Max Wasserman Stays Long-Term Bullish on AI, Likes GOOGL, MSFT, AVGO

SPEAKER_1 (0:00)

I do want to bring Sam back into the conversation, though. Take a look at the markets with Max Wasserman, the SVP and Portfolio Manager at the Miramar team. Max, great to have you on. I would love to know how you're looking at the markets right now and its overall strength with all these AI fears tied to capex spending and higher rates and a potential AI slowdown and a slowdown in the spending. How are you looking at everything right now?

Max Wasserman (0:27)

Well, thank you for having me on. I think we're looking a little bit the short term and the long term. Going into the short term, the expectations for AI spending has been at tremendous levels. And you've seen the companies issuing debt roughly around $300 billion. And you're starting to have people question the return on investment and the cost of capital. So when we look at this market, we'll go back to the fundamentals here. If you have companies that have to issue a lot of debt for financing and for growth, then a higher interest rate is going to cost them more money to do that, which is OK as long as the expectations for continued growth. But now you're starting to see some pressure from them from the credit markets. You're starting to see a wondering, are they going to continue at this level of growth? And with higher interest rates, it makes the AI spending and to make the valuations very questionable, especially when you're going to earnings, you know, next week or two, and everybody's expecting terrific numbers.

Sam (1:22)

So Max, then as a PM, does it change your thoughts and your thesis around allocation right now, given what is working and it feels like it's everything outside AI right now, even fixed income?

Max Wasserman (1:35)

Well, it does, but we've been having this change for the last several months. I mean, we have a barbell strategy, so we have probably about 15% of the portfolio in healthcare and pharmaceuticals, and we have about 13, 14% in energy. So, with balances, our 25% in technology. But we like the other parts of the market, we think better risk reward because nobody wanted them. Now, you've had in the last week or so, everybody's piling into the defense of trade and people are starting to question it. So, I caution individual investors to make major changes in the portfolio over the next week or two. But I do expect volatility to really pick up because you have higher inflation here, you do not have resolution in the Middle East with oil prices, and now everybody, the expectations for AI spending is just really too high.

SPEAKER_1 (2:22)

And so, as you look at AI, I mean, how are you looking at the long-term AI story? Do you have bubble fears? Are you overall bullish long-term?

Max Wasserman (2:31)

Yeah, we like AI long-term. We have investments in the Microsoft, the alphabet.

We have Broadcom and we may have some Qualcomm in there in the portfolio. So, we like it long-term, but we're not jumping into it. Keep in mind that if you look three, four months ago, nobody wanted Microsoft. It was in the 400 range and now it's at around 540 a share. Everybody piling into it. So, people's sentiment, the market sentiment changes. So we like the big large companies that generate a lot of cash flow. They're going to need it to spend it, right? So, we see that happening. We're cautious about, even though we have a big investment in Broadcom, we like it. They're issuing $60 billion in debt. So, we're concerned, but again, we've been lightening up on our tech throughout the year, and we've been increasing our exposure in health care and in energy. So, for us, we like these companies, but we wouldn't chase anything right now. Right now, everybody's piling into defensive trade. That could change tomorrow or the next day. So, I would say, know what you own. Have good companies. We like dividend payers. But right now, I'd be very cautious because this market could go on a dive.

Sam (3:37)

What about the bottlenecks? I mean, are you positioned and have you got exposure to some of the areas where we're seeing constraints? I mean, when you talk about AI infrastructure, but also some of the more adjacent areas like utilities, for instance, what's going to power everything and industrials, which have become AI stocks in themselves as well.

Max Wasserman (3:56)

Sure.

It's more like a second derivative, but what you're saying, the second trade on that. Yes. I mean, we like utilities. We don't own any right now because the prices went up. We'd like to see people not like them before we can go in.