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Proprietary Data Insights Top Semiconductor Stock Searches This Month
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How Big Is Nvidia And AI?
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Of the top 15 stocks investors have been searching for most this week in Trackstar, our proprietary sentiment indicator, five are semiconductor tickers. And ten are technology stocks. Of that ten, all are artificial intelligence stocks. So, AI is big. But how big is it? And does size matter? As in, are we in for a repeat of the 1999/2000 dot-com crash? First, let’s roll through some numbers to quantify things a few different ways. Then, The Juice explains why parallels to the dot-com crash make little, if any sense. We do this ahead of one of tech’s biggest earnings reports this year. AI stock market leader Nvidia (NVDA) reports after the bell today. Tomorrow, The Juice will give you our take on the company’s earnings. Of course, it depends on whose numbers you look at for just how big, but the overall AI market is big and growing exponentially.
If you listen to Bloomberg Intelligence (BI), the Statista projection is small.
Remember this from the Bloomberg report, because The Juice thinks it’s key to understanding why the AI boom will not go bust like so many dot-coms did in 1999-2020: BI estimates that generative AI is poised to expand its impact from less than 1% of total IT hardware, software services, ad spending, and gaming market spending to 10% by 2032. Bookmark that while we digest some other numbers. Such as the size of the semiconductor portion of the AI market. And, here again, depends on who you talk to.
So, kind of all over the board. But, even if things don’t jibe, even the low end would be quite remarkable. How we think we’re going to get there explains why The Juice isn’t sitting around worrying about a crash. It’s easy to look at the composition of the S&P 500 and say things are getting out of hand. Of course, the index is weighted by market cap. So, the top ten looks like this (weight in the S&P 500):
Except for two names, we’re talking all tech and all AI. These tickers make up roughly 31.2% of the S&P 500. It’s even more pronounced in the Nasdaq 100 where the top ten is almost all tech and all AI (add Tesla (TSLA) and Costco (COST)) and the nine technology stocks comprise about 47.5% of the index. The leading companies, particularly in tech, are big and keep getting bigger. But here’s why The Juice doesn’t think we’re building a bubble that’s going to burst. First, when you look at these holdings lists you realize that at least a few are either established or emerging dividend payers. To the latter end, do you really think Meta and Google would have started paying dividends at this point in their lives as tech companies and at this point in the AI life cycle, if they were not in tiptop financial health? Second, back to the Bloomberg quote on spending we asked you to remember. We’re at less than 1% of IT spending on AI right now? Even if we’re higher, this is more than sustainable when you consider the war chests the top companies have. Looking at the freaking Magnificent 7 companies alone (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla), their cash positions total a whopping $447 billion. You read that right. And Nvidia, for example, has $31.4 billion of that cash to go alongside its average earnings growth of 500% over the last three quarters. Freaking insane. Nvidia is big and, The Juice thinks, will keep getting bigger.
The Bottom Line: One difference between today’s AI market and yesterday’s dot-com market is that the companies leading artificial intelligence are well-established and financially sound players. This wasn’t the case in 1999-2000. For every company that made it (think Amazon and Google) and turned into a leader today, there were a million hopes and prayers that fell hard. This isn’t to say that hopes and prayers — speculative stocks and opportunistic posers — don’t exist today in AI. Obviously, they do. It’s just much easier to separate the wheat from the chaff today than it was 25 years ago. While there’s a lot riding on AI for these big names, not everything is riding on AI, thanks largely to their sound financial positions that allow them to invest aggressively, but not to the point where it’s a make-or-break proposition. Think what you’d like about AI — we don’t love or even like everything about it— but there’s little question in The Juice’s mind that it’s a long-term investors’ opportunity of a lifetime that’s only in its infancy. |
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