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Calling the government scum. The president appeared genuinely offended by the numerous Iranian attacks on ships in the Strait of Hormuz despite the so-called ceasefire. So we have no idea what he will do next. Of course, we've seen this movie before and know that the end result is usually just higher oil prices.
Today's market reaction reflects this dilemma. The Dow Jones Industrial Average fell 577 points, the S&P fell 1.28%, while the Nasdaq ended the day up 0.2%, despite having a similarly terrible start to the day as the other two indexes. You see, the president's diatribe has crashed all interest- rate sensitive consumer stocks, undone that wonderful start to the rotation in food and pharmaceutical stocks , and crushed anyone who dared to invest in tourism, leisure, and aerospace.
And look, I can't deny the short-term importance of Trump's belligerent rhetoric. But, at least when it comes to the stock market, I'm much more concerned about something else. I'm worried about the proposal. Specifically, supply—the flow of new stocks and bonds that flooded this market, absorbing much of the capital that had been in reserve.
I'm much more concerned about that than all this trade news. Let me explain. You know, I've always said that oversupply, too many stocks than the market can digest, can kill any bull market. And I'm really afraid that this is getting too much now. If issuers and their investment bankers don't slow down, don't back down a bit , I think the bull market could suffer.
After the blow that the market has taken, especially the technology sector , we need to talk about the balance and whether we have finally broken it . We need to know, because after equilibrium comes a sudden, irreversible surplus , and that's exactly what we saw during the dot-com crash. Before I take you down this road of tears, let me just say that we're not there yet.
So far, the market is handling the new proposal like a champ, especially considering the almost constant gun-rattling from the president. So what I'm telling you is: if anyone tries to misinterpret me , I'll refer to this excerpt or to what I'm saying now, which is: this is not a call to run away from the market right now.
I do n't do that. Instead, my attitude is a graph of form. The rally from $154 to $739 has now dropped to the $ 550 level and I think the outlook will be key. This is a real look. This is an indicator of what is happening with semiconductor manufacturers. So, I wonder how they will present their views, their predictions for semiconductors in the future.
They need to talk about China's influence, supply chain renewal, and progress. They have this " epicenter" that they're building, it's an incredible project that they're working on. They will want to provide updated information regarding it. This is the " epicenter," yes, it seems that's what it's called.
So they'll want to get an update on that as well. So this will be very interesting for the entire AI sector, because the demand for AI goes straight through Applied Materials . Advanced logic, DRAM, advanced packaging demand—all of this is related to AI, and they'll comment on all of this after the close of trading today, I think.
Tom, your opinion. Um, you know, look at what Taiwan Semi said, you know, regarding the July figures. They were at a record high. They increased revenue by approximately 36% year-over-year. This is what the earnings per share (EPS) for AMAT should be, growing by about 36% year-over-year. And then look at revenue, it should grow by about 23%.
So you expect good numbers, right? Simply because they manufacture all the machines that Taiwan Semiconductor needs to produce these semiconductor chips. So this should be a good report, but as Kevin and you mentioned, I mean, the stock went up by how much? Up 116% since the beginning of this year. There was a rapid rise, there was a rapid fall, we are in bear market territory before this report.
It is at a key technical level, uh, the 50-day simple moving average. It was a resistance zone about here, right where we are now. I think one of the key points, and Kevin mentioned this , will be the predictions, right ? But will this also be an investor drain? If you look at it based on the current P/E ratio, it's about 52.
And the forward P/E is still approaching 40. So you have to somehow weigh the move it's made in the last 12 months, which is a 192% gain, compared to expectations; because that's probably going to be a good report, just based on what we've heard from other semiconductor equipment manufacturers and from Taiwan Semi, where, you know, they use these Applied Materials machines.
So, yeah, it's probably going to be bifurcated, it's going to be, you know, unstable at this point. Yes, okay. As stocks rise again ahead of results. So the bar is being raised higher. Let's start with your applied agreement, Kevin. What is your approach today? Yes, I took the expected movement, which is around $37, compared it to the stock price and considered a short put- vertical with high probability.
So, I picked this week, August 14th, sold the 525 put, bought the 515 put. So that's a $10 short put vertical, making about $2.25. It's up about ten cents, probably 2.35 now , Tom. But this is a put- vertical with a high probability, Tom, that collects theta. And of course, as always, the risk is limited, and it corresponds exactly to a one standard deviation move, Tom.
Ah, yes, let's break this down. Weekly option for August 14. So, this is an example of a trade on the report that Kevin suggested: a neutral-bullish short put- vertical. Let's break this down. Sell a put at 525, buy a put at 515, short at a spread of $10, getting about a credit of 225. This is what you can earn: $225 at a risk of about $775.
You are taking on significantly more risk than reward in such a strategy. You choose a directional vector, that is, bullish , but you can be wrong when it... Nvidia has become much bigger than signals for the entire investment cycle in AI. And with the report approaching, investors are simply asking whether Nvidia will beat expectations.
At this point, almost everyone is expecting another strong quarter. The real question is , can demand remain this strong for many years to come? This is what will ultimately determine whether today's massive spending on AI infrastructure is justified. The shares have already made a confident recovery .
They have returned above an important technical level and are now approaching the previous record zone. This tells us that momentum has returned, but there is a nuance. The higher the stock rises before the report, the higher the expectations become. So Nvidia may show outstanding results, but the stock could still pull back if investors were expecting something even better.
And that's why the reporting conference call itself can be much more important than the headline numbers. Look at Amazon and Meta. Both companies reported strong results, but what really caught investors' attention was their willingness to continue massive spending on AI infrastructure. Amazon has been quite detailed about where its capital is going and has provided a strong forecast.
And this is important because investors are not just looking for bigger numbers. They need evidence that these costs are economically rational. And this is where Nvidia comes into the picture. Nvidia actually supplies the hardware that underpins the infrastructure expansion. So when Nvidia reports, investors get another look at the state of the entire AI spending cycle.
The question Jensen Huang needs to answer is what the market already knows: Nvidia is making money. He already knows that demand is high. He already knows that hyperscalers spend billions. Investors need to know how long this could last? Do customers continue to actively place orders for several years ahead?
Are data centers still struggling to provide enough computing power? Is the offer limited? And are Nvidia customers seeing enough return to justify the new wave of spending? These answers may carry more weight than another profit surge. Now let's consider a large-scale project in Ohio related to OpenAI.
This is not just about buying a GPU. The project included land, energy, construction, and a huge data center campus. The developer is responsible for creating the physical infrastructure. OpenAI becomes a customer through a long-term lease , and Nvidia has secured exclusivity for computing hardware.
This structure demonstrates something important. AI infrastructure is becoming a huge capital-intensive industry. And chips are just one part. You need electricity, you need transmission and infrastructure, you need buildings, cooling, networks and financing. This is where Nvidia's partnership with large financial institutions becomes particularly interesting.
The company helps attract external idea is that institutional investors can finance computing assets .
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