Tech Letter Archives - Mad Hedge Fund Trader

The Second Wave of Hot Money is Here

Here are four AI stocks that retail traders are going bananas for lately.

These retail participants are itching to get the most exposure to a batch of AI stocks that punch weight just below the tech oligarch level.

Volume remains highly positive as traders fan out to further AI stocks that didn’t benefit as much from the first tranche of hot capital.

If there is anything that could be considered a fat pitch right now in equity markets, then look no further than this collection of 4 rock-solid AI stocks that will make your heart melt.

These four stocks are gaining traction among retail investors as they search for new winners in the AI space.

Micron (MU)

The semiconductor firm just beat its earnings and revenue targets, raking in $3.75 billion in revenue over the previous quarter.

AI servers have six to eight times the DRAAM content of a regular server and three times the NAND content which translates into elevated demand for Micron’s products.

In fact, some customers are deploying AI computing capability with substantially higher memory content.

The stock has lagged behind larger names like Nvidia and Advanced Micro Devices, but retail net purchases for Micron were 18 times their daily average, even before the company released its latest earnings report.

Oracle (ORCL)

Oracle's stock has exploded 40% year to date with shares briefly hitting a new record after a stellar earnings report. Total revenue for the 2023 fiscal year hit $50 billion, up 18% from last year.

On Wednesday, the database company also announced new AI capabilities within several of its cloud products, leading more investors to jump in on the stock.

Retail net purchases of the stock were about 145 times the daily average before its latest earnings report.

Adobe (ADBE)

Adobe was another to benefit from upbeat earnings, with revenue notching a $4.82 billion record in the second quarter, up around 10% from the previous year.

The developer of digital-publishing software also recently unveiled its new platform, Adobe Firefly, a generative artificial intelligence platform for content creators.

Retail net purchases of the stock were about 18 times greater than the daily average prior to its latest earnings report. The stock is up 43% from levels at the start of the year.

Snowflake (SNOW)

The company recently expanded its partnership with Microsoft and launched a new partnership with Nvidia to implement AI into its data cloud services.

The firm's partnership with NVDA and MSFT to integrate AI tools into their suite of services was welcome by retail traders who are jumping on the stock.

The common theme with these tech companies is solely focused on positive earnings numbers and what that will do is delay the recession that everybody has been waiting for.

The bears have been talking about a recession since the stimulus spike of the lockdowns, but the US economy and corporate tech have refused to believe this false narrative.

The truth is that tech companies still do what they need to do to push earnings higher and in turn deliver higher share prices to their shareholder.

Sure, there is belt-tightening and cost efficiencies taking place, but I view this more through a prism of technology firms becoming hyper-aware of leanness instead of sacrificing quality.

Twitter was correct in laying off 80% of its workforce because that 80% isn’t worth keeping on board for the splashy wage packets they accrue.

Now that we have a second level of tech companies joining the AI bandwagon, this could trigger another leg up for tech shares.

Quote of the Day - June 30, 2023

Tech Letter

“Microsoft isn't evil, they just make really crappy operating systems.” – Said Finnish-American software engineer Linus Benedict Torvalds who is the creator Linux, Android, and Chrome OS

June 28, 2023

Tech Letter

Mad Hedge Technology Letter
June 28, 2023
Fiat Lux

Featured Trade:

(REGULATION HEATS UP)
(AMZN), (MSFT), (GOOGL), (NVDA)

Regulation Heats Up

Tech Letter

Silicon Valley has gone from the least regulated industry to trending the other way. On a global scale, draconian regulations are rearing their ugly head to really stymy places like China and artificial intelligence.
The European Union just rolled out a slew of proposed regulations on AI that could hamper its ability to embed itself in many tech companies.

The net result is highly bullish for Silicon Valley companies minus the chip companies that are experiencing revenue cuts.

When rules tighten, the entrenched benefit disproportionately and this could trigger a continuation of the tech rally that has been blistering hot this year.

Inversely, it will become even more difficult for start-ups to become unicorns, because they suffer more at smaller sizes to digest the higher amount of regulation that mature tech companies never faced.

Much of this is occurring at the highest level as the White House is considering new restrictions on exports of artificial intelligence chips to China, potentially adding to a list of banned semiconductor technology from Nvidia, Advanced Micro Devices, and other US companies.

The U.S. Department of Commerce could prohibit shipments of chips from Nvidia and others to customers in China as soon as early next month.

Nvidia, which produces graphics chips that drive the technology behind OpenAI Inc’s ChatGPT and Alphabet Inc’s Bard chatbots, is one of those chip companies that could see a slide in revenue in the short term.

Across the pond where governments are specialists at regulation, the European Parliament has approved draft legislation to regulate AI-powered technology.

The Act applies to anyone who creates and disseminates AI systems in the EU, including foreign companies such as Microsoft, Google, and OpenAI.

As outlined in the Act, EU lawmakers seek to limit or prohibit AI technology they classify as unacceptable or high risk.

It’s a little vague who will be deemed high risk but in the crosshairs are technologies such as predictive policing systems and real-time, and remote biometric identification systems.

Silicon Valley cash cows can function without these intrusive elements.

The AI Act would give the European government the authority to levy heavy fines on AI companies that do not abide by its rules.

Financial penalties may be steeper than GDPR penalties, amounting to €40 million or an amount equal to up to 7% of a company’s worldwide annual turnover, whichever is higher.

Beyond the government’s power to enforce the Act, European citizens would have the power to file complaints against AI providers they believe are in breach of the Act.

European officials expect to reach a final agreement on the rules by the end of 2023 after spending years developing the legislation. Such swift and consistent momentum to regulate technology in Europe stands in stark contrast to the United States, where lawmakers are still grappling with initial regulatory steps.

If passed, the Act is expected to become law by 2025 at the earliest.

It’s a lot easier for tech firms to operate in the Wild West when there are no rules, but if there are rules, it’s better than American tech has already built cash cows to keep the party moving right along.

It’s true there won’t be much competition and possibly an oligarchy, but it will translate into much higher share prices for the likes of Apple, Tesla, Meta, Microsoft, Google, and Amazon.

ai act

Quote of the Day - June 28, 2023

Tech Letter

“Done is better than perfect.” – Former Facebook Worker Sheryl Sandberg

June 26, 2023

Tech Letter

Mad Hedge Technology Letter
June 26, 2023
Fiat Lux

Featured Trade:

(AMAZON JOINS THE PARTY)
(AMZN), (MSFT), (GOOGL), (NVDA)

Amazon Joins the Party

Tech Letter

Keeping up with the Joneses – that’s what Amazon is doing with its foray into generative artificial intelligence.

Its cloud division AWS is building a $100 million AI center to go toe to toe with increasing competition in cloud infrastructure services

The upcoming AWS Generative AI Innovation Center will become the heart and soul of Amazon experts in AI and machine learning.

This is a seismic strategic move for Amazon whom we have heard very little about in the generative AI sphere so far.

However, most people in the know understand that Amazon wouldn’t let this get away from them and use time wisely to concoct something worthy enough to show they have some skin in the game.

Unsurprisingly, AMZN shares were up relative to other big tech companies in a down week last week on the Nasdaq.

AMZN shares haven’t had quite the mojo that stocks like Tesla or Microsoft have had this year and this call to action is an aggressive step towards the vanguard of technological development.

I highly applaud the management at AMZN for this chess move.

In generative AI, algorithms are used to create new content, such as audio, code, images, texts, simulations, and videos.

Amazon said Highspot, Twilio, Ryanair, and Lonely Planet will be among the first users of the innovation center. With the new center, the company expects to hijack additional cloud services amidst increasing competition in the cloud infrastructure market.

Enterprise spending on cloud solutions reached $63 billion worldwide in the first quarter of 2023, up 20% from the same quarter last year.

Microsoft and Google had the strongest year-over-year growth rates, gaining 23% and 10% in worldwide market share, respectively. Amazon, the leader in cloud infrastructure, kept its 32% market share in Q1.

Amazon recently debuted Bedrock, an AI solution that allows customers to build out their own ChatGPT-like models.

The company also announced the upcoming Titan, which includes two new foundational models developed by Amazon Machine Learning.

Tech is largely downsizing staff and firing diversity officers and other woke positions, but the one area that is pushing for greater numbers is artificial intelligence data scientists and a bevy of LinkedIn posts show they are on the lookout to poach talent.

Amazon, who crushed Microsoft and Google in the business of renting out servers and data storage to companies and other organizations, enjoys a commanding lead in the cloud infrastructure market.

However, those rivals are early into generative AI, even though Amazon has drawn broadly on AI for years to show shopping recommendations and operate its Alexa voice assistant.

Amazon also failed to create the first popular large language model that can enable a chatbot or a tool for summarizing documents.

One challenge Amazon currently faces is in meeting the demand for AI chips. The company chose to start building chips to supplement graphics processing units from Nvidia (NVDA), the leader in the space. Both companies are racing to get more supply on the market.

At a technical level, Amazon shares and the rest of tech shares are quite overbought in the short term.

Last week was a modest pullback between 1-2% in the Nasdaq and I view that as highly bullish because of its orderly nature and lack of volume.

No panic selling is what we want for the markets to optimize the next bullish entry point.

After the modest price action digests fully, I do expect another dip-buying shopping spree for tech shares.

Stay patient and stay hungry.

Quote of the Day - June 26, 2023

Tech Letter

“I don’t want to fight old battles. I want to find new ones.” – Said Current CEO of Microsoft Satya Nadella

June 23, 2023

Tech Letter

Mad Hedge Technology Letter
June 23, 2023
Fiat Lux

Featured Trade:

(POACHING FOREIGN TECH)
(OCDO.L), (AMZN), (TSLA), (APPL)

Poaching Foreign Tech

Tech Letter

Europe is reeling and now it is becoming Silicon Valley’s playground.

The evidence is all over Europe and quite clear-cut at this point.

The royal 7 from the likes of Tesla (TSLA) and Apple (APPL), who have been responsible for most of the stock market gains this year, are leading the charge to cherry-pick the best tech companies in Europe.

The Ukraine military conflict was a godsend for American big tech, as many European companies are now waving the red flag amid commercial electricity costs spiking 100% in many Western European countries.

The unrelenting electricity increase has caused a mad rush to relocate the best European talent to the United States.

Or, if they don’t relocate out of their own will, many are buy-out targets just like yesterday’s news of British online grocer Ocado.

They are on the verge of tasting the sweet hand of acquisitive cash from Amazon (AMZN).

Poached or not poached – Silicon Valley is dominating.

Ocado Group shares jumped as much as 47% - the most in more than five years.

Even with today’s gains, shares in Ocado have still lost about two-thirds of their value since the end of 2021 amid a selloff in growth stocks.

The stock soared in 2018 on a landmark deal to build warehouses and license software to US supermarket chain Kroger Co., boosting the grocer’s credentials as a technology company. Ocado has partnerships with several grocers, but investor focus has shifted to profitability as demand for automated warehouses slows.

I’m not surprised to hear about Amazon’s interest in Ocado.

Ocado has developed, leading automated warehouse technology that could be of great use to Amazon if it tried to take over the supermarket industry in Europe, which it might.

Many American tourists might experience how outdated and obsolete many European supermarkets are these days.

On the corporate side, when I talk to many European workers on the ground in Milan and Brussels, the consensus is that finding a job at an American big tech firm is considered the proverbial golden paycheck.

European counterparts are mired in inefficiency, unproductivity, and the politicians who exist as 27 European Joe Bidens are ruthlessly driving the industry into the ground by taxing and regulating the hell out of them.

European workers also take 2 months of vacation every year along with 15 to 20 federal holidays per year.

When I read the tea leaves, the next expansion of Silicon Valley is to gobble up anything of perceived value in Europe and anything in any European Union country is fair game.

This buying spree could trigger another leg up to big tech and expand margins.

American tech possesses the powerful balance sheets to wield around the world and dominating the European supermarket industry would add to the top line.

Amazon has already forayed into the food industry with Whole Foods in America so this should be viewed as something similar to that.

Look for big tech to enter strategic European industries and eventually buy something like Manchester United or any other high-quality asset.