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00:00 Josh
Always great to see you, my friend. So let’s dig into this. The IGV software ETF. We’re in the red again here today. We’re down about 20% already this year. You pull up a chart, Brent. I mean, you’ve basically done a round trip with that ETF. You’re back to really the April lows of last year. We know, listen, broad AI disruption fears, but maybe, maybe actually start there, Brent. Like, let’s get specific. Like what are the primary concerns for software investors? Like how would you, how would you bullet point them? How would you frame them?
00:37 Brent
Hey, Josh. The framing for software’s um complete unraveling is one, AI agents from Anthropic and OpenAI are going to erode or or basically eat away at the entire industry. So that’s number one. Number two is CapEx inflection. We uh are seeing CapEx numbers at Amazon and others like Google that are basically equivalent to the size of the GDP of Oman, uh for for one, for one company. And you look at big CapEx is bad for software, right? Because why? Um in your earlier segment, you showed semis massively out performing with Micron and Sandisk, you you’ve seen money flowing out. So like we’re at the beginning of the gold rush. Are you gonna run into Telluride and set up a gold store, are you gonna buy picks and shovels? You ain’t setting up the gold store. You’re buying picks and shovels. You’re buying all the things to get the gold. So what’s happening is you’re seeing semis, energy, uh, Microsoft said this on their earnings calls, it’s not chip shortage, it’s it’s basically a shelf shortage. We don’t have enough buildings to put these data centers in. Are you going to buy the software that goes in the data center right now or are you going to buy those assets? So you have the inflection of CapEx, that’s money’s going out of of our group. Generally, the the last point would be money’s flowing out of tech. So you’re seeing it in some names it’s going into obviously Sandisk and some of these others, but it’s largely flowing out. Look at Walmart, gold and Colgate Palmov. All these stocks are year to date returns you would get in your portfolio. You’d love to have a double digit return. You got a, you got a 15% return across those three assets you know, by the, by the beginning of February, just for the year. And so I can’t underestimate, I can’t overestimate, uh, this point is it’s a flow out of names that don’t see an inflection. Software is not inflecting in an AI yet. And that’s going to happen at some point. It’s not happened yet. It’s going to happen. And it won’t happen maybe till 2020 uh six, uh end of 26, into 27. But when you see an inflection, investors are chasing the bright lights of inflection. There is no inflection in software right now. It’s stable, it’s it’s steady. It’s not imploding, but the fear that AI is coming to get the industry has got portfolio managers running out of the space and chasing the other names and it makes sense. So it’s, it’s a portfolio reallocation, the money’s going to other places. We see it in our desk, we can see it in our fund flows at Jeffries. That’s happening. Uh, and I and I think there are other, there are a lot of other factors that are going on right now, uh, which we can talk about, but those are the big ones.
04:54 Josh
So,