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Buyers proceed to have absolute religion in AI, whereas I proceed to build up stakes in low cost FTSE 100 shares. So am I lacking out by not becoming a member of the get together?
Peak cycle
I’m making a daring name: the Magnificent 7 – led by Nvidia – seemingly peaked on 29 October. That was the day when the inventory hit $5trn and Meta warned it might miss analyst revenue expectations on account of hovering capital expenditure.
Three weeks later, Nvidia’s money flows additionally disenchanted. So why are the AI giants faltering?
Past sky-high valuations and restricted real-world breakthroughs, traders are beginning to query sure industrial relationships, equivalent to Nvidia backing smaller AI corporations that later spend closely on its chips or cloud providers.
Is a reckoning coming for the Magnificent 7? I feel so. Basic boom-and-bust: overspend on new tech and get together prefer it’s 1999. On the identical time, cheaper FTSE 100 shares supply extra grounded alternatives, setting the stage for traders to discover extra sustainable bets.
Fallen big, rising potential
For me, probably the most compelling FTSE 100 progress tales proper now’s Diageo (LSE: DGE). I’ve watched the corporate for years, however solely just lately determined to step in. Its manufacturers are legendary – Guinness, Don Julio, Casamigos – and so they retain robust international attraction.
What excites me is the enduring pattern of premiumisation. Shoppers might drink otherwise as we speak, however they nonetheless pay for high quality. The corporate is adapting nicely, shifting technique to replicate altering habits, from at-home socialising campaigns to ready-to-drink codecs aimed toward youthful audiences.
Dangers stay. Client spending may keep constrained, stock cycles would possibly persist, and international macro circumstances might weigh on near-term efficiency.
However with a ahead earnings a number of of simply 13 – nicely under its long-term common – I really feel the dangers are largely priced in. The 4.3% dividend is a bonus, however my focus is on robust manufacturers, and a possible turnaround from a cost-conscious new CEO. The rationale I maintain Diageo is that it now appears like a inventory with room to run, setting the stage properly for my subsequent decide.
Power big
For me, BP (LSE: BP.) is a standout contrarian alternative to contemplate. Everybody’s bearish on oil, however that’s precisely why I’ve been accumulating. Since its technique reset in February, scaling again pricey renewables initiatives, the corporate appears way more targeted and disciplined.
Q3 outcomes highlighted this: refining exceeded expectations, supported by increased realised margins and minimal turnaround exercise.
In upstream, the challenge pipeline is spectacular – 12 discoveries in 2025 alone, together with Bumerangue in Brazil, its largest discover in 25 years.
Money movement is strong, with working money movement comfortably protecting the 5.6% dividend yield.
BP’s break-even is $40 a barrel. But when costs stay within the $60 vary long run the corporate might miss its formidable monetary targets, which may hit the share worth and shareholder returns.
Power seems mispriced as we speak, in my opinion. Geopolitical tensions, US onshoring, rising electrical energy demand from AI, and slower EV adoption all help the case for oil and fuel.
Backside line
For me, the fun is find undervalued FTSE 100 shares. Whereas hype drives others towards costly names, I concentrate on high quality firms buying and selling cheaply, providing long-term progress, stable dividends, and the potential for regular wealth compounding over time.
