Financial News vs. Noise
The biggest news item of the week IMHO kind of sucked with NVDA beating across the board, but not impressive enough. Interestingly, the market seems to be doing fine regardless and NVDA is currently way off the lows. It's way early, but you could imagine dip buyers coming in and turning this thing green.
Nvidia Can’t Escape Shadow of AI Spending Fears-WSJ
In their own recent earnings reports, Microsoft, Amazon AMZN -1.34%decrease; red down pointing triangle, Meta Platforms META -0.45%decrease; red down pointing triangle and Google’s parent, Alphabet GOOGL -1.11%decrease; red down pointing triangle, reported combined capital spending of $58.5 billion just for the June quarter—up 64% year over year. All four projected that spending would stay elevated this year and into next, and all pointed to “AI infrastructure” as the main driver.
That has been great news for Nvidia, which commands the lion’s share of the AI chip market. But the durability of that spending is still a question—especially if actual demand for generative AI services doesn’t materialize at the pace that tech optimists currently envision.
My sense remains that we are still in the very early innings and any weakness should be bought. Speaking of weakness watch PSTG. It's a data center that missed last night. Some support in the 50 area with the 200 day and the August low.
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Will see if this has any impact on ASML. I'm not a tech guy but my understanding is that AI doesn't work without ASML.
The Netherlands to Put More Curbs on ASML’s China Chip Business-Bloomberg
From Jefferies.....
We have been in the long US Tech camp. Our view on the AI cycle is to 'follow the money'. We see wider implications of AI related output (beyond LLMs) as still a few years away but during that period a lot of investment would need to be made into AI related firms. This should support chipmakers but also related sectors like utilities given the high energy usage of AI. We keep a medium term bullish bias on US Tech.
and this.....
With the economy doing ok and the Fed ready to ease rates, the path of least resistance for risky assets is still higher between now and year-end. Of course, we don't expect it to be a straight line, but our view would be to use periods of sell-offs as a buying opportunity. Key would be positioning. For now, positioning is close to flat for equities and modest for credit which supports our modest constructive view. However, we are mindful of the likely volatility around the employment print and hence still keeping our portfolio light.
Meanwhile, for the first time in a while I have a real long watchlist coming into the day. Our longs are maxed out and we only have 3 names on the short watchlist. Perhaps two red days in a row has worked off the overbought conditions.
