The hype surrounding chipmaker Nvidia’s earnings is dangerous, but all investors should consider Artificial Intelligence (AI) exposure, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The analysis from deVere Group’s Nigel Green comes as investors worldwide await the California-based semiconductor designer Nvidia’s results on Wednesday – which come after the closing bell – to see how it performs against sky high Wall Street expectations after an impressive first quarter.
He comments: “Nvidia’s shares have jumped almost 210% this year on the frenzy around its uses within AI.
“Clearly, this is huge and, as such, all eyes will be on the earnings and also the future guidance from the company after the bell on Wednesday.
“If earnings are again stellar and guidance robust, it will help reignite the tech rally which has stalled in recent weeks. If they don’t, we expect short-term market volatility.”
The deVere CEO warns, however, that as the volume is getting louder, and the frenzy is reaching fever pitch regarding Nvidia and other so-called ‘Magnificent Seven’ tech stocks (Apple, Microsoft, Amazon, Meta, Tesla and Alphabet), the heat needs to be taken down a gear.
“This level of hype is dangerous as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth – and they are not, at least not on their own,” he warns.
“While I believe that exposure to these mega-cap tech stocks should be part of almost every investor’s portfolio, as they have robust fundamentals and are future-focused, especially in AI, they should not be exclusive.”
“These stocks are incredibly important, of course, but they’re not a panacea. I fear some investors will get burned unless some of the frenzy is turned down.”
“Diversification is, as ever, investors’ best tool for long-term financial success. As a strategy, it has been proven to reduce risk, smooth-out volatility, exploit differing market conditions, maximise long-term returns and protect against unforeseen external events.”
That said, the deVere CEO remains bullish on AI-orientated investments as part of the mix.
“The buzz surrounding AI companies is grounded in tangible technological advancements and their potential to reshape industries across the board.
“The transformative capabilities of AI, coupled with its cross-industry disruption, data-driven nature, and rapid innovation, make it a compelling investment opportunity.
“As the AI market continues to expand and evolve, investors who recognise its potential are well poised to reap the rewards of this exciting technological revolution.
“Including AI exposure in investment portfolios isn’t just a trend – it’s a strategic move that aligns with the future of innovation and economic growth. Just do it judiciously.”