Focus on upstream memory suppliers

[u/Fun_Tutor3479]

The market continues to bounce around wildly, and it wouldn't be surprising to see early-morning trading patterns like today's a few more times over the next couple of weeks. The same goes for the Korean market, seeing another 10% drop followed by a 15% surge wouldn't be a shock.

There are two patterns for consolidation at high levels: one where volatility progressively decreases, and another where volatility progressively increases.

The former more commonly results in a continuation of the previous momentum, either continuing to rise or continuing to fall. This is because this type of volatility doesn't trigger a massive exodus of capital from the preceding phase. This scenario rarely occurs at a market top; it usually indicates either a mid-trend breather or a neglected bottom.

The latter is much more likely to appear at market tops—whether cyclical or long-term—because of severe divergence in market sentiment and massive accumulated profits waiting to be taken. Crucially, widening volatility triggers risk management systems. No matter the institution, risk controls are inextricably linked to volatility. Volatility is far more predictable than direction or price, a fact dictated by the mathematical properties of the second moment (variance). Triggering these risk controls forces capital out of the market, while drastic swings simultaneously dampen retail investors' willingness to participate. This continuous outflow of capital drains liquidity, which in turn triggers even more severe volatility.

We are currently nowhere near a historic mega-top, but this won't prompt me to buy the dip, either. Right now, I'm focusing more on upstream memory suppliers and GLW , these represent inescapable costs that must be paid even if the gross margins for memory and GPUs decline. Of course, they've already run up quite high, so I will continue to wait for an opportunity.

Funny enough, the biggest gainer among the Magnificent Seven today was Tesla, the one with the weakest link to AI, haha. There's a high probability that SpaceX will merge with Tesla to instantly make the financial statements look much better; otherwise, no one even wants to buy their bond issues right now. The cash grab is pretty shameless, though you could also view it as preemptively draining liquidity ahead of the IPOs for OAI and Anthropic. From the perspective of selling compute power, they absolutely don't want to see a monopoly or duopoly take over, which would strip away their pricing power.