Protecting and Preserving Wealth Episode 70 – Investment Themes in 2025

Speakers: Jon Gay, Bruce Hosler, Jason Hosler, & Alex Koury

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Jon Gay (00:06):

Welcome back to Protecting and Preserving Wealth. I’m Jon Jag Gay, joined by Alex Koury, Jason Hosler, and Bruce Hosler of Hosler Wealth Management. Always good to be with the three of you.

Bruce Hosler (00:15):

Good afternoon, Jon.

Jason Hosler (00:16):

Good to see you, Jon.

Jon Gay (00:17):

Alright, so today we’re talking about investment themes in 2025, these growth opportunities (in garden terms, green shoots), and full disclosure, I have not a green thumb, maybe a dark thumb, and Bruce had to explain green shoots to me off air before we started. But these are opportunities and there are a lot of them. Where do you want to start, Bruce?

Bruce Hosler (00:36):

I had nine and we ended up with 10 that between us as a team, we thought were opportunities that are really unique right now. And let’s just kind of talk in general terms about what we see out there. The environment in the markets and in the economy is very strong right now. There is a lot of money in movement, and there’s a lot of money being invested, and there’s some really phenomenal growth in the markets this year.

Let’s start with crypto. The big breakthrough on crypto is the genius act that was passed this summer, and is now literally made legal in the United States. Before that, there was some question, hey, is this ever going to be legal? Are they going to allow it? Is the government going to come out with their own crypto? And Congress has made crypto legal, and more importantly, they have now also set it all up in ETFs inside the financial system.

So, crypto, outside of the financial systems, kind of the wild, wild west, you’re responsible for being the custody of your own crypto and everything like that. Now, you can entrust the financial institutions with ETFs that invest in different crypto assets like Bitcoin or Ethereum or that. The thing that is changing our world dramatically is the way that blockchain is being implemented in the financial industry. Jason, do you want to talk about that a little bit?

Jason Hosler (02:06):

Yeah, the innovation that blockchain is, is being an online widely distributed ledger that solves what’s traditionally known as the double spend problem. If I have an electronic dollar and I send it to Alex and I send it to Bruce, who has the real electronic dollar? Well, we have the ledger that verifies who I actually sent it to and who has that. So, there’s all kinds of different applications and everything from video editing to AI that they’re using this technology now.

Jon Gay (02:34):

Now, you’re speaking my language, Jason (laughs).

Jason Hosler (02:37):

Yep. And it’s coming for the financial world too, and enabling some of the updates because they’ve been put under pressure by the crypto industry. We now have one day trade settlement on pretty much all assets. They’re talking about eventually, expanding the NASDAQ trading hours here coming up, and crypto is traded 24/7 on those markets.

So, I think there’s some things where those innovations are coming to, the traditional legacy financial world from the cryptocurrency world.

Bruce Hosler (03:10):

And some of these other alternative coins are really software, the technology that allows processing or tracking, or transacting. So, when you look at these alternative coins, a lot of times, it’s just software that is a breakthrough. And the big companies are going to be using these alternative coins, maybe like the credit card companies or the banking or the financial institutions to transmit and track financial assets, whatever they be — maybe crypto or not, and it’s allowing them to do that.

So, that’s the big first mainstream thing that we see changing is crypto has now become legal and Congress is putting the laws in place for this to be regulated. That’s a big breakthrough.

The second big breakthrough is artificial intelligence. It is changing the world dramatically. Alex, let’s just talk about this. The first thing we see is this AI, it demands power. And when I mean power, I mean electricity. What are we seeing about the demands for power in the AI world in these data centers, Alex?

Alex Koury (04:18):

What you’re seeing here is big companies like Meta and Microsoft setting up contracts directly with power suppliers to get them direct energy sources. And that’s a big, big deal because if a company’s going to contract in and demand the power be given to them directly, we know that there’s a lot of demand for this in our economy to make AI go around, electric vehicles, the whole nine yards.

We’re just starting to see this in the very beginning stages, I really believe. But you’re seeing data centers being built, you’re seeing infrastructure already in process to really make this thing go now.

Jon Gay (04:58):

This was a real eyeopener for me because AI, I thought, okay, open up ChatGPT and ask it a question, big deal, it’s just another window. But I recently learned that to do all this high-end computing behind some of this AI and these newer technologies, it really, really takes a lot of power and a lot of electricity. And then sometimes, you got to cool the plants and everything else. This was all new to me that as convenient as AI is, there is a cost associated with it in terms of the power it sucks up.

Bruce Hosler (05:25):

Well, and then it’s the power to, like you said, to cool it. So, the air conditioning on these data centers, because those chips are putting off so much heat, they are having to cool that. And so, they have all kinds of demand on heating, cooling. Let’s just talk about those chips for a second.

There’s huge money going into buying chips, huge money going into these data centers, Jason. These big companies, Amazon, Meta, Microsoft, Google — trillions of dollars, they’re setting up for these data centers, and also the stuff inside the data center. What about that?

Jason Hosler (06:05):

Well, right here in Arizona, we’ve got the expansion from Taiwan semiconductor manufacturing company. They are building some of their newest fabrication units down in the valley here off the 303.

That manufacturing and all the associated businesses around it, from creating the wafers to creating the full-on units that go into the data centers from Nvidia who buys their wafers from Taiwan semiconductor. And then building- the fiber optic to the data centers, putting the power together, the water cooling, the air cooling, all of that is coming together.

There’re massive amounts of money being spent on that because it is pushing forward the AI capabilities so quickly. Everyone is trying to be at the front of this race, and it really is turning into an arms race between the US and China in a lot of ways. And there’s going to be a lot of money spent because there’s a lot of money to be made with the products on the other side the AI’s going to enable.

If we’re being honest, I think that this is going to be a revolution that’s bigger than the internet. This will change everything.

Jon Gay (07:15):

And I will say, Jason, it’s getting close to dinnertime here on the East Coast (I’m a few hours ahead of you), all this talk of chips and wafers, you’re making me hungry.

[Laughter]

Bruce Hosler (07:23):

Alex, the other thing that we see as investment opportunities, of course, is the chips. We got the Nvidias is and we have the AMDs, and of course, those companies are printing money as they print all these chips.

But the other side of the data centers is the power requirements. And we have found that wind and solar, if it’s a cloudy day or the wind’s not blowing, these data centers cannot have the power kind of going up and down and brownouts and that.

We have companies coming in and providing power for these data centers through things like natural gas and nuclear. Do you want to talk about some of the opportunities we’ve seen that way with what’s going on in the industry?

Alex Koury (08:06):

Well, we’ve got to find, again, clean, reliable sources of energy and power that goes beyond just our electrical grid. So, we’re seeing companies like GE Vernova, which is a spinoff of General Electric as being a big, big beneficiary of this push towards powering with alternative energies. SMR is another company out there that also is benefiting from this demand that’s available today to power data centers.

The key is, is that you’ve got to be able to find companies out there that already have the power supply already ready to go. You just can’t start building it today and expect it to be up online tomorrow or next year. These are ready to go now. Something you really have to be conscious of when you go looking in this space of who’s the company? Do they have product available today, or are they in the development process? Where do they really lie and be able to get access now to this energy source?

Bruce Hosler (09:05):

So, we’re really looking for earnings. SMR by the way, folks, is Small Modular Reactors. So, we’re seeing uranium and uranium plants being brought back to life and power companies reestablishing some of their uranium powered electrical plants being brought back online.

Finally, in the AI space, we see software. Last year, in 2024, one of the highest performing companies was Palantir, which is a software company that uses software to do some of the AI translation to make it work between other pieces of software. Certainly, companies like this that have software in that space are another opportunity that we see.

I want to switch gears now and change to our third thesis: robotics. And we’ve had clients that have been invested in Tesla for years, and we’ve seen how Tesla’s kind of been out of favor, but Jason, what are some of the things we’re seeing for the future of Tesla when it comes to robotics?

Jason Hosler (10:08):

Yeah, the robotic space is growing very quickly, and there’s a lot of innovation happening there, partially driven by AI. They’re actually using the AI to train the robots and to learn locomotion and how to control them better, more detailed.

China, I think probably has the lead here. They’ve got a lot of robotics companies, and they’ve got a lot of really interesting products that they’re putting out right now. But I think it’s possible in the long run that Tesla, with its AI and robotics focus, becomes less of a car company and more of a robot company with the Optimus bot that Elon Musk wants to bring out.

I think robotics and artificial intelligence paired together is very much a game changer for a lot of the world. Who knows how far they’re going to be able to actually take that. But if the early indications are any hint, these general-purpose humanoid robots are going to be able to do just about any task that you and I can imagine from cooking and cleaning to maybe even general labor and working in warehouses.

Bruce Hosler (11:17):

What about back rubs? Are they going to give back rubs too?

Jason Hosler (11:20):

Those models will be forthcoming, I imagine.

Jon Gay (11:22):

That is a whole different podcast, Bruce.

Bruce Hosler (11:25):

(Laughs) Alright, great. So, to be able to run these robots and these electric vehicles, and all the new technology, we are seeing our point number four, that there are needs for special rare earths. Alex, we have some rare earth opportunities around the world, but specifically in the United States. What are those opportunities?

Alex Koury (11:50):

That’s right. We’ve got to mine this stuff. We’re finding more and more countries are hanging onto what’s under their land. China’s a good example of that. They’re not going to be giving us any of these materials that we need in order to power electric vehicles as an example, so we need to mine them ourselves here.

We’re finding right now that there’s … again, these are rare earth, think of rare. We need to dig it up. We need as much as possible. We’re seeing more and more opportunities in the space become more of a reality. We got to dig and we got to dig now. So, we need to be aware of that as part of, again, the bigger picture as how we expand out into other areas that benefit from everything we’re talking about here on this podcast today.

Bruce Hosler (12:30):

And we see those opportunities like the Defense Department invested all that money into this space. So, we see these opportunities folks, these green shoots. So, we’re paying attention to all of this.

Now, Jason, some people have said that the Magnificent Seven are overpriced, and I would contend that a company is not overpriced if the earnings justify the price. So, the price may be high, but it’s relative to the amount of earnings and cash flow that a company’s putting out. Are the Magnificent Seven still significant, and what are they projecting in their numbers going forward?

Jon Gay (13:07):

And just to jump in before you answer, Jason, the Magnificent Seven, for our listeners who aren’t aware, are those big seven tech companies that have driven a lot of the growth in the S&P 500 recently, but I cut you off. Go ahead, Jason.

Jason Hosler (13:18):

No, that’s alright, Jon. People should be aware of what the Magnificent Seven are. And this has been a theme in markets since about 2022. And in ‘23 and ‘24, they were responsible for the majority of returns that the indices had.

Those companies are still some of the most important companies in the world: Nvidia, Microsoft, Amazon, Google, Meta, Apple. These are companies that drive serious innovation, that pay serious salaries to researchers who are doing some of the most serious work in the world, pushing all of these narratives we’ve already talked about forward.

And you got to remember guys, the stock market is forward looking. We’re looking at what is being created. This is an entirely new industrial revolution that is going to completely change how the economy works. By the time we get to 2035, 2040, we’re in a whole different world if this AI wave and robotics wave and everything moves forward. These are the companies that are going to be putting out the robots, building the AIs, doing the research, putting together everything.

So, I think that you’re looking at what’s happening in the marketplace right now. If you’re not looking very closely at the Magnificent Seven, you’re going to be missing out on something.

Bruce Hosler (14:37):

Yep, we need exposure to that. We believe many of these companies are important, but all of their stuff that they’re generating, it’s not just them. So, our point number six is I want to talk about all electric vertical takeoff and landing aircraft.

So, we’ve seen companies that are doing this. These are those like airplanes folks where they have the fans that point down and they rise up like a helicopter, then they turn the fans and then the fans go, and then the plane takes off and it flies like an airplane. And that can come and land like a helicopter.

Alex, what is this? I mean, this is life-changing stuff, and yet these companies are profitable and they’re starting to take hold in the Middle East like in Saudi Arabia and countries like that, they’re starting to use this type of aircraft.

Alex Koury (15:30):

That’s right. So, again, the same thing is it seems as if we’re entering into this more futuristic world that’s here really today. Things that you think about are becoming reality, to be quite honest. And so, again, we see opportunities in this space today. Just think about Tesla, when it was 15, 20 years ago, it was just an electric car company that sold a few cars here and there, and look how big it’s become over that period of time now.

We don’t expect companies like this to become as big as Tesla, but the opportunity, think about it worldwide, of having these EVTOL drones in aircraft, how that can really change how things get delivered, how they’re distributed. And it’s not just one big one. There’s lots of little ones, lots of different sizes out there.

So, there’s a potential huge, huge market, again, that overtime can certainly mature and grow into something bigger than what it is today.

Jon Gay (16:25):

I was impressed when Amazon was able to deliver razor blades to me the same day. Now, with these things dropping stuff off, maybe I’ll have it in an hour soon.

Bruce Hosler (16:33):

It’s amazing like that. Jason, talking about this type of vertical takeoff and flight, that brings me to the space race and the technology in space. One of the companies we invest in uses this technology for replacement of traditional cell phone.

Talk about that type of technology and the type of technology like SpaceX that’s not even publicly traded or really available, but we have it available through some of our private equity, and maybe different drones and things like that. Talk about these space technologies and how profitable they can be, what’s going on in that space.

Jason Hosler (17:15):

Elon Musk gets some pushback on Tesla and everything that he’s done there and his involvement politically, people do not give him enough credit for the difference he’s made in the space industry. He’s brought launch costs down something like a thousand x. It’s ridiculous. I mean, the price to get in space is a thousand times less than it was 20 years ago because of the innovation, the iteration that they’ve done at SpaceX and bringing those costs down.

And it changes the calculation on what is economically feasible to do in low earth orbit. Right now, the most money-making thing, of course, is putting up all the satellites. And now, that we can get satellites up for a lot cheaper, there’s all kinds of different things we can do with them when they’re sitting up there, like connect the internet to everybody in the world to be able to broadcast it anywhere, to be able to have cell phones that work everywhere, which is what a competitor of SpaceX is doing.

There’s also low earth orbit manufacturing. There’s plenty of people that would love to go into space just for the thrill of it, and that is not going to be very expensive soon. As the Starship continues in its development process, we just had another launch last week that is going to be the cheapest, most powerful launch vehicle that has ever existed on the planet when they finish developing it. And it’s the one that Elon Musk intends to take to Mars.

So, if we’re talking about a sci-fi future, we’re there as far as space is concerned. I expect over the next few years that the space economy really begins to get built out. We’ve seen a lot of very exciting things about the United States, maybe going back to the moon here in a little bit with the Artemis program, where they’re going to try and mine asteroids and use that to do manufacturing in space to build out the infrastructure there.

I think the launch costs that have been brought down by SpaceX and that innovation that’s changed the entire game, and it brings a lot of exciting prospects for low earth orbit and everything that’s going to be connected there economically.

Bruce Hosler (19:24):

And a lot of opportunities for investment of course. So, number eight is private equity and private debt. And what’s going on is the interest rates have been so high that the private world is coming in with private debt, and it’s so expensive to take your company public that many companies are electing to remain private.

And so, the private markets are becoming very popular as investment vehicles, we’re seeing that. And for accredited investors, that’s people that have more than a million dollars of investible assets or $1.2 million, that becomes a place for people to invest their money and get good returns. That’s not in the normal markets.

And so, we’re looking at those opportunities to diversify your portfolio. So, if the stock market’s going up and down, your private investments may not be moving in the same correlation. So, we’re looking for that.

Now, Alex, we’re thinking, or the market is thinking, that there’s a chance that the Federal Reserve may be lowering interest rates for the first time in about a year in September here. If that happens, we are looking, and the rest of the world’s kind of looking at small caps, they’ve started to move in anticipation of this. Do small caps do better in high interest rates, low interest rates? And how does that reflect on those investment opportunities?

Alex Koury (20:47):

Sure. So, small caps, really over the last three years now, since 2022 when the rate hiking cycle got really aggressive really have underperformed compared to the larger stock market. And that’s just because when rates are higher, it’s really expensive for small companies to be able to borrow money to finance their operations. That’s what we’ve been noticing and seeing.

Now, if we do go into a more meaningful rate-cutting cycle, where now smaller companies can borrow at lower costs, they can finance their operations, they can grow, they can do all things they need to do as a smaller company, we see an opportunity in the small caps space to start dipping our toe in the water.

Now again, it depends on how rates go, how much they’re cut, how often, so forth and so on. But we’ve already seen in the last couple months, especially now that the market is forecasting about an 85% chance that rates do get cut by September 17th, small caps are starting to look very attractive.

Now, one thing you want to always pay attention to in this market is profitable small cap companies versus non-profitable ones. So, it’s not just getting in the market and buying small cap companies. You have to buy the ones that have the best chance to succeed in the future. And we’re looking at companies that are making money very little to no debt. That’s what we want to be focusing on for this part of our portfolio.

And again, monitoring that trend and that change where we can see over time a trend change between large caps that have dominated the markets for so many years into some of these smaller companies that have, again, over time, the potential to outperform their peers.

Bruce Hosler (22:27):

So, there’s some opportunities there. Our 10th and final bullet that I want to talk about today, Jason, has to do with the biotech industry. What is going on there and what are the great opportunities that are blossoming right now?

Jason Hosler (22:42):

Well, we’ve all seen that the biotech industry as a whole has been put under a lot of pressure since the election and the appointment of RFK Junior. It’s definitely caused some jitters for investors in the space, but innovation in the space is proceeding. And we have to remember that there’s a revolution going on in this country with the GLPs, Ozempic and such, and how effective those are.

Well, I just saw that they’ve got some new myostatin inhibitors that lower the amount of muscle loss you have while using those GLP drugs. There’s innovation going on at a pace that we have not seen from pharmaceutical companies in a long time, and a lot of that is enabled by the technology that’s allowed them to read and write at the DNA level.

And they are coming up with all kinds of very interesting stuff, researching it, getting it through the trials, and bringing it to market. I think we’re going to see a lot of new products into the end of this decade being brought from the biotech industry.

Bruce Hosler (23:49):

So, folks, that kind of wraps up some of our themes for 2025 as far as investment themes. But as you can see, we’re seeing green shoots and growth opportunities in many areas of the market. We’re watching them all and we’re being very selective about what we would look for, for investment opportunities. But don’t let anybody scare you or tell you that it’s the end of the world. To the contrary, there are some great things happening, there’s some great investment opportunities.

We want you to know that we’re looking at all this, we’re evaluating it and we’re being selective in what we’re doing. But we see some great opportunities ahead and we don’t want to be caught behind the curve on this. So, we wanted to bring that to your attention and let you know that you can be looking at it and looking forward to the great things that we see developing in the future.

Jon Gay (24:38):

Definitely, an insightful conversation today. And if our listeners want to contact your team at Hosler Wealth Management, what are the best ways to reach you?

Bruce Hosler (24:45):

Well, certainly, they can reach us at the website at hoslerwm.com and schedule an appointment there. If they want to call us in Prescott, Jason?

Jason Hosler (24:53):

Give us a call at (928)-778-7666.

Bruce Hosler (24:57):

And in Scottsdale, Alex?

Alex Koury (24:59):

Yes (480)-994-7342.

Jon Gay (25:04):

Appreciate y’all not putting me out of a job with AI at least yet. We’ll talk soon. (Laughter)

Bruce Hosler (25:08):

Alright, Jon. Thanks, folks.

Jason Hosler (25:11):

Thank you, Jon.

Alex Koury (25:12):

Thanks, Jon

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Disclosure: (23:50):

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