$1T Rout Hits Nasdaq 100 over AI Jitters in Worst Day Since 2022
bloomberg.com
bloomberg.com
… or are they just telling the narrative that will drive the most eyeballs? Because they can’t have a lame headline like “$1T wiped from Nasdaq because there were more sellers than buyers”???
I know its “bloomberg” but we can’t just blindly believe everything they tell us.
"I did everything perfectly, but stuff outside my control blew up my otherwise winning trades - it would have been even worse if not for my quick thinking" is the correct answer for when your boss asks "Why did you lost $50million today?".
It is what he told his boss back in the 00's when he was in your seat and it is what some junior will tell you in 20 years time when you are in the corner office.
The less datapoints you have, the easier it is to make a line that fits.
We’re great at pretending to understand, masters at nodding wisely.
People have even convinced themselves that when they pretend to understand and nod along like a master that they themselves have obtained mastery level understanding of the subject.
- The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense.
- The declines mostly affect companies strongly linked to the AI push: Nvidia, Microsoft, Apple but also Broadcom, Tesla, etc.
- Some analysts lead by Goldman Sachs have been beating the AI bubble drum for a bit now while multiples remain very high.
Nobody knows what triggered the selloff, it's a global market with millions of actors doing actions based on numerous sources of information. More than that we come off a peak of hitting SPY500 ~$600 and NASDAQ100 at $20.5k which are all time highs and it's very normal to retrace a bit after - but even that doesn't mean much.
Whenever someone tells you the reason for a stock market move, all they're telling you is what they believe did it, but they have no clue, other than specific critical situations as like, after 9/11 attacks. For company specific "this is why" it's much easier, but even then many times it does the opposite of what the analysts' previous explanation was. They just tell you something because they know people want a "reason".
They could've easily written "after historic rise and new all time highs, some investors take profit" and it'd also be correct.
It's like a bunch of guys looking at a CPU metric in grafana without SSH access to the server or knowing what it's running trying to figure out the cause. Sometimes it pins at 100% and some guy shouts "it's paging to disk", and yeah, might be, might also not.
This is based on institutional theories or smart money of how price plays out in the chart. I have developing my theory for years using those principles(i.e Wycoff Methods[1]
[1] https://chartschool.stockcharts.com/table-of-contents/market...
Regarding the technical impact of institutional moves, that is real, if someone does a huge sell block, you can explain the drop by correlating it, but those are isolated events and it's much harder to predict what the market itself will do than to explain, ah, five minutes ago blackrock did their quarterly rebalancing of their ETFs and you can see it in the chart - that's not what these analysts from these articles usually do, they just come up with something that sounds plausible for clicks searching for a reason.
Using this argument, you can basically discard any kind of inference on any large system. That’s not particularly convincing. It’s not because something is complex that you can’t a posteriori conjecture links between causes and consequences at a macro level.
What economic journalists and analysts mean when they say a move with triggered by something is that both events happened in a time frame which is conductive to saying a correlation exists. Turn out that Google published is earning Tuesday with larger than expected capital expenditure and little return to show for it and then the market tanked. That’s what they mean by reason and that’s how everyone understands it. We know the market is large and made by a lot of actors. We are not dumb.
You are free to think it’s all random happenstance. I’m free to think you have an axe to grind and prefer denial to rational thoughts.
[0] https://link.cnbc.com/public/29081083#:~:text=%22If%20they%2....
1) Cisco had good hardware, but nothing that commodity gear couldn’t also do. Nvidia have a substantial moat.
2) Cisco had a p/e of 700! Nvidia is at 60.
3) Cisco had a decent order book during the boom, but nothing to justify their price. Nvidia’s order book is… unholy.
I do think there’s a lot of hype around the various FOMO/ridealong stocks - but nvidia, I earnestly think remains undervalued.
NVidia has 6x the cash-on-hand (>$30B) than their closest competitor (AMD) ($5B), and all of that can go towards GPU R&D rather than being split between CPU+GPU R&D (AMD has 10% of the $65B GPU market share but 33% of the $50B CPU market share — their CPU business is almost 75% of their total business). If there are changes needed to stay competitive, NVidia has the warchest they need to adapt. Just their cash on hand would allow them to fumble an entire release cycle and still catch back up.
Sure, if ROCm ever achieves parity with CUDA then Nvidia’s margins will finally decrease but the only way they’re facing any existential threat is by massively fumbling internally. If you have reason to believe that Nvidia will start executing poorly, then that would potentially be a valid concern — but so far they’re continuing to do great work despite their massive lead and their prices reflect their technical lead over their competitors.
0: https://www.theverge.com/2024/6/26/24186432/microsoft-window...
And as Bezos says, your margin is my opportunity, and nvidia makes humongous margins right now. It will attract investments in competitors. And if a competing GPU is half as powerful but a third of the price, it will eat market shares and compress margins. Unless customers cannot switch, but I don't believe that to be the case.
As the CEO from Sun Microsystems said after the bubble burst:
"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.
That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
Now, having done that, would any of you like to buy my stock at $64?
Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"
The number is more like 30 for Nvidia today...
Also, McNealy’s comment isn’t quite applicable because stocks aren’t bonds. There’s an inherent value to the ongoing operation beyond just paying the earnings out.
We have investment based on hype and lies, and the outcome is that the actual labor the market implores is misdirected and falls short of its purpose of raising the net quality of life through real creation of value.
This is Buffett’s point. When the market loses $1T in a day, it will definitely come back if you have a long term horizon.
Just like if you bought nasdaq after the 2000 crash.
That being said, the period isn’t important. But that the big stocks will likely still be up in the long run.
And when the seller puts their stock on sale, it's because they believe the stock is going to go down (even more) in the future.
> “The overarching concern is, where is the ROI on all the AI infrastructure spending?”
I have an opinion which they wouldn't listen to anyways.