Why the AI Bubble Hasn’t Popped — ft. Josh Brown
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
Josh Brown, CEO of Ritholtz Wealth Management, joins Prof G Markets to dissect his 2025 market lessons and share predictions for 2026. In this engaging conversation, Brown emphasizes the importance of trusting price action over predictions and explains why he remained bullish during November's Oracle-fueled AI panic. (02:36) He argues that many of the AI bubble fears were driven by wish-casting rather than fundamental analysis, and that following market prices proved more valuable than listening to the chorus of doom-sayers. (04:25)
• The main theme centers on distinguishing between market noise and actual price signals, with Brown advocating for a fundamentals-first approach to 2026 investing based on projected 14.6% S&P 500 earnings growth.Speakers
Josh Brown
Josh Brown is the co-founder and CEO of Ritholtz Wealth Management, a New York City-based investment advisory firm managing $6.5 billion in assets for individuals, corporate retirement plans, and foundations. He's also the host of "The Compound and Friends" podcast and a frequent contributor on CNBC, where he provides market commentary and investment insights.
Ed Elson
Ed Elson is the co-host of Prof G Markets, stepping in while Scott Galloway is on vacation. He leads the market discussions and interviews with financial experts, focusing on providing actionable insights for ambitious professionals and investors.
Key Takeaways
Follow Price Action Over Opinions
Brown's primary lesson from 2025 was trusting market prices over the chorus of AI bubble predictions. (03:55) When Oracle crashed and doom-sayers emerged, the key was observing that semiconductor stocks and other AI-related companies weren't crashing alongside the narrative. Brown emphasizes that "prices are more important than opinions" because they represent the collective actions of people actually investing money rather than just talking about markets. (06:38) This approach proved profitable as most AI stocks recovered within weeks, with 86% of semiconductor ETF holdings trading above their 50-day moving averages.
Distinguish Between Vested Interests and Genuine Analysis
A critical skill Brown advocates is identifying who benefits from market predictions. (08:05) Content creators benefit from doom-and-gloom scenarios through increased engagement, underweight tech managers hope for crashes to validate their positioning, and financial media gains ratings during market turmoil. Brown suggests focusing on analysts and investors who have "skin in the game" - actual money and reputation at risk - rather than those who profit from sensational predictions. This framework helps filter signal from noise in an information-saturated environment.
AI Has Already Created Irreversible Behavioral Changes
Unlike the dot-com bubble where few people were actually using internet services profitably, AI has already fundamentally altered how knowledge workers operate. (30:51) Brown points out that AI is embedded throughout Google's services, coding is done with AI copilots, and people use ChatGPT for daily decisions from health questions to price checking. This behavioral integration creates a "baseline" that didn't exist during previous tech bubbles, providing more solid footing for AI investment valuations. The transformation is so embedded that removing AI tools would significantly decrease productivity for most professionals.
Focus on Earnings Growth Fundamentals for 2026
Brown's 2026 strategy centers on a simple question: will fundamentals justify above-average price-earnings multiples? (18:18) Wall Street consensus projects 14.6% S&P 500 earnings growth for 2026, with technology sector growth expected at 29.7%. If these projections hold, Brown argues a 21x multiple is justifiable. Rather than making price predictions, he focuses on whether companies can deliver the earnings growth that would support current valuations. This fundamental approach provides a more reliable framework than trying to time market movements.
Young Investors Should Root for Market Corrections
Brown delivers counterintuitive advice for young investors: pray for market downturns rather than celebrating new highs. (41:02) Since people in their 20s and 30s are forced savers through 401(k) contributions, they benefit from buying stocks at lower prices over decades. He contrasts this with older investors who need higher prices since they're withdrawing funds. Young investors who root for corrections and "lost decades" position themselves to accumulate shares in great companies at discounted levels, creating better long-term wealth outcomes than those celebrating temporary portfolio gains.
Statistics & Facts
- 86% of names in the SMH semiconductor ETF are above their fifty-day moving average following the late 2025 AI correction concerns. (07:44) This statistic demonstrates the quick recovery of semiconductor stocks after Oracle's disappointing earnings sparked bubble fears.
- Wall Street consensus expects S&P 500 earnings growth of 14.6% for 2026, with the technology sector projected to grow earnings by 29.7%. (19:01) These projections form the basis of Brown's bullish 2026 outlook.
- 16 stocks in the S&P 500 doubled in 2025, including major names rather than obscure companies. (21:21) This highlights the breadth of market gains despite concerns about concentration in mega-cap tech stocks.
