A BIG Explosion Is Coming

For some unknown reason this war with Iran has catalyzed a melt-up in AI stocks. We are to believe that record oil shock is "bullish" for the riskiest and most overbought Tech stocks:

Before I delve into the parabolic AI rally, first I want to briefly mention the Iran war.

This is week eight of the war and there is no sign that it's ending any time soon. Nevertheless, Trump reassures Fox News viewers on a daily basis that the war will end "soon". And they believe him every single time. Meanwhile, the BBC reported this week that very unusual insider trades have been taking place around the time of these reassuring war announcements. Therefore we can surmise that this has been a very profitable war for certain insiders who have NO incentive to end this war "soon".

Regardless, Trump has no plan to reduce the naval blockade on Iran which is a starvation strategy. NeoCons are of the belief that Iran can be starved into submission. However, the rest of the world is also starving at the same time. The IMF reported last week that 45 million globally are now at risk of starvation due to this war. We can assume that number will grow exponentially in a global recession, which is now essentially assured.

In other words the damage is done economically, and yet Trump is totally unfazed by the pain this war is causing on the world at large and to the U.S. working class. He himself has personally GAINED wealth during this war, but the U.S. working class have suffered from high fuel prices added on to last year's tariffs. In other words, they are reaching the breaking point.

Which gets us to the supernova AI bubble. In the chart below we see the Tech/AI ratio on a long-term basis.

In Y2K, consumer sentiment was at a multi-decade high and now it's at a RECORD low. Which does not portend well for when the AI bubble bursts. Also note that on a relative basis the Tech / S&P ratio has rolled over and is making a lower high. Which was the same pattern in Y2K. After that second lower high failed that's when the wheels REALLY came off the bus.

This chart shows that S&P Tech is deja vu of last year. It plunged and now it recovered.

Therefore BOTH bears and bulls could use this chart to support their argument. Bulls see a bottom and bears see a top. Technically, this chart alone is inconclusive.

EXCEPT that the Iran war is NOT over, so the premise of this Tech rally is on much weaker grounds.

Here is where it gets interesting.

Within the Tech sector, AI Semiconductors are going parabolic.

Now compare last year to this year.

This year's three week gain is larger than last year. Larger than the pandemic. The largest gain since March 2000 Y2K peak.

And of course in this we see that last year clearly was a low whereas this year's pullback clearly was NOT a low.

In summary, levered semis are now up 1,000% in ONE YEAR.

And the war is not over YET.

Which means a BIG explosion is coming.

And I'm not talking about the war.