Short Bets Against US Equities Hit Record, AI Risks Rise

Our Bloomberg intelligence team, Tom, noted or out with a note today that says investors sold a record 30.5 billion of Korean equities in June with July selling already nearing 8 billion and showing little signs of stopping to you. What does this show to you or what is that an important sign? >> Yeah, I think it's I mean it's obvious. Um, I mean, when I came on here late May, I said, you know, the positioning with leverage in semiconductors and the Korean markets and and investors were cashing out of their life insurance policies to put money into SKHENX. The SKH two-time levered ETF is down 73% from the high. So, that's pretty ugly out there. And look, the fundamentals can be great, but positioning on one side of the boat, the boat can tip over. And that's basically what's happened. >> So stock not so bad, but down, but to be levered against it, that gets a little crazy. Is that your point? Kind ofish or a little bit of both. >> I think you've had a gamblers mentality in the market everywhere and especially in Korea. Uh but in the US, you know, the short-term options markets, uh levered ETFs, it's just getting a little nuts. >> The Cosby down about 30% just in the last month. We have a chart that shows what it's done over the over the last few months. Um I'm I'm curious about not looking at that in a vacuum and and looking at that in the context of of the wider global market and what you see as challenges that you think will come when it comes to AI capex. Well, I think it's not a matter of if, but a matter of when there's going to be capex cuts or perhaps just no growth given on the guidance. >> Well, I think you know that of course we could say that because this can't go on forever. >> It could be this quarter. It could be I think it'll be next quarter and we're starting to already see some cracks when you see you know Meta SpaceX u leasing out some of their compute and that puts into question some Frontier models in the US if they have to lease out compute which I will admit it brings in a lot of money and which they need because >> but you're saying they're leasing it out because they don't need it >> possibly possibly their what story okay so that's tells a story about models not being ready. >> Well, I think that Meta, for example, they've had some really good models recently, but I also think that they're still in the formation age of where they are, what their models look like. They brought on a lot of new people. It takes time and a lot of discovery on what works and what doesn't work. And so just if they're giving, you know, leasing out to Anthropic or others, I I think it's a nice way to just bring in some revenue. And cash flows are are down with all the hyperscalers. So there is going to be a wet blanket thrown on this market. I'm not sure which company it'll be. I mean, Oracle has some very high lofty goals uh going into 2030. I think that's coming into question right now. I think that's going to be the the issue uh in the next this quarter perhaps uh next quarter. Goldman Sachs said that uh the first one that cuts capex is going to be the winner and I don't know about that but I think I think Alphabet will probably keep capex up. They raised money. Uh they have other businesses that generate income. So >> yeah, you're bullish on Alphabet. >> Yeah, I like I like the company a lot. I think that they're going to succeed with their Gemini. The Gemini is going to work with uh the consumer because they're going to be in Samsung phones with Android and iPhones. So, I think that's really a a big deal. Anthropic probably for enterprise right now where we stand, but still that's where we are >> in terms of AI. So if we see with some of the big hyperscalers less capex spending that's kind of a canary in the coal mine or at least a red flag. >> Well back in the you know the tech bubble it was when the the selex and the telco companies said hey I think we've got enough Cisco equipment. they still were buying >> but it just leveled off and then everything started to you know domino effect uh down the road and that was Q3 of 2000 and it could be again this year u I think though that AI has a longer path and I think that there's also going to be more uh disruption in other in other places um particularly China >> let's talk China okay >> because your your year-long China and Hong Kong technology. Uh you sent some notes to a producer Talia that said you're you're buying Alibaba and others. You're crane shares, CSI, China Internet Fund, the Eyesshares, China Large Cap ETF. What what attracts you to these stocks into this market? >> The China ETFs and Alibaba were down about 50% from their highs. The businesses are good. You have Alibaba, for example, they're taking a different approach than some of the other US companies. They're they're doing chips, they're doing AI models, they're doing the cloud, uh consumer AI, other apps that they're going to come out with, plus their their core business, which is okay, not great, but still it's there. China's going to do a stimulus, it sounds like. Nobody wanted these a few weeks ago. Nobody. I told everybody buy these with two hands and basically it was crickets. Nobody wanted them. And now they're up 20% and you see Moonshot AI which Alibaba has a 35% stake in the Alibaba has stakes in every big AI startup uh as do 10 cent and and others. Uh so I think that there's an open-source um roadmap that's going to be very popular for the next six months and it's going to be disruptive for us AI companies uh especially if the models are more efficient >> so cheaper >> cheaper >> and still still do what needs to be done. >> Yeah. And you have risk of the US uh putting the brakes on uh people in the US using the Chinese models for whatever reason. I mean I can name a couple reasons but the fact is the AI models in the US are expensive. The token prices are still high for the the major ones anthropic open AI. And so if you have an alternative and it does the job I think that's going to work >> before Oh go ahead Carol. No, it's something we talked about on Friday. All of these well-known companies that are tapping into, I believe, the Chinese AI model. That's something we talked about. >> So, before we let you go, you're long China and Hong Kong Tech. You made your case. You're also short a couple names uh or or sectors. What are you short right now? Very briefly. >> Uh I Well, I'm short Tesla going into the earnings. It's a smaller position, but I think they have uh you know, it's they're moving on three years of negative growth and they have two cars that they basically sell that are getting stale. I think there's a long list of promises that haven't been kept from the CEO. Uh I I think that's going to be a a question that people want answered. When is the robo taxi coming? When is the Optimus coming? When are they going to scale all these things? and they really haven't been able to do that. >> Interesting take. Um really and I think an important perspective in terms of the overall conversation that we're having. >> You didn't take a robo taxi here, did you? >> No, not I didn't take a Whimo. I I flew on a >> But we've talked You like Whimos though, right? >> I like I like Whimos. Yes. They work. >> They work. >> I live I