TMTB EOD Wrap

Good afternoon. QQQs -12bps as US/China tensions ticked up ahead of the Trump/Xi meeting at the end of the month while the Gov’t shutdown continued. VK gave his take on Tech sentiment today: The AI conversation is about the same as it was before, with people increasingly bullish (all the talk of bubbles is actually helping, not hurting, sentiment, as many are now growing concerned about missing out on a late-‘90s-like parabolic explosion higher)

Main news out today in Tech was a mid-day article talking up capacity constrains for MSFT. Here’s Bloomberg:

Many of Microsoft’s US data center regions are experiencing shortages of physical space or servers, according to people familiar with the company’s internal forecasts. New subscriptions for Azure cloud services are restricted in some crucial server-farm hubs, including Northern Virginia and Texas, through the first half of next year, said the people who requested anonymity to discuss internal forecasts.

“It’s been almost impossible to build capacity fast enough since ChatGPT and GPT-4 launched,” Chief Technology Officer Kevin Scott said in early October, referring to OpenAI’s popular chatbot and the AI model that runs it. “Even our most ambitious forecasts are just turning out to be insufficient on a regular basis.”

Microsoft also uses significant computing resources to host its own workloads and applications such as the Office suite. Some Microsoft employees have been told to close internal projects in impacted regions to save capacity, according to people familiar with the matter.

Neoclouds CRWV+2% + NBIS +8% and the hyperscalers the big beneficiaries of tight supply and speaks to news we got yesterday on AMZN raising prices.

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INTERNET

• Large cap leading the way higher: META +2%; AMZN +1% ; NFLX +1.4% (bringing video games to TV service) while GOOGL -1% continues to lag. Lots of questions on the latter: likely a mix of Gemini dropping to #3 in the app store, upside somewhat capped at 22x until you roll estimates fwd to ‘27, and OAI fears brought back to the forefront somewhat. Some feedback re: GOOGL in TMTB Chat:

• RDDT +4.6% as they hosted an AMA (Ask me Anything) with some OpenAI employees. The read-through here being that this is a tea leaf OAI appreciates the value RDDT brings, especially given all the ChatGPT noise the past few weeks (I know it’s a stretch - but that’s the mkt we’re in). RBC was also positive on some checks saying monetization trajectory looks healthy. Unlikely shorts will want to be there when they report given likely they crush revs so wouldn’t surprise me to see stock rally into the print, but mixed user data keeps on the sidelines. Likely a “B” long though but we’re taking a bit of a break from the stock for now until we get a cleaner set up.