NVIDIA is not the only one! “AI 3 Musketeers” too! US stock investment in the second half of '24 ~ 5 forward stocks vs. 5 contrarian stocks ~

ビットバレー投資家 wrote a column · Jul 5, 2024 16:56

As early as 2024, we are entering the second half of the year.US stock market in the second halfIn order to anticipate,The focus is on whether the AI boom represented by “NVIDIA's top 1” will continueIt's probably all there is to it. However,This question was also asked at the beginning of this yearIt was being thrown at me. When I opened the lid, $NVIDIA (NVDA.US)$ofStock prices increased 2.5 times in the first halfIt became. Other tech and AI-related stocks are also generally strong,The first half of 2024 is a “tech-led AI market”It became.

The difference from 2023 is that out of the 7 US Big Tech companies (Magnificent 7), a late-running group appeared, and electric power stocks emerged as “hidden AI stocks,” making them representative $Vistra Energy (VST.US)$It has skyrocketed to the point where it is no less than NVIDIA. In that sense,If the tech-led AI market continues in the second half of 2024, there is a possibility that the contents will change slightlyIt seems likely. Below,Identify the two major factors supporting the tech-led AI marketWhat's more,We will take up “5 progressive stocks” and “5 contrarian stocks” that take into account the possibility of “changes in content”。

NVIDIA is not the only one! “AI 3 Musketeers” too! US stock investment in the second half of '24 ~ 5 forward stocks vs. 5 contrarian stocks ~

Two major factors supporting the tech-led AI market
1) Observe interest rate cuts
Trends in major US economic indicators continue to support interest rate cuts by the Federal Reserve (Federal Reserve),Observations of interest rate cuts in the latter half of the year are deep-seated. The favorable market environment for tech and AI-related stocks is expected to continue in the second half。

2) Growth potential of tech and AI related stocks
The next 2 quarters of the S&P 500 index by industryExpected profit growth rateIt's stillThe two major tech industries of information technology and communication services outperform other industries。Among them, AI-related stocks are highThe benefits of the AI investment boom are expected to continue to boost the performance of related companies.

Therefore, it is likely that tech and AI-related stocks will also be favored in the second half.

On the other hand, what are the differences from the first halfThe second half of the US presidential election is in NovemberIt's holding back. Towards the presidential electionThe first TV debate was on 6/27It was done. After the debate, it became clear that Mr. Trump had the upper hand.Subsequent market trendsWhen I checked,Sectors (*) that seem to benefit from Mr. Trump's return, such as finance, health insurance, petroleum, etc. were boughtAt the same time,Tech and AI-related stocks are also strongIt was.Growth rate by industryOKInformation technology, which consists of semiconductor stocks led by Microsoft and NVIDIA, continues to maintain the first positionI did it.

(*Of 6/28”“Biden vs. Trump” recreated in the US presidential election! What stocks should I pay attention to?(See also”.)

Former President Trumpis famous for its protectionism,Policies such as large-scale tax cuts contributed to the stock appreciation of tech stocks at the timeconnected. Large companies such as tech generally pay large tax amounts, and the benefits of tax cuts are huge.Mr. Trump, who is aiming for a comeback, is appealing for extended tax cuts and additional tax cuts due at the end of 2025. If it becomes a reality, there is a possibility that it will be positive for tech stocks, similar to last time. Note,There is still a sense of uncertainty surrounding the US presidential electionBecause,Volatility (stock price fluctuations) may increase in the second half. In the market environment where there is the strongest sense of uncertainty, large tech stocks that have strong balance sheets, are stable, and can generate high profits tend to have an advantage.

5 progressive stocks
“AI semiconductor 3 musketeers” + 2 Big Tech companies
The 5 progressive stocks were selected based on the following criteria.

・Record performance that surpassed the S&P 500 index in the first half
・The expected EPS (earnings per share) growth rate for the current quarter and the next quarter is 20% or more (or turning into a surplus)
・The upward revision rate of target stock prices by analysts after the most recent financial results were announced was 5% or more
・Stocks that the company indicated in recent financial results announcements that the contribution of AI to financial results is expected to increase

Also,AI semiconductor fieldWell, from a measure of sales scale and growth potential, it's stillNVIDIAIt sticks out and is high. Meanwhile, companies whose full-year sales related to AI semiconductors are expected to exceed 10 billion dollars, or several billion dollars, have also begun to appear. respectivelyBroadcomwithMicron Technologythat's it. Both companies are also expected to benefit from the AI investment boom in the future, and when it comes to AI semiconductors, they will start with “NVIDIA's top 1”“AI 3 Musketeers”There may also be a possibility that it will change to.

★ $NVIDIA (NVDA.US)$
・Expected EPS growth rate for this quarter: 152.7% increase
・Expected EPS growth rate for the next quarter: 86.8% increase
・Average target share price: $134.77
・Stock price margin: 5.1% (compared to closing price on 7/3)

NVIDIAIt occupies over 80% of the global market share in the AI semiconductor market. $Microsoft (MSFT.US)$Ya $Alphabet-A (GOOGL.US)$、 $Meta Platforms (META.US)$Business performance continues to expand due to the benefits of increased investment for AI, etc.Announced results exceeding market expectations for the past 6 consecutive quartersThen,Analysts followed suit and revised target stock prices upwardDoing it. NVIDIA CEO Jensen Huang said that generative AI is the beginning of a new industrial revolution, and indicated plans to launch new products at a 1-year rhythm from now on. The currently best-selling AI semiconductor H100Demand for both the H200, which is the next generation product, and Blackwell, the latest AI semiconductor, is strong. Of both productsContributions to business results are expected to increase with the start of shipments (second half of the year)It will be done.

★ $Broadcom (AVGO.US)$
・Expected EPS growth rate for this quarter: 47.9% increase
・Expected EPS growth rate for the next quarter: 63.7% increase
・Average target share price: $1888.71
・Stock price margin: 9.2% (compared to closing price on 7/3)

BroadcomThe business description is based on the two pillars of semiconductor solutions and infrastructure software (including cloud services). VMware, which was acquired in 2022, is responsible for cloud services.It has two businesses benefiting from the AI boomThe point can be said to be unique among other companies in the same industry. In addition to Apple, major customers are lined up with Alphabet and Meta, which is proceeding in-house development of custom semiconductors. Broadcom has a strong image of semiconductors for wireless, but they are also making custom AI semiconductors for hyperscalers, which are NVIDIA's main customers.Sales related to AI semiconductors have increased rapidly since last year. The company side reflects strong demand,The full-year sales forecast for AI-related semiconductors was revised upward from the previous 10 billion dollars to 11 billion dollarsThat's right. There is no direct confrontation with NVIDIA, and benefits from the expansion of the AI semiconductor market pie can be received.

★ $Micron Technology (MU.US)$
・Expected EPS for the current quarter: surplus to $1.11 ($0.45 in the previous quarter)
・Projected EPS for the next quarter: surplus to $1.73
・Average target share price: $163.88
・Stock price margin: 19.8% (compared to closing price on 7/3)

Micronis a major semiconductor memory company.HBM is essential in AI data centersIn the (high bandwidth memory) market3rd place in the world market share(1st place is SK Hynix, 2nd place is Samsung Electronics). hithertoIt was lagging behind in the HBM marketStarting this year, they are rapidly trying to catch up.Mass production of the “HBM3E” mounted on NVIDIA's AI semiconductor “H200” GPU began in February. Now that we have started supplying products to NVIDIA, what is the futureMarket share can be expected to expand. According to the most recent financial results announcement, the management team said,”Demand for data center products is strong, driven by AI” it was stated. It was shown that HBM's sales are expected to reach hundreds of millions of dollars in the 2024/8 fiscal year and several billion dollars in the 2025/8 fiscal year. The recovery in business performance is expected to continue after turning into surplus.

★ $Amazon (AMZN.US)$
・Expected EPS growth rate for this quarter: 101.5% increase
・Expected EPS growth rate for the next quarter: 63.1% increase
・Average target share price: $220.63
・Stock price margin: 11.7% (compared to closing price on 7/3)

Amazon.comIt is the largest US online retailer and the largest cloud company. While consumers are taking a cautious stance on spending, although sales in the e-commerce sector fell slightly below market expectations in recent financial results,The cloud division recorded the highest growth rate in the past yearI did it. The resumption of corporate spending on technology projects, including AI services, was a tailwind. The management teamGenerative AI is expected to generate multi-billion dollar annual salesI stated that.The cloud division is highly profitable and is expected to support the company's growing performance。

★ $Alphabet-A (GOOGL.US)$
・Expected EPS growth rate for this quarter: 28.6% increase
・Expected EPS growth rate for the next quarter: 20.6% increase
・Average target share price: $197.57
・Stock price margin: 6.3% (compared to closing price on 7/3)

alphabetsIt has Google under its umbrella. It provides search engines, online advertising, and cloud services. Google is the world's largest search engine. Google Cloud is the top 3 cloud vendors along with AWS and Microsoft's Azure.The introduction of AI-related products and services lagged behind MicrosoftIn connection with this, there were concerns about the impact of this on online advertisements and cloud computing businesses,Business performance was unexpectedly strong. According to recent financial results,Growth in the cloud computing sector contributed, and sales exceeded market expectations. Investments in AI are contributing to boosting demand for cloud services. The management team said”I am convinced that we can handle the monetization of AI functions wellI'm doing it,” he said.

5 contrarian stocks
2 big tech companies + 3 AI software companies that are late

The 5 contrarian stocks were selected from among tech stocks that performed below the S&P 500 index in the first half of the year, stocks where there is a high possibility that AI-related materials will have a positive impact on business results. In addition to the 2 companies that were late in the Magnificent 7, the focus was on AI software stocks with a clear sense of delay against AI semiconductors. This is because as the AI market enters its second year, interest is expected to shift from semiconductors that benefit from data center investments to software stocks that raise profits by introducing AI services.

★ $Salesforce (CRM.US)$
・Expected EPS growth rate for this quarter: 69.2% increase
・Expected EPS growth rate for the next quarter: 80.9% increase
・Average target share price: $294.93
・Stock price margin: 13.0% (compared to closing price on 7/3)

Salesforceis a major software company.The world's largest cloud-based business support software. Develop customer management systems (CRM) and applications. Workflow automation using AI is also provided. In the recent financial results announcement, the management team said, “We are at the beginning of a huge opportunity to connect with customers in a completely new way using AI.The world's No. 1 AI CRM companyAs, weWe're in a great position to help companies realise the potential of AI over the next 10 years” he emphasized. Based on the customer base,Monetization with AI is thought to be relatively easy, and business performance can be expected to expand。

★ $Adobe (ADBE.US)$
・Expected EPS growth rate for this quarter: 46.9% increase
・Expected EPS growth rate for the next quarter: 69.5% increase
・Average target share price: $610.77
・Stock price margin: 7.1% (compared to closing price on 7/3)

Adobeis a major software company.A company familiar with creating and editing PDFs. In the main Document Cloud business, PDF has become a global standard for automating business and consumer workflows, and Acrobat is an ideal platform for displaying, editing, sharing, and collaborating on these documents. The company is almostWe are promoting the integration of AI functions into all products and services、We are strengthening new acquisitions and monetization as a result. There were also skeptical views about the results, but the most recent financial results announcement dispelled those concerns. The management team stated that efforts to incorporate AI functions into their products are gathering support among customers, and “we will focus on changing the AI pipeline to monetization.”There is a possibility that the monetization of AI products and services will advance further。

★ $Zscaler (ZS.US)$
・Expected EPS for the current quarter: surplus to $0.70 ($0.12 for the previous quarter)
・Projected EPS for the next quarter: surplus to $075
・Average target share price: $235.03
・Stock price margin: 18.5% (compared to closing price on 7/3)

Z scalerIsCloud-based cybersecurity company. We provide solutions that simplify and protect businesses around the world. Large investments have been made in AI since 5 to 6 years ago, and now the entire platform is supported by AI.More than 40% of Fortune 500 companies have customers. The management team expressed confidence that 85%, which is double that, can be taken into customers in the future. According to recent financial results announcements, customers with ARR (annual ordinary income) exceeding 1 million dollars increased 31% compared to the same period last year.Reflect customer expansion, etc., the company sideSales forecasts for the full fiscal year 2024 were revised upward 3 timesI did it. As for the future, it was indicated that TAM (maximum market size that can be acquired) is expected to increase by 10 billion dollars to 20 billion dollars in addition to the conventional 70 billion dollars due to new use cases and new products including AI workloads.Business performance recovery is expected to continue after turning into surplus。

★ $Apple (AAPL.US)$
・Expected EPS growth rate for this quarter: 5.8% increase
・Expected EPS growth rate for the next quarter: 5.6% increase
・Average target share price: $214.6
・Stock price margin: -3.1% (compared to closing price on 7/3)

AppleIt is a major smartphone, PC, and tablet company. It is a consumer product such as iPhone, Mac, iPad, etc., and iOS, iCloud, Apple Pay, etc. are also being developed.Disgusted by the slowdown in iPhone sales and delays in AI strategiesThen,The stock price performance for the first half ranked second from the bottom of the Magnificent 7It was. However, at the footReview and buyIt's progressing. Apple at the World Developers Conference (WWDC) on 6/10AI function finally announcedThat's because I did.There is a possibility that iPhones equipped with AI functions will promote replacement cyclesExpectations are high for new products to be announced in the fall.

★ $Tesla (TSLA.US)$
・Expected EPS growth rate for this quarter: 25.4% decrease
・Expected EPS growth rate for the next quarter: 20.8% increase
・Average target share price: $194.19
・Stock price margin: -21.2% (compared to closing price on 7/3)

Teslais the largest EV (electric vehicle) company in the US.I'm disgusted by the slowdown in EV sales and delays in progress surrounding AIIt was done, and what is the stock price20% decline from the beginning of the year. However,Sudden backlash after mid-June。Signs of recovery in EV salesIn addition to being shown, expectations for progress surrounding AI were also used as purchasing materials. What is aheadPay attention to the robo-taxis scheduled to be announced in AugustThey are gathered together. Since bad materials, including deterioration in business performance, are factored into stock prices to some extent, they may respond more easily to good materials than bad materials in the future. (*Of 7/3”Has the leading role in stock prices changed from NVIDIA to Tesla? Tesla stock, what is the next detonator?(See also”.)

Created 7/5/24 Market Analyst Amelia
Source: Company materials and created by MooMoo Securities from Bloomberg

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