Hedge
fund
manager
Dan
Niles
has
named
Nvidia
,
Meta
,
Microsoft
and
Amazon
as
his
favorite
stock
picks
thanks
to
their
ability
to
boost
earnings
in
2024.
Niles,
who
runs
the
Satori
Fund
,
explained
that
stock
performance
for
Big
Tech
companies
over
the
past
few
years
has
primarily
been
driven
by
Federal
Reserve
policy
rather
than
company
earnings.
He
noted
that
in
2022,
the
so-called
”
Magnificent
Seven
”
stocks
fell
46%
as
the
Fed
aggressively
raised
interest
rates
—
at
the
fastest
pace
since
the
1970s.
Then,
in
2023,
when
the
Fed
paused
rate
hikes,
those
same
stocks
skyrocketed
111%
as
investors
anticipated
numerous
rate
cuts
despite
little
change
in
their
underlying
earnings
power.
“If
you
look
at
the
last
three
years
…
the
move
in
technology
stocks
had
nothing
to
do
with
earnings,”
Niles
told
CNBC’s
Street
Signs
Asia
last
week.
“It’s
all
been
to
do
with
the
Fed.”
This
year,
however,
Niles
sees
a
divergence
where
earnings
take
on
more
importance
for
stock
market
performance.
While
shares
of
Apple
,
Tesla
,
and
Alphabet
have
fallen
this
year
on
negative
estimate
revisions
by
analysts,
Niles’
four
picks
continue
to
see
analysts
raise
forecasts.
Specifically,
he
called
out
estimate
increases
at
Nvidia,
Meta,
Microsoft,
and
Amazon
thanks
to
their
booming
AI
businesses.
“Those
names
are
being
driven
by
earnings,”
Niles
asserted.
For
the
four
stocks,
analysts
have
raised
EPS
expectations
for
this
year
by
50%
on
average
since
the
end
of
last
year,
according
to
FactSet
data.
Meanwhile,
estimates
have
stayed
nearly
flat
for
Google,
Tesla
and
Apple.
The
stocks
have
responded
accordingly,
with
Nvidia
up
60%
year-to-date,
Meta
gaining
over
35%,
and
Microsoft
and
Amazon
also
outperforming.
When
will
the
AI
bubble
pop?
When
asked
if
Nvidia’s
continued
surge
is
reminiscent
of
past
bubbles,
Niles
pushed
back.
He
drew
parallels
between
the
launch
of
Netscape’s
web
browser
in
1994
and
the
launch
of
chatbot
ChatGPT
in
late
2022
to
argue
that
it’s
still
early
days
in
the
current
“AI
bubble.”
The
hedge
fund
manager
noted
that
after
Netscape
went
live
with
the
first
widely
popular
web
browser
in
1994,
tech
stocks
and
the
overall
Nasdaq
Composite
entered
about
15
months
of
euphoria.
From
late
1994
through
early
1996,
the
Nasdaq
rose
47%
while
the
S
&
P
500
gained
40%
as
investors
grew
excited
about
the
internet’s
potential.
Niles
highlighted
that
a
similar
thing
is
happening
today
in
response
to
ChatGPT
and
other
AI
technologies,
with
the
Nasdaq
up
42%
since
ChatGPT
debuted
in
November
2022.
However,
Niles
argued
that
the
1990s
internet
bubble
took
five
more
years
after
1996
to
reach
peak
valuations.
The
S
&
P
500
ultimately
topped
out
up
more
than
200%
from
1994
levels,
while
the
Nasdaq
hit
a
nearly
575%
six-year
gain
at
its
early-2000
peak
before
the
crash.
“There’s
no
way
you
can
say
this
is
a
bubble
from
a
valuation
perspective,
or
from
a
time
perspective,
because
it
took
five
years
for
that
internet
bubble
to
build,
and
we’re
only
one
year
and
a
quarter
into
the
‘AI
bubble’
if
you
want
to
call
it
so,”
Niles
added.
“I
think
we
have
a
lot
more
room
to
go.”
