Oracle (ORCL) Plunges Worst Since 2001...Wall Street Mogul Warns of 'End of Big Tech Era'

▲ Oracle (ORCL), Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), US Tech Stocks/AI Generated Image

A warning has emerged that cracks are appearing in the US tech stock-led rally, and the market's next flow of funds could shift from large AI beneficiaries to undervalued small-cap value stocks. With Oracle (Oracle, ORCL) plummeting nearly 20% in a week, marking its worst weekly performance since 2001, analysis suggests that the overall weakness in semiconductors and tech stocks may be more than just a simple correction, possibly signaling a larger downturn.

Kevin Smith, founder and CEO of Crescat Capital, warned in a CNBC interview on June 27 (local time) that the current market may be approaching a significant peak. Citing record valuations, record fiscal imbalances, and excessively narrow credit spreads, Smith stated, “There are definitely imbalances where something bigger could unfold.”

Weakness in tech stocks is already evident in major names. SanDisk (SanDisk, SNDK), Western Digital (Western Digital, WDC), Seagate (Seagate, STX), and Oracle all posted losses on both daily and weekly bases, and the tech sector ETF also fell by about 2% in a day. Semiconductor stocks are facing even greater pressure, indicating a shake-up in the leadership of the tech sector, which had been the market's driving force.

Smith also presented excessive optimism and changes in corporate finance flows as warning signs. He pointed out that the trend centered on share buybacks is shifting to an increase in new IPOs and additional stock issuances, and that market breadth is weakening. He also noted that the increasing capital expenditure burden on large cloud and AI infrastructure companies, leading to negative free cash flow, is a key burden on the market.

In terms of investment strategy, he simultaneously suggested defense and rotation. Smith stated, “Tail risk defense is very important in the current environment,” and revealed that he is utilizing S&P 500 put options. He viewed the current low volatility as a good environment for building defensive positions, and explained that high-yield ETF put options are also a reasonable choice in anticipation of credit spreads widening rapidly.

However, Smith did not believe that all risky assets should be avoided. He suggested the possibility of a major shift of funds from large-cap/mega-cap tech stocks to undervalued commodities and small-cap value stocks, naming metals and mining, especially exploration-focused mining companies, and biotech as preferred sectors. Biotech has been largely overlooked since COVID, with some companies trading below their cash holdings, while metals and mining were mentioned as areas that could benefit from a rotation into undervalued commodities after a precious metals correction.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*