Excess Returns

In this episode of Excess Returns, Kai Wu of Sparkline Capital returns to discuss his latest research on AI adoption, ROI, and what it all means for investors.
Building on his prior work on the AI CapEx boom, Kai tackles the trillion dollar question at the center of today’s market: Is AI generating real, measurable economic returns across the broader economy, or are we still in an infrastructure-driven bubble?
Using a systematic analysis of earnings calls, patent data, and adoption trends, Kai lays out a framework for identifying which companies are truly benefiting from artificial intelligence and how investors can position portfolios accordingly.
Find the Full Paper Here:
https://etf.sparklinecapital.com/
Main topics covered:
Satya Nadella’s AI bubble framework and why broad economic diffusion matters

The AI adoption S-curve and where we are in the technology diffusion cycle

A new AI ROI taxonomy based on earnings call analysis and quantified economic gains

Real-world AI productivity, revenue, and cost-saving examples across industries

Infrastructure vs early adopters vs laggards and how companies were categorized

AI-driven outperformance and excess returns across different adopter groups

Valuation dispersion between AI infrastructure stocks and AI early adopters

The risk of overcapacity and lessons from railroads and the dot-com telecom boom

Competition among large language models and the durability of AI moats

S&P 500 exposure to AI infrastructure and hidden concentration risk

The case for AI early adopters as a middle ground between growth and value

Intangible value investing and the concept of AI yield

Timestamps:
00:00:00 The trillion dollar question and what “real ROI” means
00:03:19 Nadella’s bubble framework: diffusion vs a narrow CapEx trade
00:06:08 The classic tech diffusion S-curve and where AI is on it
00:32:25 Why infrastructure is being rewarded even if the ROI story is different
00:33:04 The key chart: adoption vs valuation shows “basically no relationship”
00:38:00 Why early adopters and laggards should separate
00:38:26 The “25% ROI” example and how it could show up later in fundamentals
00:39:03 Railroads and fiber: builders go bankrupt, users capture the value
00:39:45 Telecom index fell 95% and never recovered (dot-com bust parallel)
00:40:00 The application layer captures profits; infrastructure becomes a utility
00:41:00 The punchline: transformative tech, but builders can still be bad investments
00:42:57 Overcapacity question: where are we on the line?
00:43:17 The buildout: another $5 trillion of data centers “or whatever the number is”
00:44:00 If there’s no ROI, companies cancel orders
00:45:01 Moat and LLM competition discussion begins
00:49:00 The big one: adding infrastructure names gets the S&P to 46% AI infrastructure
00:50:00 “Alternative indices” swing you to laggard risk
00:51:00 The “false choice” and the “middle ground” framing (early adopters)

In this episode of Excess Returns, we sit down with Bloomberg Opinion columnist Nir Kaissar for a wide-ranging conversation on markets, AI, interest rates, private credit, small caps, and the risks investors may be underestimating. Nir shares his unexpected predictions for 2026, challenges the consensus on Fed rate cuts, explains why high profitability may be putting a floor under valuations, and offers a thoughtful framework for thinking about AI, concentration risk, and the future of public versus private markets. This is a deep dive into today’s most important investing debates, grounded in history and focused on what may come next.
Topics Covered
Nir’s unexpected predictions for 2026 and why mass adoption of autonomous vehicles may arrive faster than investors expect

Why the consensus on lower interest rates in 2026 may be wrong and what the two year Treasury yield is signaling

The impact of tariffs, affordability pressures, and corporate margins on inflation

Why high corporate profitability may support elevated stock market valuations even if returns slow

The role of earnings growth in driving S&P 500 returns and why 2015 to 2024 may not repeat

Is AI more like 1995 or 1999 in the internet cycle and what that means for long term investors

The convergence of big tech companies around AI and the risks of a more zero sum competitive landscape

Why companies staying private longer could hurt retail investors and distort public market indices

Concentration risk in the S&P 500 and what it means for long term portfolio construction

Opportunities and risks in small cap stocks, including the importance of quality screens

The growth of private credit markets and the hidden risks investors may not see

Why Treasuries may still be the cleanest shirt in the laundry during a crisis

Lessons from 20 years of running strategies and what Nir has changed his mind about

Timestamps
00:00 Nir’s 2026 predictions and the rise of Waymo
05:00 Interest rates, Trump, and the outlook for Fed policy
08:40 Tariffs, inflation, and corporate margins
12:00 Valuations, profitability, and future S&P 500 returns
16:00 AI compared to the internet era and long term investing lessons
19:00 Public versus private markets and regulatory concerns
32:00 Concentration risk and the Magnificent Seven
39:00 Small caps, quality screens, and value opportunities
47:00 Private credit risks and default cycles
54:30 Nir’s investment philosophy and 20 year lessons

David Giroux, CIO of T. Rowe Price and manager of the Capital Appreciation strategy, joins Excess Returns for a wide ranging discussion on market valuation, AI investing, Mag 6 dynamics, utilities, healthcare, fixed income, and how to think independently in volatile markets. David shares his framework for exploiting structural market inefficiencies, why market drawdowns can create opportunity, how he evaluates the S&P 500 at the micro level, and what investors are getting wrong about AI, profit margins, and the current cycle.
Main topics covered in this episode
• Exploiting structural market inefficiencies in GARP stocks, high yield, and double B credit
• Why market drawdowns often lower forward risk and increase expected returns
• Strategic equity allocation during periods of fear and volatility
• Rethinking S&P 500 valuation through 500 company bottom up analysis
• The changing composition of the index and its impact on profit margins
• Where the most overvalued and undervalued areas of the market may be today
• AI investing framework including Nvidia, AMD, cloud providers, and software risk
• How AI could reshape margins, labor productivity, and enterprise software
• Differences between today and the dotcom bubble
• Overweight positioning in utilities and healthcare and the thesis behind each
• Fixed income positioning including the belly of the Treasury curve and fiscal risk
• Commodities, gold, and fiscal sustainability
• Lessons for portfolio managers on independent thinking and making high conviction bets
Timestamps
00:00 Market drawdowns and forward returns
02:09 Exploiting structural market inefficiencies
06:28 Strategic equity allocation during selloffs
11:22 Is the market expensive and how to value the S&P 500
15:00 Profit margins and index composition
17:13 Where valuation excess exists outside the Mag 6
20:38 How to think about AI and enterprise adoption
27:18 AI disruption risk across sectors
39:20 AI versus the dotcom bubble
42:30 Apple versus Meta and capital allocation
46:53 Overweight utilities and healthcare
52:57 Fixed income opportunities and risks
57:32 Commodities, gold, and fiscal concerns
01:00:15 Lessons for new portfolio managers

In this episode of Excess Returns, we sit down with Kevin Muir, author of The Macro Tourist, for a wide-ranging conversation on market sentiment, asset rotation, and the growing signals of stress beneath the surface of global markets. Kevin explains why extreme bullishness can be dangerous, why gold and commodities may be flashing warning signs, and how shifts in currencies, energy, and global capital flows could reshape portfolios in the years ahead. From hedging strategies to volatility, from AI-driven concentration to international diversification, this discussion focuses on how investors can think clearly in an environment where traditional relationships are breaking down.
Topics covered:
Why extreme bullish sentiment can be a warning sign for markets

The meaning of “buying straw hats in the winter” and how to think about hedging

Market breadth, small caps, and whether rotations are healthy or late cycle

Gold, silver, and what precious metals signal about financial stress

Cross-asset volatility and why correlations are changing

Energy markets, commodities, and the long-term impact of underinvestment

Global capital flows, foreign ownership of US assets, and currency risk

The US dollar, trade deficits, and implications for international investors

Portfolio construction lessons from bonds, commodities, and FX

How macro regime shifts can change risk management and diversification

Timestamps:
00:00 Introduction and market sentiment overview
03:00 Buying protection and the straw hat analogy
07:00 Sentiment indicators and market confirmation
12:00 Market rotations, small caps, and late-cycle risks
18:00 Gold, silver, and precious metals as warning signals
23:00 Bonds, currencies, and broken correlations
29:00 Energy markets and commodity underinvestment
37:00 Global capital flows and foreign ownership of US assets
44:00 The US dollar, trade deficits, and FX volatility
52:00 Macro regime shifts and portfolio construction lessons

In this episode of Excess Returns, we sit down with Victoria Greene of G Squared Private Wealth for a wide-ranging conversation on markets, macro risk, portfolio construction, and how investors should think about 2026 and beyond. Victoria brings a pragmatic, risk-aware framework to investing, blending top-down macro analysis with bottom-up fundamentals, technicals, and a strong focus on cash flow, diversification, and policy risk. We cover everything from the rise of what she calls a badger market, to AI capex, market concentration, inflation risk, and why policy error, not valuation, is what historically ends bull markets.
Main topics covered
• Why valuation is a poor market timing tool and what actually ends bull markets
• The concept of a badger market and how investors should mentally prepare for volatility
• Cash flow never lies and how Victoria evaluates business quality
• Diversification in 2026 and why international, commodities, and value matter more now
• Risks and opportunities in the labor market, AI-driven disruption, and productivity
• The K-shaped economy and what it means for consumers and corporate earnings
• 60/40 portfolios, alternatives, and where commodities fit today
• AI investing from infrastructure to software and cybersecurity
• Yield curve dynamics, inflation risk, and portfolio positioning
• Active vs passive investing in a concentrated market
• How policy decisions and election dynamics influence markets
Timestamps
00:00 Intro and why valuation does not kill bull markets
01:40 Investment philosophy and macro first portfolio construction
06:00 Cash flow never lies explained
07:40 Diversification beyond US large caps
10:00 Market expectations and big tech earnings risk
11:00 What is a badger market
12:40 Is the 60 40 portfolio dead
15:00 Why Victoria remains constructive on markets
18:00 Politics, sentiment, and market noise
21:00 Policy error vs valuation as the real risk
26:40 The K-shaped economy and consumer health
31:10 Hard data vs soft data disconnect
34:10 Labor market risks and data reliability
36:40 Yield curve steepening and inflation risk
41:40 Portfolio positioning in a higher inflation world
43:00 How to invest in AI beyond the Mag 7
47:20 Where we are in the AI cycle
49:30 Active management challenges and opportunities
53:00 Valuation, planning, and long-term return expectations