What momentum giveth, momentum taketh (NOTW #113)

You can read the PDF of this article here.

Best Anchor Stocks has a partnership with Fiscal.ai (the research platform I personally use), through which you can enjoy a 15% discount on any plan. Use this link to claim yours! You’ll find KPIs, Copilot (a ChatGPT focused on finance) and the best UX:

---

Markets dropped significantly this week, driven by the “problems” in the AI trade. This week was a clear example of how momentum can be a double-edged sword.

Without further ado, let’s get on with it.

Articles of the week

I published four articles this week. The first one was an overview of Stevanato’s not-so-great earnings.

Management decided to rip the bandaid off by giving a pretty bad outlook for 2027 and the market reacted accordingly.

The second article of the week was my Tiendas 3B earnings digest.

The company reported again incredible earnings and the stock rose considerably. Thus far my ownership of TBBB has been a constant surprise, to the upside that is!

The third article of the week was the awaited Amazon’s Q3 earnings digest.

Even though I do go over the company’s Q3 earnings, I focus on explaining why I believe that hyperscalers almost always win.

The fourth and final article of the week was Shift4’s earnings digest.

Despite the initial market reaction and the sentiment around the stock, I explain why I believe that earnings were not that bad (even though they were evidently not perfect) and what I think needs to change for the stock to “work.”

I am working on an earnings digest on Constellation/Topicus for next week, and will also likely write about Sabre and one of my undisclosed positions.

Without further ado, let’s see what the markets did this week.

Market Overview

Both indices dropped considerably this week:

If you only checked your portfolio on Wednesday, you probably thought the midterms were great news (maybe they were, only time will tell). The Democrats won both chambers of Congress and several key governor races, so markets took the midterms as the end of the political uncertainty and maybe the beginning of the end of the war in Iran (oil dropped quite a bit). If there’s one thing markets hate, that’s uncertainty. Investors were so fired up that the S&P 500 had its best day in three months! The problem is that the “celebration” lasted exactly one day.

On Thursday, the market started pricing what the vote might actually mean for the AI build-out. Rising electricity prices have ultimately turned data centers into a political debate. Some Democrats have called for restrictions or outright pauses on new projects, and the “problem” is that several of those wins came in key data-center states. Chip and data-center names were dumped across the board, with the Nasdaq falling over 5% (in one day that is) and confirming correction territory (10% drawdown). Just for context…it was the index’s worst day since “Liberation Day” in April 2025. The narrative shifted at the speed of light…OpenAI pledged to cover the power costs of its data centers right in the middle of the selloff and there are also rumours that Anthropic might be considering delaying its IPO (still TBD).

Now, I think that the midterms are just one side of the story. AI names had already been swinging for months on worries about how expensive it has become to fund the build-out and whether the growth would support it. The midterms were just the excuse or maybe the precursor, but the truth is that a lot of people seemed to be holding the perceived AI winners without any real conviction. A lot of people (including professional investors here) owned them because they kept going up, not because they understood the business or had a real opinion on what it was worth (of course this doesn’t apply to everyone). The problem is that this kind of holder sells the moment the chart turns (i.e., they are momentum chasers), and then the next one sells because the first one did. The bottom line is that it’s pretty normal to see things tumble this hard once they start going down and honestly this is likely why momentum has been such a strong force over the past few years.

There’s an interesting flipside to all of this as well. Forced/emotional selling doesn’t care about fundamentals and that is usually where the best opportunities come from for those who have been patient (I am currently working on a company that might have seen a lot of forced selling, and it’s not an AI name). Even though not every AI name deserves to bounce back (some probably won’t), others might become very attractive opportunities. We will see where all of this takes us.

The industry map was mixed this week, with the weakness concentrated in technology:

Source: Finviz

The fear and greed index interestingly improved despite what markets did this week:

Source: CNN

I sold one position this week