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Down 34%, This AI Stock Is a No-Brainer Buy Stock Right Now
As almost every investor knows by now, artificial intelligence (AI) has been driving the current bull market since its start in 2023.
The launch of OpenAI’s ChatGPT has set off a new arms race in the industry, and generative AI technology could be as transformative as the internet. While stocks with exposure to artificial intelligence, like the semiconductor sector, have generally done well, some stocks have done better than others.
Nvidia, for example, just set another all-time high on soaring demand for its new Blackwell platform, but not every AI stock has kept up with the Nasdaq Composite, which nearly set an all-time high earlier this week. In fact, ASML (NASDAQ: ASML) is now down 34% from its peak earlier this year after the industry bellwether gave a disappointing forecast in its third-quarter earnings report on Tuesday. The stock fell 16.3% on the news.
Why ASML stock just went on sale
ASML occupies a unique position in the semiconductor industry as the only maker of extreme ultraviolet (EUV) lithography machines, which are used to make the most advanced, smallest-node chips.
Investors have been looking forward to a recovery in ASML’s business after an earlier slowdown due to macrochallenges like high interest rates and inflation.
ASML is expected to benefit from the expansion of chip fabs around the world as governments and industries prepare for the AI era. The U.S., for example, is planning to invest tens of billions of dollars through the CHIPS Act to build foundries, and Taiwan Semiconductor, the world’s biggest foundry operator, is looking to diversify away from Taiwan and move closer to its customers.
While that should be a tailwind for ASML, the company just told customers that recovery would take longer than expected. Citing weakness in both the logic and memory segments, which make up two of its three business segments, CEO Christophe Fouquet said, “It now appears the recovery is more gradual than previously expected.” He also noted customer cautiousness.
ASML dialed back the 2025 revenue forecast it gave at its 2022 Investor Day from 30 billion euros to 40 billion euros ($33 billion dollars to $43 billion dollars) to 30 billion euros to 35 billion euros ($33 billion dollars to $38 billion dollars). Not surprisingly, investors were disappointed with the news.
Why it’s a buying opportunity
Companies tend to give disappointing earnings reports and forecasts for one of two reasons: Either there are challenging market conditions at the macrolevel or sector level, or the company itself isn’t executing well and is falling behind the competition.
ASML’s case looks to be safely in the first category. While there’s plenty of excitement about AI, which management nodded to, there are still some challenges in the legacy-chip business, reflected in key customers like Intel and Samsung, both of which are struggling.
Samsung is reportedly delaying mass production at a fab in Texas due to weak yields in its 3-nanometer process, and Intel just announced a massive restructuring, calling into question its foundry expansion. In recent quarters, half of ASML company’s revenue has also come from China, where the economy has been weak since the end of the pandemic.
For comparison, a good recent example of a company that struggled with similar headwinds was Alphabet as digital advertising slowed in 2022 on fears of a recession, as you can see from the chart below.
As you can see, revenue growth dropped to just 1% in 2022’s Q4, but if you had bought the stock then, you’d be up more than 80% now.
ASML retains a significant competitive advantage as the only producer of EUV lithography machines, and it should eventually benefit from the coming boom in chip production due to AI.
Even with its dialed-down guidance, the company is still calling for 16.1% growth at the midpoint and expects expanding gross margins and operating margins.
As profits recover, the stock looks like a good bet to bounce back now that the weak forecast is priced in. With its unique EUV technology, strong margins, and ramping AI demand, ASML looks like a great bet to be a winner over the long term.
Don’t miss this second chance at a potentially lucrative opportunity
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Alphabet, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
Down 34%, This AI Stock Is a No-Brainer Buy Stock Right Now was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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