The AI Boom Needs More Than Hype

SPEAKER_1 (0:00)

Welcome back to Next Gen Investing. It's now my pleasure to welcome in our next guest. That's Dennis Dick, the Chief Market Strategist at Stock Trader Network. Dennis, happy Friday, and thanks for joining us here.

Good to talk to you again. You know, you've been doing this a long time as a professional trader, all sorts of different strategies and things. I guess I'm curious your general thoughts on this market that's almost like, you know, someone who's stuck in quicksand or just found out there in quicksand, like violently moving but going kind of nowhere.

Dennis Dick (0:34)

Yeah, this is what we've been. We've been in a contrarian market here for the past three, four months here now. Really through the summer, we were blaming the dog days of August for this like chop and slop here. It's continued into September though. And really when you think about it, there's good reasoning for like lack of direction here. One is this war, we don't know the timeframe, how long this is going to last. So, you know, Trump is saying now, maybe past the midterms. You know, if it goes into next year, this higher oil prices is weighing on, you know, the real economy. It's weighing on a lot of stocks that are obviously sensitive to oil prices. And then, you know, now you have the uncertainty of the Fed to a certain extent where inflation is still a concern. Worst comments, they are committed to their 2% inflation target here. So we start to see, you know, interest rates sensitive names starting to get smacked around here a little bit. But then on the other side of it, the AI names continue to try to grind their way higher. So I kind of see this economy as like, you have the AI stocks trying to hold the stock market up. Some of these other stocks are trying to go down, but the weight of, you know, one, the oil prices and two interest rates continues to hold these stocks down. And what we end up having at the end of it is every time we get a significant rally, there are sellers ahead. So we have overhead supply. On the contrary, when you get dips, people are still believing in tech stocks going forward. They're coming in and buying these stocks on dips. And what ends up happening is rips are being sold, dips are getting bought. That equals a sideways market.

SPEAKER_1 (2:04)

Yeah. And we see that, right? Like we could put Matt to it. We could look at it. I mean, it doesn't take a rocket scientist to see that we've kind of been, you know, going sideways in many of these marketplaces.

But I guess my question then, Dennis, as someone who's done this and continues to do this and through all sorts of different marketplaces, you know, from your, I guess, perspective, what's the actionable step then for, you know, viewers who are involved in their portfolios, they're making decisions, kind of one, trying to avoid not to get chopped up in this market that can really do that to you, but also maintaining conviction when some of these trades just seem so hot and cold day to day.

Dennis Dick (2:48)

Yeah. I mean, it depends on who you are. If you're an investor, buy good companies at reasonable valuation and try to hold through all this noise. Eventually, the chop goes away. And if you have good companies, like let's take Broadcom for instance, like AVGO. This is a stock that I don't own, but it's a stock I kind of want to own. You've got the CEO going on Mad Money last week and saying, look, we think we can make $30 a share by the year 2028 So if you're an investor, stocks of 350 bucks, it's trading 12 times 2028 earnings if they can hit those estimates. So I don't know the path to get there, but if Broadcom can execute like the CEO is saying they can execute, then you're looking at a stock that's probably higher in 2028 Now, the path to get there is going to be choppy because obviously, all these concerns we just talked about with higher oil prices, interest rates, holding stocks down. But maybe it's about looking out to the projections. If you believe in it, some people don't believe that the AI economy is real. They think AI is a bubble and like Michael Burian thinks this is all going to come down in a blaze of sellers. But if you really truly believe that AI is going to change the world, there are companies that are actually on sale probably right now, simply because we're in such a choppy environment. So I think as an investor, you have to look at this as an opportunity. Companies like Oracle, companies like Broadcom, are trading at not crazy multiples. Even Nvidia itself, trading 17, 18 times a forward multiple here, is not crazy expensive here right now. So maybe this war and the lack of resolution to it, is giving us an opportunity to buy some of these AI names at a discount.