The Biggest Winner of the AI Slowdown
Listen to the audio version of this article (generated by AI).
In This Digest:
- AI slowdown fears grip Wall Street
- This sector will be the biggest winner of the AI slowdown
- Jeff Clark’s 12 Trades to $1 Million Challenge closes today
AI slowdown fears have hit Wall Street…
Worried about rogue AI tricking you into giving up bank account details… taking over the internet with malicious bots… or creating bioweapons that wipe out humanity?
You’re not alone. The leaders of America’s AI labs are worried about rogue AIs, too.
Over the weekend, Dario Amodei – who heads up Anthropic, the lab behind Claude – called for a slowdown in the development of ever more advanced AI models.
And Sam Altman of OpenAI, Demis Hassabis of Google’s DeepMind, and Elon Musk all agreed – in principle, at least.
The market’s reaction to the news was swift.
Yesterday, Wall Street’s tech index, the Nasdaq 100, slid 0.8% to a 4-week low.
AI chipmakers also took it on the chin.
Nvidia (NVDA) dropped 3.3%, Advanced Micro Devices (AMD) slid 4.3%, and Micron Technology (MU) fell 5.2%.
This took the VanEck Semiconductor ETF (SMH) – our go-to proxy for the chip sector – down 4.8% for the day.
And Bloom Energy (BE), which makes energy solutions for AI data centers, fell 6.9%.
If AI development is slowing down, investors reckon we’ll need fewer advanced computer chips to train and run AI models and less energy to run them.
So is the selling warranted? Or do the bears have it all wrong?
Let’s check in on the data.
The chipmakers are back in a Yellow Zone…
Yesterday, we noted that SMH, the chipmaker ETF, had been in a Long-Term Health Green Zone since July 2025.
We also noted it had taken only a few dips into the Yellow Zone recently before entering a new Green Zone.
And we said we’d update you if that changed.
Well, after yesterday’s selloff, SMH is back in a Yellow Zone.
Long-Term Health works like a traffic light. Green means go. Red means stop. And yellow means caution.
Yellow doesn’t mean a bullish trend has turned bearish. But it does mean that there’s a potential shift in the trend that you should be aware of.
If you’re invested in AI chipmaker plays, hold onto them. This is not a sell signal.
But don’t back up the truck and buy, either. Wait until we’re back in a Green Zone first.
If anything changes, you’ll be the first to know.
Meantime, if you’re looking for a winner of the AI slowdown drama, look no further than cybersecurity stocks.
Cybersecurity stocks have been in a Green Zone since May…
Here’s a Long-Term Health chart of the Amplify Cybersecurity ETF (HACK), which tracks a basket of leading cybersecurity stocks.
HACK surged almost 8% in yesterday’s trading, as investors piled into the sector.
And since HACK entered its Long-Term Health Green Zone on May 8, it’s gained about 43.2%. By contrast, the chipmaker ETF SMH is down about 1.3% over that same span.
We’ve been pounding the table for months on the cybersecurity theme.
Cybersecurity stocks were the baby that got thrown out with the software bathwater.
As you may recall, software-as-a-service (SaaS) stocks got hammered earlier this year on fears that AI would disrupt the entire software industry.
Salesforce (CRM) plunged as much as 43% from its early January peak. Adobe (ADBE) fell 42%. And Shopify (SHOP) also fell more than 43%.
And cybersecurity stocks got caught up in the selling. Palo Alto Networks (PANW) dropped as much as 25%, and so did CrowdStrike (CRWD).
But as we argued at the time, if the world was going to be flooded with AI agents, we saw cybersecurity companies as becoming more essential, not less.
The rise of AI agents – autonomous programs that can browse the web, execute tasks, and make decisions without a human in the loop – is creating an entirely new attack surface.
That means every company running an AI agent – which will soon mean every company on Earth – needs a new layer of protection. Cybersecurity isn’t becoming less important because of AI. It’s becoming more important, faster than most investors realize.
Now, cybersecurity stocks are in the spotlight as chip stocks sell off.
As for which one to trade right now, we like F5 (FFIV).
F5 keeps the software and websites that big companies run on working quickly and safely.
Think of it as a traffic cop and a security guard rolled into one, sitting between a company’s apps and the outside world – directing data where it needs to go and blocking attackers before they get in.
And lately the company has been building the same kind of protection for AI itself: tools that watch over the AI agents that companies are rushing to put to work, and stop bad actors from hijacking them.
As you can see, our Predictive Alpha AI trading model is forecasting a 7% climb for this stock by Oct. 13.
And its forecasts on this stock have been accurate nearly 82% of the time in the past.
If you’re looking to jump into the cybersecurity trade, FFIV is a stock to watch.
Before we wrap up today, a final reminder…
Jeff Clark’s 12 Trades to $1 Million Challenge closes today.
If you haven’t heard of it yet, Jeff is attempting to take a $5,000 stake and turn it into $1 million in 12 trades or less.
And although he’s the first to admit that the odds are low, his track record shows it’s entirely possible.
His team went back over nearly 400 of his closed trade recommendations and found 36 separate streaks of three or more winners in a row. Twice, those streaks ran long enough that a $5,000 stake, rolled forward, would have crossed $1 million – once during the 2023 banking crisis, and again during last year’s AI repricing.
Conditions like that – fast-moving markets, sectors repricing overnight – can supercharge your gains. So if you’ve never traded before, now is a great time to dip a toe in the water. And Jeff isn’t just a master trader… he’s also a master educator.
That’s the real value folks are getting from the Challenge. They’re learning how Jeff aims for big gains while strictly managing his risk as they go along.
Jeff’s trading Challenge is up 68% over the last four months. And his next trade is coming soon.
If you’ve been on the fence about the Challenge, this is the last call. Jeff won’t be accepting new participants after today. Get the full details here.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily