Episode summary
The AI Trade Isn’t Over but Leadership Is Quietly Rotating
Summary
The host argues that the AI trade is not over, but the leadership inside it is changing. He says the team has been taking gains across names like AMD, ASML, FormFactor, Amkor, Google, and ProFrac because the semiconductor and memory trade has become crowded, exhausted, and hard to keep outperforming from here.
He points to semiconductors making up about 20% of the S&P 500 as a historic warning sign, comparing the setup to 2006 when finance became similarly oversized before fading. In his view, the easy money in chips has already been made, and the market is now broadening beyond the most obvious AI beneficiaries.
The host says AI spending still looks durable because hyperscalers are still committing massive capex, but the gains are likely to rotate into equal-weight stocks, small caps, domestic cyclicals, and other parts of the economy that benefit as capital spending filters through suppliers. He also thinks liquidity is shifting as bank lending and private-sector credit creation become more important under deregulation. The message is to adapt rather than wait, because the market has already started moving on.
Key takeaways
- The host says the AI trade is still alive, but semiconductors and memory look overcrowded and late-stage.
- He says semis are about 20% of the S&P 500, which he treats as a historical warning sign.
- The host says the market is broadening toward equal-weight indexes, small caps, and domestic cyclicals.
- He expects AI capex to keep supporting the cycle, but with fewer upside surprises in the obvious chip names.
- He says bank lending and private credit creation may matter more as deregulation shifts liquidity into the market.
Notable quotes
“I think right now you take a breather. I think it's a little exhausted”
“Semis now represent 20% of the S&P 500. That is a big historic warning sign for me as an investor”
“In other words, the AI cycle is not over but it is evolving”
“what we see here is leadership that's rotating”
How the episode opens
Morning. This is Don Giovanni behind the markets. Happy Tuesday.
Today is Tuesday, July 7th. This weekend, I had a conversation with a buddy of mine who reads our stuff, who's a member, at a barbecue, and he said, "You know, I noticed you've been selling stuff. Do you think the AI trade is over?
I noticed you've been selling stuff this week, and I thought I could do a better job of articulating why we have decided to close out or take some gains, lock in some gains on some of our positions. Especially as you all know, I'm a guy who believes in a bull market, the money is made by sitting and being patient, okay? You guys know that about me.
So, if that's true, how can this also be true? And, you know, this is where experience really starts to come in, and you really get the personality of the person you're following, the investor you're following. Look, we took some gains in AMD, 183%, very nice winner for us.
We were laughed at, by the way, when we recommended that. ASML, again, laughed at when we recommended that, 142%. Global X Circuits, 62%.
Google, great gains. Form Factor, 150%. Amcor, we recommended closing half of the position, 136%.
ProFrac, 92%. And others. We took a lot.
It was a festival of gains last week, really. And some losses. I don't want to seem like everything I touch turns to gold.
That's just nonsense, fake news. But, you know, you can see our track record, and we do good over time. It's just really, really high batting average, a good performance.
Anyway, my point is, why did we do this? If we're in a bull market, and, you know, the criticism was fair. The question was fair.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai trade rotation
- semiconductor concentration
- chip and memory valuations
- earnings growth and market breadth
- liquidity shift from fed to banks
Companies and tickers mentioned
- AMD
- ASML
- FORM
- AMKR
- Advanced Micro Devices (AMD)
- ASML
- FormFactor
- Amkor Technology
Watch the episode
Watch “The AI Trade Isn’t Over but Leadership Is Quietly Rotating” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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