Nervous Investors Liquidate High-Risk Assets
Selling pressure has intensified across speculative sectors, with major earnings due this week. Here's my game plan.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Selling in software stocks, cryptos, and precious metals is intensifying as more earnings reports are about to hit. The action we saw last week, sparked by reports from Microsoft (MSFT) , Apple (AAPL) , and Alphabet (GOOGL) , created a significant rotational shift within the AI sector. Investors are growing concerned that AI investments in software are not delivering the same immediate returns as investments in advertising and consumer products.
This rotation hit the software sector with a vengeance. Leaders such as Palantir (PLTR) were hit particularly hard. Many of these stocks have been trading at very elevated levels, and those with the highest multiples are being punished the most. This selling is now spilling over into the semiconductors (SMH) , which hit new all-time highs as recently as Thursday. Nvidia (NVDA) , the group's leader, is down about 2% on Monday morning.
Commodity Chaos and Crypto Reversals
The concern about expensive valuations in software-related AI coincided with precious metals making a parabolic move to new highs. Silver (SLV) suffered a record-setting reversal on Friday, and we are now seeing some chaos in the commodity group.
Cryptocurrencies like Bitcoin and Ethereum were already underperforming, but the sudden reversal in precious metals spooked holders further. Bitcoin (IBIT) is sharply lower on Monday morning and is on the verge of breaking below its 2025 lows. There are gaps on the chart created when President Trump won the election that are now being filled.
Finding Opportunity in the Rotation
The good news is that the selling has not been that broad. It has been primarily rotational, with the S&P 500 (SPY) and Dow Jones Industrial Average holding up much better than the Nasdaq 100 (QQQ) and Russell 2000 (IWM) . While there is a lack of bids in many smaller stocks, we aren't seeing the same liquidation pressure that is occurring in software, cryptos, and precious metals.
There are major earnings due this week from Alphabet (GOOGL) , Amazon (AMZN) , Palantir, Advanced Micro Devices (AMD) , Eli Lilly (LLY) , and Walt Disney (DIS) . These will be the primary drivers of market mood.
High levels of volatility will likely continue in the AI sector as investors sort out which areas produce the best returns and how that impacts capital spending. Google will be particularly interesting this week as it has recently emerged as the leading hyperscaler due to the success of Gemini.
My Game Plan
My game plan is to watch for opportunities to buy my favorite smaller stocks that are under pressure primarily due to top-down selling and a lack of liquidity. In this environment, there is heavy pressure on indexes and ETFs, which causes selling of all stocks within those instruments regardless of merit.
Many of these names are fundamentally healthy but are being dragged down by the indexes. This creates mispricing and opportunity, though timing remains challenging because there is no way to know when stock pickers will become more aggressive and provide support. It is a challenging market, but these environments create the best opportunities for disciplined investors.
At the time of publication, Rev Shark had no positions in any securities mentioned.
