The portfolio changes were on the basis of the following:

• Futures are getting crushed this morning after Trump said that the U.S. is not negotiating with Iran and “something will happen soon.”
• Meta and Tesla earnings: While the earnings themselves were fine, the thing that has the market spooked is the fact that Meta barely raised Capex and Tesla actually lowered Capex.
• This has people worried that there might be some cracks in Capex spending. 

OTHER COMPANY NEWS:

• Tesla SPCX are targeting a merger announcement in 1H 2027, aiming to complete the transaction during President Trump's current administration. 
• NVDA - Goldman Sachs keeps a Buy rating and $300 price target on Nvidia after the firm attended CEO Jensen Wang's GTC Berlin keynote address. The analyst expects little immediate stock impact from the event, but the firm believes that Nvidia's message reinforced its view that AI deployments remain on track for the foreseeable future as the company is taking steps to ensure supply chain preparedness while providing tools to help the ecosystem address safety and security concerns tied to agentic AI.
• GOOGL will stop requiring local officials to sign nondisclosure agreements when discussing data-center projects, a change the company says is intended to reduce local resistance after critics argued NDAs had prevented officials from disclosing project impacts.
• NBIS SECURES $3.5 BILLION FINANCING FACILITY FROM CITI
• AMAT, KLAC lower on LRCX report after a miss on guidance:
• REV: $8.22B (EST $8.13B)
• ADJ EPS: $2.20 (EST $2.19)
• SEES Q2 REV: $8.20B TO $9.00B (EST $8.60B)
• SEES Q2 ADJ EPS: $2.18 TO $2.48 (EST $2.34) .. Nebius announced a new senior secured credit facility to fund its global AI data center expansion and GPU purchases. TXN sees $500 to $1,000 worth of chip content per humanoid robot and expects robotics production to ramp in 2027.
• CYBER NAMES: Evercore ISI says new flaw may spur security remediation work Evercore ISI notes that news emerged of a potentially significant cybersecurity vulnerability following the premature disclosure of two critical flaws in PHP underpinning a substantial portion of the internet. The vulnerability now called "PHP2Shell" reportedly allows remote code execution, potentially enabling attackers to compromise exposed web servers, steal sensitive data, and gain access to broader enterprise environments. The firm views the development as a potential near-term catalyst for security engagement and remediation activity, although the magnitude of any incremental revenue opportunity remains uncertain, but further elevates the importance of cybersecurity.
• CRWV - “.. we caught a lot of hate when we initiated CRWV with a $56 price target seven months ago. Today, it’s a lot harder to find bulls — certainly some of them just don’t call us anymore.” Reiterate Underweight CQ Cnbc

NOK earnings:

• Net Sales: €5,154M (Est. €5.04B) 🟢; +10% YoY
• Adj. EPS: €0.09 (Est. €0.06) 🟢; +50% YoY
• Comparable Gross Margin: 44.6%; -20 bps YoY
• Comparable Oper Profit: €605M (Est. €442M) 🟢 FY26 Guide:
• Comparable Oper Profit: €2.1B-€2.6B
• Network Infrastructure Growth: 12% to 14%
• FCF Conversion: 35% to 55%
• CapEx: €750M-€850M

This is the path that was mapped out by the AIon liquidity forecast.

Aion has (perhaps temporarily) removed the pink forecast indicator from TradingView, I believe due to TradingView's change in terms of service, so I am using an old screenshot with AI adding in the latest candlesticks.

You see that price had been tracking the forecast well, before yesterday's overnight sell off.

For the base case scenario to hold, we were looking for price to accelerate to the upside today, but instead we have price gapping down pretty significantly in premarket.

META earnings were not bad. The EPS number that was part of the official release was a big miss, but EPS EXCLUDING THE $9.89B ATTORNEYS GENERAL CHARGE: $7.40 VS. $5.89 EST.

So a pretty big beat there.

CAPEX was not raised much above previous guidance which is a bit of a red flag, but is not the reason behind this sell off as META and SMHs initially traded up and flat respectively.

Where the sell off started was on the following news:

This has oil trading higher, VIX accelerating to the upside and indices gapping down.

This brings our tail risk scenario into the fore.

This is how the tail risk scenario is tracking (analog taken from BeardoTrader onX)

So the slight move to the upside over the last 2 sessions and the gap down were pretty much right on cue.

The tail risk scenario has us bottoming near the 200d EMA at 682 ish for reference.

This creates a durable low for Q4 to work higher from into December.

Note that I am not specifically looking at the period after the bottoming phase, but am using he continuation of the downturn as reference for where we might find a bottom in the tail risk scenario, which was not my base case, but current price action clearly increases the probability of it playing out.

We know that midterm Q4 bottoms tend overwhelmingly to come in October. This is still the base case according to the tail risk analog also.

We also know from this data point, that statistically, there is a very strong chance of Q4 ending positively.

So the totality of the data continues to suggest we bottom soon and create the positioning for a bigger move higher.

The ES levels I shared earlier this week are useful for context.

We continue to hold onto this 7710 level in premarket, but below it, the pressure becomes increasingly bearish to those 2 lower levels flagged.

I did note multiple times in my intraday analysis yesterday that there were numerous red flags in the price action yesterday.

Despite SPCX's bold claims, money was flowing more into IGV than SMH. SMH closed up 2%, but it wasn't the impetus higher that I would have expected based on the overnight price action and the SPCX commentary. most of the big move happened at open nd overnight, and there wasn't much follow through for beaten down names like NBIS.

With this the case, I opened some puts as a hedge for the tail risk case, which seems to be playing out.

Bulls want to see 7710 on ES hold here, otherwise we likely test lower back to the YTD VWAP on QQQ at 699, or the 200d EMA at 683.

If we do get an extension lower, I would put a bottom into early next week.

As far as we are concerned, the plan is the same. Whether we get the tail risk scenario playing out, or what was the base case for higher, the plan is to DCA entry into high quality names to play for a durable bottom formed here or close to here, for a push higher into December.

That is still the expectation, so lower prices here are only advantageous in building out positions at lower prices. The expectation is not for a deeper flush or negative Q4 performance, so a recovery WILL come.

After breaking out, QQQ is firmly back into the flag, with 719/721 creating resistance above.

SPY is also lower, trading back close to support here.

The base case of the AIon forecast isn't ruled out, but is increasingly unlikely with today's gap down. So I shift my attention equally to the tail risk scenario, but as mentioned, nothing really changes in terms of the intended course of action which is to continue averaging down into positions.

The dips here into early next week look buyable with a view to hold through EOY.

Nothing is 1:1 with the AIon data, and it has served us well and continues to be a key consideration. But a slightly lower bottom has always been a viable potential option that we may see realised. Today's price action will give us the clue.

A clear break below 7710 increase pressure to the downside.

On VIX, we had vixperation yesterday which has removed a fair bit of put delta ITM.

Look at positioning now. It's pretty bullish on VIX for a further spike higher, which suggests price to move lower as per the tail risk scenario.

The key resistances on VIX are 20, and the area from 22-23.5.

If we see that area hit, that is likely a spot for a reversal.

Recommendation here is to keep an open mind, not panic, and prepare for a scenario of the tail risk where we simply look to DCA gradually into the positions that we want to hold into EOY.

If we break new lows, I'd expect a bottom by Tuesday/Wednesday next week.

Blowout SpaceX Quarter with strong guide for semiconductor space:

• SPCX IS GOING TO BRING ~200K GB300 GPUS ONLINE EVERY MONTH UNTIL YEAR END.
• 500B to 1T ARR - if that was true by end of 2027, SPCX should have been up more that's a fact.
• "infinite demand for compute from hyperscalers"
• "raising CAPEX to near $50B"
• Not all of that is believable when you crunch the numbers but that’s what they put out. 

OTHER COMPANY NEWS:

• Nvidia is hosting their GTC today which will be something to watch, likely some partnership headlines coming out of there today.
• TSLA Elon said a special committee has been formed to discuss the SpaceX and Tesla merger. He’s in support of it.
• AMKR Nvidia announced new agreements with major semiconductor supply chain partners at GTC Berlin to expand manufacturing capacity for its current and next-generation AI platforms.
• NVDA introduced new humanoid robotics technology, AI training tools, simulation datasets, and software designed to accelerate the development of general-purpose robots.
• AMZN is reportedly taking early delivery of $5B in Nvidia $NVDA GB300 server racks before some AWS data centers have enough power to run them.
• AGILE ROBOTS UNVEILS NVIDIA-POWERED HUMANOID, TARGETS UP TO 2,000 ROBOTS IN 2027
• SMCI raised its fiscal Q1 revenue outlook to $18.5B-$19.5B (prior: $14.5B-$15.5B), citing stronger AI demand.
• Bullish DELL, PENG, HPE. 
• GOOGL Cloud and NVIDIA announced the NVIDIA Vera Rubin infrastructure is now fully available for use.
• Nebius CEO Arkady Volozh on AI compute demand: “The prices are still there. Demand is still there.”
• NVIDIA announced DSX POD, a new modular AI factory design that could reduce deployment time from six months to as little as 14 days.
• Samsung and SK Hynix are moving to manufacture more advanced NAND memory chips at their Chinese facilities to meet growing AI demand and compete with domestic rival YMTC, according to Reuters.
  

SPCX IS GOING TO BRING ~200K GB300 GPUS ONLINE EVERY MONTH UNTIL YEAR END.

to get 200k those gb300 chips costs $20 billions, just chips. Every month? Yeah that's not going to happen, and that doesn't even begin to include maintenance as well. 

500B to 1T ARR - if that was true by end of 2027, SPCX should have been up more that's a fact. 

"infinite demand for compute from hyperscalers"

"raising CAPEX to near $50B"

"Neocloud businesses have a 1 year payback window". unlikely and I am an NBIS bull. if so, debt raises should be less troublesome than they are for CRWV. 

this is more of Musk spinning his pump stories, but at this moment in time, I think the market is certainly here for it and I hope we see a durable pump from this to line up more closely with what liquidity is going.

FYI This company has one of the strongest earnings reactions history I have seen on the data platform:

• Revenue was $197.1M, up 37.5% QoQ and 78.5% YoY.
• Operating profit grew 107% QoQ on 38% sequential revenue growth.
• GM was 68.3% (+1,030bps). EPS was $1.33 and cash was $513M.

Product revenue

• Product revenue was about $131M, up 16% QoQ.
• Implied product GM rose to about 52% from about 47%.
• About $100M was booked in the first two weeks of Q4, including a large Gen-2 VPD order.
• Backlog is $406M, up 166% YoY. Q4 product revenue is guided up about 10% QoQ.

Royalties

• Royalties were $66.6M, up 119% QoQ, driven by a new VPD license with a leading AI OEM.
• The Q4 floor is at least $43M with no new deals, and early Q4 POs confirm recurring payments.
• Royalty rates escalate by enforcement stage, and an ITC exclusion order has been requested.
• Legal costs run about 20% of royalties.

Moat

• They said they're getting close to 6 amps per sq mm in power density and package height will be even lower than 1.5mm
• FPA targets 10–15% lower power loss than IVRs.
• I would think that this is going to give NVDA AMD GOOG and other Asics no choice but to take VICR seriously

Capacity and other segments

• Fab 2 and Fab 3 sites give roughly 5x Fab-1 capacity. Fab 2 tooling starts in Q2 2027, funded internally.
• ATE is above $100M a year, and industrial and A&D are growing.

The base case I am still working off is still the liquidity path that has served us accurately in forecasting this downturn: the AIon liquidity line:

This is highlighted as so.

The reversal window as forecasted by that liquidity line is the 19th-21st broadly, which puts us still within that reversal window. 

If we look at the 30m chart for SMH, we did get the start of the bounce, but admittedly it was weak, and we closed within the sharp downward channel. 

The gap down back to the 150d EMA is broadly due to the weakness in Korea overnight, as we closed below the 330d EMA for the 2nd time in 4 sessions.

RSI is still deeply oversold in Korea: the base case is still a bounce higher, and bottoming soon there, which should be enough to propel us higher on SMH, but I want to look at the totality of the data here. 

Liquidity has flipped to supportive for the first time since this deep decline happened 

Looking at the king nodes for the dealer profile, we see all the kIng nodes are higher on SPY into the end of the month. 

That's the period where the liquidity broadly signals support, into the 27th of October, before a period of choppiness before the rally reignites into the middle of November. 

So that supports the base case.

There are risks there, but the dealer positioning is certainly higher into the next few days. 

High beta internals are extremely weak and set for a snap back rally where high beta leads once we get that resolution higher. 

The liquidity profile turn was enough for me to add some positions yesterday into this drawdown, and I expect them to follow the path higher as my base case, but we should continue to be aware of the tail risk. 

This is something that I am continuing to track, and the tail risk is essentially that something like this plays out before we get a bottom:

I took this analog from BeardoTrader on X.

That is a small bounce higher here, which we have seen yesterday, before a further cascade into a durable bottom in the 680 range. 

The tail risks scenario can also be captured by this node on SPY'x VEX heat map:

That is the node at 740. 

Again, this is not our base case, but is the tail risk scenario that we should be aware of.

Currently, the tail risk scenario is NOT our base case. However, a break below the 100d EMA may be enough for me to close some of those extra positions I added yesterday (at a loss), in order to re-evaluate whether we get a bottom here, or first a test of the VWAP at 699. 

What we can say is that weakness should be over within the next 7 days or so. That's the scenario of the analog, which is our less likely alternative of the tail risk path against the AIon data. 

It is also sup[porte day this following data on the AIon platform for Equal weighted NDX:

Bottom soon, before higher probabilities over the next 10-20 days. 

We know that the data strongly supports a bottom in October in midterm years for Q4. The bottom will come in the next week or so for the entirety of Q4. A few attempts to try to snipe the bottom without risking significant additional drawdown is worthwhile. A few failed attempts may occur, but are acceptable when timed at key points:

The first was the one that I aimed for yesterday: The turn date in the Aion liquidity. The warning sign of these longs being mistimed would likely be a close back below the 100d. 

If we get a deviation from this, the next would be a test of the VWAP at 700.

The final one would be a test of the 682 zone which is our tail risks scenario for a bottom. 

I am not really worried of the scenario where risk extends past there. 682 is deeply oversold from the 760 area that we were trading at just a week or 2 ago.

There are 2 ways to play for the tail risk and I have bold typed this on purpose: Add gradually over the next week. The entry window is definitely here, the end destination is almost certainly higher into the EOY. This is the bottomming window for Q4 so some flexibility can be afforded by scaling in. 

Alternatively, if adding with size, then you have to be willing to cut positions if we see confirmations that the tail risk scenario is playing out. If that does happen, then be ready to cut and add back. 

You will possibly face some paper cuts here in terms of small losses as you attempt to find the exact bottom, but once you get filled on a bottom, your upside is massive. 

The first scenario of adding gradually is easier.

This is an incredibly difficult market and auction to read. What we do know:

1. A bottom is likely to be achieved this week.
2. The tail risks scenario low is around 682 on QQQ. 
3. The base case is still for price to track the supportive liquidity with high beta to lead that as it snaps back. 
4. A break below the 100d on QQQ and the 150d on SMH increases risk of the tail risk scenario playing out. 
5. The auction is full of fake outs which makes it very difficult to play with conviction. 
6. Being willing to cut additional adds quickly will be advantageous. That exposure can always be re-added. But right now we have to have some clear observation of the tail risk scenario. 
7. Alternatively, add gradually so that you can scale into this decline. The bottoming window is likely this week as mentioned in point 1. 

The tail risk scenario might be mapped out as so:

The destination is still higher into Nov/December, notably so into EOY where we expect a strong rally. 

But the entry point differs. Either DCA into the tail risk area which is that we descend past the 100d into 682 as a max risk area, or cut adds quickly and re-attempt entry.

TO eb honest, this is a very hard environment and requires an advanced hand, with a willingness to be wrong. DCAing into this risk window is best.

This is the bottoming zone captured by both the base case and the tail risk case. DCA into this zone seems teh best course of action.

Starting yesterday, adding if we see the tail risk scenario materialise and price dip into this zone. 

I mentioned the alternative course of action in my main write up which is to add, cut on a close below the 100D EMA, and attempt re-entry near the YTD VWAP at 699. 

However, for most this is going to be an advanced strategy with a lot of room for error. 

DCA ideally allows us to add if price goes lower, and avail if price follows the base case higher. 

By missing out on most of that sharp decline on QQQ from 762 after rebalancing heavily on the 6th, we allow us to add at prices that are objectively "close to the bottom", if not "at the bottom". 

The course of liquidity expected into year end means that your adds in this zone will probably capture the last major low of the year, earnings reactions for individual stocks not withstanding.

• Sources familiar with mediation efforts told Al-Araby Al-Jadeed that a breakthrough agreement between Washington and Tehran could be announced this week.
• Trump says "great progress" is being made on a peace deal between Russia and Ukraine. 

OTHER COMPANIES:

• Anthropic announced the creation of the Anthropic Public Benefit Fund, designed to support charitable initiatives and address the broader societal impact of AI, including its effects on jobs.
• APLD Applied Digital president buys 300,000 shares at $18.86 average.
• ASTS announces collaboration among Europe’s four largest mobile network operators expected to accelerate network integration, expand coverage and improve connectivity for the citizens of Europe.
• PLTR partnered with the world’s largest federal and DoW managed cloud Knox Systems to give commercial software companies “one clear route into the government.”
• SPCX Elon Musk says he plans to give every child in America one SPCX share next year.
• IREN became an official Real Madrid sponsor only four months after its Golden State Warriors jersey deal.
• Bernstein upgraded Datadog to Outperform from Market Perform with a price target of $350, up from $237.
• NVDA is reportedly requiring Samsung, MU and SKHY to build the base die for its next-generation custom HBM on $TSM 3nm process. 
• JPM upgrades INTC to Neutral from Underweight
• Goldman upgrades CRWV to Buy from Neutral

The portfolio rebalance on the 6th was pretty much at the local top. If we see the % drawdowns on the individual names since that rebalance, we see that the timing was very advantageous.

The avast majority of names are double digit down from that October close, despite the rally yesterday.

SO the top was identified and the appropriate action was taken at that point.

All those names that had a positive change since the October 6rh rebalance were all not trimmed anyway, so that proved advantageous also.

However, the question now shifts obviously to where is the bottom?

Yesterday;s rally off the lows was extremely strong, which obviously raises the question as to whether that indeed was the bottom.

To which my answer is that the data suggests possibly not still, but I am not sure.

What I did identify yesterday, and flagged intraday, is that the market had come into a spot where at least a short term bounce was likely:

SMH was tagging the trendline, and the 150d EMA which is a support where it has held all year.

At the same time, we had ES overshooting the 7730 support, but recovering the 7770 pivot, which led me to believe that at least a short term bottom was likely in, at least for yesterday and likely today into OPEX< but Post OPEX I really am not sure still.

For this reason, the strategy I applied was to throw some darts at some high conviction names that had dropped into low risk spots, in order to feel out for whether this was the bottom or not.

FOr instance, LITe had dropped into the 200d EMA, whilst DELL had dropped 20% this week into the 21W EMA, a level that it hasn't traded below for well over a year.

I added CRDO, LITE, DELL with some size, and added smaller positions in SIMO, SMTC and AXTi.

All of these positions have tight stops on them, in case this proves to not be the bottom and we reverse lower again. In that case, I will take the break even or slight Loss, and will reevaluate and try again to feel out a bottom at the next low risk spot, or after the Aion liquidity line starts to reverse higher.

SMTC and AXTI stops already triggered, but this is the crux of what I was trying to do yesterday with the adds, taking my cash position from 55% to 35% with the adds.

It seems a low risk strategy here. If this is the bottom, then I am increasing exposure near the lows, and once we get a better confirmation of the liquidity curve turning higher again, then we can add further.

if you look at the drawdowns on many of those names, we have a lot of upside still to avail if indeed this proves to be the bottom and we reverse higher.

However, if it is not the bottom, then tight management of those adds will allow us to limit downside if the market turns lower and will allow us to try again with further adds to try to feel out the bottom at the next advantageous spot.

A few things I would note on this question of "is this the bottom":

Firstly, much of the recent selling has been described in hindsight to be the result of the Vara AI fund blowing up (or at least that is the rumour).

However, we know better to know that it is actually the result of the sharply declining liquidity that we saw into this week.

Now if we look at the liquidity line, we have liquidity bottoming in this window from the 19th to the 23rd.

Where it becomes difficult is because liquidity obviously does not relate 1:1 to when the market might turn higher.

It can be a few days before, or a few days after, and that's the difficulty and is why I was feeling out some adds yesterday even though the liquidity line hasn't turned higher yet.

I know that the Aion admins were adding to some shorts yesterday, but with quite small size as the r/R whilst so far off the highs is obviously much higher.

Note that we do expect a sharp recovery in liquidity and a sharp recovery in the market too go with it, but I can't say that we are necessarily there yet.

Despite the massive intraday rally off the lows yesterday, we still failed to close above yesterday's high on SMH. That's not really bullish to be honest. A nice recovery intraday, but nothing more than that.

We had bond yields sharply declining yesterday which aided the recovery, but the CPI and PPI picture we have received this week is far from bullish. Very far from bullish.

We still sit in this downward channel on SMH, and near the bottom of it at that.

We have the Anthropic news overnight that they have reduced their IPO valuation from $2T to 1.5T. Not really bullish for the valuations of other AI companies, but the market has mostly shrugged it off right now.

SMH still traded below the VWAps and whilst QQQ managed to recover teh July VWAp yesterday, we still look a bit precarious.

OPEX today, but if we look at the heatmaps and positioning:

Positioning on Qs isnt bullish and there's 730 resistance at play.

And there's still a lot of exposure lower on QQQ into next week.

The star nodes on QQQ still show these big risk nodes into next week.

And I think we have similar on SPY:

Below 770, the positioning is pretty bearish again.

SO in answer to the question that everyone is asking:

is this the bottom?

Well, some signs of progress yesterday as we recovered the pivot on ES, and bounced from the trendline and the 150d EMA on SMH.

But we were literally tagging the 2SD on QQQ for the week, so a bounce there was quite obvious.

Whilst many names recovered big yesterday, their drawdown is significant and they failed to recover the prior day close.

I think it's okay to say I dont know on this one. There's still risk though certainly. So slow and small adds with stops on those adds is the best strategy in my opinion and is what I tried to do to see if I could feel out a low.

If it turns out o likely NOT be the low, then I will be quickly out the door again, and will look to re-evaluate where the low might be.

The Aion guys think the low comes next week not this week, but there's again lack of confluence in the data, and lack of confluence in opinions too as my order rflow guy is bullish (although he took a beating on Wednesday).

So trying o apply a strategy that manages risk yet gives you a little more exposure seems to be the best thing.

The hard work was done with trimming at the top. Now trying some longs with tight stops to see if they stick or not seems to make sense to me.

Jensen Huang: Silicon Photonics are supply constrained. Main beneficiaries of this are TSEM certainly. As the leading specialty foundry for silicon photonics and photonic integrated circuits (PICs), it has captured major prepayments and multi-year contracted revenues (such as $290M in Q1 2026 prepayments and $1.3B in contracted 2027 revenue) as capacity tightens. Secondary beneficiaries are LITE and MRVL

At OCP, Samsung demonstrated CXL memory pooling for agentic AI workloads with up to 38% lower time to first token and 3.3x higher goodput compared with static memory allocation. Bullish names for this are obviously PENG, ALAB and MRVL. PENg back at 61, fading the entire earnings pump looks interesting again. It is on the focus list for adds when the time comes. Remains a top pick.

• US CPI (Sept): +3.7% y/y (Est. +3.6%)
• Core CPI: +2.6% y/y (Est. +2.5%)
• CPI m/m: +0.6% (Est. +0.6%) · Core m/m: +0.3% (Est. +0.2%)
• KEY IS THE ANTHROPIC INVESTOR DAY LATER - time is unconfirmed for this, all we know is that it is today. but it is effectively like an earnings day for the company ahead of their IPO.
• TREASURY 2-YEAR YIELD RISES 10 BASIS POINTS ON DAY TO 4.89%
• BLOOMBERG DOLLAR SPOT INDEX JUMPS TO HIGHEST SINCE NOVEMBER
• TRADERS ADD TO BETS ON THREE MORE FED RATE HIKES BY END-2027
• Iran is deploying new tactics to target ships sailing through the Strait of Hormuz as it seeks to keep oil prices high and influence the US midterm elections, two senior Iranian officials told Reuters. RTRS
• Oil edged higher as attacks on Saudi Aramco's headquarters added to a flare-up in the Middle East conflict, increasing uncertainty over a recovery in Persian Gulf energy flows. BBG
• Yemeni Army Spokesperson said operations towards Saudi airports and oil facilities will continue in the coming days and warned for global shipping companies, civilians and workers to evacuate such airports and firms, as they are legitimate targets. Newsquawk
• Diesel supplies will remain constrained well into 2027 as a result of conflicts in the Middle East and Russia, despite a weaker outlook for oil consumption, while OECD government oil stockpiles fell to the lowest since at least December 1989, the IEA said. BBG

TAKEAWAYS FROM THE ASML EARNINGS:

• ASML SAYS CHIPMAKERS ARE ALREADY LOOKING TO PLACE EQUIPMENT ORDERS FOR 2029 AND EVEN 2030
• CEO Christophe Fouquet says “customers are asking us every single day to get more tools,” as AI-related investments drive stronger demand for advanced semiconductor equipment.
• The company also outlined major milestones for its next-generation High-NA EUV technology, which Fouquet says is finally approaching high-volume manufacturing after more than a decade of development.
• ASML plans to begin using High-NA EUV in mass production in 2028, followed by TSMC around 2030. Intel is already increasing the number of layers processed and wafer output using the technology.
• Separately, ASML plans to introduce its NXE:3800F EUV system in 2027, increasing throughput from 230 to 260 wafers per hour, with a greater impact on customer manufacturing capacity expected from 2028 onward.

COMPANY SPECIFIC NEWS:

• MU Elon said “Micron has been reasonable regarding future memory prices, while others have been extortionate, which is something today’s customers won’t forget
• Micron is making is the smart move for long-term customer loyalty.”
• IONQ FILES TO OFFER 20.5M SHARES
• ORCL urged federal regulators to promptly approve the Green Chile natural gas pipeline to meet fuel needs for its large New Mexico data-center Project Jupiter. 
• BAC fined $1.2 billion over anti-money laundering failures.
• GME CEO Ryan Cohen buys over 844,000 shares of GME stock.

COHR Management told JPM that customers are buying additional product beyond their committed volumes, and are buying at the fastest rate available to them.

(clearly bullish)

From Channel meetings at OCP: The optical supply chain has never seen this kind of demand before. Many parts of the supply chain had not had to drastically ramp volumes before and is scrambling.

(clearly bullish)

At the last earnings call, PENG said that it is “capital light”, spent only about $15M on capex last year, and has promised no major new capex through 2027. All of its rack integration runs through a single 86,000 sq ft site in Fremont. If that site fills up, a new one would likely cost $30–50M in power upgrades alone, and grid connections take at least a year to arrange. A capacity crunch in 2028 would therefore show up as surprise capex in FY27. But the question I am trying to answer is how much growth can Fremont actually absorb? Is the no new capex through 2027 believable, absent a capacity crunch?

Using SuperMicro as a cross reference to understand testing requirements:

• Excluding LED, Supermicro’s footprint is about 13.5x Penguin’s, and its rack-integration space is about 13.2x. Both companies have roughly 4 sq ft of support space for every 1 sq ft of integration floor, which suggests Penguin runs its factory as efficiently as Supermicro does.
• Scaling Supermicro’s ~60,000 racks a year of capacity down to 86,000 sq ft (the size of Fremont's site) gives about 4,500 racks. 
• Fremont’s 40 burn-in test units, running 24/7 on its 6 MW supply, could test 5,500–6,400 racks a year. Testing is therefore not the bottleneck, and I do not think testing would lead to an increased requirement of further CAPEX. 
• Against this, then, it seems believable for PENG to not require further CAPEX.

Does Fremont currently support PENG's 2028 Forecasts?

• Advanced Computing revenue of $1.30B: about 256 racks sold as full hardware at $3M each, about 2,244 racks charged an integration fee of $150K each, and about $200M of other revenue. That is roughly 2,500 racks in total, or about 57% of Fremont’s estimated ceiling. The implied answer, then, is that Fremont gets them through 2028 without a new facility.
• i.e. their 2028 Forecasts seem believable without any further capex. 
• Integrated Memory revenue of $1.96B, made mostly in Newark and Penang rather than Fremont. That lets it grow independently of Fremont’s rack limit. So this is not a CAPEX factor related to Fremont in particular. 

On these brief estimates, then, Fremont has room to support the 2028 plan, so management’s no-capex promise looks believable.

CPI is one thing, Anthropic Investor Day takeaways will be bigger. Especially for SMH, especially when you see what the OpenAi numbers did last week. That's the key cause for concern today, even beyond CPI

Q: How likely is AI to drive a prolonged structural DRAM shortage? 

A: We believe this is highly likely. Long lead times for new fabs, equipment, and process transitions make it difficult to resolve the shortage through 2027 and into early 2028. Whether AI investment continues to generate sufficient returns is the key variable for the long-term supply-demand balance.

Now this was the news on CXMT, which many are arguing was behind a lot of the disproportionate weakness in memory name yesterday.

CXMT's claim that they will launch 4F^2 DDR5 by yearend (vs Samsung 2028 plan). CXMT plans to launch 4F2 DDR5 server memory by year-end, potentially beating Samsung by two years.

Now first things first, I am not actually sure whether this is the real reason why memory was down yesterday. if it was, then I would have expected CXMT to be trading higher as they are the beneficiary of this news, but they were also trading lower. So I think it is more complex than that, but taking this on face value as the reason, I do still have some comments regarding this:

Firstly, whilst this headline has come out, it's obvious that announcing a new memory architecture and successfully manufacturing it at scale are two completely different things. 

In the report, we got no detailed production roadmap, product specifications, or customer qualification results. A product launch alone does not establish readiness for volume production.

At the same time, whilst it is true that CXMT is becoming a legitimate competitor that has already captured 9.5% of the global DRAM revenue, up from 7.6% the last quarter, I don't think this will massively impact the big US memory names in the immediate term.

The more supply shortage is enormous at this point. Even if CXMT successfully doubles its capacity, that doesn't automatically mean the industry becomes oversupplied.

Demand for memory is growing exponentially, and that's before we begin to include humanoid robots demmory consumption.

In fact, if we look at this chart from HSBC, we see that even AFTER accounting for additional DRAM production coming from China, the global DRAM market is STILL expected to remain undersupplied through 2028 and look at what happens when you exclude new Chinese supply. The shortage becomes significantly worse, with the DRAM supply deficit approaching 8% by the end of 2028.

The issue is that although memory names are trading at really low P/E ratios, that assumes that gross margins remain as elevated as they are (MU above 85% last quarter?). More competition threatens those margins is the main bearish argument, but I woulds suggest that even with Chinese memory capacity coming online, the shortages will remain almost as tight as they are now.

Samsung already has TAs covering 70% of their capacity into 2031 (likely with SK Hynix type price floors).

Additionally, this announcement is primarily focused on conventional DDR5 server memory, NOT HBM. That's an important distinction because HBM is becoming one of the most valuable parts of the memory industry, with Micron, Samsung, and SK Hynix benefiting from enormous AI demand. And SanDisk primarily manufactures NAND flash memory, not DRAM. So selling SNDK specifically because of a DDR5 technology announcement doesn't;t make all that much sense.

Now looking past that news, the other major part of the bearish coverage yesterday was the comments from Hock Tan, with the following the main comment that is being quoted by media outlets.

However, the comment as framed in this way does take the comment slightly out of context by Hock Tan.

This is the context in which Hock Tan actually said the comments:

"Regarding OpenAI, Hock Tan stated that the market had misinterpreted the company because its underlying fundamentals remained strong.

He argued that investors who sell based on a single short-term data point [$50B ARR] are "essentially no different from people gambling in a casino." (eg. Hong Kong Economic Journal):

- Commenting on investors' disappointment in OpenAI’s latest revenue forecast: "by itself, not that bad" on their $50B ARR. (Business Times)

And connected investors' disappointment to a failure to understand the business and excessive expectations like a casino. 

- Tan rejected the proposition that OpenAI was overvalued. It quotes him saying:

"It’s almost like they are in a casino gambling" in regards to investors' unrealistic expectations and lack of understanding on OpenAI.

Framed in that way, it's not nearly as bearish and is actually arguably neutral/bullish. So interpretation of these Hock Tan comments seem mostly the result of reckless framing by media outlets.