Tech Sector Collapse? Why AI Is Crashing Stocks And What's Next | Bob Elliott
Summary
- The "Software Crisis" is a fundamental rotation: AI agents allow "Real Economy" companies to build their own tools, reducing reliance on expensive B2B SaaS (described as "leeches").
- Macroeconomic conditions remain stable despite political noise; the core economy is larger than any single presidency.
- Gold is in a secular uptrend; recent pullbacks normalized flows, signaling an "all clear" to re-enter long positions.
- Bonds are expected to underperform due to inflation and geopolitical risks; the 60/40 portfolio is considered dead money relative to global alternatives.
- Emerging Markets (specifically South Korea) offer better valuations (low P/E, high earnings growth) compared to the crowded US trade.
Trade Ideas
"The typical underperformers are bonds... 60/40 is basically flat... what a snoozer." Bonds are structurally disadvantaged in an environment of potential war, supply chain shifts, and sticky inflation. Investors are over-allocated here and missing returns in commodities and foreign equities. SHORT (or Underweight). Bonds fail to provide the necessary returns or safety in the current macro regime. A deflationary crash or recession which typically sends yields lower and bond prices higher.
"There's going to be some losers like IBM... software companies are leeches... they're being disruptive and that's a good thing for the real economy." Legacy B2B software and consulting firms (like IBM) rely on charging high fees for tasks that AI agents can now automate cheaply. This creates a deflationary pressure on their revenues as clients "cannibalize" the software vendors' value proposition. AVOID. The sector faces a deflationary crisis as their customers build internal tools. These companies successfully pivot to becoming the primary AI agent providers.
Bob Elliott
Substack author, Nonconsensus
"Post the sort of spike up... we've seen a real normalization of the flows picture... I see in the short to medium term is an all clear to get back into the gold trade." Gold experienced a "mania" phase that has now cooled off (ETF and central bank flows normalized). With geopolitical tensions (Middle East) and Western investors still underweight, the supply/demand squeeze will likely resume, driving prices higher. LONG. A resumption of the secular bull market after a healthy correction. A sudden de-escalation of geopolitical conflicts or a massive rally in real rates.
Bob Elliott
Substack author, Nonconsensus
"Software companies are leeches to real economy businesses... to the extent that we have tools that basically make it more available for real economy companies to... wean themselves off of institutional software, they will accrue more profits." AI is not just a tech play; it is a margin expansion play for non-tech companies. As "Real Economy" (Industrials/Manufacturing) firms use AI agents to replace expensive B2B software contracts, their bottom lines will improve significantly. LONG. Betting on the users of AI technology rather than the software vendors. AI implementation costs proving higher than expected; economic slowdown reducing industrial output.
Bob Elliott
Substack author, Nonconsensus
"What is clear is that there is going to be a radical investment in compute capacity, data centers, etc... the people who are providing the picks and shovels... are going to be winners." While software applications (SaaS) are at risk of disruption, the underlying infrastructure required to run AI (chips, hardware, data centers) has guaranteed demand regardless of which specific AI model wins. LONG. The safest way to play the AI boom is through the hardware infrastructure. Overbuilding of capacity leading to a cyclical downturn in semi demand.
Bob Elliott
Substack author, Nonconsensus
"The typical outperformers [in war environments] are gold and commodities... most investors are radically underweight war related assets." Geopolitical risks (specifically Iran/Middle East) are escalating. Portfolios are currently over-indexed to bonds (which suffer in war/inflation) and under-indexed to hard assets. Oil and broad commodities act as the necessary hedge. LONG. Strategic overweight required for diversification against conflict risk. Global recession crushing demand; peace treaties in the Middle East.
Bob Elliott
Substack author, Nonconsensus
"In the Korean economy, you've had incredible earnings growth. You still have low PEs far lower than what you're seeing across much of the developed world." The US market is priced for perfection (US exceptionalism). Smart money is "de-dollarizing" by seeking value in foreign markets where earnings are growing but multiples haven't expanded yet. Korea is explicitly named as a prime example. LONG. A value rotation away from the US into high-growth, low-valuation emerging markets. Strengthening US Dollar (hurts emerging markets); global trade wars.
Up Next
This The David Lin Report video, published February 26, 2026, features Bob Elliott discussing TLT, IBM, IGV, GLD, XLI, DIA, SMH, NVDA, DBC, USO, EWY, EEM. 7 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Bob Elliott · Tickers: TLT, IBM, IGV, GLD, XLI, DIA, SMH, NVDA, DBC, USO, EWY, EEM