I mentioned the “AI Supercycle” that is heading our way in 2024 a few weeks ago, but you’re really starting to see the green shoots of this economic phenomenon grow in the semiconductor sector.
Buy This Chip Stock, Not Nvidia
Let me go on record by saying I LOVE NVIDIA (NVDA) STOCK just as much as you!
It’s the leader. It’s the Coca-Cola of AI stocks. It’s the stock that everyone wants to have in their portfolio. I’m just out here telling you that there are others like Pepsi, Mountain Dew, and Sprite that are right up there with Coke.
That’s where Applied Materials (AMAT) falls in the coming AI Supercycle. It’s not Coke, but sometimes its better than Coke. Right now is one of those times.
Last night, Applied Materials provided better-than-expected earnings results and outlook, propelling their stock 6% higher this morning and into new all-time high territory.
I expect that Nvidia will do something similar next week with their earnings, but I also expect that we’ll see NVDA shares experience a “sell the news” pullback in the days following their report.
The pullback won’t happen because NVDA is a bad stock. No, it happens because everyone already owns NVDA, which means that some of the market will take the opportunity to take profits after another great report.
Not the case with AMAT.
The chart to the right displays the current analyst recommendations for AMAT. Currently, 64% of the analysts covering the stock rank it a buy with 33% considering it a hold.
This is starkly different from NVDA, which boasts more than 90% buy recommendations from the analyst community.
I love both companies, but you and I are looking for opportunities for stocks to outperform their peers and the market, and right now the potential for Wall Street to start upgrading shares of AMAT is much better than the potential for NVDA.
Bottom Line
For that simple reason, I like shares of AMAT to start catching-up to NVDA’s performance over the next six months as the AI Supercycle starts to focus it power on rising the rest of the boats in the AI harbor.
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About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.