Pod Insights Prof G Markets Why Markets Can’t Price AI About this episode Ed Elson breaks down the software sell-off and Amazon’s earnings with Robert Armstrong, US financial commentator for the Financial Times. Then, he discusses what’s happened to Bitcoin over the past two weeks with Tom Lee, Chief Investment Officer of Fundstrat Capital. Finally, Ed shares his thoughts on what this latest chapter means for the story of Bitcoin.
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Transcript 5,191 words · 19 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:29 Ed Elson? Today's number: 135 million. That's how many people watched Bad Bunny's Super Bowl halftime show. The president was not happy with the performance. He said the dancing was, quote, "disgusting," especially for young children. That is a sharp reversal from his previous views on what's disgusting for young children.
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2:01 Ed Elson? Welcome to Profitec Markets. I'm Ed Elson. It is February 10th. Let's check in on yesterday's market vitals. The S&P 500 and Nasdaq climbed as the Dow hit its second consecutive record close. Meanwhile, the dollar fell, gold climbed back above $5,000, and Bitcoin was roughly flat after its drawdown last week. More on that in a moment.
2:25 Ed Elson? Okay, what else is happening? It's been a harrowing week for the tech sector. Amazon is down 15% over the past five days after spooking investors with a nearly 60% jump in its 2026 capex outlook. The announcement came amid a brutal tech sell-off as new tools from Anthropic ignited fears that AI could kill the software industry. All told, the sell-off wiped out over $1 trillion in market value of tech stocks. However, markets rallied on Friday as some traders bought the dip. Stocks continued their rally yesterday as Google raised $20 billion in a bond offering to fund its AI spending. Still, Amazon fell deeper into the red. Okay, here to discuss what's happening with Amazon and the tech markets at large, we're
3:10 Ed Elson? speaking with pod favorite, Robert Armstrong, US financial commentator for the Financial Times, author of the Unhedged newsletter and co-host of the Unhedged podcast. Rob, welcome back to Profiteer Markets.
3:21 Robert Armstrong? Great to be here.
3:23 Ed Elson? Let's get right to it.
3:24 Robert Armstrong? Yeah.
3:25 Ed Elson? We'll start with Amazon. Amazon reported earnings, they basically met revenue expectations, basically met on earnings. It was a little bit of a miss.
3:36 Robert Armstrong? Yes.
3:37 Ed Elson? But the big news was they decided to increase their capex to $200 billion in 2026, up more than 50% from last year, $50 billion more than Wall Street expected. And now, Amazon is essentially in freefall. Let's just start with your reactions to what happened to Amazon and the market's reaction.
3:56 Robert Armstrong? Well, let's just be clear, the amounts of money these companies are now talking about, Amazon, Google, Microsoft, Meta, are unbelievable, right? I mean, there's numbers being thrown around, like, you know, the amount, the amount of spending as a percentage of GDP, somebody was taking today, is more than was spent on the transcontinental railroads. You know, it's like, I mean, I don't know what percentage of GDP the Great Pyramid of Giza was, but like, this is these, this is like Titanic amounts of money. And I think...
4:34 Robert Armstrong? The anxiety we've seen building for a number of months here, what is the ROI on these sums, hundreds of billions of dollars, the amount of revenue you're going to have to generate to make that a project comparable in profitability to the historical business of an Amazon or a Meta or a Google or a Microsoft are just staggering.
4:59 Ed Elson? Yeah.
5:00 Robert Armstrong? And so like, are these companies becoming structurally less profitable in the AI era? Maybe. And I think that's what you, you know, Amazon is down is, you know, 15% lower than it was a few days ago. I think that is what the market is thinking.
5:16 Ed Elson? Yeah.
5:17 Robert Armstrong? You know, these, these may not be as, you know, they may be great AI companies in their next iteration, but AI might not be as good a business as their old business was. And there's no way of going back. You can't just sit by the sideline either.
5:33 Ed Elson? Talk a bit about why has the market decided that? Because I look at what's happened with Amazon here. I also look at what the reaction to Google, where Google announced that they were going to double their spending and then the shares fell a little bit, but not really. And then again, rebounded. It was a very different reaction.
5:51 Robert Armstrong? And even weirdly, Metas went up.
5:53 Ed Elson? Metas went up. Exactly. And, and, and so there are different reactions. I mean, it feels like we're trying to, or at least I'm trying to understand, which is an impossible task. What is the market really thinking? But there are a lot of contradictions happening here. As you say, Meta announces this gigantic spending plan, shares go up. Amazon does the same similar thing. They basically all do the same thing. Amazon shares go down. Meanwhile, there's this story happening in AI, which is Anthropic, comes out with these incredible tools. And then everyone decides that's the future.
6:24 Robert Armstrong? Yeah.
6:24 Ed Elson? It's not going to be the legacy software companies like Salesforce and Service Now and the rest of them, which again, seems to be a little bit of a contradiction because it's like, is AI going to be massively transformative? Then, okay, maybe the spending is a good thing, or maybe it isn't going to be transformative. And in which case, the spending is a waste of money. Where does the market stand here?
6:47 Robert Armstrong? Okay. I think this is.
6:51 Robert Armstrong? A quote jumps to mind, which is what William Golding, who was a novelist and screenwriter, said about Hollywood. You probably know this one. He said, "Nobody knows anything." And what he meant by that was that you don't know, you make movies and you don't know if you've made a good movie or not until an audience sits in front of it and likes it or doesn't like it and tells their friends and people start buying the tickets. It's just a crap shoot until you're in front of the audience. You don't know. And that, there is a flavor of that here. We know this is a powerful technology, but we don't know what the business structure is gonna look like. We don't know how deep the competitive
7:30 Robert Armstrong? moats around good AI businesses are. And of course, competitive moats are what determines the size of your returns. Yeah. We don't know how commoditized is going to be. And so it feels like the market is kind of flapping around, looking for some kind of narrative it can cling to, because we just can't know at this point. Do you know what I mean? So like, software companies, this route in business software companies was a perfect example. Like, all those business software companies are not going to get crushed by AI. Some will incorporate it, some will
8:09 Robert Armstrong? get crushed, some will adopt. There's a lot more to running a business software company than just writing code. There's distribution and customer relationships and all of this stuff. So do we know who's gonna be steamrolled and who's gonna adopt? No. Yes. And we're just, it's guesses and it's volatility and it's one narrative takes control for one day and then the next narrative. So I think, you know, the contradictions are not gonna go away. Over the long run, markets will price this, but it's really struggling to do it right now.
8:47 Ed Elson? Hundred percent. I would just add, I mean, I think that's exactly right. No one really knows what's going on. Hence why we're seeing all of this volatility. And in those moments, it does seem that the best thing you could do as an investor is just go back to square one and go back to fundamentals.
9:04 Robert Armstrong? Yeah.
9:04 Ed Elson? Go back to the fundamentals of valuation. And, you know, I'm just looking at the multiple on Amazon right now. Trading at, it was 29 times earnings earlier in the day. We've bounced back up a little bit to 30 times earnings. But let's compare that to Walmart. Walmart is trading at 47 times earnings. Let's compare this to Costco. Costco is trading at 54 times earnings.
9:24 Robert Armstrong? Yes.
9:25 Ed Elson? Unbelievable disparity here between Amazon, the future of retail, and then Walmart, the past.
9:32 Robert Armstrong? Past of retail, but you know, and first of all, Walmart, we should just say, and Costco are brilliantly managed companies.
9:40 Ed Elson? Yep.
9:40 Robert Armstrong? Like it's, to say those are boring old grocers really misses it. You know, I think Walmart, Walmart's management has been courageous about kind of grasping the online nettle and making hard decisions about accepting lower margins in return for, you know, higher revenues and all this stuff. But the point is, you just know more about Walmart's future than you do know about Amazon's future.
10:05 Ed Elson? Right.
10:05 Robert Armstrong? Right. It is, it is easier to predict. And that's why, that's the difference in multiple right there is it's an uncertainty. It's a certainty premium for the Walmarts and the Costcos and an uncertainty premium for the Amazons. And you know, look, all of these staple stocks, even the, those are the two best staples companies in the world. But like all these, every, like the crappy staple stocks like Campbell's Soup, those are doing well too. And those aren't growing at all.
10:31 Ed Elson? Yeah.
10:31 Robert Armstrong? There's all these kind of old school consumer goods.
10:36 Robert Armstrong? Companies that, you know, they can't get any price and they're not growing at all, but they're rallying this year because at least you know they'll be around.
10:45 Ed Elson? Right.
10:46 Robert Armstrong? I mean, you know, people are still going to use trash bags.
10:50 Ed Elson? Exactly. It seems that that is, I mean, it's astounding the amount of money investors are willing to pay right now for certainty.
10:58 Robert Armstrong? Yeah.
10:58 Ed Elson? For some semblance of security and safety.
11:01 Robert Armstrong? Correct.
11:02 Ed Elson? It's interesting that this is the kind of stuff that investors have decided is safe. We can say the same thing about gold.
11:08 Robert Armstrong? Yep.
11:09 Ed Elson? For whatever reason, we've decided that gold this year is a safer thing to invest in than Amazon. You wrote in your unhedged newsletter, you said, this isn't just a tech sell off. You said, quote, "The market is undergoing a structural shift." Is this kind of what you were talking about?
11:25 Robert Armstrong? Yeah, it is exactly. So there was a time, I mean, the narrative of a year ago, even six months ago, was tech is kind of everything.
11:34 Ed Elson? Yeah.
11:34 Robert Armstrong? And going with that narrative has worked brilliantly for investors. But all of a sudden, people are interested in things like not just consumer staples, but energy, industrials, you know, kind of solid, steady businesses that have been neglected. And now are, you know, they're not, none of them are very cheap, but they're cheaper than some of the growth stocks have been, and they offer you more certainty. I think, you know, international stocks continue to appeal for this same reason. You know, you buy a European or a UK index, you know, you're getting banks, industrials, miners, you know, basic stuff. And I think you're exactly right. There is a tremendous premium for predictability and certainty
12:18 Robert Armstrong? right now. And that's a big part of this regime change.
12:22 Ed Elson? All right. Rob Armstrong, US financial commentator for the Financial Times. Rob, really appreciate it. Thank you as always.
12:28 Robert Armstrong? Anytime.
12:31 Ed Elson? After the break, Bitcoin takes a fall. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edredelson.substack.com.
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14:23 Ed Elson? We're back with Prof G Markets. Bitcoin just suffered its worst two-week collapse in nearly three years. It's fallen more than 50% from its October peak, briefly hitting a low of $60,000 on Friday. It finished the week with a sharp rebound to $70,000. But all told, Bitcoin is down 30% over the past year, erasing all of its gains since Trump's reelection. Here to explain what is going on with Bitcoin, we are speaking with our friend Tom Lee, Chief Investment Officer of Fundstrat Capital. Tom, thanks for joining us on Prof G Markets.
14:59 Tom Lee? Great to see you.
15:00 Ed Elson? Great to see you. So Bitcoin is seeing one of its largest crashes in a few years. Hit $60,000, then it came back up. Let's just start with your kind of high level thoughts on what's happening right now.
15:17 Tom Lee? Well, you know, Bitcoin has been in a drawdown really since October 10th. And we know that on October 10th, there was a price shock. Then that led to one of the largest ever deleveraging events. And so the industry has been crippled since because balance sheets have shrunk. About a third of the industry's market makers went away. And crypto sentiment, of course, has turned really negative because about at least 2 million accounts got wiped out during that mini crash. And so the industry has been limping along. And I think then a few things happened earlier this year that sort of triggered another cascade
16:00 Tom Lee? of not necessarily deleveraging shock, but essentially what looks like capitulation. The first is that President Trump made a tweet about Greenland in January. And that triggered another cascade of liquidations because you had another price shock that happened over a weekend. And as we know, liquid markets will sell what they can over a weekend ahead of a broader market opening, and that was crypto. The second is that as markets became very leery about geopolitical tension and then,
16:38 Tom Lee? of course, dollar weakness, but then it got magnified that we had a potentially new Fed Chair coming in that looked that he could be quite hawkish. I think that led to a real rethink about how people want to be positioned. And as you know, gold suddenly surged and that gold surge.
17:02 Tom Lee? Became quite expensive for investors because gold has about a $30 trillion network value now. Gold surged almost 20% in two days. That was a $6 trillion swing. Well, the entire crypto market is about $2 trillion. So gold made a very large volatile move over a weekend, which again could have triggered another set of margin calls for anyone short, especially gold and silver. And then crypto, of course, was really the source of funds. So I think in many ways crypto still hasn't recovered from October 10th. And then we had what I consider some macro shocks that got people really interested in
17:47 Tom Lee? gold, but there's so much gold held that you had to sell something else to actually own your gold.
17:52 Ed Elson? Doesn't this call the fundamental value of Bitcoin into question? Because a lot of the things you described there, you know, this geopolitical uncertainty because of the Greenland announcement, issues of inflation, you know, a hedge against instability at large. These are the kinds of things that Bitcoin is supposed to be the hedge against. It's supposed to be the safe haven against these forces. And so isn't this kind of the market telling us actually Bitcoin isn't the new gold, actually gold is the new gold?
18:27 Tom Lee? That's a great question. I mean, that has been the existential head scratching because a lot of people in crypto say, hey, isn't Bitcoin supposed to track gold if you have geopolitical tension or central bank easing? Or we're talking about dollar debasement?
18:44 Ed Elson? Right.
18:45 Tom Lee? But there is one scenario where gold will do well, but crypto will do poorly. Okay. And that's if the entire currency system itself is questioned. Meaning if there is a point where we say, uh, we're so concerned about chaos that I don't care about the dollar. I don't even want to own anything that's dollar denominated. And especially if it's a digital dollar, right? Because Bitcoin is digital money. In that scenario, gold would do well, but stocks and crypto would go down. So I think in some ways, the market became convinced itself of the idea that
19:27 Tom Lee? You know, gold's going up so much because we could be facing a much more calamitous scenario. And I think part of that has to do with WASH was kind of a little bit of a shock to markets. So that's one scenario where crypto would do badly, stocks do badly, but gold does well. But the other thing to keep in mind is that if you look at rolling through your history, Bitcoin is still positive and outperforming inflation, which means Bitcoin is still actually a good store of value. If we look back at the history of gold, I think it's about 15% of the time gold's had a negative rolling three-year return. So in some ways, both are stores of value, but they're just going to be working at different times.
20:09 Ed Elson? You've also been an investor in Ethereum, which has also gotten hit recently.
20:15 Ed Elson? What are your views on Ethereum at this point and its relation, its relationship with what's happened to Bitcoin?
20:22 Tom Lee? Well, yeah, Ethereum has really been caught up in the crypto sell-off because it is the second largest crypto. So if anyone is trying to liquidate their crypto holdings,
20:32 Tom Lee? and you know, there has been capitulation, people saying, I'm really done with crypto entirely.
20:36 Ed Elson? Yeah.
20:37 Tom Lee? So they're going to sell to Bitcoin and Ethereum. And I think we're in that phase. The difference, I think, is that Ethereum actually does have measurable activity that we can look at. We can look at wallets opened and created, transactions done on the Ethereum network, or even the amount of assets created on the blockchain, which is called real-world assets or total value locked. Those have actually all been rising and actually going up parabolically because Ethereum is benefiting from Wall Street's focus on tokenization. You know, tokenization is the idea that Wall Street wants to redo parts of its business
21:17 Tom Lee? on a public blockchain because it actually speeds up the product and it reduces delays. It's what they call finality. And so Ethereum's really benefited from that. You know, we know, just for instance, this year alone, BlackRock has announced its further support of creating a common blockchain. We know that the NYC is tokenizing its assets and they are working with public blockchains to implement that. And we know Fidelity launched its own investment fund on the Ethereum blockchain, so. I think there's a lot of actual strangely, and maybe this is going to bother some original crypto people, but Wall Street is really embracing Ethereum.
21:57 Ed Elson? It sounds like your view on the two largest cryptocurrencies, which is Bitcoin and Ethereum. Ethereum, you're more optimistic about because of the fact that there is this tokenization effect happening on Wall Street, and we'll see how that plays out. You sound less bullish, less optimistic about Bitcoin right now. I mean, I, it sounds like you agree with me, at least my view of what's happening, that Bitcoin needs to be seen by the investment world as a hedge against uncertainty in some, in some capacity. The dollar debasement would be an example. And it seems that the investment world is deciding kind of slowly but surely, actually, maybe, maybe that's not what it is to us.
22:41 Ed Elson? You know, when things get really difficult, we actually prefer gold instead. Is that the correct characterization? Would it be correct to say you're maybe more bullish on Ethereum and you're less bullish at this point on Bitcoin?
22:57 Tom Lee? I think it is correct to say that everything I've described gives Bitcoin a narrative problem.
23:02 Ed Elson? Yeah.
23:02 Tom Lee? Because people are going to say, oh, well, in the last year, it hasn't been a great store value. It didn't save me when geopolitical uncertainty rose. It didn't save me when we got uncertain about this new Fed. And of course, in the back of people's minds is this idea of quantum risk are growing for Bitcoin.
23:21 Ed Elson? Right.
23:22 Tom Lee? So it, it does raise that narrative question. But the one thing that we do know now is that both Bitcoin and Ethereum have had a huge drawdown. Ethereum's fallen 60%. That's the eighth time in eight years. So they're both super volatile assets. It's a little bit like when someone says. I want to own Mag7. So let's say someone says, you know, I have geoplastic uncertainty. And this time, gold really worked. And you know, there's times when when someone's buying Mag7 and they want to buy AI, only three of the seven names are working. I do think we just have to be mindful that 2026 hasn't played out yet. So if Bitcoin indeed stages a recovery, then it's going to recover its narrative.
24:07 Ed Elson? Yes.
24:07 Tom Lee? Uh, but similarly, we think Ethereum is is really tracking past declines. So we think it's going to recover strongly. But you're you're absolutely right. You know, in this battle, gold has won one Bitcoins lost zero in 2026.
24:22 Ed Elson? Okay, Tom Lee, Chief Investment Officer of Fundstrat Capital. Tom, appreciate your time.
24:28 Tom Lee? Thank you.
24:33 Ed Elson? Bitcoin just suffered its worst two-week collapse in nearly three years. It's fallen more than 50% from its October peak, briefly hitting a low of $60,000 on Friday. It finished the week with a sharp rebound to $70,000. But all told, Bitcoin is down 30% over the past year, erasing all of its gains since Trump's reelection. In that same period, gold has risen about 75%. And so it appears the market has chosen its preferred safe haven asset. Okay, let's talk about Bitcoin. If you listen to the show, you know, I'm not a huge fan of Bitcoin. I'm not a huge fan of crypto, and I never have been.
25:18 Ed Elson? I've made this position evident multiple times on the podcast. For example, when we interviewed the high priest of Bitcoin, Michael Saylor. I'm not fully bought in because I think that that statement is quite a speculative statement to say, you know, with the level of conviction that you have, that this asset will remain interesting. And then to build this giant trade off of that premise. And I think that that's what some people would have would take issue with. It's like, well, why is this thing going to remain interesting?
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25:57 Ed Elson? Yeah.
25:58 Speaker 14 We're up 30x. That's three times more than Nvidia. That's interesting. How about the number one options market in the SP500? Mine. We have the most intense options, like 130% of market cap. The most profitable convertible bond, the number one convertible bonds in the marketplace. Microstrategies, right? It's interesting because people are making money off of it.
26:24 Ed Elson? There was also the time where I said how I really feel about Bitcoin treasury companies and MicroStrategy. I think we now need to be more candid about what MicroStrategy is doing. I think what they're doing is a Ponzi scheme. And there was also the time where Scott said he was getting into this stuff and I got upset with him. I am so disappointed in you for buying shares in a Bitcoin treasury company. I need some exposure to Bitcoin. We've talked about these treasury companies, they're total, total bullshit. Every time I say this kind of thing, I get a lot of pushback. A lot of people say that I'm stupid and they say, well, look at the price. Look at the price of Bitcoin, it's going up. And now here we are. And the price of Bitcoin is of course going down.
27:08 Ed Elson? We hit a peak of 126,000 in October. Since then Bitcoin has fallen more than 50%. MicroStrategy, by the way, has fallen around 60% since then. But let's put the treasury companies to the side. Let's focus just on Bitcoin itself. The reason this sell-off is significant is because this is exactly the kind of environment in which Bitcoin should be thriving. Bitcoin is supposed to be digital gold. It's supposed to be a safe haven, a hedge against inflation, against instability, against global conflict. I often call it doomsday insurance and I think most Bitcoin bulls would agree with that. Like gold, Bitcoin is supposed to thrive in unstable environments.
27:53 Ed Elson? And yet here we are, we're living in what Jamie Dimon has called "the most unstable environment since World War II", and yet Bitcoin is falling.
28:04 Ed Elson? How could this be? Well, I think you'd have to look at what is happening to actual gold right now. Gold is ripping. And what investors seem to be telling us that actually Bitcoin isn't the new gold. In fact, gold is the new gold. When things get ugly and when push comes to shove, investors would rather park their money in actual, physical gold, not the digital kind that you might keep on, say, a USB stick. And by the way, that's not a value judgment of either asset. That is simply a description of what is happening right now in the markets. People have decided that they would prefer gold to the digital version that is Bitcoin.
28:45 Ed Elson? Now, having said that, it's very easy for me to sit here with Bitcoin down and look smart and tell you, I told you so. And I also want to be clear, I have been in this position before. Back in 2022, after FTX collapsed, Bitcoin also collapsed. And my friend said, wow, Ed, you were right. And what happened right after that? Then Bitcoin ripped up again. It's very easy to convince yourself during these crashes that the story is over, that because Bitcoin is down to 60,000, 70,000, that must mean that Bitcoin is a foregone conclusion, that the cycle is finished. I want to be clear, the crypto story is not over.
29:27 Ed Elson? In fact, Bitcoin is up more than 300% since its lows in 2022. And so regardless of what you think about the fundamental value of Bitcoin, the reality is there's still a lot of juice in this story. There is more than enough belief in Bitcoin, more than enough confidence to go around and to take the price of this asset up even higher. Now, do I believe that these prices are warranted? No, I do not. I don't see the value in doomsday insurance. I think if doomsday arrives, we want bullets, we want water and we want food. I don't think we want digital currencies. But remember what I think about gold too. I don't think gold prices are warranted either. And yet the price of gold continues to go up.
30:10 Ed Elson? The point is, just because the price is going down, doesn't mean it's over. Bitcoin could just as easily crash again tomorrow as it could rally back up to 100,000. No one really knows. And anyone who tells you they do know, either to the upside or to the downside, that person isn't to be trusted. I don't like Bitcoin. I don't think it's valuable, but I'm not going to sit here and tell you that Bitcoin is going to zero. This was just another chapter in the long story of Bitcoin. And there are plenty more chapters to come.
30:52 Ed Elson? Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our research team is Dan Shalan, Isabella Kinsel, Chris No Donahue and Mia Silverio. Thank you for listening to Profty Markets from Profty Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.
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