Investors see opportunities in AI stocks despite market volatility
Concerns about the valuations of AI-related stocks have recently caused volatility in the market. While these worries may fade over time, the potential for a rebound remains a factor to consider. That’s according to US broadcaster CNBC.
Seasoned investors acknowledge the risks involved with speculative investments in sectors like nuclear stocks and ‘neoclouds,’ which pundit Jim Cramer has repeatedly warned against. The broader category of AI companies, which generate revenues and are seen as the engine of the fourth industrial revolution, was also negatively affected despite strong fundamentals.
Companies such as Nvidia and Broadcom, known for their chip expertise, and GE Vernova and Eaton, benefiting from the growing demand for power for AI data centres, remain financially robust despite the recent slowdown.
In addition to valuation issues, there is debate about the capital expenditures and depreciation resulting from the substantial investments in AI infrastructure. Investors face a choice: stick to traditional accounting methods based on the historical lifespan of technological assets, which leads to significant estimates of impairment charges, or rely on the views of the management teams of leading AI companies.
By listening to CEOs like Nvidia’s Jensen Huang, who emphasises the longer lifespan of GPU chip platforms thanks to advancements in CUDA software, conventional depreciation models are being challenged. Lisa Su, CEO of Advanced Micro Devices, also points out that customers are now seeing a significant return on their investments.
While concerns about overestimating asset lifespan are justified, history shows that betting against technology visionaries such as Jensen Huang, Lisa Su, Mark Zuckerberg, and Satya Nadella has rarely been profitable.
Ultimately, long-term investors may find more success by aligning with the outlook of these technology leaders. The real impact of AI is undeniable and promises higher productivity as adoption increases and AI becomes deeply integrated into our daily lives, much like the Internet. The trust investors place in the management teams of AI companies is rooted in their proven experience, best-in-class offerings, and solid underlying financials.
An approach that prioritises the advice of these technology leaders over purely financial models has consistently delivered positive results in the past, and this trend is expected to continue.
Business AM
Subscribers 0
Fans 0
Followers 0
Followers