What Is the AI Trade in 2026?

Market Performance & Trends - The current market cycle is described as the most robust in over 30 years [1] - The SOX (Semiconductor Index) is up 42%, the overall index is up 21%, while the IG index (software) is only up 76% [2] - In 2025, performance was focused on optical memory, quantum computing, major semiconductor companies (Avago, Broadcom, NVIDIA, AMD), and cloud titans like Alibaba and Google [3] - The Street is not looking around the corner, and the market is currently in a state of overexuberant speculation and complacency [3] Concerns & Potential Headwinds - There are concerns that what worked in 2025 may not work in 2026 [6] - With NVIDIA shares up 300%, there are worries about pricing and potential shortages in the semiconductor supply chain [4] - DRAM prices were up 20% sequentially in Micron's last report, indicating a potential price issue [4] - Dell's CEO indicated potential shortage issues [5] Future Outlook & Investment Strategies - A pivot to software in the late 2027-2028 timeframe is worth considering, specifically agenda and security names which have recently corrected [6]