Is there a software stock bubble? Plus, Phillips 66 CFO talks earnings, Venezuela

Software Stocks and AI Disruption [0:09]

• The video opens by addressing the significant decline in software stocks following Tuesday's market action.
• Nvidia founder Jensen Huang stated that "Software is a tool" and dismissed the notion that the software industry is in decline or will be replaced by AI, calling the market's reaction illogical.
• The market, however, seems to believe that AI advancements pose a terminal value risk to software companies such as Salesforce, Workday, Thomson Reuters, SAP, and Service Now.
• Companies like Anthropic are seen as actively leaning into AI tools to potentially make traditional software companies obsolete, with their primary goal being to drive value for their investors.
• Salesforce CEO Marc Benioff has seen his stock plunge 42% in the past year due to these AI fears.

"Software is a tool."

Market Reaction and Trader's Perspective [0:27]

• Trader Tom Sosnoff views the high volatility and lower prices in software stocks as an opportunity, stating, "Isn't this an opportunity? Isn't this what we all kind of dream about as investors or as traders?"
• Sosnoff, who runs a software company himself, explains his strategy involves embedding AI into his technology, finding it relatively cheap, easy, and quick to implement.
• He believes that many software stocks were simply "too hyped and too overpriced," contributing to the current pullback.
• Sosnoff notes that a generation of traders has not experienced a significant market downturn like the 1987 crash, which he is familiar with.
• He defines capitulation as a point where high volatility and significant selling pressure (seen in volume) indicate a potential bottom.

"Isn't this an opportunity? Isn't this isn't this what we all kind of uh dream about as investors or as traders?"

Broader Market Trends and Retail's Resilience [0:40]

• The sell-offs have spread beyond niche software companies to larger names like Salesforce and Service Now.
• Piper Sandler downgraded several stocks, including Adobe, Freshworks, and Vertex, contributing to the momentum.
• JP Morgan issued a note warning clients about AI's potential to fundamentally change the software landscape, suggesting companies need to evolve even more rapidly.
• The discussion questions whether there was a "bubble" in software valuations, leading to the current pullback as investors digest the implications of AI.
• In contrast to the tech downturn, Walmart crossed the $1 trillion market cap threshold, a move that signals its increasing role as a tech player with significant internal software development and AI initiatives.
• Walmart's relisting to the NASDAQ is seen as a strategic move to compete more directly with Amazon.

"The market could care less what Jensen has to say on this topic."

Consumer Spending and Affordability Concerns [0:52]

• Chipotle's recent earnings were described as "terrible," with a call for the company to introduce a dollar menu to improve affordability, despite their premium pricing strategy.
• Chipotle's CEO mentioned that 60% of their core consumer base earns over $100,000 and is willing to splurge on high-protein, high-value meals.
• PepsiCo CEO Ramon Laguarta stated that the middle to lower-income consumer is "quite stable" but "very stretching their budgets," and that consumers would buy more products if they were more affordable.
• Tom Sosnoff trades Chipotle by selling puts, finding it "cheap relative to where it's been" and views it as tradable with okay liquidity.

"We talk to consumers they're telling us we would buy more of your products only if they were more affordable."

Oil Market Outlook and Philip 66 Performance [13:02]

• The video shifts focus to commodities, specifically oil, emphasizing their importance to corporate America's profits.
• Philip 66 reported strong earnings that beat estimates, though they experienced some margin pressure in certain areas.
• The company saw record performance in its refining and mid-stream businesses, with high utilization rates and strong NGL throughput and fractionation volumes.
• Optimism for the refining business is driven by continued strong demand fundamentals and the widening differential for heavy crude oil, which benefits Philip 66 due to its significant coking capacity.
• The chemical business is in a "cyclical trough" but remains profitable due to low-cost operations and feedstocks, generating $145 million in EBITDA for their share in Q4.

"While it's great to stock developments from anthropic, what happens in commodities like oil is vital to the profits and cash flow that corporate America produces every single quarter."

Venezuela Crude and Future Supply Dynamics [16:15]

• The resumption of Venezuelan crude oil supply is discussed, with more heavy crude expected to enter the market, potentially putting pressure on heavy crude differentials.
• Philip 66's CFO believes that supply and demand in the oil market will become better balanced, with optimistic demand trends for 2026, barring major economic shocks.
• Bringing Venezuelan oil production back to its historical peak of over 3 million barrels per day is expected to take significant time and investment.
• The company acknowledges the challenges of investing in Venezuela, citing past expropriations, but also recognizes the country's vast oil resource and continued interest from stakeholders.
• From a consumer perspective, gasoline and diesel demand have held up, with growth in demand for fossil diesel partly due to challenges in the renewable diesel business.

"So more Venezuelan crude uh means more crude supply in the overall markets."