VIDEO: Goldman Turns Heads With S&P 500 Target

Chris Versace joins TipRanks’ Julie Gillespie to cut through the noise and find out what investors should actually be focused on right now. From Iran nuclear talks and their market implications to the massive global AI buildout being fueled by ByteDance’s $70 billion capex plan and Samsung’s new Vietnam memory plant, Chris breaks down who the real winners are beyond the obvious hyperscalers, and why Applied Materials (AMAT) deserves attention.

We also dig into Wednesday night’s Salesforce (CRM) earnings, what the Zscaler (ZS) guidance miss tells us about the enterprise software space, and why OpenAI and Anthropic going deeper into enterprise is a real threat to CRM. Plus, Chris walks us through his decision to trim First Trust Nasdaq Cybersecurity (CIBR), where that capital could be headed next, and why TheStreet Pro members should vote in favor of SuRo Capital’s (SSSS) plans to transition to an externally managed structure.

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At the time of publication, TheStreet Pro Portfolio was long CIBR and SSSS.

Transcript

Julie G (00:00)

Hey everyone, it is Julie here with Tip Ranks, and I am once again joined with Chris Versace from the Street Pro, and we are going to dive into what is moving the market today and this week. Chris, thank you so much for joining me again.

Chris Versace (00:12)

Happy to do it, Julie. It feels like it’s been forever, but so much to talk about.

Julie G (00:16)

Absolutely. So to dive right into it, you know, we have futures in the green today, but there is a lot of noise. So we have the Iran talks that are continuously ongoing, Goldman raising its SP target, ⁓ AI spending is surging globally. So what is the single biggest thing that you think investors should be watching right now?

Chris Versace (00:34)

Well, you know, Julie, the market has continued to zoom higher. You know, I can’t count the number of fresh highs that we’ve seen in the SP 500, the Nasdaq composite. But from time to time, the market, if you look at its relative strength index, becomes overbought. And that’s where we are once again. Not saying it can’t go higher, but typically when we see something like this, a note of caution ⁓ is something that we need to heed. And that that has me kind of look starting to look around for some other areas that may not.

have risen quite as quickly as ⁓ everything that seems to be tied to AI, whether it’s you know chips memory chips in particular.

Julie G (01:13)

Now you mentioned the the overbought thing there. So Goldman Sachs raised its year end S P five hundred target to eight thousand dollars with twenty five percent implied earnings per share growth. But like we said, both the S P five hundred and the Nasdaq are in overbought territory on the RSI. Do we think Wall Street’s getting a bit ahead of itself?

Chris Versace (01:31)

I do think that’s the case, especially when we take a look at the components, right, of the SP 500, the NASDAQ composite that have really been driving it. And even in Goldman’s comments, they they kind of fess up that, you know, a lot of this has been ⁓ in terms of their revision for not only their target, but their comment about earnings growth. It’s really tied to that, let’s call it AI data center basket. It it cops to the fact that there are other sectors out there that are not necessarily.

keeping pace with that level of earnings growth. But you know, when we think about the market being overbought and expectations being a little heavy, you know, I start to think about that 25% EPS growth number that Goldman has. And okay, the first quarter surprised a little bit to the upside, but we had exactly one month, not exactly a lot of impact from the US-Iran war. And while yeah, we’re kind of hearing about

Getting very close to a peace talk settlement, the eventual opening of the strait. I think the lesson learned coming out of the pandemic is that it does take a while for things to open up. There is lingering pain to be had. And I think it’s something to be mindful of given where we are with the pandemic.

Julie G (02:45)

fair and then I want to pivot to CapEx. Obviously we’ve seen a big increase in this in recent years. ByteDance, the latest, saying that they’re eyeing $70 billion in CapEx this year. ⁓ we have Sam Samsung building a new memory plant in Vietnam. So what does this global AI build out mean? And is it create some opportunities? I know in your article you mentioned applied materials. So are there some overlooked opportunities beyond the obvious hyperscalers?

Chris Versace (03:06)

Mm-hmm.

Well, let’s let let’s think about this, right? And I’m glad you said the hyperscalers, right? Because most people, when we think about this AI wave, you know, we tend to focus in on the four big hyperscalers. But there are players outside of that, bike dance being one, but there’s neo clouds, data center REITs that have to continue to spend to add capacity and the like. So what we are seeing is is a massive ⁓ you know uptick in capital spending this year, growing expectations that that

Will continue, meaning higher CapEx spending in 2027. When I sit back and think about that, you know, level of spending, it tells me there’s more dollars chasing more components. Could be chips, could be power, could be other things. It it it tells me that when I look at the semiconductor industry that’s already capacity constrained, it says that that constraint is going to be with us for a little bit of time, whether it’s AI chips, networking chips, what have you, memory chips, back to micron.

So I get very excited about the shares of applied materials, which you just mentioned, because it’s going to be a beneficiary of that pain point, of that need to bring more chip capacity on stream. And remember, there is needed chip capacity outside of AI and data center, right? We were hearing about shortages that are stifling volumes this year for smartphones, PCs, and the like. So another another angle that makes me positive on applied materials.

Julie G (04:39)

Right, very interesting. And then I want to talk about Salesforce, who is reporting tonight. They’re down 32% this year about that, facing real pressure from OpenAI, Anthropic, going deeper into enterprise. So we had scalar beating earnings, but the guidance did miss ⁓ after a 58% run that they had this year. What’s your read on both? How do we view the scalar results and what are we looking for in Salesforce reporting tonight?

Chris Versace (05:05)

Sure. So let me take them backwards. So with Zscaler, like you just pointed it out, stock had a tremendous run up 50 plus percent. I think you said 58% in ⁓ I think six weeks, right? So clearly expectations were probably getting ahead of themselves. And if I remember what the company had to say, ⁓ you know, it delivered a beaten raise quarter, and their guidance ⁓ for the current quarter is slight miss on the top line.

Stock was indicated down 25% today, clearly an overreaction. I think folks are going to want to circle back to this one. you know, I continue to see cybersecurity ⁓ as addressing a significant pain point, one that is growing as bad actors continue to adopt AI to expand the vector velocity of the attacks that they’re making. But I think Zscaler is also a teachable moment because you have to remember that.

After a 58% move, the prudent move, Julie, would have been to have taken some of those Zscaler chips off the table. That’s exactly what we did yesterday. We had a 38% move in the shares of the first trusts. Let me get this right: First First Trust, NASDAQ, Cybersecurity ETF, Ticker Symbol Cyber. We took some chips off the table, locked in a 38% gain for pro members. ⁓ You have to bow to your discipline when the time is right. ⁓ you asked something about Salesforce. Okay.

Let’s let’s talk quickly about this. You are

the stock has been down big this year. A lot of concern that OpenAI, Anthropic, and others are gonna eat the lunch of Salesforce and other software companies. We are seeing them start to move into that space with some acquisitions to expand enterprise adoption of AI. But yesterday we also saw ⁓ an interesting management move where the CMO of ServiceNow jumped over.

To one of the AI companies. This tells you that they are extremely serious about this. I want to see what Salesforce has to say about this from a fundamental perspective. Let’s track those RPOs or remaining performance obligations from Salesforce. Let’s

their subscription revenue, not on a year-over-year basis, Julie, because we know those numbers will be favorable. Let’s look quarter over quarter. If we don’t see any growth, that’s gonna raise more questions.

Julie G (07:27)

All right, we’ll be keeping an eye on that. ⁓ then moving to the pro portfolio there. I know you guys recently trimmed ticker C I B R. So walk us through that decision. Was this a evaluation call after the run? Are you rotating that capital elsewhere? What areas you looking at? What was the thought process behind that?

Chris Versace (07:44)

So let’s stitch some of this together, right? The market, as we said, is overbought based on the RSI levels. We had a significant run in cyber. So that was pure portfolio discipline, plain and simple, right? when we see moves like that, we really have to say, okay, why do we buy the stock? Great. Is the thesis intact? And it still is, but a significant run relative to the market. So we’ve got to take a little bit of it off, lock those gains. as a good friend of mine, Bob Lang, once said.

Nobody, Julie, ever went broke, taking a profit. But second part of your question, markets overbought, are we starting to look for other areas that may not have participated where things are improving? The answer to that is yes. And I’m in the early stages of tracking some commodities, coffee, sugar, cocoa, and a few others, starting to formulate some thoughts. I think you and I will be talking perhaps a little more about this in the coming weeks.

Julie G (08:44)

All right, I look forward to that. Some interesting areas outside of all this AI buzz lately. Now, another upcoming thing was a shareholder vote on SSSS Thorough Capital there. Can you break down what’s at stake, how you guys are thinking about it, and what investors holding this the stock here should know going into the vote?

Chris Versace (08:50)

Yes.

Yeah.

So I will say first and foremost that Siro Capital has been a fantastic performer for the Pro Portfolio. You know, we we bought it a couple different times, but it has worked out extremely, extremely well for us. They’re a ⁓ BDC that’s really focused on on high-tech growth companies. And you know, the key is their portfolio of investments and monetizing them through primarily through IPOs. So we’re excited given what’s poised to come in the IPO market. But with regarding Suro in particular,

⁓ if we think about it being, you know, deal flow, right? They need to have access to quality deals. ⁓ they are that they’re transitioning to an externally managed advisor in partnership with Magnetar that has 18 billion under management. So, from my perspective, this transition is going to take a well-run, a well-oiled machine.

Improve the deal float, most likely improve its due diligence capabilities as well. To me, that’s a positive. So the shareholder vote is to approve this move to this new structure, this externally managed format that’s really a JV between the existing Suro and Magnetar. ⁓ so I I’m voting. If I was, you know, asked, Chris, are you voting in favor of this? And I’ve had pro members ask me, the answer is yes.

Julie G (10:29)

All right, good to know. And then to sum it all up, pulling it all together here, geopolitics, AI infrastructure, software disruption, cybersecurity, all these portfolio moves you guys are making. What is the single best risk versus reward opportunities investors should be looking at right now?

Chris Versace (10:35)

Mm-hmm.

You know, Julie, that is a very tough question. And I I say that because, you know, like I said, the market’s oversold. sorry, overbought, overbought. You would think I would not slip that up as much as I do, but I do. ⁓ I I would say here that going into earnings this week from Costco, I think that presents a great opportunity for folks. Reason being, ⁓ we’ve gotten a lot of companies that have reported, you know, their comp sales. When you trace Costco’s comp sales for the trailing three months.

Boy, ⁓ boy, are they impressive. Folks are concerned about the pinch of higher prices, not just gas, but also food. Costco alleviates both. ⁓ I think they’re gonna put up a good quarter and I think that folks who aren’t paying attention are gonna be surprised.

Julie G (11:31)

Alright, we’ll be keeping an eye on that. Well, thanks for all of your insights today, Chris. Always very valuable. And I look forward to chatting with you in a couple weeks, maybe about some of those commodity picks.

Chris Versace (11:41)

That would be wonderful, Julie.

Julie G (11:42)

All right, we’ll talk then.