To The Moon

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We cannot know yet whether we are looking at another dotcom bubble, says Greg Boland.

Greg Boland is chief strategy officer for Tiger Fintech.

ANALYSIS: “To AI or not to AI?” Type this into Google and you are bombarded about the ethical dilemma that AI presents. I typed the same question into ChatGPT and it responded with:

That’s the Shakespearean question for the 21st century. If you mean “Should we use AI?” — the answer depends on context:

• To AI — if you want to scale tasks, discover patterns in huge data, automate the repetitive, or explore creative frontiers.

• Not to AI — if the stakes involve deep ethics, sensitive human judgement, irreplaceable human connection, or high-risk decision-making where errors have severe consequences.

It’s less about “yes” or “no” and more about “how, when, and why” — and whether AI is a tool or a crutch in that situation.

While some of the huge hype around AI is justified, some is marketing noise (think DeepSeek) and some speculative fearmongering (all traditional jobs will disappear). We cannot know yet whether we are looking at another dotcom bubble. The key differences between 2025 and the 1990s are that:

• Large tech companies are committing hundreds of billions of dollars to AI infrastructure. In the first tech boom, the mindset was to build a website and hope for the best.

• AI growth is limited by physical chip production and electricity supply constraining over supply in the short term. “OG” (original) dotcom companies could create thousands of websites overnight, leading to a glut.

• Companies like Nvidia, Microsoft, and Amazon Web Services are generating billions of dollars directly from AI, whereas most dotcom companies had zero monetisation.

• AI is already integrated into search, social media, e-commerce, healthcare and industrial automation and this will continue. In the 1990s internet adoption was just beginning, and the value placed on having a website was extraordinary.

While some of the huge hype around AI is justified, some is marketing noise (think DeepSeek).ANDY WONG

AI in the US stock market

To see the current value of AI we only need to compare the return of the “Magnificent 7” with the other components of the $S&P 500(.SPX)$ in 2024. The $S&P 500(.SPX)$ gained approximately 23% last year, with the Mag 7’s average gain above 60%. This year has been a mixed bag for the Mag 7, with $NVIDIA(NVDA)$ up 33%, $Meta Platforms, Inc.(META)$ up 30%, and $Microsoft(MSFT)$ up 25%. In the middle of the pack, $Alphabet(GOOG)$ is up over 2%, with Amazon falling over 2.5% - the latter is down 7.5% in the last five days after last week’s poor result.

The laggards are Apple, down 19%, and Tesla, down over 23%, year to date.

AI stocks should be part of a balanced portfolio, but which should you keep an eye on? The most influential AI companies are OpenAI (creator of ChatGPT), $Microsoft(MSFT)$ (creator of Copilot and Azure AI, with an US$80 billion spend on data centre capex this year), $NVIDIA(NVDA)$ (which holds an estimated 80% of the chip market; its GPUs power nearly every large AI model), Alphabet (research and $85 billion capex), Amazon (leading cloud provider), and Meta (Llama).

While $Palantir Technologies Inc.(PLTR)$ markets itself as an AI company, much of its revenue still comes from analytics and custom software. Smaller-listed companies include Anthropic (Claude), Databricks (infrastructure and Dolly), Anduril (drones and surveillance), and Perplexity AI (AI search).

Energy-related companies should also be considered for a portfolio due to the huge amount of power required by AI. Notably, among the S&P 500 stocks, four entities in this sector are in the top 15 by returns this year: GE Vernova, NRG Energy, Constellation Energy, and Vistra Energy are all up between 50% and 90%.

If you’re in the market for AI-related companies, Nvidia holds an estimated 80% of the chip market; its GPUs power nearly every large AI model.MICHAELA VATCHEVA / BLOOMBERG

US reporting season, the Fed data, and tariffs

Last week has been the busiest week for second quarter company reporting so far, with majors Meta and Microsoft reporting well: Meta is up 9% in the last five days. Apple’s second quarter results were better than expected, while Amazon’s poor forward guidance meant the stock is down 7.5% since last Friday.

Palantir reported well on Tuesday (NZT) and jumped nearly 8%: that company is leading the S&P 500, up 129% year to date. The stock price was $16.21 at the start of 2024 and closed on Wednesday at $173.27. Super Micro fell more than 15% after its poor reporting in post-market trading, citing the impact of tariffs.

The US Federal Reserve left rates unchanged last Thursday, but the revised (drastically downwards) non-farm payroll numbers last Friday mean the probability of an interest rate cut at the September meeting has surged from 38% to over 80% following the jobs report.

Trump’s signing of his sweeping executive order-imposed tariffs from 10% to 41% on imports from about 70 countries, effective from 7 August (except Canada, where rates began 1 August), include:

• Canada: Tariffs raised from 25% to 35% for goods entering the US, which cited the failure to curb fentanyl smuggling

• India: Imposed 25% tariff rate

• Taiwan: Set at 20%

• South Africa: 30%

• Switzerland: 39%

• New Zealand: 15%

• Australia: 10%

US Trade Representative Jamieson Greer stated these new rates are largely “fixed” and unlikely to be reduced in future negotiations. Tariffs were the most cited topic in earnings calls so far this reporting season:

Tiger Brokers’ Greg Boland says to see the impact of AI shares, compare their value to anything else on the wider S&P 500 index.

Seasonality

Since 1945, the third quarter is historically the worst quarter for the $S&P 500(.SPX)$ , with September being the worst month and the only month since WWII that the average return is negative at -0.7%. Bloomberg reported on Monday that “some of Wall Street’s biggest firms are warning clients to prepare for a major market pullback as sky-high equity valuations slam into souring US economic data.

“How big? Maybe 15%. Morgan Stanley, Deutsche Bank and Evercore all cautioned that the S&P 500 Index is due for a near-term drop thanks to the darkening economic picture. Driving concern is the expanding fallout from President Donald Trump’s trade war, including slowing consumer spending, diminished economic growth, rising unemployment and potentially reignited inflation.”

Ups and downs

In the last five days the best performing stocks in the S&P 500 have been generator and power equipment maker Generac, up 30%, drone maker Axon, up 19%, and automated test system and robotics maker Teradyne, which gained 18%. The biggest decliners in the last five days: medical device maker Align Technology, which fell 32%, and research and advisory firm Gartner, down more than 30%.

Disclaimer:

This article is presented by Tiger Fintech (NZ) Limited and is for information only. It does not constitute financial advice. Investing involves risk. You should always seek professional financial advice before making any investment decisions.