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2/22/2024 10:13:57 AM Eastern Time

AIN'T NO PARTY LIKE AN A.I. PARTY
By Charles Payne, CEO & Principal Analyst

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Perhaps sniffing a beat from Nvidia (NVDA) after the close, all the market indices rallied hard during the last hour into the closing bell. Interestingly, all the major equity indices also swooned with the release of the Federal Open Market Committee (FOMC) minutes from the previous gathering. It looks like caution was the key feature yesterday:

“Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2%.”

"Several participants mentioned the risk that financial conditions were or could become less restrictive than appropriate, which could add undue momentum to aggregate demand and cause progress on inflation to stall."

With Fed rate cut probabilities already down significantly since that last FOMC meeting, the initial pullback on the minutes was quickly erased as investors looked toward the future.

The Philly Fed Service report was a ‘miss’ as well. The headline number was -8.8, reflecting sharp declines in new and unfilled orders. There was more erosion in the number of workers and a huge spike in wages.

"Drive"

Who's gonna tell you when

It's too late?

Who's gonna tell you things

Aren't so great?

You can't go on thinking

Nothing's wrong, oh oh

Who's gonna drive you home

Tonight? -The Cars

It was a brutal 20-Year Bond auction with a record tail of 3.3 basis points (bps) and foreign buyers dipping to 58.5% from more than 74% in November. To borrow a line from The Cars: who’s going to buy our bonds?

Rotation

The money came out of Technology (XLK) and scattered everywhere. Energy (XLE) was the biggest gainer, followed by Utilities (XLU). Investors decided to try traditional safe havens. 

That was a sizable move in Utilities, which presents the best old-school value on the board.

Communication Services (XLC) and information technology brought up to the rear. That probably will not be the case today.  #Justsaying.

Market Breadth

There was a general flight to blue chip names, resulting in more advancers than decliners, more new highs than lows, and more excellent up volume than down volume.

Never Nervous Nvidia

You will hear accolades all day for NVDA, which beat the consensus in every measure. There was some quibbling about guidance not beating the whisper number, but the quarter was pure dominance.

Back in the Pool…The Water’s Fine
The shares spiked in after-hours trading.

This bodes well for the artificial intelligence (AI) and semiconductor universe, but I am worried about other issues mentioned in this report that don’t seem to matter anymore.

Until they do!

Portfolio Approach

We are adding a new position in Technology (ACMR) this morning in the Hotline Model Portfolio.

Today’s Session

There is an air of excitement, which continues to nudge risk appetite higher.  You must participate but keep your wits about you as well.

Long Idea: ACM Research, Inc. (ACMR) @ $19.80
Industry: Technology; Semiconductors
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BACKGROUND: ACM Research, Inc., together with its subsidiaries, develops, manufactures, and sells single-wafer wet cleaning equipment for enhancing the manufacturing process and yield for integrated chips worldwide. It offers space alternated phase shift technology for flat and patterned wafer surfaces, which employs alternating phases of megasonic waves to deliver megasonic energy in a uniform manner on a microscopic level; timely energized bubble oscillation technology for patterned wafer surfaces at advanced process nodes, which provides cleaning for 2D and 3D patterned wafers; Tahoe technology for delivering cleaning performance using less sulfuric acid and hydrogen peroxide; and electro-chemical plating technology for advanced metal plating. The company markets and sells its products under the Ultra C brand name through direct sales force and third-party representatives. ACM Research, Inc. was incorporated in 1998 and is headquartered in Fremont, California.

SKINNY: The company announced earlier this year an improved revenue outlook for 2023 ($530 - $545 million vs. prior guidance $520-$540 million and a positive guidance for 2024 ($650-$725 million), reinforcing its strong growth momentum in the semiconductor market.

Historically, ACMR has been delivering strong revenue growth helped by its growing customer base in China. The company now expects $1 billion in revenue in a few years. Our target is $24.