Contrarian AI investment model warns against Nvidia, suggests Qualcomm

A machine learning model developed years before the current AI boom is now warning investors against the very stocks that are central to today’s artificial intelligence frenzy. This contrarian signal from a proven AI-powered investment system highlights the potential disconnect between market enthusiasm and algorithmic risk assessment, offering a sobering perspective on valuations in the technology sector despite recent corrections.

The big picture: Daniel Mahr’s AI-powered investment model has been consistently flagging negative signals for Nvidia and other AI-centric tech megacaps since 2023, even as these stocks drove market gains.

• The warning persists despite the sector’s recent $2 trillion valuation decline from February highs, which has attracted value-oriented investors looking for buying opportunities.
• Mahr’s model uses decision tree analysis, a supervised machine learning algorithm that examines historical data across 16 investment factors to predict stock performance.

Performance speaks volumes: The $1.6 billion Federated Hermes MDT All Cap Core Fund driven by Mahr’s model has delivered impressive results against market benchmarks.

• The fund has returned 26% annually over the past five years, outperforming the Russell 3000 Index by nearly 5 percentage points.
• This performance places the fund ahead of 98% of its peers, lending credibility to the model’s contrarian stance on AI stocks.

Behind the algorithm: Mahr’s trading program employs a sophisticated approach that prioritizes consistency over spectacular gains.

• The model recently incorporated an “economic moat” factor to evaluate companies’ competitive advantages.
• It applies different factor sets across various industries, recognizing that performance drivers vary by sector.
• “The goal of the process is consistent performance as opposed to trying to hit home runs,” Mahr explains about his investment philosophy.

Alternative tech plays: Rather than betting on headline-grabbing AI giants, the model currently favors less prominent technology companies.

• Qualcomm Inc. and Fortinet Inc. have emerged as preferred alternatives within the technology sector.
• The algorithm is also showing potential buy signals in industrial stocks, suggesting sector rotation possibilities.