Is the market ever going to crash?

本站添加: 2026-05-12

[00:00:01]Okay guys, so I'm sure a lot of you are thinking the same thing, but the market is absolutely crazy. Now, I'm sure you guys are wondering why this is happening and why the market is behaving this way.

[00:00:12]And to be honest with you, for myself as well, I've never expected the market to perform or behave like this when I bought into the market back in March.

[00:00:20]So, I just wanted to deep dive into the reasons why this is happening. And also and when I talk to a lot of people, it seems to be the case that they're about 50/50 ratio in terms of the people who think that the market will continue to go up led by the semiconductor and the AI industry and another 50% who thinks that this is a bubble. Now to be honest with you, you guys all know that there are a lot of people who are saying that AI is a bubble from almost a year ago.

[00:00:43]So I just wanted to kind of um take a step back and observe the market, analyze it and see where everyone is coming from when they say that the market is a bubble or not a bubble. Now to tell you how crazy the market is, basically the NASDAQ went up by almost 30% in the last 2 months. The index, the NASDAQ index went up by 30% in the last 2 months. And some semiconductor stocks more than doubled in the last 2 months.

[00:01:08]Now, to give you an idea how crazy this is, in order for a stock to double in two months, that means that the stock basically went up by almost 50% every month. Now, that doesn't happen that often. So, I just wanted to kind of take a step back and see where all this is coming from to give you some benchmark on the valuation multiples. Basically, if you look at the major semiconductor stocks like Micron, AMD, Intel, Marvel, Nvidia, the median last 12 month trailing price to earnings is now at 55 times in terms of the medium multiple and the next 12 months forward price to earnings ratio is now trading at around 35 times. Basically, what this means is that major semiconductor companies are being predicted to generate at least two times or even three to four times of their earnings in the next 12 months versus the last 12 months. Now to give you some numbers, AMD is currently trading at around 150 times of the last 12 month price to earnings and on a forward basis is at about 52 times.

[00:02:00]Intel is not even generating any earnings in the past months but on a forward basis is at over 100 times.

[00:02:06]Marvel technology is on a trailing basis trading at about 55 times and it'll be at 44 times on a forward basis. Broadcom is at 84 times on a trailing basis and now we're at about 32 times on a forward basis. Nvidia at 44 times, 26 times.

[00:02:21]Applied materials at 45 times and 36 times. ASML is at 51 times and 39 times and Micron is at 35 times and 10 times.

[00:02:29]So if you take the median of the trailing multiples and the forward multiples, it comes down to about 55 times and 35 times respectively. Okay.

[00:02:36]Now, as I told you before, the market is not really one-sided. Basically, it's it seems to be having a lot of an intense debate on where the market will head next. And I just wanted to give you an idea by giving you an idea on why people are saying that the market's going to drop. And I'm going to give you three rationals of why people are saying that and also three rationals on why there are people who are saying that the market is going to continue to go up and I'm going to summarize that at the end of the video and give you my views as well. Okay. Now let's look at the negative side of the squad. So basically the people who say that the market is going to drop. Now the first reason they give is that the Mac 7 is reaching a limit on their capex spendings. Now as you guys all know basically the major customer of the semiconductor companies is the Mac 7 companies who are aggressively building data centers and the chips are basically going into the data centers which the Mac 7 companies are building. Now when Mac 7 companies buy the chips they need to pay the cash to the chip companies. And while Mac 7 companies are very large companies with huge market caps, people are worried that the Mac 7 companies may run out of cash to buy the chips. Now based on the news, the Mac 7 companies already committed around 700 billion on capex to buy more chips to deploy into their data centers just for this year. Now, in order for the trip companies to continue to generate 2 to 4x of earnings in the following years, the Max 7s need to commit at least $2 trillion or more in the coming years. Now, I'm just wondering whether this is even possible.

[00:04:05]Now, basically, if you run the numbers and try to make sense of the capex spendings that the Max 7s are committing in order for them to spend $2 trillion of capex on chips, there's an expected ROI, which the investors, basically the public shareholders are expecting on their capex. Generally, when a large company spends X amount of capex, in order for the public shareholders to make sense of it, they would expect at least 20% return on the capex which the company's spending. So if they spent $2 trillion of capex on chips, the public shareholders and the investors would expect the company to generate 20% of the two trillion returns on the capex that they spent. Otherwise, the market would think that the money they spent as a capex is just dead money and they would just discount that from their market cap. So basically the Mac 7 stocks need to generate a lot of profit on the capex that they spend which is the trips. So assuming that they spend $2 trillion more in the following years, the market would expect the companies, the max 7 companies to generate 20% returns on the $2 trillion of capex that they spend, which comes down to around $400 billion of earnings. Now on the $400 billion of earnings, if you apply a conservative multiple of around 20 times on the $400 billion of earnings, it comes down to around $8 trillion.

[00:05:21]Basically, this means that the Max 7 company's market cap needs to increase on a combined basis by about $8 trillion in order for them to justify the upcoming capex spendings. And at the same time, the Max 7 companies actually need to commit the $2 trillion in order for the semiconductor companies to actually have a further run on their share price and earnings. So if you think about that this is a very stretched scenario where number one the max 7 companies needs to continue to build data centers and number two they need to accelerate the speed of building the data centers by committing $2 trillion or more capex in the future years and number three the trip companies needs to have the enough capacity to supply that amount of chips to the max 7 companies in the following years and number four the max 7 companies needs to justify their cap expanding by generating around 20% % returns on the capex that they spend.

[00:06:14]And number five, the Mac 7 companies also needs to increase in the share price so that the combined basis market cap increases by at least $8 trillion in the following years. And also when I say $8 trillion, keep in mind that I'm applying a very conservative multiple of around 20 times. So I'm just throwing out numbers to you guys um just as an example, but you guys have a think about it and whether you think that this makes sense at all. Now number two, the second risk that we may face is the liquidity issue. So yes, the interest rate may come down if Kevin Wor steps in as the new Fed chair, but we need to keep in mind that the timing of the rate cut is still unclear. Now the last FOMC which was held in April was kind of controversial. The Federal Reserve board members were somewhat divided into 8 to four. Now the eight, which is the majority of the Fed members, were of the view that yes, there's going to be a rate cut down the road, but it doesn't have to be now. So basically they were somewhat neutral to the current rate cut but at the same time they are predicting that the rate is going to come down in the future but it doesn't have to be now given the inflation and all the uncertainty. So the eight guys were kind of in line with the decision that was made by the Fed. But the other four was actually quite shocking. So one out of the four which is basically Myron he was still advocating for a rate cut. So this is quite obvious. I mean obviously Myin is a super dovish guy. So we all expected that he would be super dovish this time as well. But the other three were actually quite controversial in a sense that they wanted to remove a thing called a easing bias. So you remember how the eight guys of the Federal Reserve mentioned that the rate is going to be cut at some point but doesn't have to be now. Now out of the four the other three guys basically said what the eight guys are saying is wrong because they don't believe the rate cut needs to happen at any time in the future years.

[00:08:01]Basically they're saying let's remove the bias that the rate is going to be cut someday but just keep the rate constant at this point. So those three were actually very hawkish indicating that we don't need to keep indicating to the market that the rate is going to come down at any time soon. So basically it was divided into eight and four but if you divide that once more it's actually 8 1 and three eight who are quite neutral heading towards a rate cut. one which is super dovish who wants a rate cut right now and the other three who are quite hawkish indicating that the rate cut doesn't need to be indicated at this point. So basically if you think about it the Fed is quite divided and if Kevin Wars steps in to the office he's going to face a lot of challenges based on where the FOMC was back in April. He's going to have to convince a lot of the board members to follow his lead and basically guide them towards a direction where he wants the Fed to go. Obviously, Kevin Wars wants the rate cut to happen as soon as possible. But he can't do that when the entire Fed is not with him. So, he's going to have to go through a convincing phase to other board members and try to come up with strong ration on why a rate cut is needed as soon as possible. Now, if I had to predict what's going to happen, I think it'll take some time for Kevin Worish to actually come up with a strong thesis on the rate cut. And even if he tries to cut the rate as soon as possible, I think we'll have to reach at least towards the end of the year in order to see the first rate cut by Kevin Worge. So basically, if the market is thinking that the market can continue to go up because interest rate cut is going to happen very soon, I think it's fair to say that they're wrong. And I think it's more fair to say that interest rate cut may happen and I think it will happen, but it'll take quite a long time until we see the first rate cut. Also, Kevin Worish, as I've mentioned to you guys multiple times, is a supporter of the contraction of the Federal Reserve balance sheet. If the Federal Reserve balance sheet contracts, it immediately impacts the liquidity in the market, which would bring down the overall valuation of the stock market at some point. So, as I've been saying to you all the time, we're still in section C of the Federal Reserve quadrant. So, we can't be too composed about the market and just bet on it going up infinitely day by day. And this will continue to be the challenge. And also at the same time inflation is still an issue. So we need to watch where the inflation rate goes in the future to get a better sense of the interest rate trajectory and the Federal Reserve balance sheet trajectory. Okay. Now the third challenge which we may face is the valuation of the upcoming IPOs towards the late 2026 and early 2027. There are three major IPOs which may happen within the year and early next year as well. So first is the SpaceX IPO which they're targeting over $2 trillion of market cap. Anthropic is targeting over 1 trillion and OpenAI is also targeting over 1 trillion. Now on a combined basis that's about $4 trillion of market cap and basically in order for them to justify that valuation the market needs to remain in a very hyped phase of the market cycle. However, if any one of the IPOs fail to meet the demand or fail to justify their valuation, the overall market can crash as a whole. Now when I say crash, I don't mean like a 50% 70% instant drop, but the market sentiment may break and it will take some time for the market sentiment to break, but it may gradually break and the failure of any of the IPOs may impact the market sentiment quite severely to the extent where we may see a quite big of a drop in the overall market. Also, given that SpaceX IPO is happening pretty soon based on the market news, I think it may somehow get by given it's targeting sometime in the middle of the year. But the other two following IPOs including Anthropic and Open AAI are the things that we need to keep our eye on because those two IPOs may or may not meet the expected demand. Okay, so those three are the biggest risks that the market may face in order to continue the current run. Now without any bias let's look at the positive side of the market and why some people still believe that the market can continue to go up. Now the first one is that majority of the companies are actually generating real revenue and ebida. For example AMD, Marvel, Broadcom, Micron, all these companies are generating crazy trading multiples. However, if you look at the numbers, it's actually generating healthy revenue and earnings. For example, AMD's revenue is at 35 billion with its earnings at $8.8 billion.

[00:12:19]Broadcom is at $64 billion of revenue with $25 billion of earning. Micron is at 37 billion and 24 billion. Now, the more important thing is that in the first quarter of 2026, all these major companies are recording as small as 30% yearon-year growth for on its net income to as high as 400%. And these numbers are real numbers. We're not talking about like no earnings or minimal earnings, which is just boosting up their valuation multiples. So it's fair to say that all these companies are real companies which is generating huge amount of earnings which is appealing to all of the investors. As I told you at the start of the video, if these companies continue to generate 2x or 3x or 4x of the earnings from the previous years, the current multiples are actually justifiable. I mean if you think about these companies growing at 2x, 3x or 4x each year, actually the current trading multiples are not that expensive. And I think a lot of the people who are entering the market big at this stage are actually betting on the fact that all these companies are going to be generating huge earnings in the following years as well. So basically they're taking into account of the discount multiples based on the forward forward forward multiples in the future years. So if you think about it that way and project the net income of these major companies to generate multiples of the earnings that they generated in past years, the current multiples may actually make sense. And number two, now regardless of the liquidity issue, the interest rate will go down at some point. Now, as I told you before, the interest rate will most likely go down at least from the end of the year, and that's a good thing. And at the same time, I told you guys that the balance sheet, the Federal Reserve balance sheet is about to contract. So, we're in the section C quadrant of the Federal Reserve where the interest rate is going down and the Federal Reserve balance sheet is also going down at the same time. So, if you have both of the matrix going down, we're in the section C quadrant of the Federal Reserve matrix. Now, I actually haven't told you guys before, but there's actually one trick and a secret about the section C of the Federal Reserve quadrant.

[00:14:13]Basically, if the Federal Reserve decreases the Federal Funds rate, it directly impacts the short-term Treasury bond yield. So, 1 month, 3 month or 6 month Treasury bond yield are directly impacted by these uh federal funds rate.

[00:14:27]So when the Federal Reserve decreases the interest rate, the short end of the bond yield actually decreases and is directly impacted by the Federal Reserve's interest rate decision. Now the long-term yield, which is 10 years plus of the bond yield, because the Federal Reserve is contracting its balance sheet, which means that they're not buying any long-term bonds in the market. And if they don't buy the long-term bonds, the demand for long-term bonds will decrease, which means that the long-term bonds price would fall, which means that the implied yield would actually go up. Now, if this happens at the same time, the short end of the treasury yield is actually low and going lower, while the long end of the treasury yield is actually going up.

[00:15:07]This creates a linear and a steeper curve which means that people who are borrowing in the short term and lending in the long term are benefiting of the arbitrage of the interest rates. And who are the guys who actually can take a huge arbitrage on this? It's the banks.

[00:15:23]So the banks actually would lend humongously on the short end and then lend it to the market or people or whatever in the long end which means that they can gain a higher arbitrage.

[00:15:33]So the banks would be more willing to lend to any of the companies or people in the market which means that a lot of these AI companies can actually more safely fund their borrowings from the banks because the banks are now more willing to lend their money. Now one thing to take into account is obviously these AI companies will have to borrow at a higher rate. However, there's a huge difference between a scenario where the bank is super willing to lend and a scenario where the bank is not really willing to lend. If the credit is not frozen and is quite relaxed and the banks are willing to lend money, these AI companies will also not go bankrupt because of the failure to borrow money.

[00:16:13]So that's one secret this quadrant C has within the Federal Reserve metric. So I don't know if the Federal Reserve and Trump or whoever is targeting this scenario, but that's one trick which the stock market is also relying on. Also, I've been telling you multiple times that it was proven by the USIn war that the US cannot afford to have the stock market crash at any day. As we have seen from the war, basically Trump wanted to end the war as soon as possible because he wanted to prevent the oil price from going up and the stock market from crashing. If the market crashes, his popularity crashes together with the stock market. So, Trump wants to keep the stock market elevated at all time.

[00:16:52]And I think the market is now more firmly believing that Trump will save the stock market at any day. So I think the market is now a lot more relaxed than before. So from liquidity and political perspective, I think the market is betting that there's going to be a lot of support from both the Fed as well as Trump. Now the third positive thing that we need to think about is that there are a lot of people who also says that semiconductors is not for AI only. Basically, a lot of the new innovations that are coming out, including the full self-driving as well as humanoid robots, which may be a few years down the road, a lot of people believe that these new innovations will also require double or triple the amount of chips from the semiconductor companies. So, this cycle will continue to go for a lot more years than people are expecting. Now, we're going to have to see how these new innovations and how fast these new innovations will be commercialized in the long term.

[00:17:44]However, we just need to keep in mind that there are a lot of people who are not only forward-looking, but basically looking even further from there and looking at the cycle in a much longer time span. Okay, so that's that. Now, we've looked at all the negatives and the positive based on the current market. Now, if I had to give you my take, I think I can summarize it in three bullet points. So, number one, I now officially think that we are or will at some point head towards a bubble. Now people's sentiment and craziness towards the market is getting heated up day by day. And I think this is the first time I'm seeing this kind of market hike ever since co and I think to be honest with you, you know, it's impossible to predict how long this will go and whether it's going to break tomorrow.

[00:18:26]But what I can tell you is that the amount of liquidity that is coming in to certain sectors within the market is getting heated up day by day. And number two, however, no one knows when a bubble pops until it actually pops. So if I had to give you my view, I think it's too dangerous to sell what we have already.

[00:18:44]And number three, however, at the same time, given the uncertainties, entering the market now is quite challenging given the trailing price to earnings valuation and uncertainties on the forward price toearnings valuation.

[00:18:55]Also, the liquidity situation and the Federal Reserve situation and the max 7 demand on the chips is still unclear. So unless you have a super bullish view on the current market and the semiconductor industry as well as the AI industry, I think it is quite challenging to enter the market at this point. Okay, so that's my take. Now to give you a overarching summary, here are some of the points I wanted to mention. Number one, now I hate to say this, but it is one of those times when it is too dangerous to either sell or buy. Now therefore, I plan to hold on to what I have and not buy more at this point. And number two, if you really want to buy now, never take on leverage, but just buy with your free cash. And also don't buy any weird options or stuff like that, but just stick to plain stocks or ETF. Now, number three, when will I buy more? Now, as I said in my previous video, I'm going to buy more if five conditions are met. Number one, VIX over 30. Number two, interest rate cut visibility is still there. And number three, deleveraging taking place for at least a month. Number four, semiconductor and AI stocks are still leading stocks. And number five, those companies earnings are still strong.

[00:20:01]When all these five conditions are met, I plan to buy more. Now, number four, then when will I sell? I think I'll sell under three scenarios. Number one, when the major semiconductor or AI companies give their quarterly earnings release, if there's any indication from any of the major semiconductor or AI companies that the revenue growth or earnings will either plateau or miss, I'll instantly sell and liquidate all my positions.

[00:20:24]Number two, if Kevin Worsh fails to convince other board members and the Fed signals a no rate cut in the long term, I'll liquidate all my positions. Number three, if the forward price to earnings of semiconductor and Mac 7 stocks reach a ridiculous valuation, and when I say ridiculous, I would have to pick a number, but it's really arbitrary, but for example, if on a forward price to earnings basis, if the median multiple of the major companies goes over 45 to 50 times, I'll consider selling. But apart from those three scenarios, I think this is a point where it's really hard to make a firm decision on whether to buy or sell. So, we're going to have to monitor the market a lot more closely until we reach a certain point where things become a lot more clearer. Guys, I think this is one of those times where things are getting ridiculously expensive. And you know, while it's hard to make a decision to either sell or buy, I just wanted to remind you that, as I said before, for those of you who already own stocks in AI or semiconductor industries, I really recommend that you don't gravitate towards a selling just because you think the market has gone up too much. I think it's just too dangerous to sell your positions at at this point because generally a bubble is formed in a much more ridiculous manner. So, we're going to have to see when that breaks and it won't be too late to sell when you actually see things breaking. The market is going to give you at least a couple of months of window after a big hype.

[00:21:46]Generally, the market would fight between the bulls and the bears. And there's going to be a certain period where the market actually gives you a sufficient window for you to consider selling your stocks. But based on the run that we've seen in the past few weeks, I think it's time that we need to wait a little more. Now, for those of you who want to buy into the stock and don't own any stocks at this point, I just want to remind you to be very careful about it. Now, I understand that you may want to buy and it's okay to buy. However, don't take on leverage, please. And also, don't buy any weird like options or puts or calls or whatever. Just stick to plain stocks and ETFs at this point. The valuations are expensive and depending on how you underwrite your projections, it may yield different results buying into the stocks at this stage. But on an absolute basis, if you look at the trading multiples, it's quite expensive. So, I just wanted to let you know that this is a time where you need to be a lot more considerate when you're buying into the market. I hope you enjoyed the video and I'll be back with more videos very