TMTB EOD Wrap

QQQs -2%+ and lower for the 5th time in 6 sessions, and 5% below ATHs. Not much has changed fundamentally this week in Tech/AI (in macro land fed cut is now only 50/50 for 12/10), but the tea leaves & vibe change for weakness in Tech have been floating around for a few weeks although strength in leaders have masked that until a couple days ago.

Today was just more of similar trends we began seeing last week and this week, with the addition of leaders like SNDK -14% finally catching up with everything else to the downside. The market continues to remain jittery around the AI trade and every little datapoint or piece of news gets exaggerated. Today more news on the OAI front with Alex Heath calling out OAI’s CFO telling investors on Monday that engagement at ChatGPT has declined:

After telling the investors to take third-party estimates with a grain of salt, Friar acknowledged a chink in ChatGPT’s armor. She said time spent had declined “slightly” in response to “content restrictions” the company rolled out in early August. She then referred to the loosening of those restrictions that CEO Sam Altman has said will be implemented for adults in December, and that OpenAI expects the decline in time spent to “reverse.”

MS blasted out the news to everyone in the am, which didn’t help things early. And Alex had some comments on META that were also getting passed around re: AI skepticism.

He noted that, while unprofitable startups like OpenAI and Anthropic risk bankruptcy if they misjudge the timing of their investment, Meta has the advantage of strong cash flow. He also made the point that, while Big Tech has historically been relatively debt-free compared to large companies in other sectors, the AI infrastructure race is leading Meta and its peers to start using leverage in a more normal way relative to their size. (Depending on where you sit, normal is quite relative, of course.)

Like he told me in September, Zuckerberg acknowledged to employees that Meta’s market cap could suffer if his timing is wrong and the bubble bursts, but the message was clear: we’ll have the balance sheet to survive and emerge stronger than most on the other side.

The Similar Web and SensorTower data in October wasn’t great with Desktop showing flat to up and ST showing slight down for mobile.

We won’t dive into the reasons for the current swoon (we did that in our weekly, and in the EOD wraps over the past week). To put it succinctly: mix of macro and AI Skepticism. For now, our conclusion remains the same: we’re in a defensive posture until the narrative and price action clear up.

One area of the market that is getting hit particularly hard is names with good narratives but lack of valuation support. TSLA -6%; SHOP -6.5%; BE -18%; PLTR -6.5%, NET -5.5%, HOOD -8%…Starting to infiltrate into the high multiple infra names: DDOG -2.6%, SNOW -4.6%; MDB -4% We won’t even go into the horrid price action in more spec names like the Quantum or Nuclear group.

Why are these names getting hit so hard?