TL;DR by CuriousCats.ai
AI and chip stocks decline ahead of earnings
- Shares of chip and AI-related companies were largely in the red on Monday ahead of major tech earnings this week, with Nvidia set to report on Wednesday and Marvell Technology on Thursday.
- Recent declines stem from investor concerns about valuations, competition, high reliance on price-driven earnings, and equity deals leading to greater volatility and earnings uncertainty.
- A popular Wall Street expression, KISS (Keep It Simple, Stupid), might present the best approach to trading this week's news amid complicated cross currents.
- The 30-year Treasury rate is at its highest level in 20 years, prompting Treasury Secretary Scott Bessent to attempt a "Treasury twist" by buying back longer maturity debt financed with shorter-term debt.
- The 10-year Treasury yield dipped to roughly 4.64% then climbed back to finish the week at 4.73%, the highest of the post-GFC era.
- Talks with Canada have broken down again, with Mark Carney deciding retaliation is set for September 8, and the PM sees little chance of resuming talks with President Trump before the midterm elections.
Context on AI chip stocks and market strategies
- Main risks impacting AI chip stocks include volatility due to high investor expectations, profit-taking, concerns over AI infrastructure financing, and questions about returns on investment.
- Call options look like a better way to be long in this market, and SPY options remain cheap with 30-day at-the-money implied volatility at about 12.6%, near the 13th percentile over the past year.
- Over the past four quarterly earnings releases, Nvidia has fallen an average of ~6%, translating to a down move of nearly .5% in the S&P and Nasdaq based on its current weight.
CuriousCats Full Story
Key Insight
“Nvidia has fallen an average of ~6% over its past four quarterly earnings releases, which could drag the S&P and Nasdaq by nearly 0.5%. Meanwhile, the 30-year Treasury rate hit a 20-year high, prompting Treasury Secretary Scott Bessent to attempt a 'Treasury twist'.”
CuriousCats studied:
1
Seeking Alpha
Seeking Alpha“Shares of chip and AI-related companies were largely in the red on Monday ahead of major tech earnings this week, with Nvidia () set to report on Wednesday and Marvell Technology () on Thursday.”
Seeking Alpha →2
CNBC
CNBC“There's a popular expression on Wall Street: KISS, which stands for, Keep It Simple, Stupid. Amid a torrent of complicated cross currents, it might present the best approach to trading this week's news.”
CNBC →Ask CuriousCats
What are Nvidia's recent earnings trends?
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