AI still a “baby bubble” for now (not really)

Charts and data are just like documentaries. There might be some truth or facts in there somewhere but you can spin them any way you want so at the end, ultimately the viewer’s perspective is the one created for them.

BofA research says AI is still a “baby bubble” when compared to FAANG, ARKK, and Bitcoin.

It’s difficult to even see AI on there, so a quick scan and you’re left thinking wow this thing has a way to run because if there’s one thing about bubbles they only get bigger.

But take a look at the fine print…

AI = NVDA + MSFT ???

But what about the other names like $AI that are up over 100% this year ???

Year over year the number of AI mentions on earnings calls are up 77% meanwhile Meta, Alphabet, Microsoft and Amazon used the term a 168 times combined during their earnings calls in April.

Plus Microsoft’s “AI” hasn’t amounted to much more than a lot of unnecessary twitter threads.

In the search marketing world (one which we’re very familiar with), not only is Bing irrelevant and absolutely zero threat to Google’s monopoly on the market, but they’re actually losing market share worldwide.

Samsung was evaluating a switch to Bing for their web explorer on their smartphones, but ultimately stuck with Google. Apple could still disrupt everything by swapping for Bing in Safari.

But if we’re betting on an outcome it’s that the status quo remains, Google’s Bard catches up to ChatGPT and AI is a whole lot more than just Microsoft + NVIDIA.

So why would Bofa research say it’s still a “baby bubble” with more room to run?

Simple… it’s #RIGD

[ wsj ]

NVIDIA REPORTS WEDNESDAY → OPTIONS PREVIEW

Ahhh the last kingmaker to wrap earnings season reports on Wednesday. The stock has been nightmare fuel for bears, accelerating straight up 106.4% in the last six months.

Consensus outlook is lower revenue, lower earnings, weak gaming segment, data center slowdown and a metric ass-ton of AI mentions.

Currently trading at 136x earnings, the market clearly does not care about the double digit year-over-year declines in the categories that matter for most businesses.

But it matters less for NVIDIA.

First… CEO Jensen Huang has a PhD in Pumpanomics.

During covid when it looked like the world was going to be different forever and we’d all be stuck in our homes, NVIDIA went all in on the metaverse.

They debuted the “Omniverse” which was or maybe still is “the world’s first simulation and collaboration platform that is delivering the foundation of the metaverse — through new integrations with Blender and Adobe that will open it to millions more users.”

Who doesn’t love a good word salad.

Two years later the metaverse is dead (although maybe the upcoming Apple mixed reality headset for $3000 will change something lol) but it hasn’t affected NVIDIA one bit.

Here’s why:

Like it or not they are the new $TSLA in the market. It’s bears versus bulls and price action is like 90% trying to bleed out the other side and 10% fundamentals.

The market will always fuck max participants and right now that’s anyone who thinks $NVDA is overvalued.

NVDA Options Preview:

P/C Ratio: 1.015

Highest Call OI: $300

Highest Put OI: $250

Expected Move: 6.1% ± $19.07

Looking at the flow - there’s nothing that particularly stands out. The $250p lotto tickets are going for 0.19 now, you’d need a 20% move from them to go into the money with payouts of 42.32x today, 36.95x Tuesday, 30.63x Wednesday, 22.74x Thursday, and 9.95x Friday.

Top Call Contracts Bought:

315c - 18 orders - 3.36m premium
310c - 16 orders - 1.97m premium

Top Put Contracts Bought:

305p - 8 orders - 927.49k premium
300p - 10 orders - 901.63k premium

We like to see a large number of orders matched with high premium. That favors the bulls even if overall flow is bearish.

Yesterday news dropped that China is telling their local manufacturers to stop buying products from Micron Technology $MU. The semiconductor god says it’s not a big deal because they produce junk memory chips but does the job of scaring the crap out of people. It’s another small escalation in the technology war between the US and China. A Chinese ban on NVIDIA would give you the 20% move for the 250p to go up 30x.

[ ap ]

RIGD REPORTS on $SPY

Pre-market the action is flat but we’ll be watching 418 for potential entries for a long during the first period (the open).

Now feels like the time for a market pullback.

• NVIDIA finally reports (and maybe the stock is priced to perfection and they aren’t making that much $$$ from AI yet)

• The debt ceiling issue will go down to the wire and while there’s zero chance of it not getting raised, maybe it will get delayed

• After a brutal drawn out battle Russia captured Bakhmut in Eastern Ukraine (oh yeah land war in Europe that Ukraine isn’t winning)

Then again the stock market is rigged and we’ll probably be back to flat on $SPY by Friday.

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