Trade Alert: Following The Rotation
Adding exposure to a possible AI-lab IPO and two biotech themes.
The AI Buildout Is Still Accelerating
Yesterday, in “The AI Buildout Is Accelerating”, we argued that the sharp pullbacks in memory and semiconductor stocks didn’t mean the AI boom had run its course.
If anything, the latest results from Taiwan Semiconductor Manufacturing (TSM 0.00%↑) strengthened that argument. TSMC reported a 36% year-over-year increase in second-quarter revenue and a 77% increase in net income. It guided for third-quarter revenue of $44.6 billion to $45.8 billion, up from $40.2 billion in the second quarter, while pointing to continued strong demand for its leading-edge technologies and a steep ramp in its 2-nanometer process.
The underlying AI buildout keeps advancing.
The Tape Is Rotating
The stocks tied to that buildout don’t move in lockstep. For now, the market has been rotating away from some of the core AI hardware sectors, particularly chips and memory.
There’s no sense fighting that tape today. We structured our recent trades in those sectors with defined risk and expirations several months out, so they can wait out a correction if necessary.
Instead, we’re turning toward one part of the AI trade where sentiment remains bullish—the leading AI labs—and toward another of our core themes: biotech.
More Anthropic Exposure
We already have exposure to Anthropic through trades in two publicly traded companies with stakes in the AI lab.
Now Anthropic has confidentially filed to go public, with reports suggesting an IPO could come as soon as this fall. One of today’s trades adds to our exposure with an expiration better aligned with that potential window.
Big Pharma Looks Toward Psychedelics
There was also a significant development in psychedelic medicine Wednesday evening. Bloomberg reported that Eli Lilly (LLY) was nearing a deal to acquire AtaiBeckley (ATAI), and ATAI shares jumped 66% in after-hours trading.
We have some long exposure to ATAI from our April psychedelic trade alert.
We also have an in-the-money trade on another psychedelic medicine company, Compass Pathways (CMPS).
Today, we’re looking to add exposure to a third psychedelic developer recommended by one of our Multibagger accounts. Multibaggers are a handful of accounts from our Market Watchers X list with documented recent 100%+ winners.
Our other biotech trade is in a clinical-stage cancer-drug developer. With volatility elevated in both biotech names, we’re selling shorter-dated calls and defined-risk put spreads to lower our entry costs while retaining longer-dated bullish exposure.
Full details below, including, as usual, our pre-set exit orders for each trade.
Today’s Anthropic Exposure Trade
AI labs / potential Anthropic IPO theme
RSI: 54; Chartmill Technical Rating: 6/10; Setup Rating: 6/10; Fundamental Rating: 6/10.
