News and analysis

The boom of artificial intelligence (AI) ran a bit ahead, yet the recent price corrections of a too fast rally on chip stocks may give investors a chance to buy them cheaper. A smart purchase often follows the market crowd's blood tears.

For example, the recent estimate about AI chip availability by Microsoft CEO Kevin Scott he just shared during the Code Conference on September 27 was an improved access to NVIDIA AI chips compared to a few months ago. Yet, he also noted that demand was far exceeding the supply of GPU (graphic processing units) capacity that the whole ecosystem could produce. The situation is resolving, but it’s still tight, and that was a piece of news of one of the world's largest chip users and players on this market.

A Microsoft top manager did not confirm directly any rumours about his company’s work on proprietary AI-related chips with Advanced Micro Devices (AMD), just limited himself by saying that Microsoft is doing a bunch of interesting work with AMD to make increasingly compelling GPU offerings. Probably, we will get even more good news ahead on that front.

Meanwhile, Advanced Micro Devices CTO Mark Papermaster said later, at Mizuho Software Conference in early October, there is a growing interest in "open-source, hardware non-specific" AI architecture in the cloud and enterprise sectors, potential resolutions for data portability issues through software containers, increased software focus with a significant headcount increase, and the introduction of Siena, which is AMD's low-power roadmap with 64 cores designed for telco/edge and hyperscale applications. Buy rating for AI chip production leaders, including NVIDIA and AMD, looks justified, with at least a nearly $140-150 price target range for AMD, as its chips are seemingly ready for a massive market share capture with its MI300X chip model in 2024-2025. The current AMD stock price is just around $100, plus or minus $2, compared to almost $133 in the beginning of June, in the wake of the AI first hyping wave of 2023.

The share price of this powerhouse of the aviation industry has been slowly moving down from $230+ area in the late summer to the levels below $190 in the beginning of October. A thick fog of broad correction on Wall Street indexes prevents the investing crowd from detecting whether a landing strip for Boeing stock is already somewhere closely beneath the chassis, or this smooth descent may have larger space ahead. Nevertheless, Boeing capitalization now returned to its values of Christmas 2022, hence it significantly outstripped many other industrials and tech companies in a pace of decline during the recent months.

The situation looks increasingly abnormal, even though the famous plane maker has not generated profit since Q2 2021. The pandemic blow was painful, yet Boeing CEOs just came up in July with a more or less adequate and precise plan on how they were going to come back. The number of new orders, especially from Asian airlines, are growing during this year, while the regulatory troubles with 737 family planes are over. Boeing is also a prominent player in the U.S. defence industry. Therefore, its quarterly losses improved from more than $6 billion in Q3 2022 to $0.82 billion in Q2 2023, which was also less than many experts feared. Boeing revenue surplus is accelerating from $14 billion in the first three months of 2022 to $19.8 billion in April-July 2023. All of the above reasons are enough for Boeing stock to fly from its $200-220 range of the first half of the year to a peaking price of $243 after July's earnings report.

A 180-degree turn from a former uptrend happened after several investing funds and research companies downgraded Boeing to Hold from Buy in their portfolios. For example, the Centre for Financial Research and Analysis (CFRA) cut Boeing stock price target to $210 from $253, based on revision of earnings estimates to higher expected loss per share of $3.29 in 2023 and to smaller earnings per share (EPS) of $5.39 in 2024. As CFRA detailed, Boeing previously guided for potential deliveries of its family of 737 planes at 50 per month by the 2025-2026 period, but the company's own current guidance remained below its guidance levels of 2019. Some part of a downturn has been attributed to Boeing supplier issues with Spirit AeroSystem. JPMorgan's analysts slightly lowered their estimate to a $245 price target for this reason, yet this is still 30% above current price levels for Boeing.

Yet, even sceptics recognize that a long-term potential for aircraft demand is growing, as many estimates are saying that more than 75% of the 2022 global fleet may require replacement by 2042. This unveils new opportunities for Boeing, as well as its European rival Airbus. United Airlines has announced on October 3 that a significant expansion to its fleet is needed. The airline has ordered an additional 110 aircrafts, including 50 Boeing 787-9s and 60 Airbus A321neos. Deliveries are scheduled to be launched in 2028 to be finished in early 2030s. United Airlines also secured options for an additional 50 Boeing 787s and purchase rights for 40 more A321neos. Both Groups will continue to benefit from this. Even though the long and winding road may lead the share price of Boeing at first to a forced re-test of lower technical support levels like $170 or even $150, then a return at least to price targets between $220 and $240 seems to be a basic scenario for the airline industry giant.

EOS prices dropped by 2.5% to $0.57 per coin since the beginning of the week after an unsuccessful effort to hold above the support at $0.60. The coin signals that the extremely narrow consolidation would be over soon.

The same type of consolidation in the first half of August resulted in a 30% drop of EOS prices to $0.51 per coin. This doesn’t meant that the story will be repeated this time. The coin has enough examples to shoot out of the consolidation in either direction. The most intriguing is that this consolidation is extremely narrow, which may signal a strong move out. This could be similar to October 2020, when EOS prices first lost 15% and latter jumped by 73%.

This is not certain too. But it is likely that the coin could lose about 13% to $0.50 first as prices are below the support of $0.60 per coin. Further developments should be closely monitored amid the nearing end of the crypto winter.

Dogecoin is trading sideways within the range between 0.0589-0.0591 and 0.0634-0.0641 for the last three weeks. Its prices are nearing the support of this range now. So, it would be interesting to consider long trades from 0.0589-0.0591 with a target at 0.0634, the high of September 21. The stop-loss could be set slightly below 0.0579, which is the low of August 14.