Covid Vaccines & the AI Complex

How did vaccine makers perform? How will AI perform?

A year and 1 week ago I sent out a “Downside” piece on Moderna. The stock was trading at $160 then, it touched $63 in November and is now at $103. You can read why I was so negative on the company here.

Downside at Moderna.

The beast that is Pfizer is also suffering — its sales for 2023 were 41% lower than 2022... Its EBIT went from $37 billion to $3.3 billion, ouch.

Novavax actually never made a profit as it never managed to market its covid vaccine in time for prime-time pandemic.

For the record, Moderna only made a yearly profit in 2021 and 2022, flipping to a loss of $4.2bln in 2023.

Here are their charts and their drawdowns.

Pfizer, 50% down.

Novavax, a gazillion% down.

Moderna, 80% down.

The Market is not Efficient.

Why do their charts look like this? Why did they perform as they did?

First, let’s leave Pfizer out of this as it has been earnings billions every year before Covid. Let’s focus on Moderna and Novavax — both speculative, both massive gainers during the pandemic cycle and then massive losers as it reversed.

The market is not efficient — we should understand and believe in this without the need for a debate. Besides, it’s too much to ask from fallible humans to approach markets in such a non-fallible way.

Rather than falling prey to the theory of “market fundamentalism” — it’s better to go by the notion that markets adopt narratives (i.e. theories) and then put them to the test.

—> At those prices, the market was linearly extrapolating covid vaccine sales way into the future. It turns out that market participants should have faded the market as vaccine sales fell through the floor. In other words, reality failed the market’s hypothesis… And this is why those stocks crashed.

What about AI?

In Issue #2 of Breakout by Philo sent out yesterday, we saw how the AI/Semiconductor complex went parabolic.

It seems the market is (once more) linearly extrapolating the present into the future. What if things don’t turn out as they expect?

I’ve already explained my views on the whole setup in the piece below.

Is the Nasdaq in a Reflexive Bubble?

Sincerely,

Philo 🦉