To The Moon

All three indexes closed lower on Friday, $S&P 500(.SPX)$ down 0.38 per cent at 7,718.60, $Dow Jones(.DJI)$ down 0.51 per cent and $NASDAQ(.IXIC)$ Composite down 0.29 per cent. On the same day $Micron Technology(MU)$ closed 6.10 per cent higher at US$1,016.59, $SanDisk Corp.(SNDK)$ 11.90 per cent higher at US$1,740.00, $SK hynix(SKHY)$ 8.14 per cent higher at US$177.00, and $Direxion Daily Semiconductors Bull 3x Shares(SOXL)$, 9.87 per cent higher. The August payrolls report, out that morning, had 162,000 jobs added against the 56,000 the market expected.

That was the strongest month since March. Unemployment held at 4.1 per cent. Average hourly earnings rose 0.3 per cent on the month, after 0.2 per cent, and 3.1 per cent on the year, after 3.2 per cent. June and July were revised up by 55,000 between them, with July turning from a loss of 23,000 into a gain of 23,000. Private payrolls added 127,000 and government 35,000; leisure and hospitality added 62,000, manufacturing 16,000, and information lost 23,000.

Bets on a September hike went from about 50 per cent to about 52 per cent, having sat near 50 per cent earlier in the week and as high as 70 per cent before that. The ten-year Treasury yield stood at 4.789 per cent, up nearly three basis points on Friday, wiping out the two sessions of decline that came before it. A number nearly three times what was expected moved those odds by two points.

Christopher Waller, a Federal Reserve governor, had said on Thursday that his September vote turns on the inflation figures due on 11 September rather than on payrolls. Friday traded in that order: the jobs report was read, and then put down.

What got bought was memory, the one group that had barely moved the day before. $Micron Technology(MU)$ closed above US$1,000 and is up 256 per cent this year, but its 52-week high is US$1,255, about 19 per cent above where it closed. $SanDisk Corp.(SNDK)$ is up 633 per cent this year and 2,684 per cent over twelve months, and its 52-week high of US$2,354.39 sits about 26 per cent above Friday's close. Neither was making a new high. Both were climbing back towards one.

The reasons on offer all pointed the same way. GuruFocus put the move in Micron and SanDisk down to AI demand; 24/7 Wall St. said the bid had widened from NAND into memory more broadly, with $Seagate Technology PLC(STX)$ up 5 per cent on the day; and a Seeking Alpha piece argued this may be the start of a second memory rally.

$Bloom Energy Corp(BE)$ closed 7.35 per cent higher at US$252.87 for a reason that has nothing to do with AI demand: it is joining the S&P 500 in the quarterly rebalance, alongside Illumina and Everpure. Money that tracks an index does not ask the price; it buys on the date. Part of SanDisk's 11.90 per cent may be the same thing — reports over the weekend had the S&P 100 changing its line-up, with Nike out and four technology stocks in, $SanDisk Corp.(SNDK)$ among them — and hedge fund holdings in it are said to have more than doubled.

$SK hynix(SKHY)$ rose in two places at once. Its Korean listing closed 5.65 per cent higher and the KOSPI rose 3.04 per cent; its Nasdaq ADR is newly listed and Korean money has been chasing it. Barchart puts government backing for the company at around US$20 billion. Korean exports have also set an annual record on the strength of AI chips.

One piece of that same coverage ran the other way: Barchart pointed out that a strike threat in Taiwan could shake the AI boom, in a year when Micron's share price has more than tripled. That is the same point the number above Micron's head makes — these stocks are not cheap, they are just not at the top.

The large caps were the other side of that day: $Apple(AAPL)$ closed 2.51 per cent lower at US$319.97, $Microsoft(MSFT)$ 2.04 per cent lower at US$499.70, Alphabet 1.05 per cent lower at US$335.31 and $Tesla Motors(TSLA)$ 5.92 per cent lower at US$354.08. What the index gave up came from those four. What rose and what fell were not the same names; whether the money that went into memory came off these is not something Friday's data can settle.

Of those four, $Apple(AAPL)$ is the only one with a calendar of its own still to come. Its event is set for 10am Pacific on 9 September under the title “Surprise and shine”, the first product launch since John Ternus became chief executive. KeyBanc warned that the iPhone 18 launch could work against the stock rather than for it. Apple also raised US prices for Apple TV and Apple One again, and Phil Schiller is leaving the App Store. The market expects a folding iPhone to appear alongside the iPhone 18 Pro, with the standard model possibly pushed out to 2027 — that is the market's expectation, not something Apple has said.

The biggest fall among those four is Tesla's 5.92 per cent, and there is no news to match it. Everything on the wire about the company on Friday concerned the Cybercab, and it pointed both ways: Goldman Sachs sees the Cybercab giving Tesla a cost advantage in robotaxis; TheStreet said the Cybercab has met its first real test and that the test is federal; and Tim Higgins of The Wall Street Journal called the storm around it more of a drizzle. None of that is offered here as the reason for the fall.

Hold the same ruler — how far each name sits below its own high — against the whole chip row, and they separate. $NVIDIA(NVDA)$ closed 0.84 per cent higher at US$230.36 and is up 23.67 per cent this year; a Motley Fool piece put it near its own high while its largest peers sit 18 to 32 per cent below theirs, which is the band Micron and SanDisk closed inside on Friday. Broadcom sells chips too and managed only 0.21 per cent at US$357.89; the bid never reached it, while Intel went the other way and closed 4.51 per cent higher at US$95.80 after joining a trusted-AI standards body.

$Oracle(ORCL)$ is the exception in that row: it closed 3.08 per cent higher at US$158.78 on Friday but is down 17.75 per cent this year and 27.99 per cent over twelve months, which among the companies called AI winners is unusual. It is also the first AI name this week that has to put numbers on the table, reporting after Thursday's close, with the market looking for US$1.78 a share on revenue of US$19.53 billion. A GuruFocus headline has its US$638 billion backlog about to meet reality, and Jim Cramer has been cautious on the scale of what it is building.

US markets are shut today for Labor Day, leaving four trading days: Apple's event on Wednesday, Oracle after Thursday's close, and the August inflation figures on Friday 11 September, a print Seeking Alpha called make-or-break for the Fed. Crude for October delivery was at US$91.48 on Friday, up 0.20 per cent; the United States and Iran exchanged attacks over the weekend, which IBD has been putting on the oil side of the ledger, and none of that is in Friday's prices — the earliest it can show up is Tuesday's open.

Friday's jobs number was nearly three times what was expected and the September odds moved two points, because it is not the number that decides the September vote. What the money bought instead was memory, on two layers of reasoning: AI demand, and a couple of new names on the S&P 100 and S&P 500 lists. Micron still has US$1,255 above it and SanDisk US$2,354, and neither was touched on Friday. The number that can actually move them does not arrive until 11 September — the one Waller said he was waiting for.

The above is personal analysis, not investment advice.

💬 【Talking Point】

$Bloom Energy Corp(BE)$ rose 7.35 per cent on Friday because it is joining the S&P 500 in the quarterly rebalance. Money that tracks the index has to buy it whatever anyone thinks of the company. Do you buy a name on its way into an index, or is that exactly when you hand it to someone else?

💰 【Bounty】

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