The Strait of Hormuz has been effectively closed for over two months now.\u00a0\u00a0This has pushed energy and many commodity prices much higher. Fertilizer prices have also surged due to this blockage.\u00a0This almost guarantees inflation levels will continue to push higher in the months and quarters, absent a recession and a considerable amount of demand destruction.\n<\/p>\n
Yet here we are at fresh highs for the indexes. The huge increases in AI-related spending are the main driver of the rally.\u00a0\u00a0The historically cyclical semiconductor industry now makes up a sixth of overall market capitalization. A huge chunk of this is due to Nvidia (NVDA<\/a><\/strong>) , whose market cap is now higher than the annual GDP of Germany, the largest economy in Europe.\n<\/p>\n Initial first-quarter GDP estimates came in at 2.0% last week, a bit lower than expectations. Spending related to AI accounted for roughly 70% of GDP growth last quarter.\u00a0<\/p>\n Government spending, which bounced back following the longest government shutdown in U.S. history in Q4 contributed 0.6% of the 2% GDP growth. Not exactly a balanced economy. And first quarter GDP growth only included one month of the impacts from the latest conflict in the Middle East.\n<\/p>\n The Shiller PE ratio topped 41 last week. It has only been higher once in history, right at the tail end of the Internet Boom. The price-to-sales ratio of the Nasdaq is just under 6.4x. Before ChatGPT debuted in late 2022, it was nearly two full points lower.\u00a0<\/p>\n What possibly could go wrong?\u00a0A prudent investor, however, still has to put some money to work.\u00a0<\/p>\n Here are a couple of names on my shopping list. I have owned both for a bit, but will add to these positions via covered call orders on any dips in the overall market.\u00a0<\/p>\n Taking It in Stride<\/p>\n Shares of educational platform concern Stride, Inc. (LRN<\/a><\/strong>) \u00a0are\u00a0still slowly recovering from a big drop in Q4 that was triggered both by implementation issues and worries that AI was going to disrupt the entire SaaS space.\u00a0The company reported inline Q1 results last week.\u00a0<\/p>\n Stride management reiterated it projected between $490 million and $500 million in adjusted net income in FY 2026 (June). The stock has a market cap of just under $4 billion. The company has a solid balance sheet, a significant stock repurchase program and should produce just over $200 million of free cash flow in FY 2026.\n<\/p>\n A Small Biopharma With Promise<\/p>\n