Episode summary
The $2 Trillion Trapdoor | Tobias Carlisle on SpaceX, the AI Buildout, and the Rotation No One Sees
Excess Returns
· · Guests: Tobias Carlisle
Summary
Tobias Carlisle argues that today’s market is still broadly expensive, but that high valuations are not a reason to flee stocks; they are a reason to expect lower forward returns and to look for better opportunities elsewhere. He says the current setup resembles late 1990s conditions, with a very expensive large-cap growth market alongside a much cheaper small-, micro-, and mid-cap value opportunity set.
He points to equal-weight versus market-cap-weight benchmarks, plus small-cap relative strength, as evidence that leadership may be starting to shift away from the largest names. In his view, the market has been in a long large-growth cycle since about 2015, and the spread between expensive and cheap stocks is now extreme enough to suggest a possible transition period toward value leadership.
On AI, he sees real technological power but doubts that all the investment will translate into supernormal profits for the builders. He thinks the spending is partly competitive and market-driven, may accrue more to consumers than producers, and could eventually resemble prior booms where transformative technology still produced a painful valuation reset. He also says SpaceX, OpenAI, and Anthropic coming public could absorb marginal demand and reinforce speculative excess.
Carlisle says his portfolios combine valuation, quality, and financial-statement analysis, with equal-weighted positions chosen from the most attractive risk-reward names. He prefers to balance cyclical deep value with higher-quality businesses trading at discounts, and he remains constructive on forward returns for ZIG and DEEP if mean reversion resumes.
Key takeaways
- Tobias Carlisle says elevated market valuations imply lower forward returns, not necessarily an immediate need to exit equities.
- He believes the equal-weight S&P 500, small caps, and value stocks are starting to signal a rotation away from large-cap growth.
- Carlisle thinks AI is transformative but may deliver more value to consumers than to the companies funding the buildout.
- He says the market may be entering a long transition from a large-growth regime to a value regime that could last 10 to 15 years.
- SpaceX, OpenAI, and Anthropic coming public could soak up marginal buyers and may mark late-cycle behavior, according to Carlisle.
- Carlisle builds ZIG and DEEP from financial-statement analysis, pairing cheap stocks with quality and equal-weighting positions to manage risk.
Notable quotes
“Ultimately, those multiples do mean revert growth rates mean revert. If you believe in mean reversion, then the smart bet is small and micro value, midcap value”
“I think that we are in the very early stages of a reversal of what has been a large growth market for an extended period of time”
“It's entirely conceivable that all of this work goes into creating these incredible AI models and all of the value acrru to the consumer and not to the people who create these models”
“It's investors and that's the signal that they're taking that investors demanding that they spend this this sort of money”
“If you believe in mean reversion, then the smart bet is small and micro value, midcap value”
How the episode opens
It's entirely conceivable that all of this work goes into creating these incredible AI models and all of the value acrru to the consumer and not to the people who create these models. Maybe there's unlimited demand for compute, but it's more the stock market that's demanding it rather than consumers demanding. Ultimately, those multiples do mean revert growth rates mean revert. If you believe in mean reversion, then the smart bet is small and micro value, midcap value.
Toby, welcome back to Access Returns. Thanks so much for having me, Justin. I'm I'm excited to be on the premier financial podcast currently on YouTube.
It's our goal. Hopefully, we'll get there at some point. Uh we might we might be top 50, maybe.
I don't know. I don't know, Justin. We're we're doing our best.
Well, I've been trying to convince Jack to lean into the most bearish covers and titles as possible, and he just he won't do it.
I mean, they certainly they certainly uh attract attention. I've noticed that that they all sort of trend towards the same stuff burning down in the background, red kind of my my AI suggests it all the time as the one that you should use.
Yeah, we we don't use them either. But by by the way, Toby, uh your YouTube thumbnail game has gone up a lot recently. I've been noticing. I'm out there checking all — I'm always looking at what all the competitors are doing. You're doing some you're doing some great work over there.
Yeah, I get the I get the AI to suggest some names and then I run an AB test and it's been good. — To we always like having you on at least once or twice a year to get your thoughts on the value investing landscape, sort of how you're thinking about developments in the market, and just a wide range of topics that I think we're going to cover today.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai capex
- small value microcap opportunity
- market valuation forward returns
- spacex and ipo supply
- nuclear and natural gas energy demand for ai data centers
Companies and tickers mentioned
- SpaceX
- OpenAI
- Anthropic
- Acquirers Funds
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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