Jim Cramer Nasdaq Analysis: Don't Miss This

Leopold Ashbrenner, but the unraveling of this hedge fund oiled the entire complex. Tech down big because of it. Boy wonder. No more. His selling and the selling by the firms that borrowed that that lent him the money. Well, they caused gigantic declines in stocks over the last few days that should not have been going down. Many sprung back to life today and gave I got to tell you because they were so depressed, I think they have further to go. How does this happen? I mean really. I mean how does something behind the scenes like this just happen? As a former hedge fund manager, I can tell you how it does cuz I've been involved in it. I've seen it. See, brokers really want your business. One way to get it is to lend you money. I've had that happen. Say here, Jim, take millions. The manager of this fund had a hot hand originally and when you have a hot hand, investors are throwing money at him and brokers are always eager to lend money to new superstars. This fund was apparently able to borrow a gigantic amount of cash recklessly, I think, $3 for every $1 they put up. That's terrific when your stocks go up, but it is the kiss of death when they come down. In this case, they went down big. Big smooch of death. For months I'd heard about this situation awareness now situational unaware situation situation awareness fund and I heard that it could do no wrong. Absolutely no wrong. Everything Leopold Ashbrenner touched turned to gold. He mostly touched the semiconductor stocks along with the memory and data storage power companies and he loved the neo clouds. Oh, he and he despised software. He bought the memory plays with the same gusto that he shorted the software stocks. At some point this year, I thought this guy's view was all that mattered to host of both big time people and smaller time speculators. When you're as good as Ashbrenner was, you get a lot of copycats. This guy had a bunch of camp followers who also ran billions of dollars and also borrowed a ton of money. Lots of other funds simply mimicked him, and as did many individuals. They didn't want to be left behind. As is often the case with a younger manager with a steaming hot hand, Ashton Berner apparently didn't believe that anything ever go wrong that he did. He He didn't seem to realize that when stocks go down and you bought bought them with margin money, the brokers aren't going to lose money on you. You either pay them or they forcibly sell the stocks you bought with borrowed money. Raise money to pay or they sell them out from underneath you. It's brutal. It's self-fulfilling. So, when things go wrong, they go spectacularly wrong. Ashton Berner and his and his imitators bought the big semiconductor stocks Micron, the Sandisk, Intel. He liked the companies that built data centers, not CoreWeave Nimbix. And he had a thing for Bloom Energy, which makes hydrogen fuel cells to power the data center. Now, you need to know a couple of things. Many of the people who bought these stocks really didn't know anything about them other than this guy had them. They just knew Ashton Berner was an ace. And he been dead right for so long, they well, they had to pile in. The irony here is that when tech had just had a bit of a downturn, just a smidge, Ashton Berner apparently lost almost all the money managed, despite excellent earnings performance of the actual companies themselves. That's why I say they diverge. The good news is simply they stopped translating into higher stock prices for a variety of reasons. Maybe because rates were climbing, maybe because not every company did well, or because they went out of fashion in the Wall Street fashion show, or buyers turned to other kinds of technology as I've been saying they're doing. Plus, these stocks do tend to trade with each other. Consider the contagion. Something I don't think we ever thought about or was old enough, maybe, to realize. The contagion spared almost none of the stocks of these companies, even as the fundamentals remained very, very strong. At the same time, Ashton Berner was a serious short seller, and he bet against the enterprise software companies like there was no tomorrow. Adobe, Workday, Salesforce. So, again, we got self-fulfilling moves down as he was mimicked consistently. When the stocks turned, he apparently didn't take the the emergency actions that you needed to do. The things I've been telling you to do for weeks, he didn't sell the data center plays and get off margin. Instead, he wrote his investors on July 24th, 6 days ago, that it was really a terrific time to give me more money. So, what happened? Well, they didn't give me more money, I'll tell you that much. Uh consider a what a stock that if you're a member of the club, you know it was close to me tremendous acts. Consider Intel. We got an earnings report from Intel last Thursday night that was a thing of beauty. Not only were there no flies on it, but Lip-Bu Tan, the CEO, the CFO, and and I talked for a long time about the incredible multi-year story of demand for Intel CPUs. Intel's foundry business is great, well, will be great. Intel's semiconductor packaging division, I like it. We told members of the CNBC Investing Club that this was such a great opportunity to buy in a note we sent out Thursday night. Well, the stock roared from the high 90s where it had been trading to as high as 110 in after hours when the earnings news broke. I was ecstatic. We nailed this one. I sure didn't think the stock would go to 110, I thought 120 next stop. But that next day, unbeknownst to us, big mouth investors got that letter from Aschenbrenner asking for money from investors to to meet the margin calls. Right from the get-go, Intel stock could not get an uptick. It just came down and down and down and down. It was just astonishing to those of us who knew how good the fundamentals were, including big people at the company. Well, behind the scenes, it looked great. Aschenbrenner's fund was furiously selling Intel to raise money, though. And the brokers he owes that money to were doing the same thing. The imitators were certainly bolting from Intel, too. It didn't matter how good Intel's quarter was. The result, the stock sliced through $100 and didn't stop until the low 90s, about an 18-point swing when I thought it would be the opposite. I thought it'd go up 18 points, not down. I couldn't believe I could be that wrong. Turns out, I wasn't. Aschenbrenner and his minions didn't want to sell, but the margin clerks forced them to sell, and that crushed the stock. His fund's meltdown created an amazing opportunity to buy Intel. The selling seems to have dried up for now. I think it's going to stay dried up cuz the only people really wanted to get rid of it were his people. Now that Ash Meters is out of the picture, we can go back to analyzing stocks as pieces of the companies they represent. Last night, for example, Microsoft reported terrific quarter and soared higher. Meta, not firing on all cylinders. Tonight, we heard from Amazon and Apple. Amazon shot the lights out. It was like Microsoft last night. They reported a solid revenue beat, terrific operating income up 42% year over year, or almost $4 billion higher than expectations. I normally talk about the earnings, but this time they include a massive gain from Amazon's investment in Anthropic. So, they're not really apples to apples. What matters most here is that Amazon Web Services put up nearly 37% growth, a dramatic acceleration from 26% last quarter. I remember a couple quarters ago when it was under 20. Wow, their margins were terrific. They're making big money from AI. This is the same kind of cloud infrastructure business that made a fortune for Microsoft, and that's why Amazon caught fire in after-hours trading. Astonishing gain, and I don't think it's done. As for Apple, after running hard for most of July, it reported a slight earnings beat when you exclude the impact of tariff rebates and a slight revenue beat, the stock still got hit. Despite strong iPhone sales, their services division came in weaker than expected, as did the Americas, and they don't sound that confident about their margins bouncing back because of of well, memory prices. It just seems like that well, let's put it this way. It's doing good, not good enough after that stock run. Apple spent most of July cruising steadily higher. So, it did come in too hot. I suspect more profit taking than we got even tonight. Still, let's not forget the big picture. You know that there's a gigantic takeaway from what happened here. For 2 weeks, I've been telling you to get off margin. 2 weeks, I come out here every night and say it. Stop using borrowed money. I didn't want you to get caught up in some in some over-leveraged hedge fund was doing. I didn't want you to get blown out. Bottom line, I want you to remember what happened here. Understand that while I Ashton Bether is a spectacular flame out, these kinds of things happen with something like reality. I don't want them to happen to you, and I don't want you to be misled by it. This business is hard enough. You don't need margin to make it all that much harder. That said, the margin selling has created tremendous opportunities now.