The Nasdaq's Historic Rally Doesn't Mean the Risk Is Gone

Key Points

• Chaikin Analytics rates software and cybersecurity stocks as sectors to sell into this rally, citing AI disruption from models like Claude Mythos as a structural headwind for legacy names.
• Seven stocks across semiconductors, construction and engineering, optical networking, and mining earn bullish ratings, though Chaikin recommends waiting for pullbacks before buying.
• The S&P 500 is approaching all-time highs after a historic Nasdaq 100 rally, but Strait of Hormuz uncertainty could trigger a reversal.

The S&P 500 has pushed to a new all-time high, and the Invesco QQQ Trust NASDAQ: QQQ, which tracks the Nasdaq 100, has seen its longest winning streak on record, in terms of consecutively higher closes. Investors everywhere are asking the same question: Is it safe to buy?

Marc Chaikin, founder of Chaikin Analytics and creator of the Power Gauge stock rating system, says the answer depends on where you look. The rally is real, but so are the risks still lurking beneath the surface.

Chaikin sees a market running on hope that could stumble at the first sign of disappointment.

A Rally Built on Ceasefire Hopes—Now Getting a Reality Check

The catalyst for the market's V-shaped recovery was last week's announcement of ceasefire negotiations tied to the Iran conflict. That news pushed the S&P 500 through its 50-day and 200-day moving averages in a single session, clearing resistance levels that had capped prices for weeks.

At the time of Chaikin's analysis, neither pillar of the bull case was firmly in place—no agreed-upon ceasefire terms existed, and the Strait of Hormuz remained effectively closed to normal commercial traffic. Since then, the situation has shifted: an Israel-Lebanon ceasefire has taken effect, and Iran's Foreign Minister declared the Strait "completely open" for commercial vessels for the duration of the ceasefire.

Whether that progress holds remains the open question. Chaikin's broader point still applies: markets that climb on optimism tend to be vulnerable when the details disappoint. The Strait may be open today, but the underlying conflict is far from resolved.

2 Sectors Worth Trimming: Software and Cybersecurity

Rather than chasing the rally, Chaikin sees this as a window to prune weak positions—and two sectors top his sell list.

Software stocks, which once comprised 16% of the S&P 500, now represent roughly 8%. Names like Salesforce NYSE: CRM, Atlassian NASDAQ: TEAM, and Adobe NASDAQ: ADBE have underperformed the broader market for over nine months. The Power Gauge rates many of these names bearish, and Chaikin's proprietary money flow data shows institutional selling has been persistent. The reason is structural: advances in AI—from Anthropic to OpenAI to Google and Meta—are putting real pressure on the SaaS business model that powered these stocks for two decades.

Microsoft NASDAQ: MSFT doesn't escape scrutiny either. The stock carries a neutral Power Gauge rating and remains more than 20% below its October peak despite rallying from under $360 to above $400. Chaikin sees Microsoft and the Magnificent Seven broadly as legacy beneficiaries now facing competitive headwinds from the next wave of AI innovation.

Cybersecurity is the other sector Chaikin would trim. Palo Alto Networks NASDAQ: PANW has been in a clear downtrend, and the bearish case goes beyond technicals. Anthropic's Claude Mythos Preview—announced earlier this month—demonstrated the ability to discover thousands of zero-day vulnerabilities across major operating systems and browsers, exposing flaws in infrastructure that legacy cybersecurity firms had certified as secure. That kind of disruption creates a credibility problem for incumbents. If AI can find the back doors that existing platforms missed, the market will eventually reprice who deserves to own the cybersecurity franchise.

Semiconductors: Bullish, But Buy the Pullback

The semiconductor space has been the backbone of this rally, and Chaikin remains constructive on the group—with a caveat. These names have run too far, too fast to chase at current levels.

NVIDIA NASDAQ: NVDA is recovering after a sharp drawdown, and Chaikin acknowledges it as the dominant force in AI chips. But the more compelling opportunities may sit further down the supply chain.

Lam Research NASDAQ: LRCX is critical to the semiconductor manufacturing process, holding near-duopoly positioning in etch and deposition equipment. The stock has rallied sharply, but a pullback toward its moving averages could offer a cleaner entry.

Onto Innovation NYSE: ONTO specializes in quality control for semiconductor manufacturing and has carried a bullish Power Gauge rating since last August. Shares have surged from around $100 to above $280, but Chaikin says a retreat toward the stock's 21-day average would make it attractive again. B. Riley recently raised its price target on the stock to $310.

The AI Buildout's Picks and Shovels

Beyond chips, Chaikin is focused on the physical infrastructure powering AI—the construction, cooling, and data transport layers of the buildout.

Quanta Services NYSE: PWR has been building power plants and clearing land for electric utilities for decades. With AI data centers demanding enormous new power capacity, Quanta sits at the intersection of energy infrastructure and AI demand. The stock recently hit an all-time high near $596, so patience for a pullback is warranted.

Comfort Systems USA NYSE: FIX handles the cooling and HVAC systems that keep data centers operational—a constraint that only tightens as compute density rises. The company has delivered 35% quarterly revenue growth and has strong profitability relative to peers.

Inside the data centers, moving information at speed is the bottleneck. Optical networking stocks have been on fire, and Chaikin recently took a quick 15% profit in Coherent NYSE: COHR after a two-week hold. The stock has continued climbing, recently hitting an all-time high above $310 after being added to the S&P 500 in March.

Ciena NYSE: CIEN is another name in this space, with first-quarter revenue up 33% year-over-year and raised full-year guidance to as much as $6.3 billion. Both are stocks Chaikin would look to re-enter on a pullback.

Copper, Not Silver, Fuels the Wiring

Finally, the raw materials layer matters. Freeport-McMoRan NYSE: FCX is the world's largest publicly traded copper miner, and copper is essential to the fiber optic wiring and internal infrastructure of data centers.

The stock has carried a bullish Power Gauge rating dating back to last year and recently set a new all-time high near $70 before pulling back.

Freeport also has a major mine offline that is expected to come back into production this fall—a potential catalyst that could add meaningful supply to a copper market already running tight.

Stay Disciplined as the Market Tests New Highs

The setup is compelling: AI demand is real, the infrastructure buildout could last five years or more, and these seven names are positioned at critical points along the supply chain. But with the S&P sitting at all-time highs on ceasefire optimism while the Strait of Hormuz remains contested, Chaikin's message is clear—don't chase the rally. Identify the stocks doing differentiated work, wait for pullbacks, and let discipline do the heavy lifting.