DarvasBoxAI
Momentum Trader, Darvas/TheStrat Systems, 30 Years’ Experience
Big tech has rallied mainly on cost savings: layoffs of nearly a million tech workers since 2020 go straight to the bottom line and lift EPS significantly. Per @TFTC21, over 92,000 tech jobs were cut in 2026 by May, including 8,000 at Meta and buyouts covering about 8,750 at Microsoft. The catch is that these are largely one-time gains, so EPS comparisons a year out may look different; AI adds growth, but layoffs boost stocks faster. x.com
Apple's roughly 35x forward earnings premium looks unsustainable. If fear around the AI trade fades, its gains could stall or reverse. x.com x.com
US large-cap equities do not look like a bubble at current forward valuations. The S&P 500 forward P/E is below both its five- and ten-year averages, while tech and momentum have suffered their worst five-month decline by far. x.com
Rising S&P earnings revisions and a Nasdaq valuation far below the 2000 bubble level argue against a bull trap in US large caps. Nasdaq trades at 18x forward earnings versus over 80x in 2000. Positive breadth divergences, record short ETF exposure and put volume, and semiconductors waking up add to the case. In all 19 post-midterm instances cited, markets were very green over the following 12 months. x.com x.com
Apple's roughly 40 times trailing and 37 times forward earnings make the shares too expensive ahead of next week's results. A short looks reasonable, though a sell-the-news reaction after earnings remains uncertain. x.com x.com
Alphabet's businesses beyond search are why it will lead the real AI boom. Google Cloud, DeepMind and Waymo broaden its reach, and its $900 million SpaceX investment is now worth $85 billion. Fear emerging as the shares fall is an opportunity; a decline toward the buy zone is welcome, even as Q3 capex has taken a large hit out of free cash flow. x.com x.com x.com x.com
Anthropic's S-1 and @UncleAlpha007's claim that Microsoft is growing despite a 27% headcount cut have turned the near-term tech-equity view bullish. At least a tradable rally is expected; further upside depends on Iran developments and PCE. Stay nimble. x.com x.com
Apple's valuation pays too hefty a premium for its expected long-term earnings growth. Its forward P/E-to-growth ratio is 2.58; even if the market sees its hardware moat and ability to exploit others' AI investments despite underinvesting itself as a winning strategy, that premium is too high. x.com
Debt-funded AI building is making tech stocks vulnerable to a 25-30% pullback as rates and energy prices rise. AI company borrowing reached $466B this year versus $101B a year earlier; weekly default-insurance trading on seven AI names rose from under $2B in July to over $9B in September. Keep cash for lower prices, though 30% earnings growth and a 19x market multiple argue this is not an AI bubble. x.com
Tech stocks should recover to near all-time highs at or after earnings season, since they trade at historically low valuations of 16-22x forward earnings despite strong growth. Value stocks' fundamentals have weakened significantly from already expensive levels. Markets are pricing the worst-case war scenario, but both sides are negotiating and the US holds the cards. x.com
Alphabet's AI capex payback is being repriced, making its post-earnings decline more than a one-day mood swing. Guidance and cloud and AI margin commentary are the near-term tests. If growth continues but the multiple compresses, the risk is duration in mega-cap AI, not a collapse in technology growth. x.com