00:00 Josh
Wall Street is wrestling with whether the AI trade is running too hot after months of gains in names tied to artificial intelligence. Fears of a bubble are growing. Sam Stovall, CFRA Research chief investment strategist joins us now. Sam, always great to see you, sir. Uh so Oracle just reported, Sam, this stock is skyrocketing in the after hours. It is up 21% right now, Sam. I’m not going to ask you uh for your thoughts on that print, Sam. I do want your thoughts though about just the broader mega AI trade and trend, Sam. and your thoughts on that trend, which of course, is so critical for this market, Sam.
00:32 Sam Stovall
Sure. Well, good to talk to you again, Josh. And as your prior guest said, you know, trying to come up with a uh sports analogy. I wouldn’t say it’s in the first inning. I would say it’s still in batting practice. Uh, so there is a lot an awful lot of growth ahead. Uh, upside likely to be tied to things like uh infrastructure as a service business, uh software as a service offering, uh a lot of the uh compute demands, et cetera. And it’s the hyper scalers that are really going to be demanding services from the software companies like Oracle, uh, et cetera. So certainly good growth in this area, uh that is likely to be in double digits for the next several years.
01:00 Josh
Let me ask you, Sam, some folks say, listen, if they’re asked, what’s more important for the market? AI or the or or the Fed? They say actually the former. I’m wondering if you agree with that.
01:07 Sam Stovall
Well, the Fed certainly is important because of the uh uh lower interest rates do tend to help the stock market in general. Uh does tend to help more cyclical sectors in particular, but uh it seems as if technology uh has really um marches to its own beat. Used to be from a seasonal perspective that the cyclical sectors like tech, industrials, materials did poorly in the May through October period, hence the sell in May adage. But it seems that technology does well in both the best six months of the year, uh as coined by the Stock Traders Almanac, November through April, as well as the sell in May period because that’s where the earnings growth is. Unlike what we saw back in 2000, when we had the S&P trading, uh technology stocks trading at 60 times forward earnings, tech even with the massive explosion in prices we’ve seen, uh are dealing with real earnings, uh that are 1 half to uh 1 third of what those valuations were 25 years ago.
01:58 Josh
Let me ask you Sam, you know, we we got that weak jobs report, some important inflation prints are on deck here. But but do you think that that cut from the Fed, is that a lock next week?
02:04 Sam Stovall
I think it’s a lock for next week, but the Fed uh will certainly continue to be data dependent uh and so we will have to run the gauntlet as I call it of other economic data to see whether the Fed will then sit on its hands in October and wait to cut again in December. But I certainly think that the market anticipates that it’s a uh foregone conclusion that they will cut by at least 25 basis points next week.
