Is the AI Trade BACK?! The next move will shock investors

This video breaks down the recent 11% NASDAQ correction and the 25% bear market in semiconductor stocks, analyzing major tech earnings and the fallout of a massive AI hedge fund blow-up. It highlights how hyperscalers like Microsoft and Amazon rewarded investors by managing capital expenditure (CapEx), while offering a strategic playbook for finding asymmetric investment opportunities in monopolies and discounted AI infrastructure stocks.

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1. The Market Turmoil and Big Short Success

The market experienced a massive shockwave last week as the NASDAQ officially entered a correction, dropping 11.5% from its highs. Meanwhile, chip stocks plunged into a severe bear market, crashing 25% from top to bottom and rejecting the 50-day moving average down to the 100-day moving average.

"There was a chance that we take out June lows. That turned into my biggest trade of the year and by far my biggest short ever in my career."

This exact market setup fueled the speaker's single biggest short trade of the year. After tracking gamma exposure for the SPX sitting at 7,300, the trade details were shared in the Discord right before the FOMC meeting and successfully closed during the live stream.

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2. Tech Earnings: CapEx Punishment vs. Reward

The Magnificent Seven earnings reports delivered shocking contrasts across the board. Companies that significantly increased their capital expenditures without immediate clarity faced severe market penalties.

"All along we've said that companies that are raising CapEx and that are killing their free cash flows, the market is going to punish them. We saw that with Meta, we saw that with Google."

• Google and Meta: Google went negative on free cash flows, tanking the stock by 7% the following day, while Meta suffered an earnings miss and an 8% drop. Meta has continued to lag, trading around the same price as March 2026.
• Microsoft: In a miraculous turn of events, Microsoft became the first hyperscaler to reduce its fourth-quarter CapEx expectations by about $20 billion while maintaining a healthy free cash flow of nearly $20 billion. Furthermore, Microsoft Azure cloud revenue surged 43% year-over-year, surpassing $100 billion in revenue for the first time ever and driving a massive 15.5% single-day stock jump.
• Amazon: Amazon also soared by keeping CapEx in line, posting record-breaking numbers including its highest ever EBITDA, net income, gross profit, and earnings per share, alongside a 37% year-over-year jump in cloud revenue.

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3. The AI Hedge Fund Blow-Up and Forced Deleveraging

The severe downturn in June and July triggered massive forced deleveraging across the market, wiping out over-leveraged retail investors, funds, and Korean traders alike. This pressure culminated in the collapse of a prominent AI hedge fund run by young prodigy Leopold Aschenbrenner.

"Reportedly, he was using about 4x leverage... He lost 35 billion of the 45 billion dollars at the peak of the fund."

Faced with margin calls from prime brokers like Goldman Sachs, JP Morgan, and Bank of America, the fund couldn't meet its requirements in time. Ken Griffin's Citadel ultimately stepped in to broker a deal, buying up the entire public book of AI stocks at the absolute bottom. This massive liquidity clearance sparked the mother of all relief bounces, though underlying charts still require time to recover and form solid distribution patterns.

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4. Macro Headwinds and Market Lopsidedness

The broader market continues to deal with a new Federal Reserve leadership under Kevin Warsh, whose hawkish communication style and shortened speeches have left market credibility unsettled. While holding rates steady, Warsh welcomed rising bond yields, pushing the 10-year Treasury yield to a 2026 high of 4.74% and long-term rates to levels unseen since 2007.

"The market is super lopsided right now. The S&P 500 is less than 2% away from all-time highs. The Nasdaq, as we said, did drop minus 11 and 1/2%."

Historically, pre-midterm seasonality brings an average drop of 17% to the S&P 500, keeping the overall environment shaky and requiring caution before diving blindly into long swing trades.

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5. Investment Strategy and Asymmetric Opportunities

Rather than attempting risky bottom-hunting, the core strategy focuses on identifying asymmetric opportunities where the risk-reward ratio heavily favors the investor.

• Mega-Cap Chips & Monopolies: Buying into the semiconductor bear market via ETFs like SMH, SOXX, or the lower-priced non-leveraged alternative SOXQ is viewed as a safe long-term bet. Individual monopoly plays include Broadcom (near-monopoly in custom accelerators and high-speed networking), Intel (backed by government initiatives to mirror TSM stateside), and ARM (near-monopoly in phone chip design with a 97% gross profit margin and zero structural debt).
• Core Infrastructure & Backlogs: Data center players like Nebius and CoreWeave boast multi-billion dollar backlogs that nearly equal or exceed their entire market caps, underscoring unrelenting compute demand from hyperscalers.
• Lagging Cash Generators & Software: Meta and Google remain strong long-term buys as cash-generating powerhouses. Meanwhile, software and cybersecurity beneficiaries like ServiceNow and CrowdStrike are being monitored for deep valuation discounts.

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Conclusion

Wrapping up, the AI trade is undeniably back, but broken charts demand patience, confirmation, and proper risk management. The strategy remains disciplined: capitalize on asymmetric dips when major indexes drop by 10%, scale into bear markets for elite chip monopolies, and avoid aggressive swing trading until charts prove a sustainable trend reversal.

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