MARKET PULSE
⭐️ Markets End the Week Strong After Fed Hints at Rate Cuts

😬 The markets started off ROUGH this week as US tech stocks pulled back, with many saying AI-driven gains have been ‘overdone’ in the historic rally since April. From Monday to Thursday, the S&P 500 fell -1.2% and the Nasdaq-100 fell -2.4%.

💡 Adding to the fears, MIT issued a report saying that 95% of orgs are getting no return on AI investments, and OpenAI CEO Sam said AI is in a bubble:

✨ So with growing fears and markets in decline, Friday came just in time - with the markets bouncing back and ending the week in the green after Jerome Powell, the Chairman of the US Federal Reserve said ‘the shifting balance of risks may warrant adjusting our policy stance’.

📈 Investors took it as a signal that interest rate cuts are coming in September, which was good news for the market:

🔴 But despite Friday’s gains, many of the biggest AI players ended the week in the red:

• Nvidia ($NVDA) fell -1.55%

• Advanced Micro Devices ($AMD) fell -5.11%

• And the Global X AI Semiconductor Index ETF ($CHPS), which tracks the sector as a whole, fell -1.53%

💰 Many experts beleive these are just ‘price corrections’ and that if you look at the big picture, AI infrastructure spending continues to soar (as we covered in our big-tech earnings breakdowns).

😬 But one of the AI stocks had an even rougher week than the rest - Palantir ($PLTR), with the stock falling nearly 10%.

🤯 Now, as with any big stock drop, your first thought may be - “should I buy the dip”… but even with the drop, the stock is still up a massive +400% over the past year, meaning if you invested $10,000 a year ago, it would now be worth $50,000.

💡 So let’s talk about Palantir and whether the drop presents a buying opportunity, or if it signals a reversal of fortune for one of the most high-flying stocks on Wall Street.

🛡️ Palantir: The Most Overvalued Firm of All Time?

🚀 First off, there’s no denying Palantir has had spectacular growth, reporting $1B in revenue in its most recent quarter, 48% higher than last year.

🤖 The company, which was once extremely tied to US defense spending, has also successfully diversified into commercial revenue (aka helping companies integrate AI into their enterprise), with its commercial revenue growing 93% year over year.

📈 But while revenues have been rising, the stock’s valuation has been SOARING to over $400B before the recent dip.

🎯 Palantir’s Forward Price to Earnings ratio (a common measure of how ‘expensive’ a stock is that measures the company’s valuation as a ratio to its forward earnings), has soared to 240x - 6x higher than even Nvidia.

🏔️ Palantir’s valuation to sales, another go-to metric, sits at 120x, 6x higher than Google’s peak in 2005.

💡 According to the Economist, to reduce its price-to-sales valuation to “only” Google’s at its peak in 2005, while maintaining its current share price (i.e. no more stock growth), Palantir needs to multiply its revenue by 5.6x, requiring an annual growth rate above 40% for the next 5 years, a very difficult feat.

🤔 So, Should I Sell All My Palantir Stock?

Does all this mean the stock will surely fall? Not at all - last November, when I covered Palantir in depth, analysts were saying the same thing, pointing out that the stock had reached an ‘unprecedented premium’ and was at ‘Mount Everest valuations’… and since then, the stock has soared another +159%.

📊 But by all principles of fundamental analysis, the stock is aggressively overvalued, so just be mindful if you’re buying/holding the stock that it has become extremely speculative, making the company a very risky bet.

Daniel Sparks sums it up well:

👀 As always, I’m very curious what you all think! Make sure to join the discussion on Blossom on the Palantir stock page!

🛟 But interest rates and Palantir weren’t the only interesting stories this week - in a rare and unconventional move, the US government has taken a 10% stake in Intel, with many saying that this will ‘save Intel’.

🤿 But before we dive in, a quick word from today’s sponsor, Fidelity Investments Canada!

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THE AI RACE
🤯 The US Government Takes a 10% Stake in Intel in a Rare Move

🤖 While we talk a lot about the AI-race in terms of Meta, Google, Microsoft, Amazon, and the other tech giants, another bigger, and arguably more important AI-race is going on - between the US and China.

🇨🇳 Chinese firms like DeepSeek, Alibaba, and Moonshot have all released AI models that are close to the level of US companies, leading Trump to put in place an AI Action Plan in July to build more AI data centres and the electricity to power them. As Trump has said:

💰 The latest move in the race? A rare and unconventional investment by the US government into Intel - investing $8.9B to buy 10% of the US chip giant in an effort to boost domestic chip manufacturing.

🤝 The $8.9B investment will make the US government a passive owner of Intel with no board seat or other governance rights. It comes on top of the $2.2B in grants Intel has received from the US CHIPS Act.

📈 The announcement led to Intel stock ($INTC) jumping 5.5% on Friday, so let’s talk about what it means for Intel and whether it can turn things around for the struggling chip giant.

😰 Recap: Intel Has Fallen Behind

🏗️ As a recap, with semiconductors, there are two essential components to the building process: design and manufacturing.

🎨 As other competitors like AMD specialized in design, outsourcing manufacturing to companies like Taiwan Semiconductor, Intel fell far behind, trying to do both in-house.

😰 To make matters worse, Intel suffered from what its former CEO called a ‘decade of underinvestment’ and neglected first the Smartphone CPU boom and the GPU-boom, which has led to Nvidia becoming the world’s most valuable company.

📉 Over the past 5 years, the stock has suffered, falling -51% as its competitors soared. So…

🕊️ Can the Government Save Intel?

🎯 The #1 focus for Intel right now is proving that it can manufacture the advanced AI chips needed to attract customers and so far, things haven’t been looking to pretty, with Intel facing problems with ‘yield’ - a measure of how many chips are good enough to make available to customers.

🤷‍♂️ Analysts are conflicted on whether the government support will help, with some viewing it as a signal that Intel is ‘too big to fail’ and arguing the government support will help Intel while others point out that Intel was originally supposed to receive this funding under the CHIPS Act for free, without having to give up equity.

🐎 Can Intel Catch-up?

So can Intel catch up? Well, it now has the money and the mandate to do it, and some experts are optimistic, but Intel certainly faces many challenges.

The transition to new Gate-All-Around (GAA) transistor technology, starting with Intel's 18A, is a critical area where Intel hopes to gain an advantage.

But while Intel’s 18A is potentially ‘catching up’ on TSMC’s old processes, TSMC's N2 process is equivalent to Intel's 18A and is set for high-volume production in the second half of 2025.

Even so, Intel certainly has some wins going for it, landing Microsoft as a customer for Intel’s 18A chip and making a big architectural bet on ‘backside power delivery’, which could give Intel an advantage.

💡 My Thoughts

🔍 The more I read, the more optimistic I am on Intel, but the semiconductor race is very technical, and I need to do more research to properly dig deeper past the headlines.

👀 With the recent news, I’ll be keeping a close eye on Intel and adding it to my watchlist, and if you follow me on Blossom, you’ll be the first to know if I decide to join Trump in buying a stake in the company!

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IN PARTNERSHIP WITH CBOE
🚨 NEW ETF Alert: BetaPro Launches 4 New 3x Leveraged ETFs

💡 In other exciting news this week, BetaPro, Canada’s leading provider of leveraged ETFs, launched 4 new funds designed to provide leveraged or inverse exposure to the daily performance of semiconductors, treasuries, and alternatives!

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BetaPro 3x Semiconductor Daily Leveraged Bull Alternative ETF

SOXL is designed to provide 300% of the daily performance of the underlying NYSE Semiconductor Index

BetaPro -3x Semiconductor Daily Leveraged Bear Alternative ETF

SOXS is designed to provide 300% of the inverse of the daily performance of the NYSE Semiconductor Index.

BetaPro 3x US Treasury 20+ Year Daily Leveraged Bull Alternative ETF

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BetaPro -3x US Treasury 20+ Year Daily Leveraged Bear Alternative ETF

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FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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