U.S. stocks caught in the AI gold rush, apart from NVIDIA (NVDA.US), which "gold" will shine?

Notice that fund managers are rushing to capitalize on the interest in artificial intelligence in the stock market to make money, the amazing rise in the stock price of NVIDIA (NVDA.US) has sparked a search for other companies using AI technology. NVIDIA's chips are the gold standard in the artificial intelligence industry, and after the company's stock price doubled in 2023, it has risen by about 60% this year. This upward trend has pushed its market value to around $2 trillion, making it the third largest company in the US, behind only Microsoft (MSFT.US) and Apple (AAPL.US). This has also prompted Wall Street to seek out other companies focused on artificial intelligence, hoping to catch up on the action. Whether investors are focused on the broader chip industry or betting on other companies in the value chain, they all agree on one thing: artificial intelligence will continue to exist. Francisco Bido, senior portfolio manager of the Large Cap Focused Fund under F/m Investments, said: "This is not a temporary craze." "There are too many... companies that can utilize this technology well to enhance their revenue and profits." The excitement about artificial intelligence pushed the Nasdaq Composite Index to a record high on Thursday, and the S&P 500 index also hit a new record. Both indexes have risen by about 7% so far this year. It is easy to see further signs of increasing interest in artificial intelligence. Goldman Sachs recently stated that in the fourth quarter of last year, mentions of artificial intelligence in earnings conference calls reached a new high. Analysts at the bank estimate that if artificial intelligence technology is widely adopted in the next 10 years, it could contribute 1.5 percentage points to the growth of US productivity. A report from Morgan Stanley this week stated that a survey of chief information officers showed that 2024 is the "investment year for artificial intelligence," with chief information officers ranking artificial intelligence/machine learning as their top priority for the first time. Bido's fund still holds a large number of stakes in NVIDIA, but has also ventured into other areas of artificial intelligence, including its competitors AMD (AMD.US) and MongoDB (MDB.US). With artificial intelligence poised to change the demand for data infrastructure, there may be a significant demand for MongoDB's database products. Compared to NVIDIA and some other recently sought-after artificial intelligence companies, the stocks of these companies, although not rising as much, have still risen significantly. For example, AMD's stock price has risen by 30% so far this year, while Mongo's stock price has risen by 9%, although the stock prices of both companies doubled last year. In contrast, the stock prices of server component supplier Supermicro (SMCI.US) and chip design company ARM (ARM.US) rose by about 200% and 90%, respectively in 2024. SMCI's stock price doubled in 2023. Ivana Delevska, founder and chief investment officer of Spear Invest, stated that NVIDIA is still the largest holding in its Spear Alpha ETF. However, the exchange-traded fund is also trying to capitalize on the growing demand for cybersecurity related to artificial intelligence by holding stocks of network security company Zscaler (ZS.US). In the meantime, the fund is positioning itself in Snowflake (SNOW.US) to take advantage of the demand for data infrastructure. Of course, despite the higher visibility of artificial intelligence technology, there is still a risk in investing in stocks of companies that are often volatile. For example, Snowflake's stock price fell by 18% on Thursday, as the company forecasted annual revenue below Wall Street expectations and disclosed the unexpected retirement of its CEO. King Lip, chief strategist at Baker Avenue Wealth Management, said that as NVIDIA's stock price soared, the company reduced its holdings of NVIDIA to avoid occupying too large a portion in client portfolios. However, the company recently began to build positions in TSMC, a major supplier of NVIDIA. Lip said, "If you still want to invest in artificial intelligence but are a little uneasy about NVIDIA's stock price, I think TSMC is an effortless choice." Que Nguyen, chief stock investment officer at Research Affiliates, is looking for semiconductor companies with reasonable valuations that are poised to benefit from artificial intelligence. These include Lam Research Corp (LRCX.US), which provides equipment for the semiconductor industry, and Micron Technology (MU.US), which produces memory chips and data storage. Lam Research's stock price has risen by about 20% so far this year, while Micron has risen by 6%. Nguyen said, "Large language models not only need to process, but also need storage." Many investors are happy to continue holding large positions in NVIDIA. Portfolio manager Zehrid Osmani said that nearly 10% of the assets in the Martin Currie US Unconstrained Fund are in NVIDIA's stock, making it the fund's largest investment in a single stock. He believes the company will maintain a competitive advantage because of its greater investment in research and development than its competitors. "We have a high level of confidence in this name, expressed through a high position scale," Osmani said.