What caused the pre-holiday stock drop and what to do about it
Anthropic. Information. A session before the long holiday weekend. It was a toxic combination that crushed chip stocks on Thursday. The market is closed on Friday in celebration of the Fourth of July – so, understandably, trading volume on Thursday was light, making stocks vulnerable to large swings. Here is what happened. Tech media outlet Info broke the story on Thursday, reporting that Anthropic is in talks with Samsung to develop a custom artificial intelligence chip. Anthropic’s expertise as a maker of advanced AI models is already preparing the company for one of the biggest initial public offerings of all time. While it doesn’t make sense that Anthropic, like other AI-forwarding companies Alphabet and Amazon, would want its own custom chips, the report from The Information was short on details about what a potential Anthropic chip would be — a GPU or a CPU — or how it would be used. Anthropic told TechCrunch, another tech news site, that it uses chips from Alphabet’s Google, Amazon, and Nvidia for computing power. TechCrunch said Anthropic had nothing to add about its custom chip ambitions. It didn’t matter. Every hedge fund manager had to take action because who knew what the Anthropic chip would become. Then, everyone who knows what they’re up to has to bail on Micron, Seagate, Western Digital, Sandisk, and Advanced Micro Devices (AMD), as well as Club names Nvidia and Intel. These stocks have weak managers to begin with who don’t know how things are going. They don’t know how everyone has been sold. They don’t know how much it will cost. What they don’t realize is that if Samsung is going to get into Anthropic’s new chip, it will need billions of dollars in semiconductor capital equipment, which, if it actually exists, could be a significant write-off. Anthropic would have to make an equity offering right now to get into that line, which is well-backed, to say the least. Despite the love of Anthropic, the company has no objections that it will do anything and rule everything. I don’t know who makes these claims, if they are made at all, but I do know that Anthropic’s name is law, and the Knowledge Story plays directly into Anthropic’s craft. The problem is that we’ve seen this horror movie before. Back in January, with CrowdStrike at a high of $110, down from $138, we learned that the cybersecurity giant’s “goose” was “cooked” because Anthropic was believed to disrupt the industry. (Those prices in CrowdStrike shares account for the 4-for-1 stock split that happened on Thursday.) I soon got George Kurtz, the CEO of CrowdStrike, to come and talk about the opportunity for new entry and a superior product to come. George dismissed it from his hand. Why? Because even if Anthropic wanted to play that role, being both an unregulated service provider and a deterrent to cyberterrorists, the insurance companies, the decisions about who gets coverage, would never allow it. You can’t do both, said George. It just won’t happen. At the time, it meant nothing. CrowdStrike keeps getting threaded. The unstoppable power of the net, something that lasted until Anthropic launched Project Glasswing, demonstrated a desperate state of cybersecurity that only CrowdStrike and Palo Alto Networks had. By then, CrowdStrike had fallen into the $90s, as more and more panics followed. But it was beginning to dawn on people that the new model of the Anthropic Mythos was a real threat to cybersecurity – perhaps the best thing it could do. From there, CrowdStrike rallied into the $190s, a $100 gain from the bottom. So, fast forward now. That’s why I want to revisit the game plan we put in place last winter when we decided it was too much and Internet stocks weren’t worth the punishment. Now, I’m picking Intel because they own CPUs, build infrastructure (that’s semiconductor-speak for manufacturing facilities), and create a packaging business that will give Cadence a run for its money. It cannot be harmed by Anthropic. I don’t know if anything will be hurt by Anthropic; I choose Intel because it has a big increase. Believe me, I’d like to pick Nvidia, but there isn’t a day when someone tries to rain on Nvidia’s show, and I’m sick of flooding. Anyway, there you have it. Repetition of cyber run. It was brutal. It took several months. You needed a lot of dry powder to make it work, which we had then and we have now. (Jim Cramer’s Charitable Trust is long GOOGL, AMZN, INTC, NVDA, CRWD, PANW. See here for a full list of stocks.) 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