Why I'm Buying This Software Selloff, Best Stocks to Buy Now!

Tech stocks are down. Everything from software, semiconductors, you name it, cyber security. A few different things are happening at the same time. And I want to explain it. I want to break it down. I know that you want to know what are the best stocks to buy now. We're going to talk about some of the stocks I'm buying as well. But as an investor, it's important to understand what is happening with the market. So, first off, Service Now, that's going to be the catalyst for any of these software stocks. Now, if you remember just not that long ago, how many months was it? It wasn't long ago when Service Now was down at $80 a share, something like that, and software stocks were all going to go out of business, right? So, if I look at the year-to- date chart on this, you can see the stock was down here, 52- week low, $8124. This thing almost doubled from $81 into the 150s, and now it's down 18%. If you look at the six-month chart, though, it was up, you know, 70% and it's given some of that back. So, profit taking is normal after a run. But it needs an excuse. And of course, the earnings had a few things that it didn't like. Now, the market's going to react. It's going to knee-jerk. The first thing the market's going to do is say, "Oh, we knew that software was dead, that the SAS apocalypse was real. I can't believe I bought this. It's time to sell and get out." But that's not actually what's happening. If you understand what's going on under the hood now, if you look at the earnings overall, very solid. In fact, now if you look at it, the the fullear outlook was actually increased for subscription revenue as well as free cash flow margin, delivered 19 transactions valued at more than $5 million, representing 135% year-over-year growth with new annual contract value. The company also increased its AI annual contract to 1.7 billion for the full year, well above the target of 1 billion. So, it's not that AI is eating service now. That's not what's happening. Why did they miss earnings? Why is the stock down? Of course, EPS missing by two cents is going to be one of those main drivers, but that's going to spark the fear about the AI concerns and the SAS apocalypse and it's going to kind of stoke the fire, right? It's going to get that fire going again. And the thing there, there are several things going on at once. I'll explain. You know, if you look at revenue up 20.5% that beat by $20 million. the RPO 29.7 billion, 22% year-over-year growth, 22.5% constant currency, and again raising the AI annual contract value. So, I posted this last night in our Patreon and told you exactly what's happening with Service Now, and I'll get to that in a second, but of course, next up, one of the big drivers in the market, why the NASDAQ's down over 1% this morning, Alphabet, Google was down about 10% the last time I looked, now 11.34%. So at $288 and you look at year-to date, this stock is now down about 8% and over the last year it's only up about 7% in the last 52 weeks. So two reasons why investors hated the quarter. Really traders, right? Not investors but traders. Number one, first Google search business not sales of 63.4 billion below the expected 64.9 billion. the misfueled furies about Google search engine being chipped away by the likes of Claude, Chad, GBT, even canalization by itself by basically if you if you take out the ads from search and you're using more AI, you're not getting directed to those pages as much and you're not getting as many as many ads in front of you. Second, Google posted negative free cash flow. So now it's in the same boat says Oracle. Now everybody can hate Google like they hate Oracle because the negative free cash flow of 9.1 billion versus an estimate of 3.5 billion. Why? Because AI capex buildout. They're going to continue to spend even more money building data centers. Now it's a much different story for Microsoft which the internet told me when it was $350 it was going to go out of business. I did a video saying I thought Microsoft was a good buy $400 or less DCA and I got a lot of hate for it. But if you look at Microsoft, if you look at how simple it is for these large hyperscalers to scale out to roll out AI and with Microsoft not only to the consumer but also to enterprise and you're seeing this headline above me here, GDP increases better than expected 3.4%. So it'll be interesting to see how futures react to that. But Microsoft had a great quarter and if you look at this, the capex guidance fell to $170 billion for the full year. Azure grew 48% which is amazing if you think about how long Azure's been around. I bought this stock around 2012 and it was roughly in that time frame a year or two difference where Azure kind of got started and I said hey if anybody compete can compete against Amazon because Amazon Web Services was something I thought was going to be really big when you look at cloud services. I said Microsoft of course could be that company that could do that and it's done very well for me over the years. But 48% the largest single business they are absolutely crushing it now that is going to put pressure on coreweave NBIS and Iran again why because lower than expected capex these guys are trading higher because they need capex spend they need compute power if you're show showing a slowdown at all it's going to crush these companies first in addition Microsoft is a top customer for both coreweave and NBIS having become more reliant on neo cloud firms for capacity. Now, you also have cyber security stocks down and I shared this in Discord. If you're in Discord, you have this information last night at 6:00 p.m. You're getting it now on YouTube. If you want to be in our Discord and not have the lag, definitely join us. The link is pinned in the comments. But Forinet beat, but also cut its service revenue outlook and underwhelmed on the billings mix. Strong hardware, slower subscriptions. I'll get to that in a second. In addition to what I said last night, Fordinet said they had a security breach. It could also be why cyber security is selling off. I think that there's it's a combination of all the things we're going to talk about today, but I want to bring that up as well. But when you look at this, the stock down 25%. Of course, that's going to put pressure on all cyber security stocks. They trade in a basket, right? So you think of thematic ETFs just as a whole software is down, which these are software company. Most of them are SAS related type companies, right? They're going to be in that bucket. And then if you have something like Forinet selling off, it's going to bring down names like Crowdstrike, Palo Alto, Rubric, Zcaler, etc. The whole basket's going to sell off. Now, this is exactly though why I told you years ago to buy Crowd Strike over names like Forinet because Crowd is built in the cloud for the cloud. It's almost all sticky subscription recurring revenue. No hardware cycle. While Forinet still sells those lumpy firewall appliances, it's a hybrid company. It's you can't even compare the two apples. Apples, they're very different. Pel Alta was very much like Forinet. It has grown closer to the Crowd Strike side where it's focused more on those subscription revenues, the SAS model. But Forinet sells these lumpy firewall appliances that can even make solid beats look messy and hard to really digest. Crowd Strikes a cleaner model, cleaner story, better long-term compound. It's also best to breed, especially when you think of endpoint security. But the the market needs any excuse for profit. These stocks have had a major run. Does it impact the fundamentals of a company like Crowdstrike? No. But the market doesn't understand that necessarily. Plus, the stocks aren't cheap. They're very expensive. If you look at CrowdStrike, Crowdstrike's up 135% just in the past 6 months. So, yes, it's down 6.89% in the pre-market, but it's still up 130% just in 6 months. That's amazing returns. Palo Alto Network, same deal. Up 117% in the past six months. Yeah, it's down six and a half% pre-market. A little bit of profit taking. any kind of an excuse. You're going to have profit taking when a stock rips like that, goes parabolic in six months. Rubric, we just trimmed some of this in the community portfolio. I did a patron exclusive and I told you, hey, at $137, I'm trimming this stock. It could certainly go higher. Maybe it goes to 150 or something, but I'm fine because I bought the stock in like the 60s and now all of a sudden it's $137. I'm going to trim some of this in the community portfolio. So, we trim back some shares. Now, the stock's down 7% at 126. the 52-W week high, it got to about 140 bucks, $139.92. Now, I'm not saying you should go panic sell and sell these if you didn't trim them. It's just how we do it. If you follow the fired up methodology, what we teach in the blueprint, there are reasons, there's times when you trim stocks. It doesn't mean that everybody should do it. It depends on your blueprint, your time horizon, and many variables. And of course, none of this, guys, is financial advice. I just share with you what I see. I'll show you alphabet earnings in a minute. I missed on the top and bottom lines. Stock down 11 12%. But is important to understand that the Q3 cloud revenue jumped 103%. And this is going to set up what we're going to talk about next. And it's going to tie into NeoClouds and my thoughts. So you can see the double miss here. Revenue 127.58 versus 127.91. This is a miss on both the top and the bottom lines. The standout here though again, Google Cloud revenue increased 103% to $30.7 billion. So, I said last night, I'll keep it simple. Software and AI stocks are selling off after hours. Many of them have already had huge runs. You're talking about 100% plus gains on a lot of these stocks in 6 months. Service Now is up nearly double from the lows. The broader software group had rebounded strongly, leaving valuations high and expectations elevated heading in earnings. And there's still jitters about, oh my god, is AI going to eat the world? Is it going to replace software? People still have fears about that. So any little hiccup, it's going to bring that narrative back front and center. Service Now did have a slight EPS misspite solid revenue, RPO growth, and raised AI target. Again, it's raising its AI expectations. Alphabet's weaker free cash flow from AI heavy spending were enough to spark profit taking. Now, if you look at this, Alphabet sinking 10% plus as holds 2026 capex unchanged. Expect significant increase in 2027. Whereas Microsoft's saying, "Hey, we're not going to spend a lot more money next year." Google is saying, "Hey, we're going to spend significantly more in 2027." So my thoughts, oh, so capex spend continues for chips and data center stocks. But again, persistent fears that AI agents could disrupt traditional software demand, plus questions about near-term returns on massive AI infrastructure spending. Plus, these SAS names, most of them are really expensive. You look at Crowdstrike, I love the company. I've been invested since 2019, the IPO. It's not a cheap stock. Even if you're using EVNCM revenue, of course, you want to use those kind of SAS metrics because if you use a PE ratio, it's ridiculous, like 1,200. But if you're using those EVNCM revenue metrics, it's still expensive when you look at names like CrowdStrike. But what exactly happened? Is it the fact that AI is eating AI agents are eating Service Now? Are they taking over? And I said, LMAO, absolutely not. Service Now's adjusted EPS of a dollar missed the dollar and two consensus. So, it's missed by two cents. Mainly because of lower interest income and higher debt costs tied to its earlier acquisition of cyber security firm Armis. If you understand the reason why, I'm not saying that you should go buy Service Now or anything like that. I tell most people to avoid cloud stocks. If you were buying it, you would have been buying it probably under $100. And maybe if you if you don't understand the company and you're not a long-term investor, you're probably trimming when it was 150 bucks, right? But revenue and other key metrics including RPO and large deals still beat. The earnings were actually pretty good and the company raised its fullear subscription revenue and its AI ACV targets. So the miss was largely a below the line item rather than a core operating shortfall. So basically misunderstanding by the market. You know we're going to sell ask questions later. Noise and FUD. This is fear, uncertainty, and doubt is exactly why I advise not to buy these SAS cloud stocks. They're very volatile, high beta. Most people can't stomach these large swings, and they happen all the time. Not to mention, I've been telling you guys, especially in Discord and on our live streams, expect volatility in October before midterms. We're still in October. So, don't be surprised if there's volatility because we're not out of the woods yet. So, most recently here, just on October 28th, we bought some Uber in the community portfolio. This is a small nibble on Uber at 6477. I've said for a long time, $65 or less DCA for Uber. So, we bought some Uber. You can see the trim for Rubric right here. We sold 20 shares at 137.77. This was just on the 27th of October before the selloff today. prior to that. And this is the community portfolio. So I don't want to hear anything in the comments about this is a joke cuz this guy's millions of dollars and he's sharing one, you know, one share of Melly. This is the community portfolio. We started it to show new investors how to get to the main how to make this. This portfolio made it so I could retire early. Let's just put it that way. All right. This portfolio has done well. Now, there's no guarantee. There's there's no financial advice here like that. But we started this this portfolio new for younger investors. Like if I were 20 years younger, how do I recreate what I made here? This is a $3.7 million portfolio here. The dividend portfolio is now over a million. And this community portfolio is about $600,000. So yes, we only bought a share because we already have a position. It's just a dollar cost average into it. That's how we do it. We teach this stuff in our community. We're slowly buying and slowly trimming. We don't trade. We're long-term investors, but we bought some Marcato Libre here. This was under $1,600 and it did pop nicely after that. You know, if you look at this presidential deal, he's been there since 2023. So, I didn't really see much changing. I was hopeful. I thought that maybe the stock would go below $1,500. That's where I wanted to add, you know, heavier and it didn't get there, but we I'm happy to add one share, like I said, in the community under $1,600 on Melly. Now, this leads into the main event today. Michael Bur calls AI boom catastrophically vulnerable after anthropic filing. Now, I generally don't watch CNBC. I happen to be making breakfast this morning. I turned the TV on and they were talking about AI and it was an interesting conversation, but it it showed me that if you watch something like CNBC or Bloomberg or even YouTube channels that are doing the oh my god market crash, it's going to be really hard to control your emotions, especially if you're you don't have deep knowledge into this stuff because you're going to look at it and be like, oh my god, you know, the all these guys are telling me that the sky is falling. Maybe I should sell my stocks. And maybe you should because it's your money. do what what's best for your money. But let's talk specifically about what the big short investor Michael Bur said about Anthropic. Now, this is one of the few times where I agree in certain parts of what he's saying. We often don't agree this IPO. So, the IPO is a big deal because you're you're seeing the road show is going to start up that usually goes for a couple weeks and then the IPO probably end of this year. He warns about interconnected financing arrangements and massive competing commitments leave it vulnerable to a slowdown in growth. A lot of the stuff he's saying here, this is true and it's going to impact specific companies. The one thing I've been telling you guys all year in our private community is that ecosystems will be the winners long term. hyperscalers the big are going to get bigger and names like Oracle are going to become a hyperscaler along with the Amazon web services the Microsoft Azures the Google cloud platforms and so on and other names like IBM are trying to kind of battle in there too but I really see Oracle kind of stepping into the same arena as like a Google cloud you're still going to have the king AWS you're still going to have second place a close second place uh these days with Microsoft Azure but these hyperscalers these ecosystems where they scale to the masses. Not only enterprises, but they also have the the B TOC, right? So, Amazon is in front of you as a consumer, but they're also selling to every, you know, or organization on Earth, basically, right? Fortune 1000. This is where you want to be. Companies that can scale AI to the masses. What I don't want is a business model where I constantly have to spend money and burn capex to build new data centers. Are there any business models out there that kind of fit that mold? We've talked about this before, right? So, I'll get to that. This is precisely where the risk the risk lies. He warned that the industry's network of financial and commercial relationships make it catastrophically vulnerable at a slightest slowdown in growth for a market downturn. The market right now is tied to the AI trade. And you're going to have a cycle that's going to end that and the market's going to suffer for a period of time. And I've told you this for a long time as well. For for a couple of years, I've been saying at some point there'll be an end of the cycle and it'll end badly. I still don't think we're there yet. And you have to understand which companies benefit and which companies are more vulnerable in this cycle. Bur tallied about 537 billion in computing and in equipment commitments disclosed. This is a lot of money. Five, you know, half of a trillion dollars in computing commitments. This is an Anthropics filing. So the ticker is going to be Ant arguing that the obligations are substantial relative to the company's revenue. He also pointed out to the possibility that additional agreements could increase the total. Now, this is the big one. Pay attention for this. I do agree with this, too. And this is something I've been telling you for a while. Bur also flagged slowing revenue growth and rising computing costs, pointing to anthropic sales growth decelerating from 46% quarter-over-arter, and that's from 144%. So, it slowed down from 144% to 46%. That's a massive slowdown. If this stock were public and this information came out in a quarterly report, you know, they reported earnings, the stock would be selling off big time. He warned that more efficient AI models could curb computing demand and pressure pricing like open-source models. These are closed models, these pioneer models, these frontier models. Now, where we differ is Bur thinks that the entire earth is going to be destroyed basically. You know, everything's going to implode. Where I look at this though, I think of these neoclouds and even anthropic and open AAI. The more that I study this, the more that I look at it, to me it feels like those are going to be more commodities over time. In other words, we have a demand, you know, I need corn. That's a commodity, right? So, wherever I can get corn the cheapest, I'm going to get corn. You know, right now there's Pioneer models and the models are maybe the best. So, maybe Anthropic has the best model. then you know what two weeks later our new model comes out that's better or if I can say hey this model is not quite as good but I can get it 50% cheaper on a token basis one thing to remember guys is you're still going to need inference so you're still going to have data center need but when I think of if this number is correct like if I if I just look at these two things you're saying $537 billion in commitments to spend money and your revenue slowing down from 144% to 46% what is that telling you this is telling telling you if think about commodity a commodity you have to sell it for the best price. So if all of a sudden I have to cut my prices to get you to buy it. Is that a warning sign as an investor? It's at least something to keep an eye on. Maybe there's a reason for it, right? But to me this supports the narrative that I've been talking about for a while where these neo clouds that can't be hyperscalers there there's going to be a cycle where there's no longer going to be a need or demand for them. We always overbuild everything. So, we're going to at some point overbuild all these AI data centers and the ones kind of left hand, you know, holding the bag are the be ones that finance those neoclouds and the Neoclouds themselves. Now, I'm not saying that they're all going to go out of business. You saw this Gartner report where it said like 80% or something are going to be out of business by 2030. I don't think that has to happen. But I think that the real risk for me is if my business model is to basically spend a bunch of money to build up compute so I can build the fastest, the best, the smartest, large language models. That's really what Anthropic and OpenAI does. That's what they do. And these NeoClouds are relying heavily on these companies for that that data, that compute power. If my business model is to constantly spend money to basically sell tokens and token prices keep going lower and the demand starts to go lower and I'm cutting my prices in order to sell, that's where I see a problem longer term. And I think the real winners here, guys, are going to be the hyperscalers, the ones again that can scale to the masses that have those relationships. Amazon Web Services already works to the Fortune 1000. If I'm a a Fortune 1000 customer or company, if I can go to Amazon and I can get Anthropic through Bedrock, I'm going to do that. And when anthropics maybe not serve my needs down the road, I might go with a different LLM. To me, large language models, that's just a commodity. What you really need in order to make money in AI is the ecosystem and the ability to scale to the masses. Selling lots of contracts. These companies like Amazon, Microsoft, they already have massive, high quality, world-class sales teams. Anthropic spending money to build this up, but it's gonna be really hard to compete. I worked in software for over a decade. I know how hard it is to compete in this environment, in this ecosystem. They're going to have to spend tons of money to lure people from Amazon, from other software companies to go work for them to sell. And that those costs do add up. I'm nibbling some stocks and there are stocks that re recently bought like AOI when it was like 65 bucks. You know, it got really close to that like 60 67 or something like that. You can see it's down 1.74% in the pre-market, but it was up big yesterday and it's bounced nicely from like 67 to 80 bucks. It's $80.60 in the pre-market. So, we've been buying some of those. Now, what's the thesis on applied opto electronics? Why would I buy this stock? I want to point this out really quick before I I close. Oh, and Axon stock is another one that should be on your radar. And of course, we've been buying Broadcom. We've been filling that position nicely below 350 DCA. That's to me that was a good opportunity. You know, you can see some AOI at higher prices and then we bought it as it came down. Did buy some Axon stock there as well. But here's 10 more shares of AOI kind of show explaining the DCA battle and how that really works. Here's the Broadcom battle, the AOI battle. Buying some more Broadcom at 324.97. some more AOI under 70 bucks. But here's what I was looking for, right? So people were giving me shade on YouTube about AOI. They're saying, "Why would I buy AOI when I can buy, you know, Broadcom?" Well, they're not the same. So obviously Broadcom is a much higher quality company. I would buy that before I'd buy it. But the way I buy in my blueprints is I create these different buckets and I have different levels of risk. So this would be more of like a spec or hyperrowth where Broadcom is going to be like a higher conviction. And it could even be like a core position like a 3, four, 5% position. AOI is more of like a 2% type of position, right? So the management, they were complaining a lot of comments about how the management's bad. I don't think the management's bad. It's not necessarily elite, but it's serviceable, and I think that improvements will be made. We consider this speculative. It's not a core small position. I just explained that it's high-risisk reward. So don't compare it to Broadcom. They aren't in the same league. If you don't have a high risk tolerance, companies like AOI, you should avoid it. Here's 25 shares. You can see at 6777. So, that was a good buy. But that's how we DCA. We just slowly buy levels as it comes down. Not going all in and saving room. And the thing is, if I want say 3% and I have only 2% and I think it could get lower. If it bounces there and goes higher, well, that's a high quality problem, right? And none of this is financial advice, but that's how we we DCA buy. Now, this is from the perspective as a long-term investor who's been doing this 30 years. If you're a trader, it might not make sense, but I encourage you to look into it because this method has worked very well for me over the years and as well as our members, a thousand plus members in our Discord community. For me, this isn't rocket science. People ask all the time, how did you know to buy this stock at that price? And how did why do you have a 10x? How do you have so many bagger stocks? Right? Well, it's you know, people say you get lucky. Well, you know, the hard the harder you work, the luckier you get. So, it takes some work and a dash of speculation. You don't really know. Nobody really knows for sure. You're you're basically putting a lot of time in to make educated guesses. Here's what I do know about AOI. Management said monthly revenues in 2027 would be the equivalent to the annual revenue in 2025. So, what they made in a year in 2025, they're going to do they're telling us that they're going to do that every month in 2027. Now, even if they completely whiff and they do a quarter of that, I believe in my opinion, not financial advice, the stock is worth more. So, either that happens and the stock is 200 plus. Again, it's just an educated guess. It doesn't have to happen. It it might go way lower. It could go under 50 bucks, right? But either for me, it does this or it doesn't and I move on. It's simple stuff. I'm hedging my bet the way I do it because I'm having a small position. It's called being a good money manager, managing riskreward. For me, the riskreward is quite favorable, especially when it's below $75 and I'm using dollar cost average and saving room. By saving room, saying, "Hey, the floor is 50. If I want say a two 2% position and I have one one and a half%." I have a little bit of room if it does go lower and if it doesn't and it pops and now you're in the green or whatever, high quality problem, right? But if you believe management's lying or you think the management's bad, you have zero chance to achieve these metrics, just simply don't buy the stock and move on. Nothing I do here is telling you you have to buy. It's just giving you my opinions, never financial advice. So, here's my overall take in the market. I think that you're going to continue to see some volatility. I've told you guys in the Discord community, I've said, "Hey, you know, here's what's happening. If earnings start coming in, you could see Wall Street analysts start to slowly upgrade. Midterm elections can be done next week." It's been very predictable so far that we'd have a sell-off. This has been very normal. The key to this though, as I said, as long as earnings keep delivering. Now, if you have something like Google missing on the top and bottom lines, that can change this narrative quickly. But if earnings keep delivering and capex is still good and balance sheets are healthy and the AI trade looks like they're continuing to grow data centers and spend money, I would expect some green in the markets over coming weeks. Not financial advice. If all these mega hyperscalers start saying, "Hey, we're not going to spend as much money on capex," you're going to have problems. this anthropic IPO that could cause a rally in the market similar to what SpaceX did where all the space stocks ripped. But you know what happened after the fact, right? I'll just show you a quick chart to get to to to kind of remind you. If I look at Rocket Lab stock, this stock ripped up, FOMOed all the way up to 151. We bought this stock in these levels under $5 and it ripped from $5 to 151. Crazy crazy parabolic move. You generally see 50% retracements, which is exactly what you're seeing right now. And you know, we we were trimming up here. Never perfect. I didn't time it perfectly or anything, but when it was $100 plus, I was trying to trim out of it. I got to house shares. And now the stock can do whatever it wants. They're basically shares that I didn't pay for, right? They're shares that I didn't pay for because I got my money back plus a,000% return on this stock. And this is not financial advice. I'm just sharing what I did with my money. But my point here is the stock went to 150 bucks and then sold all the way down to 50 bucks. If you bought this top as exit liquidity, that's painful stuff. And a lot of retail investors unfortunately bought these highs. The market's really there to to entice you to FOMO chase and buy high and then panic and full fear of losing everything and sell low. But something like this could happen again where you could have the anthropic IPO be a catalyst to make stocks rip and then they sell off. Now, if you start seeing more and more headlines like this, this can change the narrative quickly, too, because retail is very fickle. And if retail gets scared off, they might might start start selling more of these stocks, and you could actually see a selloff going to the end of the year. I think that the chances though, if I were just looking at the math, the chances are that you see a Santa Claus rally after midterm elections. It's not financial advice. And like I've said before, I don't have to be right when I do something like that. I don't have to try to guess what's going to happen with the market because I'm not trading. You know, I told you to expect volatility in October before midterms. I told you to trim prices when they were high. I told you to have some cash, 5% minimum. I told you this was coming and here we are. And of course, I'm not a trader. I'm not claiming that have to be right or betting any money or anything like that that things have to go a certain certain way. If you're new here and haven't subscribed, make sure you subscribe. CLICK THAT BELL FOR NOTIFICATIONS. Drop me a like. Drop me a comment. Have a great rest of your day. Take care.