Where is the evidence behind this? Yes the Nasdaq sold off, but who said this is because of AI jitters? Who says it because investors are questioning whether AI is worth the hype? Did Bloomberg interview all these big investors who sold tech stocks today?
… or are they just telling the narrative that will drive the most eyeballs? Because they can’t have a lame headline like “$1T wiped from Nasdaq because there were more sellers than buyers”???
I know its “bloomberg” but we can’t just blindly believe everything they tell us.
At the end of every trading day, news reporters confidently state the reason behind whatever stock rose or fell that day. They must be very wise as they don’t seem to interview anyone before making these proclamations.
News reporters don't write the narrative - it is traders, analysts and economists.
"I did everything perfectly, but stuff outside my control blew up my otherwise winning trades - it would have been even worse if not for my quick thinking" is the correct answer for when your boss asks "Why did you lost $50million today?".
It is what he told his boss back in the 00's when he was in your seat and it is what some junior will tell you in 20 years time when you are in the corner office.
> We’re great at pretending to understand, masters at nodding wisely.
People have even convinced themselves that when they pretend to understand and nod along like a master that they themselves have obtained mastery level understanding of the subject.
Financial news headlines have been like that forever. They feel like they have to attribute the drop to something so they just come up with whatever sounds plausible. It doesn't even matter that they're often contradictory, like in a week I wouldn't be surprised if I saw the headline "Nasdaq 100 makes huge gains on AI's booming future."
They are in on it. They have to explain it somehow so it doesn't look like market is starting to deflate or head down... Even if some of these valuations are at point where that is not entirely unreasonable.
Worse than trying to attract eyeballs, they’re lying to put down an industry that threatens the existence of traditional media and especially media like them that relies on advertising
> - The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense.
Nobody knows what triggered the selloff, it's a global market with millions of actors doing actions based on numerous sources of information. More than that we come off a peak of hitting SPY500 ~$600 and NASDAQ100 at $20.5k which are all time highs and it's very normal to retrace a bit after - but even that doesn't mean much.
Whenever someone tells you the reason for a stock market move, all they're telling you is what they believe did it, but they have no clue, other than specific critical situations as like, after 9/11 attacks. For company specific "this is why" it's much easier, but even then many times it does the opposite of what the analysts' previous explanation was. They just tell you something because they know people want a "reason".
They could've easily written "after historic rise and new all time highs, some investors take profit" and it'd also be correct.
It's like a bunch of guys looking at a CPU metric in grafana without SSH access to the server or knowing what it's running trying to figure out the cause. Sometimes it pins at 100% and some guy shouts "it's paging to disk", and yeah, might be, might also not.
There was a massive sell off(consolidation) happening from Jun 20th until Jul 2 on the S&P. I know I made some profit off a buy position, but noticed that the trend continuation was taking incredibly long time to start, which is rare in a uptrend. This sell off was already in the works, not to mention sell structure that developed at the top. I wouldn't be so quick to say these things are random. Institutions with billions of dollars don't do things randomly. There was no black swan event this time. It was just time for the over bought market not only to correct but to actually reverse.
This is based on institutional theories or smart money of how price plays out in the chart. I have developing my theory for years using those principles(i.e Wycoff Methods[1]
I did not say these things were random at all, my point is that nobody can explain them because of the complexity - when talking about aggregate movements over time. It's like trying to explain the causal chain of events from a buttefly flapping their wings to a hurricane happening across the world. Or that if one of the twins slept closer to the window and saw the outside they will be more creative.
Regarding the technical impact of institutional moves, that is real, if someone does a huge sell block, you can explain the drop by correlating it, but those are isolated events and it's much harder to predict what the market itself will do than to explain, ah, five minutes ago blackrock did their quarterly rebalancing of their ETFs and you can see it in the chart - that's not what these analysts from these articles usually do, they just come up with something that sounds plausible for clicks searching for a reason.
> Nobody knows what triggered the selloff, it's a global market with millions of actors doing actions based on numerous sources of information.
Using this argument, you can basically discard any kind of inference on any large system. That’s not particularly convincing. It’s not because something is complex that you can’t a posteriori conjecture links between causes and consequences at a macro level.
What economic journalists and analysts mean when they say a move with triggered by something is that both events happened in a time frame which is conductive to saying a correlation exists. Turn out that Google published is earning Tuesday with larger than expected capital expenditure and little return to show for it and then the market tanked. That’s what they mean by reason and that’s how everyone understands it. We know the market is large and made by a lot of actors. We are not dumb.
You are free to think it’s all random happenstance. I’m free to think you have an axe to grind and prefer denial to rational thoughts.
It really was a matter of when. What real progress have we seen since people first experienced ChatGPT and the hype started? Investors have been very dumb throwing money on anything AI and they're starting to realize it.
It is pretty much impossible for the investment cycle to be perfectly aligned with the value creation cycle. The dotcom bubble laid the foundations for the cloud and the modern internet. But keep in mind the valuations right now are nowhere close to the valuations in the dotcom bubble. Compared to back then we are not in a bubble at all or at just the beginnings of one.
Except these might be long term duds.
The latest AI bandwagons hype cycle invites silliness.
One would be wise to look at the entity in questions overall health prior to announcing aome whole-hog AI effort.
Due dilligence, etc
The market can stay irrational longer than you can stay solvent, as they say. I have tried to make guesses that turned out to be right, with negative returns, because price was detached from value. I don't think that's how securities markets are meant to work or how they work optimally. I don't think the liquidity that pro-HFT people insist is so good means it's net positive. High frequency trading outfits, market manipulators, and trend chasers gain too much while more reasonable investors get sucked dry. A bunch of people have benefitted from predicting sentiment-based price and selling out of overinflated crap just in time. I believe the distortions that behavior creates are unhealthy for the overall economy and disincentivize smart investment, generally.
We have investment based on hype and lies, and the outcome is that the actual labor the market implores is misdirected and falls short of its purpose of raising the net quality of life through real creation of value.
If you bet on the market and not individual stocks, you’ll fair better. Find any 10 year periods where the s&p had crappy returns. The market doesn’t stay irrational, but specific sections can.
Right, but even for the NASDAQ which took a real bath yesterday, it only went back to where it was a month ago. So it's not really a historical entry point opportunity. Maybe it's the start of a bear market. But if it's not, this sort of market corrections is not something a buy and hold investor should wait in cash to try to time. You typically lose more in market opportunity by waiting for a big selloff than going in early, taking the hit and coming back.
Apple, Microsoft, and Nvidia may be long term duds? Certainly there are some, but the article talks about the Nasdaq100. The odds of all of them sucking and being down in a year are pretty slim.
One year is not long term. Nvidia is a pretty cyclical stock and most of their biggest customers are also actively trying to take their competitive advantage away. Actually long term they should not be worth more than Google.
What moat? I see people reimplementing open source models in a matter of weeks. These are not huge code bases. And when you want to run those models at scale, every cost saving will make big differences given their enormous computing requirements. It think it will become a cut-throat market.
Windows is also compiled for ARM and Microsoft literally sells their own Surface Pro computers with ARM processors[0]. So this is a terrible analogy, for a lot more reasons than that. Rather than go through all the reasons it’s a bad analogy I’ll just get straight to NVidia’s long term moat:
NVidia has 6x the cash-on-hand (>$30B) than their closest competitor (AMD) ($5B), and all of that can go towards GPU R&D rather than being split between CPU+GPU R&D (AMD has 10% of the $65B GPU market share but 33% of the $50B CPU market share — their CPU business is almost 75% of their total business). If there are changes needed to stay competitive, NVidia has the warchest they need to adapt. Just their cash on hand would allow them to fumble an entire release cycle and still catch back up.
Sure, if ROCm ever achieves parity with CUDA then Nvidia’s margins will finally decrease but the only way they’re facing any existential threat is by massively fumbling internally. If you have reason to believe that Nvidia will start executing poorly, then that would potentially be a valid concern — but so far they’re continuing to do great work despite their massive lead and their prices reflect their technical lead over their competitors.
On windows, you forget that it wasn't the case historically that windows could run on ARM, and it took years for MSFT to make it work (hence it was a real moat), and now that it works it is a real threat to Intel's grip on the PC market. So it exactly proves my point that you want to know how locked in your customers are to your product.
And as Bezos says, your margin is my opportunity, and nvidia makes humongous margins right now. It will attract investments in competitors. And if a competing GPU is half as powerful but a third of the price, it will eat market shares and compress margins. Unless customers cannot switch, but I don't believe that to be the case.
Training those models costs 10s of millions. Running them at scale some order(s) of magnitude that. At one point those AI initiatives will need to return a profit. You really think developers will not have to learn a new API? Users inertia works for retail users, I don't think it works so much for people who get paid to do it or have a financial incentive to switch. Provided there is a suitable alternative.
60 p/e ratio, means that you need 60 years of profits to get back the price you paid for the company. It's very very high, by historical standards.
As the CEO from Sun Microsystems said after the bubble burst:
"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.
That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
Now, having done that, would any of you like to buy my stock at $64?
Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"
High P/Es are more of a projection of growth than an expectation of time to pay back.
Also, McNealy’s comment isn’t quite applicable because stocks aren’t bonds. There’s an inherent value to the ongoing operation beyond just paying the earnings out.
I have some pets.com I am happy to offer to you at a 90% discount from its all time high. Act fast, you don't want to miss out on a once in a lifetime opportunity.
Or a bunch of other reasons: They are forced to sell to meet a margin call. They are irrationally fearful. They need to sell to afford their next yacht. They are rebalancing their portfolio.
… or are they just telling the narrative that will drive the most eyeballs? Because they can’t have a lame headline like “$1T wiped from Nasdaq because there were more sellers than buyers”???
I know its “bloomberg” but we can’t just blindly believe everything they tell us.