A Once in a Decade Opportunity is Here [The AI Reset]

AI stocks are about to provide a second wave opportunity, especially to those who missed it the first time as Korea has pulled back 30% from all-time highs, sending a bunch of AI stocks in the dumps as well to their major moving averages. But depending on who you are and what your portfolio looks like, you're either doing okay in July or you are absolutely suffering. So the S&P 500 equal weight is actually making all-time high after all-time high. The S&P 500 itself is just flat for the month of July. And QQQ, which is the NASDAQ 100, is down 5% for the month of July. And as I said, AI stocks are mean reverting down to major moving averages, and they are finally looking attractive once again. I may be deploying the 40% cash that I'm in in the AI portfolio, but more on that later. So, in this video, we're going to talk about what the hell is going on with the market right now. Has July seasonality failed? the Kimmy K3 saga. Is this just Deepseek 2.0? Mag 7 earnings, the stocks that I'm buying and looking at right now. We have to talk about Netflix earnings. And then I want to give you guys some tips on how not to panic here. You have to view the market objectively. That's the only way to survive. So, make sure you stick around to the end if you were absolutely lost at this moment. So, what the hell is going on with this market right now? As I said, Korea had pulled back 30%. Now this is after TSMC had recorded record earnings but there are a few reasons for this. Obviously the Korean market is made up of mostly memory stocks and it is not foreign to pullbacks. We have had three or four minus 10% or more corrections in the last 14 months in Korea. Two of them were bare markets being this one down 30% and the previous one which was just in March we were down 20 something%. A couple of weeks ago, Meta announced that it had compute to sell. And this obviously shook the market because there was this assumption that if Meta has excess compute to sell, it means a couple of things. One, it means that capex is going to go down because if they have excess compute, why would they be spending money on more compute? And two, that means stocks such as chips, memory stocks, etc. are going to go down because less demand equals less money. So chips hit a bare market, down 24% from highs. Memory hit a bare market. Korea hit a bare market and almost every AI sector hit a bare market from photonics to power to chips and memory as we discussed. But this wasn't all because of Meta. Obviously there was some profit taking, some rebalancing and June started slowing down and we started seeing these rounding tops forming which are basically distribution patterns. But regardless of AI sector, when you see charts that look like this, these distributions are necessary for the continuation of the next leg higher. And keep in mind this week we do have Mag 7 and Mega Tech earnings starting. So we have Alphabet and Tesla reporting on Wednesday. We have Intel reporting on Thursday. And then the following week we have the likes of Meta and Amazon and Microsoft as well. And going into earnings, obviously we think that during the earnings calls, these companies, the hyperscalers Meta Microsoft Amazon Google, that they are going to report even higher capex. So, it doesn't surprise me that going into those earnings, we are seeing now a little bit of price weakness and some fear headlines driven by the the idea that Meta has excess compute, which is total BS because even goo Google came out and said they don't even have enough compute for their own engineers, let alone their customers. and they're sitting on that $462 billion backlog and they have little way of unlocking that without scaling up and getting more compute in order to unlock that that backlog into actual realized revenue. So, we saw a little bit of rotation out of the AI buildout into the Mag 7 as the Mag 7 is up 4% in July so far as Meta, Microsoft, Amazon and Apple are having decent Julies. And the other major headline was that this model coming out of China, Kimmy K3 or Kimmy Moonshot that supposedly it's the number one ranked front-end code LLM in the entire market. And once again, we have a deepseek like moment, but we will talk about this later. However, this is also contributing to the negative headlines and the AI buildout stocks dropping down to those levels that we talked about. So before I get into the stocks that I'm buying and how I'm managing my portfolio here, I do have to cover a few more things. Has July seasonality failed? And the answer is kind of. So if we just look at the QQQ here, you can see that it is having the worst month in decades. 4 down 4.41%. And I know that July is not over yet, but still this is a standout print here. However, if you look at the Mag 7, they are up 4% in July so far. If we look at the S&P equal weight, it made a new high in July and it is flat on the air but slightly green or flat on the month but slightly green. And the S&P 500 is flat on the month as well. But if we look at it from the S&P 500 standpoint and not the NASDAQ, we are actually following seasonality at the moment as the second presidential midterm year is generally weaker than the first one and the S&P 500 has a mixed bag in July. So I would say depending on how you look as I said I appreciate those of you who are struggling with this market. I think everybody's struggling with this market to some degree because it because it is not straightforward. It is a multi-tiered market, right? If you're all in AI stocks and that's all you're in, obviously you're getting demolished right now and you see those portfolios on Reddit and on X. If your portfolio is made up mostly of S&P 500, you're doing okay this month. If you're tech heavy, depends on what you're in. If you're in Microsoft, Apple, you're probably doing okay. If you're in mostly chips, you're probably doing not that great, but not too bad. So, it is not a straightforward market where everything is going up or going down. So, it's very hard to determine whether seasonality is playing out or not. And if you do look at it from the standpoint of the S&P 500, it looks like it's playing out according to the averages. If you look at the NASDAQ, it's definitely not playing out so far. Now, on to the Kimmy Moonshot Agent here, the new Chinese LLM that supposedly is number one in front-end coding, even beating Claude Fable supposedly. But this is a Chinese model that that apparently needs much fewer resources than its American counterparts. And this is like a DeepSk I wouldn't say Deepseek 2.0, know, maybe Deepseek 1.5 because it alone has not sent the market in a panic the same way that Deepseek did in January of 2025 when all of the AI stocks immediately went into a bare market just because of the panic of Deepseek. Now, here's why I think this Kimmy moonshot is actually, if true, is actually bullish for the market. Might not be bullish for Claude or for Anthropic and Open AAI, but is bullish for AI stocks. Even though Kimmy is built on likely built on distillation, according to AI experts, distillation is just a training technique where you use a stronger model that's already available, something that Anthropic or OpenAI developed and using that to train your AI model. So you feed a lot of prompts into the teacher model instead of training it on humanly labeled data. And then you record the outputs, the reasoning traces, etc. And then you train the student model which is Kimmy Moonshot in this case to imitate the teacher's behavior. And I think that the biggest beneficiary of this are going to be data center stocks. And we'll talk about this when I talk about the portfolio management and the stock section. But if models are truly becoming more efficient and you think that that's the natural progression anyway, that means more intelligence per watt. And because power is the number one constraint on the AI buildout, this efficiency lets operators squeeze more value out of existing or slower to deploy power capacity. Meaning if it if it's going to take Nebius and Iron and Coreweave, if it's going to take them a long time and it's expensive, they're they're having to take on a lot of debt in order to to deploy more capacity. If they can use what they currently have more efficiently, they can rent out more compute and make more money per what the per the resources that they already have built, if that makes sense. So, they're getting much more in revenue from the resources than they were before. But I don't think that it that is good for anthropic or for open AI because that means that there is more competition. So, for those models, it is a threat. But for the AI buildout, which is what we care about, I think it is a positive driver. And in a complete shot of irony here, Kimmy tweeted out that they had to pause subscriptions because they ran out of compute already. So, you can see here it says, "Kimmy has received far more love than we expected. Our GPUs are feeling it. Over the past 48 hours, demand has pushed close to the limits of our current capacity. We're adding capacity as fast as we can. we will reopen new subscription spots in batches. So, all of a sudden, we do need more compute. And Meta doesn't have excess compute to sell. By the way, I think Meta said that because they're about to announce either some sort of offering during their earnings or they're trying to justify they're trying to justify something that's unexpected in their earnings. But if Meta actually does get in the data center game, then I think that that that is another bullish case for Meta and will provide even more opportunity for the stock to hit highs in the long term. But more on that later. So like I said, Meggaap earnings are coming out this week and next week and I think all eyes will be on two things. One, forward guidance and two, capex. Because as I said before, if capex stops or reduces, then I think the entire AI buildout stock market crashes and I do think that it will be good for the hyperscalers because they are going to stop spending money and so they'll be able to retain all that cash flow that they were wasting not wasting but spending on the AI buildout. But I think we are far from that and I think that we will see that during the earnings calls that capex is going to go up even more. All right, now on to the stocks that I'm buying slash looking at. As I said, as as as I've been telling you guys, couple of things. One, I have a separate AI portfolio. And we'll get into this when I talk about the tips on how to not panic here. But I've been telling you guys over and over again, I am not an advocate of keeping risky high beta stocks in the same portfolio as a responsible portfolio because you don't want to look at a bunch of high beta stocks during a very volatile time and have that affect your decisions on responsible stocks. Obviously, I'm not your financial adviser. You could do whatever you like. Hopefully, if some of you who who took that suggestion can now see the benefits of having a smaller AI portfolio that's dedicated to that so that you don't have to really panic or worry about it every day and having a you know your your main portfolio which is full of responsible stocks according to the way that you invest. But as I've been telling you guys through these videos, my portfolio does have 40% the AI portfolio has 40% cash and I was waiting and waiting and waiting to deploy it. And I think we're getting close to the point where deployment makes sense here. So if we take a look at Korea, which has an effect on the memory stocks, you could see here previous all-time high, golden pocket, same level that we're at. I'm comfortable buying memory stocks, DRAMM, EWI, which is the South Korea ETF, Micron, whatever it is, SanDisk, depending on the one that you have highest conviction on. I'm very comfortable dollar cost averaging here. It doesn't mean I think this is the bottom, but I think this is a great point to start adding if those are stocks that you're interested in. Continuing on the AI track, and I will talk about nonAI stocks in a second, but continuing on the AI track, I think stocks that have had large distribution patterns, right? Like the photonic stocks. These are stocks that you want to wait to see a breakout. Even though we are near the 200 day moving average, which historically is a great level for some of these photonic stocks, the longer and the bigger the distribution is, the more you want to see a breakout from a downtrend. And I've done deep dives on photonics. I've done deep dives on power, etc. I'm not going to do a deep dive on each sector and each stock. I'm just giving you some ideas as to what I'm looking at here. The AI related energy stocks. So, I talked about the penny stock that I'm in. This one is just a pure play. I don't expect this one to be huge anytime soon, but it is one that I'm holding a nice small position in. But, TE Energy T1 here at the 48 EMA testing the trend line. If we look at Vertive, this one is sitting at the 21 EMA weekly, which is a level that it actually loves going back a full year. If you look at uh GE Verova, same thing, 21 weekly EMA. And then the data center stocks, to be honest, are the ones that I'm bullish on the most because I do think that compute is going to be the number one constraint. I actually think that they will eventually be selling futures on compute, believe it or not, but that's a whole different story. But stocks like Nebula's down 45% sitting on the 21weekly EMA. Again, I'm not saying that that this is the bottom, but these are levels that I definitely want to be a buyer at for my long-term portfolio. If you look at Nebus, it currently has a $50 billion backlog, and its two biggest customers are Meta and Microsoft. Ironic since Meta supposedly has extra compute, which I think is total BS, but $50 billion of backlog, if you look at their market cap, it's 42 billion. So, their revenue backlog is actually bigger than their entire company at the moment. Those are some of the AI stocks that I'm looking at. If you want the full list of every single stock that I'm tracking in every AI sector, there is a free PDF below. Make sure you click the link in the description to get that PDF absolutely free. In terms of nonAI high beta stocks, I I mean I've been criticized for being boring on this, but I've been telling you guys that these stocks are some of these MAG7 stocks are at an insane value. The obvious ones, Microsoft, Meta, Google. If we take a look on Alphascope here, you could see that Microsoft is still trading at a forward PE of 20. It is currently one of the stocks that is actually up in July. So far up 6% in July, bouncing off of this major level, which is the all-time high from 2021. And we tested this as support three times in the last couple of years. Meta obviously super interesting to me because it does have this long trend line since August of 2025. And if this compute business is real and they are going to be able to maybe outpace some of these smaller uh Neoclouds, if they're able to compete with them and the market sees that it is a path of revenue for Meta, we could see Meta finally break out of here. And I think that if we do add the new additional business of being a NEO cloud, if that is something that it is pursuing, as a matter of fact, we'll know more by earnings. Then I think Meta can, if it does break out of here, it can start to garner new all-time highs past the all-time high that it made within the next year or two. Hood finally pulled back to the 48 EMA at around $100. Been in this since the7s. As I said, Hood is a rule of 40 beast. If you don't know what the rule of 40 is, look it up, study it. It's not that hard. But it's basically a way to evaluate SAS companies and software companies in a way that's not just looking at a PE ratio or a forward PE ratio. Rule of 40 is very important and Hood is one of the best stocks in that category. In terms of chips, I don't know that chips are done falling yet. They could be, but we do have this huge head and shoulders here on the chips ETF, the semiconductor ETF, and we have not yet hit the 100 day moving average in a while. Since the end of March, semiconductors rallied 87%. I personally am actually hedged with a semiconductor short because I do think that semis might have a little more room to fall. Remember that semis don't actually report the same time as the rest of the MAG 7. Yes, we got reports on ASML and TSMC, but we're talking about the Nvidas, the AMDs, they don't report until later. And I'm personally waiting to see if SOXL, which is the leveraged ETF, the leveraged semiconductor ETF, which we bought at $7. I ended up selling that at $70, 10x, and it ended up going all the way to 300. But I do think that this can potentially get below 100 once again, and I will be interested in picking this up. So, I am getting very close to deploying some of that 40% cash that I have in the AI portfolio as well as making some additional buys in the main portfolio. If you are interested to know exactly what moves I'm making, make sure that you join us. Link in the description below. Join the traveling trader academy where I go live every single morning at market open walking you through the market. I also do day trade and I provide macro analysis and stock market updates every single week as well as informing you what stocks I'm looking at, what stocks I'm buying, what is a good dollar cost average level according to my analysis. So, make sure that you sign up. Link is in the description below. And let's talk about Netflix earnings. So Netflix is a stock that I own and it's one that I'm increasingly becoming a little bit frustrated with because I actually don't think that it's growing in a way that is pleasing me as an investor. And you're allowed to make you're allowed to change your mind as an investor, reallocate your money to things that you think are more bullish. And although I think Netflix is a good price and a good value here, it once again has delivered a pretty lackluster earnings report. So for Q3 forecast, its guidance came in lower than expected for both revenue and EPS. And for the Q2, it actually missed on revenue as well. It also said that it's going to share even less. Remember, it stopped sharing the number of subscribers and now it is going to stop sharing the viewing hours engagement reports from twice a year. It's going to cut that down to once a year. You never want to see a company reduce transparency as the company is not really beating expectations. When you have a company like Apple, if it says, you know, Apple's no longer going to provide uh data on iPhone sales or something like that, it's fine if the company continues to beat expectations. When a company's not beating expectations and it's reducing transparency, as an investor, I tend to start looking skeptical at that company. So although it's currently trading at a 21 PE, 18 forward PE according to Alphascope. If you look at its KGER, it has really good KGER numbers, 10-year Kager is almost 21%, return on invested capital is 24%. If you look at its revenue at at its IPA, I mean it did drop because of the the last earnings report, but gross profit margin looks fine. Net income dropped a little bit as well. Uh EPS definitely dropped. Free cash flow definitely dropped. So, you know, looking at this company from a value perspective, it's fine. And I just in terms of its future, do I think that it's going to grow at a rate where it is going to significantly have blowout earnings, blowout revenue, be able to retain customers, especially fighting for the younger generation's eyeballs with Tik Tok, YouTube, etc. I don't know. Now, I'm not at a point where I'm going to sell this just yet, but I'm just going to say as an investor, I'm starting to get a little bit frustrated with Netflix. Not only because of the price obviously, but like I said, I don't like to see a reduction in transparency as the company is not performing up to par. Now, on to the reminder that it's not time to panic. As I said, a lot of you are probably doing okay depending on where your portfolio is. Some of you are probably doing terribly. If all of your money is in high beta stocks and you bought high beta stocks at the top, that is all your portfolio is consisted of, you are probably not having a great time in the interim. But when you feel that pressure, that point that you just want to sell and you are no longer thinking rationally, know that that is just capitulation. You are not thinking with your rational mind, gee, how do I reallocate my portfolio? You're thinking, I'm tired of looking at red. How do I stop the bleeding? Now, if you look at XLK returns over the last few years since 2009, here are the returns for technology for the technology sector of the S&P 500. And right now, we are actually up 22% year-to date, which is crazy considering all the panic that's ensuing. But since 2000, we have had 25 pullbacks in tech of 5% or more. Every single one of them recovered. And although tech XLK is down 8% for the month of July, this one too will recover. I promise you. So I want you to use this time to sit down and plan. What if the midterm market correction comes now? What if it came now this week? Are you ready to manage that accordingly? Do you have your plan in place? Use chat GBT cla or Gemini. I want you to take your portfolio and take a screenshot of it. put it into AI and ask the AI what is the beta of my portfolio. A beta of one means that you your portfolio moves in line with the same volatility as the broader market. If your beta for instance is two, that means your portfolio is going to be twice as volatile as the broader market. If you need to rotate, do not be afraid to rotate. Rotating is not realizing a loss. If I'm like, if I'm looking at an investment and whether it's because of a mistake I made or I got into the habit of just buying tickers that I didn't understand, following everybody, buying this ticker, that ticker, and I ended up with a portfolio full of high beta stocks that I didn't understand at the top. It's not a problem to look at and say, you know what, I made a mistake. What I really need to do is understand what these companies are, have my own price for them, have my own conviction for them, and reallocate my portfolio so that it's it is according to my actual risk management, according to my actual uh risk tolerance. So, don't be afraid to rotate if you need to. It's not taking a loss. It's not, man, if I click the exit button, then I'm a loser. No, this is investing. Investing, trading does not require require you to be right 100% of the time, but it does require you to manage your risk or you're going to end up in the dumps. Make sure that you are not overweight in one sector. If you have Broadcom and Qualcomm and Nvidia and AMD and Intel, guess what? Those are all in the same sector. If if your portfolio is five or 10% in each or of in in each of these, it doesn't mean that your portfolio is five or 10% in each of these. It means that your portfolio is 50% chips. That's insane. Another thing, because they're not sexy, a lot of folks are underweight value. They're underweight consumer staples. They're underweight financials. Healthc care, as we talked about, will likely have a pretty big back half of the year. So, if you need to spread out risk and beta, make sure that you're looking at those, too. Another thing I want you to do is just stop buying ticker symbols. Each of these are companies. You have to know what these companies do, and you have to have your own way of evaluating what is this company worth. If you don't know how to do any of that, frankly, you're not ready to stockpick yet, which is fine. But with AI, you have no excuse. You can easily go in there. You can use Alphascope, which is my product of choice if you want to look at the fundamentals. But you can also use AI and just say what how do I evaluate X and read that and if you have any follow-up questions ask the AI the follow-up questions and that's how you get better at evaluating companies. And always remember that these corrections are what make your portfolios asymmetrically green. Whether it's COVID, liberation day, the Iran war, it doesn't matter. Those times where the VIX spikes and the market drops, those are the times where your portfolio actually ends up being significantly green and you start getting those multiple 10 percentage point, 100 percentage point gains in your portfolio in a very short amount of time. You saw it with your own eyes three or four times in the last 6 years. In this environment, I'm also limiting my swing trading. I've told you guys this time and time again. This is not a swing trading environment. A swing trading environment is one where we are in a clear trend in a clear bullish market and you can put your foot on the gas and take advantage of short-term swings even using leverage whether it's leveraged ETF or options. I haven't been swing trading in July and June for uh I haven't been swing trading significantly. I've taken a couple positions here and there, but nothing too crazy. And remember, sentiment can shift at the drop of a hat. Nothing. And I mean nothing changes sentiment like price. One day it's the AI trade is over. All of a sudden Kimmy K comes out and says you know we we ran out of compute. We actually need more compute. And then now the market or you know finance media CNBC says the AI trade is back guys. It's back. We actually need more compute. Who knew? So do not panic. Don't make decisions just because you're trying to avoid pain. Sit down. Look at your portfolio. Change what you need to change. Come join the group if you need some help. Subscribe to the channel. Hit that notification bell. Stay safe out there traders.