Technically The AI Trade Is Looking Scary

Bull markets often end with double tops and Palantir’s price action is beginning to look like a double top. There is a long way to go before this is confirmed and it may never happen, but, if it is, it would be a scary development. An old chartist friend of mine, long departed for a better place, used to say that ALL bull markets ended with double tops. Palantir has had a great run, and a recent acceleration in growth from already stunning levels, has failed to push the shares to new peaks. It presents a vivid example of how the AI trade is running out of steam.

Nvidia is another case in point. The latest results, for Q2 2027, were amazing and Jensen Huang referenced how the company was being overwhelmed by the strength of demand.The shares managed to reach a new high but there was no real conviction in the latest push and they have dropped back below $200.

It is another double top taking shape. You could even say it is a triple top as three attempts to push above $200 have failed since the first in October 2025. The price action, with the shares down $11 as I write, feels like a breakdown. In narrative terms shares bottom out when prospects look grimmest and top out when they look most outstanding. No prizes for guessing where we are with Nvidia and shares generally in the AI trade.

We also have a chart breakdown on the Nasdaq Technology index. This is not from a huge pattern but big enough to suggest a change of direction for share prices with the prevailing trend now down. This is the sort of market where rallies, even sharp ones, are selling opportunities.

I have been waiting months for this market to show serious conviction on the upside. It is starting to show conviction but the direction of travel is down.

A stock which is almost like a warrant on the AI trade is Sandisk. They enjoyed a meteoric rise, but have now built a top area confirmed by the latest break below $1,000. I agree it is baffling. The latest results were incredible. Prospects look outstanding. The company has announced an 8 for 1 share split to take effect later in the month. They look ridiculously cheap, but the chart looks awful.

Something is not right. It is like everybody is swimming happily in the warm, crystal waters but below the surface a shark is approaching. The numbers for all the shares involved in the AI trade look spectacular but investors are not convinced. I don’t pretend to be able to figure it out but something is scaring the pants off everybody.

Strategy – Time For The Hard Hats

Whatever your version of running for the hills I suspect now is the time to do it. I guess the problem is that booms and bull markets don’t end with a whimper. They end with a crash. Is it politics? Democrats control Congress and will want to flex their muscles. Is it a feeling that an AI boom that could threaten humanity is raging out of control and must be reined in to allow legislators to take stock. Are investors worried that the shift of stance by central banks to fighting inflation will be a tougher battle than anyone has presently admitted. I don’t pretend to know but the charts are telling us that something is wrong and could get much worse.