Most AI related stocks are getting sold today.

This comes after the latest earnings from Oracle and Broadcom.

Oracle’s earnings disappointed. They missed slightly on revenue expectations. That is not a good look. There is basically no room for revenue or earnings misses. AI stocks trade at premium valuations because they are expected to grow faster than the expectations. Once that growth disappoints, the valuation multiple compresses quickly. That is what we’re seeing here right now and it’s taking the entire sector down. On top of that, Oracle’s debt has increased a lot, which adds even more pressure.

Broadcom’s earnings were fine overall, so the market reaction is a bit harsh. But it’s a similar story. Margins came down slightly, and there were concerns around the outlook and potential delays from key customers, which increases their dependence on its largest customer, Google. That is not ideal when a stock trades at a significant premium even to the market leader Nvidia.

Right now, the market is very sensitive to any potential cracks.

We have seen this pattern several times over the last 3 years since ChatGPT launched. Every few months, skepticism around AI growth picks up. Investors become more cautious. Every little data point gets scrutinized closely, and even the smallest of flaws get amplified. This usually means near term upside is limited because it takes some time for confidence to return and their scepticism to be proven wrong.

It’s the same cycle repeating over and over again.

So what does this mean for the AI trade going forward?

I do not expect meaningful upside in AI in the near term. A reset over the next few weeks or even months is likely. That does not change the long term potential. There is still a lot of upside over time. But it will not move in a straight line. Periodic resets are part of the process. They are even healthy and will create new opportunities. But you have to be patient. Proper timing is essential here.

Especially since there are other sectors that look more interesting right now. Capital is already rotating into areas like space and robotics. And these are the key sectors I’m focused for the time being.

Case in point: Tesla is up almost 3% today and approaching all-time highs while the Nasdaq is down 2%. That is pure relative strength. And it’s telling a very compelling story. I’m watching it very closely and will likely make it my largest position if the market holds and does not roll over.

Tesla is the best bet on physical AI.

No other company is in a better position to manufacture robotaxis and humanoid robots at scale. The stock has been consolidating for five years. And if we zoom out, Tesla has a tendency to consolidate for years before a starting a huge move. It looks like it’s setting up for the next big move.