Hello, Reader.
Tomorrow night, goblins, ghosts, and ghouls will haunt our neighborhoods in search of one thing…
Halloween treats.
Armed with pillowcases and pumpkin pails, these costumed seekers will participate the time-honored tradition of trick-or-treating.
The treat, of course, is candy. The trick, a symbolic request for said candy. (Although it used to refer to a playful, mischievous prank if the treat was not given.)
Tricks and treats exist in the investment world, too, although we call it risk versus reward.
Of course, you cannot have investment success without risk. The key, and difficulty, is taking smart risks.
You make your money by buying great stocks. Those are like treats.
And you protect that money by knowing which ones to avoid. Those are the tricks.
T tricks are so tricky because they often appear as well-known household names. Companies that seem dazzling in your portfolio.
So, before the dawn of All Hallows’ Eve, I’d like to share one bad risk… a trick… versus one good risk… a treat. The first is a frightening “Sell” and the other a sweet “Buy” for the AI boom.
Then, I’ll show you where to find even more sweet treats to fill your own portfolio pillowcase or pumpkin pail.
Let’s dive in…
Trick…
Let’s start with a monster of a trick: Nvidia Corp. (NVDA)
Nvidia held its GPU Technology Conference event this week in Washington, D.C., where CEO Jensen Huang’s optimistic outlook – including a forecast of $500 billion in future AI-related business – sent the stock surging.
Yesterday, the chipmaker’s market cap hit $5 trillion (though it’s back down below that today) – which is bigger than the French, German, and Italian stock markets combined. It is the first company in history to achieve this valuation.
Now, this news might make the company look like a treat, but there are undeniable risks lurking just beneath the dazzling headlines, especially since steep AI chip competition is starting to steal profits.
Nvidia used to keep $0.78 of profit on every $1 of sales. Now it’s down to $0.71… and falling fast.
That’s what happens when other members of the Magnificent Seven – like Amazon.com (AMZN), Alphabet Inc. (GOOG), Microsoft Corp. (MSFT), and Meta Platforms Inc. (META) – start to develop their own AI chips.
For example, Amazon Web Services (AWS) made its in-house Graviton4 chip generally available in July. This chip is one of many that come from Amazon’s Annapurna Labs in Austin.
Google designs and manufactures its own chips, called Tensor Processing Units (TPUs), for AI, data centers, and smartphones. In fact, Apple Inc. (AAPL) uses Google’s TPUs – while also making its own custom processors, known as “Apple Silicon.”
To round it out, Meta started developing and testing its own AI chips, known as Meta Training and Inference Accelerators (MTIA), earlier this year.
All of these chips were created to reduce dependency on Nvidia, which could eventually get cut out of the picture all together.
What’s more, Nvidia has had to write off $5.5 billion worth of chips that it can’t sell to China because of trade restrictions. Specifically, it still cannot sell its most advanced AI processors to China. That’s real money disappearing from its bottom line.
And with global tensions rising, more countries could be removed from Nvidia’s customer list.
Moreover, firms like Advanced Micro Devices Inc. (AMD) and Qualcomm Inc. (QCOM) are or soon will be producing competitive AI chips.
So, I recommend avoiding the monumental risks here by steering clear of Nvidia all together.
In my opinion, other companies offer vastly superior potential reward versus the risk than Nvidia does today.
This next company is one of those treats…
Or Treat!
While the larger focus remains on AI chips, there is one component that makes everything work. Without it, even the most powerful AI chip, including Nvidia’s, is just expensive silicon.
See, when you build an AI data center, thousands upon thousands of servers must be installed.
But here’s the kicker: Those servers are useless unless they can talk to and learn from each other. And the way they communicate is through fiber-optic cables.
New AI hyperscalers need 10X more cables than regular data centers. That’s enough fiber to circle the globe eight times – in a single facility.
To harness that growth, I’ve got a pick that fits squarely in the category of stock I love the most – overlooked and underhyped.
This company quietly built the backbone of the internet, while scores of companies boomed and busted.
And now, as AI explodes, it is a leading supplier of what every data center desperately needs. In fact, this company’s CEO recently said the company’s production of AI fiber is tripling every month.
High demand means customers are inking deals with the company to reserve product ahead of time to edge out competitors. Already, 80% of the AI fiber-optic cable this company makes over the next five years is spoken for.
And it is manufacturing most of it right here in America. This means virtually no tariffs and no trade restrictions for its U.S. customers.
Here’s the best part…
While Nvidia’s biggest customers are turning into competitors, nobody is trying to manufacture their own optical-fiber cables. So, AI hyperscalers are all fighting to get more cables from this company, not replace them. That’s continual, compounding reward.
I give away the name and ticker symbol of company in my free, special broadcast.
I recommended this company as a “Buy” to replace Nvidia’s “Sell” this past summer. And since then, Nvidia has risen a solid 20%
But my “treat” pick has surged more than 60%.
To add to the spirit of the season, I give away three additional treats in my presentation – companies that I believe are “Buys” right now.
And to save you from further terrifying tricks, I detail three companies that are set to give your portfolio a fright. This “Sell” list is full of household names, like Nvidia, with significant headwinds that could drag down your portfolio.
Happy trick-or-treating!
Regards,
Eric Fry
P.S. InvestorPlace’s Louis Navellier just teamed up with two bright young analysts to reveal a new data-driven system that could pinpoint hundreds of potential doubles. They give away two “Buy” picks and one “Sell” recommendation in their new, special broadcast.
That’s even more treats, and less tricks.
Click here to access the broadcast while it’s still available.
