I’ve been a trader and investor for 44 years. I left Wall Street long ago—-once I understood that their obsolete advice is designed to profit them, not you.
Today, my firm manages around $4 billion in ETFs, and I don’t answer to anybody. I tell the truth because trying to fool investors doesn’t help them, or me.
In Daily H.E.A.T. , I show you how to Hedge against disaster, find your Edge, exploit Asymmetric opportunities, and ride major Themes before Wall Street catches on.
Table of Contents
H.E.A.T.
Wall Street just got whiplash. A few days ago, the narrative was “AI needs light” — lasers, fiber, and photonic plumbing as far as the eye can see — especially after Nvidia cut big checks and signed multiyear commitments with Coherent (COHR) and Lumentum (LITE) to accelerate advanced optics for AI infrastructure. Then Broadcom reported and basically said: slow down… in the place that matters most right now, customers are still choosing copper. On its earnings call, Broadcom’s CEO framed “direct-attached copper” as the best way to connect GPUs for scale-up (inside the rack / inside the box), explicitly downplaying the “bright shiny object” of co-packaged optics (CPO) as something customers don’t need “this year” and maybe not “next year.” That one concept — copper-first for the highest-intensity, shortest-distance AI links — was enough to kneecap photonics exposure in the market (hello COHR/LITE/GLW), even though it didn’t do anything obvious for “copper stocks” like Freeport-McMoRan (FCX). And that mismatch is the tell: the trade isn’t “buy copper the commodity.” The trade is “buy the toll collectors in copper interconnect.”
Here’s the nuance most people miss: “Copper vs. photonics” isn’t a religious war — it’s a map problem. AI infrastructure has two very different highways:
Scale-up (inside the rack / inside the compute island): ultra-low latency, absurd bandwidth, shortest distances. This is where direct-attached copper (DAC) and increasingly active electrical cables (AEC) can dominate because it’s cheaper, simpler, and avoids lasers — and Broadcom is telling you customers will push copper as far as the physics allows.
Scale-out (between racks / rows / buildings): distance expands, signal integrity becomes a nightmare, power per bit matters more, and optics remains the adult in the room. Even Broadcom’s posture has been consistent: keep scale-up in copper “as long as possible,” while optics is the path for broader network expansion.
Longer term readers may have noticed that I’ve been a fan of photonics stocks. There was this filing…..
I also own a couple in some of my ETFs, and I have written a lot about LITE, COHR, and GLW.
So did photonics stocks sell off too far? The honest answer is: it depends on what investors thought they owned. If the market was pricing “CPO everywhere, right now,” Broadcom just shoved that timeline to the right — and that derating is rational. But if you believe AI buildouts continue and networking speeds keep climbing, then photonics isn’t “dead,” it’s just getting repriced from imminent inevitability to eventual inevitability.
Why FCX didn’t pop (and why that matters)
This is where the tape gives you the real signal. If Broadcom’s “copper” comment was truly a macro copper story, copper miners would have ripped. They didn’t — because the incremental copper involved in data-center cabling (even if huge in tech speak) is tiny relative to the global copper market, and because the value accrues to specialized cable assemblies, connectors, and signal-conditioning silicon, not to a mining company selling raw copper into a global commodity pool. In other words: the “copper trade” here is precision manufacturing + interconnect IP, not a bet on copper ore.
The real ramifications (what changes after Broadcom)
The market just split “AI infrastructure” into two buckets:
Compute winners (GPUs/accelerators) are now being judged on customer economics (capex, power, monetization).
Connectivity winners are being judged on where the bottleneck migrates next — and Broadcom is arguing the next bottleneck is solved with copper first, not lasers first.
Photonics becomes a “when,” not an “if.”
The long-term physics hasn’t changed: at some point, bandwidth density + power + distance push you to optics deeper into the stack.
The near-term deployment schedule might change if copper/AEC keeps working longer than the hype priced in.
The best positioning isn’t “pick a side.” It’s “own the picks-and-shovels that get paid either way.”
If copper persists: you want copper interconnect and signal integrity enablers.
If optics wins sooner than expected: you want the laser/fiber ecosystem.
Either way: you want the “toll roads” — the companies that sell indispensable parts into every AI buildout.
Winners and losers
(Not investment advice — just a framework for “who benefits if this narrative sticks.”)
Potential winners if “copper-first” (for scale-up) is right
These are the names that can benefit if hyperscalers keep leaning on DAC/AEC and high-speed electrical links inside the rack:
AVGO (Broadcom) — The messenger and a direct beneficiary if Ethernet scale-up + copper-heavy architectures persist.
CRDO (Credo Technology) — Well-known lever to active electrical cables / SerDes themes (i.e., extending copper reach at higher speeds).
MRVL (Marvell) — Exposure to high-speed interconnect silicon and data center plumbing.
APH (Amphenol) / TEL (TE Connectivity) — Connectors/cabling “toll booths” that get paid as long as bandwidth keeps rising (copper-heavy or hybrid builds).
ANET (Arista Networks) — If Ethernet keeps expanding deeper into AI fabrics, Arista tends to be a second-order beneficiary (though watch what mix of optics vs. copper sits behind deployments).
Potential losers if CPO timelines get pushed out
These are the names that can take pain if the market was pricing rapid penetration of “optics everywhere,” especially near-term CPO expectations:
LITE (Lumentum) — Lasers/optical components; very sensitive to CPO hype cycles.
COHR (Coherent) — Same story: advanced lasers and optics tied to next-gen data center interconnect.
GLW (Corning) — Fiber/optical connectivity proxy; can get hit on sentiment even if long-run demand stays intact.
The “plot twist” bucket: winners even if photonics is delayed
If Broadcom is right about copper lasting longer inside the rack, the buildout doesn’t stop — it shifts. That can actually keep the broader connectivity stack healthy: more racks, more switches, more cabling, more connectors, more everything. Some photonics businesses can still do fine even if CPO gets delayed, because scale-out optics demand can remain strong.
What to watch next (to know who’s right)
Do hyperscalers talk about AEC/DAC adoption rates (and at what speeds: 800G → 1.6T)?
Do we hear “CPO is in production” or “CPO is in trials” (big difference)?
Do power constraints accelerate (which would pull optics forward, because power per bit starts to dominate)?
Do Nvidia/Broadcom/Arista roadmaps converge on the same architecture — or diverge (creating multiple winners)?
Bottom line, if you own photonics stocks here I wouldn’t sell. If you are looking to get in, I’d watch for signs of support. For example, if a name like LITE held the 50 day moving average and bounced…..
News vs. Noise: What’s Moving Markets Today
Jobs number was awful, oil prices are higher, and interest rates are higher. Can you say Stagflation?
Speaking of Stagflation we are seeing a re-calibrating of inflation fears and a rethinking of how dovish the Fed is likely to be, which hasn’t been pretty. While the shock to oil prices may be temporary, the rise in inflation expectations and the resulting rise in rates, may not be…..
A short lived spike in oil prices would impact CPI, but the effect would be reversed quickly. A longer lived spike is a different story. Citadel wrote this on Friday….
A sustained oil shock is more problematic. Research, including Fed estimates, suggests that a sustained 10% increase in oil prices lifts US headline inflation by roughly 0.15% on the low end (FOMC estimate) to around 0.3% (using more conventional estimates). Taking the midpoint (0.225%) and applying it to the 26% rise in oil prices since end-February implies a ~0.6% increase in headline inflation if sustained. Using the Bloomberg SHOK model, and holding all else equal, the roughly $20 oil increase observed so far would add 40bp to headline inflation by end 2026, taking it to around 2.9%. However, if inflation expectations were to rise by just 0.5%, the impact of the oil shock nearly doubles…the model implies an additional 35bp increase in headline inflation via the expectations channel, lifting the total effect to 75bp relative to baseline, pushing headline inflation to 3.26% by end 2026
Watch Oil today, it spiked well over $100 last night, but it’s back under so far this morning.
Speaking of rates, this is why I don’t like longer duration Treasuries as a hedge…..
TLT has had a vicious selloff the past 5 days, anyone using that for a hedge would be quite disappointed. Anyone using TLT to “hedge” last week did worse than the market.
On the other hand, if you got some of your “bond” exposure through property and casualty stocks, as we recommend, you were still down, but not as much as the market….
The buy gold and buy energy stock playbook hasn’t been working great. In my opinion that’s because these areas were extended coming into this.
Gold miners (GDX) had an undercut and rally at the 50 day moving average on Friday. Could be an entry point if you missed the trade or wanted to add….
I do think you ought to own energy stocks, but they are extended, which also means a quick resolution could get you a nice unwind here…..
Software is really the only area of the market that is working right now, and that’s just because it got savagely crushed prior to the war…..
I do much prefer buying counter trend moves over extended moves, which is why we have a lot of software names.
Semi conductors, on the other hand, look like a short here….
Meanwhile in the market, the daily chart of SPY looks like a mess (QQQ also). On the bullish side we didn’t take out the low from the other day…..
On the bearish side we are living below the 50 day, 20 day, and 10 day moving averages.
And finally Bitcoin. It’s not going up much, but it may have put in a low….
A Stock I’m Watching
Today’s stock is Anglogold Ashanti (AU)…….
I talk about gold miners above, and this is typically one of my favorites. It had an undercut and rally at the 50 day on Friday, and if you want to get more exposure to gold, this could be as good a spot as any.
In Case You Missed It
Talking with Josh Brown about European Digital Sovereignty and European Defense….
I had the pleasure of speaking about UFOD on Stocks on Spaces Wednesday. Strangely we got cut off right as we were talking about potential Raytheon technology, so it’s in two parts…..
The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.
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