CRWVCoreWeave, Inc.BearishCoreWeave, Inc.AMZNAmazonBullishAmazonGOOGLAlphabetBullishAlphabetMSFTMicrosoftBullishMicrosoftIRENIREN LIMITEDBearishIREN LIMITEDNBISNebius Group N.V.BearishNebius Group N.V.

2w ago on

The @elonmusk reply that “200+ neoclouds are going to see guppy-level death and consolidation” (I agree) caused neo-clouds to get hit again this morning for 5-6%. Now $CRWV $NBIS $IREN all up 4-7%. This clearing event might mark at least a short-term bottom in the AI selloff. Short-term bottoms can never be known except in hindsight. But after a large decline already that has occurred over some time (this recent 19% decline in the SOX Index as a proxy for the AI names started back on 10/6 to 10/22), an event that is unambiguously negative like the post above, that initially leads to a large sell-off in the worst names in the sector (neo-clouds in my opinion) and that then reverses during the day is generally a good sign in my experience. To be clear, I do not like the neo-clouds longer-term though they they may bounce the hardest short-term given they were some of the most oversold. But this gives me more conviction that this is a potentially good time to put capital to work in the best positioned companies such as in the hyper-scalers, semis, power, construction, EPC, platforms etc. Obviously poor earnings results from one of the big hyperscalers $MSFT $GOOGL $AMZN later this week could derail this but there is a lot of negativity priced in already.

CRWVCoreWeave, Inc.NeutralCoreWeave, Inc.MSFTMicrosoftBullishMicrosoftAMZNAmazonNeutralAmazonGOOGLAlphabetNeutralAlphabetMETANeutral

2w ago on

Thoughts around AI 1) Given AI is the largest technology revolution in history at roughly 3.5% of GPD (larger than electrification, highways & internet combined); there is overinvestment due to the potential rewards for the eventual winners. 2) But much like during the Internet buildout, which had several large drawdowns including in 1997 (Asian currency crisis) and 1998 (Russian bond default), and then ripped higher, the question is whether this is THE TOP. 3) AI had 3 separate investment waves: training, inference and now Agentic a. Agentic demands 10-100x more tokens than inference and started with OpenClaw in January for the tech savvy followed by Muse in late September for the rest of us. 4) Currently, the market is repricing two things a. Financing costs are higher in both debt & equity mkts i. Debt- $CRWV unsecured debt trading at 15% ii. Equity- expected timing for AI related IPOs like OpenAI, Anthropic delayed earlier this year while filed IPOs of Firmus, AirTrunk, NScale, SB Energy delayed/ pulled iii. Meta 8K “timing is important to secure capital before competitors saturate various funding options… in an increasingly challenging environment for raising capital.” b. AI native growth rates slowing i. Anthropic revs 145% q/q in Q2 to 45% in Q3 ii. Openweight driving ASPs down ~50% since May 5) Datacenter moratoriums seem to be the only thing both parties agree on a. This could get worse after the mid-terms with a less AI-friendly political climate In summary, because of the advent of Agentic, I do not believe this is THE TOP. But having higher cash levels and being circumspect as the market reprices has been important. This has been my advice for the past several weeks. Unfortunately, my belief that it was time to start putting money to work for at least a short-term rally this past week due to oversold conditions in areas like semiconductors has been early so far. The SOX was down 3.2% last week vs the S&P down 0.5% but time will tell. $MSFT $AMZN $GOOGL earnings this upcoming wk 1) I think much like with $Meta earnings this past week where I previewed concerns, the stock reactions for the above three will have a lot more to do with their comments around future capex investments, expenses, cash flow and financing needs. 2) I worry whether a datacenter moratorium causes an issue with cloud growth guidance for the December quarter despite very strong growth in the September quarter. NextDC in Australia cut their rev guide by 22% for CY27 due to local community pushback and the stock was hit for 39% last week. Microsoft seems committed to being cash flow positive and I see them being an ultimate winner in enterprise AI. 1. They provide a safe environment to run Co-Pilot AI applications given almost all S&P companies run M365 already. Co-Pilot seats were 30M+ in the June quarter up from 20M+ in March and 15M in December. 2. One potential risk is their high margin PC business being impacted by the large declines being caused by surging memory prices. 3. Azure expectations vs their guidance of 45% y/y for September vs 43% in June have also picked up given the share gains being seen by OpenAI against Anthropic recently in enterprise. Google should see accelerating cloud growth & be an ultimate winner in consumer AI through their Android distribution on smartphones. My short-term concerns are the following: 1. Cash flow was negative for the first time since being a public company in the June quarter. 2. A slight miss in search revs in the June quarter raise concerns around AI Agents not looking at ads. 3. More aggressive analysts expect GCP growth of ~100% y/y for CQ3 y/y (but this includes TPU sales) up from 82% in CQ2 and 63% in Q1. This is more than double the growth rate expected for AWS and Azure so I worry that these datacenter moratoriums may on the margin impact the revenue growth possible at GCP. 4. Google needs to get out their consumer Agentic AI product. This should be a catalyst for their stock given it should integrate with the 14 Google products that have over 1B users each. Amazon should benefit from physical AI improving efficiency in their heavy asset e-commerce business. 1. I also think their e-commerce demand is solid as shown by them hiring more seasonal workers (+20% y/y) for the first time since 2023. 2. But as the biggest public cloud vendor and the one with the most capex, could they be too big to escape the data-center moratorium impact on their December quarter? As an example, Amazon last week abandoned its plans for a large 4 building datacenter in Loudoun County Virginia which has been dubbed "Data Center Alley." AWS grew 28% in Q1 an accelerated to 37% in Q2 with no formal guidance but hopes for a slight acceleration in Q3. 3. However, Amazon reports on Thursday so their AWS expectations will be reset by whatever results are from Microsoft Azure and Google GCP on Wednesday. Best of luck in the week ahead.

CRWVCoreWeave, Inc.NeutralCoreWeave, Inc.TSLATeslaBullishTeslaASMLNeutralDRAMRoundhill Memory ETFNeutralRoundhill Memory ETFEWYiShares MSCI South Korea ETFNeutraliShares MSCI South Korea ETFMUMicron TechnologyNeutralMicron TechnologySPCXSpaceXNeutralSpaceXTSMTSMCNeutralTSMCMETABearish

3w ago on

Last wk, $KBWB -1% despite low bank earnings expectations. AI was hit despite beat/raise from $ASML -8%, $TSM -9% due to AI financing concerns w/ AirTrunk IPO delayed, debt getting hit w/ $CRWV -25%, Anthropic rev growth slowing & valuation looking ~$1.5T vs $2T. Last Sunday I wrote that I was circumspect on the market. The KBWB (bank ETF) was sending a very different message than the S&P. “Any further sell-off despite trading at oversold levels last week would not be a great sign.” On Tuesday I posted on the KBWB getting hit despite these low expectations on mixed earnings results and therefore remaining circumspect. The Magnificent 7 eventually closed the week down 3.2% with the SOX Index (Semiconductors) down 11.4% driving the S&P down 1.9%. There was rising angst on the financing part of the AI trade later in the week. This was despite 5/10/30yr yields going down 15-17 bps last week despite hotter than expected CPI/PPI. After yields initially surged, this large drop was unexpected but this also coincided with the equity market sell-off from Wednesday through Friday. Massive external capital is needed to fund the AI infrastructure buildout. Therefore AI stocks got clobbered last week on questions around: 1) ability to raise AI public equity – Airtrunk IPO delayed till 2027 following the pulling of Firmus IPO last week 2) cost of AI debt increasing- CDS costs surging and face value of debt getting hit driving the yield to 15% for Coreweave debt 3) AI revenue growth slowing from ~145% q/q in Q2 to ~45% in Q3 for Anthropic 4) AI valuation now seen at closer to $1.5 trillion vs $2.0 trillion for some investors following Anthropic’s investor day 5) Gartner stating they expect greater than 80% of neoclouds to fold or face restructuring by 2030 6) Chinese DRAM company CXMT (-12% last week) ramping 4F technology before year-end being a threat to the current big 3 of $MU -15% last week, Samsung -18% and Hynix -24%. As for other important macro moves last week, US Oil was +10% last week with the US dollar down 37 cents but Gold declined 1% anyway. Thursday I posted the details around the historical precedent for a rally in the Korean Kospi Index over the following day and week given its extremely oversold levels. While the Kospi did rally on Friday +2.0%, the SOX Index was hit for 3.8% anyway and was down 11.4% for the week vs the Kospi -14.5%. While the Kospi, driven by the declines in memory stocks, is now down 40% from its 52 week high and is up 34% year-to-date, the SOX is down only 24% from its 52wh and is up 57% ytd. Looking forward, the first two of the Magnificent 7 report CQ3 earnings next week on Wednesday. For $META, while I see a beat and raise quarter, the stock is probably going to react to initial expense and capex guidance for 2027 coming in high, especially given the strong recent stock performance. The costs needed to support their hit Agentic product Muse and their recently released frontier LLM models, is likely to occur before their monetization. For $TSLA, the videos of their new “flying” Roadster were mind blowing. This is just a reminder why engineering god Elon gets mind blowing valuations for his companies. I also believe the Roadster is a physical example of why $SPCX (which also reports next week) buying Tesla makes sense. In summary, the recent correction made sense for reconciling some of the discrepancies between the bond market and equity markets. But I believe there is still a lot of infrastructure growth ahead to support the proliferation of personal Agents. As a result, I think it makes sense to invest some of the excess cash levels that I have been recommending. The SOX is now down 8 days in a row for a loss of 15.7% through Friday. The last time the index fell for 8 or more consecutive trading days ended on Friday October 10th 2008 for a loss of 19.8%, during the Global Financial Crisis. It then bounced for just one day the following Monday for 9.7% before continuing to much lower levels. The AI trade may be having some funding concerns today but it is not as bad as during the GFC. All the best in the week ahead.