Stock Market Breaks Into Two Worlds: AI Euphoria Meets Value Resurgence

Wall Street Splits: AI Mania vs. Bargain Hunters

Market psychology has cracked in two. On one end, investors are drunk on speculative AI trades. On the other, sharp money is quietly rotating into unloved names with real cash flow and stable balance sheets. The S&P 500 trades at 22.5x forward earnings, dangerously elevated compared to its 10-year average of 18.8x. But not all stocks are participating.

Chase Goodman, a 29-year-old analyst in Detroit, just dumped his tech ETF exposure and dove into Photronics (PLAB) and Medallion Financial (MFIN) — two small caps trading well below book value. He’s not alone. Value seekers are combing 10-Ks again. This is the most aggressive bottom-feeding seen since the post-2022 disinflation trade.

Tech Valuations Are Off the Charts: The Case of NVIDIA (NVDA)

NVIDIA (NVDA) just pierced a $4 trillion market cap, closing at $164.10, fueled by unrelenting demand for AI compute. It’s now trading at 54x trailing earnings, 39x forward earnings, and a jaw-dropping 30x sales. Still, investors aren’t blinking. The Levkovich Index hit 0.65, way above the 0.38 “euphoria” line. That’s not sentiment — that’s mania.

Goldman Sachs' Non-Profitable Tech Index is up 65% since April. Meme stock volume has spiked. Options hedging collapsed. Risk management? Abandoned. This is the kind of setup that doesn’t need a bubble to pop — just a pause.

Retail Rotation: Big Names Are Being Trimmed

Retail investors are starting to wake up — some faster than others. Angel Diaz, 64, is rotating out of Magnificent Seven heavyweights and into AES Corp (AES) and Two Harbors (TWO). It’s not a growth play — it’s a retirement hedge. “I want stability now,” he says. Names like NVIDIA, AMZN, and MSFT once made up half his portfolio. No more.

ETF flows reflect the same shift. While growth ETFs saw $47B of inflows YTD, value ETFs have only taken in $25B. But that ratio is tightening.

Energy and Utilities Find a New Audience

The most ignored corners of the market — utilities and energy infrastructure — are drawing smart capital again. Duke Energy (DUK) and Edison International (EIX) are moving higher as investors ditch speculative names and seek shelter. EIX jumped 2.98% this week, purely off dividend safety and defensive cash flow.

Even unloved real estate income plays like Two Harbors are back on radar for those seeking steady quarterly payouts over growth volatility.

Consumer Discretionary Is Falling Behind: XLY Falters

While the S&P 500 is up nearly 10% YTD, Consumer Discretionary (XLY) has barely managed +0.3%, making it the second-worst performing sector in the index. Staples are crushing it. Why? A consumer collapse is brewing beneath the surface.

Chipotle (CMG) fell double digits after a same-store sales disaster. Hasbro (HAS) delayed rollouts. Even travel stocks like Hilton (HLT) flagged weaker revenue per room.

Lower-income households are tapped. High rates, tighter credit, inflation, and now tariffs are slamming wallets. That’s why Charles Schwab’s Liz Ann Sonders is calling it a “K-shaped economy” — wealthy consumers still spend; everyone else is pulling back.

GE Vernova (GEV): AI’s Power Winner With Real Earnings

Forget speculative multiples. GE Vernova (GEV) is delivering real hardware, real energy, and real earnings. Revenue hit $9.11B, beating estimates of $8.8B. EPS crushed forecasts with $1.78 vs. $1.55 expected. Shares exploded over 12% this week, with orders for data center turbines flying in.

With $500M booked in the first half, GEV is nearly pacing its entire 2024 order book. Backlogs exploded $14B YoY to $128.7B. No dreams here — this is tangible AI infrastructure demand, not abstract machine learning hope.

GE Vernova also announced its acquisition of Alteia, a French AI grid orchestration firm, deepening its moat in electrification software.

Speculation Surge: Bitcoin, Meme Stocks, and Margin Risk

Bitcoin (BTC-USD) is pushing toward new highs again, powered by crypto ETF flows and general market euphoria. Meanwhile, meme stocks are reactivating. Traders aren’t hedging. Risk management behavior is collapsing.

Goldman’s Speculative Trading Indicator hit its highest point since 2022. Citi’s sentiment gauge, which tracks margin usage and short interest, confirms what’s visible on-screen: euphoria is back, and it’s getting reckless.

One slip — an AI disappointment, a global slowdown, a fresh tariff shock — and this setup could turn toxic.

Tariff Trauma: Volkswagen (VWAGY) and INEOS Feel the Heat

The market is ignoring what the numbers are already screaming: Trump’s trade war is real and corporate earnings are bleeding.

Volkswagen (VWAGY) saw operating profit plunge by a third to €6.7B, thanks to €1.3B in new U.S. import duties. That’s a brutal hit to margin. VW slashed its full-year margin forecast to 4–5% and cut net auto cash flow to €1–3B, half its prior guidance.

INEOS is even worse off. Its Quartermaster pickup, built in France, is now subject to 25% EU auto tariffs and the ancient 25% Chicken Tax on foreign light trucks. That’s a staggering 50% tariff burden on a vehicle priced at $92,900. It’s unsellable without margin death.

A potential 15% EU-US compromise is on the table — but the Aug. 1 deadline looms. Until resolved, this is a major macro drag, especially for euro-exposed firms.

Buy, Sell, Hold Verdicts — The Sharpest Calls Right Now

BUY:
GE Vernova (GEV) – Data-center energy demand is real, revenue beats are consistent, backlog surging, and acquisitions show smart capital deployment. Up 12% this week — it’s still not fully priced in.

HOLD:
NVIDIA (NVDA) – No question about dominance, but valuation is stretched. With a 30x sales multiple, one AI hiccup and the floor opens. Keep it if you’re in — just don’t chase at these highs.

SELL:
Tesla (TSLA) – Revenue decline to $22.5B, down from $25.05B YoY. EPS missed. Regulatory credit sales dropped 51%, and Elon’s own warning of “rough quarters” ahead seals the case. Exit while the market still believes.

HOLD:
Consumer Discretionary ETF (XLY) – The sector is under stress. Names like NKE, TGT, CMG are lagging badly, but a few premium brands may buoy the average. Wait for retail stabilization before entering.

SELL:
VWAGY / INEOS imports – Margin erosion from tariffs is immediate. Earnings are being gutted. Until trade policy is finalized, the uncertainty outweighs the upside. Offload exposure.

That's TradingNEWS