VOYA

Treacherous Side Of The AI Trade

Please click here for an enlarged chart of Intel Corp (NASDAQ:INTC).

Note the following:

• This article is about the big picture, not an individual stock.  The chart of INTC stock is being used to illustrate the point.
• The chart shows INTC shares are gapping down after earnings.
• The chart shows INTC’s high is $142.35.  INTC is trading at $69.33 as of this writing in the premarket.
• The chart shows our call to take partial profits on the core position at $130.53.  The core INTC position is long from an average of $19.05.
• The fact that INTC is down 51% is inline with our prior call that many AI stocks could pull back 30% – 50%.
• Intel earnings were not that bad, but the reaction is so severe because the momo crowd was buying INTC stock aggressively near the highs on margin and is now facing margin calls.
• Intel earnings and guidance were below whisper numbers due to slowing PC sales. In investors’ uber bullishness about AI, investors simply forgot that many AI companies like Intel also have their bread and butter business that should not be ignored.
• Now that INTC stock has fallen, investors need to look ahead.  The future of AI is agentic AI.  For agentic AI, CPUs are more efficient than GPUs.  Intel is the leader in CPUs.  From Intel’s conference call, Intel expects server CPU total addressable market (TAM) to rise to $200B over five years. As a reference, the present server CPU TAM is about $40B. 
• Looking ahead, an actionable step for investors is to take a look at our new trade around position buy zone shown on the chart.  
• Investors should not underestimate the risk of margin calls potentially driving INTC stock lower than you would think.
• Just like Intel, for Amazon.com, Inc. (AMZN), investors have been uber bullish about AI but forgot that Amazon has a very large retail business.  AMZN stock has fallen after earnings due to slowing retail sales.
• Amazon earnings and guidance are below whisper numbers due to slowing retail sales.
• Again, investors need to look ahead, Amazon is projecting that AWS business could reach $1T in the next five to ten years.  The reason behind such phenomenal growth is AI.  As a reference, in Q3 2026 AWS reached an annual run rate of $184B, and the growth rate was 39% year-over-year. 
• Just like Intel and Amazon, many AI companies that are being aggressively sold have bright futures.  The reaction to earnings from Intel, Amazon, Alphabet Inc Class C (GOOG), Alphabet Inc Class A (GOOGL), and Meta Platforms Inc (META) also demonstrate the importance of proper diversification.  For example, oil companies Shell PLC (SHEL) and Chevron Corporation (CVX) are hitting new highs after reporting exceptional earnings. Both SHEL and CVX are in our portfolio.  
• Cryptos are coming under aggressive selling after the biggest ever crypto heist of $6.3B from Binance, the largest crypto trading platform in the world.  Here is the key question for investors.  If cryptos are not safe at the world’s largest trading platform, how safe are they at other platforms?
• Crypto investors should also get ahead of the curve and be thoughtful about quantum computing approaching the time when it will be able to break crypto encryption.   
• Selling in gold started in Asia to meet margin calls on AI stocks.  As of this writing, gold has fallen below $4000 as more margin calls are expected.  As a reference, the momo crowd was aggressively buying gold around $5500.
• Silver is breaking below $50, again on margin calls.  As a reference, the momo crowd was aggressively buying silver when it was above $100.
• Oil is rising as several tankers hit mines in the Strait of Hormuz.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are negative in Apple (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG), Meta (NASDAQ:META), and Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. Most recently, we correctly called the rally from recent stock market lows and the 2026 semiconductor decline before a 25% drop in the Semiconductor ETF (SMH). In gold, we bought at an average price near $1,105, close to cycle lows, and took partial profits near $5,400, close to cycle highs. Please click here to get our free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.