AI chip frenzy is spreading to the little guys — play the small-cap tech boom
Thesis
Small cap stocks are on pace for their best first half since 1991, showing massive underlying market strength outside of the mega-cap tech names. At the same time, the AI infrastructure boom is accelerating: Micron's blowout earnings sparked a $400 billion rally in AI chip stocks, and On Semiconductor just committed $7 billion to buy Synaptics just to expand their AI footprint. When the biggest companies in AI surge and mega-mergers happen in the space, it creates a halo effect that draws investors to look for the 'next big thing' in smaller companies that haven't rallied yet. This combination favors searching for overlooked small-caps in the tech and hardware space.
Strategy approach
Build a momentum strategy on the daily timeframe. Enter long IWM (Russell 2000 ETF) when it makes a 10-day high and SMH (Semiconductor ETF) is up more than 2% on the same day. Hold for 15 days with a 3% trailing stop.