Full Video Transcript Below:
CAROLINE WOODS: You mentioned investors are going to have to be more selective given how far the market has already run in finding those growth opportunities. What should they be selecting?
KEVIN MAHN: I’ve always followed the golden rule in investing, and that’s to follow the money. In this case, it’s to follow the spending. Where is all the major spending taking place right now? Well, it’s in AI infrastructure, and it’s in aerospace and defense.
So if you look at the sectors that benefit from that spending, it’s information technology, industrials, and utilities.
Information technology — Taiwan Semiconductor is a name that we really like and hold at SmartTrust. Why? You might be surprised to know that Nvidia, the largest chip seller in the world, doesn’t make their own chips. Taiwan Semiconductor does. The largest dedicated chip foundry in the world, with nearly a 60% market share, and now they’re helping Nvidia to insource and build their chips in the US, based on TSMC’s plant in Phoenix, Arizona. They pay a good dividend and they’re trading at reasonable valuations.
Of course, I still like Nvidia. I’m a big hold on Nvidia right now. They’re not going away, and they’re going to stay as the hub of the AI ecosystem.
Industrials — there are two ways you can play them. One, through the cooling solutions all these data centers need. Or two, through the additional construction of data centers taking place across the country. I just came back from Houston last week — they’re building data centers everywhere across Texas. Who benefits? A company like AECOM, one of the leading providers of engineering, design, and construction of warehouses and data centers.
And don’t forget aerospace and defense, because that falls in industrials. A few weeks ago, we learned NATO countries have committed to spend up to 3% of GDP on defense in the next 10 years. Who benefits? Lockheed Martin, Northrop Grumman, RTX, and smaller-cap names like Kratos Defense, building drone technology for military use.
Utilities — my favorite sector. It pairs nicely with AI, because we need to supply the power to keep the AI revolution going. Our grid is maxed, so we need natural gas, nuclear, geothermal, and alternative energy solutions. Two names I like: NiSource, one of the largest distributors of natural gas in the US, with a dividend yield of about 2.7%. And Constellation Energy, which partnered with Microsoft to reopen Three Mile Island to power data centers. Both pay dividends, both trade at reasonable valuations, and both hold up well in volatility. They’re now a backdoor play into the AI revolution.
