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Welcome to the Reggaeton Capital podcast. I'm your host Colin, and this is the pre-market review for Thursday, October 22nd. It's an extremely sunny day here on Wall Street. Brent oil is rising in price due to the Houthis, Saudi Arabia, tankers, strikes on Aramco, etc. Does this still concern anyone?
I know I don't . Bond yields continue to decline. I think I saw the 10-year at 5.03%. And we are seeing a pullback in the entire market because of these attacks, attacks on tankers. I mean, when Brent jumps like that overnight, there are a lot of rumors that the US and Israel could strike a major blow to Iran right after the midterm elections, which are in 2 weeks.
So there is definitely not much hope for the Middle East right now . And we are definitely seeing a cooling in the semiconductor sector, right? Now I can confidently say the same about the industrial sector. The stocks of companies involved in AI infrastructure, in my opinion, will take a serious hit.
Of course, it's disappointing to see something like Lam Research sag so much. I think it will take time to recover. But, as I said, they definitely needed a break. Same with Caterpillar. Lam Research and Caterpillar are two examples that I will use as “ tools” for AI infrastructure. These are really two stocks that were traded in parallel with each other.
I can open the Caterpillar and Lam Research overlay chart. As you can see, they traded close to each other for quite a while, and, you know, Caterpillar has broken away significantly from Lam Research after a long period of parallel trading. But they still look similar, right? The Lam Research reports, in my opinion , were quite contradictory.
You know, I think we have a great understanding of their international sales , because this is a company with international sales. You know, the US is one of the smallest markets for Lam Research. In addition, they had somewhat disappointing forecasts. And forecasts for the following quarters of next year do not indicate the same growth.
Although the year-over- year figures are incredible and the margins looked great. However, they certainly look like they are reaching their peak. Okay, and I think the stock price might reflect that at the same time. I think semiconductors needed a pullback, and for me it's a stock to hold. Me, me, I would never panic sell something like Lamb Research, although I agree it was very expensive when the stock was around $440 or whatever.
You know, remember that Lamb Research is currently worth $237 a share in the premarket. So, I had over 1000% profit on this title. So, did I cut my share a little ? Only a little, but it's still my main asset. And the same with Caterpillar. You know, I never intended to sell Caterpillar anyway. We had reports from Meta, SpaceX, Tesla, Lockheed Martin, which I thought were pretty good too.
You know, Lockheed Martin definitely looks like another RTX. Same story, again a huge growth in the order book. But, for example, 11 percent year- on-year revenue growth . It's certainly interesting to watch defense stocks barely move after such large orders. And that's probably because the algorithms decided that we shouldn't touch these stocks until the midterm elections.
I think that's all it is . So I think you're buying value in the defense and aerospace industries. Actually, the reason I wanted to speak is because I remembered yesterday that Ken Griffin, you know, scared me a little bit. I agreed with him to some extent. Now there's an opposing view on what he said, and I, you know, see the other side, this opposition.
And I definitely think that there has been significant progress on AI in terms of margin expansion. I mean, if you work in an office like Citadel, AI has really helped increase margins. Look at the software stocks we've seen in the past quarter over the past year. We see software stocks and the margin expansion is just incredible.
This is incredible. And this is thanks to agent-based AI, or simply AI, whatever you call it. In my opinion, that's the whole point. You know, you can use AI and you can increase your margins. Now, do you see the incredible year-over-year revenue growth, the GDP growth? Do you see the country literally burning right now because of AI technology?
No, you don't see that . And there's opposition that says, "Yeah, it's going to come, but it's not going to happen overnight, you know, it takes time." You know, we haven't even finished building these data centers, these AI infrastructures. We have n't gotten to physical robots and such yet . So there are pros and cons, and in my opinion, I needed to record profits , regardless of what Ken Griffin says.
But he's one of those birds on my shoulder that says, "Hey, you know, this is negativity, this is ...this is fear." The fear is not that the Fed will act harshly, raise rates and destroy the economy. This is not my fear. My fear is not that we are locked in a perpetual war in Saudi Arabia and Iran. My fear is that development has outpaced reality, and we need a good pushback, which we are now slowly getting.
This rollback applies to AI infrastructure companies. Maybe this time it all started with Coreweave. And I don't think it's forever. I believe that in the next few years we will have mini-bubbles that look like the AI bubble. And we'll have big setbacks, right? We had something similar with DeepSeek or, I can't remember, situational awareness.
Now we have this with Coreweave or whatever it is, Neoclouds. So we'll have that, and we'll also have a tight Fed, whatever you think. They're pretty damn tough, aren't they? So will liquidity run out? This is a question I don't have an answer to. I'm not an economist, but I can say: if I had a margin, let's imagine that I had a certain margin, and my main asset was Nvidia.
20% of the portfolio. No, not so. This is about 18% of the portfolio . The Nasdaq 100 is 22% of my portfolio, and Bitcoin is 10%. Now almost 45%, maybe 50% of my portfolio is in just these three positions. Nasdaq 100 , Nvidia and Bitcoin. This is my briefcase. At least 45% are here right now. You know, if Nvidia falls hard and has a major " reset" or something like that and falls 40% from its peaks, my portfolio will be at risk of margin calls .
So I try to sell as much as possible to ensure I never get a margin call. I would never want to get a margin call. I lasted 11 years without a single margin call. I have a margin balance since about 2022. So I lasted 4 years without margin calls . And I definitely don't want to get it. Yes, I don't want to take that risk.
So I'm trying to get my balance sheet, my portfolio, in order. To never find yourself in such a situation. That's where I am now. That's where I am now. I'm still a buy-and-hold investor. I just want to have some cash on hand and clean out my portfolio in case of a nice reboot, so to speak. You know, rebooting means it's temporary.
This means that we will return to historical highs for the Nasdaq index. And I believe that we will always—I believe that we will reach historic highs again in the semiconductor index in our lifetimes, definitely. I mean SOX or SMH. We will reach historic highs in semiconductors again. In my opinion, this won't last 10 years like the dot-com crash or something like that.
Let's turn on Ken Griffin for those who have n't seen it yet. And then we can actually—that's why I came on the podcast, to talk about Ken Griffin. Good. And about what he said, let's analyze it a little. Look, I think this market is actually seeing people doing research. Isn't that right ? The last couple of years, if you were on the topic of us spending hundreds of billions or trillions of dollars on data centers.
We're going to—we're going to build computing power on a scale never seen before. Which companies in this story are bottlenecks in supply chains that will have abnormally high profits? And who will be the big winners in this transformation? Will it be Microsoft and AWS? Who will control access to fundamental models?
That is, who will receive economic rent? But in a way, I'm just going to buy them all. I'm going to buy—I'm going to buy hyperscalers. I'm going to buy chip companies. I'm going to buy—I'm going to buy businesses that are doing things that I had n't even heard of 5 years ago in Korea, Taiwan, and Japan.
And now we're reaching a point where people are becoming more demanding. Isn't that right ? We understand that we are seeing extremely high profits in DRAM and MLCC, in areas where there are real supply constraints. But people are now starting to look 2-3 years ahead. How long will this last? And in particular, and I—I don't want to be a pessimist.
But GPUs, like airlines, have very low marginal operating costs. Like an extra seat on a plane that isn't filled: if you can sell that ticket for $20, you make money on that seat. And that's one of the reasons why the aviation industry is such a nightmare: as soon as there's excess capacity, prices plummet.
We saw this, actually, with the example of TV. Okay, then it moves on to telecommunications and fiber optics, where they build out the entire network. Now there has been some resistance . Did I say that? You know, the resistance was quite reasonable. I guess my counterargument is margin expansion, but , you know, he says we're almost certainly in the middle of an AI bubble.
He says, "Corporate America is very unevenly extracting value from its AI models. I think all of corporate America is looking at the bills from Anthropic and OpenAI and thinking, 'Okay, we need to figure out how to make sure we get productivity out of this.' Of course, why not? And who's saying that?
The Bureau of Labor says there's been no productivity gains from AI . Again, I would n't disagree with that. We see it in revenue, we see it in Meta revenue, we see it in software revenue, we see margins growing. It's been over the last four quarters. We've started to see it. Uh, even when software stocks were falling because of the fear of AI disruption, their margins were growing.
And I'm not talking about MongoDB, not about cloud services, not so much Cloudflare. I'm talking about all the other software companies that aren't really "AI companies." They're using AI and seeing margin expansion. Any radical transformation of our economy is usually intertwined with a bubble. I think that's what Ken Griffin meant.
These bubbles, if we want to use that word, often coincide with these giant technological transformations. In other words, the highest-paid person in the room thinks the room is in a bubble. That's Ken. I would n't care if he's the highest-paid person in the room? He has a very good feel for the market.
Do I agree with everything he says? No, but he has his finger on the pulse of the market. He's very well informed for obvious reasons. Got it? And he definitely, uh , sees a pullback in this AI trading. I'll call it an AI investment, right? But he still thinks that this technology is real and will be something great someday, but stocks are already way ahead of the curve, right?
Griffin's timing was impeccable. Maybe too impeccable. By A few hours earlier, the Wall Street Journal had reviewed Anthropic's fresh draft S-1 . We talked about it yesterday . In short: Anthropic reported $16.3 billion in revenue in the first half of 2026. They reported a net loss of $80.7 billion under GAAP.
And about $72 billion of that loss was non-cash write-downs of financial instruments, which still leaves a sizeable underlying loss of $8.7 billion. And they've signed over $600 billion in computing capacity contracts that are mostly non-cancelable, right? With all the hyperscalers and other players.
And they're in talks for another $150 billion. That would bring the total to $750 billion. I was on the Investing or Gambling podcast, and Ileana Mike asks, " How are we going to see a return on investment with all of this capital expenditures? "My argument is that someone like Meta can pretty much expect to recoup their capital outlay because they own the infrastructure.
But that's easy to say, right? When you own it, you can rent out the capacity if there's demand, right? The same goes for SpaceX, AWS, Microsoft, and Alphabet. I think they 'll eventually see a return on their capital or investment. What I don't know is whether Anthropic will ever see a return on its investment.
That's also part of the reason I was cutting earnings before their IPO. People will just read the headline and think I'm cutting earnings because I'm eager to buy Anthropic stock at the IPO. It's the opposite. I'm cutting earnings because I'm scared to death that Anthropic will get exposed and everyone will see what a piece of [ __ ] it is, just like OpenAI.
I think they're both complete [ __ ]. And I hope they can survive. I really hope so. Because we all use their product, and it comes in handy. He does certain things for you, right? But it's definitely an evil company, and we'll leave the politics and my views on why they're evil outside of investment considerations, right?
That has nothing to do with investment. But the company definitely has to cure cancer for real. They really have to, because it's not going anywhere. It's not going anywhere . So it's just because, you know, they're just big language models (LLMs). You know, you can very easily switch between LLMs, using OpenAI, then Anthropic, then open source, then Meta Muse.
You know what I mean? It's a commodity now. It's a commodity now. They 'll try to convince you, and the bulls in the market will argue that Anthropic is not a commodity, but in my opinion, it is . At least as of today. I hope this technology changes , and Anthropic and OpenAI become the next big " mag seven" giants.
That would be great. That's a lot would make life easier for everyone, like me. Because I'm still going to own the NASDAQ 100. So the bigger the better. The bigger the better. I'm just saying I'm not optimistic about these two companies. And I think once they go public, we'll see the truth. And people are very worried.
People want to get their money out. You know, these private investors are losing sleep. I guarantee it. Okay, Anthropic had a 16.3, oh, we talked about that. Um, yeah-yeah-yeah-yeah-yeah, from trash to depression to golden age. In fairness to Griffin, this is Zero Hedge. In fairness to Griffin, his views on AI have changed a lot in a year.
That's what I was trying to say. He spoke at Davos in January. According to Bloomberg, he called AI garbage. In May, he told an audience at Stanford Business School that he was depressed what AI can achieve. I remember it very clearly. On Tuesday, he changed his tone to a more optimistic one, arguing that the technology will fuel a new wave of business creation in the United States.
He says, quote, " You see the threat to white- collar workers unfolding." As a business owner, you see your competitive advantages being bulldozed. At the same time, you think it's going to be a golden age for entrepreneurs." Griffin also mentioned the pre- dotcom bust and some of the bizarre business models of that era.
He reminds us, Griffin, that the companies that survived the bubble went on to become market leaders for decades to come. I just wish I had held onto my Amazon stock at that point. And obviously, Amazon was down over 90%, if you remember, when the dotcom bubble burst. The market breadth behind Goldman is at its lowest point since the dotcom bubble.
We don't need to get into that right now , because honestly, that's the least of my concerns, because I'm a market-cap-weighted asset owner . I don't care about the breadth of the market at all. I just want to, you know, succeed by owning the best stocks possible. Uh, Credit was there first. And then on the other side, we have Larry.
Fink, and you know, I agree with Fink too. Is it possible to agree with Larry Fink and at the same time understand both points of view? Zerohedge writes: “Not everyone in management agrees with Griffin, or rather, they agree. They just don’t see a way out.” “Less than a day after Citadel CEO’s comments, BlackRock’s Larry Fink took the opposite position.
Warning Bloomberg TV from the Berlin Global Dialogue that the real danger is building too slowly. If we don’t build these data centers, it will actually lead to more inflation because the cost of computing is so high right now. And the faster we can build more data centers, the more computing power we have and the faster we can bring the cost down.
The more data centers that are up and running, the faster the bubble will burst. So , bubble or not, I definitely think it’s a good thing to have a portfolio that can survive a potential pullback. You know what I mean? And what I mean is that you certainly shouldn't be trading on margin. You shouldn't have a huge margin balance where you're barely paying interest on the margin every month.
So you don't want anything like that. You don't want to... you want to make sure you're prepared. That's the first thing. Clean up your balance sheet or your portfolio. And, you know, I agree that it's too late to lock in profits now. I mean, we're already seeing a pullback in the stocks that I own at least.
There's nothing left to lock in. So now you should try to find money in other areas of your life to maybe put it in there. Make sure you have some cash in reserve. Maybe put it somewhere that's earning you 3.6% right now. Or if you want, buy a six-month Treasury bill. Okay, you know, wait it out. Of course, we could hit all-time highs by the end of this year.
So I'm not telling you this as if I'm predicting anything. I'm just telling you -- be prepared. That's it. I'm prepared for the market to hit all-time highs by the end of December or to pull back 40%. But we're definitely seeing some slowdown in earnings. We knew that was going to happen, and I'm not talking about consolidated net income.
I know that next year we're going to see a slowdown in growth compared to last year. So instead of 20% net income growth for the year, we might only see 11%. Remember, a lot of that is due to the repricing of Anthropic, OpenAI, SpaceX, which are on their balance sheets, and they've been trying to increase the valuation of those stocks.
I mean, they've been trying to figure out the unrealized value, like the unrealized profits of SpaceX, before they went public. Now we know what it is, right? Because it went public. And you know, we really had a really good year year-over-year . We really saw a great year for earnings, regardless of some of these companies that own a stake in OpenAI, Anthropic or SpaceX, right?
Okay, let's move on. I'm not going to dwell on Meta . You know, I don't own Meta stock directly anymore. Meta lost most of its earnings after the close of trading, after the CFO warned that the significant investments would increase service costs. And, you know, I just don't understand why this is news.
So, remember, if you look at the operating margin year over year, I think we should look at the footnote, which is $9.9 billion, that legal fee, right? And I don't think it's worth discussing Meta, guys. I read all of this last night, and I just don't think there's anything new to discuss here. I think the business will...
the stock won't show results when you're in that investment cycle . We have a lot more capital spending coming up, much more than the record $59 billion that was projected in the 2026 capital spending forecast. So we're definitely at that point, and AWS, Amazon, and all the hyperscalers. We're really ramping up capital spending.
Free cash flow is now negative for the first time, but we knew it. So that's not why stocks are falling. Stocks are falling because the amount of capital spending makes you think, "Wow, you know what? "You guys are really raising them again ? But otherwise, you know, I think they had good guidance and they beat revenue.
So that's pretty good. Tesla is growing on EPS, beating free cash flow expectations, spending $ 3 billion less than expected. But next quarter is going to be crazy in terms of capital spending, and free cash flow is definitely going to be negative. So nobody cares, because really the big thing is how are they going to merge with SpaceX?
Can we get this up and running? Can we close this deal ? They call it a merger. I guess it's a merger, right? Let's merge these guys. It would make a lot more sense so we can finally hide this whole stupid Tesla car business that's not making a profit. And focus, you know, on the real aerospace part of Elon Musk's company, and, you know , eventually to dig into the Optimus robots.
And Lockheed Martin, as I said, a good quarter. Very happy to see such a crazy backlog, but let's start turning it into money, guys, shall we? Uh , Texas Instruments, very good quarter. Very good quarter. 28% year-over-year. It's the analog version of these AI chips, you know, part of the AI build.
It's an analog semiconductor. And that's why Texas Instruments... we're trying to figure out the physical robots. Is there really a connection? Are they really going to make that much money if we start mass- producing physical robots? It's hard to say. Nobody knows, you know, nobody knows. Lam Research, again, very impressive year- over-year results.
The margins were impressive. You know, definitely a little bit too much exposure in China. You know, but we have what we have. We have what we have. And I asked why Lam Research is down after the close? Despite beating Wall Street's consensus forecast, they say " unofficial expectations fell short ." While Lam Research beat the official consensus estimate of $8.14 billion in revenue, it fell short of the higher unofficial estimates, like EPS of $2.28.
Okay. That's not... That's not my opinion. I, I don't care about that . What concerns me is that the company forecast revenue of about $8.6 billion in the forecast for next quarter, and that's modest. That's within the normal range. No, nothing that would shock us. The stock is falling because of that, you know?
Uh, here's a visualization of Lam Research. Again, uh, it's one of my top 10 holdings, I think. At least, uh, maybe top 15 at this point after the sell-off. That's why I'm paying a little more attention to Lam Research, and you can see how incredible this graph is. Quarterly revenue from 2023, net income from 2023, gross margin and free cash flow.
Just an incredible chart. If you look at it, I posted it in the notes section on Substack. I'll add it to the Substack newsletter when I publish this podcast. Thank you guys. That's it for me. We have a special guest coming in tomorrow morning. Actually, we're going to record it tonight , and it's going to be out tomorrow morning.
And that's all from me for the week after that. So thank you for watching. And I hope that everything I've said has been helpful. Remember, if you're a young investor, although I think it's all debatable. Who's young? Who's old? I don't know. Some people think I'm young. And if I were to say, if you consider yourself young and don't have access to the stock market, it's okay to start somewhere , and I think buying in a dip and a bear market is okay because you have time to recover, right?
Let's say we have a market crash on 50% because of the AI bubble, and you're young—it's okay to buy in the dip. You know what I mean? So what I'm saying is, we're seeing some weakness in semiconductors. We've got weakness in industrials, defense, aerospace . We're seeing weakness everywhere at this point.
So that's okay— to invest, to buy and hold something, to believe in it, and to watch the returns, right? Do your homework on that. Be a real value investor , like Warren Buffett. There's nothing wrong with that if you're young. For me, it was different. I've been doing this for the last 15 years. I've had this portfolio for 11 years, so it was time to just clean it out and make sure I couldn't survive a 50% market crash.
That's why I had to do some tidying up, and I'm on my way to doing that. I think the trimming is complete at this point . And by the way, I've been buying too. I have trading account at Robinhood. I bought SOXL and TQQQ there. You know, I even locked in some profit yesterday in SOXL . So, I definitely have a small account.
It's just for trading. It's, it's more for fun. Not something I would recommend for investment, right? Thanks everyone for watching, subscribe to Substack where you can make capital, and I'm also on YouTube, Spotify and Apple. Thank you guys. Bye.
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