Special Edition: Market MELTDOWN š« ā what to do, when to do it
Welcome toĀ AI CollisionĀ š„,
In todayās collision between AI and our world:
- Japan triggers mayhem
- Japan triggers mayhem
- Japan triggers mayhem
If thatās enough to get the stomach churning, read onā¦
AI Collision š„
We were going to dive deeper today into AMDās earnings. We were going to look at AI stocks and we were going to look at more stocks as they released their numbers.
But then Japan happened, and the market took a hiding. So, we cut all plans for anything else to look at whatās going on, and what should we do about it?
What is very clear from the outset is that yesterday we all got a little poorer.
At least on paper.
Thanks to the Bank of Japan, stock market bears, leverage traders, Iran and Israel, bitcoin, the Federal Reserve, fear and greedā¦ and for reasons weāll never really understand, things are RED.
When markets are rough like this itās a hard day to stay sane, to stay together and to stay rational.
In times like these, I find it cathartic to turn to the memes. And boy are the memes great today!
For all the Seinfeld fans out thereā¦
And for those who know who Salt Bae is:
If you liked the Beckham documentary then youāll love this:
And just when you thought the fear and greed index couldnāt get worseā¦
Of course, that means with stocks getting hammered, AI stocks have taken a clipping tooā¦
Or have they?
At last check (time of writing), AMD (NASDAQ:AMD) was UP for the day (not much, but still up), Onsemi (NASDAQ:ON) was up almost 4%, NXP Semiconductors (NASDAQ:NXPI) was up and LAM Research (NASDAQ:LRCX) was up ā like AMD, not by much, but a 0% to 1% win today is worth its weight inā¦ well, very good performing stocks.
So, it seems although some are calling this all a black swan-style event (and to be fair the Nikkei 225 did have its biggest single-day drop EVER) that not all stocks are going to the proverbial shi**er.
If anything, some of these AI-focused stocks are a defensive way to play a market meltdown.
But I digress somewhatā¦
Most of the market is in meltdown, and thereās a 100% chance your portfolio is worth less today than it was yesterday.
Unless youāre in cash, but then again, itās still worth less today than yesterday becauseā¦ inflation!
So, we ALL lost money. And so much so that it looks like the US Federal Reserve is going to step up, step in and aggressively cut rates ā maybe even in an āemergencyā cut this week, and then another in Septemberā¦ the double whammy!
And you know what that means kids?
Yes, the memes are great, I told you.
If money printer goes ābrrā then markets do the old ānumber go upā trick.
And if youāve got a bunch of AI stocks that have been defensive against whatās gone on in the last 24 hours, then youāre very sweetly placed to see that number go up very much indeed.
Jokes aside, itās a tough day when itās a sea of red.
And there are still systemic issues with levels of debt, particularly government debt. So, we never want days like these in the markets, but they do make great stocks cheap.
And some of the names weāve written about in the last few weeks and months are now trading at a discount.
I mentioned the stocks above havenāt been clipped too hard. But hereās some more that haveā¦
- Nvidia, down over 7% and under $100
- ARM, down almost 7% and trading near $105
- Taiwan Semi, down 5% and near $140
- Super Micro Computer, down 6% and now under $600
- Vertiv, down 7% and under $65
- Micron, down 6% and now under $90
What youāll find is these stocks are all down heavily in trading from yesterday. But theyāre also heavily down over the last couple of weeks.
Theyāre all roughly down 30% to 50% from their 2024 highs.
They may even trade lower this week and for me that means youāll get to a point very soon as to making a great call or a not-so-great call in the market.
My take is that sometime this week, weāre going to find a quick bottom in the market. Rates will cut, money will print, sentiment will come back hard and fast.
Also, earnings will continue to pump out and theyāll be pretty good. When the market is like this, all itās now looking for is a glimmer of hope to pump it back.
I think that will come. Maybe not today, maybe not tomorrow but in the next week or so. I think that being active and investing in the market makes great sense now for long-term investors.
I canāt tell you what to buy, or when to buy it. But I can highlight stocks that I think are trading at a discount to their long-term value. And thatās what Iām doing here.
Iāve just given a roll call of AI-related stocks that look attractively priced now, I liked them a month ago, and I like them more now.
If youāve got the risk appetite for volatility (the kind we last saw in 2008 and 2020) and youāve got the risk capital to deploy, I donāt think you want to sit on your hands here.
I think itās a buyerās market again, and the time to buy is upon us.
Boomers & Busters š°
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
*Aināt much booming this weekā¦but the busts give some perspective as to how heavily sold some of these stocks are right now.
Boom š
- Appex (ASX:APX) up 77%
- Team Internet Group (LSE:TIG) up 7%
- Bigtincan Holdings (ASX:BTH) up 5%
Bust š
- Nvidia (NASDAQ:NVDA) down 10%
- C3.ai (NYSE:AI) down 14%
- iRobot (NYSE:IRBT) down 24%
From the hive mind š§
- CNN says CARNAGE. And I guess theyāre right.
- Washington Post says the US government blames Elon for all their problems. Heās not it.
- BBC says UK government is shelving AI plans. They are.
Artificial Polltelligence š³ļø
Ahh youāre a smart bunch arenāt you!
Last Thursday I asked if the sell off in tech was going to impact your investment decision making at all.
And while it was a mix of results, cool heads clearly prevailed, and after the activity in the last 24 hours, the right decision at thatā¦
It should be said that thereās actually little difference for long term investing in taking action, and investing when you have available capital right away, and dollar-cost averaging, and even poorly timing the market.
But what really hits a portfolio and can drag on long term returns is being completely out of the market.
Analysis of data over time suggests that its in bear markets and in large market drops when markets end up having some of their best days.
So you might feel like youāre doing the right thing when youāre out of the market, but unless you have perfect timing which no one in history ever has, then it hurts you to be out of the market and to miss even a couple of the best days on the bounce.
Research and data analysis over time says most investors are just best placed to stay invested for the long term, ride the peaks and troughs and keep adding when you want to. That I think is the way to go, and thatās the approach I know Iāll be continuing to take.
A new poll coming on Friday (remember our new democratically voted for schedule!) and with the market behaving as it is, Iāll be very keen to see what youāre saying later this week.
Weirdest AI image of the day
A china bowl in a bull shop ā r/Weirddallee
ChatGPTās random quote of the day
āDone is better than perfect.ā ā Sheryl Sandberg
Thanks for reading, and donāt forget to leave comments and questions below,
Sam Volkering
Editor-in-Chief
AI Collision
Hi!