AI hype takes a hit as rates rise — short the chip companies leading the losses
Thesis
The recent hype around artificial intelligence has pushed tech and chip stocks to extremely high prices. Now, a strong jobs report has triggered fears of higher interest rates, causing a rapid rotation out of these high-flying stocks. With the chip sector suffering its worst day in six years, the downward momentum is strong and likely to continue as investors move their money to safer investments.
Strategy approach
Build a trend-following short strategy targeting semiconductor and AI momentum stocks, specifically NVDA, MRVL, and MU. Use the daily timeframe. Enter a short position when the price closes below the 50-day Simple Moving Average (SMA) and the MACD (12, 26, 9) has a bearish crossover. Exit the trade if the price closes above the 20-day SMA. Use a 4% stop loss.