Hey Snackers,
All that glitters is gold... especially in today’s market. Long considered a safe haven asset, gold bullion surpassed $1,000 per troy ounce during the financial crisis, $2,000 in the pandemic, and this Tuesday passed $4,000 for the first time. These charts showing how gold performed over 1, 5, 10, and 25 years compared to the S&P 500 make it plain why both central banks and individual investors have been piling into the asset.
Stocks rebounded from yesterday’s dip to fresh records, as the S&P 500 and Nasdaq 100 both posted new closing highs. The Russell 2000 also rose, coming just shy of Monday’s record close. The minutes from last month’s Fed meeting hinted that a narrow majority of officials support what traders have been betting on: two more rate cuts by the end of the year.
An ETF exclusively for meme stocks relaunched yesterday, like a phoenix rising from the ashes
The Roundhill Meme Stock ETF is back, in case you wanted a gut check for how much retail is in the driver’s seat for the market these days.
The actively managed ETF started trading under the ticker “MEME” Wednesday. It’s a relaunch of a product from Roundhill that opened in December 2021, the same year as the OG GameStop meme stock craze, before shuttering about two years later.
“There still remains a feeling among the Wall Street establishment that retail in aggregate, and especially the connectivity with meme stocks, is a non-serious endeavor,” Roundhill CEO Dave Mazza told Sherwood News. “But what we’ve learned, particularly in the post-Covid period and then into 2025, is that the power of retail investors across the broader market is particularly strong.”
The first iteration of the meme stock ETF used elevated social media activity and high short interest to screen for its components. This time around, Roundhill is aiming to take a more forward-looking approach to selecting companies that have a high potential for big swings.
After screening out the US-listed stocks and ADRs that are not among the top 200 most highly traded securities, Roundhill will then use the options market to zero in on 30 securities from the remaining list that have the highest implied volatility.
From those 30, through a mix of quantitative and qualitative research, the fund managers will select 13 to 25 stocks that will be held in the ETF. Mazza spotlighted Reddit and X as two of the social media platforms that will be key sources for Roundhill to get a handle on retail sentiment.
The Takeaway
It’s just yet another sign of how much people want what retail’s having.
To Mazza, the approach is about trying to be more adaptive to changing themes and a little closer to the ground floor in identifying and piggybacking names where retail traders see immense upside potential. The prior iteration rebalanced once every two weeks, while this time the meme stock ETF will trade “at least once a week, if not more frequently,” he said.
Why Wall Street is unbothered by any margin weakness in Oracle’s GPU rental business
When AMD reached a megadeal with OpenAI at the start of the week, Wall Street went bananas and the shares did too, with more than 20 analysts raising their price targets in the 24 hours following the announcement.
When The Information put out a report on Tuesday saying Oracle’s GPU rental business had a fairly low profit margin, shares dipped and Wall Street responded by doing... absolutely nothing.
Not a single brokerage polled by Bloomberg has changed its rating or price target on shares of the hyperscaler in the wake of this news.
That’s seemingly for good reason: the stock has completely erased Tuesday’s drop!
Heck, Mizuho Securities called Tuesday’s tumble “a buying opportunity,” while Guggenheim added that early returns may be fairly soft, but “it’s reasonable to expect any deal to be at least 25% gross margin over its life — or Oracle wouldn’t sign it.”
So, where does Wall Street’s confidence to shrug this one off come from?
While profitability challenges in the early stages of a ramp are far from uncommon, competing on price is an old hat for Oracle in particular. Back in 2017, cofounder Larry Ellison detailed plans to grow its cloud business by matching Amazon Web Services’ list prices while offering speedier compute, enticing customers with the assurance that “your bill will drop by half” if they switched over.
The Takeaway
The profitability metric reported by The Information “isn’t much of a surprise to us as the company has historically looked to undercut competitors’ pricing — as it’s done for its cloud services business,” Bloomberg Intelligence analysts Anurag Rana and Andrew Girard wrote. “We don’t expect Oracle to make changes to its pricing strategy near term as this has enabled it to capture share. Oracle can also leverage its higher-margin software and database segments to offset the pressure.”
POET Technologies is the newest low-price retail darling
What’s in a name? As Shakespeare (probably) would have posted on Reddit, would not a meme stock called by any other name trade as sweet? While the name of the latest hot stock on Reddit’s r/WallStreetBets evokes the Bard, the company seeing record volumes and call activity is focused on optical communication tech that aims to speed data transmission in AI data centers. “The massive growth of AI infrastructure represents an unprecedented opportunity for which POET is well prepared,” the CEO said, and retail traders seem to agree.
The picture of call volume does more than 1,000 words could ever.
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Off the Charts
Yesterday’s Big Daily Movers
Crypto miner and AI compute provider IREN dropped after announcing its convertible debt offering
Satellite operator AST SpaceMobile rocketed after announcing a deal with Verizon
Joby Aviation slid after the electric air taxi company announced a $500 million overnight share sale
Shares of Tempus AI surged to an all-time high
What Else We’re Snackin’
2025 could be the best year for the box office since before the pandemic
Goldman Sachs on AI bubble speculation: “We don’t think we are in one yet”
The US now accounts for 20 of the world’s 25 most valuable companies, while Europe has only one that barely made the list
Why analyst Dan Ives is “relatively disappointed” with the lower-cost Tesla models
After upsetting GOP senators, GM scrapped its EV tax credit extension plan
Snack Fact of the Day
8% of kids ages 5-12 have interacted with AI chatbots.
Thursday
Earnings expected from Delta, PepsiCo, Tilray, and Levi Strauss
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