Weekly Update: AI Is Out. Metals and Energy Are In
Good evening, and welcome to this week’s edition of Stealth Trades!
The AI trade, which has been the dominant since the 2022 lows, is quickly fading.
Stocks that soared for most of this bull market are coming down across the board.
Nvidia, Microsoft, Palantir… these were some of the biggest winners over the last few years.
But they are no longer leading the market.
Below is the peak to trough drawdowns of some of the biggest tech names over the last few months:
- Palantir (PLTR): -36%
- AMD (AMD): -27%
- Microsoft (MSFT): -27%
- Broadcom (AVGO): -25%
- Tesla (TSLA): -20%
- Nvidia (NVDA): -18%
- Meta (META): -17%
Yet, despite weakness in the Magnificent 7, the S&P 500 is within 1% of new all-time highs.
How is this possible?
One word… rotation.
Wall Street is moving its capital – out of high P/E tech names and into mining and metals companies.
Gold and silver miners are on fire. Rare earths are booming as well.
Silver, although it saw a nasty correction last week after running up too far too fast, is still up 36% since December.
The energy sector (think oil, gas and utilities) is the best performing area of the market over the last 30 days. I can’t remember the last time that was the case.
This is a major leadership shift.
One glance at our Industry Strength tables and the picture is crystal clear.
Tech is out of favor…. at least for the time being.
The “smart money” is piling into physical assets and the companies who get those assets out of the ground.
A look at the major indexes further enforces this point.
The tech-heavy Nasdaq is trading at its lowest level in 2 months.
The S&P is somewhere in the middle.
And the Dow Jones INDUSTRIAL Index is making new all-time highs.
Eventually, things will change. But right now, this is where investors should be focused.
Best wishes for your trading,
