Following the Q2 earnings season, it should be clear to investors that the disruptive transformational changes and advancements being brought about by the implementation of Artificial Intelligence (AI) are not some one-off, or temporary, paradigm shift that has a half-life of 12-18 months. Serious income can be generated from selling out-of-the-money covered calls on key AI stocks, suggests Bryan Perry, editor of Cash Machine.
Even after top tech hyperscalers reported record sales and earnings attributed to AI-driven revenues, many on Wall Street and among investment and market professionals remain skeptical of the spending wave of future AI infrastructure. Therefore, it stands to reason that investors should source one of the soundest authorities in the business of research that covers the most extensive areas of technology.
(Editor’s Note: Bryan Perry is speaking at the Income, Growth, & Value Virtual Expo, which runs Sept. 17-19, 2024. Click HERE to register)
In a report released on Aug. 27, IDC stated that worldwide spending on AI is forecast to reach $632 billion in 2028. The firm added: “The rapid incorporation of AI, and generative AI (GenAI) in particular, into a wide range of products will result in a compound annual growth rate (CAGR) of 29% over the 2024-2028 forecast period.”
Eric Schmidt, co-founder of Schmidt Futures and former CEO of Google, stated, “I’m talking to the big companies and the big companies are telling me that they need $10 billion, $20 billion, $50 billion, $100 billion.” Schmidt said OpenAI’s Sam Altman told him it’s going to take $300 billion to build out the required AI infrastructure.
So, the AI train is not even close to reaching the next station. If forecasts are accurate, then investors have another three to four years of potential outsized returns for the best-of-breed stocks that are leading the capital investment wave, but more importantly, for those companies providing the infrastructure for the ongoing buildout of AI.
The list of special AI stocks is about 10 names deep and is where serious income can be generated from selling out-of-the-money covered calls where option premiums are rich — very rich. When selling calls on stocks like Nvidia Corp. (NVDA), Broadcom Inc. (AVGO), Arista Networks Inc. (ANET), and Taiwan Semiconductor Manufacturing Co. (TSM), investors can theoretically generate 20% yields per year in a covered call AI portfolio.
With good timing, and it’s all about timing, one can sell 30–45-day calls into selected rallies and take full advantage of what professional option traders call “free money”.
Recommended Action: Sell covered calls on AI stocks for income.
