The AI Buildout Just Got Repriced

[0:00] Dano: It's Friday, October 23rd, 2026. Welcome to On The Markets from Fermata Advisors, which includes Fermata Tax, Fermata 401K, and our private wealth arm, Sonoma Wealth Advisors. My name is Dano Weir. I'm the marketing director, joined shortly by our manager, Blonski, to discuss the AI buildout getting repriced.

[0:23] Dano: AI chip stocks experiencing their fair share of volatility this week ended a little bit different than you may have heard, however. Is this further rumblings of an AI sell-off or something else entirely? Did we find a bottom for small and mid-caps?

[0:38] Dano: Why the rest of the market may actually start pulling its weight soon? That MAG-7, they're down, right? You heard that this week? Daren's got the charts to show why AI chip stocks are actually just trading sideways. And gold sits at a critical juncture. And Bitcoin also needs to decide who it wants to be. Let's roll.

[0:58] Announcer: The stock market, the economy, your money. What's the latest and what could be next? Find out now with Fermata On The Markets. Straightforward financial market updates for the brands of Fermata Advisors, Sonoma Wealth Advisors, Fermata 401K and Fermata Tax. On The Markets starts now.

[1:29] Dano: Managing principal of Sonoma Wealth Advisors, Fermata Advisors. He is Daren Blonski. Daren, all over the place this week. My gosh, I was looking at FinViz throughout the week. I was seeing a lot more red than I'm used to seeing.

[1:43] Daren: You know, it wasn't actually a super crazy week. We just, we've talked about this over and over on this channel, but we have this concentration in these large mega cap stocks. And that concentration means that when those mega caps sell off a little bit, it creates a lot of panic. But we actually have pretty good participation in a broadening and more breadth in the market this week, which is actually a good thing.

[2:07] Daren: And I think right now, the only thing you could argue is that small and mid-cap sold off in September and the beginning of October, and now they might be finding a bottom and doing what they seasonally do, which is ramp into the end of the year. When we look at the screen here, this is the S&P 500. It's the largest 500 US-based stocks. These are candlesticks.

[2:29] Daren: One way we read the market and try to read the tea leaves, as they say, and figure out what's going on. So the green candlesticks you see in front of you represent a period of time in the market. You're looking at a weekly chart right now. So each one of those green and red candles represents one week in the market. And you can see going all the way back to August, we've been trading pretty well sideways on the weekly.

[2:55] Daren: And what's happening is we're trading up. And then we're hitting this upper bound here, this 780 on the S&P. Spy, this is the S&P 500 index that tracks the S&P 500. And the reason I show this is because this is what's actually tradable. It's what's real in the market. You can buy the index, actual index. You can't buy it unless you buy it through an ETF or some type of mutual fund.

[3:20] Daren: This would be one of those type of investments. And you can see last week we had a big red week. And then we came down and had some volatility this week. And you can see this red candle closing out near the bottom. So we can't say that it's fallen below the floor here. And we could still even go below the four. But I would be looking at $7.49 as the invalidation Mark, where I would say, okay, this is something different.

[3:45] Daren: Now we're in trouble. Maybe things are headed south. So with all of the hype and all the midterm stuff and all the Ron bombing stuff, at the end of the day, we've just been trading sideways. Now, if that's the top of the hood, I guess you'd say this look under the hood and what's really happening under the hood. And when we look at under the hood of the S&P 500, there's a different way to look at it.

[4:11] Daren: And you can see this is the RSP. This is the equally weighted index. So what this index does is it, instead of looking at the S&P 500, like this heat map shows you here, where you have the bigger stocks taking up more of the capital weighting of the S&P 500, it makes all these boxes all equally weighted. So sometimes you get a better sense of what the market's actually doing when you look at the equal weighted index.

[4:39] Daren: What you can see is if every one of the stocks had an equal weighting, we've been down for many weeks in a row. We found our bottom back at the end of September. We started climbing back up. We now just printed our third green candle. What's interesting is there's these Fibonacci lines and this 61.8 Fibonacci retracement line. I won't go into all the mathematics behind that, but...

[5:04] Daren: Basically the Markets tend to respect those lines as psychological levels. And the fact that we traded right into that 61.8, we did sell off from it. I don't think it's invalidated yet. I think we're just building up. And so what it appears underneath the hood is that we had these mega caps actually did pretty well this September and into October. Now the last couple of weeks they got challenged.

[5:27] Daren: But meanwhile, while the mega caps got challenged, all these stocks underneath the hood actually did all right. And are actually doing all right, which is good because that's telling you there's more breadth and depth. And on the good news front, when we look at the IWM chart, which is the Russell 2000 index, you can see we've traded down for many weeks in a row.

[5:47] Daren: We hit this huge bearish candle here, and then we printed a green candle this week, which could be showing a bottom, right? So let me run a scenario or a thesis. If these mega caps kind of trade sideways to down, but they stay in zone. And then all of a sudden going into the end of the year, we get through the election, things ramp up and those mid and small caps go up along with the mega caps.

[6:11] Daren: Then you all of a sudden have the making for an all time high in the Markets. And that could be a very different situation than we're at right now. So I think there's a lot of noise out there as usual, right? That's normal. But there's a lot of noise about the Markets and what the Markets are doing and not doing. And I think you need to be really careful as always about projecting what the media says onto your portfolio.

[6:39] Daren: I've gotten quite a few calls this week from people who are very concerned about where things are headed going in this election. And I think at this point, it's pretty clear where the selection is headed. The only thing we don't know is whether or not the Democrats take the Senate. But believe it or not. If we now have a split government, it actually tends to benefit the market.

[7:06] Daren: And Markets like that certainty that no one's going to get anything done for the next two years is like certainty. So we actually have the makings, I think, of something like we would expect. We had this seasonal sell-off in September, halfway through October. Things came down, not in the mega caps, a little bit the last two weeks, but it really came down in the small mid.

[7:28] Daren: That's where we saw the big correction in September. And then if that turns around going into the end of the year, you've got the building box for a pretty nice finish to the year. Where I do see trouble is I see trouble in the emerging Markets. So emerging Markets think China is one of the big emerging Markets and drives most of this index.

[7:50] Daren: You can see this double top pattern here and this double top pattern right here and right here. And then we have a neckline. That double top and the fact we closed right below that neckline, we're at risk of emerging Markets going down, which could be a headwind for the rest of the Markets. But right now, emerging doesn't look great.

[8:12] Daren: We'll see, though, if this invalidates and this is just another trade sideways and it's trading in a channel like the S&P. When you look at developed Markets, think Europe, you can see it's in a similar kind of precarious decision point. So it's fair to say every... Major Markets sort of in a decision point. I'm a little more bullish on U. S. Stocks than I am on emerging and I am on developed at the moment.

[8:35] Dano: Why? Why is that?

[8:37] Daren: Just the patterns, right? So if you see the SPY, it's trading sideways within this zone. If you look at emerging Markets, you can see we close below this neckline. If we close like up here, somewhere in that range, I'd feel differently.

[8:53] Daren: But the fact that it closed right below this psychological point of this neckline or this double top, and then just sitting right under the close here of this candlestick, that makes me concerned that this market's weak.

[9:08] Daren: So if I'm looking at emerging, this is maybe whispering in the tea leaves that perhaps there's something going on over in China or coming in that area in the emerging Markets. And if we look at developed Markets again. We closed right on top of this really important candle.

[9:26] Daren: This is important in validation candle for this breakout. So Markets tend to come in, you can see. So market broke out, came in, tested this, found support, came up, and it's revisited now with a double top pattern right on that neckline close right here.

[9:45] Daren: And that could be risky for the overall market and for the developed Markets. So right now, America stocks. Looking good. Emerging, not so much. Developed a little bit better, but not much.

[9:59] Daren: So going back to the RSP versus the SPY. So we compare the relative strength index versus just the S&P 500 index, and we compare and look at that on a ratio basis. The fact that it's going up, so this ratio is trading upward, that tells you that you're getting broader participation.

[10:19] Daren: Now what we need to watch out for here and what we need to see in the broader participation is you can see this downtrend that's in place. So we still need to get above 0.29 on this ratio for me to feel okay. That was the bottom of that lack of breadth and depth. But really, if you look at it, we've been dropping in breadth and depth since 2003.

[10:44] Daren: When people say, oh, wow, we're getting a concentration, we're getting a bubble, this is where that is illustrated. Because you can see breadth to the market and the participation of the market is going down. In the last... Three, four years, if you didn't own some of the mega cap tech stocks, your performance was vastly different than if you did.

[11:11] Daren: And then we look at comparing the S&P 500 to IWM. If this is building and going up, that means that your mid caps are doing really well and your mega caps aren't carrying the Torch as much. And the fact that this is traded down, but maybe finding a bottom right here.

[11:30] Daren: On this ratio. So that tells you that, okay, maybe we're going to get a turnaround with IWM small and mid caps. If we get mega cap participation, then all of a sudden you got the makings for a ramp into the end of the year.

[11:46] Daren: Dan, did you have a slide you wanted to share on that one? I think we brought that earlier.

[11:50] Dano: Sure. Yeah. If you want to talk about that. So we, I noticed this this week. Particularly in light of what was happening with some of the chip stocks and the repricing that seemed to be happening. The headline is that speculative data center debt is being repackaged and sold to pension and retirement funds, university endowments, and other institutional investors in a manner eerily reminiscent of the subprime bubble.

[12:16] Dano: This is coming from an Instagram post from Invested HQ, also found a supplementary article from Forbes, basically saying that In order to, the theory and the thought is that in order to, just as the railroads did, do this build out, it's taking so much money they're having to borrow. It's considered risky in some senses because they don't know necessarily that the revenue is going to be there.

[12:45] Dano: The theory out there, Darren, is that with bonds, they will be, with corporate bonds, they will be basically shoving this into retirement plans. So I noticed that this week, and I wanted to get your take on that idea.

[12:57] Daren: Well, it's not too far distant from what we've talked about in the past. And we've talked a lot about this during the XAI IPO. Now that we're staring at a potential anthropic IPO and the OpenAI IPO, and there's like this debate, like, is it going to IPO or not? At the end of the day, like, why does a company IPO? Well, it's not because they all have.

[13:21] Daren: Good intentions, right? Like it's not because they just feel like we want to share our wealth with other people. It's generally because they're running out of financing and they need to put the financing onto the rest of the market. And so if they need to put the financing onto the rest of the market, well, that happens through an IPO.

[13:42] Daren: And one of the things we've been asking for a long time is like, whoa, this build out with all this compute doesn't feel... Like it's super rational, right? Like they're building out compute at any cost, any price, taking out debt at anything, all on this belief that the future is just compute, which it very well might be.

[14:04] Daren: But I do think that we'll probably face some level of an S curve on it, where it'll be all and everything. And then all of a sudden, it was like, oh, just kidding. That was a fad. And then it becomes everything. And we have a great example of that in the internet, right? Think in 2001, when we have the dot-com bubble.

[14:21] Daren: And it was, that's why I was at Davis at that time. And I remember like a bunch of my buddies who were all into business as well. They were all like, I'm starting a WWW startup. And, you know, I remember going to this one guy's office. He was doing a startup and it was like coupons or something.

[14:40] Daren: And he had an office in downtown Davis and had no way to make money, but his dad had already bought him an office. And, you know, he was going to build the next Google or something. I don't know. And it felt like everyone and their mom had their startup, WWW. And it's not so dissimilar right now. There's a lot going on. In the AI space that feels very similar.

[15:06] Daren: And so you have to start to wonder and ask, like, what's my exposure to AI? What's my concentration to AI? Am I ready if something changes there? Am I okay with the potential volatility? And that's not to say that this won't go on and change all of our lives in a massive way, because I absolutely think it will, even more than we can even perceive or understand at this moment, how big of an S-curve we hit.

[15:31] Daren: And how much all the baby gets thrown out with the bathwater, I don't know. Like, we'll see how that plays out over the next little while. But the way that these build-outs are getting funded, the way the compute's being built, it feels very bubblicious.

[15:50] Dano: And, you know, I've got a couple thoughts just based on what you just said, which is that I feel like they've just kind of let everything out there. I have an idea that you might actually have access to more compute and options right now than you ever will. Because right now they're just on air. They're on borrowed money. They're pre-revenue. They're just trying to get the idea out there and see what sticks.

[16:18] Dano: If you want to try to conceptualize what the efficiency of compute might be, I'll put it into another context. Let's say that it's 1965 and they have rocket technology that can put people into space. The fastest way in 1965 to get from San Francisco to New York City would have been a rocket, right?

[16:42] Dano: Faster than an airplane. Highly inefficient and not actually useful for the millions of people who would need to fly, right? I feel like that's kind of the stage where AI is at. We've invented rockets, and it is technically the fastest way to get there, but it's just completely unfeasible at scale.

[17:02] Daren: Well, it's like getting new technology, right? There's this period of time where, oh, it's going to solve everything and do everything. And hey, in fairness, last week, OpenAI announced that they had solved 722 mathematical problems that were not solved by mathematicians. And there's this interview floating around the internet where this mathematician at MIT or something's in tears crying because literally his job is gone.

[17:31] Daren: He enjoyed math because he enjoyed just sitting around trying to solve these mathematical equations. And with $300 in tokens, math is solved. And I think we're very rapidly approaching a world where everything that is verifiable will be solvable. And there'll still be the element of creativity.

[17:51] Daren: But when you think of like jobs and professions, if it's verifiable, AI will solve it faster and quicker. I'm personally really excited for the future of that, right? I mean, think about all the potential diseases there will be cured potentially in the future. There won't be human disease that we can't deal with.

[18:12] Daren: I think that begs a whole nother set of questions and problems and challenges as society. But that's really hopeful. And really powerful, but it is going to change things drastically. In the meantime, though, it might be that we go through this cycle, who knows how extreme it will be, where you see a moment of volatility.

[18:35] Daren: And that volatility comes because all of a sudden, people don't believe that the AI build-out is going to continue going. And then we all look back and go, oh, wow, we really overdid it here. The VIX is a measure of volatility. It's measuring how complacent those who trade the S&P 500 futures are and how complacent they are. And when you see it going down in red, that means that there's complacency.

[19:00] Daren: And the last two weeks, there's less complacency, and that's where we saw that volatility come. But when we look at this in the context of other moments of volatility, we're just trading sideways still, folks. Like this is nothing. So again, the media would make you feel differently if you listen to your primetime news du jour.

[19:28] Daren: But at the end of the day, the volatility is not there. We break above 2320-ish in that range right in here. Then we can say volatility is doing something different.

[19:39] Dano: And just so I can follow, just so I can follow here, we've got a large to the right there kind of over March. Of 26. We've got a large spike there. Is that an example of the tariff incident and the volatility that happened there? Yeah.

[19:50] Daren: So, like, this is tariffs. You can go back. Like, this is COVID right here.

[19:57] Dano: Spicy.

[19:58] Daren: Yeah. But, you know, when you look at this. Like one of the things you see immediately, these are weekly candlesticks. This spike in volatility lasted one, two, three, four weeks, right? And so we get these like very big moments in volatility. Everyone's eyeballs are glued.

[20:20] Daren: This is the end of the world, yada, yada, yada, fill in. But at the end of the day, like that's not, it doesn't last long. And so it's really important not to ever overreact to what's going on in the media, because they're there to sell your eyeballs so that you have the TV on more.

[20:42] Daren: But you shouldn't be projecting that onto your portfolio. When we look at the move index, this looks at bonds and volatility in bonds. And you can see we do have an elevated moment in bonds, which to me is not super surprising, given that we have interest rates that are high.

[20:58] Daren: We've got all the questions going on with Iran. Which is very interesting, the OSINT community, which is the outsourced intelligence community. So these are all people that basically do what I do with the market. So they sit around all day looking for intelligence in the public space.

[21:16] Daren: The feeds that I monitor and look at in the OSINT community right now are very loud about something building for Iran and something happening in Iran, where you start to see diplomats getting moved out of. Different places and things shifting around in the Middle East like we're going to start throwing bombs.

[21:37] Daren: So we have this kind of joke on this channel that it seems like the bombs always drop after one o'clock on Friday when the market closes Pacific. So I'm very curious to see if this weekend we see something spicy heat up with the Vonagon and what exactly that is. But the OSINT community is very loud right now. And this is the market could be saying that as well.

[22:03] Daren: All right. Let's look at the 10-year. I was going to say.

[22:07] Dano: I'm hesitant to say, but did the 10-year actually have a good week?

[22:13] Daren: Well, it had a good week because when the 10-year goes down in that 10-year, that's good in the sense it doesn't blow up mortgage rates in the U. S. It brings down the cost of debt. Why I think that the mid-caps have been going down is because interest rates have been going up. Smaller companies are really impacted by interest rates, right?

[22:36] Daren: So if all of a sudden it's much more expensive to loan money and you need, as a small mid-cap company, your lifeline is debt. You're, you know, you're a building company. You're not making enough money to actually survive on your own, right? So you got to go get debt. Well, if that's really expensive, that impacts your valuations. But if interest rates start coming down, then...

[22:58] Daren: Well, that's good because then if I'm a small company and I need to keep operations afloat, it's more likely that I can do that if I have to pay less for my debt. And that's what's happened. The 10-year, we saw this big spike a few weeks ago where it was just ripping upward. The bad news of this chart is the good news of the S&P chart. Well, what do I mean by that?

[23:20] Daren: It's a very similar structure and setup, right? You have a high and then you have this Trade up and it comes down And support holds right here. And now we're sitting on support. What we really want to see in this 10-year chart is we want to see a breakdown. We want to see it go lower, right? Because that's going to be more stimulant.

[23:40] Daren: But we don't want to see it go down too fast. If it goes down too fast, then you get like here's 2020, an example where the 10-year went down super fast. And that's because there's something really negative going on economically. And then all of a sudden we start printing money like we're drunk sailors and interest rates just shoot to the moon because inflation is shooting to the moon.

[24:05] Daren: So we had a pretty bad inflation week. We got some prints that didn't look so good on the inflation side, but the market kind of shrugged it off. So it's possible that the market was already seeing that coming through and it already priced it in. Another good example why we don't advise that.

[24:21] Daren: People spend too much time watching the media and projecting that onto their portfolio because oftentimes the things that happen by the time they hit the TV, they're already priced into the market. The market is in a lot of ways is very, very efficient and absorbs information far faster than the human mind, especially nowadays with all the AI and tech.

[24:42] Daren: So it's very hard for by the time you're seeing it and by the time, you know, CNN or Fox or whatever is freaking you out. And then you call up your advisor and be like, hey, I need to go more conservative. It's too late. It's already been priced in the market for weeks. You're actually probably selling at the low, and that's why people tend to sell at the low because they freak out. After the fact.

[25:11] Daren: When we look at the yield curve, so this used to be like the only for sure barometer of a recession. It actually got kind of invalidated during this go around. When we go below, we have an inverted yield curve. And then we tend to hit recessions when this shoots up. We can see that the yield curve now above zero is back in a more healthy place. But it's actually working down.

[25:35] Daren: So part of me wonders if it's going to invert again on us. And what that means is that the long end of the rates are actually lower than the short-term rates. And that tends to happen when Fed starts moving rates up. That pushes the short-term rates up and then the long end of the curve down. And when the long end of the curve is down, you're actually paying more for short-term debt. And that doesn't make sense economically.

[26:00] Daren: So that tends to... Be a sign and also a catalyst in the economy. And there's lots of debate on whether or not when inversion happens that it's more just symptomatic that, oh, there's a flu in the economy, there's a cold in the economy, or whether it's actually what causes the flu in the economy. Because short people stop taking out short-term debt because, well, it's really expensive.

[26:30] Daren: All right. But that's just interesting. I noticed that kind of the corner of my eye this week, watching that head back down to zero could be a sign or, you know, we're going to continue on up. We shall see. I want to look at oil. And this is why I'm really curious to see what happens now. You've been hearing me on this channel mentioned for weeks, 80 and 100.

[26:53] Daren: And look where we printed above this week, 100. So we're sitting at 103 a barrel. Why is that problematic, right? Trump's going into a very important midterm election. They're trying to win the Senate or at least keep some of it. It looks like they're going to lose the House at this point.

[27:10] Daren: And it doesn't look good for him politically. I also think that assuming that Trump loses the House, maybe keeps the Senate or loses the Senate, I think if he loses the Senate, I think you're going to see a whole... Host of different things happen between election day and January 1st when the new Congress is put in place because it's kind of like this dead window, right?

[27:36] Daren: Where no one can really do anything. You have all these people leaving and new people coming in. And for the executive branch, it's kind of a window. I'm of the feeling that we don't really see any skirmishes break out with Iran until after the election. And then I think it's going to be pretty...

[27:56] Daren: Pretty brutal that's my current thesis and i think that's what the market the oil Markets might be whispering to us and saying at this point saying hey oil going up because you know we're weeks out now from the midterm election so keep an eye on that although the ocean community has been very loud and usually when they're loud there's something brewing.

[28:25] Dano: That would be counterintuitive if it's above 100, but then again, it wouldn't be out of character for Trump to be doing something that's counterintuitive.

[28:38] Daren: Well, I also think there's this moment where, you know, kind of the throw the baby out with the bathwater moment where you like Trump just doesn't care. Like. He's pissed off that he lost the midterms because they couldn't get gas down. And he's going to come out and say, Iran messed with the midterms, whatever.

[29:06] Daren: He's going to come out and be social and say. And then I think you have to be careful with any leader. And I think this is the risk with Russia. If any leader gets to the point of no return, where they just start getting desperate, that's the most dangerous place to be. Where we don't want any leader to be, right?

[29:24] Daren: Because then that's when they get just callous and careless. And I think we need to be really careful there. And so, you know, one thesis or one theory, because these are just thesis and theories and trying to interpret the tea leaves again, that I have is that oil is going up right now because we're about to see a skirmish break out.

[29:44] Daren: So it's what the oil Markets, just like what I talked about, they're pricing in a larger skirmish. And although Trump wants to calm things down, he's almost in that place where he can't. Like there's really no, he's really, because if he just keeps the way it is.

[30:03] Daren: Then the iranians now have control of the strata hormos not that they necessarily control it but they control it just by the threat of what they can do to it and he's really kind of stuck he's in a quagmire now in the Middle East and so one of the routes that he might take which based upon his previous history is he might you know strength peace through strength where he just starts bombing the you know what out of Iran which then could escalate, right?

[30:32] Daren: Because you have Russia now helping Iran, China helping Iran, and that would be the bigger fear, right? That that happens. So we don't really want Trump to get desperate either, right?

[30:42] Daren: And that's also why I think Markets tend to like when you have a split House and a split executive branch, because when you have a check on power, there's more safety in that. There's more certainty in that. Like the leash is only so long. The bigger fear is that the leash is too long and then some leader does something that's catastrophic.

[31:07] Daren: So that's what I'm surmising, like why now we're above 100. We're not even hearing talks of peace from Trump right now, right? In previous months, anytime we got above 100, it was, oh, we got a peace agreement on the table. We got a peace agreement. Maybe we hear that.

[31:24] Daren: But because the OSINT community, there's lots of rumors flying in the OSINT. And what the ocean. Community does is actually look at things like, hey, how many planes have moved out of blah, And they'll count, they'll literally count like executive jets leaving the Middle East, right?

[31:40] Daren: Because the people with the executive jets tend to have more information than the other people, right? So they're like, I'm going to move my plane and we're going to take my family and I'm going to go to Europe for a little bit. They're seeing stuff like that where they can actually track planes that then make assumptions about.

[31:58] Daren: What's going on. Some are surmising and certainly CENTCOM has said stuff about this where they've moved a lot of the U. S. Infrastructure out of the Middle East and out of harm's way from Iran being able to bomb back should we start doing something. Anyway, I digress.

[32:19] Daren: There's just a lot going on there that I think we need to watch really carefully. And gold is going down, which is interesting, right? Gold is now sitting at that 4,000 and break. If that goes down, then maybe we end up with 3,400 an ounce. There's a pretty far fall from there.

[32:37] Dano: Wow. So gold giving back basically an entire year.

[32:41] Daren: Yeah. Yeah. I mean, it's basically last time it was this low consistently was 20, November, 2020, 2025. I had a, you know, so yeah, you have. People who were just throwing their money into gold, it ripped, it was doing incredible, and then shows you. And this is just a perfect example of why rebalancing is so important, right?

[33:06] Daren: Because it's going up forever and ever, and you think it's going to always go up. Well, if you're not rebalancing your portfolio on a regular basis and selling some of your winners, then you end up in situations where you just end up giving it all back anyway. And the psychology of most investors is that. They end up giving it back because... They don't rebalance.

[33:28] Daren: Taking a look at Bitcoin, Bitcoin actually looks pretty decent right now. I'm not concerned with that. It looks like a bull flag to me is the current pattern. And you can see it's kind of building.

[33:42] Daren: This is going to be headwind, $88,000 to $92,000. We'll see where it goes. Closing the lower end of that, but it is a little bit precarious. You can see this double bottom here and this neckline.

[33:54] Daren: You could also say that this is actually, there's another pattern called a cup and handle. It's a very bullish pattern. You can see this is like a cup here with a handle forming. And there's your handle. There's your cup of hot chocolate. Whatever you choose, that's a very bullish type pattern. So generally, I look at Bitcoin bullish at the moment, which I think is interesting in context of...

[34:22] Daren: I don't know, Dan, if you caught all the cyber hacks this week, and there was just so many cyber hacks. AI is finding all these weak spots and all this legacy tech like PHP and Quest Diagnostics supposedly got all their data hacked. I'm like, great, the whole world knows what my blood is doing, right? Yeah. And they can find out just how healthy I am.

[34:48] Daren: But yeah, there's a lot of... Stuff like that and technology is being challenged incredibly and every organization now is looking at ways. I was speaking at a conference this week, Advise AI on AI tools and how they're being used in financial services.

[35:07] Daren: And I think we're rapidly, you know, the conversation the last two years at that conference has been like, well, how do you use AI tools and protect your data, you know, and not let the AI get a hold of your data? And now it's like, if you're not deploying some element of an agent to protect from other agents, you're probably in trouble as an organization.

[35:28] Daren: Like, there's just no way you can protect by traditional means. And so like, Amazon now has a service that will allow you to, basically you have to be constantly scanning your system for weak spots. Otherwise, not going to be a good go for you.

[35:48] Daren: And I think that's the way of the future. I think we're also going to see a lot more hacks coming through. I think critical infrastructure is going to get drastically challenged. I also have this theory that like OpenAI And Anthropic are like letting all these hacks.

[36:04] Daren: Like sort of happen that aren't too bad then if enough like non-meaningful hacks happen then enough people call the regulators and say clamp down on this AI stuff right now and so then the regulators create these regulations that basically put all the big players at the top and kill all the competition which is actually happened a lot in history and you get these big first go movers They start seeing these open weight models that are getting dumped onto the market, like China's dumping them left and right and trying to get companies to download them because they're a lot cheaper.

[36:38] Daren: And then they get onto the market and then prop and get run into $80 billion in debt. It's like, oh, well, we let these open weight that are nearly free come into the market. We're never paying back our $80 billion in compute bill that we had.

[36:53] Daren: So it's possible that we're seeing a lot of cybersecurity stuff get talked about. Because then that'll force regulators to regulate. And if they regulate, that puts the winners in the winner's chairs.

[37:05] Dano: But what you're basically describing, we've been talking about the railroads, it actually sounds more like the automobile industry in the 50s. Yeah. You've got the huge players and anybody, there's a lot of stories of startup cars that tried to make it and the big dogs found a way to squash them all. So kind of a similar playbook.

[37:26] Daren: Yeah. Yeah, it's really interesting how that's playing out and how history rhymes, right? As our friend Chris Sykes would say, Chris loves to read history, right? And it is shockingly similar to the automobile, even the railroads, all that kind of thing. But I was also thinking a lot this week about how adoption of AI is.

[37:47] Daren: And I was imagining back in the day when there was... The first automobile was created and there's this guy driving around in his horse and buggy. And he looked at the other guy with the automobile with some disdain, like, oh, you're ruining life and you're ruining the blah, Because it's probably this really loud, polluting thing originally.

[38:11] Daren: And I'm going to drive my horse until I die. You're seeing very similar behavior with AI. Like, oh, that AI is going to ruin it. It's going to kill everybody. And Maybe it does, but maybe it doesn't too, right? Like I'm pretty sure when the railroad was created and when cars were created, it was going to kill us, right?

[38:32] Daren: I mean, didn't we have that with the internet? Like in 2000, weren't we all going to die because the internet- The Y2K. Y2k, right? Like it's the same kind of stuff, but the reality is my experience with the human condition is humans are resilient and they'll find a way to survive.

[38:50] Daren: Yeah, some won't, but the- the general populace is resilient like we are humans are the apex predator in the world and the human like homo sapiens are the apex predator we have risen through millions of years they're not just going to roll over and die because of a bunch of bots it's not going to happen right but it's like maybe it's because this generation we all grew up on like terminator right we watched don connor and like we have this like thinking that these bots are going to kill us and maybe they will.

[39:21] Daren: Maybe they won't, you know? And I think we need to bet they won't and that, yeah, things are going to change. And if we all just sit here and don't adapt to the times, then we're making a mistake. But man, there's going to be some cool things that happen.

[39:37] Daren: Like I'm so excited about like the medical advances that are going to come and the ability to like literally create custom medicine for genetic and DNA. I mean, that's incredible, the stuff that's going to come. From it and what a cool time to be alive and to see that just happen before us and like I mean you can't change it and.

[40:00] Daren: And I was like maybe a year and a half ago doing like super research into it all and deep diving into AI. Like what is this going to do to us and what are we going to do? And I was definitely like it's true that the closer you get to AI, the more fearful you get because you really see what it's doing. But at the same time, like you get to this kind of like doom zone, right?

[40:22] Daren: Where you're like, oh my gosh, this is going to disrupt everything. And then you kind of go to this dark place about it. But then you have to back up from that and go, well, yeah, I mean, it could be that. But it also could be a world now where people could be invested and spend more time doing creative things, doing things that they really want to do, because the AI can do 80% of the other junk that they didn't want to do.

[40:44] Daren: And maybe it's a world where when grandma gets sick, we can actually cure grandma. We can actually do something about it because we have cancer treatments now where we can actually eradicate the cancer in a body because we understand how the genome works. And then the AI can create a custom medicine for that person.

[41:03] Daren: Like that's an incredible time to be alive. Now, don't get me wrong. It's going to create a population problem, but it's an incredible time to be alive that way. Right? I think about the loved ones I've lost that shoot, man, if they'd made it five more years, 10 more years, I wouldn't have lost them because we would have been able to cure that particular disease or whatever they were fighting.

[41:25] Daren: So. Anyway, I think that's the positive. There's a lot to be positive about. There's a lot of really cool things to watch happen over the next 10 years because we're definitely, I think, going through a period of time that is going to change more than we've ever seen. It's going to challenge all of our psychologies from a change perspective.

[41:46] Daren: It's insane how fast things are shifting right now, and I think it's just going to continue on.

[41:55] Dano: Well, speaking of, you got me thinking, and I actually want to bring this up anyways. You mentioned the horse and buggy getting passed up and the idea of something that's over and done with and the world has moved on. I wonder if you know, I always like to pull up a random single stock at the end of the show.

[42:11] Dano: And this week, as I was looking at the heat map, I saw this bright green, like really screaming to me for, I was looking at the year to date, and I went, what is PM? And this is not an endorsement at all for what the product is.

[42:31] Dano: But I was shocked to see that Philip Morris International is on a run right now. This is their this is cigarettes. This is they no longer own craft. I found that out. This is also just their international arm. But man, I pulled this up and I just went, whoa.

[42:53] Daren: Something i mean cigarettes are done right like we've regulated this like to the hilt this is people aren't you don't ever see anybody smoking these days and yet look at that price action well which is funny as i saw a headline last week that people at like anthropic and open AI are so convinced that we're going to cure cancer a bunch of them started smoking again heard that yeah i've also right and so again going to my what i said earlier which is like often before you hear about it, it's already moved.

[43:24] Daren: Like what if in 2024, the market was already seen that, right? I don't know if that's why this went up. Like again, you know, no one ever knows why stocks go up or don't go up. Like we all try to find stories, like it does what it does. And then we contextualize it and create a story around it, why it did what it did. But there's not like a right story, right? It's just does what it does. And then we create it.

[43:49] Daren: Narrative for why it did what it did and i wonder if that's it i did want to bring up one stock and it's this one remember this one from last week hold on which one i'm getting getting yeah can you it says change symbol i'm not saying it because it's dead oh did they delist it you delist it went bankrupt this week so it's gone wow and i mean like what an a a perfect example of the guy watching, sitting there on his horse and buggy, watching the car drive by saying, I'm never going to do that.

[44:26] Daren: Like another perfect example of a company who failed to change, who have failed to adapt to the times. And here you go. It's gone. No Getty Images. Why? Because I was at a conference yesterday and watching this guy speak and every one of his images was custom designed with his AI. You know, like...

[44:47] Daren: Whereas it used to be back in the day when we were prepping for a presentation, like we'd have to have our subscription to Getty Images and go download it and find the right image. And now I'm like. All right, Claude, just spin up this or Getty image or, you know, Gemini images, and you just create your own images now, which is remarkable and powerful and great.

[45:08] Daren: But like, I think what a perfect example of what we're going to continue to see is disruption, right? And one of the things I said to the other advisors this week, like if you're not actively looking to disrupt your business because of what AI is going to do to change your business.

[45:27] Daren: It's coming to an end for you.

[45:30] Daren: And we all have to be, unfortunately, be focused on how are we disrupting ourselves in a time and an environment where we're about to go through 100 years of technological change in 10 years. I mean, it's going to be dizzying, folks.

[45:54] Daren: I do think there'll be a... A period of time where it pulls back some and we question its relevance. I hope it doesn't go awful. I'm choosing, I'm choosing to stay optimistic about what AI brings to the future.

[46:09] Dano: We'll leave it there for the week. The AI build out has been repriced, but the headline is perhaps as usual, not all that it seems. Thank you so much for checking out our show, especially if you've made it this far. My gosh, to the very end, you must be one of our clients. Appreciate your time very, very much.

[46:25] Dano: I hope you enjoyed this. This is educational. This is our insights and our perspectives, how we're seeing the market. If you're new to our firm, well, why don't you check us out at SonomaWealth. Com. That's where you can book a wealth analysis, learn how we help clients and individuals and families in Northern California with investment management, with tax planning, and a whole lot more.

[46:46] Dano: SonomaWealth. Com to book that wealth analysis. Wherever you found the show, whether it's on YouTube, Apple Podcasts, Spotify, make sure to subscribe so you don't miss future episodes. And we'll be back next week On The Markets.

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