AI News Driving Tech ‘Building Blocks’ Stocks like Nvidia: Advice from Veteran Investors
As AI mania continues to grip the tech world, seasoned investors Inge Heydorn and Jenny Hardy advise investors to choose tech companies carefully, given that high valuations could make earnings vulnerable. Heydorn and Hardy, who work on the GP Bullhound Global Technology Fund and run a hedge fund together, suggest looking beyond short-term volatility, as tech investments are driven by several long-term secular themes that will continue to play out despite a macroeconomic weakness. The duo advises investors to focus on the “building blocks” of AI infrastructure, choosing semiconductor and semiconductor capital equipment companies like Nvidia, Advanced Micro Devices, Infineon, Cisco, Microsoft, ServiceNow, Palo Alto, KLA, ASML, and Applied Materials. The pair also backs semiconductors that cater to electric vehicle (EV) cars and green energy projects, rather than EV makers like Tesla, where they see competition, notably from China. In the near term, they suggest investors watch out for sales numbers and AI mentions from Taiwanese companies TSMC, mobile chip group MediaTek, and Apple supplier Foxconn.
Related Facts:
– Nvidia recently forecasted record revenue, backed by a “killer AI app.”
– Tech giants like Microsoft, Apple, and Alphabet continue to drive tech forward.
– The Dow recently received a Fitch warning over debt wranglings ahead of a long weekend.
Key Takeaway:
Seasoned investors who run a tech-focused private equity fund suggest investing in companies that cater to the “building blocks” of AI infrastructure, such as semiconductor and semiconductor capital equipment firms. Given high valuations in some segments of tech and the potential vulnerability of earnings, investors should choose companies carefully. In the near term, investors should also watch out for sales numbers and AI mentions from Taiwanese companies TSMC, mobile chip group MediaTek, and Apple supplier Foxconn.
Conclusions:
While AI mania continues to drive tech valuations to new highs, investors should keep an eye on the underlying driving forces behind tech investments. In the case of AI, companies that manufacture the infrastructure needed to develop and run AI applications remain promising investment prospects. Additionally, investors should be wary of overvalued tech stocks and macroeconomic risks that could affect earnings.
