These 15 stocks trade like the hottest tech names - but they're still under the radar

By Joseph Adinolfi

RenMac found 15 large-cap stocks - mostly industrials - that have been heavily correlated with an index of semiconductor names

The AI trade is no longer just semiconductors and Big Tech stocks.

For years now, Wall Street pundits have been talking about the "AI trade." But exactly what they're referring to isn't always clear.

Are they talking about the "Magnificent Seven," which includes stocks in tech and tech-adjacent sectors that are investing heavily in AI? Semiconductor names that are providing the chips needed to train and power cutting-edge artificial-intelligence models? Utilities? Industrials? All of the above, or at least some of the above?

On Thursday, Renaissance Macro's Neil Dutta offered his clients some guidance. In a research report shared with MarketWatch, Dutta said that his firm had run the numbers, and found a small group of stocks that have been highly correlated with a popular index of semiconductor names over the past year.

Semiconductors are widely considered to be the core of the AI trade, largely due to their role in providing the "picks and shovels" needed to make AI work. Then there are the so-called hyperscalers like Meta Platforms (META), Alphabet (GOOGL) (GOOG), Microsoft (MSFT), Amazon.com (AMZN) and Oracle (ORCL), which are pouring huge sums of money into building data centers and buying the chips required to make them work.

But Dutta and his team looked at the daily correlation of every member of the S&P 500 SPX with the VanEck Semiconductor ETF SMH over the past year, and created a list of the 20 nontech S&P 500 constituents that were the most highly correlated with the chip trade.

The top 15 names on the list all have a correlation with SMH of above 0.5. That is not perfect, but still pretty good. When analyzing the correlation between two data sets - or assets, or indexes - readings are scaled between minus 1 and 1, with 0 suggesting no relationship.

The top 15 was dominated by industrial names like Vertiv (VRT), Eaton (ETN), Caterpillar (CAT), GE Vernova (GEV), Cummins (CMI) and Hubbell (HUBB).

"These are not tech stocks. They trade like semis because their order books have become AI capex order books," Dutta said in written commentary. "Caterpillar is selling backup gensets and engines into hyperscaler data centers. Vertiv is selling cooling and power management. Eaton is selling electrical components. GE Vernova is selling gas turbines for data center power."

-Joseph Adinolfi

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05-07-26 1636ET