by Bryan Perry

April 2, 2024

The bullish narrative remains intact following Friday’s release of the Personal Consumption Expenditures (PCE) index, showing a gradual slowing in the Fed’s preferred inflation gauge, coupled with a short-term rebound in household spending. It was kind of a “best of expectations” report, but one that probably will hit some market resistance with oil prices trading above $83 per barrel, implying a spike in gas prices.


Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The S&P finished the first quarter up 10%, its best quarterly performance in five years, despite shares of Apple Inc. (AAPL) losing 11% YTD. Formerly, the world’s most valuable company, Apple is beset with a fresh antitrust lawsuit by the DOJ that could extend for quite some time, given the endless resources of that department. That, and the fact that Apple abandoned its autonomous driving project and has not yet developed a robust AI feature, exposes some internal weaknesses. Toss in a contracting economy in China that accounts for 40% of iPhone sales and there is risk of the company entering its own lost decade.

In contrast with Apple, there is a clear changing of the guard within the mega-cap tech sector with NVIDIA Corp. (NVDA) being the new king. Normally, we don’t single out stocks, but in the case of Apple, there is real downside risk to the shares if the price breaks $170 on volume. The next support level is $150. The chart of Apple shows a technical death cross where the 20-day and 50-day moving averages move down through the 200-day moving average that almost always portend of further downside risk.

AAPL Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Just ask the perma-bull Pied Pipers leading the pro-EV mice over the cliff of late. Tesla shares were trading at $300 back in July and today trade at $180, a full 40% pullback as it becomes quite clear that the consumer isn’t buying into the EV revolution nearly as fast as their utopian business model was laid out.

I think one of the big differences between Apple or Tesla vs. NVIDIA is that the first two put out consumer products (iPhones and EVs), while NVIDIA produces chips that consumers never see and thus don’t create that personal bond. Apple and Tesla are Business-To-Consumer companies whereas NVIDIA is a Business-To-Business (B2B) company, whose technology is hard to grasp by most. It’s not like the experience of holding the iPhone in your hand or getting behind the wheel of a Model S.

When is the last time anyone told you, “Man, have you seen that latest H200 chip?”

As long as the market makes the necessary adjustments to replace some former All-Pro stocks with those that will become the new crème-de-la-crème mega caps, then all will be fine with the overall bullish uptrend. The remaking of the Magnificent Seven was bound to happen, but not with the speed with which investors should consider repositioning their portfolios to accommodate the tsunami of the AI revolution.

According to UBS, the global demand for AI is projected to surge by over 10-fold in five years, from $28 billion in 2022 to a staggering $300 billion by 2027. This exponential growth underscores the significance of AI in shaping the future. And here’s the best part, most investors are still trying to figure out AI.

It is vitally important that investors don’t camp out on the original Magnificent Seven but look to a new Magnificent Seven mixture. It was bound to happen. Just look at the poster child of the dot com era, Cisco Systems Inc. (CSCO). Even NVIDIA has yet to achieve the lofty returns of Cisco, which rose from $5 to $80 from mid-1998 to mid-2000, a 16-bagger, only to crash back to $10. While the stock has made its way back to $50 during the past 24 years, for those investors who never sold it, it’s been a painful ride.

Over the past week, some $4 billion in cash has left money markets, but they still total over $6 trillion in cash. Imagine when a portion of that money gets religion on the AI rollout and begins gobbling up shares of companies that are dominating that space. It is becoming crystal clear that in addition to NVIDIA Inc., other big-cap tech companies are at the front end of the wealth building AI trend, offering investors opportunities to cast a big cap net over the AI revolution. It takes copious amounts of capital to lead in the AI space, therefore a blue-chip list of companies with rich balance sheets makes sense.

While there are large numbers of what are considered small cap “pure plays” on AI, this is a capital-intensive transformational technology. Stick with the winners that the market has identified and truly believes in. It’s all in the charts. Stick with leading AI stocks trading in an upside breakout pattern.

Don’t fight the tape. Don’t try to be too “clever.” Just get in the flow of the market, the analyst community, and the fund flows. Professional managers will continue to bid-up these and others just as blue-chip in nature AI stocks because the capital investment in this space is legit and accelerating.

Consider using periods of selling pressure to acquire these names and others that fit the profile of market-blessed big cap AI stocks. We’re in another golden age of technological revolution that can have a major positive impact on investors’ lives by being in the right stocks. We still live in the time of Moore’s law, where advancements have an exponential impact on industry, and because the implementation of AI is so capital intensive, the risk/reward profile for committing portfolio capital falls squarely on market leaders.

Navellier & Associates owns Nvidia Corp (NVDA), and some accounts own Tesla (TSLA), and Apple Computer (AAPL), in managed accounts but does not own Cisco (CSCO).   Bryan Perry owns Nvidia Corp (NVDA), personally but does not own Apple Computer (AAPL), Cisco (CSCO), or Tesla (TSLA) personally.

All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Food and Energy – The Overlooked Inflation Drivers

Income Mail by Bryan Perry
A Changing of the Market’s Guard

Growth Mail by Gary Alexander
Is the Economy Really Growing at a Robust 3.4%?

Global Mail by Ivan Martchev
Stocks Are Partying Like It is 1995

Sector Spotlight by Jason Bodner
Raiders of the Lost Art of Investing

View Full Archive
Read Past Issues Here

About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry

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