TMTB EOD Wrap

Good afternoon. QQQs -30bps as market volumes continue to slow heading into the middle of August post-earnings, when Bloomberg terminals start feeling more like expensive screensavers. Price action post-earnings continues to be a lot better in internet & software. Investors there are still showing an appetite for buying names up post-earnings, especially where numbers accelerated and the narrative improved, even if just marginally. PLTR +2%; TEAM +2%; TWLO +3.5%; U +25bps; UBER +4%; SAP +1%; MSFT +1%; ABNB +4%; TTWO +2% are a few of the names that printed solid earnings and have follow-through. This shift in flows out of semis and into hyperscalers started a couple weeks and has now expanded. We even started to see some willingness to buy the dip on misses, with DDOG +11% and FIG +9% today while something like AKAM +6.5% didn’t stay down long.

Compare that with the anemic follow-through in AI Semis: ANET following its big beat, STX, or ALAB selling off despite the big Sept Q guide. The weaker prints like INTC and SNDK also continue to struggle to find a bid.

There’s admittedly some cherry-picking here, but in our defense, there are a lot of cherries. For illustrative purposes:

To put it succinctly: with the AI semi vibes & narrative remaining choppy and some of the more favored parts of the trade (memory, CPUs, storage, etc.) seemingly rangebound for the time being, investors appear increasingly comfortable putting $ to work in idiosyncratic ideas outside the space in names where the earnings narratives are moving in the right direction, numbers are beating, valuations have come down, names have underperformed YTD, and where sentiment is tilted to the left. We thought some of those flows would also go to NVDA, but even that is lagging. Today felt like that risk appetite broadened another notch outside AI semis, with investors willing to spread dollars further down the bench, buying misses and revisiting high-quality underperformers without an obvious near-term catalyst, as the NFLX/SPOT moves illustrated.

In macro-land, Oil +5% and yields climbed 4-6bps across the curve ahead of the CPI print on Wed. Fed expects continue to price in 31bps wroth of rate hikes over the final three meetings.

Lots to get to today in our recap, so let’s get straight to it…