Rory McPherson says the AI trade is still intact despite Broadcom’s modest miss and the sharp selloff in some chip names. His base view is that expectations are very high, the trade has run a lot, and some rotation and profit-taking are likely — but he still sees tech as attractive for long-term investors because earnings growth and valuations remain supportive.
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Rory McPherson, chief investment officer at Magnus, argues that the AI trade has not broken even though Broadcom’s earnings miss triggered an outsized negative reaction in tech and spilled into Asian markets. His core point is that the market has become highly sensitive to anything short of exceptional results: “The expectations are super high for some of these AI names,” and the reaction is partly a function of how far and how fast the trade has already run. He repeatedly frames the move as a strong but now more crowded trend rather than a busted thesis. He supports that view with several examples. He points to Nvidia’s prior post-earnings drop despite “excellent results,” says US tech is up about 40% from its March lows, and notes that South Korea’s Kospi — which he calls a “poster child for AI” — is still up roughly 80% for the year even after a 5% decline on the day. …
Near term, AI and chip stocks remain vulnerable to sharp post-earnings moves because expectations are extremely high. Traders should expect rotation and volatility rather than assuming every dip is a buy.
Over the next few weeks and months, the more likely path is selective leadership: strong AI names can still work, but only with continued earnings delivery. Broader equities may benefit if capital keeps rotating into financials and cheaper sectors.
Longer term, the AI theme still looks structurally intact as an earnings-driven market leader, not just a momentum fad. The regime implication is persistent dispersion: winners will need to keep outperforming fundamentals to hold elevated multiples.
The AI trade is still intact despite the Broadcom selloff.
He explicitly says the AI trade still looks intact even after the reaction to Broadcom.
Expectations are so high for AI names that even good results can be punished.
He cites Nvidia and Broadcom as examples of strong results with negative stock reactions.
US tech has run about 40% from its March lows and is no longer a cheap trade.
He says tech is up 40% from March lows, supporting the idea the move is extended.
What does Broadcom's modest miss say about confidence in the AI trade right now?
Rory McPherson says expectations are extremely high for AI names, especially after a strong run. He argues the AI trade still looks intact because earnings growth has been sensational and valuations do not look egregious, though some profit-taking is likely.
Should traders buy the dip in tech now or stay cautious?
He thinks the tech trade still makes sense for long-term investors, though some rotation is likely because technicals look a bit overbought. He adds that at 25 times forward earnings, valuations are not out of line with history or earnings delivery.
Is the current move into healthcare and financials the start of a broader rotation?
He says some parts of the market, especially the US equal-weight index, still look attractive because valuations are less demanding. He expects financials to benefit from a resilient consumer, higher-for-longer rates, and solid economic growth.
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