{"id":1235867,"date":"2026-03-06T11:37:52","date_gmt":"2026-03-06T09:37:52","guid":{"rendered":"https:\/\/www.etoro.com\/?p=1235867"},"modified":"2026-03-20T19:18:03","modified_gmt":"2026-03-20T17:18:03","slug":"deep-dive-understanding-the-ai-trade","status":"publish","type":"post","link":"https:\/\/www.etoro.com\/en-us\/news-and-analysis\/market-insights\/deep-dives\/deep-dive-understanding-the-ai-trade\/","title":{"rendered":"Deep Dive: Understanding the AI Trade"},"content":{"rendered":"

The AI trade continues to ebb and flow, evolving with different winners and losers. The Daily Breakdown takes a deep dive into the AI trade.<\/p>\n

Before we dive in, let\u2019s make sure you\u2019re set to receive The Daily Breakdown each morning. <\/span><\/i>To keep getting our daily insights<\/i><\/b>, all you need to do is <\/span><\/i>log in<\/span><\/i><\/a> to your eToro account.<\/span><\/i><\/p>\n

Deep Dive<\/b><\/h2>\n

ChatGPT launched in November 2022 and hit 100 million users within months, kicking off a whirlwind AI trade \u2014 from Nvidia\u2019s massive rally to more recent <\/span>turbulence in software stocks<\/span><\/a>.\u00a0<\/span><\/p>\n

Despite the flurry of headlines this week, one item stood out: Nvidia<\/a> investing $2 billion in Coherent<\/a> and $2 billion in Lumentum<\/a>. That\u2019s a reminder that the AI buildout isn\u2019t just chips \u2014 it\u2019s also \u201coptics and photonics,\u201d where bandwidth demands are exploding inside data centers. COHR and LITE are up 37.5% and 77% year-to-date, respectively.<\/span><\/p>\n

Understanding the AI Trade\u00a0<\/b><\/h4>\n

Chips were the first, most obvious winners \u2014 Nvidia, Advanced Micro Devices<\/a>, Broadcom<\/a>, Taiwan Semi<\/a>, and the toolmakers like ASML<\/a>, Lam Research<\/a>, Applied Materials<\/a>, and KLA Corp<\/a>. But the opportunity set is broader.<\/span><\/p>\n

The AI infrastructure trade is really a \u201cpicks-and-shovels\u201d buildout: compute, networking, and the physical systems required to power and cool dense AI racks. Beyond silicon, that includes networking (Broadcom, Marvell Technology<\/a>, and Arista Networks<\/a>), optics (Applied Optoelectronics<\/a>, Coherent, Lumentum), and increasingly power and thermal enablers like Eaton<\/a> and Vertiv<\/a> as electricity and cooling become gating factors. Datacenters are the \u201chousing\u201d layer for all of that gear \u2014 the physical campuses and leased capacity that determine how quickly new AI compute can actually be deployed. That\u2019s where operators like Equinix and Digital Realty fit in.\u00a0<\/span><\/p>\n

Finally, there\u2019s the \u201csoftware infrastructure\u201d layer: Firms like Datadog<\/a> and Snowflake<\/a> help enterprises monitor and manage data and AI workloads in production, while companies like Palo Alto Networks<\/a> and CrowdStrike<\/a> operate on the cybersecurity side of the expansion as AI increases complexity, automation, and the attack surface.<\/span><\/p>\n

Want to receive these insights straight to your inbox?<\/strong><\/p>\n

Sign up here<\/a><\/p>\n

Diving Deeper \u2014 Sentiment & Risk<\/b><\/h2>\n

We\u2019ve seen how sentiment can ebb and flow, particularly within this group. Take Nvidia for instance. Despite beating on earnings and revenue estimates and providing strong guidance, shares have moved lower since earnings. Its valuation now hovers near multi-year lows. In other words, sentiment has dampened despite a strong fundamental backdrop.\u00a0\u00a0<\/span><\/p>\n

\"Nvidia's
Nvidia’s valuation and fundamentals, for The Daily Breakdown<\/figcaption><\/figure>\n

A key dynamic in the AI infrastructure trade is bottleneck rotation. It began with scarce accelerators and advanced-node capacity, then shifted to networking and optics as moving data between chips became the limiter. Now power delivery and cooling are increasingly becoming key factors, with grid constraints and long-lead electrical and thermal gear dictating how fast new capacity can come online.<\/span><\/p>\n

In other words, these dynamics can shift quickly, with sentiment flipping from hot to cold \u2014 and back again.<\/span><\/p>\n

Risks\u00a0<\/b><\/h4>\n

Sentiment swings are one thing to be cognizant of, but there are other risks too. Some include: timing risk on \u201cnext leg\u201d themes, power\/permitting delays that push revenue recognition out even when demand is intact, and concentration and pricing risk in the enablers, where a small set of customers can re-source, insource, or renegotiate as volumes scale. That doesn\u2019t even take into account bigger-picture macro risks.\u00a0\u00a0<\/span><\/p>\n

The Bottom Line<\/b><\/h4>\n

AI is still a multi-year buildout with real, investable opportunities across the stack as spending expands from compute into networking, optics, and power infrastructure. The trade won\u2019t be linear \u2014 bottlenecks and sentiment will rotate \u2014 but the direction of travel is clear, and the winners tend to emerge where constraints are tightest and demand is most durable. Still, investors should do their own research to determine which risk-reward setup best fits their style.<\/span><\/p>\n

Disclaimer:<\/i><\/b><\/p>\n

Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.<\/i><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

The AI trade continues to ebb and flow, evolving with different winners and losers. The Daily Breakdown takes a deep dive into the AI trade. Before we dive in, let\u2019s make sure you\u2019re set to receive The Daily Breakdown each morning. To keep getting our daily insights, all you need to do is log in…<\/p>\n","protected":false},"author":130,"featured_media":1245682,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[6819],"tags":[],"asset_type":[],"class_list":["post-1235867","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deep-dives"],"acf":[],"yoast_head":"The Daily Breakdown's Deep Dive: Understanding the AI Trade<\/title>\n<meta name=\"description\" content=\"The AI trade continues to ebb and flow, evolving with different winners and losers. 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