Beyond the NVIDIA ‘Sugar High’: Why I’d Pivot My Portfolio Toward the ‘Boring’ Side of AI

Even long-time market darling Nvidia (NASDAQ:NVDA | NVDA Price Prediction) is starting to look a bit toppy, especially after plunging to the lower end of its lengthy consolidation channel. Undoubtedly, if Nvidia breaks through the low end, it’ll be tough to tell what the next stop will be, and it’s perhaps the technical breakdown that could cause a panic as investors rush to the exits while the profits are still intact.

Of course, the recent slide has been quite terrifying for latecomers who bought the sideways move. That said, the GPU titan is still up 50% in the past year and commands that $4 trillion market cap (at least as of the time of this writing). As Michael Burry starts to look right in a big way, questions linger as to what investors who still believe in the future of the AI trade should do.

Nvidia faces challenges, but this isn’t its first sell-off

Undoubtedly, my biggest concern with Nvidia is what the endgame will be once the hyperscalers make their own custom silicon. This is a major question mark that I’ve brought up in a number of prior pieces.

Sure, GPUs aren’t going anywhere, and the Nvidia ecosystem is sticky enough to make competing with it far less economical, at least on the surface. But I think it could prove tough as the rest of the Magnificent Seven looks to eat their own cooking, so to speak, while potentially teaming up with each other to meet their AI computing needs.

Of course, Nvidia will continue to be the place to get chips as the AI revolution moves on and Vera Rubin demand looks to blow away the numbers again. Either way, Nvidia stock might still be considered a tad on the expensive side, especially for Mag Seven standards, at 34.1 times trailing price-to-earnings (P/E), especially considering the cyclicality and downside risks of chips.

Nvidia stock might be too cheap for some, but it’s still pricey-looking for others

Depending on your perspective, Nvidia stock is either too cheap (given its growth) or too expensive (given the potential for growth and margins to move lower in the coming years). Either way, I think it all comes down to whether you think Nvidia can continue defending its moat against competition as more firms look to get in the custom silicon game.

There are massive rewards to be had in the AI chip scene, and that alone is enough for firms to spend substantial cash on the effort, even if it means only gaining a slice of the pie. With Nvidia trading below its strong support level ($170 per share), I have no idea what the next major move will be. Technically speaking, it’s a tough name to consider doubling down on.

Personally, I have difficulty valuing the stock, given the uncertainties that cloud the future of the AI trade. Will AI demand stay off the charts for more years? If so, how many? And if the AI boom lasts longer, will Nvidia continue to be the king? Or will credible challengers arise? I don’t have the answers, but I think “boring” might be a place to bet on AI with somewhat less risk.

What’s boring at a time like this?

Look no further than cooling systems, energy plays, and AI-driven software (think the “disrupted” SaaS stocks that are already down so much).

Whether we’re talking about Vertiv (NASDAQ:VRT) and its role in chilling the scorching-hot AI chips, the energy producers that will actually keep the data centers running, or the enterprise software companies (Microsoft (NASDAQ:MSFT) is the most obvious play) that are actually taking steps to allow customers to effectively automate workflows, I do think that there are other places to be, apart from Nvidia, as the AI trade encounters its first big stumble.