Update on my US portfolio
The US market seems to be in the grip of recession fear from the time the FED started increasing interest rates. Market feared 2000 like a bubble burst when interest rates were going up, now it fears 2007-8 like the apocalypse as the interest rate cut cycle begins. Due to this cross-current market moves one step forward, two steps back. It’s a total madness that has been going on in the biggest markets of the world for the last 3 years.
It’s the classic situation where one needs to either be on the sideline sitting on cash/t-bill and chill or keep fully invested in stocks without doing any tinkering with existing positions. Again as a long term investor I have learned to ignore all this macro noise and choose the later option which gave me my biggest winner of my investment journey till date – NVDA. This year also turns out to be the same as last year where my 50%+ return came in the last couple of months of the year.
As I see, now 70% of my US portfolio is invested in pure AI and its derivative stocks. In fact as I stated earlier I started to build this portfolio from 2019 after getting hands-on experience with AI transformer architecture. It just blew my mind and since then I kept NVDA in my watchlist. Went aggressive during the 2022 bear market and the rest is history.
After chatGPT’s success, I got convinced that AI was a multi year if not decade story like internet technology. Otherwise without huge anticipated/pent-up demand, hyperscalar would not have invested $100BN+ in each year to build the AI infrastructure. Moreover there is a huge multiplier effect on these investments, each dollar invested on NVDA, hyperscalar may earn 3-4 Dollars, software infrastructure companies may earn 7-8 dollars and finally application layers may earn 10-11 Dollars. This is evident from winners from internet technology (e.g. Amazon/google/facebook/netflix vs Cisco/Arista/CRM etc…)
So what I am doing now. I am just putting money where my mouth is:) I have selected 20 odd stocks which should do well if I am right.
Application Layer where maximum profit from AI can be made: Tesla, Shopify, Spotify, Zoom, Palantir, Duolingo, Lemonade, Upstart, Uber, Trade Desk, Soundhound and Fiverr. US small cap stocks are in the dog house since the end of 2021. As a result right now no one wants to touch AI application stocks like Upstart/Lemonade/Fiverr and this is where I see big opportunities to make generational wealth as and when US small caps come to life with full force. Also as evident from internet cycle, applications which make life easier for user come out to be biggest winners (e.g. FANG stocks)
Infra Software and security: Cloudflare, MongoDB, UIPath, Microsoft and Crowdstrike
Hardware: Nvidia (selling slowly and putting money into software layer) and ASML
Right now the US market does not seem to agree with me, especially with the prospects of software stocks, it still thinks AI is a bubble which is about to burst. Clearly I am going against market wisdom and taking huge risks with my conviction. Last time when I did in 2022 I got the biggest winner like Nvidia, Am I going to be lucky this time with software stocks, can I get huge winners from the above list? Fingers crossed:)
Finally a few words on the recent Crowdstrike blue screen of death fiasco:) Even after a 40% drop it remains a big winner in my portfolio. I was personally involved in such a situation when a bug in our product was responsible for bringing down a client’s entire telecom network in India for a couple of hours sometime in 2019. Do you think the client replaced all our products with competitor products? Actually, in reality, our company was able to sell more products to clients to prevent this kind of mishap in future:) Won’t be surprised if the same happens with Crowdstrike as well. Good CEOs won’t let a crisis go to waste ever:)
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