The Crash Is Here - Buy These Dips Now?!?
In a Nutshell
Markets lost $1 trillion today, with $541 billion from just six memory stocks after China revealed its own DUV chip-making machine—raising fears of oversupply and price collapse. Nvidia, SK Hynix, Micron, SanDisk, Western Digital, and Seagate all plunged 4-11% as investors worry about China's ability to build chip factories independently. Meanwhile, Michael Burry's semiconductor short, Nvidia's $700B+ AI financing exposure, and the Fed's unexpected rate-hike risk add pressure ahead of Wednesday's FOMC decision.
These notes were generated by AI and may contain inaccuracies.
The host recovered from over $2,000 in the red to $7,200 in the green trading Micron (MU) by selling the rips and buying the dips aggressively with large amounts of capital. The Nasdaq market lost approximately 0.25% of its value after being up 1.5% during the pre-market session.
Three primary factors are highlighted as driving markets lower, excluding the Iran news coverage.
$1 trillion has been wiped from the US market in the last three hours. 50% of that loss came from six memory stocks. US memory stocks are crashing on news that China has begun producing its own DUV chip-making machine. Investors worry that China can build more chip factories independently, adding supply and pushing memory chip prices down.
- Nvidia: down 4.3%
- SK Hynix: down 9.4%
- Micron: down 4%
- SanDisk: down 11% (at one point 14%)
- Western Digital: down 5%
- Seagate: down 5.5%
$541 billion was wiped out from these six memory stocks alone. Nvidia represents one of the most valuable publicly traded companies and took a 5% hit.
Nvidia's credit risk has jumped with the cost of insuring its debt surging to records. The company is reportedly discussing more than $700-750 billion in AI infrastructure financing tied to OpenAI. Analysts are warning that complex financial structures could increase credit risk.
Michael Burry maintains an aggressive short on the semiconductor sector. He believes in a loop where valuable companies are funneling money among one another. Two potential shocks are identified: companies being too aggressive in funneling money between themselves, and the supply shock from China's new chips.
Citadel Securities expects Kevin Warsh of the Federal Reserve to raise rates this week. The FOMC rate decision is scheduled for Wednesday at 2:00 p.m. Eastern Time. The likelihood of a pause was previously considered confident, but the possibility of raising rates has been introduced. Raising rates would make borrowing more expensive for individuals and businesses, slowing the economy. Key concerns include the unemployment rate, labor market conditions, and rising oil prices contributing to inflation.
Meta has declined for eight straight days, marking its longest losing streak in history. Meta is expected to report earnings this week on Wednesday after market close.
The host recommends conducting due diligence by learning more about China's chip production developments and Nvidia's credit risk. The decision framework involves understanding market shocks to determine whether to wait for further selloffs or buy the dip. The approach acknowledges that buying during fear and selling during greed is easier said than done, and positions should be sized to tolerate potential recovery timeframes.
"It's much easier said than done, but now you're in the thick of it."
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