My post the other day did pretty well, so I just wanted to do a follow-up to give some additional context on my perspective is going on.
First of all, the only reason I have conviction in this trade is because it's what I've always done for a living. I am a software engineer with both AI and datacenter experience, I don't think you should trust me just because of that, so I won't go into much more detail on my background. I just think this is important to mention because in general trading off what someone else tells you to do is probably a bad idea, especially if you don't see the same "warning signs" they do.
One thing I kept noticing in my last post were AI bulls projecting on me that I have been losing money for being short, this isn't true. The majority of my stock has been in Microsoft, AMD, and a retirement ETF that was mostly made up of the Russell, all of these have performed extremely well. I started seeing warning signs about 6 months ago and placing a few late 2027 hedges just in case as I knew a crash would destroy my portfolio (it was a pretty small amount CISCO puts, they are up about 70% so far).
Now that that's out of the way, let's talk what's going on and what to do next.
The easiest way to understand this thesis is by looking at a cloud map of the market.
https://preview.redd.it/d8ad4rjuillh1.png?width=2032&format=png&auto=webp&s=a08d2cdda6e885aa6dda1c39647c9e7e893af556
The problem here is NVDA is valued at market cap of 5.16 trillion, more than Microsoft (3.6 trillion) and Google (4.23 trillion). This is an absurd evaluation for a company that doesn't even build their own graphics cards, they essential just make cad models and intellectual property to Taiwan to make their chips. The only reality where 5.6 trillion makes sense, is a future were AI literally does replace all white collar workers. However, this starts to look farfetched when you realized not a single industry or company has been able to successfully replace workers with AI. I mean you can try, but the token costs are absurd and you will absolutely get hammered with hate by your customers, it's a lose/lose.
Something else you REGARDS need to understand here is that these evaluations only ever got so high because of the combined power of our 🌈 AUTISM 🌈. We were the early ones to buy NVDA cause we wanted to own a part of the company that power our gaming PCs, it makes sense. Same with AMD, that's why I bought that stock years ago. Big money tried to stay rational for a long time and kept getting hammered by NVDA bulls who were happy to buy up any dips, especially since we all saw the company as the future. This process basically went exponential when even bigger autists like Leopold came in with heavy leverage and big money funding his pump.
Now we are in a very dangerous place though. Some of these companies like Sandisk are up 3000% on the year all based on a future where AI takes over. This is just looking increasingly unlikely as Anthropic tries to claim as of today they will somehow in the future has a 30 Trillion dollar market for their product. It's full on AI Psychosis as this point.
What I see happening next is smart money selling to dumb money. Let me be very clear, Smart money is NOT big money. Smart money is dude who bought NVDA 4 years ago and sells a portion of it to lock in guaranteed profits. Smart money is the asset manager who realizes these big Tech companies are valued on the assumption that AI produced any growth in any sector, it hasn't.
Dumb money are the tech companies that invested all their liquidity in a gamble on data centers. Dumb money are the guys buying 0DTE calls because they were late to the AI trade and now they are trying to catch up. Dumb money are the ants piling into TQQQ because they were late to the semis trade in Korea. All of these people are about to get fucked if we get any signs that AI hasn't driven the profits it promised.
This is where the NVDA earnings come in. For me, this is one