SUPERNEWS

Macro

BlackRock's Moore: Buy AI Stocks Amid Market Dip, Sees Upside

BlackRock's Moore sees market dip as opportunity, highlighting AI and copper commodities as key investment areas amidst market challenges.

By Bill Bullington

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4/16, 11:53 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Advanced Micro Devices, Inc.
Emerson Electric Company
Eli Lilly and Company
NVIDIA Corporation
Charles Schwab Corporation
Waste Management, Inc.
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Key Takeaway

  • BlackRock's Kate Moore views the market pullback as a "healthy consolidation," advising to buy AI and semiconductor stocks.
  • Moore highlights strong potential in AI software, semiconductors, and global commodity producers, especially in copper.
  • Anticipates "solid" corporate profits in Q1 earnings reports, with companies likely to raise guidance amid resilient consumer spending.

Market Resilience Amid Challenges

Recent market activities have shown a downturn, with the S&P 500 experiencing a nearly 4% drop this month, influenced by concerns over prolonged high interest rates and escalating conflicts in the Middle East. This decline was mirrored in the performance of the Dow Jones Industrial Average and the S&P 500, both of which fell for a second consecutive week. Notably, there was a pullback in the "Magnificent Seven" stocks and semiconductor companies like Advanced Micro Devices, which had previously driven an AI-fueled rally since late October. Despite these setbacks, BlackRock's thematic strategy head, Kate Moore, views the current market dip as a healthy consolidation rather than a sign of a weakening market. Moore emphasizes a "supportive" macroeconomic climate that could bolster stock returns throughout the year, highlighting the potential in AI-related technologies and global commodity producers, especially in the copper sector.

AI and Commodities as Investment Opportunities

Moore identifies significant investment opportunities in AI-adjacent software and semiconductor companies, as well as in global commodity producers and miners, particularly those involved with copper. This optimism is rooted in the continued demand for AI technologies and the early stages of the semiconductor cycle. Moore also points to the attractive valuations of companies essential for the energy transition and AI advancements, suggesting a strategic entry point for investors. The anticipation of solid corporate profits, with companies expected to affirm and raise their guidance amid cost-cutting efforts and resilient consumer spending, further supports the investment case in these sectors.

Phases of AI Investment

Goldman Sachs Research outlines a multi-phase approach to AI investment, starting with Nvidia's dominance in the initial phase, followed by companies involved in building AI-related infrastructure, incorporating AI into their products, and finally, those achieving productivity gains through AI. This framework suggests a broadening of the AI rally beyond Nvidia, with Phase 2 focusing on infrastructure and Phase 3 on AI-enabled revenue. The analysis indicates a cautious optimism among investors, with long-term earnings growth expectations and analyst growth estimates reflecting a tempered yet positive outlook on the technology sector.

Diversification Beyond Nvidia

For investors concerned about overexposure to Nvidia, Trivariate Research's Adam Parker recommends considering a diversified portfolio of steady growth stocks with low correlation to Nvidia. This strategy aims to hedge against potential volatility and maintain positive alpha. Among the recommended stocks are Berkshire Hathaway, Eli Lilly, Charles Schwab, Waste Management, and Emerson Electric, each offering a unique growth profile and market resilience.

Street Views

  • Kate Moore, BlackRock (Bullish on AI-related companies and global commodity producers):

    "I think healthy consolidation after an extremely strong return in the first quarter is completely fair, and doesn’t change the fundamentals... There’s a considerable amount of upside to go. That said, it’s not going to be a straight line... We are very constructive on the continued demand for AI and AI-related technologies. I see a lot of upside in the software companies, and I think we’re at the very beginning stages of the semi-cycle... after a significant lack of investor attention for the last number of quarters, I think it makes sense to take a good look at companies that produce materials that are necessary for the energy transition, that are necessary for AI and technology advancements and are trading at ... very attractive valuations."