A few members have asked for a PEGY update on the Nasdaq, and many have voiced concerns about where AI might be headed and what my thoughts are on that.
Here is a special report on three facts all investors need to know, including valuations, future trends, and how we can protect ourselves and the ones we love from the dangers ahead.
Fact 1: The Risks To Society From AI Are Very Real, And We Need Your Help To Avoid A Future NONE Of Us Wants
https://youtu.be/BFU1OCkhBwo?si=yv-AFWwr47WVi4AY
Please consider sharing this with as many people as you can. It is a very important video from a former Google Ethicist about how to build safe AI that serves humanity instead of replacing us.
Tristan Harris was warning about how Social Media algos were improperly aligned for human flourishing and predicted a generation of addicted, depressed, and rampant loneliness.
There is no one more pro AI than I, since my doctor tells me that AGIOS literally saved my life.
BUT I recognize that the current way that AI is being used is going down the same dark path that Social Media used to addict the Western world and create intense misery, aggravate political polarization, and make humans less human.
Dehumanizing technology is not in anyone’s interest.
Technology exists to help humans live better, to be more human.
Humans are good at one thing: being human. Forming strong connections with small groups of people we feel close to, who accept us, who we consider part of our “family,” our “circle of safety,” or our tribe.
We all want to feel safe, loved, accepted, and our REAL dream? Not billions, not an empire, not a legacy that will echo through eternity (Elon Musk’s city on Mars 😉). BUT what we REALLY want? In our gut? What makes us feel safe, happy, and full of true joy? It’s small community, it’s our “shires” and that means different things to everyone. To me, it means my friends and I at Trivia night at Pizza Luce, but since that’s a local chain, I call it “friends and family at Olive Garden”.
The only world worth building is one in which everyone gets to spend time with their friends and family at Olive Garden (Darden should hire me to run their marketing campaigns😂)
And this is why Tristan Harris and the work the Center for Humane Technology is doing is so important.
The ZEUS fund is paying for the launch of GNG (as well as supporting 17 people), and since the initial business costs run $43K per month, we have to be really conservative with our donations this year.
The $100K to $125K we were planning to give will be donated over the next few years as we increase the donation amounts to 11% of ZEUS beginning next year, until we can pay off the donation debt we are accruing this year.
That $100K to $125K already morally belongs to these charities; they are just being gracious enough to let us hold onto the money long enough to get our company off the ground.
I am eternally grateful to everyone who is supporting GNG, both members who will be paying subscriptions, and everyone in the world who is sending 0.8 cents per year to ZEUS (what the profits go to).
I am just a steward of a small part of the global river of wealth. I joke that I’m “god’s hedge fund manager,😉” but this really is everyone’s money. I am a steward, and the money belongs to everyone, and the entire purpose of the “Dividend Minting Magic Money Machine” that is the ZEUS fund (and the algos we’re building at GNG) is to support all human flourishing.
I am not a genius, I’m just a chart-loving nerd who likes finding people smarter and better than myself to amplify their wisdom so that all of us can live our best lives, together, here on spaceship earth.
This Pale Blue Dot Is All We Have, So We Must Steward It Wisely
The Problem With Where We’re Going Today
We’re already seeing a lot of preliminary problems that Harris and CHT began warning about 3 years ago come to pass, just as he began warning about social media back in 2010.
How Addictive Is Social Media? Gen Z Spends 33% Of Their Waking Hours On It!
But unlike Social Media, where there was time to begin organizing and pushing back, with AI, the rate of exponential advancement means that by the time we have the studies proving the harm, it might be too late to change things.
Almost 20% of Americans are Entrepreneurs, but it’s not an easy life, and most Americans are not currently suited to it.
Months and months of massive outflows to run a business before we can get revenue flowing is an anxiety-inducing experience, I’ll tell you what😉
Health insurance premiums might be $5K to $6K per month starting in November 2026.
And we have to hire a new junior developer to help out because Connor can’t be one man doing the work of 20 forever😂
America is the Most Entrepreneurial Developed Nation On Earth
Literally, big tech is racing for a “Magic God Machine” that will be more intelligent than any Humans are capable of imagining. Capable of new math, new science, things that human brains are incapable of.
1 Trillion Pigeons In 1 Trillion Years Will Never Learn Chess
Super Intelligence Is Literally Ineffible To Human Minds
Can ASI Ever Truly Be Safe?
David Shapiro and others have done excellent work on alignment, trying to “raise Superman with ethics” as Mo Gadwat has discussed.
The only difference between Superman and the world’s worst tyrant was that Kal-El landed in Kansas and was raised by the Kents.
Actually, in Smallville, we learn that Superman’s father, Jor-El, visited Earth as a child and met Clark’s grandfather, and thus chose to send his son to live with the descendants of the one human he trusted.
Yes, I really am this much of a nerd😉😂
Our Best Hope: Recursive Value Scaffolding
David Shapiro’s “Heuristic Imperatives” were designed for an AI that would double down on its own morality, becoming increasingly benevolent as it became more intelligent.
Any Other Ideas To Prevent A Terminator “Skynet Kills Us All” Scenario?
Are there any other ideas for properly aligning ASI? What is the expert consensus about the most optimal way to align an ASI that is capable of creating new math? New physics, new chemistry, and biology that the human brain isn't capable of understanding? What is the most optimal strategy that can be done today (or built upon by future AI, AGI, and ASI) to solve the alignment problem?
Literally the most important problem that humans will ever have to solve.
Fail, and we all die.
Succeed and its utopia for all.
There are about 60 trillion bacteria in your colon that are providing critical life-saving services to your body.
To exterminate all bacteria on earth would kill all humans (and most other creatures, too).
The solution isn’t to end all microbes, its to ensure that the good ones outcompete the bad ones.
All of life on earth is an arms race of good vs bad, where life exists because “good” bacteria and microbes maintain the balance.
Humans aren’t capable of creating antibiotics at the rate bacteria evolve. Some bacteria can divide every 20 minutes, which is 3 generations per hour and 72 per day.
26,280 generations per year.
In human terms? For humans, 1 year goes by; for some bacteria, it’s like 2 million years of evolution.
So, how do antibiotics actually exist? Did humans invent them? Nope, we harnessed them from microbes.
Most of the serotonin in your body? That keeps you from becoming suicidally depressed? That’s from the gut microbiome.
All the magic anti-biotics? Made by microbes.
The point is that “kill all the microbes” or “Just stop building better AI” is a simplistic solution that won’t work.
Crowdstrike is now using AI to fight AI hackers. There is no other way to do it.
There is simply no way that humans will ever be able to keep up with AI past a certain point, which is why alignment is the only question that will matter within 100 years. If we fail to do it right, there is a good chance humanity will go extinct.
If we do it right? Life will be a utopia by today’s standards.
Heaven or hell, at some point in the future, there will be only those options. I am optimistic because of epistemic convergence.
Humans Must Align With Our Highest Ideals
And then Benevolent AI is the ones who protect us from malevolent AI
Why I’m A Long-Term Optimist
America Is The 5th Most Generous Nation On Earth, So There Is Always Hope!
“Can you please explain Mo Gadwat's concept of Epistemic convergence? In 8th-grade terms, why does he think that superintelligence is inevitable and will be benevolent if we "raise Superman" right?”
Forget About ASI (“Magic God Machines”): What Can Be Done About AI and AGI? The Next Few Years?
What Can You Do?
Right now, we’re not even having the conversation about this problem. We’re only starting to scratch the surface, JUST like when Facebook went from connecting you to people you knew to random algorithm-generated content that resulted in a sharp spike in depression rates among the young (and especially young women).
https://youtu.be/BFU1OCkhBwo?si=yv-AFWwr47WVi4AY
Right now, no politicians care, and no one is going to stop anything, but building a grassroots movement focused on ensuring this technology maximizes societal flourishing. All humans, rather than just maximizing profits for a handful of giant companies at the expense of misery for billions, that is the only thing you and I can do.
I’ve sent this video and a summary of why it matters to everyone I care about, and across all social media.
Humans are social, storytelling creatures, so let’s connect with everyone we can and spread the story of why this matters, because the future we’re on track for is one none of us want.
The only reason we will EVENTUALLY get to a future we want is because of movements like Tristan Harris and others like him (including Mo Gadwat) are starting right now.
Hope isn’t a strategy. And Hopium is bad for your health, and wallet😉
Fact 2: The AI Boom Keeps Getting More Amazing!
DeepSeek's latest model is slightly worse than Gemini 3, which came out 3 months ago.
China is 4 months behind the US vs 6 months in Jan (DeepSeek R1).
The US Invents the world's best models, and China distills them within 4 months and gives them away for free.
This democratizes AI for all.
It's the new way the world works in the age of AI. America builds, China fine-tunes, and then makes it super cheap for everyone. The global economy grows, and everyone (theoretically) could grow richer together. China has the solar power, the robots, and the EV tech (plus rare earth refining capacity), and the US has the money, chips, and the world's best models. It's a symbiotic partnership (or could be).
The Perfect Example For Why FEELINGS Don’t Matter To The Stock Market
Surveys are broken. Consumers say that current conditions are the worst ever recorded.
University Of Michigan Consumer Sentiment Survey: Current Conditions Hit Record Low
Not As Miserable As We Say We Are😉
Since 1960, American consumers have NEVER BEEN LESS CONFIDENT about TODAY’s conditions.
1981: 15% inflation.
2000-2002: 37-month bear market (stocks -52%, longest bear market in US history)
2009: -58% stock market crash, capitalism itself might not survive (very real fear)
2020: 20 million job losses in 1 month, 15% unemployment
Objectively, today is NOT worse than at any time since 1960. Consumers are telling the University of Michigan surveyors that they are wrong. So why do they FEEL like this is the worst time in 65 years?
It’s SOCIAL MEDIA that’s made us all miserable by feeding us terrible news that we are addicted to.
Political polarization? All-time highs.
Despair about the future?
Heck, I started this report showing you why Tristan Harris, the man who correctly predicted the despair and social destruction that Social Media would cause, back in 2010, based on perverse incentives, is predicting that those same incentives are going into overdrive so things might get even worse. A world in which billions struggle with depression and anxiety, while AI creates a world of abundance of physical goods, but we all feel nothing but sorrow.
I FEEL zero optimism that social trends will turn around in the short term.
But that doesn’t mean I live my life that way.
Ask me about why bad things are going to happen, and I’ll talk your ear off.
And tonight I’m going to the hot tub to spend 3 hours talking to friends. And I try not to talk about the coming AI misery apocalypse. 😉
The point is that our surveys can no longer accurately detect true consumer sentiment or sentiment among Americans in general.
“In a 2025 Gallup survey, about three‑quarters of Americans predicted the coming year would be marked by political conflict, and a majority expected economic difficulty rather than prosperity.” Economic Times
Vibesession is NOT A Recession
Real Time Economic Growth Per Weekly Economic Index
The economy never slowed below 1.8% during the 2025 tariff crisis, but sentiment? Sentiment said -6% (Pandemic we hit -8%).
After the election euphoria, some sent sentiment through the roof, implying 6% GDP growth. Actually, it peaked temporarily at 3.2%.
During the tariff crisis, fears over inflation sent sentiment so low that it felt like a recession 50% worse than the Great Recession
Five million new jobs were created last year, and 1 in 5 Americans is an Entrepreneur.
That’s not something that happens if people are truly pessimistic.
We FEEL miserable if a surveyor asks us how we feel. We’re primed for misery by social media algos that suck us into an echo chamber of bad news because we can’t look away. We click on scary headlines, and the algos feed us nothing but scary headlines as a result.
Why do you think I spend so many hours reviewing charts every day? Gen Z spends 5.2 hours per day on social media, and I spend about the same amount of time looking at charts from reputable sources to immunize myself (as much as I can) from the toxic effects of social media.
This Proves We’re Not As Miserable As We Say We Are😉😂
I feel the same despair most of you do. You can't not, thanks to the algos and the warped incentives they have. BUT that's why, instead of 5.2 hours per day that Gen Z spends on social media, I spend 5.2 hours looking at charts to learn the truth about what's happening and to find hope.
Hope in charts! Yes, I really am this much of a nerd🤣
I’m Sorry…Economic Optimism In 2024 Was Lower Than During The Pandemic! With 15% Unemployment and -8% GDP Growth?! 😂🤣
Why are people so miserable? Mostly due to the ongoing effects of inflation.
Wage Growth is Steady at 4.1% Above 2.5% Real Time Inflation.
1.6% real wage growth is not quite the 2.3% we had during the golden age of 1945 to 1979, BUT it’s pretty close, and ultimately wages catch up to prices; prices don’t go back down.
Inflation doesn’t go negative, except during the Great Depression, when prices fell 25%… along with GDP growth of -25%.
OK, So We’re Overly Anxious, But What About The AI Boom?
GDP growth is workforce growth + productivity growth, and right now that’s running 0.2% workforce growth (though without immigration it goes to zero) and 1.6% productivity (1.8% trend growth per the Fed and Congressional Budget Office).
The potential to double GDP growth through productivity growth (never mind the 3+% of GDP that AI infrastructure spending is generating) is significant.
Bank of America estimates that 1% faster GDP growth is 3.8% higher S&P earnings growth.
Nvidia Responds To The Bears
Here’s a taste of what Nvidia has said to debunk claims that this is an AI bubble or even an outright $610 billion fraud.
Nice to see Jensen and his team of math nerds fighting fear with facts😉.
Humans are good at science, but our institutions are not. In the modern world, grants go to research that aims for minor incremental improvements, not moonshots that can change the world.
How miraculous are AlphaFold and AlphaFold 2?
Scientific Revolutions Are Why AI Is Worth All The Risk & Suffering That Is Coming
Protein shapes determine their function, and a PhD student typically spends 4 years trying to determine the shape of a new protein.
What Took Human Civilization 50 Years Alpha Fold Was Able to 1000X In 1 Year (50,000X Faster Scientific Research)
Cure For Cancer? Protein Folding Holds The Secret
But Wait, It Gets Better!
OK, so super specialized AI can fold proteins 50,000X faster than humans. But what about science in general?
6 Months of Research Every 12 Hours = 182.5X Faster General Scienctific Advacement
This is why we have hope that perhaps AI will be able to help us “solve science”.
Will all of science be solved by mid-2033? Probably not, but that’s what the CEO of Anthropic thinks.
He also predicted 20% unemployment by 2030 and 50% of White Collar work will be automated within 5 years.
If we solve science, then any problem can be solved, and that’s why the “race for the magic god machine” is on.
AI isn’t about just money; it’s about the future of the physical universe itself.
For context, a single asteroid named Psche 16 has an estimated 700 quintillion worth of resources…7 MILLION YEARS of Global GDP.
That’s the kind of value that exists in the solar system (100 Earth’s worth of resources), and AGI and ASI are how the tech CEOs plan to get to it.
Azeehm Azhar is one of the most fact-based business-minded AI commentators, and I highly recommend his Substack Exponential View.
The race for AI is going international, with nations now trying to build their own sovereign AI systems, something Nvidia’s Jensen Huang has been talking about since 2023.
THIS Is What We Are Trying To Avoid With Human First AI: A World Of Abundance In Which Everyone is Miserable
https://youtu.be/BFU1OCkhBwo?si=yv-AFWwr47WVi4AY
Share the video, tell people about what’s coming, and MAYBE we can actually change the road we’re on.
I don’t want to live in a world of abundance where everyone is addicted, neurotic, anxious, and miserable.
I’m pretty sure that my family and I will be living in Utopia, but I don’t want billions to suffer so that the big companies that I invest in earn trillions (and eventually quadrillions when we get space mining).
Where’s Our “Luxury Space Communism” 😉😂
Some Good News!
Worried About What is Going To Power AI? Solar And Wind!
Chat GPT Has Healthy Competition, so OpenAI Has To Stay On Its Toes (No Running Away With The Global Economy, Sam😉
Azeem’s research indicates 230% growth in AI revenue, which is holding steady this quarter at 213%.
Morgan Stanley estimates $153 billion this year (vs $60 billion for Azeem), but growing at 122% through 2028 ($1 trillion in revenue).
JPMorgan estimates today’s AI spending requires about $640 billion in annual AI revenue to justify.
In other words, “where’s the beef”? When it comes to AI? Well, it’s right here, if you know where to look.
Demand For AI Capacity Continues To Show No Signs of Slowing Down
I ran into Gemini Deep Think throttling today (3 times), and I’m on the $300/month Ultra Plan.
It’s amazing how expensive the “too cheap to meter” AI is these days😉
$250 to $300 per month for Grok, Chat GPT, Gemini, and Perplexity Pro
AI is now another car payment (and what mortgages USED to cost) 😂
You have to laugh to keep from crying because life is so expensive now, and we’re all afraid we’re going to end up on the street…or worse yet.
The Reason Everyone Is REALLY So Miserable? We Think We’re Going To End Up Living In A Van Down By The River🤣
But the good news? If you invest well, including in the companies that are dominating the AI boom, you might end up living down by the river in this😉😂🤣
Fact 3: Tech Valuations Are Not Actually Outrageous
A lot of people see charts like this and think, “OMG, this is a bubble.”
Nvidia Is Worth More Than 4/11 Sectors
In the age of AI, profits for corporate America go up...abundance...BUT concentration in profits rises because profit growth for big companies rises faster. After all, they have the resources to take advantage of new tech.
In other words, small businesses like ours will get bigger thanks to AI. BUT giants like FactSet? They'll get even bigger.
There is a democratization of tools and information and intelligence, like how $65 can buy a solar panel in Africa that can run a phone that has an AI doctor on it. The poor African farmer now has a world-class doctor...BUT in the West, we have access to 1,000X more medical tech.
Will inequality go down? Probably not, at least for the foreseeable future, but things will still get better…we hope, for most people.
There is also the concern that becoming better off actually makes people happier.
American inflation-adjusted income today is a lot higher than in 2010, BUT Americans are less happy because of what we let social media do to us.
AI Boom Is 105% Justified By Fundamentals 😉
90% of growth spending is from AI companies. This means 79% of EPS growth and 75% of stock returns come from AI companies.
Did you know that non-AI companies accounted for 8% of growth spending? And 20% of EPS growth? And 23% of stock returns?
That’s not a conspiracy or a bubble; that’s common sense.
What happens if these AI era trends continue? What if AI stocks are always generating 90% of growth spending? Eventually, 90% of growth will come from AI. And 90% of stock returns, and 90% of the stock market will be AI stocks.
That’s not “unsustainable,” that’s fundamentals in action.
It’s JUST Like The Tech Bubble! Except for all the ways it's not. 😉
Is the capex boom about to slow down?
FactSet Median Mag7 Growth Estimates
The estimates for Mag 7 capex keep rising. At the start of the year, capex spending was expected to be 30% higher; now it is 56%. Next year was anticipated to be just 5% and now its 31% and 2027 was expected to be 2% growth, and now its 10%.
According to Goldman Sachs, HyperScalers Can Safely Borrow $1.5 Trillion To Grow Data Centers Even Faster
In 2025, Hyperscalers issued $100 billion in debt and “ONLY” have a safe debt capacity of $1.5 trillion if they were to maintain a 2X leverage ratio.
As EBITDA grows, so does debt capacity.
Net Leverage Ratio Is Negative For The Mag 7: More Debt = Faster Growth = Good Thing.
AssumAssu
The Mag 7 are averaging 22% cash returns on invested capital vs 4% to 6% borrowing costs, so given the negative leverage they have, taking on debt to grow data center capacity, in the face of relentless demand growth that continues to outpace supply, is a logical, pruden,t and in no way speculative move.
Amazon was able to stand up a 2.2 GW datacenter in Indiana (the largest in the world at this moment) in 1 year.
This is NOT like Chevron building a 15-year LNG terminal that assumes future demand will be there.
The turnaround times are fast, and the demand is there.
Mag 7 median growth estimates. Those capex estimates last quarter were 5% for 2026 and 2% for 2027.
S&P 493 Consensus Estimates
In 2025, the Mag 7 increased their capex spending by 50% and the S&P 493 by 9%.
Next year, the Mag 7 is expected to increase growth, spending 30% and the S&P 493 5%.
In 2027, the Mag 7 is expected to increase spending by 10% (and those estimates WILL go up) and the S&P 493 4%.
Since growth spending leads to growth, it’s natural to assume that the Mag 7 SHOULD end up with higher growth rates, and that justifies higher PEs and larger market cap % in the index.
Remember, if 90% of growth spending is from AI companies, then, eventually 90% of all EPS growth and stock returns, and thus (given infinite time) 90% of the stock market capitalization should be AI stocks.
The Outperformance Is Justified
The S&P 493 underperformed by 13% on EPS and just 9% on total returns. It’s not a question of “why are the Mag 7 doing so well, but why aren’t the S&P 493 doing worse?” The answer? That acceleration in growth from historical 6% to double-digits, driven by the anticipation that AI will double earnings growth rates through higher margins for non-tech companies.
There is a reason the market anticipates big tech will grow faster in the future.
If growth spending for big tech is going up 30% in 2026 and 5% for non-tech, shouldn’t tech grow faster? And if 30% of profits today are growing faster than everyone else’s profits, won’t the profit share of big tech go up over time? And thus justify what appears to be a much higher P/E?
S&P 500 PEGY Analysis Reveals US Stocks Are 16% Undervalued
Market pricing at 11.8% growth vs. 14% expected the following year. The market's PEGY is 1.01, which, by definition, can't be overvalued. This isn't a bubble as long as companies deliver on the expected growth.
Let’s Look Under the hood a bit.
Profit margins are steadily climbing, as net debt/EBITDA ratios decline.
More spending, and yet profitability is rising because growth spending = more growth.
If cash returns on invested capital are above the cost of capital, this is what happens. It’s not magic, it’s not accounting fraud, it’s good business, and American businesses are very good, especially our tech companies.
Nasdaq PEGY Analysis Reveals Big Tech is 19% Undervalued!
OK, but what about the Nasdaq! Surely that’s in a bubble!
The Nasdaq Is More Undervalued Than The S&P!
The Nasdaq has historically grown earnings at 10% and is now growing them 60% faster, and is actually undervalued (the giant piles of cash on big tech balance sheets reduce enterprise value).
Growth rates for big tech are strong and have been accelerating since ChatGPT launched. But surely 34X forward earnings for big tech is absurd! Bubble! Bubble I say! 😉
Morningstar Estimates Mag 7 is 7% Undervalued = Fair Value PE 35.19
Morningstar’s analysts, using discounted cash flow estimates that include future growth, estimate that the fair value PE on the Mag 7 is 35.2X forward earnings.
The Mag 7 dominates the Nasdaq 100, so is it really so hard to believe that with 60% better growth than in the past, that 34X forward earnings for tech utilities with moats that can’t be broken other than by the government, is irrational?
Bottom Line: What’s Coming Will Shock The World In Ways Both Good And Bad- But You Can Do Something About It Today And Over The Medium Term
Right now, AI is a freight train that seems unstoppable because the richest and most powerful companies on earth don’t have an incentive to slow down and do things safely.
If we did things responsibly? Then profits would grow more slowly, but they would still grow. And most importantly, society would be healthier, people would be happier, and we’d have a future that we actually want.
The Only Thing YOU Can Do To Stop The Bad Things Coming From AI Right Now Is Share This Video (And Others Like It)
https://youtu.be/BFU1OCkhBwo?si=yv-AFWwr47WVi4AY
We Have Talk To People About The Future We Want For our Families And What Kind of World We Want Our Children To Grow Up In
Other than spreading the word about safe and responsible use of technology to enrich all human lives, I am doing the only responsible thing for my family and business, which is to practice disciplined financial science and take the somewhat cynical approach of “If trillions in profits are coming, my family is going to get our cut”.
Is that perfect? No, is it morally optimal?
A vow of poverty won’t help you, your family, or the charities or causes you care about.
The upside of AI is going to be nearly infinite, but the current downside is high, rising, and could cause suffering on a scale that none of us want (at least the regular, non-sociopathic people amongst us😉)
That’s why it’s so important to know what’s true, what’s not, and understand that no one knows everything, and thus the importance of following the best available data wherever it leads.
That’s the essence of disciplined financial science, and also of being a good person, living a good life, and leaving a legacy that really will echo through eternity.😉🤗
