As AI-Infrastructure Charts Break Down, It’s Time to Dramatically Reduce Exposure
We took profits early. Now we’re cutting further. It’s not about belief. It’s about what the charts are saying now.
Microsoft Pushes Higher: 8 Key Items Shaping the Stock Market Thursday
OPEC+ meeting expectations, politician Warsh and other headlines are moving stocks this morning.
Interest Rates Set to Move Higher for Longer as Inflation Persists
With the AI bubble looking to “jump the shark” and conflict in the Middle East ongoing, the Federal Reserve has little choice.
Why You Should Think Twice About That 12% ETF Yield
A 12% yield sounds better than 3%, until you look at what’s actually generating each payout.
Is China Really to Blame for the Chip-Driven Tech Wreck?
Semiconductor stocks are selling off hard, a scary picture in a key week for earnings. But is the ‘China factor’ really to blame?
As Corning’s Shares Shatter, the Buying Opportunity Is Clear
Corning is in disaster mode today. But should it be? Let’s looking into the report.
Chips Take a Dive, Oil Slides, SpaceX Burns Off … a Trillion
The good news is Iran and the U.S. seem to be talking again. The not-so-good news is the AI tech trade and all its parts are falling fast. Let’s dig in.
4 Problems Converge on the AI Sector as Investors Await Earnings
Four issues have arrived at the same time. But they are not the same problem. Here’s what to know.
More Tales From Nvidia: Fitch Warns About AI Credit Risks/GAAP Is Meant for a Reason (Issue #227)
Circular Deals
For nearly a year I have been warning about the circular AI financing deals.
When company A (e.g. Nvidia ($NVDA)) is funding company B (e.g. OpenAI) to buy product from them they are basically “creating” a huge discount on chip purchases and should be treated that way from an accounting perspective and amortized into the expense side of the P&L.
The company A is simply moving the discount from the P&L to the balance sheet and cash flow: The balance sheet and cash flow tell a very different story than reported earnings.
And we are not even seeing the entire balance sheets with all the off-balance sheet commitments.
Said another way, revenue and earnings are massively over-stated especially given all the operating leverage companies like Nvidia have. Buying your own revenue should have consequences for the P&L, but since it doesn’t, the grossly irresponsible behavior continues.
GAAP is meant to exist for a reason. This industry is exploiting every loophole in GAAP with these deals, off balance sheet structures, and depreciation schedules that do not reflect reality.
Meanwhile, the cost of insuring debt at Nvidia and the hyperscalers (credit default swaps) speak volumes and underscores the perception of rising AI credit risk:
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Position: None
Earnings Dynamics Have Changed With Biggest Reports Ahead
Semiconductor weakness lifted the hyperscalers again while the market waits on the Fed.