AI Demand Strong But Margins Now Matter Most

Andrew@CANSLIM RESEARCH

The Tape Holds, But the Fuel Is Changing

The stock market closed at fresh highs on Thursday. The S&P 500 hit a record 7798.99 (+0.65%). The Nasdaq rose 0.81% to 26803. Cooler inflation data gave stocks room to breathe. It also lowered the odds of a near-term Federal Reserve rate hike. The probability of a September cut fell from 55% to below 35%. This is a constructive backdrop. However, the rally is getting more selective. It is heavily concentrated in technology and memory chips. The broad market is not participating with the same strength. The Dow gained only 0.14%. This tells you the leadership is narrow. The market is holding up, but it is vulnerable. Higher Treasury yields and sticky oil prices remain a problem. They keep the pressure on valuations.

Memory Mania Hits a Fever Pitch

The online crowd is extremely euphoric. They are overwhelmingly bullish on memory stocks. SanDisk’s Investor Day ignited the third wave of this rally. The company set long-term targets for mid-to-high double-digit revenue growth. They also guided for an adjusted gross margin of approximately 80%. The stock surged 13.63% to close at $1527.7. Micron (MU) gained 5.61% to close at $962.4. The crowd is talking about using leverage and betting everything on this sector. They are making capitulation-style declarations. They say they will never buy puts again. This behavior is a warning sign. When rational analysis is drowned out by FOMO, risk is high. The fear and greed level sits at 88/100. That is based on behavior, not prices. It is not a healthy sign for a sustainable advance.

A Contrarian Bet Against the Crowd

Michael Burry’s portfolio disclosure is the biggest contrarian signal. He increased his short position in MU as the stock approached 1000. He also bought a larger put position on the QQQ. This is a bet against the entire tech-heavy index. The online crowd sees this as a bullish signal. They joke that he will be squeezed. But he also closed his shorts on TSLA and AMAT. He raised his cash position to 12%. He explicitly said he is preparing for a “larger fall.” This is selective repositioning, not just blind bearishness. The crowd is ignoring this nuance. They are choosing to see only what they want. This disconnect between price action and smart money is important. It suggests the rally is getting stretched.

The Volume Tells a Different Story

The featured chart is SK. It currently shows the weakest technical pattern. This is a red flag. While the indexes make new highs, a key player in the memory complex is lagging. This divergence is a warning. The strength in SNDK and MU is not broad. It is a narrow, speculative push. Meanwhile, AMAT collapsed 6.00% despite a double beat on earnings. The sell-off in Coherent also fits this pattern. Strong AI demand is not enough. Investors want proof of margin expansion and cash flow. They are questioning premium valuations. The market is entering the AI monetization phase. The story is shifting from revenue growth to durable profit. This is a higher bar to clear.

Sell the News and Other Traps

The drone tariff news is a perfect example of “sell the news.” The White House imposed 100% tariffs on large drones. Despite this highly favorable headline, ONDS fell 9.56%. The market is not rewarding policy benefits. It is taking profits. This behavior shows a mature, skeptical market. The same pattern may hit RDDT when it joins the S&P 500. The crowd is planning to front-run the inclusion. But history suggests a spike and fade. The fundamentals are solid, but the valuation is not cheap. There is also the structural risk from AI summaries. The market is selective and unforgiving. It punishes names that do not deliver immediate results.

The Real Risk Is a Triple Threat

The market faces a triple threat. First, oil prices are a live inflation risk. Tension around Iran lifted prices. This limits relief for consumers. Second, France’s drought-hit maize crop could push food inflation higher. This adds another supply-side headache. Third, trade tariffs are tightening. This adds friction for importers. If rates, oil, and inflation all turn the wrong way at once, the rally is vulnerable. The good inflation news is supportive. But it is not enough to erase these concerns. The market is holding up well. But the foundation is not solid. The next data points will be critical. Watch if inflation stays tame. Watch if oil keeps feeding into headline prices. The path forward is narrow.

Selectivity Is the Only Safe Play

The market is at a crossroads. The rally is real but narrow. The leadership in AI and memory is strong. But the demand must translate into cleaner margins and cash flow. The online crowd is euphoric and using leverage. This is a classic late-stage signal. The weak technical pattern in SK adds to the caution. The smart money is hedging. You should respect that. The market can go higher. But the risk of a sharp pullback is rising. Do not chase the hype. Focus on quality names with proven profitability. Avoid the speculative fringes. The market is rewarding discipline and punishing excess. Stay selective. Stay patient. The best opportunities will come to those who wait for the right setup.

Sources: market news brief & global social sentiment data. Updated 2026-08-14 20:37 HKT. For educational purposes only — not investment advice.