Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.
It’s a tale as old as time: A novel technology receives hyperbolic praise about its world-changing possibilities, then comes the eye-popping VC funding, followed by an electric jolt to public market prices—just for it all to come crashing down.
We saw this pattern play out during the 2000s dot-com boom. We saw it with crypto. We saw it with crypto, again. Then, we saw it once more with crypto.
Are we seeing it right now with AI?
That’s the question everyone rushes to ask as soon as the Nasdaq drops more than a point these days. And no stock more clearly represents how the hand of AI has lifted companies from relative obscurity to superstardom than Nvidia, which is up about 2,190% over the past five years.
Over the past five trading session, however, the company has dropped nearly 14% on the heels of a less-than-ecstatic second-quarter earnings report and growing antitrust concerns.
Is this a buying opportunity? To tech bulls, now is a great time to invest in the chipmaker at a relative bargain. After all, demand is still growing for Nvidia’s ultra-powerful GPUs.
- Bank of America analyst Vivek Arya reiterated his price target of $165 on the stock in a note yesterday. Although he acknowledged that “market forces could enhance near-term stock volatility,” he pointed out that the stock is the cheapest it has been in the past five years based on its PE ratio.
But… Not everyone agrees that tech stocks up by triple digits over the past year are really a great deal right now.
- “It’s time for every big cap tech investor to start questioning the ability of these stocks to continue to carry the load, as the AI hype cools down as they all breathe the same economic air as everyone else,” Chief Investment Officer at Bleakley Financial Group Peter Boockvar wrote in a note this week.
The bottom line: The vast majority of analysts believe that there’s still room for AI to grow, and don’t foresee the entire house of cards coming down. But if you’re already exposed heavily to tech in your portfolio, other sectors, like defensive picks, could give you a better bang for your buck.—LB