Were there dark arts clues $SOX was about to go parabolic?
Corporate dark arts, part 8
Semis have gone parabolic. The index is up ~40% over the past month, and plenty of components are pushing toward doubles inside of a month…
So, yes, it’s been a broad based melt up…. but there is something interesting under the hood. The two largest components of the index are AVGO and AMD, and both gave out unusually large “dark arts” style grants1 in the past few months.
The timing of those grants is probably not a coincidence.
Let’s start with AVGO. In FY25, the company did >$20B in AI revenue. They just gave the CEO a package that requires AI revenue to grow to $90B by FY2030 in order to vest in full, with a high-end case where AI revenue grows to >$120B.
Just hitting the target range would require AI revenue to almost 5x in five years….. that’s insane! But, if you’ve been following the dark arts series at all, you know that companies don’t give out these big awards for no reason at all…. particularly awards that could reasonably be worth $1B if they hit in full.
AVGO reported AI revenue “grew 106% year-over-year, above our forecast” in Q1, while also noting “Our AI revenue growth is accelerating.” It seems they’re well on their way to hitting those targets (and, in turn, the CEO is on his way to adding another 10 figures to his net worth!).
Or consider AMD: in Feb., the CEO was given PSUs that require the stock to return 10%/year for the next five years just to start vesting. The target vesting percentage requires the stock to do 15%/year for five years; that’s a fantastic result, and it’s the baseline for the reward.
AMD’s stock was in the low $200s when the grant was made. With the current stock run up, AMD is trading in the mid-$300s…. so the low end of the vesting is already in the money, and it will require much more pedestrian stock performance from here for the CEO to vest in full and receive a ~$250m windfall.
I’ll be writing more about the implications of the acceleration over the next few days, but I can’t stop thinking about two things here.
First, whether you believe in my dark arts “companies grant awards that they have some fundamental reason to believe they will vest” theory or not, it’s hard to believe that the two largest components of the semiconductor index would start granting mammoth upside awards without a ton of signs demand is accelerating.
Which brings me naturally to the second thing that’s stuck in my mind: it’s not like 2025 was a slow year for these companies. If they’re seeing signs that things are inflecting even harder (and now the market is starting to see it and believe it if the stock prices are any indication!)…. what are they seeing? And what are customers telling them about demand and their forecasts that makes AMD and AVGO believe the inflection is heating up?
To be continued (and don’t forget to sign up to see future posts in this series!)…
The dark arts have been a huge focus of mine recently; today’s post marks the 8th in the series. Previous posts include RELY + OPEN’s pay package, META’s YOLO options, incentives gone awry, an analysis of LION + STRZ new packages, five more dark arts ideas, the ACHC case study + premium dark arts basket, and this premium write up on my favorite current dark arts set up.
The idea that performance-vesting comp structures are a form of insider signaling is underrated and specific in a way that most technical analysis isn't. Management doesn't write in extraordinary performance hurdles when they think the stock is stuck. The AVGO and AMD packages that seemed absurd at the time now look like a tell that people inside those companies saw the AI infrastructure wave earlier than the market did.