AI infrastructure plays are the way to go: Analyst

The tech sector is pulling stock markets (^DJI, ^IXIC, ^GSPC) lower following underwhelming reports from Magnificent Seven tech stocks. Harvest Portfolio Management CIO and partner Paul Meeks comes on Catalysts to share his perspective on the current market rotations.

Meeks reveals he's refraining from buying tech stocks at the moment. While he remains "pretty comfortable with the continued AI infrastructure building names," he acknowledges that regardless of fundamental performance, stock prices could still decline. "So what I am doing is I have a prohibition on buying [tech stocks] at least till we get through next week's reports," he explains.

In terms of specific investments, Meeks highlights several AI infrastructure plays, including Nvidia (NVDA), Advanced Micro Devices (AMD), Dell (DELL), Hewlett Packard Enterprise (HPE), and Super Micro Computer (SMCI). However, for other AI-related companies, he emphasizes the need to see "more use cases" before gaining confidence in investing.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video Transcript

We're gonna take a look now at the tech sector losses, driving the NASDAQ to its worst day in 2024 on Wednesday's close, but we still got earnings to come from Amazon Meta Microsoft and Apple.

So what should investors be anticipating joining us?

Now, we've got Paul Meeks Harvest Portfolio Management, Chief Investment officer and partner Paul, thanks for joining us.

So talk to me about this.

Uh sell off that we are seeing right now and how you're digesting it.

Are you buying tech today tomorrow?

I am not, you know, I'm pretty comfortable with the continued A I infrastructure building names.

And so I indeed plan to add to all of them that are on my favorites list.

But what we've seen and we're pretty early in the quarterly earnings season is that it really doesn't matter what these companies say.

Fundamentally, you could be spot on, on the fundamentals positively and the stocks still get whacked.

And so what I am doing is I have a prohibition on buying at least until we get through next week's reports.

And then I'll assess, I imagine these stocks no matter what they say will be lower.

And I probably will get back in Paul.

What's on your favorites list?

Can you say that?

Yeah.

So my favorites list, I continue to like the infrastructure plays more than I do on the companies such as software that will be developing products for A I customers coming out of the A I infrastructure building pipeline.

So I like NVIDIA.

I like a MD.

I like Dell, I like Hewlett Packard Enterprises and I like Super micro and we will get some good tells in the next week on all those names.

It sounds to me like you like the picks and shovels of A I.

Is that an accurate kind of thesis here?

Yes, that's accurate thesis.

The way I look at it is you have uh uh A I infrastructure builders that's part one of the game.

And then you have what comes out on the other side as such as the CFO of service.

Now was talking about, I need to see more use cases and maybe service now stocks up big today.

It's going to be a good positive data point.

I'm really rooting for them because before I move on to those part two A I trades, I need to see that the Roy I'm super comfortable that the arms race, the nuclear arms race will continue and it'll help my server and related semiconductor companies.

Uh Even despite service now, good news today and A I use cases that they're talking about.

Uh I'm not there yet on those other tech stocks, Paul give us a better idea just on how long you think it could potentially be until we see more of those use cases.

Because I think that that's really at the crux of some of these questions that analysts and investors are, are, are trying to answer at this point.

Unfortunately, I don't think it comes anytime soon.

That's another reason why I've avoided these, uh, companies that depend on with their stock prices rising on showing us some A Iroi.

I don't even think it's really that much of an indication in 2025 maybe this time next year.

But, you know, right now it's based on a lot of conjecture.

The use cases are very small sample sizes and uh, I'm jaded enough from doing this a long time that I'll believe it when I see it.

But unfortunately, I think we're pretty far out on that.

I hope uh service now and other companies come and prove me wrong.

That would be awesome for everybody.

But uh I need to see uh, more evidence.

Well, Paul, we just had this service now.

CFO on after their earnings, print in the market, certainly reacting positively.

So we'll definitely have to bring you back, uh, especially as we get those NVIDIA earnings coming in here in a couple of weeks.

Paul, thank you so much.

That was Paul Ks, uh harvest Portfolio Management, chief investment officer and partner