5 Stocks to Buy as the AI Trade Wakes Up
When a Formula One broadcaster approached a woman on the Shanghai starting grid, the broadcaster thought she was just some random attendee.
“Excuse me, ma’am, do you speak English?” he asked.
Not only was she fluent in English, she also happened to run Advanced Micro Devices (AMD).
Her name was Dr. Lisa Su.
The interviewer had stumbled into a conversation with one of the semiconductor industry’s most consequential executives, and apparently had no idea.
For investors, there is a useful lesson here: Always do your research, or else one of the most powerful businesses in the world could be right in front of you without you realizing it.
Everyone today recognizes AI, but knowing about it and understanding its many trends and opportunities are very different things.
That doesn’t mean you have to invest like an institution, as Peter Lynch put it in his book “One Up On Wall Street”. Otherwise, you may be doomed to perform like an institution.
“If you’re a surfer, a trucker, a high school dropout, or an eccentric retiree, then you’ve got an edge already,” wrote Lynch. “That’s where the tenbaggers come from, beyond the boundaries of accepted Wall Street cogitation.”
That same curiosity can serve you well in today’s AI market. Look beyond the familiar headlines, and you start to see opportunities in the chips that coordinate AI, the storage it requires, and the devices that bring it into everyday life. In our latest episode of Being Exponential, I connect those opportunities to a shift in the charts: After months of sideways trading, several AI and semiconductor benchmarks (and individual stocks) are breaking higher.
My read? The AI trade is waking up. And the opportunity extends across the chips that coordinate AI, the storage that supports it, and the applications that make AI usable.
There are five stocks that explain why, and one offers a particularly interesting connection between today’s data centers and tomorrow’s robots. Just click the video below to watch it now:
Advanced Micro Devices (AMD)
Most investors approach this stock by asking whether its AI accelerators can take share from Nvidia (NVDA).
While that does matter, the reason I recommend Advanced Micro Devices (AMD) here also involves a less glamorous chip: the central processing unit, or CPU.
Think about what happens when an AI assistant completes a task. Generating an answer is only part of the job. Software must retrieve information, coordinate computing resources, and move work between different systems.
That coordination requires computing power, too.
As AI moves from training models to running them (a process called inference) the opportunity expands across the data center. CPUs remain essential alongside specialized accelerators. And AMD participates in both markets.
You do not need to predict that one chip replaces another to see the investment case. You just need to recognize that putting AI to work creates more jobs for the surrounding infrastructure.
Arm Holdings (ARM)
That same logic brings me to Arm Holdings (ARM).
Arm’s processor designs already reach across an enormous computing ecosystem. Now the company is expanding its role in AI infrastructure, including through its own data center CPU. Arm describes the opportunity around coordinating increasingly complex AI workloads in its product announcement.
There is one little wrinkle, though… Licensing a chip design and selling a finished chip have different economics.
A licensing business can generate exceptionally high gross margins because it does not bear the same production costs as a chip supplier. Selling silicon can reduce that percentage while increasing the dollars available to cover operating expenses and generate profit.
So, a lower gross margin does not automatically mean a weaker business. Watch revenue, operating expenses, and operating profit together.
That is why I am focused on Arm’s growth opportunity alongside the improving chart. The combination matters more than either piece alone.
Meta Platforms (META)
Then there is Meta Platforms (META), which tackles a different investor question: Where is the payoff from all this AI spending?
Its Muse assistant gives us something concrete to examine. The app’s strong early reception is drawing fresh attention from Wall Street.
But downloads are not profits.
What matters is the sequence of attracting users, giving them a reason to return, then building a business around that repeat activity.
Meta already understands that sequence through Facebook and Instagram. So its experience converting engagement into advertising revenue strengthens the case that it can build a business around AI usage, too.
That alone does not guarantee that Muse succeeds, however. But it does give Meta a credible starting point.
For investors, the next questions concern repeat usage, monetization, and the cost of serving those users. A popular AI assistant can be expensive to operate. The opportunity becomes more compelling when revenue grows faster than those costs.
Sandisk (SNDK)
Now consider Sandisk (SNDK).
This is where investors can confuse a stock’s past return with its present valuation. A stock can rise dramatically and still offer value if its expected earnings rise faster.
But storage businesses are cyclical. Strong prices attract investment, additional supply eventually arrives, and profits can fall. A low price-to-earnings ratio sometimes signals that investors expect today’s earnings to decline.
I address this in the episode. My thesis is that AI supports a longer growth runway than the market gives Sandisk credit for.
The question is how durable the earnings become as demand develops and suppliers add capacity. That is where the bull case must prove itself.
I also want the chart to confirm improving fundamentals. In the episode, I explain why Sandisk’s recovery and sequence of higher highs and higher lows strengthen my conviction.
Qualcomm (QCOM)
Finally, Qualcomm (QCOM) is what I call the sleeping giant of this trade.
Its expanding data center ambitions create one opportunity, while its position in computing inside devices creates another.
Consider smart glasses interpreting what you see, a vehicle processing sensor readings, or a robot responding to its surroundings. Sending every decision to a distant server can introduce delays and connectivity problems. Processing more information inside the device addresses those constraints.
Qualcomm’s work in low-power computing and connectivity positions it for that shift, which the company discusses in its physical AI overview.
That is the opportunity: nearer-term infrastructure opportunities alongside a multiyear expansion into physical AI.
My Takeaway
There is also a marketwide ingredient here in the form of interest rates.
My macro scenario is straightforward. If Middle East tensions ease enough to bring oil prices down, inflation pressure can diminish. That could reduce pressure for tighter monetary policy and lower bond yields, making future earnings more valuable today.
It is a scenario, not a completed chain of events, and a renewed oil shock would challenge it.
Improving earnings expectations and a more supportive interest-rate backdrop can be a powerful combination. When several related benchmarks break higher together, I pay attention, while watching whether those breakouts hold.
In the full episode of Being Exponential, I dive into the charts and the business cases, explain the price levels I am watching, and share my upside targets for several of these stocks.
Watch the full conversation to see why I believe this rebound has room to run, and how I distinguish an attractive business from an attractive entry point.
P.S. An improving market does not make every stock a winner. That is why my colleagues Louis Navellier and Marc Chaikin’s upcoming Midterm Mayhem broadcast deserves your attention. They believe an unusual market event could begin before the Nov. 3 midterm elections… and they are getting together Tuesday, Sept. 29, at 10 a.m. ET to explain what they see and why preparing before Election Day should be your top priority. Louis will also reveal a major change to his Stock Grader system. Everyone who attends gets four free recommendations: two stocks to consider and two to avoid. Reserve your free spot for Midterm Mayhem.
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