Pre Market Thoughts - 10 Jul 26

Anxiety still seen within Asia markets as morning trading started. Despite a surge in $SKHY implied in US markets, local KR shares started plummeting into the open, dropping as much as 6%. This gave many participants a heart attack - though it quickly proved to be a head fake with KOSPI trading up 4.6%. NKY continued to trade firmly, up 1.5%. The character of markets has definitely changed into one that is much less momentum driven.
Taking into context KOSPI's performance, i can say that most levered players have probably been flushed out. The most recent drawdown has approached 20% - this would have wiped out 5x levered players. Even participants on 2x leverage were looking at an almost halved portfolio. I would expect risk sentiment to slowly improve.
In US markets, $META staged a strong reversal in its price action. Notably, despite announcing implied higher capex needs - markets are thrilled that Zuck is now starting to monetize - pushing ahead out in the model training race. Semianalysis has published - saying that they see META as the 3rd participant in the frontier race.
GPT's new models are released - give it a try. I would say i would find it hard pressed to distinguish AI from a human at this point....
Next - going into earnings, we see some leaks about META's capex spending plans - about META getting to a total of 14GW compute by end 2027...this is insane. Mizuho thinks that "they are likely getting all that added GW next year from neocloud leases vs actual capex build internally" - this is monumental.
This is massively bullish for semis and a big bold bet for META. Hence, Zuck needs to say that they could lease out any DC capacity not needed internally to create breathing room for himself in this CRAZILY AUDACIOUS capex plans.
Are neoclouds competitors? NO. Neoclouds are the likely suppliers of this compute to Zuck.
After taking profits on my $PENG position, i have also added exposure in $ORCL. In a market starved of compute and with OAI's new GPT plans, i think $ORCL at this equity valuation is pretty worthwhile. The only risk on this is the possible equity dilution for capex financing.
On Bloomberg's reporting last week, the market underwent a deep positioning cleanse. With positioning cleaned out from record highs to something more manageable. GS reports that gross leverage is at the bottom decile over the last 1year for fundamental L/S funds.
Going forward, i think that volatility should finally start to dampen down as the market needs to regain its footing after the widespread positioning puke. Participants need to regain conviction. This means a more steady path with lower volatility.
Besides neos, the other sector that i see strength in is memory pooling. I continue to think that memory remains afflicted by overly thick positioning.
Good luck