The artificial intelligence (AI)-driven boom has driven up the share prices of a wide range of technology companies that have skin in the game. Undoubtedly, a lot of investors want a piece of tech’s next big trend. Unlike crypto assets, web3, and other hype-driven trends, AI seems to be more of a revolution driver. The influence of AI could spread well beyond the tech sector. Pretty soon, even boring, low-tech companies may need to have the tech talent to get AI working hard for them.
Indeed, a lot of people are a tad worried about the disruptive implications on the labour market. Regulators and tech firms themselves need to set the rules and abide by them to prevent any negative consequences of the rise of AI.
For now, though, a lot of investors seem to be worried about missing the AI boat entirely. Whenever there’s a sense of missing out, one may be more inclined to “chase” stocks without conducting enough due diligence.
AI stock melt-up: The fear of missing out is almost palpable!
For investors, you must weigh the risk of “missing out” on AI-driven upside against the risk of being a tad too late to the party. After such a euphoric surge, tech has essentially melted up.
Melt-ups tend to end in meltdowns whenever there’s a large degree of euphoria on the part of investors. However, given America fell into a tech-fueled bear market last year, I’m not so sure you can dismiss the recent melt-up as unsustainable. Arguably, we’ve already had the meltdown, and as the market climbs higher, I’d look for relative laggards to pick up traction again.
The AI trade is no secret anymore. But there are still plenty of “undercover” companies out there that could still have a lot to gain from AI’s continued boom.
Though I can’t promise you the next Nvidia (NASDAQ:NVDA) — a red-hot AI stock that has soared more than 200% year to date. However, I can list two names that I believe could earn the appreciation of investors, as they look to explore possibilities in the AI scene.
Shopify (TSX:SHOP) is an e-commerce company that’s looking to disrupt the point-of-sale market. If it can, Shopify could be the go-to platform for merchants. Indeed, moving into physical commerce is a smart move that won’t cost Shopify much if it fails.
After pandemic lockdowns, we’ve seen a lot of consumers return to physical stores, taking a bit of tailwind off the backs of e-commerce. As recession hits, consumer resilience will be put to the test. Regardless, Shopify can get its foot into new waters to offset any further recession-driven pain.
One route is AI. The company has actively been using AI to improve its product. Most recently, the company embraced OpenAI’s translation bot. Undoubtedly, Shopify’s “dabbling” with AI could drive growth and efficiencies higher in a hurry. In that regard, I believe SHOP stock deserves more AI upside than is currently being priced in.
Shopify stock’s rally has been impressive, and I’d be willing to bet that $100 will be hit by year’s end, assuming the tech trade doesn’t falter again.
Undoubtedly, Nvidia is the AI stock to own for appreciation right now. After tripling over a year-to-date basis, the valuation has swelled to unprecedented levels. Eventually, the stock will come back to Earth. But until it does, it’s hard to tell just how much higher the graphics processing unit kingpin can climb.
If you’ve got a tolerance for risk, I’d not be afraid of starting a tiny position here. Just be ready to buy more after the next dip. Nvidia’s chief executive officer Jensen Huang is a man on a mission, and there’s not much that can stop him. And as new AI-capable chips are unveiled, I find it hard to believe that prospective customers won’t be submitting orders in droves. Recession or not, Nvidia stock is riding on a tailwind that’s so strong that not even a cold macro climate can cause it to backtrack.
For now, Nvidia is a speculative nibble. However, I would prefer to wait for a return to the $350 level.