The AI trade may be at a turning point. Where it may go, and how to play it
The AI trade may be at a turning point. Where it may go, and how to play it — according to Todd Gordon.
TL;DR
- A steady rotation from technology to value stocks has been occurring since early summer.
- Portfolio managers are actively adjusting positions, trimming AI holdings and increasing exposure to energy and healthcare.
- Recent positive SpaceX earnings led to a temporary surge in growth stocks, raising the question of a market turning point.
- Ratio charts comparing semiconductor ETFs (SMH) against the S&P 500 (SPY) and Nasdaq-100 (QQQ) are used to assess relative strength.
- These ratio charts show semis have lagged since June 1 and are currently at support levels.
- A break below support on these ratio charts would signal a continued rotation out of semis and favor value sectors.
- The Nasdaq-100's daily chart shows a potential double top and a break of its uptrend line and key moving averages.
- The current rally is testing the broken support on the Nasdaq-100, which may now act as resistance.
- The portfolio manager believes resistance will hold but is prepared to lift hedges and redeploy capital if wrong.