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This Is What Market Intervention Looks Like
It was many years ago, I can’t remember where (maybe in Market Wizards?), when I read that trading an equity position is like surfing: you feel the wave form underneath you, stand up on your board, and go along for the ride, shifting your balance to stay on long enough for the wave to carry you to shore. I was impelled to believe in the veracity of this mental image because it presented an idea of what trading was that naturally appealed to me: a skill that could be learned by doing. There was something so wholesome about the idea that markets are organic, bound by unseen natural forces; that they conform to natural rhythms to which we can attune our senses and predict their ebb and flow and thus, that they can be capitalized upon by simply being in tune with their rhythm. Back then, I believed that guys who pulled wealth out of the markets were the ones that were best able to feel the current of liquidity in the markets, put on a position, and just ride the currents of capital flows in a primal, visceral way, stripped down from all intellectual embellishment. When I finally made it to a trading desk in 2013, I was sitting next to the guys who “surfed” the market. They got rich by reacting to their natural instincts, formed over many years of operating in markets. But something changed that summer. That was the beginning of the QE era, where the natural forces of markets were overwhelmed by the dictate of central planners. Everything about the nature of markets started to change that summer. That is when almost all trading converted over to algorithmic trading. Instead of riding the waves of capital on the open ocean, if you wanted to survive, you had to abandon your instinct to feel the wave form underneath you, to be in tune with the tides. Instead, trading became a game of waiting for the signal from central planners that liquidity was on the way. Like a wave pool at a water amusement park, we had to just get in and wait for them to turn on the wave machine. Our waves became man made, precisely controlled, and merely imitations of the powerful forces of nature. Even the seasoned pros on the desk were struggling to adapt to the new environment. We had to find new tools to help us regain a sense of balance. It was the on the trading desk where I first learned the value of Twitter as a trading tool. Each of us had one of our six monitors dedicated to our lead trader’s Tweet Deck feed. He had a curated feed of the most important accounts on Twitter. Over time, as we were forced to adapt to the new market environment, we learned which accounts were the most valuable for their ability to cut through the noise and draw our attention to the signal. The lead trader’s favorite account back then was RedDogT3, Scott Redler’s Twitter handle – on my honor, a true story. Red Dog was one of the first guys to flag a signal, a sort of poker tell the market would show before it succumbed to the algorithmic robots, bent to the will of the central planners, and began the grind higher for the day. Back then the signal was AAPL. Every day, no matter how bearish the set up was, no matter how weak the entire market was, if AAPL went green, as Red Dog would point out, we knew it was time to cover shorts and scramble to get long something. After I left the trading desk, I ran an equity portfolio for a small RIA shop, and Twitter was still a useful tool if you knew who to follow for the signal. There was an account called BamaBroker that got popular because he was one of the only guys to pinpoint another signal that became the market’s tell during the Yellen Fed. He called it the “Bat Signal” and it was the early morning, pre-market, 8:00 AM yen smash. If he saw the USD/JPY flash green at 8:00 after a spike down move, he knew it was the central planners’ signal that market prices were being supported that day by systematic yen selling. Back then, policy makers wanted a weaker yen to induce more of the yen carry trade on a daily basis. The yen was much stronger back then as it took only 113 yen to buy $1 vs the 160 yen it requires now. Here’s a Bama tweet thread from Oct, 2017: And here is the USD/JPY on the morning Bama’s tweet describes: Below can be seen the correlation between the USD/JPY and the S&P futures back in October 2017. On days when the USD/JPY was bid up, the market was strong. When USD/JPY fell, the market couldn’t make upward progress. USD/JPY vs SPX in Oct 2017 (with yen intervention days annotated in green): Bama was an anonymous Twitter account until he got doxed one day. It turns out his dad ran a fancy RIA. Bama was rumored to be trading the ES in huge size and making clients good money, but his tweeting about it was a bad look for an old, blue blood, Southern gentry type of advisor. Bama’s account went dark and never returned. For many years I haven’t thought about the lessons I learned from his tweets. That is until this week. A couple weeks ago I wrote about Bessent’s intervention that squeezed me out of my SPY short. That was the first sign that bearish conditions would not be allowed to develop, and this past Wednesday, early in the pre-market, I saw the Bat Signal once again. USD/JPY this past Wed, Aug 19th: S&P 500 futures at the same time: This time, however, the Bat Signal is just the reverse of what it was in 2017 when Bama brought our attention to it. Now, the yen is
Continue Reading -->My Favorite Secret AI Stocks
What a week! Moderna (MRNA) announced a major cancer vaccine breakthrough. Rising Treasury yields have traders on edge, even with Treasury Secretary Scott Bessent cranking up buys of long-dated bonds. And Wal-Mart (WMT) announced disappointing sales. Now let’s dig into the most interesting stories in the market ahead of a very busy week for tech earnings and economics. Skip Ahead! Nvidia Needs a ShockJensen Huang’s Other Favorite Stock Is Reporting EarningsThese Banks Might Be the Best “Secret” AI StocksThe Great Biotech Short SqueezeTraders Are Still SkittishNext Week’s Calendar Is StackedThe Pristine Mentorship Is Open Nvidia Needs a ShockNvidia (NVDA) earnings are coming in hot on Wednesday, August 26.And it looks like we need a big monster beat and guidance to catapult the stock higher.The stock has sold off the day after earnings 4 straight times, and in 6 of the last 8 quarters. You can see this on the right-most column here:The culprit is shrinking revenue beats.Yes, the company is growing fast but gone are the days of giant revenue beats, which is the heart soul of momentum stocks.Nvidia always reports strong numbers, but they it’s been years since they’ve shocked the market with blockbuster sales and guidance.Will that change next week?With the way hyperscalers like Meta (META) and Alphabet (GOOGL)are spending money, anything is possible.But for now the bears seem to have the post-earnings advantage. Speaking of earnings…Jensen Huang’s Other Favorite Stock Is Reporting EarningsI’ll go out on a limb and say Nvidia CEO Jensen Huang’s #1 stock is Nvidia. His second favorite appears to be Marvell Technology (MRVL), a stock I bought myself. One reason I jumped on Marvell was because Mr. Huang called it “the next trillion dollar company” back in June. Marvell reports after the close Thursday. The company has its fingers in multiple AI data center applications, so we’ll get even more insights on AI infrastructure spending trends. Traders will also be eager for more details on Marvell’s monster chip deal with Google. To make a long story short, Google’s gonna spend a ton of money on Marvell chips. And in return, Google gets the right to buy up to 58,970,907 Marvell shares at $206.58. The more Google spends, the more Marvell shares it can buy. That’s great for Marvell shareholders because Google has a financial incentive in keeping Marvell’s stock price as high as possible. Jensen Huang gave me a reason to buy. Google gave me a new reason to stick with it. But with Marvell’s stock 44% off the June 29 lows, it’s hard to argue that expectations are anything but high:And on Friday, we saw an interesting piece of news from Marvell competitor Broadcom (AVGO), which makes me think…These Banks Might Be the Best “Secret” AI StocksBloomberg reported that Broadcom is looking to raise more than $60 billion in its newest AI debt financing deal.2026 has seen a wave of capital raises from the likes of Amazon (AMZN), Alphabet (GOOGL), Nebius (NBIS), CoreWeave (CRWV), Iren (IREN), Terawulf (WULF), and so on. And that money is going straight into AI infrastructure. Plus, it’s a major IPO year with SpaceX (SPCX), Cerebras Systems (CBRS), SK Hynix (SKHY), and eventually Anthropic, OpenAI, Databricks, and Stripe. And the M&A market has been quite strong thanks to megadeals like the Paramount/Warner Bros combination. This means lots of deal fees for investment banks like Morgan Stanley (MS) and Goldman Sachs (GS), regardless of which actual AI companies end up dominating. And as long as AI doesn’t put the bankers out of business (it won’t), Wall Street will print money from AI-related dealmaking. So they are next on my buy list.The Great Biotech Short SqueezeThe State Street SPDR S&P Biotech ETF (XBI) is up over 36% in 2026, putting it at #3 on our ETF leaderboard:Biotech got a turbo boost this week when Moderna (MRNA) announced successful trial results for an mRNA vaccine for melanoma. But what many people are missing about the biotech boom is the impact of short squeezes. The XBI ETF itself has short interest of 116%, because ETF shares can apparently be borrowed and shorted multiple times. And the average stock in the XBI ETF has short interest of 14.3%. For comparison, the average short interest of a stock in the VanEck Semiconductor ETF (SMH) is just 4.0%.Traders Are Still SkittishThe latest AAII Sentiment Survey shows that 35.5% of investors are bullish.This is the 5th straight week of below-average bullishness, which I chalk up to stubborn inflation (I mean the real inflation we feel, not government numbers) and other economic concerns. So even with equities near record highs, the crowd is unwilling to say “I love this and we’re going higher.” On balance, this is positive because it implies a lack of euphoria. Meanwhile, the CNN Fear & Greed Index, is at 57, indicating modest Greed.So sentiment remains neutral overall. There just aren’t strong feeling on either side.Next Week’s Calendar Is StackedAside from Nvidia and Marvell’s earnings, we have a lot going on next week. In economics, we have CB Consumer Confidence, Core PCE Price Index, GDP, and Durable Goods. And of course there’s a chance Fed Chair Kevin Warsh makes a market-moving announcement at Jackson Hole on Friday. And on the earnings side, we’ll be watching CrowdStrike (CRWD), Salesforce (CRM), AutoDesk (ADS), and Workday (WDAY), which will give us key insights on software demand amid concerns about encroachments from AI. Here’s the full calendar:The Pristine Mentorship Is Open Sami Abusaad and James Rich Young’s Pristine Mentorship is open! In this video, they take you through how to build a trading plan, then tell you all about the program. Highly recommended:
Continue Reading -->Your Unique Talent Is Your Greatest Asset in Trading
“Money grows when it’s allocated deliberately, not constantly.” – Jessie Livermore Professional speculation, at its core, is a game of questions and deductions: questions are posed, deductions are made, and bets are placed. We know we’ve deduced correctly when a profit is shown and wrongly when a loss occurs. It’s always been the difficult questions that lack apparent answers that have interested me. In the act of deductive reasoning to answer difficult questions is where the profitable opportunities lie. Life outside the stock market has the same quality: it’s in searching for answers to the existential questions that are difficult to answer where the most opportunities lie. The most difficult question I’ve ever had to think about came from a friend some years ago. Over lunch he asked me a seemingly simple question, but I fumbled for an adequate response: “what is your talent?” That question sent my neurons jumping across synapses in all directions inside my brain, but none were able to come back on a return path with the correct information to articulate a clear response. I ended up blurting out something rather incoherent about being “able to interpret reality properly.” The cynical look on his face betrayed his genuine incredulity that my response had been formed with any modicum of introspection. That question was posed to me over seven years ago, but now I have a veracious reply: it’s patience. My talent is that I’m able to exercise extreme patience after I’ve deduced that an outcome is certain. Scrolling through thousands of charts a week, I’ve deduced several certain outcomes are now developing. Below are three charts of prices that want to move higher: the TNX, the USD/JPY, and the AW futures contract. TNX, (10yr yield): USD/JPY, (the quote of this contract is inverse of the convention so the price is actually yen per dollar; the higher this price is, the weaker the yen): /AW (Bloomberg Commodity Index Futures): The difficult question the speculator must ask is: “will these prices be allowed to move higher?” In the case of the dollar/yen and the 10yr yield, it’s obvious after last week’s intervention that the answer is a hard NO. That leaves only commodities as the most fertile ground for the speculator to toil in. Commodities are the only asset that policy makers cannot influence indefinitely because they are tethered to the physical world, whereas fiat and bonds are purely abstractions. While the appeal of commodities is probably obvious to most market participants by now, their risk is perhaps less frequently discussed. I’ve learned that professional speculation requires one to think risk first. If one produces enough well-reasoned trade ideas, managing the loss on the incorrect ideas will ensure a steady profit, given enough repeatable trials. Speculating in commodity stocks requires an extra degree of focus on risk because of the commodity producers’ pronounced boom/bust cycle and tendency to trade with valuations inversely correlated to the cycle. This means that buying commodity producer stocks is not as easy as buying a growth stock and holding. Commodity stocks have to be bought deliberately and sold intentionally. Theoretically, they should be bought when their trailing twelve month PE is highest or even negative, because that will be an indication that they are being bought at the bottom of the cycle after economic weakness reduces their earnings to almost nothing. They should be sold when their earnings are accelerating after a period of increase. Ostensively we can look at the gold miners as a recent example of how commodity producers should be bought and sold. In 2023, NEM had lost $2B but traded at about a $40B market cap. The sky-high PE was due to many years of depressed earnings with a gold price that refused to move above its cost of production. This was the time to buy. In 2025, NEM made $11B in pretax earnings, and traded at a very cheap 10x PE. That was the time to sell. I had the trade of a lifetime in gold miners from 2023 to March of 2026, and while I’ve still got a chunk of my original position in the big 5 miners, I’m in no rush to build back my position. If metals and mining stocks aren’t yet in the right buy point of the cycle, why is the Bloomberg Commodity Index drawing my attention? Here’s the question the astute speculator must now ask: “with the business cycle clearly entering the contraction phase, why is the Bloomberg Commodity Index trying to break higher?” The answer to that question is that the largest components of the index are energy and agriculture. We all know the reasons crude started it’s ramp this spring. Normally, after a move up on conflict escalation fears I would be inclined to dump my energy stocks like XOM and CVX and my agriculture stocks like NTR, but not this time. In fact, I’m waiting with patience for the right spot to add. I’ve also written about my inclination to bid on pipeline stocks recently. I’ve studied food and energy price spikes extensively this year, and there is one thing in common that all food and energy price spike periods share that the astute speculator can key in on: a long period of supply drawdowns followed by a sudden supply crunch. In 1971, Nixon introduced price controls on domestic oil, which caused a supply drawdown as it was unprofitable to increase production. The real oil price spike didn’t occur until 1974 when Arab oil was under embargo. This is the pattern: sustained supply draw down for a couple years, then sudden supply crunch, followed by a price spike. The pattern also plays out in food price spikes. While the pattern is similar, the motivations and human nature are more readily observed with the grain price spikes of the past. In 1988 there was an extreme grain price spike, and it fits the template: a sustained period of supply draw down starting in 1985 when agricultural legislation was passed
Continue Reading -->This Micron Chart Is Insane
What a week! Our hero SanDisk (SNDK) delighted investors with its Investor Day, earnings season kept on cruising along, and the CPI/PPI reports helped quell fears over inflation. So let’s dig into the 5 things you need to know about markets right now. Use the table of contents to skip ahead: Skip Ahead! It Was a BAD Week for Michael Burry and AI ShortsThis Micron Chart Is InsaneEarnings Season Has Been Amazing4 Reasons SanDisk Is KINGTraders Are a Little Bearish It Was a BAD Week for Michael Burry and AI ShortsMichael Burry of “The Big Short” fame made headlines this week. Among other moves, he increased his Micron (MU) short and put on a big QQQ put options position. The problem is that AI shorts are getting crushed. First, SanDisk’s (SNDK) Investor Day was very well-received, pushing up other AI stocks like Micron in sympathy. Second, did you see the monster post-earnings moves in Nebius (NBIS), CoreWeave (CRWV), and Lumentum Holdings (LITE) this week? They are the three most heavily shorted stocks in the Nasdaq 100.And they are among the top-10 performers in the index this month. Plus the QQQs have been grinding up, which eats away the value of put positions. So let’s talk about what makes shorting a stock like Micron so tricky.This Micron Chart Is InsaneHistorically, memory and storage have been highly cyclical. But thanks to the AI boom, demand is outstripping supply like never before. Micron can’t even meet half of customer demand, based on comments from a KeyBanc conference. Customers are insensitive to memory prices, and some are signing deals out to 2030. This supports the “this time it’s structural, not cyclical” argument. And if we look at historical earnings for Micron, you can see how things have changed.In the last two cyclical earnings peaks, Micron earned: -$2.59 per share in Q3 2022-$3.53 per share in Q4 2018 But in Q3 of 2026 the company earned $25.11 per share. By shorting Micron, you are saying this is the peak. But look at that chart again. If Micron can earn $25 a share in a quarter, how can you count out $50? Or $100? And the memory/storage boom is just one reason…Earnings Season Has Been AmazingQ2 earnings season has been absurdly strong, according to FactSet data. Q2 revenue growth is tracking at 15.0%. Back on June 30, analysts expected just 12.2% growth.This is the highest since Q4 2021, when the economy was rebounding from the Pandemic lows. The tech sector has been a major contributor with 35.9% growth thanks to huge numbers from AI-driven names like the aforementioned Micron and SanDisk. We can always say the most obvious thing in the world: “It can’t get much better than this.” But even 3 years ago, people were saying the AI bubble was going to pop. And AI spending just keeps going through the roof as companies trip over themselves to buy servers, GPUs, memory, and other hardware. Speaking of SanDisk…4 Reasons SanDisk Is KINGSanDisk’s Thursday Investor Day was going well. And then the company said it would return 100% Excess Cash to Shareholders. Then things started going REALLY well. The stock took off like a rocket:That was great for my 1,000 shares of SanDisk! Oh, excuse me. That was a typo. I own 1 share of SanDisk. (as in ONE) But the bull case here is obvious:Solid revenue growth back by long-term customer agreementsDirt-cheap valuationSuper-high margins and cash flowThe company will buy back tons of stock in the years to comeOf course, it’s hard to chase a stock that’s up 587% year-to-date. (my entry was $1,587 so I’m not pretending I caught it early) BTW, you can get David Prince’s takes on SanDisk and the AI landscape here:Traders Are a Little BearishThe AAII Sentiment Survey shows that investor sentiment is just all over the place week to week. 34.7% of investors are bullish, which is slightly below the long-term average of 37.5%.Technically, this is the fourth straight week of below-average bullishness, despite a string of all-time highs. I take this as positive, because it implies there is still a lot of doubt facing this market. Meanwhile, CNN’s Fear & Greed Index is at 65/100, signifying modest Greed: See you next week kids!
Continue Reading -->Treasury Secretary’s Memo to Market Bears: Drop Dead.
The short setup into the FOMC decision last week was one of the best I’ve ever seen: during an ominous time of the year where crashes occur, the stock market was being pushed closer to the edge by 10yr US Treasury bond rates rising in response to pressure on the Bank of Japan (BOJ) to hike rates and in response to pressure on the Japanese Ministry of Finance (MOF) to sell dollar assets to buy yen in order to stop yen weakness. I had been on the lookout for a rate hike by a foreign monetary authority that would cause the initial break in the market which could lead to a crash just like the 1987 and 1929 crashes, both of which had foreign bank rate hikes as the catalysts. The BOJ was the obvious candidate for a hike as their currency was in free fall, and their domestic population was clamoring for authorities to stop the pain. The MOF would normally intervene in the FX market by selling US Treasuries to buy yen, but that option was off the table as Scott Bessent can’t have rates in the US rise. I thought the BOJ would be forced to hike, which would pull money out of US assets and into Japan. I laid out my reasoning for a low risk short and was short the SPY from just above $740. Instead of a BOJ hike, what we got was a coordinated intervention between the US and Japan with Scott Bessent as the front man, complete with a full media appearance tour and planted photos of Bessent’s memo pad detailing his secret plan to buy yen for $5-$10B. Bessent’s move was a masterful stroke that averted a crisis in the stock market by offering Japan a reprieve without requiring them to either hike rates or sell Treasuries. The very public announcement that the US will not allow the yen to weaken further was enough to put the squeeze on shorts like me (fortunately, I followed my plan to cover and took a 2.5% loss). Bessent’s public statement in support of the yen is enough to take any notion of shorting this market off the table for now, but it also revealed the Achilles heel of the entire global financial system: the yen carry trade. We caught a glimpse of the importance of the yen carry exactly 2 years ago when the BOJ was forced to raise rates off the zero bound to 0.25%. On August 5, 2024 the SPX gapped down, and a full blown melt down was a real concern. The BOJ helped calm the panic by promising not to raise rates again any time soon. The panic level was high enough for Jamie Dimon to release an absurd statement that most of the yen carry trade had been unwound, and there was no reason to be concerned about a market melt down. Jamie is too smart to think that’s true so it’s obvious he was being compelled to sooth the highly leveraged speculative community and their brokers and to convince them to ease off the short yen covering and margin calls. The dire situation of a yen carry unwind was allowed to grow acute in August 2024, but Bessent was taking no chances this time around in 2026 and preemptively intervened before the stock market could weaken. In doing so, he revealed the lynch pin to the asset price bubble we now find ourselves in, and while he may have relieved the pressure building up to that point, neither he nor the BOJ did anything to alter the underlying dynamics of the situation. While Bessent may have altered the path we are taking, I don’t think he was able to change the ultimate destination at which we will eventually arrive: a significantly lower stock market. I think this short squeeze will buy enough time for Wall Street to get out two more big IPOs: OpenAI and Anthropic. One of the greats, Paul Tudor Jones, lays out his case for why those IPOs will likely signal the top in the market. I’m not as smart or as rich as PTJ, so I’ll just adopt his opinion until he changes it. I won’t have a chance at getting anywhere near as rich as PTJ if I dig my heels in on the short side. I’m still bearish, but I’ve got very little trading inventory left to sell and way too much cash if this is the start of a melt up into the IPOs. As bearish as I’ve grown the past month, I managed to resist the temptation to prematurely sell what few longs I’ve got until the time was right. FTK was an easy ride until the recent sell off from $27 to $22, but I reviewed my trade plan when the temptation to bail out of the trade seemed to be on the verge of overpowering my holding discipline. It was a gamble holding over earnings, but I figured the odds were on my side based on the monthly chart and the acceleration in business described on its last report. The bet paid off. DAC was another great win that I locked in this week. With these two trading positions moved out of inventory, I’ve only got a little bit of ATUSF, NTR, XOM, and CVX left in long inventory. I’ve still got a large chunk of the gold miners as long term position trades I put on in 2023. My trades in FTK and DAC are a reminder to myself that my process works. I have a strict set of criteria for putting on longs and sticking to that discipline has been profitable all year. I’ll only buy stocks when I get the setup I’m looking for, like FTK at $18, DAC at $100, MT at $34, ATUSF at $20, XOM at $120, or CVX at $156. If you look at those on a chart, you can see the tight price structure I am looking for. If
Continue Reading -->Nvidia: The Force Awakens
What a week! We had a light jobs report. SanDisk (SNDK) and Western Digital (WDC) hit me where it hurt (my account). And SpaceX delivered its first earnings report as a public company. So let’s jump into what you need to know right now, including the earnings season boom, Nvidia’s (NVDA) monster comeback… and even how Caterpillar (CAT) turned into an AI stock.Earnings Season Has Been Awesome. But Not for SanDisk.Q2 earning season has been ridiculously strong, according to FactSet data. 86% of reporting companies have beaten EPS estimates, the highest percentage since Q2 2021. And earnings are coming in a ridiculous 29.2% above expectations, the highest since at least 2008. Excluding Alphabet (GOOGL) and Amazon’s (AMZN) large one-time investment gains, earnings would still be 10.9% above estimates. Earnings growth is tracking at a whopping 32.0% excluding GOOGL and AMZN. Unfortunately, our biggest, brightest shining star SanDisk (SNDK) got taken to the woodshed. The flash memory maker delivered a strong report, but its guidance disappointed and the stock got smacked around. The same happened with Western Digital (WDC). Now SanDisk is almost 50% off its highs! But fun fact: SanDisk is still the #1 stock in the S&P 500 index this year: Get JR Romero’s latest take on SanDisk here.Meet the Guidance MonsterLast Friday, I said power management semiconductor stock Monolithic Power (MPWR) may be the new SanDisk. And I bought the stock on Monday. SanDisk and Western Digital’s (WDC) guidance disappointments took them out of a unique category of AI stock I call “Guidance Monsters.” These are the AI stocks that deliver revenue guidance so strong that even the biggest bulls can’t believe it. Monolithic Power is seeing wild demand from data center clients. And last week, its Q3 revenue guidance came in 17% above consensus. You have to think that the company plans to handily beat that guidance. See the lines going up and to the right? Those are consensus earnings estimates:This is exactly what you want to see with high-octane growth stocks. Note: I also own SanDisk and Western Digital, so I didn’t have a bang-up week on the AI front.The Nvidia Value Trap Debate Ends for NowI’ve been suggesting Nvidia might be a value trap based on its cheap valuation. That was dead wrong because the stock just woke up:This week, the stock got a nice boost when Elon Musk said SpaceX (SPCX) will exclusively buy Nvidia chips over AI chipmakers like AMD (AMD). I’ve been wondering myself where Nvidia could find its next big customer, and SpaceX may be just that. I have my doubts about how soon we’ll see fully operational data centers in space, but SpaceX’s capex spending is going through the roof. JP Morgan said “we now project capex of nearly $200B in both 2027 & 2028.” A decent chunk of that will flow through to Nvidia.It’s Gonna Be Another Busy Week for AIWhile most big companies have reported, multiple key AI/semiconductor names will report earnings next week, including: Tuesday: Lumentum Holdings (LITE), CoreWeave (CRWV), Super Micro (SMCI)Wednesday: Cisco (CSCO), Coherent (COHR), Cerebras Systems (CBRS)Thursday: Applied Materials (AMAT) So we’ll have even more inputs to help us deal with the ultimate question: Will the spending ever stop? Everyone from Alphabet (GOOGL) to Meta (META) to Amazon (AMZN) to SpaceX is throwing wild amounts of money at AI infrastructure projects. Heck, Caterpillar (CAT) raised guidance because of AI data center buildouts. So maybe we’ll add CAT to our list of AI stocks… Here’s the full calendar for next week:Traders Are… Confused?The AAII Sentiment Survey shows that investor sentiment is just all over the place week to week. 37.0% of investors are bullish, which is right in-line with the long-term average of 37.5%. This follows two straight weeks of bearish readings.This continues the trend of there being no real trend from week to week. Meanwhile, CNN’s Fear & Greed Index popped to 63/100, signifying modest Greed: Of course, if the market dips 2% next week, sentiment will swing back bearish in the blink of an eye. So it’s getting harder and harder to make sense of sentiment data, because there’s never any sustained string of positive or negative readings. Oh well… Have a great weekend!
Continue Reading -->Shorting a Vulnerable Market
One of the most profitable beliefs about the stock market that I’ve adopted is that there exists a distinction between the real world company and the common shares of that company. I like to think of these two, distinct entities as being tethered, sometimes loosely, and sometimes strongly together. At times when the tether between the company and its traded shares is too loose, the price of the shares can travel very far away from the actual value of the company. I think we are approaching a point in time when the tether between the shares and the company is stretched to the max on the upside. A snapback of price down to true value is quickly coming. One of the more prominent metrics that most traders will be familiar with is the Schiller PE which has only been higher than the current level of 40x for several months in the year 2000 before the .com crash. It would be improper speculation to simply take this as a reason by itself to be bearish on the market. Proper speculation requires one to dig deeper and to look for a reason why the market would be vulnerable now. I think that reason is that passive investing is about to see a big slowdown in inflows. As tech companies work AI into their workflows, they are seeing just how many employees they need to keep the same level of output. Big corporations have been, for months now, burning through compute tokens as they let their employees run unconstrained with AI to see how much they can produce. The employees that can produce the most output, document it, and present it to management get to keep their jobs. This has been going on since this Spring. As CFOs get back from the lazy days of summer, they will be planning their budgets for next year. The inflation that has caused all of us to figure out how to do the same with less is now biting corporations as well. The belt tightening always hits them last because they have so much money that they can resist the inflation for longer than individuals. It’s these employees that are getting let go that will cause a slowdown in inflows to passive ETFs in retirement accounts; no more job, no more contributions every paycheck. Mike Green has been publicly vocal for 6 years now that passive investing has an outsized influence on the price of the index as it plows money indiscriminately into the largest market cap companies. This is exactly why SpaceX needed to get a huge valuation on a tiny sliver of shares that are allowed to be traded and why the rules are being changed to allow these shares to be included in a large index like the S&P 500 far quicker than has customarily been allowed. Wall Street needs these shares to get inclusion so the price will be supported. We’ve gotten to the point in this cycle where professionals on Wall Street are gaming the system right out in the open for all to see. Signals like this indicate we are very close to the end of the up cycle in asset prices. Another cycle that seems to be coming to an end is the credit cycle. Michael Howell has been making the podcast rounds lately telling us that the 65 month credit cycle is due to peak imminently. I’ve attempted to read his book, Capital Wars, but it’s far too complex in it’s entirety for me to fully grasp. All I need to know is that when excess reserves in the banking system fall below a certain dollar amount at the end of the credit cycle, we get a liquidity crisis, and asset prices fall. We know we are nearing the end of the credit cycle because the first warnings that private credit was in trouble came when Tricolor defaulted. Private credit funds have been gating their products for months now. The combination of a slowing passive inflow and an ending credit cycle leave the market vulnerable. We saw the first hint of that this week with the FOMC decision to hold and the response in the market was a hard sell to the lows of the week. We’ve got expanding new 52 week lows as the market has been stuck in a range for 2.5 months. My bet is that this range resolves to the downside. I think the market is vulnerable, and I see a low risk opportunity to short in a good, low risk location, with the added benefit of a potential autumn crash whose signs I’ve been watching for several weeks now. Here’s my trade plan for shorting the SPY. I’ve left plenty of room for a logical stop for the usual coordinated market intervention by the Fed and BOJ that could spike the SPY up to $750. That gives about 2.5% of risk at current prices around $740, but the reward is two times that risk if the SPY can get down anywhere near the 200dma on a good sell move down. That’s my plan on the large portion of a short position, but I do want to see if this $760 is the real top, so I’d like to keep a small short on unless and until $757 is breached on the upside. That’s not a great risk to reward if my profit target is $700 so I’ll keep that portion of the position to maximum 1/3rd (in other words, only $33 of every $100 bet would have the higher $757 stop). There are more indications that this range could resolve to the downside like heavy volume on the last good sell move and weak volume on the subsequent rally to here. There are also increasingly more frequent volume increases on red days lately. All these elements combine to give me enough evidence to hypothesize that shares are moving to weak hands. The odd part about being short the market is that my
Continue Reading -->The Next AI Chip King?
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 failureEarnings Season Has Been Awesome27% 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 KingI’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 ContinuesLast 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 FightKorean 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.
Continue Reading -->24 AI Stocks Explained in Plain English
Updated July 29, 2026 using data from Koyfin. This is an educational overview, not a big list of stocks to buy right now. Always do your own research or talk to a financial advisor before buying anything. People talk about AI stocks all the time, and the media’s obsessed. So it’s easy to want to start buying these wild stocks, even if you don’t know what they actually do. That’s why we’re breaking down 24 key AI stocks in plain English. Take your time reading this. There’s a lot of ground to cover since the AI supply chain is absurdly complex. Building and running applications like ChatGPT, Claude, Gemini, and Grok takes a massive supply chain: chips, cloud computing, software, networking, cooling, and of course, electricity. That’s why everything from GPU makers to memory producers to nuclear power companies gets lumped into the “AI stocks” category. Below are 24 companies across that entire chain, grouped by what they actually do, explained without the jargon (or at least minimizing it). We’ve also included some helpful stats for each one like the current stock price, market cap, recent performance, distance from its 52-week high, the average Wall Street price target, and short interest. These numbers were last updated on July 29, 2026, so keep that in mind. 🧠 Part 1: The Chipmakers (the “brains” of AI) These companies make the physical processors that train and run AI models. Without them, there’s no AI boom. 1. Nvidia (NVDA) Nvidia is pretty much THE flagship AI name. This Mag 7 name makes the GPUs (graphics processing units) that have become the industry standard for training and running AI models like ChatGPT. Originally built to power graphics in high-powered gaming PCs, these chips turned out to be awesome at AI math. Nvidia is the single most important hardware company in the AI world right now, and most of the biggest AI buildouts run on its chips. 📊 Stock Price: $194.13 | Market Cap: $4.70T | 1-Mo performance: -0.4% | YTD Performance: +4.2% | Below 52-Wk High: -17.9% | Analyst Target: $302.83 (+56% implied return) | Short Interest: 1.3% 2. Advanced Micro Devices (AMD) AMD is Nvidia’s main rival in AI chips, just as it is in PC GPUs. AMD makes its own line of AI accelerators (called Instinct) and has landed major deals, including a huge multi-year agreement to supply GPUs to Meta (META). AMD isn’t likely to dethrone Nvidia anytime soon, but it gives big tech companies a second supplier so they’re not fully dependent on one vendor. 📊 Stock Price: $444.05 | Market Cap: $724.1B | 1-Mo performance: -17.7% | YTD Performance: +107.3% | Below 52-Wk High: -24.1% | Analyst Target: $575.49 (+30% implied return) | Short Interest: 2.6% 3. Broadcom (AVGO) Broadcom doesn’t sell off-the-shelf chips. It’s best known for making Google’s TPU processors, and also co-designs custom AI chips for other customers like Meta, and OpenAI. This lets those companies get chips tailor-made for their own AI workloads instead of using general-purpose GPUs. Broadcom’s AI chip and networking business has grown explosively, and management has talked about reaching $100 billion in annual AI-related revenue. 📊 Stock Price: $380.02 | Market Cap: $1.81T | 1-Mo performance: +2.0% | YTD Performance: +10.2% | Below 52-Wk High: -23.2% | Analyst Target: $527.00 (+39% implied return) | Short Interest: 1.5% 4. Taiwan Semiconductor Manufacturing Company (TSM) TSMC doesn’t design chips. It manufactures them for everyone else, including Nvidia, AMD, Apple, and Broadcom. If you own an AI chip, there’s a good chance TSMC physically made it. That makes TSMC one of the most important, and most geographically concentrated, companies in the entire AI supply chain, since nearly all of its advanced manufacturing happens in Taiwan. However, TSMC is looking to make inroads in the US. 📊 Stock Price: $385.75 | Market Cap: $1.79T | 1-Mo performance: -15.2% | YTD Performance: +27.5% | Below 52-Wk High: -19.5% | Analyst Target: N/A | Short Interest: N/A 5. ASML Holding (ASML) ASML makes the extraordinarily complex (and pricey!) machines that TSMC and other chipmakers need to actually print circuits onto silicon (called EUV lithography). Nobody else on Earth makes machines capable of this at scale, which gives ASML a near-monopoly on the equipment behind the most advanced chips. News reports indicate China is entering the same market, but is way behind ASML in terms of technology. 📊 Stock Price: $1,583.21 | Market Cap: $607.5B | 1-Mo performance: -15.8% | YTD Performance: +48.6% | Below 52-Wk High: -20.8% | Analyst Target: N/A | Short Interest: N/A 6. Micron Technology (MU) Micron makes memory chips (DRAM and, increasingly, high-bandwidth memory or “HBM”) that sit right next to AI processors and feed them data fast enough to keep up. Demand for its newest memory has been so strong that Micron has reportedly sold out its 2026 HBM supply through long-term contracts. Memory used to be thought of as a boring, cyclical business, like potatoes or soybeans. Now it’s a high-growth piece of the AI puzzle. And the debate is raging over whether AI has turned memory into a secular growth sector. 📊 Stock Price: $772.02 | Market Cap: $871.9B | 1-Mo performance: -32.6% | YTD Performance: +170.6% | Below 52-Wk High: -38.5% | Analyst Target: $1,507.38 (+95% implied return) | Short Interest: 2.8% 7. Marvell Technology (MRVL) Like Broadcom, Marvell designs custom AI chips for big cloud companies (its biggest customer is reportedly Amazon) and makes chips that help data move between AI processors. It’s grown fast and joined the S&P 500 in 2026, but it also trades at a very high valuation relative to its earnings, meaning investors are pricing in a lot of future growth. 📊 Stock Price: $171.02 | Market Cap: $149.8B | 1-Mo performance: -38.4% | YTD Performance: +101.5% | Below 52-Wk High: -48.2% | Analyst Target: $256.91 (+50% implied return) | Short Interest: 3.9% 💾 Part 2: The Storage Makers (where all this AI data actually lives) Training and running AI takes a ridiculous amount
Continue Reading -->The 2 Ugliest Charts in the World
What a week! Alphabet (GOOGL) failed on earnings and there’s no peace in the Middle East. So let’s go over: The 2 ugliest charts in the world Why it’s hard to be an AI hyperscaler right now Why Nvidia may be a value trap Where sentiment sits Let’s go. Ugliest Chart in the World #1 SpaceX (SPCX) was hot for 4 days. Now it’s been cut in half. We identified $150 as an obvious line in the sand. And SpaceX just cut through it like a knife through butter: And let’s give credit to Sami Abusaad! He got short at $154.89 and has been riding it down the whole way. So why is this stock getting dumped? Because the more the stock drops, the more attention is paid to the danger on the horizon (insider lockup expirations). That’s created a race to the exits. Meanwhile, Wall Street banks (many of whom earned paid big fat IPO underwriting fees from SpaceX) love the stock. According to Koyfin, the average analyst target price is $236.71: So they think SpaceX will double. Do you? Now let’s talk about its twin… Ugliest Chart in the World #2 This is Oracle (ORCL) over the past year. Oracle has a major problem. It’s a hyperscaler with potential credit problems. While other AI stocks like Microsoft has heaps of recurring revenue and free cash flow to reinvest in capital expenditures, Oracle does not. Just so you understand the difference in scale here, Microsoft generated almost $73 billion in free cash flow over the past 12 months. Oracle (ORCL) had NEGATIVE free cash flow of almost $24 billion. So it has to borrow tons of debt to power its AI dreams. Maybe too much. It’s Hard Out Here for a Hyperscaler The AI market remains split between “haves” and “have nots.” The AI hyperscalers are most certainly have-nots in 2026, given these performance numbers: Alphabet (GOOGL): +2.8% Amazon (AMZN): +2.3% Meta (META): -7.9% Microsoft (MSFT): -19% Oracle (ORCL): -36% Meanwhile, the VanEck Semiconductor ETF (SMH) is up a whopping 61%. This makes sense because the hyperscaler buildout is a wholesale transfer of cash flow to the likes of Nvidia (NVDA), AMD (AMD), ASML (ASML), Micron (MU), SanDisk (SNDK), etc. Think of it this way. Google sucks up money selling ads. Then that money goes straight to hardware and chips from the likes of Nvidia, AMD, Micron, Dell, etc. Which flows down to networking gear, semiconductor equipment, etc. At some point the trend reverses, but for now – hardware looks like easy money. Especially when we have Alphabet raising its capex forecast. And Meta, Microsoft, and Amazon might do the same when they report earnings this week. Is Nvidia a Value Trap? Many traders and investors are zeroing in on Nvidia’s (NVDA) valuation. The stock is now trading at 21x forward earnings, which looks cheap for the flagship AI chip name: But I wonder if Nvidia is a value trap. As in, it looks cheap but goes nowhere. I see Nvidia’s biggest challenge as a lack of sex appeal relative to other places within the AI landscape. Right now, the market is excited about the memory and storage names, because that’s where the biggest supply-demand imbalance is. On Thursday’s earnings call, Intel (INTC) CEO Lip-Bu Tan said “…memory has become the big supply constraint challenge.” Yes, Nvidia is most likely still supply-constrained. Just not at the level of a Micron (MU) or SanDisk (SNDK). But we’ll know for sure this coming week. If we see Meta, Microsoft, and Amazon signal higher capex spending and Nvidia does nothing, then maybe the thrill really is gone. We’ll see. In the meantime, I recommend watching this interview with Cerebras (CBRS) CEO Andrew Feldman, who shares some interesting points about the AI chip universe. He discusses why Nvidia’s CUDA platform may be losing its competitive moat, though you should obviously take that with a massive grain of salt: Investors Are Bearish… for Now The AAII Sentiment Survey shows that just 29.6% of investors are bullish. This is well below the 37.5% long-term average. And it’s a massive decline from last week’s 44.9% reading (above average bullishness). So are investors bearish? Kind of. These sentiment surveys have been topsy-turvy all year, so we never get any sustained bullishness or bearishness. That reduces the predictive power of these numbers, which wasn’t all that great to begin with (outside of real extremes). Meanwhile, the CNN Fear & Greed Index is at 41, which is slightly fearful. Add it up and it looks like investors are far from euphoric. But they’re not down in the dumps either.
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