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Deep Sonar isn't about predicting tops or bottoms.
It's about recognizing when pressure is forming.
Learn the difference Thursday at 7pm ET |
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Good morning. |
Momentum is still red. |
I don't say that to alarm you. I say it because that's what the data shows. |
This isn't a healthy pullback. This isn't a healthy rotation. |
Let me walk you through what's driving this. |
AMD: When Good Isn't Good Enough |
AMD reported after the bell yesterday. Revenue beat expectations… $10.3 billion versus $9.67 billion expected. Earnings beat too… $1.53 versus $1.32. By normal standards, that's a solid quarter. |
But the stock is down 7% in premarket trading. Why? |
Guidance. |
Q1 guidance came in at $9.8 billion. The street wasn't looking for that number specifically. They were looking for evidence that AMD could compete with NVIDIA in the AI chip wars. Instead, management's forecast rekindled doubts. One analyst described it as a 'slight dip in revenue forecast' that raised questions about AMD's AI positioning. |
In a normal market, AMD's quarter would have been celebrated. But we're not in a normal market. We're in a market that's questioning the entire AI narrative. And when you're questioning the narrative, companies need to clear a much higher bar. AMD cleared the consensus bar but tripped over the narrative bar. The punishment was swift. |
NVIDIA: Frozen in China |
While AMD was disappointing investors, NVIDIA is dealing with a different problem: the Trump administration has essentially frozen the company's China sales pending a national security review. |
This isn't another export restriction. |
This is a full review of the entire China relationship. For a company that used to derive 15-20% of its data center revenue from China, that's significant. The timeline is unclear. The outcome is uncertain. And uncertainty is what markets hate most. |
NVIDIA reports on February 26. |
Between now and then, we're trading on fear and speculation. Not exactly a recipe for stock appreciation. |
The Software Bloodbath |
The IGV software index is down 12% in five sessions. |
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That's the worst performance since March 2020, when we thought the world was ending. CrowdStrike, Intuit, Adobe… they're all down. The India IT index dropped 6% yesterday, its biggest single-day decline since April 2025. |
What's happening? AI anxiety. |
For years, software companies traded at premium valuations because of their 'moats' — sticky customers, recurring revenue, and high switching costs. |
But AI is challenging that thesis. If AI can write code, what happens to developer tools? |
If AI can handle design work, what happens to Adobe? If AI can automate customer service, what happens to all these SaaS multiples? |
Traders are stepping back from what Direxion called 'an ostensibly crowded AI trade.' They're not selling because software is bad today. They're selling because they're worried about what software will look like in 3 years. Existential anxiety is getting priced in. |
The Few Bright Spots |
Not everything is falling apart. |
Gold reclaimed $5,000 an ounce yesterday and held. |
Silver is pushing higher, too. |
Consumer staples look very strong as well… |
What I'm Watching Today |
The government shutdown ended, which means economic data is back. ADP employment hits at 8:15 (expectations: 48,000 jobs). ISM Services at 10:00 (expectations: 53.5%). After being in the dark, markets are hungry for information. How we react to these numbers will tell us a lot about sentiment. |
Tonight: Alphabet reports after the close. |
Momentum is bearish across all indices. The market is repricing AI expectations in real time. Good earnings aren't enough when the narrative is being questioned. |
My stance: defensive. |
Cash is a position. |
This isn't the time for heroics. Look for asymmetric opportunities, but keep the size small. |
The tape is telling us to be patient. |
Join me here for the top stocks to trade and much more… Click the link here. |
Stay positive, |
Garrett Baldwin |
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