u/Bluewolf1983

Memory stocks have declined recently despite strong earnings; author lists bullish news: DRAM unit prices continuing, Xiaomi raising smartphone targets expecting lower memory costs, and pushback on price hikes is seen as temporary. The decline is driven by war fears and profit-taking, not fundamentals; the memory cycle hasn’t topped, offering a buying opportunity for a sector rebound. Go long MU (or SMH) to benefit from continued memory demand and price momentum as near-term headwinds fade. Escalation of Iran conflict worsens supply chain; China DRAM rejection becomes a lasting price cap; hyperscaler capex cuts reduce demand.

Author argues hyperscaler AI capex ($5tn by 2030) cannot generate a reasonable IRR short-term; companies are capping AI spend (e.g., Tesla $200/week/employee) and pushing back on costs per recent WSJ and other articles. This disconnect between massive capex and weak near-term demand creates a short-term selloff opportunity in tech-heavy indices as investors rotate away from FCF-negative hyperscalers. Short QQQ to capture expected weakness in major AI-related tech stocks (AMZN, MSFT, GOOGL, etc.) over the coming weeks to months. Hyperscalers may continue spending disregard for ROI; any positive AI revenue surprise or Fed pivot could reverse the selloff.

Data center construction is significantly delayed, with capacity coming online at half the rate of NVIDIA's GPU sales, indicating a potential inventory buildup. A quarter or two of inventory digestion would be devastating to AI stock prices in the short term, and supply chain issues from the Iran war could exacerbate delays. NVIDIA's stock price is at risk due to a mismatch between GPU supply and the delayed installation of AI infrastructure. Data center construction delays could be resolved faster than expected; sustained massive demand could absorb the inventory.

The war in Iran has closed the Strait of Hormuz, disrupting global oil supply chains. The author's base case is that the Strait remains closed for some time, keeping oil prices elevated until supply chains normalize. The supply-side shock from the conflict creates a near-term opportunity for elevated oil prices. The Strait of Hormuz could reopen sooner than expected; global demand destruction could occur.