This edition of Market Factors starts with the ways Traitors exemplifies the worst type of investor decision making. It moves on to the stocks currently climbing on the surprisingly huge AI spending spree. The diversion covers the recent travails of the former richest person in the world.
The team from "The Traitors" accepts the award for outstanding reality competition program during the 77th Primetime Emmy Awards on Sunday, Sept. 14, 2025, at the Peacock Theater in Los Angeles.Chris Pizzello/The Associated Press
Behavioural finance
Your mind is a Traitor
Finance author Joe Wiggins used the TV show Traitors to explain “Why investors can’t help themselves when it comes to trying to time the market” and I can add another reason on top of his.
In the show there’s a group of about 20 people, three of whom are “traitors” from the outset, unbeknownst to everyone else. The traitors determine someone to be removed from the group at regular intervals, and every day the group meets and expels someone they believe to be a traitor.
There is no evidence available to point to who the traitors are and yet many participants believe their unique life experience and deep knowledge of human behaviour make them capable of picking out the bad apples. Mr. Wiggins notes that many times, complex reasoning that sounds highly intelligent turns out to be wrong.
You can see where he’s going. The game is analogous to investing in its low signal-to-noise ratio, delusional overconfidence and evidence that the mind can weave complex, genius-sounding and wrong theories in the absence of relevant information.
I would argue that it’s worse in investing because the desperation for the correct answer is stronger, leading directly to standards of living. Thus the pattern finding behaviour, in the absence of an actual pattern, is more intense.
The other reason for attempting to pick a market top, for me at least, is impatience. The technology sector has been leading the major indexes for at least the past decade – the Vanguard Info Tech ETF’s 22.8 per cent average annual return over the past ten years beat the S&P 500 by 8.3 percentage points annually – and frankly it’s getting boring. I want leadership to change if only for the entertainment value and I’m projecting this wish onto the market.
Nobody can pick market tops. Nobody. There is the occasional manager that jumped to cash just before a big downdraft but no manager has done it twice. This strongly implies that luck played a huge role the first time.
Investors that can’t sleep at night because of their portfolio should de-risk it a bit, removing more speculative investments and adding cash or bonds. That is less timing the market and more an investor discovering their true risk tolerance.
De-risk if you have to but don’t try and time the top. It won’t work.
Equities
AI-related equipment providers up huge
Evercore ISI analysts built a list of AI-affected stocks called AI Enablers, Adopters and Adapters. I looked at recent returns for all 75 members in search of those with the highest price momentum.
Over the past three months the top performing companies have been hydrogen power producer Bloom Energy (up 239.9 per cent), DRAM maker Micron Technology Inc. (95.4), hard drive maker Western Digital Corp (93.6), network connectivity experts Credo Technology Group (43.6), Alphabet Inc. (43.4) and industrial equipment maker Sitime Corp. (36.7)
The year-to-date winners are mostly the same – Bloom Energy (487.7 per cent , not a typo), Western Digital (232.8), Credo Technology (176.0) and Micron (173.0) at the top of the last. CVS Health Corp is the next name on the year-to-date list but, even though the company is adopting AI, it is in the midst of a full-scale restructuring that almost certainly had more to do with performance than AI.
The performance results strongly imply that the AI investment story is still in the physical building stage, led by the companies assembling data centers and the equipment makers selling the stuff they’re using to do so.
The performance is also not surprising in light of Meta Platforms news last week. Meta’s stock plunged over 12 per cent after announcing AI-related spending plans that were much more aggressive than analysts expected.
Bill Gates speaks at the annual Bloomberg Philanthropies Global Forum in Manhattan on September 24, 2025.Caitlin Ochs/Reuters
Diversions
Bill Gates in hot water
Bill Gates is getting pilloried for a recent blog post suggesting that climate change will not cause humanity’s demise. His hope is that continued innovation will help further reduce emission forecasts.
Mr. Gates states repeatedly in the essay that climate change remains a very important problem that needs to be addressed. His hope is that more efforts will be made to address climate-related suffering in poor countries.
Mr. Gates has been using his fortune to support clean energy innovations for over two decades. He is happy with his own efforts in this regard but is concerned that projects with poor prospects are being supported elsewhere and that investment funds are not being spent as efficiently as they should.
The essentials
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The Rundown
Ian McGugan lists some reasons for why investors may be laying a rational bet that this stock market “bubble” may continue for a while. And for more on that topic, here’s Mehmet Beceren of Rosenberg Research on whether this is indeed a repeat of the dot-com bubble - and how investors should think about playing it
Brian Belski, who has just started his own investment advisory firm, warns too many investors in Canada have jumped on the gold trade over the last three months. He provides two top stock picks.
How many months of returns matter for momentum stocks in Canada? Norman Rothery has the answer
While we fret over the stock bubble, Tim Shufelt notes that the one in housing has already burst - and the recovery may take many years
Preet Banerjee on how investor memories of past performance becomes distorted
Larry MacDonald updates the latest short positions on the TSX as well as provides a list of activist short seller reports so far this year
Quick hits
Happy trails to cable giant John Malone who is retiring from the Liberty Media empire he built. He is a genius of financial engineering and general business acumen and also one of the largest private owners of U.S. land. His reclusive style only adds to his legacy.
Funding the AI buildout is becoming the most interesting part of the story. Special purpose vehicles, oceans of convertible bonds and Meta’s huge borrowing spree are all involved.
This issue’s diversion reminded me of the Bill Gates documentary on Netflix, Inside Bill’s Brain: Decoding Bill Gates. His efforts to support climate change-fighting technology were portrayed in a really interesting way but the series also had a surprisingly melancholic edge to it.
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