Josh Schafer, the Barron's Investor Circle newsletter editor and author of the Searching for Signals Substack, says the AI trade is getting later and the outlook has gotten "a little bit gloomier."
On Full Signal with Phil Rosen, Schafer discussed the headline risk around Nvidia CEO Jensen Huang, why midterm seasonality may not hold and why Barron's Investor Circle likes Alphabet, Visa and Walmart.
Why the Jensen Huang headline matters for Nvidia stock
Rosen opened with the report that Huang admitted to an affair with a woman the US government suspects is a Chinese spy. Schafer noted that Nvidia's board is now investigating.
He said Nvidia fell about 5% on the first trading day after the headline. The bigger question is succession, since Huang co-founded the company and has been CEO for over 30 years. "There isn't a clear succession plan," Schafer said.
Rosen noted the stock is in its fourth 20% drawdown since 2024 and was already down 20% before the news. Schafer said AMD rose 10% on the day Nvidia fell.
Why midterm seasonality may not rescue stocks
Schafer called post-midterm return stats "baseball stats" that say little about today's market. The average midterm-year drop in the S&P 500 is close to 15% to 19%, he said, but the index never reached a 10% drawdown this year.
He said he saw a stat showing big tech beating earnings by the lowest amount in four years, and that the market is closer to peak capex. "The midterms are a clearing event to what skies?" he asked.
Value's big month is an ominous sign
Schafer recently wrote that value stocks just had their best one-month run against growth in 20 years. He called it "sort of an ominous sign" for a bull market led by AI, since similar moves came in the early 2000s.
Rosen cited Schafer's finding that in three of the past five similar periods, the S&P 500 was lower a year later.
Where AI profits are showing up
Outside of cloud, Schafer wants more evidence that AI is boosting profits. "You can't spend forever," he said.
Rosen raised macro investor Jordi Visser's argument that flat headcount shows AI productivity gains. Schafer called it a good point but said many companies also overhired in 2021.
Why Barron's Investor Circle likes Alphabet, Visa and Walmart
Schafer said Alphabet fell below a market multiple after earnings and is down 30% from its 52-week high. He cited a Bloomberg Intelligence note that sees its TPU chip business growing from $12 billion in 2026 to over $150 billion in 2028.
Visa, now in its second year as a pick, rose about 18% over the past 12 months, and colleague Teresa Rivas renewed it. Schafer said digital payments and AI shopping agents keep running through the card.
Schafer said Walmart beat on earnings and revenue and raised its outlook, though its same-store sales growth was the weakest in a couple of years. "It's buying the platform, not buying a brand," Schafer said.
Tune in to the full conversation with Josh Schafer on YouTube, Spotify and Apple Podcasts.
For more on Nvidia, read Nvidia is in its fourth drawdown of 20% or more since 2024, and subscribe to the free Opening Bell Daily newsletter for a daily briefing on stocks, macro and Wall Street.
This article is for informational purposes only and is not investment advice. Views and stock opinions are those of Josh Schafer and market figures are as stated by the guest at the time of recording.
