Veteran manager sends blunt take on buying the June swoon in July

I do not want investors to worry about the selloff in AI and data center-related stocks that commenced in late June. 

If you decided to sell the AI and data center stocks, you literally have nowhere to go, since spectacular returns are forecasted. As an example, Micron Technology now trades at 7.4 times forecasted 2027 earnings, while Nvidia trades at 15.3 times forecasted 2027 earnings. As a result, any dip in the AI and data center-related stocks is a screaming buy.

Speaking of nowhere to go, Bespoke Investment Group documented that the S&P 500 returns in the second quarter were driven by Semiconductors (up 41.6%), followed by Tech Hardware & Equipment (up 25.3%). Historically, when these two sectors perform so strongly, the market continues to rally impressively.

Related: Navellier explains why Micron is better than SpaceX

July Could Bring Fireworks

The NASDAQ market is closing in on a 20% gain for the second quarter, which is far below its average annual earnings increase, so, as a result, price-to-earnings (PE) ratios are being compressed. In my opinion, the big news is that the order backlogs for AI and data center-related companies surged to nearly a 3-year backlog, so the data center boom is expected to persist at least through 2029.

Furthermore, I expect that GDP growth in the third quarter will accelerate to a 5% to 6% annual pace, fueled by AI productivity gains, surging energy exports, and robust consumer spending. Essentially, the 4th of July celebrations are expected to kick off the strongest quarter for GDP growth in decades

Profit from AI inflation with Micron (MU)

Although energy-related inflation is fizzling fast, a new problem is emerging: AI-related inflation, after Apple (AAPL) announced it has raised the prices of its computers and iPads due to higher memory costs. 

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Apple has not yet raised the price of its iPhones, but price increases are anticipated when it announces new iPhones in September. Additionally, Microsoft (MSFT) reduced the RAM in its Surface laptops to avoid a price increase, but obviously, if you add the RAM back in, the price increases.

But while some investors are worried about price increases, others are profiting from higher memory prices. As an example, Micron Technology (MU) recently posted spectacular sales and earnings, beating analyst expectations and raising its quarterly guidance well above the consensus estimate.

Breaking down the numbers, Micron Technology’s revenues surged 345.8% to $41.46 billion compared to $9.3 billion in the same quarter a year ago. During the same period, the company’s earnings soared 1,368.5% to $28.24 billion, or $24.67 per share. Excluding extraordinary items, Micron Technology’s operating earnings were $25.11 per share. The analyst community was expecting revenue of $35.25 billion and operating earnings of $20.28 per share, so the company posted a 17.6% revenue surprise and a 23.8% earnings surprise. 

Related: Micron Technology’s stock buybacks explained