The Compound and Friends
00:32:28 · Josh Brown, Michael Batnick, Daniel Clifton
[00:32:28] S2: So You don't want a compute campus? [00:32:30] S0: I'm curious about your reaction in the stock market. So Yeah. Sunday night Yep. As soon as the Texas gubernatorial race flipped Yep. The market did a nosedive. [00:32:39] S1: Correct. [00:32:39] S0: The Nasdaq was down 3% in the after hours. Alright. I went to bed. I woke up, and futures are ripping. Yep. And I'm just like, LOL, of course. [00:32:45] S1: Yep. [00:32:46] S0: And as I'm sifting through the narrative shift, it made sense. It actually made sense. Almost all the time when prices flip, we'd laugh about the narrative ten hours ago. It made sense. Okay. Democrats won and therefore data center activity is going to go down. Sell the stocks. That made sense in the after hours. Then people woke up and said, Hey, wait a minute. Actually, we hate the AI trade. We hate all the spending. We hate the negative free cash flow. Let's get back to normal. Actually, this is good. Okay. So on Monday, we had a great day in the stock market, but NVIDIA did fall Yeah. Three [00:33:20] S2: The day after the election was Wednesday. [00:33:22] S0: Sorry. Hold on. Let just start by question. John, chart 15. So what's today? Today's Thursday? Okay. So whatever. So this was yesterday. Yeah. So yesterday, we had this really bizarre day where the S and P was up 1.7%, and NVIDIA and the semi stocks got murdered. [00:33:36] S2: Yes. Okay.
00:33:36 · Josh Brown, Michael Batnick
[00:33:36] S2: Yes. Okay. [00:33:36] S0: So that makes But what about... What do you make of today? Yeah. How do you explain today? Because today, the semi stocks are getting killed, but everything is getting killed for the most part. Absolutely. So what what do we make of today?
00:33:47 · Daniel Clifton
[00:33:47] S1: You guys are stock market expert. I'm just a policy guy. So... But I will tell you, we spent a lot of time on Texas. We knew that Texas was going to be where the big change comes. Okay? So, like, we were in the early vote data. The early vote data moved 17 points to the Democrats, a very good leading indicator that you could get change there. Abbott's team really thought that they can pull this thing out. Okay? He doesn't pull it out. We're like, this is a much bigger problem for the market overall. But when you look at that trading, we have 45 AI stocks that we put on our screen, and the only ones that were up were like the hyperscalers and Qualcomm. And remember, this is happening during earnings, so you get multicollinearity, right? It's hard to break this apart. Everything else was getting killed because the data center trade has always been about the parts that go into the data center. Those are gonna be industrial stocks. They're gonna be the data center real estate. Caterpillar has Caterpillar annihilated. Semi equipment stocks Power generation. Power generation. That stuff got destroyed, and that was the right thing. And everybody's like, oh, the equity market's up. No. My election baskets were working perfectly yesterday. They are not working perfectly today. Right? Like... Right? So so what we said was yesterday was buy everything except data centers, a, d, c, any... Right? Anything but data centers.
00:35:09 · Josh Brown, Daniel Clifton
[00:35:09] S2: But... Yes. But your election baskets were working because yesterday, the data center was a sideshow. Yep. What really was being expressed yesterday is, oh, cool. No revolution. Yep. No court battles. No Like, no war. To me, that was like... Because the assumption was Yeah. No matter what happens, Trump will lose some states that he wants to contest. Correct. And it's gonna be supreme court, and it's gonna be six months of this bullshit. And he basically came out and said Yep. I'm not contesting it. And that... Here, check out my ballroom. But that was what set the market on fire. And then today Yep. Was this, we think, like, oh, wait a minute. We might have gotten too excited yesterday. Hangover. Guess what? Dan Ives, the biggest AI ball on the street. We might lose 10% of the projects I'm baking in. Yep. That's what today is about. [00:35:58] S1: But... So let let me... The Democrats won so overwhelming Trump couldn't challenge us. It would be a much different story if it was fifty one-forty nine and Alaska was still hanging out there and the third party candidate is taking 2% of the vote that makes the difference. We would be in a legal disaster right now. The Democratic space is so [00:36:17] S2: big. Okay. [00:36:17] S1: He has to accept it. That's number one. [00:36:19] S2: So yesterday, that was that.
00:36:19 · Josh Brown, Daniel Clifton, Michael Batnick
[00:36:19] S2: So yesterday, that was that. [00:36:20] S1: Right. Number two is that the market was like, oh, the Democrats are going to restrict this spending on the war. The war's going to end. Oil goes down. Yep. So you had a lot of those factors. Today is the right way to think about it. Not saying that the stock [00:36:33] S2: me. Market No. No. No. [00:36:34] S0: No. No. I'm not [00:36:35] S1: saying the stock market is fine. The right way to think about it is [00:36:38] S0: Welcome to the new reality. [00:36:40] S1: You have to adjust your CapEx forecast. And if it's 10% down, you've to do that. When you adjust your CapEx forecast [00:36:47] S0: Earnings. [00:36:48] S1: You now got to go into the earnings. Yes. That's the way we've been communicating it with our clients for three, four months. And by the way, I would get destroyed by my long only mutual fund clients because they were all invested in a trade. And I'm like, I'm just trying to manage risk [00:37:00] S0: for you So the last two days were a sonic boom in the stock market. John, let's do chart 16. So this is the last two days. We're looking at a scatterplot of QQQ versus MTUM, the momentum trade, which is usually correlated, as well as QQQ versus SMH. So the Nasdaq versus semis also very correlated, obviously. Complete outlier. Next chart. 17, please. So, we have 20 semis that are down 10% or more over the last two days. There's only 25 stocks in the basket, and 20 of them are down over the last two days. [00:37:33] S1: Yep. Let me throw something [00:37:33] S0: else So, earnings are impaired.
00:37:33 · Michael Batnick, Daniel Clifton, Josh Brown
[00:37:33] S0: else So, earnings are impaired. [00:37:35] S1: Let me throw something else out to you. Somebody's probably blowing up. I don't want to start rumors or anything, but, like, July situational awareness blew up after we had that big [00:37:46] S2: You felt it in the market before. [00:37:47] S1: Found out [00:37:48] S2: who it was. [00:37:48] S1: And my sense is that people are still in that same trade, and all of a sudden, things are unwinding on them. Right? So just my experience, I've been doing this for twenty years. [00:37:55] S2: Hearing it's Nancy Pelosi. [00:37:56] S1: Well, could be You know what? Totally convey. Right? Because he won. And she won the election. [00:38:00] S0: It was Nancy Pelosi. Taiwan Semi is down 9%. That stock never ever ever moves like that. Right. Even after all the memory stocks were down 60, this stock was going sideways. [00:38:11] S1: Let me give you the [00:38:11] S0: And NVIDIA is down 10.