Tech Leads as Data Centers Hit Full Capacity

SPEAKER_1 (0:01)

Welcome back to Opening Bell. Time for the very latest from this floor, the New York Stock Exchange, the financial capital of the world. And joining me right here is Wayne Kaufman, Chief Market Analyst, Phoenix Financial Services. Look, you've been on this floor a long time, and now we have a new month, new quarter. What say you, Wayne Kaufman?

Wayne Kaufman (0:24)

Well, it is a new quarter, and it's supposed to be a good one.

We're entering the sweet spot of the presidential cycle, the four-year presidential cycle, and so the next three quarters historically are the best part of the whole cycle. And the S&P 500 on average goes up about 16 percent, and the NASDAQ 100 goes up about 23 percent. So we've just left very bad seasonality, and September acted the way it usually does. So now we hopefully have good things ahead of us. There's a couple of issues, but I'm optimistic.

SPEAKER_1 (1:09)

So this time is the time to bite, get in there, be fully invested. And how are you navigating this? Because you do have market conditions that vary. Market breath has shown some weakness lately. How do you navigate this now?

Wayne Kaufman (1:23)

Yeah, so we've had terrible market breath, okay? Interest rates going up really hurt things.

And it is the beginning of a Fed hiking cycle. Historically, tech does the best during a Fed hiking cycle. And so October is the best month historically in a midterm election year for the S&P and the Dow.

It's second best for NASDAQ, but then November is the best month for NASDAQ. So I think tech has been the place to be. I think it still is. There are a scattering of other places to be, but tech is the place to be. And I think Micron's earnings last night showed that. And I think people may actually be underestimating the whole AI cycle, believe it or not.

SPEAKER_1 (2:20)

And I know your pics here, I'm looking at some tech names here. What percentage, okay, I know for clients, you have to be a little more diversified portfolio. Are you loading up on tech personally?

Wayne Kaufman (2:36)

I would say I'm, at this point, overweight tech more than you've ever been type of thing. No, not yet, but I could be.

SPEAKER_1 (2:47)

What are you watching for? What will be the catalyst?

Wayne Kaufman (2:50)

I think the catalyst is just the earning season coming up, but when I say I think people are underestimating, you know, first of all, the high bandwidth memory story is only gonna get stronger and stronger. The new processors from Nvidia, from AMD, these require 50% more high bandwidth memory than prior versions. That's 50% more.

And we just had with, you know, Meta with their Muse, they came out. Well, it uses more CPUs. So AMD's newest CPUs, the lead times on them have gone from a typical 16 to 20 weeks to 25 weeks. They're sold out, they're taking orders for 2028

And, you know, maybe the most important statistic of all is that data center capacity is 1% availability. And for all of the new data centers that are being planned, they're already 92% leased by the hyperscalers. So I just don't, I just see that semis and tech and the whole AI thing, I think it's just going, getting stronger and stronger.

SPEAKER_1 (4:16)

That's where most of your picks are today.

Wayne Kaufman (4:18)

Right.

SPEAKER_1 (4:19)

What's the other sector that you love a lot? For the folks who I say, I'm already already loaded on tech, what else can I look at?

Wayne Kaufman (4:27)

Well, biotechs have been very strong. So, and healthcare typically doesn't do that well during a fed hiking cycle.

But, we've seen some explosive moves with biotechs as they've come out with data. And so, there's some really exciting things there. And maybe most people should do biotechs through ETFs, because the individual stocks- There's a variety. And if you have bad news on an individual stocks, you can really get clobbered.

SPEAKER_1 (5:02)

Yes, they really have some big moves. So, let's get to some of the names you do like. You have Taiwan Semi in there, Microsoft, Western, Dij.

Do you want to touch on each one of these for a few seconds?

Wayne Kaufman (5:13)

Sure.

Taiwan Semi is just the best manufacturer of chips in the world. Even their competitors use them for the leading edge chips, Samsung, Intel. They use Taiwan Semi. And they're just the best operator. I have one you didn't mention, ASX.

SPEAKER_1 (5:36)

Right. The Asian Equities, right?

Wayne Kaufman (5:39)

No. It's ASX is in Taiwan.