Shares of ASML Holding (ASML) closed up 8.85% today after the company reported record orders for its chip-making equipment in the fourth quarter. ASML sales grew 12.5% year-over-year. And orders more than tripled from the third-quarter. I added shares of ASML Holding to my long-term 50 Stocks Portfolio on December 12, 2023. The position is up 17.6% since then as of the close on January 24.
It’s important to remember exactly how young artificial intelligence is as a market product. I certainly don’t think it’s possible to project the long-term winners on either the software or hardware side. Remember the days when Apple (AAPL) thought it was worth buying a Super Bowl add to urge consumers to smash the IBM PC empire? But I do think the hardware road map is petty clear for the next two to three years. Which is why I’m adding shares of Advanced Micro Devices to my portfolios tomorrow.
Artificial intelligence really is a paradigm-breaking, transformative technology. Right now, investors are so enthusiastic about the sector, especially the obvious leader Nvidia (NVDA), that we’re looking at a potential bubble that will collapse with much gnashing of teeth and I-told-you-so “wisdom” casting doubt on the reality of the entire endeavor. I think a bubble is indeed possible. Nvidia did trade at a trailing twelve-month price-to-earnings ratio of 196 on May 31, after all. But I think you do want to own the sector now–because the breaking of the bubble, if it does break is, in my opinion, two quarters or more away. And you want to own the sector for the long run–say, 10 years or more–because it is such a game changer for so much of the economy. But what to own? I’ve put together a list of the 10 stocks that I think are the best way to participate in the AI gold rush.
If you liked the Trump administration’s trade war with China, you’ll love the Biden administration’s new, more dangerous, escalated version. Rather than slapping tariffs on Chinese goods, and inviting retaliatory tariffs by China on American products, the Biden administration war limits the same of advanced semiconductors and chip-making equipment to Chines companies. The action is aimed straight at the heart of China’s efforts to build its own chip industry. And it plays right into a belief, stoked by China’s President Xi Jinping, that China is the victim of a Western plot to prevent the country’s rise to its rightful place in the global order. And the opening blows in this trade war come just as President Xi aims to be installed as China’s newest preeminent leader with a status near that of Mao. I don’t know what the retaliation from China will be, but it is unlikely to stop with a few restrictions on how U.S. companies, such as Tesla (TSLA) and Apple (AAPL) operate in China. The situation is so dangerous because it is so uncertain and so open-ended.
After the close today October 6, Advanced Micro Devices (NASDAQ) announced that its preliminary estimate of revenue for the third quarter would be just $5.6 million. That’s well below Wall Street forecasts of $6.71 billion.
Despite today’s CPI inflation bounce and the continuation (flagging but still in business) of July’s Bear Market rally, my goal is still to sell into rallies. I don’t think this Bear Market is over and done with. I see another down leg when investors and traders admit that the Federal Reserve isn’t going to be able to get inflation under control with just another 100 basis points of interest rate increases (and, the other part of this hopeful scenario, to begin cutting interest rates by the middle of 2023.) So I’ll be making three sells today out of my Jubak Picks Portfolio to take advantage of the CPI bounce.
First, it was Nvidia (NVDA) cutting its guidance for revenue and earnings due on August 24. Today, August 9, it was Micron Technology (MU) warning that its revenue for the fourth-quarter revenue may come in at or below the bottom end of a forecast range provided in the company’s earnings call on June 30. Micron is scheduled to report on September 27. All this comes as the market is on edge anyway ahead of tomorrow’s report on CPI inflation. As of the close on Tuesday, August 9, shares of Micro Technology were down 3.74%. Shares of Nvidia were down another 3.97% after closing down 6.30% yesterday.
We’ve had a great one-week rally/bounce/whatever in chip stocks. Nvidia, for example, was up 17.42% for the week that ended on Thursday, July 21. Advanced Micro Devices (AMD) was up 8.71% in that same period. But I think there are good reasons for thinking that this move was just a very short-term gain in a long-term Bear Market that remains in place. So today, I’m taking some chip money off the table.
The Chips for America Act looks headed to a cloture vote in the Senate on Thursday. As the $52 billion bill now stands, it includes $39 billion for semiconductor companies to “build, expand, or modernize domestic facilities.” Here are the winners as I see them.
The bill, known as the Chips for America Act, is a pared-down version of a broader set of competition measures and would authorize $52 billion in grants and loans for chip manufacturers, as well as a new, four-year 25% investment tax credit for chip making. Senate Majority Leader Chuck Schumer has pressed for a vote today with final passage as early as next week.
My one-hundredth-and-thirtieth YouTube video “Market gives Fed a razzberry” went up today. Yesterday, the Fed announced that it would raise rates by 50 basis points but that it was not looking to raise by 75 at the June or July meetings. In response, the market had a huge rally, especially in tech stocks, as it had b been widely assumed that those meetings would see the larger 75 basis-point increase. All that has changed today, when upon second thought the market no longer likes this news, with the S&P 500 and NASDAQ Composite giving back all the gains they made yesterday plus a little more. I look at a few specific stocks, like Amazon and Advanced Micro Devices, and talk about why I think the selloff in tech stocks is going to continue.