Editor’s Note: Eric Fry, here. Today, my InvestorPlace colleague Luke Lango will discuss why the AI Boom seems to be firing on all cylinders right now – even in the midst of a major market selloff. He will also share his current strategy.
Take it away, Luke…
Hello, Reader.
You know what they say; numbers don’t lie. But of course, people do.
That’s why, when it comes to the stock market, I ignore the pundits and talking heads. I block out what folks are saying on social media. Instead, I let the numbers themselves do the talking. And right now, the numbers are screaming that investors should buy the dip in AI stocks.
AI stocks have been the hottest trade on Wall Street since ChatGPT’s launch in late 2022. However, over the past few weeks, they’ve suffered through their worst crash since the AI bull market began, leading some to question whether the AI bubble has popped.
But we believe the data is showing that it decidedly has not.
To see why, just look at the spate of AI companies’ corporate earnings over this past week…
AI Stocks: Q2 Earnings Imply the Industry Should Stay Red-Hot
In our view, recent second-quarter earnings clearly suggest that the AI boom – from infrastructure to applications – is stronger than ever right now.
The AI infrastructure build-out remains robust and shows no signs of slowing, evidenced by AI server supplier Super Micro Computer (SMCI) and data center networking solutions provider Lumen Technologies Inc. (LUMN). The former anticipates ~90% revenue growth next year (versus ~60% expected). And the latter is reporting record demand for its products, thanks to relentless AI infrastructure spending.
Meanwhile, the AI hardware upgrade wave is coming, and incumbents expect it will be huge. Smartphone components supplier Cirrus Logic Inc. (CRUS) delivered blowout guidance for the coming quarter on huge expectations for an AI smartphone upgrade cycle.
And on the software side of things, it seems companies are finally creating transformational AI applications. For example, law enforcement tech solutions provider Axon Enterprise Inc. (AXON) said its newest AI product – Draft One – is seeing record demand, building an order pipeline of over $100 million in just three months. AI lending firm Upstart Holdings Inc. (UPST) said massive improvements in its AI modeling are improving deal flow and powering big margin expansion. Not to mention, Dynatrace Inc. (DT), Blackline Inc. (BL), Wix.com Ltd (WIX), AppLovin Corp. (APP) and Fortinet Inc. (FTNT) all also highlighted new AI software products driving growth.
The Final Word
From infrastructure to hardware to software, the AI Boom seems to be firing on all cylinders right now.
Plus, companies are also figuring out how to use AI to supercharge profits. For example, both Upstart and Shopify Inc. (SHOP) talked about how they are using AI and automation to reduce costs, improve margins, and drive accelerated profit growth.
Folks – those are some very good read-throughs for the AI investment theme.
It is real. It has a lot of momentum. And it will not slow down anytime soon.
That’s why we think that investors should view short-term weakness in AI stocks as nothing more than a buying opportunity into long-term winners.
That is our recommended strategy amidst the current stock market volatility. Buy into this chop with high-quality AI stocks.
Of course, AI hardware stocks like Camtek Ltd (CAMT), Micron Technology (MU), Dell Technologies Inc. (DELL), Applied Materials (AMAT), Qualcomm Inc. (QCOM) and others look attractive in this selloff. So do software stocks like Axon, ServiceNow Inc. (NOW), Intuit (INTU), Adobe Systems (ADBE) and Atlassian Corp. (TEAM)…
But those aren’t our favorite AI stocks to buy on this dip.
Learn more about a few other top stocks we’re watching right now.
Regards,
Luke Lango,
Editor, Hypergrowth Investing
