Louis Krauskopf
NEW YORK (Reuters) – Nvidia’s stunning rise has money managers looking to capitalize on stock market interest in artificial intelligence to make money as Nvidia’s meteoric rise sparks a search for other companies to leverage the technology. .
Shares of Nvidia, the AI industry’s leading chip, are up about 60% this year after tripling in 2023. The soaring stock price has increased the company’s market capitalization to approximately $2 trillion, making it the third largest company in the United States by market capitalization. After Microsoft and Apple.
Wall Street is also starting to look for other AI-focused companies in hopes of catching a large-scale move. There’s one thing he says investors agree on, whether they’re focused on the broader chip industry or betting on other companies in the value chain. That means AI is here to stay.
“This is not a fad,” said Francisco Vido, senior portfolio manager of large-cap focused funds at F/m Investments. There are too many cases where it can be done.” bottom line. “
Excitement over AI pushed the Nasdaq Composite Index to an all-time high on Thursday, while the S&P 500 also hit a new all-time high. Both indexes are up about 7% since the beginning of the year.
The signs of a growing obsession with AI are now easy to spot. Goldman Sachs recently announced that mentions of AI in conference calls reached an all-time high in the fourth quarter. Analysts at the bank estimate that if widely adopted over the next decade, artificial intelligence technology could boost U.S. productivity growth by 1.5 percentage points.
Morgan Stanley survey of chief information officers suggests 2024 is the ‘year of investing in AI’, with CIOs naming AI/machine learning a top priority for the first time the bank said in a note this week.
Bido’s fund owns a huge stake in Nvidia, but it’s also branching out into other AI businesses, including rival chipmakers Advanced Micro Devices and MongoDB, as AI transforms data infrastructure needs. As a result, there is a possibility that demand for its database products will increase.
These stocks have soared, albeit less dramatically than Nvidia and some other AI businesses that have recently captured the market’s attention. For example, while both companies’ stock prices have doubled in the last year, AMD’s stock is up 30% since the beginning of the year and Mongo’s is up 9%.
By contrast, the stock prices of server component supplier Supermicrocomputer and chip designer Arm Holding rose about 200% and 90%, respectively, in 2024. SMCI stock price tripled in 2023.
Ivana Derevska, founder and chief investment officer of Spear Invest, said Nvidia remains the Spear Alpha ETF’s largest holding. But the exchange-traded fund is also looking to capitalize on the growing need for cybersecurity related to AI by owning a stake in cybersecurity expert Zscaler. Meanwhile, the fund’s position in Snowflake aims to capitalize on data infrastructure demand.
Of course, despite the technology’s increased prominence, AI companies remain at risk of volatile stock prices. Snowflake stock, for example, fell 18% on Thursday after the company projected annual sales that were lower than Wall Street’s expectations and revealed an unexpected departure from its CEO.
Baker Avenue Wealth Management has reduced its holdings in Nvidia due to the stock’s rise to avoid taking too much of a position in clients’ portfolios, said King Lip, the firm’s chief strategist.
But the company recently began building a position at Nvidia’s main supplier, Taiwan Semiconductor.
“For those who still want to get into artificial intelligence but are a little cautious about NVIDIA’s stock price, I think Taiwan Semi is an easy choice,” Lipp said.
Que Nguyen, chief investment officer for equities at Research Affiliates, looks for reasonably valued semiconductor companies that could benefit from AI. These include Lam Research Corp., which supplies equipment to the semiconductor industry, and Micron Technology, which makes memory chips and data storage.
Lam Research’s stock is up about 20% since the beginning of the year, while Micron’s is up 6%.
“Large language models require storage, not just processing,” Nguyen says.
Of course, many investors are content to maintain a large position in Nvidia.
The Martin Currie US Unconstrained Fund holds nearly 10% of its assets in Nvidia, the maximum the fund allows for a single stock, said portfolio manager Zefrid Osmani. He believes the company can maintain a competitive advantage because it spends more on research and development than its competitors.
“We have strong conviction in the name and that is expressed by the high position size,” Osmani said.
(Reporting by Louis Krauskopf in New York; Additional reporting by David Randall in New York; Editing by Ira Iosebashvili and Matthew Lewis)
