Earnings season is officially sputtering to a start in the Real Money Portfolio, so we’ve got some meaningful new numbers from one of our favorite stocks. And it’s nice to have something real to talk about, instead of having to fret all day about whether the latest clues dropped by the latest hot company mean we’ve got a “bubble bursting” in the market — that’s the news of the day today, with the hottest stock in the market, Super Micro Computer (SMCI), falling more than 20%. And importantly, the stock fell not because they had a disappointing earnings report, or announced any bad news, but because they sent out a press release that announced their next earnings date (April 30), and failed to also announce their preliminary results or increase their forecasts for future quarters in that press release, as they had done for most of their previous quarters. Investors had gotten used to that early “beat and raise” signal from SMCI, and the lack of that signal freaked them out.

That didn’t just bring down SMCI shares, but because this is one of the leaders of the ‘AI mania’ over the past year, and had risen to a higher valuation multiple than even NVIDIA (NVDA) of late, it seemed to offer a “bubble is bursting” signal to all of the stocks that folks are trading as “AI plays” — which includes Vertiv (VRT), the data center supplier we looked at yesterday. NVDA fell by 10% today just because of that SMCI worry, and VRT fell about 7%, among many other examples of this “uh oh, maybe the fun is over” trade today.

Is that justified? Maybe. All of these stocks have been trading on sentiment about future AI spending, and speculation about how long the spending boom will last. I wouldn’t have thought that a “failure to preannounce” would be terrible news, but when a stock is up 1,000% in a year and 300% just so far in 2024, you don’t need terrible news for folks to want to take profits. You just need some smoke signals that say maybe the bad guys are coming on the other side of the mountain. Whether this is really the beginning of the end of the manic interest in AI stocks probably depends on what the big tech companies say in their earnings next week, which will offer ...