Chip Rewey

The semiconductor capital-equipment cycle has been sideways for years, with weak spending by customers of large equipment suppliers such as Lam Research and Applied Materials. If AI demand is real, wafer starts and capacity for communications, power, processing, and edge AI devices should eventually pick up, pulling small-cap semiconductor capex and supply-chain names higher. Many of these smaller suppliers are flat-to-down YTD, have net cash and strong balance sheets, and can be held through a two-to-three-year cycle.

Regional banks are cheaper than large-cap peers and are neglected: results are good, capital levels have roughly tripled since the financial crisis (Tier 1 around 11% versus 8% minimums), deposits exceed loans, dividends are decent, shares trade around or below book, and deregulation/M&A could help. Reserves already assume meaningful economic weakness, so recession risk is partly priced in.

Select utilities are attractive because they benefit from data center growth, natural gas growth, and rate cases, offering decent yields plus capital appreciation; natural gas pipeline companies and water utilities also look interesting. He would avoid utilities with wildfire risk because lawsuits can hurt investors.