The AI Bubble Is Real—Here Are 4 Stocks to Own

Is an AI bubble here? Well, it may be. But the question is, if there is an AI bubble, and if it bursts, what investments are going to be are we going to want to be in long term? John and I have four stocks for you today. I want to start with the most controversial one. I don't think John even agrees with this one. But look, if we go through the bubble bursting, if we go through some sort of recession, maybe it's not as bad as 2009, maybe it doesn't last as long as the dot bubble, I don't think people are going to be cancelling their Disney sub subscriptions, their Disney Plus subscriptions, their Hulu subscriptions. I don't think they're going to be canceling ESPN. And I think especially at the high end of the market, people are going to still be visiting Disney parks. That's why I think buying Disney today at a forward price earnings multiple of just 14 a.5 John I think is going to be a phenomenal place to be. The stock doesn't mean the stock couldn't pull back but this is such an unloved company that continues to grow continues to invest in their products and in a world where we're using artificial intelligence and technology more and more those realworld experiences are just going to be more and more valuable. I visited Disney and the Universal Parks in Florida earlier this year. It's amazing how much better Disney is run, how much better they can monetize their business. I I think this is going to be a company that we look back on. If there is some sort of bubble that bursts, this is this is going to be a stock that's going to thrive. I certainly can't disagree with the framing of that thesis that you want to double down on on real world experiences in a I would say regardless of whether the AI bubble pops or not. I mean that is really the diff differentiator between what is happening online to a very large degree. It's becoming more and more artificial and therefore it stands to reason that the real is going to have more and more import. And so that does favor a theme park experience even movies to an extent. This is not an AI slop company. This is a >> yeah, >> in theory it has very valuable intellectual property that can be developed into very quality content. And so that makes sense to me. What what I struggle with is the fact that it's only up 20% in the last 10 years. And so there's been plenty of opportunity for Disney. Why is it finally going to be able to turn it around at this point and actually be a good investment for shareholders? >> Well, I will tell you that Disney has gone through this before. And if you look back on the long history of Disney, they got go through usually about a decade long drought before something really turns them around. So if you look at before uh Eisner came in in the early 1980s, the company was kind of lost. They had lost their creative spirit, really turned around that business, invested more in parks, raised the prices at parks, by the way. That's when those price increases really started to go into place. Uh late in his run, stock kind of went nowhere again for a while. Bob Iger comes in, buys Marvel, buys Pixar, everybody gets excited. Again, over the past 15 years or so, there's been a ton of changes, structural changes in the entertainment environment, and those have been major headwinds for Disney. So, you think about the decline of cable. That's something that's going to impact not only a lot of their their businesses, their their cable brands that they were selling to companies, but also ESPN, which is a huge cash cow for them. Movies aren't doing as well as they once were. streaming has obviously taken over, but what other legacy company is better positioned today than Disney in streaming? I mean, you have Netflix. Netflix is obviously the big game and then YouTube and streaming. I would argue that Disney is number three. That's actually a pretty good position to be and their streaming business continues to grow, continues to get more profitable. But the part that I wanted to show off is the parks business. So, this is since re trailing 12-month revenue since the end of 2022 compound annual growth rate of about 7%. I think that's probably going to accelerate in the future as they have some of these major expansions that are going in all over the world. You have more cruise lines that are coming online. Also, those margins are going up. Companion growth rate of operating income up about eight and a half% and now over 10 billion. This is the real core of the business today. I wouldn't be surprised to see Disney. Jet is in some of its non-core business. I mean, I don't know if the ESPN really fits with the the Disney that we know today. this is what I want to own is the theme park business, all the other things around it. Hopefully, they're a little bit profitable, but if this business grows, you know, potentially high single digits, maybe even low double digits over the next day decade, this can be a phenomenal stock and it's the kind of thing that isn't going to go down 90% in a downturn. So, sometimes you want to be a little bit defensive in a downturn. All right, I want to talk about your first stock that is C Limited. >> Yeah, C Limited. This is a $50 billion company out of Singapore and it has three branches to it. So first of all you have Shopppee which is their e-commerce business. You have money which is the financial services business and then you have Garina which is the video games business. And this is a business that is very large and yet revenue growth is accelerating. So 47% growth in the first quarter, 48% growth in the second quarter. You look at the projected growth management only guiding for the volume growth for its e-commerce business, but projecting around 25% volume growth for the full year. That's pretty comparable to the first half of the year. So and that's still a great growth rate. It doesn't account for the other two branches of the business which are growing a little bit faster and it trades at only 22 times forward earnings. So phenomenal growth business, very profitable, nearly a billion in first half 2026 net income, not adjusted earnings. This is real net income and a reasonable valuation here. So C Limited is one that I like uh for the business starting out. I think it's a great combination of growth and profit and valuation, but I also, as we'll talk in a moment, I think it's insulated from AI, but any thoughts here? >> Yeah, I just the valuation is really compelling. I always have a hard time with these companies that I can't really interact with their products. Uh, but you know, I think, you know, the markets that you're talking about are extremely attractive. You just I showed the revenue growth rate earlier, phenomenal revenue growth rate. Uh, and you know, they seem to have built a good good position. The gaming business is one that I kind of question. That kind of goes across the board for all those gaming companies. I think that's just become a much harder business. But right now, trading for about 10 times free cash flow. That's a pretty compelling valuation. What is the AI story for them or non-story? >> Well, I mean, it's interesting that you bring up free cash flow because that's one of the things I did want to point out. This is not a company that is investing capex into the AI infrastructure buildout. Does not have data centers. It's not trying to play this game at all. In fact, it doesn't even have logistics warehouses. It rents those from other companies. So, this is a capital light business in that way. And so, when it comes to the free cash flow, yeah, it's really really strong because it's not investing a whole lot in capex. Um, you think about it, it's basically just using AI to optimize its own business. It's not using it to sell AI to to its customers. So AI is not a product. It's it's what it's using on the inside to make things better. So one of the things that you do have is the fact that it is growing that advertising business. And we've said before in other videos that AI is one of those things that can make digital advertising better because it can just better and more efficiently use the inventory that you have. Make sure it's getting to the right people that can command higher rates. And so it's using AI in its operations, but it's not selling AI. That's one of the good things here. >> Yeah, I'm getting much more intrigued by the companies that are potentially going to benefit from artificial intelligence but don't have the capex risk. And I think that we're going to we're going to look back at this moment is potentially being a little bit irrational with the amount of money that we're putting into artificial intelligence today because today it looks like hey there's great ROI on everything. Even though a lot of these companies aren't profitable, we've seen massive cash generators, one of which I will get to in just a moment, go from cash generation to now negative free cash flow to taking out debt. Uh, and some of those companies will ultimately thrive and some of them will find out that there is no turning around. There is no no pot of gold at the end of the rainbow. So sometimes sitting it out and I would put Apple in this same boat, right? Sit it out. Maybe it can be opportunistic if there if there is something to buy at some point in the future for so C Limited on my watch list. I don't own that one yet. All right, I want to talk about another one that's in probably a lot of people's portfolios. I still continue to call this the easy button in artificial intelligence. But in the framing of this video, and we're talking about companies that would could thrive if the AI bubble bursts, the way that I want to frame Alphabet is that this is one of those companies that can really adjust their business and the amount of spending that they're doing on the AI capex buildout. Because if if we're talking about the bubble bursting, we're assuming that there's something that says, you know what, the the ROI is not there on this buildout. So what does Alphabet do in that world? they just cut back their spending. Instead of spending whatever gobs of money, $200 billion dollars or whatever that they're planning to spend in 2028, maybe they pull that back by 50% or 75%. You know, we've seen companies do that before. Then suddenly you're now a positive operating cash flow business and you could opportunistically go out and buy some of the companies that are struggling. Alphabet has done this before. the dark fiber that was built out during the dotcom boom and then ultimately bust. Where did that end up? A lot of it ended up on Alphabet's balance sheet. So GPUs are not the same but technology companies that they could acquire. I think that could be really compelling. The other thing that I have here is their revenue components for their business. In blue you have search, orange is YouTube, purple is Google network. So this is the advertisements that sort of sit all over all over the internet. not necessarily. This is the one business that isn't really growing uh for Alphabet. And then green is subscriptions, platforms, and devices. So, think Android, the Play Store, things like that. This is a much more diversified business than you might think. And I think there are still long-term tailwinds whether we're using AI or not. And that's a really interesting position for them to be in. >> Yeah, absolutely. It's hard to argue with an alphabet investment thesis. I was talking with some other analysts earlier and essentially what you get with Alphabet is an incredible dominant business and then you have call options on a lot of other businesses. >> Love that. >> And the call option here would be artificial intelligence, but you have other call options as well. You have quantum computing, you have self-driving cars, you have some other things and but it's not contingent. Your investment thesis is not contingent on those things working out. And so that can be a really powerful thing in a AI investment hyped world having something that yeah it's a top player but it's not dependent on it entirely that that can be a powerful thing. I just wanted to put some numbers to the capex that we talked about a little bit earlier. So over the past year $132 billion worth of capital expenditures $186 billion worth of operating cash flow. that has actually if we look at the quarterly numbers alone capex now exceeds their cash flow this is really the fundamental change that alphabet went through couple other companies like Amazon have gone through this in the past I think uh Meta Platforms is going to go through this probably in the third quarter where you're your capex is now exceeding your cash flow so now you're taking on debt to be able to continue that capex level especially if that capex level continues to grow but what I want to flag here is that the operating cash flow is extremely strong. So if you're looking at AI related companies and you're looking at, you know, where does the risk lie? If you're looking at like a coreweave or a Nebius uh or an Oracle, they don't have this kind of cash flow coming in from their operations. There is no ability to say, you know what, if this isn't working out, we're just going to cut this number right here. This this hundred $200 billion worth of capex. we're going to just cut that next year and spend significantly less and then we'll what we'll have left over is a positive cash flow business. A lot of people don't have companies don't have that luxury. And so that just puts them I think in a much different position if you're looking up at a bubble bursting and I'm not saying that they're going to be 100% insulated because they're not. But this is the kind of company that is going to be able to use this as a point of advantage. Uh and not everybody can say that. All right. Stock number four, BJ's Wholesale. Why are they going to be thriving if the AI bubble bursts? >> Yeah. So, my previous idea with C Limited, yes, it is free from somewhat free from risk when it comes to AI infrastructure spending and if that bubble pops. But when it comes to AI itself, I mean, it is exposed to some risk. In particular, agentic shopping and the shoppy part of the business is very big. And if agents are what is interacting with the platform, they're looking for the cheapest price, that does favor the company, but it also disintermediates shop or excuse me, C Limited from the end user, and that could have complications with the financial arm of its business, with the ads business. So, it's not completely unexposed to AI risk. If you're looking for acceptable growth, a good valuation, and really free from AI risk, then you go with BJs. And so this is a poor man's Costco stock. Everyone knows it. The business is fantastic. >> Y >> except the valuation is pricey and it has been for quite some time. BJ's is half of that valuation with a very similar business model. Albeit BJ's is much smaller. So 268 stores, 8.5 million members. That's much much smaller than Costco. However, it is taking some market share. So, it's gained market share for 15 straight quarters. That's good. It has a 90% renewal rate. Not as good as Costco, but Costco is only around 92%. So, not much difference there. >> Um, and it has very similar brand penetration from its own brand. So, about 27% of the products it sells are its own brands. And that has a little bit better margin. So, that's good as well. Not great on growth necessarily. only looking to open 25 to 30 stores over the next two years versus the 268 it has today. So maybe 5% annual growth there. Not a whole lot from the new stores, but still if you're looking for a reasonable valuation, trades at about 22 times forward earnings as well. Reasonable valuation and look, people aren't going to stop buying groceries just because the AI trade fizzled out. >> Yeah. And this falls into one of those categories of shopping that I don't think is going to be impacted by whether it's agents or even things being delivered to your door. I mean, we we get lots of things delivered from Target to our door. But if you want to go buy a whole bunch of stuff and fill, you know, three shopping carts, that's probably not the kind of thing that you're going to do, you know, on an app and get it delivered to you. Also, you're going to pay for that if you do. So, the margins are completely different. And this is where, you know, BJ's uh the Costco business model, the reason that they have lower uh margins and they have can they can have lower prices on the product. So they is they can just say, you know what, we only need to run the store break even because we're going to make our profit on that membership. That's a completely different way to think about a business than a Target or a Walmart that has to cover their operating costs, their rent costs, their, you know, employee expenses, all that kind of stuff with sales. And then once you get over a certain level, then you start to make a profit. It's like thinking about the business backwards almost. And so that's what makes this really compelling. And it's the kind of thing that just isn't going to be replaced by online shopping because you don't get those same benefits. All of the efficiency of you know what, we're going to have a huge truck come deliver all of our stuff. It's going to be in one place and then you are going to bring it home. Once you start having somebody else deliver it to your home, that's got to get paid for somehow. This is why, you know, buying things on Amazon is actually more expensive than buying it in a retail store oftent times doesn't mean it's not convenient, but you're paying for that convenience. And that's where, you know, I think you're right. These are the kind of companies that are going to still exist. Maybe not going to be a massive growth machine, but it's still going to be a great business 10 years from now. >> Yeah. And it's digital platforms. It does have that. It is using AI and the digital platform, a little shopping assistant, and it's, you know, everybody has that. Now, what is interesting in what you're just saying there is the digital orders, most of them are still picked up in store. So, most of the time people are coming into the store to pick it up. They're just >> adding on the convenience of ordering on the app or whatever. And so, that is a very interesting part of this business. Yeah, like you said, AI is not disrupting this. It's not going anywhere. People still need to go in store for a lot of things. >> All right, let us know what you think about those four picks. Disney, C Limited, Alphabet, and BJ's Wholesale. If there is some sort of AI bubble popping, are those going to be solid performing stocks? Leave those comments in the comments section below. Don't forget to subscribe to the Mono channel here on YouTube. Thanks for watching everybody. See you here next time.