Where is my momentum?

Automatic translation: Originally published in Finnish 02/06/2026, 05:40 GMT. Give feedback here.

Momentum investing has once again become a focus of investor interest due to the AI boom. The strategy is based on a simple observation: shares that have performed well in the recent past often continue their strong development in the medium term. 

The momentum strategy is based on findings from behavioral economics. Investors often underreact to new information, leading to a gradual adjustment of prices to changes in fundamentals. This creates a trend that systematic momentum investors can capitalize on. Typically, the strategy focuses on a 3-12 month window, during which the momentum effect has historically been strongest.

In 2026, the AI market is estimated to grow to approximately $2.5 trillion, and this massive wave of investment has created particularly strong "momentum signals" in the technology sector. For example, SanDisk has surged by as much as 636% during 2026, becoming one of the year's strongest momentum stocks. Seagate, the world's second-largest hard drive manufacturer, has also risen by over 200% this year due to the increased storage capacity required by AI applications.

Source: Bloomberg

In the semiconductor sector, momentum is distributed across different stages of the production chain. Hyperscalers like NVIDIA are a story in themselves, and infrastructure companies have also benefited from the momentum. Lumentum Holdings has risen 140% and Applied Materials 77% this year, as AI data centers demand increasingly advanced manufacturing technology and optical components. Similarly, Micron Technology (YTD +262%) is experiencing strong growth as demand for DRAM and NAND memory accelerates in AI applications. If one wishes to focus on the industry rather than a single company, momentum is evident there too. In the ETF world, AI and Big Data ETFs have significantly outperformed the S&P 500 index in recent months (see figure)

Xtrackers AI and Big Data ETF and the S&P 500 index 
Source: Bloomberg

Investments are now also on the side of momentum investors. Tech giants such as Amazon, Alphabet, Meta, Microsoft, and Oracle plan to invest hundreds of billions of dollars in 2026, with the majority targeting AI infrastructure. This creates exceptionally strong grounds for momentum trends.

I aim to acquire companies for my long-term portfolio, and therefore, this momentum, too, has largely passed me by, leading mainly to reflections on an investor's worst opportunity costs—that is, lost returns. On the other hand, a small skeptic within me wonders how long this can continue. Verneri has aptly noted in his videos that if current trends persist, the value of American shares will exceed the size of the global economy in the coming years. He has also discussed AI bottlenecks, meaning scarcities in the market that keep demand significantly higher than supply. Certain companies benefit greatly from these, and this is now reflected in the stock market.

But what happens when the market normalizes and momentum fades? Sooner or later, the balance between supply and demand will be closer to being found, and then momentum investors must again be alert: if one knows how to jump into the hype early enough, one must also know how to jump out. As Verneri mentioned in another one of his videos, hyperscalers like NVIDIA have both strong incentives and vast cash reserves to remove bottlenecks. It is up to the momentum investor to decide when the situation begins to normalize, and at that point, the importance of risk management will also be emphasized.