Jul. 24 at 3:24 PM
The AI trade is diverging sharply:
The 30-day correlation between the largest US CapEx spenders and the semiconductor index,
$SOX, is down to almost zero, near the lowest in at least 4.5 years.
This marks a sharp decline from the +0.78 positive correlation seen in April.
By comparison, the average correlation coefficient has been +0.60 since the start of 2022.
The divergence comes as semiconductor stocks have rallied while the largest AI infrastructure spenders have declined, and vice versa, since the beginning of June.
This tells us that investors are no longer treating AI infrastructure builders and chipmakers as one trade, as chipmakers benefit from AI demand while hyperscalers face questions over whether massive spending will generate sufficient returns.
The next phase of the AI trade will be defined by profitability, not investment.
$DDOG $PATH $ZETA