The AI Bubble Is Bursting

Victor Dergunov analyzes the recent correction in the AI hardware and semiconductor sector, predicting emerging buying opportunities following significant price drops. He believes that the AI bubble hasn't peaked yet, with an anticipated $1.25 trillion in AI datacenter spending next year. Dergunov previously made moves to minimize his semiconductor positions and shorted overvalued stocks but maintains a bullish outlook, setting an S&P 500 target of 8,000 by year-end, potentially rising to 8,200 by early 2027, fueled by AI infrastructure growth. He plans to hold long positions in high-quality AI stocks while preparing to adjust his strategy as signs of a bubble appear. Additionally, he promotes his investment group, The Financial Prophet, for guidance.

Summary

The AI hardware and semiconductor sector has experienced a sharp correction, but I see compelling near-term buying opportunities emerging after significant drawdowns.
Despite recent volatility, I believe the AI bubble has not peaked; hyperscaler CapEx is accelerating, with $1.25T in AI datacenter spend expected next year.
I previously reduced or exited semiconductor positions and shorted several names near their highs, capitalizing on “perceived” overvaluation and overbought technicals.
My S&P 500 target remains 8,000 for year-end, with a bullish case of 8,200 for early 2027, driven by continued AI infrastructure expansion.
I plan to stay long on high-quality AI infrastructure equities through this phase but will aggressively short and reposition when clearer signs of bubble exhaustion emerge.
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I discussed significant rotation in the AI segment in an article several weeks ago (from hardware to software). Moreover, in a longer-term perspective piece, I talked about this AI bubble eventually ballooning into the

This article was written by

Victor Dergunov

56.24K Followers

Hi, I’m Victor Dergunov, MBA, and I’ve been an active investor for over 20 years. My passion for investing started early, and I’ve spent two decades honing strategies that consistently deliver results. Whether it's tech giants like Apple and Tesla or opportunities in commodities and crypto, I provide diversified insights to help you succeed. Join me, and let’s take your investing to the next level.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BE, NVDA, AVGO, MSFT, SPCX, MU either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am long a diversified portfolio with hedges.

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