Artificial Intelligence drives the market higher
Green Edge Portfolio Performance Update for May 2023 (#31)
Isn’t artificial intelligence the big talker who spews forth trivia on many topics trying to impress at a cocktail party? Well, this month, the market has richly rewarded the REAL artificial intelligence, or A.I., and not the fake A.I. dude at the party.
The big winners in May were all companies that mentioned Artificial Intelligence or A.I. in their quarterly report calls at least 60 times. Semiconductor stocks rallied led by Nvidia (NVDA) who beat estimates and gave a rosy future forecast moving up 36% in May and 159% YTD. The street estimated next quarter’s revenue at $7B and Nvidia blew away expectations with a $11B number. NVDA stock gapped up 80 points from $305 to $385 on May 25th igniting a rally the tech sector. Nvidia became only the seventh company to ever hit $1 trillion in market cap. Below is the monthly price chart of NVDA. It crossed $10/share in May of 2016 and traded as high as $419.38 on May 30th - over 4000% gain in seven years.
It will be interesting to see how the market reacts to the dramatic run-ups in these stocks. Some believe companies in A.I. have moved up too far too fast and are in need of a correction. Others believe that the productivity improvement possibilities with A.I. could signal a beginning of a new bull run. Let’s get into the performance charts.
Portfolio Update - May 2023
The tech heavy NASDAQ was up 5.8% for the month and now 23.6% YTD while the more widely held S&P 500 gained a minuscule 0.2% in May. The broad, small company Russell 2000 (IWM) moved down -0.8% and is negative YTD by -0.3%.
YTD returns for the S&P 500 are just under 9%. However, the returns of the seven largest tech companies have gained 70%+ while the other 493 companies are roughly break even for the year so far. Money has been pouring into these gold star stocks to stay “safe”. Apple, Amazon, Google, Microsoft, Tesla, Meta, and Nvidia have kept the market in the green while the rest struggle.
The question is whether the highflyers come back down to earth (taking the indexes down with them) or is it the rest of the market’s turn to rally and catch up? It could be a bit of both - big companies stall while money flows into mid- and small-cap stocks. One upbeat note is that on Friday, June 2nd the IWM index rocketed 3.6% versus a 0.6% increase in the NASDAQ, but a goldilocks moment is far from a certainty.
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Green Edge Portfolios
There was a bit of spark in climate tech companies in May as the debt ceiling deal did not affect the clean energy incentives included in the Inflation Reduction Act (IRA). As this risk was becoming clear in the GOP banter in April, the clean energy ETF basket dropped 7.7% that month but has turned the corner (hopefully) and began to move up in May, gaining 1.3%. The Innovator groups moved up 8% and 4.2%, respectively. With this black cloud clearing up, perhaps this provides room for continued recovery and potential upward trend for the next few months.
The Top Picks portfolio was up 1.8% led by STEM (+30.5%), indie Semi (+25.5%), and Luminar (+13.1%). On the downside, EVGO (-33.9%) and Polestar (-11%) struggled with challenging quarterly reports. ChargePoint received an upgrade this month and the stock was rewarded with a 11.5% gain for May.
First Solar (FSLR) and Enphase Energy (ENPH) are among the top 5 holdings in several of the clean energy ETFs. With market caps in the $20-25 billion range, they wield a big sword on values of these funds. At the end of April, both had disappointed in the Q1 earnings report resulting in price drops of 15% and 26%, respectively (as pointed out in last month’s edition). In May, First Solar announced an acquisition of European technology company Evolar. The stock jumped on the news and finished the month up 13%. ENPH also gained back 11% this month. These are two good companies to watch when tracking solar and clean energy momentum.
Portfolio of Portfolios and Crypto Performance
The “Aggressive” portfolio was the only one in the green this month due to heavy weighting of the NASDAQ index, up 2.7%. The Traditional and the DT-Mix were both down slightly, -0.4% and -0.3% respectively. The Bond index moved down -1.3% as interest rates inched up.
The crypto market was relatively quiet as trade volumes are the lowest since 2020. Bitcoin dropped -7.0% while Ethereum was near break-even, down -0.1%. The crypto portfolio of 10 tokens was down 5.4% for the month, but still up over 50% YTD.
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A big thank you for all of our American military as we celebrated their dedication to freedom this past Memorial Day weekend. Until next time…
Efficiency Yours,
D.T.