What a week!
Microsoft (MSFT) and Amazon (AMZN) dropped beautiful earnings reports. Kevin Warsh delivered a short and sweet FOMC statement. And hedge fund Situational Awareness choke on leveraged AI stock bets before a rescue by Ken Griffin's Citadel.
Now let's drill down for the most interesting things happening in markets now.
We go over what's been an awesome earnings season, a candidate for the next AI chip King, and 2 semiconductor stocks that appear to on the edge of greatness... or failure
Earnings Season Has Been Awesome
27% of S&P 500 companies have reported, according to FactSet.
And the numbers are pretty dang amazing.
86% of companies reported positive EPS surprises. And 80% beat revenue forecasts.
The strongest numbers are coming from the financials, tech, and energy. And utilities are lagging.
Q2 EPS growth is tracking at 37.9%, the highest growth rate since Q3 2021, which had the benefit of an easy year-over-year comp from the pandemic:
That 37.9% number was boosted by a $98 billion one-time gain by
Alphabet (GOOGL). Excluding that, earnings growth is still tracking at 25.9%, which is still spectactular.
Plus that 25.9% was calculated before this week's beats by Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Seagate (STX), Lam Research (LRCX) and Monolithic Power (MPWR).
And odds are we'll see positive earnings surprises from Palantir (PLTR), AMD (AMD), SanDisk (SNDK), and Western
Digital (WDC) next week.
Interestingly, the data shows that the market is not reacting well to reports. This goes for companies that beat AND companies that miss.
So Microsoft and Amazon's booms this week were exceptions to the rule!
We May Have a New AI Semiconductor King
I've heard of the company Monolithic Power (MPWR), but never paid any attention to it.
Until I saw its earnings report on Thursday, July 30.
MPWR reported $980.6 million in sales, 9% above consensus. EPS was 11% above estimates.
And revenue guidance for next quarter was 17% above expectations, which reminds me of SanDisk since it came public again last year, and Nvidia in 2023.
Look at how fast analyst estimates are rising:
Again, just like prior boom periods for SanDisk and Nvidia.
And what does Monolithic Power do?
It designs and develops power management solutions that go into everything from AI GPUs and TPUs to batteries to robots.
And it's seeing booming demand for AI data center and server applications.
With a $72 billion market cap, this isn't exactly a top-secret micro cap, but there's surprisingly little discussion about it.
So put Monolithic Power stock on the radar.
It could be the next SanDisk, and it's at the top of my personal watchlist.
Related: check out JR Romero's Greatest Hits: SanDisk Edition.
The Nvidia Value Trap Debate Continues
Last week, I suggested Nvidia might be a value trap at 21X forward earnings.
Well, now it's trading at 20X forward earnings, even with Microsoft (MSFT) and Amazon (AMZN) showing huge cloud and AI growth.
This is Nvidia's cheapest valuation in decades.
The problem remains the same.
Nvidia is so well-known that it's hard to deliver a major positive surprise.
And major AI infrastructure tech buyers like Alphabet and Amazon have made major strides in developing chips in house. Which means more competition for Nvidia's high-priced GPUs.
Plus from a basic market mechanics perspective, attention and money has shifted to the memory/storage names, which are posting much bigger earnings beats and upside guidance.
Sure those stocks are more volatile, but that's where the momentum money goes when the market is in a good mood,
SK Hynix Is in for a Fight
Korean memory superpower SK Hynix (SKHY) made a huge splash when it listed in the US on Friday, July 10.
The $26.5 billion deal priced at $149 per share, and the stock hit $194.80 on July 14, its 3rd day of trading.
On July 29, it hit a low of $124.80 after an Earnings Miss.
It's since rebounded to $149+.
But now the fight begins.
2026's other two big IPOs have been messes.
SpaceX (SPCX), which also made a high on its third day of trading, is down over 60% from its peak.
(FYI: SpaceX delivers its first earnings report on Tuesday, August 4 after the close)
Cerebras Systems (CBRS) made itsarecord high on its May 14 IPO day, and has since dropped about 50%.
And aside from sagging sentiment towards these mega-issues, traders are concerned about Chinese memory giant CMXT disrupting the likes of SK Hynix, Micron, and Samsung.
Traders Are... Bearish?
The AAII Sentiment Survey shows that the topsy-turvey downside action in tech stocks may be impacting the mood.
Just 31% of surveyed investors are bullish, which is the second straight week of below-average bullishness.
So it looks like the crowd is leaning bearish.
The tricky thing with sentiment data is that it's lagging, and AAII tends to bounce around from week-to-week.
However, if we get another below-average reading next week, that could signify real negativity.
Meanwhile, CNN's Fear & Greed Index is at 38/100, signifying modest Fear.
