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2024 is off to a hot start. Major average stock prices have been steadily rising, with the S&P 500 and Nasdaq Composite rising about 5%. Moreover, these advances exceeded last year's strong growth.Therefore it must be solid A year where many blue-chip stocks gather.
Since the start of 2024, the ones I'm most interested in include Nvidia (NVDA), AMD (AMD), Palantir (PLTR), and Super Micro (SMCI). The “AWP” tech segment of my all-weather portfolio is up 20% year-to-date due to the incredible rally in many AI-related tech stocks.
AWP 2024 Year-to-date review
All-Weather Portfolio (Financial Prophet)
The decentralized equity and ETF segment grew by about 10%, while the Bitcoin/digital asset space grew by about 30%. The weak spot was gold and silver mining stocks (GSM), which fell about 11%. However, gold may be near the bottom. GSM is likely to recover soon.
AWP is up 8% year-to-date, and my basic year-end profit target remains 30-40%. I expect the S&P 500 to close at around 5,800 and the Nasdaq at around 20,000. Businesses, government agencies, and the general economy should greatly benefit from the AI phenomenon, and I predict a big year for AI.
AI Market: This is just the beginning
Outlook for AI market size (preliminary survey)
The magnitude of the AI opportunity is staggering. The AI market is projected to grow from about $538 billion last year to more than $1.8 trillion by 2030, with an estimated CAGR of 19% by 2032. So we're still in the early stages of this big picture, and many of the top AI-centric companies will do very well in the future.
AI optimization should make American companies more efficient, increase margins and profitability, and enable higher EPS. In addition to EPS growth, many companies will benefit from the sales surge that comes with the huge AI economy. Many of today's top AI companies could become AI giants in a few years, generating tens or hundreds of billions in revenue and huge profits.
Compound revenue growth from increased AI-related sales and increased EPS from AI-powered optimization should lead to multiple expansions. Due to multiple expansion effects, many “mid-growth” stocks that trade at around 20-25 times earnings could sell at forward P/E ratios of 30-35 times or more in the future. Moreover, the more accessible monetary policy that the Fed may soon provide could further exacerbate expansionary phenomena.
The question is not “when” but “when?”
The Fed is likely to cut interest rates soon. We thought it might be March or May, but now it seems likely it will be June. Currently, the probability that the FOMC will introduce at least one rate cut is about 75%. By June 12th.
Rate probability (CME group)
In my view, the recent rise in PPI and CCI can be, and likely is, temporary. Inflation will not fall in a straight line; there will always be a small revival. Therefore, recent slightly higher than expected CPI and PPI readings do not signal that the Fed will return to tightening. On the contrary, inflation could be lower than expected, solidifying the Fed's path to accommodative monetary policy. This move should be very positive for risk assets, especially blue-chip stocks.
My top 5 AI recommendations
1. Palantir – Palantir remains AWP's most important position and could be one of the sneakiest and most under-the-radar AI stocks. Palantir's applicable market share is so large that essentially any company or government agency, domestic or international, can benefit from his Palantir optimization “AIP” platform. This mechanic should become a trend in his AI era, and Palantir is at the cutting edge in the field. Therefore, Palantir's prospects are phenomenal, and the company has the potential to become profitable much faster than the analyst community's current predictions.
PLTR (stock price chart)
I reduced Palantir stock a little near its recent highs. I also have $22 covered calls on 13% of my position with a date of 3/15/24, which I plan to buy back if the stock price continues to decline temporarily. Additionally, I intend to increase my position in Palantir if the stock recovers to around $20 or closes the gap around $18.
2. Super microcomputer – I've been discussing Supermicro quite a bit recently as it skyrocketed after I added about $309 a few weeks ago.
SMCI (stock price chart)
We've seen a surprising combination of short squeeze, strategic buying, and FOMO drive stocks to absurdly overbought levels. Although the correction may continue, SMCI remains a blue-chip company with outstanding shares. SMCI's liquid cooling solutions and other cutting-edge technologies allow SMCI to maintain market leadership in its field and have the potential to significantly expand its revenue and EPS as the company advances.
The $700 strike price on 3/15/24 included the call I sold. I intend to buy back SMCI stock as it likely has more upside potential going forward. The $750-$650 level is also a good long-term buy-in zone.
3. Nvidia – Nvidia remains the godfather of AI. Companies continue to raise their estimates and price targets, and there's a good reason for that. Nvidia is in a very unique position at the fundamental level of AI. AI “lives” in server rooms, and these servers require vast amounts of power to keep the AI and its intensive processes working efficiently and accurately.
Nvidia's market-leading GPUs are the powerhouse driving the cutting-edge AI revolution. In addition, Nvidia's other AI-related hardware, software, and services provide enterprises with a “complete package” when it comes to AI. Nvidia offers the most comprehensive AI-related hardware, software, and service solutions, which has enabled its stock price to rise significantly over time.
NVDA (stock price chart)
Nvidia stock has been a bit overheated lately, and could use a post-earnings correction. Due to the huge rise in the stock price, we could see a 20% decline even if the performance is great. This dynamic will put the stock near my $600 buy-in zone.
4.AMD – Like Nvidia, AMD also has huge potential in AI. AMD may not offer a “complete package” like Nvidia. AMD has powerful GPUs, CPUs, APUs, and other technologies. The AI chip market is going to be huge and is likely to increase seven times over the next few years. AMD is well-positioned to leverage capital, leading to high growth, expanding profitability, and strong stock price appreciation as we move forward.
AMD (stock price chart)
AMD became a consolidated subsidiary after announcing its financial results. Although the report wasn't a blockbuster, it was encouraging, suggesting that AI-related growth could accelerate significantly in the second half of the year. Therefore, there may be another buying opportunity after the Nvidia report. A price movement between $155 and $145 would be a solid long-term buy.
5. Tesla – Tesla is an undervalued AI stock, and many market participants may not consider Tesla to be an AI company. But Tesla has broad AI potential. For example, every Tesla car is equipped with a camera that records endless amounts of data, which is then stored on Tesla's in-house supercomputers, where the data is collected, managed, and analyzed. Tesla also has great potential in robotics, FSD, and other areas that can be incorporated into Tesla's large AI ecosystem. Despite the unremarkable nature of Tesla's AI, it could become one of the world's most important AI powerhouses.
TSLA (stock price chart)
Tesla's stock price has been depressed recently, making it a great buying opportunity in the $170-$180 range. I increased my Tesla position by 50% at about $186. Tesla's stock price may remain in the $200-$250 range for a few months, but it is likely to rise further over the long term.
New AI stocks on my radar
SoundHound AI (SOUN) has recently surged about 75%. First, Nvidia reported its stake in his SoundHound and several other AI-related companies. Additionally, Softbank recently established his 1.1 million share stake in SoundHound. Additionally, Nvidia's investment in SoundHound AI could be the start of something “even bigger” for SoundHound, which currently has a market cap of less than $1 billion.
Recent spike – may just be the beginning
SOUN (stock price chart)
SoundHound AI's innovative voice AI platform is a market-leading service and will continue to grow. Furthermore, the global AI voice generation market is expected to rise to approximately $4.9 billion (CAGR 15.4%) by 2032.
AI Voice Market (Market.us)
Therefore, SoundHound AI has the potential for tremendous growth in the future. Additionally, our strategic partnership with Nvidia provides exceptional benefits. Currently, it is in Nvidia's favor that SoundHound AI be successful and expand as quickly as possible. Additionally, Nvidia may increase its stake in SoundHound AI, and an acquisition of the company is not impossible.
Either way, SoundHound AI is in a very good position. The company also has “real earnings” and significant growth potential. Consensus forecasts are for revenue to be around $70 million this year and around $100 million in 2025.
Sales forecast (alpha version currently available)
This move indicates that SoundHound AI is trading at approximately 10 times forward revenue estimates. Moreover, going forward he could bring significant sales increases of 30-50%. As you scale up, your profit margins should improve and you should become more profitable in the long run. SoundHound's stock price could be solid after its recent rally, but the company's stock could rise significantly over the next few years.