u/armadillo_stocks

Yesterday Space X stock was up 4% on reports that NVIDIA, Google and Harvard took massive positions in the stock as seen in the 13F fillings.

That is however wrong.

What actually happened was Space X trading as a public company is going through its first quarter meaning this is the first time 13Fs had to be filed in the midst of their time as a public company.

In short, these are not new positions, they are actually very old and made at completely different valuations.

Google invested $900m at a $10-12b valuation.
This stake is now worth about $90 billion and is up nearly 100x since its investment.
Google has not sold out of this position yet as part of the IPO as the shares are locked up for the most part, however with each expiry they are becoming sellable as with all other insiders.

NVIDIA made its standard 2 billion investment in its GPU clients to secure customers. Then when xAI got merged into SpaceX at a large markup, that investment ballooned to 20 billion.

Harvard invested through a private fund pre-ipo, to essentially provide early liquidity to investors/employees and sell through later on.

All of these championed investors bought at prices way lower and are having their lockups expire over the next 8 weeks.

The following is a warning to all investors in the AI compute space.

Over the past year nearly all equities linked to the AI hardware space have experienced 10x runs or more.

While there is real promise in the AI trade, it is my belief that compute equities will be responsible for the ruin of the largest class of retail investors since the dot com crash.

This is why.

Leveraged ETFs account for less than 1% of AUM out of all ETFs yet they account for 16% of trading volume.
At the same time 0dte options have reached a scale where they drive the performance even of the SP500 in a day to day timeframe.

In short, retail has never been so leveraged.

Another issue is platforms like this one as we’ve transitioned from social media to interest media. Whatever your point of view is, content served will validate it and you’ll get more entrenched.

This, compound to an era of desperation capital where average people believe they need to take outsized YOLO risk to generate capital typically leads to their total ruin.

You’re starting to see this play out even at hedge fund level - see Situational Awareness’s collapse or Jane Street’s $15 billion losses in July.

This class of risk-on investors have grown blind to the outsized exposure they have on the downsize which has led them to wrong asset allocation.

At the same time, AI hardware providers and compute sellers especially are now priced for not only operational perfection, but also all of that outsized growth (that may not happen) is wholly priced into the stocks.

Even if these companies meet all of their projections and accelerate forward, they are barely worth what they are to do as discount rates on DCF valuations would need to be at blue chip level lows, which doesn’t warrant the risk return.

If they don’t, or if there’s any indication they might not, the cascade of liquidations between retail and specific hedge funds will lead to a brutal drawdown that will wipe out many investors. This is not a risk; this will eventually happen, question is when, and that’s the gamble.

Sure, shorts position on these stocks, including mine on SpaceX, might not work, however long positions with no exit targets at all and DCA sells are sure to fail when deploying so much leverage; Situational Awareness’s warning shot was ignored by many, and that will be many’s downfall.

Companies themselves and management know this to be true, and although you won’t find it in their sell side presentation, you will find it in their actions.

Ask yourselves this - if the payback period was 1 year on a data center, or even 2, why not raise all the needed capital on loan at fed rate + 3% and not build out all of the capacity at the same time, if demand is truly infinite.

To be more concrete; ask yourselves this. Why did both Nebius and IREN amongst others issue equity ATM to raise cash if they could make back all of capital on a loan within a year.

Why is NVIDIA not building the data centers itself and selling compute direct if they are selling the chip for 1 year worth of profits and could capture 4-5x the revenue as these companies suggest.

Why are hyperscalers not paying 1-year worth of leases to own the data center instead of paying that supposed capex every year. Power has been disproven as a bottleneck already (see Bloom Energy).

Why did SpaceX acquire Cursor for stock if it was supposed to 2x in the near future and could generate so much on compute, did they want to overpay.

The reality is all of them are at the very least hedging what is a rally that has lost all links to reality, retail isn’t and is levering up, this will be ultimately the downfall of many.

Be smart - derisk.

NFA.

In total I now hold 175,000 shares of SSPC.

I believe the pump today is the result of all meme stocks like Nebius and Coreweave and other neoclouds going up, lifting up Space X amidst them.

This just severed even more the connection between reality and where Space X trades. Next week; another lockup expiry, and then another one and so on…

We should see the front running of this expiry affecting selling volume soon, this rally is definitely not sustainable.

Space X started with a tiny 5% float as we all know which has now doubled to 10% last week and will expand to 40% by early December in increments every 2 weeks.

There‘s a lot of amazement to the Friday 15% run up despite this and what most miss is that the amazement is largely linked to the fact of it being a rare anomaly.

Given the dynamics, it’s likely exact dates of a lockup expiry at Space X are not relevant as institutions are front running the expiries through short sales, similar to how an ELOC or even an ATM would function and then cover around the expiry lockup.

So in effect, it’s very possible the selling pressure is spread out in the period between the lockups and it gets relief when that lockup expires and then a new pressure starts.

I’m short 3.3m SpaceX because of FOMO but not in the way you think.

Space X has arguably been trading in a world of its own since the beginning and in a way that has been disconnected from reality.

Many investors better than me have pointed out the numerous contradictions in Space X’s financials and guidance with reality, so I won’t get into that here yet again.

Today however, I think something has changed in the reality Space X operates in following the insider lockup expiration on Thursday.

Many had feared a collapse of SpaceX stock as insiders would start dumping their shares immediately into the market. Instead, it went up 22% this week.

The reality is, it seems so many institutions were short SpaceX from much higher levels into this lockup expiration that them covering was a bigger volume than the share sale.

Since it happened on a Friday, retail started losing their minds chasing another rally, which was in effect whales covering their short positions.

This triggered a 22% stock gain, 16% of which was today, on essentially a technicality and FOMO drive.

Space X is now by the way only back to its IPO price of $135 per share, another wall that’s likely to provide significant resistance.

Ahead - there are no catalysts with earnings behind us (disappointing) and no way to justify a 1.75 trillion valuation.

In my view, this will gradually gets the speculators out of the stock leading it back to a $100-105 per share floor where some more buyers could step in temporarily, longer term, in my mind we see $50/share, which would be a great success still.

Time to follow up on my previous posts.

I had bought 2.2 million worth of Reddit shares through RDTL (2x leverage at 13.3) targeting a slow recovery to true value.

Instead the stock shot up in value in 1 day and I am now up near 15% overnight, so I’ll take that profit.

I have now sold my RDTL shares and am buying 1.000 RDDT shares ($160k) with the profit from the investment which I plan on keeping until we reach Reddit’s true potential.

It’s good to be home.

On Friday I took a 2.2 million position in Reddit following the stock dropping over 20% percent on its earnings report, which was actually good.

My investment thesis in general stems on waiting for the market to get something wrong and take advantage. Two days ago it got it wrong on Reddit.

The main thing is this - market assumes Google using Reddit to display instant answers in search without click through represent a systematic danger to the site. At a time where Reddit contemplates revisiting its Google training data deal.

Then market looked at earnings, found a less than 1% move in DAUs in US which was the only metric not up double digits, and immediately pointed that’s what it feared. That’s the mistake.

Sidenote - back when I built niche marketplaces in high ticket spaces, one breakthrough moment was when updated our sites to target search engines to display our data in instant answers (what market is afraid of here)

Why? Because, sure, not everyone who saw the data clicked through, but the overall number of users went up as a result of first result status being almost guaranteed and because those that did were much more targeted customers as those looking only at spec data got that on the Google page.
For DuckDuckGo we even built the instant answers plugin ourselves to get that result.

So Google displaying these instant answers is not only not a threat, it’s a great thing for Reddit and its advertisers as it’s where they can find users with the highest intent possible, allowing Reddit to keep ramping up its revenue.

Reddit revamping its LLM deal for training data with Google will also only increase the revenue run rate for Reddit which is slowly turning into a fast growing free cash flow machine with 375 million in EBITDA. Per quarter on 800 million of revenue, all going up 20% YOY.

Reddit is really cheap by any valuation metric, especially for a high growth business, but to me the most important part is to understand why the opportunity appeared and what the market got wrong. This is it.

On Friday I took a 2.2 million position in Reddit following the stock dropping over 20% percent on its earnings report, which was actually good.

My investment thesis in general stems on waiting for the market to get something wrong and take advantage. Two days ago it got it wrong on Reddit.

The main thing is this - market assumes Google using Reddit to display instant answers in search without click through represent a systematic danger to the site. At a time where Reddit contemplates revisiting its Google training data deal.

Then market looked at earnings, found a less than 1% move in DAUs in US which was the only metric not up double digits, and immediately pointed that’s what it feared. That’s the mistake.

Sidenote - back when I built niche marketplaces in high ticket spaces, one breakthrough moment was when updated our sites to target search engines to display our data in instant answers (what market is afraid of here)

Why? Because, sure, not everyone who saw the data clicked through, but the overall number of users went up as a result of first result status being almost guaranteed and because those that did were much more targeted customers as those looking only at spec data got that on the Google page.
For DuckDuckGo we even built the instant answers plugin ourselves to get that result.

So Google displaying these instant answers is not only not a threat, it’s a great thing for Reddit and its advertisers as it’s where they can find users with the highest intent possible, allowing Reddit to keep ramping up its revenue.

Reddit revamping its LLM deal for training data with Google will also only increase the revenue run rate for Reddit which is slowly turning into a fast growing free cash flow machine with 375 million in EBITDA. Per quarter on 800 million of revenue, all going up 20% YOY.

Reddit is really cheap by any valuation metric, especially for a high growth business, but to me the most important part is to understand why the opportunity appeared and what the market got wrong. This is it.

Shorted NBIS through NBIZ at 270, covered at 200.
Then shorted again at 260, covered at 180.
Used profits to buy 300k worth of Nebius at zero cost

Seems sell off is over done, purchased an additional 250k worth of NBIL yesterday at market close planning for a reversal in the stock today.

Is this how you trade Nebius now?
What are your projections?

Stock is trading at a 20% discount to NAV.
Buying shares would result in growing ETH/share, effectively buying ETH at 1.400-1.450/eth.

Even preferred shares were issued to buy ETH, yet the cheapest eth (buybacks) is not being purchased.

Question is why not? Obvious argument is Lee hitting his comp plan based on total ETH buys.

But is there any other reason why they would held back on buybacks? I think not and it’s due to the comp plan incentives. Could I be wrong?

BMNR follows me on X but they dodge these questions obviously XD

Opened my short position at around 285/share.
Thinking we’re going to test the 200-220 range before any significant room higher.
Main thesis is AI infrastructure is overhyped and overcapitalized whereas crypto and SaaS are undervalued. Short the first and long the latter.

Tell me why I’m wrong. Curious

Adobe released earnings and the stock dived over 10% within a day to its 8-year low. All of the reasons that led to this are also those that will see it trend up.

The reasoning behind the SaaSpocalypse is simple - AI will make software development cheaper and better, leading to more competition on price and companies building out their own custom solutions.

Enterprises are actually not about to vibe code their own solutions, as anyone who’s dealt with their compliance stock will know, however the first threat of cheaper competition might be more severe.

In a world where customer acquisition becomes the key parameter if we were to imagine software to be commoditised, brand and expertise will matter significantly matter. This is why companies that have access to large cohorts of users will be able to have the largest user bases.

In focusing on a freemium user acquisition channel, Adobe is doing exactly that, by broadening the scope of its users to grow and cement brand recognition as well as acquire large cohorts of users. This is also why Adobe has raised its full year ARR guidance by 0.5 billion as well as its EPS guidance.

Market sold off as with any SaaS earnings report as it’s views a change of strategy as a sign of weakness to AI competition whereas in reality it is a sign corporations are adapting and embracing new tech developments in AI which is exactly what they should be doing.

The key part for me here is that a large freemium user cohort will allow Adobe to build better products with AI faster, having access to user data and better distribution given it an edge over any disruptor. Costs for Adobe will also trend down as AI is embraced which should increase its margins and not decrease it.

We’ve seen the same behaviour to focus on MAUs at Duolingo and in part at Salesforce as well. Elite SaaS companies understand that this is the moment to scale their business, market is sleeping on it.