Alex Micalizzi, who runs equity structured notes at Nomura, explains why structured notes have become a popular way to bet on the AI trade. This is his read of the current market mood.
…to odd lots. I have to admit, there are a few episodes I don't like totally get what you're talking about. And I'd be like, I don't really get what we're talking about either. But I, but I, but I, you know, I, I, I, we like to aim high. Yeah, we like to aim high on this podcast. That's right.
…is important because we're used to talking about markets as these sort of fundamentally driven things. Like, what's the bull case for AI? What's the bear case for AI? But there are all these technical flows that also have an impact on markets. And I think we're in one of those moments right now.
No, totally. So I think a couple of things. First of all, you know, we are in this moment where like, look, anything AI related has been up an extraordinary amount over the last few years. That's undisputable. And in fact, if you look at like expectations going over the next couple of years, all you see are various straight lines into the right. So revenues, capital expenditure, all of it, it all looks pretty good. But we are clearly in this moment of turbulence. If you just look at, say, certain aspects of the market, whether we're talking about some of the neoclouds, whether we're looking at credit default swaps, even credit default swaps on some of the really big companies are starting to inch up. I mean, I hadn't seen anyone post a chart of NVIDIA credit default swaps up until recently, but they're inching up just a little bit. There is clearly like, it's like the planes like rattling at high speeds here. And one of the ways that people have expressed bets on the AI trade is through structured notes, which, as you've mentioned, we've mentioned in various episodes, but I don't think we've really devoted an
episode to them.
Yeah. So this is one of the things when markets start to get kind of crazy, we tend to see more of these structured products sold. So, you know, people aren't satisfied with the 20% return in an AI name. They want to get 40% yields through a structured note on, I don't know, a Core Weave or…
And thank you so much for having me.