Are investors reentering the AI trade after recent 'exodus'?

Yahoo

2 days ago

While Nvidia shares (NVDA) continue to see post-earnings gains after topping first quarter revenue estimates, Spear Invest Founder and CIO Ivana Delevska speaks with host Brad Smith about investor exits from the AI trade and their reentry into the play as they chase the new highs from chip stocks and tech leaders.
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Stocks higher after a US court struck down President Trump's tariffs, declaring them illegal. The Nasdaq also getting a boost after Nvidia topped first quarter results, revenue soaring 69% in the most recent quarter. Joining me now, we've got Ivana Delevska, who is the Spear Invest founder and CIO. You say that investors have abandoned the AI trade, and we'll have to come back and chase the high-quality stocks and AI stocks like Nvidia. Why is that?
So that's right, Brett. Thank you for having me. Basically, as tariffs started getting announced, and the economy became a little more uncertain, investors sold what they own, and they were really overweight the AI trade. Specifically people that didn't quite understand what they were getting themselves into, so it was a real exodus coming out of names like Nvidia, but even more so in some of the smaller caps. And right now as we approach second half, we're seeing the Blackwell ramping really well. And that's going to drive the entire value chain up, so we are very positive on the second half. So we think as we get closer to that, investors will have to come back and and chase it.
What type of flows back into Nvidia do we see, even leading up into this earnings print from what you were able to assess?
Well, for Nvidia specifically, it was really people coming back to it given the cancellation of the diffusion rule and few other positive catalysts. Like people thought that deep seek was going to be a headwind. It's actually turning out to be a tailwind. So there's been several positives for Nvidia specifically. For some of the smaller caps, there's also been a lot of short covering that we've been seeing. So the first leg up, I would say, from the bottom was mostly short covering. I think institutions and hedge funds are still quite underweight. And as they come to the market, I think that's when you're going to see the next leg up for these stocks.
What's the most underappreciated portion or sector of the AI trade if you will?
Well, there's several sectors that are underappreciated. One example is power generation. This space basically came under a lot of pressure, but it's actually not even going to be negatively impacted by tariffs, right? So as you have more onshoring, there's going to be more build out in the US, and there's going to be more power demand. So I would say that one sector is pretty misunderstood. Another area is networking. You're seeing a lot of the networking names sell off today, like Arista Networks, like Marvell, and those stocks basically are positively impacted by the AI trade. Some of the comments that Jensen made regarding their entrance into networking is making people nervous about the rest of the networking space and they're thinking that maybe Nvidia will gain market share. But even if they do, the market is growing at such an exponential rate that there is some piece of the pie for everybody here.