- GP Bullhound Global Technology Fund portfolio managers urge careful company selection in tech investing amid high valuations. They recommend investing in infrastructure and building blocks that underpin AI, such as semiconductor companies. Nvidia, Advanced Micro Devices, Taiwan Semiconductor, Infineon, Cisco, NXP, Microsoft, ServiceNow, and Palo Alto are all in their portfolio.
- Long-term secular themes will continue to drive the tech sector, despite a weaker macro. AI is a perfect example of this, with Microsoft, Amazon, and Google continuing to spend and drive earnings for semiconductor companies that supply training and inference servers. The semiconductor capital equipment industry, including companies like KLA, Lam Research, ASML, and Applied Materials, is an AI beneficiary with tailwinds from increasingly localized supply chains.
- The picks and shovels infrastructure, which for GP Bullhound is semiconductor companies supplying training and inference servers, is the way to invest in AI as big tech continues to spend on the technology. Nvidia’s record revenue forecast helped deliver a strong performance for the Nasdaq, alongside other tech giants like Microsoft and AppleAlphabet.
Veteran investors are predicting that aside from Nvidia, another area of the stock market will benefit from the growing influence of AI on technology building blocks.
As AI continues to revolutionize various industries, it has become clear that the technology behind it, such as microprocessors and semiconductor chips, will play a key role in its development. This has prompted investors to look beyond traditional AI-focused companies like Nvidia and explore other sectors that will benefit from the trend.
One such area is the semiconductor industry. Companies that specialize in designing and manufacturing semiconductors, such as Intel, AMD, and Qualcomm, are expected to see a surge in demand as AI continues to gain traction across various industries.
These companies’ products are essential building blocks for AI applications, from the small chips that help power smartphones to the powerful graphics processing units that enable machine learning algorithms.
Veteran investors like Michael Cusumano, professor at MIT’s Sloan School of Management, suggest that semiconductor companies will play a critical role in advancing AI technology.
“As AI continues to gain prominence, the companies that make the chips that power these systems will become increasingly critical,” Cusumano said in an interview.
Indeed, the semiconductor industry is already experiencing a boom in demand for AI-related products. According to research firm MarketsandMarkets, the global AI chip market is expected to reach $83.2 billion by 2026, up from $5.2 billion in 2020.
As such, investors are eyeing semiconductor stocks as a promising avenue for investment. Over the past year, Intel’s stock has risen by 45%, while AMD’s has surged by 141%.
Overall, it seems that as AI continues to shake up various industries, the ripple effects will be felt across the stock market. And for investors looking to ride this wave, semiconductor stocks may hold the key to unlocking lucrative returns.