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QF Research Profile picture
@ResearchQf
Jan 13, 2023 • 4 tweets • 3 min read • Read on X
1) I respect @garyblack. He deals with facts tho may disagree with analysis.

Here's $TSLA '23 sales and OP est in same format (no updates for US/EU price cuts yet).

'23 cons rev $109B (+33% Y/Y). Cons OP $19B or 17% OM.

~ 10-20% price cuts ...

$SPY $QQQ $TLT $GLD #Commodities ImageImage
2) flows directly to bottom line (assuming all else equal for now e.g. opex unchanged).

It's tough for OM not to decline 50% or more even if units grow > 50% (and I'm doubtful).

I.e. EPS could easily fall 50%.

After every price cut there's a quick orders spike. Unknowns ...
3) dominate after that.

Reminder orders had to double (or more) 1H '23 just to make estimates given depleted backlog (meant Q4 orders were as low as ~200-250K).

Now even if order run rate double (we'll see) profitability falls something in order of ~50%.
4) Gary must realize this isn't correct way to view '23 consensus since most estimates are stale.

Avg $TSLA '23 EPS post 1/13 is $3.88.

Avg '23 GM is 22.1% (too high IMO).

Big dispersion. Will change with more updates.

$SPY $QQQ $TLT $GLD #Commodities

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More from @ResearchQf

QF Research Profile picture
Aug 12
1) $NBIS and $APLD now outperformed > 2x despite $CRWV bouncing. AI inference spikes overflowed to CRWV and then even 3rd tier such as APLD. NBIS is another +40% since 7/18.

NBIS raised year end ARR from $700M-$1B to $900M-$1.1B. Despite higher ARR and sales more than doubling Q/Q, NBIS didn't raise rev guide due to expected delivery of GPUs coming online by the end of the year, "particularly the Blackwell Ultras."

"Pricing is stable for Hoppers" and "we did bring on the B200s, and we are actively selling through them well."Image
2) Less overhang and "cheaper," yet still not profitable. But listen to the call and do a moderate bull case back of envelope. And consider secular environment

NBIS capacity target is 220 MW this year, with > 1 GW contracted capacity end of 2026. E.g. there is 200 MW under construction in NJ, part of which will come online this year.

Like APLD, it's a seller's market for anyone with future capacity.Image
3) NBIS & APLD are at 3+ year highs. Not sure 2021 is a real compare (yet). There was an actual, but fairly narrow & short-lived bubble in 2021, when price action was much crazier than today and sometimes approached final year or two of the dotcom bubble.
Read 4 tweets
QF Research Profile picture
Aug 8
1) Nice week for AI but software net exposure was at 5 year lows, and negative, near July end (GS PB).

Glad didn't post this then. We all wanna be contrarian.

Semi exposure was also at lows entering 2023. Remember tech (and general equity) sentiment then?

But that was right after ChatGPT moment, though market took a while recognizing its importance. Imo we're still in very early innings of understanding consequences of AI. Many are still trying to ignore it.Image
2) Semis to ratio is now at 21Y high?

Pretty chart. Is it breaking out again after consolidating?

This is only 20% serious. I've chart-mined, tho GICS do have long history. Semis include many non-AI semis. Many are down or barely up since GPT. Software has a big AI infra ... Image
3) components $MSFT $ORCL $SNPS $CDNS.

So this S&P GICs ratio *understates* AI semis vs non-AI infra software, which act like old media stocks when internet & streaming began kicking in.

Could SaaS have huge rallies given nets? Sure. Would I try to ...
Read 6 tweets
QF Research Profile picture
Aug 8
1) Physical AI, rare earths & tariff macro, $MP & $OUST.

MP is up > 3.5x in ~ 2 months. That Sputnik moment went warp speed faster than one might've hoped. MP is the domestic rare earth champion.

Also rare earths = most important macro factor for at least a few weeks. Image
2) MP beat but current numbers don't mean much.

a) DoD stake and partnership guarantees $110/kg floor. That kicks in Q4. Could domestic & commercial and military demand be so high that > $110/kg is possible?

"Included in this commitment is some upside sharing with DOD if, as we suspect to occur over time, prices go materially above $110."

b) Initial magnet production target at Independence was 1000 MT. New 10x facility is targeting 10,000 MT, but that not sufficient for rare earth independence.

Worth listening to call and considering both risks & EPS power if MP executes.Image
3) OUST up > 4x since first post. Not bad, but wild vol tho price stayed above ~ $6. Is it less spec at $27 than $6? Maybe, but it's still speculative. Not quite as Sputnik as rare earths, but domestic LiDAR and physical AI techs are very critical. Image
Read 6 tweets
QF Research Profile picture
Jun 27
1) $NVDA hit ATH yesterday. Other AI related names are at or near ATHs. Makes sense. AI demand & supply data keep improving almost daily within an exponential framework.

It's not impossible that CQ4 NVL racks may be ~ 12-14K vs ~ 6K in CQ2. Prior post in May was more a 20-80 guestimate. Q4 variance is still very large, but smaller than in May. Track data real time going forward. Subject to quick change.

That's with BW Ultra only starting to kick in. B300 production prob ~ 100K's in Q3, with nominal GB300 shipments (given lag to racks) but some GB300 volume CQ4, followed by bigger ramp in 2026.

More important LT. AI inference demand went into higher gear months ago, and that acceleration has continued. Those cute AI insider hints about next gen models & apps show also show no signs of slowing.

Also where did all the bear stories about NVDA B200 GPU inventories go? Remember to review NVDA rev rec, which is product dependent.Image
2) Jensen's high level TAM comments at yesterday's annual meeting was nice but they're hard to distinguish from previous comments. What are durations of these TAMs and shape of deployments?

- Robots and AI infrastructure to train them will be the next multi-trillion $ industry

- 100 NVIDIA AI-powered AI factories, buildouts around the world. That's double a year ago, and they're larger. Average number of GPUs/factory has also doubled and requires tens of GW of AI infrastructure in coming years.

- Robots and AI infrastructure to train them will be the next multi-trillion $ industry

- 100 NVIDIA AI-powered AI factories, buildouts around the world. That's double a year ago, and they're larger. Average number of GPUs/factory has also doubled and requires tens of GW of AI infrastructure in coming years.Image
3) If one were worried about BW transitions. Some were very worried about Hopper last year.

Wistron told clients "if you don't buy GB200 you won't get GB300" via Jefferies 10D ago.

These are fun but wouldn't keep coming up without strong NVDA leverage.
Image
Read 4 tweets
QF Research Profile picture
Jun 1
1) Rare earths. Trade, China and $MP

"If China doesn't speed up those approvals, companies have warned the White House, auto plants may have to idle pandemic-style stoppages." (WSJ)

Rare earths were more important for initial trade detente with China than some realized.

Chinese rare earth controls are similar in nature to US tech export controls. But why are mostly unknown elements so important?Image
Image
2) Rare earths are necessary for huge ranges of industrial, tech, automotive, robotic, defense (e.g. drones, missiles, fighters) and consumer products.

Light (LREE) & heavy (HREE) rare earths elements aren't always rare, but even when mined elsewhere, Chinese companies refine > 90% for critical markets.

E.g. NdFeB magnets are very strong, high perf and necessary for key electromechanical products, such as EVs.

US has some mining but *zero* refining capacity of such magnets. MP is the only US company that mines rare earths in volume.

MP defines 3 stages. Stage 1 ~ upstream REO mining. Stage 2 ~ midstream NdPr oxides. Stage 3 ~ downstream or *magnets*

MP mined 12K metric tons (MT) of REO in Q1, which is ok but much smaller than China's capacity. Sales were lower. MP stopped shipping to Chinese refiners due to tariffs and is trying to drive midstream, stockpiling, diversification and longer term vertical integration thru Stage 3.Image
3) When will MP produce Stage 3 high perf magnets?

MP is ramping its downstream "Independence" magnet mfg facility. And in Q1, MP sold $5.2M in NdPr precursors to $GM and provided GM with first automotive-grade magnets for "them to validate."

There are many grades of magnets. Back to EV grade NdFeB magnets that require HREE for processing. HREEs are sourced globally, but MP also plans to separate HREEs such as DY & TB (for NdFeB) from its Mountain Pass ores.

Furnaces to support 1,000 MT are now installed at Independence. LT capacity targets are higher.Image
Read 8 tweets
QF Research Profile picture
May 26
1) Storage stocks (components) reacted ~ as expected Fri.

$STX $WDC (mostly DC) up Fri despite EU & $AAPL threats. Both up big YTD.

$MU & $SNDK (large CE exposure) down Fri despite strong ST data points. Hard to believe but MU is +11% YTD. Again, fears of pull-in and net demand destruction from unknown future electronics tariffs, such as 232.

High level anecdote. I have an AI output folder. Folder size is growing exponentially. Text was tiny. Multimodal i/o such as document formats, audio e.g. NotebookLM, images, video = storage rose from tiny -> 100's KB -> MB's -> 10's MB -> 100 MB or more/file. More later in thread.

This also needs inference & storage on AI cloud side.

I've never ever never seen spot DRAM (NAND-related spot, card, SSD prices are also up but not as much) do this without some stocks rising sharply.Image
2) So stocks are saying "this isn't a real cycle." DDR4 will be legacy soon but still.

Is the cycle 100% non-organic? There is some pull-in, but it's unclear how dramatic. May & June PC & SP data will help. Net demand destruction still depends on "policy" i.e. a megalomaniac.

But are there organic elements too? Edge & DC AI both help (let's leave out HBM for now). PCs are being futureproofed for edge AI and Windows 10 expiration with higher configs. Rumors of higher DRAM content in future iPhones & SPs due to AI do make sense.Image
3) *If* spot pulls back but not fully, that could be bullish at these valuations depending on demand outlook post-'25.

And god forbid $AAPL Apple Intelligence makes real progress. $MSFT Copilot too. User base for these 2 companies alone is massive.

Is even SNDK a buy? Beat & raised but still losses due to what should've a mid-cycle inv correction plus underutilization charges & startup costs. Ex-$110M charges which go away if inv correction ends, SNDK guided to > 6% higher GM (ex charges again) and ~ $2.5 EPS run rate.

Given its leverage, peak $10+ EPS power still isn't impossible in a normal upcycle. Normalized EPS is lower but will increase if this downturn is short & moderate. What's discounted at 0.67 EV/C26 rev?Image
Read 5 tweets

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