Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Artificial Intelligence Contradictions Please click here for a chart of Alphabet Inc Class C (NASDAQ: GOOG).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of Alphabet stock is being used to illustrate the point.
- The chart shows when Alphabet (GOOG, GOOGL) earnings were released.
- The chart shows that immediately after the earnings were released, Alphabet stock went up as the earnings were better than expected and Wall Street was positioned for better than expected earnings. The momo crowd was buying aggressively before the earnings, hoping for Alphabet stock to reach $160 after earnings.
- The chart shows that buying after earnings in Alphabet stock did not last very long as selling came in and overwhelmed the buyers. The selling came from smarter investors who noticed that Google’s cloud growth was lagging.
- The chart shows that Alphabet stock fell off the cliff. One of the reasons behind the rapid fall was that Alphabet stock was over-owned going into earnings.
- In contrast to Alphabet, Microsoft stock ran up on cloud growth.
- There is a contradiction here. Google cloud growth lagged. Microsoft cloud growth did well. Why? In The Arora Report analysis, the answer is artificial intelligence. Microsoft is ahead of Google in artificial intelligence and therefore able to attract more clients to its cloud.
- The Microsoft versus Google difference due to artificial intelligence is one set of new data. There is another set of data from Texas Instruments Inc (NASDAQ: TXN). Texas Instruments is a major semiconductor manufacturer. Texas Instruments earnings indicate that the semiconductor cycle was still depressed, inventories were still high, and the company did not see a turn up in the cycle.
- You may recall that only a few days ago, we shared with you that Taiwan Semiconductor (TSM), the largest foundry for advanced semiconductors, said in earnings that the semiconductor cycle had bottomed, inventories were low, and an up turn was ahead.
- Again, there are contradictory data points from two major semiconductor companies. Why? In The Arora Report analysis, the reason is that Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) is highly exposed to artificial intelligence but TXN has very little artificial intelligence exposure.
- Now investors have two contradictory sets of data from four major companies in leading sectors. The difference is coming down to artificial intelligence.
- A fortune is to be made in artificial intelligence over the next seven years. However, at times it will be treacherous. Moreover, market mechanics are very powerful. Here, the market mechanics of year end chase, over-ownership, and positioning are at play. Our long experience with thousands of investors has clearly proven that given the exact same information in the Real Time Feeds, investors who take time to develop more in-depth knowledge perform significantly better compared to those who do not take time to develop in-depth knowledge. The most time efficient way to develop in-depth knowledge is to listen to the podcasts in Arora Ambassador Club. Arora Ambassador Club has a number of in-depth podcasts on artificial intelligence, semiconductors, and market mechanics.
- No action is needed by members of The Arora Report because The Arora Report already correctly anticipated this difference between Microsoft Corp (NASDAQ: MSFT) and Alphabet Inc Class C (NASDAQ: GOOG) as well as between TXN and TSM; and it is already taken into account in the protection band.
- Among important earnings released and not discussed above, earnings are better than expected from Boeing Co (NYSE: BA), General Dynamics Corp (NYSE: GD), and T-Mobile Us Inc (NASDAQ: TMUS).
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
In the early trade, money flows are negative in Alphabet, NVIDIA Corp (NASDAQ: NVDA), Tesla Inc (NASDAQ: TSLA), Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), and Meta Platforms Inc (NASDAQ: META).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is