Why AI Stocks Could Go Boom

seekingalpha04-23

The S&P 500 Index is experiencing a correction, with a potential 10% pullback to around the 4,800 level. Yet, the bottom is likely near.High-quality AI-related stocks have corrected significantly, ...

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Yet, the bottom is likely near.High-quality AI-related stocks have corrected significantly, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4685131-why-ai-stocks-could-go-boom\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Why AI Stocks Could Go Boom</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy AI Stocks Could Go Boom\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-23 02:21 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4685131-why-ai-stocks-could-go-boom><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The S&P 500 Index is experiencing a correction, with a potential 10% pullback to around the 4,800 level. Yet, the bottom is likely near.High-quality AI-related stocks have corrected significantly, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4685131-why-ai-stocks-could-go-boom\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2264538146.SGD","symbol_name":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4685131-why-ai-stocks-could-go-boom","article_id":"2429772879","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1392461176/image_1392461176.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2429772879","pubTimestamp":1713810071,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The S&P 500 Index is experiencing a correction, with a potential 10% pullback to around the 4,800 level. 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Yet, the bottom is likely near.High-quality AI-related stocks have corrected significantly, providing a buying opportunity for the next move higher.The Fed will likely cut rates soon, which is a constructive dynamic for stocks and other risk assets.Despite the possibility for more near term volatility, I am keeping my year-end SPX target in the 5,700-6,000 range.   J Studios The correction we've discussed recently has finally materialized and may be gathering more steam. In my \"prophet report\" on April 2nd, I said: \"In my view, there are several possibilities for a possible correction. The S&P500/SPX (SP500) could experience a 5% pullback to around 5,000 in a base-case scenario and roughly a 10% correction to the 4,700-4,800 zone in a worse-case outcome.\"  While the S&P 500 (SPX) overshot the base case pullback scenario and could be heading to our 10% correction buy-in zone, the bottom is likely near. The SPX 1-Year Chart  SP500 (StockCharts.com | Advanced Financial Charts & Technical Analysis Tools) The SPX has declined for six consecutive days and is down roughly 6% since I discussed the near-term market top in early April. It's also becoming significantly oversold now. The CCI hit its lowest point in the last year, the RSI is approaching 30, and the full stochastic is below 5. The SPX is also well below its 50-day MA and is approaching the 10% correction mark around the 4,800 zone. Also, while the SPX has shed about 6%, we've seen a substantial consolidation and rotation, and many high-quality stocks have corrected by considerable margins just in time for significant tech earnings in the coming weeks. For instance, the \"Nasdaq 100 ETF\" Invesco QQQ Trust ETF (QQQ) has declined by about 9% from its recent high. Nonetheless, some of the top AI-related stocks have gotten hammered much worse. For example, many top tech companies have corrected considerably now that they are entering or approaching our long-term buy-in levels.    Nvidia (NVDA): 22%   Super Micro (SMCI): 42%   Tesla (TSLA): 45%   Advanced Micro Devices (AMD): 36%   Palantir (PLTR): 25%   Arm Holdings (ARM): 48%   Meta Platforms (META): 10%   Amazon (AMZN): 8%   Microsoft (MSFT): 7.5%.   The declines have been substantial and massive. However, now is no time to panic. Instead, now is likely the appropriate time to buy the dip. High-quality AI-related stocks did precisely what we needed and expected. They corrected into earnings, providing an excellent opportunity for the next move higher into H2 and year-end.  This week, Tesla reports on Tuesday, Meta and Qualcomm (QCOM) on Wednesday, and Microsoft, Intel (INTC), and Alphabet (GOOG, GOOGL) will report earnings on Thursday. This is the heart of earnings season, and we have more action-packed tech names reporting next week.  Fundamentally, Not Much Has Changed We saw massive run-ups in high-quality tech stocks late last year and in the first quarter. More recently, we've seen significant pullbacks because trees can't grow to the sky. We need healthy corrections to bring market conditions and valuations back in line before the next round of buying can begin. AI Remains a Massive Driver AI-related sales projections (Statista - The Statistics Portal ) The AI market potential remains massive. We could see around $400B in AI-related revenues this year, but the sales figure is expected to grow exponentially to approximately $1.85T by 2030. This dynamic implies that the top companies in these segments have enormous potential and could immensely increase their revenues and profitability in future years. The Fed Will Likely Cut Rates Soon Rate probabilities (CMEGroup.com ) Despite some increases in expectations of \"higher for longer,\" there's about a 65% probability that the Fed will cut rates in or by September. Moreover, the rate cut probability pendulum may have swung too far in the hawkish direction, and the probability of a rate cut sooner than later could increase as future inflation readings may come in better than anticipated. In my view, we've had a normal transitory uptick in CPI inflation, and the market has overreacted. Inflation Continues To Trend Lower We saw some slightly higher-than-expected CPI inflation numbers recently. However, I've explained why the CPI is not my preferred inflation gauge. The Fed looks at the core-PCE when it discusses its 2% target range, and core-PCE continues trending in the right direction. Core-PCE % YoY Trend  Core-PCE (TRADING ECONOMICS | 20 million INDICATORS FROM 196 COUNTRIES ) The core-PCE continues trending lower, and the most recent reading was 2.78%, very close to the Fed's target rate. Also, if we look at other inflation gauges like Truflation, real-time inflation is below 2%. Therefore, despite the market's recent tamper tantrum, the Fed will likely cut rates soon, and it could begin earlier than September, with an initial rate cut occurring in June. This is a highly constructive dynamic for stocks and other risk assets, in my view. Stocks Remain Relatively Inexpensive P/E ratios (WSJ.com ) The Nasdaq 100 (NDX) is below 30, and the SPX is around 22.5x on a TTM basis. However, the SPX is between 20 and 21 relative to its following twelve-month estimates. Moreover, suppose the SPX beats earnings (as I suspect it will). In that case, we could be looking at a forward P/E ratio below 20, which is relatively cheap, provided the growth dynamic and the tilt toward a more accessible monetary stance soon. At 26 times forward EPS estimates, the Nasdaq 100 appears even cheaper because the growth is more significant than in the broader market. As many top tech companies could surpass expectations, the forward P/E may be closer to 25-24. The R2K appears most attractive, with only a 21.5 forward P/E ratio, suggesting that small and mid-caps could outperform in the coming years.  Despite the recent pullback and the possibility of more volatility in the short term, I'm keeping my year-end SPX target range at 5,700-6,000.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429772879"}