Nvidia’s (NVDA) stock slump — down by 9% over the last five trading days — dragging down tech-heavy indexes (^DJI, ^IXIC, ^GSPC) along with it.
Yahoo Finance’s The Morning Brief welcomes Commonwealth Financial Network CIO Brad McMillan to talk about recent trends in the tech sector and major chip players.
“When you look at the underlying trends, there are some companies coming up underneath Nvidia in the in the artificial intelligence [AI] market. But at the same time Nvidia is still amazingly dominant,” McMillan explains. “So, you know a little bit of a pullback, that doesn’t worry me necessarily in the short term as long as the trends remain positive and they are. And those other companies give you other opportunities going forward.”
McMillan also weighs in on opportunities in small-cap stocks (^RUT) and the Federal Reserve’s interest rate approach to inflation.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Luke Carberry Mogan.
Video Transcript
We’re going to focus in on and video because those shares moving to the downside at the open, it’s down about 1.8% right now.
The giants down over 6% in the last two days, dragging the index along lower with it.
You can see over the past two days and videos down nearly 5% there.
Our next guest saying despite all that continues to be a top pick, joining us to discuss, we’ve got Brad mcmillan.
He is Commonwealth Financial Networks, Chief Investment Officer, Brad, thanks so much for being here with us.
I just wanna get your broad take on positioning in tech right now.
What are you seeing?
How would you categorize the positioning that you’re seeing in the tech space?
What we’ve seen, Matty is a significant run up in some of the headliners and via of course, we’ve been talking about that all morning, but at the same time, you’re starting to see a bit of a pullback there and that’s fine because we’ve seen some insider selling, which makes sense.
But when you look at the underlying trends, yeah, there are some, there are some companies coming up underneath NVIDIA in the um in the Artificial Intelligence market.
But at the same time, NVIDIA is still amazingly dominant.
So, you know, a little bit of a pullback that doesn’t worry me necessarily in the short term, as long as the trends remain positive and they are and those other companies give you other opportunities going forward.
So I don’t see this as a NVIDIA story.
I see this as a continued growth story for the industry as a whole.
How do you kind of really separate what we’re seeing within Nvidia’s tech story and the orders that are coming in from the the business to business side on anticipation of how generative A I will be utilized versus the consumer technology story where you’ve got firmly within their companies like Apple that are trying to continue to make their own rebound over the course of this year, given some of the slippage that we had seen out the gate to start 2024.
Well, when you look at NVIDIA and let’s let’s stick with those.
For example, they are selling the, they’re selling the picks and shovels to the miners and then the miners are actually going out and trying to dig the gold.
So I think it’s, I think it’s an iterative process where you see the business to business, take immediate advantage of that because obviously a company like Apple wants to be ahead of the consumer and then the pickup demand from the consumer comes to that.
So to the extent that Apple can make this happen.
And then of course, I would bet on Apple, I would bet on Microsoft, I would bet on IBM as you said earlier to make artificial intelligence work for the consumer.
That’s just gonna create more demand, that’s gonna drive demand for the underlying chips in the first place.
So I see this as a virtuous circle.
OK?
Well, talk to me about where small caps play into that circle.
Brad, I was mentioning that we saw the Russell sort of starting to tip into competitive territory very lightly with the broader market at the end of last week, could this be evidence of broadening out or are we kind of overstating that at this point in hopes of seeing broadening out in this market?
Well, I certainly want to see broadening out of the market as well.
So certainly hope is a is a part of the picture here.
But at the same time, when you look at the attention that’s been paid to some of the largest stocks again, let’s look at NVIDIA and people are starting to look at that and say, well, maybe there’s some opportunities in other sectors besides tech.
And I think that’s a good thing.
I mean, one of the things that I think has been underappreciated is consumer staples.
Now, what we see here is we can see continued growth in jobs in wage growth in spending ability and we’re seeing a lot of those companies continue to move up kind of quietly.
So I do think we’re seeing a broadening and just because we hope it’s so, doesn’t mean it’s not true.
Brad, you, you’re continuing to see inflation at a range of 3 to 4% this year.
I mean, we’re, we’re clearly watching it right now, try to get towards the fed’s target.
What do you think are some of the hiccups in the road that would actually keep it in your target range?
Well, with respect, I think that’s the wrong question.
You know, we’ve been saying, oh, it’s going to go back down.
We’ve been saying, oh, it’ll go back to the Fed’s target.
And we’ve been saying this for a couple, well, a lot of people have been saying this, I haven’t for the past couple of years and the truth of the matter is we don’t see any signs that it’s going to continue dropping.
You know, it stayed about where it is for most of the past year.
And if I look at it from the Feds perspective, I now have to see proof that it’s going to go down because it hasn’t been.
And that changes the decision calculus for the Fed.
So, you know, I look at it and I say the question is not, why would it stay up the question at this point?
And I can give you a lot of reasons, but the question is why are we going to assume it’s gonna go down because we’re just not seeing it.
Well, Brad with respect to you here, that’s the question because the FED has not given us any sort of central thesis to go off of.
So we’re all just kind of wearing, you know, cloak over our eyes trying to guess what the FED may or may not do because they’re just data dependent, data dependent.
Where do you get clarity given the lack of the central thesis from the central bank?
See, I think the FED has actually been extremely clear because they’ve been saying all along we’re data dependent as you say.
But then that begs the question, what data are they looking at?
But let’s go back to, let’s go back to their statutory mandate, which is employment and inflation.
So right now they need, they wanna see inflation down and they want to see employment up right now, employment is up but inflation is also still high.
So they have absolutely no reason to cut.
I’ve been saying all along, you know, the question is, when is the fed gonna cut that?
I think that’s the wrong question.
I think the question is why would they cut and they have no reason to cut until job growth falls apart or inflation goes down.
Brad mcmillan Commonwealth Financial Network Chief Investment Officer, Brad.
Thanks so much for taking the time this morning.
Thank you, Brad.
Great to be here.
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