Nvidia delivered incredible earnings once again.

Here’s a quick recap from the earnings report of the largest company on earth:

• Nvidia posted adjusted earnings per share of $1.62, beating Wall Street’s consensus estimate of $1.53.

• Revenue came in at $68.1 billion, ahead of expectations of $66.1 billion.

• Gross margin also beat, at 75.2% versus the 75.0% estimate.

• Data center revenue rose 75% year over year to $62.3 billion, above the $60.7 billion estimate. Nvidia said hyperscalers accounted for slightly more than half of data center revenue this quarter.

• The outlook was even stronger than the January quarter. For the current quarter, Nvidia guided to a revenue midpoint of $78 billion, well above the $72.7 billion consensus.

• The guidance is even more impressive when you consider it includes no contribution from China. China is a roughly $50 billion market per year.

In short, it was a superb quarter with incredible guidance. But even that was not enough to convince Wall Street. The stock is down more than 5% today. This is the kind of market where great results are simply not good enough. And Nvidia is not alone here. Dozens of stocks are getting brutally punished today after they missed earnings or did not meet investors expectations.

One thing people often forget is how emotional markets are in the short term. Large price swings can swing can happen even for no good reasons. Fear, excitement, headlines, and investors sentiment sometimes matter more than the actual numbers, at least for a while. That’s why it’s important to zoom out and not react to every move.

To put this into perspective, Nvidia is trading at roughly the same price to earnings ratio it had when ChatGPT launched. Since then it grew its revenues by 8x and continues to accelerate. Nvidia has become the backbone of AI infrastructure. Yet the valuation multiple has not expanded. It has actually compressed.

That means this is the cheapest Nvidia has been on a PE basis since the start of the AI boom, even after all this growth.

We have to deal with the fact that Ssort-term price action can be unpredictable and volatile.

But one thing is clear.

Demand for compute is not slowing down. It is speeding up. It is going exponential. We are at an inflection point for agentic AI.

1. Nvidia’s networking products are often purchased 4 to 6 months in advance of data center buildouts. Its networking business grew 162% year over year in Q3, which was an important sign of demand going into 2026. In this recent quarter, networking revenue grew even more and accelerated to 263% year-over-year growth. That is an insane number. It suggests the current NVL72 AI server cycle is strong and likely has several more quarters left to run.

2. In late December, Nvidia acquired the assets of AI inference chip startup Groq by hiring key employees and licensing the technology. It was expected that it would take years before there was clarity on how Nvidia would use Groq’s high-performance, low-cost AI inference technology. That assumption turned out to be wrong. Jensen said on the earnings call that he will share his ideas on how to incorporate Groq technology at the annual GTC conference next month already. He even said that Groq could be similar to its prior acquisition of Mellanox. Mellanox is one of the most successful acquisitions in the history of the technology industry.

3. Nvidia increased its supply-related agreements from $50.3 billion to $95.2 billion this quarter. That likely means Nvidia has secured key supplies like memory chips and wafers. Locking up component allocations ahead of major shortages gives Nvidia a meaningful advantage over the rest of its competition.

For whatever reason, Nvidia shares over the past few quarters have become unpredictable the day after earnings, even when the numbers are great. It’s always sold off the after. There are a few speculations as to why but the honest answer is nobody really knows.

What is clear is that Nvidia stock has tripled over the past 2 years despite these strange post-earnings reactions. Nvidia is now growing at a 70%+ rate and trades at a forward P/E of about 22, which is roughly a market multiple while growing several times faster than almost any other large company.

If Nvidia keeps this up, the stock will take care of itself, just like it has over the past few years.

Still that doesn’t mean you just ignore risk management and hope for the best. Staying calm doesn’t mean being careless. Because irrational behavior can last way longer than you expect. Way longer than you can stay comfortable. And there will be a time where even companies like Nvidia go through 80%+ drawdowns. I know because I’ve lived through several of them.

Markets are often not rationale in the short term. Prices can stay unjust, overpriced, or underpriced for months or even years. You can be right on the facts and still lose money if the timing is off. That’s the part people underestimate. And risk management is what keeps you alive during those periods.

There are a few ways to manage risk.

The first is position sizing. This means never letting a single position get so large that it can seriously hurt the portfolio if it goes wrong. Even great ideas fail. Keeping positions at a reasonable size makes sure one mistake does not take you out of the game. That’s why I’m a big proponent of adjusting (adding and trimming) positions accordingly.

The second is knowing when you are wrong. Every investment should start with a clear thesis and clear reasons for when to sell. If the facts change or the scenario didn’t play out, the position should be reduced or exited. The goal is not to be right every time. That’s impossible anyway. You should always plan for the worst case. leaning into positions that are working and when they are working. At the same time, it means cutting back exposure when something is not working, rather than hoping it turns around.

And the third is separating long-term and short-term positions. Long-term positions are based on multi-year trends, big-picture ideas, and secular growth trends. They are meant to ride through volatility and short-term noise. Short-term positions are different. They are driven by timing, sentiment, or specific catalysts and need to be managed more actively. Most people get into trouble when they mix these two up. Long-term positions get panic sold because of short-term price moves, or short-term trades are held too long and turn into long-term mistakes.

It was a short trading week, but it certainly wasn’t a boring one. The S&P 500 was up 1.1%, and the Nasdaq gained 1.5%. That made it the best week for both since January 9. The Nasdaq also finally snapped a 5 week losing streak.

The big moment came on Friday. The Supreme Court struck down one of President Trump’s tariff plans, and that was enough to get buyers back into the market. Trump later announced a new 10% global tariff, which the markets largely ignored.

With the Supreme Court ruling the IEEPA tariffs imposed by President Trump illegal, the administration now faces up to $170B in potential tariff refunds. Over 1,500 companies have already filed trade court claims to secure their place in line.

On the upside, there is an immediate reprieve from current tariffs, which could act like a temporary tax cut for businesses. On the downside, any tariffs imposed under these other statutes are more likely to stick. But the administration has several other tools it can use to re-impose similar tariffs, but those will take time.

Energy is the best performing sector this year.

This the best start to a year over the past 25 years for the energy sector. However, the irony is that it’s the only sector with negative earnings growth.

Meanwhile, The worst performing sector are financials.

I don’t like to see energy leading bull markets. Financials lead new bull markets. They don’t lag. The financial sector is traditionally the first sector to lead a new market move. Energy is traditionally the last.

The S&P 500 is basically flat on the year.

But if you are only watching the index, you are missing most of the action.

In fact, The average stock in the index is up 6.0% in 2026. About two-thirds of S&P 500 stocks are positive on the year, and two-thirds are actually outperforming the index itself.

54% of S&P 500 stocks are currently overbought, which is the highest percentage since June 2025. At the same time, 27% of names are oversold, the highest level since October.

Normally, when a lot of stocks are overbought, very few are oversold. And when many are oversold, very few are overbought. They usually move in opposite directions. Right now, both are high at the same time. That means many stocks are being aggressively bought while many others are being aggressively sold.

It shows the market is very bifurcated, emotional, and volatile.

Perhaps the most unusual data point is this. Nearly 20% of S&P 500 stocks are at 52-week highs, while 6.3% are at 52-week lows at the same time. It’s incredibly rare to see such an extreme divide.

The big question is how long this can last. Broad participation is a good thing, but the index still depends on its biggest names. Right now, the megacaps are mostly on the sidelines. But tech stocks make up more than 40% of the S&P 500, and most of them down on the year. That is a lot of weight for the rest of the market to carry.

Here’s a number that really puts things in perspective. All 7 members of the Magnificent 7 are negative on the year right now. That does not happen often.

The last time this happened was March 2025, after the tariff announcement. Before that, you have to go back to 2022, when the group sold off hard during the Fed’s aggressive rate hikes.

The S&P 500 will continue to struggle, if the Mag 7 don’t start to turn around.

The $MAGS ETF holds only the Mag 7 stocks and T-Bills. Because of that, it is a clean way to see how the Mag 7 are doing compared to the rest of the market. Right now, it is sitting at a key inflection point right at the 200-day moving average. This is the make or break moment.

Valuations have also come down a lot. The Mag 7’s forward P/E has dropped from nearly 32 a year ago to 25.8 today. Still not cheap, but a much more reasonable entry point than where this group was trading at its peak.

And perhaps most telling. According to Morgan Stanley, mega-cap tech is now the most underowned it has been in 17 years. At the top of the list is Nvidia. This will be very interesting going into next week.

This is the grand finale of earnings.

To start, we have Nvidia, the most important stock in the market. I expect a strong beat and raise quarter with very bullish commentary. The capex numbers we have heard from almost every company have blown away expectations, and most of that money is flowing straight to Nvidia.

The reaction will be critical. If a big beat and raise is bought, that could be a major signal that there is still strong appetite for AI names. If not, it would be a major red flag in my view.

Nvidia’s earnings could very well be the next big catalyst for the market. For months, we have not made much progress. Since November, we have only seen a volatile, directionless market. This is not a supportive environment for most growth and momentum names. And there is really not much to do unless we get a clear direction, either way.

But whichever way it goes, it will continue to be critical to avoid sectors that are likely to be disrupted by AI and focus on the ones that will benefit. That divide is only getting wider. AI is not lifting the whole market. It is rewarding a small group of companies and pressuring others at the same time.

The software selloff has now reached a new low. Relative to the S&P 500, software stocks have been crushed all the way back to where they were trading at the peak of the dot-com bubble. That is not a typo.

The selling in software is relentless, and it’s starting to spread.

This past week, Anthropic announced their newest offering called Claude Code Security.

This led to a major selloff across cybersecurity names, whether that’s Cloudflare, Crowdstrike, or Zscaler. All of them got hit. At this point, owning software or anything even remotely close to software is taking on major risk because we’re just a headline or breakthrough away from a group wide selloff.

In my view the sell-off is mostly overblown and unjustified. The mass adoption of AI will actually increase the demand for security tools. Scams, ransomware, etc. will only get more sophisticated with AI, not less.

But this is the kind of market where anything with a non-zero chance of being disrupted will be punished. It is best to stay clear of those areas for the time being. Markets can be irrational in both directions for a long time.

Perhaps the starkest data point of all. 89% of semiconductor stocks are trading above their 200-day moving average right now. For software, that number is exactly 0%. Not a single name. Two sectors, both in tech, living in completely different worlds.

The markets seems to be inching closer to a decision point. Nvidia could act as the catalyst that pushes the Nasdaq in either direction out of this drawn-out, multi-month consolidation.

And there are a few interesting sectors and stocks that I will be highlighting soon. These are areas I want to focus on going forward, especially if the market decides to resume its uptrend after Nvidia’s earnings.

For now I want I want to reiterate exactly what I said last week. In the big picture, I am still bullish. But short-term I remain cautious. I have long exposure, but I am not trying to be aggressive. That kind of action is best saved for clear uptrends and easy markets. You want to be aggressive when the market feels easy, when everything starts to work. Not when there is a volatile chaos.

Moving averages are the foundation for almost every investment decision I make. They have been part of my core process for more than a decade. They are one of the most common indicators in the world for a reason. They are an incredible simple, reliable, and effective guide through all kinds of market conditions. That’s why you’re seeing them everywhere on here.

I use moving averages to decide how aggressive to be with my portfolio, which stocks to buy or short, how strong a trend really is, and even which news events are worth paying attention to. They carry more importance than headlines, economic data, or even earnings reports. If I were starting over as a beginner looking to build my net worth, learning how to use moving averages would be my number one priority. They simplify the noise of the market and turn complex price action into something you can actually understand and act on.

Moving averages are valuable for every investment style, whether you are a day trader, swing trader, or a long-term investor. They help you see whether buyers or sellers are in control, whether a pullback is healthy or a sign that the trend is breaking, and whether a breakout is sustainable or extended. I always want to own stocks that are “surfing” their moving averages because it means they are in sync with the trend.

My personal setup includes four moving averages:

• 10 SMA/EMA: very short-term trend

• 20 SMA/EMA: short term trend

• 50 SMA: intermediate trend

• 200 SMA: long-term trend

The 10-day and 20-day SMAs react quickly to price movements and help me track short- to medium-term momentum. They change direction fast enough to alert me early when the character of a trend begins to shift, which is useful for entries, exits, and managing risk.

The 50-day and 200-day SMAs represent the bigger picture. These are levels that institutions watch closely. They often act as major areas of support or resistance. A stock trading above both of these rising averages is usually in a strong structural trend, while a break below them often signals deeper weakness. Together, these four averages help me see both the short-term momentum and the long-term foundation of a stock’s move.

The difference between an EMA and an SMA is in how they treat recent prices. The EMA gives more weight to the most recent data, so it reacts faster to changes. The SMA treats all past prices equally, creating a smoother picture of the overall trend. EMAs are more sensitive to recent price action, giving me an earlier read on near-term momentum while preserving perspective on long-term trends. That is why I use EMAs for short-term movement and SMAs for the broader structure.

Moving averages are also a key part of risk management.

No matter if you’re a long-term or short-term investor, you should only take new long positions when a stock is trading above its 200-day SMA. That way you automatically filter out weak names and limit exposure to downtrends. If a bullish breakout forms while the stock is below its 200-day SMA, I usually skip it because the odds are against me. This simple rule will save you a lot of money and headaches. Conversely, if the breakout occurs above the 200-day SMA, that often signals a potential turnaround and a shift in the long-term trend.

So, to make this more visual here are few current examples:

Netflix ($NFLX)

Hims & Hers ($HIMS)

ServiceNow ($NOW)

Strategy ($MSTR)

Bitcoin

That’s why you should avoid stocks or assets that are below their 200-day SMA if you’re thinking about buying a new position. The odds are against you. It’s much easier to make progress when everything is aligned in your favor. Ideally, all the moving averages are stacked on top of each other and pointing up. Sometimes less is more, and keeping it simple is best.

This also works for the general indices.

The most dangerous markets are when the index is below the 200-day SMA. If we look at the crashes in 2000 and 2008, you’ll see that most of the drawdown happened below the 50-day SMA and, more importantly, the 200-day SMA. You could have avoided most of the crash simply by getting out once the market fell below its 200-day SMA. It’s really that simple.

Now, of course, sometimes the market will briefly touch or close below the 200-day SMA and then move right back up. That will happen. There will be false signals. No indicator is perfect. But if it continues to stay below a key moving average, you know something is not quite right.

Many investors dismiss moving averages, saying they “don’t work” because everyone can see them. But moving averages are not meant to be a secret signal or a standalone strategy. They are a tool for context and decision-making. I do not buy or sell solely because of a moving average, but they shape almost every choice I make.

A correction is likely. In fact, in many parts of the market, it is already here. Some sectors are even in deep bear markets. It started with software and crypto, then spread to private credit, consulting firms, insurance brokers, financials, and real estate services. Today, logistics stocks are plunging by double digits. The weakness is slowly spreading from sector to sector, crushing stocks across the board.

What stands out most is not the selling itself, but the complete lack of willingness from investors to step in and defend during these sharp selloffs. That is because everyone is all in. There is very little dry powder left, as highlighted in last week’s update.

So, from last week’s update:

Continued volatile and choppy action is likely. And it’s not like a pullback would be completely unexpectedly either. So, some caution is definitely warranted. You never know when they happen exactly but the market offers subtle clues, if you pay attention and look closely. I’ve been highlighting some of them over the last few weeks.

• Elevated volatility

• Sell off on good earnings

• Value names outperforming

• Gold and silver going parabolic

• Narrowing breadth market

• Crypto getting crushed

Of course, there are no guarantees.

But when you start to see more of these signals, it makes sense to be more cautious.

Now add this on top of what we already discussed:

• Deteriorating sentiment

• Many sectors are in deep bear markets

• Most of the Mag 7 are in no man’s land

• Very few leading stocks and sectors

• And the main indices are starting to roll over

The market is clearly starting to cool off, which isn’t entirely surprising. But with increasing distribution days, leading stocks starting to give back, and risk-on assets under pressure, it adds up to the setup for a market correction.

Nobody knows how deep this correction could go.

But one thing is clear: the downside risk clearly outweighs the upside potential right now.

It’s really important to know when to be aggressive and look for opportunities in the market, and when to be defensive and protect both your mental and financial capital. This is a market where you get paid for being patient. You do not need to swing at every pitch. You can simply wait for the next big pitch when the odds are back in your favor and the market starts rewarding risk again. Right now it’s clearly not.

It’s hard to see any sustained rally when most of Big Tech is fading and showing no real signs of life. Google and Nvidia are holding up reasonably well. But even they cannot carry the entire market if the rest does not follow. You want to see broad participation, more stocks acting well, and leadership expanding. That is missing at the moment. Until that changes, rallies are likely to be short lived and sold into. Chasing strength in this environment usually ends poorly. Let the market prove itself first.

So, even though there is no reason to believe this bull market is over, it does not hurt to be cautious in the near term.

The focus right now should be on managing risk. When the market starts to correct, even a little, momentum stocks can get hit very hard. As we have seen, a normal 5-10% correction in the major indices can easily turn into a 40-50% correction in individual stocks. The goal is to give back as little of your hard-earned profits as possible. Make sure your risk exposure stays under control. That means smaller position sizes, fewer trades, and being very selective. Cutting exposure early is a lot easier than trying to recover from deep drawdowns later.

Here are a few ways to do that:

1. Cut losses early. You don’t want to hold too many losing positions, especially at the start of a correction. Nobody knows how long a pullback will last. That’s why you need to be even more disciplined.

2. Hold enough cash. A pullback can create new buying opportunities. But you can only take advantage of them if you have cash available.

3. Clean up your portfolio. You want to constantly prune your portfolio. Keep the strongest. Get rid of the weakest.

4. Reduce exposure to momentum names. They are the most vulnerable names in a correction.

5. Hedge your portfolio: This is a more advanced strategy and not suitable for everyone. If you know what you are doing, you can use short positions, inverse ETFs, or volatility instruments to help manage drawdowns.

I believe we may have just seen the ChatGPT moment for agentic AI.

OpenClaw is one of the newest AI tools the public has gotten their hands on, and it might be the one of the most useful AI tool on the market.

(Side Fact: They had to change their name from Clawdbot to Moltbolt and then OpenClaw after Anthropic threatened to sue them.)

It is an open source, messaging native AI personal assistant that runs locally or on a small device server you control. Instead of living in a browser tab on a computer, it operates inside everyday messaging apps like WhatsApp, Telegram, iMessage, and Discord, replying and staying in sync across devices.

It essentially acts as a gateway that routes messages to AI models such as Claude or ChatGPT and can trigger real actions like checking email, managing calendars, running scripts, or sending proactive alerts.

For example, you could text Moldbot, “Keep an eye on my inbox for anything urgent from my boss,” and it would monitor your email in the background and message you as soon as one arrives. Or you might ask it to summarize tomorrow’s calendar and remind you an hour before your first meeting without needing to open another app.

It’s a true personal AI assistant.

What sets OpenClaw apart from many other AI applications is its persistence and proactivity. It maintains long term memory, can monitor conditions on a schedule, messages you first when something important happens, and generally stays up to date with your life. It does not need constant prompts. Instead, it becomes an extension of you. It may sound a bit dystopian, but this is what makes it feel like a real assistant. Go give it a try.

The future of AI is agentic.

So, which stocks could benefit from this shift toward agentic and personal AI assistants?

OpenClaw essentially gives models like Claude or ChatGPT a “life” by allowing them to interact with files, run commands, monitor inboxes, and message people proactively. Once these agents are enabled, they generate more automated traffic and more machine to machine activity across the internet. Essentially, AIs can start to work with one another. Not only that but software is becoming a commodity. Everyone will be a developer simple by using natural language.

The biggest edge you can have right now as an investor is to spend as much time as possible learning and using AI. You’ll understand what’s possible and the huge number of opportunities being created at this very moment.

One of the sectors that will likely be a huge beneficiary is security or cybersecurity to be precise. Hence, make sure to check out the Cybersecurity thematic portfolio.

And in that sector Cloudflare ($NET) is one of the leading companies in this sector. It sits directly at the intersection of edge compute, API security, bot management, and more, which makes it a natural beneficiary of AI agents.

As more AI agents come online, Cloudflare’s ability to inspect and secure requests at the edge becomes even more valuable. This further reinforces its position as the default front door for the modern internet. They also allow you too create and orchestrate your agents right in Cloudflare.

When products and moments like this appear, they can change the entire story and trajectory of a stock and even a whole sector.

OpenClaw looks like a clear inflection point where agentic AI moves into the hands of real users. It feels similar to when people first tried ChatGPT and could not believe what it could do.

This also means a lot more activity behind the scenes. More automated traffic, more API calls, more background processes, more DDoS attacks, more scams, more systems failing, and simply more of everything related to cyber.

Hyperscalers like Amazon, Google, and Oracle benefit as well, and the entire AI value chain will be a major beneficiary. Cybersecurity sits right at the application layer for agentic AI.

It’s not just that we’ve reached an inflection point for agentic AI. We may have reached one for video generation as well with the launch of Seedance 2.0 by ByteDance, TikTok’s parent company. It’s almost hard to believe how far AI video has come in just a few years.

Most people still underestimate what AI can do, but it’s improving so quickly that what seems impressive today will feel normal in a few months. And markets often underprice these second order effects at first, then reprice them quickly once people understand.

That’s why it’s crucial to be positioned to benefit from the AI tailwind and not invest in sectors that stand to be disrupted.

The last week was one of the most bifurcated weeks of 2026.

The Dow Jones crossed 50,000 for the first time ever. But beneath this good headline the market underwent a violent rotation. The Nasdaq had its worst 3 day decline since April before Friday’s reversal. Software stocks posted their worst week since the 2008 financial crisis. Bitcoin and the entire crypto complex melted down, while the S&P 500 was essentially flat.

It’s remarkable how well the S&P 500 held up with everything going on. But let’s explore.

A clear rotation is happening under the hood.

Market participants are moving into more stable blue chips and defensive. Energy, materials, and industrials all hit record highs this week.

The divergence is striking. Value and cyclicals are gaining strength while growth and tech face an existential reckoning tied to AI disruption.

Software has been one of the weakest sectors this year. The drop was fast and deep, like what you usually see in real bear markets. For many software stocks, it felt like pure armageddon.

A big reason for this selloff is fear. Fear that new AI players like OpenAI and Anthropic could disrupt the whole software industry. It’s clear that new tools like AI agents are completely changing how developers work.

And OpenAI and Anthropic are clearly going not just after developers but almost all white collar jobs.

That’s why software stocks just had their worst week since 2008.

The IGV Software ETF fell more than 11% for the week and is now down over 24% to start 2026. Names like Salesforce, ServiceNow, Figma, and Hubsspot have been crushed.

No one wants to own software right now.

It feels like everything has been thrown out with the bathwater. That is also what creates opportunity. Investors are selling first and asking questions later. But you have to be very selective here.

Not every software company will come back. Some business models will truly get disrupted. Others will adapt, integrate AI, and come out stronger. (More on the latest AI developments in a later market update.)

I have been very bullish on AI for a long time. It will change almost every industry. That is why it is so important to spend time understanding it and actually using it. This is the biggest tech shift we have seen.

What happened in software makes one thing very clear. You want to be in the sectors that benefit from the AI buildout and avoid the ones that are most at risk of being disrupted.

And if you invert the chart above, you see the other side of the story. It has been all about semisconductors. And of course for good reason. They are the most critical part of the trillion dollar AI buildout.

Now onto crypto.

Bitcoin fell by over 20%, its worst weekly loss in a long time. This drop already far exceeds the decline it saw in April 2025 during the tariff wars.

Big drawdowns are nothing new for Bitcoin.

It is now down about 50% in just a few months. It literally got cut in half. This is the worst drawdown since the 2022 bear market. Most other cryptocurrencies did even worse. As strange as it sounds, 50% swings are almost normal for Bitcoin and just a “routine” correction.

Now the real question is this. Does this turn into another 80% bear market, or is this the end of the correction?

If Bitcoin follows the pattern from past crypto winters, it could even fall toward $50,000 or $40,000. In previous cycles, Bitcoin saw drawdowns between 70% and 80% from its all time highs during major bear markets. Of course, this is not a projection, but merely a possibility.

Now that was the extreme scenario. If this is just a routine correction, we could be closer to a low.

Last week we saw record put volume in Bitcoin ETFs. That shows extreme fear, heavy hedging, and panic all at once. Traders rushed to protect against more downside. Many investors exited positions. This kind of action often happen near exhaustion points close to the lows, where most sellers are already out.

Whichever way this goes, there is no reason to try to time the exact bottom. One key principle I advocate is to focus on the strongest assets, not the weakest. There will be plenty of chances to buy IF it starts to turn around.

The problem is this. I do not see a clear catalyst. The “digital gold” story is broken. Gold is up 24% since last October while Bitcoin is down 44%.

For months, people pointed to Strategy and Michael Saylor as a weak spot. The idea was that Saylor could be forced to liquidate and flood the market with Bitcoin. That fear was addressed on the latest earnings call.

Management said they are not at risk of liquidation and that the value of their Bitcoin holdings would cover their debt as long as Bitcoin stays above $8,000. So, apparently there are no balance sheet issues unless Bitcoin collapses far below current levels.

That action spilled over into equities. Tech stocks, software, and other momentum groups started falling just as fast and just as hard as crypto.

There are a few reasons for that:

First, many investors are positioned in the same momentum names. Today, momentum makes up about 26% of the market.

Second, fund managers are putting money into almost anything except cash.

That makes sense in a bull market like this. Cash levels usually get drawn down, especially during a period when the USD is actively being devalued. But if cash is not an option, the natural result is rotation.

The chart below shows a clear rotation inside the S&P 500. Performance is no longer driven by just a few mega cap names but by a much wider group of stocks. Instead of relying on a handful of leaders, investors are now rotating capital into the laggards.

Third, it is not just low cash levels. Funds are also the least hedged in almost a decade.

They are fully exposed with very little protection if selling speeds up. Many portfolios now move almost 1 to 1 with the market.

When selling pressure increases, they cannot buy the dip because they have no dry powder. They also cannot rely on hedges to soften the fall. That leaves selling as the only option.

This triggers a chain reaction where selling leads to even more selling.

This is why we saw an extreme number of stocks with an oversold RSI this past week, the highest reading since the April 2025 tariff war lows.

If you look left on the chart, the last time before that was in 2022. Each time, the market still went a bit lower after the signal. So it did not mark the exact bottom. But it was usually very close to a low.

This supports the idea that we are not heading for a crash.

The action under the hood was brutal in some groups, but the S&P 500 held up well and many stocks still hit new all time highs.

Everyone likes to compare the AI boom to the dot com era. So far, the path actually looks quite similar.

If this analog holds, what we are seeing now is normal for this stage of the cycle. Year 3 and moving into year 4, where we are now, was very volatile back then too. And a larger correction is still possible.

There is another important point. The biggest gains often come late in the cycle. That is when the real mania starts. That is the part most people remember about the dot com bubble. The final few months. Fortunes were made but unfortunately also lost.

If we see a wave of IPOs from names like OpenAI, Anthropic, and SpaceX, we could see similar behavior.

Catching even part of that move can be life changing. The key is to not give it all back on the way down. That is why risk management matters so much.

We are seeing mind boggling CAPEX numbers.

The four hyperscalers, Microsoft, Meta, Alphabet, and Amazon, are set to invest more than 600bn this year into data centers. And this is not likely to slow down soon. This is a global arms race.

You do not need to know when it ends. You just need solid risk management. You might miss part of the upside, but you avoid serious trouble.

Position sizing is one of the most important parts of investing. If you size wrong, you can get wiped out in a single week. We just saw that across crypto, software, and other speculative groups where normal selling turned into forced selling.

This does not mean you need to own 100 or more stocks. But it does mean that going all in on a small number of names carries real risk. When momentum turns, concentration works against you as fast as it worked in your favor. That’s why I’m a fan of increasing exposure and sizing when the markets are favorable and reduce exposure when the markets are deteriorating or much more volatile.

Speaking of volatility. There will be plenty of it over the next two months.

We are more than halfway through the Q4 earnings season. But there are still plenty of interesting names left to report.

This week was wild and I don’t think we’re out of the woods yet. I still believe we are in a bull market and recent action is just a bump in the road. Pullbacks and corrections are part of any bull market. But even so it’s important to not let a correction get out hand.

Crypto and software are still two groups to watch to see if sentiment and price action improve. Focusing only on the weakest groups while ignoring the strength in energy, blue chips, semiconductors, and other leaders does not make much sense to me, but it is still a useful indicator to track.

I also want to point out again that most individual stocks and themes are at the mercy of the broader market. If the market, and especially the Nasdaq, weakens, many themes and groups will likely weaken as well. The past month has not been very constructive for many momentum themes, which explains the poor performance from these areas.

It is important not to force positions in a choppy market. It is very difficult for a single theme to move higher when there is broad selling across speculative sectors. In the end, money flows often behave like one large trade. You need capital flowing into speculative areas for these themes to work, and that has not been the case recently.

We’re not even 3 weeks into 2026, and it already feels like 3 months have passed.

A lot has already happened. Over the last decade the markets have started to move much faster now. News. Reactions. Pullbacks, rallies, rotations. Everything is compressed.

This week the broader market pulled back a bit even though we saw record earnings from TSMC. The selloff came from somewhere else. Rising yields and fresh talk about who the next Fed Chair might be.

That’s how markets work. The story changes every day.

One day it’s rates. The next it’s geopolitics. Then central banks. Then tariffs. And so forth.

Just over the weekend, Trump announced new tariffs targeting Europe, tied to the US pushing to buy Greenland. This is the environment we’re in right now. There is always a new headline. Always a new reason for fear or excitement.With earnings season starting again, so expect volatility to return.

All major indices ended the week in the red. But not everything was down. Bitcoin, gold, and Small caps were up. That tells you money did not leave the market. It just rotated.

The Nasdaq and S&P 500 are essentially flat over the last four months.

Long periods of consolidation usually don’t last forever. They tend to lead to a big expansion move. The only question is the direction.

Ideally, we see QQQ break out of this range. But a breakdown is also possible. That’s the reality of markets. Nobody knows anything for sure. What we can do is study history, look at the data, and consider different scenarios to form a hypothesis.

Only time will tell. But it will likely be coming sooner rather than later.

Interestingly, the big tech stocks aren’t really moving together anymore. The average correlation between the Mag 7 is close to 0. In simple terms, they’re no longer acting like one big group. Investors are trying to separate the winners from the losers. Right now, Google and Amazon are the ones holding up best.

Except for some weakness in a few areas, most other sectors are actually doing fine.

Market breadth keeps getting better, and that’s important. More stocks are participating. Last week, more than 250 NYSE stocks hit new 52 week highs. That’s rare. It has only happened 18 times since 1970.

History is pretty clear here. In the prior 17 cases, the S&P 500 was higher 12 months later 88% of the time. Of course, nothing is ever guaranteed, but improving market breadth like this usually shows the market is healthier than the headlines may make it seem.

Even crypto is starting to come back to life.

Bitcoin ETF inflows this year have reached about 3.8K BTC. That’s slightly more than the 3.5K BTC we saw in the same period last year. This is still early in the year. That’s important because January is usually quiet for crypto flows. The bigger inflows tend to show up later, often between February and April.

Small caps are off to a strong start.

The Russell 2000 is up more than 7% to start 2026. That’s the best first 10 days of a year since 1987. A very uncommon move. In fact, the Russell 2000 has now outperformed the S&P 500 over the last 3 months.

Small caps are clearly leading. And there’s a good chance that leadership continues through the year. It’s another sign the market is broadening out, not narrowing.

January’s performance is worth paying attention to, mostly because history has been pretty clear on this.

If January finishes higher, it’s usually a good sign for the rest of the year. When January is up, the final 11 months tend to do even better. And when January is up more than 2%, the rest of the year is higher almost 85% of the time, with returns of more than 12% on average.

Of course, nothing is guaranteed. But it’s worth keeping on the radar.

Wall Street is very bullish on 2026. And when you zoom out, it’s not hard to see why.

• Stocks are at record highs.

• Gold is at a record high.

• Silver is at a record high.

• Home prices are at record highs.

• Copper is at a record high.

• Platinum is at a record high.

• Money market funds are at record highs.

Almost everything you look at is sitting at or near an all time high. So it really shouldn’t surprise anyone that bullishness is also at a record level.

The only thing that’s a bit worrying is when almost everyone is bullish and on the same side of the boat. There aren’t many new buyers left, expectations get really high, and even a small surprise can move the market more than people expect.

And it’s not surprising that risk appetite has increased a lot. You can see it clearly in the market. More speculative themes like rare earths, space, robotics, biotech, nuclear, crypto, drones, and quantum are all starting to take off.

By itself, that’s not a bad thing. You can actually benefit from it if you play it right. But you have to manage risk and your exposure at all times.

This is a big change from where things were just a month ago.

The AAII sentiment survey is now at 49.5%, the highest level we’ve seen in the past year. The Fear and Greed index has also flipped back to Greed for the first time in what feels like forever. On top of that, the BofA Bull and Bear indicator is now at 9.3.

It’s worth paying attention. That’s enough to start being a bit more cautious.

Goldman’s Marquee client poll shows bullishness at levels we’ve only seen three other times in the past decade. Late 2017, late 2020, and late 2024. In 2 of those cases, the market saw a correction within about 3 months.

For now though, the music is still playing. And there’s no clear sign that it’s about to stop.

Retail traders have carried their buying streak into the new year after a record 2025. In the first 4 trading days of January, purchases hit the second highest level in almost 8 months.

Earnings season is well underway, and this week brings a few important reports.

Netflix will give us a good read on the consumer and whether discretionary spending is still holding up. Intel is another key one. Expectations are high after its recent stock run, so the bar is set pretty high.

I’ll be paying more attention to the guidance and management commentary than just the headline numbers. Intuitive Surgical is also worth watching. Last quarter it had a huge earnings gap, and the market will be looking to see if it can deliver something similar again this time.

A lot of banks are reporting as well, along with a few smaller names like Mobileye ($MBLY).

Wars, unemployment, the Fed, Greenland. There is always noise in the market, and there always will be.

That noise isn’t all bad. But at the end of the day, what really matters for stocks is earnings. A lot of things affect earnings, but the direction of those earnings is the long term driver of stock prices.

Over time, prices follow profits.

The chart below shows this clearly over the last 25 years. Forward looking earnings move closely with stock prices. There are ups and downs, times when the market runs ahead or falls behind, but over the long run, earnings and prices tend to move together.

This bull market isn’t ending anytime soon, but it does suggest we could see some short term volatility.

Pullbacks are normal. In fact, 94% of years see at least a 5% pullback in the S&P 500. And about 63% of the time, we get a pullback of 10% or more.

Volatility is the price of admission. If you want to take part in the greatest wealth building machine on earth, you have to accept those swings. If the market were risk free, everyone would be doing it. Unfortunately, t’s not.

There are a few things to watch. Earnings are coming up. On the macro side, we have new tariff threats, Iran, and the whole Greenland situation. To me, this is mostly noise. It can create some short term volatility, but nothing that changes the bigger picture. If we were to get another pullback like we saw in April because of headlines like this, that would be a gift. I think the market has learned its lesson, and a selloff like that feels unlikely. Some volatility, though, makes sense.

There are clear pockets of excitement and froth in areas like space and drones. That said, the bigger macro trend still points higher, even if we run into some bumps in the short term.

Overall, this price action looks healthy. I don’t see any major red flags yet. What we’re seeing is rotation, and rotation is the fuel of a long lasting bull market. Money is moving into new stocks and new sectors.

SkyWater is a pure play chip foundry.

That means it makes chips for other companies, similar to TSMC. Customers design the chips. SkyWater builds them in its own factories, called fabs. It does not sell its own chips or consumer products. Instead It works with fabless chip companies, large chip makers, and equipment companies that do not want to run their own fabs. And SkyWater focuses only on manufacturing and the engineering behind it.

SkyWater works very early in the chip process. Customers often come with just an idea or early design. SkyWater helps turn that idea into a real chip. This includes choosing materials, figuring out how the chip should be built on silicon, testing prototypes, and then producing the chips at scale. It supports the full path from design to volume production in the same fab.

This model is called Technology as a Service.

The big difference versus companies like TSMC is the type of chips SkyWater makes. Its chips are usually not the most advanced or smallest chips. Instead they are highly specialized. They are built for reliability, safety, and security. Many are radiation hardened for space and defense, mixed signal chips, MEMS, power devices, or fully custom designs.

These chips are used in aerospace and defense systems, cars, industrial equipment, medical and biotech devices, and some advanced computing and quantum related projects. These are the sectors where customers care more about trust, long lifetimes, and U.S. production than about the lowest cost or fastest node.

It’s been growing steadily until this recent quarter. In FY2024, the company did about $340M in revenue and was only barely profitable. Then last quarter alone, revenue jumped to around $150M, which is close to half of last year. That’s because their newly acquired fab in Texas added a ton of production capacity and revenue right away. Overall, business is accelerating.

At the same time, there has been noticeable institutional buying over the past few months. Large investors and institutions are building positions. And it just broke out of a 3 months long consolidation. This is one to watch very closely.

Here are a few new positions I’ve initiated:

1. Add: Tesla ($TSLA)

I’ve talked about Tesla at length already.

2026 will be a critical year for Tesla. It has many potential tailwinds ahead. There are a few key highlights to watch this year: Cybercab production begins, without a steering wheel or pedals. Unsupervised FSD is solved. Optimus V3 is unveiled. Robotaxi expands more widely and sees broader adoption. Tesla Semi production starts. And the Tesla Roadster is unveiled.

Of course, Tesla still needs to deliver on its promises. But this could be a pivotal moment. With a potential SpaceX IPO coming, Elon has mentioned that Tesla investors could receive preferential treatment. We will see how that plays out.

The stock is just below all time highs and has had 7 down days in a row. That is tied for the longest streak ever. Tesla has never fallen 8 days in a row. I have been waiting since August to add to my position, and this looks like a good opportunity.

2. Buy: Rocket Lab ($RKLB)

As highlighted in my sector outlook, I wanted to get exposure to the Space sector. Hence, I used the pullback in RKLB today to initiate a position.

I’ve talked about Rocket Lab for a while now. It stands out as one of the few space companies already generating significant amount of revenue from both launches and satellite components. While it isn’t profitable yet, the company is investing heavily in new technology and long-term growth.

It’s one of the few public companies with a real shot at competing in the multibillion-dollar space industry.

3. Add: Nu Holdings ($NU)

I’ve also added to my NU position.

Nu is building a large digital bank with a lean cost structure and a broad product portfolio on top of it. And the bigger it grows, the more data it collects, better its systems become. And even with all that growth it is still at a reasonable 30 PE.

After the initial break out a few weeks ago, it did a perfect retest and is now approaching new all-time highs.

I just published a new thematic portfolio: Solar Energy.

One of the reasons I enjoy doing these sector breakdown is because you’ll always discover new interesting companies.

All of this comes at a time when valuations across the solar industry have pulled back after 4 very challenging years. After a long reset, the sector’s fundamentals are starting to stabilize. Solar is now experiencing a renaissance. Global electricity demand is accelerating again, and a big part of that growth is coming from data centers needed to power AI.

So, here are 3 stocks that stood out.

1. Enlight Renewable Energy ($ENLT)

Enlight builds and operates large clean power projects. Its main focus is utility scale solar and wind farms that feed electricity directly into the grid. These are not rooftop panels, but very large projects designed to supply cities, industries, and data centers.

Enlight works across the full life cycle of a project. It finds suitable land, secures permits, arranges financing, builds the power plants, and then operates them for many years. By owning and running the assets long term, the company earns steady revenue from selling electricity under long term contracts. The company operates internationally. While it started in Israel, it now has projects in Europe and the United States.

Solar and wind are the core of the business, but storage is becoming more important. Enlight also develops large battery systems that store energy from solar and wind and release it later when demand is higher. This makes Enlight a full stack renewable energy company.

It has not only been growing incredibly fast, but it has also been profitable for years.

2. Spruce Power ($SPRU)

Spruce Power is a residential solar company focused on owning and operating home solar systems in the United States. Unlike many solar installers, Spruce usually does not sell systems to homeowners. Instead, it owns the panels and sells the electricity or leases the system to the homeowner. It also uses battery storage and system upgrades where it makes sense.

Spruce Power grows mainly by buying existing residential solar portfolios. These are thousands of already installed home solar systems that come with long term customer contracts. By acquiring these portfolios, Spruce gets immediate cash flow instead of waiting years for new installs to pay back.

The company’s business is built around long term recurring revenue. Homeowners sign contracts that often last 20 to 25 years. Spruce collects monthly payments while handling system monitoring, maintenance, and customer service. This makes the business more stable and predictable than pure installation companies.

Interestingly, since its IPO in 2020, Spruce lost about 99% of its value. Then, starting in August, the stock jumped more than 300%. I am not fully sure what caused that move yet. I need to dig into that. This makes the stock clearly speculative.

What makes it interesting though is its the size. Even after the big run up, the company is still valued at under $100M. That is tiny for an energy company with thousands of operating solar assets. Even more surprising, it is likely generating more than that in revenue this year and is close to being profitable. That gap between revenue and market cap is unusual and worth a closer look.

3. Nextpower ($NXT)

I highlighted Nextpower a few weeks ago, but since it fits this theme so well, it does not hurt to mention it again.

Traditional solar panels are fixed, which limits the amount of sunlight they can capture.

That’s where Nextpower comes in.

They build solar tracking systems with intelligent motors and software that make panels follow the sun throughout the day. Each tracker uses sensors, algorithms, and cloud software to adjust in real time for wind, terrain, and sunlight.

The result is up to 25% more energy output from the same panels.

Until now they’ve deployed systems on more than 90 gigawatts of solar projects across over 30 countries. And Nextpower works with many of the world’s largest renewable energy developers and utilities

They are profitable, growing steadily 20% year after year, and trade at a PE of 24.

This week was a whirlwind. I feel like I’m saying this every week now.

But that’s because we’re going through a period of elevated volatility.

The unwind in AI infrastructure names seemed like it was never going to end, and that peaked on Wednesday when news came out that Blue Owl was backing out of its funding to support Oracle’s new 1GW data center in Michigan. This was a big red flag because Blue Owl had been acting as a major lifeline to these AI-centric companies building data centers. When a big lender like that steps away, people start to wonder if these projects are riskier than they thought.

That fear led to more selling.

However, all of that selling came to a screeching halt on Thursday and Friday as many of the high-momentum stocks were bid relentlessly higher.

Why did this happen? There are a few reasons.

News came out that OpenAI is considering raising $100B at a monstrous $830B valuation. This would mean OpenAI will be able to fulfill its obligations to companies like Oracle and CoreWeave. This has been the biggest fear in the AI complex.

On top of that, the recent earnings report from Micron was incredible. This was arguably the biggest and most telling semiconductor quarter we’ve seen since this AI bull market began. They absolutely smashed expectations and guided much higher than what the Street was expecting.

Another signal that the AI boom is still far from over.

In fact, US tech companies are making massive bets on AI.

They are committing to spend a combined $569 billion on data center leases over the next several years.

This is a $197 billion increase, or a 53% jump, from Q2 2025.

The reason for this continued volatility is simple:

First, it’s leverage.

Right now, there is about a 12.5 to 1 ratio of leveraged long ETFs versus inverse ETFs. This is the highest in over a year. That simply means far more investors are betting aggressively on prices going up than protecting against a drop.

But When the market falls just a little, these big risky bets lose fast. People panic and sell. That selling pushes prices down even more.

Second, margin debt is rising fast. And this matters more than most people think.

Margin debt means investors are borrowing money to buy stocks. It is leverage. You put down some of your own cash and borrow the rest, hoping prices keep going up.

Right now, margin debt compared to the total money in the system is climbing quickly. That tells us something important. Investors are optimistic. They believe stocks will be higher in the future, so they are willing to take on more risk.

The problem is that leverage only works well in low volatile markets. But when markets get choppy, leverage turns against you very fast. So leverage makes the whole system more fragile. It works great on the way up, but it increases the odds of sharp and sudden corrections.

Third, Bitcoin is acting like a risky tech stock, not like a digital store of value.

Over the last 3 months, Bitcoin has been moving almost the same way as momentum names. Which is to say down.

This lead to a lot of selling of long term Bitcoin holders.

Long term holders are people who bought Bitcoin and did not touch it for years. They usually believe the most in Bitcoin and sell last.

Since early 2023, about 1.6 million Bitcoin that had not moved for at least 2 years has been sold. That is around $140 billion worth. That is a huge amount.

Even more important, the last 30 days were one of the biggest selling periods by long term holders in more than 5 years.

The market loves to shakeout the few remaining holders. The bottom could be close.

Bitcoin is very oversold.

When the RSI falls below 30, Bitcoin is considered very oversold. And this chart looks at what Bitcoin usually does after that happens.

Historically, after Bitcoin gets this oversold, prices tend to bounce. Not always right away, but often soon after. Selling pressure starts to fade because most people who wanted to sell or were forced to sell already did.

Fourth, the stock market positioning is extremely stretched right now.

Retail investors have about 70% of their money in stocks, near the highest level in 20+ years and similar to the 2021 meme stock period. Professional investment managers are also almost fully invested, with stock exposure close to 100%, which means most investors are positioned the same way.

And when everyone thinks the same, markets get fragile.

Because when something unexpected happens, there are no buyers left. Everyone tries to react at the same time. Even small changes can lead to huge moves.

Fifth, Bank of America clients now hold about 65% of their portfolios in stocks. That is very close to a record high.

Everyone is already heavily invested. There is less new money left to push prices higher. A lot of the optimism is already priced in. This data point is not a sell signal by itself. But it’s a good temperature check.

And we know that the market loves to shake everyone out before it reverses higher for the next leg higher.

All of this is to say that there is a lot of leverage in the system right now.

Sooner or later, that has to balance out. Markets cannot function properly when leverage builds up too much, because even small price moves get amplified. Both leveraged long and leveraged short positions get whipped around or even forced to liquidate.

This is why we’re seeing this heightened volatility right now. That is the market’s way of clearing out the imbalance. Volatility flushes out excess leverage and resets the system.

But on the positive front, the overall market is holding up better than many expected. Even after recent volatility, the big indexes have not broken down. Every time the market looked like it might break down, it didn’t. Instead it recovered immediately.

And now, we have seasonality on our side.

Going back to 1950, this is what the average December looks like.

People think the Santa Rally lasts all of December, but in reality it only covers the last few days of December and the first few days of January.

Maybe Friday marked the start of the Santa Rally.

In fact, the S&P 500 is positive nearly 80% of the time during that stretch, making this one of the strongest periods of the entire year.

So there is no reason to be too bullish or too bearish right now. A neutral stance makes sense. It gives you flexibility, enough dry powder to deploy, and enough exposure so you don’t miss out on too much. You are not forced to make rushed decisions, and you can take advantage when good opportunities show up.

2026 will likely be another good year, but volatility is not going away. Large swings will be normal. That makes staying open-minded critical. The last 2 years showed that the biggest gains came from spotting major themes early and staying on top of them. That will matter just as much in 2026. Themes shift quickly, so you need to stay flexible and adapt. But we’ve been able to catch most of the leading themes. And we’ll do our best to do the same next year. I will share the top themes to focus on for 2026 in a separate update.

Two weeks ago I said this correction is probably over. And that turned out to be the exact bottom. Of course, a lot of luck was involved. Nobody can time the exact top or bottom on purpose. But you don’t need to.

What really matters is having a system that keeps you on the right side of the market. There is no certainty in the markets. But if your strategy puts the odds in your favor over long enough period, you’ll win eventually.

Now what we’re seeing is a snapback from many of the growth and momentum names.

• AI

• Space

• Drones

• Nuclear

• Robotics

• Quantum

• Rare Earths

So make sure to review the thematic portfolios.

Those are the names that will outperform in a bull market. And make large moves in a matter of weeks or even days.

Though they rarely have strong fundamentals backing them. Instead, they are mostly based on promising, exciting possibilities for the future. That’s why these stocks tend to be incredibly volatile, erratic, and heavily influenced by sentiment and short-term catalysts.

Hence, they are riskier and more volatile. Those are not names you just buy and hold for years. Many of them will not make it. So, you have to manage risk tightly and be disciplined.

That being said they offer tremendous opportunities in the right market environment. And the best time to track them is coming out of a correction. Timing is essential. Waiting for the right moment is key. You don’t to end up chasing late or too early. (More on that in Chapter 3 of the Handbook for that which you can read here.)

So, here’s a quick guide on how to handle speculative names:

• Price action: Look for stocks making recent all-time highs or coming out from bases after pullbacks.

• Volume: Confirm that the price move is supported by strong volume. Ideally volume should be several times higher than the stock’s average daily volume.

• Avoid FOMO: Don’t chase in just because it’s up right now. Wait for the right opportunity.

• Position size: Keep it small relative to your overall portfolio (around 1–5%). You don’t want a single bad position to take a big chunk of your capital, especially in volatile names.

• Be ready to cut your losses quickly: If the position stops working, cut losses quickly rather than hoping it will recover because corrections can be brutal.

• Stop loss: Use tight stops. A good rule is to set stops 5–8% below your entry price or just below a key support level or breakout point.

• Take profits in stages: Speculative stocks can move fast. Don’t hold 100% of your position until the top. Sell 25–50% at predefined price targets depending on your risk reward profile (e.g., +25%, +40%, etc.).

• Trailing stops: After partial profit-taking, use trailing stops (e.g., 5–10% below the current high or under a moving average like the 10-day EMA) to protect gains while allowing the stock to run.

• Watch volume and price action: If volume dries up or price action weakens (e.g., lower highs, a break of a key moving average, bearish reversal candlesticks), consider reducing or exiting.

• Don’t let winners turn into losers: If you have a sizeable gain, make sure to book some profits along the way. That gives you some cushion to weather volatility.

• Be prepared for volatility: Lastly, expect a healthy dose of volatility and large swings both ways.

Credo just delivered the strongest quarter in the company’s history.

• Q2 revs of $268M vs $235M est. (+14% beat)

• Q2 revs up +20% QoQ and +272% YoY

It has been one of our core positions for a while. This is now the third record breaking quarter. And this quarter makes one thing very clear. The build-out of the biggest AI training and inference clusters in the world is nowhere far from done.

It is always the same. Every few months investors get skeptical about the AI buildout. And every time the data proves them wrong.

Credo also gave an incredible outlook.

Guidance:

• Q3 revs of $340M vs $247M est. (+37% beat)

• Q3 revs guidance implies +27% QoQ and +152% YoY

It's safe to assume CRDO will beat their Q3 guidance which means they probably do at least $365M+ which would be +36% QoQ and +170% YoY.

There is a reason why it’s up almost 300% and one of the best performing stocks over the last year.

It’s not a cheap stock by any means but they deserve to trade at a premium with these growth numbers plus 31% net income margins and gross margin guidance coming in 120+ bps above street estimates.

These numbers tell a pretty clear story.

But I keep seeing discussions about AI that focus almost only on chatbots and demand is limited. That view is too narrow. When you look at what is happening inside data centers and large tech companies, the long-term demand for AI compute is coming from areas that are rarely part of the public conversation.

The first area is basic data center compute. This is already close to $100B dollars per year. It includes data processing, pipelines, analytics workloads, risk models, and internal machine learning jobs. None of this feels new or exciting, but much of it will move to accelerated architectures over time because they offer better speed and lower cost. Even without consumer-facing AI, this creates a large and steady demand for AI-class hardware.

The second area is recommender systems. This is the part of the internet that drives most of the revenue. Examples include Google Ads, YouTube, Instagram, TikTok, Amazon search, Spotify, Netflix, and e-commerce funnels. The economic value here is in the range of a few hundred billion to around one trillion dollars. The next generation of these systems will use GenAI models rather than older methods. This shift is not a small change. It affects the core business models of trillion dollar platforms.

The third area is physical AI. Robotics, autonomous systems, warehouse automation, delivery robots, agricultural machines, drones, and home devices all fall into this category. These systems rely on continuous real-time inference. The compute load is very high and can exceed chat-style workloads by a wide margin. If this sector grows as expected, it could become the largest source of demand for AI compute.

When you consider these three areas together, it is clear that the AI story goes far beyond chatbots. Large parts of modern computing are shifting toward models that need far more acceleration. And there is almost no limit for the AI compute. Text, images, videos, simulations, science. There are so many use cases that are not quite feasible or that could use billions of tokens of compute.

The AI buildout is just getting started.