Foreign stocks: tech rally continues
Tech stocks suffered severe setbacks in the summer, but were able to recover. Many major US analyst firms are still enthusiastic. However, there are also critical voices.
31 October, 2024 FRANKFURT (Frankfurt Stock Exchange). Is the AI euphoria over? There's no sign of it on the stock market so far. Rather, the skepticism from the summer has faded again. On Tuesday evening, the Nasdaq 100 stood at 20,551 points, not far from the all-time high of just under 20,748 points reached in July.
The interest is also reflected in the turnover of foreign shares on Deutsche Börse's marketplaces. Chip company Nvidia (US67066G1040) remains the absolute favorite - with turnover in September more than three times as high as that of second-placed ASML (NL0010273215). The top ten also includes almost exclusively tech companies, namely China's car manufacturer BYD (CNE100000296), Tesla (US88160R1014), Apple (US0378331005), Amazon (US0231351067) and Alphabet (US02079K3059). The only non-industry players: Novo Nordisk (DK0062498333) in 7th place and Berkshire Hathaway (US0846707026) in 9th place.
The shares of Denmark's pharmaceutical group Novo Nordisk had risen sharply until the summer in the wake of the weight loss injection boom, but have fallen again significantly since June. The B-share of Berkshire Hathaway, Warren Buffett's investment holding company, which is traded in Germany, is currently trading at 418 euros, hardly any less than its record high of 436.75 euros at the beginning of September.
Five of the Magnificant Seven report
Five of the largest tech companies are presenting their quarterly reports this week. The figures already published by Alphabet were convincing. Meta reported a significant increase in revenue thanks to its advertising business. Microsoft grew more strongly than expected due to high demand for AI products. However, the figures from chip manufacturer and Nvidia competitor AMD (US0079031078) were disappointing. Apple and Amazon's figures are due this Thursday evening.
Wall Street analysts had forecast an increase in profits for the “Magnificent Seven” in the third quarter of more than 18 percent compared to the same period last year. This would be significantly less than the 37 percent increase in the second quarter. For the other S&P 500 companies, however, profits are only expected to stagnate.
“Moon prices for AI infrastructure”
However, Stefan Waldhauser, who has been investing in technology and growth companies for more than 35 years (www.high-tech-investing.de), warns: “The most important issue at the moment is to warn retail investors against overweighting the ‘AI winners’ - i.e. Nvidia,” he explains. There are three reasons for a bubble: firstly, he cites the “moon prices” for AI infrastructure, such as the latest Nvidia GPUs. Waldhauser also criticizes the “AI-adjusted earnings” profitability figure cited by OpenAI, which excludes large blocks of costs. “Even according to the optimistic forecasts of its own business plan, the real OpenAI figures show a loss of 14 billion US dollars in 2026 and losses of 44 billion US dollars by 2028.” In addition, a veritable “AI gold rush” has broken out among venture capitalists. “New companies without any turnover are being financed with hundreds of millions of US dollars right from the start, simply because the founders are well-known AI experts from big tech companies.” Read more: www.high-tech-investing.de/post/ai-blase-2025
Almost only buy recommendations
Overall, however, there is still a lot of confidence in the analysis departments: For example, UBS, Jefferies & Company, Bernstein Research, Goldman Sachs and JP Morgan recommend buying Amazon, while UBS, Jefferies, Bernstein and JP Morgan also recommend buying Meta. Buy recommendations also predominate for Microsoft, Alphabet and Apple. In the case of Apple, however, UBS points to the somewhat weaker demand for the new iPhone and only rates the share as “Neutral” with a price target of 236 US dollars (currently 230 US dollars).
Waldhauser is also skeptical about other tech stocks: “With the exception of Alphabet and Meta, all big tech stocks are ‘priced for perfection’ with a P/E ratio of well over 30 and are therefore susceptible to a major setback.” Apple Intelligence, for example, is far from delivering what its marketing promises. Waldhauser assumes that in the current quarterly season - as in the previous quarter - selected second-line stocks will perform better than Big Tech. “Investors are therefore well advised to keep an eye out for promising stocks outside of Big Tech.”
From Anna-Maria Borse, 31 October 2023, © Deutsche Börse
About the author
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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