When to Sell the A.I. Rally

stocks in pretty good shape this morning we don't have a lot of movement from the dollar or bonds we'll check back in on that about 30 minutes to an hour as PMI and ISM data start coming in right now equities are Bid in Tech joining us Peter Anderson as founder at Anderson Capital Management and he's been in some of those Tech trades uh so Peter welcome back to the show good to have you this morning uh how much confidence do you have that uh growth Tech is still going to be generally the theme here and I mean real talk it's pretty much Nvidia that's done so much of the leg work I think there's still a lot of uh fuel in the tank so to speak you know it is getting kind of worrisome because anytime we see anything like this you know one or two stocks with a theme that's so intense and so intensely followed now that everybody knows the name Nvidia you know 10 years ago uh hardly anybody knew that name now it's a household name so basic intuition tells you boy this seems like it's getting a little topheavy and maybe I need to get out so I think a lot of investors right now managers portfolio managers are struggling with that not necessarily the financial performance the financial performances are great I'm used to looking at financial performance and triggers like that as a sell trigger this time it's kind of difficult to do that tell me what you mean by that I think this is more susceptible to say macro perceptions of things I mean if you look at the financial performance of these companies it's fantastic and their revenues are probably going to move higher and higher what I more worry about and I haven't heard anybody talk about this stuff and I think it's so important in this case of AI is let me give you an example I have two cell triggers they're macro cell triggers the first one is somewhat surprising I think to people but let's just hook up this scenario a major influencer God knows who that would be one morning comes on a show like this and starts a trans a trend where he or she says you know I woke up this morning and I'm thinking AI isn't all that it's cracked up to be the buildout is great but I think we've gotten a little bit ahead of ourselves as to how much of a Panacea this is going to be for every problem out there I think I'm going to start trimming now that Oliver could actually cause a tsunami given the right condition right in a very sensitive part of the market if you get sentiment like that developing I think you could see an irrational sale of these AI stocks so your point is that uh when you've got kind of a high momentum speculative rally it's susceptible to you know changes of heart that may not be kind of fundamentally based just whenever the The Fad reaches its limit whenever it's not cool anymore or let me add that that's very close I would say um not necessarily The Fad but the hula hoops in this case you know they're fun it's a fad but it's not going to help you lose weight for instance or increase your health you know we projected so much responsibility on artificial intelligence that I think it's almost impossible the AI that we currently know and that's important what we currently know it's impossible for AI to satisfy all those wild imagination scenarios that all of us have cooked up in our heads I like that uh so then as we're how can we measure that Peter is there a quantitative way to do that it's very no it's very hard to measure I mean let me give you an example the first article I have seen was in the Wall Street Journal this past weekend a reporter and I'm paraphrasing the headline was something like what I just said only condensed you know that uh the buildout is great but maybe we thinking a little bit too much about how much responsibility is going to take off our lives relying on AI I don't think it was uh enough momentum and you know not a major influencer to actually develop a following so to speak but those are that's an example and I also want to tell you my other cell trigger so that's one and this one is even I would say less remote but I haven't heard anybody mention this either and I do think that this is a possibility we're all on this model of AI you know throw uh gpus at this and we'll just get whatever we want what if somebody comes along maybe they're working at Burger King for instance but they have a basement research lab and there are people out there like this okay has a a research lab and they come out with a totally different model of how the human brain works and blows away everything we've thought and also says I can mimic this with off-the-shelf materials not expensive gpus this is even more remote but if that were to happen that would bust open the entire expectations of the direction we would take in and frankly a stock like Nvidia would be extremely vulnerable as would uh super micro computers well it seems like one could argue I'll play The Devil's Advocate here I mean a few of the things you're describing arguably have kind of been showing up the last couple weeks when you look at one uh the potential for cheaper alternatives I mean that's basically Bally like AMD and Intel's case right now they're going look we can't give you as good of a product but would you give you a good one that's solid and it's going to be a lot cheaper uh so it may not be you know from a you know garage startup but the you know right now the Market's treated until like a garage startup basically uh second thing uh Peter will beat to your point about kind of the limits of the utility and the expectations that this solves all our problems well a lot of these Cloud companies have been telling us for like six months that it's going to change their entire and then earnings came and nobody raised their guidance so I mean have we kind of run up against some of these things in some way well I worry about that constantly yes I think uh anytime I see any perturbation like that I ask I asked myself is this the beginning of you know a change in Trend but it just doesn't and I hate to use qualitative terms because this is a quantitative kind of investment you know that the the fields were in but you know when it starts to so-call feel that way and can I quantify that no but we have to look at the sentiment if there's more okay let me give you an example when uh we count the number of times AI is mentioned in an earnings release for instance uh if we were to see something like that you know but not the number of times AI is mentioned but the number of times some phrases like I've just been discussing if they start to creep in then I do think we really have to rethink how heavy we want to be in these positions and also to first point uh with Intel I I understand what you're saying I would also add though that it's the same stuff it's the same technology Intel is not coming out and saying hey we can offer something cheaper but guess what everybody this does not depend on the ones and zeros that everybody has erroneously been modeling the brain I mean there's so much to talk about in terms of the brain and what AI is trying to emulate we are totally on the wrong track in terms of figuring out how the human brain works by modeling it by ones and zeros we have to use something else but so far nobody has stepped up all right so uh right now tell me the structure of the fund have you made any tweaks uh what does it look like what's kind of the the main driving force for your strategy yeah well you know you're going to be surprised at what I'm saying but there is a a focus on AI but it is a Vigilant Focus you know I have been a holder of nvidias for 15 years okay I bought the stock when it was and you talking it up big the last six months credit to you yes yes and I also want to tell you that I think it's amusing you know I had a great year last year in the portfolio and some critics will say oh of course he did he's in Tech and it's almost like saying you know of course he won the World Marathon he's been training since he was a foury old yeah true you know I mean it's not an easy path to hold Nvidia all those years it had some rough times just like you would if you were training since or four years old to run a marathon so there's a lot of thought behind it and I just don't want to be dismissed as saying I own Tech I also own many other sectors although the portfolio is only uh 12 stocks so I own uh some medical instrumentation companies I also own uh data storage a Cosmetics company but it still remains very concentrated and because I I'm competent or confident with the stocks I own all the other noise about interest rates job numbers really do take a backseat in my analysis because I'm so focused on the actual business of the companies that are in the portfolio tell me about uh data storage and just generally data kind of some of those KnockOn effects I've heard arguments that utilities are ways to play the AI Revolution uh some argue some of the REITs you know the data center stuff uh what makes sense to you where are you in well I'm glad you mentioned youtil because you know now what they're saying I don't know if you saw this but Goldman Sachs had had projected the total demand of energy that going to be the next I mean extremely difficult to predict uh or model but say the next 5 to 10 years AI if it's going on this pattern will suck up most of the energy and I would tell you this how come the human brain only uses 20 watts of power that's the size of a refrigerator light bulb so that loone should tell us we're not on the right track we don't use megawatts of energy to come up with the most Creative Solutions frankly in human history correct so I do think utilities are a good place to play I would but I would also say it depends on the election whoever wins the election can either be a bull or a bear for utilities for instance if Trump gets elected I think uh the supply will increase and so that will put pressure on energy companies but if we're status quo then it certainly the way to go all right uh Peter always enjoy the conversation uh fun one and like the uh transparency on what you're doing and how you're thinking about it uh always nice to get in your head thanks for being here this morning you're very welcome absolutely Peter Anderson founder and Anderson Capital Management all right still hanging on to the Nvidia trade but acutely looking for signs of slowdown in the narrative

Channel: Schwab Network

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Id: mH2J18ZNfKQ

Length: 11min 3sec (663 seconds)

Published: Wed Jun 05 2024