Everyone Hates AI | Animal Spirits 453
Speakers
Summary
- The "AI Doom" narrative has reached escape velocity, with markets pricing in a scenario where AI agents cause mass white-collar unemployment (10% by 2028), leading to demand destruction and mortgage defaults.
- Michael Batnick views the recent market sell-off—particularly in software and financials—as a "stupid overreaction" and an opportunity to "catch falling knives." He argues that while the transition may be bumpy, the market is pricing in a catastrophe that ignores human adaptability and government fiscal responses.
- Ben Carlson argues that the "Physical World" (Real Estate) is the ultimate hedge against AI. If AI is deflationary and disrupts digital labor, physical assets become more valuable, and falling rates will boost housing prices.
- The Private Credit sector is under immense pressure (e.g., Blue Owl), with valuations implying GFC-level default rates (21%), which Batnick suggests is mathematically extreme, though he believes Blue Owl specifically has suffered a "PR mega fail."
Trade Ideas
Capital One (COF) and American Express (AXP) fell ~8% following a research piece suggesting AI agents will disrupt payments and cause white-collar credit defaults. Batnick characterizes this specific move as a "stupid overreaction." The idea that AI immediately destroys the creditworthiness of the consumer base or invalidates payment rails is viewed as hyperbole. Buy the dip on high-quality financials sold off on science-fiction narratives. Rapid rise in white-collar unemployment leads to actual credit deterioration.
The prevailing doom narrative is that AI destroys jobs and income, crushing the economy. If AI is deflationary and replaces digital labor, the "Physical World" becomes the primary store of value. Furthermore, if AI causes deflation, the Fed will cut rates and the government may print money, both of which historically cause housing prices to skyrocket. Real Estate is the "best AI hedge" because it cannot be digitized or automated away. Mass unemployment (10%+) leads to mortgage defaults and a housing crash (the specific bear case cited in the Catrini piece).
Bitcoin's price action is currently charting almost identically to software stocks. Despite the narrative of Bitcoin as "digital gold" or a separate asset class, the market is currently treating it purely as a risk-on/risk-off software asset. It is trading as a high-beta proxy for the software sector, not an uncorrelated hedge. Decoupling from equities during a monetary debasement event.
Software stocks recently experienced their worst month since October 2008. Specific names like Salesforce (CRM) and ServiceNow (NOW) are down significantly, and Microsoft (MSFT) is down ~30% from highs. The market is panic-selling on the "AI Doom" thesis (AI replaces software seats/white-collar demand). Batnick believes this is an emotional overreaction ("The market is more drunk than sober"). If AI is as powerful as predicted, these tech incumbents will likely be the beneficiaries, not the victims. Aggressive buy on the dip. Batnick explicitly states, "I am going to buy Microsoft today. I am running into the fire." The "AI deflationary bust" thesis proves true, leading to structural decline in SaaS pricing power.
Blackstone (BX) is in a 43% drawdown. The private credit and private equity sectors are being hammered by fears of "software exposure" and valuation concerns. While acknowledging the risk ("No [__], the stock is down 43%"), Batnick argues that the market is pricing in a disaster scenario (GFC-level defaults) that isn't visible in the actual credit data yet. He is "comfortable holding this stock" through the volatility. Contrarian Long into deep negative sentiment. Private credit valuations mark-to-market lower; "Software exposure" in private portfolios leads to realized losses.
Blue Owl (OWL) stock is down 60%. They recently attempted to quell fears by offering a buyback that the market misinterpreted or rejected. Batnick describes their handling of the situation as a "PR mega fail." He explicitly states, "Blue Owl's done. They will not raise another dollar in these private credit funds." Even if the sector is oversold, this specific issuer has suffered irreparable reputational damage with allocators. The stock is so beaten down that it becomes a deep value play if they stabilize flows.
Up Next
This The Compound News video, published February 25, 2026, features Michael Batnick, Ben Carlson discussing AXP, COF, XLRE, BTC, MSFT, CRM, CRWD, SPGI, NOW, NFLX, BX, OWL. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Michael Batnick, Ben Carlson · Tickers: AXP, COF, XLRE, BTC, MSFT, CRM, CRWD, SPGI, NOW, NFLX, BX, OWL