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Earlier this month, billionaire Ken Fisher, while talking to Bloomberg, said that in his career spanning 50 years he never spent a “moment” thinking or worrying about what the central banks “might do.”
Billionaire Ken Fisher Says He Doesn’t Waste a “Moment” Worrying About Fed Moves
Why? Because Fisher said he’s “always believed” that “they are just about as crazy and out of their minds as you can be.”
Fisher, 73, said that the central bank management “never” knows what to do as it’s reactive. To drive this point home, Fisher reminded everyone that just a month before the Fed’s first 75bps rate hike, Fed Chair Jerome Powell had said that he was not even “thinking about” raising rates by 75bps.
Fisher Says Some Threats and “Big Surprises” are Not Priced In
Ken Fisher has been bullish on the economy over the past several months. Rate hikes, the inflation storm, banking crisis and global uncertainty did not waver Fisher’s belief that we will come out of this crisis unscathed. But in his latest interview Fisher voiced concerns about some of the threats he believes are not yet “priced in.” Fisher is worried about “big surprises” that can impact global stocks and global GDP. Fisher said in financial markets everyone is usually worried about more or less the same things. But sometimes threats can slip through the cracks and we don’t see them coming. Ken Fisher said a classic example of this surprise is mark-to-market accounting rules implemented in 2007 which “hugely took the mortgage problem and amplified it to write $2 trillion off of global bank balance sheets.”
However, Fisher reiterated that he’s bullish on the market right now.
“But whenever I am bullish I am still looking for risks.”
Fisher Is Worried About a Nuclear War in Asia
Fisher’s worries about the geopolitical chessboard stem from what he called the nuclear-armed triangle: China, India and Pakistan. Fisher said these three nations have different economies, politics and culture and they “usually don’t like each other.” While Fisher thinks the odds of war in the region are not high, he doesn’t think such a war is “impossible” and fears any conflict between the nuclear powers in Asia would be “catastrophic.”
Ken Fisher’s Favorite Sectors
When asked about what sectors he’s looking as bargains, Fisher said he wouldn’t call them “bargains” because “valuations don’t usually tell you much about short to intermediate term stock price direction.”
Instead, Fisher is looking for sectors that would do “pretty well” in a moderate growth economy with a “slowly decelerating inflation” environment.
Fisher likes energy and high-end consumer luxury goods sectors. He also said that while healthcare hasn’t been in a market-leading position, he expects “big healthcare” stocks to start becoming “better and better.”
Bubble or Not? “It’s The Garbage That Tells You”
Asked whether he believes the tech stock rally of 2024 is a bubble, Fisher talked about a “telltale” sign that we can use to find out whether we are in a bubble or not. Fisher said that when “garbage”, low-quality IPOs start to flood the market, you should start worrying about a bubble. Fisher said high-quality company stocks making new highs, backed by revenue and profit growth, is not what you call a bubble. Fisher highlighted that after the “SPAC world of 2021,” 2023 saw the lowest volume IPO market since 1984.
“And that tells you we are not anywhere close to an actual bubble.”
Fisher Investments Likes Q1 Earnings
Fisher Investments in a latest post talked about how positive Q1 earnings were and said the latest numbers show the market returns were broadening out and the firm’s bullish outlook was confirmed.
“With 427 companies having reported as we write, the blended earnings growth rate is 5.5% y/y.This figure, for those who don’t have their financial jargon glossary handy, blends actual results for the 427 reporting firms with estimates for the remaining dozens. So while the stragglers could pull the headline rate down some, it seems safe enough to say earnings grew for the third straight quarter. Growth was broad-based, too, with 8 of 11 sectors growing and only Materials, Energy and Health Care in the red. Communication Services led the charge at 35.8% y/y, driven by whopping 70.2% growth in its Interactive Media and Services industry. Pair this with Tech’s 22.7% y/y and Consumer Discretionary’s 24.0%—led by e-commerce—and it seems clear to us the Tech and Tech-like firms leading the charge during this bull market are doing so for concrete reasons, not just AI hype and other associated faddish chatter. Yet the more value-oriented Industrials (6.7% y/y) and Financials (7.2%) also did well, underscoring the bull market’s underappreciated breadth.”
For this article we scanned Fisher Investments’ Q1’2024 portfolio and picked its biggest AI-related holdings. With each stock we have mentioned Fisher’s stake. Why is it important to pay attention to hedge fund sentiment? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
10. Meta Platforms Inc (NASDAQ:META)
Ken Fisher’s Q1’2024 Stake: $2,742,649,339
Meta Platforms Inc (NASDAQ:META) is using AI to increase engagement on its platforms. Meta Platforms Inc (NASDAQ:META) talked about its AI-spending plans during its Q1 earnings call:
“We expect full year 2024 total expenses to be in the range of $96 billion to $99 billion, updated from our prior outlook of $94 billion to $99 billion due to higher infrastructure and legal costs. For Reality Labs, we continue to expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts and our investments to further scale our ecosystem.
Turning now to the CapEx outlook. We anticipate our full year 2024 capital expenditures will be in the range of $35 billion to $40 billion, increased from our prior range of $30 billion to $37 billion as we continue to accelerate our infrastructure investments to support our AI roadmap. While we are not providing guidance for years beyond 2024, we expect CapEx will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts. On to tax. Absent any changes to our tax landscape, we expect our full year 2024 tax rate to be in the mid-teens. In closing, Q1 was a good start to the year. We’re seeing strong momentum within our Family of Apps and are making important progress on our longer term AI and Reality Labs initiatives that have the potential to transform the way people interact with our services over the coming years.”
Read the full earnings call transcript here.
Patient Capital Opportunity Equity Strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its first quarter 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) was a top contributor in the first quarter gaining another 37.5%. Performance has been supported by strong top and bottom-line growth as the company maintains its leadership in the advertising space, despite Reels still being under monetized versus Newsfeed and Stories. The company continues to return cash to shareholders, increasing their buyback program by another $50B in February (6.4% of shares outstanding), and announcing their first dividend of $0.50 per share (0.39% yield). The company trades at 25x this year’s earnings, which we do not view as too demanding for a company with some of the best AI assets, an improving topline that should lead to free cash flow outperformance and continued capital return.”
9. Broadcom Inc (NASDAQ:AVGO)
Ken Fisher’s Q1’2024 Stake: $2,873,725,266
Broadcom Inc (NASDAQ:AVGO) is one of the best AI stocks to buy according to Ken Fisher. Citi in a recent note reiterated its Buy rating on Broadcom Inc (NASDAQ:AVGO) along with some other semiconductor stocks as the firm is bullish on the industry amid the rise in sales in March.
“This data, together with recent commentary from the analog companies, support our view of an analog inventory replenishment in 2H24, and we remain bullish on the group,” Citi analyst Christopher Danely said.
Carillon Eagle Growth & Income Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its fourth quarter 2023 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) traded higher after closing on its acquisition of VMware. The company also announced earnings that were relatively in line with estimates with some benefit of better operating expenses. The stock appears to be one of the first real beneficiaries of generative artificial intelligence (AI) with meaningful revenue expected to show up in 2024.”
8. ASML Holding NV (NASDAQ:ASML)
Ken Fisher’s Q1’2024 Stake: $3,007,951,821
Netherlands-based ASML Holding NV (NASDAQ:ASML) is one of the top semiconductor stocks to own for the AI revolution since ASML Holding NV (NASDAQ:ASML) supplies ultraviolet lithography photolithography machines used to manufacture advanced 3nm and 5nm chips. Jim Kelleher of Argus has set a $1,000 price target on the stock.
Polen International Growth Strategy stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its fourth quarter 2023 investor letter:
“Netherlands-based ASML Holding N.V. (NASDAQ:ASML) and Japan-based Lasertec play dominant roles within different segments of the global semiconductor industry. In both cases, shares rallied significantly in the fourth quarter of 2023, prompting our positions to grow as a percentage of the overall portfolio. We believe both companies will see demand for their products as extreme ultraviolet (EUV) lithography and soon high-numerical aperture lithography must be utilized to manufacture the world’s smallest chips. However, in our estimation, 2024 could deliver a year of less exciting growth for the semiconductor industry, which prompted us to trim these positions back.”
7. Salesforce Inc (NYSE:CRM)
Ken Fisher’s Q1’2024 Stake: $3,265,146,393
Ken Fisher owns a $3.2 billion stake in Salesforce Inc (NYSE:CRM) as of the end of the first quarter of 2024. UBS recently published a list of stocks that would be the leaders in the “Enabling Tech” space by 2030. Salesforce Inc (NYSE:CRM) is part of the list. When it comes to AI, Salesforce Inc (NYSE:CRM) is being considered as a pick-and-shovel name that would allow businesses to actually implement AI in their operations as Salesforce Inc (NYSE:CRM) offers AI-powered CRM solutions.
Vulcan Value Partners stated the following regarding Salesforce, Inc. (NYSE:CRM) in its first quarter 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the world’s leading SaaS vendor for customer relationship management (CRM) and salesforce automation (SFA) software. Free cash flow for FY2024 came in significantly better than expected, and Salesforce guided free cash flow growth to again be very strong in FY2025. The company also pointed to several things with the potential to accelerate future growth including pricing, artificial intelligence, and a better buying environment.”
6. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)
Ken Fisher’s Q1’2024 Stake: $3,946,548,478
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is in the spotlight after the company posted a whopping 60% jump in April revenue on a YoY basis. Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is one of the leaders in the AI space, powering AI chips as it supplies semiconductors to major companies like Apple (AAPL), Nvidia (NVDA) and AMD (AMD). Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) recently said it plans to begin producing A16 chips by 2026. This would be a new technology in the semiconductor manufacturing space which, Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) believes, would be welcomed by companies that require AI-focused chips. A16 chips feature nanosheet transistors that supply power to chips from the bottom up.
Ariel Global Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its fourth quarter 2023 investor letter:
“We purchased manufacturer and marketer of integrated circuits, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). TSMC has a dominant share of the global foundry market and is an industry leader in terms of scale, technology, customer service and execution. Although demand for smartphones and PCs is stabilizing, we expect the company to benefit from the secular growth trends of Artificial Intelligence (AI) longer-term. A downturn in the foundry industry this year presented us with an attractive entry point, as we think the current forward price-to-earnings ratio does not fully reflect the high-quality nature of the business model.”
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Disclosure. None. Billionaire Ken Fisher Loves These 10 AI Stocks was initially published on Insider Monkey.