Dear Reader,
Good morning,
Today I want to talk about the market selloff we saw last week, especially in big tech.
We saw risk-off mode.
Meta broke below $600 a share - I love Meta below $600 a share.
Wedbush Investment Group - a very smart bank - says the tech selloff is a buying opportunity.
In a brutal week for tech investors, Wedbush came out bullish on big tech.
Names like Tesla, Microsoft, Palantir, Nvidia, among others, have put some near-term concern in the tech bull market.
Analysts added that it’s been a “white-knuckle moment” for tech stocks.
But let’s zoom out for a moment….
This market has been marching up.
They don’t all go straight up.
That’s not the way this works.
The bulls get tired, and in this particular selloff, we have one company to blame:
Meta.
Meta came out with earnings that really scared people.
Meta’s earnings were actually great - but people freaked out about their announcement on how much they plan to spend on AI.
People look at Google, and Google says, “we’re going to spend $100 billion a year on AI and CapEx buildout” and people say, “that makes sense - Google has search in Chrome, and when you add AI to Chrome, I can see how they’ll get a return on their AI capital investment.”
They look at Microsoft and say, “Microsoft’s going to spend $100 billion in AI CapEx. We understand. Microsoft’s adding that Office Co-pilot thing to their Office suite - we can see how they’re using AI.”
But when they look at Meta, they say, “wait a minute - you’re spending as much as, if not more than, everyone else, but you’re not using AI…
“Where are you integrating AI on your product that will increase to where we’ll get a return on that investment?”
And that’s a fair question.
Especially when you consider how Mark Zuckerberg literally went off the rails a couple years back on the metaverse.
He was like, I’m going to do a metaverse thing. We’re going to be spending $20 billion a quarter.
We’re renaming the company.
It was a whole thing.
The stock crashed from $700 to $100.
It was a great buying opportunity, and we recommended it to our readers, and of course bought in our personal accounts.
It was a great opportunity.
We’re nowhere near that now, but people are saying, Mark Zuckerberg, you burned us in the past.
And, he’s a little younger than some of the other CEOs.
He gets excited. He gets caught up.
So investors are saying, you come off that metaverse disaster and now you’re going all in bigger and better than everybody? Show us the money!
Remember that old commercial “Where’s the beef?”
Analysts are saying, “where’s the beef” with Meta’s capital spending.
What I see when I read Meta’s quarterly numbers, is a company using AI to improve its ad targeting.
They’re generating revenue on videos.
I see a lot of AI application behind the scenes.
I have not seen clearly how they’ll be using AI facing consumers, yet.
I see on Facebook and Instagram they have these little commentaries, you can ask it this and that, but I haven’t formally fully seen it yet.
That’s what’s freaking people out.
I’m a big believer Meta is cheap under $600 a share… trading at 23-times earnings.
I believe that with a $1.5 trillion market cap, this company throws off so much cash it’s astonishing.
To trade at 23-times earnings, under $600 a share, that’s when I start to lick my chops.
Remember that Bugs Bunny episode where two starving castaways are stranded on a raft, and they look at each other and see a hamburger and a hotdog?
When I see Meta go below $600 a share I get very, very excited.
I hope it goes lower, honestly, because then I’ll get a chance to buy even more.
That’s all I have for you this Monday.
Have a wonderful day. See you tomorrow!
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