are willing to give you money to make their problems go away. You will have lifetime employment. It's as simple as that.

• 46:39Ed Elson?

  I love it. Josh Brown is the co-founder and CEO of Ritholtz, a New York City-based investment advisory firm managing six and a half billion dollars in assets for individuals, corporate retirement plans and foundations. And you can also check out his podcast, The Compound and Friends for more. I highly recommend it. Josh, uh, next time we'll have to do this longer, but we'll let you go. Thank you so much.

• 47:01Josh Brown?

  Always a pleasure, Ed. Wishing you guys all the best in 2026.

• 47:05Ed Elson?

  You too. Thank you, sir.

• 47:09Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Shalane, Isabella Kinsel, Christian O'Donoghue and Mia Silverio. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Profty Markets from Profty Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

• 48:11Speaker 14

  They're running a cover two defense. But you're running to get game day deals on Uber Eats. Keep everyone at tonight's watch party fed with deals from your go-to restaurants. Or stock up with deals on your favorite snacks and groceries. Whatever the occasion, get game day deals on Uber Eats all season long. It's not football without food. Uber Eats. Order now. Terms apply. Product availability varies by region. See app for details.

• 48:41Speaker 15

  Looking for a simple way to thank your clients or recognize employees for a job well done? A Starbucks card is more than a gift. It's a pick-me-up, a break in their day, and a reminder that you appreciate them. Whether you're shopping for digital or physical cards in bulk, Starbucks cards are the perfect gift to brighten anyone's day. Share the joy of coffee and connection when you give the gift of Starbucks. Shop Starbucks cards in bulk now at StarbucksCardB2B.com.

• 49:08Speaker 07

  For a limited time, you can get a Big Mac meal for just $8. That's a burger, fries, and a drink. They don't call it an extra value meal for nothing. Get a Big Mac meal only at McDonald's.

• 49:21Speaker 12

  Price and participation may vary. Promotion pricing may be lower than meal pricing.