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Watch Technology Sector as AI Stocks In Control Again

AMD’s (AMD) forecast of a $400 billion addressable market from artificial intelligence is lifting Nasdaq. Alphabet (GOOG), which markets doubted in its AI efforts, is up 6.13%. GOOG stock trades at a $1.727 trillion market capitalization.

AMD is up ~ 7% with a $208.9 billion market cap. It is a relative bargain stock when Nvidia (NVDA) trades at a 1.142 trillion market cap.
Investors are not concerned that AMD’s TAM only refers to the potential market size for its AI business. Much may change between now and in 2027. Nvidia could come up with higher-performing AI servers at lower prices. After their initial investments, customers may not need to spend more on AI.

Value investors may follow Stifel’s publication of the Macro and Portfolio Strategy. In it, the analysts believe that cyclical sectors have value. Markets may buy up financial (XLF), industrials (XLF), energy (XLE), real estate (XLRE), and small-cap ETF (IWM).

For this thesis to work, WTI crude prices must stop falling from the ~ $70/bbl level. Real estate and REITs still face significant headwinds. Famed short-seller Carson Block is betting against Blackstone’s (BX) publicly traded mortgage REIT. The bear believes that the REIT will have liquidity constraints by the second half of 2024.

Mortgage rates dropped closer to 7%, levels not seen since August. This will help the real estate market, potentially lifting prices. This would also encourage the Fed to keep the funds rate at current levels.