Why AI Is Scaring Investors & Hitting Tech Stocks

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All right, welcome to another Talking Wealth episode you're on with Phil and Pedro and

today we're covering something that's going on at the moment and that's basically the

tech sell off that everybody would have seen and why AI is actually the driving factor behind

it and why is it sprucing investors.

So we're going to cover off what the real reasons behind it is.

I know there's a lot of commentary going on around and some technical reasons and also

Elon Musk.

You can't talk tech without talking Elon Musk and why he's throwing a bit of a spanner

in the works as well.

So without further ado, Phil, welcome back.

Thank you.

Thank you, mate.

This is going to be good.

It will.

It will.

I know that tech is something that we both love to talk about and quite passionate about.

So this will definitely be an interesting one.

So let's start off by outlining really what's happened.

Basically, it's been a very bad start to the year for tech all around the world.

The S&P 500, which is very heavily relying on tech, has been sold down.

The tech sector here in Australia has been sold down.

But even in the Asia, haven't been spared from the downturn.

They've been hit quite heavily as well.

So it seems to be more of a sentiment driven rather than fundamental and another you've

touched on it before that there is maybe some type of fundamental factor to it that valuations,

they're finding it hard to catch up.

How can you justify these multiple earnings, multiples of earnings that the stocks have

priced at?

Yeah, really.

I mean, we saw stocks like Palantir and go up thousands of percent in a couple of months

and they hadn't done that ever.

And I get it.

The hype was there.

And it was always going to be that way, right?

Through every tech cycle, whether it's the internet revolution or now AI, it's always

the way in terms of the way the market unfolds in that you have all this really hype and

excitement about what it can bring.

You have all these, I guess, companies getting funding hand over fist, people buying into

the possibilities.

And then a few years down the track, reality sets in right.

And they realize, oh shit, maybe we've spent a bit too much in terms of what we're going

to get back for our money.

And at the end of the day, they realize that the stock market is a game where if you're

not able to continuously exceed expectations, the share price gets hurt.

And I think we're at that point where the realization is which ones are actually good,

strong, solid companies, which ones are performing and which ones have probably spent a bit

too much in terms of the anticipation of where things will be and now finally starting

to settle down and get some realization, well, maybe our share price isn't worth 4,000

times earnings.

You have basically, you know, I mean, a perfect example of that is Microsoft with a Zua

cloud services.

They've spent a huge amount of money in those services, but they're barely meeting

growth expectations.

So it goes exactly to what you're saying is there's

enormous amount of money, but are they getting their return on investment?

Yeah.

And then you've got to ask the costs of these things that they're building as well,

right?

Like we know AI, AI right now, the more advanced it gets, the better it becomes, the more

energy it requires.

So it's like, you know, at what point does the cost of this just completely outstrip what

it gives and we're starting to realize that that they're very, very energy dependent

like that.

They suck the energy out of the globe.

There's this wave of technology and that's not for free, you know, you got to pay for

that.

In fact, that in.

And so we're hitting at the threshold of productivity versus cost, cost is increasing

dramatically, but productivity or application is not moving at that same pace.

And yeah, we're sitting in a situation like I mean, in video release earnings today,

which we're not too bad, but, you know, it's, you got to ask yourself, what forever,

they're forever going to be beating earnings quarter on quarter, that's the expectation

now for a video to smash earnings every quarter.

And as you know, no company does that forever.

So yeah, I mean, even though they had, they had a good result, right?

Yeah.

And I believe that they're moving into a bit of the IBM's field, they're trying to tackle

them head on.

I believe that they're moving into the AI infrastructure and strategic partnership of enterprise

AI deployment.

Yeah.

So, you know, now they're moving from that kind of hardware story into that more service

and software type service, so I think that they're trying to capture as much market share

as possible.

I think that the market like that, but this is normal, right?

I mean, for AI and for any type of technology, like at some point, you know, you're probably

going to dive into this, the comments by Musk about how there's things already in the

works that might even supersede these current technologies as we are now.

And it's like, that's always been the way.

And if your company's purely focused on that and fully invested in an avenue of technology

and all of a sudden you find something you spring up, it's like, okay, that's going

to supersede that.

Well, you're in trouble.

Yeah.

But for me, like if one thing I want to say about, you know, this, or whatever they call

it, AI capitulation or, you know, all that word about AI, AI is struggling in that.

But if I just look at the 100, you know, the NASDAQ 100 index, which is basically made

up of most of the technology stocks, I look at that index and right now it's pulling

back from the all-time high, but it's only down 12 percent, right?

It's had way worse falls.

It's probably the biggest correction that we've seen since the tariffs.

And if you take away the tariffs, it's probably the biggest correction, while it's the second

biggest correction, there was a very similar correction back in July 2024.

So yeah, it's interesting right now where this market sits, really.

Yeah, yeah, definitely.

It seems to be more of an opportunity rather than a cause for concern in that sense.

When you're looking at it technically like that and, you know, what's really driving

it, which is basically fear.

Yeah.

And it'll always, like in the tech sector, it'll always be that way.

If you expect to get a broad, by broad tech stocks and think you're going to win over

the long term, well, it didn't happen during the dot com era and it's likely not going

to happen during this era.

You're going to have a few really strong powerhouses that find their way in this space and

become the mega leaders, you know, like the Apple, like the Amazon back in that period.

And they're going to drive things forward.

But don't expect to buy every software company or app company or AI company.

And think that you're going to succeed in this space.

Tech is one of those sectors.

You've got to be selective.

You have to.

For sure.

And you've got to be on the right.

You've got to be on the right company.

And that right company is the one that can adjust that can adapt.

You see with Nvidia now, it's not just the, like you said, not just a semiconductor chip

story.

Now they're moving into AI, their, their version of it.

Hmm, these are the companies that win.

If they do it right, they can also blow up badly if they get it wrong.

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Yeah, that's right, if they're investing in the wrong thing and I think the key word

with tech is disruption because anything can come out and disrupt it.

It's like if we can liken it to pre, say, I don't know, pre-internet, you invest all

of your money into radio, you know, into radio technology or something like that or you

spend all your funds in the VHS and then DVD comes out and just completely blows you

out of the water.

So definitely that's, I think we're going through those kind of turning points at the

moment that the market is worried that they don't know basically where to invest.

They can put billions of dollars into something and then something you can just come out and

completely make that obsolete.

A good example of that, going back to Elon Musk, I was watching a presentation by him

and he was talking about, they're working on something that can actually emulate how

you work on the computer.

So it's not only one software, it's his AI that can actually work a computer just like

a human would so it can open up programs, it can close them, it can kind of like moving

around the mouse and just doing everything on the computer.

And he said that any service, any company that's offering a service that is done over

the internet or not physical, it will be replaced.

Anything that is done by a computer, it will be replaced by AI.

Now if you've got one software, one program doing this, that can take out a lot of sectors

and I'm thinking zero, no wonder people are scared, accounting, all these different

softwares that do things social media.

Well, look at Weistek today, or Weistek yesterday came out, slashing jobs, moving purely

to AI agent type business as the workforce, no manual cutters will be in Weistek anymore.

Like just think about that, you know, all those jobs completely wiped.

And you know, the market's kind of rewarded that behavior over the last year, I really

you go back to a lot of those retailers last year that stole the show, the consumer discretionary

sector, the reason they stole the show because they all cut costs by implementing AI,

CBA, West Farmers, the banks gone involved as well.

And it's like, all right, well, is this the model moving forward?

We've seen the GDP numbers over the next year, over the next couple of years for Australia,

the worst they've ever been.

And so is this how we're going to create value for the stock market?

Just use AI to slash costs as much as possible.

If that is the way, I'm just hypothesizing here, you know, the AI may be more expensive

than jobs, but I doubt it.

There's nothing more expensive than manual labour in this world.

I'm not scale.

Yeah.

You know what I mean?

But anyway, I just throw that in there.

But realistically, it won't be that way.

It was going to make things a lot cheaper for the company, which is going to increase profits,

which is going to reflect in earnings.

And then the share price continues to go up all the while the economy jobs get dislauded

and the average man and woman doesn't feel any better, which I don't know if this is

an advertisement for start learning how to trade shares.

But it's probably the only thing you got left.

Yeah, really that can mitigate that downside, because at the moment, I haven't seen any

AI that can read a chart and apply levels and do the things that we do with who cares.

With the certainty anyway.

You know what?

Even if there is who gives a crap throughout because it doesn't stop you from doing it.

What this other stuff does is it takes your job in trading.

You have a choice because at the end of the day, the AI doesn't have money to give to

the broker.

You do.

So the broker wants your money.

And so from that point of view, I shouldn't say the broker, the market wants your money.

The broker is just there to facilitate.

I use the wrong word.

I apologize.

But that's the point.

They don't mind taking your money there.

You know, over the years, I don't like to dive into that, I guess, discussion so much

because I've seen enough from trading itself to say, there's no boogie man out to get

you.

And this is where people fall in that trap.

It's like, oh, the broker did this to me.

No, the broker just facilitated the trade mate.

You were wrong.

It's on you.

Go and fix it yourself.

Tell you.

That's what I think helps people more so than, anyway, we're going off track.

But the point is, you know, it will not take the, if you want to, the option for you to

trade, because it's too much money, it's like getting rid of consumers, all right, then

so what will do we live in now?

The consumers, the one that makes the money cycle through the system.

So you really don't want to get, you really can't get rid of consumerism.

Yeah.

Of robots aren't going to be the ones that are going to be buying fruit and all of these

little furgies or whatever toys that that's the new fad at the moment.

But I mean, that's really our third point there, that, you know, the job, the job loss

story is what's kind of driving that fear as well in the markets, you know, basically

that companies across multiple sectors could be cutting loss jobs as a shift investment

toward automation and AI reinforcing fears about economic disruptions.

So that's, that's a real thing here that the whole economy could suffer.

And this is why I think, this is why I think inflation for longer is, is, you see, oftentimes

the world repeats and rhymes, right?

Yeah.

You've seen it so many times, you see the same thing, the same thing again.

One raid Dalio even talks about it, but the one, I guess, smoking gun or the one thing

that can change everything has always been technology always.

And so right now what we're seeing is AI, a very, very real threat and doing it, taking

away human jobs, right?

And like you said, that is going to create a drag on the economy.

And really the one way that we do stimulate the economy, it's either the government starts

spending, which has been happening, or we, you know, we start lowering, pushing money

out into the markets and lowering rates.

So I think we might end up in a situation where we're probably going to have inflation.

And economy start to go, you know what?

We've got no choice.

We've got high unemployment.

We've got no money circulating into the market.

People are going to have to live with inflation.

And we're going to have to stimulate things.

I think that technology, the AI, is the one thing that changes what you would normally

do, or what you would normally care about, because it's taking jobs left for our

incentive.

So yeah, because normally what happens, okay, inflation is high in Australia, bang,

raise rates, raise rates, raise rates.

Okay, now what if the unemployment figures, if the government stops spending, because

really the employment numbers have been jacked up by the government spending?

Let's say they're restricted and now, you know, we're sitting in a scenario where inflation

is sitting a little bit higher than above.

What happens?

We get a law changing owner.

Actually, we have a new target range for inflation, ladies and gentlemen, within inflation

over the next 30 years should be leveled at four to five percent.

I don't know.

I'm just throwing it out there.

But at some point, AI is going to affect, and like you said, affect the labour force.

The labour force means it's going to affect money moving.

And that's going to affect the economy and you're going to have to make a decision on

what they do with things.

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Now, the next part is at the talk of the AI bubble, and we saw this all last year.

Everybody was talking about the AI bubble, and this is an interesting thing.

So they did surveys of fund managers in late 2025, and they showed that many of them

actually viewed AI stocks as a potential bubble.

And they were ranking it above inflation and trade wars as a tail risk.

So they actually factored that in more of a risk than inflation or trade wars,

which is it's crazy to think that.

So no wonder they've been sort of obviously, as we know, the big money is what drives the

market.

So if the big money is backing off, then it's no wonder they've had these falls and these

kind of capitulations.

So again, that, for me, screams a little bit more opportunity than risk, because they're

very cautious.

Of course, they have to be their risk managers first, but they're not always right.

And with technology, like you were just saying, it's always changing, and if you're that

forward looking, if you can see past the next five, 10 years, then you're going to benefit

from these types of off-down moves.

So that's definitely something else that's driving that fear.

Well, it makes sense, because imagine you were thinking about the AI story five years

ago, right?

And looking at the price of stocks that were getting involved in this space five years

ago.

Yeah, look at him video five years ago.

Nothing.

Right.

I mean, we were talking, and that's why we, I bring up that example, like we're looking

at drone shield and all that kind of stuff.

We were looking at drones before they were talking about drones with war.

And we, and, but the application was definitely there, and then it's like, okay, well, there's

something obvious here that there's huge application for, you know, for this company to go ballistic.

It's still not moving like that.

And then what do you see now?

Everybody's talking about it, but the cat's out the bag.

They've won the contracts, stocks flying.

Like you said, it's always about looking, especially technology, looking forward beyond

what the next, what the current is right now.

And this is why it's an important conversation about talking about how it's going to affect

the economy and employment and jobs.

Because that's the next, I guess, challenge that that governments are going to have, because

these companies, really, to be honest, the only loyalty they have is to the shareholder

and the share price.

They don't give a shit about really about whether or not GM or, or, or bills going to get,

need to get sack tomorrow.

If they need to get sack tomorrow for them to, you know, get another uptick in earnings

or whatnot, or if they can become more, more profitable, more streamlined through AI,

what company is going to say no, realistically?

Of course, I mean, a great example is the other day I was looking to book an appointment

for the doctor just for a general checkup.

And they had the option, they said, press one to go to an automated AI agent to, to schedule

it in or press two to talk to an operator, but you'll have to wait because we're having

a, you know, long wait time, whatever.

So I said, all right, you know, I'll give it a go, I pressed one.

And this lady answered the phone and, you know, they've done a great job at that conversational

way.

It actually sounds like a human, of course, you can still tell it's AI because of the,

the stops and the punctuations and things like that.

She called you Peter instead of Pedro, that's how you knew.

Well, that's the thing I had to repeat my name a few times and I actually had to spell

it out for her.

Yeah.

But, you know, she starts off by asking the date of birth and then the name and then she'll

check your records and then book it in and everything.

But it actually, when it came to booking, it wasn't so natural.

Like she was giving me dates and then I would say no, that doesn't work.

And then, you know, she would come back and then I just said, look, just give me the next

available one.

She wasn't able to do that.

She was just saying, you know, going day by day.

So there's still a fair few things to be ironed out.

But I was thinking, if this thing worked, to be honest, like this is my opinion, I would

any day much rather talk to an AI agent and just schedule this way, then talk to an

actual human.

And I'll say why?

There's no attitude.

There's no, they're having a bad day and that they might be condescending or they might,

you know, give you attitude or something like it's just great to the point or make a mistake.

Exactly.

It repeats it back to you in a systematic way.

So it's confirming along the way.

So it's like you're booking it, you know, online and I thought it's great.

It's in the early stages.

But that's a great example of how companies are automating this thing.

So how many jobs will that take away?

That's basically, you know, when I go into the medical center, it's like three people

on the desk.

Well, that probably has now become one.

And I think even like, you know, when you're calling you for like your telephone services

and that, I mean, that's going to take half the jobs out of India and Asia and the Philippines,

right?

Yeah.

Exactly.

And that's an argument that I heard the other day because Elon Musk comes out and says,

well, there's going to be universal basic income.

You know, I'm one of the skeptics that don't think that's going to happen.

And there was another guy saying, well, all right, just say AI agents take away most of

the jobs in Philippines, which, you know, a lot of them, a customer service.

Yeah.

Is that company that developed that AI?

Are they going to subsidize those Filipino people for taking their jobs?

They're not going to care.

They're just going to take their jobs and they're going to have to look for something else.

So how does this universal basic income work?

Who is responsible for distributing it?

Is it going to be the government?

Attack.

Is it going to be attacked?

Are they going to tax companies for saying, all right?

If you want to use AI part of what you've profited from some of that has to go to, you

have to pay as a tax to income for it, to the universal income.

But yeah.

Yeah.

Yeah.

It doesn't seem to work.

And would a company, it would a country administrator that would probably want to keep

the profits, or within the, that have all their companies, leaving to the Bahamas within

a week as the, as the place of residence, which is another interesting point.

I mean, you might get a whole shift in, I guess, geopolitical structure of big companies.

You know, will they move to your demise or to your, like, will the world change from

a geographical point of an island, right?

Even Singapore, Singapore's got a really low company tax rate compared to the rest

of the world.

And that happened to be companies then go, you know what?

It's not worth my, my time being here.

If you're going to put these restrictions, look, nothing's been said right now.

But it's, it's important to think about it, if it does go down that route.

But it's, yeah, yeah, it's interesting very, we live in, in wild times.

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We do.

Do we, and you know, if we're considering all this, could you imagine, you know, the

big end of town there, they're factoring so, there's so many scenarios that this could

play out at, and that's contributing to that kind of fear.

So, you know, we'll just end it with, again, with Elon Musk and his everything app, you

know, and I say that because we did mention that we're going to talk about this, this isn't

the same one that I was talking about that you can actually, it can use a computer like

a human.

This is what he's planning to do with X. So he's planning to, to make it be able to

have payments through it, messaging, investing and financial services.

So, it's a similar concept to an app called WeChat in China.

I'm not sure if you're familiar with it, but in China, you've got this app, it's great.

It's like, it's called WeChat and you can just do your payments through it.

You can, you know, schedule things through it.

It's like basically a life app that you do so many things through it.

Well, he wants to develop that and that's going to be X. So X is going to be that app

that you can do so many things.

So that will probably, you know, wipe away PayPal, it will wipe away maybe a lot of the

afterpay ones, it will probably offer afterpay there as well.

It'll maybe wipe away Visa, who knows like how many industries it will disrupt, maybe

even, you know, financial services, the financial advises and investment advises, things

like that.

That's another reason why I think, you know, market is a little bit worried about these

types of things coming out and these AI agents that can basically do so, so much.

But I guess we'll end with saying that the best thing to do is just to embrace all this

and stay up to date because it's developing every day, basically, there's something new,

a new story coming out about AI.

So definitely being in touch with it.

And like you said, find other ways, other resources to kind of supplement your income.

Because if the AI does come for you, well, you know, it's, I'm sure a company would

prefer to have an AI agent that doesn't have sick leave, doesn't, you know, bring their

personal, no super, bring their personal life to work or anything like that, not, not

saying that they should, you know, that's an ethical story aside, but, you know, factual

and this is the way that it goes, companies are always going to be looking for the bottom

line.

So, yeah, definitely just staying up to date and watching all this unfold will also give

you guys, you know, temporary kind of, you know, updates and things like that, as with

and see things unfold, but definitely great, great opportunities in this space.

So, yeah, keep a watch out.

Yeah, yeah, I'm, I'll just go tank tight then, yeah, no, that's good.

Yep, all right.

Well, that's it for this episode.

Hope you guys enjoyed it.

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Bye.

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