Morning briefing · Thu, Jul 9
The hardware plumbing underneath AI is quietly winning while software stumbles
AI software stocks slipped today while the physical layer, the switches, chips, and cooling gear that actually move data through a data center, surged. The market is repricing where the real bottleneck is.
Today's split is worth paying attention to. AI Software stocks dropped 1.42% on the day. Meanwhile, the stuff that physically runs the internet, networking gear, chips, and cooling infrastructure, went the opposite direction.
Arista Networks ($ANET, a company that makes the high-speed switches connecting servers inside data centers) jumped 8.76% in a single day. Broadcom ($AVGO, a chipmaker that builds custom AI processors for Google and Meta) added 4.83%. Vertiv ($VRT, which makes cooling and power systems for data centers) was up 4.00%. The Cooling and Data Center Infrastructure theme gained 2.83% on the day. Memory and Semi Equipment added 2.55%.
The read here is direct. Every major tech company is still spending heavily to build AI infrastructure. That spending hits the hardware layer first. Software valuations can compress overnight when sentiment shifts. The pipes and switches that carry the data cannot be wished away.
Smart money sees this too. Coatue Management (Philippe Laffont's $50B+ hedge fund) holds $AVGO as its second-largest position at 5.9%. Situational Awareness LP (Leopold Aschenbrenner's fund, built around the AI arms race thesis) has $NVDA at 11.5%.
If AI capex holds, the hardware layer keeps printing. If it cracks, software falls faster.
*When software narratives wobble, the market finds its footing in the physical infrastructure that no one can build fast enough.*