00:00 Speaker A
Some big tech companies, like Nvidia and AMD, have been left out of today's market rally. This comes after the semiconductor giant unveiled its AI roadmap at CES on Monday. So what does this tell us about the outlook for AI trade? Joining me now is David Stubbs, chief investment strategist at AlphaCore Wealth Advisory. David, nice to meet you. Let's start on the subject of AI, David, and you seem to think here that this AI boom is here to stay. Why do you say that, David? what gives you
00:29 Speaker A
Confidently, especially David, some of the big-name strategists are telling their clients, “I know you think it looks like AI fatigue is setting in.''
00:43 David Stubbs
Well, I'm glad to be with you. I think it's more an evolution of AI than fatigue. I think there are two paths to further boom. One is the continued construction of the CAPEX cycle. Look at the tight situation that still exists in the data center market. Look at the tight situation that still exists in the energy market. Therefore, we still believe that direct capital investment in AI and related capital expenditures will be an important driver for the economy and markets over the next two to three years.
01:12 David Stubbs
And, of course, the point of evolution is for the market to reward companies that deploy AI to improve their profit margins. And there are many companies that could make that happen within the next few years. For example, you can see the recent strength of the finance department. I think this site is an area where we have a lot of proprietary data and a lot of backend routine processes that can be automated.
01:38 David Stubbs
I think there are all sorts of ways that the AI boom is going to evolve from here and really continue to be a major driver of the economy and the market for the rest of this decade.
01:46 Speaker A
So, David, if I'm a viewer and I'm following the evolution of this AI, how do I pick my spot here? How do you tell the winners from the losers? So the way to do it is to look for David. The name is fine. You control the entire stack, right? Search like Google. So Sundar Pichai, he has the chips and the cloud infrastructure and the distribution. Is that what I'm looking for?
02:12 David Stubbs
That's certainly one way to go. I think there are many ways to play it other than obviously buying famous chips in chip space. That's not to say they won't work. Well, I think you can target any company that has low revenue per employee. This usually indicates that the company has a significant number of employees and has the potential to grow in the future without adding more employees.
02:40 David Stubbs
I think energy is a great way to do this. There is a general shortage. Across electric vehicles and energy supply, the energy landscape is evolving. And, and this is important, today in S&P, only 2.9% of its market capitalization is energy. So this is a very difficult theme to actually play unless you really try. You can go into the high yield market, but only roughly 11% of the high yield market is related to energy.
03:09 David Stubbs
I think the best way to harness energy right now is in the private market. Look at private infrastructure funds that specialize in energy and data center businesses. There are clearly some world-renowned companies, and energy majors across Europe are named as well. So we like energy themes because it takes a little effort to get there. You don't need to do any work to play the technology theme at this time. You can buy the NASDAQ, you can buy the S&P. But I think the energy side of things is an area that we're really looking forward to, even though it's going to take a little bit of adjustment.
