From ASML to Nvidia: Navigating the AI Chip Boom

SPEAKER_1 (0:00)

Time now for the watchlist panel. We're taking a broad look at the state of the AI trade. Joining us now for that are John Freeman, co-founder, senior analyst of Ravenswood Partners, and Melissa Armo, founder, owner of the Stock Swoosh. It's good to see both of you. John, you say, look, the AI trade keeps shifting on a weekly basis. It does, and even daily, with one day it's about the software trade, one day it's about the chips trade.

So when you think about this week, we started with this existential question, is the proliferation of AI moving too fast when you think about safety, security, et cetera? How do you think about the state of the AI trade now?

John Freeman (0:39)

Right. So it's interesting. I mean, I think software is very, is kind of a particularly untethered software, the software that's untethered to hardware. So not the hyperscalers, we think they're going to do fine. But software that's enterprise software that's not tethered to hardware or doesn't have network effects, I think is really vulnerable in the long-term.

Unless, like ServiceNow, which is one of our software positions, they have, because they are trying to man, they have software that manages other agents and secures other agents, which obviously I think they're going to see a pretty substantial demand for. Other than that, we really like semi-cap equipment for a lot of reasons. I think the continuation of Moore's Law with ASML and with Lam being the primary beneficiary is there.

SPEAKER_1 (1:30)

Let's talk cybersecurity, because one of the big things that came up this week is risk, right? Risk around the speed and safety of the AI arms race. Melissa, I want to hear your thoughts on this, because for instance, you think about CrowdStrike, it made a big move this week. It's not the only one in the cybersecurity space that made a move. What's your thought on this?

Melissa Armo (1:50)

Well, Crowd has been strong for quite some time. That's had a nice lift, but when you look at the sector that's been lifting the market for the majority of 2026, it is the chip sector. It is all the stocks that are associated with AI.

I believe the CEO of Palantir was mentioning that if something happened, this could potentially crash the market. Well, that's true, because it's been the one sector that's been lifting the market. That's the danger if something happens or people get scared. Remember, Monday, we started the week out because this conversation over the weekend and the market ended up opening lower. Now, we recovered since then, for sure.

The fact is that we're going into fall earning season. It's coming up in a few weeks. If these companies don't report the way that the market wants to see them, or God forbid, there's some other tweet out there that scares people, then I think there could be a problem. I think these companies are definitely driving towards wanting to have some kind of regulation and government intervention just because of the unlimited liability. I don't know if there's really any way to stop or prevent the huge liability that they're taking on. I don't know enough about what happened here that created this issue that came out over the weekend. I'm not sure if publicly it's known yet. But when you think about it, you say, okay, we're in competition with China, Trump's meeting with presidency this week, and Jensen Heung is going to be there too in that dinner. And so, I mean, it's going to be talked about. This isn't the end of it. It's going to go on and I don't know really what the outcome is going to be or if the market will crash eventually because of this.

SPEAKER_1 (3:29)

Melissa, though, I just want to stay with you for a minute. Do you really think they want it? Because there is a Wall Street Journal report that says that Mark Zuckerberg over at Metta, Jensen Wong, and Elon Musk pushed back on a previous plan with regard to regulation of the AI industry. And there is the concern about seeing out in front of China. Do you really think they want it?

Melissa Armo (3:52)

I don't know. That's what I'm saying. There could be an ulterior motive behind that we're not aware of. So Anthropix is still supposed to come out with the IPO in October. And OpenAI was supposed to come out this year, and I guess they pushed that back to 2027 So maybe that's a good thing for OpenAI. They're going to wait and see a little bit longer to see if they can shore some things up. I really don't know if there was, again, an ulterior motive behind it that had to do with financial reasons, or if something really happened that scared them. Let's just say there is something out there that could potentially be dangerous. Well, who's to stop China from launching it and it happening anyways? So I don't know.