The Semi-Conductor Surge and a Power Play Pivot

"If it ain't broke, don't fix it" seems to be the motto for chip investors lately, but the rest of the market is currently looking for its compass.

As we head into the new trading week, I’m seeing a fascinating tug-of-war between high-octane AI enthusiasm and the cold, hard reality of industrial capacity and political maneuvering.

The Silicon Shield: Chips Lead the Pack

While the broader indices stayed close to home - with the Dow Jones dipping 0.2% and the Nasdaq shaving off a marginal 0.1% - the semiconductor sector acted like it was at a different party altogether.

The catalyst remains the glowing outlook from Taiwan Semiconductor Manufacturing Company, which has effectively given the green light for another round of buying in the AI value chain.

I’m noticing that even with the slight dip in Nvidia (NVDA | -0.44%), the peripheral players are soaking up the liquidity.

Broadcom (AVGO | +2.53%) and AMD (AMD | +1.72%) are holding steady, but the real star was Micron (MU | +7.76%). It seems the market is finally pricing in the long-term memory demand that AI infrastructure necessitates.

Political Chess and the Fed Chair Dilemma

One cannot ignore the "Kevin vs. Kevin" drama unfolding in Washington. President Trump’s recent comments suggesting he "can't miss" advisor Kevin Hassett have sent a ripple of uncertainty through the bond and equity markets.

Why? Because the alternative, Kevin Warsh, is widely viewed as a "hawk" who might favor a tighter monetary policy than the market (and perhaps Trump himself) would prefer.

My take? The market hates a vacuum. Until we have a clear successor to Jerome Powell, expect a bit of "wait-and-see" volatility. If Warsh is indeed the pick, those of us hoping for rapid-fire rate cuts might need to temper our expectations.

A Short Circuit in Energy Stocks

Perhaps the most dramatic shift on Friday occurred in the energy sector, specifically those tied to the "data center trade." For months, companies like Constellation Energy (CEG | -9.82%) and Vistra (VST | -7.54%) were the darlings of the AI boom, expected to reap massive rewards from long-term power purchase agreements.

However, the reality of these "capacity contracts" - where tech giants pay for the availability of power regardless of use - is being re-evaluated. While these deals provide financial certainty, the market seems to be questioning the speed at which this infrastructure can actually be monetized.

It’s a classic "buy the rumor, sell the news" event. For the disciplined investor, this might be the correction needed to enter these names at a more reasonable valuation, but don't expect a V-shaped recovery overnight.

Out of This World

In the "edgy and interesting" category, AST SpaceMobile (ASTS | +14.34%) continues its moonshot. Being selected for the US Missile Defence Agency’s SHIELD program is a massive validation for a company that many dismissed as a speculative pipe dream.

It’s now clear that space-based communication isn't just for rural cell service; it's a matter of national security.

My Perspective for the Week Ahead

We are in a "stock picker's" market. The broad indices are stalling, but the thematic moves in chips and satellite tech show that there is still plenty of "dry powder" ready to be deployed.

Keep a close eye on the Fed chair rumors; that's the macro-anchor that could either hold us steady or drag us down if a surprise hawk enters the nest.

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Kristoff - ChartMill

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