AI bubble pops for software, but chip hardware is booming — long Micron and Qualcomm
While fears of cheap Chinese AI competition are crushing expensive software and compute stocks, physical chipmakers Micron and Qualcomm just reported explosive demand and soaring profits. The AI trade isn't dead; the leadership is just shifting from overvalued concepts to the companies actually delivering the hardware.
Idea
The broader market is panicking over cheap Chinese AI alternatives, which is inherently bad for expensive, software-centric AI stocks. However, Micron's blowout earnings—where margins jumped to nearly 85%—and Qualcomm's massive data center revenue forecast prove that the physical building blocks of AI (memory and chips) remain in a supply crunch with insatiable demand. By combining the bearish Chinese AI news with the bullish hardware earnings, we can see a clear split: the AI trade is rotating from software narratives to hardware reality. Going long the hardware makers offers a way to play AI growth while avoiding the software valuation crash.