AI trade 'alive and well' this year and Nvidia will continue to work: Intelligent Alpha's Clinton

Joining me now to discuss Doug Clinton, Intelligent Alpha founder and CEO. It's good to see you. Welcome back. Thank you, Scott. What do I want to do here with this tech trade, which I felt like was asleep, and now I feel like it roared back, and now I really don't know what to do with it because I see rising rates and some of these stocks are rolling pretty hard. It's been an uncomfortable start to the year. It felt like we were kind of off to the races, Scott, and now all of a sudden people are maybe starting to doubt again, but what we look at is just go back to the fundamentals. First ask yourself, are these big cap tech names really that expensive? Are they overpriced? NVIDIA is trading at 32 times this year's earnings. The group of the mag six, so excluding Tesla, trades at about 27 times this year's earnings. It's not cheap. I don't think it's egregiously expensive, and as we look forward to the rest of this year, I still do have pretty great confidence that the AI trade is alive and well. I think NVIDIA can continue to work. That might shift later on this year, and I also think Microsoft and Meta are the names that you can own out of those mega cap tech stocks. Well, you didn't say Apple conspicuously absent from your list, and there was that downgrade to sell this week, which I thought was pretty interesting, basically saying that the move from WWDC to close to now was punk, that it was based on nothing that had to do with anything with fundamentals. I think that it's harsh, but I think it's also probably fair, and the reality for Apple is this. There's this incredible opportunity for all of these mega cap tech companies with AI, and Apple has shown that they are dipping their toes into AI, but they haven't really shown us anything yet of substance that should really move the needle in terms of people feeling like, I really have to upgrade my iPhone. We probably won't get any more substance from that until this year's WWDC. I think that's kind of the key event for them to really become an AI player. Wow, so we have to wait again to WWDC, so you're not counting on an upgrade cycle that just is, rather than one big event, just becomes this rolling deal that's going to be good enough. It's just going to take you longer to get to the destination you thought you'd be. I think that's probably the right way to think about it. I think that the bar is low, but I also think that Apple's, even if they don't get an AI tailwind, I think they have easy comps, I think that they've done enough with AI and other upgrades to the iPhone 16 that they can beat that low bar. I think the question in my mind, if you're really getting excited about Apple, is what does it look like for next year? Can they really exceed and get back into that strong, double-digit kind of growth for iPhone that we haven't seen in a long time, and that I think the people who are AI goals really hope that it could accelerate to. But again, we just won't really know what that will be, that AI story will be that could drive that kind of growth until later this year. What do you think about this backup in rates in general? Are you concerned that it's going to derail what seemed to be a pretty good market heading into this year? We use AI and Intelligent Alpha, Scott, to make predictions about the market. One of the predictions that our AI trio that we use, GPT, Gemini, and Claude, suggested for the markets was that we may see a correction. It predicted the back half of the year, so kind of a 10-ish percent flavor of correction. And what it specifically called out was that we may have a recurrence of inflation, and that may result in something that maybe looks a little bit like what we're experiencing right now with rates becoming more stable, maybe even rising a little bit. So maybe AI is wrong on the timing, but I wouldn't be surprised if we do eventually get some sort of market correction driven by a narrative around rates and inflation, because that's really what the market has been sensitive to for the last two years. And we've been lucky, in my opinion, the last two years, the markets have been relatively tame. I think we've only had one 10% correction. And so this is very unscientific, but you could also say maybe we're due.