Chip stocks rallying on ‘a lot of the fanfare around ChatGPT and OpenAI,’ strategist says

Defiance ETFs CEO and CIO Sylvia Jablonski joins Yahoo Finance Live to discuss the expectations for the Fed ahead of the FOMC meeting, the rise of AI, semiconductor stocks, and the outlook for investors.

Video transcript

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JULIE HYMAN: All right, will that January rally be thrown in the trash? Our next guest thinks investors are ready for a resurrection, but will probably sit on the sidelines until the week is up after the Fed announces its rate decision. Are there still opportunities in some areas, though, like technology, even renewable energy? We're joined by Sylvia Jablonski, Defiance ETFs CEO and CIO. Sylvia, it is great to see you. You heard the discussion we were just having about the "Morning Brief" here and the sort of conundrum of job growth versus price stability, et cetera. Do you think the Fed is going to be more aggressive here, more hawkish? Is that what we're going to hear today?

SYLVIA JABLONSKI: Good morning, and great to be with you all this morning. You know, I don't know how Fed Chair Powell is going to go about it. If history tells us anything, it's that he will likely be uber hawkish and will continue to send us the resounding message that the Fed plans to stay higher for longer and the job is not done and, you know, a lot of this type of activity that tends to pull the market back, which is, in your opening, why you mentioned why I'm sitting on the sidelines this week. I just sort of don't trust the way that the information is communicated and how the market digests it.

But if we take a step aside from that, you can kind of see that data is favorable for the Fed in terms of what they've been doing. So you have that annualized CPI down to 6.5% from that 9.1% number. You're starting to see inflation budge in various service sectors and consumer goods and things like that. It's not all rosy and Pollyanna, but inflation is coming down. And I think that the market is starting to look through the idea that the Fed will continue to really pound us with rate hikes and stay higher for longer.

But if you listen to what the Fed said, I mean, Kashkari came out the other day saying, if you're playing chicken with us, you're going to lose, right? Those weren't his exact words, but they were the intended words, I think. And that's not great for the market. So uncertainty in the time being until we see what Fed Chair Powell says.

BRAD SMITH: Yeah, don't want to play chicken with Jay. I think for some of the biggest 52-week declines that we had seen, or at least the stocks that are still on sale, as you defined them, from their 52-week highs here, you continue to keep an eye on semiconductor and machine learning. They have been one of the more sensitive areas as well in the pathway of the Fed's policy here. And so what would you classify as a solid pullback that would be the signal to you to get back in?

SYLVIA JABLONSKI: Right. And I think if you held a lot of these names last year, you're just wholly unhappy with the performance of these stocks. As you mentioned, they're way down from their 52-week highs to the tune of 20%, 40%. But, you know, I like to look to the longer term at least a year or two out, but really 10 years out, particularly for your younger investors or those who are not set to retire in the next 5 to 10 years.

I can't time the market. Most of us can't. But we know that when you have these names, which are essentially the technologies and innovations required to run our economies and all sorts of businesses, everything from energy to health care to technology in the future, you know, it's sort of smart to dollar cost average in and ignore the noise in the short term. And a great example of that actually is what's going on with semiconductors and some of the tech names.

So I think that part of the reason that they're rallying is a lot of the fanfare around ChatGPT and OpenAI. So now there's this sense that OpenAI is an actual tangible service and resource that we can use in various fields and industries, and that a lot of these jobs that can't be replaced could be replaced with things like OpenAI. A lot of the health tech and research and things like that can be replaced with OpenAI and help our economy expand and grow.

But long story short, I think without the tech names and the semiconductor names, you just don't have things like machine learning, quantum computing, natural language processing. This is all the rage. We're clearly back into looking at it, and those are the names that are going to benefit.

BRIAN SOZZI: Sylvia, those younger investors that you mentioned, should they be concerned-- if they're looking to put money in to work in some of these big cap tech names, should they be concerned that these names are now laying off thousands of people and they ultimately will not be able to innovate the same pace looking out over the next few years as they had been the previous five years?

SYLVIA JABLONSKI: Well, I would argue that they're laying-- they're laying off because they're investing in technology that will allow them to innovate at a faster pace. So I think that a lot of the jobs that are replaced are being replaced with things like artificial intelligence, quantum computers that can solve problems. And, you know, I don't-- I don't suggest that this is going to be resolved in the next year or two. But I think that these are investments that play out over a decade. So again, if you're a young investor, you have decades, right, to wait that out. And you have a lot of evidence, too, that these are becoming real technologies and the proof of use cases exists.

BRIAN SOZZI: All right, we'll leave it there. Sylvia Jablonski, Defiance ETFs CEO and CIO, always good to see you. We'll talk to you soon.

SYLVIA JABLONSKI: Great to see you. Thank you.