AI Chips Are Hiding the 'Stealth Bear Market'
The Weekend Edition is pulled from the daily Stansberry Digest.
It was a big week for tech earnings...
After market close on Wednesday, memory-chip giant Micron Technology (MU) reported blowout fourth-quarter results. And, as with all AI-related companies, investors were clamoring for the release.
Micron's investor relations page saw such high traffic in the minutes after it released earnings that its website crashed.
Revenue and earnings both beat Wall Street's estimates, with sales more than quadrupling from the same period last year. And for the full 2026 fiscal year, revenue nearly quadrupled.
It wasn't just revenue that saw a huge jump... Micron's diluted earnings per share surged more than 1,000% year over year in the fourth quarter, and it grew 879% for the full fiscal year.
All four of Micron's segments more than tripled their revenue year over year. But its Core Data Center division – the one that most benefits from AI – was the real story. In the fourth quarter, data-center revenue hit $18 billion, up from just $1.6 billion in the same quarter last year.
So AI has Micron firing on all cylinders. And CEO Sanjay Mehrotra said that he expects "an even stronger fiscal 2027."
Even with the solid report, Micron shares fell as much as 3.5% on Thursday... before roaring back to finish higher.
That early selling makes sense. Micron's shares have soared more than 270% this year, and more than 500% over the past 12 months.
Lots of folks were ready to take profits.
What's good for chips is good for the S&P 500 Index...
And that's important right now. As our colleague and Stansberry's Investment Advisory editor Whitney Tilson wrote in his free daily e-letter on Wednesday (and covered in his presentation during our Alliance Day), we're in a "stealth bear market."
From Whitney...
Consider this graphic posted on X by user Compound248 on Monday:
It shows that 59% of the stocks in the S&P 500 are in a bear market – down 20% or more. It also shows that 41% are down 30%-plus and 17% are down 50%-plus.
So even though the S&P 500 is less than 2% off its all-time high from August, nearly all individual stocks are doing worse... and most have slipped into bear market territory.
Now, since the benchmark index is weighted by market cap, the big tech companies shape its performance. But the S&P 500 Equal Weight Index, essentially an average of all 500 stocks, is down more than 6% from its own high.
Over the past month, the semiconductor industry has been the only thing keeping the market afloat. The average S&P 500 stock is down about 5% in that time, but the overall market is just about flat.
That's because the chip sector – as measured by the iShares Semiconductor Fund (SOXX) – is up more than 15%. And for good reason.
Hyperscaler data-center companies like Alphabet (GOOGL) and Meta Platforms (META) used to produce loads of free cash flow ("FCF")... raking in profits from their web businesses. Now, they're using that cash to build AI data centers – and chipmakers are seeing the benefits.
As research firm Hedgeye shared on social platform X, FCF for semiconductor companies has surged to nearly $450 billion.
Once again, the market is getting extremely concentrated around AI stocks...
That's not a sign of a healthy, long-term bull market. But as long as the hyperscalers are spending (and chip companies keep reaping the rewards), AI will remain in the driver's seat.
Meet the AI 'Insiders'
On Tuesday, President Donald Trump hosted a luncheon with executives from many of the largest AI and technology companies.
At the event, Trump said that he and the executives had signed a "morally binding" agreement to commit to AI safety. And he added that the White House is considering building a 10-person committee to oversee AI companies.
The lunch was a "who's who" of the AI industry. It included executives from AI firms Anthropic and OpenAI... hyperscalers like Alphabet, Meta, Amazon (AMZN), and Microsoft (MSFT)... and chipmakers like Nvidia (NVDA) and Advanced Micro Devices (AMD).
Financial commentator Gannon Breslin shared the seating chart from the event in a post on X...
If you're wondering which companies have been the biggest winners from AI so far, you should start with this room.
The government has long been putting its thumb on the scales and picking winners in the critical-materials sector. Now, the same thing is starting to take shape in the AI industry...
While the government hasn't taken any stakes in these companies, their executives are now in Trump's AI "inner circle." That gives them the inside track on shaping AI legislation... and maybe even a complimentary post from the president on his Truth Social account (like both Nvidia and Micron received).
Many AI-related companies have gotten expensive as investors chase the market's trendiest sector. But with the power the White House has to back them up, we wouldn't bet against any of the companies in the inner circle... no matter how stretched their valuations get.
Our colleague and True Wealth Systems editor Brett Eversole also sees more upside in AI – at least for some companies...
In the past few weeks, several different warning signs have popped up for the AI boom. Big IPOs have gotten postponed. Many AI players rely on "circular financing" deals... And many firms are losing money on their AI investments.
But now, Brett says, the boom isn't over – it's just shifting to a new phase. The market is valuing companies that can make money from AI...
As he shared at our Stansberry Conference this week, Amazon and Microsoft shares jumped roughly 15% and 16%, respectively, after their latest earnings reports showed that their cloud businesses are turning AI demand into big revenue. Amazon Web Services revenue grew 37% year over year, and Microsoft's Azure revenue grew 43%.
Meta Platforms, which has no cloud business to sell AI capacity through, saw its shares fall about 8% after it reported earnings the same month.
Brett also cited Anthropic's revenue run rate... which he said went from about $1 billion in January 2025 to $65 billion this July. OpenAI's revenue run rate has roughly doubled since year-end to around $40 billion. It's proof that real money is now moving through AI products directly.
However, Brett said that shift doesn't make the market's dependence on AI capital spending any less real or concerning...
He called the setup a "house of cards." The market will keep rising only as long as the spending does. But things aren't slowing down yet... AI spending is expected to top $700 billion this year and reach as high as $1.6 trillion in a few years.
Until that stops, the bust is "years off," Brett said.
And the thing is, the spending part of the boom – "Phase 1" – can still keep going as "Phase 2" plays out.
That's why he just released an all-new, free presentation to explain what the next phase of AI will look like... and the opportunity building for the next wave of AI darlings.
All the best,
Nick Koziol
Editor's note: The first wave of AI investing created some of the market's biggest winners. But according to Brett, these same companies could be in real danger of collapsing... leading to a new wave of winners that may look very different.
That's why Brett shared an urgent briefing this week to reveal the name of one AI stock to buy... one stock to stay away from... and the date that he believes could kick off the "AI Melt Up."