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Hey everyone, me Kevin here. Holy smokes, what a wipeout in the NASDAQ 100 today. I'll tell you, out here in Copenhagen people were not paying attention at all to the stock market, but I was. And boy, oh boy, Bitcoin dropping under 60,000 and NASDAQ 100 down nearly five percentage points. You had SOXL, the triple leveraged semiconductor ETF down 35% between Thursday and Friday. Holy moly, what a wipeout. And in this video, I'm going to touch on why is this happening? What is contributing to this?
What does this have to do with SpaceX? So far, there is not a lot of institutional response yet because I think a lot of people, including the institutions themselves, are like, "Holy smokes, we don't even know what the heck happened." But I have a suspicion, and that's what we're going to talk about in this video because I think it all has to do with SpaceX and prep for next week, combined with what we've actually been talking about this week. A liquidity squeeze. In fact, I had two very prescient, in my opinion, videos that I would encourage you to go back and watch. One has "squeeze" in the title and thumbnail, and the other one is the Sara Fryer open AI complaining that I did.
In the Sara Fryer open AI complaining video that I made, I talked about how Sara Fryer thinks that there's so much liquidity available, and so much money available because oh, there are so many stock buybacks going on, and companies are just flooding money into the market. And when we actually look, that's the opposite of what we're seeing. Companies like Google and Meta, who used to conduct a lot of buybacks, are eliminating their share buybacks. Companies like Microsoft are seeing a small reduction in buybacks, and the companies that are buying back stock, companies like software companies, we know have been obliterated because of fears over AI Armageddon and oh my gosh
what's AI going to do to software stocks? So we know software stocks, well we had a little bit of a short squeeze uh not uh you know, yesterday as in Friday, although it depends on when you're watching this video, but a week ago and the following Monday we had a little bit of a software squeeze that you turned really quickly in what we called short reloading on Thursday and Wednesday. Uh or sorry on uh Tuesday and The liquid the software bottom therefore it isn't in and so it's not like software stocks even those software stocks are doing share buybacks when their values are going down it's not like you're actually sending liquidity to shareholders. So you're not getting
liquidity in software stocks. Hardware stocks aren't really doing share buybacks anymore. And really the only thing driving liquidity is debt. FINRA margin statistics at all-time highs and triple leverage ETFs that have gotten really popular. The problem with triple leverage ETFs is they're really fantastic on the way up especially when you have an 8-week period like what I called the most frustrating rally from the beginning of April to well frankly the beginning of June. Of course triple leverage is going to look really sexy. But you should never touch a triple leverage ETF for a long-term hold especially because of the resets that you get.
Topic for a different video. But you should always have trailing stops if you're exposed to them. Why? Look at what just happened Thursday and Friday. Thursday and Friday we saw the SOXL semiconductor ETF wipe out 35% and I think a lot of this has to do with liquidity and SpaceX. So we talked about the lack of liquidity from buybacks. Lack of liquidity in software stocks because software stocks still haven't formed a bottom. We get the occasional squeezes. But we've also talked about leverage. So triple leveraged ETFs that work great on the way up, but they actually accelerate selling in the way on the way down. That's what we saw yesterday. In fact, and forgive me for continuing to look at my watch, I could just sort of check to
make sure I'm still in frame here as I ball around in Copenhagen. Uh but anyway, with a triple leveraged ETF, what usually happens is towards the end of the day, these funds have to actually sell into selling. So, you could be down 2.8% on the Nasdaq, and then the funds are like, "Crap, we need to unwind debt. How do we unwind debt? We sell at lows, and we actually drive more selling into the market." So, our market has been so phenomenal over the last 8 weeks on the way up, that we've actually created a very sensitive uh and unstable foundation because it's built on debt. And debt always screws people. We already know that. Last week, we had a warning. Nvidia could not hold a 227 breakout. That was really important because yes, Earl, well, last
week in our Alpha membership over at mekevin.com, yeah, you can still join using Marvel, which is still a great stock and kicking butt, but boy, you know, it had a little bit of a topsy reversal there because in part Broadcom. We'll touch on that in just a moment. But, you can join the membership, get lifetime access over there at mekevin.com. You can see what we're buying, you can see us buy the dip, you can see exactly what we're doing. And remember, the nice thing about the membership is it helps you in these crazy downtimes and the fun uptimes. Now, what I want to touch on when it comes to Nvidia and the top signal is if Nvidia can't break out, and our largest stocks can't break out, as in the largest stocks in the economy can't break out. Broadcom's
a $2 trillion company, Microsoft, right? These are massive companies. If these companies can't break out, then we can't broaden the rally because these mega caps have already almost fully priced in. Even though I think Nvidia could run more on a valuation basis, right? It could be justified at a higher valuation. It's not. So, on a technical basis, this is where you get that confluence or that convergence of technicals and fundamentals that say, "Hey, you know, fundamentally, Nvidia could be worth more if this growth continues, but technically, we keep rejecting. That's a red flag. So, now you get software shorts reloading. Nvidia can't pull through 227. And the market gets really sensitive.
What's the kiss of death? Broadcom. Now, we already touched on Broadcom, which is basically the big daddy to Marvell. Marvell stock is a fantastic company, and it had a lot of incredible sort of almost meme momentum. We called it rallying into it, especially since there's talk now that Marvell is going to get into the S&P 500 or is potentially eligible for S&P 500 inclusion, whereas SpaceX actually won't be because SpaceX will have to wait at least 1 year for S&P 500 inclusion, whereas other indices like certain Russell or Nasdaq indices are basically bending over going, "Oh, we'll let you in within 15 trading days." Which is crazy and is, you know, probably one of the most historic uh
you know, retail cash outs ever. But, more on SpaceX in just a moment. When we look at a company like Broadcom and we see that their ship revenue guidance for Q3 missed by 7%. You now had no good news on Iran. Really hot jobs revisions, really hot ADP report, really hot ADP BLS jobs report headline read and household read. So, you have strong economic data suggesting higher rates. You have bad news out of Iran, basically no news. No news is bad news out of Iran, but the market generally ignores it unless of course you're talking about oil and interest rates going up which also went up at the end of the week.
So, take these two factors plus Nvidia can't broaden plus a Broadcom miss plus software re-leveraging or re-shorting I should say, reloading the short weapon plus triple leveraged ETFs are really topsy. You get a day like Friday. You get a potential wipeout. And that's exactly what we saw. Now, a long-term investor, somebody who's investing for 10 years is going to look at Friday and say that's an opportunity. Economically, we could be strong on a bear bull scale and we could utilize it as a buy the dip opportunity. Now, you could actually remove some of that leverage and FOMO from markets because people who are too in debt get wiped out. Creates an
opportunity to buy into high-quality names that you can hold for frankly uh the next two to 10 years. That's sort of long-term outlook. Short-term obviously, you got to be cautious during a dead unwind because a lot of positions are going to get hosed in the short-term. Now hopefully it ends next week for the SpaceX IPO. But, here's the next catalyst that I think really affected the market here. The SpaceX IPO, yesterday we got news that it was more than two X over subscribed by retail. To understand how this functions, you have to know how you request shares at companies like Charles Schwab or Fidelity or whatever. You could go in
and give an indication of interest. So, basically if you're qualified, uh if you have a certain net worth in your account, you could request shares of SpaceX for IPO and IPO allocation. You could put in whatever maximum number of shares you want. You could say, "Oh, I want a million shares on day one." You might not even have the money for that. You know, some brokerages will actually gate how much you say you could put in based on your account value. But, the point is you could say I want a million shares, let's say if you have the capital for that or you know, 100 shares, whatever it is, and then not actually have the intention of buying those shares. You're giving an indication of interest to your brokers,
and then your brokers are like, "Oh, wow. You know, I got all these people who collectively want 10 million shares, let's say. We only have 5 million available at Fidelity. I guess we're 2x over subscribed." Even though just because you filled out an indication of interest has zero bearing on whether or not you're actually going to get those shares or whether or not you're actually going to pull the trigger to buy them. Because it's basically just an option like on the IPO day, like, "Hey, do you actually want it?" You could say no. The reason I think that matters is it sent a signal to markets that people needed cashola because they had to get ready for the
SpaceX IPO. And so, what did that do? The same morning you get news that the SpaceX IPO is 2x over subscribed. People are like, "Oh my gosh, I definitely need to have my cash available." What are they not doing? They're not buying the dip on stocks like Broadcom or frankly anything in semis. And the Broadcom earnings, which you know, we went through in detail in the course member live streams, uh fundamentally analyzing how bad is this? We look and go, "This is really just a shifting of revenue." Broadcom still sees a hundred billion dollars of chip revenue in uh you know, the next year.
This Q3 revenue timing forecast isn't saying, "Oh, the AI bubble is over." The AI bubble will end at some point, don't get me wrong. But, it was actually, in my opinion, more of just a timing shift because of their XPU processors, which they're custom made. They take time. You know, I actually personally believe the Taiwan Semiconductor CEO who says the global chip supply for all AI will fall short of AI fuel demand for years to come. I personally believe that's probably all of the rest of 2026, likely a lot of 2027. And then we're probably going to be uh, you know, looking going, "Oh man, things are actually starting to turn to the downside." So, this is why I say I don't
think Friday was this, "Oh, the AI bubble is over." I think this was more of the combination of interest concerns. Oh my gosh, we might get hikes. Iran still not solved. It's still a concept of a plan that's not finished like healthcare. Okay. Kevin, stop. Don't be political. Okay. Uh, at the same time Nvidia can't expand. At the same time software is getting short reloaded. At the same time buybacks aren't really aiding the market unlike what Sara Frier said, right? Leveraged ETFs have been running for eight weeks straight. We put all of that together, a Friday flush out actually makes sense. And then the icing on the cake is the SpaceX IPO where they're like, "Oh, it's 2x over subscribed."
People are like, "Oh, crap. I need to get my SpaceX shares. What am I going to do? Well, I'll just not buy the dip on anything else cuz I want to have money available for the SpaceX IPO next week." That's my take. Now, uh, what's actually very interesting and I thought this was brilliant. Google, you should know this. Google has uh, exposure to SpaceX by about 5%. So, Google owns 5% of SpaceX. And in owning 5% of SpaceX, uh, let's see here. They actually own 6.11% before the XAI merger, but they got diluted. They're at about 5% right now. Google just gave SpaceX a contract to essentially access 110,000 of Nvidia's GPUs and CPUs as well as other components.
Uh, and SpaceX has to deliver this by September, otherwise uh, Google can revoke this contract, which is very similar to the terms we saw with Anthropic where Anthropic and Google could sort of rug pull SpaceX if they wanted to. But you have to understand, Google agreeing to pay $920 million a month to Elon is the perfect way for Elon to say, "Look, we're getting revenues from the Colossus facilities we built. We're getting revenues from our GPUs. You don't have to worry about us. We're going to make money. We're not bag holding yet." But they also have a vested interest. Anthropic has a vested interest in seeing SpaceX's IPO do really well. So, they can also do well on IPO. They've confidentially filed for IPO, right? They want to do well as
well. You don't want SpaceX, which could happen. You don't want SpaceX to be the biggest flop of a generation of an IPO. Can you imagine if SpaceX pulls a meta where, you know, when meta IPO'd, it fell after IPO, and it didn't regain it for I want to say somewhere around five or six years. It was years. It was years that meta didn't actually regain its high after IPO. And SpaceX could theoretically pull something like that off. Now, that would be bad because then it would indicate the cash that people have saved up after this liquidity crunch is going into something that is just
pulling a Cerberus on them and losing even more funding, which would frankly, at that point, be a concern regarding the sustainability of the AI movement regarding the stock market need that funding in order to keep the cycle going. We know it's circular. We know 80% of AI revenue worldwide goes to the United States. But the circular funding is drying up. That's why they need the liquidity. That's why they need IPO. That was another update that came out. Meta rumor dropped that Meta might have to raise money. Meta sells off because they might have to raise money. What do you know? Liquidity again. That's why I'm saying yesterday was a liquidity flush out.
No, yeah. That hurt everybody. Everybody who has long positions I mean there were some stocks that actually did fine yesterday. Like I was actually surprised. Apple 11, which is one of our stocks as well, is up 50% since we've been buying it. And this is why it's nice to have a diversified portfolio, but that stock is freaking killing it and we love that stock. I actually think it's going to keep doing really well. Well, that's it. We got to change the coupon code from Marvell to Apple 11. I'm not going to do that. We're not going to do that because I'm not worried about Marvell. I'm also not worried about Apple 11. But because it doesn't matter for a
long-term investor, this is an opportunity. [snorts] Mostly. Unless of course SpaceX is the top. That's going to suck. That would be the biggest grift of a generation. Every VC is going to get rich off of SpaceX. And I have to be transparent. I Technically, I guess I'm a venture capitalist as well. I have a venture capital company that has a lot of exposure to SpaceX. And I mean I you know, my net worth isn't going to change from this like dramatically. It's certainly going to go up. It's not going to change dramatically. So that like I'm not When I say every VC is going to get rich off of this, I mostly mean like the Wall Street bankers. The amount of commissions and money that's
coming out of this SpaceX and when these lockups start releasing over the next 180 days, you know, they're going to have phased lockups. People are going to take their money out. Now where that money goes, that'll be very interesting. But I mean putting all this together here, highest levels of margin, highest levels of ETF leveraged ETF trading, which accelerates selling into the close. SOXS goes down 35% in 2 days. Triple TQQQ, the triple leveraged Nasdaq 100 down 15% over that same timeframe. The SpaceX oversubscribed news, the SpaceX Google deal, which makes people more excited about Google, the liquidity concerns,
which did accelerated by announcements like what we saw over at Meta, along with a choppy market, the misunderstanding of how much liquidity is available, ala Sarah Friar, limited buybacks, Anthropic IPO, Quantinuum, you know, people got mad at how I talked about that uh company. I think I was too blunt. It's It's a stupid one, in my opinion, but whatever. That was another video we made last week. Uh and we broke down the uh the IPO and uh what it really is a way to pay for uh you know, $500 million worth of salaries. Well, actually, I think it was 500 employees worth of salaries.
400 PhDs as something like that. Go watch the video. Plus the software short reload, plus the Nvidia reject, is the perfect storm of people wanting cash for next week and not wanting to be involved in them buying the dip. And that's what contributed to our massive flush out. So, anyway, if you found any of that useful, consider subscribing. Share the video with somebody you think wants some insight. It is literally um 5:21 a.m. here in Copenhagen and I think I'm going to go to the gym. Have a great day.
