Deepak Puri, the chief investment officer of Deutsche Bank Private Bank, engaged in a discussion with Quartz as part of the “Smart Investing” video series.
The interview can be viewed above, and the transcript below has been edited slightly for brevity and clarity.
Andy Mills (AM): Andy Mills inquires, “Does the surge in Nvidia stock signal an AI bubble?”
DP: Puri responds, expressing that while he refrains from labeling it as a bubble, he acknowledges the significant momentum gained by Nvidia in the past year. He emphasizes the enduring nature of AI as a secular trend and its potential impact on productivity, attracting attention from the market due to ample liquidity. Puri notes the differentiation among stocks within the Mag 7, citing Nvidia and other names that have shown varying levels of performance. He anticipates a year of distinction within the Mag 7, suggesting active management as a viable approach over passive ETF investments.
AM: Mills humorously suggests the need for a new moniker for the Mag seven, proposing alternatives like the Fab Five or a return to FANG.
DP: Puri concurs, highlighting the financial industry’s penchant for acronyms and the necessity for a fresh designation amidst evolving market dynamics.
AM: Mills reflects on the simplicity of investing strategies centered around popular groups like FANG, emphasizing the importance of diversification across broader market segments for enhanced resilience against correlated stock movements.
DP: Puri elaborates on the earnings growth disparity between the S&P and the Mag 7, advocating for a diversified equity portfolio that extends beyond the Mag 7 to capitalize on opportunities in sectors like healthcare, industrial materials, and commodities.
AM: Mills raises concerns about the current economic landscape’s dependency on Nvidia’s stock performance, prompting a discussion on risk management strategies and prudent investment decisions.
DP: Puri underscores the significance of a risk-centric approach in navigating the market, cautioning against excessive optimism during peak market periods and advising strategic entry points, particularly in the tech sector.
AM: Reflecting on the AI bubble discourse, Mills probes Puri on his views regarding the tech sector’s valuation and the presence of a potential bubble.
DP: Puri analyzes the tech sector’s PEG ratio compared to the broader S&P, debunking notions of a tech bubble based on valuation metrics. He notes the gradual shift in market dynamics towards digitization and tech-oriented firms, highlighting the robust earnings momentum as a distinguishing factor from past market bubbles.
AM: Concluding the conversation, Mills expresses gratitude to Deepak Puri for his insights.
DP: Puri reciprocates the sentiment, thanking Mills for the opportunity to engage in the discussion.
