I am an investor who has had to work really hard to learn the semi space. For that reason, among others, I find your Substack to be invaluable.
With that said, I do lead an investment group where we do a LOT of research to build conviction within sectors as well as among specific companies.
The framework I approach it from is based on my studies of elite traders who have built fortunes in the stock market.
Basically, I am looking for a structural trend that I can ride through the greater part of its move.
If I can be right about the structural move, my biggest task as a stock operator is to have the emotional discipline to manage the campaigns (we call them campaigns and not trades) through the volatility.
From my experience, that is where the big money is made.
In addition, we are not against adding 'trading shares' in these companies that can be acquired during drawdowns (the "buy opportunities" you referenced) as long as the structural uptrend is still in tact and the longer-term line of least resistance is higher.
These trading shares can be sold for profit when the aggregate market, the sector or individual stocks get extended (we monitor charts constantly to determine those situations).
While position sizing can vary depending on the near-term line of least resistance in the overall market, the sector or the stock, IMHO the key is to have the emotional mastery to hold the core position without trying to time tops and bottoms.
IMO, picking tops and bottoms in a really tough game and you often risk missing the greater move if you don't time it correctly.
That is why we say if you want to partake in that exercise then use trading shares and not your core positions.
In the case of the current AI cycle, we have advocated holding core positions in key names we have identified and the key "tell" as to whether or not the structural trend remains in tact is the CapEx spending of the bigger companies.
This is something we monitor rigorously and with great vigilance because when that spending decelerates then the overall thesis changes and the structural trend is invalidated.
At the end of the day the following quote attributed to Jesse Livermore substantiates this approach:
"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!...I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
Just my 2 cents and my apologies for the long post.
Thank you for everything you share. As I said, for someone like me that has had to work hard to learn this space, your insights are truly valuable beyond measure.
I am a retired engineer having worked in embedded software during the time of the early CPU wars (Intel, Motorola, Mos, Zilog, etc) way before the ARM1 was released (many years ago, lol).
My life long career allowed me to accumulate some wealth and just only very recently (few years ago) I started to invest /actively/ in the stock market.
So I am also an early subscriber of your substack with I genuinely find very useful.
There is however one single concern that I have, that I also shared with other authors. The point is that we need to acknowledge that the recent excitement on the semiconductors theme and the fast development of everything related with GPUs, Memory, Networking, etc, is ultimately paid by the known hyperscalers (Google, Amazon, Meta, etc) through unprecedented data center capex.
They are expending that much money because they believe at some point it will be highly profitable. Or let me put it in more detailed terms: the tech industry expects a massive surge in enterprise AI adoption so huge revenues will eventually come. Yet there are some famous contrarian viewers who have put it into doubt, and have even shorted semiconductor stocks.
This is I guess part of the "sector durability" factor, but my question to you is whether you have thought about covering not only the hardware theme, but also go into software applications or companies that may help to justify the long term continuation of the hyperscaler capex which currently benefit the hardware companies.
That’s a very good point. I do plan to look beyond hardware, and my current view is that agentic AI and physical AI will be the key demand drivers that justify sustained hyperscaler capex over the long term.
One important point not mentioned is price. How much of the fear is priced in the stock? So much doom was priced into intel last year i had no problem making it a large position
In fact, I had originally written a much more detailed section explaining my own view on valuation and price, but I ultimately removed it and kept the discussion more general. I did not feel the framework was fully developed yet, and I was also concerned that the article would become too long.
I believe it is important for every investor to develop their own approach to valuation and price. Once my own methodology becomes more structured, I hope to share it in a future piece.
Very enlightening write-up, thanks. Question: I understand that you don't share portfolio details. However, do you, or can you, post when you enter and exit positions? -- thanks (and apologies if I missed something).
I still need to better understand the legal implications, so I’m considering gradually sharing more, as long as it stays within appropriate boundaries. Thank you.
Thanks for asking. I don’t share real-time entries or exits because doing so can raise legal and regulatory issues by making the publication resemble a trading-signal or investment-advisory service.
I therefore keep my personal trade timing private and focus on publishing independent research, industry analysis, and investment frameworks.
I am an investor who has had to work really hard to learn the semi space. For that reason, among others, I find your Substack to be invaluable.
With that said, I do lead an investment group where we do a LOT of research to build conviction within sectors as well as among specific companies.
The framework I approach it from is based on my studies of elite traders who have built fortunes in the stock market.
Basically, I am looking for a structural trend that I can ride through the greater part of its move.
If I can be right about the structural move, my biggest task as a stock operator is to have the emotional discipline to manage the campaigns (we call them campaigns and not trades) through the volatility.
From my experience, that is where the big money is made.
In addition, we are not against adding 'trading shares' in these companies that can be acquired during drawdowns (the "buy opportunities" you referenced) as long as the structural uptrend is still in tact and the longer-term line of least resistance is higher.
These trading shares can be sold for profit when the aggregate market, the sector or individual stocks get extended (we monitor charts constantly to determine those situations).
While position sizing can vary depending on the near-term line of least resistance in the overall market, the sector or the stock, IMHO the key is to have the emotional mastery to hold the core position without trying to time tops and bottoms.
IMO, picking tops and bottoms in a really tough game and you often risk missing the greater move if you don't time it correctly.
That is why we say if you want to partake in that exercise then use trading shares and not your core positions.
In the case of the current AI cycle, we have advocated holding core positions in key names we have identified and the key "tell" as to whether or not the structural trend remains in tact is the CapEx spending of the bigger companies.
This is something we monitor rigorously and with great vigilance because when that spending decelerates then the overall thesis changes and the structural trend is invalidated.
At the end of the day the following quote attributed to Jesse Livermore substantiates this approach:
"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!...I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
Just my 2 cents and my apologies for the long post.
Thank you for your thoughtful and valuable response. It was genuinely very helpful.
Thank you for everything you share. As I said, for someone like me that has had to work hard to learn this space, your insights are truly valuable beyond measure.
I am a retired engineer having worked in embedded software during the time of the early CPU wars (Intel, Motorola, Mos, Zilog, etc) way before the ARM1 was released (many years ago, lol).
My life long career allowed me to accumulate some wealth and just only very recently (few years ago) I started to invest /actively/ in the stock market.
So I am also an early subscriber of your substack with I genuinely find very useful.
There is however one single concern that I have, that I also shared with other authors. The point is that we need to acknowledge that the recent excitement on the semiconductors theme and the fast development of everything related with GPUs, Memory, Networking, etc, is ultimately paid by the known hyperscalers (Google, Amazon, Meta, etc) through unprecedented data center capex.
They are expending that much money because they believe at some point it will be highly profitable. Or let me put it in more detailed terms: the tech industry expects a massive surge in enterprise AI adoption so huge revenues will eventually come. Yet there are some famous contrarian viewers who have put it into doubt, and have even shorted semiconductor stocks.
This is I guess part of the "sector durability" factor, but my question to you is whether you have thought about covering not only the hardware theme, but also go into software applications or companies that may help to justify the long term continuation of the hyperscaler capex which currently benefit the hardware companies.
Thanks !
That’s a very good point. I do plan to look beyond hardware, and my current view is that agentic AI and physical AI will be the key demand drivers that justify sustained hyperscaler capex over the long term.
Great article! I especially liked reading about your buy/sell thought process. Do you have a preferred LLM for technical chart analysis?
I use Claude Code and Codex to build my own automated tools for this. They’re still a work in progress, though.
One important point not mentioned is price. How much of the fear is priced in the stock? So much doom was priced into intel last year i had no problem making it a large position
You’re absolutely right.
In fact, I had originally written a much more detailed section explaining my own view on valuation and price, but I ultimately removed it and kept the discussion more general. I did not feel the framework was fully developed yet, and I was also concerned that the article would become too long.
I believe it is important for every investor to develop their own approach to valuation and price. Once my own methodology becomes more structured, I hope to share it in a future piece.
Very enlightening write-up, thanks. Question: I understand that you don't share portfolio details. However, do you, or can you, post when you enter and exit positions? -- thanks (and apologies if I missed something).
I still need to better understand the legal implications, so I’m considering gradually sharing more, as long as it stays within appropriate boundaries. Thank you.
Thanks for asking. I don’t share real-time entries or exits because doing so can raise legal and regulatory issues by making the publication resemble a trading-signal or investment-advisory service.
I therefore keep my personal trade timing private and focus on publishing independent research, industry analysis, and investment frameworks.