| “He threw it straight to him,” Super Bowl-winning Quarterback Brad Johnson1 said from two seats to the left of me. I shook my head and repeated, “He threw it straight to him.” The former Tampa Bay Buc and I then traded a look and a smirk. We were commenting on UNC’s QB throwing the football right into the chest of the Wake Forest defensive player, who fortunately was so surprised at his luck that he couldn’t hang onto it on the Tar Heel half of the field. (The views expressed by Brad Johnson are his own, and don’t reflect the opinion of the Wealth Training Academy on either football or financial matters. He is not a client of, compensated by, or affiliated with our firm in any way. His comments are informational only and aren’t an endorsement of our services. ~The Compliance Department) |
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| The Johnsons were there in Winston-Salem Saturday night sitting next to my family at the UNC-Wake Forest game and supporting their two sons, Max and Jake, who are both on the Tar Heel offense. While Max didn’t play, his brother, Jake, a Tight End, registered 5 catches for 54 yards including a “man’s man” catch where he grabbed a pass sailing high over the middle, got hammered in the midsection and still hung onto the ball. He was the lone bright spot for the Heels who lost 28-12 on Saturday night2, and I had a great time rooting him on with both his parents Brad & Nikki Johnson, who were exceptionally gracious with their time in talking with me and with the surrounding Tar Heels in the Visitor stands. High comedy ensued as the Johnson’s patiently waited for me to convince my wife to stop to take a picture on our way out of the stadium, as Ashley didn’t understand at first why I wanted a picture of me with a player’s Dad in the stands, instead of them taking a picture of us, as strangers will sometimes do for each other at events when no one else is around. Who’s taking a picture of whom? (In the end we got both pics in one, as Nikki gracefully intervened and took the photo you see above. Ashley and I had a good laugh about it when she found out who he was – she had only heard me say earlier in the loud stadium that he was a player’s father – so I understood what she was thinking). Kinder people than the Johnson’s just aren’t out there. They had been through a lot with Max’s recovery from his broken leg at Minnesota last year and Brad told me it had been a “wild year”. I told them what an inspiration Max was in coming back from such a horrific injury. (His leg was broken so badly it required 5 surgeries, and they had considered amputation at one point).
The Tar Heels only ran about 5 plays in varying order: a screen pass, a hitch route, an out route, pitch right and the old “run-it-up-the-gut”. The Heels scored 12 points on 6 field goal attempts, two of which were blocked, and ran for just 56 yards on 24 carries. Efficiency, thy name is NOT Tar Heel. If it was, we should have just thrown the ball to Jake each time. Despite paying $10.1 million for Head Coach Bill Belichick3 and a reported $12.5 million for his staff, UNC’s only won 4 games this season and it’s not looking good for the next two games against our rivals, Duke and NC State. So, let’s do the math on this season for the football staff. That’s $22.6 million divided by 4 wins, that’s $5.65 million per win. Like I said, not a model of efficiency and a pretty poor Return on Investment (ROI).
The wild, inefficient spending with little ROI for UNC football is a lot like the collective AI spend by tech companies on AI right now with barely any AI revenues or ROI to show for it. This is not only the Mega cap companies of Microsoft and Google we’re talking about, but private companies OpenAI and Anthropic, amongst others. OpenAI has contracts to spend $1.4 trillion. In an interview with investor Brad Gerstner4, Open AI CEO Sam Altman got extremely defensive when Gerstner asked him, “How can a company with $13 billion in revenues make $1.4 trillion in spending commitments? You’ve heard the criticism, Sam,” he finished. Sam quipped, “First of all, we’re doing well more revenue than that. Second of all, if you want to sell your shares, I’ll find you a buyer. Enough.” Microsoft CEO Satya Nadella howled like a hyena in the background.
This was a very childlike, petulant response to a very adult, reasonable question pointing out that OpenAI’s Math Don’t Math. Thank God the adults are in charge of the future, right? Sam’s eventual response was that they were “taking a forward bet that they would continue to grow”. That’s a lotta growth, an awful lot of chickens he’s counting. I didn’t think you were supposed to do that.
At WTA, we are bullish on AI. We are bullish on Microsoft and Nvidia and others in the AI space but we’d be foolish not to point out that risks are building in the space with huge spending commitments by some major players that don’t have the current revenue to support them. Peter Thiel just dumped all of his Nvidia shares as did Softbank, which curiously is partnered with Nvidia, Oracle, Microsoft and OpenAI in the government’s Stargate project. Microsoft, Anthropic and Nvidia just announced a deal where Anthropic is committed to buy $30 billion with Azure, the cloud services of Microsoft, while Microsoft will invest $5 billion and Nvidia, $10 billion into Claude-maker Anthropic5. This is but one of many deals between the major players in the AI space and they all seem to be committed to supporting each other’s revenues. Microsoft, OpenAI, AMD, Nvidia, Oracle, Anthropic. It’s all circular spending and it’s been a hot topic on YouTube. Is this a 3-Shell Game or is there actually a ball (money) in there somewhere? … Kind of makes you wonder the same thing when you contemplate shaking the piggy bank of the US Treasury, doesn’t it?
The returns of many of these companies’ stocks have faltered and it’s fair to say their momentum has been broken. Many of those are down appreciably from their 52-week highs6. These include: Microsoft down 9%, Amazon down 10%, Nvidia down 12%, Tesla down 16%, Palantir down 18% and Meta down 25% from their 52-week highs. The S&P 500 meanwhile was only down 4% from its high. Tuesday, however, for the first time since April 30th, the S&P 500 closed below its 50-day moving average. So it’s fair to say that momentum in the Nasdaq has faltered. It’s worse in the Cryptocurrency space. As of Wednesday, Bitcoin was down 29% and Ethereum was down 40% from its 52-week high. Add another 4.6% drop for Bitcoin Wednesday, (which puts it less than $90,000 a coin) and a whopping 8.4% one-day fall for Ethereum and we are seeing some volatility return to some high-beta investments. The last few years crypto has traded 1.5 to 2X the Nasdaq, so that performance tracks.
One reason for these declines was questions about AI spend, what the ROI might look like on that, and reductions in company earnings’ forecasts due to the increase in Capex spending on it. Is the juice worth the squeeze? I ask myself this all the time, whether evaluating stocks or deciding to suffer through another 10 minutes on the treadmill at the end of a workout. So far, we’ve determined that yes, the companies we are invested in on your behalf are worth it. We evaluate stocks using their ROIC, or Return on Invested Capital, which we believe is the best “juice-for-the-squeeze” metric. So those metrics look good for these companies overall over time, and we think that dominance will continue, but valuation questions are absolutely fair. And high valuation will cause some temporary drops in stock prices as those companies can appear spendthrift like UNC football and less than efficient when it comes to the ROI on AI as of this snapshot today. But many of them have other revenues that are growing, such as we discussed a couple of weeks ago with Microsoft’s Azure revenue up 40% this year.
As I write this, I see that Nvidia has blown out their earnings numbers with 62% growth in the past quarter7 and reaffirming the massive number of $500 billion in bookings for its advanced chips through 2026. CEO Jensen Huang is saying in the press release that sales are “off the charts” and “AI is going everywhere, doing everything, all at once”. Nvidia may have just eased fears of an AI bubble for the moment as the S&P 500 overnight futures are up 1.27% and Nvidia’s stock up 5% in PM trading thus far. All is not gloomy.
We may not have mentioned it, but Social Security announced last month your COLA increase for next year at 2.8%8. “Don’t spend it all in one place,” as my father used to tell me after getting my allowance. For many of you Social Security represents a negative ROI over the years, which puts even more pressure on your investments and your stewardship of your monthly expenses. We’re putting in time on our side to capture the best ROI we can get on the money you invest and are happy to help with budgetary questions and problem-solving as well. We’ll strive to be as efficient as possible for you and to run more plays than the Tar Heels did Saturday night. In all we’ve got over a dozen strategies we manage internally to try to grow your accounts beyond the effects of taxes, inflation and expenses. If you feel like adjusting your risk in light of recent volatility in the market or would like to run a different play than “run-it-up-the-gut,” then give us a shout on our headsets. We’re happy to change the play call if we need to or put some new players on the field if there’s a blitz coming. If you listen to us, we’ll change your financial world …
Sincerely, Scott Wright Portfolio Manager The Wealth Training Academy
Sources: 1Brad Johnson reflects on his unique QB journey, Super Bowl XXXVII, and being a QB dad 2Wake Forest 28-12 North Carolina (Nov 15, 2025) Box Score – ESPN 3A look at Bill Belichick’s contract and bonuses at UNC – CBS Boston 4https://twitter.com/i/status/1984619454047625659 5Microsoft, Nvidia to invest in Anthropic as Claude maker commits $30 billion to Azure | Reuters 6@KobeissiLetter 7Nvidia’s strong forecast calms AI bubble jitters, for now | Reuters 8Social Security Announces 2.8 Percent Benefit Increase for 2026 | News | SSA |
