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So midweek Meta announced they're going to start selling their "excess" AI compute to outside customers. Meta jumped 10% on the news.
https://preview.redd.it/ad1jc29aohbh1.png?width=1000&format=png&auto=webp&s=f904b16f5a5b9d3f9230289634a0bea3a4e3f050
Everything downstream of it though got cooked. The news did not sit well with a lot of people holding the semiconductor supply chain trades. The entire AI supply chain trade right now is underwritten by scarcity, and one of the biggest capex spender in the market just said it has spare capacity.
Six months ago the hyperscalers were telling us there wasn't enough compute in the world for the next 20 years; now META says it has extra? You don't sell surplus of something that's scarce.
The selloff started in the neocloud compute providers and spread down the stack, feeding what feels like a rising "bottleneck fatigue" across the whole space.
The bears got loud: the trade is overcrowded, semis are pushing 20% of the S&P 500, the dot-com comparisons are back, and capital looks like it's flowing out of the sector as a whole, the great rotation.
https://preview.redd.it/884oepeyohbh1.png?width=1108&format=png&auto=webp&s=3c7c0d44a401cd6c67613787253a22c56bf3a285
But in my opinion, the doom and gloom is overblown.
After all **how does the stock of the company selling AI compute jump 10% while the industry supplying it collapses?**
IMO, META's move is not an admission of a glut. Instead, it proves compute is monetizable, and Meta's $27B commitment to Nebius still stands. The selloff is a misunderstanding of the news by a segment of market that doesn't have the slightest clue where AI is going, and is just responding to any daily stimulus.
And the fundamentals did not change overnight. **Semi supply is still constrained**: Micron's CEO says memory is in the tightest supply the industry has seen in years, with the shortage expected to run into 2028. Demand is not slowing either: $MU just blew out earnings, carries $2,000+ analyst price targets, and even has Trump publicly pumping the stock.
If anyone recalls November selloff, then historic rally , this feels eerily the same.
https://preview.redd.it/wpyhnmsophbh1.png?width=1502&format=png&auto=webp&s=465db6b97d6b1caf54260f843eadba871af4480e
So what can we expect over the next coming weeks? Months? And how can we position ourselves intelligently.
Of course nobody really knows but we can look at how the biggest players are positioning themselves and what the markets are reflecting overall to get a good gauge.
# The short term
Let's look at where the most short dated, out the money, high-conviction option premiums this week went. These represent big directional big bets by high level institutional investors. Depending on the skew we can get a good a sense of which direction they are betting betting on.
We can also flag any extra large single contract premiums for further conviction.
Secondly we can take a look a the gamma levels to gauge what the key levels that we can expect to hold and bounce off of.
https://preview.redd.it/8g2gu8zrphbh1.png?width=1500&format=png&auto=webp&s=4b1c209273e353549e3ceb506849042f97430070
Based on the stats here we have a couple of setups that seem interesting short term. Ranked by confidence:
\- $LITE : 86% Bullish whale premium. Price currently nearing the $700 wall. Long 720-750 | Target of $820 | Caution below $690.
\- $BE: 90% bullish premium, lots of volume $160 million worth . Strong Gamma wall at $240, look for bounces of that wall. LONG $240-$250 | Target : $300 and up | Caution below: $230
\- $AMAT: 82% Bullish whale premium. More upside gamma pull then downside, this one is a little longer play but overall still definitely bullish outlook. LONG: $590 and up | Target : $800 | Caution below: $550
\- $AMD : 71% Shorterm Bullish premium. A staple in semi trade. Long the lower half of $450–520 only, target $600, out below $400. The zone is too wide to chase.
https://preview.redd.it/1sq34s8vphbh1.png?width=1530&format=png&auto=webp&s=f51434e1cba7e9c37652e805687e28768e1f803b
# The long term
If your horizon is years and you believe overall in the AI boom, then this week's drop is a discount across the board.
Nonetheless we can still do some very basic analysis to see which ones are the most "on sale" at the moment.
To asses long term outlook, we can see we can where institutions are placing there longer horizon LEAPS bets, and then do some fundamentals analysis to see which ones still give us the best deals.
https://preview.redd.it/5jltmtgxphbh1.png?width=1470&format=png&auto=webp&s=1287fec7f558e188ebdccf29de35dae76b9d0287
Reading the tape and fundamental comparisons, here are the winners ranked by confidence:
\- $MU: The golden child of the memory stack. Took in$892M of LEAPS calls against $243M of puts, at 13x forward earnings with 91% revenue growth expected. Add in thirds: some in $900–975, more at $900, the rest only after a test of the wall holds
\- $AMAT: the cleanest chart in the group, above every line that matters. Add in $500–610, stop adding below $450.
\- $SNDK: Another staple of the semi trade. Strong business, strong margins and right now the biggest winner, so let it come to you. Accumulate at $1,500, stop adding below $1,300.
https://preview.redd.it/etgwysc8qhbh1.png?width=1684&format=png&auto=webp&s=a8e58d13d8ab919ef5c59599d995e077223f588b
Of course this is not financial advice by any means. This is just my read on the market. There's like an infinite way to look at the same data and of course, I have my bias.
Please lmk what y'all think !