The star of the movie “The Big Short” bet against
semiconductor stocks using the iShares Semiconductor ETF, but think twice
before jumping on the same bandwagon.
Just because someone got it right once doesn’t mean all of
his predictions and actions will always be correct. Since 2017, he has been
going about an impending collapse that has yet to happen.
Yes, there may be signs of a possible collapse, such as a bubble in the commercial real estate
market, troubled debts in regional banks, overvaluation of
technology, etc. But the market always sets its own rules.
Hope Dies Last
There seem to be reasons for a downturn and a full-blown
collapse, but the indices are still not falling. The reason is that investors
would instead look to an optimistic future than to a gloomy present.
The thinking is this: yes, corporate bankruptcies are
rising, troubled debts and delinquencies among the population are rising, but
inflation is falling, so the Fed will start lowering rates sooner than
expected.
The fact that a mere reversal of the regulator’s monetary
policy will not solve all the problems seems to worry no one. Or at least, no
one realizes the risks yet, acting on the principle of striking while the iron
is hot.
The question remains whether this strategy will be
successful in the long run or whether, as in the past, a change in the Fed’s
actions will lead to a recession and a significant market sell-off.
For now, the trend remains powerfully bullish; QQQ is
breaking yearly highs, and the indices are moving in the same direction, and it
is hard to say what could stop them. One of the last hopes rests on Nvidia’s
poor results.
The only problem is the high probability that the company will not disappoint.
Will Nvidia be a boost?
Analysts expect the company’s total revenue to grow 172% to
$16.2 billion and revenue from the data center segment nearly quadruple to
$13.02 billion, up from $3.83 billion a year earlier.
On Wall Street, Nvidia’s adjusted earnings are expected to
rise to $3.37, up from $0.58 in the same quarter last year. The reasons for
these numbers remain the same: the company’s dominant position in generative
artificial intelligence.
The consensus forecast for Nvidia stock is
$648.01, and judging by the pre-results optimism, the company’s shares could
surpass $600. The bottom line is that if Nvidia rises, so will the shares of
other semiconductor, AI and related companies.
Opening a short position in the face of such prospects is
an extremely risky venture; at the very least, it requires significant capital.
Otherwise, you may face a margin call and substantial losses.
Think before you act.
When we see headlines trumpeting the opening of a position
by a large investor, it is not worth rushing to imitate them. Firstly, it is
unclear exactly when they opened it, and secondly, they can afford to take
risks, whereas a small investor might not.
Remember risk management, use technical analysis tools such
as a volume indicator to confirm a trend
and research before buying or selling anything. It may not make you a
millionaire in a few months, but it won’t bankrupt you either.
This article was written by FL Contributors at www.forexlive.com.
