To The Moon

Tech Stocks Tumble, Chips and AI Lead the Slide What a wild ride on Wall Street this Friday! 

The major indices—Dow, S&P 500, and Nasdaq—all took a hit, with chipmakers and AI stocks dragging the tech sector down. After the S&P 500 hit an all-time high yesterday, it seems investors decided to cash in some chips (pun intended) ahead of the long Labor Day weekend. With markets closed on Monday, we’re looking at a short four-day trading week ahead. Inflation Holds Steady, but Trade Deficit Stings

The early kicked off with the July PCE inflation data, which came in line with expectations. A slight uptick in inflation was driven by rising service costs, portfolio management fees (thanks to the market’s hot streak), and even pricier sports and entertainment events. But here’s the good news: American consumers are still spending like champs! July saw the biggest jump in consumer spending in four months, showing demand is still kicking. Inflation’s stubborn, but it hasn’t crushed the shopping spree just yet. The real mood-killer, though, was the July trade deficit. Imports surged, ballooning the goods trade deficit by 22.1% to a whopping $133.6 billion—way above the $89.4 billion Wall Street expected. This could put a damper on Q3 economic growth, and it definitely poured cold water on yesterday’s economic cheer. Fed Rate Cut Hopes Persist, but Optimism Dims

Traders are still betting on a Federal Reserve rate cut in September, but the rosy vibes on Wall Street are fading. All eyes are now on next week’s August jobs report. Economists predict nonfarm payrolls will add fewer than 100,000 jobs for the fourth straight month, with unemployment ticking up to 4.3%. If that happens, it could keep the Fed’s foot on the rate-cut pedal, but the market’s getting jittery. Chips and AI Stocks Steal the Spotlight (for the Wrong Reasons)

The big drag today? 

Semiconductor and AI hardware stocks. Word on the street is Alibaba’s diving into self-developed AI chips, ditching TSMC for domestic foundries to fill the Nvidia void. It’s like China’s saying, “If you won’t sell us AI chips, we’ll just make our own!” The news sent U.S. semiconductor stocks into a tailspin. But let’s be real—catching up to Nvidia is no walk in the park. AMD, Broadcom, and others haven’t cracked that code yet, so Alibaba’s got a steep hill to climb. 

Today’s chip sell-off feels more like an excuse to take profits after lackluster Q2 data center growth and flat guidance from some big players. Nvidia, sitting at a $4.5 trillion valuation, needs sky-high expectations to keep soaring, and it’s showing signs of wobbling. Market Movers: Winners and Losers Alibaba stole the show, surging nearly 13% after a stellar earnings report—2% revenue growth and a 76% profit jump. Their Taobao flash sale monthly active users skyrocketed 200% quarter-over-quarter. The AI chip buzz? Take it with a grain of salt—it’s more about geopolitical posturing than an immediate threat to Nvidia. 

Dell Technologies and Marvell Technology both got hit despite decent earnings. Dell’s AI server sales tanked 53% quarter-over-quarter, and Marvell’s guidance underwhelmed, hinting at a possible slowdown in custom AI chip demand. Stocks slid as Wall Street wasn’t impressed.  

APLD, a data center operator, dropped 3.7% despite landing a massive $11 billion leasing deal. The AI hardware sector’s sour mood dragged it down, but long-term, this one’s still got potential. Short-term? Brace for volatility.  

Affirm crushed it with 33% revenue growth and a surprise profit, but the stock’s 24% intraday spike fizzled to 10.6% by close. That ugly candlestick on the chart screams caution—watch that gap!  

Ambarella, a semiconductor design firm, was a rare bright spot, soaring 16.8% after a strong Q2 and raised full-year guidance. Breaking the 200-week moving average? That’s a big deal.  

Caterpillar and other industrials like Deere got hammered after the U.S. slapped tariffs on aluminum and steel, with Caterpillar projecting $1.5-$1.8 billion in extra costs. Ouch.

Defensive Stocks Shine Amid Tech Wreck

While tech stocks stumbled, defensive and cyclical stocks like UnitedHealth and Walmart held strong, soaking up some of that fleeing capital. The Dow, up 3.2% for August, outperformed the Nasdaq 100’s measly 0.85% gain and the S&P 500’s 1.91% rise. But with the S&P 500 up 34.5% since April’s lows and trading at a pricey 22x forward P/E, hedge funds are running low on ammo—stock exposure’s at the 80th percentile historically. What’s Next? September’s Historically Dicey

September’s notorious for market wobbles, and with valuations stretched, funds are locking in gains. Volatility’s creeping up, and hedge funds are shorting at the fastest pace since 2022. The VIX is hovering around 20, and history suggests choppy waters ahead. My take? Rate cuts are coming, so funds will likely rotate into defensive sectors rather than ditch stocks entirely. For now, risk management is king—don’t let FOMO cloud your judgment. What do you think—time to hunt for bargains in tech or play it safe with defensive stocks? Let’s hear your thoughts!

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