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This may be the last cheap AI stock worth a punt, but only at the right price

Aug 16, 2023

Good morning! 👋

Futures are flat as I type in the wee hours.

Not a surprise—Wall Street is looking for direction into the backend of earnings season but ahead of more Fed follies at next week’s annual central banking confab in Jackson Hole, WY.

No word on whether chefs will be serving magic mushrooms.

Here’s my playbook.

One way to trade $WMT and $TGT

I stopped by for an extended chat with Maria Bartiromo this morning, and not surprisingly, retail earnings were a topic. (Watch)

MyPOV is that there’s a big difference between the likes of Target and Walmart. Consumers are still stretched, which means the uplift from e-commerce and groceries will be material.

Target reported as we talked, and the stock jumped 11% on news that earnings offset a revenue miss. I told Maria that kind of price action makes the trader in me want to short it.

Then I thought to myself after I got off the air…

A pairs trade idea: Buy WMT and short TGT or use options to accomplish the same thing. Meanwhile, I’d rather own another big-box retailer that I think is stronger than both companies… and do. Upgrade to Paid

An investor’s take on NVDA ahead of earnings

We also spoke about Nvidia.

The chip-maker extraordinaire has received a slew of upgrades recently, and many are wondering if the stock is getting ahead of itself.

Not me.

My current target is $500. But as I noted to Maria, I’m starting to think about $575–$600 within the next 12–24 months. Selling cash-secured puts could be an interesting way to capitalize on the volatility while also getting paid to shop. (Watch)

Tactically speaking and as an aside, I kept the long put butterfly spread open that I mentioned in yesterday’s 5 with Fitz because my analysis suggested that volatility would rise into the close. That happened, but options don’t trade overnight, so now we’ll see if I get lucky at the open and can exit at a profit… or not. [Shrug]

Intel: Time to fish or cut bait

Intel has reportedly binned its planned $5.4B acquisition of Tower Semiconductor after regulators failed to approve the deal. (Read)


The deal would have given Intel a much-needed foothold in the specialty tech arena, including industrial and radio frequency sensors.

Reuters is reporting that Intel didn’t receive Chinese regulatory approval prior to the deadline that’s now passed, but I think the more likely reality is that said approval was withheld.


Intel must pay Tower a $325 million termination fee.

Beijing is undoubtedly lovin’ it.

Meanwhile, investors… it’s time to fish or cut bait.


Intel just can’t seem to get out of its own way lately.

WMT + XOM = a run at COST?

Walmart has teamed up with Exxon, announcing that Walmart+ Members will get $0.20 off every gallon of gas bought at participating US Exxon and Mobil stations… some 12,000 in all. (Read)

Walmart is billing the deal as a huge benefit for members because of the savings ahead of Labor Day and back-to-school travel, but I’m suspicious about the timing of the announcement ahead of earnings on Thursday.

Both of these companies have their act together.

What I’m wondering is whether or not this is a dress rehearsal for something bigger.

Like a run at COST.

This may be the last cheap AI stock worth a punt

Shares are down 90%, but I think they might be worth a punt under $14.

Lemonade (LMND) uses AI to interact with customers and write insurance policies in 5 high-demand segments: homeowners, renters, life, car, and pets.

Revenue has more than doubled YoY, and it’s still a cash-gobbling startup.

So there is that.

But insurance strikes me as an area just begging for a new business model.


Bottom Line


Some think it’s the future.

Others think it’s the end of the world.

The chips don’t care.

Either way, there will be a new generation of millionaires created.

As always, let’s MAKE it a great day!


Keith 😊

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