The UNTHINKABLE is About to Happen to Stocks.

A huge shot just hit the market and it is likely to affect you and your portfolio, all of the stocks you hold and how you trade and invest moving forward. Now, I want to break it down for you. So, just listen. And yes, we will go over solutions and talk about stocks that I'm going to try to take advantage of the situation in in both the short term and the long term. So, Google reported earnings yesterday as of the time of this recording, Wednesday, July 22nd. And although the earnings were great, here is what happened for the first time ever since Google IPOed. Negative free cash flows. This has never happened, folks. It shows that companies are literally willing to eat themselves alive in the short term in order to spend as much as they possibly can on the AI race. And here is Google's capex, 44.92 billion just for the quarter. To get free cash flows, you just take the cash from operations minus capex and that's how you get the free cash flows. Now, this sent the other hyperscalers tumbling. You could see Amazon took a 5% dive. Google itself took a 7% dive. Meta took almost a 4% dive. Microsoft took a 2 1/2% dive. And this was the worst single day for the MAG 7 in years. But with extreme moves like this comes asymmetrical opportunity, especially for smart traders and investors. So, in this video, I'm going to break down Google Google earnings, Alphabet earnings, which was a harsh reality check as to how far companies are willing to go in this AI cycle for Google to report negative cash flows. You might expect this out of Amazon or even Meta, but Google, that's crazy. So, if Alphabet is willing to nuke its own cash flows, what does that mean for Meta, Microsoft, and Amazon, which report next week as of the time of this recording? The key here is that the money will be spent. This is what we've said all along. The money will be spent. Capex is only going up. Now, it is our job to follow that money. Where is the money going? Which stocks are going to benefit? And how do we capitalize off this? And then I will give you my midterm plan and my long-term plan. These two things are different and you will likely fall into one or both of these buckets. And then we will go over the Tesla earnings disaster because that was just a dumpster fire, but I'm sure a lot of you guys want to hear me cover it. They also increased their capex. They also had negative free cash flows, but they are not Google. They are not Microsoft, Meta, or Amazon. So, like I said, sit down, open your ears. I got you. Alphabet a harsh reality check here. Negative cash flows for the first time ever. Negative $5.9 billion even though they beat revenue by 24%. Google Cloud revenues came in at 82% growth and Google Cloud operating income was 3x but the capex this capex doubled yearoveryear and that led to the negative free cash flows. And not only that, but they raised the capex forward guidance, meaning they were they said the last quarter that they were planning on spending 180 to 190 billion for the full year of 2026. They now said that they are upping that from a from a to 195 to 205 billion. And the CFO said it will rise significantly and it is only expected to go up from here. Now, although Tesla recorded a record revenue of 28.2 billion, which is a 26% growth, and they had record deliveries, their earnings per share missed heavily. And what's important to realize here is that part of this earnings per share, most of it actually, twothirds of it, came from an unrealized paper gain on their SpaceX share. Tesla has a share of SpaceX, a significant share of SpaceX and through what's called marktomarket, which is they're following GAAP accounting practices, they're they are able to report unrealized paper gains on the assets that are on their balance sheet, which in this case include SpaceX shares. However, twothirds of this came from that gain, and it was when SpaceX was trading at $170 a share. Obviously, now it has tanked 50% from the high from the all-time highs. Also, their gap operating income came in at 57% lower yearover-year. Operating margin continues to go in the toilet and their free cash flows were negative as well. They are also spending like crazy because they need to make a pivot out of cars and go into robotics as well as robo taxi and some of these automated driving services. But here's what we do know. The race to spend. We look at Meta. Their capex guidance right now is 125 to 145 billion. This is likely going to be raised. Microsoft's capex for 2026 was 190 billion. And Amazon came in at the highest at 200 billion. Now, Amazon does routinely report negative free cash flows from from quarter to quarter. sometimes it is in an entirely different business because it does have a huge retail sector as well. But if we take a look at Microsoft on Alphascope, you could see that it does not report negative cash flows. As a matter of fact, going back to at least 20 years, it has never reported a negative free cash flow. So, it will be interesting to see if it does next week. And I will tell you what that means for the market and how to take advantage of it. But for now, you should be pretty concerned with the Mag 7 stocks here if they are willing to tank their free cash flows. But it will talk about that in one second. And if we take a look at Meta's free cash flows, you could see here that since the early days, it did in the early early days did report a few quarters of slightly negative free cash flows, but since it has become a multi-t trillion dollar behemoth, it does not report negative free cash flows either. It will be very interesting to see what these companies are willing to do. But as I wrote about in the traveling trader discord, I said these are historically the best cash generating machines to ever exist. If Google, which was the cash flow king, if it just went negative on free cash flows, the fear is that all of them are about to do the same. Now, why does that spook investors? Because as an investor, you want a company to return shareholder value. That's either going to come in the form of stock buybacks or that's going to come in the form of reinvesting in something that that shareholders can see a value in and can foresee a return in. A company can give back to shareholders in the form of dividends obviously, but there needs to be some form of reassurance for why someone should invest in your company. And if Alphabet of all companies is willing to let its cash flows go negative for the first time ever without even blinking an eye, that is going to raise concerns. Are is is all of this spending are we really going to see a return on investment? It's going to to really surface a lot of questions about AI. How soon will we see a return on investment? Is OpenAI going to go out of business because now it has too much competition and it owes too many people too much money? Now, in my opinion, as I've said time and time again on this channel since Google was in the hundreds, Google to me is better situated than most of the hyperscalers. Not only does it have a extremely diversified array of products and services, but it is actually one of the few companies that is making a ton of money from its AI services. Its current backlog which was 462 billion before is now 514 billion. Backlog is not guaranteed revenue. They do have to unlock that revenue by delivering and in order to deliver they have to build hence the negative cash free cash flows. But it does not mean that the market is not spooked as the mag 7 collectively dropped almost 5% in one day. This is the single biggest drop in the Mag 7, biggest 1-day drop in 5 years. So, the real question that you guys want to know is how does this affect me and how do I make money off this? Well, we are going to talk about who benefits from Alphabets Capex. I spent a lot of time putting this together for the Discord, but I want to share it with you guys because I care about everybody and I hope that everyone can distill this information as you know wi without fear as much as possible and with as much rationality as possible to try to make sense of what's going on. But before I get into which stocks benefit, I do want to say this. Okay, there are a couple of approaches here and I don't think that everyone is well suited to trade or try to invest in the AI buildout. It is what it is. Okay, there are people that watch this channel that play the long game. There are people that watch this channel that are traders, hence the name, the traveling trader. Obviously, if you're part of the Discord, you know we do everything long-term investing, swing trading, day trading, futures, but I know that there is a wide array of people that watch this channel, and I want to respect that. So, I don't want to talk about stocks or about certain trends or sectors in the same way that might not be applicable to everybody. Obviously, I'm not a financial adviser, but I am here to try and help you make sense of the market as much as possible. In my opinion, if you are playing the long game, if you are just a passive investor, if you are just a long-term investor, if you don't have a lot of time to retirement, or you don't really have a penchant for risk, in my opinion, if you don't have the desire to actively manage your portfolio, AI investing is the wrong game. That is my opinion. And the reason that I say that is because in and it sounds funny to say this as someone who invests and trades AI companies. I think this will end badly eventually. So this spending that we see here, how long can this sustain? How long can a company sustain negative free cash flows quarter after quarter? At some point the spending is going to stop and these companies are going to have to try to make sense of all of this money that they spent. You also are dealing with potential geopolitical risks such as what's going on with Iran, spiking the price of oil. That obviously has an effect on Fed policy and government policy which could affect borrowing costs which could affect the amount of debt that these companies can take or the rate at which they finance as debt or even if they get debt at all. Right? There's so many things at play here and I think that like all bubbles this will end badly at some point because the bubble will burst and it doesn't mean that AI is fake or not useful. Just like the internet there has to be a reset and a taking of stock before implementing these technologies in our lives so that they are seamless and then people will start making money from them gradually again. That in my opinion is what's going to happen. And the minute that a company says we are done spending which will happen whether it's next year or 3 years that will happen by hook or by crook. They will either have to willingly say that or they will be forced by policy and by the macroeconomics by the market itself to stop the spending. It will happen. Obviously they cannot continue negative free cash flows forever. So if you are just passively if you don't really understand these stocks if you don't understand what are photon what photonics do if you don't understand you know what what the memory cycle is if you don't understand any of this stuff and you are just looking for companies to invest in passively the AI game is a very dangerous one not only because these stocks in and of themselves are high beta so some of these stocks are trading at two three beta meaning twice or three times as volatile as the broader market, but this game is also at some point the music is going to stop playing as they say or as my dad used to say and now I'm a boomer. So, back to practical solutions. If you're playing the long game, if you are passive, not really active, you don't feel like jumping in and out of stocks or rotating every so often. there it the good news is there is an easy path here because these companies the MAG7s as I've discussed time and time again these companies are trading cheap now and they're not trading cheap because they suck they're trading cheap because as I said shareholders need to see immediate value and if they cannot see that the stock is going to trade at much lower multiples but these companies are still generating cash from operations it's just that when you combine that with the amount of money they're spending, it's turning into negative free cash flow. If you remove the spending, then you get back to massively positive free cash flow, which is also something that's going to happen. So, in my opinion, treat this market like we are in a bare market already. If you are not interested in the AI sector, learn to evaluate stocks and plan your waiting by your time to retirement, your risk tolerance, and your conviction. I shared this with you guys, but some of the ways that you could do this, obviously PE and forward PE, compare historical PE, look at forward PE to determine if earnings are expected to grow. So sometimes you will get in a situation where current PE is actually lower than forward PE. And that is not a sign of a company that is growing or expected to grow earnings. Look for a company that has a PEG of one or lower. Lower is better. This is price earnings growth. So let's take a look at a Microsoft for instance. Its price earnings growth is 76. It's below one. Its 4 PE 19 lower than its current PE. You want to see if ROIC, which is return on invested capital, if it has an high ROIC between 10 and 15% usually indicates that the company has a moat or a competitive advantage or even a monopolistic advantage at some point like ASML or TSMC. You can see here that Microsoft has an excellent return on invested capital at 21%. Are margins increasing or remaining steady? You can see here that its gross profit margin, it has been steady for 20 years, one of the highest in the game between 70 and 80% on average. And by the way, I'm looking up all these metrics on Alphascope.trade, which is only $19 a month, even less if you pay by the year. The quickest and most concise way to do fundamental analysis in my opinion. And then you would want to look at a company's debt to equity ratio. Is it higher than two? In this case, Microsoft's is less than 0.5. So the lower the better obviously because it means you have low much lower debt compared to your equity. Now another thing that I look for which is not really found in the numbers per se is monopolistic value. So you take an ASML or TSMC or even an ARM. Does anybody do what these companies do? And you can obviously use Google for this, but ASML holds a near total monopoly on EUV lithography systems, which are the essential machines used by foundaries like TSMC and Samsung to print cuttingedge AI capable semiconductor chips. Another thing I want you to remember is that tech isn't everything. There are a ton of great companies right now, and tech will likely be in the dumps. At least it will be volatile for the foreseeable future, especially if Microsoft, Amazon, and Meta report negative free cash flows as well. And those are the obvious companies. I don't want to say, you know, buy Microsoft, Meta, Amazon. And I've talked about Hood and Visa, Mastercard, some of the financial stocks that I like. But in my opinion, there are hidden gems like FICO, Fair Isaac Corporation. This is another near monopoly here. And if you look at its stock price going all the way back to the 80s, you can see here that it is a steady growing stock. And when it does dip in the way that it has dipped recently, and this is all because of the fears that AI will take over FICO's uh business model or at least it will take over FICO's business operations in my opinion an unfounded fear. But FICO also operates a near monopoly. Literally just type into Google is this ticker a monopoly or at least a duopoly like Mastercard and Visa. That is my investing style when I'm investing long-term. I want to invest in company. That's why when people ask me about companies like Nike or Lululemon, I can't bring myself to invest in them. Not that they they don't look good on paper, there's so much competition, especially in women's athletic wear. It's like I I don't really care to be in that battle, but when you look at FICO, I mean, 224 PE, if you look at its return on invested capital 53%. You will be hardressed to find a company that does a 53% return on invested capital. Look at its revenue, gross profit, Ebita, free cash flows. It doesn't have capex, which is music to my ears as someone that has been suffering through this cap cap capex aocalypse. Uh net income. And another thing you want to look at is is a company's earnings and a company's revenue and all of the important metrics. Are those things going up while price and PE are tanking? And if the question is yes and everything else checks out, that is a company you want to pay attention to. Pay attention to index dips. So, I talked about in the last video how I expected in right now, especially since we didn't get that July seasonality and the diamond top that the NASDAQ was forming, that it was very possible that we get a at least a 10% dip on the NASDAQ. If this entire runup was due to the fakeou or the Iran uh peace talks, right, obviously that is out the window now. And part of the reason for this slowing down now, but to be tr to be truthful, not all of the reason. However, it is really logical, even if you don't know much about technical analysis, for this to give back a lot of this runup. And I do think we can hit the 100 day moving average at around 670, which would bring the NASDAQ down to about - 10%. And if you guys are fans of this channel, you know every time the indices are minus 10% I take advantage of that. And one thing you cannot discount is how consistent midterm year drops are and how you really have to, in my opinion, take advantage of them. Here are all of the midterm drops going back to 1950. Some of them are worse than others. We already had a 9% drop this year. Could be more if things don't shape up in the near term. If oil continues to spike, if the Fed continues to be really vague about its plans, if the Iran war continues, if these companies continue to eat themselves alive, reporting negative free cash flows, we could really see a a drop, a double- digit drop in the indices. Every single one of those is buyable. Every single one. And just to remind you, this is what investing in panic looks like. It pays to buy the panic. Why? Because most don't. There is a direct correlation between the spike in the VIX and your returns. It just is because nobody buys the panic. They actually sell on the panic. So, make sure if you see the VIX spike to 25 or 30 or above, you are thinking about what stocks were on my list that I want to buy. And just back to the index dips, I always make a habit of buying every minus 10%. And every minus 10% beyond the initial minus 10% I average in even more because no matter what the worst drops in history, if you are the person that is buying these drops, it does not take you a long time to get back to profitability. Unfortunately, if you are a person that has only bought here and then you rode this entire thing up, it will take you years to get back to profitability. I hope those tips really helped you. Leave it in the comment section below if you have a question about long-term investing or methodology or how to evaluate a company and I try to respond to each comment. So, just put it in there and I'll respond to you. Unless you're in the Discord, just ask me in there. But how do we take advantage of the AI buildout and the fact that these companies are eating themselves alive with capex? Well, I told you I put this thing together. This is based primarily on Google, but I will have one for Microsoft and Meta as well in the Discord, but I'll share the one that that I did for Google. That way, you have an example of what to look for if you're not in the Discord. But I put together a list of companies that are very dependent on Google spending. And it is based on how much Google spends with them, how tied they are to the Google life cycle and what the uh and the the public information that's available to us from disclosures and whatnot. So Broadcom 78% of Broadcom's ASIC revenue is Google and they co-design the TPUs which is Alphabet's chip, the Tensor chips. They co-design these chips with Alphabet. The single biggest dollar flow out of Google's capex is to Broadcom. Now Broadcom just happens to be a company that I'm invested in. An excellent company forward PE of 20. If you look at its return on invested capital almost 20 10-year keer 25% that means it averages 25% revenue every single year for at least 10 years. PEG of less than one at 0.5. This is excellent. Debt to equity of less than one as well. Everything trending in the right direction. Look at that juicy free cash flow. Why? Because it is a company that's being spent on. It is not a company that's doing the spending. Broadcom was one of the companies that I bought back in February when it dipped just under 300 at the 200 day moving average. And it did revisit the 200 day moving average again. But that and Marll are two of the companies in the semiconductor industry that I'm really bullish on. Another company that's dependent on Google Capex is CLS, which is Celestica. This is a connectivity stock. Google is its largest customer, 32% of its revenue comes from Alphabet. It integrates the racks OCS switches and TPU systems, the last mile of Google's AI servers. It is also the preferred partner for TPUs. Terraolf, which is a data center company, former Bitcoin miner, but $3.2 billion Alphabet backs stop and Alphabet has a 14% stake in this company. Now, from a technical perspective, it is sitting at the 200 day moving average, but I would much rather see a break and retest here. And yes, I do invest in AI companies also based on technicals. And the reason for this is you have to know the phase that you are investing in. Is the stock accumulating, expanding or distributing? because you were dealing with such high beta stocks and I saw this when I was talking about a couple months ago I was saying that you know giving you my my strategy for trading AI stocks and I was talking about like for AOI for instance a photonic stock the 921 EMA was a trend that you can ride until the trend is done and I said when the trend is done when it breaks market structure then you'll know your trade is cooked and I'm not one to try to hide my losses or say oh I never take a loss Of course, I'm writing this trend, trading it, trading it, trading it. And of course, once the trend broke, then I ended up with a losing trade. But a lot of people, they don't know how to trade or they they do want to make money, and I can sympathize with that, but they don't really understand what they're doing. And so, they see a ticker symbol and they buy it, and then they write it all the way down, and like, "Oh my god, I lost money. I heard about AOI." If there's one thing that I want to impart on my audience, be deliberate. If you are not deliberate, do not click the button. Whether you are trading or investing, just don't click the button. Once you develop enough conviction and knowledge to be deliberate, by all means. So, this trend right here is called a distribution. And you have to recognize when a stock is in distribution. And some of the data center stocks like Wolf, which have had an insane runup, are now completing a distribution phase. And I need to see it break above a trend for me to want to join in. It doesn't mean I don't think that Wolf is going to be a great company in the AI buildout for the next 1 to 3 years. I mean, obviously it is. If if Alphabet took a 14% stake in them, they are not a stupid company. But I also want to be on the right side because you can suffer some pretty big drawdowns in the AI trade and a lot of you have seen that. Another thing is you cannot value these companies by traditional metrics. These are emerging technologies. They are spending a ton of money. They're taking out a lot of debt. They are being spent on but they are also generating revenue really fast. So when you look at a company like Wolf and you see the last couple of years, it's generated revenue unlike ever before. Look at its gross profit, right? it converted or it's in the process of converting from being a Bitcoin miner to a data data center. Look at its growth gross profit margin. That's why these data centers are catching a bid here. So, when you look at a company like Coree or Nebus, two of my favorite data centers that I own, you have to look at things such as the revenue they're generating. You have to look at their backlog. Who do they have deals with? So, Coreweave has a hundred billion backlog. Now, this company that just entered the NASDAQ also has a $44 billion market cap. So its revenue backlog is twice as big as the entire company. That is why these companies see asymmetric growth in the very short term. Once again, look at its revenue, EBIT, gross profit. So even though the company is not generating an income, it's because it's growing so fast. Remember the early days of Amazon when Amazon did not report a net profit for I think 10 years because it was in a hyperrowth stage in the early 2000s. And by no means am I saying coreweave or Nebus or Amazon, but I'm just giving you an example of what this life cycle looks like when it's in the growth stage. Now, I'm not going to go through each one of these, but you can take a screenshot or read them, but these are all of the dependencies on Google's capex here. Cipher Mining had a massive day today as of the time of this recording. 1.73 billion Google back stop and Google has a 5.4% stake in Cipher. just a monster week up 60% in 5 days. Lumenum, which we've talked about on this channel. This is a photonic stock. TSMC, but who doesn't have a dependency on TSMC? Marll and Nvidia, but these are pretty low in terms of dependency cuz I graded them here. Now, here are some tips to help you survive the AI buildout. Understand the supply chain. Do you understand the dependencies? Don't just buy and bagold what you don't understand. If you don't know photonix, sit down, spend half an hour or an hour on the weekend and read about photonix and see what are the best companies in photonix, who has the biggest backlog, who has the the most prominent customers. If you don't understand what data centers do, just literally Google what are data centers, what do they do? You can learn an infinite amount of knowledge in a couple of hours on a weekend. Take profits into strength. Now, whether you're trading these, as I said, off of the 921 EMA along the way, whether you are investing in them, I am making a big habit of taking profits on the AI buildout into strength. You know why? Volatility will hand you a fresh entry as the AI buildout continues. Whether you're talking about semiconductors, whether you're talking about memory, as you can see here, you will get a chance to re-enter these. Have an exit plan. As I said, and I don't mean to be crass, this will end badly. Now, whether it's one year or three years, I'm not Nostradamus. But the minute that someone says we're done spending, then the whole AI buildout falls apart. It doesn't mean that it won't have a resurgence after the dust settles, but there will be a lot of dust. Now, for the time being, as of this recording, this is not a swing trading environment. I've said this the last five videos or more. This is not a swing trading environment. Swing trading happens when the ride is smooth. And you'll know it when you see it. Like when the market is doing this or when the market is doing this or when the market is doing this or when the market is doing this. These are swing trading environments. When the market is doing this or this or this or this, you just have to chill and let things be. We will get back to it. I promise. And lastly, you guys are sick of me saying this, separate your portfolios. I don't care who you are. I have separate portfolios for the AI buildout and my regular responsible portfolio that is more based around traditional investing principles. Separate them. You do not want to have a you don't you don't want to have 10 positions in your real portfolio swinging wildly affecting your mood, affecting your decisions. And just to give you a few more tickers, I talked about this before, but we bought the dip on DRAM that is already up like 19% in three or four days. I consolidated all of my data center holdings into uh Nebas and Cororeweave. Here you can see it's in the AI portfolio, up almost 24% on this position. It's about 14% of the total portfolio, 100 shares. Photonix are currently in a distribution phase. I need them to break trend for me to be interested in them again. Obviously, the AI buildout is dependent on power. I talked about constellation energy. Want to see if it can break this trend here. Vertive, VRT, Bloom Energy as well. I like Bloom Energy here from a technical perspective because it has its its own pattern really off the 100 day moving average and we are back there again right now. But need to see it trade above the 100 day moving average for me to be confident again. They do report earnings next week. So, if you don't have a position in Bloom, would be prudent to see what they say. I talked about this in the last video, but I'm not too certain that chips are done correcting here. We are we broke below the 50-day moving average and are coming up against it. And I looked back in the history of SOXX and SM SMH, which are the two main semiconductor ETFs. And when it does that, it typically does retest the 100 day moving average. We do also have a distribution pattern here. Some people can see a potential head and shoulders. So if SMH or SOXX if they do correct down to the 100 day moving average then S so XL because it is leveraged will likely be below 100 at the 200 day moving average and I will be doing a cheat sheet like this who benefits from the capex for Microsoft Meta and Amazon. So if you're in the Discord for sure look out for it. But the most important thing are these companies going to continue cannibalizing themselves? Who is the first company that is brave enough to say we are cutting back on capex? I don't think that's going to happen this year. Maybe we could see it next year. Maybe if the price of oil gets out of hand and the Fed goes crazy, then that could affect borrowing costs and companies like Oracle will be in the dumps. If you want to trade live with me every single day, market open link is in the description. You also get access to all of my thoughts, my analysis, the AI portfolio, as well as the regular portfolio, all the buys that I'm making, and all the swing trades that I take. And you also get access to me as I'm in there chatting every single day. I hope this helps you. Subscribe to the channel. Hit that notification bell. Stay safe out there, traders.