Jim Cramer is buying the dip while Michael Burry is short semis like no tomorrow

can anybody advise what burrys thesis is on microsoft, his leaps signals hes bullish on a strong recovery, wanting to know his thoughts behind this if anyone can enlighten me?

Last weekend I was looking into data of the CFTC COT, and I noticed something that I think deserves more attention than it's getting. On its own, the COT report is just a snapshot of futures positioning, but when you combine it with what is happening across other markets, a pretty interesting picture starts to emerge. I'm beginning to think we're seeing the early stages of a regime shift away from the AI/mega-cap/growth leadership that has dominated the last couple of years, toward longer-duration Treasuries, value stocks, and a much broader market.

The first thing that caught my attention was the positioning in Treasury futures. Asset managers continued to add long exposure, particularly in the long end of the curve. The strongest positioning is in the 30-year Treasury Bond and Ultra Bond contracts. That suggests institutional investors are becoming increasingly comfortable extending duration. Whether that's because they expect lower inflation, slower nominal growth, or simply believe long-term yields have peaked is open to interpretation, but the positioning itself is difficult to ignore. Of course, large institutions can be wrong just like everyone else. However, what makes this more compelling is that the price action has started to confirm the positioning.

One of the charts I've been watching is the TLT/SPY ratio. Rather than focusing on whether TLT is going up in absolute terms, I care more about whether long-duration Treasuries are beginning to outperform equities as you can see below. Over the past few weeks, the ratio has started moving higher and recently broke above its 50-day moving average. By itself that's not enough to call a new trend, but it's the first technical confirmation that the market may be rewarding the same positioning we see in the COT data.

TLT/SPY moving higher and breaking above 50-day moving average

At the same time, the 10-year Treasury yield appears to be losing momentum. After spending many months trading at elevated levels because of the war in Iran, yields have recently started falling from around 4.56% to roughly 4.37%. Probably because a peace deal was in sight. Of course, this is not yet a confirmed long-term downtrend, but it's exactly what you would expect to see if institutional demand for duration is beginning to influence the broader bond market.

10-year Treasury yields

If this were happening alongside widening credit spreads, I would interpret it as a classic flight-to-safety trade driven by recession fears. But that's not what we're seeing. As you can see below, the ICE BofA US High Yield Option-Adjusted Spread is sitting near its lowest level of the year and has actually continued to decline over the past few months. That's an important distinction. It suggests the bond market isn't rallying because investors are panicking. Instead, it points toward a much healthier scenario where inflation expectations ease, long-term rates decline, and credit markets remain confident. In other words, a soft-landing narrative rather than an outright risk-off event.

ICE BofA US High Yield Option-Adjusted Spread

What makes this even more interesting is what's happening inside the equity market itself.

For almost two years, performance has been dominated by a very small group of AI-related mega-cap technology companies. But that concentration may finally be starting to unwind. This is visible in the CFTC COT where open interest in the QQQ futures has significantly declined, while exposure to value has remained the same. This is also visible in the VTV/VUG ratio and the RSP/SPY ratio breaking above their 50-day moving averages. To me, this suggests that the average company is beginning to participate again instead of the entire market relying on seven or eight giants to carry the index. These are exactly the types of relative-strength charts I would expect to improve if investors were quietly rotating away from expensive growth stocks toward cheaper value names. Again, none of these charts individually prove anything. But together they begin telling a remarkably consistent story.

VTV/VUG moving higher and breaking above 50-day moving average

RSP/SPY moving higher and breaking above 50-day moving average

That's really the key point I'm trying to make. I'm not arguing that AI is over or that technology is about to collapse. AI will almost certainly remain one of the biggest secular growth themes of this decade. What I'm questioning is whether the extraordinary relative outperformance of a handful of mega-cap growth stocks can continue if long-term yields gradually fall, market breadth improves, and institutional capital starts seeking opportunities elsewhere.

Historically, when inflation moderates without a severe recession, lower discount rates don't necessarily benefit the most expensive growth stocks the most. Quite often they create a much better environment for reasonably valued companies with solid cash flows, strong balance sheets, and lower expectations already priced into their valuations. At the same time, longer-duration Treasuries become increasingly attractive as both an income-producing asset and a potential source of capital appreciation if yields continue to decline.

None of this guarantees that we're entering a new regime. There are still obvious risks. A renewed inflation shock, a continuation of the war in Iran (and the closure of the Straight of Hormuz), higher energy prices, or stronger-than-expected economic growth could easily push long-term yields higher again and invalidate this entire thesis. Likewise, if AI-driven earnings continue to surprise to the upside, growth could easily regain leadership.

But when I step back and look at everything together (i.e. the CFTC positioning, the improvement in TLT/SPY, the declining 10-year yield, tight credit spreads, improving market breadth through RSP/SPY, and the relative strength beginning to emerge in IWD/QQQ and VTV/VUG) it feels like more than just random noise. It looks like several independent markets are starting to tell the same story.

I will be loading up on (calls on) longer-duration bond ETFs and keep adding to value stocks as I think these asset classes may finally have a chance to outperform after spending years in the shadows.

I'd be interested to hear whether anyone else is seeing the same rotation, or if you think these signals are simply coincidental and we're still firmly in the same AI-led growth regime.

Adobe at roughly 8x forward (non-GAAP) earnings about 11x trailing generating ~$10B a year in free cash flow at ~89% gross margins, with the market implying it basically stops growing.

The market is doing two contradictory things at the same time right now. On one side, it's paying up tens of times forward earnings for almost anything tied to AI: the chipmakers, the hyperscalers, the picks-and-shovels names riding nearly $3 trillion of promised infrastructure spending. On the other side, it's dumping Adobe to roughly 8x forward earnings about 11x trailing, a fraction of the ~35–40x it averaged over the past several years down by half and near a 52-week low, on the fear that AI will destroy it.

So the same trend is being used to justify the most expensive names on the market and to condemn one of the cheapest large-cap software franchises on it. In effect, people are paying up for the shovels and selling the thing being dug up. That contradiction is what got me looking.

What actually sits behind the ticker. Strip away the headlines and this is a very high-quality business. Gross margins have held in the high 80s for nineteen straight years ~89% today and never dropped below the mid-80s even during the wholesale shift to subscriptions. Revenue went from $3.2B in 2007 to $23.8B in 2025, compounding about 12% a year through a financial crisis, a pandemic, and that transition. Return on invested capital has run in the 30s on most measures lately (one data provider puts it higher), with a ~20% median across nineteen years consistently several times its ~8–11% cost of capital. Free cash flow converts at well above 100% of net income, about $10B a year in real cash. The balance sheet is barely levered: ~$7B of debt against ~$5.6B of cash (net debt near zero), debt/EBITDA ~0.7x, and an Altman-Z around 8 no solvency risk here. No single customer is a meaningful share of revenue, and the accounting-quality screens are clean (Piotroski 7 of 9; the report's Beneish manipulation screen flags nothing). Adobe effectively takes a cut of nearly every PDF, ad campaign, and enterprise content pipeline on earth, and it's done that profitably since before the iPhone.

Valuation

Strip the narrative and look at what you're actually paying today, against the stock's own history:

Metric	ADBE today	Its own norm / context
P/E trailing (GAAP)	~11x	3-yr avg ~35x · 5-yr avg ~38x
P/E forward (non-GAAP guidance)	~8x	software-industry median ~18x
FCF yield	~11%	3–5-yr avg ~4%
EV/EBITDA	~8x	-
EV/FCF	~8x	-
Price/sales	~3.2x	well above historically; peers ~4.8x
Price/book	~8x	3–5-yr avg ~14x
PEG	~0.55	-

The ~8x "forward" multiple uses Adobe's FY2026 non-GAAP EPS guidance (~$23.4); on GAAP guidance (~$18) the forward multiple is closer to ~11x. Either way it sits far below the company's own history and the software median. Multiples per S&P Global / public aggregators, June 2026.

A business that traded between roughly 35x and 44x earnings for most of the past decade now trades in the 8–11x range. Its free-cash-flow yield has roughly tripled from about 4% to about 11% and not because the cash flow fell, but because the price did. A PEG around 0.55 means the market is pricing a double-digit grower as if growth were a problem.

Behind those multiples is the cash itself: about $10.5B of operating cash flow against almost no capital spending, so roughly $10B of free cash flow a year on a ~$78B market cap. Management is using it to buy back stock about 6% of shares retired in the last twelve months, with ~$25B still authorized. The balance sheet is essentially unlevered. The business clearly survives; the only real debate is how fast it grows.

So it's worth asking what the market is actually assuming. Reverse-engineer the price and it implies only low-single-digit long-term growth about 3% on the report's DCF versus the ~10% revenue growth analysts still model and the ~12% the company has compounded for nineteen years. Reverse-DCF outputs are sensitive to the assumptions you feed them, but the direction is hard to argue with: the price is closer to pricing a near-stall than a slowdown.

Value it several ways and the estimates spread out, which is expected growth-aware methods land high, deep-value formulas land low because they give a durable grower little credit for its future:

Lens	What it credits	Value	vs ~$195
Discounted free cash flow base case	normalized cash flows, conservative	~$372	+91%
Quick cash-flow DCF	simpler, cash-based	~$375	+92%
Owner-earnings DCF	same, but charging stock-comp as a real cost	~$278	+43%
Analyst consensus target	mean of ~30 sell-side desks	~$282	+45%
Earnings-power value	today's earnings, zero growth	~$181	-7%
Peter Lynch fair value	fair P/E ≈ growth rate	~$138	-29%
Graham number	defensive deep-value formula	~$107	-45%

I wouldn't average these. I anchor on the conservative base case (~$372) and treat the rest as a range. The most optimistic lenses historical price-to-sales and some screen models — sit above $550, which I'd call a ceiling, not a target, and I'd be skeptical of anyone quoting it as one. The more useful number is the floor: even the owner-earnings version, which charges all stock-based comp as the real cost it is (about 8% of revenue, knocking ~20% off reported FCF), still lands roughly 40% above the current price. The only methods that call Adobe expensive are the ones that assume growth basically stops which is exactly what the market is currently assuming.

In plain owner's terms: an ~11% free-cash-flow yield plus high-single-digit growth is a high-teens expected annual return at today's multiple, before any change in valuation. If the multiple drifts back toward even half its historical average, the returns get a lot bigger. That's the bull case. Here's the other side.

The bear case, honestly

The bear case is real, and worth laying out properly rather than waving away.

Generative AI has pushed the cost of "good enough" content toward zero. Canva competes from below on price. Figma the $20B acquisition regulators blocked, now public on its own competes from above in design. OpenAI and Google give away image generation as a feature. And the bigger question is the workflow itself: if someone can just describe a banner and get it, why keep paying for the seat? Adobe's answer is Firefly, GenStudio, and a freemium funnel of 850 million monthly users but that's the catch. With 850 million users, AI-first ARR has only tripled to about $500M, which is a rounding error on a $26B base. The funnel is huge; direct AI conversion so far is tiny. The market read the freemium pivot less as offense and more as an admission that Adobe isn't sure it can charge for AI directly yet.

A few other warning signs. The CEO of eighteen years is leaving and the CFO already left for Marvell both near the low in the stock, which could be coincidence or could be a signal. The FTC/DOJ case (settled for ~$150M a $75M penalty plus $75M in free services) was over hidden early-termination fees and a deliberately hard cancellation process; the complaint quotes an internal Adobe executive calling the fee "a bit like heroin for Adobe." Adobe says those fees were under 0.5% of revenue, so this is more a governance and reputation problem than a revenue hole but it shows a company willing to lean on dark patterns to hold its subscriber base, which is the opposite of the frictionless moat the bull case assumes. Insiders sold 18 times against 2 buys. And technically the stock is still weak: bearish score, new lows, no real sign of capitulation. Nobody looks done selling yet.

Where I land

This is a high-quality business priced as if it's in decline, and the only question that matters is whether it actually is. I don't think a company that takes a cut of the entire professional content economy falls to ~3% growth because consumers can make free images. The professional workflow layers, color, rights, compliance, the file formats everyone already uses isn't the same product as the free toy that supposedly threatens it. But I could easily be early, and early looks exactly like wrong while you wait. Cheap got cheaper in 2000 and again in 2008; the people who were ultimately right often made nothing for a year or two first.

It's worth noting that patient, quality-focused investors are already buying: Oakmark built a 2.3M-share position from scratch, Bill Miller's firm opened one, Lindsell Train added ~32% and Dodge & Cox ~15%. Polen, on the other side, cut its stake by 99%. Someone is wrong..

The market has decided Adobe is roadkill in the AI shift. Maybe it's right. But I'd rather own a ~$10B-a-year cash machine at a single-digit forward multiple than pay forty times earnings for the AI story, and I think the odds favor this business outlasting the panic the way it has before.

I can tell a good business from a bad one, read a 10K without my eyes glazing over, fine but every day DCF I've built is so sensitive to terminal growth that I can justify any price I want, which means I never actually trust them with a number. For people who actually set the price to targets they trust, what does this process look like?

He is just aggressively buying cheap stocks, including the tech sector, which appears to be breaking his AI bubble thesis. Is he betting against himself at times? Or is he in denial that markets have changed since his big win over a decade ago?