Why AI Stocks Could Be the Best Buy After the Selloff

A big day for economic data and earnings now earnings season is off to a roaring start with giant banks posting their best results in a decade, although crude oil hovers near a one month high as we continue to monitor the situation in the Middle East.

Now the cool CPI was backed by a softer than expected producer price print, and we did see bond yields lower as they dial back a Fed rate hike that will joining me this morning to weigh in is Matthew Tuttle.

CEO of Total Capital Management.

Matthew, good morning.

Thank you so much for joining us.

So we are looking at mixed trading in terms of futures prices on the major equity averages this morning.

We continue to see volatility when it comes to semiconductors, but when it comes to big bank earnings, they have already posted outsized beds.

So are we set up for a painful sell the news reaction as we move forward, because how sustainable are recent gains for the financials.

Yes, so I mean I think they're sustainable.

The financials are kind of outside of all the things that are impacting AI, you know, we're not that interested in the financials here.

I think it's a target rich environment in being able to eventually, and that eventually maybe today, maybe sometime this week, pick up a lot.

These AI names that have sold off, so I wouldn't be chasing the Goldman Sachs and the JPMorgans here.

But you know, certainly the economy looks strong.

Things are, things are moving along.

It doesn't look like the Fed is going to raise rates next meeting.

We'll see with still some, still some data to come there, but yeah, I think the banks are fine.

I just think there are better opportunities elsewhere.

Yes, and speaking of this, I do want to talk about this rotation that we're seeing out of tech and into other sectors.

So given what we're seeing in terms of price action this morning ahead of the open as well as overnight in terms of that volatility in semis, what do you make of the volatility we're seeing in the semiconductor names?

So it's interesting that the semiconductor names started selling off right after the SpaceX IPO, and they've come down a lot this week.

We've had cool CPI, cool PPI, awesome earnings from ASML and Taiwan Semi.

We should be rallying here, but we're not.

So the market is telling you something, and I think what it's telling you is not that this is the top.

But that maybe we've got a little bit more to go.

We're watching what's going on in Korea.

The Koreans just suspended new listings of levered ETFs, raised margin requirements.

We run a couple of funds RAM, which is 2xD RAM, and HYNX, which is 2x HX that the Koreans like to trade in the early, you know, pre-market, and our volumes are down a lot, so.

You know, I think that the Korean investor may be pulling back a bit, which is healthy.

I do think we're going to get a bounce here at some point.

I'd be watching for weakness that turns into strength intraday, so a day where all of these companies are red and they end up green.

That could signal that the time is right to get back in.

Hopefully that's today, but we'll see.

Yes, and Matthew, another area I do want to focus on is geopolitics as well as inflation.

Now Fetcher Kevin Warsh claims that high AI prices aren't inflationary because the tech sector will just create more supply, but energy prices are creeping higher yet once again, and inflation could potentially spike again.

So what names are you looking at right now factoring in this uncertainty?

Where is the opportunity?

So I think the opportunity here and I don't agree that AI is not inflationary.

I think we're seeing that, especially on the memory.

Oil prices are the wild card.

You know, this war has ended what, 40 or 50 times.

You know, oil's whipping around.

It's come back up.

You know, I would be barbelling these AI names, which I still think you need to have exposure to.

You just watch your position sizing with energy names, so I really Like the oil companies.

I like the natural gas companies, you know, Devon Energy, EQT, names like that.

I think belong in your portfolio.

You know, we're doing that through our HALX ETF, which has energy and materials, but those are the types of names I really like here, adding to some of this AI exposure.

And finally rounding up today's discussion, I do want to get your take on the impact of uncertainty regarding geopolitics.

So it is too early to assume that while the Strait of Hormuz is still a geopolitical quagmire, so how do you expect, especially on the heels of this morning's retail sales number, consumer spending to grow or hold back across the nation?

And what does this mean for the growth figures for the US economy here?

Yeah, so I think the average consumer is still in trouble, you know, the the inflation numbers that are reported came down.

I don't think those are accurate.

I think, you know, for the average consumer, inflation is not 3% something.

It's a lot higher.

And it's really in the products that they're using, food and energy.

Interest rates are down, but they've been, they've been ticking up as well.

So I would be worried about any type of stock that relies on the average consumer.

But then if you look at the overall economy, I don't know that that's going to play out because All of this AI spending, that's what's really driving everything.

We're going to have some really interesting earnings reports coming up.

We're going to be writing about this actually in our newsletter tomorrow about all kind of the upcoming earnings and what that's going to mean for the AI trade.

I think that's going to be more impactful for the overall economy.

Well, Matthew, we will have to leave it there for today, but as always, great talking to you.

Thank you so much for joining us and thank you so much for all of your insights.

Thank you.