Today’s issue in preview:
- Engineering & Construction stocks display incredible relative strength in a weak market
- Record AI spending continues to drive strength in the semiconductor business
- The most concerning stock chart in the world: An update
Engineering & Construction stocks display incredible relative strength in a weak market
Credit: ugurhan
If the worst of Operation Epic Fury-induced market chaos is behind us, we can say that the Engineering & Construction (E&C) theme “had a good war.”
As evidence, we can point to the new all-time highs registered today by E&C giants Mastec (MTZ) and Argan (AGX) today.
In October 2024, I sent a note to colleagues that covered the bull case for E&C stocks. I described them as a way to invest in the AI data center building boom.
E&C firms design and build giant infrastructure projects such as airports, skyscrapers, power plants, subways, and data centers. Well-positioned firms in this space are enjoying soaring revenues thanks to Big Tech’s race to build AI data centers… a race that will see the likes of Google and Amazon invest a colossal and unprecedented $600+ billion this year.
E&C firms also have a “Donald Trump” kicker in the form of our president’s efforts to massively increase U.S. manufacturing capacity. This push will see hundreds of billions of dollars spent on building new factories and the power grids required to operate them.
Given the extreme urgency behind Big Tech’s AI data center buildout and Trump’s manufacturing push, the bidding process for many infrastructure builds will consist of E&C companies throwing out absurdly high bids… then Big Tech or the White House replying, “Sure, we’ll take five of them. Can you start yesterday?”
That’s the bull case for E&C stocks. But regular readers know we care more about what the market thinks about a forecast than the forecast itself. In the case of E&C companies, the market approves. The negative financial effects of Operation Epic Fury have reduced the number of stocks reaching new all-time highs recently. However, E&C leaders Mastec and Argan have pulled off this rare feat. This strength in a weak market indicates that the fundamental forces described above are incredibly powerful.
Both the AI data center buildout and the manufacturing capacity buildout are big, multi-year themes. This means well-positioned E&C stocks will likely continue their winning ways.
Recommended Link:
24 Hours Left to “FutureProof” You and Your Money
A $10 Trillion Market Shock begins April 24th. The window to protect yourself is shrinking, with only 24 hours left to get your complete playbook – including 7 stocks to sell and 15 stocks primed to soar. Make sure you and your portfolio are prepared for the chaos to come. Get everything here FREE for the next 24 hours only…
The most concerning stock chart in the world: An update
Credit: Art Wager
On March 12, we highlighted the concerning weakness in America’s most important financial companies. At the time, the Financial Select Sector SPDR Fund (XLF) had reached its lowest low in nine months and was trading below its 200-day moving average.
XLF is the market’s largest and most liquid ETF focused on the U.S. financial sector. Major holdings include JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Berkshire Hathaway (BRK.B), Goldman Sachs (GS), and Visa (V).
These firms and others like them form America’s financial backbone. They rise and fall with America’s ability to make money, save money, start companies, service loans, invest money, and generally “get along.”
From late 2023 to early 2026, XLF enjoyed a bull market, and its members reported robust growth. But over the past two months, investors have grown concerned about the health of U.S. banking and the larger economy. AI is threatening major industries, such as software, in which the banking industry has significant exposure. In addition, Operation Epic Fury is constricting supplies of critical resources and damaging the economy. In response, investors have sold XLF and its constituents with enthusiasm.
The selling took XLF below its 200-day moving average, which is used to gauge a security’s long-term trend. Securities below their 200-day moving average are on the wrong side of the tracks. It’s the ugly part of town. All the really bad things – crashes, panics, horrible bear markets – happen below the 200-day moving average.
This past week, some bullish rays of sunlight have pierced the financial sector’s darkness. XLF established a recent low on March 19 and just reached its highest high in two weeks.
This recent strength is no guarantee that the worst is over. But it’s a good start.
If XLF can get back above its 200-day moving average… aka “get back on the right side of the tracks,” we can say the broad market is healthy.
Record AI spending continues to drive strength in the semiconductor business
Credit: imaginima
While we’re watching which market trends “had a good war,” as E&C stocks did, let’s keep an eye on the all-important VanEck Semiconductor ETF (SMH).
All things considered, this fund has performed very well over the past month… a performance that helps judge the great “AI Boom or AI Bust” debate.
Over the past six months, I’ve frequently highlighted how “AI Boom or AI Bust” has become the world’s most important financial debate.
More than three years into the AI boom, tech giants Meta, Google, Amazon, OpenAI, and Microsoft are in an epic race to build the world’s best AI models and infrastructure. This year, they are on pace to spend over $650 billion on AI infrastructure, with more than a trillion dollars coming behind it. It’s the largest infrastructure spending boom in history… which has driven many powerful stock rallies.
Whether Big Tech’s huge investment pays off or not has become one of the most important issues in business and investment.
AI bears say much of this spending is madness. It won’t generate the profits required to justify it. Once the world realizes this is the case, GDP growth will stall, and the stock market will plummet.
AI bulls say, “AI is the greatest innovation of the century. Big Tech leaders know what they are doing. The coming innovations will justify the enormous investments.”
Regular readers know we like to know both sides of any debate about the “fundamentals” of a megatrend. But what the market thinks of those fundamentals is far more important than either side’s beliefs.
The market currently prefers the bull case here.
Operation Epic Fury began on February 28. The war’s negative effects on the economy led to large declines in homebuilding, airline, industrial, and many technology stocks.
However, semiconductor stocks, as represented by SMH, have held up relatively well. SMH declined just 6.4% from the start of Epic Fury to its March low. And as you can see from the one-year chart below, SMH is in a clear uptrend and not far from all-time highs. If Epic Fury starts to wind down soon, we will be able to say the AI Boom and semiconductors “had a good war.”
Market Notes
- Our October 2025 recommendation to own the natural gas theme is paying off. GE Vernova (GEV), the global leader in gas turbine tech, just reached a new yearly high.
- Specialty semiconductor foundry company Tower Semiconductor (TSEM) is up 11% today to a new yearly high.
- Our Feb. 13 recommendation to own stocks in the edge theme is doing well. Akamai Technologies (AKAM) just hit a new yearly high. It’s a global edge network provider.
- Identity verification and security provider Clear Secure (YOU) just hit a new yearly high. This could be a stock to watch in the AI agent supernova trend we discussed on March 16.
Regards,
Brian Hunt
Editor, Money & Megatrends
An urgent message from our colleagues:
When the Iran strikes hit the wire, algorithms had already sold before most investors saw the headline.
The investors who made money weren’t reacting. They were already positioned. Luke Lango has identified 100+ stocks he believes are at the center of the next major move. The full list is free.
