Nvidia, tech rally woes 'shortsighted': IG North America CEO

Following the release of the August Consumer Price Index (CPI) report, IG North America CEO JJ Kinahan joins Brad Smith and Seana Smith on the Morning Brief to provide some perspective on retail investors' tech trades ahead of any potential interest rate cuts.

"We have seen Nvidia (NVDA) come into some troubles recently, but I think you have to keep that in perspective that the stock is still up over 100% year to date," Kinahan says.

"Overall, I think it's really, sort of shortsighted to say that technology will not continue to lead us," Kinahan tells Yahoo Finance. He notes that monetizing artificial intelligence (AI) spending will be "key" to a continued tech rally.

Kinahan indicates that Nvidia remains a top name among Tastytrade's retail clients. Alongside Nvidia, he highlights that clients also seem bullish on Ulta Beauty (ULTA) and the United Parcel Service (UPS) while there was broad bearishness around Lululemon (LULU), Qualcomm (QCOM), and Disney (DIS).

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Naomi Buchanan.

Video transcript

Jj as, as we think about not just the data that really keys up or, or, or tees up rather this cutting cycle more broadly, the out performers that tend at least historically to do well in cutting cycles.

Technology, but technologies run so fast and, and so far so quickly, when you think about what the set up is for technology in this next cutting cycle, do you expect that historical element to reign through and again?

Or are, are you expecting some type of repositioning here?

Well, you know, it, it, I think Brad it the so many times people over the last couple of years have said, oh, you know, the tech stocks cannot continue to carry us et cetera and they've proven everybody wrong every time now.

We have seen NVIDIA, you know, come into some troubles recently, but I think you have to keep that in perspective that the stock is still up over 100% year to date.

And so I think any stock and any CEO in the world would be like, oh, please let me run into trouble up 100 percent on the year.

And so, you know, overall I I think it's really uh sort of short sighted to say that technology will not continue to lead us the one area of technology that's starting to be questioned and I think will be something that they do have to prove, however, going forward is all the spending in the A I and how they can really monetize it.

You know, if you think about NVIDIA, what they're actually doing, if you compare them to a gold rush, they're the ones selling the shovel very wise because it doesn't matter if the other people make money or not, but long term, they have to in order to keep buying your shovels.

And so with that, what we've seen in the last round of earnings calls really for the first time was analysts asking the CEO S ok. How are you going to monetize it?

I do think you're going to start to see a lot more pressure there because we've seen hundreds of millions of dollars spent on A I that to me will be the key of whether we can continue the rally or not in a bigger way.

Uh, you know, one of the things I think many of us were hoping is that the fin the financial sector would pick up this and, and continue to lead us.

So you could have tech and you could have finances go, financials going together.

Obviously, in the news that we've seen over the, you know, last couple of days and you guys just reported on the financial sector really having a bit of a tough sled right now.

And so I think it's gonna be very difficult, a rate reducing environment for them to really get back on track in terms of their earnings.

Also JJ, we talked to a Scott runner over at city yesterday and he was making the case that NVIDIA is just becoming a quote unquote.

I think he said just another large cap growth name.

Do, do you share in that sentiment?

Just in terms of the fact that we are seeing the sentiment on the street shift away from technology.

It may be so much emphasis isn't going to be placed on NVIDIA and those A I names that you were just talking about.

Uh I I think it's we're not there yet, Jonah because when I look at the retail client right now and I look at our clients trading through Tay Trade, NVIDIA is still the name that you know, different stocks go through this at different times for how many years was it?

Apple?

I think NVIDIA has taken the place in terms of a confidence monitor if you will.

So as people get more confidence in the market, more people start to buy NVIDIA, you know, this is a stock that's al al almost always a bullish play for our clients overall and I think for the street overall.

So, uh you know, maybe you could make the case that it's starting to become just another stock.

But there is a confidence that goes with NVIDIA when it's doing well, that gives their average retail clients some confidence also that, like I said, Apple, we needed somebody to fill that void.

And NVIDIA has certainly done that over the last year and a half.

We'll see what the next stock is that does it.

But for right now, I really feel NVIDIA will continue to do that for at least the next six months or so.

And so if that's where your clients are signaling, they're the most bullish, where are they signaling?

They're the most bearish right now.

Well, there, there, there's a few other stocks they bullish on right now can also uh Ulta and UPS are two that I think are really interesting.

But on the bearish side, you know, Lululemon is one that we've started to really see a lot of bearish activity over the last uh couple of weeks and one related directly to technology Qualcomm and particularly through the, you know, many people seeing that it could go back down and test that 150 area.

We've seen a lot of 150 puts over the next month and a half bought in Qualcomm.

So that's one I definitely have my eye on and then the third one may be a surprise to many people, Disney.

Uh I don't think what's going on with Direct TV right now is helping them because so many clients are shut out from the Disney channels, et cetera.

I'm sure you guys saw, you know, a lot of people online, particularly with Monday night football.

The other night people were not happy about the fact that they could not watch it.

So, uh, we'll have to see what happens on that one because I think that's turned a lot of consumers sour recently on that.

So those are three stocks right now that I find uh ve very interesting that our clients playing to the downside.

But Qualcomm probably the one that's most interesting to me to watch because again, it relates directly to where we started this conversation.

All right, JJ Kenna, who is the IG North America CEO?

Thanks so much for taking the time here with us.

Have a great day guys.

You too.