20% Market Crash By Year-End Is Just ‘Tip Of The Iceberg’ | David Woo
Speakers
David Woo
— Founder, David Woo Unbound
Summary
David Woo joins David Lin to discuss the political and economic backdrop heading into the 2026 midterms. He argues Trump will de-escalate tariffs, push fiscal stimulus like a $2,000 tariff rebate, and try to lower inflation, but the US economy is dependent on an AI bubble that he believes is unsustainable. Woo says he is short NASDAQ, expects a 20%+ decline, likes India as a 2026 beneficiary, and sees risks from China's AI catch-up and Fed reluctance to cut rates.
- Trump is expected to de-escalate tariffs and push a $2,000 tariff rebate to boost approval ahead of midterms.
- Consumer confidence is weak due to tariffs, job insecurity, and AI bubble worries.
- AI capex and wealth effect have kept the US out of recession, but Woo sees the AI trade as a bubble.
- Woo is short NASDAQ, triggered by Oracle's 60% rally on OpenAI's $300bn spending promise.
- AI monetization is weak; China is rapidly catching up with open-source models and cheap chips.
- Fed is worried about AI valuations and may avoid rate cuts if stocks keep rising.
- Woo likes India as a major beneficiary of US-China rivalry and expects it to win in 2026.
- Woo also expects the US Treasury curve to steepen due to fiscal stimulus.
Ideas
Short NASDAQ as AI bubble bursts
David Woo has been short NASDAQ for months and expects it to fall 20% or more because the AI bubble is unsustainable. The trigger was Oracle's 60% rally after OpenAI, a company on track to make $12bn this year, promised $300bn of spending on Oracle computing services. The NASDAQ rally has been driven by OpenAI partnership announcements rather than fundamentals. AI monetization remains weak: only 5% of US companies have AI in production, ChatGPT 5.0 is only about 20% better after three years, and AI chips depreciate in about three years. China is catching up rapidly with open-source models and cheap AI chips, threatening US AI dominance. The Fed is worried about AI valuations and may avoid rate cuts if stocks keep rising. He expects NASDAQ to head much lower over the next three months and sees a US recession if it falls 20%+.
Fiscal stimulus will steepen Treasury curve
David Woo expects the US Treasury curve to steepen next year because Trump is likely to push a $2,000 tariff rebate through a second reconciliation bill as early as Q1 2026, before the Supreme Court rules on tariffs. This fiscal stimulus will blow a hole in the budget and drive curve steepening.
Oracle rally signals AI bubble excess
David Woo views Oracle's 60% stock rally as a key sign of AI bubble excess. OpenAI, on track to make only $12bn this year, announced it would spend $300bn on Oracle computing services over several years. Woo believes this valuation disconnect is not justified and it triggered his decision to short NASDAQ.
China cheap chips threaten Nvidia
David Woo sees a growing competitive threat to Nvidia from China. At least 20 Chinese chip companies are working on AI chips that will cost a fraction of Nvidia's chips, as part of China's strategy to turn AI into a cheap commodity. This could erode Nvidia's pricing power and is another major risk to the US AI bubble.
China AI catch-up risks US dollar
David Woo warns that China's rapid AI catch-up—open-source large language models, at least 20 chip companies making cheap AI chips, and domestic semiconductor equipment—is potentially the biggest risk for the US dollar. A Chinese victory in the AI race could threaten US technological and economic hegemony, hurting the dollar along with US stocks and the US economy.
India is 2026 winner
David Woo likes India because it is the worst-performing stock market in 2025 despite being the fastest-growing economy. He expects India to be the biggest beneficiary of the intensifying US-China technology and economic rivalry, citing the shift of iPhone 17 production to India, India's deep talent base in Silicon Valley, and its ability to adopt AI. He sees India as a winner in 2026.
