Good morning, investors. With stocks at record highs, investors will get a firehose of data this week with earnings from the five of the Magnificent 7 companies, a Federal Reserve announcement and likely more start-and-stop catalysts out of the Iran conflict.
There’s still one trade to cover that best captures everything, everywhere all at once.
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Hardware vs. software
The AI trade is no longer one trade.
For the first time in 25 years, chip stocks and software stocks have started moving in opposite directions. The shift came on April 9, after more than 6,200 trading days of moving together since 2001, according to a new analysis by Opening Bell Daily.
That means for investors holding both, the AI trade has started to act as a hedge against itself.
Here are the two sub-sectors’ correlations this century:
2008 financial crisis: 0.89
2020 COVID crash: 0.87
2022 Fed shock: 0.85
On a scale from -1 to +1, anything above 0.85 means two assets basically trade as one.
Near zero means they trade as two.
For these two ETFs, the correlation never dipped below 0.59 even during the worst market crises.
It ended last week at 0.15.
The iShares Semiconductor ETF (SOXX) is up 53% year-to-date through Friday, with most of those gains concentrated in an 18-session winning streak I flagged in that morning's newsletter.
The iShares Expanded Tech-Software ETF (IGV) is down 19% over the same period.
That's a 73-percentage-point spread inside an investment thesis both ETFs were supposed to ride together.
It's only widened since the break started in late January.
And now the chips are selling shovels while software pays for them.
Adam Parker, founder of Trivariate Research and one of the leading semiconductor strategists on Wall Street, called this divergence in early March.
"My North star has been — and remains — semis over software," Parker told me on Full Signal.
Until they start moving together again, the market will keep buying picks and shovels rather than the software supposedly running on top of them.
Market snapshot
Elsewhere
🇺🇸A shooter charged the security checkpoint at the White House correspondents dinner on Saturday. President Trump and other cabinet members were safely evacuated, the suspect was taken into custody, and the event is reportedly set to be rescheduled. (CNBC)
🏦 Fed Chair nominee Kevin Warsh looks set to take the job. Sen. Thom Tillis said he plans to support Warsh’s nomination to the central bank now that the Department of Justice dropped a criminal investigation into Jerome Powell. (Bloomberg)
🛢 Crude posted its biggest weekly gain since early March. The Strait of Hormuz remained largely shut, and Brent is coming off a 14% gain last week, with US-Iran talks set to resume in Pakistan. (Yahoo Finance)
Rapid-fire
IT budgets are getting blown out as companies spend more on AI than human salaries (Axios)
This beat-down infrastructure play can double in 2026 as enterprises race to automate (Best Ideas Club)
Investors continue to look past the Iran conflict at an optimistic market outlook (Barron’s)
Bank of America’s “sleep like a baby” portfolio is having its best year since 1933 (Yahoo Finance)
These 3 defense stocks can boom with the US rebuilding the Navy (ProCap Insights)
Strategy added $2.5 billion in bitcoin to bring total holdings above 815,000 (Yahoo Finance)
On this day
🗓 April 27, 2011: Ben Bernanke held the first FOMC chair press conference in the Fed's history. The move ended almost a century of central-bank silence after rate decisions.
Last thing
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