Moonshot Winners And Losers

Please click here for an enlarged chart of Micron Technology Inc (NASDAQ:MU).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of MU stock is being used to illustrate the point.
  • Micron is important because it has been a market leader, and AI models are memory hogs.
  • The chart shows significant pullback in MU stock from the highs.
  • The chart shows MU stock is between zone 1 (resistance) and zone 2 (support).
  • Prudent investors should carefully watch to see if MU stock decisively breaks above trendline 3 shown on the chart.  For now, this will likely be one of the most important tells for the semiconductor sector and the entire stock market.
  • On Friday, we shared with you the introduction of an AI breakthrough in China from a Chinese startup called Moonshot causing significant fear on Wall Street.  The media amplified the fear.
  • In our analysis, Wall Street fears about Moonshot might be overblown.  
  • To stay ahead of the curve, in our analysis, here is a nuanced analysis for prudent investors of winners and losers from Moonshot:
    • Moonshot’s Kimi K3 model needs a significant amount of high bandwidth memory.  The memory requirements make memory makers such as Micron, SK Hynix Inc – ADR (NASDAQ:SKHY), and Samsung Electronics Co Ltd (OTCPK:SSNLF) winners.  
    • For Moonshot to work efficiently, it requires faster networking to connect thousands of AI chips.  This makes a company like Marvell Technology Inc (NASDAQ:MRVL) a winner.  
    • It is also good for optical names such as Corning Inc (NYSE:GLW), Applied Optoelectronics Inc (NASDAQ:AAOI), Coherent Corp (NYSE:COHR), and Lumentum Holdings Inc (NASDAQ:LITE).
    • Moonshot is mixed for GPU makers such as Nvidia (NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD).  Moonshot appears to use GPUs more efficiently.  However, investors need to keep in mind that Moonshot has already run out of GPU capacity as demand for Kimi K3 is very high.  
    • Moonshot is neutral for CPU makers such as Intel Corp (NASDAQ:INTC) and Arm Holdings PLC – ADR (NASDAQ:ARM).  
    • Frontier model makers such as OpenAI, Anthropic, and Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) might be the losers as they have new Chinese competition.  
    • Many open source AI models are the losers because they provide no edge.
  • In our analysis, there is a significant probability that the U.S. government may eventually ban Chinese AI models.  We previously shared with you:

Due to the security requirements and deepening distrust between the U.S. and China, the world is likely to be divided into two camps for AI: one dominated by the U.S. and the other dominated by China.  

  • The Department of War is in talks for Space Exploration Technologies Corp (NASDAQ:SPCX) to provide it with billions of dollars of computing power.
  • Prudent investors should pay attention to an important geopolitical development – Houthis in Yemen are announcing a maritime embargo of Saudi Arabia.   This development has two major implications:
    • Houthis in Yemen stepping up will further strengthen Iran’s hand in negotiations with the U.S.
    • The export of millions of barrels of oil through the Red Sea is at risk.
  • Last night, oil was spiking after a series of escalating attacks by the U.S. on Iran and counterattacks by Iran on U.S. allies in the Middle East.  This morning, the situation has calmed down on an Iranian report that mediators are working on a proposal for a 10 day ceasefire.
  • We have long pointed out that the way the government calculates inflation is flawed.  In a positive development, the Bureau of Economic Analysis will revise the way it calculates core PCE.  Core PCE is the Fed’s favorite inflation gauge.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Amazon.com, Inc. (NASDAQ:AMZN), Alphabet (GOOG), Nvidia (NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO:BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.