The juggernaut that is Artificial Intelligence continues to rumble along towards an inexorable future, one that most still fail to grasp the magnitude of the changes that are just around the corner as humans think in linear terms whilst the AI trend is EXPONENTIAL. Where developments that even the proponents of AI thought would take several years are taking place in mere MONTHS! That is the power of the unfolding AI MEGA-TREND!
AI has already CHANGED THE WORLD! EXPONENTIALLY! You have an AI super computer right in your pocket for likely less than £1000!
Especially, when one marries AI with other big world changing tech mega-trend "Quantum Computing"! Put the 2 together and we are literally going to see an explosion in SUPER INTELLGENCE that would soon far exceed that of human intelligence, following which it won't be that many years before the AI exceeds the intelligence of the sum of ALL humans! For better or worse, that's the path we are on.
And all those who say AI can be controlled are going to be proven wrong, as new technologies tend to be first sequestered towards military aims. So whilst we focus on the benefits of AI in reality AI is a POWERFUL WEAPON and so the world is in an AI arms race, commercial, economic and military AI arms race.
Here I a review the performance of my list of Top AI stocks, of how they performed during 2019 and current technical state going into 2020 that resolve in an updated list of buying levels of where the stocks 'could' trade down to during a correction for potential buying opportunities, which may prove opportune given that my opening 2020 expectations are for a correction in the general stock indices.
My list of AI stocks has more or less remained static for many years, with the likes of Google, Microsoft and Intel having been on the list for more than a decade! Though personally I only really started walking up to the developments in AI around 2014, as up until then I had remained skeptical of the hype that was AI given my experience from the late 1990's when I actually spent a good 6-9 months programming a neutral net given the hype in the media and movies at the time. But soon realised that there was a huge gap between AI reality and the media hype and so become skeptical of all things AI for the next 15 years or so. But gradually during the early 2010's there were signs of that which had been promised was taking it's first steps towards becoming reality. Where by 2016 I was fully converted to the emerging reality of the AI mega-trend, investigating AI stocks and making the following video to help spread the word.
So when I say investing, I mean INVESTING, and not to focus on intra year volatility which is only good for accumulating more exposure on dips.
The main thing where AI stocks are concerned is to HAVE EXPOSURE! Because without any exposure your not riding the AI train and so unless you are prepared to immerse yourself in AI, i.e. trundle along to the many AI platforms out there such as by Google. Microsoft or Elon Musk's OpenAI then your only real way to capitalise on the AI mega-trend is buy OWNING AI stocks.
This graph further illustrates the magnitude of the change currently under way, where just 2 primary AI stocks, Apple and Microsoft are now worth more than the entire German stock market!
INVESTING in AI
Investing means INVESTING. Which is definitely a different mind set to Trading. For instance whenever the AI stocks take a tumble then my instincts are to buy more! Though of course I do keep track of what's happening to effect each stock. For instance AMD's Ryzen and Threadripper processors have been giving Intel a run for their money for past 3 years. Where my initial expectations were that Intel would soon squash AMD like a bug by releasing it's next generation of powerful processors. But never happened! instead Intel has been losing ground and market share to AMD. Thus making me reluctant to add more to Intel holdings despite several opportunities.
AI Stocks 2019 Review and Buying Levels Q1 2020.
For primers on all of these stocks and how to invest in them then do check out my following earlier articles:
- Top 10 AI Stocks for Investing to Profit from the Machine Intelligence Mega-trend
- How to Invest in AI Stocks with Buying Levels
- Investing to Profit and Benefit from Human Life Extension AI Stocks and Technologies
1. GOOGLE (Alphabet) - GOOGL
I always refer to Alphabet as Google, and maybe one day they will change it's name back to Google.
Google Up 26% in 2019
Google has had a spectacular bull run 2019, where investors had several opportunities to accumulate at sub $1200, all the way down to sub $1050! In the real world in 2019 I told people to BUY GOOGLE, they typically reply was $1170 or so was too expensive. I repeat BUY GOOGLE! Nope it's too high. don't listen. So what's $1300?, $1350?, $1500? $2000?
The stock price rose 26% 2019. This just iterates the primacy of being PRIMARY, and GOOGLE is PRIMARY! Keep things simple folks! Start with Google. Investors who can't fathom buying Google at $1300 need to think what will they do when Google is trading at $13 million per share? For who wins the AI war will OWN the world! And all we mere mortals can hope to do is to ride on their coat tails by owning a tiny spec of AI monsters such as Google. In terms of a correction, downside appears limited to around $1280.
2. AMAZON (AMZN)
The more time I spend looking at Amazon and it's products the more it reinforces as being correctly placed as No2 on my list.
AMAZON Up 24% in 2019
Amazon soared like a rocket to a mid year peak of near $2050, since which time has given several opportunities to accumulate at $1750 or less before the end of year surge higher. Today's giant online retailer is going to turn into an AI giant tomorrow, when the retailing of products will only amount to a fraction of it's revenues. So don't be fooled by what Amazon does today, it is No2 in terms of AI primacy! Which definitely warrants exposure. Again don't be fooled by relative under performance since it's mid 2019 peak. If you miss the opportunities it's giving you then you WILL REGRET IT!
There's strong technical support under Apple from $1720 to $1750.
3. MICROFT (MSFT)
I have owned microsoft stocks for over 2 decades! So a favourite of sorts. Yes it was dead for a decade but as soon as the world started waking up to AI in the Mid 2010's it started rocketing higher, literally going parabolic, a trend that continues to this day!
Microsoft Up 58%
Up 58% what more can I say? Virtually destroys the mentality that tech giants are too big to rise at a phenomenal pace. Why is it going up? Because it's winning the AI war that's why! Unfortunately unlike Google and Apple there was no discounting of stock price from Microsoft for the whole of 2019. If you want to jump on board this AI juggernaut then you were expected to pay full price!
In terms of a corrective price target, $148 pops out on the chart.
4. INTEL (INTC)
The CPU leader that's being put to the test by whipper snapper AMD. Can it regain it's crown and crush AMD like a bug?
INTEL 26% GAIN!
All those wanting to invest in Intel had NO EXCUSEs for not doing so! Investors had ample opportunities during 2019 to buy exposure at sub $48, even as low as $44. So even what I consider in operational terms as a bit of a dog for 2019 given it's loss of market share in the CPU market to AMD, apparently that did not effect it's stock price! Why? Because it is PRIMARY! Intel is an AI PRIMARY stock, and so get used to pricing AI in ahead of the normal mainstream media noise that has been obsessed with AMD beating Intel in the CPU market. What they tend to fail to mention though is that Intel still owns 70% of the consumer PC CPU market! And 93% of the server market!
Downside appears very limited with strong support from $56 upwards.
5. APPLE (AAPL)
I don't like APPLE PRODUCTS! Over hyped, over priced. closed systems. For unlike the Apple generation I have grown up on open source platforms such as that which the likes of Google promotes, and to a lesser extent Microsoft. But by virtue of the fact APPLE is a control freak corporation that has many millions of customers who blindly stroll into Apple stores to buy, then Apple IS able to charge ridiculous prices that the likes of Dell or Samsung can only dream about.
APPLE Up 78%
Houston we have lift off! What can one expect when Apple can charge whatever it likes from a captive market, typically paying 30% more than they should! That's not to say Apple products are rubbish. they're not, it's just that they are over priced with a lot of restrictions in the o/s and hardware.
Apple stock spent many months gyrating around $200, a level that now looks long gone, so all those who missed the boat need to get over it or they might find themselves saying the same about failing to invest at sub $300, around which Apple is likely to trade for much of 2020.
Apple stock is more than any primed for a significant correction and could take a serious tumble all the way to $255.
And those are my 5 primary AI Tech Stocks, all delivering far too much during 2019 and thus should be ripe for a correction going into 2020.
6. JOHNSON & JOHNSON (JNJ)
A first none tech stock on my list that covers the life extension and Big Pharma aspects of the AI mega-trend.
Johnson & Johnson Up 18%
J&J has performed well given that it's had a lot of bad news throughout the year, including being hit with a $600 million fine in August for its part in America's opioid crisis And then again with a much larger $8 billion fine early October. All apparently priced in well ahead of time!
J&J isn't a galloping ahead tech giant but a steady as she goes big Pharma that should be able to capitalise on the AI mega-trend. So J&J as a primary has also done well during 2019 especially given the fact that up until November it could typically be found trading at under $130.
Possible downside appears limited to $138-$139.
7. Facebook (FB)
I have been skeptical of Facebook's long-term prospects right form it's 2012 IPO, for I have always thought here we go with another MYSPACE, but No, Facebook proved me wrong and why I slowly become a reluctant investor in Facebook. I still have my niggling doubts of whether this tech giant is going to make it to other side of the singularity. which is probably why my holdings of Facebook stock are a lot lighter than they should be.
Facebook Up 52%
Facebook's stock soared by over 50% during 2019. Though this stock is VERY volatile, it's definitely a bumpy ride for Facebook stock investors, hence why I still rate Facebook as a higher risk secondary stock. Yes, as we have seen with 2019 it can give fantastic results, but what it givith it can just as easily taketh away. So expect volatility during 2020.
The stock price retreating from it's July $208 highs implies to expect a strong correction that could see the stock trade down to at least $188.
Despite having blown owning the personal computer operating system market to Microsoft (whom they contracted to create OS2). IBM are still managing to hang in there. Yes, expect less return and higher risk than Google, but IBM are still in with a fighting chance of grabbing a significant piece of the AI and Quantum computing pie.
IBM Up 24%
On face value a 24% gain for 2019 is a pretty good performance for a sleeping giant. But virtually all of that move came in the first month of the year. Since when it's basically stagnated. IBM is prone to stagnating. In terms of a correction then the downside appears limited i.e. it's already trading near support, perhaps a dip towards 130 is possible.
9. iShares Nasdaq Biotechnology ETF - IBB (Secondary)
As requested by Patrons, I included an AI and sub sector ETF in August for its big cap holdings and that it's been kicking around for over 10 years so has a track record to look back on.
IBB Up 27%
The 27% gain is not so surprising since it tends to track the S&P quite closely. The main thing is that it performs as expected i.e. when the market goes up then this ETF goes up by a similar amount, unlike a number of ETF's that fail to follow through on expected trend trajectories. IBB has already begun it's correction that will likely see it move to just below the preceding string of highs, i.e. into the $112 to $117 range.
The South Korean electronics giant that unbeknown to most also has a significant footprint in the defence sector. Seeking to put a HAL9000 into every home (Bixby). Plus they make great smartphone's, better and more open than Apples and of course much CHEAPER!
Samsung UP 43%!
I definitely was not expecting Samsung to perform as strongly as it has. For one thing it was stuck in a a multi-year down trend which it managed to breakout of during September, then it was off to the races. Samsung already had a correction into early December, so may not correct much this time around before continuing higher, maybe no lower than $1150.
And now we move into smaller cap tertiary stocks that are higher risk, higher volatility but also higher potential rewards.
11. NVIDIA (NVDA)
NVIDIA reminds me somewhat of Apple in that it basically LACKS competition. However NVIDIA is tiny compared to it's monster rivals such as most of the above. Several of whom are targeting NVIDIA's GPU dominance such as INTEL and AMD.
NVIDIA Up 73%!
Another pocket rocket stock! Obviously not sustainable. But it is performing due to lack of competition against it's high end GPU's, ideal for not just gaming but AI applications. How long will this market anomaly last is hard to say, but it's definitely benefiting NVIDIA.
The stock is overbought to say the least, and a correction is likely that would first target $210 and then $195.
And briefly the two remaining tertiary Pharma stocks with AI enhanced potential -
Current $40.66, Up 31%. A correction could target $37.
Current $47, Up 28%. A correction could target $44.
14. BAIDU (BIDU)
And last but least is Baidu, the only chinese stock on my AI mega-trend investing list.
BAIDU DOWN 24% on the year!
THE ONLY STOCK TO END 2019 DOWN ON THE YEAR. Therefore it's BYE, BYE Baidu from my list because it illustrates that no matter how good one thinks fundamentals are for a Chinese stock, and no matter what it's past performance maybe. Investing in chinese stocks is ASKING for TROUBLE!
Chinese companies are NOT like western companies. They are part and parcel of Chinese government, they do not operate in terms of maximising profits which I guess why Baidu was LAST on my list of stocks! And why I don't include other Chinese tech giants despite often being asked why the likes of Tencent or Huawei are not on my list.
The US War with China mega-trend is inevitable which means Chinese companies should be kept well away from as they form part of an unfolding corporate tech war against western corps as dictated to by the Chinese totalitarian government. You think the chinese state is going to allow foreigners to profit from chinese corporations? Think again! Every stock up 25%, 35%, even 75%, Baidu DOWN 24%! I get the message loud and clear!
Chinese stocks are just NOT WORTH THE RISK. And as Baidu illustrates the rewards are just not there for the risks investors are taking!
So out you go Baidu! No more Chinese AI stocks on my list.
That leaves a spot vacant for....
For the past 20 years all of my desktops have been powered by Intel processors and chipset's. But with each new AMD Ryzen release of the past 3 years, I find myself increasingly salivating at the prospects of making the switch to an AMD Threadripper based system such as the 16 core 32 thread 3950x (£720) that far excels INTEL's meager 8 core 16 thread offering (i9 9900KS, £600), at least in terms of high productivity multi-threaded tasks, typically out performing the Intel chip by 50% to 70%!
Looking back over the past 10 years, we can clearly see that Intel's domination of the CPU was the reason why the advance in processing power stagnated. Why Moores law was deemed to have come to an end. However, it was not because of hitting the nanometre roadblock, it was basically INTEL slowing down innovation. Why innovate when there was no competition! And so Intel has remained STUCK at 14 nanometre architecture for its processors since 2015 a good 3 years late in it's move to 10 nanometre architecture that has allowed AMD to 3 years appear out of nowhere and storm the processor market with first its 10 nanometres architecture processors and this years Zen 2 7 nanometre Ryzen 9 desktop and EPYC server processors.
And there's more to come in 2020 with the release of ZEN 3 Ryzen 4000 processors, set to deliver higher cores with faster clock speeds. Perhaps a 4950x 16 Core 32 thread processor running at 5ghz for under £900! If AMD deliver's that in 2020 then I'll buy the processor / system at least if not the stock.
The bottom line is AMD IS WINNING THE CPU WAR! They may not have much of a AI division (yet) and likely not even thinking about Qubits,. But AMD is CRUSHING INTEL! And they don't need to spend a penny on mass advertising for their processors sell themselves!
Of course INTEL has DEEP pockets, and if it finally gets its act together and starts innovating again (which it has been promising to do for 5 years!), then Intel could bring AMD's grab of market share to a shuddering halt. But as things stand AMD is way ahead of Intel with this trend looking set to continue in 2020 and likely 2021 as well!
Ouch! AMD's financials don't look too good. Definitely would not be able to cope if INTEL gets it's act together. So it appears that the market has already priced in AMD's CPU advantage, and discounted some more. Over the past 3 years AMD's share price has SOARED by 300%. The question is, is AMD over valued or does the market know something we don't i.e. are we definitely seeing the early stages of INTEL passing the CPU mantel over to AMD?
Personally I doubt that AMD has won and delivered INTEL a knock out punch, as INTEL has very DEEP pockets! More than 10 times the cash that AMD has. THAT and Intel is developing AI and Quantum Computers. So on the financials, on a forward PE of 41 AMD looks over priced.
AMD Stock is up 149% for 2019!
Unfortunately the AMD stock price is discounting too much. Yes AMD is storming the desktop and sever CPU market which is likely continue for the whole of 2020. But what happens when INTEL fights back?
So the financials don't justify the stock price, which could quite easily trade lower into the $33 to $35 range that would represent a 26% price drop from current levels.
So whilst I most definitely do want a piece of AMD, and thus will keep AMD on this list, but it is a bit too high risk for me to consider investing in AMD right now. Maybe after the stocks fallen by at least 25%, maybe by 30% then I would consider buying some exposure.
The bottom line AMD is a high risk / high reward stock that unlike Baidu does deliver rewards. So one should have some portfolio exposure to. However, right now the stock price appears too high even with the success of it's Zen 2 Ryzen 7 processors with ZEN 3 likely to continue AMD's success during 2020.
Maybe AMD will turn out to be the one stock that I let get away because despite knowing that I should be invested in it, always deemed it to be too expensive to press the buy trigger and invest.
AI Stocks Current Buying Levels Update
Where stock investing is concerned then if you are not already invested in the Primary AI stocks such as Google then what are you waiting for? The time to act is before AI goes super nova and literally rules the planet for the fundamental fact that what we are dealing with here is NOT Artificial Intelligence as in terms of trend trajectory towards human level AI will only exist for a few months before it becomes SI - SUPER INTELLIGENCE! Soon after human intelligence will no longer be able to understand how the AI arrives at x,y,z solutions to the myriad of problems we hope it will solve before it stops paying attention to our instructions. And so the tech giants will be headed by competing Super Intelligence's of which we aim to ride the backs of through our stock holdings.
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Your Analyst wishing ALL a Happy and Prosperous New Year!
By Nadeem Walayat
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