Market commentary/forecast June 20, 2024
In a little more than a year, AI has become ubiquitous across economies as it becomes poised to redefine nearly all sectors in unprecedented ways. Its integration is revolutionizing business operations, transforming individual interactions with technology, and is already addressing complex human challenges with innovative solutions.
The global AI market is currently valued at over $196 billion but is projected to reach $1.81 trillion by 2030. By 2025, as many as 97 million people are expected to be employed in the AI sector, underscoring its transformative impact globally.
That's why companies like NVIDIA (NVDA) will keep leading the markets. NVIDIA, known for its advanced GPUs and AI-focused hardware, is at the forefront of the infrastructure essential for AI, and on Tuesday, it surpassed Microsoft to become the world's most valuable publicly traded company.
There will be others, too, and it only makes sense to own these stocks in our portfolios during their growth phase. We can achieve this with broad market exposure through the SPX and Nasdaq ETFs. However, the SOX, which is concentrated in the semiconductor sector that underpins AI technology, is even more intriguing these days.
For example, look at this comparison between the triple beta TQQQ versus the SOXL (also triple beta):
Here's that difference graphically starting at the long-term cycle low in October:
While I never recommend any investment as a long-term 'buy and hold,' strategically buying the SOXL at cyclical lows and exiting at cyclical peaks—aligned with the Nasdaq's cycles—has been offering returns double those of the TQQQ.
As we anticipate another buyable cyclical low in early July, we should also prepare for a cyclical decline that is expected to continue through the end of this month. To manage that risk, ensure that stops are set below the 2/3, 3/5, and 4/7 crossover averages to safeguard against rising volatility.
Why AI Stocks and ETFs?
AI stocks are at the forefront of technological innovation and are expected to drive significant growth in the coming years. Companies like NVIDIA, Microsoft, and Alphabet (Google) are leading the charge with their advanced AI capabilities and infrastructure.
Investing in these companies provides exposure to the rapid advancements and adoption of AI technologies across various sectors. Here are some best AI stocks to buy now.
Top AI Stocks to Consider
NVIDIA (NVDA): As a leader in GPU technology and AI infrastructure, NVIDIA is well-positioned to capitalize on the growing demand for AI applications. Its recent surpassing of Microsoft in market value underscores its prominence in the sector.
Alphabet (GOOGL): Google’s parent company is a major player in AI research and development, with its AI-driven products and services making significant impacts in various industries.
Microsoft (MSFT): Known for its Azure AI platform and AI-driven products, Microsoft continues to innovate and expand its AI capabilities, making it a strong contender in the AI market.
Amazon (AMZN): With its AI-powered cloud services through AWS and AI-driven consumer products like Alexa, Amazon is a key player in the AI landscape.
Meta Platforms (META): Formerly known as Facebook, Meta is heavily investing in AI to enhance its social media platforms and develop new technologies like the metaverse.
Best AI ETFs to Buy Now
Global X Robotics & Artificial Intelligence ETF (BOTZ): This ETF provides exposure to companies involved in the development and production of robotics and AI technologies.
iShares Robotics and Artificial Intelligence ETF (IRBO): IRBO focuses on global companies that derive significant revenue from AI and robotics.
ROBO Global Robotics and Automation Index ETF (ROBO): ROBO offers diversified exposure to companies in robotics, automation, and AI sectors.
ARK Autonomous Technology & Robotics ETF (ARKQ): Managed by ARK Invest, this ETF targets companies involved in autonomous technology and robotics, including AI.
Strategic Investment Approach
When considering AI stocks and ETFs, it's essential to adopt a strategic investment approach. This involves understanding market trends, assessing the growth potential of individual companies, and diversifying your portfolio to mitigate risks.
For more detailed strategies on trading in the stock market, check out our comprehensive guide on stock market trading strategies.
Risk Management and Timing
As highlighted in our market commentary, timing is crucial when investing in AI stocks and ETFs. The cyclical nature of the market means there are optimal times to enter and exit positions to maximize returns.
Setting Stops and Managing Risk
To safeguard your investments, set stop-loss orders below key moving averages (2/3, 3/5, and 4/7 crossovers). This strategy helps protect against significant downturns and ensures you can capitalize on upward trends.
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