Macro Events & News
The markets were closed Monday in observance of Martin Luther King Jr. Day. The week also marked the inauguration of Donald Trump, with policy details beginning to emerge. Notably, support for the Stargate project—a $500 billion initiative to develop AI infrastructure in the U.S., led by OpenAI, SoftBank, and Oracle—boosted AI-related stocks early in the week. However, enthusiasm waned as Elon Musk cast doubt on the initiative, citing a lack of funding, despite the project not relying on his organizations or government funding.
Earnings season continued, with Netflix (NASDAQ:NFLX) impressing investors by reporting unexpected 16% year-over-year subscriber growth. Despite a strong start to earnings season, investors may remain cautious ahead of next week, which features key reports from Tesla, Microsoft, Meta, and Apple. Additionally, the Federal Reserve’s interest rate decision and PCE inflation data will provide further direction for the markets.
The 10-Year Treasury yield remained at 4.6%. The VIX continued to pull back to 14.85.
All major indexes ended higher: the Dow up 2%, the S&P 500 up 1.7%, and the Nasdaq up 1.6%.
Watchlist News
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Dell Technologies (NYSE:DELL) experienced an initial surge following announcement of support for the Stargate project. However, the stock’s momentum faded as Elon Musk raised doubts about the project’s funding commitment, leading to a loss of earlier gains.
august bear notes
Elon Musk’s remarks, while influential given his voice and ties within the White House, should be viewed through the lens of his ongoing feud with OpenAI CEO Sam Altman. It’s important to recognize that the Stargate project had been in motion well before President Trump’s inauguration. While the government’s support does not include direct monetary funding, it provides valuable visibility and other forms of assistance to the initiative. Ultimately, the significant capital investment tied to Stargate means that companies like Dell stand to benefit as key enablers in the buildout of AI infrastructure.
5% ▲
Meta Platforms (NASDAQ:META) saw positive momentum this week, buoyed by new price target upgrades from equity research firms including Wedbush, Bank of America, and MoffettNathanson. The announcement of the Stargate project added further support for all AI players and Meta’s Llama is definitely one of the leaders. Additionally, news of ad testing on Threads in select markets provided an extra boost to investor sentiment.
august bear notes
Meta reached all-time highs this week, demonstrating strong momentum as it heads into earnings. However, heightened expectations surrounding its performance warrant caution. Any weakness or a miss in earnings could trigger a sharp and significant selloff. The company’s renewed heavy investments in AI, while promising, may not generate immediate revenue—similar to its Metaverse initiatives, which previously led to severe market backlash. Given the impressive rally in Meta’s stock, this could be an opportune moment to reduce exposure and secure gains.
3% ▲
Microsoft (NASDAQ: MSFT) had a strong week, gaining interest following the Stargate project announcement, as the company stands to benefit from its investments in OpenAI. The stock shows positive momentum heading into earnings week.
august bear notes
The Stargate project announcement provided the catalyst Microsoft investors have been anticipating, positioning the stock for a potential breakout if earnings exceed expectations and guidance surprises positively. However, this is a significant “if,” as elevated expectations for the Magnificent 7 following their remarkable growth in 2024 could limit upside potential and amplify the risk of disappointment.
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Micron Technology (NASDAQ: MU) experienced a volatile week, briefly surging past $110 midweek amid renewed AI enthusiasm linked to the Stargate project. However, the momentum waned, and the stock ended the week lower.
august bear notes
Micron dipped this week despite positive news surrounding AI and increased corporate spending in the sector. While demand for AI infrastructure remains strong, the market may be taking time to digest these developments before deploying capital. The weak guidance from Texas Instruments (NASDAQ:TXN) did not help the sector. Additionally, investors could be waiting for updates from NVIDIA’s largest customers next week.
Even if some companies shift toward custom chips, High Bandwidth Memory (HBMs) remains essential, positioning Micron as a critical player. As the only U.S.-based HBM manufacturer, Micron stands to benefit from strong support under the America First policies of the Trump administration.
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Workday (NASDAQ:WDAY) did not have substantial news but was green every day of the week. As noted at the start of the week, it was sitting on a couple of key technical levels coming into the week.
august bear notes
The price action in Workday stock over the past week seems primarily driven by technical factors, as there were no significant news events. While the company continues to integrate AI into its products, it is not a market leader in the space, making it difficult to attribute the movement to any AI-driven catalysts like the Stargate project news that has recently fueled other players. The defense of the $250 level is a key technical point to watch in the future.
