I still maintain that a local bottom will form in November. The reasoning is that before February next year, what all sides want is for the AI boom to fall short of its extraordinary expectations—not for the U.S. stock market to completely collapse.
The logic behind the Trump Trade is to use 5–10% in thematic stocks (semiconductors) to drive the entire market higher. Those who believe in it make money, which is also the core reason for the market’s extraordinary gains earlier.
Compared with other themes, semiconductors have the advantage of being backed by earnings. A large part of those earnings expectations relies on layers of activity within the industry (more like DeFi). But current prices already reflect earnings expectations for the next three years, with demand leverage factored in. As prices rose, some people imagined new valuation models. Whether the industry can sustain those expectations three years from now is another matter. My understanding is that Trump won’t care if the world is left in chaos after he leaves office.
So the expectation after the Democrats take office is that they’ll bring AI valuations back to a proper level. The market is already fragile because of factors like war and high oil prices, so a crash would be only natural.
But do the Democrats really want stocks to die? I don’t think so. They just want to bring valuations back within a reasonable framework. This is especially true for semiconductors: high margins in hardware will be hard to maintain as demand falls, and there’ll be more emphasis on optimizing software (models) to increase token/GPU utilization. Hardware valuations would be the first to be hit.
What about Trump? He has two years left in office. After losing both chambers of Congress, his greatest leverage is the Fed (its policies don’t need approval from both chambers). He wants a smooth landing during his term, and the Democrats also need to support his policy framework. Stocks are a good lever for that. So I believe the upcoming nonfarm payrolls data through the December Fed meeting will be positive.
For the Fed, the priority is maintaining overall economic stability. The AI boom siphoning resources from other industries is not a good thing, which is why they’ve held firm and refused to cut rates. But once the AI valuation model changes, rate cuts will be only natural.
Right now, hedge funds have built up a large number of short positions, while retail investors have kept buying the dip. When hedge funds cover their shorts, there’ll be a short-term rally. I think it’ll start in late November or early December and last until the new Congress takes office.
A major crash over these next three months would benefit no one. $AAPLB $NVDAB
The logic behind the Trump Trade is to use 5–10% in thematic stocks (semiconductors) to drive the entire market higher. Those who believe in it make money, which is also the core reason for the market’s extraordinary gains earlier.
Compared with other themes, semiconductors have the advantage of being backed by earnings. A large part of those earnings expectations relies on layers of activity within the industry (more like DeFi). But current prices already reflect earnings expectations for the next three years, with demand leverage factored in. As prices rose, some people imagined new valuation models. Whether the industry can sustain those expectations three years from now is another matter. My understanding is that Trump won’t care if the world is left in chaos after he leaves office.
So the expectation after the Democrats take office is that they’ll bring AI valuations back to a proper level. The market is already fragile because of factors like war and high oil prices, so a crash would be only natural.
But do the Democrats really want stocks to die? I don’t think so. They just want to bring valuations back within a reasonable framework. This is especially true for semiconductors: high margins in hardware will be hard to maintain as demand falls, and there’ll be more emphasis on optimizing software (models) to increase token/GPU utilization. Hardware valuations would be the first to be hit.
What about Trump? He has two years left in office. After losing both chambers of Congress, his greatest leverage is the Fed (its policies don’t need approval from both chambers). He wants a smooth landing during his term, and the Democrats also need to support his policy framework. Stocks are a good lever for that. So I believe the upcoming nonfarm payrolls data through the December Fed meeting will be positive.
For the Fed, the priority is maintaining overall economic stability. The AI boom siphoning resources from other industries is not a good thing, which is why they’ve held firm and refused to cut rates. But once the AI valuation model changes, rate cuts will be only natural.
Right now, hedge funds have built up a large number of short positions, while retail investors have kept buying the dip. When hedge funds cover their shorts, there’ll be a short-term rally. I think it’ll start in late November or early December and last until the new Congress takes office.
A major crash over these next three months would benefit no one. $AAPLB $NVDAB