The AI Rally Has Room to Run

Millions of investors are just getting up on the topic of artificial intelligence (AI) and the promise it brings to those who invest and trade in the right stocks leading the AI revolution. The total AI market is projected to grow twentyfold by 2030, reaching nearly $2 trillion dollars. In 2022, the AI market was valued at approximately $100 billion. Spending on AI-centric systems is forecast to surpass $300 billion in 2026, with a compound annual growth rate (CAGR) of 27% from 2022 to 2026.

This past week, first-quarter earnings season came to an exciting end after the most important stock to the market rally, NVIDIA Corp. (NVDA), crushed sales and earnings estimates while also raising guidance. It declared a 150% increase in its dividend, announced the company bought back $7 billion of its stock during the quarter and announced a 10-for-1 stock split to occur on June 10. The leading AI chipmaker provided not just a blowout quarter, but also fortified the conviction of those wondering if the AI revolution had gotten ahead of itself.

Such is definitely not the case, and there seems to be a runway for stellar growth in this sector for the next two to three years. We’ll be looking to add more leading AI-related stocks to our trading portfolios to participate in this secular theme. NVIDIA is out front of all companies in the chip space, with key partnerships that include Synopsis Inc. (SNPS), Micron Technology Inc. (MU), Western Digital Corp. (WDC) and Applied Materials Inc. (AMAT), among others.

And then there are other cash-rich, blue-chip companies that are making big inroads with AI products and services. Apple Inc. (AAPL) recently announced that MacBooks and Desktop Computers will be installed with Qualcomm’s Snapdragon chips to run Copilot+ on all new devices. Look for Apple to announce a full-featured iPhone in the not-too-distant future that will trigger a global replacement cycle, like what is now happening in the PC world.

Oracle Corp. (ORCL) doesn’t get much attention, but it too is rolling out AI technology addressing infrastructure. Its OCI Supercluster is designed to compete with AWS, IBM, Google Cloud and Microsoft. This infrastructure supports AI workloads across various domains that can be customized with enterprise data while also deploying tools to install machine learning (ML) models used in open-source frameworks and databases. For instance, Oracle’s generative AI assistants are being added to its Software as a Service (SaaS) offerings.

Data centers the size of three football fields are sprouting up all over the country and around the globe, led by hyperscalers Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Alphabet Inc. (GOOG) and Meta Platforms Inc. (META). They have the war chests of investment capital needed to warehouse the world’s AI data needs that also require exponential electrical power, which has put a strong bid under the utility stocks that services these power-hungry data centers.

Because deploying AI is so capital intensive, it is likely the strong will just get stronger, and their stocks will remain the favorites of professional fund managers. Therefore, investors should consider following the money during this incredible secular trend in the disruptive transformation in the digital world, where volatility will be high during the next year. My recommendation is to own some stocks, trade stocks, trade long call options and collect covered call and naked put option premiums, as well, for total return.

I manage all these AI-related trades within the investing and trading services I oversee, like Hi-Tech Trader. Go to www.bryanperryinvesting.com to find out which services are best to serve personal risk/reward levels and get started with building and trading an AI-driven portfolio. The AI train might have left the station but it has not gone far. There are many more miles ahead of profitable track for this train to travel. All aboard!