LIVE MARKETS-Investors place more bets on AI with all eyes on Vegas

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INVESTORS PLACE MORE BETS ON AI WITH ALL EYES ON VEGAS

Shares of chipmakers are soaring on Monday with artificial intelligence on the forefront of investors minds ahead of a keynote speech from AI darling Nvidia' NVDA.O CEO Jensen Huang at the annual CES trade show later in the day in Las Vegas.

"Today is the beginning of the consumer electronics show in Vegas. It used to be all about the consumer but now it's all about AI," said Kim Forrest, chief investment officer and founder of Bokeh Capital Partners LLC.

And while keynote speakers have occasionally caused a stir at CES in years past, Huang's appearance at a time when investors are hyper focused on AI seems to be sparking more excitement than usual across chips and the broader tech sector.

While Nvidia's shares are up ~5% on Monday, the Philadelphia semiconductor index .SOX is up 3.7% with its biggest gainer Micron technology MU.O, which is rallying >12%.

"There are high hopes Huang's going to give outrageous numbers, that data centers will cover the earth and we'll be able to live our best lives," said Forrest.

And she noted that, reinforcing the build-up excitement was a blog post on Friday from Microsoft MSFT.O, discussing its plans to invest about $80 billion in fiscal 2025 on developing data centers to train artificial intelligence $(AI)$ models and deploy AI and cloud-based applications.

Also, with AI in mind, nuclear power companies Constellation Energy CEG.N and NRG energy NRG.N are rallying ~4% and 0.8% respectively, as investors bet that they will benefit from increasing demand for power from an expansion in the number of data centers needed to support AI.

The power company gains are against the grain of declines in the broader S&P 500 utilities sector .SPLRCU, which is the weakest of the benchmark's 11 major sectors, falling 0.7%.

But while Forrest sounds enthusiastic about AI, she is cautious about how investors are approaching the technology.

"Investors are piling into names like Nvidia assuming we need more and more data and more and more data centers," she said, "It's just going to take a more nuanced approach."

"So far to improve the (AI) models they've thrown more chips and more data at them, but we're now at a point where the models need a more nuanced change in the algorithm to learn more. More data centers, more data, is not going to equal smarter, better models," Forrest said.

(Sinéad Carew)

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