If you’re an Eagles and Chiefs fan, it was a great weekend. I am in fact an Eagles fan, they always keep us on the edge of our seats but wow did they look good Sunday! Over the weekend we started hearing more and more information about the Deep Seek Chinese AI models that where supposedly cheap to build ($6m), and just as effective as the best American models. Color me skeptical about the cost and how many Nvidia chips were required but with such a massive crowded trade across the chip, power, datacenter, and memory universe, I was expecting a rough day for tech today and largely that’s what happened. What was most interesting to me today: NVDA was -17%, Vistra (energy) -28%, XLK -4.9% and yet 2/3 of the market was green on the day. Massive and positive moves happened outside the blast zone as money rotated out of the most crowed names and moved into other tech via AI beneficiaries as well as companies that would benefit from cheaper costs to deploy AI tools. The brands portfolio held up like a champ today because we are massively underweight tech because of our view it was too crowded. Remember, there’s about $2.8 TRILLION in tech sector ETF’s, about $13 trillion that’s benchmarked to the S&P 500 with tech being the top weighting at 35%, and trillions more across the active fund complex and growth style boxes. As I’ve written many times over the last 12 months, when crowded trades unwind, even a little, they can be disruptive and unsettling for a period of time. Imagine the positive benefits to high quality company shares if they get just a fraction of the flows from the world’s largest and most crowded trade. That’s a large wave coming to a very small shore where the “rest of the market” is concerned. I sincerely hope this is a warning sign investors will heed as a reminder to make sure they have proper diversification. The momentum factor is a good one but it crashes on occasion, particularly when it gets wildly crowded like tech and semiconductors are today. There will surely be opportunities in many of these names in the coming days but for now, I want to watch how the most popular stocks trade and what kind of volume they show. For now, the group is a trading vehicle for us.
Did Stargate, Sam Altman and Masa from Softbank ring the bell with the idiotic $500B+ AI spend announcement? It sure feels like a headline that marks at least a short-term top. Masa being aggressive in anything continues to be a wonderful contrarian signal.
Here’s how the Brands portfolio looked at the close today. I’m anxious to add to the Alts basket and COIN along with more American Express, and some pure retail.
