Investing

Wall St. Vet: "It's Time To Take AI Chips Off The Table"

Austin Smith

Published: October 20, 2024 8:51 am

Key Points

• AI Chip demand continues to hit all time highs
• But geopolitical issues like sanctions, Taiwan, and threaten the entire industry
• Investors who are sitting on material gains should trim their position, and risk
• If you’re looking for places to invest the gains, look at ‘The Next Nvidia’

Watch The Video

Edited Transcript

[00:00:00] Doug McIntyre: So the chip business, we’re starting to see, you know, one or two of these companies will say things are going well, you know, NVIDIA (Nasdaq:NVDA) said the Blackwell is just, we can’t keep it on the shelves. Right. And another couple of companies recently say, ah, you know, things aren’t that good. Why don’t you describe to us the fact that there is a political sort of geopolitical problem that these companies have.

[00:00:29] Doug McIntyre: Can you walk us through that a little?

[00:00:31] Lee Jackson: Yeah, there, there is a problem and it, and it manifested, you know, in ASMLs numbers, uh, because there’s restrictions on sales into China, especially of these, you know, really popular, um, big data type chips. And the question is, is, what? Is there going to be a point where that starts to hit other chip makers?

[00:00:54] Lee Jackson: Is it going to hit NVIDIA? Is it going to hit AMD (Nasdaq:AMD)? You know, because these, these high use chips that are, that are for, you know, AI and things of that nature, they don’t want that data and they don’t want that capability going into China.

[00:01:10] Doug McIntyre: Yeah,

[00:01:11] Lee Jackson: but I think, yeah, I think it could have a big impact on things and it, and it’s going to, and boy, if Donald Trump is elected, you can bet that he will just.

[00:01:21] Lee Jackson: Throw up roadblocks on everything into China that has the least bit of impact on AI, uh, crypto mining, anything of that nature, data centers, anything like that. He’ll put the kibosh on that, too. It’s sweet.

[00:01:37] Doug McIntyre: Well, what that says to me is is that the situation with China for the chip makers right now It’s a net negative, but not a significant net negative yet.

[00:01:49] Lee Jackson: No. Yeah. It’s not the administration.

[00:01:52] Doug McIntyre: There’s a good chance it will be a net net negative negative.

[00:01:56] Lee Jackson: Yeah, and it, but it is a sort of Damocles for the entire industry, because if, if that gets totally shut down and not just on, on, on AI related chips, but across the board, that can be tough.

[00:02:11] Doug McIntyre: And when you do have companies that have doubled or tripled in market cap in a short period of time.

[00:02:16] Doug McIntyre: Yep, it takes almost nothing to get those stocks to sell.

[00:02:21] Lee Jackson: No, no, because uh, and again, We’ve been on a two year bull market that literally started about this time in in 2022 and a lot of the the jettison behind it was the nvidia and the chat and all of the you know, The whole ai Explosion started then and you know in the last year alone You Year year over year the stock market’s up almost 40 It’s been one of the biggest rallies in decades And if there’s any time to sell it’s soon

[00:02:58] Doug McIntyre: well I think what people should think about if if they are invested in any of these chip companies and they you know There’s right now china’s having even a modest effect on them.

[00:03:09] Doug McIntyre: They have to make a decision Do they think that this is as bad as it’s going to get for a chip company that they have? Needs China to keep its earnings. And so, or can they withstand a really big hit if there’s a change in administration and there the barriers are set higher than that, what does it do to the earnings of the company you own?

[00:03:32] Doug McIntyre: And what does it do to the stock?

[00:03:34] Lee Jackson: Yeah, I think it could be devastating as, as, you know, indicated by what happened in ASML. And, um, there’s no reason to think that everybody else will be burdened somewhat like they are. So, yeah, I think it’s something we got to keep a super close eye on and, and, you know, kind of report back if we see more companies starting to face that.

[00:03:58] Doug McIntyre: So if you own these chip companies, the message here is keep an eye on China and what. The administration here in the United States and any place else where You know, you’ve got you’ve got chip companies that are parts of governments where the Relationship with china may end up not being terribly friendly,

[00:04:18] Lee Jackson: right?

[00:04:19] Lee Jackson: So you’re basically saying people should take some chips off the table. Is that what you’re saying? People might want to take some chips off the table Yeah, and and and for for folks that are viewers, you know, if you don’t want to sell right now Call up your broker or do it yourself and just put in a, a, a sell limit, stop loss at a level 10 percent down or 15 percent down, or, you know, if you’re up 60%, you know, put it 20 percent down, but have something in to protect you because when there is a landslide of selling and we’ve seen it within video, it can drop 15 percent in a couple of days.

[00:04:54] Doug McIntyre: Yup. Sure. It can.