Concerned about impact of a rise in populism from Fed, says GMO's Tom Hancock
Speakers
Tom Hancock
— Portfolio Manager, GMO U.S. Quality ETF Fund
Summary
Tom Hancock of GMO discusses market risks from populism, Fed independence questions, tariffs, and regulatory uncertainty, but argues these are more of an overhang than a major market break. He remains constructive on the broadening AI trade, highlighting semiconductor equipment, TSMC, Alphabet, and Broadcom as better or narrower ways to play AI, while viewing Nvidia as facing a more competitive two-horse AI race.
- GMO portfolio manager Tom Hancock weighs Fed independence and populism concerns.
- He says political uncertainty could discourage corporate investment but the market is not treating it as a major issue.
- He sees the AI trade broadening beyond Nvidia.
- Semiconductor equipment, Lam Research, and TSMC sales/earnings are cited as strong.
- Alphabet's AI ecosystem, Gemini, TPU sales, and Apple partnership are highlighted.
- Broadcom and Alphabet are preferred AI chip plays over relying only on Nvidia.
- Nvidia is not disliked, but faces more relative competition from Alphabet's world.
- GMO's top holdings include Microsoft, Lam Research, Alphabet, Meta, and Apple.
Ideas
AI trade broadening benefits chip stocks.
The AI trade has broadened over the past year, benefiting GMO's top holdings and chip/semiconductor-equipment stocks; Lam Research and TSMC's strong sales and expected earnings reconfirmation show the AI semiconductor cycle remains very strong.
Lam benefits from semiconductor equipment strength.
Lam Research is a top GMO holding and a key beneficiary of the broadening AI trade; semiconductor-equipment stocks like Lam have been really strong this year, supported by TSMC's strong sales and expected earnings confirmation.
TSMC strength likely confirmed by earnings.
TSMC's recent sales numbers were strong and he expects its earnings later in the week to reconfirm that strength, indicating the AI semiconductor supply chain remains very strong.
Nvidia AI capex dominance is challenged.
Nvidia is no longer synonymous with AI capex because Alphabet's ecosystem is re-emerging; the AI chip trade is becoming a two-horse race between Nvidia's and Alphabet's worlds, so GMO sees better ways to play the theme and the relative leadership change may continue.
Alphabet AI ecosystem comeback has legs.
Alphabet's ecosystem is coming back into the fore through Gemini and by selling TPUs; its Gemini partnership with Apple makes AI a two-horse race with Nvidia, and GMO likes Alphabet with relative leadership likely continuing through the year.
Broadcom is preferred AI chip play.
GMO likes Broadcom as a better way to play the AI chip trade; Broadcom and Alphabet together let investors have exposure across the Nvidia-versus-Broadcom debate and have their cake and eat it too.
