What the AI bubble means for the market
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First, JOLT job openings came out today and the market has been on a violent rip. This could mean that the Fed’s plan is working and we may have less rate hikes in the future.
Less job openings means the economic is finally slowing down which is exactly what the Fed wants and therefore the market (which is forward looking) appreciates that which is why we ran with so much strength today.
Next, this amazing statistic shows “AI” mentions on earnings reports:
Here’s what this means:
-Companies want to take advantage of the hype -This implies the hype is not long term sustainable (historically based I'll get into this in a second) -Most of the companies forcing "AI" into their prospectus and their business plans don't have good use of it, do good DD first
1) Late 1990's dot com bubble: companies added .com to everything. Pets.com is the go to example for the unsustainable, low margin business who's stock skyrocketed during this time.
2) Early 2010's big data hype: in the early 2010s. Many companies mentioned "big data" in their reports to suggest that they were leveraging large datasets for better decision-making, this wasn't true. $IBM mentioned super analytics, many analysts say this simply wasn't true.
3) 2017's Crypto Hype: Long Island Iced Tea Corp., a beverage company, announced that it was rebranding as"Long Blockchain Corp. and their stock went flying. I can't find their stock on my broker now, maybe it's OTC lol.
4) 2023's AI boom: this is still going, so it's important to ride a wave while you can, but some cards are starting to topple. $SNAP Snapchat introduced a bunch of AI stuff but the stock is now trading near the lows. $NVDA had a great report but the market sold it off.
Bad news running markets is a good sign, good news dumping is bad.
Lastly, the price of cocoa is hitting new highs and I think short HSY 0.00%↑ Hersheys may not be a bad trade in my view.
A move to $235 with a stop loss at $248 doesn’t seem like a bad idea if this head and shoulders decides to play out.
Thanks for reading and have a great day,
-Adit Dayal