Addressing SNDK Earnings Potential Amid AI Memory Volatility

**SPEAKER_1** (0:00)
So for more on the overall market and some of the insight that we can expect for the back half of this year, we are joined by Brian Mulberry, Chief Market Strategist at Zacks Investment Management. Brian, great to have you with us today. Now we're seeing some dramatic moves in names like SanDisk, Seagate, Verdiff and GE-Vernova. And so do you think that this is a case of fundamentals deteriorating or is it the market just repricing stocks that perhaps had run a bit too far too fast?

**Brian Mulberry** (0:25)
Yeah, I think it's more of the latter. It seems to be a bit of a rotation. We saw some even more dramatic swings from the end of June to the end of July. And here we are in the middle of August. It feels like just more of that rotation. As I look at the fundamentals of each of these names, they just look stronger and stronger as we go out over the next two, three or four quarters. These are the critical components that AI is going to need more of in order to expand to find out what AI tools are actually gonna look like in the next year or two from now.

**SPEAKER_3** (0:53)
Brian, as a market strategist then, when you're given the opportunities, when the story doesn't seem to be changing, it's simply just the price component. I'll use a name like Vertiv, for example, gets down to the 200-day moving average. Some technical investors would call that a pretty significant support line.
But even so, these names are moving around dramatically, way off the highs, way off the lows in many cases. Is this sort of a trader's market where you're adding and you're trimming, you're a little bit more active in these names?

**Brian Mulberry** (1:28)
Yeah, I think there are opportunities for sure. I mean, it seems to be more sentiment driven than anything at this point in time, day-to-day. There are obviously some headlines that seem a little scary in this market. So I understand that part of it. But if I go back as a long-term investor and see some of these pullbacks as opportunities, I definitely want to take advantage of them. When I look at Seagate, this is a name that's doing incredibly well. They've been growing their margins and capacity at the same time. As they expand their business, the amount they're investing is actually getting them more profit into the future. That's definitely something I want to lean into at a moment like this.

**SPEAKER_1** (2:03)
Leaning into all of the recent volatility, you have suggested the markets right now feels very sentiment-driven. What are you watching to determine whether this recent volatility, is a healthy reset or the start of just a more meaningful pullback?

**Brian Mulberry** (2:17)
Well, I think one of the key areas of risk that the market is clearly showing us is in interest rates. If the 10-year treasury were to bump back across that 4.75 figure, obviously, there's enough people out there saying that there's stress, there's concerns, now we have $40 trillion in debt at a national level.
All of those things seem worrisome at this point in time. If it were to travel even closer to 5 percent, then you might see a very big risk-off rotation with that sentiment declining even more than it is right now. Those pressures definitely do have an impact down the road. The higher rates go for longer, the more negative the pressure there is on future earnings. That's why we want to look at fundamentals in a moment like this and say, okay, these companies are not using an enormous amount of leverage, therefore, they're insulated from that rate cost and they can still drive earnings growth organically into that same period of volatility.

**SPEAKER_1** (3:13)
Okay. I think really good points there, especially as right now we try to dissect every single move, it seems like, on each given day. So, it's been a busy market, but relatively at least hanging in there right now, although lower this week, of course. We really appreciate it. Brian Mulberry, Chief Market Strategist at Zacks Investment Management.