AI software stocks like Palantir are winning while chip stocks sink — long PLTR
Thesis
The AI trade is bifurcating right now. On one hand, hardware and memory chip companies are getting crushed, with SanDisk and Seagate falling sharply on supply glut fears. On the other hand, software and data analytics firms are landing game-changing partnerships; Palantir's collaboration with NVIDIA and Broadcom's massive deal with OpenAI prove that the monetization of AI is shifting from hardware to software infrastructure. This divergence suggests that capital will rotate away from the struggling semiconductor names and flow directly into AI software and networking companies, making Palantir and Broadcom prime candidates for a relative outperformance trade.
Strategy approach
Build a rule-based strategy that enters long PLTR when it makes a 10-day high while the SMH (Semiconductor ETF) drops >1% on the same day. Exit after 21 days or if PLTR drops 8% from its entry price.