Jim Bianco: AI will overtake the Internet in impact, SaaS pricing models are under pressure, and older generations may struggle with AI-driven business models

Important takeaways

• AI is poised to transform modern life more profoundly than the Internet.
• The market is reacting to AI as a substitute for SaaS, resulting in sales.
• AI significantly reduces software development costs and times.
• SaaS pricing models are under pressure due to the impact of AI.
• The markets for gold and silver are small, resulting in large price fluctuations.
• Excessive capital spending in technology markets can lead to overcapacity.
• Investments in AI infrastructure are huge, raising concerns about overbuilding.
• Future tech booms will be driven by cost-cutting AI.
• The older generation may struggle with new AI-driven business models.
• A high stock price for Nvidia may indicate a high level of investment in technology.
• Crypto markets are unstable due to artificial markets of traditional currencies.
• The next crypto bull market may come from building other financial systems.
• The Federal Reserve’s balance sheet is always too big, it needs to be reduced.
• Irrational expectations in traditional financial markets do not correlate well with future returns.
• Senior investors should focus on wealth preservation over high risk returns.

Guest introduction

Jim Bianco is President and Macro Strategist at Bianco Research, an independent research firm he founded in 1998 that provides analysis of financial markets and macroeconomic trends. Since 1990, he has built a long-standing reputation for objective commentary on monetary policy, market orientation, and the intersection of government policy and financial markets, including early analysis of how Federal Reserve policies affect inflation. His research focuses on fixed income markets, capital flows to institutional investors, and the broader economic dynamics that shape equity, commodities, and emerging asset classes.

The transformative power of AI

• “AI will revolutionize modern life, surpassing the impact of the Internet.” – Jim Bianco
• AI is comparable to the industrial revolution in terms of its potential impact.
• The market sees AI as a substitute for SaaS, leading to significant sales.
• “The Saaspocalypse is just the name for this fear-driven marketing of the idea that AI is starting to look like a replacement for SaaS software companies.” – Jim Bianco
• AI is dramatically reducing the cost of software development, changing the dynamics of the industry.
• “They spent about $100 to $150,000 in tokens to get this browser worth tens of millions last year.” – Jim Bianco
• The SaaS pricing model is changing due to the influence of AI.
• The impact of AI on software development is reshaping market expectations.

Market forces and precious metals

• The markets for gold and silver are small, resulting in large price fluctuations.
• “When you add up the total value of stocks, bonds, and real estate, gold and silver are like 3 or 4% of their size.” – Jim Bianco
• The rise in gold and silver prices was fueled by Asian buyers, particularly in China and Japan.
• “Many investors in those countries are worried and looking at metals.” – Jim Bianco
• Recent speculation in the gold and silver markets may lead to heavy losses.
• “They bought at $100 to $110, it went up to $125, now it’s set at $82.” – Jim Bianco
• Silver acts as a high-beta version of gold, performing particularly well during bullish periods.
• “Silver is its highest beta version, so when it moves, it outperforms gold.” – Jim Bianco

The impact of AI on productivity and efficiency

• Companies are investing heavily in AI infrastructure, raising concerns about overbuilding.
• “Google has announced that it will spend $200 billion on capex by 2026.” – Jim Bianco
• The advancement of AI tools will dramatically change productivity and work efficiency.
• “I can be done in minutes because of what some of these AIs are capable of.” – Jim Bianco
• Investments in AI infrastructure may lead to market volatility once the peak is reached.
• Technology goes through two phases: infrastructure development and business model development.
• “We overspent our money on infrastructure and left the world and the Internet behind.” – Jim Bianco
• The future tech boom will be driven by AI innovations that drive down costs.

A generational shift in adapting to AI

• The older generation may struggle to adapt to new AI-driven business models.
• “They will push 68-year-olds because they can’t adapt.” – Jim Bianco
• Investors should consider selling overheated infrastructure stocks and reinvesting after the reset.
• “It would have been nice to sell Cisco in 2000 and buy the application layer after the dust settled.” – Jim Bianco
• Nvidia’s high stock price could indicate a high level of investment in the technology.
• AI technology is advancing rapidly, surpassing the current capabilities of AI systems.
• “This technology is advancing so fast that AI is lagging behind in telling you how to use it.” – Jim Bianco
• The AI ​​application field is still in its infancy, with many developers in the early stages.

The economic implications of AI and software costs

• Companies are adopting new software solutions to save on existing subscriptions.
• “I can give you something for very little money and save you tens of millions of dollars.” – Jim Bianco
• The AI ​​application layer is near but facing challenges due to constant change.
• “It is very difficult to build on assets because they are constantly changing.” – Jim Bianco
• The value in AI grows for users who use the technology to improve business.
• “It’s available to users who use the product to do something important.” – Jim Bianco
• Companies that use AI successfully will emerge as winners in the industry.
• Apple’s strategy of waiting to get into AI may not be as successful as the iPhone.

Changes in the S&P 500 and market value

• The trend of concentration in the S&P 500 is reversing, benefiting the long tail of companies.
• “The market is not going down now … the other 50% of the stock market is benefiting.” – Jim Bianco
• The overall stock market value remains stable due to changing sources of value.
• “It’s just a mix of where it’s coming from that’s what’s driving it.” – Jim Bianco
• Silver acts as a high-beta version of gold, performing particularly well during bullish periods.
• Chinese investors are turning to precious metals like silver as a hedge against volatility.
• “They are looking at my defense and what I should do.” – Jim Bianco
• Japan’s interest rates are rising due to high inflation, which risks economic disruption.

China’s economic and political situation

• China’s economy is facing historically low growth rates amid political risks.
• “Those are fifty years short of economic growth from China.” – Jim Bianco
• Apple may move production to China due to political risks and labor issues.
• “Apple is starting to move their product to India as much as they can.” – Jim Bianco
• China’s growing authoritarianism is reducing its competitiveness.
• “They’re getting stronger almost every day, undercutting their competition.” – Jim Bianco
• The US has outstripped Europe in defense, which has contributed to changes in global security.
• “We spent almost $20 trillion more on defense than Europe.” – Jim Bianco

Crypto market volatility and traditional finance

• The recent decline in crypto markets may be related to traditional financial issues.
• “Some of these breaches may have happened off-chain in the tradfi world.” – Jim Bianco
• Synthetic bitcoin represents how traditional finance interacts with crypto assets.
• “Crypto assets, especially bitcoin, are traditional financial assets.” – Jim Bianco
• The creation of a partial storage system around Bitcoin introduces instability.
• “These systems are inherently unstable … crypto is new with this artificiality.” – Jim Bianco
• Digital asset wealth and ETFs leverage crypto investments without blockchain interaction.
• “You have crypto representation in the tradfi world.” – Jim Bianco

The need for a new crypto narrative

• The instability in the crypto markets is partly due to the artificial markets of traditional finance.
• “Tradfi artificial markets began to crack, forcing the end of the series.” – Jim Bianco
• The introduction of leverage in crypto markets can lead to instability.
• “Leverage systems are unstable and can explode without experience.” – Jim Bianco
• Crypto volatility contradicts the narrative that tradfi will stabilize the market.
• “Great volatility contradicts the idea that tradfi is stable.” – Jim Bianco
• Crypto needs a new narrative to drive future growth beyond current adoption stories.
• “Crypto needs another story.” – Jim Bianco

Federal Reserve Dynamics and market expectations

• The Federal Reserve’s balance sheet is still too large and needs to be reduced.
• “A $9 trillion balance sheet by 2022 was too big.” – Jim Bianco
• The Fed’s actions to manage reserves are effectively simple.
• “They buy reserve management… essentially QE.” – Jim Bianco
• The structure of the Fed gives too much power to the chairman, stifling dissent.
• “The chairman is all power … dissenting opinions are suppressed.” – Jim Bianco
• There could be a lot of controversy within the Fed about lowering interest rates.
• “There are no strong votes for any rate cuts this year.” – Jim Bianco

Investment strategies and market expectations

• Irrational expectations in traditional financial markets are not consistent with future returns.
• “The problem in tradfi markets is one of impossibility.” – Jim Bianco
• Investors should use a diversified portfolio strategy that includes stocks and bonds.
• “A combination of some bonds, some stocks … less risk as you get older.” – Jim Bianco
• Older investors should prioritize wealth preservation over high-risk returns.
• “You have to start thinking about not losing part of it.” – Jim Bianco
• There will be a shift in the market to traditional companies benefiting from cheaper software costs.
• “There’s a lot of turnover in traditional companies because of cheap software.” – Jim Bianco