What the Hell Just Happened?! (EP. 490)

NVIDIA

Across the shows: 102 speakers in other episodes, 86 bullish and 56 bearish calls, past 30 days

• Ben Carlson · Ritholtz Wealth ManagementBearish

  CEO affair with an alleged Chinese spy is a massive risk; expects months of investigations; stock reaction too small.

  Ben argues the story of Nvidia CEO Jensen Huang's affair with a woman described as a Chinese spy is a massive risk for the company. He expects investigations for months, and says the new Democratic control of Congress could push probes into whether secrets were passed to China. He is surprised the stock fell only about 5%, and cites Dan Ives's view that the company is worth 20 to 30% less. Michael Batnick pushes back that the story is already public and Huang will not be removed, so the stock's muted reaction is not that surprising to him.

  “this is a massive risk for this. There's gonna be investigations out the ass for months and months to come on this.”at 42:37

US stock market outlook

• Michael Batnick · Ritholtz Wealth Management

  Still bullish on the US market, based on sentiment washout and the earnings trajectory.

  Michael recalls that he concluded the prior week he was still bullish, for reasons he did not fully list. He says the main reason was a sentiment washout combined with the earnings trajectory. He acknowledges that the view aged badly when the Nasdaq 100 fell about 6% on Thursday, the worst day since March 2020, and that such calls often age poorly.

  “I am still bullish for reasons x, y, and z. And primarily, it was the sentiment washout coupled with the earnings trajectory.”at 2:53

• Ben Carlson · Ritholtz Wealth Management

  Investors rotate out of AI stocks rather than selling equities; AI-led turmoil is a mega rotation.

  Ben cites Fidelity's Jurrien Timmer, who showed AI stocks down about 30% from their highs while the S&P 500 was down about 6%, the equal-weight S&P was down 1.3%, and the S&P excluding AI was up about 0.5%. From this he concludes that investors are not moving to cash during turmoil. Instead they sell one set of stocks and buy others, which he calls a mega rotation.

  “My only takeaway from this is anytime there is some sort of turmoil under the surface that we've been talking about, people do not want to sell stocks. They wanna sell certain types of stocks, but then they just wanna be in other types of stocks.”at 9:10

• Michael Batnick · Ritholtz Wealth Management

  Stock market in 2026 is driven almost entirely by whether AI news is good or bad that day.

  Michael cites a Warren Pies chart showing that the S&P 500 is up 71% cumulatively on days when semiconductors (SMH) rise, versus down 34% on days they fall. That is a spread of about 105%. He concludes the 2026 market is driven by whether AI is seen as good or bad on a given day, which he calls nuts.

  “The market in 2026 has completely been driven by is AI good today or is AI bad today?”at 18:04

• Michael Batnick · Ritholtz Wealth Management

  Broader market held up during the dot-com bust, so if AI falls, money should rotate into other sectors.

  Batnick had Chart Kidd look at the dot-com bust. The Nasdaq fell roughly 80% while tech and telecom stocks were destroyed, but the rest of the market was positive. The S&P 500 excluding tech and telecom was positive from top to bottom, and small, mid and value stocks did well. He argues that if money leaves tech for good, as he expects in a bust, it will move into staples, financials and other sectors. He also notes that there is too much money sloshing around the market.

  “The S and P ex tech and telecom was positive... If and when it really leaves tech for good, it will go into staples and financials.”at 50:40

Market sentiment, positioning & volatility

• Michael Batnick · Ritholtz Wealth Management

  Hedge fund degrossing to the largest extent since 2016 explains the Thursday selloff.

  Michael says the Thursday selloff makes sense as a narrative because of forced selling. He cites a JPMorgan chart showing hedge funds degrossing to the largest extent since 2016. He concludes that there was a lot of forced selling, which he sees as a case where a narrative really does fit the price action.

  “has a chart that shows hedge funds degrossing to the biggest extent since 2016.”at 11:07

• Ben Carlson · Ritholtz Wealth Management

  Hedge funds are overleveraged and crowded into the same trades, making them the new dumb money.

  Ben links the Thursday selloff to hedge funds being forced to unwind positions after being blown up. He cites a run of Bloomberg headlines about hedge funds dumping stocks, losing 30%, and cutting staff. He says that because hedge funds are taking heavy leverage and are all in the same bets, they now look like the dumb money. He admits he lacks the quantitative data to confirm it.

  “The hedge funds feel like the dumb money because they're taking so much leverage. You know? They're all in the same bets.”at 11:39

• Michael Batnick · Ritholtz Wealth Management

  The sharp sentiment wipeout in tech is a positive, and he loves it.

  Batnick sees the recent tech selloff as a healthy sentiment reset rather than a warning. He ties this to the AI trade not being done and to the idea that capex slowing down would be easier for investors to accept. He says he had been ready to tell people to calm down, but the market rebounded, so that advice was not needed.

  “I view this as a positive, especially the wipeout, like the sentiment wipeout. I love it. I think it's great.”at 47:22

• Ben Carlson · Ritholtz Wealth Management

  Retail investing is going global as young Europeans take over their own retirement saving.

  At a 400-person live event in Italy, Ben saw many young Italians who know they can't count on the generous pensions their parents had, and who are asking what they should do about it. One 18-year-old started his own podcast. Ben argues that young people globally are learning markets and investing, which means years of more participants. He thinks this changes the 'relentless bid' Josh Brown has discussed from a US story into a global one that is already starting.

  “There's going to be a continued bull market in young people being able to look at this stuff, gain market knowledge, and invest in the markets. It's a global thing. We're gonna have years and years of more and more people investing in the markets.”at 54:28

AI infrastructure & data centers

• Ben Carlson · Ritholtz Wealth Management

  Local data center backlash will raise hyperscalers' build costs and shrink their returns, not stop the buildout.

  Ben reads the 2026 midterm ballot results as voters rejecting data centers in their communities; he cites roughly 43 of 44 local measures on data centers. He does not expect companies to abandon the business, especially in places like Texas. He expects communities to extract more tax revenue and incentives, so hyperscalers will pay more or build farther away. He concludes that hyperscalers stay entrenched but the ROI on these projects gets smaller.

  “Or they're gonna have to go further away and pay more money. It's just gonna be a little bit more expensive, and it's gonna make the ROI a little smaller. That's my big takeaway.”at 28:29

• Michael Batnick · Ritholtz Wealth Management

  Market overreacted to the midterms; data center spending is not finished and leverage has been flushed.

  Michael argues that the Thursday selloff in AI names, which he links to Republicans being more supportive of data center spending in places like Texas, overreacted. He calls the idea that data center spending is done an overreaction. As evidence he cites a Meta president, Dina Powell McCormick, who said a governor who campaigned on data centers asked to meet after the inauguration because they did not want to lose the investment. He says things should settle down and that leverage has hopefully now been wiped out.

  “[Meta's Dina Powell McCormick said:] we did have a governor that won last night who did make data centers a big part of their platform say to us ... as soon as we get past the inauguration, let's meet because we don't want to lose this investment in our town.”at 29:28

• Michael Batnick · Ritholtz Wealth Management

  The AI trade isn't done; a slower capex pace after the election would be more palatable for investors.

  Amazon CEO Andy Jassy said AWS could grow 39% on a $184B run rate and keep growing about 40% a year toward a trillion-dollar business, so spending needs to keep rising. Batnick notes that Jassy was asked whether it would be more convenient to spread the capex over 25 years, and that the answer was no. He suggests the election could mean a slower pace, so cash flow stops hemorrhaging and investors find AI spending more palatable. He thinks CEOs would be thrilled with that, and says the AI trade is not done.

  “Maybe things do slow down and we don't see like the cash flow hemorrhaging... the AI trade is not done. It's just going to be more palatable for investors.”at 46:51

US elections & politics

• Ben Carlson · Ritholtz Wealth Management

  Political recency bias is far worse than in markets; voters flip their views fast.

  Ben contrasts 2024 narratives that billionaires were buying elections, young men had permanently moved to Republicans, and Democrats were finished for years. Two years later Elon Musk's backed candidates reportedly lost about 98% of races, and young men swung from roughly +38 Republican to Democratic in one tweeted data set. He concludes that politicians underestimate how quickly voters change their minds, so political recency bias is worse than market recency bias.

  “I think anytime you look at this, the recency bias in politics is so much worse than it is in markets, that the people try to figure out what happened.”at 20:44

Credit markets

• Ben Carlson · Ritholtz Wealth Management

  Fixed income is finally a normal market again, with bonds offering spreads over cash that should be a buffer.

  Ben says rates have reset, so cash has lost its competitive yield versus short-term bonds, corporate bonds, core bonds, multi-sector, high yield and municipal bonds after taxes. For a long time cash yielded more than almost everything. Ben now sees a normal fixed income market in which spreads look as they should. He also points to tax-equivalent municipal yields and says the cash income helps other holdings by acting as a buffer. He cites a recent conversation with PIMCO's head of municipal bonds. The segment is sponsored by PIMCO.

  “this to me, this is a normal fixed income market finally for the first time in a very long time.”at 49:51

US jobs & labor market

• Ben Carlson · Ritholtz Wealth Management

  Unemployment will likely stay below 5%, breaking the record streak, so AI has not yet disrupted jobs.

  The US is near the longest stretch of unemployment below 5%. The record is 64 months (1965 to 1970), and the streak is at 61 months, which is longer than the late-1990s, 1950s post-WWII and late-2010s streaks. Ben expects the record to be broken because he cannot see unemployment spiking above 5% over the next three months. He treats the resilient labor market as a possible bearish signal for AI, since AI has not yet disrupted employment, though he frames this as a question rather than a firm call.

  “We're probably going to beat it... I can't see unemployment next three months spiking above 5%.”at 51:46