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How to Protect your Wealth by Investing in AI Tech Stocks

AI Tech Stocks - The Good, the Bad and the Ugly

Companies / AI Dec 22, 2023 - 11:03 PM GMT

By: Nadeem_Walayat


Ho Ho Ho , Merry Christmas, have you all been good boys and girls during 2023? What do you want Santa to bring you for Christmas? Pop S&P 4800+ down your chimney? New all time highs in a number of AI tech stocks to celebrate Christmas morning.... Your family will wonder why this year you are so much more full of christmas spirit!

Understand this if you invested in the stock market to any significant degree during 2023 then you went AGAINST the herd because the herd (Institutions and retail investors) plowed most of their money into money market accounts having been talked into by the likes of the clowns on the CNBC cartoon network, MSM and the blogosfear. In fact it is even worse than that as Equity Funds experienced a net outflow of about $250 billion during 2023. so not only did investors not invest, they actually sold stocks. So what is going to happen when they see rates on their money market accounts drop? They are going to BUY STOCKS! Which will be NEAR ONE AND HALF YEARS LATE TO THE PARTY!

The rest of my latest analysis Stock Market Santa Rally to the MOON! S&P 4800+ has first been made available to Patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $5 per month, lock it in now at $5 as this will soon rise to $7 per month for new sign-ups.

AI Tech Stocks - The Good, the Bad and the Ugly

The S&P rocketed higher to basically play catch up to where it should be trading at by now as the bears got slaughtered and those waiting to buy the dip panic bought. Though as I often state the S&P is a nothing burger, the only thing I was focused upon was to accumulate target stocks during earnings season volatility in respect of which the market gave us a number of opportunities, many of which would have been missed if one blindly just focused on the S&P. We got to add to Google, AMD, TSMC, Qualcom, ASML, Lam Research, Amazon and Tesla amongst others. What about META? What about Broadcom? Getting discounts in good stocks is always a case of GETTING LUCKY! In the comments the impression I get is fear if losing a few pennies made when the name of the game is to gain and maintain exposure because without exposure one will never get X returns.

What's next? I doubt that the rally can sustain it's current momentum which would put the S&P at a new bull market high by the end of next week! More likely is a correction to consolidate the advance followed by a more orderly advance, i.e. the S&P trades to 4300 on break below targets support at 4260 to suck in fresh bear meat into the grinder before resuming the bull run. My base case is 4510+ by the end of 2023, though risks are to the upside i.e. a new bull market high above 4610 is doable before year end.

The rip your face of rally has taken place in the midst of extreme bearishness as the AAII survey illustrates, 50.3% BEARISH! That is just nuts!

How can so many folks be so wrong? It's once more folks getting infected by MSM clowns and fool analysts which tends to infect the comments from time to time when I am asked about this or that persons usually bearish view, where my response is that MSM is populated by turd brain academics which is why it is dying. In fact virtually everything that MSM focuses upon is a nothing burger, the biggest of which is the RECESSION IS COMING! Guess what? AI tech stocks already HAD their recession in 2022! Which was FLAGGED ahead of time by the metrics! They told you that tech stocks were going lower given that virtually every stock had RED EGF's at the time, now it's mostly BLUEs! The recession, recession, recession that most focus on is a nothing burger! The signs for which are not visible in most target stocks. Each stock has cycled in and out of recession in it's own time so what the likes of GDP states is irrelevant, much as I was warning to expect early 2022.

So as I repeat from time to time that whilst a recession may be coming, however I am not seeing any signs of it actually becoming manifest, even the shrill cries of a US housing market crash in the wake of 8% mortgage rates continues to be a nothing burger, where I correctly deduced that unlike the government home owners are smart people who will lock in the low rates, and that faced with out of control inflation, and a collapsing so called safe bond market, then who in their right mind would sell and go to cash or bonds? Thus the recession is coming mantra just could fail to materialise for the whole of 2024! And to be clear I am referring to the US Economy not the basket cases that are the UK and Europe, they are probably in large part already in recession as a function of being rabbits in the headlights, the EU and UK don't have a clue what they are doing which is why apart from housing I choose to keep the bulk of my wealth in US assets.

AI Tech Stocks Portfolio Current State

My portfolio current stands at 86.2% invested, 13.8% cash with rising stock prices acting to reduce the percent cash that is cash.

Portfolio spreadsheet -

Here is a chart that shows the breakdown of my portfolio that is included in the spreadsheet,

My top 10 holdings by value are -

1. Meta
2. Google
3. AMD
4. Intel
5. Qualcom
7. GPN
8. Lam Research
10. SMT.L

Post Earnings EGF Updates for AI Tech Stocks

The good the bad and the ugly of earnings in terms of PE, EGFS (Pre-earnings state) where the name of the game is for stocks to continue to deliver earnings growth which is what delivers the long-run stock price bull runs. Remember at the end of the day as investors the best we can hope for is to accumulate stocks when they are undervalued with a view towards trimming when they become overvalued.

Google $130 : 25 21% 19% (29.5 22% 31%) GOOD
Google beat earnings, the initial reaction to drop down to $121 was nuts! I added a little more. The bottom line is despite all of the doom and gloom out there regarding Google Search being on it's death bed, Google continues to deliver solid earnings growth, the EGF's continue to point to strong earnings growth whilst the PE drops! I am 90% invested and aiming to get to 100% invested. So regardless of all of the noise out there in the MSM, Google remains the Alpha and Omega, the beginning of AI and the end of Mankind!

NVDA $112 : 86 130% 158% (82.1 129% 153%) UGLY
Yet to report earnings on 14th Nov, the EGFS are ridiculous, the stock is floating on another planet! This is what it will be like when AI takes over, exponential! IF Nvidia delivers on HUGE expectations then Nvidia will soar higher, but conversely if it's earnings are not as good as expected then it will be UGLY, the blood bath could take Nvidia below $300 hence I remain lightly invested at barely 2% via DCA nibbling. Nvidia is a tough stock to own at $450 because the direction of travel could be $150 in either direction! It's a coin flip, buy for $600 or sell for $300.

AMD $112 : 44 14% 22% (52.5 32% 76%) GOOD
ROCKETED HIGHER! after a fake out dip to $94! Which illustrates not to take after hours moves to seriously as they either tend to be fake outs or are a mere pinprick of the main move to come. My base case was AMD would rocket higher which is what it did from the next days open. The PE has dropped whilst the EGF's remain robust, definitely a stock to remain invested in for the long-run.

Microsoft $353 : 34 10% 14% (33 9% 19%) GOOD
Microsoft is battling with Google to dominate the AI space, as expected beat earnings, thus just like Google is a no brainier, the only problem is that unlike Google it has remained EXPENSIVE, a difficult stock to accumulate into i.e. why Buy Microsoft at 34x earnings when I can buy Google for 25x? Hence I am only 12% invested. The EGF's remain robust. So where gaining MSFT exposure is concerned it's a case of biting the bullet via DCA.

TSMC $92 : 16 -5% -3% (15 -24% -12%) - BAD
The China invasion dark cloud looms large over TSMC, given that Chinas has PEAKED thus Xi Ping is living on borrowed time in making his wish of parading downtown Taiwan come true. Bad EGF's are somewhat offset by the low PE. The EGF's following earnings have improved a lot, a primary AI stocks that I continued to accumulate during it's dip below $90 to currently stand at 113% invested.

QUALCOM $120 : 14 2% 13% (16 10% 27% ) - UGLY
Ugly in the sense that the stock price has so far failed to respond to strong metrics, delivered an earnings beat which has sent the stock price higher some 15%. Qualcom's metrics remain strong and is one of the few stocks with the potential for a huge upside surprise thus I am 131% invested.

META $315 - 23.7 37% 19% (29.7 29% 42% ) - GOOD
META is my largest single holding, 101% invested where I was eager to accumulate more but it is that good of a stock that it never gave any significant discount, even the S&P plunging down to 4100 failed to budge this AI primary lower. Those who bought and held onto most anywhere near the lows are sitting on near X3 returns! I keep getting asked should I sell META give it's gone up so much! I can only show what I am doing which is seeking to accumulate NOT SELL! There is no point selling one of the best AI tech stocks on the planet! Especially given that it is still relatively CHEAP! Which is a function of earnings growth.

APPLE $176 - 29.7 -11% 5% (29 -11% 6% ) - UGLY
Apple just plain refuses to drop as the herd laps up Apple as though it is going to repeat what it has done over the past 10 years, yes it will grow but it's too big to X10! It's becoming a utility stock. This is why I see it Apple is a HYPE stock, it is not what people think it is which is obvious from the metrics i.e. -11%, 5%, PE 29.4 - That is a slow grower, yes I would buy it but not on a PE of 29.4! It needs to be sub 20 which equates to a price of about $120. One of the primary things keeping it afloat are the stock buy backs without which it would probably be be trading at under $140. Yes Apple stock will trend higher over the long run because the US government will continue to print money on an epic scale and this that which is not being printed will rise in their dollar price. So unless there is a panic sell off, I will continue to lightly accumulate into Apple via DCA towards a target holding of about 20%.

MICRON $72.6 -16.3 -5% -138% (-16 -4% -139% ) - BAD
Micron continues to report losses, this stock has defied gravity which means investors are clearly looking beyond current losses to future profits given that MEMORY CHIPS are a requisite for AI which is why Micron has just started building a new giant chip Fab in the US for $13 billion, with another 4 in the pipeline so lets game play 18 months down the road and Micron is reporting an EPS of say $1.2 per quarter, what would the metrics be? Trading on a PE of 15.8, EGF +4% and +11%. Which means the stock would be fair value so unfortunately for those looking to accumulate, Investors are acting smart by not selling the stock down on current weak metrics, so whilst Micron today is definitely expensive i.e. it should have been dragged below $60 during the correction, but for the same reason I would be a buyer is the same reason why it's not dropping. I am 69% invested, if it continues to rally I may trim a little as the stock is several quarters away from recovery so there is time for the stock to take a temporary dump.

AMAT $139.75 - 20.3 -11% 5% (17 -3% -3% ) - GOOD
Earnings are due to be reported on 16th November, the EGF's are mildly weak but the PE is low, so earnings on balance should be positive. The stock briefly traded down to $128 going into the end of October, which was not quite low enough to trigger any significant accumulation given the buying range of $126 to $112.It's basically a good stock that could deliver a buying opp during earnings as other good stocks such as AMD have already done.

I will cover the rest of the portfolio in batches of 10 stocks during November, as well as look to update the buying levels whilst working in tandem on completing HGR2.

On occasion I get asked when will I sell, I don't have targets to sell at because as the metrics illustrates stocks can get cheaper as they go UP in price, it's more a case of balancing exposure, valuation and cash on accounts, I don't want to be sat 50% in cash, I don't want to be over 90% invested as then I don't have enough powder dry. The sweet spot for me is between about 83% to 88% invested. I'll trim that which I am over exposed to and has become over valued as happened with AMD during May. That and f/x plays a role which is why I also list the stock prices in sterling at $1.3, which means Google at $130 is like buying the stock for $137. This is also a good indicator on direction of travel, i.e. gives a window into what is expensive and what is cheap i.e. right now only Qualcom and TSMC stand out that could be worth further accumulation if I were not already over invested.

Bitcoin $35k

And lastly bitcoin $35k! Even the so called experts have got it wrong, convinced by their various models that bitcoin will only really start to move some time after the halving (April 2024), instead it's moving 6 months BEFORE the halving which is why I have been DCA'ing because the markets never make it easy as inexperienced bitcoin analysts think it will be, they have fallen in love with their models and thus get to learn the hard way that one should always LISTEN to the what the price is saying, when it breaks above resistance i.e. $32k it is telling you your expectations for $20k, even $25k are wrong, those ships sailed on the breakout.

It looks like the halving event is a NOTHING BURGER, sure it was a big deal during past cycles but that was when most bitcoins were yet to be mined, today 92% of bitcoins have already been mined, so the market is moving in response to the fact that future new supply is limited to 8% of market cap! That is now the primary driver for the bitcoin price, not the halving's events, but rather that there are not many more bitcoins left to mine regardless of halving's as the following graph illustrates.

Whilst many vocal cryptoholics remain obsessed with their models pumping out tweets and videos for why Bitcoin will fall before going higher, yes there is always the chance for discounting event, but without exposure one is going to make NOTHING!

Lets do the math -

BTC $35k
RISK = Drops to 25k = -29% draw down
REWARD - Bull run to $99k = +180% potential profit.

So the reward is 6 X the risk of buying today at $35k. So remains good to continue to accumulate via DCA and on the chance of a price plunge.

This analysis AI Tech Stocks - The Good, the Bad and the Ugly was first been made available to Patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $5 per month, lock it in now at $5 as this will soon rise to $7 per month for new sign-ups.

Also gain access to my epic 3 part How to REALLY Get Rich series which is exclusive to patrons.

Part 1 was BIG! >

Change the Way You THINK! How to Really Get RICH - Part 1

Part 2 was HUGE! >

Learn to Use the FORCE! How to Really Get Rich Part 2 of 3

Part 3 Is Huger! And Gets the Job Done! >

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By Nadeem Walayat

Copyright © 2005-2023 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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