It is often said that we trade a "stock market," but in reality, we are currently navigating a market of stocks. The distinction is critical. Even as the headline indices flirt with all-time highs amidst a backdrop of rising oil and geopolitical tension in Iran, the surface performance is a tale of extreme "Haves" and "Have-Nots."
At Worch Capital, we are paying close attention to the extreme concentration in the semiconductor and AI space. While the long-term fundamentals of AI are vastly superior to the dot-com era, the technical velocity has reached a point that is, in some metrics, even more extreme than 1999.
Better Than 1999? The Math of a Blow-Off
The data from BTIG’s Jonathan Krinsky provides a sobering reality check. In the year leading up to the March 2000 peak, the top 10 Nasdaq 100 stocks averaged a 622% gain. Today, the top 10 names are up an average of 784%. We are witnessing a level of verticality that exceeds the most parabolic moment in modern market history.
Consider this: during the height of the bubble, Qualcomm’s best 52-week run was 2,600%. Today, we see names like Sandisk (SNDK) up nearly 4,000% over the last year. While the 1999 "bubble" was built on eyeballs and promises, today’s move is built on actual data center demand and memory shortages. However, price eventually moves beyond even the best fundamentals. A 25-30% correction in the SOX (Semiconductors) would only bring the group back to its 50-day moving average. That is not a "crash", that is a routine return to the mean after an exhausted move.
The Tech Monopoly on Performance
The "Haves and Have-Nots" theme is best illustrated by sector breadth. In May, only one S&P 500 sector ETF has made a fresh 52-week high: Tech (XLK). Out of 11 sectors, the majority peaked months ago, some as early as January.
This creates a high-stakes environment for the long-short manager.
The Risk: If the Semis hit a "swing high" today on the back of positive earnings and Middle East de-escalation, can the "Have-Nots" (Financials, Energy, Staples) pick up the slack?
The Reality: Historically, when the primary leadership engine stalls, the rest of the market usually follows it into a period of digestion rather than rotating into laggards.
The Bottom Line
At Worch Capital, we respect the trend, but we acknowledge the math. We are not calling for a 2000-style wipeout, but we are tightening stops and avoiding the urge to chase the "climactic" laggards of the semiconductor space.
In a market of stocks, your job is to find the winners, but your duty is to recognize when those winners have become a crowded trade. We stay light, we stay alert, and we wait to see if the "rest" of the market is ready to step up if the AI leaders finally take a well-deserved breath.