Joe Terranova — The Market Setup for the 2nd Half of the Year

Micron makes memory chips (the DRAM and flash storage that data centers and AI servers gobble up). The stock is up 228% and the obvious worry is that memory is a boom-bust "cyclical" business — prices spike, everyone builds factories, then prices crash. Terranova's counter is that this cycle is different: it's bullish and will run longer than past cycles.

His evidence is "strategic customer agreements" — big AI buyers signing long-term, locked-in supply contracts (a take-or-pay style commitment) rather than buying chips on the open spot market quarter to quarter. That contracted demand is what makes him call memory "secular, not cyclical" — i.e. a durable multi-year growth story, not a quick price spike. So he'd hold through the noise rather than treating it as a trade to flip.

Onto Innovation is a smaller (~$17 billion) maker of inspection and measurement tools used in making memory and advanced chips. Terranova frames it as a "derivative" — a second-order play. Once the obvious memory leaders (like Micron) have already made huge "parabolic" moves, the easy money there is gone, so he hunts for a less-crowded name that benefits from the same boom but hasn't run as far.

He's explicit that this is a "trade to capture alpha" — a tactical position to squeeze extra return out of the memory theme after the leaders have spiked, rather than a core long-term holding. The idea travels: when a leader goes vertical, look down the supply chain for the cheaper, smaller beneficiary.

Applied Materials is one of the big "semicap" companies — it sells the machines chipmakers use to build chips. Terranova likes it for two overlapping reasons: it's on the 52-week-high list (so it's already a proven leader the market is rewarding), and it's a "derivative off memory" — as the memory boom forces chipmakers to add capacity, they have to buy more of Applied's equipment. Owning the toolmaker is a steadier way to ride the memory wave than betting on any single chip.

KLA makes the equipment that inspects chips for defects during manufacturing. Terranova names it alongside Lam and Applied Materials as a "derivative off memory" — a supplier that profits whenever memory makers expand. It's also one of his technology names on the 52-week-high list, so the price action already confirms it's a leader, not a hope.

Lam Research builds the etching and deposition machines that are especially important for making memory chips — so it's tightly levered to the memory boom Terranova thinks is secular. It was one of the semi-equipment names leading the S&P higher on the day (up ~8-9%). Same logic as KLA and Applied: own the picks-and-shovels suppliers to the memory build-out.

Palo Alto Networks is the largest cybersecurity software company. Terranova groups it with his technology 52-week-high names as part of "the tech that's working." His discipline here is simple momentum: rather than guess which corner of tech recovers, own the ones already making new highs — and Palo Alto qualifies.

Valero is a big oil refiner (it turns crude into gasoline and diesel). It's Terranova's energy pick off the 52-week-high list. His point isn't a deep oil call — it's the leadership-screen discipline: even in a sector that feels "cold," own the specific name that's actually making new highs rather than fighting the tape.

Eli Lilly is a pharma giant (best known for its blockbuster weight-loss and diabetes drugs). Terranova uses it as a healthcare 52-week-high leadership name. The broader story: healthcare was "left for dead six months ago" and is now a hot sector — and his way to play that broadening is to own the names confirming the move by hitting new highs, like Lilly and Merck.

Merck is a large pharmaceutical company (cancer drugs, vaccines). It's Terranova's other healthcare 52-week-high name alongside Lilly — picked the same way: the sector is broadening back to life, so own the leaders the price action is rewarding rather than the laggards.

CSX is one of the big US freight railroads. Terranova lists it as an industrials 52-week-high name — a representative of the broad-market strength he wants spread "across a variety of places." Again the logic is the leadership screen: own what's already breaking out, not what you hope will.

Honeywell is a diversified industrial conglomerate (aerospace, automation, building tech). It's Terranova's other industrials 52-week-high name with CSX — same idea: industrials are participating in the broadening rally, so own the ones making new highs.

Allstate is a big property-and-casualty insurer. Terranova uses it to make a subtle point: "momentum" doesn't only mean expensive, fast-moving growth stocks. A lot of the financial sector — insurers like Allstate, Travelers and Chubb — has quietly been a momentum winner all year while still trading at reasonable valuations. So you can ride the momentum factor in steady, cheaper names, not just in hyper-growth tech.

Travelers is a major commercial and personal insurer. It's one of the three insurance names (with Allstate and Chubb) Terranova cites as evidence that the momentum factor has spread into reasonably-valued financials — "all doing really well YTD." A way to own momentum without paying growth-stock prices.

Chubb is one of the world's largest property-and-casualty insurers. Terranova names it third (with Allstate and Travelers) to drive home that insurance has been a quiet momentum sector in 2026 — strong performance, sensible valuations — the kind of "reasonable-valuation" momentum he wants alongside the flashier tech.

Monster makes energy drinks. Terranova's call is comparative: within the defensive "consumer staples" group, he says the best name to own right now is not the warehouse clubs (Costco, Walmart) that have started to roll over on valuation — "it's Monster Beverage." So if you want staples exposure, he'd rotate into Monster rather than the crowded, richly-valued retailers.

Terranova's airline thesis is structural, not a trade on the cycle: he thinks the market is only "at the beginning of understanding" that Delta and United have effectively become a duopoly — the two dominant carriers steadily taking market share from everyone else (to American Airlines' annoyance). When two players entrench like that, they gain pricing power and durability, which he calls "a powerful, entrenched bullish setup." Near-term the stock is overbought, but the long-run setup is what he's pointing at.

United is the other half of Terranova's airline duopoly call (with Delta). Same argument: the industry is consolidating around these two, who keep capturing share — an entrenched, structurally bullish position rather than a quick bounce. Own the winners of the consolidation.

Corning makes specialty glass and optical fiber — and the fiber business is increasingly tied to AI data centers (which need huge amounts of cabling). It was Terranova's "final trade." His framing is pure momentum discipline: a 14% one-day jump doesn't scare him out of a leader — he reads strength as a reason to stay, not to sell. He thinks there's "more to come" and flags the next earnings report at the end of July as the catalyst.

Terranova has owned Walmart since October 2024 (bought at $81) and still holds it, but he's flagging a yellow light: both Walmart and Costco "have begun to break down," meaning the stock has started rolling over because "the valuation story got the best of each" — they simply got too expensive. So it's a hold he's watching warily, not a fresh buy; the momentum that carried it is fading.

Terranova already sold Costco — at $1,015 back at the end of October — and his view here is the bearish bookend to Monster. His reasoning is valuation plus price action: the stock got too expensive and has "begun to break down" (started falling), so even though a Wall Street firm (Bernstein) just named it a top second-half pick, he'd rather own Monster Beverage in the staples sleeve. A reminder of his sell discipline: exit a winner when the valuation stretches and the chart rolls over.