{"id":27281,"date":"2026-05-21T07:30:00","date_gmt":"2026-05-21T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=27281"},"modified":"2026-05-20T15:36:42","modified_gmt":"2026-05-20T19:36:42","slug":"momentum-for-this-critical-ai-supplier-is-fading-fast","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/momentum-for-this-critical-ai-supplier-is-fading-fast\/","title":{"rendered":"Momentum for This Critical AI Supplier is Fading Fast"},"content":{"rendered":"
\n

Managing Editor\u2019s Note:<\/strong>\u202fToday, we\u2019re hearing from our contributing editor Mike Burnick in his weekly feature.\u00a0\u00a0<\/p>\n

Mike has over 30 years in the investment and financial services industry \u2013 from operating as a stockbroker, trader, and research analyst, to running a mutual fund as a registered investment advisor and portfolio manager, to being Research Director for the Sovereign Society, specializing in global ETF and options investing.\u00a0\u00a0<\/p>\n

\u202fAnd he\u2019s been senior analyst at TradeSmith for three years, running Constant Cash Flow, Infinite Income Loop,\u202fand Inside TradeSmith.\u202f\u202f\u00a0\u00a0<\/p>\n

Here\u2019s Mike\u2026\u00a0\u00a0<\/p>\n<\/div>\n

Momentum for This Critical AI Supplier is Fading Fast r<\/h2>\n

BY MIKE BURNICK, CONTRIBUTING EDITOR, MARKET MINUTE<\/em><\/strong><\/p>\n\n\n

Don\u2019t look now but the AI trade is eating the stock market.<\/p>\n\n\n\n

And it is sucking all light and life out of the rest of the stock market.<\/p>\n\n\n\n

For me, this all looks familiar. It\u2019s uncomfortably similar to the dot.com bubble<\/em> in the late 1990s.<\/p>\n\n\n\n

Back then it was computer networking stocks like Cisco (CSCO) that were booming by supplying servers that fed the dot.com trade.

I can recall CSCO shares gaining 50%-60% in just a month during that mania 25 years ago.<\/p>\n\n\n\n

Today, semiconductor stocks like Micron (MU) are soaring as the key supplier to the AI-trade.<\/p>\n\n\n\n

MU is up over 100% in just the past month!<\/p>\n\n\n\n

Folks, that\u2019s just not normal stock market behavior, even if AI is going to change the world as we know it.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The recent rally may look strong, but beneath the surface just a handful of mega-cap technology stocks account for most of the gains.<\/p>\n\n\n\n

This can easily be seen in the chart above.<\/p>\n\n\n\n

It tracks the S&P 500 Equal Weight Index, where all stocks count the same, divided by the market-cap weighted S&P 500, where just a few stocks dominate.<\/p>\n\n\n\n

The equal weight index is a better representation of the \u201caverage\u201d stock.<\/p>\n\n\n\n

When the line rises, the average stock outperforms the index. And when it falls, the average stock underperforms the index.<\/p>\n\n\n\n

Right now, the S&P 500 is outperforming the average stock by a very wide margin. It\u2019s even more lopsided since the March low!<\/p>\n\n\n\n

That\u2019s a big red flag for a continuation of this rally, but it\u2019s not the only one.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Jeff Clark and I are both big believers in momentum, especially when you spot divergences that could signal a change in trend.<\/p>\n\n\n\n

And when momentum starts to diverge from price, it\u2019s an even bigger red flag of a likely reversal.<\/p>\n\n\n\n

As you can see above, the Semiconductor Index ETF (SMH) just posted a parabolic move, up 60% just since the March low.<\/p>\n\n\n\n

Trouble is, the Relative Strength Index \u2013 RSI (lower panel in the chart above<\/em>), stopped going up in April and has been rolling over.<\/p>\n\n\n\n

RSI is key measure of momentum. And what you see above is a classic negative divergence, with the price of semiconductor stocks going up and<\/em> momentum fading fast, at the same time.<\/p>\n\n\n\n

Bottom line<\/em><\/strong>: The main supplier to the AI-trade \u2013 semiconductors<\/em> \u2013 are quickly losing upside momentum. It could be just a temporary dip for chip stocks. Or it could mean the start of a much larger and deeper correction. After a 60%+ gain for semiconductor stocks in just a month, a correction seems overdue.<\/p>\n\n\n

Good investing,<\/p>\n

\"Signature\"<\/p>\n

Mike Burnick
\nContributing Editor, Market Minute<\/em><\/p>","protected":false},"excerpt":{"rendered":"

Managing Editor\u2019s Note:\u202fToday, we\u2019re hearing from our contributing editor Mike Burnick in his weekly feature.\u00a0\u00a0 Mike has over 30 years in the investment and financial services industry \u2013 from operating as a stockbroker, trader, and research analyst, to running a mutual fund as a registered investment advisor and portfolio manager, to being Research Director for<\/p>\n","protected":false},"author":159,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[155],"newsletter-type":[],"ticker":[],"class_list":["post-27281","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-mike-burnick"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_content_changed_during_generation":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/27281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/159"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=27281"}],"version-history":[{"count":5,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/27281\/revisions"}],"predecessor-version":[{"id":27302,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/27281\/revisions\/27302"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=27281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=27281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=27281"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=27281"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=27281"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=27281"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=27281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}