Microsoft And Google Face Monetization Test Amid Expected Fed Pause— Seagate And Oil Cloud AI Trade

Market Reaction To Tech Earnings

Please click here for a chart of SK Hynix stock (NASDAQ:SKHY).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of SKHY is being used to illustrate the point.  SK Hynix is the second largest memory maker in the world.  As we previously shared with you, 34% of the S&P 500 growth is coming from just two companies – SK Hynix competitor Micron Technology Inc (MU) and NVIDIA Corp (NVDA).
• The chart shows a 35% drop in SKHY stock from the high in September. 
• The chart shows the jump up in SKHY stock on earnings.
• RSI on the chart shows SKHY stock is not overbought even after the earnings jump.
• The SK Hynix outlook is very strong.  Here are the key points:
  • Operating profit came at 83.33T won vs. 76.72T won consensus.  This is a 632.1% year-over-year increase.
  • Revenue came at 104.62T won vs. 98.34T won consensus.  This is a 327.9% year-over-year-increase.
  • SK Hynix is announcing a 20T won share buyback.
  • The supply shortage is likely to stay until 2030.
  • DRAM bit shipments are likely to increase by about 25% year-over-year in FY27.
  • High bandwidth memory (HBM) that is used in AI will see price increases.
• SK Hynix competitor MU stock is seeing aggressive buying in the early trade.  MU is in our portfolio long from an average of $21.77.
• At a time when SK Hynix is adding confidence to the AI trade, disk drive manufacturer Seagate Technology Holdings PLC (STX) is throwing a monkey wrench.  STX stock fell as low as $609 yesterday after hours.  STX stock’s 52 week high is $1145.  This represents a drop of 47%.  Seagate earnings and projections were strong, but under the surface there are two issues:
  • Exabyte growth is slowing.
  • Gross margins are trending down.
• Even though demand for disk drives is higher than the supply due to AI, prudent investors should note that as we shared with you earlier, Seagate competitor Western Digital Corp (WDC) had the same negative issues.
• In our analysis, prudent investors should be concerned about a new supply that will come online down the road both in memory and in disk drives.  Prudent investors should get ahead of the curve by anticipating supply and demand coming into balance. 
• Two hyperscalers Microsoft Corp (MSFT), Alphabet Inc Class C (GOOG) and Alphabet Inc Class A (GOOGL) will report earnings after the close.  Blowout earnings are expected.  However, we will mostly focus on capex and AI monetization, as they will be the biggest drivers of these stocks going forward.  Both Microsoft and Alphabet are in our portfolio.  MSFT is long from an average of $32.88. 
• The Fed will announce its rate decision today at 2pm ET.  The market is expecting the Fed to leave interest rates unchanged.
• In the middle of bullishness this morning, oil has the potential to either add to the bullishness or bring the market down.  Netanyahu block is ahead in Israel’s election as of this writing.  Oil is rising on the prospect of Netanyahu staying on as prime minister.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Alphabet (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN).

In the early trade, money flows are negative in Apple Inc (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).

In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Oil

API crude inventories came at a draw of 2.031M barrels vs. a consensus of a build of 0.8M barrels.

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. Most recently, we correctly called the rally from recent stock market lows and the 2026 semiconductor decline before a 25% drop in the Semiconductor ETF (SMH). In gold, we bought at an average price near $1,105, close to cycle lows, and took partial profits near $5,400, close to cycle highs. Please click here to get our free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.