President-Elect Donald Trump rang the bell at the New York Stock Exchange this morning to start the session. Many wags on social media thought that it would be poetic if it signaled the top of the bull market.
And, who knows, it might have. As I write this all major indexes in the U.S. are down about half a percent. Gold is down about 2% and silver is down 4%. Crude oil is flat but natural gas is running contrary and is climbing due to low inventory levels in the U.S. and in the EU.
None of that matters. The only thing that matters in this market is that the MAG7 is up.
Here is the chart of the 5x leveraged Magnificient 7 ETF which I recommended on November 26, 2024, at $35. Today it is up another 3% to $59.27 mostly due to Microsoft (MSFT) having a good day.
That’s a 69% gain in two weeks! Nice. Go ahead and take profits. I don’t like that doji candlestick at the top of a trend. That is a clear sell signal.
This market is overdue for a breather but I don’t think the AI boom is even close to being over and I’ll tell you why…
Ciena Crushed it On Future Growth
Ciena Corp (CIEN) gapped up more than 16% today after it missed earnings. What gives?
The company announced Q4 earnings of $0.54 per share which was well below the $0.66 that Wall Street was expecting. Revenue however came in at $1.2 billion well above the $1.1 billion estimate.
But beyond that, the CEO projected that growth would also come in better than expected due to our old friend – AI demand.
Ciena CEO Gary Smith said: “As Cloud and AI drive bandwidth demand across the network, we are positioned for accelerated revenue growth and market share expansion moving forward.”
Smith expects one and three-year growth to be in the 8% to 11% range, versus the prior target of 6% to 8%. This growth is based on the cyclical recovery within telecoms. Capex is expanding, trends are improving and order growth is beating revenue growth.
The upshot of this is that companies are still spending on cloud and AI. Furthermore, Ciena also announced it had repurchased 2.1M shares for $132M during the fourth quarter.
Other networking companies like Cisco (CSC0) and Juniper Networks (JNPR) were flat for the day.
However, last week Hewlett Packard Enterprise (HPE), the spin-off from the printer company, also attributed its growth to new AI orders. The share price jumped 12% in two days. HPE makes servers which are also in demand for AI.
Corning Incorporated (GLW) is up 65% this year based on AI growth. The company makes fiber optic lines. More servers, more infrastructure, more cables.
It is obvious that demand for new data centers and the electricity to power them is in the early stages of growth. The AI investment boom has many years to run.
And many of these companies are still cheap. HPE has a PE of 11 and trades a little over book value.
If you are looking for AI infrastructure plays check out our free report.
All the best,
Christian DeHaemer
Outsider Club
Big Predictions on the Way: https://www.outsiderclub.com/whats-ahead-in-2025/
I Just Bought GOOGL: https://www.outsiderclub.com/i-bought-google-today/
Up, Up and Away: https://www.outsiderclub.com/this-market-only-goes-up/
