Trade Radar | U.S. Debt Ceiling Progress and AI Craze in Focus: 2 AI-related Uncovered Gems and More AI-themed ETFs to Watch
Another Weekly Session with Loui, M+ Online Head of Research. He shared some views of the US Debt Ceiling and AI-related stocks to watch including Nvidia.
US Debt Ceiling
We have a shortened trading week in the US this week as the US stock markets were closed for Memorial Day Holiday on Monday. We noticed the overall sentiment was turning more positive as the US debt ceiling was tentatively resolved over the weekend and the US Treasury has been using “extraordinary measures” to prevent a default (deadline pushed to 5th of June).
If the deal is passed, it will suspend the US debt limit until January 2025. However, the suspension of the debt limit is a temporary measure, and the US would need to bring down the national debt or raise the debt ceiling by then.
Certain requirements will need to be met such as (i) keeping the non-defense spending about the same for 2024 and raising it by 1% in 2025. Among others, the bill would also place new restrictions on Snap benefits, capping the number of individuals eligible for food stamps.
Artificial Intelligence theme
Since the debt ceiling issue is tentatively being resolved, the sentiment was positive riding along the Artificial Intelligence trend following a bullish result and forward-looking statements from Nvidia last week. Nvidia hit the USD1 trillion market cap value briefly yesterday but was unable to hold above that zone yesterday.
We are still optimistic about the overall AI trend given the use cases are on the rise and likely to dig out several uncovered gems within the AI segment. Last week, we posted several trading ideas for our investors. It has turned out to be a marvelous uptrend for NVDA, GOOG and MSFT.
AI-related uncovered gems
· Broadcom Inc. (AVGO)
This week, we are trying to observe if there are any good deals in the market for our retailers to pick up. Broadcom will be issuing its quarterly result on 1st of June, but the share price has moved from USD600+ zone to USD800+ zone after Apple announced a multi-year, multi-billion-dollar agreement with Broadcom. In this deal, Broadcom will develop 5G radio frequency components - including FBAR filters and cutting-edge wireless connectivity components.
· Teradyne Inc. (TER)
Meanwhile, there is another company that we felt has the AI-related catalyst - Teradyne. The company is focused on task automation through robotics, as well as making automated test equipment. It has gotten industrial automation through several acquisitions, one of them including Universal Robots (acquired in 2015 for USD285m).
Teradyne’s industrial automation group’s revenue stood at USD404m (13% of overall revenue for 2022) and the company aims to expand the revenue mix to 20%. Meanwhile, the lion share of revenue is in its testing segment and it should grow generally well in tandem with the AI theme, demanding for more sophisticated chips.
Stocks and ETFs to watch
| Ticker | Name |
| QQQ | Invesco QQQ Trust |
| TER | Teradyne Inc |
| NVDA | NVIDIA Corporation |
| AVGO | Broadcom Inc |
| ROBO | Robo Global Robotics and Automation Index ETF |
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More about Loui:
Loui Low leads a team of analysts to perform equity and economic research and to provide investment advisory services to the organization's sales team, fund manager and retail fraternity. He has more than 10 years of experience in the stockbroking industry.
He graduated with a Bachelor of Science in Statistics from University of Malaya. He also holds an STA Diploma and is a member of the Society of Technical Analysts (MSTA) United Kingdom.
More about the Trade Radar:
Trade Radar is a weekly-updated section, featuring Loui's latest insights into market trends and hot topics. Traders may find some trading inspiration from Loui's views.
More Insights from Loui:
· Trade Radar | U.S. Debt Ceiling “X-Date” Nearer, What Can Traders Do?