The SpaceX Liquidity Drain: Where the Real Bargains Are

Dear readers,

On Friday we wrote that the SpaceX IPO had shifted from liquidity threat to liquidity magnet, and posed the question: what happens to the rest of the market when $75 billion in fresh equity needs to find a home in portfolios? We now have the answer, and it isn’t pretty for anyone who owned mega-cap tech going into the week.

Hedge funds scrambling to build positions in Elon Musk’s $1.77 trillion rocket company sold what they could, not what they should. Positioning in mega-cap tech names collapsed from the 97th percentile to the 48th — a violent de-crowding that dragged the sector roughly 11 percent below its June record high. The selloff was indiscriminate. The opportunities it created are not.

Broadcom: Record Revenue, Punished Anyway

The most conspicuous victim of the rotation is Broadcom. The stock dropped 12 percent in its worst session in years, dragging the SOXX semiconductor ETF down with it. The financials tell a completely different story: record quarterly revenue of $22.2 billion, up 48 percent year over year, with AI chip sales surging 143 percent to $10.8 billion.

What spooked the market was a gross margin guide of 74 percent for the third quarter. But that number reflects the delivery phase of a massive $10 billion XPU order — a temporary compression tied to a specific contract, not a deterioration in the business. At a forward price-to-earnings ratio near 32, with a multi-year AI buildout still in its early innings, several analysts have set price targets as high as $825. The stock is cheaper today because of portfolio mechanics, not because anything changed about Broadcom’s earning power.

Adobe: The Market Refused to Read the Print

We wrote on Friday that Adobe was “a company where the AI transformation is showing up in the numbers, only to have the stock punished anyway.” That punishment deepened. The shares fell nearly 7 percent despite second-quarter earnings of $5.96 per share on revenue of $6.62 billion — a 12.7 percent increase — both above consensus. Management raised full-year 2026 guidance on the back of accelerating AI-driven demand.

None of it mattered. Institutional holders, including Platinum Investment Management, reduced positions sharply. The leadership vacuum we flagged Friday — no permanent CEO, an outgoing CFO — continues to weigh on sentiment. But the valuation has reached a point that demands attention: a trailing P/E of roughly 11.7 on a market cap of $82.5 billion. For a company growing revenue at double digits with an AI product portfolio generating over $500 million in annual recurring revenue, that multiple prices in a level of distress the financials simply don’t support.

Semiconductors Snap Back — Hard

The speed of the rebound confirms what the selloff was: a liquidity event, not a fundamental repricing. The PHLX Semiconductor Index jumped 7.9 percent on Thursday, its best single session since April. The rally had substance behind it. TSMC’s CEO reaffirmed expectations for a sustained AI chip shortage and maintained guidance for revenue growth above 30 percent. Bank of America raised its price target on AMD to $560, sending shares up 4.7 percent. Intel climbed 6.5 percent after securing new AI chip orders from Google.

Should investors sell immediately? Or is it worth buying Intel?

The pattern is clear. The same companies that were dumped to fund SpaceX allocations are being bought back within days as the forced selling exhausts itself.

Inflation Complicates the Recovery

The corporate earnings picture is robust. The macro backdrop is less cooperative. U.S. headline CPI printed at 4.2 percent in May — the highest reading since April 2023. Producer prices are running at a 6.5 percent annualized rate. The Fed meets on June 16 and 17, and futures markets are pricing a greater than 99 percent probability that the central bank holds rates steady at 3.50 to 3.75 percent.

The geopolitical angle adds a wrinkle. The emerging U.S.-Iran framework agreement, which we covered Friday, is being cheered as a de-escalation that could ease energy prices. Bank of America analysts caution, however, that stabilizing but moderately elevated oil prices could paradoxically push the Fed toward further tightening rather than cuts. The dot plot projections released after next week’s meeting will tell us whether the committee agrees.

What Matters Now

The SpaceX-driven liquidity shock is already fading. The fundamental question for the week ahead is whether the Fed’s updated projections validate the market’s assumption that rates have peaked, or whether the inflation data forces a hawkish revision that extends the pressure on high-multiple names.

For investors with a time horizon longer than a trading session, the setup is straightforward. Broadcom and Adobe are trading at discounts created by capital flows, not by any deterioration in their businesses. The semiconductor complex has already begun correcting the mispricing. The risk is macro — specifically, a Fed that refuses to accommodate a market eager for rate relief. But at current valuations, patient buyers are being compensated for that risk.

We hope you’re enjoying the weekend.

Best regards,
The StocksToday.com Editorial