The geopolitical landscape experiencing a seismic shift as the Middle East conflict continues on this Thursday morning.
We are looking at the major US stock averages lower while oil is rallying.
We are looking at WTI and Brent soaring by 8% this morning.
Meanwhile, the AI revolution shows no signs of slowing down despite recent market jitters over AI funding.
Hyper scalers are projecting a massive $600 billion in caps for the next year and industry leaders like Nvidia are pouring billions into critical fiber optics infrastructure.
Well joining me to weigh in this morning is Andrew Rocco stocks.
Man and tech innovators portfolio for that investment research.
Good morning, Andrew.
Thank you so much for joining me.
So a lot of market action this morning, but the initial shock of the Mideast conflict.
What do you make of what has transpired in the past several sessions and where is the smart money rotating.
Yeah, what I would always advise investors is to not just monitor the headlines, but monitor the price reaction in relation to those headlines.
So it's something that Stanley Druckenmiller would call price action versus news.
So this Iran conflict has been in the pipeline for 40, 50 years.
We've talked about it.
It's never actually happened.
And if you would have told me this would've Happen the market would have been within a couple percent of highs holding that 200 day moving average.
I probably wouldn't have believed you.
So while the headlines are pretty scary, the price action itself is telling me that the economy is strong, the market is strong, and if we get any kind of resolution here, I expect stocks to continue this bull market moving forward.
Yeah, and I do want to get your take on the macro scenario here especially since that term stagflation has been popping up recently since the beginning of this conflict in the Middle East, but what is your macro take on what's happening and how do you see inflation being affected, especially as this conflict continues.
Yeah, so we've heard concerns about inflation on the tariff front, but I like to look at the data instead of predictions, basically, and the data is telling us that inflation is a lot lower than most of the street thinks.
If you look at the true inflation number, which It is a more up to-date number than the government number that's a little over 1%.
They use a bunch of real-time data, I think over 100,000 data points, and the government numbers typically lag that.
So before the Iran conflict, I would have told you we might even have deflation.
But now with oil soaring, I think that we might see a delayed reaction, a little bit of a move up in inflation, but I think overall the inflation concerns are way overblown in terms of both Iran and the tariff front, and that's just based on the data that I'm seeing that could change, but we haven't seen any signs of another big wave of inflation like we got the 9% a few years ago.
I just don't see that happening.
Yes, and we know that the headlines are being dominated by the geopolitical concerns over the conflict, but at the same time we can't ignore what's happening in private credit as well as artificial intelligence.
So I do want to get your take on.
Market anxiety over AI caps that we have seen.
So how are the so-called pick and shovel plays like say Texas Pacific land and the fiber optics sector position to absorb some of this infrastructure spending and where your concerns right now.
Yeah, so we have seen a couple cracks in private credit, but I'm glad you mentioned the AI infrastructure stocks because we don't really see an end to the CPE spending over the next few years, as you said, it was 600 or it's going to be $600 billion this year.
That is going to kind of hockey stick higher over the next couple of years and rather than betting on, let's say a specific chatbot, whether it be A Gemini or Chachi PT to win.
I think the best way to play it is the picks and shovels play because we know that that money is going to be spent on the AI revolution.
So one thing I would point investors to is the bottleneck in energy.
So we want on-site energy.
A stock I own, a stock clients own is Bloom Energy.
They allow you to make that energy on site.
And there's two reasons for this.
The Trump administration is pushing big tech companies to not impact the grid.
They don't want to see consumer electricity prices rise.
And then also these companies want consistent and loads of energy for the data centers.
So with the outdated grid, companies like Bloom Energy allow you to kind of supersede that.
So that's One area I'm looking in, we've seen the photonics stocks move higher like applied optoelectronics, Lumentum, that's another good one.
They kind of make the network run smoothly with those coveted Nvidia GPUs and just the data center stocks in general, one that just got investment from Nvidia is Nebius, and what makes that investment. important ticker symbol NBIS is that they're going to get access to Nvidia's next generation of technology, and they're going to be working on this agentic AI stacked together which should be critical moving forward.
Andrew, a lot to keep our eyes on in that sector, but I do want to pivot to crypto to round out our discussion today.
Now Bitcoin as well as proxy stocks, including that strategy, have taken a beating recently, but we're finally seeing insider buying at MSTR and also.
Market sentiment has plunged to multi-year lows, but we are seeing a surge in stablecoin adoption and with a potentially dovish Fed transition on the horizon.
Do you think the worst of the downturn is behind us in digital assets.
I would say that it depends on the digital asset that you're looking at.
I would focus on Bitcoin as an investor.
Bitcoin has had several of these 60, 70, 80% corrections, and it typically rebounds.
We saw them move into metals.
They kind of went euphoric and they peaked, in my view, or they're close to peaking.
So I think we could see some of.
Money in metals come back into the bitcoin space, into the crypto space.
I do like a strategy.
We own that.
We own that for clients and more as a mean reversion play and then Coinbase and Circle on the stablecoin front.
The stablecoin adoption has been stunning so far and with new legislation, I see that only moving forward, moving higher going forward.
Yes, and Andrew, last but not least, we have less than 60 seconds, but you mentioned legislation.
So what is your regulatory outlook stateside when it comes to digital assets?
Yeah, so I think they're going to work to get more crypto legislation passed specifically on the stablecoin front, and it could be disruptive to some of the legacy banks, but a lot of them are making moves towards that, and basically it's going to be better for customers because they're going to move the money along these rails a lot cheaper, a lot faster, and it will be able to move. be moved 24/7.
So this has been a long time coming, and I see it being good for the stablecoin companies and just the general public as well.
OK, Andrew, well, thank you so much for joining us this morning and we appreciate your insights as well as perspective.
Thank you.
Thank you.
