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March 27, 2024 at 03:24 PM
What You Need to Know
- Clients shouldn't put all their eggs in the Nvidia basket, the Creative Planning CEO said.
- He drew a distinction between companies with a head start, like Nvidia, and those with a wide moat, like Apple.
- The point of a diversified portfolio is seeing the rewards from runaway stocks, Mallouk noted.
The tech rally will continue for decades, Creative Planning President and CEO Peter Mallouk said Tuesday. But he warned that investors shouldn’t bet it all on Nvidia, since the artificial intelligence chip phenom faces real competitors that eventually will catch up.
“Tech’s got a long way to go. A lot of people, clients, ask us, ‘Well, how long is this tech rally going to continue?’ And I tell them, ‘For the rest of your life. … We’re in the middle of a revolution and we’re in the middle of an AI revolution. And chip makers are going to do well for decades,” he said on CNBC’s “Closing Bell.”
“But with Nvidia … I don’t know when it’s going to pause, but it is going to pause, Mallouk said, adding that he wouldn’t equate Nvidia to Apple, which “has a significant moat that’s going to protect it for all time.”
Instead, Mallouk would place Nvidia in in the same boat as Netflix or Tesla, “which is just an incredible company. It’s an innovative company, who knows how much longer it has to run, but it doesn’t have a moat, it has a head start. And those are very, very different things.”
He added that for companies with a head start, “the market eventually catches up with them. Yes, the AI revolution can continue, but that does not mean all the eggs should be in the Nvidia basket.”
While Nvidia’s powerful and transformative AI chips may provide a moat, “I would add the words ‘for now’ to the end of it,” Mallouk said. “There’s going to be all kinds of companies that are going to come into this space. They are going to be successful. They’re going to figure it out, and they are eventually going to catch up.
“And when we see that this sales-to-earnings ratio is going to come back down to earth. That might be a couple years, it might be a couple months. I’m not big on timing. The short run, the space is for real. This company is for real. But at some point, at some point, people are going to regret if they’ve got all their eggs in one basket.”
