Good morning, investors. I hope you enjoyed America’s 250th birthday and took in some FIFA games over the long weekend.

To kick off the week we are tackling the most pressing issue of the market today: Are we in an AI bubble?

It’s complicated. Let’s get into it.

The only AI bubble investors should worry about right now is stuck inside analyst spreadsheets. 

Wall Street can't stop comparing the current, modestly-priced market to the extreme valuations of the dot-com era, yet almost all the froth is concentrated in forecasts for what companies will earn in the future.

"The industry's analysts might be irrational in believing that [the semiconductor industry] is now a secular grower capable of maintaining its extraordinary profit margin and earnings growth rate," veteran strategist Ed Yardeni wrote in a note to clients Sunday.

It’s true that chipmakers have been a boom-and-bust business historically. Nonetheless, Yardeni’s work shows that analysts now predict semiconductor companies to keep a record 50.3 cents of every revenue dollar as profit, more than triple the broader market’s margin.

And the exuberant forecasts extend beyond cyclical chip names.

Wall Street last week raised its long-term earnings growth forecast for the S&P 500 to an all-time high 25.5% per year.

Meanwhile, analysts have also raised their 12-month tech earnings estimates by nearly 40% this year.

Those lofty expectations clash with relatively tame current valuations. Tech stocks today hover at 22.2x forward earnings against 20.4x for the broader S&P 500. 

For context, those numbers peaked at 55x and 25x, respectively, in March 2000. 

Speaking to those numbers, Yardeni said the dot-com bubble ran on “fear of missing out” while the latest bull market runs on “fabulous earnings momentum.”

Notably, the internet as a technology and investment thesis required a crash before it paid off. It’s unclear whether AI will need the same. 

"AI is unique in that we are seeing AI showing up, but also being instantly integrated into a number of businesses, so those two waves are happening much closer together," Founders ETF chief investment officer Lauren Cassidy, told me on Full Signal.

Semiconductor investors themselves do not seem to believe the analysts. Chip stocks trade at 18.4x forward earnings, cheaper than the broader market.

If this were an asset price bubble, multiples would be sprinting ahead of the earnings outlook, but the opposite is happening for chips.

All this points to a stock market that trades more conservatively than the estimates it rests on.

If there’s a bubble waiting to pop, the data suggest it's more likely to be confined to the spreadsheets.

Quantify Funds is building actively managed funds that seek to pay weekly dividends from the performance of bitcoin, gold, and US stocks. 

$1 of ISBG gives $2 of total exposure to bitcoin & gold. 

Governments print. We stack bitcoin & gold.

📊 The June jobs report marked the weakest print of the year. Nonfarm payrolls added 57,000 versus the 115,000 economists expected, unemployment ticked down to 4.2% only because 700,000 workers left the labor force, and April and May were revised down by a combined 74,000. (CNBC)

📊 Getty Images walked from its $3.7 billion Shutterstock merger. The board refused a UK regulator demand to divest Shutterstock's editorial arm and Shutterstock shares plunged 28%. (Investopedia)

📈 The Russell 2000 just closed the best first half of any year since 1991. Small caps rallied 22% through the end of the second quarter with the AI trade broadened beyond mega-caps. Chip names are in 16 of the index's top 50 performers so far this year. (CNBC)

I sat down with veteran investor Anthony Scaramucci to discuss the potential government stake in OpenAI, how big the AI bubble could get, bitcoin's 50% drawdown, and how he would build a $1 million portfolio from scratch.

Tune in on Spotify, Apple Podcasts, or YouTube — and please leave a review on the show if you like this episode!

🗓 July 6, 1785: The Continental Congress unanimously resolved that "the money unit of the United States of America be one dollar," making the US dollar the country's official currency.

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ISBG uses Bitcoin, Gold, and Stock options and do not invest directly in bitcoin, gold, or stocks. The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. The use of leverage by the Fund, such as borrowing money to purchase securities or the use of options, will cause the Fund to incur additional expenses and magnify the Fund’s gains or losses.

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