Gabriel Osorio-Mazzilli

May, 2026 The market has significantly deviated from any rational sense of fundamental / business logic It seems most have forgotten the law that governs all assets. From bonds to stocks and real estate. - All investments are judged by the present value of all future cash flows Cash flows are: - Net operating profits after tax, adjusted by CapEx and other investments or acquisitions Since 2023, the $SPY $QQQ have deviated from all factors responsible for delivering excess returns above the $TLT $SHY bond risk-free rate Factors like momentum, quality, value, and growth. The reason is that, since 2023, the market has been driven by one thing and one thing only: $MAGS and AI being responsible for 80% of all stock market returns, not unlike previous extremes like 1929, 1999, 2007 etc. So what's the problem? There isn't one, except for what we saw in 1Q'26. $GOOGL $AMZN and other hyperscalers reported massive EPS beats on paper, though in reality 40% of these earnings came from non-cash items (accruals). The problem with accruals is that they can be written off should the industry's underlying demand slow down. Which directly impacts the net operating profit side of cash flows. Then comes the CapEx and investment side of the equation: ~$700 billion in CapEx to be invested in 2026 toward AI, an area which currently returns less than 5% of its invested capital. In other words, the market's biggest companies have pushed free cash flows out by 20 years on average. Yet their valuations reflect a boost in immediate cash flows instead. Two years ago, these companies traded at exuberant forward P/E ratios to reflect the expectations of growing profits and cash flows. Let's take $NVDA for example. Today, they have all been repriced lower as these expectations melt in real time. These companies are taking longer to pay their accounts, and even longer to collect cash, hence the growth of accruals as a share of net income and EPS. So I think the market is correct in repricing these multiples lower because: - EPS are much weaker than they seem - Cash flows are 90% lower than they were a year ago - Cost of capital is rising as inflation pushes higher, and the $SPX expected returns fall to -2% / +2% for the next decade You may say this time is different You may say the CapEx outflows will 100x eventually I ask how much of that is already priced in? I ask what happens to expectations when cash flows to shareholders get cut by 90%? Surely, accruals and intangible assets drive earnings more than ever before, so P/Es may not be as significant as they once were. But, here's one thing that will NEVER change: - How much equity do you buy with one unit of currency? So I leave you with this chart, the $SPY / M2 Money Supply ratio. 1999 highs.

The AI selloff is not over I think we’re only in Phase 2 After Thursday’s liquidation, Friday gave us the rebound I expected That does not mean the unwind is finished My framework from here: • Phase 1: AI names fall into bear-market territory • Phase 2: Forced buying + bargain hunting creates the rebound • Phase 3: Remaining cash piles back in • Phase 4: A second breakdown triggers broader liquidations I think we are sitting in Phase 2 right now That creates two very different opportunities: Short term: wait for the rebound to give us better entries into selective AI shorts Long term: keep building exposure to the defensive, low-AI-beta businesses absorbing capital as the rotation develops That is already showing up in the portfolio We remain near all-time highs since June while holding roughly 65% cash and materially less volatility than the broader market Meanwhile, I am working through the new PMI watchlist to decide which names deserve capital next Today’s Morning Digest covers: • The 4-phase AI unwind • Where the rebound may fail • Defensive rotation opportunities • China and emerging-market upside • Why small/micro caps may lead the next cycle • $NET, $LYFT and $TEAM • ES levels at $7,400 / $7,460 / $7,500 • The next PMI-driven portfolio additions The rebound is the easy part What happens after it is where the trade gets interesting Read today’s Morning Digest: offsideresearch.com/subscrib…

The best asset investors can have It’s to find out what you believe in, and live that belief out I believe in only buying things that make sense on a business, people, and price level Having failed to care much about stories or promises, I have managed to avoid every bubble since Marihuana stocks I have also made a killing from companies everyone thought would not make it What do you believe in?

Last week I told you $7,330 was the support to buy in the $SPY $SPX index We got 5 points away from it before a 70-point run! Who does it better than us?

2,500 stocks... Screened down to just 20 That’s the output of this month’s PMI process Manufacturing + Services data gave me the industries The screen gave me the companies And now I’ve narrowed the field to the names I actually want to research as longs, shorts, and relative-value trades Last time we ran this process, the portfolio gained more than 15% This time, the opportunity set is being shaped by: • Normalizing fuel prices • The AI unwind • Shifting Treasury yields • Defensive real-economy strength • Margin pressure in companies sitting on the wrong side of those moves One of the setups is the second phase of the same diesel-spread thesis that already paid us through the $VVV / $VLO trade And a few of the others are large-cap names getting repriced much faster than the market seems to understand Premium members are getting the full watchlist: • Which stocks made the screen • Which ones I want to research as longs • Which belong on the short side • What needs to happen before any of them earn capital The next batch is ready Read the full watchlist inside Offside Premium: offsideresearch.com/subscrib…

Just heard something mind blowing from a grocery chain in Texas A head software engineer just got fired because he didn’t meet the company’s AI usage scoreboard goals In other words Hundreds of non-tech companies are now pushing employees to use AI and spend the most on tokens just for the hell of it What do you call this stage?

Of all things that could have gone up in our portfolio today $BABA was one of them

$MU puts paid of huge today Added about 10% to the portfolio while only risking ~1.5% In other news $VVV vs $VLO still up more than 20% $VITL up more than 15% $WY and $WFG up 25% combined And you're still betting on robots?

June 2026 My relationship with BMB was terminated, the feedback from the company was that I represented an "opposing force" Why? I pushed hard against buying stocks like $MU $MP and even $QCOM They are down more than 30% since In good conscience, I could not let members lose their money investing in hyped up names with no fundamentals to them The story was sexy, the "bottlenecks" were running, and momentum was present I was fired for doing the job I was hired to do Honestly? Good riddance And my condolences to people who lost money following an empty promise @lukedavisBMB respectfully, maybe it's time to go back to crypto

$MU is cooked The amount of heat I got from this bearish view… Where are the AI bros now?

The AI rebound lasted less than a day Yesterday’s $AMD driven bounce faded almost immediately By the close, the market was back to rewarding the same things we’ve been positioning around for weeks: • Value $IVE • Breadth $RSP • Quality $QUAL • Financials $XLF • Real-economy businesses • Defensive cash flows Meanwhile, Technology and the more AI-sensitive industrial names rolled over again That matters because this is no longer just a thesis Our portfolio just hit a new all-time high since June A big part of that came from last month’s PMI-driven ideas, while the market kept rotating away from momentum-heavy AI exposure And the next batch is already being built Today’s Morning Digest covers: • Why the AI rebound failed • The rotation into value, breadth and quality • Why Materials and Financials are leading • What Anthropic says about AI financing risk • Why the market is no longer rewarding AI capex • Oil and the diesel spread trade • $UBER, $DUOL, $QCOM, $MU • ES levels and portfolio positioning • The next PMI watchlist for Premium members The market used to reward companies for spending aggressively on AI Now it is starting to ask a different question: Where is the cash flow? That change in behavior is the entire story Read today’s Morning Digest: offsideresearch.com/subscrib…

Untrained investors, and crypto bros turned AI scammers alike Will see this and tell you it’s the best buying opportunity this year I’m here to tell you the opposite When cyclical stocks trade at discounts, it’s usually for a very good reason Reasons I’ve covered extensively in my newsletter, going over the risks in the financials and the coming margin collapse for these companies $ORCL $CRWV $MU $DRAM $SNDK $SKHY $AMD $NVDA $SOXX $SMH

Markets no longer care about AI capex The old playbook used to be: - Raise your AI capex, see your stock gain It has now turned into: - Raise your AI capex, be judged harshly by the market This is exactly what neoclouds, hyperscalers, and chipmakers are going through right now Complete regime shift $AMZN $GOOGL $MSFT $META $DRAM $NVDA $AMD $MU $CRWV $ORCL $SNDK $SKHY

DO NOT BUY THIS AI DIP Most of the companies at the top, the hyperscalers, are investing way too much way too quick The laws of capital dictate current capex/depreciation ratios will eventually lead to declining and even negative ROIC rates All present for $GOOGL $META $AMZN $MSFT But even more so for chipmakers like $MU $SNDK $SKHY $DRAM Don't be surprised to see this fall 20%+ from highs, and most already did

Supply chains are improving Fuels are no longer in short supply Which is why we see massive gains in our plays like $VVV long and $VLO short Metals and basic materials fell out as well Explaining the recovery in $WFG $WY this month More importantly It is beginning to threaten the shortages around chipmakers And exactly why we want to take some put spread trades around them $DRAM $SMH $SOXX $MU $SNDK $AMD $NVDA $SKHY

Managers are less optimistic now The PMI surveys showed that businesses are more concerned about: - Pricing volatility - Lead times Less concerned about: - Tariffs - Iran war If this is not a real time gauge on the midterm election results I don't know what is It is also confirmation into my current macro view Bid for defensives, sell for cyclicals $NVDA $ORCL $MU $CRWV $AMD