It was a tough finish to a tough week. Only 24% of S&P 500 (SPX) components finished higher; anxiety is spreading beyond the superintelligence/artificial intelligence (SI/AI) trade. Ironically, superintelligence news and developments set the pace on Friday. Midweek reports described how an old vulnerability in a widely used web-scraping language was exploited and how close the Internet came to being shut down.

According to USA Today:

Researchers at digital infrastructure defense firm Calif first caught the issue, called PHP2Shell, in July, with help from one of OpenAI's most advanced models, according to OpenAI. As the story unfolded, cybersecurity stocks rallied.

The session's top performer, Crown Castle, Inc. (CCI), surged on reports that SpaceX (SPCX) is in talks to lease many of its U.S. towers. Software (IGV) surged, and investors looked beyond cybersecurity for opportunities.

Tug-of-War

Bespoke Investment Group did great work showing the Jekyll-and-Hyde year between semiconductors and software. At some point, the SI/AI Revolution will move beyond the picks-and-shovels (chips) phase, but that part of the story isn’t over yet. But this is a momentum market when behavioral trends supersede fundamentals. Instant reactions bake assumed success and assumed failure into share prices.

Software Breaking Out

Software (IGV) is breaking out against semiconductors,confirming a reverse head-and-shoulders formation, and breaking above the 50-and 200-day moving averages. Hang on for another wild week.

Today’s Session

Anthropic finally dropped its official S1, and it'll take time to comb through the hundreds of pages.

A research report from Rittenhouse over the weekend underscores that the company’s debt obligations are spread over many years.  This is important as the bear argument is key, players need to make x-amount of money by 2030 so the SI/AI world implodes. It's going to implode.

The Bear Argument

This bull market is younger than the average, and the gains have been far less than many.  Some say the recent rotation is reminiscent of April 2000 through December, when tech imploded while the rest of the market excelled.  I do not think this is 2000 all over again.

It's good news the market has held up without the Mag Seven, but tech has played a critical role. There will be a shakeout period and many players will fall to the wayside, but this is still the start of the revolution.

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