Is the AI bubble finally bursting?
No.
At least not according to Nvidia (NVDA) CEO Jensen Huang. In his comments following the company’s earnings announcement yesterday, Huang said that demand for Nvidia’s AI chips is “off the charts” and offered a wildly bullish outlook for the year ahead.
I won’t argue with the numbers. Nvidia may be the single biggest success story of our lifetimes, and the stock rates a perfect 100 on its quality and growth factors. It really is a fantastic business.
That said…
The AI bubble fears haven’t exactly gone away, and the circular nature of industry remains a major risk. Nvidia actively invests in many of its largest customers – the people buying its chips – which raises questions about just how sustainable its growth is.
Nvidia is also already widely owned. If you own stock mutual funds in your 401(k) plan, then chances are good you already have plenty of exposure. The stock makes up 8% of the S&P 500 index. And it rates a “Neutral” 51 on my Green Zone Power Ratings system.
I’d prefer to try my luck with stocks that are still mostly flying under the radar.
So, with that said, let’s take a look at the S&P 500 stocks that are newly rated “Bullish” this week. (Stocks with a score of 60 or higher are rated as “Bullish.”)
As was the case last week (see Not My Grandmother’s Utilities), we see representation by biotech in Amgen (AMGN) and utilities in Atmos Energy (ATO). We’ve seen several stocks from these sectors rate as newly “Bullish” over the past several weeks.
Match Group (MTCH), the owner of Match.com, Tinder and a host of other dating apps and services, also made its “Bullish” debut as its Green Zone Power Rating jumped 20 points over the past month.
While Match’s shares have struggled to find direction this year (it rates a very average 49 on its momentum factor), it’s a high-quality, fast-growing business with quality and growth factor scores of 82 and 87.
Perhaps most interesting was the addition of food producer Archer-Daniels-Midland (ADM) and discount retail chain Dollar General (DG).
Neither of these stocks is anyone’s idea of sexy. They’re about as boring as you can get, and neither rates particularly well on growth. ADM rates a 42 on its growth factor, and DG rates a 39. But both stocks do rate well on value, with factor ratings of 80 and 72, respectively.
As I wrote earlier this week in my sector X-ray of consumer discretionary stocks, shoppers flock to discount retailers when their budgets are tight. With the labor market starting to cool and inflation still stubbornly refusing to die, this may be exactly the kind of environment in which a low-cost leader like Dollar General could thrive.
Gold Still Glittering
Looking at newly “Bullish” rated stocks outside the S&P 5oo, we see an eclectic collection of companies. At the top of the list is Sharplink Gaming (SBET), an online sports betting site that has reinvented itself as an Ethereum “treasury management” company. In a similar vein, fellow Ethereum treasury company Bit Digital (BTBT) cracks the top five.
While I will never tell a trader not to trade, I’d recommend caution on these, as they are stocks with truly gut-churning volatility.
I was, however, interested to see Metalla Royalty & Streaming Ltd (MTA), an owner of gold, silver and copper royalty and streaming rights, pop up on the list.
Streamers earn exposure to gold and other precious metals without taking on the operating risk of actually running a mine. Streamers finance mining companies upfront in exchange for the right to buy a portion of future gold production at a fixed, discounted price.
I’ve been actively investing in both streamers and gold mining stocks this year in my premium services. In Infinite Momentum Alert, I recently closed out two gold mining positions at gains of 65% and 43%. And in my flagship Green Zone Fortunes newsletter, I recently added a gold streamer with a very similar business model to Metalla. We’re up about 7% as I write this, and I expect a lot more where that came from.
Gold miners and streamers ultimately follow the general direction of gold. So, after the yellow metal’s epic run to over $4,000 per ounce this year, does this trend still have longer to run?
So far, I see no reason to doubt it. Gold has been holding steady around the $4,000 mark, consolidating its gains from September and October. And the factors driving its rise – angst over inflation, central bank diversification away from the dollar, etc. – remain firmly in place.
To good profits,
Editor, What My System Says Today