TOP 5 STOCKS TO WATCH AS AI STOCKS DROP!!!
In a Nutshell
Markets are vulnerable to a sharp pullback as AI hype fades, with leaders like Altman and Musk calling for slower development while the Fed is 85% likely to raise rates on Wednesday, hurting heavily debt-financed AI projects. The speaker warns against overvalued AI stocks like CrowdStrike (4,700x earnings) and NBIS (1,400x earnings), favoring caution until the FOMC decision clarifies direction. Non-AI names like Walmart and Intel are highlighted as alternatives, though Intel is viewed as fundamentally broken despite the Trump stake narrative.
These notes were generated by AI and may contain inaccuracies.
Markets have been incredibly resilient despite some fear and pullbacks. The NASDAQ ETF (QQQ) has strong support around 700 on the 1-hour timeframe, with no clear breakup pattern. Markets have historically recovered quickly from dips, though the upcoming FOMC rate decision on Wednesday, September 16th could create different conditions. There's currently an 85.5% probability that the Federal Reserve will raise rates, which would be bearish as higher borrowing costs would impact heavily debt-financed AI infrastructure projects and reduce company net profits.
Anthropic's CEO, OpenAI's Sam Altman, and Elon Musk's xAI have all acknowledged potential security concerns with rapid AI development. The leaders building the technology are now calling for a slowdown. Speculation suggests this may be due to Anthropic and OpenAI delaying their IPOs, as their S1 filings would reveal they are bleeding money with no clear path to profitability. The stated safety concerns could be a justification for cutting costs on new model training, with some believing the IPO timeline extension is the actual motivation.
The broader market has been supported by massive investments in AI and AI infrastructure companies. If AI companies slow development due to safety concerns, the timeline to profitability extends, potentially triggering market corrections. Markets haven't opened yet, so implications remain uncertain.
The FOMC rate decision on Wednesday, September 16th will be live streamed at 2:00 p.m. Eastern time, approximately 2 hours before market close.
QQQ is down 1.22%. AI memory chip companies are down significantly more - 4.5% after gaining 4% on Friday. SK Hynix is down 5.4%, Micron down 4%, and SanDisk down 4.78%. Markets are described as irrational, always looking for recovery reasons.
CLS trades at $340 per share from lows of $280 and highs of $300, with 15.9% downside potential. The company trades at 35.7 times earnings and previously traded at $470 per share. There's a descending pattern with lower highs and lower lows. The stock is down 21% from recent highs and currently down 3.6%. On the 4-hour timeframe, descending resistance and support are clear. Fair value indicates 12% downside. The P/E ratio isn't cheap at 35 times earnings after already selling off 21% from recent highs.
CrowdStrike shows a strong ascending uptrend pattern with consistent higher highs and higher lows. The stock is up 1.72% in overnight trading and appears less influenced by broader market noise compared to other Magnificent 7 companies. Fair value shows 37.9% downside with an extremely high P/E ratio of 4700 times earnings. The company generates $5 billion in annual revenue but has razor-thin margins. Revenue growth is attractive but profitability metrics are concerning. Price momentum is the primary positive factor, though momentum can reverse. The stock has a significant gap down potential if support breaks.
CoreWeave demonstrated a pattern of reporting earnings, shooting up to $110 highs, correcting to $80 lows, ripping back to $105 highs, then crashing down again. The LPP team has been shorting into the lows, then reopening shorts when it rips back up, closing into the lows again.
With AI uncertainty, non-AI sectors are suggested. Walmart is mentioned as a strong performing company that recently reported lower guidance than expected, recently selling off to lows of $105 before recovering to $134 highs. However, Walmart trades at a P/E ratio similar to tech companies despite being a retail company. Nike and Lululemon are fundamentally oversold but have reasons for their selloffs. The broader market shows NASDAQ and S&P 500 near all-time highs, propped up by AI companies while most other stocks lag behind.
AppLovin has 27% upside potential with a 24 P/E ratio. Concerns include relative value, cash flow growth, and price momentum. Management attributed revenue miss to lighter than usual model improvements, with the next major model uplift pending. Growth heavily depends on periodic AI model improvements which are inherently uneven. Technical indicators show a strong sell signal. The stock trades at 52-week lows, down 53% year-to-date, having fallen from $700 highs to $300 lows. The stock shows signs of consolidation, trading between $360 lows and $480 resistance range throughout the year.
The NASDAQ shows no breakup structure and remains above the 700 support level. Markets have been trading between 700-730/740 since July, with the exception of one leg down to 650 lows. The market has been moving sideways for an extended period. The speaker advocates being level-headed, noting that those who overleveraged at overbought levels are now bag-holding and cannot buy the dip due to lack of funds.
TTK has super low volume and would not be recommended for trading. The stock has a P/E ratio of 21 times earnings with $431 million in net income. It's an industrial commercial supplier with non-growing revenue quarter-over-quarter. The stock shows strong rallies followed by lower highs and lower lows. Since $50 highs, it has dropped to $25 lows, losing 50% of its value. There's clear resistance at $40 where it tends to get rejected. The speaker views this more as a trade than an investment.
Intel trades at a negative P/E ratio with negative $11 billion revenue and $57 billion market cap, showing 33% downside. The stock took off when Trump took a 10% stake under the United States, with the US reportedly making over $35 billion in profit since the investment. The speaker views this as a turnaround story driven by Trump hype rather than fundamentals. Intel has attempted to ramp up revenue growth, but the speaker questions whether this is a failing business being artificially supported. If the AI bubble pops, Intel would likely be affected. The stock is viewed as cheap but with fundamentals disconnected from current technicals.
The speaker notes that Intel has a common support range and previously a common resistance range. If markets begin to pull back, there is decent downside potential. Breaking that support would lead to a big gap down to fill. The speaker is not a fan of Intel and is okay with missing out on potential gains to $300-400 per share because fundamentally it is not a good deal. There is a disconnect between current valuation and what the business actually produces. Intel is a business that bleeds billions of dollars every year.
NBIS is identified as full stack infrastructure services. The speaker has not been a fan but acknowledges it is one of the information technology companies. At 1,400 times earnings, the valuation does not make sense. The company has really good stories and very high expectations, but the speaker believes these are disconnected from fundamentals. The speaker acknowledges there are different ways to make money in the market and that staying away from fundamental value plays is not the only path to profits.
The speaker presents scoring metrics for NBIS: price momentum receives an A, growth health receives a 1, relative value receives a 2, and profitability health receives a 2. The speaker emphasizes not trying to make others believe or agree with their viewpoint, but rather sharing their reasoning process.
Following the recent rally, the speaker believes it is very important to keep a close eye on overvalued stocks. When stocks are elevated, one should avoid being leveraged on them. NBIS is down 4.6% and the speaker is happy to see the selloff. However, the speaker notes that even when NBIS becomes oversold, it rips higher. The speaker acknowledges that two things can be right at the same time: fundamentally the company is overvalued and not believed in, but it has a great story, great price momentum, and direction can go in one's favor to make money.
NBIS moved from lows of $150 to highs of $282, representing significant price appreciation. The stock is described as very volatile, having gone from $282 all the way back down to $198. The speaker warns that beginners may not want to trade this type of volatile stock if they do not know how to manage risk, manage position size, or stay away from leverage. The advice given is to learn how to walk before running.
Despite not believing in the stock fundamentally, the speaker states they would trade it if it became oversold enough where it could potentially rip back up. The speaker would be mindful of position size and take a very small position. The aggressive upward movement within short periods of time makes it attractive when it becomes oversold. The speaker acknowledges everyone is in the market to make money.
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The NASDAQ market is currently down 1.06% but already trying to recover. The FOMC rate decision is scheduled for Wednesday at 2:00 p.m. Eastern time, and the speaker will be live streaming that event as well. The speaker asks viewers to give a thumbs up and consider subscribing, with the goal of ending the year on a green note.
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