AI is not a sector it’s a capital rotation ladder from chips to apps (with ETFs for every layer)

I don’t really see AI as a single sector. To me, it’s more like a supply chain where money slowly rotates down the stack.

It usually starts with compute, basically chips. That’s NVIDIA, AMD, Broadcom, Micron, names like that. This is the stage where sentiment is strongest and the market is mostly pricing in expectations.

The ETFs here are usually SMH or SOXX. This is basically the first wave of the AI trade.

Then the money tends to move into data centers. Stuff like SMCI, Dell, Equinix. At this point it’s not really about stories anymore, it’s about who is actually getting orders, expanding capacity, and building out infrastructure.

You can track that part through CLOU or WCLD.

After that comes networking. Names like Arista or Cisco. This stage usually lags, but it tends to catch up later because once AI clusters scale, networking becomes non negotiable.

FIVG is one way to think about that layer.

Then there’s the part most people overlook, which is power and cooling. This is becoming a real bottleneck. Vertiv, Eaton, Constellation Energy, and some utilities fall into that bucket.

At this point it’s pretty simple. AI is not just a chip shortage anymore. It’s an electricity shortage.

You can express that layer with XLU or GRID.

Above that you get the hyperscalers. Microsoft, Amazon, Google. This is where all the capex across the stack eventually turns into revenue.

That’s basically XLK or VGT.

And then at the top you have applications. Things like Palantir, Salesforce, Adobe, basically software that sits on top of the infrastructure.

IGV or HACK fits that layer.

If you put it all together, the rotation is actually pretty simple.

Chips go first

Then data centers

Then networking and power catch up

Then cloud and applications start to monetize it

SMH and SOXX move first

Then CLOU and WCLD

Then FIVG

Then XLU or GRID

Then XLK or VGT and IGV

At the end of the day, most people are just buying AI as a theme. Institutions are buying the whole stack, one layer at a time, as it turns into real infrastructure