CHART OF THE DAY
A few shakeups are circling the biggest companies in the United States.
From NVIDIA to CrowdStrike, fundamentals are starting to matter again (at least for now).
Even through double-digit revenue and EPS growth, these companies are down by over 10% after quarterly earnings.
Here’s the truth nobody wants to hear…
These companies and their valuations aren’t as solid as the market makes them seem.
ARE YOU COVERED? —>
Broadcom Stock, X/Twitter
Underlying earnings are worse (a lot worse) than reported, a huge tail risk compared to the expectations their valuation multiples are setting for the future.
Check out our Expectations Playbook for more.
FOOL ME ONCE, SHAME ON YOU.
FOOL ME TWICE, SHAME ON CLAUDE?
“Some of this capital will not generate a return at all.”
That’s the quote that shook the world seven months ago during this interview with David Solomon, CEO of Goldman Sachs.
A double-digit run in the S&P 500 along with meme-like rallies in some of the AI names would suggest he’s going to be absolutely wrong about this take.
However,
Think about what’s happened in recent weeks.
Microsoft, Uber, Starbucks have all cut back significantly on their AI usage and budgets.
Not a single company has seen the benefits of AI productivity or improvement in their workflows.
China’s DeepSeek has made it clear AI doesn’t need to be that expensive to use, as they now run models at 90% lower costs than Claude and ChatGPT.
Before all of this became clear to the market, though it should always have been clear, the hyperscalers like Meta, Amazon, and Google were justified in their trillion-dollar commitments to spend on the AI buildout.
Now?
Solomon’s view may be closer to being right, never mind the timing of it.
We as investors in the AI world (if you have a retirement or savings account, you are being forced to invest in it), should have a vote or at least an outlook on what our money is being exposed to.
Yet,
There has been no guidance, no roadmap, no clear path to profitability.
What’s worse, an already dark environment has gotten even darker:
Just as Solomon predicted, there is “a ton of waste” happening with AI users.
Our entire team, from content to finance and operations, has been tasked with operating AI agents for the past quarter.
We’ve actually measured how long it takes each member to complete the task with and without the use of AI.
The results will shock you…
Off by ~5 minutes on average, faster with AI
Doing the work is probably 3-5x faster with AI, but where you eat up a lot of time is checking for mistakes and hallucinations (which there are a lot of).
This is why the aforementioned companies have started to cut back on their AI usage and budgets, there simply is no way to justify 5x the spend with half the production.
Chip Supply, AIMultiple
These slowdowns, and the hesitant approach to adopt AI across several businesses, have had an effect on supply and prices.
NVIDIA’s best H200 chips are now off by 50% on a per hour usage pricing model.
Broadcom just dropped over 12% on disappointing chip revenue guidance.
Super Micro Computer’s inventory doubled in the past quarter.
What more proof do you want?
We are initiating a deep-dive research spree on the entire AI trade:
Its economics
Rising risks and blind spots
Who wins, who crashes
And much more, all within our Premium Research subscription.
It all begins next week, protect yourself while there’s still time.
A Final Note
In other news, our lead analyst just slapped together one of the best opportunities I’ve seen in this raging bull market.
Trading at less than 70% of its 52-week highs
Owns 22% of its market
Is buying back stock like crazy
We believe the market is overly pessimistic on this company because of the Iran War and its disruption on food supply and pricing.
Underneath the surface, free cash flow is pumping and margins are above peers.
This is an easy 50% upside name.
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