Mag 7 to Drag 7: The Biggest Rotation in Markets Since 2008 w/ Jordi Visser
Summary
- Believes the market is in the early stages of a new disruptive force and a deleveraging phase, not a crash, driven by AI, leading to multiple compression for fiat assets.
- AI is a structural bull market, not a bubble, but its rapid progress is disrupting the macro environment and financial markets sooner than anticipated.
- The economy is shifting from the "software era" (non-cyclical, nominal GDP correlated) to a "hardware/commodities era" due to infinite AI demand requiring massive infrastructure investment.
- Decades of underinvestment mean there is not enough copper, silver, memory, compute, or energy to meet AI demand, leading to a decade-long bull market in these physical inputs.
- Software is a "dead asset"; while not all companies will go to zero, most will be "dead money" as AI disrupts business models built on code.
- The "Magnificent 7"/"Drag 7" and hyperscalers (Meta, Amazon, Google, Microsoft) will face significant headwinds as they are built on code and are major spenders on AI infrastructure.
- Financial stocks are the worst-performing sector YTD, which agrees with underlying stress signals in private credit markets, indicating real credit risk.
- The market environment may resemble the 1970s: episodic corrections of 15-20%, earnings growth but multiple compression, leading to a flat overall market for years.
- Capital will rotate from software and long-duration assets into commodities, compute, and Bitcoin to chase returns in this new regime.
- The Federal Reserve may eventually need to provide liquidity backstops due to private credit risks, but the path is uncertain.
Trade Ideas
The speaker stated we are entering a "decade" of underinvestment in the hardware needed for AI, and energy prices are going up. Infinite AI demand requires massive energy for compute and infrastructure, but supply has been underinvested, creating a structural supply-demand imbalance. Long energy minerals due to sustained, rising demand from AI infrastructure build-out against constrained supply. A severe global economic slowdown reduces overall energy demand, or alternative energy sources scale faster than expected.
The speaker cited copper and silver prices "going through the roof" and stated there is not enough copper or silver for AI demand. AI infrastructure requires vast amounts of metals for wiring, electronics, and other components, creating a structural shortage against finite supply. Long non-energy minerals due to a persistent supply-demand deficit driven by the physical build-out of AI. Technological innovation finds material substitutes or a recession crushes industrial demand.
The speaker stated to "short, anything built on code" and called software a "dead asset" that will face a structural headwind. AI is directly disruptive to software business models by automating tasks and reducing the need for certain software, leading to multiple compression even if earnings grow. Avoid the technology services (software) sector due to a broken growth narrative and structural disruption from AI. Software companies successfully pivot and monetize AI tools faster than they are disrupted by them.
The speaker explicitly named Meta, Amazon, Google, and Microsoft as "hyperscalers" and stated they are "going to have a really hard time." These companies are "built on code" and are the primary spenders on AI infrastructure, facing massive capital expenditure, potential margin pressure, and disruption from the very AI they are funding. Avoid these stocks due to their dual exposure as legacy software/platform businesses and capital-intensive AI infrastructure builders in a disruptive period. Their cloud and advertising businesses prove more resilient than expected, or they achieve dominant monetization of new AI services.
The speaker stated he is "focused on Bitcoin" because "money is going to chase returns" and returns will "come from that asset class." In an environment of multiple compression and disappointing returns in traditional fiat assets (equities, credit), capital will rotate to alternative stores of value with asymmetric return potential. Long Bitcoin as a beneficiary of capital rotation away from compressed traditional assets. A sharp, prolonged risk-off market event causes correlated selling across all speculative assets, including crypto.
Up Next
This Milk Road Daily video, published March 29, 2026, features Jordi Visser discussing XLE, XLB, XLK, META, AMZN, GOOGL, MSFT, BTC. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Jordi Visser · Tickers: XLE, XLB, XLK, META, AMZN, GOOGL, MSFT, BTC