To gain an edge, this is what you need to know today.

Surging AI Infrastructure Demand

Please click here for an enlarged chart of Super Micro Computer Inc (NASDAQ:SMCI).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of SMCI stock is being used to illustrate surging AI infrastructure demand.  Super Micro Computer manufacturers AI servers.
  • The chart shows SMCI stock has not done particularly well, and herein may lie the opportunity.
  • The chart shows the gap up after earnings.
  • Super Micro Computer’s revenue projections are eye popping.  Here are the details:
    • Super Micro Computer projects Q1 revenue of $14.5B – $15.5B vs. $12.09B consensus.  Super Micro Computer is on fiscal year accounting.
    • Super Micro Computer projects FY27 revenue of $65B – $72B vs. $53.29B consensus.
  • Long time readers may recall that in the past we have been very critical of Super Micro Computer, and there was a short position.  Those calls have proven spot on.  Super Micro Computer has faced repeated accounting and financial reporting concerns.  Delayed filings and its auditor’s resignation put its Nasdaq listing at risk.  Delivery delays, low profit margins and export control charges against people linked to the company added further pressure, although Super Micro Computer itself was not charged.  Now, the company seems to be on the mend, and there is a long position.  History haunts Super Micro Computer, which may provide opportunity.
  • Adding to the positive sentiment in AI infrastructure as of this writing are good earnings from neocloud companies CoreWeave Inc (NASDAQ:CRWV) and Nebius Group NV (NASDAQ:NBIS).  There are also good earnings from Lumentum Holdings Inc (NASDAQ:LITE).  Lumentum makes optical components and lasers that are used in high speed AI data centers.
  • In our analysis, the foregoing earnings are adding to the confidence of the bulls’ proposition that the demand for AI infrastructure is insatiable.
  • In our analysis, in spite of insatiable demand right now, investors need to look ahead and be alert to early indications of overbuilding.  
  • Consumer Price Index (CPI) came inline.  Here are the details:
    • Headline CPI came at 0.1% vs. 0.1% consensus.
    • Core CPI came at 0.2% vs. 0.2% consensus.
  • Before concluding that inflation is moderating from the monthly numbers, investors should look at the yearly numbers.  Here are the details:
    • Headline CPI came at 3.4% vs. 3.4% consensus.
    • Core CPI came at 2.5% vs. 2.5% consensus.
  • The foregoing numbers are well above the Fed’s 2% inflation target.
  • In digging below the surface, falling energy prices contributed to inline CPI.  However in the month of August, oil prices have risen again as there is no Iran resolution.  If oil prices continue to stay high, CPI for August may go up.  
  • Producer Price Index (PPI) will be released tomorrow at 8:30am ET.  PPI data is useful in projecting PCE.  PCE is the Fed’s favorite inflation gauge.
  • Prudent investors should note that Core PCE is hovering around 3.3%, well above the Fed’s 2% target.
  • In our analysis, when this inflation data is combined with the weak jobs report that we shared with you on Friday, there is risk of stagflation.  
  • In our analysis, the risk of stagflation puts the Fed in a very difficult spot.
  • In the early trade, the stock market is ignoring economic risks and is mostly focused on surging AI infrastructure demand as outlined above.

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 Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

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 (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.