Daily Rundown: May 18

J.D. DURKIN: Good morning, subscribers Chris Versace and I are back once again to answer some of the questions we did not get to during yesterday's call. For those of you who may have missed it, you of course can catch a full replay by heading over to the video tab on our homepage. Chris, thank you for being here.

CHRIS VERSACE: Happy to see you, J.D.

J.D. DURKIN: You as well, my friend. Let's start with a look at the banking sector. And why we went ahead and added to bank of America last week. Can you dive a little deeper with us into why B of A stands out to you, as all eyes certainly remain on US banks as a whole.

CHRIS VERSACE: So when we look at what's unfolding in the banking sector, it's really at the regional front. So you have to remember as we saw that unfold with Silicon Valley Bank, Signature Bank, we saw bank of America shares come in. That was the catalyst for us to say the risk/reward here looks more than favorable, particularly as we are likely to see a flight to bulge bracket banks. And that's exactly what happened.

So when we saw some renewed pressure that pulled our Bank of America shares back down below our cost basis, we wanted to step in. Remember, we want to patiently build out this position preferably below our cost basis, and that's exactly what we did.

In terms of why Bank of America, though, in terms of just being a bulge bracket bank, we do like its mix of business relative to other ones out there. Candidly, when we were looking at making this move, the other contender was JP Morgan. But given the weakness that we're seeing in the IPO market. We felt that Bank of America was better positioned from here on out.

J.D. DURKIN: All right, fair enough. As the debt ceiling debate-- ah yes, that debate keeps many investors suddenly awake at night. Would AAP consider a plunge tied to the uncertainty a bit of a buying opportunity, you think?

CHRIS VERSACE: We always have to assess the catalysts behind this and what the timing is, right? With regard to the debt ceiling, I do think that we're likely to get a let's say later than 11th hour deal done. But if we were to see something come out, we would probably stay on the sidelines, let the worst of the news be absorbed into the stock, at least for the first day or two and then likely start building back, taking advantage of that sharp pullback in the market.

You know, again, ultimately I do think that something will happen. If not before the deadline, I think that once the pressure is on if we pass the deadline, certainly there will be moves made to shore up the government and government spending.

J.D. DURKIN: All right, let's talk about lithium batteries, something Elon Musk has called the new oil. Chris, do you buy into that thinking? And if so, will you be looking for opportunities to get the portfolio a bit more exposed?

CHRIS VERSACE: So that's an interesting question, right? Because we have some exposure to the EV marketplace, obviously currently with Ford, currently with ChargePoint. But the lithium battery is kind of an interesting model, right? We recently held a podcast where we kind of talked about the drivers of the lithium market. There's a combination of storage, but also EVs. So it is an intriguing one.

I think, candidly, though, that we would want to hit the tipping point with EV market-- sorry, the EV market as it relates to vehicles before kind of adding another play on it. So I think we'll keep it on our radar. We might introduce something into the bullpen at a certain point in time. But for now, we're just going to continue to monitor that aspect of the market.

J.D. DURKIN: All right. Finally, let's conclude with a name AAP exited some time ago. You've been very focused on the chip stocks, given the club's position in Applied Materials. But any updated perspective from you, Chris, on former holding Nvidia?

CHRIS VERSACE: That's a great question. With all the talk on AI, it's something that we've been keeping some eyes on. I think the harder part with NVIDIA is really twofold. One, it has really run significantly this year. And when we look at the breakdown of its end markets, whether it's on the graphics side, the data center side, or some others, the markets still remain weak and that tells us that the real catalyst for this significant move in Nvidia shares is all the hopium surrounding AI.

And there are other companies that are involved in doing AI chips, including our own Marvell, but the other side of it, J.D., is we're starting to see some regulatory efforts come about as a result of larger concerns about AI. We saw some things making progress in the Eurozone as we talk about this, and even China is kind of drafting rules to kind of put some bumper guards, if you will, around AI.

So I think if we were to go back in time, probably a great pickup would have been Nvidia shares back in January. But given where they are now, I think we need to understand me the evolving regulatory landscape before we to make a move with them.

J.D. DURKIN: All right, Chris, thank you as always.

CHRIS VERSACE: Thank you, J.D.

CHRIS VERSACE: That will do it for today. Members, please continue sending us all of your questions to aapclub@thestreet.com. Thanks for taking the time to watch. We'll see you soon.