Tech Stocks CORRECTION! Full Analysis & My Plan + LRCX, WDC, BE Earnings

[00:00:00] Speaker 1: Good evening, traders and investors. Will back here with another one, coming to you with a Thursday market recap. Hopefully you guys are doing very well today. In terms of today's action, guys, well, another big risk-off day for the markets, the NASDAQ getting absolutely obliterated, and so too were most of these semiconductor stocks as well. If you take a look at the board right here, the Qs almost down 3%, and the SMH down almost 6% on the day. Take a look here at the volume on the QQQs. We're definitely coming to a certain sort of climax here. As we know, there's a lot of short pressure in this tech trade at the current moment in time. It's being led to the downside by semiconductors. However, the market is finding some certain strength in other portions of the market that we've been highlighting over the course of the past few weeks. Take a look at financials. Financials, very strong uptrend. Healthcare retains its very strong uptrend of its own. Consumer staples, one of the best days in recent memory. They are very close to a new all-time high, 3% right there. Even consumer retail getting a bit of a bump, and that's surprising because the concerns recently have been all around inflation and interest rates and things of that nature, but retail getting a bit of a bump, and so did utilities, another more defensive area of the market. If you notice here on the yields, the 10-year yield, once again, moving to the downside, which is favoring the broadening out of the trade into different areas of the market that previously, during this big old rally in yields in September, those areas of the market, such as financials, utilities, staples, and even retail, were very much out of favor. But when we notice the pivot here in the move index, in terms of the volatility coming down in bond land, well, that was kind of the trigger signal, especially when most of those sectors were oversold, such as financials were oversold, consumer staples were oversold, consumer retail was almost oversold, not quite, but still, same concept, and the utility sector, also in oversold conditions down there. That was the rotation queue from the large institutions who were pivoting away from mostly NASDAQ and tech names, especially in terms of the hardware trade. So in terms of this sell-off tonight, guys, is it just a risk-on to risk-off movement derived by a lot of hedge fund positioning? And are institutions just trying to shake you out of your AI bags? Or are there more concerns possibly on the horizon? And how are you guys feeling tonight? Risk-on or risk-off? Well, I'm definitely feeling a little bit risk-on tonight, not because of any positions that I took in the markets recently. As I was saying in the past few videos, I'm not really doing too much in this environment in the Federal Reserve meeting coming up and the midterm elections. No, the reason I'm feeling risky tonight is that, once again, I have worn my green shirt with a green screen. Very dangerous endeavor, so if I do disappear during the course of the video, just know that all is well. Even though I might appear naked, you may only see my head. We're all good. But I do like this shirt. It's quite comfortable. Sorry for the bit of comic relief because I know a lot of you guys might be feeling a lot of pain today. And I know tensions are very high and possibly emotions are very high as well. And maybe your sentiment is down, but we're going to talk about all things happening in the market and explain what's going on and where we could possibly seek some resolve in terms of some of these positions. And also, are we approaching possibly a sell-off climax or is there more to go? So in terms of today's video, guys, we've got a lot of things to cover. Obviously, we will go over, number one, the news cycle of the day because it's very important to understand where are these massive flows to the downside coming from? Is it retail panic selling their bags? Is it the institutions? Is it a combination of both? And thereafter, how sustainable are these rotations into other aspects of the market? Is it too late to bid the financials trade? Is it too late to chase the staples, the retail trade, the utilities trade, the real estate trade, all elements of safety? And you can even see the bond trade right now. People are actually seeking safety. Now, this is actual structural bids in the bond market. Not so much because yields are coming down because of, you know, there's no longer any government debt across the world or competition with corporate bonds. No, this is actually people seeking safety in various forms of yield, whether it's in dividend stocks, value stocks, or even decently yielding longer term bonds. So we'll talk about the news cycle of the day and how it affected the markets overall and where all these moves came from. After we've done that, we will talk about a few earnings releases that definitely impacted the markets over the course of the today's session. So LAM Research had the earnings yesterday. They were down about 11% on the day. We will talk about them and how their earnings impacted the direction of semiconductor trade today and why. We'll talk about Bloom Energy and Western Digital, two very strong companies, big AI winners, which also are seeing declines tonight in the after hours despite posting record earnings. So why are all these semiconductor companies posting record numbers and only going down? It's somewhat reminiscent of last quarter Q2 as well. And last but not least, guys, we will get into, or rather not last but not least, so we'll get into those three earnings. After we've done that, we'll get into the technical part of the video, cover the S&P, the Qs, the breadth expansion of the market, the leaders in terms of the sectors, the laggards in terms of the sectors, which should be very obvious at this point. We've been covering it for a few weeks now, but at this point, it should be very obvious what the market is favoring and what it's not. And after that, we'll get into our big tech names because big tech is also getting washed. AMD down 8%, Amazon down almost 5%, Google 3, Meta 7% after the earnings that we covered yesterday, even Microsoft down 2 and a quarter, NVIDIA 4, you get the point, right? So are there any opportunities in this tech list right here or should we possibly stay away and bide our time as we come into a majority of their earnings next week with the Federal Reserve meeting? And at the very end of the video, since it is long-term Thursdays, well, we will talk about some long-term positions that I'm still exploring in my portfolios. Am I buying growth? Am I buying value? Am I buying a little bit of mix of both? Those are the ones we'll cover at the very end of the video. As we do every Thursday, we focus on the long-term portfolios. The rest of the week before, we talk a lot about trades, right? And charts and things like that, but there is a time to focus on fundamentally strong businesses that are trading at discounts that you want to hold and let them compound for a very long time. So that's what we'll do at the end of the video. That being said, we got a whole bunch of stuff to cover. Never a dull day in the markets in 2026, is there? So let's get into it right now. So the S&P down about 1.18%. The Q is down 2.86 at the peak of the sell-off of the day. This was down almost 3.2%. You didn't really get much of a bid into the close at all. And you can see here in the after hours, we are barely green, especially in light of the sheer size of today's sell-off. If you take a look here at the heat map, well, it was once again, more of the same. Semiconductors and infrastructure trades down all across the board and down very big. And also the MAG-7, not there, unless you're speaking about Apple. Now, consumer defensives, consumer cyclicals, which were not Amazon and Tesla, they did very well. You'll notice here, a lot of the financials industry also doing very well. If I move myself to the side, healthcare doing very well. And the interest rate sensitive sectors, at least the industrial names that are not exposed to the AI build-out, did quite well. But you'll notice the ones that are exposed to them, such as G-Vernova, Eaton Corporation, Caterpillar, Train Technologies, JCI, Vertiv Bloom, they were all down tremendously on the day. And even some of your HVAC companies or PWR or fixed comfort systems, all down. But the rest of the industrials, such as the railways, which we highlighted recently, doing very well. And look at these very boring stocks that we've been highlighting over the past few weeks. Look at waste management. What a move there. Waste Connections, same concept. They had their earnings. And usually, these types of companies do not blast off this much after earnings. You are lucky to find another 3%, 4% earnings move on a company like Waste Connections. And to be quite frank with you, their earnings was nothing crazy at all. But it just goes to show you how the Wall Street algorithms are positioned into these earnings, whereby a company like Waste Connections can go up 10% after their earnings. But companies such as TSM, ASML, LRCX, et cetera, at all AI related, they're posting record earnings and going down 5%, 10% after their respective earnings. And a company like Waste Connections, which posts very, very ordinary earnings in line with what they always do, they're up 10%. So it just goes to show you what Wall Street's algorithms are programmed for at this current stage in the market right now. Moving on further to our index breadth analysis here, consumer defensives, utilities, real estate, healthcare, and financials all up and to the right. That's been a common theme here over the past one week as well. The same, same sectors up and to the right. And even over the course of the past one month arguably at this point since the end of September into now, you'll notice a common theme here, the same sectors. It's been a very big rotation, very fast-paced rotation into all these sectors. And the SMH, just take a look at the SMH guys, I mean, we're down a lot since the end of the month of September right there. From the top to the bottom of this move, that's already 18% to the downside. And the Qs suffering a pretty decent blow as well. They're down about 7.5%. A few percentage points more into the 200-day EMA, you're officially into a market correction of 10% plus on the QQQs while the S&P remains fairly flat and up into the highs right now. Why? Because you get 75-80% of the market participating. So it definitely is a situation in which you were seeing the market go from a concentrated market previously in the first half of this year favoring the MAG7 mostly and semiconductors and now broadening out into everything else that didn't do well in the first half of this year arguably in the first two-thirds of this year so far but it's really been coming alive here over the course of the past two, three weeks. Fear and greed index right now down to a 20 which is a super low print. The things that are pulling you down is the market moving averages right now. We have seen some improvements here in stock price strength in terms of the net new 50-week highs and lows on the New York Stock Exchange. It's getting better. Why? Because you have 75% of the market that's participating very well moving away from its former 52-week lows. Market breadth as measured by the McClellan Volume Summation Index is also improving at the same time. The two things that have upswinged here to take us from fear yesterday into extreme fear well at this point in time the put-to-call ratio remains in extreme fear and the VIX the VIX having a pretty big day today because of that technology sell-off that was up 14% at the height of the day it was up almost 20%. So those two things definitely working against the markets right now in terms of your EMA analysis right here so percent of stocks above their 20-day EMA look at this 52% of all stocks now above their 20-day EMA don't ask the semiconductors or the AI stocks though because they're all below them at this current moment in time but the broadening out of the market is very real we're moving from a concentrated market into a broadening out market which is very healthy but also very destructive if you're heavily positioned into that one AI themed sector percentage stocks above their 50-day EMA also having a nice curl up this is good in terms of thrust right especially when you might be approaching a volume climax sell-off on possibly the queues and semiconductors it doesn't mean it's the bottom it just means that if you can bottom out that sector also you might get a little bit more breadth and any type of a bounce coming into next week and the midterms and whatnot it may still take a while guys but these are the types of things that we notice I mean we were playing this game with the rest of the rest of the market at the end of the month of September when we were noticing the sheer amount of breadth sell-off right as I said in the introduction financials oversold conditions staples oversold conditions consumer retail destroyed during the month of September right there utilities destroyed as well August and September oversold conditions real estate absolutely rinsed late August and into September as well so keep that in mind right we were noticing those kind of climaxes in terms of oversold conditions and sell-offs just brutal brutal brutal sell-offs on a lot of those sectors and now well it is the semiconductors turn as they were the ones that led the moves here in September when the rest of the market was doing nothing and dying this is what was holding up the S&P all on its own them and the MAG7 but now you've noticed the MAG7 has fallen off in the past week and a half semiconductors have fallen off for the past two and a half weeks but the rest of the market is there which is why your S&P is literally flat so keep that in mind right now in terms of the news headlines for the day we're going to go over various different forms of you know statistical analysis but also news headlines that translate into the size of the downside today and moving on from our fear and greed index well how are retail investors feeling the way they're feeling usually is a good indication of how they are positioning are they buying or selling AAII sentiment survey is fresh off the press from yesterday 46% of all people are bearish on the markets for the next six months which is an uptick in relation to the last two weeks worth of data we are now back to the end of the month of September overall okay so keep that in mind still a lot more people are bearish than they are bullish or even neutral at this current standpoint so not a lot of bulls in this market you're trending towards your historical average lows in terms of the well or highs rather in terms of the amount of people that are selling or very bearish on the markets right now the one year bearish high was at the midpoint of the month of September as you can see right here it was at 53.3% that was when everything was getting crushed before semiconductors popped off this rally okay before that a lot of everything was getting crushed all the other sectors that we previously talked about and the semiconductors were barely holding on by a thread so at that point everybody was bearish because nothing was doing well but now that you have a portion of the market doing well but I assume a lot of people Q3 I'll remind you the earnings profile of the S&P are expecting growth of almost 30% which is an extremely strong metric the valuation of the market right now is at 19.1 which is below its 5 and 10 year historical averages obviously it's because of the massive earnings growth in the market the S&P market cap is trading right in line with its EPS growth curve which is good it means you're not too rich speaking about the broad market are there pockets of the trades such as semiconductors that still remain a little bit richly valued and that pulled forward a lot of their earnings over the first half of this year sure but we cannot say broadly speaking that most components of the S&P are trading very expensively right now and you can see that even better here here's your P ratio history in terms of the last 5 and 10 years you can see that we're trading below your 19.2% average moving on a bit further here we are currently in the period of seasonality that's a little bit rough which is the end of the month of October sell-off into a midterm election year because of all the uncertainty right we know into next week we had a lot of big things most of the MAG7 the remaining MAG7 earnings are all next Wednesday and Thursday after that you have the Fed decision meeting on Wednesday you also have the PCE data coming out next Thursday as you can see right here so Fed on Wednesday PC on Thursday has the market a little bit nervous right now and then of course you get into the midterm election cycle and there's going to be a lot of discussion surrounding data centers and AI for the midterms because we know social sentiment around data centers and AI hasn't been the best and it's a very big political talking point right now I'll add to that in the mix right now some bearish news headlines that we've been getting out of the Middle East Iran's message is stark posted by the Wall Street Journal today if the US and Israel restart their air campaign Tehran will respond with strikes not only on American bases and warships but on airports pipelines and other civilian targets in the neighboring countries of the Persian Gulf this is after news that President Trump yesterday said that a decision would be made pertaining to Iran recently and you had comments out of Israel as well yesterday that were saying that they were contemplating strikes on Iran but were willing to hold off until the midterm election so this is Iran's formal message to those two things definitely not very good geopolitical developments right now tensions are rising and the barrel of oil does reflect that about $100 so a lot of noise in the markets right now my friends moving on a bit further here in terms of what's been plaguing the markets obviously we talked about the debt problems surrounding some of these hyperscalers and or the neoclouds right so keep that in mind whether it's Oracle whether it's CoreWeave a lot of them have been making the news recently because their bond yields are moving a lot higher as there's deemed to be more perceived risk in the AI build out the good old you know the good old calculation that everybody's trying to make right now is is the amount of spending going to translate to a decent enough amount of revenues to substantiate this amount of spending right now and when is that going to happen how long are people going to have to wait so now the bondholders of these names are getting a little bit nervous and as a result these credit default swaps this is just basically a fancy insurance product for against the default of these companies that you see on the screen and as you can see in the month of October here is when things really started kicking off the end of September and all the way through right now now you have concerns here and a lot of these corporate structures and a lot of these companies having to obviously raise debt they're out of free cash at this moment in time so the market is concerned especially when your risk-free yields even though they've come down recently are still quite high the 10-year still trading around 5% the 20-year yield is still trading around 5.3% which are very close to 20-year highs I mean you look at the 10-year right here last time you were there was 2006 it's very expensive to raise capital for this AI build out right now and it has a lot of people nervous that's been the main discussion over the past few past few days and past few weeks honestly at this moment in time in terms of positioning I showed this chart yesterday which shows that Goldman Sachs prime desk trading flow had so many people shorting information technology and exiting their positions at the most rapid pace that has been seen here in the last 12 months a bit further here Jeffrey's own trading desk right now in the last 10 days we've been net for sale in tech to the tune of over a billion dollars in those 7 days across client assets here's the trading net flows over a 20-day period one of the more dramatic net selling periods we've seen in tech in recent years take a look at this this is a massive shift in positioning and an extremely quick one at that and it coincides with the formal top of semiconductors that you saw here about at the end of the month of September into early October that big old rotation when everybody got scared from a few different things whether it's the you know perceived perceived peaking of anthropic revenue growth rates or perceived risk in core weave bonds and also the other hyperscaler bonds and things of that nature right a lot of perceived risks in the market right now and you can see that from the positioning from these two institutions Goldman Sachs and Jeffries as well moving on a bit further here in terms of the valuation this compression that you've seen since the month of June which is now carried into a wave two of selling you can see that semiconductors right now trade at 17 times forward earnings as measured by the SOX index you can see here the S&P is trading a little bit higher now you obviously can see here guys that the June period was a very rich period of time that's what semiconductors really do they're extremely volatile they get really really rich they trade down extremely aggressively and then after you trade down very aggressively you can usually find balance so it's a great big balancing act in the semiconductors which are the most volatile sector of the market by far because of this massive capex cycle moving on a bit further here Goldman Sachs their fund VIP basket relative to SPX is down 2.6% today and since the peak of the end of Q2 the 75 day rate of change is now the worst since the weeks after the Lehman bankruptcy back in 2008 this is just equities adding the pain of fixed income from Corwee fallout last week and the French bonds every day and hedge fund deleveraging contagion continues all with positive breadth today and 12 of the last 16 as the unwind of concentration isn't stopping yet so even they recognize obviously I mean who wouldn't recognize the broadening out of the market so that's what's very funny right here is you have such a historic sell-off in semiconductors and high beta it's a very concentrated sell-off all while the market broadens out and that looks something like this you have your worst target basket performance right here since 2008 so this year has been a year of very odd records record dispersion in the markets record concentration record rallies record sell-offs there's been so many records it just goes to show you how bifurcated this market is over this overall AI build-out to where early in the year I mean let's just recap this year's events right earlier this year you couldn't even make a case for any software companies nobody wanted to touch them supposedly AI was going to replace every software company on planet earth and this IGV index had its most nasty sell-off in like 20 years with so many SaaS names turning at multi-decade low valuations eventually that resolved right but during that time that they were bottoming out what had its most historic quarter in arguably the history of this index or at least since 2001 semiconductors I'll remind you SMH put in an April through June quarter of a 71% gain all while SaaS was getting absolutely destroyed during that time you had record dispersion the difference between the biggest gainers in the S&P and biggest losers was very wide you had compounders very legacy companies such as Visa and MasterCard which were down tremendously with people saying well stable coins are going to replace their entire business or you had legacy compounders like SPGI which literally could not catch a candle almost this entire year before as of just recently those are just two examples so the dispersion in this market the degree in which people wanted to concentrate in the AI trade and thereafter completely de-lever in record times from the said AI trade both in July and also recently right now there's been so much dispersion in this market this year it's been one for the record books for sure hedge funds are selling global tech stocks at a record rate just more iterations of that and this was measured as of October 16th so I assume it's even worse than this right now driven by liquidations and new short openings take a look at the selling right here this is more than COVID it only rivals what do you think this candle is what I'm pointing my mouse it rivals the July sell-off in terms of information technology so keep that in mind information technology is measured by XLK if you're wondering this is a very sharp sell-off here in overall XLK from the hedge funds which has resulted in them being very much very much well I wouldn't say they're offside but they're extremely onside in one direction so you'll notice here the last time that they were net short the markets in this amount which is measured by the gray line right there in terms of net leverage for their shorts well look at this was back during the tariffs of 2025 and as we move on to here sure there was that big round of selling in July but thereafter where we find ourselves right now guys into Q3 also record levels of net leverage shorts and just the overall positioning the ratios look how short the hedge funds are on this market the worst levels that we've seen since 2025 and also Goldman Sachs right here putting on another one the historical drawdowns in US semis versus the S&P 500 so peak to trough drawdowns in the socks versus the S&P pair this is also one that is currently breaking records it's the second time the first time this year was in July culminating in Leopold liquidation sell-off the second time is where we find ourselves right now you would have to go back to either the 2025 liberation day sell-off to find similar events the peak of the 2022 bear market even 2020 to even get close to this or prior to that you'd have to go back to the flash crash back in 2012 or as you can see right here the great financial crisis so so many records in terms of positioning the sheer violence of the rotations this year guys in out in out stop and go traffic semis up 40% down 30% high beta names up 100% down 70% and then all the other staples names right I mean a lot of these guys got absolutely rinsed like what is McDonald's doing down here okay just this is one example what are they doing here down 33% from their highs as people just wanted nothing to do with McDonald's because they were too focused on the AI trade and now that the AI trade is seemingly blowing up overnight or over the past few weeks I guess everybody just wants these staple trades once again just such wild moves in this market which has made this year overall a very challenging year to navigate for most people so that being said those are news headlines for today hopefully you guys enjoyed that those are the reasons behind the sell-offs right very fearful retail environment which were over leveraged and over concentrated into semiconductors and AI obviously ill-aligned and ill-positioned for the rotations hopefully on the channel in the past two three weeks I've been able to clearly explain the rotations and state my positioning as well about me just not really buying into the semiconductor weakness just yet but rather focusing on dividend quality and value names in the recent weeks so hopefully you guys on the channel have been able to catch a little bit of these rotations because that's basically what's been kind of keeping you know a broad portfolio afloat right now is not over concentration especially for long-term portfolios or even trading accounts if you're somewhat balanced then the moves have been obviously less hardcore to have to deal with but overall guys a very wild year of rotations think of how many records right like the SAS sell-off then part number one the Iran sell-off number one Iran sell-off and semiconductor number one preceded by a majestic rally right there semiconductor sell-off number two one of the fastest breadth expansion on staples that you've seen in well I mean since last year I guess right but just look at these moves guys just such unnatural moves over the course of this year just goes to show you guys how polarizing the AI trade overall is either everybody wants it at the same time to the detriment of the entire rest of the market everybody only wants AI but then throw in a few negative headlines and then nobody wants anything to do with AI everybody liquidates everything hedge funds go massively short and then everything else catches the bit of the century and that's happened like twice at least twice over the course of this year so far so quite a challenging year for the rotations definitely not smooth and consistent as something like at 2025 was I mean and after the tariffs this was like smooth sailing the market breadth here from like April through pretty much October November of last year it was very smooth sailing even 2024 like sure you had the you know Japanese carry trade on wine right there and you had a bit of an inflation scare in April but the breadth and the smoothness of the rotations here was very consistent in 2024 and 2025 this year you see the S&P is up a lot and thank goodness for semiconductors because if it wasn't for them I mean nothing else was doing well up until a few weeks ago at this point with his most recent rotation but you know I can't stress it enough you know before that I mean financials gave back their entire yearly gains in a month all the yearly gains in financials they gave it back in a month you know months and months and months of work just undone here in the blink of an eye right same thing for staples months and months and months of slow stair-step accumulation erased in a month you know what I mean so like it's a the S&P doesn't show the full picture that's going on in the hood right now it's a good thing that you actually had the semiconductors there and the market has actually finally been able to broaden out because other than that guys I mean just look at the equal weighted S&P you're up okay 13.5% but just about a few weeks ago guys you know you were like barely up 4% year of date on the equal weighted S&P so it's a good thing you had semiconductors because that's the only thing that moved you on the actual SPY if not the past year we said it and we'll kind of conclude right there since the end of October last year this moment in time to where we are right now this is a year's worth of trade how many times have we actually been trending on the SPY October through end of March that's actually six months then you had not even a month and a half worth of upside right here call it let's say the first of April all the way through the middle of the month of May before it kind of started peaking out right there so about a month and a half month and three quarters if we want to view it then other than these two days right there in August flat for the following few months so out of the entire last year how long have you actually been nicely trending and like consistent on your rotations or consistent in any sectors really only like what two months out of the past 12 that you've actually found consistency in some of these things you know what I mean so very very wild market overall like I say like 2024 look at financials 2024 was okay for financials then you had the liberation day in 2025 but post liberation day was fairly smooth sailing this year though I mean dude you started off nobody wanted financials everybody wanted AI and the scare of the the scare of Iran obviously and a nice rally right there and then they erased all of that rally or most of it in a month that's just financials we can go through these sectors one by one and you'll see it's the exact same concept look at consumer retail consumer retail this year since last year I mean does this look smooth to you I mean after tariffs all you had to do is call out tariffs and retail was smooth sailing through pretty much October November you had a lot of months that was very good retail this year this is XRT yeah look at this you know it had a very nice like you know end of the year last year sell off rally people position oh nice consumer stocks might be back nope forget it oh wait we're back nope forget it oh wait we're back nope forget it this is the past year trading on consumer retail stocks your average consumer retail stocks restaurants apparel things like that push and pull with oil push and pull with inflation Iran headlines wars on wars off it's just guys this year has just been an absolute mess in terms of consistency and predictability of certain sectors because the macro is changing the early part of the year you had you know we were expecting rate cuts you were still expecting rate cuts then about a month ago the fed threw water on that plan right there and now you're expecting rate hikes so not only are you juggling the macro you're juggling the on-off rotation of the AI trade people love it and people hate it and now it pours in all the other sectors very noisy so I get it trust me I get it in the past few months at least once or twice per week I talk about this but specifically in the past three weeks when we talked about the rotations going on and how violent they were and catching financials early catching utilities early catching staples early and things like that and being cautious with the queues and very cautious with semis I get it though it's not everybody's cup of tea to have to go in and out of positions like that but that's what you had to do this year because there hasn't been that much consistency across a multitude of sectors for extended periods of time I'm talking beyond two three week little stretches there hasn't been that much consistency let's be honest here okay so that is the early introduction of the markets and explaining what's going on and why and all more clarity a bit more explanations as to why I get it the hedge funds this year have been absolutely ruthless in their positioning manipulating the markets as much as humanly possible I completely get it this year has been a bit crazier with that but it's because the amount of margin and leverage in the system guys when there's this much margin and leverage in the system you saw it in July you saw it in the Korean markets right the Kospi when there's this much marginal leverage the hedge funds and the CTAs they are very good they are ruthless they're extremely good at pressuring especially retail positions but also don't forget all the long only funds as well such as Leopold's fund right he's technically a private fund right but that's institutional money so when the CTAs the momentum funds and the hedge funds at least the predatory ones when they can smell blood in the water no matter what it is with these rotations they will violently push the pain points and this year has been one of the more ruthless years that I've seen in a while from those hedge funds overall so it's a bit normal if you're being caught off side by these things it's kind of big money and it's completely out of your control at this point in relation to that right so that being said with that introduction out of the way we've done a very long one we will cover some earnings at this current moment in time and we're going to start off with how do I have them ordered here okay so we're going to do lamb research bloom energy and western digital three very large players in this AI build out lamb research they make a lot of semiconductor equipment obviously mostly recently they've been very popular well they've always been a very strong company but it's their memory manufacturing equipment that's been extremely highly in demand bloom energy has been well behind the meter solutions for power for the data centers to get them operationally running faster than these data centers can possibly get authorizations and the infrastructure required to connect the formal grids so they've been like an off the grid solution and then western digital obviously part of the whole memory which has been one of the more popular ones in the past year of trading we will cover all of them respectively and also explain why every single one of those companies is down after earnings you will notice a common theme with all of them we're going to start off with bloom energy so bloom energy obviously with the market has sold off in recent few weeks down about 27% from the bloom energy is no stranger to volatility to the upside and to the downside always important to remember where we started about a year ago here in last October I'm not going to cherry pick from earlier because that'll be even crazier but you just take last October levels from these lows 22nd October day to date they were up about 4x if you go a few months earlier they were up more are we still early in spite of the 10x are we still early is there still money to be made is the company still executing well or have we just priced in too much too fast which has been a common theme we talked about this last quarterly earnings when we covered all these in Q2 and we were saying well they pulled forward a ton of earnings power is that still the case is the market throwing a temper tantrum or is this one possibly even fairly valued at these current prices let's have a look okay so in terms of easy numbers for bloom right here 36% beat on EPS massive beat on EPS and a 15% beat on revenue not good enough for Wall Street apparently though down 2% it's the whole look at waste connections 9% off of a nothing beat and then bloom energy these massive beats and still down 2% just goes to show you guys okay how the algos are positioned I can't stress it enough right now I know it's not fair I know earning seems like a casino but that's who you're kind of playing against right now in the market these algos right now if you don't know what bloom energy does just a quick little recap right they do these little fuel cell conversion boxes okay so essentially what this is it's a behind the meter solution when a data center cannot get plug-in power from the grid or the plug-in power from the grid is limited they need to seek these behind the meter solutions says it in the meter everything that goes in excess of the grid so some companies are using massive G vernova gas turbines and funneling natural gas with these massive turbines which make a lot of noise but generate a whole bunch of power another solution is in these fuel cell conversion boxes that boom energy uses very popular technology recently it's not a new company this company has been doing this since 2018 but obviously with this data center ramp well their products have been excessively strong in demand recently for getting these data centers up and running in the fastest conditions possible now if you want to have a look at how this actually works well they funnel a combination of things be natural gas or alternative fuel sources such as hydrogen or biogas and essentially with a combination a chemical reaction with that and air through the what they call the solid oxide fuel cells well it puts out with many different energy solutions here and you create these little energy farms right no different than a solar farm I mean it's different technology obviously but it's no different right you get these energy farms going and it just pumps out a whole bunch of megawatts that is excessively needed right now and that being said take a look at the bloom energy easy numbers total revenues were up 138% year over year massive numbers right there gross margins beat by just a little fraction right here so the estimate was 34 34.5 is what they came in at last year 29.3 so not only are they growing revenues by a very substantial amount they're growing their profit segments as well but the street needs to understand or everybody's trying to understand here is this peak for both revenue growth and margins as more expensive than they were just a few years ago which is a common theme going around in the markets right now in times of great demand crunches and supply shortages you can charge top dollar but everybody's trying to ascertain when is that top dollar going to end EBITDA margins coming in a little bit better than expectations as well EPS was a blowout and take a look at the guidance was even though they beat on this quarter they surprised on the guide and keep in mind when this company released earnings initially they popped and then the company went down from its closing price here it went down all the way to about 9% so just the fact that you've retraced some of that 9% is good but it just show you who took over control here instantly off of those numbers obviously the algos right moving on a bit further here gross margins beat on the estimate 34 versus 33.5 operating income as well and their full fiscal year guide on EPS $3.25 which was a 20% beat versus the guide and take a look at the year-over-year numbers here on EPS and revenue still extremely strong so talking about the company's earnings call what did they highlight in terms of demand and other notable features right here that everybody is focused on because that's the concern right demand and visibility so demand their backlog is still expanding faster than their revenue with growing diversity across customers verticals and geographies and their pipeline remains strong they're also doing preparations for expansion beyond the 5 gigawatt annual manufacturing milestone as needs are rising not only North America but worldwide examples of rapid deployment include the Oracle Utah site powered in under that's extremely fast Nebbius New Jersey achieved planning approvals in three months and the first power block was ready two months later other wins even include the US army and this is something that we'll focus on because Bloom is not only doing data center solutions but also other independent power solutions for other types of businesses demand drivers extend beyond AI data centers to resiliency security critical infrastructure such as hospitals bases water treatment facilities and airports inclusive of factories and other high reliability loads on-site interest is rising in Asia Europe and elsewhere so they're not only doing data centers there are other angles to this business now comparing Bloom Systems to the grid which is what I asked it to do here in terms of the earnings call the grid as management highlighted on the earnings call it was a pretty good earnings call I listened to it in its entirety for like an hour and something the grid was designed for evenly distributed loads over large areas and many customers it is overwhelmed by concentrated high scale data center needs that's why friendly quiet more secure and redundant fault tolerant and distributed architecture for higher availability it is always on and resilient to natural disasters cyber attacks or physical attacks eliminates backup generator requirements as well they win on the total cost of ownership these systems are fast implement they have high efficiency outputs overall so it's a question of access and speed competitive advantages on cost as well there is a value proposition that is now competitive such as Texas earlier commentary from management noted the competitiveness with the grid power in most US markets full stack economics meaning from the deployment and how it efficiently helps your rack and token costs favor bloom due to fewer conversion stages so still very strong numbers from management reiterating the fact that their backlog was very strong reiterating the fact that they were a broad company in terms of their types of offerings so not too bad so nothing bad was said on the earnings call overall the guidance was very good but the stock got sold off anyways so why are we seeing all of these sell-offs in a lot of these companies we talked about it last [00:40:36] Speaker ?: last last [00:40:36] Speaker 1: last quarter right now number one these stocks have ran a lot but a lot of them did deserve a big run because of well there's the sheer size of the revenue and EPS growth take a look at this company where it was just a few years ago at this moment in time years ago in the past four years bloom was a unprofitable business they've just now recently flipped to profitability we need to understand how profitable can they actually become and to do that I like to look at their maximum gross margins in the last few years if you take a look at their maximum gross margins here they've varied between 20 12% and now up to a high about 33% on their gross margin so you can see that it is not definitely a SaaS company nor is it a micron that generates 80% gross margins things like that and brings a whole bunch of money to the bottom line their operating margins are still very good but possibly the best that they will ever be in the context of this demand constraint build out and net margin same concept you can see right here I'll flip it too I just want you to notice the yearly progression of this company now that they're highly in demand they deserve these higher margins obviously but look at the gross margins here you're not going to be able you can't push your operating net beyond gross I mean that's just cost of goods sold with some fancy accounting tricks sometimes you can but still you get the point right it costs the money to make these systems after that they have operating costs and then they find their bottom line profits so these are possibly some of the best margins that the company may ever have it doesn't mean they can't hold them it just means that when a company expands revenue very quickly and margins very quickly eventually you come into a situation where you are at peak earnings for the time being and this is the problem that a company bloom energy faces right now the revenue growth these blue columns right there is extremely violent everybody knows that but the gross margins are peaking keep in mind the net margins and your operating margins are likely peaking as well similar to some of the memory players and in the process this company used to trade back when the revenue growth was a lot slower obviously this company used to trade an average price sales of two granted the margins were a lot lower at that moment in time the revenue growth was a lot lower so they did deserve the lower multiple now with the higher growth they have re-rated on the multiple significantly going for an average of two price to sales two and half price to sales to a peak at the height of their stock price just a few months ago back here in June of $350 per share they peaked at 23 times forward earnings that's why I tell you guys it's so important to understand what you are paying for a stock because that will impact your forward compound annual growth rates if you look at things a little bit differently here I'll do some math with you guys to explain exactly what I mean instead of me writing it down I just want you to understand what a slowdown of growth rates actually means it means the company goes very very quickly here and eventually you slow down while the growth rate is still going up they're still growing the rate of expansion is declining what that looks like here in terms of EPS is a phenomenal EPS ramp but you'll see what happens eventually the law of large numbers catches up with you right Wall Street priced in a lot of very big growth and they had very big growth but did it run too much too soon meaning should this expansionary move instead of having taken one year should it maybe have done more streamlined over two or three years in normal market conditions where people aren't looking for the next bottleneck trades loading up a whole bunch of call options with a bunch of leverage probably in my humble opinion okay so let's do some math together because you'll see I'll do it now but we'll do it again for LRCX we'll do it for Western Digital and now you guys are going to understand the problem with the AI infrastructure trade at the moment time so what's the EPS growth rate we will take 2027 to 2026 because it be unfair if we take 2025 you already through that so we'll comp 2027 with 26 and onwards here's your EPS growth rate okay 505 divided by your EPS this year which is 271 okay that's an insane EPS growth rate if you look at the EPS growth rate for this year alone it'll show you that the EPS growth rate is nuts 86% total year over year okay not quarter over quarter year which is do you want to know what happens after that even that these bars are getting a lot bigger it's the growth rate 829 2028 EPS divided by 505 okay you see what's happening here that's only 64% growth still fantastic in absolute terms compared to a lot of other companies like McDonald's or whatnot and now we get into 2029 the forecasts obviously the forecasts can change but as of right now the street has them at 1106 divided by your 2028 earnings profile 829 and now you see now it's down to 33 you just went from 86% growth rate next year and from this year then to 60s then to the 30s that is peak earnings growth that you're witnessing in real time and I don't have to do the calculation for revenue you guys can probably understand that it's this is front loaded a lot into 2027 less into 2028 and less into 2029 the same thing for EPS which is what we just did this is front loaded EPS 80% 60% 30% and the market is forward looking it is seeking to understand how much of the forward free cash flows should we pull forward in other words what happened here is the markets pulled forward 2029 numbers immediately that's how excessive a lot of these moves got okay so now our job if we're looking to run a model on this we don't even have to run a model I mean I can give you guys a very fancy model analysis but I probably lose half of you guys we're just going to lose use logic and reasoning for a company that has expanded margins right here and expanded its sales rapidly what do they deserve and for how long if we are now at peak growth do they deserve to still trade now they're coming down right they're still growing but they're coming down now and the street realizes that the company's own guidance says as much now that they're coming down should they still deserve to trade at 20 times forward sales or should this be declining and normalizing now who is to say that this is fair that's the fun thing with financial models nobody knows what's fair it's a market consensus if the market doesn't want to pay up for the growth anymore because they're nervous about the AI trade and the duration of visibility then arguably even 12 times forward sales is too much some could argue with these margins in terms of expansion and this revenue growth they still deserve to trade 10 times sales is very good for a fast growing company which is expanding margins and growing revenue at those clips but can we say they deserve 20 or 15 maybe that could be your peak bull case but you'll notice here that it will change the results a lot so rather than using EPS we're just going to use normal price sales because if I use EPS for a company that was formerly negative you'll see that the price to earnings ratio is all over the place there's no consistency here it used to be way higher here when they had no EPS then they went negative in terms of profitability and it's just a mess we will use a more normalized price to sales and you can see here that at least in the growth burst of this company they've oscillated between let's say 7 all the way up to 20 20 is probably not fair but 7 might be a little bit too low but if it compresses a little bit more you might be trading towards there so if I just use a very normal what they're trading at right now a 10 price to sales and an optimistic outlook that this company can hold up and keep delivering on their obligations and whatnot you'll see the price targets that we're setting right here okay so 10 times let's just use 10 times 20 27 sales 10 times are expected let's say I'll be a bit generous let's say they beat again I'll give them 7 billion that's a 70 billion market cap in 20 27 by the end of the year what's the stock currently trading at 64 billion dollars what's the CAGR on that you're looking at a 9% growth rate or rather a 9% share return into next year if I use a 10 if you guys want more than that either the company is lying about their Ford guidance and is severely underestimating it that's the only other time you're going to get a substantial beat on these revenues okay but now that you have more information the streets able to model it a little bit more consistently you know what bloom's output is they're slammed all right so that being said if we use a 10 that is your next year forward ROI now can this get a little can this go back to being crazy mode and expand yes but what are you anticipating what are you trying to do here if you're saying no I think this stock should go back to 350 what are you asking for are you asking for the company to just pull random revenues out of its behind and just somehow deliver two times more revenue even though it doesn't have the production capacity for that or are you asking me hey bro can we can we just expand the multiple back to 20 again at which case if I'm Wall Street I will ask you why this is the peak growth that they'll have on revenue and earnings why would I allow it to trade back at 20 if the market is now concerned and a bit fearful surrounding the visibility and duration and the cap cycle of AI it's up to you you guys are free to run the numbers right if you think it should trade at which point you would possibly looking at 100% ROI into next year but is that realistic should we actually model that as a baseline scenario or should that be the optimistic end of the war in Iran everybody leverages up to call options again everybody warms up to the idea of AI again it goes turbo mode once again but you are asking me for multiple expansion you're not asking me for normal progression don't like begging the market for multiple expansion on possible peak earnings growth that doesn't mean the company is not growing it means they are growing but at a slower pace and this is the same concept when we cover LRCX and other things of that nature it is the same concept across the board with the AI infrastructure trade right now if you apply a 10 normalized price to sales which then you really won't like the ROI the ROI is going to be negative it means you're overpaying for Blooms forward revenues but if I am very generous and still apply a 10 sales multiple to 2028 numbers that would mean the company would be worth approximately 10 times 10.27 that means the company would be worth 102 billion into 2028 if they just keep a 10 price to sales multiple which is generous for all companies out there it's very generous I mean you can find Palantir that trade at 30 times sales you can find cybersecurity companies that trade at you know also 20 30 times sales but that should not be your benchmark okay that is very lofty expectations you should not really model around that if you do get 10 forward price sales by 2028 that means this business in relation to its current market cap would be about 102 billion it trades for about 64 you'd be looking at a 60 percent ROI from now through 2028 not too bad if they can hold a 10 times forward sales multiple if the street doesn't allow them to trade there because of AI concerns and the fact that nobody wants to buy this chart that it's been up 10x and everybody is nervous about the next two years what if capex slows down what if companies aren't able to raise enough debt things of that nature if people just take a back seat and the position never gets backed as bullish as it was earlier this year let's say they trade for a 7 you guys are going to like this number 7 times your 10 billion and forward expected I'll just be generous let's say 11 billion in 20 28 that means that the company in 20 28 should only trade for 77 billion divided by this year's current market cap you'd be only looking at a 20% return for the next two years that is what happens when you're looking at multiple big expansion or compression I like to have room on the multiple here in terms of bloom energy I don't have room on the multiple this is still a speculative trade a phenomenal company with a phenomenal position right now but what happened here essentially for a lot of these trades guys is this move here is like three years of growth priced in in one single year that's what happened with a lot of these names okay it's just the unfortunate reality of the situation right now for a lot of these businesses so would I buy bloom at 210 well if I have a very strong stomach and I'm expecting to trade this perhaps into the AI liquidation sell-off possibly past midterms and then looking for a bit of a rally here and people get open again to bloom because it's a favorite fan favorite retail ticker and even institutions when times are good can relever up on this one yes but I want you to clearly know what just hold these and even get a bit of multiple compression you know then you should not be eyeing five six seven hundred dollars per share as your base case scenario if it happens the bonus but I just want you guys to know here that you are not buying something that is cheap by any stretch of the imagination it is expensive can it possibly have market being returns yeah but you agree to expand the multiple and say oh no it's fine we're willing to pay up for this growth bloom will be around for the next 5-10 years would I hold it in my portfolio for a long term company probably not although very strong I just don't feel that my cost basis is optimized enough from here but that's the type of investor that I am right I like to put more stable things in my long term portfolio would I possibly be interested as I said after the midterms if they flush here would I be interested in for a trade for the next maybe 12 months if I'm looking to play a bit of mean reversion here and by mean reversion I mean revert back to these super high multiples and super bullish price action in the markets maybe but that would be the extent of my positions I would put it in like the high growth you need to have a strong stomach to hold this all while knowing it's not cheap anymore not even close to being cheap anymore okay that's everything for bloom energy love the business love the company but a business and the company is not the stock price I could love a company love the business model while still acknowledging like listen the easy money on bloom energy has been made this company will likely not 10x again in that quick of a time okay it may just have to grow into its multiple and that is the nature of growth investing sometimes guys now that being said let's move into company number two and you're going to see some of the same problems we're talking right now about LRCX is very important I'm spending a lot of time on these earnings because if I go through bloom and lamb research and other semiconductor names now you guys will be able to understand what's going on for all of them if you see drops across the board and wondering why none of these trades are working the way they used to this is what Wall Street is coming to as a conclusion it's not me it's not my opinion I'm just telling you why these names are going down after their earnings even though they're posting record numbers like it's not me don't be upset at me right I'm just conveying how Wall Street views these things from the analyst community the institutional community you may believe they're wrong and that's fine and a very small beat on revenue as well the street might have been a bit disappointed because previously this company was beating by wider margin than this previous quarter EPS 8% quarter before that 8% as well on EPS and the quarter before that also 8% you can see the beats were much larger before and now the street is able to more accurately predict some of these earnings outlooks even though bloom blew it out of the water you know literally speaking in terms of their numbers right there LRCX a little bit more thin here on the beats let's have a look at some of the numbers and once again play the game of what price should this company trade for in these current market conditions so take a look at the easy numbers from lamb research here as we said slight beats here on the estimates EPS even with those big beats though guys absolute numbers are insanity EPS was up 74% year over year revenue was up 54% year over year even quarter over quarter numbers up 20 plus percent but once again the question remains is this as good as it will ever be and as such should these companies trade at these same multiples if we know that we're coming into peak earnings growth let's get into some numbers right here more numbers adjusted gross margins also record breaking numbers for the time being the margins are very high for most of these companies the fiscal guide though coming in a little bit flat here revenue you can see flat against the guide not that impressive adjusted EPS flat against the guide as well gross margins maintained operating margins maintained as well in terms of their revenue per region you can see very strong revenue growth even if with all these reasons right here and in terms of their operating income as we can say right their profits are very good but that's not the point right there you guys can probably tell it right now the commentary for management initially with AI driving higher semiconductor demand and greater device complexity our focus on operational execution helped LAMM deliver record revenue record profit and earnings per share in the September wondering the problem as you guys can clearly see is not demand never been demand right it's it's not even visibility we'll keep talking about what the problem is AI is driving unprecedented semiconductor demand and rising device complexity increasing deposition and etch intensity across memory logic and advanced packaging LRCX a lot of their machines at least the bulk of their machine sales has been for memory logic and advanced packaging in recent times they have a much more broad portfolio but this is what they've been focusing a lot on recently this is expanding LAM's served available market as a percentage of wafer fabrication equipment multi-year investment cycle is in early stages still all these companies are saying the same thing you are indeed early into this CapEx build-out cycle with strong customer visibility extending through 2028 another company giving you very good visibility for at least the next two years now in terms of system revenues boundary logic and DRAM accounted for roughly 80% of systems revenue growth year to date memory systems revenue is at a record dollar level of over 120% year over year so obviously demand here is not the problem at all nor is the visibility it's a question of well you know beyond everybody's focused on beyond 2028 at this point right is 2028 the final big year does it keep going on further and as such should we keep piling into these positions now that we're already several years into this build out and these names have ran up I mean this one from the April lows last year maybe that's a bit unfair maybe it should take October but even if we take October September it was up 4x in the last 12 months to the peak is that something that should have happened in that short amount of time or should that maybe have taken a more smooth three-year curve to get those same returns have we go through too much pull forward of returns essentially what the market is asking itself right now the only red flags not even red flags the only things that management said on the call that were a bit [01:00:23] Speaker ?: bit [01:00:23] Speaker 1: bad was in terms of supply constraints near term supply chain constraints on certain components are holding back shipments the December quarter revenue guide of 8.6 billion would have been a bit higher you remember I said that the guide was not the greatest it would have been better however timing related delays are expected to shift into the March quarter management is actively managing the tightness and did not quantify the exact impact so supply chain constraints here clean room space availability plus supply chain constraints on certain components are expected to continue limiting chip makers and equipment companies ability to fully meet and demand as the industry moves into calendar year 2027 unconstrained demand meaning with no constraints whatsoever would be higher conditions are expected to remain constrained into next year though management is working closely with suppliers to accelerate capacity expansions including recent supplier events to communicate multi-year demand expectations and it's confident it can manage the issues effectively these are described as tighter than normal due to the strength of demand but not comparable to COVID era shortages this was the one negative piece in the entire earnings call was the fact that well they would have done more revenue they just don't have the components to get the machines out the door fast enough to demand at the same time though in the earnings slides I'll just present you a couple of them so their exit rate for calendar 2026 is expected revenue to grow over 30% year over year but then a few lines lower what about calendar year 2027 15% that's a pretty big drop off reminiscent of a lot of other companies right there as such I mean we can go through a lot of earning slides their earnings slides are fantastic they reference their advancements in technology and how well their clients are able to pump up more volume with those new technological advancements talking about the memory players obviously we talk about different quarterly mixes and segment revenue mixes we can go all over that stuff right but what we need to convey here is what should this company trade for it was it too much too soon and where could we maybe normalize to okay so once again similar to bloom energy right there since we already did a long piece on bloom energy LRCX is a company where a few years ago they were making about 25% in know about what do you notice about the slope of these curves well per the company's own guidance this is not me this is their own guidance the revenue growth rate is slowing down as such with a company with slowing down of revenue growth rates should they trade at this peak price to sales that they got just a few months ago ending the month of June when they were trading for 17 18 bust cycles obviously but even the peak of previous booms was the six price to sales and the low of previous booms was a two and a half four price to sales that all started changing here this year with the dynamic pricing and the visibility and the massive demand from data centers it went all the way up to an 18 times four price of sales now some could say that are deserving of that because of the margin expansion profiles you can see right here not only gross but also operating the purple line and net margins the green line and also the sheer speed of the revenue growth rate some could say they were deserving of that expansion but was that the peak and what should we price them out further into the future if they are slated to maintain very good revenue growth rates above their previous standards even 15% is very strong for this style of company but if you're slowing from 30 to 15 should you command as high as of a multiple as you got earlier this year when you were peak right when year over year growth rates were much higher than they are right now and now you're coming down probably not but what should be an adjustable floor margin profile at least for the next few years so they should command a higher premium than usual because their numbers for the next few years will be higher than usual but we can't sit here and say that oh well it deserves a 15 again okay nor maybe can we say it deserves a 10 because even a 10 is like you know two times their average okay so keep that in is front loaded this revenue growth rate and the EPS growth rate these are front loaded these are averages of the next three years but they're front loaded in nature okay 30% next year then it goes down to 15 etc and same for EPS very high this year and then it kind of stables out there after a while right so at 2.30 you'll notice these valuations trades for 24 times forward earnings a 0.6 peg but you gotta be careful with this peg these will be declining EPS ratios as years move on so you gotta be careful with this peg and as we model it right here at 2.30 over the next well for full 2027 this fiscal AI measures Q3 to next Q3 so it's not like the full year if I take the full year then it's just at 8.13 for price sales but does it deserve that let's say it deserves this floor of 8 which is the highs of previous cycles let's just say it deserves an 8 maybe it doesn't deserve an 18 because this was pretty crazy but let's say it deserves an 8 higher multiple you know higher margins higher growth rates than it's traditionally used to slammed on demand critical component supplier all good arguments to say that it needs or rather it can command a higher premium that being said if you take a look right here what is their forward sales forecast if we just use price to sales because price to earnings will be a little bit all over the place I mean you can use that too on this one it's a bit more consistent but you probably won't like that chart either 50 times forward versus a current 22 times forward even 22 times forward is higher than their average of the last 10 years okay now they have higher revenue growth rates and higher EPS growth rates in the last 10 years but you guys get the point we can't command that high of a forward multiple when there's concerns in the market right now about durability the debt cycle the macro with Iran the Fed interest rate hiking cycle all those things play into people's perceptions of what should we be paying for the forward gross when there's so much uncertainty in the market I love a good story too but a good story can only be a good story if you have no background noise okay so let's just say that they are allowed to trade for an eight times forward price of sales multiple into 2020 I mean what do you guys want to use here maybe we can use perhaps 20 29 these are this is fiscal year for them so next two years keep in mind this 20 29 is actually like mid 20 28 so I guess we'll use that we'll go two years on this chart so let's see how much they're worth so if we take an eight times forward price of sales let's say they beat I'll give them around 50 50 billion in 20 which here says 20 29 but I just explained it two seconds ago 50 times an eight forward price of sales which is very fair I think that's very fair you're still above an average multiple that this company trades for so I'm compensating heavily here for the fact that it's growing it's very much in demand it's a construction boom cycle it's an equipment boom cycle they're going to be needed by everybody by Micron by the Korean memory manufacturers by Elon and his TeraFab they're going to be needed by everybody so I'll give them an eight in bull case scenario or optimal case scenario I'll give them an eight that's a $400 billion market cap for the next two years what does the stock trade at right now stock right now trades for a $288 billion market cap and I'm being very fair here that is a 38% return over the next two years not too bad 19 20% per year decent from here but it just goes to show you if that's if 400 was their max value okay that's how much this company 38% higher 38% higher than here right the company was trading 80% higher than here 30% higher than here for you to trade into 20 28 numbers you got to get back to where we were two weeks ago so if you're like wow it's sold off so much in the past two weeks yeah two weeks ago they were already trading at 20 28 numbers I will leave you to be the judge whether or not that's fair so if you're contemplating buying the dip on LRCX here just remember what this three month chart looks like should it have gone this far this fast or should have gone in a more smooth fashion arguably more smooth fashion for reasons outside of our control in terms of positioning leverage call options and the sheer amount of bullish euphoria that it was in the AI trade and that arguably you can still find remnants of that in certain places it probably should have had a more normal execution or rather a more normal chart distribution phase instead of this whole parabolic and then big blow off and now it's going to be ugly if it wants to follow this move again right so keep that in mind I'm not saying it's going all the way down there as I said the forward valuation price should probably be around this this would be fair value price for the next two years but there's concerns about the next two years what's the debt cycle going to be how much are the mag 7 companies going to raise debt and dilute can the market afford it at these current interest rates in a Fed rate hiking environment what happens with their on all very good questions right do some neoclouds blow up what about anthropic and open AI can they pay for all their data center obligations because if they but is it a big discount no you can't really say you're trading at very low prices I mean if I give it a 5 forward multiple which is very average for it some would argue too average for the growth rates but let's say the markets go into a bearish stint here and they just don't trust this trade at all I [01:10:13] Speaker ?: I [01:10:28] Speaker 1: now if I use a 5 okay we're still overvalued for the next two years which would mean you would have a negative rate of return that's why the multiples matter a lot I don't set the rules right here at the current moment in time you cannot say what is a fair multiple there's too many questions perfect execution it deserves I mean perfect execution of the entire AI build out okay then you might command a higher multiple maybe a 10 not so perfect execution with a lot of flaws and supply chain component delays and things like that maybe you don't command a 10 the range should be between 10 and 5 that's your bear case and that's your bull case you know what I mean and the degrees of variance are quite wide here it's not that predictable in nature they have good visibility good demand but this is the problem that some of these companies are having which is why the sell-offs are very aggressive but the question we should be asking ourselves is should it have traded all the way up there in the first place which is what we were saying last quarterly earnings when we covered this company last time should it have traded up there in the first place that quickly probably not but now that we're here what can we expect in the future well we just said it in terms of the Kegers right so am I buying lamb research even after this massive sell-off daily oversold conditions am I buying it well I'll leave you with the bloom energy analysis if you have a strong stomach and you think it's overdone and you believe in the AI build out and you believe in the resilience of it and you want to hold it for the next four years and see what happens and you're agreeing to pay a above historical multiple for this business then you would buy it if you don't then you wouldn't touch it it it's as easy as that guys right I can't tell you to buy or sell things I can only offer you perspective and have you realize oh okay so that's what we're dealing with if you want to assume that risk and you think the market is wrong then you would be a buyer you don't want to assume that risk and you rather just not play it and play something else and that's perfectly fine as well and that my friends is what makes a market it's a game of expectations right so keep that in mind moving on to and this AI build out guys is like is revolutionary like we haven't seen this stuff in like 25 years so it's uncharted territory at this point you know we've never seen the mag 7 blow all their free cash low on what they believe to be humanity changing technology right it is this historical build out it sometimes commands historically strong multiples but there's also you know historically big concerns right now so it's a lot of noise right now so now let's move on to company number three and you will see that it's more of the same Western I'm spending a lot of time in these earnings because I think it needs to be said it's it's more worth it for me to spend more time in the earnings rather than going over the technical in my humble opinion which is why I'm spending so much time on them but I digress anyways let's get into Western digital same concept beautiful earnings stock down not only on the day but in the after hours as well after the earnings release they're currently down about 60% from their all-time highs but this stock from last year if we take the tariff flows it's a bit unfair this is a 25 26x wild absolutely wild if I take it from October of last year while it's a little bit less impressive if I take it from the October lows of last year to the peak that's still a 6x from October last year to where we are right now we're still up 3x so should it have gone up this fast this quickly or not does it deserve it or not let's play that game again guys you guys getting used to this game right now right let's get into the numbers here and this will include a little bit of a snippet of the games that analysts play sometimes because some of you guys think they have no idea what they're doing they just rate stocks higher when they're going up and rate stocks lower when they're going down you're 12% beat on EPS 5.5% of revenue but wait till you see the guidance revenue was up 55% year over year EPS up 161% year year staggering gross margins staggering 58.1 on adjusted basis revenue guidance they crushed it they raised guidance by 10% stocks still down adjusted EPS they raised EPS guidance by almost 20% for next quarter that's an insane raise okay still stocks down the after hours gross margins improving a little bit right there now pre cash flow is the only negative thing of this entire earnings it came in slightly under the required estimates right there adjusted operation income operating income was a bit higher common stock repurchases hey at least they bought back a billion dollars worth of stock on a $132 billion business which is not that bad and thereafter fiscal 2027 is off to a strong start with results exceeding expectations they're not wrong driven by robust customer demand and disciplined execution and that's kind of a testament to what's been happening here what about the headlines how do the headlines treat this one Western digital shares slide as cost pressures how much higher they expect capital expenditures to average 4-6% of revenue over the next five years with the ratio running modestly higher over the next two years management said that's not that much capex overall guys not that much to pump out what they're doing but just this slight little increase in capex the sheet was like oh no we're done we're going a bit further here demand visibility once again we'll play this this game again visibility is extending further with high conviction and the durability of HDD demand okay hard drives visibility to 2030 and 2031 across the top seven customers demand forecasts continue to increase each quarter customers are extending planning horizons into the next decade demand is broadening beyond core and cloud or hyperscaler into enterprise neo clouds and AI frontier labs creating a larger and more diversified base the visibility is so strong they extended it into 2030 and 2031 supply constraints kind of like lamb research which was just covered tight supply environment expected to persist industry and company demand growth remains strong so it's not a demand problem it is still very much a supplied side problem we've known that for the past three four quarters at this point capex expected to modestly grow above the long-term 4-6% revenue range over the next two years as we said to support what though heads and media technology factory automation and higher density not necessarily unit expansion that's why they're very tight they're expanding the amount of they're expanding the well let's just say the amount of they're not expanding units they're expanding the amount of capacity per unit that they can ship out in terms of the well the amount of terabytes per hard drive essentially right so the ASP per terabyte rose 28% year ASP is average selling price so they've still have a lot of pricing power which accelerated from the high teens in the prior quarter driven by pricing strength and a mix to higher capacity nearline drives and different pricing advantages near term headwinds from input cost inflation namely the DRAM and the NAND used in drives in a tight broader supply chain the cost per terabyte reductions are expected to be below the long term 10% annual target in the near term through value engineering which is underway so they're trying to find internal cost savings per terabyte output but the other day some other that's what they're doing internally but the DRAM and NAND inputs used in those drives are still something that's keeping the input cost quite high so they're trying to do as much as they can internally but the NAND and the DRAM that they're using in those HDDs sadly that's a fixed cost for them that rains excessively high at the current moment in time and then they talk about product ramp obviously competition because we know what dropped these stocks a lot about two weeks ago you remember this big old drop right there 10% drop on these names that was the news from Toshiba so what does the company have to say about that output from Toshiba so Toshiba reported plans to roughly double their AI data centric HDD capacity by 2027 raised near-term sentiment pressure but WDC's response stresses technology leadership long-term agreement commitments and supply tightness as structural supports no change even with these Toshiba announcements no change seen in long-term industry or company fundamentals despite concerns over incremental capacity ads from the smallest player Toshiba and industry consolidation chatter demand reigns strong at 25% CAGR in a tight supply environment so they were asked on this earnings call hey what about Toshiba well they said Toshiba no impact to their long-term visibility moving on a bit further here what did the analyst community have to say about this one so here's an analyst downgrade from from who this is give me a second right here Cantor Fitzgerald okay so look at what they say at the bottom end here okay reflecting the overall market sell-off and lower overall multiples which we spent the past half hour talking about our new price target of 625 is based on 15x our updated calendar year 2020 EPS estimates they dropped their price target from where from 900 to 625 why because of the market sell-off and lower overall multiples meaning the same thing that we said here about the other two companies when we covered LRCX when we covered Blue Energy multiples prices look where price sales got this is a company that has been in existence for a while right now WDC I mean you guys have probably used some of those in your custom built computers for the past what 20 years there are boom bust cycles usually previously associated with the consumer this time it's enterprise obviously now that being said particularly the multiples here same concept look how high the price sales got sorry the gross margins of the orange line the net margins they peaked a couple quarters ago they're not normalizing or whatnot their operating margins also are very good so do they deserve a higher multiple than maybe five years ago when their margins were a lot lower a lot lower like a lot lower okay sure but how much is the question nobody knows guys this we're all going through this together right we probably know that they probably shouldn't trade at a forward maybe even 15 price to sales if this is the best that their earnings profiles are going to be and same as with lamb research and bloom energy I mean look at these margins these margins are ridiculous at least in the past two quarters ridiculous and they still are ridiculous if you look at the guidance here okay nobody's doubting this company will expand but it's the slowing of the growth rates and the allowable multiple now they give good visibility said demand is still through the roof that's not the problem here it is should this company that previously was allowed to trade at a one price of sales multiple with lower margins and a lot lower revenue growth we agree with that we can give it a bump because of the visibility the demand the growth in margins the growth in revenue we can give it a bump but how much is the question nobody sets rules guys I just want you to understand here because maybe modeling guys is a game of assumptions there are no rules here okay trust me I have a degree in corporate finance in university right not that it really serves you much in terms of like the real workforce and whatnot just like many other degrees but still I digress okay it's a game of consensus and estimates here and everybody has different assumptions all right assumptions on durability of growth durability of margins velocity of growth and sustainability of that and then you plug all those assumptions and variables into a model and it spits you out a fair value of future cash flows the present value right now there are no rules guys this is not physics whereby every time I drop either a ball or a computer from a certain height that the laws of gravity state that the object will hit the ground at this time because there's a mathematical formula that is replicatable in all standpoints right it is not physics there are no laws that say these companies should trade at this multiple the S&P should trade at a 20 or an 18 or a 24 it is all assumptions based on many different factors and it's a game of expectations if you're right on your expectations you make lot of money if you're wrong your expectations then you're wrong right there's no laws in finance like the law of gravity or certain laws of physics that are replicable through various different experiments where every time you get the same number okay that's not how financial modeling works which is why you see a bunch of analysts change their price targets because of the market sell off and lower overall allowable tradable multiples okay they'll justify that through various different things oh supply this demand this growth rates this growth rates that concerns this concerns that treasury rates this treasury rates that macro geopolitical uncertainties this that et cetera et cetera et cetera what we need to understand here is what should allow be allowed to trade at well you know a multiple of its former growth that's for sure but let's say we just take the baseline of what it currently trades at off of a big multiple re-rating let's say that this was unfair but that may be just like micron and all the other companies making a boatload of profit with great visibility maybe it should trade at what it trades for right now which is because before this company was not making money and then it does make money and anyways EPS is just less consistent than the last 20 years worth of sales data which is pretty consistent okay so let's say we use price to sales at a six forward on this company and we go into 2029 because this company as well is into their fiscal year 2027 already so let's say we use 2029 fiscal which in this case would be 2028 calendar and we just apply a seven forward multiple on price to sales for their future guidance of 32 billion maybe they even beat all right great I'll take it up to 35 I'll be nice let's say they do 10% more I don't know how they're going to find it maybe through higher prices for longer and maybe they can find new factory production output let's say I just even bump it up to $245 billion market cap that's how much it should trade for in two calendar years what's the current market cap right now it's 132 billion that's not that bad that gives you an 85% growth rate for the next two years that's not that bad not that bad at all right however that's if we allow it to trade still at a 7 what happens if the street just normalizes that these companies should trade instead of a 7 that they should trade back to like a 4.5 and re-rate these even further to the downside like this okay get out all this froth here re-rate it and then hold it at a 4 4.5 multiple what if that happens okay that because this right now we're using 7 in an you know I mean if you want to go up to 10 that's up to you okay you can if you want to that would be your ultra bull case maybe 7 is your base case and maybe 4 is your street reading to the downside with a bunch of overall market concerns permanently throughout this entire build out okay maybe it re-rates to 4.5 well here is your base case scenario right or your more bearish than base case scenario okay great so let's say I take that same 35 billion which is an increase of 10% on guidance in 2029 I'm being very fair here times 4.5 well then your forward market cap in the next two years would be 157 billion which over and above current price would only mean that you're going to make 19% ROI in the next two years so you see there's a great difference between the bear the base and the bull case scenarios in other more predictable companies such as a Procter and Gamble or dare I say even an Amazon or even a software company okay your bull base and bear will be a bit tighter the problem with these companies in the AI space is there's so many so many different perspectives so many unanswered questions surrounding debt the duration of the cycle there's just so we've been over them many times in this video I'm not going to repeat myself again but there's so much divergences between the peak bull even base and bear that your kegers differ so wildly okay so wildly and I'm just here to say if you can make these I keep I'm going to say cash though because I'm so used to real estate but if you can make sense of these in a bare case scenario of a multiple contraction and the keger still makes sense then these companies still make sense to buy here if you cannot make sense of these at even the base case or you don't believe in them or you think it's gone too far too fast and you think there's going [01:28:11] Speaker ?: to [01:28:11] Speaker 1: be a big unwind you're not going to touch them these companies require a lot of risk tolerance a strong stomach an optimistic view on the future to give yourself the function of a base case thesis of this holding a 7 price to sales into the next two years off of declining revenue growth still good but declining and declining EPS growth still good but declining over time if you can say that I think it still deserves a 7 and that's what I'll model for my base case and maybe I can get an 80% return the next two years then this trade makes sense to you if you think it should only ever trade at a 4 then this trade will not make sense to you at all that's only 20% over the next two years which is still okay right you know it all depends on what do you want to model for but what you probably shouldn't be modeling for to be quite most retail investors probably realize that by now essentially saying you know this what they did right here that's like three years of growth in one year it probably should have done something like this instead which would have been very good still but instead they chose to go turbo mode and price everything really quickly and people couldn't get enough of it and now the kind of expectations are meeting more realistic outcomes and people are saying hmm maybe there are a lot of unanswered questions and maybe we should taper back our multiples and be a bit more conservative well that's what happens multiple expansion into peak euphoria and peak expectations and compression when the market has unanswered questions that only time will solve all right and that is going to conclude our earnings presentations for the day I spent a lot of time on them it could have been three different companies guys we spoke a lot about this with ASML last week and TSMC we spoke a lot about this in Q2 so I will use these this earnings presentation today as the barometer of expectations so if any of you are curious well hey in terms of the companies that have earnings maybe like next week if we go into next week and we go into the end of the earnings season here and look at other companies that might be reporting such as Amphenol or G Vernova or Caterpillar because they're a big component in the AI build-out trade right or any other company literally guys pick one pick anyone whether it's Dell SanDisk Seagate LRCX AMAT KLEC pick one TV Caterpillar as we said train technologies fixed comfort systems right you're talking about you want to see another example of this fixed comfort systems look at this chart on three month time frame it's an HVAC company all they do is HVAC systems commercial grade still okay fixed comfort system plotted on physical AI right here I'm not I'll just show you what I mean right here okay so here's what I mean for this AI trade doesn't mean the I trade is not good it means that expectations are being reset a company that formerly would have traded at a price to sales multiple with lower growth lower margins yada yada yada yeah one what they used to trade at one to about two price to sales peak is a six three times traditional valuation for this four two three times the growth obviously but when you come into once again peak S-curve growth and the street starts pricing that in you're still growing at very good returns but should they have done this maybe over three years instead of just like you know one one and a half maybe maybe you know what I mean so what you're seeing right now across the board here is a multiple compression a re-rating of euphoria and peak optimism with no problems whatsoever to now people being like oh okay wait a minute maybe we have to have a more realistic outlook if we're now beyond the peak peak growth with relentless demand and relentless commitments from the cloud providers you know the hyperscalers and things like that you're beyond the peak here should you still deserve peak fundamental expansion or should you compress a little bit and normalize the multiple to I'm not saying a that for the next two three four years so the floor of this sell-off will be higher as a multiple okay but we can no longer model for this peak right there that was a bit excessive so whatever company you're looking at you need to compensate for multiple compression at this point multiple normalization however you want to call it it is compression from the peak but it is normalization as such which is why take your pick all these companies that went down today by phenomenal amount if you're wondering why they're all down by so much and so fast even though a lot of them are still off their former all-time highs Celestica all of them well now you know how to better view these companies to have a bit more realistic expectations for the next two three years and that is all about these earnings as you further into it as I said guys I'm not bearish on the AI trade I'm not trying to be overly bullish on it or overly bearish I'm just trying to set realistic expectations and we've been talking about this now you can't say it's new we literally went through this same discussion in July when we covered a lot of these stocks as well and we were saying be careful what your expectations are whether I'm buying or selling them but you guys should probably know by now right if we're looking for trades you're looking at positioning wouldn't you want them to find an established base recapture some of their EMAs and maybe play the uptrends you know so like it's tough to buy these on valuations alone because you just said they're going through multiple compression right now it's tough to buy and say we should go back up here because we were there once upon a time do not fall into anchoring bias guys it's one of the worst biases in the entire stock market okay you need to look at things as they are right now with the data that you have right now you can't say just because this stock is down 48% from the all-time highs it's a good not a good anchor that's not a good anchor at all so do not fall into anchoring bias my friends and if you're looking to trade these semiconductor names as I said a lot in the recent videos guys just try not to step your foot in front of the steam roller in front of all these earnings next week and to God knows what happens excuse me Lord knows what happens with the Iran Lord knows what happens with the Iran situation try not to step in front of the steam roller when you know that there's multiple compression for many very valid reasons that's all I have to say for these earnings spend a lot of time on them probably way too much time but you guys know man context is everything and I just want people to be safe in this market environment and understand why the moves are happening not get caught into very awkward anchoring bias using prior highs and saying it's down so much it's down so much from the highs it must be a buy here be careful with that always keep your fundamentals in check for a very big cycle trade let's be honest AI is life changing it's world changing arguably it's one of the biggest infrastructure build outs of all time but the execution phase right now we just passed the funding phase when everybody is euphoric all the mag 7 companies open AI anthropic throwing a whole bunch of money around for data centers well now the data centers are being built and there's a lot of noise how much debt how many these companies will have to dilute in that process what about the construction timelines will they be pushed back will certain counties and at the end of the execution phase how much revenue how fast will we monetize all this AI spend this is a question mark the execution phase and although we can model for some revenue this too remains a question mark so I'm bullish on AI I'm bullish on the technology but you have to understand what phase of the cycle you're in and temporary expectations a little bit and just be realistic at this point right not saying that the AI trade is done forever and that there's never any money to remain in it it it'll ebb and flow obviously but as long as you're approaching these trades with a grounded logical basis then it will be impossible for you to ever get caught off side and say oh my god I can't believe these names are down so much well to the flip side you know in with all due respect a lot of people were saying I can't believe these names are up so much you know we were talking about that while it was happening right it's like you can't believe if how they're down so much well you could probably also not believe how they're up so much and they kind of go hand in hand it's the nature of parabolic moves when a whole bunch of things get priced in really really quickly then you have to discount those expectations and maybe find a bit of normalcy and it even happens and you might say well it's because of it's an AI bubble I mean this happens in many other assets guys lest you forget what happened with gold you know no AI bubble there but the same thing can happen sometimes when the trade gets crowded even in gold sometimes it has to go through a big cycle a big downswing and get back to a bit more normal price appreciation here over time that's just usually how markets work that's everything let's another TA it's going to be another two hour video I feel it guys so I might not have time to go through the long term portfolio buys you can just reference my previous videos the past few weeks you'll find a couple very nice ones okay but now we'll probably just get a chance to go through the technicals and maybe this big tech list I do apologize I spent way too much time on earnings but I think it's very important because this is the trade that everybody's concerned about I spent the last few weeks talking about the rotations and how I was buying different value things different dividend things and stuff of that nature I'm not really buying growth right now I've said that also in the past few weeks of time I promise you guys done on the S&P and the Q's it's tough to say you got all this stuff in the way next week all the Microsoft Google Amazon earnings and so many more you got Intel you got a couple big players here guys Intel Caterpillar all things that will affect the direction of the AI trade at the same time you have the Fed meeting next week and PCE the same time nobody knows what's going to happen with the Middle East in the midterms midterms are also about two weeks away and like I said nobody knows what's going to happen with the Middle East escalation no escalation peace deal no peace deal it's a toss up big X factor right now some of you might think for sure they're escalating some you might think no that's not what's going happen but predict right but just say that certain technical levels or certain technical setups will hold there's just too many big catalysts the area the big line in the sand as we said on the S&P as we move into the vehicles here the big line in the sand for the S&P now that we're losing the daily option even though we have nice market breadth the equal weighted SPY that's where the money is currently rotating right now it's moving from concentration to broadening out which is a good thing for the overall markets okay at least money is not leaving the markets it's just rotating around which is still a good constructive thing for the overall equity markets which do have a very strong earnings profile at the end of the day and this is a broad based profile not only semiconductors big you lose a weekly it takes a while to get back so if we do flush this you have to reset your expectations of growth capacity and recovery capacity here into the end of the year you give back too much you know then you can rally into the end of the year but you'll be rallying from lows and you may just make your way up back here okay if you can hold these prices in the next two weeks and all your volatility catalysts go according to plan and we hold these levels well then obviously we can have a more bullish expectation of it going to 8000 but the decisions in terms of positioning and level structure will be all decided in the next two weeks which is why my positioning in the next two weeks very light extremely light I'm not really rushing into the doors to buy anything we picked up some nice things when they were oversold conditions a few weeks ago but now I have my dividends I have my value I'm just letting them ride not adding to them and growth I'm still waiting to see here got a lot more earnings got the fed you got the midterms and whatnot maybe we can find even better discounts on semiconductors coming down from the recent tops I'm not in a rush to buy anything right now I've been very vocal about that on the channel for the past two weeks so pay attention to that level if you crack that you're going for your 12 monthly back test okay that'll be a top to bottom sell off on the actual S&P about 7-8% just shy of correction territory but not a stranger to all the 12 m8 retest that we've done many times in this bull market but also in bull markets previously right even if the 2008 the 2021 I mean you can see how many times we were back testing this 12 with other periods of corrections going further such as 2018 and COVID but you guys get the point a test of the 12 is very natural practice for the S&P when you have all the catalyst on the table right now to do that well you can increase the probabilities of that happening we'll see though strong rotation you may not get that drawn on the S&P it may just only be concentrated the queues and semiconductors as it has been right now as a function that's going to be a function of yields the 10 20s if they're on stuff pops off again oil is going to go higher the yields are probably going to go higher and you will see some pullback and take profit out of the equal weighted markets because at that point it'll be interest rates that'll be moving things inflation expectations moving things and then all these trades did well that are interest rate sensitive and inflation sensitive financials will pull back okay staples will pull back retail pull back utilities will pull back that's why I'm not buying these anymore we made some good bets on them when they were at their structural lows but now coming into the next two weeks I'm not you know I'm definitely not selling semiconductors okay right now to buy into these names right now here that's a poor rotation if anything if you're looking to sell semis because you're nervous which is fine if you're going maybe just maybe you get some better discounts here on staples as they've offered many times and whatnot you know or maybe you can re-enter semis when the conditions are more favorable and you have some uptrends but if you're looking to sell anything right now the rotation at least in my opinion if I take profits on you know staples or retail or utilities or whatever I'm looking to take profits on or cover some losses or take some accrued profits from semis this entire year whatever I'm selling right now what I'm buying is US dollars I'm just buying cash too many binary events for me over the next two weeks again for fear of repeating myself for the 5,000th time earnings next week all the mag 7 CapEx all that good stuff the Fed the midterms and Iran that's four very big big big big things so if I'm selling anything for profit or loss what I'm buying is US dollars that's all I'm buying right now I'm waiting to see rather wait and see especially when this is the last big volatile period of arguably probably the entire year it'll all come to fruition in the next two weeks same concept with the QQQs right now much further than you can throw them we are under the EMAs EMAs are crossing the downside for the first time since July daily downtrend bears are in control not yet oversold conditions sorry my head's in the way not yet oversold conditions on the daily if you do breach down below here you might clip an oversold it might trigger a bounce we will see is the bounce going to be as legendary as EMAs will be here are they going to reject and go further more because of Iran or whatever it might be at the time that's what we don't know so there's no sense in guessing here or predicting here you just have to say listen it's times of very high uncertainty so I may not want to call it either way okay so support 707 to about 695 you're into it right now as I said no dealer of sold conditions it's an important level because if you lose that level you lose the weekly higher lows and you forfeit the weekly uptrend at that point could take a while to come back but at the day you might be looking for the 12 EMA back test 677 same concept the spy many times during any bull market it tests the 12 moving on to financials so financial same concept beautiful bounce off the lows but can we guarantee follow through over the next two weeks very tough to determine guys but all I can say is that it's a very nice option right now the bulls have created a lot of space on the weeklies here is it going to be the all-time high v-shape recovery continuation or we'll get a little bit bumpy here and we have to reset it in two shots that could be very logical as well if that does happen over the next two weeks pay attention to the retest down here 54 that's where I'd be looking for possibly some reload longs at this point am I chasing this trade all the way up here no there's a few trades though that are a bit extended right now like insurance we hired this one few weeks ago is a beautiful breakout retest the trade is now gone so if you're looking at Berkshire and whatnot trying to play the breakout continuous breakout on Berkshire I mean it's overbought conditions 81 in the RSI tough to chase up here at least per my style you guys are free to do what you want Chubb same concept all-time highs right now Allstate same concept all-time highs but there are some laggards if they have strong fundamentals and coming off a big base of support with curling EMAs on the weekly food for thought what about the banks JP Morgan not that big of a bounce not a bad area to play into JP Morgan if you love this bank for the long term 200 day EMA Bank of America still sold off its all-time high by a lot pricing area you should be paying attention to this one here first nibble this one down here possibly for Bank of America if you enjoy this company as well huge monthly retracement if they make the full retracement with the entire financial sector coming down and it drags down Bank of America you'd be buying it 22% from the highs 28% from the highs and no the anchor is not that high on price to book Bank of America is probably just going to continue its downtrend it is already oversold which should catch your attention here oversold on the daily and almost oversold on the weekly so you know what happens if it comes down to this 200 weekly EMA could be interesting just pointed it out moving on to XLV healthcare right now healthcare as well 70 on the daily RSI good enough to chase up here we know what chasing ends up with sometimes right Moderna massive pullback over the course of today still would have massive weekly upturn overall but if you listen to the first half of this discussion today with earnings presentation and what earnings presentations parabolic moves story of today is parabolic can't really say that you're early on these types of moves so if you take a look at AbbVie also pushing highs right now other trades such as Eli Eli is coming off a better stronger base here that they built for a while but still the expansion like if you're buying this right here technically speaking you are late you're extended from the weekly EMAs at this point the better area was the one we were talking about a few weeks ago and the month you're also very extended so if you guys want to chase it up here ready to do as you want still strong momentum right now can't guarantee that'll continue forever possibly the back test could be a nicer set up at least that's the way I enjoy taking trades or whatnot but healthcare still very strong semiconductors moving through okay you can argue that some of them are oversold conditions they've come down way too much and there's too much fear and that hedge funds are shaking you out of positions with their massive amounts of shorts that are currently in like the 90th percentile of how short they will ever be they're massively short as short as they can possibly ever be is it a shake out possibly very possibly can get some oversold bounces possibly but can you guarantee those bounces though through all the earnings next week through the Fed meeting through the midterms through an Iran escalation I don't know I'll be very honest with you guys some guys out there on other YouTube channels will tell you that they do know for certainty you know take that for what you will you know I'm at least you know not proud enough to say that I know how to predict these markets into massive amounts of volatility and a whole bunch of external factors that we can't control I'd just rather let the price action tell me build a nice base of support give me a nice daily uptrend and then we can maybe play with a tradable stop loss those are playable and to a falling knife set off breaching below supports trade some of these local lows that's the way that I like to do things instead of just calling you know bottoms and tops every now and then I'd rather just wait for the trends to shift and the price action to tell me and be through most of the volatility catalysts so we'll just have to wait and see for semiconductors overall but definitely a lot of pain recently we're on the Russell remember what the Russell is okay so IWM sector waitings right here okay so just remember what the holding ratio is for the Russell at the current moment in time you'll notice that it is 21% healthcare it's not only tech okay a lot of people make that mistake of thinking that this is only unprofitable tech companies not the case 21% healthcare 18% financial services and only 15% technology with industrial cyclical real estate and whatnot so obviously if the market okay the Russell is just like a small mid-cap expression it's not the same weightings but you can kind of view it like the S&P it's a whole bunch of different sectors and when you know that a lot of those sectors have been bullish recently such as biotech small cap biotech and healthcare okay and financial services XLF has been on upswing so you could also argue that a lot of the small and mids have been on upswing as well well your two best sectors are performing where maybe technology is not so it's a big push and pull here but you know more sectors are pushing than pulling to the downside so that's why the Russell is trying to find a base of support we'll see the risk appetite is not fully there for small and mid caps in general but still that's why the Russell is not falling off a cliff as aggressively as semiconductors are right now I just figured I should put that into context although still no confirmed daily uptrends and the weekly still in full bear control we will see if this is enough of a support area to stop them and the 12VMA backtest has been completed the next few weeks will be crucial for the Russell to determine further downside expansion or trend reversal at which point maybe we can play this one we'll just have to wait and see moving on to other sectors of the market xlp staples staples can we chase it here 75 rsi if we go back in history what has 75 rsi taught us in the past that usually it's maybe not the best time to lean into staples even though it seems like a very good safety trade here there are times at least this is the way I trade and I invest guys okay I look for things that are trading for low multiples in relation to history I don't want anybody to say yeah but you just said you look for oversold conditions and low multiples why can't we apply that to semiconductors well because it's not the same thing okay it's just not the same thing right when you can call this a discretionary staple as you wish okay when I have pepsi here okay it's not the same thing but I know some guys will say well you just said for semiconductors you you know you just said that even though they're oversold and they've come down a lot from their highs that they might not be buys well it's the it's the context where is pepsi in relation to its 10 years last price to sales it's at 10 year lows not 10 year highs coming off an even crazier high right it's at 10 year lows okay so whether you consider this one a staple or whether you consider this one a staple or a it is a staple some of you guys think it's discretionary end of the day right tomato tomato at the end of the day for some of these companies like McDonald's they put it here into cyclicals I would argue that it's more of a staple than it is than it is a discretionary name but that's just me right you see names like you know names let's say let's just pick a few of them right I don't know let's look at let's look at maybe Procter & Gamble or something like that it's a big component in there it's the first one that comes to my mind so let's look at Procter & Gamble right the Procter & Gamble you look at the chart here okay coming off a very beautiful base multi-low year prices multi-year low prices 2022-2023 yeah nice long dated base of support and then top line industry meaning the entire sector pushing pushing pushing pushing wasn't oversold but it built a very nice structural base of support so some of them were oversold some of them were not this is a very nice structural base of support they had their earnings and trust me guys I mean it's Procter & Gamble their earnings were very boring to say the least there was a nice bump on EPS right there but very boring earnings okay in relation to semiconductor earnings but where were they coming off from okay they were coming off of a this is it might look like a not long chart this is 2019 they're trading at 7 year low price to sales multiples okay so just keep that in mind 7 year low price to earnings multiples very low structural base whole sector coming live a little bit so you get the pop would I buy it up here I mean I think you guys know the answer right maybe on a rate test a little bit of weakness maybe we can kind of lean into those plays again but that's the whole concept so the whole sector right now 75 on the RSI I'll put a little line right there little yellow line you tell me if every time it comes in a 75 RSI if it's a good time to buy it when was the time before that right there okay I'll just highlight these when do we have these previously I mean okay let's go for 70 yeah right here that was the top right there that was the top right there that was the top right there that was the top right here that was the top right there that was the top I think we're getting the point do I need to go further probably not right so should we be chasing should we be exiting semis and piling into the safety trade thinking that we're so early up to you you know I won't stop you there's still some names you can pick and choose your names there's still some names that are low they've come off their lows but they're still way way way way down on a on a multi-year basis right so this is like a pick and choose environment not all of them will fit the bill some of them still will but it is still very still very much a pick and choose environment like look at you know Colgate Paul I'm spending way too much time on this video sorry that's not the right Colgate Paul Molliv I wish they would just give me the regular one Colgate Paul Molliv multi-year lows yes or no no no multi-year lows so are you late on the chart arguably okay are you getting a great fundamental discount here on Colgate Paul Molliv you're looking for this one because I know some of you guys will just go through these names individually right well you're coming off of a low valuation here but you're a bit late okay so some are like up to you type of trades you know what I mean but some of them are trading at better discounts than others as a function of their multi-year bases some of them you're just a little bit late too you know like these are big moves guys on staples don't move like semis right this is 15% in two and a half weeks that doesn't usually happen for these companies just keep that in mind consumer retail push and pull this entire year we've been very clear on this one whether you want to go for apparel or restaurants or whatnot it's completely up to you okay but this one very this one is going to be push and pull the next two weeks guys got a lot of earnings you got Iran you got the midterms you got the Fed the Fed's going to impact this trade a lot that's why it's been push and pull this entire year it's so tied into oil and interest rates so tough to make that call right there it hasn't expanded that much but still it might just be very choppy still restaurants clothing brands apparel all that good stuff two hours and I haven't even done the big tech names yet wow utilities utilities is one this is one of the exceptions utilities is still one that and is an expression of how much has come down recently yes it's popped off from the lows I would still be a buyer here but I also be buyer on a retest function I do really enjoy utilities for the expansion here into 2027 for the grid because it's a permanent expansion of the grid all these companies will be having permanent bumps in the expansion of their their revenue profile essentially right they'll just be bigger companies more demand and the electricity shortages guys especially for the grid they're multi-year in nature this is everybody knows it by now probably you know this is the real bottleneck like forget about memory and equipment and all that stuff hardware and GPUs and CPUs energy is the real real real bottleneck like the big one the mother of all bottlenecks is energy people are coming around to it right now so I'm still a fan of utilities on that multi-year basis function so keep that in mind that one is not close to all-time highs on an ETF basis but it has popped off the lows recently it has seen some nice expansion but I would still be a buyer as I was on the downswing I started buying it as a matter of fact into here and through the way down so it's not as if I started my positions here no I started them there and leaned into them so I would still be buying around these structural you know monthly lower areas right here and waiting for the progressive expansion you know of this it's slow very slow sector guys but you know utilities I am a fan and then real estate obviously is going to move with interest rates it's popping off the lows you guys know the drill I like some of the REITs you know whether you take O or triple net those are not you know they come down a lot they're still around their structural lows so those are still doable in my opinion they're going to move with interest rates VG or you know public storage you guys know that I've been a big fan of talking about VG and public storage especially coming off their lows so good dividend yields solid companies trophy assets arguably right so just keep that in mind and then XLE obviously this is just Iran a proxy for Iran altogether if you think that Iran's going to escalate then maybe you want to take XLE higher keep in mind though they got all their earnings next Friday a lot of the big ones Chevron Exxon Mobil you know BP and things like that Royal Dutch Shell on the Thursday session there so you got all those earnings they'll probably have very very strong earnings to say the least right but it's kind of tough to bid energy up here if I were in energy like for a long-term position like I wouldn't be selling my oil measures up here but I would enjoy focusing on still in the pipelines like an Enbridge or something like that like you guys know like a few of them like Enbridge a Kinder Morgan energy transfer you know like take your pick there are some MLPP ETFs as well that some of them have a bit favorable more favorable taxation because you guys in the US I think you got a specific type of taxation for them if I'm not mistaken so there are some ETFs that provide a bit more favorable taxation on the dividend streams but anyways that's a different discussion right now but I still am a fan of the pipelines great infrastructure obviously and they haven't pushed as much as the oil majors and they are big in terms of data center players as well you know not only that but still a good component of the data center requirements on a permanent basis of course that being said guys that's everything I think we'll skip we'll skip over gold and gold silver and bitcoin for now I mean we talked about this many times like the bears are in full control of gold and silver right now and they're just coming down people are searching for yield right now yielding assets not metals they're searching for yielding assets and I'm sure somebody's gonna bring up the oh there's a nuclear fusion company that was able to create gold from what was it mercury or something like that like they compressed or infused mercury with different atoms and they let it cool down and it created artificial gold for the first time basically breaking the laws of alchemy or like changing it the output is so small guys it's so small and to do that on a permanent basis is so wide so people on twitter or whatnot I know some of you guys don't watch twitter maybe for the best sometimes but you might have seen this in the news like oh people created artificial gold it's so small so small you need so much power to do that in the first place you know it was a nice experiment they made it happen but for it for them to say like oh no gold is gonna no longer be a hedge or a safety trade or a counter fiat trade like forever and ever like that's a very far stretch a very far stretch but that's the news cycle in the last like you know two three four five years with the propagation of social media and the diffusion of the speed of diffusion of information and whatnot people see a headline immediately jump to either of the most positive or peak negative conclusions and like that's welcome to the modern day and age you know Bitcoin and Ethereum not doing too much of anything they're holding up but really not doing too much of anything bears in short term control you need to see a daily trend change you guys know that by now that'll only happen if you get more clarity in the overall markets in my opinion especially in relation to the overall risk risk on trade but that is everything for your overall market rundown now let's get into our big tech names and the rest of the tech names and would you be surprised that Apple is the only green name on this list it has been for all intents and purposes the Walmart of big tech right no CapEx spend 100 billion dollars in buybacks almost every single year over 100 billion dollars in operating profits every single year resilient ecosystem and you know what's funny is that this company was chastised and criticized all of last year for the lack of their AI strategy altogether and you know and then they've somehow proven to be like one of the biggest winners of AI without ever participating in AI so it's funny how the turns have tabled I guess for Apple but I'm a proud shareholder but I still wouldn't be buying any up here you guys know the drill all-time highs obviously very nice structure but Apple has earnings in two weeks worth of time tough to say they're going to move up or down after that earnings presentation they had good earnings last time still went down 7% just got to keep that in mind they are extended right now against the weekly EMA a little bit and extended especially on the monthly EMA usually this is like the extent of extension that Apple creates with its 12 EMA before possibly going into a just a multi-month retracement a healthy retracement at that but I wouldn't be buying it up here at least personally not financial devices what I'm doing I'm not buying it up here over even over 310 340 the valuation is just too high okay same concept I'll bring you guys back to my good old tool here Fiscal AI so if you look at Apple here in terms of the traditional earnings multiples or sales multiples I mean you're trading at the I'll use the annual basis here you're trading at the top top top and the highest valuation that Apple has traded at since the boom here in 2020 even higher you are effectively paying the highest forward multiple on Apple ever like ever and same thing for price to sales you are paying the highest price to sales multiple on Apple this little cute blue line right there sorry let me take off free cash flow it's being a pain let me take off free cash flow this little blue line right here you're paying the highest price of sales ever so once again just like staples if you're thinking like hey let me be smart and sell out all these names that are not working and just buy Apple up here because it keeps going up just understand what you're buying into I just want people to have perspective if you still want to go through with it all power to you wishing you the best of luck but that's why I have been saying for the past few months even when on this correction at 310 I was even saying at 310 I'm not a buyer why? because we're still at the top end of the range and I just don't like investing like that I'm a kind of bottom end of the range type of guy but you guys probably know that by now maybe that's why you enjoy the channel at least I hope it's why moving on to the next name here AMD so good old advanced micro devices here AMD off its recent highs is it a buy the dip opportunity are you still early on the AMD trade or if you've been listening to any of my live stream recently or live streams any of my videos recently you probably understand that probably know this peg ratio needs to be taken with a grain of salt why? well because of all we just covered with LRCX and things like that if you apply a normal price sales multiple sorry of 10 into 2028 you end up with a casual share price here of let's do it for you guys no not that's the bonds sorry about that so AMD a lot of very bullish price targets for good reason strong company tantamount in the AI build out right now what if we just normalize 10 price sales into 2028 well 10 times 125 billion maybe you think that's more that's a 1.2 trillion dollar valuation right now they traded 829 billion so is there still money to be made 50% ROI over the next two years is there still money to be made on AMD I've said this the entire time so far while we've been up here yes there is probably still perhaps market beating returns to be had in this stock provided that everything goes perfectly okay however you cannot say that you're so early on AMD just because it's gone up this much right don't get into that bias right there if anything you know I'm just trimming back my AMD exposure for now because the easy money has been made on AMD so far but we'll see what they have to say for us in earnings I'm expecting great earnings and shout out to Lisa Sue you know she's doing an amazing job right there but at the end of the day it's another case of this company like should it have gone up this much this fast or should it have been maybe more normalized here to this price through 2028 I'll let you guys be the determining factor on that moving on to Amazon right now so Amazon Amazon down about four and a half percent in a support crack support into earnings are coming right back down there obviously we'll see what happens I'm expecting great earnings but it's a toss-up whether or not they're going to be able to rally after earnings or slide I do like this valuation though not only on a price to earnings basis but also on a Amazon's a bit more different Amazon is a bit different because we're looking for operational efficiencies in their cash flows so you'd have to look at something like a price to operating cash flow instead of price earnings price sales if you really want to be fine-tuned on it but I still really do enjoy this company and you guys know I spent a lot of times this video talking about valuations versus forward expectations and whatnot you're paying 2.7 trillion for this business and their sales pipeline just don't forget where Amazon's going right with all their multitude of businesses over the next few years first company probably to be making a trillion dollars worth of revenue you are paying for their current multiple almost only their AWS business or their e-commerce business but not both what I'm saying here essentially is that in this share price for this market cap right now you are getting a few of Amazon's businesses effectively for free no matter which way you cut it so we'll have to see what happens with earnings but I still like this company but it will be prone to a lot of volatility nevertheless drops a little bit further I'll be adding more shares moving on to Google right now Google down to where we thought it might go to if they broke this range right there which they did daily downtrend right now bears full control weekly full control monthly still big consolidation right now but same concept with Google should they should they ran this fast this quickly debatable right so at 330 where they just left from you were trading at 27.5 times forward price earnings now if I use good old Google right here I'm just going to do them all at once today I guess we're going to make a long video it's not terrible right now but I'd like to find it a little bit I mean keep in mind right like last year we were buying this one forward price earnings ratios of like 18 17 at that point in time last year so here at 24 it's like midpoint of the range which is why like I'm saying I need a better discount send Google down like sub 300 and maybe you can talk but up here I'm a little bit greedy on my desired price for it they have their earnings next week we'll see what happens on to meta meta came down 7% and unfortunately while I was filming the video I did not see that while I was filming the video they got hit with an extra piece of news that added to the selling pressure today their earnings presentation remember they were up like 1% in the after hours but then kind of what killed it in the overnight session here if you'll notice around like 4 in the morning etc etc etc what really eroded this one was the market coming to terms with this piece of news that hit the stock while I was filming the video very late last night so I apologize for not covering this in my earnings coverage yesterday a New Mexico court filed meta platforms $25 billion over their Cambridge analytical data that affected I mean this is such old thing meta has been like fighting this class action for years now at this point so meta argues that they should pay a lower fine they agree that they were somewhat negligent in their discretion here but we'll see if they actually have to pay they're fighting it it's still under appeal right now but that piece of news definitely soured the overall chart you know from the peak of the earnings release yesterday 750 to where we ended the day today the 14% swing on meta right so we'll have to see but also what rubbed people the wrong way is the stock split because they've split it into voting class shares versus non-voting class shares and if you read between the lines that's Mark Zuckerberg wanting to retain control of the voting control voting shares but they're probably gonna have to dilute and that's what the market's been dealing with all throughout today and the most recent few weeks is the market's very quickly coming to the realization that a lot of these companies they're not stopping on CapEx they've used all their free cash those meta's free cash flow negative right now they're not stopping they'll either have to raise more debt or they will dilute shareholders okay until they are sufficiently they are literally going to they're going all in on this build out guys there's no way to put it right they are literally going absolutely all in and since these companies other than the cloud players like Amazon, Google, and Microsoft are showing good cloud growth so they have something to show for it right now meta has a nice new muse model but still no hardcore revenue for it just yet so you can clearly tell why the market is a bit concerned not only with meta but also how metas they didn't announce dilution yesterday but people read between the lines and they feel it coming so Google raised earlier this year 85 billion and you can clearly tell the stock has not been the same since so now the worry is that well is Amazon going to do the same thing is Microsoft going to do the same thing how often are they going to do it how much are they going to do it a lot of questions however that being said meta right now at 650 10% off of this price you're back down about a 19 forward earnings so if we're looking at buy and hold meta over the next few years even though it might be bumpy you guys already know this location right now is where I would be accumulating some long-term shares but short-term swing trades probably off the table for now very violent price action once again we're kind of back in the gulag right there we'll see if the bulls can protect this weekly uptrend but we'll see what happens right very uncertain environment for even the hyperscalers right now too much concerns around debt capital raises combination of both so the market has to work through it at this point Microsoft Microsoft also okay sliding from its highs earnings next week so keep that in mind if they retrace from these highs we're going to probably revisit this lower area here call it about 495 down about 476 weekly EMAs and structural support down there but one thing's for sure they're slowly losing the time frames right now on the highs even though they held up better than most it's been a great rally from the lows here okay so the only thing that I did at these highs is take profit on some of the call options the leap call options that I was building down here around these lows take profit was the all-time highs holding all my long-term shares though at this point in time we'll see the earnings next week NVIDIA NVIDIA just continues to plummet at the current moment in time down about 4.4% if push comes to shove over the next week or so with the CapEx guidance and things like that and you revisit these lower 200s I can make a case for NVIDIA down here okay at that point it'll still be structurally undervalued in my opinion NVIDIA as opposed to all the other names it already had its parabolic run it's now normalized and followed its EPS growth profile over the course of the past year year and a half so at least it doesn't have the same you know high valuation into low valuation that other stocks had that we discussed thus far which is why it still is a nice look for me into the you know 200 or sub 200 region so just pay attention to that we'll see what the price action does obviously anybody's guess right now time frames you know are in short-term bear control and the price action is just going to be a function of hedge fund flows and retail panic selling and things like that right so technical support level here might not hold we'll see if they actually get a bounce or not that's your weekly low so you lose that it'll take a while to rebuild the price action again you know as they kind of did this right here you got to rebuild the weekly uptrends progressively so keep that in mind Tesla not too much to say on Tesla they had their earnings yesterday same thing as the other companies they'll have to spend a whole bunch of money trying to do what they wanted to do for the energy business Optimus and things like that you know the pushback on Optimus to the end of 2027 or barely 2028 just gives the street a little bit more pause gives retail a little bit of a little bit more pause in terms of tempering their expectations so Tesla I'm just expecting this one to move with the queues honestly more self on the queues more self on technology you can expect this one to rotate down the one thing I'm not expecting though just off of yesterday's guidance I'm not expecting Tesla to re-rate to 500 anytime soon does that mean they're going to break down at like 250 you know debatably not as well but could they just get stuck in this like big old you know this terrible 300 to like high twos range they've been in for the past few years as they're looking for the new S-curves maybe I'm not buying though moving on to Palantir right now so Palantir a bit of a down day today but the bull's still protecting pay attention to 185 break that to downside daily downtrend and weekly attempt for some higher lows will be underway into structural support we'll see how they respond to it they had a nice clean down from it the first time but you know Palantir is on the chopping block as well for their earnings presentation in about two weeks worth of time so keep that in mind for Palantir I'm not buying up here valuation alone prevents me from doing that SpaceX down 9% so they round trip their entire earnings move unfortunately another company is going to have to spend a lot of money ramping their AI data centers and obviously that's going to come at a cost of raising capital things like that right so that's what the street's been concerned about so no secret why it's been down flush these lows 141 daily downtrend weekly will downtrend as well and after that if it comes down if it comes into here if they give me this one IPO true IPO price 130 or lower I'll be building some long-term positions in SpaceX been waiting for it for a while if it comes into me great I'll start slowly building my long-term position that I'll be holding for the next 10 years if it comes down there and I say I'm buying on the channel and then it drops I hope nobody comes to the comments say you said you were buying SpaceX it's down what are you doing anything I buy here guys 10 years I'm buying it I'm putting it in a vault 10 years is the time frame for me investing in SpaceX at these valuations that's the only way you can justify the investment here moving on to TSM and the rest the TSM moving to the downside breaks of these lows and these lows you're gonna be losing a key area of support right there and daily downtrend probably oversold conditions at that point too interesting location down here though into the low 380s and this is not one just like NVIDIA TSM's a bit different than the other ones like LRCX or whatnot they've been very consistent they never really went parabolic they followed their EPS curve I know the chart doesn't look like it but they have followed their EPS growth curve as opposed to EPS plus multiple expansion TSM didn't really get much multiple expansion they've really been in line with the last few years even pre-Data Center build out okay they've just always traded between a you know high 20s multiple and a high teens so now they're like back to lower end of the range which is why TSM's a bit different so you gotta understand that in relation to TSM which is why here it would be a bit of a nibble for me for long-term shares if I were looking for them moving on Broadcom right now Broadcom down on its lows obviously selling off the rest of the semiconductor industry I mean it was cheap at 340 it's even cheaper at 320 this one is is actually justifiably cheap whether you look at on it at forward price to sales or price to earnings with the growth the margins it also didn't really go it kind of followed a more natural curve wave expansion I'll show you that to you I mean I guess we'll be fair we'll do it on all of them right Broadcom same concept here right so Broadcom went on a bit of a parabolic move but this was like at the end of last year so this move right here was like the unnatural move since then they've grown into it at least there's that okay they've kind of grown into it they've kind of normalized to a pre data center build out priced earnings on a forward basis 2023 as a matter of fact that's why I say it's not that bad of a deal at these current prices in relation to its previous history okay I mean you can go back to like 2020 or like 2019 if you really want to and say it's still overvalued here but still you guys kind of understand what I'm trying to say here is that you've unpriced the entire data center move even though the stock price has moved the earnings it's followed in line with the earnings expansion better than other companies in the sector which is why I still enjoy it at these prices and even a little bit lower but I mean who's in control clearly the bears of the entire semiconductor trade right now keep that in mind Robinhood earnings next week not too much to say if they come back down here to the low 80s though that'll be a buy just because valuation wise it's too expensive for me I'm not buying call options here in earnings nor am I buying put options I don't trade into earnings at all I'll wait to see what happens if they dip here I'll buy more long term shares valuation down there at the like 80s to 70s is much more much more accretive to longer term compound annual growth rates than anything up here in the 100s to 120s so but I've been saying that for a while ever since we've covered Robinhood I've said I was buying down here I'm not touching it up here okay so I'm not swing trading it either and lastly but not least Micron down about six and a quarter daily almost on the verge of downtrend almost forfeiting these the revisit these lows Leopold liquidation levels 200 day EMA and kind of the same concept I guess we'll put Micron on the chart as well which is why I always said if memory doesn't work for this re-rating thesis if memory doesn't work and they trade for like four price of sales I mean I'll take off price of earnings because if not it's just crazy if memory doesn't work okay then nothing works see because memory Micron here sure the previous anchor at five times price of sales was maybe a little bit rich but it trades for and forget about price to earnings everybody focuses everybody's like trades for a four or five price earnings yeah okay price to sales is it more normalized here in relation to previous cycles of ten years right so you can see it's not really it's at the midpoint of the range right now does it deserve it with the longevity of their margins the amount of buybacks they'll be able to do not all companies will be able to buy back if they want to like 10% of the company per year so Micron is a unique case but it's why I say it's the strongest case it's the most visibility the most durability of these margins the most free cash though and the lowest multiple of all of them if Micron doesn't work none of them work that's the moral of the story here that's why if I'm buying any of these saying that well they've come down a lot from that's why the only one the only one that I'd be interested in buying here which is why I said I'm still interested in Micron here is because of those reasons it's not the same as the other one you might look at this chart and say well it's the same as LRCX it's the same as all the other companies you discussed during this presentation not quite not quite see we're back to 2023 2022 price to sales when Micron was trading for like $70 or sorry that's all when Micron was down here trading for $50 the price to sales has kind of fallen in line it's just they've grown so much more than everybody else with such stronger margin than anybody else such better free cash there's such a critical component not that others aren't but they're like the peak the epitome of you know the expansion of the AI trade if this doesn't work nothing else works if this doesn't work I promise you guys well I shouldn't promise never mind I don't promise you guys but that's my opinion if this doesn't work nothing works okay for the rest of the AI expansion trade you know you might think well you just did Western Digital why wouldn't Western Digital work it's not the same look at the expansion on the multiple here it's not the same thing at all look at this blue line it's not the same as Micron right so that is everything I had to say guys for the overall video I spent a lot of time in this video it's like a movie at this point 2 hours and 20 minutes my longest video ever but I'm like I said earlier this week guys I'm making the longest videos ever this year because it's been one of the most challenging years since I've had my YouTube channel and I really want to be I really want to I really just want to always be provide the most amount of education for you guys as possible so you guys understand what's happening why is it coming from the valuations why are people concerned about the valuations what are people concerned about the visibility the durability the debt cycle the Fed the interest rates the Iran situation and how it impacts people's penchant for risk the rotations in the market and all this takes time I would be doing a disservice if I just made 20 or 30 minute videos and saying oh support's here support's here this is the forward multiple cover earnings in like 2 minutes this is the earnings this is the price earnings ratio stock's down 40% from the highs this is the support so buy it if you want to who does that even help you know I'm not going to shout out other channels because all those other guys do a very good job but I just want to provide more context where I find other people lack context you know lack the educative qualities so I'm trying to give you guys the best that I can in terms of the videos here so hopefully you appreciate them sorry we don't have time for the long-term portfolios or the rundown but hopefully with just this video you guys understand I don't even need to go through any of these charts but that's why I do these videos the way that I do them is because from the way that I explain these videos using the sectors overall well then you guys can go in the individual charts and do the valuation models on your own and look at the charts on your own and relate them to their top sectors here how they relate to the sector and you guys can probably assume what I would say about various different charts if I were to run through them individually whether it's the semiconductor niche or the software niche or the software niche because of the resilience of their cash flows right or the consumer staples trades or the consumer discretionary trades or whatever there might be a few here there might be some exceptions but broadly speaking I think you guys need a pretty good idea of what I'm trying to say for most sectors in the market right now and that is everything I have for you guys today and I know it's very late it's like one in the morning for me spent a lot of time this video like I said in the introduction I do apologize I had a bunch of family things to take care of yesterday and today so I do apologize for uploading and filming the videos very late I will catch you guys on Sunday for next week's top 5 options video and I hope you guys have a good day in the markets tomorrow and hopefully this video helped out a lot of people at least it's two hours at least you guys have the next few days to watch it and absorb it because none of the stuff I said today requires any immediate action whatsoever okay so please don't feel the need to move super fast but there there it is that's your two hour and 24 minute video this is going to be the longest video I think I'll ever make because it comes at a crucial moment in time before a very important sequence of two weeks in the markets and I want everybody to be perfectly prepared for it that way you can say oh I wish I would have known this before hopefully I've laid everything on the table for you guys across multiple sectors the rotations the entire AI trade and what's happening and why hopefully now you can make an educated decision coming into tomorrow and this weekend reflect on your portfolios reflect on your sector allocations reflect on your margin and leverage levels be very careful with that reflect on the fact the next two weeks could be the most bumpy and volatile weeks that we've had in a long time and hopefully you'll be able to make sound decisions to manage your risks in your portfolios and that's everything I have for you guys today have a good one have a good Friday have a good weekend catch you guys on the weekend take care and peace