News and analysis

You may be aware that CrowdStrike has been an essential part of my personal stock portfolio for many months. This cybersecurity firm provided good profit, nearly doubling its market value since last autumn. However, today CrowdStrike's management had to accept its responsibility for its faulty update to trigger a "super weird happening" which will become "the largest IT outage in history", according to Troy Hunt, an Australian Microsoft Regional Director. As a matter of fact, millions of Windows-equipped laptops and PCs around the world were suddenly BSoD’ing (showing the so-called Blue Screen of Death). Surely, shares of CrowdStrike immediately plummeted (by nearly 15% at some moments of pre-market trading today), as soon as the Windows outage quickly disrupted a bulk of global services like Visa and MasterCard transactions or airports' automatic check-in systems damaging of a lot of lowcosters, broadcasters and even supermarkets.

One may find much more detailed information on the issue in newswires, so that I just limit myself here with a single line saying that the latest software update of CrowdStrike's Falcon Sensor (actually an antivirus platform) led to crashes on Windows hosts, including Azure clouds, related to Falcon. Lingering degradation impact for Microsoft 365 and other applications is here, yet there is a little doubt that CrowdStrike will simply come back to its previous version of Falcon for a while, to fix the problem in the course of the weekend or even before this Friday evening. Getting more time to test all of its new programming codes Microsoft is also unlikely to abandon its cooperation with now-not-almighty but still extremely powerful and experienced CrowdStrike in the future, exactly as most users cursing Windows are not going to stop using it forever.

Everyone likes to grumble, but the share price would probably recover, sooner than later. This week's wave of AI and chip-based stocks' correction with a sectoral rotation may worsen the situation to some extent, but not in a fatal way, I believe. Therefore, my choice is slightly reducing the volume in some of my other favourite stocks from the AI segment, like Broadcom, Oracle, Micron, to fix some of my big profits in Google and Amazon (thus, temporarily exit from some positions, with a thought of re-buying after two or three weeks). Not reducing my stake in Microsoft, for now, as it lost only 1.5% as a first response to the outage news today, thus drifting from almost $470 in early July to below $440, yet I don't think Microsoft correction would go well below $420, in the worst possible case. At the same time, I am going to purchase even more of CrowdStrike later today, probably just 30-40 minutes before today's regular session's closure, as market conditions and circumstances are giving a great price discount. In the worst scenario, the current downside move in CrowdStrike may reach a technical support area between $250 and $275 per share, which is clearly marked by lows of late December and mid-February (look at the chart). But most likely the price rebound will happen already on Monday or Tuesday.

Even Citigroup sceptical analysts, who recommended rotation from skyrocketing IT segment to smaller caps and broader markets to their customers earlier last week, said they foresee further S&P 500 upside during the second half of 2024, even though at a moderate pace vs the first half. Goldman Sachs sees a "risk of a setback in the summer" for the S&P 500, shifting to a "neutral stance across assets on a three-month horizon" but remaining "mildly pro-risk for 12 months', favouring overweight positions in equities. There can be a higher risk of a market correction rather than a bear market for the second half of the year, the group's letter said, given that "with only some [economy] growth slowdown, a healthy private sector and a buffer from central bank easing, equity drawdown risk should be limited".

Monero (XMR) has been trading mostly neutral around $159.38 this week, though it reached $164.05 on July 17. The token's retreat aligns with the broader crypto market trends. Since June 18, 2022, XMR has been moving within an uptrend, having surpassed the resistance level of $155.00 in June and maintaining its position above this uptrend in July, despite administrative pressures from U.S. authorities. This resilience enhances its upside potential.

The nearest resistance for XMR is at $175.00. If Bitcoin (BTC) rises to the $70,000-$72,000 range, XMR could breach this resistance, paving the way for a potential rise to $225.00. Given the current market trends, Bitcoin reaching these levels by August seems plausible, which in turn would support XMR's upward movement.

Dogecoin (DOGE) is adding 5.5% to $0.1205 this week, slightly retreating from $0.1274 on July 17. DOGE's movements are synchronized with the broader crypto market. Bitcoin (BTC) prices rose by 5.2% to $64,525 over the same period and are also slightly retreating.

Investors are speculating about the future prospects of the memecoin, considering Donald Trump's rising chances for victory in the upcoming presidential election this November. Elon Musk, a well-known advocate of Dogecoin, has committed $45 million to back Trump. If Musk's political bet pays off and Trump wins, DOGE could see significant gains. This strongly supports the memecoin in its upward movement towards $0.1400.

Dutch-rooted lithographic equipment maker ASML has kicked off a corrective wave of decline in European and Asian markets on July 17, which quickly echoed in the chip segment on Wall Street as well. The EU technology sub-index dropped by 4.5% marking the most substantial one-time fall for the last 18 months and the U.S. tech-heavy Nasdaq Composite index plummeted by 2.75% to challenge the area below 18,000 technical support, which was an all-time resistance level before July. American Depositary Receipts (ADRs) of ASML suddenly shed almost 12% of its market value, sparking concerns of a massive rotation away from tech stocks to industrials and smaller caps.

It was amazing that the Dow Jones index (DJIA) closed above 41,000 for the first time ever (228 points, or 0.6%, of daily rise) at the very moment when the broader S&P 500 and its AI-related flagships including NVIDIA lost their upside steam. This fact emphasizes the reallocation of money, and not the outflow from equities to the cash, as it happens in times of crisis or stock crashes. Nominally, ASML posted quite decent second quarter figures on both equity per share (EPS) of $4.01 ($0.02 better than consensus forecast) and somewhat lower revenue of $6.24 billion vs the average expectations of $6.49 billion. Yet, the weak point by this giant chip-making equipment manufacturer was its disappointing forward guidance, with supposed Q3 sales between $6.70 billion and $7.30 billion, compared to higher Wall Street expert pool estimates of $8.32 billion. At the same time, ASML's stock price was clearly overheated after rallying nearly 25% during the recent three months, and now it only returned to its levels of late May. Thus, downstairs sliding is fast, but it's not a disaster yet.

A double-digit drop in ASML shares could go rather smoothly for other AI leaders, if not the synchronous news came from U.S. government sources, as whistleblowers said regulators might consider more severe trade restrictions in order to suppress China's access to advanced chip know-hows. If firms such as ASML, NVIDIA and AMD continue to send advanced semiconductor decisions to Asian markets, the White House subordinates may impose a measure called FDPR (the foreign direct product rule) to control on foreign-made products, which use even the tiniest amount of U.S.-licensed technology.

This kind of threat could be how the U.S. wants to push European and Japanese companies to restrict their contacts with Chinese firms, and the spectre of a trade war is here again, inside investing minds. Again, the sectoral leaders like NVIDIA and AMD have already learned to bypass most of the former restrictions. However, in combination with moderate demand concerns and covering a big distance in a short time by hyping AI stocks, this prompted an immediate profit taking, so that NVIDIA and Micron (MU) lost nearly 6.5%, Broadcom (AVGO) dropped by 8%, while AMD corrected by more than 10% in one trading session.

Further price developments in the nearest couple of days will show how deep the correction may go, but the major fundamental conception suggests that too rapid decline is typically temporary and short-lived on such an advanced stage of the lasting uptrend, as it has the solid AI-related nature.