To The Moon

Technology stocks have rocketed over the past seven months, with the S&P 500 Technology Sector index surging +31%.

Tech stalwarts like Google, Amazon, Microsoft, Meta Platforms and Nvidia have dominated the S&P 500’s ascent.

It does not hurt that earnings for these companies have soared.

Much of the increase in share prices stems from the market’s mania for all things artificial intelligence (AI).

And above 5 tech titans are starting to enable, provide and utilize AI in a major way.

• For example, Microsoft and Google enable users to make inquiries to their AI platforms.

• Nvidia is the biggest maker of chips that enable AI technology.

Economic experts are excited about AI, too.

Mr Summer says.

According to former US Treasury Secretary, Mr Larry Summers:

• “If one takes a view over the next generation, Artificial Intelligence (AI) could be the biggest thing that has happened in economic history since the Industrial Revolution.

• “AI offers the prospect of not replacing some forms of human labour, but almost all forms of human labour.”

• AI will be particularly good at performing white-collar workers’ “cognitive labour”.

• Like many others, Mr Larry Summers, injects a note of caution. “I do not think that this is going to drive a productivity miracle in the next 3 to 5 years”.

• “The thing about technological innovation is that it takes time (longer than one’s expectation) for it to happen.

• When it does, technical innovations then happen faster than one’s imagination.

Goldman Sachs’s top-pick list

$Goldman Sachs(GS)$ tech analyst Eric Sheridan has a positive outlook against an internet-related equities backdrop.

• For this earnings season, GS’’s main takeaway (cited by CNBC) was that internet consumer is continuing the theme of settling into a normalized behavior, where consumer spending continues to grow.

• Goldman Sachs put together a list of top tech stocks (as of 22 May 2024) that includes some highly recognizable names. (see below)

While the run-of-the-mills tech stocks are “expected”, there are 2 unexpected stocks that caused my eyebrows to be raised.

And surprisingly, Morningstar has comments for them.

Morningstar & it’s Comments.

Just so you know, Morningstar is a financial services company, that with a paid subscription - a member would have access to its suites of:

• Analysis of stocks & funds.

• Ratings to help investors which are “good” investment.

• Research & tools to help members learn about investing.

Morningstar analysts are quite high on Alphabet, Amazon and Meta, giving the companies Wide moats.

That means the analysts see them maintaining competitive advantages for at least 20 years.

For $Alphabet(GOOG)$ , Analyst - Michael Hodel has the following comments:

• It dominates the online search market with 90%+ global share for Google.

• The business generates very strong cash flow.

• We expect continuing search growth as we remain confident that Google will maintain its leadership.

• Alphabet’s Q1 2024 earnings were strong.

• Google Cloud delivered impressive growth, with revenue up +28%, buoyed by AI demand.

• Alphabet’s fair value at $179, matching Tuesday’s quote.

For $Amazon.com(AMZN)$ , Analyst Dan Romanoff’s opinion:

• After its Q1 2024 earnings report, Amazon dominates its served markets, notably for e-commerce and cloud services.

• Overall demand continues to trend favourably across business units.

• Last several quarters (earnings) continued with notable improvement in Amazon Web Services (AWS) demand and additional cost savings; arise from fulfillment and cost to serve.

• Amazon’s fair value at $193, compared with Tuesday’s quote of $182.

As for $Meta Platforms, Inc.(META)$ , Hodel wrote:

• It has attracted users and increased engagement by providing additional features and apps within its ecosystem.

• With more user interaction among friends and family and the sharing of videos and pictures … the firm will steadily compile more data.

• Meta and its advertising clients can then use the data to target specific users for ad campaigns.

• Meta’s fair value at $400, compared with Tuesday’s quote of $464.

The Other Two.

• For $Expedia(EXPE)$, Morningstar had assigned a Narrow moat. This means it sees Expedia with competitive advantages for at least 10 years.

• For Instacart (CART), it did not give a moat rating.

My viewpoints: (mine only)

• After all that has been said and done, in the end it is still Magnificent 7 that holds centre court.

• Mr Larry Summers’ comments on AI usability will take another 3 to 5 years to develop and become really impactful, makes a lot of sense.

• Application of AI is still in its nascent state.

• This also implies the future of AI path is still full of possibilities, not just for the Magnificent 7 but also “to-be-borned” companies.

Hopefully Goldman Sachs tech stocks list serves as a guiding light when it comes to investing our limited resources.

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