When the AI Trade Cracks, John Rogers Says Look at Peanut Butter

The S&. P 500 closed above 7,800 for the first time on Tuesday, and semiconductors did nearly all of the heavy lifting. That's the kind of narrow, one-theme market that gets value investors out of bed in the morning.

Count John Rogers among them. The co-CEO of Ariel Investments, the Chicago firm that's been hunting cheap stocks since 1983, says he expects overlooked consumer names to carry the next leg once the AI trade loses its grip. His marquee pick is J.M. Smucker, the company behind peanut butter, Folgers coffee, and a shelf of jelly brands most shoppers couldn't name if you spotted them a letter. He named four consumer stocks in total. The other three weren't spelled out in the initial coverage, which is a shame, because the list matters more than the headline.

Here's the pitch. Plenty of those consumer brands trade under 10 times next year's earnings, according to Rogers. The market's darlings in chips and AI infrastructure, meanwhile, are priced for a future that hasn't shown up yet.

How We Got Here

Start with Tuesday. The index punched through 7,800 for the first time, and chip names did the punching. That isn't a broad rally. It's a very expensive handful of stocks dragging everything else along behind them.

Rogers has seen this movie. He says the setup rhymes with 1999 and early 2000, when internet stocks sucked up all the oxygen, valuations detached from any reasonable earnings math, and the whole thing came apart over a matter of weeks. The firms left standing weren't the ones with the flashiest story. They were the ones selling toothpaste and coffee at eight times earnings.

That's the thesis. Granted, it's a familiar one. Value managers have been calling the top of the AI trade for two years, and so far the trade keeps winning. Cycles do end, though. Every single one of them has so far.

What Actually Changes

The impact here isn't one event, it's a rotation. If Rogers is right, money bleeds out of the crowded AI names and finds its way into consumer staples nobody's paid attention to since 2022. Smucker and its peers get a re-rating, not because earnings explode, but because the multiple on those earnings stops being an embarrassment.

The skeptics will tell you consumer staples have their own problems. Private label is chewing into branded food margins. Grocery volumes are soft. GLP-1 drugs are quietly changing what people put in their carts. All true. Proponents would counter that those worries are already baked into the price, which is the whole point of buying something at under 10 times forward earnings.

The question worth asking: is cheap enough on its own? A stock at nine times earnings can sit at nine times earnings for a long, long time.

I'm not entirely convinced the AI trade is anywhere near finished, either. Enterprises are still spending. The capex numbers are still climbing. Calling the top is a track record business, and almost nobody has a good one.

What to Watch

Watch market breadth. If the S&. P 500 keeps printing records while only a few chip names advance, concentration risk grows and the case for Rogers' rotation gets stronger. If breadth widens and more sectors join in, the urgency fades fast.

Watch the next round of consumer staples earnings. Anything resembling stabilizing volumes or better pricing power hands the value crowd ammunition. Another quarter of shrinking volumes makes the whole narrative a lot harder to defend.

And watch AI capex guidance. That's the number that matters. If hyperscalers start trimming spending plans, this won't be a slow handoff. It'll be a stampede, and the peanut butter aisle will look like a life raft.

Color me skeptical, but I've covered enough bubbles to know the last thing anyone wants to hear is that the cheap boring stocks are the answer. That doesn't make it wrong.