If you're wondering whether the AI trade has run its course, Jay Peters has a simple answer: not yet. The portfolio manager at NewEdge Wealth told CNBC on Thursday that NVIDIA Corp. (NVDA) and Broadcom Inc. (AVGO) remain attractive ways to play the artificial intelligence infrastructure boom, thanks to strong earnings growth, profitability, and cash flow.
Peters is staying bullish even as worries swirl about AI dealmaking, Federal Reserve policy, and growing resistance to data center construction. But he's not ignoring the risks.
NVIDIA's Hugging Face Deal Raises Financing Questions
Peters said NVIDIA's reported Hugging Face deal could strengthen the company's push to offer customers a more comprehensive AI platform. Greater vertical integration could also expand NVIDIA's role across the AI ecosystem.
However, he acknowledged concerns about increasingly large AI investments and "circular financing" across the industry. The idea is that money is flowing around in a loop, with AI companies investing in each other, which can inflate the sense of real demand.
Still, Peters thinks NVIDIA and Broadcom are well-positioned to handle big acquisitions. They generate enough free cash flow and operate with strong enough margins to absorb large deals. That said, rising leverage across the AI ecosystem could eventually become an issue investors need to digest.
Both companies trade at roughly 19 to 20 times forward earnings while offering strong profitability and growth prospects, he noted. That's not cheap, but it's not nosebleed territory either, especially if growth continues.
AI Spending Could Beat Expectations
Despite recent volatility, Peters sees little evidence that the broader AI infrastructure cycle is weakening. He expects hyperscaler capital spending to grow about 30% next year. Even that estimate could prove conservative as AI adoption drives greater demand for computing capacity.
"We're still incredibly short compute in this country," Peters said, arguing that the shortage will fuel a multiyear infrastructure buildout. In other words, the building boom is just getting started.
Peters also acknowledged several near-term market headwinds. Risk appetite has weakened, investors face an unfavorable seasonal period, and uncertainty around Federal Reserve policy remains elevated. September and October are historically rough months for stocks, and the Fed's next moves are still unclear.
Still, he said the fundamental forces supporting AI investment remain solid, even after enthusiasm cooled from second-quarter highs. The hype may have faded, but the underlying demand is still there.
Price Action: NVIDIA shares were up 2.09% at $233.22 and Broadcom shares were down 0.47% at $355.47 at the time of publication on Friday, according to market data.
