This AI Selloff Is a Bloodbath. Here's What's Going On

Hey everyone and welcome back to another video. For today's video, let's discuss the current selloff we're seeing in the AI/Chip space. Now, not everything is down. Okay, actually there are quite a lot of names that are green as of right now, but it is more towards real AI players, the Neoclouds, the cheap making companies. We'll talk about why that is. Now, tomorrow, Wednesday and Thursday, we have of course Meta, Microsoft, Apple, Amazon. They will report their quarterly figures. They'll talk about capex. They'll talk about demand. So, expect a lot of moves over the next couple of days. Also, FOMC meeting happening on Wednesday, expect even more volatility in the market. And so, right now, if we go and have a look at the current state of the market, it looks a bit better than when the day has started. Apparently, there was a report coming out that said that the United States and Iran might again have a quote unquote agreement. We know what happened the last time, but okay, I guess we'll take the green when we can get it. But here you can clearly see again it's one of those days where software names are performing better than the others. We see a Palanteer down 6%. We see a Netflix up 3.6%. Heck, we even have PayPal that's up 3 4% today. I'll cover PayPal later in this video because the company did report a quarterly figures earlier today. But then if you look at the bottom left corner as always the semiconductor names we have AMD down 6.3%, Micron is down 8%, Intel down close to five, Dell down over 9%, if we go and have a look at our list here of names. First of all, fintech names you can see mixed although trending towards more green than red. As for the Neoclouds, most of them are red. The only one that is green is Applied Digital. Apply Digital did report the quarterly figures I believe yesterday after hours. Then if we go and have a look at the semiconductor names here as well, most of them are red surprisingly enough, Nvidia is green to flatish. Big tech companies also most of them are green. Tesla is red a little bit and Amazon is basically flat. As for cyber security names, a bit of a mixed bag here, but as you know with cyber security names, most of these names are super expensive and a lot of them, if not all of them, have gone up substantially over the past 2 months. And so what exactly is going on in the market right now? Is this really the bubble popping? The demand isn't there? Is it about open source, open weight? What the heck is going on here? Well, what is going on is this. The information on Monday reported that an unnamed Chinese company has begun manufacturing an immersion deep ultraviolet lithography or a DUV machine. The tools are expected to be delivered this year to China's biggest chip manufacturers including Semiconductor Manufacturing International Corp. And this one right here, this one actually went public this week. Stock went up over 400% or so. Totally totally normal in today's environment. Now investors are concerned that if China continues to build out its homegrown semiconductor technology, it could cut off some of the biggest US, European and other Asian firms from the huge market. An immersion DOV machine is a tool that is used to etch circuit patterns into silicon wafers. It is a critical part of the semiconductor manufacturing process that is purchased by foundaries such as TSMC and Intel. And of course, DUV EUV machines, we immediately think about ASML. However, DUVs are not EUV machines. It is used for less advanced chips. EUVs are used for the most advanced chips designed by Apple, Nvidia, and everybody else. Of course, ASML dominates the market for DUV and EUV lithography tools. No other company has been able to replicate what ASML does, which is why it is a big deal that the Chinese firm has reportedly done so. Nevertheless, questions remain as to what impact the latest development will have on the company. Now, when it comes to performance of China's DOV machine, semiconductor manufacturers focus on a term called yield. We've spoken about that when we talked about Intel, when we talked about TSMC as well, which refers to the number of usable chips that come out of the process. All foundaries aim for maximum yield. Now, for this to become, let's say, a problem, they need to get at least yield parity, not just to have a working tool, cuz otherwise, why would anyone choose this over ASML's machine? Another part here which again makes all of this overblown is uh this one right here. The information reported that the Chinese firm developing the DOV tool is aiming to produce five units this year and around 20 in 2027. In comparison, ASML said it plans for capacity of around 130 DUV immersion machines in 2026 and planning to add 30% in 2027. So yeah, also China right now because of all of the restrictions, everything that's been happening over the past 2 years or so as part of ASML's revenue has become smaller and smaller. Now, should this be worrisome? Not really, right? We we knew that China is not going to stand still, right? Why would they? We've been seeing how strong their chips have become, how strong the models have become. I mean, Huawei is doing an amazing job. I'm not just saying this, Jensen. has said this as well. So it is not that surprising but again to suddenly freak out that oh everything's going to go down. China is going to be able to compete with Nvidia and ASML and TSMC and AMD and etc etc etc and everybody's going down and going out of business to me again screams overreaction. Now we'll of course have to take the other side of the coin. Will you be comfortable owning a name that is down 50% or that could go down 50%. Right? You're extremely bullish. Maybe it's because it only went up. But what happens when a name goes back 50%. Are you still going to be bullish or are you going to start to doubt yourself? And that's something we'll talk about throughout the video because yes, a lot of the names, the high-flying names, a Core Ree, Nebus, AMD, no, we're still quite close to all-time highs. A Rocket Lab, yes, and SD Space Mobile, yes, as well. A lot of these high-flying names are down substantially from the all-time highs. SK Hinings, Micron, SanDisk are all down a lot in a matter of a month or so. Of course, year to date, they're still up a lot as well. So, we'll have to talk about that. You have to ask yourself the same question. Am I comfortable owning the name if I know or if I think that this could drop 50%. Yes or no? Now, I'll first start off with something that I missed from the Sunday portfolio overview, which is go over the usual names we went over to look at some technical support areas or resistance. Usually do this during the portfolio update. Forgot to do it. Did add a couple of extra names here as a bonus. So here we go. Of course, before we jump into that, if you enjoy this type of videos, hit all the buttons. Really appreciate that. Want to support me even further, do check out the link down in the description and in the pin comment to the top 10 best stocks to buy now or go to full.com/couchinvestor. Thank you very much. So let's start off here with a Google Alphabet. So here as well, we have a little retracement despite the very very good quarter. Now right now it's sitting at around $326. It's directly testing its daily 200 day floor at $324. Now holding above 319 324 apparently could represent a prime long-term accumulation zone before trying to go back to 346 350. As for Rocket Lab, here we have the case of a falling rocket. Rocket usually only go up. In this case, we are going to go down. The support test at $81 didn't hold. Right now we're closer to $60 or so. We could see a broader support area closer to $55 or $50. Of course, if we do drop this low for long-term investors, I mean, is it cheap? No, it it wasn't cheap at $100. Wasn't cheap at 80. Never said it was. Just said it's less expensive. It was very expensive and overvalued at 150 $60 $50 in my opinion becomes very very interesting if if you want to hold this for the long run because remember and I'll say this time and time again we still did not have any neutron launch. So we're still waiting for that big catalyst. In the meantime I get to buy back my shares that I sold at higher prices. As for SoFi and you'll see a couple of other names. I won't focus that much on technical analysis for this week because well reports tomorrow and so technicals they don't matter that much. But right now we are below the weekly 100 that sits at 1774 EMA and 18.12 uh the simple moving average and the implied move is around 11%. We'll see what happens on Wednesday. As for Amazon here as well, reports Thursday. Currently, it's under the weekly 50 simply moving average of $232 or so. It's very, very close. $3, $2 difference depending on when you're watching this video. A daily close back above $235 would confirm this report. But here as well, we have an earnings report happening. Same here with Meta. We did go all the way to $669. We're now back under $600. We'll see if we could end the week back above $600. But the most important is of course the earnings report. As for for finally a positive thing here, that's new holdings. New back above $14. In this case, we're back above $14.5. So we're definitely having a little bit more momentum from the battles it had at 133.5 or so. As for Netflix, still in the accumulation zone here in the low $70 since the post earnings reaction. It did get a lot more uh buying action, but we're still here in the low 70 bucks for Netflix. As for Nebuse, well, this one of course huge huge draw down right now sitting around $170 or so. Says you're 166, but yeah, it changes every single minute. And so here as well, I do think that the comments from the hyperscalers are going to help Nebuse and we need to go back above $181 to get back into some momentum. As for Reddit also, it reports later this week, but currently we are at $175 approximately holding above the daily 100 EME of $172. We would like this to go back above 180. As for Axon, we had a pullback successful test and now we are back on track. Although this is the one where it's still expensive at $522 with Marcado Libre. Same with new. It was battling in certain area for a couple of weeks. We're now at 1,800 plus close to 1,900. I do think we can go back above 1,900 if this momentum does continue. As for Uber, I've said it in the past video, it is not worth touching this right now. We'll have to wait until the earnings report. It is sitting right around $70. Low 60 would be ideal zone for accumulation for the long run, but I would I would still wait for the earnings report and a comment during the call. Now, let's start here with a conversation looking at Nebus, one of my highest conviction names, if not the highest conviction name right now. Nebus is down 42% from the highs it experienced at the end of June. So let's call it a month from now. Right during a month this name is down 42.7%. Of course if we go back to let's say the start of this year approximately here stock is still up more than double. Stock was up 268% year to date approximately. And so, am I going to say that, oh, now that we're down 42% in a matter of a month, is that a problem for me? Okay, ideally, we would not go down 42%. But when we go up so fast, these types of pullbacks are going to happen. You cannot continue to go up and up and up indefinitely. It just doesn't make any sense. It It never happens, right? And you're going to say, "Oh, of course it happened." No, no, it didn't. Look even at Micron. Micron also peaked here at the end of June. Micron is now down 34% or so, right? Is this now a a company that is 32 33% worse? No. But but look at how fast this thing went up. Of course, this is a company that is growing rapidly. Top and bottom lines. Everything's improving. It has the momentum. So why shouldn't the stock go up? You're right. stock should go up, but maybe should not have been this low for this long, right? Because if if let's say towards the end of 2025, this thing was already worth $400 per share or so, then the huge volatile move that we've seen this year would have been less violent and that pullback right here would have maybe also been less violent. Right? This is something that people or most investors don't think about when you purely look at a stock from its all-time highs. Oh, it's down 50%, it's down 40, it's down 60, it's down 30. Like, oh, it shouldn't be down that much. But then you have to go and look at what has happened before because if the stock went from $10 to $20 in a matter of a month, so basically doubled in a month, then of course huge pullbacks are going to happen. Now, then you have to say, "Yeah, but should it have been trading at $10?" If the answer is no, then who cares, right? Because if it's extremely undervalued at 10, it's probably still undervalued at 15 and maybe at 20 it's fair value. So, right now you're down a tiny bit from fair value, which means it's attractive to you. But if you're saying that even at $10 it didn't make any sense, then it went to 20, then yeah, of course, don't be surprised if you see a huge pullback. It really depends on how fast a stock has moved up, why it has moved up, if it's purely hype or if it's business related as we've seen with the Micron. But then again with Micron, I think the stock should have been worth way more than $150 or so towards the end of 2025. So going back to that point, if at the end of 2025 this was a stock worth $400, maybe even more, then going from 400 or 450 to 900 or 2,000 this year is of course less violent than going from the low 200s. Makes sense. And so the pullback would in my opinion also be less violent because business-wise nothing is telling me right now that it is a 35% worse business today than it was a month ago. Of course markets are always forwardlooking and so we did already see a couple of headlines and I've said it in multiple videos already. people are trying to optimize for the memory use because they don't want to keep paying the huge premium right from Micron from Skhindings probably from Samsung as well. Now of course this pullback is not only for the high-flying names and Nvidia no matter what you mean not high-flying names. Yeah of course Nvidia went up a lot over the last year or so last two years but Nvidia is also down since May. Since May Nvidia is down 16% was down as much as 20% or so. Why? This was a $5 trillion business that was growing what over 60% or so. Extremely profitable and forward PE is close to the low 20s or so. Does it make sense? No, it doesn't. But the market doesn't always make sense, especially not in the near- term. And we've seen that with a meta, right? Meta at $600. Does it make sense? No, it doesn't. Yes, they're spending a lot of money. Yes, free cash flow is going to be negative just like with Google, just like with Amazon. We know this, but the core business for Meta is very profitable, but right now market doesn't care. And so here as well, if you don't know what you own, then yes, when stocks stop to go up a lot, as we've seen with a Rocket Lab, Rocket Lab is now down 57% from its peak year. Basically, it's because of the SpaceX IPO, right? Why? Why would a name like Rocket Lab go from $65 at the end of March to $150 at the end of May? SpaceX IPO anticipation, the business did not improve by 2x over that period. And so, right now, we're back down. We're back to the March levels. Now, of course, if you started buying at 100, 120, 150, thinking that, oh, this can only go up more and more. this will go to 200 to $180 to $300 and you don't know what you're buying. Then yes, right now you are you're probably crying. You maybe need some therapy, which maybe this video will be the therapy session, but you're going to start asking questions, right? Nobody asks questions when stocks go up. You only ask questions when stocks go down. That's a problem. But for those that have been with Rocket Lab since $4, $5, $10, $20. We know what we own. We've seen this happen before. Huge runups, pullbacks, pullbacks, pullbacks. What we want to see is the business execute. We've had new contracts. We've had acquisitions. Great news. Of course, we're still waiting for Neutron, which is the big game changer here. But it is very, very important to just understand what you own. Otherwise, yes, in situation like this, you will freak out. You will freak out because, oh, I thought this only goes up. Well, no, it doesn't. AMD, right at AMD since March, AMD in March was trading at $190. We're now at $460. And people already scream, "Oh, ridiculous. We're only down 20%." Now, should AMD have been trading at $200 in March? Maybe yes, maybe no. As you can see right here, we were at 266 in November of 25 and we were at 260 at the start of this year. And so here as well, if you know what you own, you should not be surprised when pullbacks happen. Because sometimes, even when you're very bullish on a name, sometimes you just have to look at what's going on and say, "This does not make sense despite me liking the business." Now, for those that are still interested in PayPal, PayPal over the past couple of weeks, as you can see, has gone up back above the 50 weekly here and has stayed over the 50w week, which is very good. Of course, that big green candle here is because of the Stripe rumored acquisition. Now, what's also interesting is that the stock did not retrace all the way back down after management said that they're not interested to sell at that price because they believe the business to be undervalued. And so, the report that we got today was a better than expected report which could reinforce the point that well, if somebody wants to buy PayPal, they will have to pay a bigger premium. Now, luckily for them, stock already jumped a lot, which means no matter who's coming in right now, they'll have to pay way more, right? Cuz if the stock went back to the 40s, $45 or so, then you could still say, "Oh, we're going to pay $60 a share, $65. But now that the stock is still trading close to $60 per share, if you want to buy it, you'll have to put up 70, maybe $80 per share or so." Now, for the quarter, the bar has been set very low. Let's be honest here. And so we did have some modest beats here across the board for total revenue adjusted EPS and TPV. By the way, TPV for those that think that who who uses PayPal? Well, there's a lot of money flowing through PayPal. Close to half a trillion dollars actually. And that was up 10% year-over-year. So all in all was a okay quarter. Not not excellent, okay quarter. transaction margin dollars was actually up 1% year-over-year excluding customer interest that was up 3% year-over-year. As for guidance, they expect full year 2026 adjusted non-GAAP EPS of $5.38. That's raised from low singledigit decline. Transaction margin dollars expected to be 15.6 billion, 14.5x interest. Online branded TPV low singledigit growth that was also raised. So all in all for the guidance a bit more positive than negative. They're also expecting no rate cuts for uh this year. They still talked about the four strategic pillars financial services, Venmo and Brainree. High value focus. When they say high value focus is basically re-energizing the network for one-third customers who represent over 50% of TPV scaling biometric pass keys to minimize friction. They're targeting $1.5 billion gross run rate savings, $400 million by year end, AI adoption, shortening production time by 25%. Now, they announced a couple of things here. They're launching an integrated consumer lending partnership with Amazon in Germany and Austria. So again, some Amazon connection here. Venmo debit month activives grew over 50% year-over-year. User adoption debit plus pay with Venmo yield are nine times higher. Average revenue per active versus P2P only. Buy now pay later. TPV accelerated 26% to $10.4 billion. They expanded T-Mu now pay later to eight markets in Home Depot Canada. They've also rolled out a rebuilt Venmo app in Q2 to elevate product discovery, engagement, and financial monetization. As for M&A and market speculation, the CEO explicitly addressed acquisition rumors, stating, "Management is disciplined in maximizing shareholder value, open to opportunities, but fully confident in standalone execution." As for Merchant Synergy Wins, they're partnered with a leading social platform generating more than 50% TPV and transaction margin growth. A fashion retailer flipped from declining TPV to around 10% growth via exclusive buy now pay later. And then again for the fiscal year 26 guidance they assume no further interest rate cuts and July branded checkout trends remains at around 2% steady and consistent with Q2. As for the cost savings and reinvestments, the $ 1.5 billion dollars in cost savings, it's 20 to 30% in simplified operating structure, 30 to 40% operational optimization, and around 40% accelerated AI adoption. They are going to use that to reinvest for growth. And then they ended here with the multi-year strategic road map. strengthen fundamentals for 26 27 build momentum 2728 and then accelerate and disrupt 28 and onwards. Now of course maybe in 26 maybe in 27 somebody might acquire the business or parts of the business so it won't matter anymore but right now does this mean that they're back on track? I have PTSD with this back on track PayPal we are shocking the world etc etc. So, right now I'll say uh let's wait and see another couple of quarters. And so, ladies and gentlemen, that's about it for me in today's video. Tomorrow, very exciting day. We have SoFi, Meta, Microsoft, Robin Hood. We're going to go live for SoFi. We're going to go live for the after hours action as well. So, make sure you're subscribed. You have your notification bell on as well. See you tomorrow. Bye-bye. Hey, hey, hey.