How Smart Investors Evaluate AI Stocks (Without Guessing) - Andy Tanner

Welcome back to Rich Dad Stockcast. I'm your host, Del Denny. And today we're tackling a question. Investors everywhere are asking right now, what AI stock should I buy? Now, artificial intelligence is transforming industries from software to healthcare, to robotics. Some companies are exploding in value and many investors feel like they might be missing the biggest technology wave since the internet, but here's the problem. Chasing headlines and buying hype rarely ends well. So today we're breaking down how smart investors, uh, evaluate AI stocks, what separates real opportunity from speculation and joining me is Rich Dad expert, Andy Tanner, who helps investors look beyond the noise and focus on fundamentals, cashflow and risk management. And before we dive in, go to stockcastbonus.com, grab your free investing tools. If you want to invest with structure instead of emotion, that's where you start. Andy, welcome back. This is great, Del. This is fantastic. You know, I, I recently put out an ebook about AI and I also did a two hour class on AI, so I don't know that we can put in the description, but if people go, I don't know if they go to the cashflow Academy or, you know, stockcastbonus.com get on our list or whatever, uh, you know, they'll find out about those resources as well. So this'll be a great primer for that because it's something that the student body has asked for absolutely where my attention is a hundred percent. I mean, I'm locked in on the opportunities and the risks of AI for sure. Uh, it's where I do most of my study, you know, I'd spend most of my time learning and, uh, that's definitely the topic right now for sure. AI, I spend way too much time with it. It's a fun topic right now. Very pertinent. Now let's start with the question everyone asks is asking what AI stocks should I buy? Uh, but, but maybe the better question is how should investors think about this in the first place? Yeah. I mean, the advice culture, I love that question because it's such a great opportunity to separate the amateurs from the pros. You know, the advice culture is really just a lazy culture. Uh, I don't want to learn anything. I don't want to do any work. I don't really want to learn about that stuff, but can you give me a tip? Can you just tell me what to buy and shortcut it for me? And it really is. It's, it's kind of like if you took that mentality in any other realm, look, you know, I, I just, I just want some tips on playing the piano. Uh, I really don't want to take the lessons. I really don't want to practice. I would like to have the concert pianist ability and the rewards because, because you just shortcut all that learning and work for me and personal development. Cause I just, I just want to go to the recital and play. I really don't want to learn the piano or even how to read notes. I just want to be Billy Joel. Is that cool? I mean, that's asinine it's. And yet that is exactly like what I would, you know, when you go to the rich dad, a radio show with Robert and you know, the asked Robert section that he would do. And people say, Hey, if I had $10,000, what'd you buy right now? That's exactly that attitude of wanting a tip. And that's the advice culture. And that's why wall street's rich because they'll tell you exactly what to buy. It's always mediocre and they'll charge you a fee for that advice. And they love that ignorance. So when people say, what AI stock should I buy? I say, well, take your chances. And by the way, it could change. I could be wrong. I could pick one and I can be wrong. So what do you do if you're, if you're wrong? Cause I'm wrong sometimes. And the ability to know how to deal with being wrong is a huge asset. So I liked your second question is how should I think about it? Um, see, now you're asking the education question. So I like to delineate that right out of the, you know, we should delineate that right out of the gate. I think it's important. Cause instead of just say, Hey, buy 5,000 shares of X, Y, Z, I think it's important to do that. Right. What, what, what, what more do I know now? You know, should I buy gold? Yes. What do you know about gold now? Nothing. Should I buy gold? No, not now. What do you know about gold? Nothing. But if you say, you know, gold's fungible, what does that mean? Now we're starting to, now we know more about gold than we did before. Hmm. I like that. Same with AI stocks. Now I can talk about how to think about it. If you want. I love that question. How do you think about it? Well, let's let's I, that's a good look. How about we do this? The first part of this, let's think about it. Then let's get into some maybe technicals if we will. So the thought of thinking about it, why do professional investors focus on, on process before the picks? Well, I think that, I mean, I don't know. We, we studied a lot of generalized principles. I don't know that process is a generalized principle, but it, in my life, it seems to be that I can't always control outcomes, but I can definitely define and engage in my process and risk is about control, right? And the more control I have on my process, that probably leads to less risk, more controls, less risk. So when my sons decide to be athletes and basketball players, we really didn't focus on whether we'd start, whether we'd even make the team, whether we get a scholarship. We wanted all of those things, but those were out of our control. Uh, what was in our, you know, how, how, how tall am I going to grow, right? Am I going to be quicker than the other guy? What I can control is my nutrition, my weights, my agility, my skill level, my basketball IQ, those are all within my control. So we engaged in processes to improve those. So as an investor, I would think about it that way, uh, in, in the process. So, you know, one of the, like, for example, part of the process of an AI would be Warren Buffett's process. He says, where's the moat, right? Where's the moat, which one of these can withstand assaults to the castle. I want a deep moat. I want a wide moat. I want a huge castle that's well managed, but I want sharks in that alligators and depth and waves and lava. And I want to, I want a great moat. So when I look at AI says, where's the moat, what is, what is going away? And what is, what, what is vulnerable? What is vulnerable? I'll tell you what I think is vulnerable is labor. Let's let's hear it. Labor's free. Labor is electricity. Labor is going to the trend. If you look at the trend and I look at trends, the trend is exactly what, uh, Buckminster Fuller said. It's, it's, uh, you know, you have family a lot, you were from a firm relies and you start doing more with less and more and more with less and less and more and more and more with less than less than less till pretty soon. You hit a point of infinity where you do everything with nothing. That's infant return. So the leverage that it offers is pretty soon. There will be no human tasks, no human tasks that cannot be reduced to energy and maintenance. You have some automatic apparatus that needs to be maintained. Just like a human does humans need, you know, sick leave and humans need food. And, you know, humans need bathing and showers and clothing. We have human needs. Okay. Well, you know, robots have need to, uh, they need, uh, electricity and they need maintenance. And, and that's always going to be cheaper than a human in the long, long term. So essentially that's free labor. You know, you get a solar or whatever from sunshine and there you have it, you know, you have free energy, the sun gives you free energy and then you, you have a cost of maintenance and even that gets better with time. So essentially whether it's one year, five years, 10 years, whatever, I see the biggest, the weakest moat, the moat that isn't going to hold is, is labor, human labor, it's going to be free. So what does that mean for shares? Well, it means the ownership just got way more powerful. If you have a currency that's losing value and the moat of the currency is dying, the currency can be attacked and it can lose value like the Zimbabwe dollar. When that goes away, people find, okay, what is the valuable? Well, if labor goes away, ownership increases and there's a tipping point where you have hyperinflation where all of a sudden the confidence, what, what the difference between inflation, hyperinflation is confidence, you know, as soon as you know, people can have inflation, but they still have confidence in the dollar because they'll go earn them. The tipping point happens where people say, wait, wait, wait, wait, these dollars aren't good. I don't want them anymore. I don't want to do that anymore. And then that's when it accelerates where people really don't want it. And the next thing, you know, well, what do I want? So, you know, it's kind of funny. People say, well, I want to get out of the rat race. The rat race is automated. Now they don't need you in the rat race. Rat race is going away. You'll there are people that pray. They can get the rat race now. Well, I, I want to get out of the rat race. So you're getting out. We're all getting out. If we're in the rat race, we're all getting out because that's going to be electricity and automation. It's going to be free. Now people don't want to hear that because people are taste buds, not brain cells. They'll reject that idea simply because it makes them uncomfortable. That's the only way. Oh, it tastes like broccoli must be bad. No, it's nutritionist. It's good. Well, I only want to eat ice cream. Only tell me things I want to hear, Andy. That's what clickbait is, right? Only tell me stuff. I want to hear the algorithm to turn this off. Cause I don't want to hear that. Right. Well, that's fine. But, but all of a sudden what happens when people see the limited amount of flow, what happens when you see Salesforce, uh, lay off 4,000 people job shrink, but buy back, you know, 20 billion share, $20 billion worth of shares, total of 50, uh, ultimately that means the amount of shares available shrink and the thing that's the most valuable is getting more scarce. So that's the way I think about AI. I've never in anyone that's followed me does notice I've never really been, I've always been cautiously bullish and very conservative and, and, you know, Tom Wheelwright noticed he was at a, uh, an event. Uh, he invited me and he'd be on a panel and I said, it's the biggest boom that mankind's ever seen. It's going to make the.com boom, maybe a little bust, but ultimately it's a boom like Google boomed, Apple boom, Netflix boomed, you know, Microsoft boomed, it's going to make that look like a birthday party, man. Tiny. It's going to be massively bigger party than a birthday party. It's going to be a rave, man. It's going to be crazy. Uh, it's going to be studio 54 party, man, because, because I'm not going to sell and the institutions aren't going to sell Salesforce is pulling them out of the float. They're not going to sell. So all of a sudden you don't have a way to make money by labor and you, the way to make money by ownership is more and more expensive because it's in demand. So I, I think the value of owning a business, so let's go start a business. Yeah. Go compete, go compete with 300 million Americans to start your own business. Everyone started on business, but just go, Hey, you know what? I'm going to team up with the late Steve jobs and I'm just going to own his business and let him share profits with me. That's how I think about AI. I love that broadly. Now we can, we can get into this now. I don't mind giving out specific stocks either. I don't mind that. We can do that in the second half. You've won. If people want advice, well, that's probably stupid to, they're not going to learn anything, but I'm happy to tell them what I'm, I'm happy to tell people what I'm buying. Absolutely. I'll tell people what I'm buying. All right. Let's just, that's a great cliffhanger. Let's go to break real quick. When we come back, Andy's going to break down how smart investors position themselves during this technology revolution, this studio 54, if you will, I love that little fall out there and don't forget, go to stockcast, bonus.com, download your free investing tools. These resources are designed to help you to analyze stocks with discipline and clarity. Stick around. We'll be right back. So far, it's been great. I needed a source where I could really enrich my education through stocks. I didn't really have an avenue for it. And it's helped me a lot. The simplicity has really gotten me on the track to where I enjoy the learning as well as it's really solidifying in my mind and like, they're not just trying to sell you something. They really care about the people that are in the course and they really do care about you and your personal goals and what you want to do is to help you and your family and whatever your goals are in life through that. So it's really been great. Welcome back to rich that stockcasts, Andy, let's talk strategy. You know, AI being one of the most important technology shifts in our lifetime. But investors still need discipline. We've talked about that. We need education. So my question is, how can investors prepare for this AI boom that's coming? Is it, you know, you said I'll give them stocks or is it the pick and shovel Levi Strauss trade? How should we be thinking right now going into this? Yeah. I mean, you, you don't, you, you shouldn't invest in things you don't understand. Um, that's another reason the advice culture. So, you know, it's like that flight I always talk about where I'm going from salt Lake to Atlanta. And I sit down, get all set in my first class seat and I get my Bose headphones, those noise canceling ones, I get them like right here, almost there. And the guy next to me wants to chat. He wants to chat. He wants to get to know me. And actually he wants me to get to know him. So he's a thoracic surgeon and I just happened to have a flight for four hours with the greatest thoracic surgeon in history, the best in the world ever. And the reason I know that is he told me for four hours that he was the best. And so I'm listening to all the stuff in the school and how complex it is and how hard it is to replace the bicuspid valve and all this crap forever. I'm just my, I put the headphones down. They're not, and I'm just my knit, my next kink because I'm, and then the pilot says, we're coming into Atlanta. And he goes, so it looks like flight services. So what do you do? I go, well, I teach investing and do a little investing. It was all like stocks and stuff. I go, yeah. He goes, Hey, you know, I really not interested in, in learning a lot about that, but do you have any, you have any good tips for me? I'm always looking for a good tip. And I almost said this, I says, you know, it's interesting. You said, cause I really didn't want to do all that BS. You just said, but I sure like to replace my own bicuspid valve on my kitchen table with a butter knife tonight. You got any, I mean, the disrespect, he demanded my respect for all his education. He gave no respect to you and I, or our listeners for our education. Oh, well, I don't really need that. I just need to tip, just need to tip. Don't need to learn anything. Just give me the tip. Can you give me a tip on how to replace a heart valve? We'll go to school first. So how can people repair? There's no putting on the seatbelt when the auto accident happens, there's no getting on the plane after it's taken off the prime to prepare where you're going to learn how to, you're going to learn how to do options overnight. You can ask chat GPT, how to do it. He doesn't know how to do it. So preparing is the first step is look, I all I'm a financial education advocate. Learn, increase the time spent with your mentors now and paper trade or learn real estate or learn business. I don't care what you do, but learn. So when this thing goes pop, you're ready and waiting and you're not, you know, there's three types of people, people that make it happen, participate, making it happen, people that watch the other people do it, they don't get anything. And then there's the people have no idea we're even having this conversation. They're just so tuned out. I have no idea what's going on. They don't even know what's coming. So decide where you want to be. If you want to be participant, making it happen for you, start learning with urgency, like you've never, like you've never felt before. Um, I'm so glad for the assets that I have. I'm I, I, you know, Robert, thank you. Do you know, they, they gave him the best honor ever. You know, they gave him a veteran award and you know, I was talking to Tom and you know, he, he might be the most successful Marine ever. I'm trying to think of someone who was a Marine that did more for the world after his time. I talked about a guy that deserves to have that award and I'm just grateful because I've been imperfect, man. I've made mistakes and lost money here and there and all this. But when I look, when I look at what is standing in the moat around it, I'm like, man, I'm sure glad going into this next phase that there's some ownership there, man, I'm really, really grateful. It's, and it, and to think how that can explode, you know, like gold has, you know, like he told me to buy all this gold, you know, I'm like, Oh my gosh, you don't look at gold right now. So I'm grateful that I was prepared and I want to prepare more. You can feel the urgency in my voice. I want to get better. Indeed. I I've never felt so much urgency. You know, we've known each other for two decades. What's just crazy to think about, but this urgency of getting prepared for this AI shift. I mean, this is just big, man. It's going to be huge. So big, what else can we do to, to fortify ourselves? Yeah. Look, I'll just tell you what I'm buying. That's what people are. Well, you want advice? Well, I might change, you know, I might be out of these tomorrow if things change. So you can go out and buy them in ignorance. And when, uh, when I see something change and I do a protective put or change something and, or hedge, uh, you can watch your stock go down while I react to a mistake or to just change. So the education is invaluable because I don't have the ability to predict where things are going. I'm going to go through criteria and get my best thoughts to it. But without exit strategy and hedging and knowing how to do that, you know, that's why I worry about giving out names because someone buys it, things change that I didn't see coming, which is human. I'll know how to react to that. I'll know how to hedge that. I'll know how to react to that. They won't. So that's why I don't like giving out stuff, but I'll tell you a couple. So you mentioned the Levi Strauss type trade. So what is the Levi Strauss trade? I'll let you say it. You teach it for a minute. I'll get a drink here and refill my cup. My producer says, Andy, I hate having plastic. Always use your mug because it looks better, but, but I'm out. So I got to refill my mug here. So what's the Levi Strauss trade? The Levi Strauss. If you think about, if you do your little Google search on Levi Strauss, you might think of Levi's and the blue jeans. He made his money during the gold rush during the, I think, 1849 gold rush. And he didn't make it in gold. That's where everybody went to. They went to San Francisco and California to buy gold. But the gold, the money wasn't in the gold. It was in selling the picks and the shovels and the blue jeans to the people that were going after the gold. And that's where Levi Strauss truly made his, his fortune was in selling picks and shovels, not the gold itself. So that's a little context on Levi Strauss. So you're basically saying, what are the tools and clothing that the gold miners need? So instead of talking about AI, we take a step back and we say, well, what are the AI guys going to need as they go for all this AI profit? So as you look at Antropic and Google and Apple, uh, you know, all these other Gemini, you look at all these, you know, what are they going to buy? Where are they, where are they absolutely going to spend money? Where are they like the gold miners were absolutely going to buy pick absolutely by blue jeans, absolutely by shovel. They're going to buy them. So Levi Strauss says I'll sell them the blue jeans because whether they find the gold or not, I don't really care which miner finds the gold. Some will find it. Some won't, but they all need blue jeans. That's his thought. Well, I've got three or four right there. Um, God, I don't know how long it's been. It's probably over a year ago. I'll bet it's, it might be two years ago. I don't remember what it was, but I was talking with Corey holiday, one of our major mentors about the Levi Strauss trade and the biggest bottleneck in AI right now, by far the biggest bottleneck isn't ships, it's not software. It's the hardware. Uh, it's two things. Number one, it's energy, energy, uh, Google three mile Island and just see what Microsoft is doing with those guys that have three mile out. They're opening it up. They're going to reopen that thing. Nuclear. They got to go nuclear. We're talking data centers that take the amount of electricity of a small city. They got to go nuclear. So one of the things I bought is a company called chemical because they sell uranium. So that's a Levi Strauss trade. It's done very well. I really don't care though, about the price, the price gone up like crazy, but I'm not here to say, Oh yeah, look, I bought this low and that's high because I'm not going to sell it. It is meaningless that it has gone up. What's meaningful is that I can get a dividend from it forever and I can write options on it forever and I can cashflow that asset and I can have new refrigerator money rather than old pantry money. I'm not selling it. The biggest regret I have is I didn't buy more. It's always the biggest regret that you didn't buy more. I'm not going to sell it. I'm not going to say, Oh, it's up now. Now it's time to sell. No. So that's one energy chemicals. And by the way, I also have, you know, I, I enjoy, uh, looking at utilities, you know, people pay the phone bill and people pay the electric bill. So energy, particularly nuclear nuclear energy, I just said like George Bush, nuke energy is a big one. Okay. Uh, another one, another stock that I really like, and it's kind of all over the place and this dividend moves around, but it's in the, in the spreads, the spreads on the options, aren't the best I've seen. So, you know, you, you weigh that, but what I like about him is I think he got a decent moat. I don't think they're going anywhere. Got a friend who's in construction, his company just went public by the way. And, uh, they're, they're building a data center. They're building the data center for Apple or for one of the big ones. And the, the, you know, I can't remember what, what the figure was from him, but my wife, she used to work for a company in Kelton, Georgia called Southwire. When we were first married, you know, she was a receptionist for Southwire and they make wire, they make copper wire. Um, they, they also had, uh, uh, for, uh, Oh, who the heck was it? It was a chip maker. Can't remember the name. Um, no, he's there and they were in Lehigh, Micron, Micron. And, uh, these are the orders for the wire, the orders for the wire for, for tech places and particularly Dennis data centers, the wire it's in the hundreds of millions of dollars. So just like the gold rush guys are going to spend, you know, 20 bucks on a pick. The, the AI rush miners are going to spend hundreds of millions of dollars on copper wire. So I have a company called Rio Tinto. They mostly sell steel, which data center structurally, but, but, what the, or iron rather, but what they, they also have the largest open pit copper mine in the world. The place used to be called Kennecott comp. You see it from the moon. You put the empire state building this thing. They literally had the faith to move a mountain shovel by shovel. And in my lifetime, I've seen them literally move an entire mountain where I live in the Salt Lake Valley. It's enormous. They've named a town out there called copper town, copper Hills high school. The Hills are made of copper. Uh, it's unbelievable. So I really think that if you're going to do AI, you can need energy and to transfer that energy into whatever you're building, you need copper. So I really liked the copper. Um, those are the type of Levi's we could go on, but those are the type of Levi Strauss trades that I really like right now, and they're not really trades, they're investments. And I think there's a lot of upside to them. I think there's a good moat to that stuff. I think that we'll need more and more and more and more and more and more and more of it, just like we always need more chips, we'll need more energy. For sure. We're going to need more energy for freaking sure. We're gonna need more energy and absolutely. We'll be wiring stuff up like never before as we automate, because that's what the, the, the labor is it's electricity and maintenance. It, that's what it is. Uh, so you got a channel out. So I like those two for Levi Strauss trade. Now, am I right? We'll find out, but that's what I'm doing in the Levi Strauss. There's a couple others, but that's good enough for that. That's fantastic. All right. My, my final question is this. If someone that's listening, wants to start learning how to evaluate AI stocks, the right way, I know I have like three more, but that's okay. We're going to have to say, we're going to have to save it for next time, man. You know, I, that was just the Levi Strauss section. I got a lot of more, we'll do it. And we'll do another podcast because there's a whole lot, like that's not the big part of it, man. So, but that, but, but I think what was valuable is the thinking of it, right? How do you think about it? And hopefully there's some benefit to thinking about it where you'll say, Hmm, and you'll come up with ideas as a listener. So that's awesome. So, okay. Final question. What's, what do you got final question? What's the first step somebody should take it to, to increase their, the way that they think about these AI stocks? Well, there's a number of first steps. Uh, you know, mentors is a good step talking to people and getting to know people that know more about it than, than, you know, that I do, or you do, you know, the, the, no listener does, um, always, uh, stockcastbonus.com. Pick up your free stuff, start learning, get with us a great first step. If someone just wanted to watch this picture and imagine this, um, what if you could just go to like Kenny McElroy's office and you weren't allowed to say anything to him, but you could just sit and watch what he does all day and see who he calls and who he meets with and what deals come across his decks and which one he says no. And which one he says, yes. You know, this brochure is too thick. It's this crappy deal. This one's clean, you know, financials. This is good. You know, wouldn't it be cool just to watch a guy that's got, you know, a couple of billion dollars in real estate under his belt, uh, or someone like Dan or someone like Buffett, right? So one of the great first step, if you want to really watch how this dones, we, we have an immersion program. It's not a class. It's an immersion. It's like, if you want to speak Japanese, fly to Tokyo and move in and just hang out with the people that speak Japanese and you know, you'll be speaking Japanese, I really think so. Right. Uh, and so we have this mentor club. It's inexpensive. Uh, it doesn't cost a lot and you can watch once a week. We, we do a trading session. We record it and we put it out. So it's like watching the screen of a guy that's done this more than like, like in thousands and thousands and thousands of times he's done it. It's not new. So a new guy gets the water gal gets to watch a guy who's done it a thousand million times, and that's a killer foot. First step to start is just start watching what it looks like to find these assets, make the decisions, hedge them, you know, exit strategy, them, you know, risk manage them. Um, so any of those things, you know, get a mentor, go to stockcasts, bonus.com, start learning, getting a mentor club, uh, all of these things, uh, you know, but do, but, but I'll tell you the step that not to take is to do nothing and to go look at, Oh, let's go get some more content. You know, let's upgrade our content from scrolling, you know, five second tech talks and let's, let's get relationships. Let's get people that we can ask questions to let's get feedback. Uh, you know, let's get serious. So those are from, so any number of those first steps would be great ones for whatever, uh, whatever you're inclined to do, but the worst thing a person can do is nothing that would be a horrible. Uh, first step is a no step. I couldn't agree more. Thank you, Andy. Listener artificial intelligence may reshape the global economy, but it's smart investing still comes down to fundamentals, discipline and education. And again, big, thank you to Andy Tanner for helping us separate opportunity from hype. If you want to become a smarter investor and learn how to evaluate opportunities like AI, the right way, go to stockcastbonus.com right now. You'll find free tools and resources designed to help you to build real investing confidence. And if you've got value from today's episode, make sure you like it. Subscribe, share it with someone who's trying to figure out AI for themselves. You're not here by accident. You're building something that most people won't. So stay smart, stay invested and we'll see you next time. Thanks. This podcast is a presentation of rich dad media network.