AI trade is still alive and healthy but reset was needed, says Intelligent Alpha's Doug Clinton
Speakers
Doug Clinton
— Managing Partner, Loup Ventures
Summary
Doug Clinton of Intelligent Alpha says the AI trade remains alive and healthy after a needed reset, with TSM's capex guidance and strong Mag-7 spending confirming that the AI infrastructure buildout is still early. He favors value within the Mag-7, naming Amazon, and says he owns NVIDIA and Google. He also sees a contrarian opportunity in software, where sentiment is poor but valuations may become hard to ignore, and he owns Adobe, ServiceNow, and GitLab.
- Doug Clinton says the AI trade remains alive and healthy after a late-2025 reset.
- TSM's report and capex guidance are seen as a catalyst for AI infrastructure spending.
- Mag-7 capex growth could exceed consensus, perhaps approaching 50%.
- Amazon is highlighted as the value name within the Mag-7.
- Clinton owns NVIDIA and Google, with Google viewed as an AI winner.
- Software is contrarian: sentiment is weak, but valuations may become hard to ignore.
- He owns Adobe, ServiceNow, and GitLab as software exposure.
- Chip stocks continue to outperform software in early-year trading.
Ideas
AI trade alive; buildout still early
The AI trade remains alive and healthy after a needed late-2025 reset; TSM's report and stronger-than-expected Mag-7 capex, which he thinks could grow closer to 50% rather than the expected 35%, show the AI infrastructure buildout is still earlier than most investors believe. He favors chips over software in the current trend.
TSM capex guide confirms early AI buildout
TSM is one of his top holdings and its report is the catalyst: management guided capex to about 40% growth next year, and TSM is building more fabs to meet AI demand, confirming the infrastructure buildout is early and that other large spenders will likely increase capex too.
Amazon is cheapest Mag-7 value play
Amazon is the value name in the Mag-7 that his models have liked since late last year; on forward PE it trades in the mid-20s, one of the lowest multiples in the group and unusually cheap relative to its own decade-long history versus peers.
Own NVIDIA; China demand is catalyst
He owns NVIDIA; the story is well known, but the key potential catalyst is an incremental buyer and Chinese demand finally sorting itself out, which could extend the AI trade.
Google in pole position for AI
He owns Google and views it as now in pole position to be the AI winner; if it stays in that position, it is hard to see why the stock would stop working.
Contrarian software value hard to ignore
The market has decided software/enterprise software is disrupted, making it feel sick to buy, which may be exactly what investors should do; his models have been gravitating toward software and he owns Adobe, ServiceNow, and GitLab. The chip-vs-software performance gap continues (10% YTD after 35% last year), but over time the value of these software companies should become hard to ignore.
