Big tech companies like Nvidia (NVDA) continue to rally profits and the Nasdaq (^IXIC) is soaring, with Nvidia alone up nearly 165% year to date.
Doug Clinton, Managing Partner at Deepwater Asset Management, joins Market Domination to discuss strategies for investors looking to incorporate Big Tech into their portfolios, as well as some lesser known stocks to watch.
Clinton spoke about one of the hidden gems in the technology space: “We still like Arista (ANET). In fact, last week was a great week on top of Broadcom (AVGO) earnings. Broadcom talked about strong networking demand, and they actually raised their networking revenue outlook given the reality of strong demand for Ethernet-based products in AI data centers. Arista has built their portfolio around Ethernet, so we think they’re well positioned to benefit from the trends we’re seeing at Broadcom.”
For more expert insights and the latest market trends, click here to watch this entire episode of Market Domination.
This post Nicholas Jacobino
Video Transcript
As we’ve discussed many times before, technology stocks are continuing to perform well, with the Nasdaq Composite Index hitting a new intraday record and closing at a record high for the fifth consecutive day after posting a perfect week in Friday’s session, and tech giant Apple continuing its weekly gains.
We’re using the Yahoo Finance playbook to look at how we look at the bigger picture. Doug Clinton, managing partner at Deepwater Asset Management, joins us to discuss this. Doug, it’s great to have you. We’re seeing these mega-cap tech giants continue to rise.
I know you’re all looking at those closely, but I think you’re also looking at a lot of the kinds of things that we don’t talk about every day.
Here we only show the big picture.
Do you feel like things are getting worse, or do you feel like there’s still a lot of positives?
I feel there is still room for further growth.
And the bottom line for us, Julie, is that we think we’re still in the relatively early stages of this AI-driven bull market.
It may feel like we’re approaching the end of an economic cycle, but in fact, when we surveyed 1,300 people at X, almost 90% of respondents said that we’re already in a bubble that will either continue or burst, or that we’re not in a bubble yet, but one will come.
So, it feels like the market is just now adapting to the reality of AI.
And our view is that it’s still early.
But I think the way to position yourself for that is to be in a place where you can add alpha and prepare your portfolio appropriately.
What we want to do in deepwater is to invest in both the public and private markets.
On the public side, we really like the hardware sector.
It’s been the best performing sector this year.
We believe there is still a lot of room for spending on AI infrastructure on the private side.
We get into AI software because that’s where the pure AI companies are embracing the data bricks.
Yeah, and our latest deepwater investment, Xa I.
You can find those types of investments there.
Doug, as you know, in the public markets, some of the AI hardware stocks have seen some strong gains.
Doug, are you going to add to that or are you going to wait for a pullback at this point?
We own Aisa.
Josh, we still like Aisa. In fact, last week was a great week for Broadcom on top of earnings. Broadcom talked about growing networking demand and actually raised their outlook for networking revenue given the reality that there’s strong demand for Ethernet-based products in the AI data center. This is a risk for the company that has built its portfolio around Ethernet.
So I think they’re likely to benefit from trends like we’re seeing with Broadcom.
Um, and also, what strikes me as I’m looking at the different options that you listed is that even if you’re talking about memory chip makers like Arria or SK or Mikron, they’re, for lack of a better word, a less glamorous space, in other words, they’re not getting as much attention, right?
Um, so throughout this whole situation, I mean, the stock price still did well?
But do you think they are receiving a more attractive review than the more high-profile ones?
I think some of that is true, but more than that, I think we need to think about what has been factored into the price up until now.
When we look at a stock like NVIDIA, obviously, the company has seen phenomenal growth in revenue, which is what’s driving the share price movement.
Well, I think a company like ERISA Verta is also one of our favorite companies that offers liquid cooling solutions.
I think these are stocks that actually still have room for the numbers to go up.
And that’s what we’re looking for, beyond the big players like NVIDIA and Com.
We want to ensure that there is still potential in the market that has not yet been fully realised.
And I think if you just look at the numbers, these stocks are actually cheaper than they look.Doug, you know, I haven’t had a chance to talk to you since Apple’s big software show.
Doug, I’d love to hear your thoughts on this, because, you know, that’s the story going into this show, at least in some quarters.
You know, Apple has been lagging behind in this AI race, but Tim Cook has obviously taken to the stage to try and change that.
That story.
Doug.
Do you think he did it?
There are two sides to this.
Well, if you’re an AI nerd like me, you probably won’t be impressed, so that’s a tough one.
If you’ve been following the AI space really closely, you’re not seeing anything from Apple that you haven’t seen from Google in Open AI, so it didn’t surprise me, but more importantly, the average Apple customer, the one who doesn’t care about chat GP T, probably doesn’t use it on a daily basis.
They probably saw some features, like Siri might actually work for once.
I think this means a lot to the average Apple customer when you think about customers who need to upgrade and really drive device growth in the last 18 months or so when Apple hasn’t seen any device growth.
It’s these customers that matter, and Apple has probably done enough with its AI measures to make them want to buy a new AI-enabled iPhone in the next year or two.
So, were you one of the people who bought Apple shares the day after the presentation began?
I can’t discuss our recent trading activity as we’ve seen the stock price soar to new records.
But what I’m saying is this is about large caps overall this year.
In fact, Google and Meta are two names we like because they are both leaders in the AI generative model space.
I think there are really only four companies that have the potential to develop artificial general intelligence and win the AI race.
That’s Open AI, Google, Meta, and Xa, and as I mentioned, Deepwater is Elon’s company that’s actually invested in this.
We think that’s a good place to allocate capital. And I think that’s a really interesting point because as much as there’s been buzz around the software side of AI, it’s not necessarily accessible to a lot of people. A lot of the exciting things are still happening in the private sector.
So what can people who didn’t get these raises do?
Like you said, how can we access it?
Perhaps it would be better to approach those companies with vendors?
The short answer is, maybe look back at some of the hardware companies and wait until some of the AI companies go public, or if there are vendors you can work with that have access to the private markets, I think that’s worth considering as well.
But I think the easiest way, and the opportunity that’s open right now for a lot of AI companies, is probably to wait for those companies to go public.
And we expect to see some of that happening over the next six to 12 months.
Doug, thanks so much for having me on the show.
Thank you for coming, my friend.
Thank you, Josh.
Thank you, Julie.
