Author: Hannah Perry

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Trading Tips

Top 3 Tech Stocks to Buy Now and Hold for a Decade of Profits

3 Tech Stocks You Can Buy and Hold for the Next Decade

In the ever-evolving world of technology, some stocks are not just a flash in the pan; they are the real deal for long-term investment. With the seismic shift towards artificial intelligence (AI) driving massive competition, it’s critical to identify companies that won’t just thrive today, but dominate a decade from now. Here, I break down three tech titans that possess the innovation and market leadership to stand the test of time.

1. Nvidia: The AI Chip Powerhouse

If you think you’ve missed out on Nvidia (NASDAQ: NVDA), think again. While Nvidia’s stock has already seen explosive growth, the journey isn’t over. With an impressive estimated 70% to 95% share of the AI chip market, the company is undeniably the major player. The recent launch of the H200 AI processor, the successor to its wildly popular H100 chip, is evidence that the demand is skyrocketing—much higher than supply, according to management.

To put things in perspective, Goldman Sachs predicts that companies will unleash a staggering $1 trillion to build their AI infrastructures in the next few years. Countries are also joining the fray; the Japanese government is investing in AI supercomputers powered by thousands of Nvidia H200s. Sure, Nvidia’s current forward price-to-earnings (P/E) ratio is at 41, and the stock is down about 8% over the past quarter, but these factors create a ripe buying opportunity for savvy investors riding the AI wave. With the AI race gaining momentum, Nvidia’s stock could keep climbing for years to come.

2. Broadcom: The Under-the-Radar Player

Are you on the lookout for a tech stock that isn’t on every investor’s radar? Look no further than Broadcom (NASDAQ: AVGO). Unlike its competitors, Broadcom specializes in application-specific integrated circuits (ASICs), tailored for general-purpose AI tasks. Leading tech giants like Meta and Alphabet have turned to Broadcom to meet their cloud and AI ambitions. This has resulted in a meteoric rise in ASIC demand, pushing Broadcom’s AI sales to triple in the last quarter, ultimately hitting $3.1 billion.

Management anticipates wrapping up 2024 with an astounding $12 billion in AI revenue, an increase from their previous estimate of $11 billion. When juxtaposed with J.P. Morgan’s estimate of a $150 billion total addressable market in AI chips over the next four to five years, it becomes clear Broadcom holds substantial growth potential. Combine that with its recent acquisition of VMware for cloud platform services, Broadcom is well-positioned for long-term growth. With a forward P/E ratio around 27, this stock comes at a more attractive price compared to its AI chip cousins.

3. CrowdStrike: Defending Against Cyber Threats

Tackling cybersecurity is a challenge that won’t disappear anytime soon. Enter CrowdStrike Holdings (NASDAQ: CRWD), a powerhouse utilizing AI to bolster security. The company’s Falcon security platform has employed AI for years and just recently launched Charlotte AI—a generative AI system that allows security analysts to identify threats and mitigate risks more efficiently. By leveraging this resource, CrowdStrike’s clients save up to two hours a day in security operations.

The potential for CrowdStrike is enormous, with Morgan Stanley estimating a $135 billion market for AI cybersecurity solutions by 2035—an increase of nine times from 2021. The customer demand is already evident: about 65% of users in the second quarter adopted five or more services from the Falcon platform. While the stock does carry a hefty forward P/E of 82, recent dips of around 20% open a fresh window to enter into this market leader.

Final Thoughts

The tech landscape is teeming with opportunities, but only those firms that can consistently innovate and dominate their respective niches will emerge as long-term winners. Nvidia, Broadcom, and CrowdStrike are all positioned to take advantage of the AI boom in unique ways. Each offers compelling reasons to consider them for a decade-long investment horizon. Keep an eye on these companies—they’re not just stocks, they’re the future.

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Politics and Trading

Understanding the Impact of Corporate Tax Hikes on S&P 500 Profits and Stock Performance

Why a Corporate Tax Hike Wouldn’t Sink S&P 500 Profits and Stocks

The prospect of corporate tax changes has long been a contentious issue in American economics, leading to debates among investors, policymakers, and business leaders. However, recent analyses suggest that a hike in the corporate tax rate would not have as much of a detrimental effect on corporate profits or the stock market as many headlines imply. Particularly, much of the hype stems from the implications of the Tax Cuts and Jobs Act (TCJA) of 2017, which reduced the U.S. corporate tax rate from 35% to 21%. As this legislation is set to expire at the end of 2025, discussions surrounding tax changes are on the rise again, especially with contrasting views from political leaders.

The Tax Landscape for Corporations

A key argument against fears related to tax rate hikes centers around the complex nature of the U.S. tax code. Many investors may not realize that the headline tax rate is only one of many factors that affect a corporation’s tax liabilities. According to a Government Accountability Office (GAO) study, about half of large U.S. corporations do not pay any corporate income tax in an average year. Furthermore, among profitable companies, around 25% also evade corporate taxes.

This discrepancy exists mainly due to a myriad of possible tax credits and deductions that corporations can leverage, which means that profitability—rather than tax rates—plays a much more significant role in determining their tax burdens. Hence, if corporate tax rates were to increase, it is plausible that companies would simply pass these costs onto consumers by raising prices, particularly given the growing pricing power many companies have accumulated.

Pricing Power and Profitability Trends

Over the last several decades, corporations have slowly gained increased pricing power, a theme highlighted by Lawrence Tint, former U.S. CEO of BGI. This trend aligns with the consolidation seen in various industries, where a small number of companies command the majority of the market share. This enhanced pricing power enables these companies to maintain their profit margins relatively unchanged, even amidst fluctuations in tax rates.

A compelling illustration of this pricing power can be seen in the S&P 500’s profit margins. Despite the turbulence triggered by the TCJA and inflationary pressures, profit margins have displayed remarkable consistency. For instance, the profit margin for the S&P 500 was 10.9% in the fourth quarter of 2020, remaining stable amid rising inflation over the following years.

The Limitations of Profit Margin Growth

However, it is essential to recognize that profit margins do operate within certain limits, as noted by Rob Arnott, the founder of Research Affiliates. He warns that history shows profit margins can experience backlash, potentially causing them to plateau or drop after a period of rapid expansion. Arnott also predicts that, after witnessing extraordinary earnings growth over the past decade, corporate profits may see minimal growth in the coming years, regardless of whether tax rates are increased or maintained.

The Future of Corporate Earnings

If profit margins stagnate, corporate earnings are unlikely to outpace sales growth. As previously reported, the S&P 500’s sales per share have historically lagged behind U.S. GDP growth—growing at only 0.6% below the GDP’s annualized percentage. With the Congressional Budget Office forecasting a 1.8% annualized growth rate for GDP over the next decade, a similar trend could dictate corporate earnings growth at just 1.2% annually until 2034.

Final Considerations for Investors

Given the current high valuations of U.S. equities—where the S&P 500’s forward price-to-earnings (P/E) ratio exceeds historical averages—investors may want to temper their expectations for future returns. As Arnott asserts, it is plausible to foresee a scenario where U.S. large-cap equities fail to even keep pace with inflation over the next decade.

In conclusion, while discussions surrounding corporate tax hikes persist, it may be prudent for investors to redirect their focus toward fundamental market dynamics such as corporate profitability, pricing power, and prevailing economic growth trends. Amid fluctuating tax policies, the broader implications for the S&P 500’s profit margins and overall stock performance appear to hinge more significantly on these underlying factors rather than changes to the tax code itself.

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Financial News

Unlocking Alpha: How China’s Stimulus and Emerging Brands Are Shaping Investment Opportunities

Chinese ‘Bazooka’ Could Drive Significant Alpha

In a recent turn of events, China has begun to implement monetary stimulus that has raised eyebrows among investors worldwide. While this move is crucial for Chinese stocks and bonds, it has yet to create ripples across the global financial landscape. The noteworthy point, however, is that China is not stopping at monetary policy; fiscal stimulus is on the horizon, particularly aimed at bolstering the banking sector to energize the wider economy.

Previously, we expressed optimism regarding Chinese stocks earlier this year, specifically through tracked exchange-traded funds (ETFs) like (FXI) and (KWEB). However, as Chinese stocks faced resistance and the economy showed signs of unease, we decided to retract our bullish stance. Now, we believe it’s time to re-engage. While the overall sentiment surrounding China remains cautious—described as “not investible”—the opportunities for trading within this context are promising.

A Look into the “Made in China 2025” Narrative

This strategic return to the market corresponds perfectly with what we refer to as the “Threat of Made in China 2025.” This narrative influences both long-term investment strategies and immediate trading decisions. At its core, this theory posits that:

  • The Chinese economy is experiencing turbulence, with the real estate sector—a significant wealth driver for many—facing considerable challenges.
  • China can no longer depend on foreign firms manufacturing goods within its borders, as the fear of intellectual property theft and the impact of COVID-19 lockdowns have made businesses wary.
  • Therefore, China must focus on nurturing and launching its own global brands.

Indeed, there are signs of success on this front. Chinese brands, particularly in the tech sector, are gaining traction. Domestic phone brands are blooming, and companies like BYD have made headlines as the leading electric vehicle (EV) seller in Germany. Just a year ago, few had even heard of brands like Shein or TEMU, yet these companies are now carving out significant market shares in the U.S. Notwithstanding these victories, the larger economic landscape continues to show strain.

The Case for Stimulus

Stimulating the domestic economy seems to be a judicious way for China to achieve a bridge: to bolster its internal market while it continues to seek international expansion. By facilitating growth at home—with government support—China can stabilize its economy and establish a firmer foundation for global brand exposure.

Moreover, current market dynamics reveal that many investors are underweight in Chinese equities. This opens a window for a potentially lucrative “catch-up” trade. Recent movements toward small-cap stocks and domestic value equities have shown promise, particularly in the wake of Federal Reserve rate cuts; however, the quantum of opportunity in Chinese stocks could outpace these smaller shifts. Among easier avenues for exposure, (FXI) and (KWEB) remain our preferred choices, primarily for their simplicity.

Geopolitical Considerations in the Middle East

On another front, we have witnessed what some might describe as an “escalation to de-escalate” in the Middle East. In discussions on Bloomberg TV, the theory suggests that regional factions, particularly Hezbollah and others hostile towards Israel, are likely feeling pressure after Israel’s defenses proved sturdier than expected following Iran’s coordinated missile attacks. While a singular attack might be brushed off, multiple failures could expose vulnerabilities, dampening retaliatory ambitions.

Positive signals are emerging from the Saudi region as well, suggesting that a comprehensive break from Israel is not attainable. Instead, the dynamics hint at a desire to solidify economic growth beyond fossil fuels, thus reinforcing the fragile regional stability.

The Bottom Line

In concluding remarks, while there are broader implications for the global economy arising from these developments, the most effective strategy appears to be leaning into the opportunities in China. Investing in Chinese equities—though ultimately viewed as a trade rather than a long-term investment—could yield significant alpha as investors reposition in the wake of these new fiscal stimuli.

With the potential for both short-term gains and the overarching complexity of geopolitical factors, the atmosphere is indeed ripe for traders willing to navigate these waters carefully.

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Technology

Is Alphabet Stock a Hidden Gem or Risky Investment? Insights from Bernstein Analyst

Is Alphabet Stock a Bargain or Justifiably Cheap? Insights from Bernstein Analyst

Alphabet Inc. shares have recently attracted attention as they trade at unprecedented discounts relative to both the S&P 500 and Meta Platforms Inc. This situation raises questions about the value proposition of investing in Alphabet. According to Bernstein analyst Mark Shmulik, while Alphabet’s stock may seem like a tempting buy based on certain financial metrics, there are significant regulatory and competitive risks that investors must consider.

Current Valuation Metrics

Alphabet shares (GOOG) and (GOOGL) are currently trading at nearly their largest-ever discount to the S&P 500 when looking at forward price-to-earnings (P/E) multiples. This record discount was established just weeks ago, indicating a pronounced divergence in market sentiment. Additionally, Alphabet’s shares are now trading at their largest discount ever relative to Meta (META). Shmulik noted that, without context about the company, one might be inclined to buy Alphabet’s stock, given that it is trading at 19 times forward earnings estimates. These estimates suggest that revenue could grow at an impressive annual rate of 11% through 2027, while earnings per share might compound at a robust 15% rate during the same period.

A Generational Buying Opportunity?

With such promising forecasts, the narrative could easily support the notion that this is a generational buying opportunity. Shmulik points out a familiar investment adage: “Be strong when others are weak, brave when others are fearful, or really just plug your nose and buy, right?” However, the reality is more nuanced, and investors need to consider several factors before committing capital to Alphabet shares.

Regulatory Risks Ahead

One of the most pressing challenges Alphabet faces is regulatory scrutiny. The company is currently embroiled in legal battles related to antitrust issues concerning its search engine and app store. Shmulik suggests that it is highly unlikely Google will completely emerge unscathed from these proceedings. A significant concern is the potential impact of these antitrust actions on Alphabet’s search distribution channels, which he estimates could be jeopardized by up to 20% to 25% if the outcomes lead to significant changes in the way search placements operate.

As noted in other discussions about Google’s regulatory complications, the possibility exists that it could lose its position as the default search engine across multiple platforms, should competitors like Bing or Apple capitalize on the openings created by these legal issues.

Competitive Landscape: AI Threats

In addition to regulatory hurdles, competitive risks also loom large. Alphabet must contend with the rapid advancements in generative artificial intelligence, particularly the first-mover advantage exhibited by OpenAI. Shmulik highlights that competitors like Apple are entering this sphere more slowly, yet there are concerns that new capabilities in Apple’s software could result in users relying less on conventional web searches.

With AI staying at the forefront of tech discussions, the market appears divided on Alphabet’s future in this domain. Some view Google as an “AI loser” due to potential risks regarding search share and monetization. Conversely, others consider Google an “AI winner” thanks to initiatives like Gemini and their cloud offerings. Such dichotomy only serves to impede clear investment strategies.

Comparative Analysis with Meta

Despite Alphabet’s valuation gap and promising growth rates, Shmulik maintains a favorable outlook for Meta over Alphabet. He rates Alphabet shares as “market-perform” with a target price of $180, while simultaneously rating Meta shares as “outperform” with a higher target of $600. Shmulik expresses that “it’s difficult to defend a high-conviction long Google pitch to investment committees, especially with Meta ‘easier’ and firing on all cylinders.” This comparison underscores the complexities investors face in choosing between these two tech giants.

Concluding Thoughts

Ultimately, the question remains: are Alphabet’s shares a bargain or justifiably cheap? Key financial indicators suggest that Alphabet has potential for growth, yet regulatory and competitive landscapes present formidable challenges. Investors must weigh these factors carefully, alongside analyst insights, before deciding whether to commit to Alphabet’s shares in what could either be a compelling investment opportunity or a risk-laden endeavor.

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Resource Stocks

China’s Stimulus Propels Silver Prices to New Highs Amid Gold Surge and Economic Concerns

China’s Stimulus Fuels Gold Surge, Silver Prices Soar, but Risks Linger

Silver prices have risen to significant highs, reflecting a robust performance amidst a broader bullish trend in precious gold. As of Thursday, spot silver (XAGUSD) hit $32.71 per ounce, marking its highest price since December 2012. This remarkable uptrend corresponds with a gain of over 35% in 2024 alone, placing silver at the forefront of the precious metals complex.

The Impact of China’s Stimulus Measures

China’s central bank recently unveiled a substantial stimulus package, the largest since the onset of the COVID-19 pandemic. The announcement included expectations for a reduction in the seven-day reverse repurchase agreement rate, a tool often used to manage liquidity in the financial markets. These measures are seen as beneficial for the performance of industrial metals, particularly appealing to silver traders.

According to Ole Hansen, head of commodity strategy at Saxo Bank, “China stimulus is giving industrial metals a boost, something silver traders had been waiting for.” The interplay between gold’s ongoing strength and stable to rising industrial metal prices is anticipated to enable silver to outperform gold. Hansen speculated that this dynamic could see the gold/silver ratio decrease to the 70 to 75 range, potentially driving a 10% outperformance in silver.

Gold-Silver Ratio and Future Price Predictions

The gold-silver ratio indicates how many ounces of silver are equivalent to one ounce of gold and serves as a market gauge for potential future trends. With the reduction in interest rates by the U.S. Federal Reserve last week—a half-percentage-point cut—analysts like Max Layton from Citi predict this could create a bullish impulse for global economic activity and enhance silver consumption. Layton anticipates prices may reach $35 in the next three months and $38 over the next six to twelve months.

Market Dynamics and Future Outlook

Macquarie has pointed out that silver market deficits are likely to persist over their five-year forecast. This indicates that investor flows could significantly influence short-term price movements, with Exchange-Traded Fund (ETF) holdings potentially providing considerable price support. However, the firm has also raised caution about the sustainability of this rally.

Concerns about the continued growth of China’s industrial sector could dampen demand for silver. According to Hamad Hussain, assistant climate & commodities economist at Capital Economics, “China’s newest support measures on their own will probably be insufficient to drive a turnaround in growth.” Hussain suggests that market participants might be overestimating the chances of an additional 50 basis point rate cut by the Federal Reserve come November. This context could mean that the silver price rally may encounter challenges as some of the driving factors behind its demand diminish.

China’s Industrial Output at a Low

Further emphasizing the potential risks to silver’s price dynamics, recent data revealed that China’s industrial output growth decelerated to a five-month low in August, highlighting a trend of weakening domestic demand. These developments indicate that the silver market’s health may largely hinge on the ongoing performance of gold rather than on market-specific factors affecting silver.

As Carsten Menke, an analyst at Julius Baer, noted, “We believe that silver is primarily dependent on gold in terms of its medium to longer-term performance rather than any silver-market specifics.”

Conclusion

The current price surge in silver amid stimulating financial conditions in China and supportive actions by the U.S. Federal Reserve presents a dynamic that could favor the white metal. Silver’s rising price and relationship with gold depict a significant opportunity, but cautious investors must remain aware of the underlying risks, especially related to industrial demand and the broader economic conditions in key markets worldwide.

As the financial landscape continues to evolve, traders and investors alike should keep a keen eye on these developing dynamics, as they could have substantial implications for silver’s trajectory in the coming months.

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Small Stocks to Watch

Top Space Stocks to Watch: Will Firefly Aerospace and ispace Follow in Intuitive Machines’ Footsteps?

2 Space Stocks That Could Be the Next Intuitive Machines

On February 22, 2024, Intuitive Machines (NASDAQ: LUNR) made headlines as it successfully landed its uncrewed vehicle, Odysseus, on the moon. While the landing faced challenges—most notably, the vehicle toppled after landing, hindering communication with Earth—it achieved a feat that the U.S. hadn’t accomplished in over half a century: a successful lunar landing by a private commercial company. This achievement not only bolstered Intuitive Machines’ reputation but also positioned the company favorably for future contracts related to lunar payloads. Following its landing, Intuitive Machines secured a $117 million contract earlier in the month and a colossal $4.8 billion contract just days later.

With Intuitive Machines paving the way, other space companies are eager to capitalize on the moon exploration trend. Two contenders aiming to duplicate Intuitive Machines’ success are Firefly Aerospace and ispace.

Firefly Aerospace and the Blue Ghost Lander

The first company vying for a lunar landing is the privately owned Firefly Aerospace. In November 2024, the company plans to utilize a SpaceX Falcon 9 rocket to launch its Blue Ghost lunar lander, loaded with 10 scientific experiment payloads, on a mission to the moon. A key question arises: Why isn’t Firefly using its own rocket for this endeavor? The answer lies in the current limitations of Firefly’s Alpha launch vehicle, which isn’t capable of carrying Blue Ghost to the moon. However, with the impending rollout of a new Medium Launch Vehicle developed in collaboration with Northrop Grumman, Firefly may gain an economic edge by keeping rocket costs in-house rather than relying on external providers.

ispace and the Hakuto Resilience

The second contender is Japan’s ispace, renowned for its attempts to land on the moon. In 2022, the company’s first attempt using a Hakuto lander ended in a crash due to software glitches that depleted fuel and compromised braking capabilities. In December 2024, ispace plans to make a second attempt with a new Hakuto lander named “Resilience,” which will hitch a ride on a SpaceX Falcon 9 rocket. This mission aims to deliver six payloads, including a small Tenacity rover, to the lunar surface.

Looking Ahead: Intuitive Machines’ Future Plans

Adding to the excitement, Intuitive Machines aims to launch its second lunar lander, IM-2, potentially as early as the fourth quarter of 2024. This sets the stage for a thrilling race among Firefly, ispace, and Intuitive Machines—not just for who will replicate the lunar landing but also whether Intuitive Machines can achieve a second successful landing at the same time as its competitors attempt their first.

Challenges in Space Launches

However, it is essential to note that these launch dates are merely targets. Delays are common, influenced by factors such as development hiccups, the readiness of payloads, and unpredictable weather conditions. Space journalist Eric Berger highlights this uncertainty in his book “In Reentry,” comparing the optimistic timelines of space companies to a hypothetical journey from SpaceX’s headquarters to Malibu hitting nothing but “green lights.” Therefore, while there’s a chance of up to three moon landings in the upcoming months, investors should remain cautious and mindful of potential postponements.

Implications for Investors

For investors, the scenarios in the coming months could yield various outcomes. Under the most optimistic scenario, if all three landers successfully reach the moon, Intuitive Machines would benefit, especially if Odysseus lands upright this time. However, this success could disrupt Intuitive Machines’ monopoly on commercial moon landings, introducing competitors like Firefly and ispace and potentially leading to price reductions and delayed profits.

Interestingly, a successful landing by either Firefly or ispace might ignite interest in their initial public offerings (IPOs), paving the way for more space-related investment opportunities. In fact, Firefly has hinted that it might be contemplating an IPO in the future. Conversely, a complete failure of all three landers would adversely impact all involved companies, likely erasing Intuitive Machines’ stock gains and stalling the IPO prospects of Firefly and ispace.

Regardless of the outcome, the next three months promise to be a fascinating period in space exploration. All eyes will be on these companies as they embark on their lunar missions, shaking up the competitive landscape and potential investment avenues in the burgeoning space industry.

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Pharma Stocks

Eli Lilly Stock Analysis: Is It Time to Buy After Ebglyss FDA Approval?

Is Eli Lilly Stock a Buy After Winning FDA Approval for Ebglyss?

Eli Lilly (LLY) stock has been tracking sideways as of late September after the company received Food and Drug Administration (FDA) approval for its new eczema drug, Ebglyss. This groundbreaking treatment is aimed at individuals aged 12 and older suffering from moderate-to-severe eczema that is not adequately controlled by topical treatments.

Overview of Ebglyss

Ebglyss is administered as a monthly injection, which can be used either with or without topical corticosteroids. On September 25, Eli Lilly revealed that more than 80% of patients who had received Ebglyss over a three-year period successfully managed their eczema symptoms. Despite this positive news and having reached an intraday record high on August 22, 2023, Eli Lilly shares have seen a downward trend since then.

Weight-Loss Drug Developments

In addition to Ebglyss, Eli Lilly’s weight-loss drug, tirzepatide, has shown promising results. A study lasting three years indicated that the drug reduced the risk of developing type 2 diabetes by 94% in individuals with prediabetes and obesity. Those receiving tirzepatide also lost an average of 22.9% of their body weight, compared to only 2.1% among placebo recipients. Furthermore, on August 27, Lilly announced a lower-cost version of tirzepatide, marketed as Zepbound, which will be priced at least 50% lower than other similar obesity treatments.

Recent Expansions and Financial Earnings

Beyond the development of Ebglyss and tirzepatide, Eli Lilly has been busy expanding its reach and product portfolio. On September 4, the company revealed a partnership with Eva Pharma to enhance access to Olumiant, another treatment aimed at inflammatory conditions. Eli Lilly recently also reported impressive second-quarter earnings, with adjusted earnings of $3.92 per share on $11.3 billion in sales, an 86% surge from the previous year. This performance significantly exceeded the anticipated earnings of $2.74 per share as per FactSet.

Diabetes and weight-loss drugs Mounjaro and Zepbound brought in $973 million more than projected, and Eli Lilly raised its sales outlook for the year by $3 billion. The company has also recently completed the acquisition of Morphic Holding for $3.2 billion, focusing on a treatment for ulcerative colitis and Crohn’s disease.

Stock Analysis of Eli Lilly

As it stands, Eli Lilly stock is not currently forming a base but remains above its 50-day and 200-day moving averages. The stock enjoys a strong Relative Strength Rating of 90, which places it in the top 10% in terms of 12-month performance. Additionally, Eli Lilly holds a robust Composite Rating of 98, reflecting excellent fundamental and technical metrics.

Market Competition and Challenges

The race to develop new weight-loss drugs is intensifying, with Eli Lilly facing increasing competition. The stock experienced a dip in July following announcements from Pfizer (PFE) and Viking Therapeutics (VKTX) regarding additional obesity treatment testing. Criticism of high drug prices, including from President Joe Biden and Senator Bernie Sanders, has also weighed on stock performance.

However, Eli Lilly is advancing its next-generation weight-loss drug, retatrutide, which aims to target three hormonal pathways instead of the two that tirzepatide targets. The company is also developing an oral version of its weight-loss treatment, orforglipron, which is expected to be the first weight-loss pill to hit the market.

Alzheimer’s Disease Treatment Progress

In addition to its other advancements, Eli Lilly’s Alzheimer’s drug, donanemab, received FDA approval in July and will be marketed as Kisunla. This medication works by reducing the protein beta-amyloid buildup, and it demonstrated efficacy in slowing cognitive decline by 22% to 29% over 18 months.

Conclusion: Buy, Sell, or Hold?

As it stands, Eli Lilly’s stock is considered neither a buy nor a sell. Although it exhibited a bullish sign by regaining its 50-day moving average on August 9, it isn’t currently forming a base for investors. While the company reported strong sales and earnings growth that outperformed expectations, investors should monitor the evolving markets for weight-loss drugs and Alzheimer’s treatments closely.

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Trading Tips

Invest in These Hidden Stars of the AI Chip Boom: Your Ultimate Guide to “Picks-and-Shovels” Stocks

Surging Demand for AI Chips: Invest in These “Picks-and-Shovels” Companies

The AI Gold Rush: An Undeniable Trend

With the artificial intelligence (AI) landscape constantly evolving at breakneck speed, the theme of the AI gold rush is fundamentally shaping the investment landscape. As data-driven technologies seep into every corner of the economy, investors must align their portfolios with companies that serve as the backbone of this booming sector. Oppenheimer analyst Edward Yang has identified high-potential stocks that are your go-to investments to capitalize on the shortfall in semiconductor supply and the rising demand for AI-enhanced technologies.

The Semiconductor Supply Crunch

In a note to clients, Yang laid bare the stark reality of the semiconductor market. He highlighted that **AI compute demand doubles every six months**, whereas hardware performance only improves every two years. This creates a **“severe, structural shortage”** of advanced semiconductors and essential tools required for their production. It’s an opportunity for savvy investors: while AI chip makers like Nvidia Corp. (NVDA) capture the limelight, the lesser-known infrastructure companies start offering significant upside potential.

Invest in “Picks-and-Shovels” Companies

Yang stressed the importance of looking beyond flashy tech stocks and focusing on the **“unglamorous”** yet crucial players in the semiconductor space. He initiated coverage on two standout stocks: **Onto Innovation Inc. (ONTO)** and **Ultra Clean Holdings Inc. (UCTT)**, both of which boast outperform ratings.

Onto Innovation Inc. (ONTO)

For Onto, he set a bullish price target of **$260**—indicating a **27% upside** from current levels. Why the enthusiasm? Onto is dubbed a **“key AI enabler”** producing yield-enhancement tools specifically for advanced packaging and high-bandwidth memory (HBM). Its growth trajectory is nothing short of impressive, driven largely by significant orders from major suppliers like Nvidia, Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), and SK Hynix Inc. (KR:000660). With AI showing no signs of slowing down, Onto stands poised to capitalize.

Ultra Clean Holdings Inc. (UCTT)

Shifting gears to Ultra Clean—Yang’s target here is set at **$70**, reflecting an astonishing **90% upside**. This California-based company is on the cutting edge with its burgeoning franchises in HBM, advanced packaging, and vacuum-based extreme-ultraviolet-lithography (EUV) tools. Additionally, its local production capabilities shield it from any potential fallout from U.S.-China trade tensions concerning semiconductors. Yang underscored Ultra Clean’s strategic position as essential to addressing the **“long-term bottlenecks”** arising from the ever-growing AI demands.

Market Landscape and Other Recommendations

Yang didn’t stop with Onto and Ultra Clean. He also initiated coverage on **KLA Corp. (KLAC)** and **Ichor Holdings Ltd. (ICHR)**, albeit with a more tempered perform rating. For those keeping score, KLA is a heavyweight player in the semiconductor manufacturing supply chain, while Ichor specializes in fluid delivery systems—a pivotal aspect of the chip production arsenal.

Conversely, **Cadence Design Systems Inc. (CDNS)** received an underperform rating, signaling potential caution in upcoming market fluctuations.

Positioning Your Portfolio

The crux of Yang’s analysis is centered on the opportunity manifesting in critical infrastructure companies that support the AI megatrend. With pressure mounting on chip production capacities, those looking to profit through thoughtful investment would do well to consider Onto and Ultra Clean as foundational stocks to incorporate into their portfolios.

To capitalize on the seismic shifts in the AI sector, understanding the underlying market dynamics is crucial. The persistent demand for computing power will only escalate, and the companies equiping AI chip producers with necessary tools are primed to ride this wave to heightened growth.

As you look to position your portfolio for the next big trend, consider these insights actionable. Happy trading, and may your investments flourish in this electrifying period of growth!

Conclusion: Seize the Moment

Don’t let the opportunity pass you by. Follow the trail blazed by strong analysts like Edward Yang, and consider stocks that might not be in the spotlight but are indispensable to the very technologies revolutionizing both industries and our daily lives. The **AI gold rush** is just getting started, and the time to act is now.

For more information on stock recommendations, stay tuned for regular insights here at “Traders on Trend”!

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Financial News

Stocks Set for Rare Back-to-Back Rally as S&P 500 Eyes Historic Gains

Stocks on the Verge of Rare Back-to-Back Rally: Is History Repeating Itself?

Exceptional Performance of the S&P 500

The S&P 500 index is on the brink of achieving something that hasn’t occurred since the height of the dot-com bubble — consecutive annual gains of 20% or more. As of Tuesday’s close, the U.S. benchmark marked its year-to-date advance surpassing 20% for the first time in 2024, according to Dow Jones Market Data. This milestone coincided with the index’s 41st record close of the year, stirring discussions about the sustainability of this impressive rally.

Historical Context and Comparisons

Such robust performance from the S&P 500 has not been seen in a consecutive manner since 1998, when technological innovations and a surge in online trading enthusiasm led the market to experience phenomenal growth. From 1995 to 1998, the S&P achieved a staggering four successive years of gains exceeding 20%. However, the streak nearly fell short in 1999, where the index rose just 19.5%. Prior to these developments, stocks had not posted similar back-to-back gains since 1955.

Mixed Sentiments on Future Returns

As the S&P 500 has soared about 60% since its low in October 2022, many market analysts are divided on whether this bull market will persist or start to fizzle out. Recommendations for investors have ranged from shifting away from large-cap stocks in favor of small- and mid-cap opportunities, to seeking better value in international markets. In contrast, others argue that large-cap stocks remain the optimum choice, despite their current elevated valuations.

Echoes of the Dot-Com Era

Comparisons to the dot-com boom bring a mixed bag of nostalgia and caution. According to Steve Sosnick, chief strategist at Interactive Brokers, while parallels can be drawn due to the public’s renewed engagement with stock investing, the market dynamics are markedly different today. The technology sector, a significant driver of recent growth, holds an outsized share of the S&P 500, with both information technology and communications services leading the pack.

Valuation Dynamics

Today, the S&P 500 shares some concerning metrics with the late ’90s dot-com bubble, particularly regarding the forward price-to-sales ratio, which stood at 2.9 times at the end of August — exceeding the 2.4 times calculated in late 1999. Despite this, the current profitability of leading companies is higher than it was during the previous boom. The index is currently trading at a forward price-to-earnings ratio of 21.6 times, down from nearly 24 times in 1999.

Market Outlook and Projections

Despite the high valuations raising alarm bells, several analysts, such as those from J.P. Morgan Securities, warn investors to prepare for a decade with average returns considerably lower than those experienced historically — predicting a shrinkage to about 5.7%. This falls below the average annual return of 8.5% the S&P 500 has registered since its inception.

Contrarian Views and Growth Prospects

On the other hand, experts at Yardeni Research remain bullish, attributing their optimism to expectations of higher-than-predicted economic growth extending through 2030. They argue that improving productivity could bolster corporate profit margins, which in turn would support market appreciation at rates above historical averages.

Broadening Market Participation

Notably, the dominance of technology stocks may wane as more sectors such as financials, industrials, and utilities begin to gain traction. Observers point out the recent uptick in contributions from these previously subdued sectors, indicating potential for further bullish momentum in the broader market. Currently, about 34% of S&P 500 companies are outperforming the index, a slight improvement from last year, suggesting that a wider variety of stocks are contributing to the gains.

The Path Ahead

Historically, the S&P 500 has averaged a gain of just over 9% in the year following a 20% return, based on data from Dow Jones. While the current landscape raises fresh questions about market sustainability and valuation levels, investors might find opportunities in sectors that are gradually gaining strength. As the market evolves, many will undoubtedly keep a keen eye on the developments, weighing potential risks and rewards in light of historical patterns.

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Technology

Crypto Market Awakens: How Fed Rate Cuts Could Fuel DeFi’s Revival

Expect Crypto Bulls to Flock Back as Fed Cuts Rates

Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch. In the latest developments affecting the cryptocurrency landscape, the Federal Reserve has made a significant move by cutting its policy rate for the first time in four years, decreasing it by half a percentage point. According to data from CME FedWatch, futures traders are pricing in the possibility of another 100 basis points of cuts by the end of this year. This brings to the forefront the question: How might these rate cuts impact the crypto space?

A Resurgence in Decentralized Finance?

To gain insights into this, I reached out to Chris Rhine, a portfolio manager at SPDR Galaxy ETFs. Rhine believes that certain decentralized finance (DeFi) lending protocols could see a revival due to the Federal Reserve’s decision. DeFi refers to financial services built on blockchain technology that enable peer-to-peer transactions, thus eliminating the need for intermediaries. Typically, these transactions are facilitated by smart contracts—automated computer programs that execute actions when specific conditions are met.

The initial surge in DeFi activity, commonly referred to as the “DeFi summer,” occurred in 2020 when the Federal Reserve began its rate cuts in response to the COVID-19 pandemic. This period was characterized by the emergence of decentralized lending platforms and exchanges like Aave, Compound, MakerDAO, and Uniswap. Investors were drawn to DeFi back then, looking to capitalize on attractive yields—some borrowing rates for cryptocurrencies on decentralized platforms soared to as high as 30%.

Impact of the Rate-Hiking Cycle

However, the landscape dramatically shifted when the Fed initiated its rate-hiking cycle in March 2022. The interest rate hikes rendered the yields from DeFi protocols less appealing as traditional risk-free rates steadily climbed. At one point, U.S. Treasury bills were yielding over 5%, prompting a retreat from riskier assets. As a result, the total value locked in DeFi protocols plummeted, dropping to a cycle low of under $40 billion in December 2022. This was a stark contrast to the almost $180 billion peak reached in November 2021. As of Tuesday, the value locked in DeFi protocols rebounded slightly, standing at approximately $87 billion, according to data from DefiLlama.

Now, with the Fed cutting rates once more, Rhine suggests that the DeFi space could see renewed interest as investors look for higher returns amid an environment of falling rates. He also emphasizes the importance of monitoring the supply of stablecoins, a category of cryptocurrency whose value is pegged to other assets. An increase in the supply of stablecoins typically signals growing demand for cryptocurrencies and more funds entering blockchain ecosystems.

Other Noteworthy Developments

In addition to market dynamics, notable legal proceedings and settlements have occurred in the crypto world. Recently, U.S. District Judge Lewis Kaplan sentenced Caroline Ellison, the former girlfriend of FTX co-founder Sam Bankman-Fried and the last CEO of his hedge fund, Alameda Research, to two years in prison. Ellison played a crucial role in the fraud that involved Bankman-Fried diverting billions in customer deposits from the FTX exchange to Alameda Research. Despite her involvement, her cooperation with authorities led prosecutors to seek a lenient sentence.

In another significant event, crypto companies TrustToken and TrueCoin (now operating under the name Archblock) settled with the U.S. Securities and Exchange Commission (SEC) over charges of fraudulent and unregistered sales involving their stablecoin TrueUSD, which is meant to maintain a 1:1 value with the U.S. dollar. The SEC’s allegations claimed that a substantial portion of TrueUSD’s reserves had been invested in high-risk offshore funds. Each company agreed to pay civil penalties of $163,766, while TrueCoin will also return over $370,000 in profits and interest. They did not admit or deny wrongdoing in the settlement.

Conclusion

As the Federal Reserve’s rate cuts take effect, the cryptocurrency market stands poised for potential revitalization, especially within the DeFi sector. Investors should remain vigilant, not only regarding market trends but also the evolving regulatory landscape affecting crypto companies. With renewed interest in cryptocurrencies on the horizon, the digital asset space could be gearing up for another wave of investment, akin to the notable activities witnessed during the previous DeFi boom.