The Market Has Spoken

The AI Buildout Is Accelerating. The Tape Is Rotating.Yesterday, in “AI Isn’t A Bubble And Its Buildout Is Accelerating”, we argued that the selloff in memory and semiconductor stocks didn’t mean the AI boom had run its course.

— Portfolio Armor (@PortfolioArmor) July 15, 2026The evidence from ASML Holding (ASML 0.00%↑), Aehr Test Systems (AEHR 0.00%↑), Micron Technology (MU 0.00%↑), and Penguin Solutions (PENG 0.00%↑) pointed in the opposite direction. Orders, revenue, production plans, and forward guidance all showed that the physical AI buildout was still advancing.Since then, Taiwan Semiconductor Manufacturing (TSM 0.00%↑) added another—and arguably stronger—data point.TSMC Sits At The ChokepointTSMC manufactures many of the world’s most advanced chips. That puts it at one of the semiconductor industry’s critical chokepoints and makes its results an unusually useful read-through on demand for leading-edge computing.TSMC reported second-quarter revenue of $40.2 billion, up 36% year-over-year. Net income rose 77%, while its gross margin reached 67.7%.Advanced technologies—defined as 7-nanometer processes and smaller—accounted for 77% of wafer revenue.The company also guided for third-quarter revenue of $44.6 billion to $45.8 billion. At the midpoint, that would be roughly 12% sequential growth from an already record quarter.Management pointed to continued strong demand for its leading-edge technologies and a steep ramp in its 2-nanometer process.The companies building AI infrastructure are still ordering advanced chips. Semiconductor manufacturers are still expanding capacity. The equipment makers supplying that capacity are still reporting strong demand.The underlying buildout keeps advancing.The Thesis And The TapeNone of that means AI-related stocks have to start climbing again soon.The market has been rotating away from some of the core AI-hardware sectors, particularly chips and memory. After enormous gains, those stocks became crowded, and the tape has been punishing crowded positions.The fundamentals and the price action are answering different questions.The fundamentals tell us what’s happening in the industry. The tape tells us what investors want to own today.Both matter.There’s no sense fighting the tape by forcing more short-term exposure into sectors the market is currently selling. Our recent chip and memory trades have defined risk and expirations several months out. They can wait out a correction if necessary.For Thursday’s trades, we turned toward two areas where sentiment remains stronger: the leading AI labs and biotech.Following The AI LabsWe already had exposure to Anthropic through trades in two publicly traded companies with stakes in the AI lab.Anthropic has now confidentially filed to go public, with reports suggesting its IPO could come as soon as this fall.That potential listing offers another way to participate in the AI boom—one removed from the current crowding in memory and semiconductor stocks.One of Thursday’s trades added to our Anthropic exposure with an expiration better aligned with the potential IPO window.Big Pharma Looks Toward PsychedelicsBiotech supplied another significant signal Wednesday evening.Bloomberg reported that Eli Lilly (LLY 0.00%↑) was nearing a deal to acquire psychedelic-drug developer AtaiBeckley (ATAI 0.00%↑). ATAI shares jumped 66% in after-hours trading.No deal has been formally announced yet, but Lilly’s reported interest is important. A major pharmaceutical company looking to acquire a psychedelic developer offers another form of validation for a field that has spent years moving from the fringes of medicine toward mainstream clinical development.We have bullish exposure on ATAI from our April psychedelic trade alert.(From this alert on 4/20, ironically) https://t.co/zHN4icpEYG