In-Depth Breakdown of the AI and Tech Stock Market Rally

Recently, the semiconductor and memory sectors have delivered a sustained two-month rally, driven by rising demand for AI computing power. At the same time, market divergence between bulls and bears has continued to widen. Key variables such as Federal Reserve interest rate policy, supply-demand cycles across the industry chain, and the earnings performance of Micron and Nvidia have become central areas of focus for market participants.

This AMA focused on the increasingly hot market trend surrounding AI and U.S. technology stocks.

Guest Speakers:

@ZhanweiC — ZC @rayrayweb5 — Rika @JinYu762 — Jinyu @laosanhemao — Laosan

1. Why Have Tech Stocks Rallied for Two Months? Can the Rally Continue?

This round of tech stock gains began after geopolitical tensions between the U.S. and Iran eased in April, followed by a sustained uptrend starting in May. Unlike the pure concept-driven speculation seen during the early internet bubble, the semiconductor and memory sectors currently have real earnings support.

The four guests shared independent views from different perspectives.

1. Laosan

Core logic behind the rally: The easing of geopolitical risks improved risk appetite, while memory and semiconductor companies delivered real business performance. This is not a purely theme-driven rally.

Three short-term bearish factors suggest potential pullback pressure, making short-term chasing unattractive:

Market sentiment: Stock market discussions across the internet have surged, and a large number of new retail investors have entered the market. Historically, this has often been a warning sign of a market top.

Technical indicators: Major indexes have been trading above the upper Bollinger Band for an extended period, creating strong technical demand for a pullback.

Capital rotation: The Dow Jones Industrial Average has continued to reach new highs and has significantly outperformed the Nasdaq and S&P 500, showing a late-cycle “capital siphoning” effect often seen near the end of a bull market.

Overall conclusion: The long-term industry fundamentals remain positive, but short-term downside risk is high. The risk-reward ratio for short-term trading is very unattractive.

2. Rika

Three key drivers of the current rally:

Continued AI capex expansion: North American cloud providers continue to increase spending on GPUs and data center hardware.

Ongoing earnings upgrades: Nvidia, TSMC, Micron, and other companies across the AI supply chain have delivered revenue and profit results above expectations, prompting institutions to continuously revise earnings forecasts upward.

Continuous inflow of incremental capital: New index highs have attracted passive ETF inflows and quantitative funds, creating a positive feedback loop in capital flows.

Market stage assessment: The market has not yet entered a full bubble phase. There is still significant bearish disagreement, and sentiment has not reached an extreme level of euphoria.

Sector rotation strategy: Follow the sequence of upstream → midstream applications → downstream robotics.

Stage 1: Chips, semiconductors, and memory, including Nvidia, TSMC, and Micron. Stage 2: AI large model application companies, such as OpenAI and Anthropic. Stage 3: Robotics and other AI terminal application supply chains.

3. Jinyu

Warning signs of a cycle top: Apple has raised prices across its product lines, while Microsoft has also increased Xbox prices. This resembles the historical pattern in 2008, when oil prices surged before collapsing, suggesting that the current cycle may be approaching its final stage.

Demand-side concerns: AI has significantly pulled forward demand for memory chips. Price increases in consumer-end products may weaken purchasing power and suppress long-term upstream demand.

Practical strategy: Investors who already have unrealized gains should consider recovering their full principal first, while allowing the remaining profit position to continue following the trend.

4. ZC

Valuation safety margin: The Nasdaq’s overall P/E ratio is only around 30–36x, which has not reached historically extreme overvaluation levels. The AI industry chain has strong profit realization capability.

The memory sector is the strongest medium- to short-term opportunity, supported by three bullish factors:

Supply-demand gap: AI is consuming large amounts of HBM and DRAM capacity. Previous industry expansion was insufficient, keeping supply tight.

Smooth price transmission: Apple and Microsoft’s end-product price increases indirectly support the continuation of the upstream chip price cycle.

Long-term order lock-in: Micron has signed multi-year long-term contracts with 16 leading customers, covering around 50% of its capacity. This provides strong visibility into 2027 earnings.

Longer-term risk: Memory remains a cyclical sector. The industry expansion cycle is around three years. After concentrated capacity comes online in 2027–2028, chip prices may face significant downside risk.

Long-term strategy for ordinary investors: For investors who find it difficult to select individual stocks accurately, dollar-cost averaging into AI-themed ETFs may be more suitable. AI is a cross-generational long-term investment opportunity.

2. What Are Micron and Nvidia’s Earnings Reports Telling Us?

Micron and Nvidia are two core observation points in the AI supply chain. Their roles are clearly different: Micron represents the level of upstream supply shortage, while Nvidia reflects downstream computing demand and the industry’s profit distribution power.

If both move in the same direction, it suggests the AI boom is continuing. If their trends diverge, it may indicate a redistribution of profits across the supply chain.

1. Laosan

Nvidia: Its earnings were largely in line with market expectations. The stock showed a classic “good news priced in, stock price falls” reaction, creating short-term pressure.

Micron: Its earnings significantly exceeded expectations, with gross margin breaking above 80%. The stock surged nearly 20% on the release day but then quickly pulled back, which is a bearish signal.

Overall view: The fundamentals of the memory sector are strong, but current valuations are high. It may be better to wait for a deeper pullback before building long-term positions.

2. Rika

Key takeaways from Micron’s earnings:

Results significantly exceeded expectations: Revenue reached $41 billion, far above the market expectation of $35 billion. The company also secured $22 billion in long-term memory supply orders, with remaining backlog of around $100 billion.

Two structural changes in the industry: First, memory is shifting from a traditional cyclical raw material into a strategic core resource for AI. Second, customers are locking in capacity through long-term contracts, which significantly smooths out the industry’s cyclical volatility.

Potential risk: If the industry collectively expands capacity in the future, chip oversupply may weaken manufacturers’ pricing power. This sector is not monopolized by a single company.

The observation logic for Nvidia is changing: Investors should no longer focus only on revenue and profit, but also on the broader supply chain ecosystem.

Observation point 1: Whether HBM and TSMC foundry capacity bottlenecks are easing. Observation point 2: Once supply becomes more abundant, whether downstream customers gain more bargaining power and whether the profit distribution structure across the supply chain changes.

Why both companies matter:

Micron: Measures whether upstream hardware supply remains tight. Nvidia: Measures whether downstream computing demand can continue converting into profits.

Divergence warning: If Micron rises while Nvidia weakens, or if Nvidia rises alone while memory stocks fall, it may signal deterioration in supply chain profit distribution.

3. ZC

Evidence of strong demand: Apple, one of the largest memory buyers, strongly resists chip price increases. However, it has still been forced to accept higher purchasing prices, confirming the tight medium-term supply-demand structure in memory.

Capacity cycle view: Before 2027, global HBM and DRAM capacity has largely been locked in by long-term contracts with leading customers.

Opportunity from market disagreement: Current market divergence between bulls and bears is huge. The greater the disagreement, the more attractive the medium- to long-term allocation opportunity becomes. ZC continues to add positions and remains confident in his holdings.

3. The Fed’s Impact on Tech Stocks and Crypto

Federal Reserve interest rates, inflation, and geopolitical conditions are the key macro variables shaping technology assets this year. The guests showed clear differences in their expectations for rate cuts or rate hikes.

1. Laosan

Rate-cut expectations are very weak: Employment and inflation data continue to limit the Fed’s room for easing. A restart of rate hikes cannot be ruled out. After previous Fed meetings, Bitcoin and the Nasdaq fell at the same time, which already confirmed pressure from tightening liquidity.

Asset comparison: If an unexpected rate cut occurs, capital is more likely to flow first into AI tech stocks with real earnings support. Crypto lacks a strong long-term fundamental narrative, so its ability to attract capital is relatively weaker.

2. Rika

Fed policy expectations: Multiple institutional reports predict no rate cuts in 2026, while several Fed officials have publicly signaled the possibility of rate hikes this year.

Impact on tech stocks: A high-interest-rate environment suppresses valuations based on future cash flows. This creates polarization within the sector: AI leaders can offset valuation pressure through high-growth earnings, while unprofitable concept-driven tech companies may continue to see valuation declines.

Impact on crypto: Crypto is highly tied to U.S. dollar liquidity. When the Fed sends dovish signals, risk appetite improves and crypto prices tend to rise. When the Fed turns hawkish, capital tends to rotate toward gold and short-term U.S. dollar bonds, putting pressure on crypto.

3. ZC

Market pricing: Derivatives market pricing suggests around an 80% probability that the Fed will neither raise nor cut rates in 2026, which represents the mainstream market consensus.

Inflation logic: Current high oil prices and shipping disruptions are event-driven inflation, not sustained inflation caused by an overheated economy. If oil prices fall, inflationary pressure could ease quickly.

Fed communication strategy: The Fed is more likely to use verbal guidance to cool down market momentum. The probability of an actual rate hike is relatively low.

4. Is This a Market Top or a Mid-Cycle Pause? How Should Investors Position Next?

1. Laosan

Market structure warning: The Dow outperforming the Nasdaq and S&P 500 is a typical late-bull-market signal. Short-term topping risk is high, and new retail investors should avoid chasing the rally.

Strategy by investor type:

New investors who entered in May or June and already have profits: Stop adding positions and avoid increasing risk through short-term speculation.

Long-term dollar-cost averaging investors: Ignore short-term volatility and continue holding.

Investors who missed the AI rally: Consider shifting to lower-volatility power and electricity-related sectors. AI large models will significantly increase global electricity demand over the long term, while the sector has more stable trends and continued institutional allocation.

2. Rika

The current market does not yet meet any clear top signal. Three key warning indicators should be monitored:

Signal 1: Companies report earnings far above expectations, but their stock prices fail to rise. Signal 2: Severe divergence across the supply chain, where only Nvidia rises while memory, foundry, and optical module stocks all weaken. Signal 3: Market sentiment reaches extreme euphoria, with trillion-dollar companies emerging in batches, ordinary investors going all-in, and the entire market becoming unanimously bullish.

Long-term bubble risk: TSMC, Intel, and Micron are all continuing to build new fabs, and the expansion cycle may last until 2030. If future AI demand falls short of expectations, large-scale overcapacity could emerge and trigger a market breakdown.

Additional allocation direction: Beyond memory and chips, investors can also look at the most upstream hardware infrastructure, such as lithography equipment.

3. ZC

Limitations of market timing: Historically, predictions of “market tops” often fail for long periods. It is impossible to precisely capture the top.

Volatility tolerance: A normal 20%–30% pullback is a healthy correction, not necessarily a systemic bear market.

Core strategy: Stay with high-quality AI leaders, anchor investment decisions to the long-term growth logic of U.S. technology, hold for the long term, and reduce frequent market timing.

5. Shared Consensus and Key Differences Among the Four Guests

A. Shared Consensus

The upstream AI memory and HBM sectors have real demand and earnings support. The short-term supply-demand gap is clear, and long-term contracts signed by leading companies locking in 2027 performance have become a new industry norm.

The two key observation targets have clear roles:

Nvidia = downstream computing demand and the industry profit distribution indicator. Micron = upstream hardware supply shortage and the core indicator for price transmission.

If both strengthen together, it suggests that the AI boom is continuing.

B. Key Differences Among the Guests

Short-term market rhythm

Cautious view — Laosan and Jinyu: Market sentiment is overheated, technical levels are elevated, and end-product price increases may suppress demand. Short-term pullback risk is high.

Optimistic view — Rika and ZC: Corporate earnings are being revised upward, multi-year long-term contracts have locked in capacity, and the market has not yet entered extreme euphoria. There may still be further upside.

Fed interest rate direction

Bearish view — Laosan and Rika: High interest rates may remain in place for longer, and rate hikes remain possible, which could pressure tech stock valuations.

Neutral view — ZC: The highest-probability scenario is that rates remain unchanged throughout the year. Inflation is mainly driven by short-term events and is unlikely to be persistent.

6. Closing Note

All market logic, sector views, stock analysis, allocation frameworks, and trading strategies shared by the guests during this AMA represent their personal independent opinions and are intended only for industry research and discussion.

Nothing in this AMA should be interpreted as investment advice, financial planning guidance, or trading instructions.