Fasten your seatbelt! (Nicolas Economou/Getty Images)

Palantir’s tumble creates another gut-check moment for AI momentum trade

The AI-centric parts of the momo trade and its biggest gainers off the lows are under pressure this morning.

5/6/25 7:59AM

The V-shaped recovery in US stocks off the lows has been a story of “meet the new boss, same as the old boss.”

The iShares MSCI USA Momentum Factor ETF has rallied nearly 20% since its April 8 lows, recovering not just the losses suffered in the wake of the Rose Garden reciprocal tariff announcement, but also much of the decline seen since February 19, when Walmart’s soft 2025 guidance kneecapped the momentum trade and marked the peak for the S&P 500.

But a similar dynamic to the Walmart-induced momentum meltdown might be brewing again on Tuesday: Palantir’s solid earnings failed to wow investors after the stock’s 68% surge in under a month, which played a key role in refueling the momentum trade.

The pain in momentum stocks is not confined to that company this morning. We’re seeing big retreats in the components of the momentum ETF that had done the best since the April 8 lows, as well other notable AI-adjacent names that are some of the biggest weights in the index:

All are doing worse than the SPDR S&P 500 ETF in early trading. These stocks are more volatile than the S&P 500, so you’d expect them to be down by more than the benchmark index, but most are also far underperforming their typical beta to the market, as well.

Zooming in on Palantir, we’ve got ourselves a clash of the titans: unrelenting retail buying is squaring off a potential break in a short-term trend that itself can engender more selling.

When a group of stocks stop going up when the reason to buy those stocks was, in short, because they were going up, well, we don’t have to look too far back in time to see what a risk that can become for the broad market.

Old electronic items tossed on ground for disposal, Hudson

Technology giants don’t look like they used to, as the asset-light era fades

Oracle and Meta are now some of the most capital-intensive businesses in the S&P 500, spending more than energy giants. I guess data really is the new oil?

David Crowther1h

Matt Phillips2h

Space stocks rip amid speculation on Altman joining race

Space stocks AST SpaceMobile, Planet Labs, and Rocket Lab all soared Thursday amid a recovery in the high-beta momentum class of shares coveted by some retail traders.

(High-beta momo stocks are basically shares that have been on a winning streak for a while, and tend to go up a lot more than the overall market on positive days. Goldman Sachs includes all three of the aforementioned space stocks in its themed basket of such shares.)

There’s little other fundamental news out there on the companies themselves.

But a Wall Street Journal report that OpenAI impresario Sam Altman has been toying with the idea of entering the space industry, potentially standing up a rival to Tesla CEO Elon Musk’s Starlink satellite service, may also be contributing.

As we’ve mentioned elsewhere, sometimes these stocks seem to trade on a what’s-bad-for-the-Musk-empire-is-good-for-us-and-vice-versa vibe.

Matt Phillips3h

Intel sinks on news it will hang on to networking unit

Intel dropped in early trading Thursday after it disclosed plans to retain ownership of its networking unit following a strategic review of operations.

The unit, known as NEX, makes products like infrastructure processors, which do needed “housekeeping” tasks like running security checks, thereby freeing core Intel CPUs to do the higher-value operations. It also produces switches and controllers that manage and direct the flow of data to CPUs.

Intel Shelves Plans to Sell Networking Division After Review

Luke Kawa3h

Quantum computing stocks soar on return of bullish options bets

The calendar says December, but the price action is starting to look a lot more like September to me:

Quantum computing companies IonQ, Rigetti Computing, and D-Wave Quantum are all up at least 7% as of 11:04 a.m. ET, buoyed by a wave of bullish options activity.

Nearly 50,000 calls in IonQ have already changed hands, well above the 20-day average for a full session, with activity concentrated in strikes from $50 to $55 in contracts that expire between Friday and mid-January. Its put/call ratio is near 0.2, versus an average of over 1 for the past 20 sessions.
More than 65,000 calls have traded in Rigetti, a hair shy of its full 20-day average. Like IonQ, options activity has a bullish tilt, with a put/call ratio of about 0.7 versus a 20-day average of roughly 1.2.
D-Wave, which received positive commentary from Evercore ISI on Wednesday, isn’t seeing call activity as elevated as its peers, but the options action is also very skewed toward the bull side, with a put/call ratio of less than 0.3 versus a 20-session average of 0.7.

Pure-play quantum computing stocks nearly doubled from late August to late September amid heavy options market activity thanks to reports on government support for the sector, M&A activity, tech breakthroughs, and a flurry of price target hikes by Wall Street.

Luke Kawa

Retail traders are killing it this year because of both what they’re buying and when they bought it

Buy the dip. Buy AI. Buy gold.