Josh Brown Talks AI and ‘Perpetual Motion Machines’

AI’s been getting headlines for all the wrong reasons lately. Investments in artificial technology infrastructure (new data centers, chip factories, power grids) are expected to top $1 trillion in the coming years, but new research from Goldman Sachs is asking … why? And with about half the earnings growth of the S&P 500 tied to AI-heavy tech companies, it’s just not clear what happens if that dries up.

It’s the biggest open question for the markets right now, according to famed investing commentator Josh Brown. “It’s more important than literally any jobs [report] numbers or whatever the Fed does next week,” he told The Daily Upside.

It Is What It Is

Downtown Josh Brown has come a long way since he started his groundbreaking blog “The Reformed Broker” in 2008 (it was sunset last year), and is now pulling together some of his best talking points into a new book, “You Weren’t Supposed to See That,” that hit shelves this week. 

“I wouldn’t have written this 10 years ago,” he said. “I’m obviously writing this from a period in my life where I have less to fear about offending people. I’ve been around long enough that if you don’t like me, you’re not going to like me.” 

Brown sat for an interview with The Daily Upside this week:

TDU: Is AI overhyped?

JB: These companies are all interrelated and they are round-tripping each others’ revenue, and so a company spends this much money on chips, which leads another company to spend on more computers. It’s obvious that if the merry-go-round stops spinning or starts to spin in reverse, it’s gonna put earnings growth in jeopardy. There’s no such thing as perpetual motion machines. That’s the No. 1 risk to the S&P 500. Rationally, I still want to be an investor.

TDU: What’s no one talking about?

JB: When Apple comes out with an iPhone where AI functions are native. You can truly have a conversation with Siri and say things like, “Hey Siri, get me tickets to Pearl Jam next week in Boston,” and you literally have a phone that is acting as an agent on your behalf and scouring ticketing websites, and negotiating with other people’s bots. That s*** is coming. 

TDU: What’s the book’s main takeaway?

JB: Just how hard it is to be an investor. Given the noise level in any given year, there are 10 or 15 things that take place that are powerful enough to jar you from your strategy or your goals. There are constantly things happening that can confuse people or can change their minds about how much risk they want to take and that can throw a portfolio off course.

We’ve lived through so many things that have never happened before and so many things that have happened again and again and again. You’ve basically seen more in the last 15 years than investors, prior to this era, have seen in 50 years. The bigger story is taking risks ultimately pays off — if it’s done in an intelligent way.