Contents:
ARTAIS AI Model Update
Current Rotation
Managing Risk in the Model
Current Status of the Credit Gate
Current Model Allocation
Pass/Fail Screen for AI Universe
The ARTAIS AI Model Update
The ARTAIS AI universe, like the broader market, is starting to rotate from hardware into construction.
Areas like semiconductors, servers & storage, and power & cooling are showing signs of deteriorating momentum and relative strength.
Meanwhile, areas focused on AI buildout and data center construction, like power/utilities, engineering/construction, and networking/optical, are starting to improve:
HOWEVER…
The ARTAIS AI model’s goal is to participate in the AI theme while managing risk.
As readers of my research will know, I have been talking about the increased risk in the credit markets.
High-yield bonds are an input in the model to help control risk. Currently, the high-yield bond market is flashing a warning sign as the spread between high-yield bonds and “safe” US Treasuries has significantly widened:
This has caused the model to switch to “risk-off."
Managing Risk in the Model
The AI Model has two parts:
The stock sleeve: This is where the model screens various technical signals to decide which stocks to include (the model holds up to 18 stocks).
The credit gate: How much of the portfolio should be allocated to the stock sleeve? The goal here is to manage risk.
The credit gate screen has three parts:
