THE CPU SHORTAGE HAS ENTERED THE BULL MARKET, NEGOTIATIONS MIGHT BEGIN AGAIN | MARKET OPEN

SUMMARY

Amit Kukreja provides a comprehensive analysis of the semiconductor sector's explosive gains, focusing on Intel, AMD, and Nvidia as they lead the market to new highs. The discussion covers the causes and implications of the ongoing CPU shortage, earnings results, and broader market dynamics amid geopolitical and macroeconomic developments.

MAIN POINTS

• Intel and AMD experience sharp pre-market gains, with AMD up over 10% and Intel up 25%, driven by strong earnings and a validated CPU shortage. [2:00]
• Geopolitical headlines about potential US-Iran negotiations influence oil prices and contribute to the market's early green momentum. [6:01]
• Intel's earnings report significantly beats expectations on revenue, EPS, and gross margins, attributed to unprecedented CPU demand. [9:00]
• Industry experts explain the critical role of CPUs in reinforcement learning and agentic AI, highlighting why CPUs are now in high demand alongside GPUs. [12:00]
• Intel's call reveals that AI-driven businesses now represent 60% of its revenue, with AI and ASIC segments showing rapid growth. [15:01]
• AMD's stock surges as investors debate whether to hold, sell, or take profits amid speculation about future earnings potential. [17:03]
• Semiconductors reach their most overbought level versus the 200-day moving average since June 2000, but current demand is seen as fundamentally justified. [20:01]
• Meta expands its partnership with AWS to deploy Graviton cores for AI workloads, signaling broader industry investment in CPU-heavy infrastructure. [21:02]
• The White House declines to comment on Iran negotiations, while Trump reiterates his approach to ongoing Middle East conflicts during a press conference. [23:00]
• Insider trading concerns surface as Trump dismisses the significance of prediction markets and betting on geopolitical events. [27:01]
• Qualcomm, previously lagging, breaks out in pre-market trading, possibly due to its ARM data center CPU launch and indirect benefits from the sector rally. [29:00]
• Michael Burry's portfolio activity is discussed, revealing a mix of bearish and bullish positions in major tech and AI names. [32:00]
• VO, a major market index, sees record inflows, reflecting strong investor confidence despite volatility and skepticism from market bears. [35:02]
• Nvidia's relative underperformance is attributed to its massive market cap and the need for further earnings confirmation, while CPUs and other semis take the spotlight. [37:00]
• Semiconductors log their 17th consecutive day of green inflows, with the market's focus firmly on AI infrastructure and hardware plays. [41:00]
• Market opens with Intel, AMD, and Micron all posting substantial gains, while software and fintech names lag behind. [44:01]
• A poll is conducted on whether investors would buy AMD or Intel at current elevated levels, revealing hesitation despite strong price action. [49:01]
• Goldman Sachs projects significant pension fund rebalancing, but the market remains resilient as semiconductors continue to rally. [54:00]
• Seasonal volatility is discussed, with historical data suggesting May and June are typically weak months for equities. [57:00]
• Consumer sentiment and inflation expectations are released, showing mixed results and prompting debate about the reliability of survey-based data. [1:03:03]
• The DOJ drops its investigation into Fed Chair Powell, clearing the way for Kevin Worsh's potential nomination and reducing uncertainty around monetary policy. [1:19:02]
• Tesla's earnings are critiqued for accounting maneuvers, while Microsoft offers buyouts to employees as part of a broader labor market shift. [1:24:03]
• SanDisk reaches $1,000 per share, exemplifying the extraordinary returns seen in select semiconductor stocks over the past year. [1:27:02]
• Community debate arises over celebratory 'bell ringing' for stock milestones, reflecting the emotional highs and lows of retail investors. [1:35:01]
• Software and SaaS stocks continue to decline, with no clear headline catalyst, as capital rotates further into semiconductors. [1:41:01]
• Nvidia joins the rally with a 4% gain, surpassing $5 trillion in market cap, as option activity surges and retail sentiment turns euphoric. [1:59:00]
• AMD hits an all-time high of $350, prompting retail investors to share their gains and reflect on the importance of long-term conviction. [2:29:11]
• Wisconsin files suit against several prediction market platforms, highlighting ongoing regulatory scrutiny in the fintech and crypto sectors. [2:40:00]
• The session closes with a recap of the historic semiconductor rally and a reminder of the risks of being 'dilatory' with investment decisions. [2:42:00]

DETAILED ANALYSIS

The trading session was marked by an extraordinary rally in semiconductor stocks, with Intel and AMD leading the charge following Intel’s blockbuster earnings report. Intel’s results exceeded Wall Street expectations by a wide margin, with revenue, earnings per share, and gross margins all coming in well above consensus. This performance was attributed to a historic shortage in CPUs, a trend that has rapidly shifted market focus from GPUs to CPUs as essential components for the next phase of artificial intelligence infrastructure.

The report highlighted that Intel’s AI-driven businesses now constitute 60% of its revenue, growing at a 40% annual rate, and that even older inventory was being snapped up by customers desperate for compute power. This surge in demand has been mirrored by AMD, whose stock soared over 10% in pre-market trading, and by ARM, which also posted double-digit gains. The broader semiconductor sector, including TSMC, Micron, and Marvell, saw significant inflows, marking the 17th consecutive day of sector-wide gains.

The rally was further fueled by macroeconomic and geopolitical developments. Early in the session, headlines about potential US-Iran negotiations led to a temporary decline in oil prices and contributed to the market’s green open. However, the White House’s lack of comment on the negotiations and ongoing uncertainty in the Middle East continued to inject volatility into the market.

Former President Trump’s remarks at a press conference suggested that negotiations could take longer than anticipated, and he emphasized the importance of securing a lasting deal. These geopolitical factors, while significant, were ultimately overshadowed by the strength of semiconductor earnings and the sector’s central role in the current bull market.

Industry experts, including Dylan Patel, provided context for the CPU shortage, explaining that reinforcement learning and agentic AI workloads are increasingly dependent on CPUs rather than GPUs or ASICs. As AI models become more complex and are deployed in diverse environments, the need for CPU-driven compute has surged. This shift has led to a re-rating of companies like Intel and AMD, which had previously been seen as laggards in the semiconductor space.

The market’s response has been dramatic, with price targets for Intel raised across the board by major institutions, and AMD’s valuation approaching levels reminiscent of Nvidia’s 2023 rally. The discussion also noted that the current overbought condition of semiconductors relative to their 200-day moving average is the highest since June 2000, but unlike the dot-com era, today’s demand is viewed as fundamentally justified by the scale of AI infrastructure investment.

Meta’s announcement of an expanded partnership with AWS to deploy tens of millions of Graviton cores for AI workloads underscored the breadth of the CPU buildout. This move, along with rumors of further deals involving Broadcom and Google TPUs, signaled that the largest technology companies are diversifying their compute suppliers and investing heavily in custom silicon. Amazon’s stock responded by hitting new all-time highs, reflecting investor enthusiasm for the arms race in AI infrastructure.

Despite the semiconductor euphoria, other sectors lagged. Software and SaaS names, including ServiceNow, Salesforce, and Palantir, continued to decline, with no clear catalyst for the selloff. Fintech and international stocks also failed to attract investor interest, as capital rotated decisively into hardware and infrastructure plays.

The discussion emphasized that the current market is highly thematic, with AI, memory, data center buildout, and packaging dominating investor attention. The S&P 500 and Nasdaq indices benefited from their semiconductor exposure, while more traditional sectors were largely ignored.

Retail sentiment was a recurring theme, with community polls revealing widespread hesitation to buy into semiconductor names at elevated levels, despite the strong price action. Many investors expressed concerns about chasing the rally, recalling the psychological difficulty of buying after significant gains. Nevertheless, those who held long-term positions in AMD, Nvidia, and other semis were rewarded with extraordinary returns, with some reporting gains of over 100% in a matter of months.

The celebratory mood was tempered by reminders of the risks of being dilatory with exits, as well as the potential for volatility if macro or geopolitical conditions were to shift.

The session also covered regulatory and policy developments. The Department of Justice dropped its investigation into Fed Chair Jerome Powell, clearing the path for Kevin Worsh’s potential nomination and reducing uncertainty around future monetary policy. This news was seen as positive for risk assets, as it removed a key overhang and suggested a more dovish stance from the Federal Reserve could be forthcoming.

Meanwhile, Wisconsin filed suit against several prediction market platforms, including Robinhood and Coinbase, highlighting ongoing regulatory scrutiny in the fintech and crypto sectors.

Tesla’s earnings were critiqued for accounting maneuvers that artificially boosted free cash flow, while Microsoft announced buyouts for 7% of its workforce, signaling a shift in labor market dynamics as companies reallocate resources toward compute and AI investments. The discussion noted that the environmental narrative around electric vehicles has faded, with EV demand softening in the face of changing political and economic conditions.

Throughout the session, the emotional highs and lows of retail investors were on display, particularly in debates over celebratory rituals such as 'bell ringing' for stock milestones. The community’s engagement reflected both the excitement and anxiety of participating in a historic bull market, as well as the importance of conviction and patience in realizing long-term gains. The day closed with a reminder of the risks of delay in investment decisions and a celebration of the transformative impact of AI and semiconductors on the broader market.

LINKS

• Amit Kukreja's official Twitter/X account
• Amit's Deep Dives Substack for in-depth market analysis
• Amit Kukreja's new website for market news and commentary
• Amit Kukreja's Instagram profile
• Chicago meetup event link

KEYWORDS