Weekly Update: Nuclear Is Out. Solar Is In.
Good evening, and welcome to this week’s edition of Stealth Trades!
After a record rally off the April lows, the AI trade is getting a bit long in the tooth.
The big leaders of 2025 are showing weakness and beginning to roll over. Nvidia – the undisputed king of the AI revolution – fell as much as 14% this week. And 14% of 5 trillion dollars is no small thing.
Palantir, which I discussed in depth in a YouTube video this week, fell after reporting better-than-expected earnings and sales and raising forward guidance.
Generally speaking, this is not a good sign. When stocks drop following positive news, it is often a sign they have become overpriced. Investors are unimpressed with anything but massive beats.
Essentially, Wall Street has priced in perfection, and anything else is being viewed as a disappointment.
The market indexes, thanks to the enormous valuations of the tech giants, are disproportionately weighted to a small number of mega-cap stocks. Nvidia, for example, represents nearly 14% of the entire Nasdaq.
So, as Nvidia goes, so goes the market. And given the interconnectedness of the big AI players, weakness in one tends to rub off on the others, creating a domino effect that brings markets down.
Is this the end of the bull market?
It’s possible. But I doubt it. To me it feels more like a near-term pullback. And after the run we have seen in the last two quarters, the market needs it.
It is not healthy to go straight up forever. That is what leads to nasty crashes like what happened in 2000 when the dot-com bubble burst.
Plus, if the market were cashing, everything would be going down. And at least so far, that is not the case.
I have discussed the strength we are seeing in the solar area for the last month or two. A quick look at the industry strength tables shows that it has spread to the whole clean energy sector.
The macro argument is a simple one – we have an energy crisis. There is not enough juice to power our daily lives. And artificial intelligence with its massive power-hungry data centers is accelerating the issue.
This is why nuclear stocks performed so well in 2025. But those stocks, like the big AI darlings, are seeing their stock prices come back down to earth.
Solar stocks, on the other hand – represented by the Invesco Solar ETF – are steadily marching higher.
The iShares Global Clean Energy ETF (ICLN) represents the whole sector – solar, wind, renewable utilities. It is also trending nicely.
Those looking for individual stocks in this sector might want to keep an eye on stocks like Clearway Energy (CWEN).
It broke out from a textbook cup and handle pattern this week on big volume. And despite weakness in the general market indexes, CWEN has held strong near $35 and looks like it wants to go higher.
First Solar (FSLR) is another stock showing tremendous strength.
It has been riding its 20-day moving average like a jockey at Steeplechase.
The stock hit $317 back in 2008, so it might be time to finally make a new one.
Overall market conditions remain weaker than what we have seen over the last two quarters. I have reduced my equity exposure, especially in the highflyers like nuclear, quantum and AI.
Ideally, we will see an 8-12% pullback in the indexes to knock the froth off and force the cowboys to de-leverage, then set up for another run higher.
I will keep an eye on where the money is flowing. But as of today, Wall Street is betting on higher prices in clean energy.
Best wishes for your trading,
