David Benefield

This isn’t happening to me. This is happening for the growth of my consciousness.

The 2nd biggest IPO in history is happening under your nose and it has created a unique buying opportunity in memory stocks. SK Hynix is listing its ADR on the Nasdaq and offering shares to institutional investors. What many have missed is the giga size of $26bn, which would have made it the 2nd largest IPO of all time, after SpaceX. As we saw, markets traded down into the SpaceX IPO. This is mechanical, as funds buying into the offering need to sell other shares to make room. What is unique about the SK Hynix ADR is that the funding sources are narrow and obvious: Korea-listed SK Hynix as well as Micron, Sandisk, Kioxia, and other similar memory names. The greatest pressure would be on Korea-listed SK Hynix, and my work suggests it could have been up to 20-25% of ADV per day since the offering was announced. Note that foreigners net sold Korean shares for 13 days in a row since the offering was announced, which helps confirm these flows. My sharp friends and I have been searching for the last week to explain the extreme sell-off in memory stocks, as while it felt natural for there to be a cleansing of froth amidst the rolling bull market in AI stocks we’ve seen since last year, it also felt unusually aggressive. This means it is quite possible $15-20bn of memory stocks have been sold into a narrow exit door, which explains their stunning declines, but also setting up the deck for reversion once these flows cease. You can’t forget that memory is the most important capex ingredient for AI, and everything points towards greater memory demand as LLM can more used, with bigger models and longer context windows. As the offering was over 7x oversubscribed, which is surprising for such a large secondary offering, it is probable that funds oversold and are now underexposed and will have to buy back once allocations are known during the trading day Thursday (likely in the afternoon). Of course, these flows lined up with exogenous factors that exacerbated the sell-off: frothy and overextended positioning, fears around memory efficiency gains, glimmers of the war restarting, Warsh coming in and being subtly hawkish. All of this came after SpaceX and the end of Q2 rebalance sucked out a lot of flows, which had made the market more fragile. After the stunningly good MU print, I was confused at how poorly it was trading, but now in hindsight it makes sense that is when the institutional VWAPs began. It is logical they would take advantage of the liquidity and demand created post-print to begin exiting in advance of the share offering, and as the negative factors accumulated, they got more aggressive on the offer to try to beat each other out. The offering is more than 7x oversubscribed: $26bn x 7 = $182bn. This does not mean that $182bn of memory stocks were sold, but there is some relationship between the amount that funds submit for, and the room they need to create. Especially for a secondary offering where it would be more normal to get better allocations versus a hot IPO where getting close to nothing is to be expected. The greatest amount of pressure would have been on SK Hynix (given the ADR will likely trade at a premium), which appears to have then created downwards momentum in Korea, which has been very leveraged, and already seeing other negative factors such as margin increases for retail trading accounts, and rumors of market negative government actions such as unrealized capital gains taxes (which I view as unlikely). If $15-20bn in the stocks were sold, that is a huge amount of flows to be hitting a few stocks, even if they are large in market cap. As I have explored in a past post about the right tail QQQ leaps, in the current market paradigm, even if market caps are large, free floats are deceptively small as passive flows have crowded them out. On the efficiency gains, I don’t have any particular insight into the claims although it is very possible they are true. The reality is that efficiency gains around memory are being constantly made. This is not a binary where any efficiency gains mean the end of the trade, rather you can view it as the way that extremely undersupplied buyers of memory are coping with a difficult situation. So even with constant efficiency gains, the situation remains undersupplied, and has a high probability of staying undersupplied. If you look at the memory supply/demand model created by my brilliant friend @AlexCorrino, who has gone deep on these technical nuances, there are good odds the supply deficit will widen much further over the coming years, despite assumptions of significant efficiency gains. Thus it became an excuse to sell, as memory was already acting very badly due to the pre-ADR mechanical flows, and then when the rumors hit, it created a setup where everyone felt like the efficiency gains were a big deal because the stocks had been acting so bad, and then sellers with different motivations were competing aggressively on the way out. It was a perfect storm, and it was a perfect storm that you are now poised to benefit from. Generally, these mechanical flows wash out stocks and set them up for reversion, because the baby was thrown out with the bathwater. In this case it is likely there was overselling so those funds will have to buy shares back. And many other holders have sold, and knowing this thesis will give them the confidence to buy it back. It is also probable that some funds that were aware of these flows shorted or sold memory stocks as a trade into that, and will have to buy them back as well. It’s a good setup, and while I can't say that prices will immediately make new highs now, it feels like a strong and defensible entry point into one of the most important trades of the year, an opportunity that does not come around often. Build medium-to-long term positions and be patient, I suspect it will be rewarding. Disclaimer: This is not financial or investment advice, it is not personalized to you, and it does not account for your objectives, risk tolerance, or situation. Nothing here is a recommendation, solicitation, or offer to buy or sell any security, private investment, or related asset, and nothing creates an advisory, fiduciary, or client relationship. The author holds positions in some of the companies discussed here. Positions can change at any time without notice, and there is no obligation to disclose, update, or correct them. The author is not paid by, and has no affiliate or sponsorship relationship with, any company mentioned. Assume a real, built-in conflict of interest, assume the content may be self-serving, and read it that way. Do your own work, check the primary sources, and consult your own licensed financial, legal, and tax professionals before you act on anything. Any decision you make is yours alone and made at your own risk.

@asparagoid @goodalexander You’re seeking the unitive mystical experience.

@goodalexander What's a suitable substitute

I want to confess something. I turned 54 this week. Even though so many decades have now passed, and I've had so many relationships with different women. I have still never felt truly loved and seen by even 1 woman. I fear this is something that straight men can never experience

Beautiful.

Judging by my tl there is a growing gap in understanding of AI capability. The first issue I think is around recency and tier of use. I think a lot of people tried the free tier of ChatGPT somewhere last year and allowed it to inform their views on AI a little too much. This is a group of reactions laughing at various quirks of the models, hallucinations, etc. Yes I also saw the viral videos of OpenAI's Advanced Voice mode fumbling simple queries like "should I drive or walk to the carwash". The thing is that these free and old/deprecated models don't reflect the capability in the latest round of state of the art agentic models of this year, especially OpenAI Codex and Claude Code. But that brings me to the second issue. Even if people paid $200/month to use the state of the art models, a lot of the capabilities are relatively "peaky" in highly technical areas. Typical queries around search, writing, advice, etc. are *not* the domain that has made the most noticeable and dramatic strides in capability. Partly, this is due to the technical details of reinforcement learning and its use of verifiable rewards. But partly, it's also because these use cases are not sufficiently prioritized by the companies in their hillclimbing because they don't lead to as much $$$ value. The goldmines are elsewhere, and the focus comes along. So that brings me to the second group of people, who *both* 1) pay for and use the state of the art frontier agentic models (OpenAI Codex / Claude Code) and 2) do so professionally in technical domains like programming, math and research. This group of people is subject to the highest amount of "AI Psychosis" because the recent improvements in these domains as of this year have been nothing short of staggering. When you hand a computer terminal to one of these models, you can now watch them melt programming problems that you'd normally expect to take days/weeks of work. It's this second group of people that assigns a much greater gravity to the capabilities, their slope, and various cyber-related repercussions. TLDR the people in these two groups are speaking past each other. It really is simultaneously the case that OpenAI's free and I think slightly orphaned (?) "Advanced Voice Mode" will fumble the dumbest questions in your Instagram's reels and *at the same time*, OpenAI's highest-tier and paid Codex model will go off for 1 hour to coherently restructure an entire code base, or find and exploit vulnerabilities in computer systems. This part really works and has made dramatic strides because 2 properties: 1) these domains offer explicit reward functions that are verifiable meaning they are easily amenable to reinforcement learning training (e.g. unit tests passed yes or no, in contrast to writing, which is much harder to explicitly judge), but also 2) they are a lot more valuable in b2b settings, meaning that the biggest fraction of the team is focused on improving them. So here we are.

The only winning move is not to play.

@ramahluwalia aotd

Isn't Congress supposed to approve when the Pentagon chooses to wipe out a civilization? Or, is that not defined as war?

@AahanPrometheus Pony Room’s great

Might never come back

service to self whispers “take what you’re owed.” service to others asks “what can i become?” one builds walls around the self; the other opens a door and finds it leads back home.

@ramahluwalia 'We're going to hit them extremely hard over the next 2-3 weeks and bring them back to the stone ages where they belong.' Bit of a different message than the optimistic 'we can just leave' that seemed to inspire bullishness Monday. Bringing up WW1, 2, Vietnam etc also not great.

Futures down. Incidentally, Trump did not say anything new to what he said yesterday if you are following what he says closely. If anything, he outlined a desire to coerce Iran into a deal and if that is not successful there is further escalation. The last two days was a mechanical bid driven by quarter end vol compression. Big irony is this speech was given almost exactly one year after ‘Liberation Day’ speech last year… What’s also notable? What was not said. No mention of ground forces. I continue to expect an inflation impulse ahead and that’s not good for US consumers.

@AviFelman What are next steps to reach the end from here?

Polarity isn’t a war—it’s a dance. Light only sees itself fully when it meets shadow, and shadow only exists to remind light how to move. The trick isn’t to win; it’s to honor both steps of the rhythm.

People fantasize about hitting the freedom money and then disappearing to live life, but the ones who would actually have disappeared to live life will almost never make it. Why? Because you don’t wake up one day with 8 figs because you “balanced work and life” perfectly. You get there because you’re a little broken in the head and actually like the game more than the prize. In the same way, bodybuilders don’t quit the gym the day they look shredded. People with real money all still work in some form. Investing, building, trading, whatever. When I talk to friends with safe office jobs, they’ll say something like: “If I were pulling what you make, I’d just be on holiday all year.” That’s exactly why they never get there. The second money appears in their head, they’re already planning how to burn it on vacations and luxury items, and end up right back where they started. It feels a bit controversial to say this, especially from me, Route2FI lol, as you know what the initials stand for, but yeah, I used to think the same way: dreaming of financial independence so I could basically do nothing. Looking back, the problem wasn’t that I hated work. It was that I hadn’t chosen my work. Once you find something you think is fun and you feel good at, you don’t fantasize about quitting. You just want to keep playing.

@Kunal_K_Patel @strassa2 @TomDwan It was the best of times

@strassa2 @TomDwan @DWBenefield More jealous you got to hoop with Raptor. Miss running pick and rolls with the legend

Now that we are apparently sharing @TomDwan stories… I’m playing bball with @DWBenefield in NYC. He says hey Tom is in town — want to get lunch after? Sure. We go to Ramen spot. Tom rolls in with… a random dude and his girlfriend… Emily Ratajkowski. So yes I once had ramen with Durrr and Emily Ratajkowski.

@strassa2 @TomDwan I was most impressed that she slammed 3 pork buns then the entire bowl of tonkotsu.

Every night human beings go to sleep, lose all sense of their known reality, plunge into an abstract hyper-dimensional realm of infinite experience where time collapses, all moments instantly manifest, and then they wake up and just go about their day.

Credibility of our leadership rapidly diminishing.

PSA - someone is scamming as me via text message from a variety of local phone numbers. I’ll never ask you for money or favors. If anyone has thoughts on what I can do about this please share, thanks!

Dostoevsky; “People don't want truth, they want comfort dressed as truth.” Franz Kafka; “Reality is too heavy for most people to carry. So they borrow illusions, soft dreams, sweet lies, and call it happiness.”

“He who had recognised himself came to the Supreme Good, while he who had prized the body, born from the illusion of desire, remained wandering in the dark, suffering through the senses the things of death.”