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🔥 Here’s What’s Happening Now

The day after the FOMC is often when the real action is, and stock traders slept on the news and seems to have liked what they heard. Bond traders didn’t…..

I have often said that when bond traders and stock traders don’t agree, you want to side with the bond traders. We will see.

The big issues now for this bull market to continue are whether we see signs of stagflation and/or slowing AI capex spending. One of the reasons why we say you should always have hedges.

🧠 SEMIS – Chasing the Rally or a Trap?

Now that the FOMC is out of the way focus shits to AI Capex and whether it can continue.

Semis are of course a major component, but what do you do with SMH now pretty extended?

The Setup

European semi-equipment names like ASML and ASM ripped higher this week on two catalysts:

  1. Memory contract prices (DRAM/NAND) unexpectedly rising 15–20% in Q4 ’25, breaking seasonal norms.

  2. Nvidia/Intel partnership — $5B Nvidia investment, co-developing custom CPUs/AI chips, with Intel ordering all High-NA EUV machines ASML makes in 2024.

Add dovish Fed headlines and U.S. flows rotating into EU semis, and you had the perfect storm for a short-term melt-up. But does it stick?

Where Fundamentals Really Stand

  • DRAM/NAND: Tightness is real, but driven by legacy DDR4 (PC/smartphone lag in DDR5 conversion). This is unlikely to fuel new capex spend—price hikes ≠ equipment orders. NAND side is similar: SanDisk and Micron can lift contracts, but ASML/ASM don’t have NAND exposure.

  • Intel/Nvidia deal: Long-term positive for Intel capex (good for ASML), but it underscores Nvidia’s distancing from ARM. That’s strategically bearish for Arm Holdings (ARM), positive for x86 and Intel’s ecosystem.

  • Valuation/positioning: ASML and ASM look stretched after this rally; DeMark sell signals flagged; outlook into 2026 remains below current expectations.

🏆 Winners – First, Second, Third Order

First Order (direct beneficiaries)

  • ASML (ASML) – Captures Intel’s High-NA EUV orders, but upside is capped if DRAM/NAND price hikes don’t translate into new build cycles.

  • ASM International (ASM) – Rides equipment sentiment, but similarly stretched.

  • Micron (MU), SK Hynix, Samsung – Direct beneficiaries of DRAM/NAND contract price hikes. Micron has cleaner leverage to NAND tightening.

Second Order (ecosystem pull-through)

  • Intel (INTC) – Nvidia’s $5B investment validates Intel foundry efforts; High-NA EUV orders show it’s still in the game.

  • Nvidia (NVDA) – Wins either way; hedging compute strategy via Intel while maintaining GPU dominance.

  • Applied Materials (AMAT), Lam Research (LRCX), KLA (KLAC) – U.S. semi-equipment levered to memory/dram cycles; benefit if tightness persists.

Third Order (derivative plays)

  • Infineon (IFX) – Preferred industrial semiconductor in Europe. Less frothy, tied to autos, power management, and electrification. A steadier compounder vs cyclical equipment.

  • Eaton (ETN), Schneider Electric (SU FP), Vertiv (VRT) – Data center and power infrastructure plays if AI/data demand sustains.

  • Foundry services (TSMC, GFS) – Long-term winners from capex reallocation to advanced nodes + custom CPU builds.

⚠️ Potential Losers

  • Arm Holdings (ARM) – Nvidia pivot away + SoftBank’s competing AI chip ambitions reduce ARM’s role in next-gen AI compute.

  • Legacy suppliers tied to DDR4 – Price spikes driven by lagging adoption don’t translate into sustainable capex.

  • Overextended equipment stocks (ASML, ASM) – At risk of pullback if sentiment cools and focus shifts back to 2026 outlook.

Investor Takeaway

  • Short-term: This rally can run a bit more on sentiment, but chasing ASML/ASM here feels late—the tape is stretched and 2026 fundamentals don’t support it.

  • Medium-term: Prefer first-order memory winners (MU, SK Hynix) and second-order ecosystem plays (INTC, NVDA, AMAT/LRCX/KLAC).

  • Long-term: Stick with industrial semis like Infineon (IFX) that compound outside the cyclical DRAM/NAND swings, and the data center/power stack (VRT, ETN, SU) where AI demand is structural.

Bottom line: Unless DRAM/NAND tightness translates into a new capex cycle, this is more a sentiment rally than a structural inflection. Use it to rotate into more durable plays rather than chase stretched equipment names.

Trader Takeaway

This is a spot where selling options can come into play. You could sell puts or put spreads under key support levels on SMH or individual names. Worst case you get into these names at a lower price. If you own the underlying you could sell calls.

The Investment Strategy Wall Street Hopes You Never Discover

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- 4 ways to hedge your portfolio that don't include bonds

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📈 Stock Corner

Today’s stock i Fluor (FLR)…..

This is an AI infrastructure play that had a bad day in August. Yesterday it pulled an undercut and rally at the 10 and 20 day. The thing we know about gaps is the eventually get filled. Could be 5 years from now or 5 hours from now, either way I like the risk reward of this set up.

📬 In Case You Missed It

🤝 Before You Go Some Ways I Can Help

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  2. Inside HEAT: Our Monthly Live Call on What Wall Street Doesn’t Want You To Know

  3. Financial HEAT Podcast https://www.youtube.com/@TuttleCap Freedom from the Wall Street Hypocrisy

  4. Tuttle Wealth Management: Your Wealth Unleashed

  5. Advanced HEAT Insights: Matt’s Inner Circle, Your Financial Edge

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