MU, ASML & TSM: AI Demand Remains Strong Despite the Selloff

Sam Vardis (0:00)

Welcome back to Market on Close. I'm Sam Vardis on the floor of the New York Stock Exchange. Let's discuss the top themes of the current market. Welcome in our next guest, Isaac Wakszol, who's the founder and CEO of Activest Wealth Management. Isaac, thank you so much for your time. We've seen the market reaction loud and clear. You're welcome. In response to this hotter than expected CPI print, what did you make of it?

Isaac Wakszol (0:22)

Well, you know, inflation, I don't wanna downplay inflation. Coming from Latin America, when I moved to this great country 20 years ago, inflation was 100% a year or even a month. So 3%, it would be nothing compared to that. But I understand it's very important for the economy, very important for the consumer.

And, you know, the inflation came at 3.7, but the core inflation, which is the most important one, was a little bit stronger at 2.6, 2.7. So let's dig deeper into the results.

The question is that the most important part is the volatile oil prices. And because of the situation I ran, it's as high as it is now. But these tend to be historically very short-lived. And I think, hopefully soon, this is going to be stabilized. The problem is that this is pushing the interest rates. And I don't know if you remember, Byron Wayne, he used to be working at Morgan Stanley, and then in Blackstone, he always told me, when this movement, this fast movement, such as the 10-year, which is the most important thing here, things to happen, something is going to break. What is going to break? A lot of things can break. In 2023, the Silicon Valley Bank broke. So now another bank can broke, maybe highly leveraged companies, highly leveraged real estate. I don't know, but anyway, the market is resilient. It's always, when something goes down, opportunistic money is going to have its moment.

Sam Vardis (2:03)

Can the AI trade break? Because it's certainly being tested right now.

Isaac Wakszol (2:09)

But the AI is being tested, but it's about competition, not the demand. The demand is there. The computer power is still scarce. It's a matter of who gets paid for it. Precisely, when you have commoditized part of the change, the chain, like memory in this case, are the most exposed. Now a new company out of China is saying that maybe they're going to be able to manufacture some computer power or some memory, and Micron and all their cousins are 10-20 percent down.

So at some point, it is going to get normalized, so to speak. As a matter of fact, the demand is there. We are activists. We have a team of people specialized in AI. All of a sudden, we have a bunch of thousands of dollars on a weekly basis in tokens. We're seeing this demand firsthand.

Sam Vardis (3:08)

When you talk about the cousins selling off and the degree in fashion that we've seen off the back of this whole Chinese scare, if you will, what does that mean for the AI trade? What does normalization mean? I mean, is this the beginning of the end of mid-80s margins or something? Because these companies seem to have a lot of visibility right now.

Isaac Wakszol (3:33)

Yeah, but it's a scarcity in the memories. You want to buy memories, by the way, but memories are used in your phone, in the computer, in your TV, everywhere. And I have friends who import and manufacture electronics, and they need to raise prices because there is a scarcity of memory.

And that's the situation, that there's nothing to do about that. You need to wait until the companies are producing memory today. They're going to have new assembly lines, or new competitors are going to come into the market. Look at Elon Musk.

He hates to be in the hands of a provider. So at the end of the day, he ended up building his rockets at a much cheaper price. And this is exactly what he's doing with the TerraFap. And at some point, he's going to be able to do it in memory. It takes time, but it's going to normalize, I think.

Sam Vardis (4:23)

Okay.

But when you hear from ASML and what they had to say today, I mean, they've got great visibility now, they say, they're going to do it in 2030 as far as the customer is expressing order interest way out for another four years. You've got demand looking strong, capacity is sold out this year. I mean, they've upgraded their guidance three times. I mean, this is a monopoly company with massive customers like TSMC and Samsung. If they're saying what they're saying and the market sells off like this, which one do you believe? I mean, is this just a healthy correction because they say that the demand is there?