AI Stocks, Interest Rates, and Market Trends with Michael Collins, #239
Will AI stocks like NVIDIA continue their meteoric rise, or are we heading toward a market correction? What do recent Federal Reserve decisions mean for your investments and mortgage rates? And is it time to reconsider small-cap stocks?
In this episode, I sit down with Michael Collins, CEO of WinCap Financial, to tackle the biggest financial trends of 2025. We discuss the future of AI-driven investing, the Federal Reserve’s impact on interest rates, and whether large-cap stocks will remain dominant. This episode is a must-listen!
You will want to hear this episode if you are interested in...
(0:00) Introducing Michael Collins: CEO of WinCap Financial and finance educator
(2:40) AI and NVIDIA: Will new competition shake up the market?
(5:50) The usefulness of AI for businesses
(7:24) How NVIDIA dominates the S&P 500 (and what that means for investors)
(9:36) Will the Fed lower interest rates?
(12:47) Will homebuyers see lower mortgage rates?
(20:18) The future of large-cap vs. small-cap investing
(24:52) Bitcoin, the Fed, and risky government investments
The AI Investing Boom: Is It Sustainable?
Artificial intelligence stocks have captured investor attention, but is the excitement justified? Michael Collins discusses NVIDIA’s meteoric rise and the challenges ahead, including competition from new AI developers. Recently, a Chinese company released an open-source AI that rattled the market, raising questions about NVIDIA’s long-term dominance.
Beyond competition, there’s also the issue of valuations. NVIDIA has been trading at over 25 times sales—an eye-popping figure that could mean a correction is inevitable. While AI-powered tools like ChatGPT and DeepSeek have gained traction, businesses are still struggling to quantify their financial impact. Will AI drive real economic growth, or is it just the latest speculative bubble?
Will the Federal Reserve Lower Interest Rates in 2025?
With inflation slowing but still a concern, the Federal Reserve is under pressure to adjust rates. Michael explains how recent rate decisions have impacted mortgage lending and the stock market. While investors were initially hopeful for aggressive rate cuts, the mortgage market hasn’t reacted as expected—rates remain stubbornly high despite the Fed’s moves.
One reason? The housing market itself is a key driver of inflation. With landlords knowing that mortgage rates are high, they’ve been able to raise rents, keeping inflation persistent. If the Fed cuts rates further, it could ease the cost of homeownership, but whether it will be enough to truly lower inflation remains uncertain. Investors should watch the Fed’s next moves closely to see how this plays out.
Large Cap vs. Small-Cap: Where Should You Invest?
For over a decade, large-cap stocks have dominated the market, leaving small-cap investors frustrated. Since the last financial crisis, large-cap stocks have returned nearly double what small-caps have. But could that trend be shifting?
Michael explains that small-cap stocks are now trading at a much lower price-to-earnings ratio than large caps, making them look more attractive. However, not all small-cap indexes are created equal. Some, like the S&P SmallCap 600, screen for profitability, while others, like the Russell 2000, include more speculative companies.
A potentially safer bet? Mid-cap stocks. Michael believes mid-cap may be the sweet spot in 2025, offering the growth potential of small-caps with the stability of larger companies. Investors looking to diversify may want to shift their focus accordingly.
Bitcoin and the Federal Reserve: A Risky Proposition?
A surprising proposal has been floating around—should the Federal Reserve hold Bitcoin as part of its reserves? While crypto enthusiasts might love the idea, Michael sees major risks. Bitcoin’s extreme volatility could make it a dangerous asset for a government already dealing with debt concerns.
There’s also a philosophical contradiction at play. Bitcoin was created as an alternative to government-controlled currencies, so having the Federal Reserve invest in it could undermine its very purpose. Plus, with Bitcoin’s price often driven by hype rather than fundamentals, any major downturn could put taxpayer money at risk.
For investors, Bitcoin remains a high-risk asset. While some may want to own a small percentage as a speculative investment, those nearing retirement should be cautious before making it a core part of their portfolio.
Resources Mentioned
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