Last Thursday’s Meta-Tech Correction

Commentary

As we enter the heart of the third-quarter earnings announcement season, hope for wave after wave of better-than-expected results to propel the stock market dramatically higher. It will be hard to be bearish in the midst of stunning earnings announcements, so let’s just enjoy the ride.

Of course, there was a correction in tech stocks last Thursday after Meta Platforms missed the consensus analyst earnings estimates by almost 30%. Meta is also burning through cash due to its aggressive AI spending plans, so due to Meta’s deteriorating cash flow, some bears on Wall Street spread the narrative that AI spending would grind to a halt. I want to make it crystal clear there is no slowdown in AI spending, which is why we are seeing order backlogs growing longer, now stretching into the 2030s.

Many of these false narratives are being spread by Chinese bots with the sole objective of slowing down the AI boom in America so that China can control most of the global AI traffic. The good news is that I expect these false stories to diminish after the midterm elections. Another source of a brighter future is that Treasury yields have declined dramatically in the past several days in a flight to quality, so rising interest rate fears are subsiding, which is good for the stock market over the long term.

Here are the most important developments recently and what they mean:

– The memory stocks are staging an impressive rebound this week, and most AI and data center stocks are rebounding, because fundamentally superior stocks “bounce like fresh tennis balls.”

– There is no doubt that the Anthropic IPO is generating a lot of excitement, since the company announced in its pre-IPO filing that its revenues in the first half of 2026 surged 1,258% to $16.3 billion, up from $1.2 billion in the same period in 2025. Anthropic also lost $81 billion in the first six months of 2026 due largely to an extraordinary $72 billion convertible note charge. Despite operating losses, Anthropic’s revenue growth is stunning, so this is expected to be an IPO that is grossly oversubscribed. The excitement about the Anthropic IPO is now lifting the AI and data center stocks.

– Interestingly, Nvidia’s largest customer, Super Micro Computer (SMCI), recently pre-announced that its fiscal first-quarter sales would be in the range of $18.5 billion to $19.5 billion, up from its previous guidance of $14.5 billion to $15.5 billion due to increased demand for the company’s server and storage solutions. Super Micro Computer also said that its gross margins are expected to increase to 12% to 12.5%, up from its previous guidance of 10.4% to 10.8%. This higher guidance also helped to boost Dell Computer (DELL) and Hewlett Packard Enterprise (HPE).

– The world seems to have been turned upside down recently, and we seemingly have been living in “Opposite Ville.” First, the September inflation data was horrific, but then Treasury yields declined in a historic rally. Second, the AI and data center stocks that announced strong sales and earnings have been punished on mythical cash funding fears that have not materialized. Third, there is plenty of crude oil now being shipped from the Persian Gulf, including through the Strait of Hormuz, but crude oil prices remain high due to the ongoing Houthis attacks on Saudi Arabia. Finally, the Trump Administration ordered Ukrainian President Zelensky to stop attacking Russia’s energy infrastructure, but Zelensky has been defiant, continues to attack Russia, and ran to Brussels to seek EU support for continuing Ukraine’s attacks on energy facilities. Opposite Ville cannot persist for very long, and the upcoming G-20 meeting in Doral, Florida, will be interesting.

– The Treasury yield decline may not persist due to Fed policy, but the Federal Open Market Committee (FOMC) statement on Wednesday should help to clarify interest rate policy. The Fed has made it clear that it will follow market rates. As protests in France persist and similar protests have spread to Spain, right-wing, anti-EU leaders are expected to be elected in the Spring. Germany is also expected to allow the AfD Party to lead, even though Chancellor Merz is holding on to a fragile coalition, just like French President Macron. Essentially, the ruling elites in France, Germany and Spain are expected to be overthrown, so the only other question is, will the EU in Brussels that ruined many of these countries with open immigration policies and political meddling also be defeated and defunded? Britain and the EU are using Ukraine to lead a proxy war with Russia, which is a dangerous escalation that the Trump Administration opposes, because the U.S. wants to pursue a peace deal.

– I hope investors are excited about the explosive rally that is about to unfold. It is impossible to suppress the optimism from growing sales, earnings, guidance, and order backlogs much longer. I realize that the world is a mess, but that does not apply to America, which is an oasis for international capital. The U.S. dollar remains very strong due to our GDP growth as well as the fact that we do not have the social unrest that is undermining some of the largest economies in Europe. The only question is: is France the first domino to fall that will undermine the entire EU? I expect the international capital flight to America in 2027 to be relentless.

In conclusion, get ready for an explosive rally in fundamentally superior stocks. The end of the mid-term elections may be a major trigger, since the fake news and the naysayers are expected to finally shut up. It is impossible to ignore the earnings stampede that is now unfolding, so please be fully invested in fundamentally superior stocks, since there will never be a better buying opportunity.