A 'Super-Momentum' Small-Cap Play on Nvida
This company, involved in Bitcoin mining, has evolved into a player in the High-Performance Computing market.
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On Monday, we have a continuation of recent market action with negative breadth of around 3,200 gainers to 5,800 decliners, while the Nasdaq 100 QQQ has a gain of 035%. Small-caps IWM and DJIA are lagging, while Apple AAPL and Broadcom AVGO are leading technology names higher.
Many traders are very frustrated with this extremely lopsided action, but as I discussed on Monday morning, there is a bull-case argument that is still being embraced. It has some flaws, but in the short run, price action is truth.
I’ve been looking for some opportunities on dips. One of my favorite longer-term names, Humacyte HUMA, is weak on Monday due to news that hit on Friday that Senator Tommy Tuberville had closed his long position in the stock more than five weeks ago at around $4.40.
The stock has been highly volatile due to the reporting about Tuberville’s trading, but I view the emotional reaction of retail traders as an opportunity for patient, longer-term investors, and aggressive traders. I’ll have more on this later this week, but the company announced today that the Centers for Medicare and Medicaid (CMS) has issued insurance codes for its HAV product that is awaiting FDA approval in August.
Another stock that I’m watching today is Core Scientific CORZ. It is finally dipping after a straight-up move, and I think this has potential for continued momentum.
Core Scientific was a struggling Bitcoin miner that escaped years of bankruptcy when bitcoin prices recovered late in 2023. It has now evolved into a player in the High-Performance Computing (HPC) market and is indirectly tied to Nvidia NVDA through a partnership with CoreWeave.
CoreWeave is a cloud infrastructure startup that has a joint venture with Nvidia and rents out its GPUs on demand. It has data centers throughout the U.S. and is used for applications such as AI, machine learning, graphics, and real-time streaming.
CoreWeave entered into a series of 12-year contracts for 200 MW of infrastructure power for HPC services from Core Scientific. At the same time, CoreWeave offered to buy CORZ for $5.75 per share. The offer was immediately rejected, and the stock has been running up since then.
While CORZ has a history in Bitcoin mining, it now offers cloud services to allow others to self-mine. It has also found ways to deal with the cost of the great power demand of Bitcoin mining.
The main interest here is the hosting program that CORZ has developed. Its technology can be used by CoreWeave in its AI and GPU leasing business. The technology is highly complex, but the stock is on a tear and has traded nearly straight up since the Corewever offer to buy CORZ.
This is what I call a super-momentum play right now, and it is very difficult to find an entry unless you are willing to chase it. In view of the potential for growth in this case, CORZ could move much higher, especially if Nvidia stays strong. It is currently the top momentum play in smaller stocks in the market and is in the right niche.
The challenge here is finding entry points while the chart is likely to stay very extended. I have taken a small initial position and will now shop for more entry points. It is very likely that any dips will be bought quickly and aggressively, but the stock could see some consolidation, given how extended it is. It is finally taking a rest on Monday.
At the time of publication, Rev Shark was longong HUMA and CORZ.
