Investors are rotating into HALO (Heavy Assets, Low Obsolescence) stocks like Caterpillar (CAT) and Coca-Cola (KO) as a safe haven from AI disruption fears. This trend is causing a sell-off in software stocks like Adobe (ADBE) and DoorDash (DASH), which are perceived as vulnerable to AI. The panic has spread to Private Credit, with Blue Owl Capital (OWL) shares falling 10% after halting withdrawals from a fund exposed to these struggling software borrowers. This has created a contagion fear, pulling down other alternative asset managers like Blackstone (BX) and Apollo (APO). In contrast, Advanced Micro Devices (AMD) is a standout performer, gaining on a significant multi-year chip deal with

Advanced Micro Devices (AMD)

• The stock climbed 9% after Meta signed a multi-year deal to purchase their chips.
• The deal also gives Meta the option to take a 10% stake in AMD over a period of time.

Takeaways

• The partnership with Meta is a significant positive catalyst for AMD, validating its chip technology and securing a major long-term customer.
• This news suggests strong demand for AMD's products, particularly in the context of AI and data center build-outs, positioning it as a key player in the semiconductor industry.

Meta Platforms (META)

• Meta's stock was flat on the news of its multi-year chip deal with AMD.
• The deal includes an option for Meta to acquire a 10% stake in AMD.

Takeaways

• While the deal is a strategic move for Meta to secure its chip supply for AI initiatives, the market had a neutral reaction.
• This could indicate that the market has already priced in Meta's aggressive spending and strategy in the AI space, or that the financial impact of this specific deal is not seen as immediately moving the needle for a company of Meta's size.

Bitcoin (BTC)

• Bitcoin fell below $63,000.

Takeaways

• The podcast mentions this price drop as part of a general market update, indicating short-term bearish price action. No further context or long-term views were provided.

Software & Tech Stocks

• Software stocks as a sector fell 5% following the release of a viral Citrini Research blog post about a potential AI-induced economic crisis in 2028.
• The premise is that AI will become so productive it will displace jobs, crush consumer spending, and disrupt companies whose business model is based on "handling friction."
• DoorDash (DASH) was mentioned as an example, falling as much as 6% on the idea that AI could replace its services.
• MasterCard (MA) and Visa (V) were also mentioned as having been repriced downwards due to the blog post.
• Adobe (ADBE) was contrasted with Apple and described as a non-HALO stock, implying it is more vulnerable to disruption from AI.

Takeaways

• The software sector is currently experiencing high anxiety and volatility related to the disruptive potential of AI.
• Investors are selling off shares in companies perceived as vulnerable to being made obsolete by AI agents, even based on speculative articles. This indicates a highly reactive and fearful market sentiment.
• The podcast argues this reaction is overblown, as it ignores the value creation and new industries that AI will also generate. However, for now, the perceived risk of AI disruption is a major headwind for many software and asset-light tech companies.

HALO (Heavy Assets, Low Obsolescence) Stocks

• A new investment theme, HALO, was introduced to describe the types of companies investors are now favoring. It stands for Heavy Assets, Low Obsolescence.
• This is seen as a reversal of the post-financial crisis trend of favoring asset-light, subscription-based businesses.
• HALO companies have physical, hard-to-replicate assets and are considered less vulnerable to disruption by AI.
• Examples of HALO stocks mentioned:
  • Anheuser-Busch (BUD), Coca-Cola (KO), Pepsi (PEP): You cannot create their physical products with an AI prompt.
  • Caterpillar (CAT), Deere (DE): Heavy industry and machinery.
  • Natural gas transmission lines and Utilities: Essential physical infrastructure.
  • Delta Air Lines (DAL): Contrasted with Expedia, you cannot use an AI prompt to create a physical airplane.
  • Apple (AAPL): Considered a tech HALO stock because of the physical iPhone device. The thinking is that AI like ChatGPT will become a plug-in to the iOS ecosystem, not a replacement for it.

Takeaways

• The HALO framework offers a new way to analyze investment opportunities in the age of AI, moving beyond traditional "growth vs. value" or "tech vs. non-tech" dichotomies.
• Investors seeking to reduce exposure to AI disruption risk may want to consider companies with strong physical assets and low obsolescence risk.
• The podcast suggests this trend of favoring HALO stocks will likely remain important for the rest of the year, as it provides a "safe haven" from the uncertainty surrounding AI's impact on asset-light businesses.

Private Credit & Alternative Asset Managers

• Private Credit is described as the "asset du jour," a rapidly growing asset class where funds lend money directly to companies, often those who wish to avoid public markets.
• It offers investors a higher yield (an "illiquidity premium") in exchange for locking up their money for long periods.
• A key risk highlighted is the lack of transparency. These assets are not marked-to-market daily, which can hide underlying problems and create a false appearance of low volatility and uncorrelation to public markets.
• Blue Owl Capital (OWL) is at the center of a "new panic" in the space.
  • The firm is "shutting the gates" on one of its private credit funds, preventing investors from making withdrawals.
  • This was triggered by a high volume of redemption requests, driven by concerns over the fund's exposure to software borrowers who are now seen as risky due to AI.
  • Blue Owl's shares plunged 10% on the news.
• The sell-off had a ripple effect, with other alternative asset managers like Aries (ARES), Apollo (APO), and Blackstone (BX) falling more than 5%.

Takeaways

• The situation with Blue Owl highlights a major risk in the private credit space: liquidity mismatch. The funds hold illiquid, long-term loans but may offer some liquidity to their investors. When sentiment sours, a "bank run" can occur where the fund cannot sell assets fast enough to meet redemption requests.
• Investors in private credit funds, or in the asset management companies themselves, should be aware of these structural risks. The high yields come with a trade-off that can become critical during times of market stress.
• The podcast raises a comparison to the 2007 financial crisis, noting that while the current situation is more about anxiety about the future (AI's impact) than a present-day cash flow crisis, the "red flags" of opacity and liquidity risk are "strikingly familiar." This is a significant warning for the sector.