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On January 9, 2007, Steve Jobs stood on a stage at Apple’s annual Macworld convention and introduced the world to the iPhone. He spent 90 minutes showing the features – playing Beatles tunes, cuing an order for 4,000 Starbucks lattes and even checking Apple’s stock price, which was up better than 8% that day…
The stock closed on January 9, 2007 at a split-adjusted price of $3.31 (a ridiculously low price, I know).
By the time Apple began delivering the first iPhones on June 29, 2007, Apple’s share price had rallied a little – to $4.35…
Apple shares had rallied as high as $7.50 by the end of 2007.
But you know, the U.S. economy was about to enter the most vicious recession it had seen in 100 years. Even Apple shares dropped 50%.
And between November of 2008 and when the Great Financial Crisis (GFC) ended in March 2009, Apple shares never traded higher than $3.70 a share!
In other words, from the time Steve Jobs stood on that Macworld stage – investors had two full years to buy Apple shares at bargain basement prices.
Most investors were probably too scared to buy Apple stock during the Crisis, even though it was obvious that the iPhone was a revolutionary product. I’m sure plenty of other investors bought the stock but got scared out of their positions and sold during 2008.
Can you imagine saying “Yeah I bought Apple at $7.50 but sold it at $3.50 because I was scared…”
Ouch.
Strength in the Weakness
Now I know, it has been a tough market over the last few months. And it seems like it’s getting worse — the possibility that the U.S. economy is right on the verge of recession is all anyone in the financial media can talk about.
Thew Wall Street Journal says “Blue Chip Stocks De-Risk on Recession Fears”…
Bloomberg says “6 Reasons a Recession is in the Cards Soon”…
Citigroup says “Recession Looms”…
Reuters says “U.S. Leading Indicators Point to Recession Soon”…
CNBC says “Recession is coming…”
Obviously, when investors get scared, it shows up in the financial markets.
It’s been an absolute rout for bond investors. Bond yields have been soaring at a record pace as investors fear the Fed is not done hiking rates.
And soaring oil prices are stoking another spike for inflation, a strong sign that the Fed will hike rates yet again…
No wonder the stock market is down nearly 10% in the last two months.
And if the U.S. indeed falls into recession, it will take most stocks down even further.
Bank stocks, retail stocks, real estate and housing stocks – there won’t be many places for investors to hide out…
Even gold and bitcoin are well below recent highs…
I’m sure you could even put a pretty negative spin on Artificial Intelligence (AI) stocks if you wanted to…
After all, the supreme leader of the AI revolution – chip-maker Nvidia (NASDAQ: NVDA) is way off its highs from July. Microsoft (NASDAQ: MSFT) looked like it would be a sure-thing, slam-dunk AI winner. But its stock is well below its recent highs too…
Check out some of the smaller AI stocks, you’ll find some of their stock prices have been cut in half.
Now I can’t tell you that the U.S. economy is going to avoid a recession. And I’d expect many stocks to trade lower if there is a recession…
But don’t let a recession trick you into making the same mistake with AI stocks that many investors made with Apple 15 years ago…
Is There An AI Slowdown? Nope…
Now, like the iPhone was back in 2007, Artificial Intelligence (AI) is still a very young technology. Despite all the AI hype you see in the financial media, it would be easy to think that AI might fizzle out a little, like so many other supposed “tech breakthroughs” have fizzled…
And if the fear in the market gets worse, I can guarantee you a lot of investors are going to throw the babes out with the bathwater…
So let me tell you something that should give you confidence to hold your AI investments, no matter how this recession drama plays out.
I expect you know some of the AI babes already.
There’s Nvidia…
Over the last month or so analysts have raised their 2024 earnings estimates for Nvidia by 50%. And if we go back to July, Nvidia’s earnings estimates for next year have nearly double.
This tells us that demand for Nvidia’s earnings is so strong that analysts can’t even keep up with it. They have to raise their expectations every few weeks.
Pay attention to Meta (NASDAQ: META) too. Top money managers have recently bought $452 million worth of Meta stock, largely due to its AI potential.
Now, not many people think of Micron Technologies (NYSE: MU) as an AI stock. Micron is best known for making the type of memory chips that go in smartphones and flash drives.
But rumor has it that Micron is about to start supplying its high-end bandwidth memory chips – HBM3 – to Nvidia for inclusion in Nvidia’s market dominating AI chip packages.
It’s estimated that the market for High Bandwidth Memory (HBM) chips like Micron’s HBM3 will grow better than 80% a year for the next 3-4 years.
That’s a huge potential market for Micron, and it’s worth buying the stock now. And if a recession pushes the price lower, use it to lower your average cost basis for Micron.
Yours in Wealth,
Brit Ryle