'Buy China, Sell AI' Is The Ultimate Contrarian Trade By This Top Wall Street Analyst: Find Out Why

As investors continue to flock to technology firms on the back of the AI boom, contrarian investors on Wall Street are contemplating the next move to profit on setbacks from the current market euphoria.

Michael Hartnett, chief investment strategist at Bank of America, suggested the ultimate contrarian trade in June may involve long positions in Chinese equities monitored by the Hang Seng Index and short positions in artificial intelligence stocks.

Not For The Faint Of Heart: This is not the sort of trade for the faint of heart, and requires guts and determination given the stark difference in performance so far this year. 

The Hang Seng Index is down 9% year-to-date compared to the 33% spectacular gain posted by the tech-heavy Nasdaq 100 index, which is closely tracked by the Invesco QQQ Trust Series 1 QQQ.

Hartnett Takes Bearish Stance on Tech Amidst Flock of Investors: The extraordinary inflows into tech-related funds over the previous weeks was a detail grabbing Hartnett's attention.

The expert noted that tech-related funds experienced the highest monthly inflows since Feb. 21, as well as the highest weekly inflow ever at $8.5 billion.

"We remain bearish" and "tech wins when growth is scarce and rates are falling," Hartnett said. 

However, "tech equities have heavily discounted a Fed pause in June, leaving potential China stimulus as a bullish June surprise," he added. 

The third quarter of the year is a "bear story," especially if Fed rate hikes resume, as liquidity in market is set to drop by more than $1 trillion in the next three months, according to the expert. 

Chart: Nasdaq 100 vs. Hang Seng Index, Nearing All-Time High

"The Magnificent Seven Tech" vs. the Remaining 493 S&P 500 Stocks: The vast performance disparity between the seven tech titans of the S&P 500 index and the remaining 493 companies of the index is another factor that lends credence to Hartnett's contrarian views. 

• An equal-weighted index made by Apple Inc AAPL, Microsoft Corp MSFT, NVIDIA Corporation NVDA, Alphabet Inc GOOG GOOGL, Amazon.com, Inc. AMZN, Tesla Inc. TSLA and Meta Platforms Inc. META would have generated a performance of 57% year to date.
• The rest of the 493 S&P 500 companies are up 2.5% year thus far. 

Read More: Analyst Labels AI As 'Infant Bubble,' Warns Federal Action Could Burst It: 3 Investor Lessons From Dot-Com Collapse

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