“Software Earnings Massacre” While Precious Metal Vol Explodes | Jack & Max on Silver, Fed Meeting, and Earnings

Episode Summary

Executive Summary: The episode argues that the surging precious-metals complex reflects a mix of trend-following, dollar weakness, central-bank behavior, and geopolitical reserve diversification, while the Fed sounded more hawkish and less concerned about labor risks. Earnings then drove markets: Microsoft’s strong results were overshadowed by heavy AI CapEx, Meta rallied on core ad strength, Tesla’s weak auto business was masked by future-tech optionality, and software names faced renewed AI disruption fears.

Main Topics: Precious metals surge and what is driving it (Priority: 5/5): The hosts debate gold and silver’s relentless rise, separating monetary, industrial, speculative, and trend-following drivers. They argue the move is real but not necessarily a sign of healthy global markets. Dollar weakness and reserve diversification (Priority: 5/5): They connect the gold rally to a weaker dollar, rising hedging activity, and global investors/central banks reducing US-dollar exposure amid geopolitical uncertainty and Trump-era policy actions. Federal Reserve meeting and hawkish tilt (Priority: 5/5): Powell’s comments are interpreted as less dovish than before: the labor market is no longer emphasized over inflation, March cuts look unlikely, and tariff inflation is framed as largely one-time. Microsoft and the AI capex trade (Priority: 4/5): Microsoft beat expectations but sold off because Azure growth slowed slightly and CapEx was enormous; the discussion centers on whether AI spend is still a market positive or now a margin concern. Meta, Tesla, and divergent earnings reactions (Priority: 4/5): Meta rallied on strong ad fundamentals and guidance, while Tesla’s weak auto business was partly offset by the market’s continued belief in its robotaxi, robotics, and AI optionality. AI’s impact on software valuation and disruption (Priority: 4/5): The hosts debate whether SaaS businesses are vulnerable to AI commoditization. They argue some software is likely disrupted, but sticky enterprise products, distribution, and pricing power may still protect leaders. AI infrastructure remains the favored trade (Priority: 4/5): Despite skepticism about some software names, they remain bullish on chipmakers and data-center beneficiaries, arguing the AI buildout is still in mid-innings and could run for years.

Key Arguments: Gold’s rise is being driven in part by systematic trend-following, not just a single macro narrative; many macro funds are effectively long what has already been working. The “debasement trade” is criticized as a marketing label that obscures chronic underallocation to precious metals by large institutions. Silver is argued to be more industrial than monetary, with strong real supply-demand tightness, though speculative activity also matters. A weaker dollar is not automatically bad; it may simply reflect the dollar’s previous overvaluation and could help non-U.S. assets outperform. Central-bank reserve behavior changed meaningfully after actions like the freezing of Russian reserves, encouraging more gold buying and hedging. Powell’s press conference signaled less concern about labor-market weakness than before, making a near-term rate cut less likely. Microsoft’s earnings were good, but the stock sold off because investors are increasingly sensitive to the scale and trajectory of AI CapEx. Meta is rewarded because its AI spend is seen as improving a durable core ads business, unlike some other large AI spenders whose returns are less clear. Tesla’s valuation remains dependent on faith in future robotaxis/robots despite declining auto revenue and shrinking margins in the core business. AI may commoditize some software, but sticky enterprise workflows, customer retention, distribution, and specialized vertical products can still preserve value. Not all SaaS is equal: pricing power, seat-based billing, and customer segmentation will determine which companies are truly vulnerable. The AI infrastructure buildout remains structurally bullish for semis and related suppliers even if some software multiples compress.

Data Points: Gold daily performance: Only 3 down days out of roughly 18 trading days this year - Used to illustrate the relentlessness of gold’s rally Gold price: Above $5,300 - Stated as part of the precious-metals surge Silver price: Still over $110 - Referenced to emphasize the strength and rarity of the move GLD up days: 8 consecutive up days - Trend-following explanation for gold strength Silver market history: 1981 Hunt Brothers squeeze; 2006-2011 bull market - Examples used to argue silver rallies are often speculative-driven Solar demand: Down slightly year over year - Mentioned to counter the idea that silver’s move is purely industrial-demand driven Dollar index: Recent 4-year low - Used to frame the dollar’s slide and its relation to metals FX swaps/turnover growth: Up 175% in April 2025 vs 2022 - Cited in discussion of hedging dollar exposure Fed March cut odds: Below 20% - Current market pricing after the meeting Fed March cut odds a month earlier: About 50% - Shows hawkish repricing over the last month Fed April cut odds: About 74% chance of staying put - Used to show the market is now more hawkish First meeting where market expects lower rates: June - FedWatch expectations after the meeting Microsoft Azure growth: 39% YoY - Strong but slightly below the prior quarter’s 40%, contributing to the selloff Microsoft CapEx: $37.5 billion in the quarter - Reason investors worried about profitability and capital intensity Microsoft annualized CapEx run rate: About $150 billion - Derived from the quarterly CapEx number Microsoft paid property and equipment: $30 billion - Described as CPUs, GPUs, and property-related spending Microsoft RPO: Over $600 billion, up over 110% - Large non-GAAP backlog metric cited as bullish but less decisive for the market Meta after-hours move: Up over 8% - Rewarded for strong ad business and raised guidance Tesla automotive revenue: Down 11% YoY - Core business weakness despite market optimism Tesla operating margin: 5.7% (about 6%) - Used to compare Tesla’s economics more closely with traditional automakers Tesla market language: $2 billion investment into xAI - Used to show Tesla’s expanding AI optionality ServiceNow customer retention: 98-99% annual renewal - Evidence of sticky enterprise software economics ServiceNow founding/portfolio context: Customers signed in 2011 remain the most valuable - Illustrates long-duration customer value in software Daya Pernas research performance: 30% compounded since 2017 - Mentioned in connection with software valuation and pricing analysis

Pivotal Quotes: "Whatever bank it was, like all the big banks had their clients in their gold allocation was 0% or 1%." — Jack: Used to argue the gold rally reflects deep underallocation rather than a new macro revelation "The Federal Reserve looks at the falling unemployment rate... and that inflation is still high." — Jack: Summarizing why the Fed statement was interpreted as more hawkish than the prior meeting "I think that this AI train trade and the AI CapEx data center boom is in its middle innings." — Jack: Expressing continued bullishness on AI infrastructure despite skepticism elsewhere

Implications: Listeners should expect continued volatility in rates, FX, precious metals, and AI-linked equities. The market is rewarding durable fundamentals and punishing weak AI monetization stories, while gold, hedging, and reserve diversification may remain key macro themes.