Will SMCI Affect NVDA?
MEGA8s losing its luster? Bitcoin Technical Potential
Super Micro Computer Inc. reports today after the close and no matter what numbers they provide, all guidance and all resulting factors may influence the price of Nvidia. This AI led mania is what drove SMCI to new highs after years of sketchy corporate diligence and practice. Just a few weeks ago EY their auditor resigned sighting that,
"We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee's representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations." EY Resignation letter/IBD
We also know that the WSJ reported an investigation into the firm began in September by the DOJ. So there are all sorts of ongoing problems which basically have be going on since 2018 but the AI mania saved the company (for awhile) and now the skeletons are coming out in full force. Then there are the sketchy relationships of nepotism with Compuware, Ablecom and Lambda Labs. (Hindenburg Research)
So all in all many accounts we follow are looking into this company and sourcing data that could ultimately prove fatal and even worse, drag Nvidia down with it. We aren’t saying it will of course because that would be speculation, rather we want our readers to do their own digging and if invested in Nvidia, well maybe find a reason not to unload some of that risk.
Anyway SMCI reports after the close and who knows, it will be overshadowed by the election no doubt, but its something to keep on the radar. The stock has been hammered, down -80%:
Nvidia as everyone knows, continues to push and push higher although the weeklies do not look good and maybe the SMCI saga will prove to much for it to be immune. Speaking of immunity, Nvidia is appealing recent decisions in their class action securities fraud suits,
Artificial intelligence chipmaker Nvidia appealed to the Supreme Court after the San Francisco-based 9th U.S. Circuit Court of Appeals allowed separate class action securities fraud lawsuits to proceed against them. (Reuters)
Now before you guys start comparing the pricing charts as Apples to Apples, understand that on its highs SMCI was about $72Bn whereas Nvidia was $3.5Tn and SMCIs top quarter in revenue was $11.8Bn and Nvidia about $30Bn. Speculative fervor has obviously favored Nvidia by a wide margin and who knows, should some of this negative sentiment spill over, well let’s just say Nvidia has a lot of speculative sentiment to lose and the big question in the future will be how much of the revenue is “real” and how will Nvidia be able to maintain its margins…for now the growth charts look great, but will it stay that way?
Alright onto yesterday’s market action via our settlements page. US bond yields sunk as did most of the equity indexes except for the Russell2k futures. The dollar was hit so FX was higher on the day as was the energy complex with Copper the only winner in the metals we follow. As far as trends Silver and Bitcoin are the w/w biggest losers with Crude and RBOB the standouts:
As far as the US Bond market yield curve which saw new 3 yrs come online and with new 10s and 30s this week as well, the curve flattened out a bit with 30s the winner on the day -6.3bp:
When we look at the MEGA8s data currently they seem to be hitting into some key breakdown areas, now either the election results set the rest of the year tone bullish or they set it bearish and this weeks closing levels will be our key for that. For now we would suspect small upside call short hedges via the QQQ 498C at 2.50 or better and an outright 480p buy at 4 or better for some speculative downside volatility protection for this weeks expiry:
(As of the opening bell this mornings trade the Hedge for the MEGA8s basket will be Short 5 498C at 2.80 and Long 5 480p at 3.15)
You can see the breakdown of this grouping here as 17k total market cap is a big level now and we settled right on it yesterday:
Our last chart is of Bitcoin, we can’t help but think the Bitcoin maxis will be quiet on any real retreat from here. We love the decentralized platform and network that BTC provides whoever we do not believe that Wall Street accumulation is what will ultimately lead to its eventual rise. Rather we want to see an ecosystem of Bitcoin built so that value can be transferred seamlessly and never converted to a fiat, for us that is the real value and until that network of users is built out, BTC will not reach its full potential. We do not ever promote buying BTC into highs like this and this next chart should make it pretty obvious as to why:
Now a breakout above our topping pattern could lead to another run, but ultimately the decision needs to be made, does BTC at these nominal values offer a better return structure then say, Gold, Copper or Silver? A better return profile than a US Govt 10y at 4.3% vis a vis? When we speak of the 10Y we aren’t just looking at its coupon, rather we look at its capital gain return should it move from 4.3% to say 3%!
Anyway that is all just food for thought and our job here is to present data, present possibilities and you guys go and dig and see what fits in your own personal sphere of influence. We study this stuff all the time, we are studies of Science, Anthropology, History, anything that will give us a chance at a lightbulb moment and then we present our findings to you!
Alright guys that is it, expect a lot of volatility post the close today due to the election uncertainty, due to the SMCI reports and who knows whatever else they want to add onto that pile with the FOMC decision coming on Thursday! Have a great day, subscribe or at least share our work and we are grateful for all of you who have supported, continue to support and spread the word on work. We are almost at 500 subscribers which is a great milestone and hopefully you guys can get us shared out there so we can over come it! Till next time…Cheers