The co-founder of Stocktwits dumped chip stocks before their 20% slide. Where he's putting his money now.

By Barbara Kollmeyer

Howard Lindzon is treading carefully with AI investments and betting on 'degenerates'

Robinhood and Cboe are part of a "degenerate economy" that's winning right now, says Stocktwits co-founder Howard Lindzon.

Roughly a month ago, Stocktwits CEO and co-founder Howard Lindzon raised a red flag on his blog about chip stocks, selling down more than half of his semiconductor-index exposure.

That proved savvy as the PHLX Semiconductor Index SOX went on to slide around 20%, meeting the definition of a bear market. Lindzon based his warning on 100% or more one-year gains in some chip stocks, concentration risk, and "leverage and degeneracy" both by investors chasing a trend and companies trying to win the artificial-intelligence race.

Lindzon, also a partner at venture-capital investor Social Leverage, noted at the time a crescendo in the chatter about AI chips, he told MarketWatch in an interview on Monday. "Everybody's starting to talk like they're experts in this space, and I think we just had a peak moment. But I'm not bearish."

"I don't think we were so much in a bubble as we were just in some kind of mania," he said.

Lindzon said he'd probably buy back in after the chip selloff and is also watching biotech and healthcare companies that could benefit from AI and the chip boom - he sees some genomic companies breaking out. He also thinks some software stocks may be worth a look, he said.

Lindzon believes most investors belong in index funds, about 90% of what he does, he said. But his approach is direct indexing - he uses Frec.com, one of Social Leverage's "big investments" - so he can tailor an index like the S&P 500 to his preferences.

He used direct indexing to edge SpaceX (SPCX) out of his investments, an initial public offering that he referred to as "silly and grifty" and full of hype that saw Elon Musk naming the price shares would list at. The company has lost more than $1 trillion in stock-market valuation since its post-IPO peak.

Lindzon believes investors need to approach the AI space with caution, he said, even if the technology looks enduring.

With a knack for picking winners, Lindzon had been invested in the chip space for five or six years, he said. He bought Apple after walking into an Apple Store when it opened in the early 2000s in his Phoenix suburb and being blown away by the iPod. Apple (AAPL) and Google parent Alphabet (GOOGL) remain his AI plays, along with chips, selectively.

"They have the Android and the iPhone, and that's kind of how you're going to use AI for now," he said.

He was a pre-investor in Robinhood (HOOD) when it had a valuation of $8 million, and it's now an $89 billion company. "When I got pitched Robinhood, [what] was obvious to me in 2013 [was] that if you build it, [investors] will come," he said.

The trading platform is on his the Degenerate Economy Index, which he created in 2023 to track companies involved in "the next phase of investors, ownership, gambling, living life with a wallet on/in your phone" that has merged with education and entertainment, notably among younger people.

The Degenerate Economy Index versus a thematic large-cap portfolio.

Anything that powers that is included, such as Amazon (AMZN) and bitcoin (BTCUSD), plus Google and Apple, whose phones offer the "on-ramp" to betting on options and cryptocurrencies. The index is up 178% since inception.

"The kids are playing because it's easy access from their iPhone. They think they have an edge, and they also want to make 10 [or] 20 times their money because they can't afford a house," he said.

"You won't see Coke or Disney or Nike in my degenerate economy, but you see all the exchanges," he said. Those include Cboe Global Markets (CBOE), CME (CME) and Hyperliquid Strategies (PURR), a digital-asset treasury company offering indirect exposure to HYPE tokens, the cryptocurrency of the Hyperliquid blockchain protocol.

"America's greatest export is the capital markets, right?" said Lindzon. "Disneyland is tiny compared with the U.S. capital markets, and that goes into the degenerate economy."

The markets

U.S. stocks SPX DJIA COMP have opened higher, led by tech. Gold (GC00) and silver (SI00) are climbing.

 
Key asset performance                                                Last       5d      1m      YTD     1y 
S&P 500                                                              7443.28    -0.96%  -0.39%  8.73%   18.04% 
Nasdaq Composite                                                     25,508.07  -1.41%  -2.52%  9.75%   21.62% 
10-year Treasury                                                     4.6        0.80    9.80    42.80   25.00 
Gold                                                                 4072.2     0.34%   -1.38%  -6.00%  18.24% 
Oil                                                                  83.17      4.18%   13.85%  44.87%  27.07% 
Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

The Trump administration threatened to impose 50% tariffs on some goods from Canada.

D.R. Horton (DHI) posted better-than-forecast results, but shares aren't doing much. General Motors (GM) snapped a four-quarter run of revenue declines and lifted its outlook, boosting shares. 3M (MMM) stock is climbing after an earnings beat.

Adobe (ADBE) stock is dropping after a downgrade by Morgan Stanley, which also axed its price target to $240 per share from $365 on AI worries.

Novo Nordisk (NVO) said it's suing Eli Lilly (LLY), its arch rival, over ads comparing the weight-loss drugs both companies make.

JPMorgan CEO Jamie Dimon is not a fan of U.S. Treasurys.

Oil (CL.1) (BRN00) is down as mediators keep working toward another ceasefire, after the U.S. and Iran exchanged strikes for a 10th straight day.

Spain celebrates both a soccer win and a sense of wider success.

The chart

With S&P 500 futures on the rise early Tuesday, the index may be able to retake its key 50-day moving average, viewed as an important technical level. The index finished Monday's session below its 50-day moving average, the second session in a row for that occurrence.

Top tickers

These were the most searched ticker symbols on MarketWatch as of 6 a.m.:

 
Ticker  Security name 
SPCX    SpaceX 
MU      Micron 
NVDA    Nvidia 
TSLA    Tesla 
AMC     AMC Entertainment 
AMD     Advanced Micro Devices 
AAPL    Apple 
MSFT    Microsoft 
SNDK    Sandisk 
GME     GameStop 

-Barbara Kollmeyer

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(END) Dow Jones Newswires

07-21-26 0950ET