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The Market Has Spoken

Portfolio Armor's Photo
by Portfolio Armor
Thursday, Jul 16, 2026 - 15:51

Studio Ghibli Biotech and AI

The AI Buildout Is Accelerating. The Tape Is Rotating.

Yesterday, in “AI Isn’t A Bubble And Its Buildout Is Accelerating”, we argued that the selloff in memory and semiconductor stocks didn’t mean the AI boom had run its course.

The evidence from ASML Holding (ASML 0.00%↑), Aehr Test Systems (AEHR 0.00%↑), Micron Technology (MU 0.00%↑), and Penguin Solutions (PENG 0.00%↑) pointed in the opposite direction. Orders, revenue, production plans, and forward guidance all showed that the physical AI buildout was still advancing.

Since then, Taiwan Semiconductor Manufacturing (TSM 0.00%↑) added another—and arguably stronger—data point.

TSMC Sits At The Chokepoint

TSMC manufactures many of the world’s most advanced chips. That puts it at one of the semiconductor industry’s critical chokepoints and makes its results an unusually useful read-through on demand for leading-edge computing.

TSMC reported second-quarter revenue of $40.2 billion, up 36% year-over-year. Net income rose 77%, while its gross margin reached 67.7%.

Advanced technologies—defined as 7-nanometer processes and smaller—accounted for 77% of wafer revenue.

The company also guided for third-quarter revenue of $44.6 billion to $45.8 billion. At the midpoint, that would be roughly 12% sequential growth from an already record quarter.

Management pointed to continued strong demand for its leading-edge technologies and a steep ramp in its 2-nanometer process.

The companies building AI infrastructure are still ordering advanced chips. Semiconductor manufacturers are still expanding capacity. The equipment makers supplying that capacity are still reporting strong demand.

The underlying buildout keeps advancing.

The Thesis And The Tape

None of that means AI-related stocks have to start climbing again soon.

The market has been rotating away from some of the core AI-hardware sectors, particularly chips and memory. After enormous gains, those stocks became crowded, and the tape has been punishing crowded positions.

The fundamentals and the price action are answering different questions.

The fundamentals tell us what’s happening in the industry. The tape tells us what investors want to own today.

Both matter.

There’s no sense fighting the tape by forcing more short-term exposure into sectors the market is currently selling. Our recent chip and memory trades have defined risk and expirations several months out. They can wait out a correction if necessary.

For Thursday’s trades, we turned toward two areas where sentiment remains stronger: the leading AI labs and biotech.

Following The AI Labs

We already had exposure to Anthropic through trades in two publicly traded companies with stakes in the AI lab.

Anthropic has now confidentially filed to go public, with reports suggesting its IPO could come as soon as this fall.

That potential listing offers another way to participate in the AI boom—one removed from the current crowding in memory and semiconductor stocks.

One of Thursday’s trades added to our Anthropic exposure with an expiration better aligned with the potential IPO window.

Big Pharma Looks Toward Psychedelics

Biotech supplied another significant signal Wednesday evening.

Bloomberg reported that Eli Lilly (LLY 0.00%↑) was nearing a deal to acquire psychedelic-drug developer AtaiBeckley (ATAI 0.00%↑). ATAI shares jumped 66% in after-hours trading.

No deal has been formally announced yet, but Lilly’s reported interest is important. A major pharmaceutical company looking to acquire a psychedelic developer offers another form of validation for a field that has spent years moving from the fringes of medicine toward mainstream clinical development.

We have bullish exposure on ATAI from our April psychedelic trade alert.

We also have an in-the-money trade on a second psychedelic developer, Compass Pathways (CMPS 0.00%↑).

Now, we’re looking to add exposure to a third company in the space. It was recommended by one of our Multibaggers—a handful of accounts from our Market Watchers X list with documented recent 100%+ winners.

Our other biotech trade is in a clinical-stage cancer-drug developer pursuing a different approach to difficult targets: degrading disease-causing proteins instead of merely attempting to inhibit them.

Harvesting Biotech Volatility

Biotech options can be expensive, particularly when a company has binary catalysts or a speculative theme attracting fresh attention.

Instead of simply buying that volatility, we’re using it to lower our entry costs.

In the two biotech trades, we’re pairing longer-dated calls with shorter-dated short calls and defined-risk put spreads. The options we’re selling offset most—or potentially all—of the cost of the calls we’re buying.

That gives us asymmetric bullish exposure without paying the full price of the long calls outright.

If the shorter-dated calls expire out-of-the-money, or we can buy-to-close them inexpensively first, the longer-dated calls become uncapped.

Volatility isn’t just a risk in these structures. It’s also something we can sell.

What We’re Trading Now

The AI buildout remains intact, but the market is currently rotating away from some of its most crowded hardware beneficiaries.

We’re not abandoning the thesis. We’re letting our longer-dated chip and memory trades work while directing today’s new exposure toward areas with stronger sentiment:

  • A publicly traded route to additional Anthropic exposure,

  • A third psychedelic-medicine developer following the reported Lilly–ATAI talks,

  • A clinical-stage cancer-drug developer where elevated volatility lets us structure a near-zero-cost bullish trade.

We had three new bullish options trades for Thursday. You can find our trade alert for them below.

I’m enabling Substack’s one-post unlock on Thursday’s trade alert, so free subscribers will be able to unlock and read it when it goes live.

You can become a free subscriber via the widget below, and you'll also get an email with today's trades before the market opens. 

 

And if you're worried about market risk here (understandably so), you can hedged with the Portfolio Armor website or iPhone app. 

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