Lumentum Holdings Inc.

Palo Alto, 8.

Lumentum, 7.

SK Hynix ADR, another 7.

Marvell, 7.

So one could argue, everyone's asking, has the AI bubble popped? Well, a lot of the data would suggest that the AI bubble has already popped in some weird way.

So I guess you could say that, yes, if you look at the price action, you look at the tape, if you look at how big some of these drawdowns have been in names like Micron and Lumentum got hit super hard this week on that Marvell Lumentum deal that the market doesn't like.

If you look at all that stuff, you could say, yes, the AI trade is broken, but That would be a technical answer.

Technically, looking at technical conditions, the AI trade is broken.

I like the setup on Broadcom quite a bit.

I like Marvell a lot.

It got punished dramatically because they're going to buy Lumentum, broke below its 200-day moving average.

But I think this sell-off is totally incongruent with the fundamentals.

The hardware news has a very large number attached to a part of computing that's easy to overlook.

Marvell and Lumentum announced an all-stock acquisition agreement on the 2nd of November, with an implied enterprise value of US$115 billion at announcement.

The proposed combination would bring Marvell's connectivity and semiconductor capabilities together with Lumentum's lasers, optical transceivers, and optical switching.

Those technologies concern the movement of data between chips and systems.

A processor can only do useful work with the information available to it, so the connections carrying that information are part of the performance equation.

Since the Sox peaked on June 22nd, it's down more than 60% in that span.

But you are seeing counterparts like Bloom Energy, Lumentum, AMD, Micron, Western Digital, Seagate.

I mean, those are amongst some of the top 10 worst performers on a percentage basis.

Yeah.

Sterling Infrastructure, 21%.

Forgent Power, 19%, MassTech, 15%, Vistra, Vertiv, Iron, Quanta Services, GE Vernova, Credo Technology, Lumentum Holdings, all down double digits.

Oh, there's a whole other page of this stuff.

Celestica, CoreWeave, down 10%.

But when you really think about what that deal means for another good high quality player in the space, that bottleneck has value.

Enough value where Marvell is looking to make an 80 billion plus dollar purchase of Lumentum of light.

You know, you're the second investor this week to tell me they really like Lumentum.

So that's hopefully a good sign.

Two smart people.

They're leaning into the interconnect business.

I saw with the Lumentum acquisition.

Intel feels like it's similar.

There's so many things that they can do as long as they execute long-term operations.

I mean, it could be nothing and it could be significant in terms of how much this is going to affect the build-out.

And there is a very complex analysis to see what different levels of spend will be next year relative to the supply that's being brought on across these categories.

But I will say that The Marvel, Mar-Vell, I should say, Lumentum buyout.

I saw a lot of people reading that as a Lumentum cashing out.

So whether it's Marvell and or their merger partner or their...

The company they're buying, Lumentum, they are both relying on continued spending on data centers and selling into them.

Look at what happened at Dell yesterday as well.

They

It is suboptimal.

Yes, I believe that to be the case.

When it comes to Marvell, just real quick to wrap up, because you did ask, right? It's 4.5 times each Marvell share for each share of Lumentum.

Yes, exactly right.