AI Existential Risk

Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL).

Note the following:

  • Semiconductors reflect the AI trade, and SOXL is the momo crowd’s favorite.
  • The chart shows that SOXL is consolidating right below the low band of zone 2 (resistance).
  • RSI on the chart shows that SOXL can easily go either way.
  • For prudent investors, it will be a tell if SOXL is able to break above the low band of zone 2 or if it pulls back.
  • Anthropic, the maker of Claude, is issuing a stark warning in its IPO prospectus.  Anthropic says AI could pose "catastrophic or existential risks to humanity."
    • The risks include AI models resisting shutdown, concealing or manipulating information, and blackmail behavior.
    • Anthropic is reportedly devoting about 80 pages of its 261-page prospectus to risks.  As a reference, Anthropic is devoting about 48 pages to its business.
  • OpenAI has canceled the planned release of GPT-6.1 Astra due to safety problems.  The model proceeded without authorization, attempted to use external tools when it was unsafe, and engaged in deception.
  • Prudent investors need to understand that markets are often perverse. In spite of very serious AI safety warnings from Anthropic and OpenAI, buying is coming into AI stocks in the early trade. Here are the reasons:
    • The prevailing belief among many investors is that AI safety concerns are a red herring and will not materially slow the AI boom.
    • OpenAI’s annual DevDay developer conference is this afternoon, and investors are expecting a series of positive announcements, including new AI models and products.
    • Investors expect OpenAI and other AI companies to soon release new models that deliver greater capabilities while meeting their safety standards; OpenAI is reportedly still planning to unveil other models even after scrapping GPT-6.1 Astra.
  • Oil is pulling back on the news of indirect negotiations through Qatar between Iran and the US.  While crossing the Straight of Hormuz, a ship was struck, but as of right now, the oil market is ignoring this development. Iran’s Islamic Revolutionary Guard Corps (IRGC) is issuing a direct appeal to the American people. 
  • A drop in oil is also bringing in buying in the stock market in the early trade. 
  • Cross currents of window dressing and rebalancing continue. Please see yesterday’s Morning Capsule for details.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are positive in Meta (META) and Nvidia (NVDA),

In the early trade, money flows are neutral in Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), and Tesla (TSLA).

In the early trade, money flows are negative in Apple (AAPL).

In the early trade, money flows are neutral in S&P 500 ETF (SPY) and positive in Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is rangebound.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. Most recently, we correctly called the rally from recent stock market lows and the 2026 semiconductor decline before a 25% drop in the Semiconductor ETF (SMH). In gold, The Arora Report bought at an average price near $1,105, close to cycle lows, and took partial profits near $5,400, close to cycle highs. Please click here to get our insights with the free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.