Is $AMD still an AI play?

With the stock down 35%+ from its peak, investors are starting to doubt it.

Among the pushbacks are valuation & results. Thread w. thoughts on earnings and valuation (incl. sum-of-the-parts) 🧵 👇

Loved sharing with @OJRenick on @SchwabNetwork 1. Valuation: $AMD is trading near the high end of its valuation range (despite the recent pullback), making investors conclude that the stock is expensive. Why does the valuation make sense?

Two reasons:
a) Earnings are at a trough
b) GPU demand is not reflected in earnings

Excited to publish Spear's AI primer and ecosystem map!

While most people are focused on the application layer (e.g., ChatGPT, Copilot 365), there is much more to the AI opportunity.

Let's explore each of them below: 1. The Hardware Layer:

$NVDA was already growing its DC business at a ~40% CAGR. But generative AI took this to another level.

Market pullbacks are when the best opportunities arise, yet most people struggle with them.

Citadel stood out in its risk management prowess compared to other hedge funds over 10-yrs ago.

Here's what I learned about risk management during my time there: Three fundamental principles are at play here:

1) Be proactive, not reactive.
2) Embrace idiosyncratic risk instead of avoiding it.
3) Effectively manage your downside.

Now, let's delve into each one:

Time to load up on cyber stocks?

$MSFT announcement to enter the SASE market is sending all cyber stocks down. $ZS $PANW are ~down 7-10% over the past 2 days as a result.

Risks, opportunities, and my thoughts 👇 Expect #cybersecurity to go through an innovation wave driven by #AI.

Not surprising that $MSFT wants to capture some of this growth.

$MSFT is by far the largest cyber player ($20-30bn revenue). Despite this, the "best-in-class" solutions in cybersecurity are NOT Microsoft's.

A company's earnings report makes up almost 80% of its price action.

Your ability to manage risk on earnings is key for capturing alpha.

I've worked at hedge funds like Citadel and Millennium that generate significant alpha from earnings.

Here is how to do it: Why should you care:

• Earnings are crucial times that determine the ST direction of a stock
• Large institutions have expectations and have algos ready to increase/initiate/decrease positions, which leads to big stock movements

It's about results - expectations = % surprise

Nvidia's rally is one of its most hated ever.

Beyond the AI hype, what's driving $NVDA momentum? What's the core thesis behind the business?

Here's an overview of the long-term thesis and the key factors before the earnings report tomorrow: The most important thing for earnings will be F2Q guidance.

1) Investors already expect upside to F2Q (w/ buyside expectations ~$300M higher than Street at $7.2B).

2) Eyes on Data Center sales (buyside at $4.2-4.4bn). This is where AI demand should show up (if it does).

$NET Glass half full vs. half empty?

We just attended Cloudflare's Investor Day.

Below are some of the key takeaways and debates for the stock: The reason behind the Cloudflare guide-down was the extension of sales cycles (up 27%!).

It is very important to understand that Cloudflare has some of the shortest sales cycles in the industry (<1 quarter)

But note the significant YoY growth in new pipeline (red line)

The Spear Alpha ETF Investor Letter is out!

Our ETF was up 25.5% in Q1 2023, outperforming the S&P by 18% and the Nasdaq by 8%.

Below is a commentary on the key drivers behind our outperformance:

For full fund disclosures and holdings visit spear-funds.com.

$SPRX Outperformance was driven by:

1) Semis & AI: $NVDA by the momentum in AI and semis.

2) Enterprise: $HUBS and $SHOP, both companies benefiting from reducing their workforce by 7% and 10%, respectively, while growing revenues at a double-digit rate.

I've been following #copper for over 15 years at leading hedge funds including Citadel & Millennium.

Investors often underestimate the insights that copper prices provide as a barometer for the economy.

Here is what you need to pay attention to: Because of its use across many sectors, copper is seen as a leading indicator of economic health.

Copper prices are the fist to react to any economic uncertainty.

I've spent the past decade at leading hedge funds like Millennium, Citadel and a Tiger Cub.

I've gotten questions about how to perform due diligence like a hedge fund does when given a new stock to cover.

There are 10 critical things many people miss, based on my experiences: As a hedge fund analyst at Millennium and Citadel, you are grilled and rewarded for your ability to drive alpha for your PM.

There are many things, but the core basics include:

I've spent over a decade at some of the leading L/S hedge funds like Millenium, Citadel and Tiger cubs managing over $100B.

I disagree with most of the advice young analysts receive today.

These are some of the hard lessons I've learned about stock picking: 1/ To outperform, you need to have a differentiated thesis.

You can’t just invest in a stock because it’s a 'good company'.

Big difference btw a stock and business.

You need to define a clear path as to how that thesis will generate alpha and why other investors might disagree

Why is $NVDA stock soaring this year after only a small earnings beat? (thread) 1. Semi-cycle has turned around. While the company posted a relatively small earnings beat in F4Q23 (revenues growing 2% qoq, declining 21% yoy), management guided to all segments growing sequentially in 1Q24.