Tech tug of war: fear vs. greed

0:10Sarah Awad from Tech Contrarians. Always great to talk to talk to you on Investing experts. Welcome back to the show. Thanks so much for having us. It's great to be here. It's always great to have you. We always get a lot of insight about the tech space. And true to form, as a contrarian, you also provide us with very interesting, I think, and unique takes about the tech space, which, as we've mentioned so many times, is almost the whole stock market at this point. Yeah. So here we are, middle of February, 2026, a new year for us. What would you say you are thinking about and looking at in the tech space these days?

0:48So Raina, when it comes to the tech space, I feel since the year begun, we are kind of stuck in a tug of war, right? It's like, we know that markets are usually driven by greed and fear. And so we're having a tug of war between the two. And it feels like with the volatility that we're seeing, investors are leaning more into the fear than into the greed. So we have massive sell-offs. We saw that with Upwork. We saw that with PayPal. We saw that with Microsoft, with so many of these names that otherwise have shown good fundamentals or healthy positioning. And so it's a market that's not holding back on punishing stocks if the growth that's anticipated isn't really showing up.

1:26And so that's why I think we're leaning more towards the fear aspect of things. But having said that, the other theme that's playing out aside that kind of tug of war, I would say, that's really interesting to us is the fact that some of the biggest, you know, tech names, especially on the semi front, are, you know, trading sideways. You know, if we look at NVIDIA, if we look at Broadcom, you know, since Q3, NVIDIA has really been either an inline performer to the SOX or an underperformer. And the same thing is playing out with Broadcom. And these are, you know, the two guys that are really pushing the compute power behind AI, whether in terms of AI GPUs or in terms of ASIC.

2:01And so I think that If we take that into account and then we look at kind of the movement that we see with Micron when it comes to memory or even Seagate and Western Digital on, you know, hard disk drives and storage demand that's being driven by AI. It's interesting because if these guys are moving, then the assumption is that, you know, Broadcom and NVIDIA must be doing well. So we're seeing a market that's not saying that the AI trade is dead, but it's becoming more selective in terms of shying away from names with, you know, premium valuations and really looking to scoop up cheaper names with that AI exposure, even if we look to the NeoCloud guys.

2:35So I would say it's a confused market. Everyone's waiting for the other shoe to drop and no one wants to be in the market once that happens. What would you say about the sell-off in the software stocks specifically? So when it comes to the software stock specifically, I think we're seeing a lot of panic just around the idea of a lot of promises over the past year when it comes to integrating AI. And people are getting anxious, waiting to see the return on investment. And so I think that's why we're seeing a lot of panic. And we're seeing that even among the biggest players. I think the Microsoft crash is really monumental.

3:07Aside from the surge in CapEx that we're seeing across the big tech, the tier one players, we're also seeing a revived panic around the open AI narrative. and the circular financing there. I think part of really what dragged down Microsoft's post-earnings was the idea that 45 % of their backlog is linked to OpenAI. And so if we follow this trend of being associated to OpenAI, dragging down stocks, we can see that with NVIDIA, with the whole drama that happened after the Wall Street Journal reaffirmed NVIDIA's commitment to$100 billion investment in OpenAI not being binding. we can see that as well when it comes to AMD on the Q &A session within the last earnings call Lisa Sue got asked about you know what do you think about the the circular financing situation when it comes to open AI and your attachment there because that's really what pushed AMD into the next leg of growth late last year and we're seeing management really beat around the bush we're not really getting a lot of clarity and I think that's what's feeding a lot of the fear for investors, especially with the higher capex.

4:12I mean, if we're looking at the tier one players alone, looking at north of 600 billion in commitment, and then if we loop that into the global conversation, which I think isn't discussed enough, although it's now gaining more traction as we went through the deep seek anniversary moment earlier in January, is that there's such a gap, a wide gap between the US capex, which is I think now around 625 billion and the expected capex from china for the year which is you know barely a small portion of that 74 billion and so i think we're seeing a lot of you know renewed fear about how much these companies are spending and how much they can really guarantee a return on investment when it comes to that so you know markets investors are being merciless when it comes to the discussion of capex and for good reason because everyone's worried that people are overspending and they can't really deliver on that return yet.

5:05And we know that these tier one players can't hold back, you know, you can't see Google, for example, hold back on spending or meta hold back on spending while Microsoft and Amazon are upping their spend, because you have to stay competitive and what is still, you know, an AI market in its early innings. So the question is, then, how do you play off of that? How do you kind of see opportunity on the table, even in this volatility? And that's where we, you know, we like to, as always, we like to go back to the fundamentals. So even in a market like this where you know nvidia isn't being treated um you know isn't isn't being treated like it's in markets good graces we still see opportunity on the table there and i think this loops back into the conversation we've been having for a while i think we discussed this on our last podcast which is that whole h200 situation so while we've had a lot of will they won't they over the past couple of months since the u.s approved the sale of the h200s now we're seeing a more, you know, cold shoulder from China.

5:58But I, we still do believe that it's a, you know, it's a matter of when rather than a matter of if the H200s are going to be back into the market. And I think the case in point to that is the fact that, you know, you have a widening gap in terms of the technology between the US and China. Although, you know, you got new domestic players, really, you know, a lot of new IPOs, a lot of backing from the Chinese government to achieve that kind of self-sufficiency, I would say that gap is widening more so with the technology transition that we're seeing when it comes to memory, for example, when it comes to DRAM, and even when it comes to, you know, NVIDIA's next generation, Vera Rubin.

6:37So I think if we take all these moving parts together and we kind of tone down the market panic, there still is a lot of opportunity on the table. And here what I'm talking about is, you know, NVIDIA having a catalyst in the upcoming, I would say, two quarters that has to do with one, China sales, and two, that has to do with the Vera Rubin ramping in the second half of the year. And I emphasize that Vera Rubin, that's something that we didn't discuss too much on the last podcast. I emphasize that specifically in light of AMD's print, because on AMD's call, I think the way that Lisa Su talked about, you know, the fact that they don't have supply constraints and the kind of discussion there, I think it hinted at the fact that AMD is still inferior to NVIDIA's offerings.

7:20And so once we see Vera Rubin ramp, and it'll be ramping before AMD's MI450, I think we're going to see everyone really favor NVIDIA's product. And we've seen this in the past. And even with AMD having OpenAI in their pocket, I don't think that really changes the dynamics there. So I think with NVIDIA, although the stock has been acting pretty still, you know in Q3 it was up 17 % which was in line with the Sox Q4 was flat quarter to date's flat I think we're NVIDIA's you know it'll have its its breakout moment once again as confidence is revived in you know the Vera Rubin narrative and then once we get a lot more clarity much needed clarity on on the China front and then even from there I would say the other you know the other area to look at is really the behind the scenes guys and that's where we look at the semi-cap players.

8:10So that are, you know, ASML, LAM Research, and AMAP. Because as a technology, you know, the industry transitions technologically, both in terms of logic and specifically in terms of memory and DRAM, these guys are going to benefit massively, not just because of, you know, AI momentum, but also because of this broader industry transition. And we got signals from, you know, management from Micron talking about how they're going to have higher capex for the year, and that's going to be weighted to the second half of the year. So I think even with the semi-cap guys really running up year to date, there still is a lot of opportunity there.

8:44So I think that although investors are fearful about being positioned in names ahead of a big crash, I think there still is opportunity in these names that have that kind of fundamental positioning and are more secure than, I would say, the more volatile names like the neoclouds that are moving faster, but that also come down harsher once that AI panic rises and becomes part of the conversation once again. Even with your bullishness on, let's say, NVIDIA, what about, practically speaking, valuation-wise for retail investors? What would you say, again, no investing advice here, but what would you encourage investors to think about?

9:24When it comes to valuation, I think that's become, as I mentioned earlier, a massive point of concern for investors. Having said that, I think the fundamentals will shine through and Nvidia does grow into its forward earnings. I mean, if we look at, for example, Nvidia against other players like AMD or Broadcom or all of these guys, Nvidia is still the best positioned AI name. And I know that that seems like a worn out narrative in 2026, but I think the fact that it's fallen out of market's favor really does show that that still should be the case, especially that you have the Verarubin ramp coming up and you have, you know, NVIDIA demonstrating pretty much outstanding growth with, you know, revenue growth forward looking at 75%, which is, you know, far superior to the sector average.

10:17So I think that NVIDIA is delivering on growth. I think part of what's causing the stock to, you know, get looped into the conversation of, you know, fear around premium valuation is the way that we're seeing Jensen discuss AI on the earning calls. I think what we got last quarter, in the midst of all the panic, really when that circular financing became the spotlight in investors' mind, is that we have Jensen trying to talk on the earnings call as if it's an educational lesson. And that's not what investors want anymore. Maybe that was attractive for their first two years of the AI boom. But now I think investors really want tangible, fundamental understanding of where things are headed.

10:57I don't think Jensen can kind of spin the kind of earning calls that we see Elon Musk do with Tesla, right, where he's kind of talking vaguely about very far out goals and how, you know, how this can play out in 10, 20 years. I think what investors want to know right now is how can this be sustainable today? And that doesn't just apply to NVIDIA. I think this also applies to, you know, what we saw from Lisa Su on the earnings call. and really investors are just looking for tangible metrics to understand where this AI kind of narrative is headed today in 2026, especially with the surge in CapEx that's really causing panic, especially with OpenAI and Anthropik and Claude.

11:35I think those guys would be the point of concern because at the end of the day, tier one guys, they're in a healthy position financially. But then when you have OpenAI's spending spree that happened late last year, still weighing on markets today, still kind of, I would say, coloring the way that investors are digesting, whether Microsoft's results or AMD's results, or even Jensen's commentary with reporters and with the Wall Street Journal, we're still seeing this kind of panic. And the interesting thing is, again, to take this back and look at this from a global perspective, that you saw NVIDIA outside of the world's largest smartphone market, PC market, EV market, and that's China.

12:16So I think that investors aren't giving enough credit to the fact that that's an untapped into market for NVIDIA that sooner or later they should be able to access. From our perspective, our speculation is that China's kind of holding back on letting NVIDIA in before they have another deep seek moment to kind of reaffirm this idea that they can do less with more. But eventually, sooner or later, that should be, you know, re-wiving into the conversation. We should see regulation there kind of relax a bit. And we saw this a bit when it comes to AMD in terms of NVIDIA's, you know, superiority, not just to the domestic Chinese players, but also to AMD with AMD's earning results only really beating because of the sales of the MI308 to China.

12:59So when it came to that, AMD, you know, took a massive nosedive. I think it's around 13 % post earnings because of that idea that investors realized without China sales, AMD really wouldn't have performed as well as expected. And so if we take that and we put it side by side with NVIDIA, if AMD is selling the MI308s to China, then NVIDIA's product is going to be far more superior. And that really loops back in and it's inseparable from the conversation about the semi-cap and where technology is headed. Because if we look at ASML, the semi-cap guys, whether ASML, LAM or AMA, have seen a huge China factor really drive their earnings for the past two years.

13:44and that was a massive point of concern as China tries to build its own kind of semi-cap peer group especially when it comes to the lithography and where ASML is the dominant player so with China sales you know representing I think it was around 42 percent of the total system sales for ASML last quarter when they reported in mid-October we're seeing this normalize to around 36 percent of total sales this this quarter and management expecting the the China sales to normalize further in 2026 to 20 % of the total sales. So if we take that into account, and we still see ASML delivering on growth, that shows us that growth for ASML is really driven not by the DUV machines that are sold to Chinese customers, which are, you know, the older, less advanced tech, but by the EUV tools that, you know, are surging in terms of booking.

14:34So for EUV tools, ASML saw EUV tools grow 105 % quarter over quarter, which is a huge number. And so as we see, you know, we like to say that semi-cap are basically a forward indicator for the market. And so as we look at the semi-cap players and we kind of see this momentum build up, especially for ASML with EUV demand, then we're seeing that the future is going to be basically driven by this technological transition by advanced nodes. And when it comes to that, China doesn't have its hand in that market. And so because of that, the gap will widen and eventually to keep up, China will need to kind of lean its shoulder a bit on NVIDIA.

15:13And so that's what I think at the end of the day does justify the kind of valuation we're seeing for NVIDIA. Although valuations are crazy when it comes to AI, it does make sense that NVIDIA can grow into this, especially as sooner or later it should be able to tap into this Chinese market. And then, of course, you have the Verorubin that's going to be upcoming as well. and I think if we circulate that as well into the memory side of things valuations on that front are also you know we've seen memory guys and storage guys really surge here today so I think investors are really getting driven towards that side we're seeing momentum stick around for those players and less so for the the you know the players that are really making the product itself and people are treating memory like it's going to you know stick around like memory is not cyclical by the end of the day everything has a shelf life right and Micron or Seagate or Western Digital are no exceptions, especially if we take a closer look at Micron's print last quarter, or late in December this quarter, really, and the fact that they didn't really share their HBM sales because usually in the quarter prior, they had given us the exact number for the HBM sales.

16:20This quarter, they didn't give us that, and I think that just signifies the fact that the upside we're seeing now for Micron, for these guys that investors are getting extremely excited about in terms of their AI positioning, The upside isn't necessarily being driven by AI as much as it's being driven by the surge in memory prices because of this idea that there's a huge memory shortage. But once again, memory sooner or later will be cyclical because once again, HBM is sold out in terms of capacity for Micron for this year. They're going to have to go through this technological transition and, you know, these kinds of constraints should ease into the second half.

16:51And I think that's when we're going to see, you know, the market, especially when it comes to AI and these guys like Broadcom or NVIDIA really take a breather and be able to see momentum pick back up. Do you do price targets for any of these stocks? We don't share price targets per se, but what we do is we share entry points within our investing group at TechCountrain. So I'll give you an example of the most recent one that we triggered. It was a price alert as an entry point for Credo, which works in the connectivity realm of AI and has been really getting hammered, you know, year to date. And over the past couple of months, I mean, I think year to date, it's down 12%.

17:28It was down a lot more. It was down 32 % before it kind of recovered. So we triggered a price alert there around the below 100 level, and it's really recovered since then. We see even more momentum picking up there, and that's because of their AEC. And it'll be very difficult to displace that, even with guys like SimTech, who have done well to try to bring ACC to the market. So that's the kind of way that we work around price alerts. We look at the names that have that really solid fundamental positioning. and then we trigger these price alerts when we think that they're trading below their actual value or you know the market's really ignoring the fundamentals on those names.

18:06And what would you say is most concerning to you or what are the things that are most concerning to you that you're most worried about? In the broader market? Given your thesis on these particular players in the tech space what is most concerning to you? I think when it comes to you know the tech space in specific and what we're discussing today, I think we're seeing investors, you know, it really goes back to that kind of tug of war. I think we're seeing investors really wait for that other shoe to drop and that AI bubble kind of concerns to come to fruition. But what we think is really going to happen is that we're going to see this back and forth.

18:45That's going to bring down kind of valuations, going to bring down stocks, some more attractive buying windows. But the real concern for us is what's going to happen next with China. I think that's a big point of the conversation. And I think even though we saw that DeepSeek moment happen in January 27th last year, I don't think we really kind of priced in the full effect of this huge gap between U.S. CapEx and China CapEx. So I think if we have more, I know we have more, you know, Chinese models anticipated before the Chinese New Year. And I think as we look at the next couple of weeks, if we see something very substantial in terms of performance come out of China, especially given their minimal capex compared to the US, that could drag down markets substantially.

19:30So that would be the number one concern that we're watching. The second one, I would say, really goes back to that idea that investors aren't really looking at the market in terms of fundamentals. A lot of this is, you know, just driven based on opinion and fear of exposure to names that don't have enough upside or that run up a lot. And so I think that's why we're seeing such dramatic reactions to print. While I'm on it, one last thing to throw in there is I think that, you know, well, excitement around the memory and the storage kind of peer group is well founded in terms of, you know, when we track spot prices, DRAM prices are expected to surge north of, you know, 95 % for the first quarter of the year.

20:08While all of that is great, I think what's also important to remember for investors, I wouldn't say this is a concern for us so much as it's something that I would share just for investors to be aware of, is that at the end of the day, everything has a shelf life and there will be a time to need to kind of step out of memory and revisit the narrative on that. And with, you know, Micron trading at the levels that it's trading, I think that that's really important to keep in mind because when stocks run up this much, you know, we have Micron at$418 per share. I mean, I remember it wasn't too long ago, it was on the April crash that Micron was around 67 bucks.

20:46So with this kind of surge, I think it's really important to remind investors that everything has a shelf life and memory is, you know, maybe a super commodity, but it's still a commodity at the end of the day. And so it's really important to remember that because these guys can go up so fast, they can also come down very, very fast. So it's important to keep an eye on spot prices. It's also important to keep in mind that towards the second half, as Micron kind of spends more capex and we see that technological transition, that's when I think it's worth looking at names like Semicap, even after, you know, the mini run that they have early on, because they're going to be in a healthy position to benefit from that transition.

21:22So it's not just through memory exposure that you can play on that, but it's also through exposure to where Moore's Law is taking us, which is where it loops back into the semi-cap players. And even suppliers of the semi-cap players, which are smaller cap names like iCore and a couple others that we share within Tech Contrarians. So a nice little ecosystem that feeds on itself that keeps the cycle going. Yeah, I mean, if there's one thing you can trust in when it comes to tech at the end of the day is that you're going to have, you know, Moore's Law will continue. Inventory will build up and then inventory will digest and it will be a cycle.

21:57So it's really important to also not get carried away and forget that even when we're seeing, you know, unprecedented levels for guys like Micron. Share with listeners what Moore's Law is for those that don't know, please. Yeah, of course. Moore's Law is essentially the idea that technology needs to consistently be progressing. So the number of transistors on a microchip needs to be doubling approximately every two years. And so that's the idea that, you know, you go from HBM 3E to HBM 4 and you transition and you evolve as tech advances. And so, you know, a couple of different areas where you can track this early on as leading indicators are the semi-cap guys, but also the foundry players.

22:32And we've been very bullish on TSMC because it's really at the heart of, you know, this shift towards more advanced process nodes. so whether that's in terms of you know iPhones moving to more advanced process nodes or in terms of NVIDIA and AMD you know their next generation moving to more advanced process nodes and that's really why we have so much attention on Intel really because Intel is really trying to keep up with that because of its legacy and its golden days and trying to kind of revive that kind of positioning so we've really seen Intel surge I'm not sure if you remember we talked about Intel I think on our earliest time on the podcast with you and it was our thesis then was you know buy Intel.

23:09It's a no-brainer under$20. And then you can just trade it and then hold it through Q4. And it's really surged sense. And we've stepped, we've turned more in terms of fundamentals bearish on the stock after that surge and after it really crossed into the high 40s level. But at the end of the day, that's part of why we're seeing so much love towards Intel, because they're trying to build up this foundry position with the 18A and then the upcoming 14A. And if they can tap into this market, then they tap into this essentially playground that TSMC has dominated for so long. And it enables them to have exposure to the whole process of Moore's Law and this technological transition there, which is something that's, you know, it's still a work in progress very much for them.

23:53I think we need to see, you know, a raised capex for us to really regain confidence in, you know, Intel's foundry and where that's heading next with the upcoming 14a because they still don't really have external customers on that front so they're still more or less trying to fish those out so i don't think we're going to see you know intel really pressure or compete with tsmc anytime soon but what i would say is that there is potential there and the stock definitely does move you know drastically on on any rumor that there could be a potential external customer we saw that with rumors around apple and nvidia becoming external customers.

24:29And I think we could see that again with Intel. You talked about how investors should keep in mind that these stocks may slide, these stocks coming up and going up and coming down. What would you say about timelines that investors should keep in mind in terms of, you know, we were talking to Steve Kress and he was talking about this historical context to don't get lost in the noise that everybody's, you know, to your point about the fear and the uncertainty that we've been through this before, you know, investors that have been in the market for some time have been through this before, maybe not this exactly, but, you know, a downturn, a sell-off and riding the wave.

25:05What would you say about the timeline here for the ones that you're bullish on? For the guys that we're bullish on, the way we're looking at it is that because there's so much fear in the market today, there very well could be a pullback that kind of encompasses the entire tech sector. But when it comes to that, the guys that bounce back first are the guys with, you know, strong fundamentals. And so that's why we stick to these guys. So we do like to, you know, suggest swing trades on NeoCloud players. We do flag, for example, guys like Core Scientific who are in the NeoCloud group, who are verified by others like CoreWeave, who still don't have, never had that kind of hyperscaler breakout moment.

25:43So we do look at those guys as attractive swing trades with, you know, that potential upcoming catalyst. But having said that, the way that we're looking at this market is that you want to stick to the guys with strong fundamentals if you're holding and you want to make sure that you're you know reducing exposure to the names that are more volatile that have kind of run up on ai hype because these guys are going to be the ones that that come down the fastest uh so when it comes to that that's why we like to you know we're classic we like to stick to the names that have carved out of space for themselves within the supply chain um so one of the the stocks that we got asked about you know earlier this year a lot was super micro uh because you know they would have that first mover advantage when it came to the whole AI server supply chain.

26:25And they've really lost that. It's really deteriorated over the past year. And it's gotten worse with Taiwanese ODMs coming into the scene with the need to maintain lower margins. So it's really squeezed Supermicro. It's squeezed guys like Dell, especially with a memory shortage. So these guys who are in the supply chain who have this positioning or NeoCloud guys that are, they have these deals with hyperscalers, whether we're talking about applied materials or we're talking about HUD-8 or IRN, all of these guys, they're great. They're beautiful for a swing trade. I think that's the exact sweet spot for swing trades, but these aren't the guys you want to stick around too long because of this kind of volatility that we're seeing.

27:08There's not a lot of confidence in the long-term narrative around these guys. So it really does, I would say, when it comes to timeline, it comes back to sticking to names that you're comfortable holding on a red day because there will be red days in a market like this. Do you hold for the long term? So we do a combination. I would say we do a combination when it comes to the, you know, guys like NVIDIA, like Broadcom, we do hold these for, I would say, you know, the mid to long term. But when it comes to the swing trades, we have a different kind of portfolio there that we like to get in and get out because basically these guys, we like to buy them when everyone hates them.