VIDEO: Here's the Plan as a Big Tech Holding Sits on Our Pick-Up Level

In today’s Daily Rundown video, Chris Versace strings together several data points to explain why AI adoption is still in the early innings and why we are bullish on our related holdings. 

Chris also explains why we want to be patient investors with Qualcomm QCOM shares and what our plan is for Alphabet GOOGL shares as they sit on our published pick-up level. 

Today’s video is rounded out with a quick recap of Friday's November Flash PMI data, with Chris sharing why upcoming November data will determine the timing for the Fed’s next rate cut.

Transcript

SUBJECT: Hey, folks, it is Friday, November 22. Hard to believe it, but we are actually closing out the last full week of trading in the month of November. And by my count, again, it's hard to believe, but we have 24 and 1/2 trading days left this year. Unbelievable. I know we've got the Thanksgiving holiday next week, Black Friday, Cyber Monday, but still pretty hard to believe that we are barreling towards the end of 2024.

Well, what can we say? Well, this week, it has been yet another busy week for the portfolio, but it's also been a good one as well. I trust that you've seen the move in Elastic shares following the company's better than expected October earnings report last night and they kicked up guidance. I also hope that you have seen our alert in which we boosted our price target to $135 from $105, a number of positives going on at the company. Again, if you read the alert, you'll see why we remain very positive on the company over the longer term. Again, many positives, especially how it's not only winning additional customers, but as it ramps its AI offering, it is squeezing more revenue out of those customers. So a lot of good things going on.

But I also want to use that report to step back and take a 10,000-foot view on AI adoption. Because whether it's the comments that we've been getting this week from NVIDIA, from Elastic, or other companies over the last few weeks, or even some of the surveys that we've been reading and sharing with you, whether they're in our signals or talking about in other alerts, the reality is that not only are we in the early innings of AI adoption, but all indications are that companies are going to spend more next year on AI. And that is the positive backdrop not only for our shares of Elastic but also for the shares of ServiceNow as well.

And as we connect the dots and think about that adoption flowing through to what it-- other areas-- meaning data center, digital infrastructure-- the more AI is being used, the greater the stress we will see on data center and the digital infrastructure that's been at the heart of our thinking about Marvell shares, but it also bodes extremely well for NVIDIA as well.

So when we think about that, we continue to remain bullish not only on Elastic and ServiceNow but NVIDIA and Marvell as well. And to the extent that we do see greater adoption in smartphone and AI PCs-- something we'll be watching next week with quarterly results out from Dell and HP-- but to the extent we see greater adoption of the consumer. for AI-enabled devices, that's another layer that simply reinforces our thinking about digital infrastructure in NVIDIA and Marvell.

I also wanted to use today's video to touch on a few other positions in the portfolio. You probably saw yesterday that we picked up some additional shares of Qualcomm, Applied Materials, and PepsiCo. The rationale behind that is all explained in the alert, so please be sure to look at that.

But I did want to call out that, particularly with Qualcomm shares, that we did a very deep dive on the company's investor day earlier this week that really focused on that diversification strategy. And we recognize that the diversification is going to take time and that we could be early with our pickup of Qualcomm shares this week.

But we've been early before. And as long as the story unfolds the way we expect, which means we will be checking data points to confirm that it is, we have no problem being early because being patient has paid off handsomely for us in the past in similar scenarios. And just remember, the key here with Qualcomm is that as the diversification plan unfolds, we want to capture the benefits associated with that fruit as it is borne out. Pretty simple.

Let's also talk quickly about Alphabet. I know some folks, either in the comments section or the forum, have been asking some questions about it because the shares have been under pressure. We know what that pressure is being driven by. It's the DOJ suggestions that we talked about in our alert on Thursday. The key here is that it has Google shares flirting with our $165 pickup point that we talked about.

Now, I can understand why it's tempting, but we have to consider a few things. First, there is a key support level for Google shares just below $164. So while tempting to perhaps use the $165 pickup point, we're going to be a little patient just given the headlines this week and see if the shares positively test that support level. If they do, then we will contemplate picking up some shares. If, however, Google shares break that support level, we are going to want to most likely hold off until they become oversold, just like they were a few months ago.

Now, remember, being oversold means that the Relative Strength Index, RSI, falls below 30. Currently it's right around 41. Now, ultimately, what we're thinking is that the DOJ effort will be scaled back. This will be a little bit of a bump in the road for the shares. It's going to take, as we discussed in our alert, a lot of time. We laid out the start of the trial, April. We talked about when the judge expects to have their ruling, August. And of course, we expect that Alphabet is going to appeal. So, by and large, this is going to be at least a year, if not longer, away. It'll be an overhang.

But in the near term, we want to make sure that we go with the smart play. That means either making ensure the shares test that support level or that we hold off until the risk/reward skews extremely favorably, potentially, as I just mentioned, with them bouncing back into oversold territory. Let's see how it develops and we'll make our decisions as things become a little more clear.

Finally, I just want to make sure that you guys read the note we had out on the flash November PMI data, very supportive for the overall strength of the economy. But I would also say that what it showed us regarding inflation and on the jobs front in the month of November was constructive for future rate cuts. Notice I said future rate cuts, not December, as I point out, in the alert. And, again, this is why I think you should really take the time to read it.

As constructive as that November flash PMI data was, we are going to want to see confirmation when we start to get more November data after the Thanksgiving holiday. That is, of course, going to be what ISM has to say about the manufacturing and services economy, what the various job indicators are and then right before the Fed's policy meeting-- that will be the inflation data that we get. So we're going to have a lot to discuss when we're back from the holiday. But don't worry because we only have, again, less than 25 trading days in the balance of the year. We're going to make every one of those count. That means we will be with you throughout next week and, of course, in December as well.

But what I want you to do is make sure that you continue to check your emails, your alerts. We want to make sure you're getting our latest thoughts. And, as you know, if we happen to make any moves with the portfolio, like we did yesterday, we want to make sure that you are right there with us. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long GOOGL and QCOM.