MAGNIFICENT 7: The ‘Magnificent 7’ big US tech stocks rallied 11% from Oct. low, double the rest of the S&P 500. Driven by the boost from lower bond yields to their premium valuations. But also evidence that AI adoption is strong and its impact broadening. This will see a key test next week with NVDA’s results. The ‘7’ are up 70% this year vs the 16% gain for the remaining S&P 493 stocks (see chart). AI is the fastest general-purpose tech adoption in history, and moving from hype to reality as it rises up the adoption chain from suppliers to enablers and to broader end users. Representing a powerful idiosyncratic profits and efficiency driver. @AI-Revolution.
NVIDIA: The semiconductor leader and AI poster child is the last of the Magnificent 7 to report (Tue). Last quarter’s sales doubled, and earnings quadrupled. The outlook for Q3 is for sales to rise 20% QoQ and 170% YoY to $16 billion, with both strong demand and pricing power. Its next-gen H200 chip will ship next year, keeping it ahead of rising competition from AMD (AMD) to Intel (INTC). This momentum helps the whole value chain. From suppliers like Micron (MU) and Hynix up to users like AWS (AMZN) and Azure (MSFT). The stock surged 20% this month and 240% this year. But earnings forecasts have risen more, bringing its fwd. P/E down to 30x.
ADOPTION: One measure of AI consumer adoption is whether you would let it manage your investments. We asked 10,000 retail investors in 13 countries and the results show a surprisingly positive result, across most ages and countries. A high 52% said yes, led by eastern Europe and Spain. With just 36% saying no, led by France and Denmark. The proportion positive remained over half for all age groups except those 55+. The reason for such adoption openness was led by a belief in the future of the technology (43%), its ability to boost productivity (40%), work better than the human alternatives (32%), and to be cheaper (26%).
All data, figures & charts are valid as of 15/11/2023.