Stock Buying On New AI Data, Potential China Truce Extension, LAC And ABAT Show Insanity

Author: The Arora Report | October 16, 2025 01:10pm

To gain an edge, this is what you need to know today.

Reinforcement Of AI Trade

Please click here for a chart of Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of TSM stock is being used to illustrate the point.
• The trendline on the chart shows TSM stock continues to move up in a new leg.
• The chart shows TSM stock is up this morning after reporting earnings.
• Taiwan Semiconductor reported earnings.  Here are the details:
  • Revenues came at $33.1B vs. $32.07B consensus.
  • Revenues increased 40.1% year-over-year.
  • In Q3, advanced semiconductors, defined as those at 7 nanometers or less, were 74% of total wafer revenue.
  • The company guides Q4 revenues of $32.3B – $33.4B vs. $31.55B consensus.
• Taiwan Semiconductor manufactures AI chips for NVIDIA Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD).
• Prudent investors should note an indication of exuberance among U.S. investors – TSM ADRs in the U.S. trade at a 26% premium to the shares in Taiwan.  Taiwan Semiconductor is a Taiwanese company.  
• Earnings from Taiwan Semiconductor are reinforcing the strength of the AI trade.  There is aggressive buying in AI stocks in the early trade.
• There is also aggressive buying this morning in the stock market on the potential of kicking the can down the road in the China and U.S. trade war.  The pause on tariffs on Chinese goods is set to expire in early November when the previous extension from August 12 will expire.  Treasury Secretary Bessent suggested an extension of the truce between the U.S. and China could be reached if China backs off from its tightened control on rare earth mineral exports.
• Lithium Americas Corp (NYSE:LAC) and American Battery Technology Co (NASDAQ:ABAT) have become the poster children of momo crowd insanity.
  • The momo crowd believes lithium is a rare earth mineral, which it is not.
  • The momo crowd does not understand that there is plenty of lithium outside of China.
  • The momo crowd does not want to know that the supply of lithium is more than the demand.
  • The momo crowd ran LAC stock from $3.09 to as high as $10.57 and ran ABAT stock from $2.41 to as high as $11.49 on mistaken beliefs.
  • To Wall Street's credit, Wall Street has been trying to set the record straight, but to no avail.
  • The Department of Energy terminated a grant to American Battery Technology.  ABAT stock has fallen to $6.86 as of this writing in the premarket.  The momo crowd believes the dip is a gift and is aggressively buying ABAT stock.
  • A major bank downgraded LAC today.
• ABAT and LAC stocks are emblematic of the insanity that is going on in many popular stocks right now.  History tells us that such insanity never ends well.  It always ends the same way: the momo crowd losing 70% – 100% of their account values.
• At this time, prudent investors should carefully guard against becoming afflicted with FOMO (fear of missing out).
• Producer Price Index (PPI), retail sales, and initial jobless claims will not be released today as scheduled due to the government shutdown.

India

President Trump is claiming that India will stop buying Russian oil.  It appears that President Trump is again setting his sights on securing peace in Ukraine after his big win in the Middle East.  You may recall that President Trump imposed 50% tariffs on Indian goods for India buying Russian oil.  Normally, there would have been a signal from us to add to Indian stocks with ETFs WisdomTree India Earnings Fund (NYSE:EPI), iShares MSCI India Small-Cap ETF (BATS:SMIN), and VanEck India Growth Leaders ETF (NYSE:GLIN) , but at this time, reports from India are contradicting what President Trump is saying.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks. The best way to get an edge, dig below the surface, and rise above the noise of the daily news is 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 Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), and NVIDIA Corp (NASDAQ:NVDA).

In the early trade, money flows are neutral in Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are positive 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 (NYSE:GLD).  The most popular ETF for silver is iShares Silver Trust (NYSE:SLV).  The most popular ETF for oil is United States Oil ETF (ASCA:USO).

Gold

Gold and silver continue to see new highs.  Money flows are especially strong in gold ETF (GLD) and silver ETF (SLV).  Prudent investors should note that gold and silver are very overbought, and as such, it is not prudent to buy right here.

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

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.

Posted In: $BTC AAPL ABAT AMD AMZN EPI GLD GLIN GOOG LAC META MSFT NVDA QQQ SLV SMIN SPY TSLA TSM