Matt Orton of Raymond James Investment Management sees attractive opportunities in both the Asia and US technology trade. He argues that the AI trade is 'not in a bubble' and discusses Nvidia's upcoming earnings expectations.

Beijing

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Recent U.S. trade and technology policies are motivating China to intensify its focus on artificial intelligence and semiconductor manufacturing. This shift has led to a resurgence in earnings growth among Chinese technology companies, despite broader economic challenges. The trend is also reflected in other regions, with European financial and technology sectors showing strength.

Industry analysts note that significant capital expenditure in the U.S. technology sector, especially among hyperscale companies, is supporting a broad ecosystem beyond just technology firms. The reopening of the Chinese market to certain NVIDIA chips has generated both optimism and caution, as concerns about regulatory approval and security persist. Overall, the durability of the AI and chip sector is seen as a long-term opportunity for investors.

U.S. 'inspiring a movement' in China to prioritize AI and chip building

When you look at what's happening, even just say China more broadly, you know, building off of the strength in healthcare in Hong Kong, I think looking at some of these economies from a broader perspective outside of just tariffs, you look at China, the strength of the semiconductor trade, the fact of what's happening in negotiations with the U.S. I think is inspiring the movement to really prioritize not only artificial intelligence, but chip building in China. And so you've seen a resurgence of earnings growth amongst those companies, despite, I would say, a weaker economic backdrop. And so you're seeing that play out also in Europe. European financials, broadly speaking, are doing incredibly well this year. That's an area that I think continues to look attractive because of strong capital returns and also the potential for just easier regulation in response to some of the evolving geopolitical concerns, trade concerns that need to support the economy more broadly. So I certainly think there are some really attractive opportunities overseas, particularly for financial companies and also the technology trade in Asia. The technology trade. Let's talk about that, Matt. I'm curious whether or not you think, you know, the whole A.I. trade and big tech is starting to look a little stretched in terms of value and whether or not some of the answer to that is going to come Thursday stateside when NVDA reports. Yeah, you know, Martin, I don't think this tech A.I. trade is stretched. I still think we're in the early innings. I think certain names are stretched on this side of the equation. But when you look at the durability to this theme, the amount of money that's being spent, $365 billion in CapEx from just the hyperscalers in the U.S. alone, that's significant. And that accrues to a very large ecosystem of companies that are not only just in technology or communication services, but in areas like industrials, areas like utilities. So again, that goes back to building breadth in portfolios and finding ways to play it. What I do think near term with NVIDIA earnings is that there is an incredibly high bar to beat because you've seen analysts increase their expectations and price targets heading into earnings. So that just makes for a more challenging setup. But you know, NVIDIA doesn't miss results. So I think it's going to be how much does the guidance that Jensen provides exceed the expectations of Wall Street. And I think any downside that you see to the ancillary A.I. trade should be used opportunistically by investors to get exposure, because so many people have complained about missing this trade. Well, this could be your chance. And if they beat and clear that incredibly high bar, more power to the durability and showing everybody that this is not a bubble, this is very tangible, it's real and it's long term. I've got to ask you, several weeks ago when the president decided to let NVIDIA H20 chips back into China, rather than decide to let China have them again, folks are getting very excited about NVIDIA because they're saying, look, their projected earnings do not account for China. Now that China is back on the table, hey, it's just going to be icing on the cake, except for the fact that now on the Chinese side, they're saying, I don't know, you're letting us have these chips. I'm not sure if we want them or should have them, because big boss upstairs says no. And by the way, we're worried about things like back doors. So China, which accounts for a big chunk of NVIDIA revenue, is that a risk hanging over the stock? It is. I think that's another reason why that bar is really, really high, because analysts have basically anchored to those expectations, and whether or not they've taken that down over the past week since we had the announcement from China on the H20 chips, it's still out there in the ethos. And so that's why I really wouldn't be surprised to see some weakness with respect to just where the guidance comes in on NVIDIA. But again, NVIDIA is one company in the system, and NVIDIA is going to report strong numbers. So I think the takeaway should really be, is there a strong durability to this AI trade? Yes or no? I think the answer is yes, and thus you want to lean into that weakness.

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Tel Aviv-Yafo

Middle East Conflict

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Jerusalem

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Stockholm

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U.S. 'inspiring a movement' in China to prioritize AI and chip building

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Rise of AI