Why The Stock Market Panic Is FAKE: Understand NVDA, META, AMZN, GOOG, MSFT, SPCX and TSLA

[00:00:00] Speaker 1: The world is being shaken in its foundations and everyone thinks it's gonna end. People become biblical. They think this must be the end of days, the end of time, especially for anyone who's a shareholder or stock investor. And it's time to shed a little bit light on what is actually happening and if we should panic and sell everything or stay tuned and why. So what is happening in pre-market today? Amazon falls 7%, even though they reported pretty good earnings in my opinion. Intel plunges 25%, I think even a little bit more right now in pre-market. What does it all mean? It is very clear that we are looking at a very red day-to-day unless some miracle happens and we see a turnaround. If you look at the futures, Dow Jones is even, not much happening there. S&P down 1%, but the Nasdaq is a nasty 2.6% down and that hits stocks like Tesla, SpaceX, Micron of all things, SK Hynix. The entire thing looks like a complete bloodbath and we can be pretty sure it remains pretty bad. If you go through the individual stocks, you see everyone is getting hammered, even people who did not report anything. For example, look at this. AMD down an unbelievable 9.6%. They didn't do anything bad, right? They're just sitting there. They didn't even report. But because Intel is getting crushed, this thing drops like a stone. 10% based on what? We can look into Intel in a second. You see Amazon down 7.5%. They reported earnings yesterday. Was it bad? No, it was pretty good. Pretty much in line with expectations. A little tiny little earnings miss. The guidance pretty much intact. So it is a big question what is going on here. Google still selling of another 1% after its disastrous day yesterday. 12.7% down. Then random stocks like Robinhood, for example, also getting slaughtered because why not? No real reason here. Nothing happened with Robinhood. Meta. Meta was on the recovery path. Now getting a little bit hammered again. 1.7% down. Again, nothing happened there with that stock. Microsoft just reported amazing earnings and didn't get any, anything for it. When you look at that, it went up very significant, up to 6% after hours on Wednesday. And then guess what? Didn't get any reward for blowing earnings out of the water. And today also down 0.5% for absolutely no reason. MicroStrategy reported, of course, totally down because of the Binance hack and Bitcoin getting destroyed. So lots of negativity. One of the insanest situation is Micron down 6.5% pre-market. Even though everything that came out yesterday with Intel was a huge confirmation for Micron because Intel is getting hammered because their PC business is underwater. These people say the memory shortcomings are putting tremendous pressure on PC prices because you put memory into the PCs of Intel and then no one wants to buy it because it's too expensive. And Intel just said, this is not going to end anytime soon. We see no end insight for the memory shortage, which is very bad for Intel. But guess who's manufacturing the memory? Micron. People being concerned about Micron being in a cyclical business and the memory prices come crashing down. That is the fear for Micron. And now Intel says our fear is the price is not coming down instead of that going up and crushing Intel. So the market drops Intel because memory is too expensive and they're dropping Micron because memory is going to get too cheap. You see where this is going? Hey, to make videos like this is a lot of work. So if you enjoy it and get some value out of it, please subscribe to the channel. It helps me to grow it and bring this content to more people. Thank you so much. Let's get back to the video. This makes very little sense. Palantir, I didn't even check their report earnings soon. Not much dramatic dropping here. Then our favorites, of course, SpaceX getting totally hammered negative 4.25% after reporting probably the best earnings I've ever heard in my entire life and going up 10% after that last week and then dropping 9% because of an unlock. To be fair, there was a huge unlock for SpaceX. But now losing 4.6%, I'm pretty sure 4.2% after already going down 4.6% over the last month and over the last five days, 2% down. So getting kicked. Then Tesla in the middle of cyber cap scaling. Tesla scaling the cyber cap. People get very excited that even Tesla drops $8 for no reason. So in other words, the market is basically in total panic mode. Panic because it is clearly irrational what's going on here. It makes zero sense when you look at earnings, when you look at the facts on the ground and that's the exercise you want to do today. I do believe what we are seeing right now is clearly, clearly negative exuberance. People want to panic. They want to create an AI bubble situation. And when they don't get the data to back up that it's a bubble, they sell anyways. And that's why things make no sense. You can't sell Intel because you're scared memory prices are not coming down. And at the same time, selling Micron because you're scared memory prices are coming down. Which one is it? You can't have both. And of course, when you drop all the hyperscalers, we see that too with Nebius and Core Weave and all these guys dropping like the flies right now. Was SpaceX for that reason. You have heard and seen the outlook of Amazon, Microsoft, Meta and Google. These stocks are getting hammered. Amazon first in line, despite great earnings, down 7.8% pre-market. So you're telling me the hyperscalers are getting hammered for too much CapEx. Let that sink in. The market is telling them you're spending too much on CapEx. This is crazy. You can't spend that much money on CapEx on building these data centers. And on the other side, they're selling Nvidia, the Micron, AMD and so on and so forth, because they're saying the spending on data centers is not sustainable. They will stop spending. So you're selling one side because they're spending too much. And you're selling the other side because you're concerned that people are not going to spend enough. Again, you can't have it both sides. Either you're scared they're spending too much, the money goes to the other guys. So you don't have to be concerned about them. Or you're concerned that these guys who get the money won't get the money anymore because these guys are pulling back on spending. But you're concerned that they spend too much and they get too little. You're concerned that these people give these people too much money, but they don't get the money somehow. They only lose the money. The same way with the memory. So you see all these contradictions in this current market environment, which tells you irrationality is in control. And is that a good or bad thing? Well, it depends. It is a very good thing if you're not leveraged in this market, if you have dry powder, because in irrational sell-offs like this, buying is the central rule of the day. When things are dramatically undervalued, as we will go into it in a second, it's time to buy. But we should also get the warning from this market. This market tells us also, "Dudes, I don't care about your logic. My emotions don't care about your logic. If something trades as a one price earnings ratio, I'm going to sell it anyway. I don't care." And we should take that warning seriously. It means the market can screw us any, at any point in time, and no rational argument will help. This market is a little unhinged. Whatever the reason. Maybe it's too much retail. Maybe the hedges have lost their minds. Maybe it's too many agentic agents trading. Maybe there's too much, I don't know, connectivity in the market and there's too much hurt mentality. You don't know, but we get the message. Don't put yourself in a situation where you have to rely on the market being rational short term. That is a bad idea. Long term, you can always rely on it. Short term, you can't. And what does it mean? Leverage is dangerous in these times. Whatever you think is the worst case, it can always get worse. Short term. And that is what we have to learn. Understand when things are cheap. Now, SpaceX, ridiculously undervalued. Tesla, on a tremendous upwards momentum, also undervalued. The Mag 7 in general. Nvidia, are you kidding me? Dramatically undervalued. Amazon, dramatically undervalued. Microsoft, undervalued. Meta, dramatically undervalued. Mikron, are you kidding me? So you can rely on these things to go up in the midterm even. Not even long term, midterm. But you can rely on these things to not drop more because, as we just see, if something drops like this today, why wouldn't it drop more next week? So it's very important to understand, don't rely on short term market rationality. That thing doesn't exist. So we have to be cautious. But if you are in it to win it, if you can sustain your investment, do not have to withdraw your money if there's a giant drop. You should be in a very good position. Not just that. I think it's a unique buying opportunity. If we look into some of the most important stocks, I put together some of the Mac 7, Mac 5 outside Tesla and Apple. Of course, Tesla is a little different. And Apple doesn't matter too much in my opinion. We could have thrown Apple in here too. But I want to show you something. I want to show you something. First of all, the price earnings ratios of these things. Right now, Nvidia is trailing price earnings. The stock is worth 20, here you see it, 27 times earnings. Okay. But the forward PE looking one year ahead of what's going to happen with Nvidia is an unbelievable 17.67 price earnings for the most important company in the world right now. 17 times earnings, which means if you buy the stock now, the theory is based on 2027 earnings, you make your full money back just on cash coming in through earnings while you still own the company. In 17 years, you get your money back. That's a crazy ratio, especially given the growth. Because that implies it's not 17 years, it's actually much shorter. Meta at 18. As a general rule, everything under 30 with these growth rates should be considered insanely cheap. Insanely cheap because you don't have to wait 20 years to get your money back if this thing grows at a rapid pace. And we will get into this in a second. By the way, Google and Amazon have crazy trailing price earnings for us right now, but that is a little distortive because that is based on certain investment gains they had that are one-off, like Anthropix, SpaceX, things like that, where they owned big shares. And that's why they have insanely low, short, like trailing price earnings. And that's why they're going up next year. So while they're growing strongly, they had one-off events that make them look even cheaper, of course, right now. But they are distortive because they are not representative of what's going to happen in the future. So that's the price earnings. But why is this so cheap? It is so cheap because of this. Look at this. Here you have the company NVIDIA. Here you have the current revenue. Here you have the revenue growth year over year. You have the operating profit and the operating profit year over year growth. Now I want you to let that sink in. The price earnings ratios we just looked at. The cost of the company to buy the company based on the earnings. And that year you see, if something has a 20 price earnings ratio, in theory that means it needs 20 years if you buy it to make you your money back just through the earnings. But that assumes that these are 20 years of 0% growth. 0% growth. You can do the math. If you have a certain earnings, it's a 20 price earnings ratio and the earnings go up 100% next year, your 20 price earnings ratio is suddenly a 10 price earnings ratio. And if it goes up another 100% the year after, you are at 5 price earnings. And since you already made the earnings, you are actually down to 3 because you already had two years of earnings. Rough math. So a 20 price earnings ratio of a fast growing company does not mean you have to wait 20 years to get your earnings back, which would already be better than real estate or anything else. It means you are on path to have a five year payback period. 5, 6, 7 year period, depending on how fast it grows, you have a five to seven year payback period. And you know what that is? That is unheard of. If you can buy a company like Google or Amazon or Tesla or whatever, SpaceX, and you get your entire investment back just through earnings while you still own the company within five to seven years. That is the most insanely undervalued situation you can imagine. Insanely undervalued. You shouldn't be able to buy stocks that get you your entire investment back through earnings within five or seven years. That is not a normal market. That means we are one of the cheapest markets in history right now. Now you might say, Joe, are you crazy? 100% profit growth? Who does that? That's insane. Well, one company that does that, for example, is the world's largest company, NVIDIA, because they just had a 124% operating profit growth. 124% year over year growth in their profit. So that means the people who bought NVIDIA at 40 PE are already down to below 20 today. And that's exactly what you see. But what happens next year? What happens next year? And at some point with these super low price earnings ratios, you create a forcing function of unprecedented proportions where the stock has to absolutely explode just to be reasonable. And that's exactly the interesting point here. When you look at Amazon, a top five of the largest companies in the world, that thing had a 61% operating profit growth. 61%. Google, even Google that got penalized like crazy has 30%. Microsoft, a giant company number two or three, I don't even know. 21% profit growth. And that's all profit growth, right? Of course, revenue growth is in line. Meta had a revenue growth of 26% lower profit growth because they are ramped up spending by a lot, which is an investment in the future. So 11% is, I think, underselling matter a little bit. But these are massively growing companies that you can buy at massively discounted price earnings now. And when you talk about SpaceX or Tesla, you need more fantasy in your mind for the next year to see what is coming. These are things that some people might not be able to see, even though SpaceX is an easy pitch. Tesla is more complex to understand. But these companies are not complex to understand. They're just selling what they're already selling. And you see insane demand for the data centers and for the GPUs. Boom. There's not much to discuss here other than coming up with some insane theory that for some reason, that growth is not going to continue. When in fact, in many instances, it can even accelerate. In case of Micron that I didn't even put in here, it will not just accelerate, it will explode. So that is what's happening. And that's what makes this whole situation so crazy. This is the opposite of a bubble. This is the exact opposite of what we saw in 2000, in the year 2000, in the internet.com bubble. When you looked at the price earnings ratios, then let's go back down here. The price earnings ratios, they weren't 17 forward PE. They were also not 27 trailing PE. You were talking about 200 infinity PE's. Many had infinity PE's because they didn't even have earnings. And even Cisco had at the peak 120 price earnings. Cisco, which is the equivalent of these companies. And now we are at 14. Are you kidding me, Google? And of course, it's a one-off event in here. But Cisco didn't have a one-off event where they made billions and billions of dollars in profit. Microsoft at 27. So if that is a bubble, Meta at 21. Amazon at 19. Are you kidding me? Of course, one-time event, Anthropic. But this is the opposite of a bubble. A bubble would mean that the trailing PE's or the forward PE's or both would be very high. Very high means over a hundred. Okay. Over a hundred for normal companies. It's different if you have SpaceX or Tesla, where you clearly have disruption coming in the next 12 months. That's a little different. But the main companies that carry this market, you know how important these are. These represent 40% of the entire index at this point. They are clearly undervalued by any normal metric because the forward PE's could get cut in half again the year after if they don't rise or cut by 25%, 50%, 75%. And then you are talking about ridiculous situations where you are trading at 10, 15 price earnings ratios. That is unsustainable at growth rates of 100%, 50%, 30%. So why is this all important? Because it tells us panicking now is not a good idea. You're at historic lows for valuations and valuations provide a certain floor. Not in the very short term. Of course, you can drop price earnings ratios to one if you want in a panic, but they will snap back violently as we have seen in July because you can't just sustain it. If the cash comes in, a cash flood comes in, what are you going to do? You have to drive up the price because it's just cash. It's called cash. And the underlying business here, the AI business or SI business has shown no signs of slowing down. When you look at the Intel report, when you look at Microsoft, when you look at Google, and of course, when you look at Amazon's report, and of course, the biggest of all, when you look at SpaceX, when you see all the commentary from the memory makers, everyone has a single message for everyone. What they are seeing in the market is extreme demand that is not going down at all. In fact, it's going up and supply cannot keep up. I think we are right now in a situation where for some reason, the market wants to panic. And we see this also on a bigger scale, not just in the market. We see it also when you look down, we see it in politics, both on global politics and on midterms. There is just an instinct right now. Maybe it's the United States midterms elections next Tuesday that create like an incentive of the media. Media skewing a little left, as we know, giving the Democrats a little tailwind to creating some chaos. The worst people feel the more the incumbents, the Republicans get hit, which is true. Maybe that is behind it. Maybe it's just a media frenzy of some panic. And we are still in October, last day in October. Maybe they want to give us a Halloween, bad surprise. But we have to look through the noise and understand real risks are extremely limited at this point. Market panic can always happen, but real risks are very limited. We see the Binance hack, by the way, no one knows how much got actually hacked. We still don't have a confirmation that there was a hack. It just looks like it a little bit. But let's see what this actually is. We have, of course, a theory that the Iran war will get reignited. But now with the Israeli elections looking tricky, looking like Netanyahu is not in charge anymore. This will take some time to figure out in Israel. But this, in my opinion, does not pave the way for a major war in Iran. If the Israelis have to pull back now because they have internal discussions and Trump, who knows what he's going to do? Ukraine is looking pretty good at this point as if peace is coming finally, hopefully. But everything points to a peace in Ukraine. So on the macro level, sure, right now it might look like the world is ending, but when we look through the actual mist, dust, and it's settling, what's actually the problem here? I don't see any problem. I don't see anything that actually weakens the market, the AI trade in any way. And that is my takeaway here. I think we should stick to the numbers, look at the numbers, ignore the little panic tantrums here that are being thrown. Whatever this day brings, when you watch this video, we'll probably see what it brings. But it's going to be a very red day, not much doubt here. We either go down into the close, that would be bad for Monday, or we're going up into the close and we probably see a rally on Monday. Let's see what happens. I do think the midterm elections can throw us into one if the Democrats take both houses. Maybe that's the problem. If the Republicans keep the Senate, I think that's the best case scenario for everyone. We have a nice locked up DC where no one can do anything. Republicans still have some thing to say. But even if the Democrats take both houses, you know how it works. We have the president with veto rights. So what can actually happen? Not too much. And I think we need to stay sober in these turbulent times. I think this is all a screaming by with the one caveat. Don't go into margins. Don't put yourself into a position where you can get squeezed unless you are sitting in front of your screen 24/7 and make sure you manage the situation. But you have to be cautious. So for everyone long term, I think beautiful situation. I hope this was helpful. Let's see what this brings. But keep calm, sip some tea like I do, and it's all going to be fine. More than fine. It's going to be very good. Thank you so much and see you tomorrow.