Nvidia Is Just the Beginning: The AI Stocks to Buy Now

Nvidia might just be the beginning. The AI boom is creating a massive memory shortage that could last for years. And it could create some huge opportunities for investors. [music] So, which stocks should stand to benefit? We have a special guest to break it all down today. Welcome back to Navellier Market Rocks. >> We're excited to have Lucas here. He is an expert with Money Flows, and we want to make sense of this memory shortage and what's going on out there. Welcome, Lucas. >> Glad to be here, Louis and Crystal. >> So, Lucas, you live in Greenwich, and it kind of is the hedge fund central. So, this one might hit close to home. Situational Awareness that we've been talking a lot on this channel, reportedly got leveraged over 4:1 through market makers before it nearly collapsed. So, how does that relationship even work? >> Yeah, so banks, you know, they love to give asset-backed loans, right? They do that with real estate. They do the same thing with stock portfolios. So, in practice, the way to think about it is let's say you have $10 billion of securities, and you want to lever it 4:1. So, you're going to go to your prime broker, and they're going to take your securities as collateral. They'll extend to you a margin loan. And then, just to make this easy, you got $10 billion, they give you, you know, $40 billion of exposure, and it's great when everything's going up, like we saw earlier this year. However, if you got a $40 billion da portfolio, you lose 25% in a month, you're down $10 billion. And remember, if that's what you started out with, prime brokers aren't going to take a big L, right? And so, this caused this big death spiral to happen, and then, you know, you're hearing about all the high-frequency firms that have come in to basically save the day, but I think the bottom line is leverage is great on the way up, and it is deadly on the way down. >> insight. So, Leopoldo ran Situational Awareness. I think he had a lot of Bloom Energy, Micron, SanDisk, and they all were acting pretty weird in July as as they were trying to unwind all this leverage. There's a selling pressure over we saw that, you know, Citadel saved them, but uh Jane Street lost money. >> Yeah, a lot of people were wondering that because in July it seemed like there was a liquidation that was happening, right? Then we get the headline that Ken came in, saved the day, had this humongous relief rally, and then Citadel he sent a note to investors saying that hey, they'd already reduced 80% of that portfolio. So, remember that is selling, right? And and they're motivated sellers. And so, that's why you've been seeing a lot of these, you know, momentum names, AI trade names just get hit. And so, if he's got 20% left, that's probably a couple of weeks left of sell pressure that's going to be on some of these stocks. So, I think we're near the tail end and honestly with some of the earnings that we are seeing out of Nvidia, we probably have less downside to worry about over the near term. >> Speaking of odd trading, did leverage ETFs and memory stocks pour gasoline on that too? >> Absolutely. I mean, the market has really become like a casino. I mean, now they have leveraged stock ETFs. So, you know, it's not enough that you can go buy a stock or go buy an option on a stock. Now, you can get two, maybe three times leverage, and these things can be dangerous if you don't know what you're doing, but I think it ultimately amplifies all the moves that we're seeing. And, you know, Louie knows this. In the summer, low liquidity, you start adding all this leverage, and stocks are going to move around in these big air pockets. So, not surprised one bit at how leverage is impacting all of the the daily gyrations. >> So, let's go back to Nvidia. They've had to raise their prices to their customers almost 15%. They're blaming higher memory costs for that cuz they make these integrated rack systems. Furthermore, their sales guidance would be higher if we didn't have this memory shortage. So, how long is this going to last, this memory shortage? Is it 15 months, 24 months? I mean, you know, we see SK Hynix is throttling up, building these mega fab factories. I mean, it's very uncertain how long this acute shortage is going to last. >> Yeah, everybody continues to worry about that, but the best guess is to just listen to what the CEOs are saying. Micron CEO says that tight conditions, they're going to persist beyond calendar 2027. You know, every time we get an update from quarterly earnings, it seems like there just isn't enough supply and they extend basically with all the backlogs that are going on. They do have a Idaho capacity that's going to be coming online, I believe in 2027. And then SK Hynix CEO said that 2027 is going to be the worst year from a supply standpoint. And he's saying that consumer demand should stay very strong beyond 2030. So, that is incredibly bullish. And then just to throw a little bit more in there, you look at Western Digital, which is more of the hard disk drive space. They're already discussing long-term agreements with customers for 2029, 2030, and 2031. So, it's seeming like it's less cyclical right now than what memory used to be. >> With all this being said with the memory shortage, Apple seems to be raising their prices, which includes the new folding iPhone. Lucas, I know that you have four kids. Is this going to impact you? I know that everyone wants the new phone, that's always the new rage. >> Listen, I try to show them flip phones. I try to get them interested and, you know, some other older type of phones, but the reality is kids just want the new exciting products from Apple. I'm not so sure we're going to be getting the the foldable phone, but what I can tell you is Apple makes a great product. I'll probably be forced to buy their products just because most kids just aren't going to be happy without the best. >> Well, that's going to be a $15,000 trip to the Apple Store, you know. Good luck with that one. >> Yes. >> Don't forget to get them extra memory cuz they they got to store everything on their phone. >> I'm causing the bottleneck. >> Lucas, I want to talk about P/E ratios. Obviously, we know memory is cyclical and Micron trades at barely five times forecast earnings. But Western Digital, SanDisk, Seagate trade at higher multiples. Is that just because they make disk drives versus flash memory? What's going on here? >> I think about this all the time and to me Micron represents, you know, uh, you know, peak cycle DRAM. That's what everybody's pricing in. Whereas you look at the Seagates and the Western Digitals of the world and it's more of a a tighter, durable play. Now, on a forward basis, Micron is roughly the same valuation as SanDisk. It's about six or seven times the forward. But, you know, think about where they were, you know, late last year Micron had a forward P/E near 14. Stock was around $218. In 2027, they're estimated to earn $155. SanDisk, incredibly, is going to earn 258 bucks in 2028. The stock was in the 30s in April of 2025. So, nearly seven times where the stock was trading is what the earnings are going to be. So, when it comes to memory, peak earnings get a trough multiples. There's a lot of people that think, "Wow, we're at the peak of earnings." And this is just your classic memory pattern for Micron. Western Digital, which is one I I really like as example, it didn't see this huge meteoric move that we've seen in Micron. And so, the peak maybe just doesn't feel as close, but the bottom line is if Micron supply constraints, if they last through 2028 like the projections say, a 6 PE is dirt cheap. >> So, Lucas, based on your money flow system, which memory stocks have the strongest institutional buying pressure right now? >> Great question. Um, so the way we can check that is we go over into our portal. Um, I'm going to look at Seagate because this has been a really powerful stock. It's got a great score, 77.6. But here you can just see that this stock has seen nothing but inflows over the past year. Um, not one outflow, even with the situational awareness sell-off that we did have. We are, you know, experiencing some consolidation, but overall, um, money flows continue to go into this space. And then we'll do one other one, which is obviously going to be Micron. It's got a great score, but here it's the same story. Tons and tons of inflows, and uh, these blue bars are highlighting that this is one of the strongest names in terms of fundamentals and flows in all of our data. >> So, let's go talk about your neighbors again. Jane Street had a pretty big loss in July, which is unusual, and but they invested in situational awareness. And we've had a pretty big rebound in August. So, you think Jane Street made all that money back? I I would assume they had a good month. >> I would assume they're having a great month. I used to trade with them a lot back in the day, and again, they would just provide liquidity, and they make most of their money whenever these black swan events tend to happen. So, I would not be surprised, you know, everybody else's portfolio that was levered to AI had a big bounce. I would assume that Jane Street's going to have some nice returns for August. >> Is there anyone competing with Citadel, maybe firms like Hudson River Trading? >> Well, well, Citadel is the king. I think they're roughly around 25% of some of the trading that we see. Hudson is definitely gaining some ground. Also, Jump Trading, you don't hear about them that often, but they are one of the top-tier firms, especially in in derivatives and in products like that. So, Citadel is still king, but there are definitely a lot of shops that are popping up to uh feast on the cake. >> And Jane Street's number two? >> I believe so, and they might even be number one in ETFs. So, used to do a lot of work with them, so they provide a ton of liquidity to the street. Everybody uses Jane Street. >> So, let's talk about all these big movers and shakers hanging out with you in Greenwich. Do you run into them at your kids' sporting events or Whole Foods? I mean, it's it's different in Greenwich. So, I I just be curious if you get any insight. >> Totally. Yeah, it is it's a hedge fund playground. Uh just about everyone is in finance, so it's kind of dull from that perspective. But yeah, when you're on the sidelines and you're doing sports with your kids, that's kind of what everybody's talking about, right? So, uh situational awareness, they were discussing that. Every time there's a market panic, you know, people want to talk about that. They don't want to talk about football. They want to talk about stocks. >> And by the way, during the meltdown in July, wasn't Leopold getting married in Carmel or something? >> Yes, what a time, right? They say, what is it? There's a few moments in life that are super stressful. One of those are are getting married. The other is moving. I would also say that, you know, having a fund liquidated might need to be on that list, too, cuz it probably was really, really tough. >> Yeah, no kidding. Well, Lucas, given all these money flows you've been talking about, I'd love to ask if there's any stocks currently on your radar. >> Yeah, so I mean, we've been really excited about what's been going on in the wafer fab equipment names. So, like Lam Research, KLA Corp, right? These are really important to the whole AI trade, especially as chips get faster and and smaller. Those are areas that we think are going to have they just had big dividend raises. Yesterday, Lamb raised their dividend 27. That and also in the photonic space. So, as you know data centers want to you know send all their data through through light, they use glass. So, companies like Corning had a big pullback and we think that that looks like a great opportunity right here. >> Lucas, how about Ciena, which is obviously optical, which I think they're going to announce soon. And then Coherent. What's your opinion of those two stocks? >> Those are all-star names. So, I think you would lump those into the whole photonics basket. Lumentum also has a lot. I think they just guided at either an investor day or a conference where their earnings are just going to explode in the coming years. So, that is a space that I think a lot of people underappreciate, but flows have definitely been going into that space this year. >> So, Lucas, you are the co-founder of Money Flows. I would love for you to share with everyone what your system is about and where people can find you. >> Yeah, so moneyflows.com is all about money flows and we look at thousands of stocks every day. We see all of the flows that are going in by sector and we just released frontiers. So, that helps investors see the biggest themes like photonics, memory where you can see all of those stocks and we've got this automated portal. We've got lots of research reports to help people find the best stocks loved by institutions. So, it's a really it's a really great product, a lot of technology. >> Lucas, before we let you go, I've noticed of the 11 sectors in the S&P, it seems like most of the money flow is going to four with two being really strong, which is obviously information tech and energy. Do you see flows outside of those the leading four sectors? >> Yeah, I So, there's been a lot of flows that have been going into healthcare stocks, believe it or not, and that's really been over the past few months. And I would also say that just financials in general have just done very, very well. You know, even if it's the you know, the big money center banks, a lot of regionals. So, you do start to see a lot of leadership out there outside of the AI trade, and it just doesn't get a lot of voice time because everybody's just so focused on the Nvidias of the world. But, there is definitely a bull market outside of the core AI trade. So, money's not leaving the market, it's just getting reshuffled is what you're saying. That's absolutely true. So, we actually have this big money index, and it's been kind of flatlining over over the past couple of months. So, even though we get these pullbacks, money's just going into other pockets, like you said, and that's indicative of you know, if the BMI's not falling, then that means that money isn't leaving. Money's just rotating into another group. >> So, what would be the best health care? Is it Lilly, or is it United Health Care? Who's getting the flows? >> Lilly's been getting a lot of flows. Amgen has been getting a lot of flows recently. Um, and then there's some other smaller names like Corcept, ticker CORT, has uh has been getting some flows as well. So, there's a lot of smaller names, biotech-related, medtech. They are littering all of our reports right now. >> And that big reversal we saw in Moderna, that was a short squeeze, wasn't it? >> I believe so. I think the stock went up I think north of 100%. That is the telltale signs of people being offsides and a lot of forced buying. >> Great insight, Lucas. Thank you for being on the Weekly Market Buzz. >> Thanks for having me. >> Yeah, thanks so much, Lucas. We really appreciate all your insights. And as always, all of Lucas's links will be in the description below. Please go check out his channel if you haven't already. Leave us a comment below, any questions that you have, and we'll answer them in [music] our midweek update. Thank you all so much for watching. Give this video a like, and subscribe if you haven't already. But, we'll see you this Wednesday for a new midweek.