Nvidia just helped power the stock market above a key resistance level, suggesting more upside ahead.
According to Fairlead Strategies’ Katie Stockton, the S&P 500 needs to close above 4,155 on Friday to confirm a bullish breakout.
Stockton sees the S&P 500 trading 8% higher from current levels if the strength continues.
Big-name investors are going all-in on AI
Some of the best-known names in investing are betting big on artificial intelligence stocks.
Bill Ackman recently revealed a $1 billion bet on Google parent Alphabet, while Stanley Druckenmiller pumped a combined $430 million into Microsoft and Nvidia.
Tiger Global founder Chase Coleman, billionaire trader Paul Tudor Jones, and Ark Invest CIO Cathie Wood are all bullish on AI.
Some of the biggest names in investing are piling into artificial intelligence, the theme that has taken markets by storm in 2023.
Billionaire investors including Bill Ackman, Stanley Druckenmiller and David Tepper are betting big on firms at the forefront of the AI race – such as Microsoft, Alphabet and chipmaker Nvidia.
Here’s how seven top players are responding to the AI trend:
1. Bill Ackman
Ackman’s hedge fund revealed Monday that it had plowed over $1 billion into Alphabet in a quarter where the tech giant significantly ramped up its AI efforts.
Pershing Square Capital Management snapped up more than 10 million shares in Google’s parent company – buying about 2.2 million Class A shares and 8.1 million Class C shares, according to a Securities and Exchange Commission filing.
Hedge fund billionaire Coleman said last month that mega-cap stocks like Amazon now look like a good bet again after a brutal 2022, thanks to the rise of AI.
The Tiger Global founder told investors to buy the so-called FAANG stocks – shorthand for Facebook parent Meta, Apple, Amazon, Netflix, and Alphabet – and cited Amazon sellers’ use of ChatGPT to write product listings as an example of how AI was already boosting Big Tech.
3. Stanley Druckenmiller
Druckenmiller loaded up on Nvidia shares and made a new investment in Microsoft last quarter, snapping up two of the best-performing stocks of 2023.
The billionaire investor’s Duquesne Family Office bought a $220 million stake in Nvidia and upped its Microsoft position by $210 million, according to its latest 13F filing, released Monday.
Nvidia, the world’s No. 1 producer of graphics chips needed for high-intensity AI computing, has seen its share price double this year. Microsoft, which was an early investor in OpenAI and has integrated ChatGPT technology into its search engine Bing, is up 30%.
4. Paul Tudor Jones
Large language AI models like ChatGPT will have a massive impact on both the economy and the stock market, according to billionaire investor Jones.
He said Monday that the tool had completely shifted his outlook on both inflation and equities – and he’s now bracing for an AI-fueled “productivity boom” that drags down soaring prices and pushes up stock valuations.
“The introduction of large language models [and] artificial intelligence is going to create a productivity boom that we’ve only seen a few times in the last 75 years,” Jones told CNBC.
5. Morgan Stanley
It’s not just individual investors who are caught up in the AI fanfare.
In a research note last month, Morgan Stanley said that 2023 would be a breakthrough year for the technology, which it believes represents a $6 trillion investment opportunity.
“We see AI accelerating digital transformation and tech diffusion across the economy,” internet analyst Brian Nowak said in the note.
6. David Tepper
Like Ackman and Druckenmiller, the owner of the NFL’s Carolina Panthers made some big bets on AI over the past quarter.
Tepper’s family office Appaloosa Management bought 150,000 Nvidia shares worth around $42 million and 500,000 shares in Cathie Wood’s ARK Innovation ETF, which specializes in investing in disruptive tech.
Wood’s fund plunged last year but is up just under 24% in 2023 thanks to tech stocks’ massive rebound.
7. Cathie Wood
The Ark Invest CIO has never been one to miss out on a disruptive technological trend – and she’s been heralding AI’s potential long before ChatGPT’s explosion in popularity earlier this year.
The stock market can thank Nvidia’s eye-popping rally this week for helping it clear a key resistance level that suggests more upside ahead, according to a recent note from Fairlead Strategies’ founder Katie Stockton.
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Stockton highlighted last week that the S&P 500 cleared an important resistance level at 4,155, and that a bullish breakout would be confirmed if the index managed to hold about that level at the end of this week’s trading session.
While stocks languished for much of the week, falling back below that key resistance level and threatening the bullish breakout amid uncertainty surrounding the fast-approaching debt-ceiling deadline, that weakness was quickly reversed on Thursday thanks to Nvidia.
Nvidia stock soared as much as 30% on Thursday after it’s jaw-dropping earnings guidance highlighted that the hype surrounding generative artificial intelligence is translating into big revenue gains, and the broader tech sector has surged in unison.
“Yesterday’s rebound gives the S&P 500 a better chance of confirming last week’s breakout above cloud-based resistance [of] 4,155,” Stockton said.
And that means more upside ahead for the broader stock market is likely, according to Stockton, who highlighted 4,310 and 4,510 on the S&P 500 as key resistance levels to watch. A rise to those levels implies potential upside of 3% and 8%, respectively.
“A decisive breakout would be a bullish development with a duration of three to four months,” Stockton said. “A compelling upside objective of ~4,510 could be derived from a subsequent breakout above February’s high based on a measured move projection.”
Stockton also highlighted the upside move in semiconductor stocks on Thursday, thanks to Nvidia’s monster rally, which has bullish implications for the sector as a whole. And that strength should continue even if Nvidia stock takes a breather and gives up some of its recent gains.
The semiconductor index “has room to intermediate-term overbought territory with resistance initially ~$142 and then ~$159,” Stockton said, representing potential upside of as much as 10% from current levels.
