Interview, Fireside Chat
Are Hedge Funds Still Bullish on AI Stocks?
- High beta momentum basket prices are expected to stabilize with resurfaced buying activity over the last three trading sessions as the momentum factor stabilizes.
- The magnitude of recent supply is projected to match the volume observed during the summer of 2024.
- Global semiconductor net allocation is forecast to decline from a peak of 24% to 18%, remaining significantly above current year levels.
- Realized momentum factor volatility has reached record levels, hitting the highest point in the past 45 years and the highest outside of recessionary periods.
- Market de-risking in the AI trade is anticipated to represent a healthy reset rather than a total erosion of fundamental conviction.
- Single-stock volatility is expected to remain elevated while index-level volatility stays relatively contained.
- Stock correlations are currently priced as low but may begin to increase as the market progresses deeper into summer.
- Mega-cap tech investors will monitor the trajectory of AI capital expenditure for the remainder of this year extending into next year.
- Due to increased volatility, investors are likely to favor limited loss structures, such as cost spreads in the option space, when buying U.S. AI infrastructure equipment names.
- The AI cycle is characterized as one of the most significant technological developments in a lifetime.