This is an I Heart podcast. Guaranteed human. Hey guys, Sagar and Crystal here. Independent media just played a truly massive role in this election and we are so excited about what that means for the future of this show. This is the only place where you can find honest perspectives from the left and the right that simply does not exist anywhere else. So if that is something that's important to you, please go to breakingpoints.com, become a member today and you'll get access to our full shows, unedited, ad free, and all put together for you every morning in your inbox. We need your help to build the future of independent news media and we hope to see you at breakingpoints.com. Turning now to the stock market. Absolutely insane things happening. There are drops, there are increases, but overall the shakiness over the last couple of days from Friday to Monday reveal potential major weaknesses in the U.S. economy, which lead us directly into our next segment with Jeff Stein on AI. But let's start with D-Sex actually. Let's put it up here on the screen. This was written over the weekend. The market route leaves Wall Street bracing for rockier times. Investors have to confront the challenges from the latest inflation reading and SpaceX IPO in the days ahead. Specifically, they show stocks bonds gold Bitcoin. Investors entered the new week battered by a market sell-off that left very few places to hide. The route followed Friday's stronger than expected jobs report, which sheared 4.2% off the NASDAQ, sending investors racing to increase bets that the Federal Reserve will raise interest rates by year-end and sparked a bond slide that lifted yields on treasuries to their highest level since early 2025. That pressured shares of multinational and smaller domestic companies alike and gold fell to its lowest levels on the year. The tumble drew warnings from Wall Street that more tarp moil lies ahead. Ray Dalio of Bridgewater said this, Friday was an important move that highlights the central role that the global craze for artificial intelligence and other related stocks has played in the record run. With valuations stretched and yields rising, bonds are now much more attractively priced than stocks. Leaving the market in a precarious position, market and economic concentration is in one new sector that is highly volatile and risky, is super popular among unsophisticated investors, quote, that is classic bubble stuff. So the two things that caused the NASDAQ and stock market to go down significantly on Friday were the jobs market that came in a little bit stronger than normal. Now, why would that matter? Because it would mean that they believe that thus the Federal Reserve would have to raise interest rates. Everything from the AI stocks to the general rise had actually previously been bet on the fact that the Fed was gonna lower interest rates or at the very least keep them the same. So when that reading came in, they immediately bet that their interest rate was gonna go up. That's already crushing now multiple years of generally high interest rates. How does that affect AI? Basically, from what I've been able to gather, a lot of it is based on the construction of the capex costs for borrowing because they have to borrow all this money to build all these new data centers. And for all these other things, money being more expensive increases the cost. And it also demonstrates, as he was talking about, with the bonds, making it less attractive to bet on these ultra risky high investments. Like, I mean, you got micron out there up like 1,000% and all these other chip companies which are up, by boatloads, AMD is up by 200% and video's up, I God only knows how much Google, Meta, everybody, they all got hammered largely either because of the bond issue, interest rates. And then sometimes things just kind of break. Now, I do wanna be clear on the day that we're recording this, it currently does look like the market is actually up, it's up by some 0.85%. So it's a race, maybe like a percent or so of the general drop that it had. We don't wanna make too much of the drop itself. We're trying to look for the rockiness of where some of the investor beliefs are and what that will mean in the future. So for example, let's put D2 up there on the screen. There was all that carnage in the chip stocks, quote, hit extra hard in the top heavy market. Everything has been dependent now on a small group of big tech companies which they specifically point to, Micron, Super Macutor and Sandisk, they all lost more than 11% in a single day. Cisco and Nvidia dropped 6%, Caterpillar, lately apparently an AI play because of its power and energy businesses, fell by 3.8%. All of that, you can point to these, you know, semiconductor indexes and others combined to erase more than 1.2 trillion in market value on the single day. And this chip story really was the big story out of the general drop. And I think highlights how much of the current market is dominated in this one sector. So yes, it was like a little bit of a blip, but I think that we have to focus on it just to make sure that we're covering our bases because in the future, with this a massive drop in those chip stocks will significantly deplete all of the gains from the S&P 500. It won't erase all of them, but so much of your current wealth is tied up in that, basically no matter who you are really, because it's not like your companies and others aren't betting on that, that it will mean genuine catastrophe for US markets. And that is actually what will push us into a full blown recession, if something like that happens. Absolutely, you know, I mean, in terms of the level of expenditure, the data center build-out has now surpassed the price tag of all public infrastructure spending in the entire country. Like that's the scale that we're talking about here. The, you know, this is beyond the railroad build-out, it's beyond the dot-com boom. So if it does turn out to be a bubble, there will be, the entire economy is bet on this. I mean, that's not an exaggeration. So there will be just a massive, massive crash. And so, you know, you won't be surprised that investors, they are aware of that or a little bit jittery anytime anything happens that could pump the brakes on that, you know, ever expanding valuations and investment. So I think that's part of why you see the volatility there. You know, at the same time, we should put a D4 up on the screen here about how voters are feeling about the Trump economy, because while the markets might be up, for most voters, that is not the thing that they are focused on. This is from the Financial Times. They say voters sour on Trump's handling of inflation and grocery prices. I was saying before that even Republicans, there's been a lot of upset about how Trump is doing on inflation in particular. So they have only 38% approval among Republicans of Trump's handling of inflation. He's actually underwater among Republicans on his handling of inflation. And if you look at the numbers overall, 68% disapprove of his handling of inflation, only 19% approve. Those are the worst numbers from this entire poll of various issues. They're also not happy with government spending. He's deeply underwater on Iran, deeply underwater on tariffs and trade. And all of these things are areas where it is completely under his control. So whatever the stock market is doing, I mean, things could get much, much worse if you have a stock market crash. And then the one thing that is a bright spot in the economy also goes south with tons of carnage. And then you have an utter decimation across our entire economy. But even without that happening for the American consumer, this has been a very, very difficult period and all owing directly to the choices made by Donald Trump. Yeah. And I think what this highlights to is, look, while everybody's looking at AI, the general cost for all of us. Let's go to the next one, shall we? D5, for example. We haven't talked about jet fuel here in a while. Airlines have faced a $100 billion hit on jet fuel from the Iran energy shock. Industry warns that profits will be halved by the surging energy costs. Oh, I mean, yeah, feeling so bad for airline profits. But we also know what that means is that these prices, they're never going back down. We talked about some of those new surcharges that United and American and all this other people have added after the war and even across the world. Yeah. Call me. So when jet fuel is trading at like half the price, and I don't know, like three or four years, I can virtually guarantee you that price or those surcharges will continue to be there. And that is the general quote and shitification, I think, of the US economy. You will see continued inflation be used as an excuse, both because of supplier cost, but all because they want to, of general increased price. And it will never go down. We were talking earlier outside of the show about these NICs tickets. I think this is a perfect example, is that you have an immense amount of wealth with the S&P where it's at. The wealthy 10% of Americans have so much unbelievable amounts of money. People are out there paying eight grand for nosebleed tickets to Madison Square Garden. I told you about the US Open. People are out there paying $6,000 for like normal US Open tickets, which previously would have been something that you could go to the NBA final. Apparently the World Cup, at least in some, you know, some of these more luxury cases is the same. F1 is another example. It's just purely for the super rich. And it's only continued to explode. All those prices continue to go up. Meanwhile, all of our Costco prices also continue to go up. But the wealthy people, because they have so much wealth tied up in the markets, and just fundamentally their wealth is very different from the way that most W2 people make money, that they're able to afford that while everybody else's everyday life continues to get more expensive, and their little luxuries that they may have had in the past. You save up to take your dad to a game. I mean, maybe at this point. But even that is just so crazy expensive. Yeah, steak dinner, exactly. But once a month, steak dinner, or a barbecue, they may want to throw for your friends. You better have like $500 if you're going to try to feed 30 or 40 people nowadays. And that will only continue to go up as the war continues. And I just don't think it'll ever come down. I really don't, after the evidence of the last five years. No, it does. It only goes one way. That's the way this works. All right, so we got our guest standing by. Jeff Stein, let's get to him. Joining us now to talk all things AI, including a very important new scoop is a longtime friend of the show, Jeff Stein. He is now an economics correspondent with Notice. Great to see you, Jeff. Good to see you, man. Hey, thanks so much for having me on. Yeah, of course. So let's go ahead and start with this scoop that you were able to obtain. Put E1 up on the screen. So Trump is talking with tech executives about acquiring pieces of major AI companies. You say that he said on Friday he's talking with the leaders of the largest AI companies about having the government acquire pieces of their firms. This actually confirmed your previous reporting that he had been discussing that idea with Sam Altman in particular. So what do we know at this point, Jeff? So I think this has the potential to be one of the most dramatic federal interventions in the economy in modern American history. The big mystery at the heart of this that I've been trying to figure out is why does open AI do Sam Altman? Why do they want this? I'm curious for your guys' potential take on this. But essentially what we revealed last week is that open AI has gone to the Trump administration and said, you know how we're moving forward with this potentially trillion dollar IPO to become sort of a public company? What if the government stepped in and became one of the largest shareholders? And not because the government would come in and buy shares. Like if you or I wanted to go out and buy shares in open AI or anthropic stock, that would be one thing. What they're talking about here is having Sam Altman is proposing to the Trump administration effectively ceding controls of his company to the government. And that's the story we broke. And we reported that the Trump administration is looking into this and thinking about it. And then Trump confirmed that they were doing that. And so this is an unusual thing where you have the head of a major company saying to the US government, hey, would you guys like billions and billions of dollars worth of my private company? I don't know about you guys, but I can't remember the head of any company ever saying to anyone, much less the government, like what if you guys came in and made me billions of dollars poorer? And it's such a head spinning thing. And it raises, I think, a lot of questions about motivations, about money, about sort of the Trump administration's role in all of this. And it opens up, I think, a really important and fascinating policy debate. Yeah, let's go ahead and take a listen to Trump actually confirming this story. Let's take a listen. When Bernie Sanders lost, you know that I got many of his people that voted for me. Because we are on an economic plan, as far as economics is concerned. We have certain things that aren't that far apart. People are surprised. But many of you, if you'll take a look, many of the people that voted for Bernie Sanders, when he was no longer there to vote for, they went to me. I picked up a lot of us, a tremendous amount of his voters. So there he was confirming the Bernie idea being asked specifically about AI. So Bernie had previously proposed some legislation, I think, taking a 50% or so equity stake as part of a sovereign wealth fund. What do you think is the Trump administration's motivation, though, behind exploring this type of deal? I think the Trump administration on AI is in an incredible sort of two forces colliding right on top of each other. And one is that the base of the Republican Party on every poll and every demonstration that we see is extremely skeptical. Almost the way like there are a lot of Republican voters who are skeptical of the party elite on Israel, there are a huge portion of the base is really riled up about data centers. It's not seeing the benefit to them of this AI explosion and is pushing back. I mean, I think we saw the head of the Michigan Republican Party expressing openness to data centers because at the ground level, the base of the Republican Party is extremely skeptical of this, but then at the elite establishment level, the Trump administration, I'm not breaking any news here, is deeply intermeshed with the biggest tech companies Trump relied on, you know, the biggest players in this game, David Sacks and others to set administration policy. And that administration policy has been very supportive. And we're at a point now where because in part of that supportive policy, there's trillions and trillions of dollars. I mean, I don't know what your guys take is on this, but it seems quite possible to me, not the sound over the top, that we are heading towards an enormous bubble popping. And the risk from the Republican Party's standpoint is that the base opposition to these data centers and to AI will basically prevent the build out on which trillions of dollars on investment is now contingent. So, right, you're seeing like those two trains are heading towards each other. And what the Trump comments there confirm, which I was kind of delighted to see because a lot of people before my story came out were like, this isn't true. You have no idea what you're talking about, like blah, blah, blah, blah, blah. And then of course, like the president himself is like, yeah, of course, that like sounds great. But like the really interesting thing to me is that Trump is sort of implicitly acknowledging that they have this problem, that people don't like this. And so if the suggestion seems to be if they can absorb the shares of the AI companies and maybe redistribute them through a dividend payment, maybe they use them to pay down the debt, like there's lots of ways they can use that money, then maybe they can maintain elite support for the build out of AI while simultaneously assuring people at the bottom that they're not getting totally screwed by this. Yeah, that there's gonna be some benefit to them. Because right now all they're saying is there are electricity prices going up and everybody's brains being rotted and a bunch of oligarchs, plotting whatever evil plans they have. And Jeff, let's get to that question about the motivation from open AI and Sam Altman. I mean, to me, the most straightforward reading is that they too are worried that it's a bubble that is about to come crashing down at some point. And they want to guarantee that they're going to be able to get their government bailout. Yeah, I mean, I think that's the main criticism I've heard that if the government is a major shareholder in open AI, then the incentives for the government to step in in the event that open AI has a true bubble bursting economic collapse that that incentive will be greater. I think it's a little, I don't know. And maybe that is what's going on. I think part of my hesitation is that like, if they're just seeding shares, the US investment in this will technically be $0. It's not like they have an investment to recoup. But maybe like, just the fact that the US government is more part of this company now means that they have a greater incentive to step in. That makes a degree of sense. I mean, I think the other major thing that's going on here is that there's a war within the Trump administration over the regulation of AI. And you have on the one side David Sacks, who left the administration, but he sort of articulates the antibodies, the idea that there should be essentially no, maybe that's an overstatement, but very, very little federal oversight of this industry at all. And it slows down sort of the innovation and that we are in a fierce fight with China and that the best way to win is to not exert really almost any scrutiny over these companies. And then on the other side, we've seen recently, Pete Hegseth and the Department of Whatever We're Calling It War is now saying, these capabilities are so dangerous to US national security as they're framing it that we need some degree of federal intervention. And I think part of what might be going on here is that open AI and the other AI companies are saying, well, we're trying to prevent this regulatory onslaught. If we bring the government in a little bit, maybe they have less of an, if we're generating all this money for the government, they may have less of an incentive to slow down the pace of our growth, which is a little different than the bailout argument, but maybe not that dissimilar in some ways too. Interesting. So they think they'll be regulated less because their view is, I don't know that this is totally true because Anthropoc has been like not perfect, but the most responsible on the safety front and has also been very successful. But anyway, their view is that as much off to the races as that they can be with little hindrance and as irresponsible as possible, the more they're gonna profit and the more they're likely to win the race to super AI, AGI, whatever the goal ultimately is. So that's interesting perspective. Yeah, I think the idea is if they somehow set up a dividend payment, the math doesn't quite, I don't think for this, but you can imagine a world where they say, okay, Trump accounts exist and we'll add $1,000 into each person's Trump account from the shares of open AI and the other AI companies that we've acquired. Then the thinking is regulation makes that payment go down. So the government is less likely to do it. And people will be less interested in regulation generally. Maybe they'll be less populist pressure. That could be thinking. Correct, and I think to go to your point about Anthropoc, which I think is really important and interesting, we reported in our first story that Anthropoc, that basically open AI and Samuel Lohman have been pushing this with the administration. And that Anthropoc has not discussed this idea with the administration in my sense, from sources is that Anthropoc is much cooler to this, which is kind of an interesting inversion of the idea that Anthropoc is kind of the more popular. The good guys, yeah. Yeah, right, and maybe that's a function of the fact that open AI has a bigger PR problem, or they're like, please take our money because we are so unpopular and Anthropoc doesn't have that problem, or maybe it raises questions about Samuel Lohman's motivations and is it partly a reflection of his co-sinist with the Trump administration? Let's talk a little bit more about you asserted earlier, you think that this is a bubble. There are many others who do related to that. We have SpaceX IPO, which is imminent, and we can put this up on the screen from CNBC. They wrote up this Morningstar analysis that SpaceX, in their estimation, is worth less than half of its $1.75 trillion IPO target. And of course, SpaceX includes XAI, includes GROC and XAI, but it also is a much larger company. Obviously, they do the rocket ships. Their most profitable business is Starlink, which is genuinely a good product that is in demand. A lot of the other stuff in here is a money loser, including XAI at this point. So what do you make of the valuation here? Do you think it is overvalued and overhyped and could help to further fuel and potentially help to collapse this potential bubble? Yeah, my first disclaimer is never take stock advice from Jeff Stein, as my friends have discovered, and for all the listeners out there, don't trade on anything I say. That said, there's a new report coming out today from Economist Adam Seaper. They're going to find essentially that they did a systemic analysis of the dot-com bubble and the current AI bubble. And the findings, which I've been talking to the researchers about, are really striking. In 1999, Microsoft's, the peak of the Microsoft stock was 20%, was 6% of GDP. So that number was the top, and then after the dot-com bubble burst, the number went to 3% of GDP. Today, we've seen NVIDIA stock come close to 20% of GDP. Wow. So more than three times the relevant metric for evaluating how much money as a percentage of the economy is pouring into these sort of really frothy tech stocks. And that to me suggests, you know, obviously Microsoft did become an extremely profitable, successful company. So it's a little bit of a nuanced picture where I think there's a good chance that SpaceX is making products that make money and that it will take some time to do that. But that is not a sign that, you know, no one would look back and say Microsoft was a failure, right? But that reality was simultaneously true with the reality that this was a bubble. And from what you mentioned right about sort of the profitability and the revenue that SpaceX is generating is so far from the valuation, and we're seeing that across the tech sector, not just NVIDIA, not just SpaceX, but Open&Arenthropic, it doesn't mean that this technology is unimportant or unvaluable for this, for us to be heading towards a major course correction in the valuations. The other thing that was a huge red flag to me, can we put E4 up here on the screen? I had no idea about this, but Fidelity actually slashed its SpaceX minimum to $2,000 for retail investors. So basically, they changed the getting into an IPO for the offer price is normally a privilege that's reserved for big accounts. From what I could see, you needed a minimum balance of like 100k or something like that for Charles Schwab. Fidelity actually changed that, offering it to any customer with only $2,000 in a retail brokerage account. It's a fraction of the threshold that has been quote, historically gated access to hot new users. That's the easy end. The costly out is a 15-day calendar leash and penalties that escalate with each early sale until a third strike triggers a lifetime ban on Fidelity IPOs that are tied to your social security number. So basically, you can buy it with a very small amount of money in your bank account, but if you sell it, you'll get banned sometime in the future. But this appears to have been a coordinated effort by SpaceX and others to let retail investors buy into the IPO. I mean, zooming out generally seems like fraught the activity. I'm clearly curious to see what you think. I haven't seen that report, but that is really interesting. I saw another report basically that SpaceX has been trying to essentially circumvent the normal process for being put on the stock market. They wanted to essentially move it up faster than any other company has done, which is probably not a great sign of the confidence of the long-term durability of the stock if they're like, we have a ton of momentum to cash in on right now, and if we let people take the average amount of time to invest, that is a threat to us. That seems inauspicious to put it mildly. Well, the other impact of that is so they were denied this fast-track entry for the S&P 500, but they were granted it for the NASDAQ. A lot of people who aren't like retail investor day traders just have a lot of money in what's supposed to be very safe index funds. That means without doing anything, SpaceX shares will flow into their 401Ks, and so you will have a lot of retail of normal investors who aren't the top 0.1% who end up exposed to SpaceX and this potential overvaluation. It is definitely a concerning situation given the fact in particular that I think the entirety of the loft evaluation here is based on the possibility of XAI and the idea that this could be incredibly, incredibly profitable, but XAI also hasn't been at the sort of bleeding edge of the competition. Anthropic is considered the best in some areas. OpenAI is considered the best in other areas. XAI has kind of fallen a bit behind. So even from that perspective, it seems hard to justify, let's say. Yeah, I mean, I think we're all just going to be insanely jealous when everyone else sees their SpaceX stock triple in value and the three of us are left without anything. I mean, I don't know. I think there's, to argue the other side of this, maybe, you know, Elon took the long view on Tesla and the company has had problems, but it is also the most successful EV maker in the world right now. And the Starlink product is unbelievable. It's incredible, as you mentioned. But no, I'm not the world's biggest expert in the SpaceX stock, but it, you know, the idea that we are on the precipice of some something that is sort of beyond any of our conceptions of what the economy might look like is such a sort of either or dichotomy that if you are of the mindset that we are about to like enter a different dimension almost in our sort of political economy that these technologies are so transformative that we can't even conceive of what the world is going to look like in a year or two because everything will be run by these firms. Then like, yeah, then it's a rational investment, but there are so many, so many regulatory and real world logistical hurdles to the extent of deployment that these guys have bought in on in their own heads that we are on the precipice of that. It's so hard for me to see that in a year or two, we are going to be in this brave new world that everything looks different and every AI company is valued six times above its projected profit in the near-term future. Well, where I am currently, and this could shift as I continue to take in new information and try to figure out where to land on this stuff, is that it is both a bubble and it is going to be extraordinarily transformational. I think it's both. There are parallels right to the dot-com bubble there, as you were pointing out before, that it was a bubble, but also the internet did change the world. Part of why I think it's potentially a bubble, and I've been talking to Zach Exley about this as his view, is if you look at the AI that most startups and entrepreneurs and companies are using at this point, it's not open AI, it's not Claude, it's not ChatGPT, it's DeepSeek, it's the Chinese competitor, because it's almost as good and it's way, way cheaper. Cheaper, yeah, incredibly cheap. So the idea that you're going to have one of the American companies that establishes this dominant position and then everybody goes to that one, that's not the way it's playing out right now. It may end up being much more like a utility that is cheap and easily available, and then yes, it still has that incredibly transformative impact, but it doesn't lead to all of these US AI companies being fabulously successful from a revenue perspective. That's kind of where I am at this point with what's likely to happen here. Sagar, is that your view as well? I don't know. I go back and forth. At the same time, I see all of these reports about people inside of these companies who say, well, we don't even use AI all that much, then I also see people who, what is that company that spent half a billion dollars in a single month on on on Thropic credits? I'm like, okay, well, they're spending the money not for nothing, like they're clearly buying it. And despite DeepSeek being available, Anthropic and OpenAI do make billions of dollars. They're not profitable, but that's because their outlay is still very large. They're still, I think, OpenAI revenue is like 10, 15 billion or something like that and projected. Well, yeah, but it was projected to increase year over year. So the thing is, is that there does seem to be a genuine technological edge, at least for tech on the forefront of technology. The utility point remains there as well. But circling back to the original story that you said about the stake in government, I also think that there's an element here, not just of regulation, of being too big to fail and entrenching yourself with the government and with Trump's pension for wanting to take stocks in companies anyways, to make sure that you preference government regulation and others to keep them afloat no matter what, like maybe in the future, even banning cheaper Chinese AI, DeepSeek or any of these other models. That's just my reason. That's a really good point, the potential desire for these companies to ban foreign competitors. And the government's incentive to do that if, yeah. I think that's very possible too. That makes a lot of sense. Jeff, the last thing I wanted to ask you about is that the SpaceX IPO is likely to make Elon, it's set to make Elon a trillionaire, world's first trillionaire. We're going to be minting many new billionaires between that IPO plus potentially OpenAI and Anthropic. What impact does this have on society? How do you think people are going to take in this brave new world in terms of wealth that is already being created before our eyes? I've just spent the last year or so not in this program and working on a biography of Senator Bernie Sanders, whose view on this is now like something I read about every day and half for the last year. So it's hard to think of that question and not think of the things he was saying in the 60s and 70s about how one day America is heading towards a trajectory of unbelievable inequality that makes democracy extremely difficult to persevere in the face of that degree of wealth disparity and that degree of differential in power. I think this gets back. I've seen a lot of confusion on Twitter about this. Bernie Sanders and Donald Trump do not have. And you see it in that clip, right? Trump is sort of like, oh, Bernie and I aren't that different. The proposal that Sanders has and the proposal Trump has are incredibly different. They're similar in the sense that both of them are talking about having the government involved in these companies. But Sanders is talking about forcibly seizing control and over half of each of these companies and redistributing the gains from them to the entire American citizenry through a sovereign wealth fund. Trump is talking about seizing a tiny fraction, maybe five, maybe 10%. We don't know yet, but a small percentage of these companies in allowing the private sector and these trillionaires now to continue to have full control over them. And I just think it's really important for the public to understand that those are very different paths for the future of what they themselves are saying is the most important technology in world history or whatever. Yeah. Very important note. Jeff, excited about your new position there at Notice. Super excited about the Bernie book that you've been working on and it's great to see you. Where can people find your work now? My Twitter is now Jay Stein underscore star, which is actually not the name of the publication. Right. They're still trading out. So Jeff Stein underscore publication name TBD. But thanks for everyone. Great to see you Jeff. Thanks for having me. I guess really appreciate it. Thank you guys so much for watching. We appreciate it. We'll see you all tomorrow. This is an I heart podcast. Guaranteed human.
