News and analysis

Minor corrections in the major markets are mostly of the technical nature and certainly are wrong reasons for smart investors for retreating from mid-term bullish positions in the AI-based techs and other fundamentally strong mega cap equities. The prospect of further slashing U.S. interest rates is too serious an argument to ignore, while the leading role of artificial intelligence in increasing the growing payback of huge businesses is too high. A short-term repositioning in the form of a rather modest rollback of the broad S&P 500 indicator from its historical highs at nearly 6,700, accompanied by just several days of small-size profit-taking on a number of assets like Oracle or Broadcom that had outperformed the market right in September, is precisely what we warned about earlier.

This entire development is therefore not only quite logical, but also fits perfectly into our baseline scenario, which was projected long before last week's meeting of the Federal Reserve. This is our team's very practical conclusion. In purely theoretical discussion, the only wild card that could be obtained in the hand of bearish pessimists about the Wall Street sentiment is the Joker of a potentially impending economic slowdown, and therefore of consumer spending decline on both sides of the pond. This, of course, can be taken into account for a number of vulnerable businesses, since we recall that it was precisely the significant slowdown in the U.S. job numbers that triggered the restart of borrowing costs' reducing by the lagging, as always, central bankers from the Fed. However, that's our part to remember that even during all previous periods of crises, only small and some medium-sized businesses suffered from a decline in consumer spending, while huge businesses were never exposed to such obstacles for too long. Moreover, it was the behemoths of the transnational economy, especially in the IT sector and online sales that emerged as the main winners from all the hardships. That's why this potential Joker, even if it were on the hand, is not able to transform into some kind of Trump Ace to play against giants with trillions of market caps, especially as one of the Trumps (meaning U.S. president Donald Trump, of course) is clearly playing for the bull's optimistic camp as well. He is a master at creating a timely information environment for new market records. However, there are enough arguments like “money goes to money", even without Trump's rhetorical tricks.

In this context, fading of most US-China and US-EU barriers to self-consistent AI demand chains, where NVIDIA invests in OpenAI, OpenAI orders capacity from Oracle, Microsoft or Amazon, and then the latter companies again turns to the same original NVIDIA for chips etc, looks very stable. Thus, even some current technical corrective movements on "bought AI and Fed expectations - sold facts" in such special mega capitalized equities are merely greater dip-buying chances that should not be put off for long. At least, this is an important strategic principle of trading stocks for anyone who wants to have a happy Christmas, taking advantage of the upcoming wave of US indexes' and key global asset's price climbs on the back of the usually very strong third-quarter earnings season, which is about to start in mid-October. Investing in S&P 500 and Nasdaq futures, as well as buying the businesses that corrected most quickly in September like Amazon (-8.3% at the moment from the highest price of $238.85 on September 9 to nearly $218, seems like the simplest idea. The sales season, including Black Friday and Cyber Monday, will speak for itself. E-platforms offering the greatest savings, like Amazon and Walmart online, will benefit when people want to save more money. Given the growing contribution of Amazon Web Services (AWS), its monstrous cloud division, to total profits, we nominate Amazon as our top pick for the next couple of weeks compared to many other mega caps.

Ethereum Classic (ETC) is down 10.1% this week to $17.90, underperforming Bitcoin (BTC), which has fallen 5.1% to $109,499. Pressure on crypto assets has intensified following $1.0 billion in forced liquidations on Thursday, while unexpectedly strong U.S. macroeconomic data has fuelled fears of a potential government shutdown. With time still remaining before the October 1 deadline, the market could see additional downside. ETC has already slipped below the $20.00 support level and may continue lower toward $15.00 unless sentiment improves sharply in the near term.

Ravencoin (RVN) is down 10.1% this week to $0.0115, underperforming the broader crypto market, where Bitcoin (BTC) has fallen 3.3% to $111,600. The decline comes amid growing fears of a potential U.S. government shutdown on October 1, with bets on this scenario reaching 77% on Polymarket. The last shutdown, which lasted from December 22, 2018, to January 25, 2019, pushed BTC lower by 11%. If history repeats, Bitcoin could fall toward $100,000, while RVN may once again test its strong support at $0.0100. Since launch, the token has never dropped below this level, and every approach has triggered a sharp rebound. The most recent example was in June, when RVN bounced 141.5% from this threshold. Given this history, the chances for another upside scenario remain high.

One of my portfolio's favourites, Micron Technology (MU), refused to rise further immediately after posting another three months of solid growth. Its share price edged in the extended trading hours on the hot heels of the report, then slid by 2% during the first minutes of the regular session on Wednesday. For me, there's nothing surprising or discouraging in it, as Micron stock's sustainable rise from $120 in late August to $170 in mid-September, on hot market expectations before earnings release, was accomplished too quickly. This couldn't have gone without any damage to future performance. And there are always hope-buyers looking to take profits on facts. If so, making this halt at a campsite between $155 and $170 looks relevant, even though a tripling in Micron's cloud memory sales to $4.5 billion caused the whole group-wide revenue to spike by 46% YoY to reach $11.32 billion. Both numbers topped expectations.

Citing "tight" supply and "healthy" demand environment for DRAM (dynamic random access memory) chips, Micron is planning to hike its investments in the semiconductor sector of the US to $200 billion, also projecting its current quarter's midpoint profit at $3.75 per share on revenue of $12.5 billion, plus or minus $300 million. The expert pool of Wall Street was betting for Micron CEO's own forecast of $3.10 per share on $11.9 billion in total sales. All together it looks like a fascinating adventure for an almost inevitable hike to new and previously unknown heights. Pricing exceeded expectations for both DRAM and NAND (non-volatile flash memory to store data, used mostly in SSDs, smartphones, and USB drives). Hard disk drives (HDD) supply shortages are also good for NAND demand.

Personally, I believe in targets well above $200, and possibly even before Christmas. Only a very high bar of blowout numbers from other behemoths like Broadcom and Oracle prevents immediate price gains for Micron. Analysts at Wedbush hastily raised Micron's price target to $200 "on strong memory cycle outlook" beforehand, even one week ahead of the report. Barclays raised its target for Micron to $195 today. Wolfe Research and many other famous investment houses put it around $200 as well. KeyBanc just set its new price target at $215 several hours ago vs $160 before the release. The most reputable JPMorgan put its target at $220.00 from $185.00 while maintaining an Overweight rating. This is a sign of deep underestimation, and I join JPMorgan's estimates eagerly.