How to Bet on Artificial Intelligence: Invest in Nvidias, Not Teslas!
Despite the huge volatility, the advantage of technology stocks lies in being driven by many long-term themes, and many tech giants have provided more certainty.
NVIDIA has given a record-breaking revenue guidance for Q2, pushing up Nasdaq futures by about 2%.
Indeed, thanks to it and several other giants such as Microsoft, Apple, Alphabet, etc., tech stocks seem unstoppable:
Inge Heydorn, partner at GP Bullhound Global Technology Fund, and portfolio manager Jenny Hardy suggest being cautious in stock selection, as the high valuations of some tech stocks may make their profits fragile.
Heydorn said: "But aside from volatility, the advantage of tech stocks is that they are driven by many long-term themes." GP Bullhound invests in leading tech companies globally, managing assets of over $1 billion.
How to invest in AI?
"We try to ensure that we invest in these more resilient sectors. Artificial intelligence is a perfect example - Microsoft, Amazon, or Google will not fall behind in the AI race - they will all maintain spending, which will continue to drive the performance of semiconductor companies higher."
She said: "We consider the way to invest around (AI) is to build infrastructure, which is actually betting on semiconductor companies."
NVIDIA, AMD, TSMC, Infineon, Cisco, NXP, Microsoft, ServiceNow, and Palo Alto PANW are all in their investment portfolio.
They are also bullish on the semiconductor capital equipment industry, including companies such as KLA Semiconductor, Lam Research, ASML, and Applied Materials.
Don't invest in Tesla
Hardy said that NVIDIA's performance proves that "the AI spending race has begun, and the adoption of this technology is widely spreading, which is indeed a new normal."
She said they see the benefits of the entire AI value chain - CPU providers, network infrastructure operators, memory and semiconductor equipment manufacturers.
Hardy said there are currently two major tech trends - "comprehensive AI and power semiconductors driven by electric vehicles and green energy projects."
But GP Bullhound avoids electric vehicle manufacturers such as Tesla because they face a lot of competition. "Ultimately, they will need semiconductors, and semiconductors can maintain this pricing power, while car companies cannot do so due to competition," she said.