I’m Eyeing 3 Names Amid Market Rotation
Here’s my strategy as the Dow rises as cash rotates out of overbought semiconductor stocks.
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We have some interesting rotational action on Thursday, triggered by semiconductor-sector selling on Broadcom (AVGO) earnings. I was expecting broader weakness, but breadth is robust with around 68% of stocks in positive territory.
What is most notable about the action is that the Dow Jones industrial average is up about 750 points, or roughly 1.5%, while the Invesco QQQ Trust (QQQ) is down about 1%. Even though QQQ is taking a healthy hit, breadth within the index is running about two-to-one positive. The selling is concentrated in the large-cap semiconductors that ran the hardest into the parabolic move. Micron (MU), which has been a leader, is down about 8%
This rotational action and narrow selling is a good sign and it looks like it is picking up steam an hour or so into the day. Nothing could be better for the market than a rotation into the many stocks that are good values and aren’t wildly extended.
The question is whether this move will have legs. The biggest obstacles are the Iran situation, the massive IPOs on the horizon, and economic issues. Any of those could trigger broader selling, but if some of the air comes out of the AI group then the market won’t be as precarious.
Narrow Selling in Large-Cap Chips
The damage is concentrated in the AI infrastructure names that led the recent parabolic move. Broadcom (AVGO) is down hard after it did not raise the company’s $100 billion full-year AI chip sales target for 2027. The sympathy selling is hitting Arm Holdings (ARM), Micron Technology (MU), and Marvell Technology (MRVL). The common thread is that all of these were among the biggest beneficiaries of the recent short-covering and degrossing rotation that pushed the chip group into overbought territory.
What is constructive about the action is that the damage is not spreading. The cap-weighted indexes look much worse than the average stock, which is the inverse of what we have seen for most of the AI run. When the largest weights take the hit and the broader market actually works higher, that is the structural definition of a healthy correction inside the index leadership rather than a broad-based selloff.
Three Names I Am Working On
I anticipated I would do more selling today but that has not been the case. As I mentioned yesterday, I took a partial stop on Roku, Inc. (ROKU). This morning Morgan Stanley raised its price target on the stock to $170 from $150, citing sustained double-digit Platform revenue growth. The “sustained double-digit Platform growth” view matches what Roku put in its Q1 2026 shareholder letter, where the company also reiterated a $1 billion free cash flow target by 2028. My sale does not look well timed, but that is the cost of discipline. I will look to add back what I sold but won’t do it right away.
One of my top small-cap biotech names, Precigen, Inc. (PGEN), has pulled back over the last four sessions on no news, and I am using that weakness to add to my position. With a stock like this, I make numerous small buys when I have the opportunity and then trade some short term while building my longer-term position. These small caps move mainly due to illiquidity, and that is what creates the mispricing.
I also have my eye on a couple of short-term speculative trades. One is T1 Energy Inc. (TE), which has been a battleground stock. Northland Capital initiated coverage Tuesday with an “Outperform” rating and a $16 price target, citing T1’s domestic solar manufacturing and the planned solar cell facility in Texas.
The setup got more interesting when Leopold Aschenbrenner’s Situational Awareness fund disclosed a 10 million share position for around $44 million, which gives the long side a credible AI-adjacent backer against an aggressive short interest. T1 also announced a $32 million acquisition of KORE Power, pushing the company further into battery storage for AI data center markets. There is squeeze potential on a stock that has already run more than 950% over the past year, and the short side is now dealing with a heavyweight long with a real thesis.
Strategy
The rotational action gives the market room to digest the parabolic move in chips without forcing a broader unwind. That is the best possible outcome given how extended some of those names had become. I am still defensive overall, but the breadth is telling me to keep working the individual setups rather than raise cash further into a market that is actually working under the surface.
At the time of publication, DePorre was long ROKU, PGEN, TE.
