The chip-stock crash was driven by momentum and leverage, not by a repudiation of the AI thesis: the AI capex boom is a real investment that will deliver returns, and it was only the leveraged momentum traders who got wiped out and margin-called.

6:00valuation of these companies and then he just got caught in a downdraft. Yeah. >> Well, I think that is the key question here. Is this correction in the markets? Is it driven by fundamentals or is it driven by momentum? And my view is that I think it's driven by momentum. Meaning that over the past year, you've had this roughly 10x runup in memory chip stocks and you've seen this overall huge rise

6:27in any stock that's related to the AI boom. So, anything related to this AI capex boom has been going up like crazy. And I think it was inevitable that you'd see a pullback. I think there was something like a 10% pullback in the NASDAQ from the peak. But when you look at this momentum trade, it was down like 30% or 40%. Right? Because the 10% was on the

6:53whole market. So this sort of momentum trade was the most exposed part of it. And you look at what happened in South Korea, you look at what happened with Leopold's fund and obviously there was a lot of leverage behind this momentum trade. So when it corrects it's going to be brutal. But I think that the question again is does this reveal anything about the fundamentals? And my sense is that

7:16you're already seeing the rebound this morning and what I mean by that when I say fundamentals is is the capex that's being invested in the AI boom is that real or is it misguided? Right? Is it is that a sound investment? Is that an investment that the hyperscalers for example should be making? Is that an investment that's eventually going to deliver ROI or is this some sort of

7:37bubble? And my view is that it's real that I think there will be a return on all this capex. I don't try to predict stocks or tell people when they should be buyers, but you look at the hyperscalers, they have invested pretty much all of their free cash flow and then some in this boom. You know, a lot of people are trading those stocks down because of that. My view is that

7:59eventually there will be a return on that investment. And this is sort of temporary market volatility amplified by leverage. And Chimath is right. You know, I think it was Warren Buffett or maybe Munger who said that leverage is the only way that smart people go broke because, you know, if you're not using leverage, your portfolio would just be down 30% this month and then it would already be

8:23up 7% today. So, you'd be rebounding. So, you'd be down, okay, 20 something% this month, but after having risen 10x in the past year. But if you're leveraged 3 or 4x, you're wiped out >> and you get margin called. So look, there's many examples of really smart people getting hurt by by leverage. Yeah. And that that's the lesson there. Now, I think Leopold's a really interesting figure in the whole AI

8:48movement and I would say an interesting thinker. I met him about a year year and a half ago. >> Did you invest in the fund? Did you give your >> No, I wasn't in I was prohibited from investing in things like that. >> You were in you were in DC at the time. Yeah, >> but I thought he was a really interesting thinker and he wrote a blog