Is AI a Mistake? | Animal Spirits 452

Speakers

Michael Batnick — Managing Partner, Ritholtz Wealth Management

Ben Carlson — Director of Institutional Asset Management, Ritholtz Wealth Management

Summary

The hosts debate the "AI is a Mistake" thesis, ultimately landing on a middle ground: AI is likely a massive productivity tool rather than "vaporware" or an immediate "world destroyer."
There is a significant disconnect between the "tech worker" view (AI will automate everything immediately) and the reality of enterprise inertia (companies buy software for support and liability protection, not just code generation).
Japanese equities are in a structural bull market, with rising bond yields signaling the end of financial repression rather than a crisis.
Gen Z is aggressively entering the stock market (brokerage accounts) because they are priced out of the housing market, creating a shift in asset accumulation patterns.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
CRM /NOW	LONG	Michael Batnick Managing Partner, Ritholtz Wealth Management	Software stocks like Salesforce and ServiceNow have crashed recently due to fears that AI will replace their business models (the "AI killing SaaS" narrative). The market is over-extrapolating. Enterprise buyers don't just buy software for features; they buy it for "career risk" management (i.e., "You don't get fired for buying Salesforce"). Incumbents have distribution, data, and support teams that a "vibecoded app" created over a weekend cannot replicate. Michael bought these stocks during the drawdown, viewing the valuation compression as an overreaction to the AI threat. The stocks could remain "dead money" for years if the market refuses to re-rate them higher, or if AI actually does erode their seat-based pricing models faster than anticipated.	7:56
SPGI	LONG	Michael Batnick Managing Partner, Ritholtz Wealth Management	Michael distinguishes between software companies with "proprietary data/regulatory lock-in" versus those without. While generic data providers (like FactSet) might be at risk from LLMs, S&P Global has a regulatory moat. An AI cannot issue a credit rating that satisfies regulatory requirements; only a licensed agency can. Michael explicitly stated he plans to buy SPGI, viewing it as immune to the disruption facing generic SaaS. Regulatory changes or a shift in how credit analysis is consumed.	24:29
SCHW /RJF /LPLA	LONG	Michael Batnick Managing Partner, Ritholtz Wealth Management	Schwab stock dropped 10% on news that a competitor (Altruist) released an AI tax tool. The market's reaction suggests a fundamental misunderstanding of the industry. The idea that a single AI tax feature would dismantle the moats of massive custodians like Schwab, Raymond James, or LPL is "a joke." The sell-off is an irrational "recency bias" event where algorithms are selling on AI headlines without understanding the business durability. Continued algorithmic selling or genuine disruption in wealth management fees over the very long term.	21:28
JAPANESE EQUITIES /JAPANESE EQUITIES / NIKKEI INDEX	LONG	Ben Carlson Director of Institutional Asset Management, Ritholtz Wealth Management	Japanese bond yields are hitting records, and inflation is rising, yet the stock market is surging. Contrary to the fear that rising rates will break Japan, this signals the end of financial repression. The economy is normalizing, allowing for inflation and growth, which is driving equity performance (outperforming the S&P 500 over the last 5 years). Bullish on the structural changes in the Japanese economy. A rapid spike in yields could cause short-term volatility or currency instability.	39:56
NFLX	LONG	Michael Batnick Managing Partner, Ritholtz Wealth Management	Michael mentioned he "finally pulled the trigger" on Netflix during a drawdown. Despite the competitive landscape, Netflix has won the streaming wars. The thesis parallels the "prediction market" consolidation where too much competition eventually favors the dominant incumbent. Long the winner of the streaming sector. Consumer spending slowdown or saturation in subscriber growth.	31:15
DKNG	WATCH	Michael Batnick Managing Partner, Ritholtz Wealth Management	DraftKings reported earnings and showed prediction markets (like Polymarket) currently have only 1% wallet share, but the stock got "smoked" (down ~60% drawdown). While currently small, prediction markets are in a "super cycle" (according to Robinhood's CEO) and could cannibalize sports betting wallet share over time because they offer better odds/utility than traditional sportsbooks. Cautionary stance as the stock price reacts negatively despite revenue growth, potentially signaling fear of this new competitive threat. Regulatory crackdowns on prediction markets could send users back to traditional sportsbooks.	54:22
HOOD	LONG	Michael Batnick Managing Partner, Ritholtz Wealth Management	Robinhood CEO Vlad Tenev stated we are at the beginning of a "prediction market super cycle" that could drive trillions in volume. Robinhood is positioning itself to capture this volume, viewing prediction markets as a new asset class that fits their retail trader demographic. Bullish on Robinhood's ability to integrate and monetize this new trend. Regulatory hurdles for prediction markets in the US.	—
SILVER	AVOID	Michael Batnick Managing Partner, Ritholtz Wealth Management	Silver is down significantly (crashing) while other assets move. Michael admits to losing money on this trade ("Software and Silver" are his current pain points). He characterizes the price action as "strange." The trade is not working; implied sentiment is frustration/avoidance until momentum changes. A sudden reversal in commodities could leave sellers behind.	53:33