The Forward Guidance crew breaks down why the hottest trade of the year is suddenly falling apart and what it means for everything else.
Key Points
Key Highlights:
- The AI momentum trade just had its worst selloff in 27 years as money rotates out of big tech into banks, industrials, and smaller stocks that nobody cared about for years
- A new Chinese AI model just matched the best American models at a fraction of the cost, which puts a giant question mark on why companies are spending trillions building out AI infrastructure
- The people getting hurt the most are retail traders using triple leveraged ETFs on semiconductors, when these things go wrong they go wrong fast and the losses are brutal
- Hyperscalers like Google and Microsoft are already burning more cash than they make while taking on more debt, and their borrowing costs are now rising at the worst possible time
- The Iran war flaring back up with oil inventories already at dangerous lows adds another layer of uncertainty on top of everything else
Takeaway Too much money chased one trade for too long with too much leverage. The unwind is messy and probably not over yet. Protect capital and wait for the dust to settle before getting excited again.
