To The Moon

Hello. The first thing to move this week was not a set of results. It was policy.

The US government spoke up and asked Apple to steer clear of Chinese memory chips. That one request lifted the entire memory chain on Monday.

$SanDisk Corp.(SNDK)$ closed up 8.88 per cent at US$1,786.85, and $Tradr 2X Long SNDK Daily ETF(SNXX)$ rose 17.73 per cent in a day. $Micron Technology(MU)$ closed up 4.13 per cent at US$1,011.75, back above US$1,000. $Western Digital(WDC)$ rose 5.35 per cent, $SK hynix(SKHY)$ 3.04 per cent, $Roundhill Memory ETF(DRAM)$ 5.36 per cent and $Direxion Daily Semiconductors Bull 3x Shares(SOXL)$ 4.54 per cent.

The logic is plain. If $Apple(AAPL)$ has to switch suppliers, non-Chinese memory becomes easier to sell and dearer to buy. For Micron and SanDisk that is an order. For Apple it is a cost.

The phrase "memory bill" is not mine. Last week one analyst note already put Apple's biggest risk as "the memory bill, not demand". On Monday that bill got a specific reason to be sent.

Apple itself barely moved, down 0.11 per cent, and it was upgraded: Rothschild took it from Neutral to Buy and lifted its target from US$260 to US$400, on the foldable iPhone and the AI roadmap.

Same day, same company: a cost on one side, a product story on the other. The market bought the second one first.

There was a sober line on the memory side too. One analyst pointed out that SanDisk rallied on "contracts it had already signed" — those capacity agreements were not new on Monday. I wrote yesterday that the company says roughly half its financial-year 2027 capacity and two-thirds of financial-year 2028 is already contracted, which is the company's own figure. The question now being asked back is why something signed long ago should be bought a second time as news.

Turn to Nvidia. It is now being written up as "AI's bank", and one of the things it did on Monday was cut its own guarantee by more than half.

$NVIDIA(NVDA)$ reduced the guarantee on OpenAI's Ohio data centre from US$250 billion to US$120 billion. Some coverage read that as good news — one headline ran "Nvidia Rows Back on US$250 Billion OpenAI Pledge and the Stock Rises" — though at the close it had barely moved, down 0.07 per cent.

Its other moves that day were not small: US$105 billion arranged to finance OpenAI's data centre, US$1.5 billion invested in SB Energy's Ohio campus, a site planned at 8 gigawatts with OpenAI as anchor tenant, compute capacity spoken of at up to 16 gigawatts and a potential revenue figure of about US$600 billion. A piece of guidance from the Securities and Exchange Commission also removed the risk rules from its US$500 billion financing push.

Jensen Huang publicly rejected the "circular financing" label, saying what he sees is a US$600 billion compute opportunity.

That statement and another fact can both be true: Friday's filings showed Nvidia holding about US$21 billion of SpaceX, a customer that has said it is going all in on Nvidia for chips. Whether it is called circular financing is a question of naming. The real question is whether the structure holds when demand for compute slows.

Seen that way, cutting the guarantee from US$250 billion to US$120 billion is the structure taking risk back off itself. The market did not sell it for that.

The mega-caps were broadly weaker. Meta fell 3.54 per cent, Microsoft 3.04 per cent, Alphabet 0.61 per cent, AMD 1.63 per cent and Tesla 0.87 per cent, while Nvidia finished about flat.

The indices gave a little back: $S&P 500(.SPX)$ fell 0.52 per cent to 7,745.06, $Dow Jones(.DJI)$ 0.51 per cent, $NASDAQ(.IXIC)$ Composite 0.32 per cent and $Invesco QQQ(QQQ)$ 0.16 per cent. Coverage that day put it down to geopolitics and oil price risk.

Optical had something fiercer. AXT surged 17.55 per cent to US$95.97, $Marvell Technology(MRVL)$rose 5.54 per cent, Applied Optoelectronics 3.07 per cent, and in Hong Kong today Yangtze Optical Fibre is up 1.75 per cent.

AXT had no company news that day beyond a notice about attending an industry conference. The explanation available is momentum after its second-quarter results plus AI-driven demand for indium phosphide, the substrate lasers are built on. There is one more layer: about 16 per cent of its free float is sold short, and the stock is up 30 per cent in a week and 109 per cent in a month — at that point the short side has to buy back too.

$NEBIUS(NBIS)$ closed down 3.18 per cent, handing back part of Friday's 8.88 per cent. The interesting thing is that three notes landed the same day pointing three ways: one upgrade saying it is back in bullish territory; one warning of a possible bull trap, on the view that the growth is being held up by strategic financing; and a third downgrading its peer CoreWeave while arguing that worries about its debt financing are overdone — just not a reason to buy.

Three notes on one day is what it looks like when a sector has not settled on a way to price itself.

$SpaceX(SPCX)$ closed up 4.45 per cent, on Thiel and Founders Fund declaring a stake of about 5.5 per cent. I left that out of Friday's piece: it was not in that day's coverage of disclosed holders, and it surfaced only on Monday, in a piece listing Nvidia, Alphabet and Thiel as SpaceX's largest shareholders. When Friday's filings landed the price hardly moved; on this day it rose 4.45 per cent.

The week's papers now start coming in. Home Depot reports pre-market on Tuesday, as do Baidu and $XIAOMI-W(01810)$, $KUAISHOU-W(01024)$ after the Hong Kong close on Wednesday, Alibaba pre-market in the US on Thursday, and Yangtze Optical publishes interim results on Friday. The minutes of the July policy meeting come at 2am Singapore time on Thursday — rates did not move a single basis point at that meeting, but three members argued for a rise.

The harder memory runs, the worse Apple's cost sheet looks. On Monday the market bought the side collecting the money. The side paying it has not been counted yet.

The above is personal analysis, not investment advice.

💬 【Talking Point】

Nvidia cut its guarantee on OpenAI's Ohio data centre from US$250 billion to US$120 billion, and the shares did not fall. Do you read a smaller guarantee as the structure getting safer, or as Nvidia quietly stepping back from its own bet?

💰 【Bounty】

Drop your view in the comments and there are coins in it for you! 🎁

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