Welcome to Market Overtime here on Schwab Network. I'm Diane King Hall. Every market day right here from the New York Stock Exchange, we discuss the biggest stock moves and macro storylines impacting every tick higher and lower. Chances are, if you're investing in the market, you probably have some ETF exposure. Today we're chatting with the CEO of a firm that's responsible for several significant funds with exposure to semiconductors, gold, and much more. It's our pleasure to welcome to the show Jan Van Eck, CEO of VanEck Funds. Congrats to your group celebrating its 70th anniversary, Jan. And now you all have more than $160 billion in assets under management. So, first just talk to me a little bit about what this milestone means to you all.
Well, it's just, listen, we try to look at the markets and go through market cycles. We all want to survive, right? And the world is changing so much. So we thought it was a good time to step back and just appreciate what we've done and look forward to the future.
Okay, speaking of the future, one of the themes that has consistently been at the forefront over the past going on three years now, it feels like, is AI. And that's obviously a theme that you all invest in. You all take a thematic approach. So tell us a little bit about the lens that you look at AI through.
Sure. Let me just take a minute and describe our firm's investment philosophy, Diane, which is we call it macro investing, which isn't very helpful, but what we say is putting your portfolio together: are you exposed to stocks? Are you exposed to bonds? Are you exposed to gold? That's like the most important question. You know, if you're investors with Mag 7, they've all done well, right? So you want to be in the right sectors of the market. So what do you look at to give yourself a perspective on what you should be invested in in today's market? And first of all, we like to take a long-term perspective, which sounds silly, but let me suggest to you four things that will matter when we're sitting here 10 years from now in 2035. So number one, the federal budget deficit by historical any historical perspective, it's never been as high in US history and we have full employment. So I would think all of the financial markets are really affected by how we're dealing with that problem. That's number one. Number two might be a little bit of a surprise, but India at its rate of economic growth is going to approach the size of Europe in 10 years when we're sitting here in 2035. So we say, okay, what are the takeaways from some kind of very likely scenario as that? Thirdly, we look at the changing economic weightings in the world. And one of our takeaways is that gold is really emerging or re-emerging as the world's leading currency. So that's number three. And the last point, and we don't have to talk about too much, but what happened this year with the stable coin bill is to me the third most important piece of bank deregulation in US history. So we had Alexander Hamilton set up the financial system. We had FDR save it, and now we are allowing technology companies to compete against banks. So all of our personal finances are all around our checking accounts, right? But now technology companies could use stable coins to do payments, even savings. So that's, we know in 2035 almost for sure that's going to be a bigger part, like apps are already a part of our life, but banks are going to continue to play a less of a role in people's financial lives.
So let me ask you that. Is that good or bad? Off of that, when you say that is kind of the third most momentous moment when you think of those kind of moments, this is not where I anticipate this going, but I have to follow up on that. Is that good or bad, or is that the wrong way to look at this? Again, the main question is what does it mean for people's portfolios? I would say probably that one, even though it matters a lot for those of us in the industry and will change winners and losers, I'm not sure it matters for people's portfolios. It's sort of like, listen, we expect companies to use the cheapest database, you know, just to drive their cost down, and they're going to use the lowest cost payment system, and if stable coins is part of that, that's what they're going to do. The one question I thought about asking you is, are we in an AI bubble? Because people keep asking that question, but I want to phrase it this way: not are we in a bubble, because there are those who argue yes we are, so if that's the premise, where are we in that?
Yeah, thanks for bringing us back to that. So technology is one of those things that really affects financial markets. I like to go back in history and say the largest non-financial sector in US history was actually the railroads, and that was because the railroad knitted the country together, created a consumer market, and the railroads as a percent of the stock market actually were higher than the AI companies today. People worry about the top 10 stocks being 40% of the S&P. It was higher back then. But let's look at what is this technology doing and what's the structure of it? Basically, if you tried to do a very simple model, demand for AI processing is growing so fast, it's like a rocket ship. It's growing 38 times in the last 12 months. So even Satya Nadella, the head of Microsoft, said, 'We can't project this. This is crazy. I can't even tell you what's going to happen next month.' Right? So that's craziness number one. And craziness number two is you've got Nvidia that says they're going to come out with a new computer every year and that's dropping costs by 90%. So you've got demand going like this and costs falling, and then better LLMs or better software is also driving costs down. So what does that all mean for my portfolio? It means that we know this is all driven because demand is insatiable. So I feel very comfortable that AI is at such a big weighting in the S&P. In fact, over the last couple of months, I've been saying could be even higher because the last point is they're generating more revenue with the same number or fewer number of people, right? Amazon laid off workers two weeks ago. That's an unbelievable profit machine, right? If you can keep growing revenue and cutting costs.
It that begets a philosophical question, but I'm going to bookmark that and potentially come back to that. Let me ask you this. So it does seem like demand is insatiable because, you know, most recently you had Nvidia CEO Jensen Huang saying that from Taiwan Semiconductor, they need basically more of the tools to keep up with the demand. When you think about that, what are the layers of, or let me ask this, what inning do you see us being in in this AI cycle? Is it about the infrastructure buildout and what are you watching for in terms of the choke points?
Yeah, I would say first of all, for the next two years, they're going to be completely busy and sold out of their chips. So we think if anything, the Nvidia earnings expectations that Wall Street has, and that's sometimes you have a perspective by sitting back a little bit, they're too low. So we think Nvidia and the semis are still very attractive because there's no way that they're not going to keep building these data centers. So that's number one. The number two thing in the kind of AI ecosystem that we'd like to point out is how unbelievably successful OpenAI has been as a single company. They are now getting 800 million monthly users, so they're way ahead of everyone else, way ahead. And then but they also don't have as much revenue as everyone else, right? So can they pay for it? But I guess our feeling is because they're so far ahead of everyone else, they will find a way to get that equipment paid for.
So let me ask you this. In one of your notes, you talk about the gateway to commerce risk as it relates to OpenAI and how it might dominate traffic or potentially lead to a bottleneck or act as a gatekeeper. How do you perceive that? Whether do you perceive that as a risk or as an opportunity or a little bit of both?
It's sort of like this historical macro voice in me. I can't get it out of my head. It's just the world is changing so fast. It's like literally for the last 30 years, all we've cared about is does your company website come up when someone does a Google search. That's really been e-commerce, right? The American consumer lives on Google. Now the American consumer is living on ChatGPT. It's totally changing. So what does that mean today? VanEck website, 20% of website traffic is coming directly from AI prompts. That's number one, and that's good, but that's looking to grow. And guess what? Of the AI chat volume that goes to Amazon.com, guess who has 90% market share? 90% OpenAI. It's all OpenAI, right? So like OpenAI, you would have thought three years ago, can anyone compete with Amazon for books and all the stuff we buy on Amazon? Now since all the traffic is going through OpenAI, OpenAI has partnered with two companies that can do the payments and have all the inventory: Walmart and Shopify. So now suddenly OpenAI with those two companies is competing against Amazon in their core business. It's inconceivable that that would have happened before.
Absolutely. And it makes me think of a conversation I heard the other day recently here at the exchange. It was a sidebar conversation, and you know how googling has become basically a verb, right? Just Google it. I heard a young woman say to her colleague, 'Just chat it.' And I was like, are we at that phase now where it's becoming a verb in terms of our lexicon? When you think about all the excitement around it, you talked about railroads giving the historical perspective and the percentage of dominance they had at the time. How do you monitor risk or the crowded nature of the AI trade, if you will?
Yeah. I mean, look, at the end of the day, you have to use traditional metrics like the PE, forward PE of Nvidia. So that's just very simplistically something I look at, and I'm just saying for a company that effectively has what I would call a hardware monopoly over this new technology. Okay, there are threats and there are other players, but basically they're the new mainframe provider of the AI era. I'm really just not worried about the competitive threats to Nvidia, and so 30 times forward earnings for a company that I think has a lot of demand for its products is not a crazy price.
Do you expect when you think into 2026, do you expect AI as a kind of thematic, and when you think about your ETFs or just overall, do you expect that to still be one of the main themes of thematic investing?
It's a great question. I've been asking myself that. I don't know. A lot of what we've been talking about in 2025 for investors is not just the semiconductors but also the subsidiary beneficiaries of the buildout. So nuclear power investments have done very well, like everything relating to data centers. Bitcoin miners that have pivoted to AI have been in the stratosphere, right? So I think a lot of that is overdone. Nvidia I'm okay with because they have a monopoly, but I think some of these subsidiary investments, even though we have ETFs in those areas, I'm a little oriented towards profit taking.
Okay. Okay. Given the run that we've seen so far, let's talk a little bit about another space where you all operate, and that's gold. We've seen some massive outperformance this year in gold. Last year in 2024, you saw gold and the S&P 500 essentially moving lockstep. This year gold has overtaken that. We're currently at record levels, but there's been a lot of excitement around gold. What's your view on it as a thematic investment currently?
I guess from the 10-year perspective, I really like gold. So we started pounding the table on Bitcoin and gold in 2023. Again, just some history on VanEck. My father started the first gold fund in 1968. And at that time, gold was pegged to the US dollar at $35 an ounce. So it was a pretty risky thing to say inflation is coming and this thing that's pegged is going to depeg. Of course it went from $35 an ounce to over $800 an ounce. So I guess what we see now is that the role of the US and the US financial system is becoming less important in the world, and so I really see this as a decade-long trend where people like India's economy, they don't want to be dollar-centric. China's economy, they don't want to be dollar-centric. So I just think people are looking for a second currency, and gold is serving that role.
Are you worried about de-dollarization? Is that why you see that as the trajectory for gold?
Yeah, I don't worry about it because I think it's natural, right? So I think it's not bad for the world economy or the US that gold has a higher role in our financial system. But yes, what I was describing we call de-dollarization, and I think it's going to last a lot longer. US investors are still not piling on board, which is what you'd normally expect.
Right. Yes. So you're paying more attention to central bank buying, correct?
Let me ask you this because you mentioned Bitcoin and you all pounding the table on both Bitcoin and gold, and there are those, the Bitcoin believers and crypto hippies as I'm told they're called. That's what they say, they call themselves. Even the button-up ones. Bitcoin has had quite a run recently, but it's pulled back. We're not sitting near the highs. They look at it as digital gold. Do you consider it less or the least risky of the crypto layers that we look at? And is it less or do you look at it similarly to gold? How do you evaluate Bitcoin?
I think they're very similar in terms of their role in people's portfolios. It's sort of a store of assets, and they both have limited supply. VanEck was actually the first ETF sponsor to file for a Bitcoin ETF in 2017, which was way before it was popular, when it was a $3,000 token. So maybe I'm a crypto hippie. But I think yes, we suggest that people own both to have that as a role in their portfolios because it helps during different market cycles. I would say the one negative thing I don't like about Bitcoin, having followed it for a long time, is it's become very highly correlated with the NASDAQ, and people don't need just another risk-on asset in their portfolio just for the sake of having it. In the long term pre-COVID, there was no correlation between Bitcoin and everything else. So it was a wonderful diversifier. So I'm just kind of hoping things go through cycles, Diane. I'm just hoping the cycle changes a little bit and that correlation comes down.
