Tech share price bonanza prompts investors to search for next Nvidia

The AI revolution has propelled US tech company shares into the stratosphere, and investors are searching for the next big winner.

First there were the FAANGs – Facebook, Apple, Amazon, Netflix and Google.

Then Tesla crashed the party to become one of the world’s most popular fast-growing companies, Microsoft rejoined the club at the expense Netflix, and now AI chip maker Nvidia has turned the top of the US tech giant tree into the Magnificent Seven.

Nvidia’s stellar climb has left investors, fund managers and armchair experts everywhere looking for the next tech-focused giant to become part of the great eight, or whatever someone clever will call it.

Market strategist Jessica Amir from trading platform moomoo said the biggest US stocks were likely to broaden, and choosing the next Nvidia would depend on people’s stock-picking processes, and other factors such as companies being admitted to major market indices, profit and growth profiles, and their customers.

Market strategist Jessica Amir from moomoo

“Forty per cent of Nvidia’s customers are the world’s biggest companies including Microsoft, Amazon and Alphabet (Google),” she said.

An online search of investment websites and chatrooms will provide plenty of options for the “next Nvidia”, including semiconductor company Advanced Micro Devices, protein engineering group Codexis, hardware innovator Super Micro Computer and quantum computing company IonQ.

Ms Amir said health technology could create the next mega-giant, and was “moving forward in leaps and bounds”.

“Think of the weight loss drugs that have hit the world by storm – investment managers are loving them because they have strong forward orders,” she said.

Ms Amir said US pharmaceutical giant Eli Lilly, relatively unknown to many, was the eighth largest US stock by market value, behind only the big five tech giants and Warren Buffett’s Berkshire Hathaway.

“That’s flown under the radar – most people aren’t talking about it because of Nvidia,” she said.

“We know that with obesity and longevity a focus, governments are doing all they can to put more money into this space, and there’s a lot more innovation to come.”

Capital.com senior financial market analyst Kyle Rodda said the tech sector would remain the area where investors could find hit stocks.

“Tech’s tied to innovation, and innovation represents whatever is new and growing,” he said.

It was difficult and unpredictable searching for the next big thing, Mr Rodda said.

“By nature, it has to come from an innovative place, from an industry that we don’t know exists yet or don’t have an appreciation of its importance,” he said.

For example, much fewer people understood AI five-to-10 years ago, Mr Rodda said.

He said Nvidia’s rise had been “almost a bubble-like bounce because there’s so much enthusiasm around it”.

Finding the next big winner was “a high-risk, high-reward gambit”, Mr Rodda said.

Trillion-dollar-plus US tech giants are becoming more common. Artwork: Emilia Tortorella

“You need to be able to pick a significant trend before everybody else and allocate your money in advance,” he said.

Catapult Wealth director Tony Catt said “the next winner is harder to pick than a broken nose”.

Mr Catt said many of his clients were not jumping on the AI bandwagon.

“People are a bit wary of this whole AI space, where is it heading, and what does it mean,” he said.

“A lot of clients will play it through index funds, with their exposure to Microsoft, Google and others – that’s the safe way to play it.”

Tech-focused exchange traded funds target AI, cybersecurity and robotics, and spread people’s money across many stocks.

Ms Amir said while it was easier than ever to buy overseas tech stocks directly through trading platforms and stockbrokers, “if stock-picking is not for you, look at ETFs”.

Buying broadly echoes long-used investment advice: “don’t look for the needle in the haystack – just buy the haystack”.

Originally published as Tech share price bonanza prompts investors to search for next Nvidia