mo

[mo @d_dmau]

@TalkinBaseball_ THIS IS A REASONABLE CRASHOUT!!!

[degentrading @degentradingLSD]

Pre Market Thoughts - 24 Jul 26

Yields pretty much unchanged from yesterday. In Asia trading, markets were broadly weaker following a weak close into the NY session. $KOSPI is down 5.7% while $NKY is down 2.7%. Memory broadly is weaker with $0660 down 7% and $285A down 10%. This has dragged down pre market trading in $MU and $SNDK - with both down about 2% at this point.

Before i touch on the Asia performance - its important to look at the US session yesterday. We had an average of -5% on the Mags7/Bag7 (see the heatmaps on https://t.co/WVEnDamHEa) while semis were firm. The market is anticipating that $GOOG is not the first mag7 to increase its capex cadence. At this point, the market is looking for some verification that the capex spend will lead to durable revenue. For all the noise around buybacks - remember. In corporate finance 101 - a company only does buybacks if it does NOT have a better use for its cash. The mag7s finally have a usecase for the vast horde of their cash. The market is broadly right in the long run, but in the short run they can be myopic. Especially when the regime and the environment changes. For next week's reporting, we have the rest on the earnings tightrope - I would expect to see further increases in capex cadence like $GOOG and also some validation of cloud revenues.

On semis, while the reaction was firm initially, you could tell that market participants are scarred and were not bidding semis as per before. Why are we in such an environment? First of all, $CL is rising and yields are higher. These are durable fears for the market and in my opinion creates a wall of worry for markets to go over.

Finally on correlations - we are finally seeing the ending phase of this correlation blanketing. For the past month, SPX moves have been muted via different sectors covering up for each other as the money rotates around. This looks to be coming to an end. Both put and call flies on indexes offer decent value. The 7500/7350/7200 24 Jul P/Fly i recommended last week trades at 4x of the initial cost already...

As a result we had a lacklustre NY session yesterday. $INTC earnings were great however the stock retraced its gains. Possibly from the CFO commenting that "if we are super successful, we may need to tap the capital markets to drive more investment".

Initial price action in Korea was panicked as a note from MS's Shawn Kim in 2022 was circulated and edited to appear as from today. Shawn was bearish on memory before and published a piece called "Memory Winter". That said, i respect Shawn for his independence and that puts him ahead of most bank analysts. However, this points to the weakness in the korean markets - most participants have been shaken out and exhausted. Korea is also raising margin requirements on leveraged products on 31st Jul. This will put pressure on local markets in the short run. IMO, the spread between $0660 and $SKHY will widen as the 2 different investor base diverge in their holding power and cash reserves...

$CXMT while being seen as the cheaper alternative (not much cheaper frankly) has also raised prices. For the DDR5 64GB modules, it is reportedly charging more than Samsung now... In other news, $CXMT also kicked out Huawei engineers from their clean room when Huawei did not agree to a price hike...The memory shortage is global. China does not have a surplus of memory.

Markets always change. There are no similar regimes as participants within continue to learn and evolve. It is likely that the upcoming market regime will look markedly different from the April-May everything easy rally that people were accustomed to. In this regard, i think it is critical for everyone to develop their own thesis and truly know what they own. Do not be swayed by influencers peddling their own thesis or doing all-in challenges. At the end of the day, it is your own hard earned money at stake. Respect it by at least doing the bare minimum of due diligence.

Good luck!

[degentrading @degentradingLSD]

Pre market thoughts - 7 Jul 26

30y yields inched higher towards 5%. Meanwhile Asia markets were on edge following the weak US action. KOSPI is down 6.6% and NKY is down 1.6%. $SAMSUNG reported earnings today, hitting it out of the park with a huge profit beat, however revenue was below expectations. For context, the operating profit of 2Q was about 58B usd, this amount was the total amount that samsung used to earn in years. Talk about an epic memory run.

The market however was clearly on edge and started taking down $SKHY together with it. Overnight in US markets, we saw $SNDK and $MU both on extended weakness. Again, in my note yesterday - I talked about how popular tickers like $SNDK and $NBIS were showing weakness even within their own sectors that was staging a recovery.

In the medium term, fundamentals matter. In the short term, flows drive price action. The $SKHY IPO is about 28B in size. This represents potentially 28B of semi holdings that have to be sold down to make space - which in my mind is what is driving the weak price action especially in semis with heavy positioning already. This also explains why we had such terrible sell offs. The last one we had was SPCX at ~80b, however, it was not concentrated on semis portfolios and i am sure everyone remembers the brutal swings then.

On Neoclouds, $NBIS was the weakest performer of the lot. Before this, last week - the entire sector traded together. Post the weekend and especially on the Anthropic news, it started differentiating again. $CRWV’s firmness contrasts to $NBIS’s weakness - this is especially pertinent because $CRWV generally underperforms. In after market trading, $NBIS has been soggy again. In terms of zones, $NBIS sits on a strong demand zone that has been tested a few times 180-210 level (this was where the market tested on the broad semis sell off). It is worth noting that yesterday’s sell off in NBIS happened on thin volumes.

As a heavy holder of $NBIS, of course it doesn’t feel good with the mtm drawdown. However, unlike other writers who just tell you to take leverage and you can make a lot of money...I would advise people to once again see how they can survive a drawdown. If you must take leverage, use the 2x etfs. They have a terrible rep from the volatility drag, however they also automatically downsize your exposure on the downswing. Given the strong fundamental bull case for $NBIS, it is far more important to be able to survive the journey to the end.

Levels where I think there is deep value (MU 800-850) (SNDK 1500-1550) (SMH 550) (SKHY 1400s - around this region) (NBIS 180s-200s) - I am not saying that the market gets here, but if it does - these are strong levels of risk reward.

Another point i want to make is that, these positioning cleanses are extremely painful - but they also offer the best opportunities to establish a position in sound names (this is why you need to know your fundamentals and have your own conviction). More importantly, they are the turning point for a transfer of positions from weak hands to strong hands. Without these cleanses, it is difficult for the bull market to continue.

The $SKHY subscription ends on the 8th Jul at 4PM - I would expect PMs to already finish their selling to make space for their allocations before that.

Below let me detail out how the $SKHY book building process works

First - the underwriters for the deals are (GS, JPM, Citi, BofA), they set an indicative reference price.

Then comes the roadshow where these leads will pitch the offerings to instis (Coatue, Bailie and Situational Awareness are the anchors) (← we are past this)

Thereafter, the underwriters will compile all the bids they receive into an orderbook to see the total demand curve. The deadline for $SKHY was shifted forward because of oversubscription already to 8 July 4PM NY time.

After closing the bidding, the company and the underwriter will cluster them into the highest acceptable price point. There is a limit based on how much the shares can be discounted from the Korean shares in order to prevent dilution.

From this mechanics, you can see that we are probably midway or even mostly through the trimming period by PMs to make space for $SKHY in their books. It is also expected for $SKHY on the korean market to drop because international PMs would sell down their Korean shares to subscribe to the US shares (which most likely comes at a slight discount). However, i would peg 1.4k USD as the approximate bottom end of the range for $SKHY to trade down to. It is difficult to hold down a liquid blue chip stock, especially one that is printing cash right now.

Good luck!

[mo @d_dmau]

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