Liquidity Drain

Please click here for an enlarged chart of Alphabet Inc Class C (NASDAQ:GOOG).

Note the following:

  • This article is about the big picture, not an individual stock.  The chart of GOOG stock is being used to illustrate the point.
  • The chart shows Alphabet stock was only slightly down on a massive $80B equity raise.
  • The chart shows that as of this writing in the premarket, GOOG stock has not even closed the gap from April 30.  This indicates that the stock market is so bullish that it does not care about the massive equity raise.  Under normal market conditions, the April 30 gap would have been filled.  
  • Google's $80B equity raise consists of $30B from public offerings, $40B from an at-the-market offering, and selling $10B to Warren Buffett's Berkshire Hathaway Inc Class B (NYSE:BRK).
  • Alphabet is saying it is raising equity to fund AI spend.  Alphabet is scheduled to spend $180B – $190B in capex in 2026.  Capex is expected to significantly increase in 2027.
  • In our analysis, here is what prudent investors need to pay attention to:
    • Alphabet's equity raise is a surprise.  In the earnings call in April, the company did not say the need for the equity raise.  Instead, Alphabet focused on having raised $85B in debt and strong cash flow.  
    • Alphabet is going from a stock buyer to a stock seller.  Alphabet bought $46B of its own stock in 2025 and $62B in 2024.  
    • Historically, when a large cash rich company decides to sell a massive amount of stock, it often signals that a short term market top may be near.  However, investors should note the difference that this time there is AI and it is not clear if historical precedence will apply.  
    • Prudent investors should also note that Alphabet chose to get ahead in its massive equity raise, ahead of massive IPOs from SpaceX (SPCX), OpenAI, and Anthropic.  Together, along with other IPOs, about $400B of liquidity is being taken out of the stock market.  Here is the key questions: 
      • How will this liquidity be funded?  
      • Will it be funded by investors selling other positions?  
      • Will this liquidity test bring the stock market down?  
  • As of this writing, the stock market  seems to be oblivious to the liquidity test.  This should not be a surprise as the stock market is controlled by the momo crowd.  The momo crowd does not think ahead. 
  • President Trump appears to have prevailed on Israel to stop marching towards Beirut, the capital of Lebanon.  Israel has been trying to make maximum military gains ahead of a peace deal.  This is the reason Iran had stopped messaging with U.S. negotiators.  President Trump’s quick action may salvage an Iran deal.
  • ISM Manufacturing Index came at 54.0 vs. 53.1 consensus.  A value above 50 is considered economic expansion.
  • In important news, Hewlett Packard Enterprise Co (NYSE:HPE) massively beat earnings whisper numbers due to high demand for AI servers.  Also, NVIDIA Corp's (NASDAQ:NVDA) CEO Jensen Huang is promoting semiconductor company Marvell Technology Inc (NASDAQ:MRVL) by saying Marvell is the next $1T company.  Marvell's current valuation is about $190B.

Europe

Eurozone inflation has risen to 3.2%.  In The Arora Report analysis, this increases the probability that ECB will raise rates.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Nvidia (NVDA) and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), Alphabet (GOOG), and Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.