Where the AI Trade Is Still Ripping

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That’s how many days the Philadelphia Semiconductor Index fell before finally catching a bid yesterday.

It was the index’s longest losing streak in 18 years – you have to go back to the 2008 financial crisis to find a longer run of red for chip stocks.

And the damage wasn’t subtle…

According to Reuters, the selloff wiped out about $2 trillion in chip-sector market value during that streak. The semiconductor index lost 11.4% last week alone, its worst week since spring 2025.

Several forces combined to drive the brutal selloff. A Chinese memory maker announced advances in next-generation chips. A hot inflation report raised the odds of more Fed rate hikes. And worries grew about the mountain of debt funding the AI buildout.

But there’s an interesting twist – while the Nasdaq fell 4.5% and the S&P 500 lost about 2%, the Dow, which holds far fewer chip names, eked out a small gain for the week.

In other words, investors didn’t flee stocks. They fled AI.

Now, as I write on Tuesday near lunch, this morning’s AI bid is losing some steam. But whether the rally holds or fades, last week was a gut check for anyone whose portfolio rides too heavily on a single theme.

If that describes you, our macro investing expert Eric Fry has an idea…

Eric, editor of Fry’s Investment Report, recently took on an assumption most American investors never question: that U.S. stocks are simply the better place to be.

On the surface, the numbers make that case…

From the lows of 2009, the S&P 500 has delivered a total return of roughly 1,340%. That’s nearly triple the 468% return of the MSCI EAFE Index, which tracks developed markets in Europe, Australasia, and the Far East.

But Eric says the reason behind that gap isn’t what most of us would assume:

From a self-congratulatory perspective, we might assume that American technological prowess and economic dynamism have been powering the massive outperformance of U.S. stocks. But upon closer examination, we find a much more pedestrian explanation:

We can call multiple expansion by its other name: sentiment.

So, this means that a huge chunk of the S&P’s gains came from optimistic investors simply being willing to pay higher prices for the same amount of earnings. Today, the S&P 500 trades for about 26 times earnings, compared with under 18 for the EAFE.

Now, if you rode that buying pressure higher, great. But Eric points out the flip side of that same dynamic:

Multiple expansion can’t continue forever. And when valuations stretch this far, even good news can struggle to push prices higher, while bad news can send them sharply lower.

Plus, market leadership never lasts forever.

History backs him up. Foreign developed markets have outrun the S&P 500 for long stretches before.

From 1986 to 1991, the EAFE led. In 1986 alone, it returned nearly 67%, more than triple the S&P 500’s 18.7%. It happened again from late 2003 through early 2011.

Here’s Eric’s chart tracking the back-and-forth.

Over the last two years, the EAFE and the S&P 500 have delivered nearly identical returns. Back to Eric for his interpretation:

This recent trend only suggests, not proves, that U.S. momentum may be fading relative to foreign stocks. Still, as we’ve seen, history shows that a shift is possible.

No matter what happens next, we American investors should never remain “overweight” in U.S. stocks and bonds, simply because they are familiar.

We must remember that, as investors, the world truly is our oyster…

For example, in January 2025, he recommended the iShares MSCI Japan ETF (EWJ). It’s up 54% since then, easily outpacing the S&P 500’s 33% gain. Even better, Eric believes it still has plenty of runway.

EWJ isn’t the only international ETF that Eric holds in this portfolio. Plus, he has plenty of international single stocks that offer diversification from the U.S. market.

What if you want to follow Eric’s advice to diversify beyond U.S. stocks but don’t want to give up your AI exposure entirely?

Back in our July 9 Digest, we highlighted senior analyst Brian Hunt, editor of the free daily newsletter Money & Megatrends, who had just offered one answer that wasn’t on the radar for many investors…

A couple of days earlier, Brian had made the case that the iShares MSCI Brazil ETF (EWZ) was set up to keep climbing. Part of his reasoning was AI.

Brazil is a commodity superpower, and commodities are the overlooked backbone of the global AI buildout.

Brazil is a beneficiary of the historic AI infrastructure spending boom…

Brazil’s huge network of rivers also makes it a giant producer of hydroelectric power. This makes it an attractive destination for power-hungry AI data centers.

Brazil also has large reserves of rare earth elements. Demand for these raw materials is soaring thanks to growing demand in AI infrastructure, robotics, and defense tech.

Brian had turned bullish on Brazil all the way back in September 2025. Soon after his analysis, EWZ surged 38% in less than seven months. It then experienced a natural, healthy bull market correction from mid-April to mid-June.

But as of this past July, Brian said that correction was over, and EWZ looked poised to resume its uptrend, so he flagged it once again for his Money & Megatrends readers.

Well, congrats to Brian and his readers. Since his bullish note on July 7, EWZ has jumped another 21% while the S&P 500 is up just 2%.

Bottom line: Brazil gives you a stake in the physical side of the AI boom – the power and raw materials – without tying your portfolio to semiconductor valuations.

For more of Brian’s free analysis, he writes Money & Megatrends every day the market is open, highlighting these kinds of opportunities before they become front-page news. His issues are loaded with actionable advice and specific tickers.

Brazil plays the AI boom from the natural resource side – you get AI exposure, but with some cushion from chip-stock swings. But what if you want international exposure that sits right at the heart of the AI buildout, and you’d prefer to buy it after a steep markdown?

To be clear, this isn’t a hedge against AI volatility. It’s a concentrated bet on AI memory chips – just at a discount and outside U.S. borders. But if that’s for you, there’s one place to look…

Last Thursday, South Korea’s KOSPI index plunged 7.6%, triggering circuit breakers and leaving the index nearly 39% below its June high.

Just one week earlier, Samsung reported the most profitable quarter in Korean corporate history. Its preliminary third-quarter operating profit came in around 107 trillion won, or about $80 billion, up roughly 782% from a year earlier.

Record profits, collapsing stock price. That kind of disconnect is exactly what veteran trader Jonathan Rose, editor of Advanced Notice, has been watching.

I particularly like what I’m seeing in South Korea.

Most investors think about artificial intelligence in terms of familiar American companies like Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), and Alphabet Inc. (GOOG).

But the AI Revolution extends well beyond Silicon Valley.

All those data centers, AI models, and increasingly sophisticated computing systems require enormous amounts of memory and semiconductor technology.

And South Korea happens to be home to two of the most important companies supplying those components: Samsung Electronics Co. Ltd. and SK Hynix Inc. (SKHY).

Both are major holdings in the iShares MSCI South Korea ETF (EWY), which gives us a way to participate in the broader South Korean stock market without selecting an individual semiconductor stock.

Jonathan recommended a trade on Korea last week – and it’s already up 22% as I write on Tuesday.

He walks through his full approach: how he spots opportunities like this one, what signals he looks for before he acts, and how he plans his trades and how he decides how much he’s willing to risk.

Last week was a reminder that even the strongest investment theme can suffer steep losses when too much money crowds into the same few names. But the answer isn’t to abandon AI. It’s to be thoughtful about where and how you own it.

Eric makes the case for spreading some of your capital beyond U.S. borders. Brian offers a way to own the physical backbone of the AI buildout through Brazil, and Jonathan shows how a patient trader can approach a beaten-down AI story in South Korea.

Three different approaches, but one shared idea: the AI boom is global, and your portfolio can be, too.

Article printed from InvestorPlace Media, https://investorplace.com/2026/10/where-the-ai-trade-is-still-ripping/.