3 AI Stocks to Buy on the Dip Now

Key Concepts

• AI Revolution: The ongoing technological advancement and adoption of Artificial Intelligence.
• Data Center Capacity: The physical infrastructure and computing power required to store and process data, essential for AI.
• Infrastructure Stocks: Companies involved in building and supporting the physical components of the AI revolution, such as data centers and their associated equipment.
• Pullbacks: Temporary declines in stock prices after a period of growth, often seen as buying opportunities.
• Power Gauge: A proprietary system used by Mark Chaken to analyze stocks based on fundamental and technical factors.
• Digital Information Revolution: The historical progression of technological advancements in information processing and access, of which AI is seen as an extension.

AI Infrastructure Investment Opportunities

This discussion focuses on identifying investment opportunities within the AI revolution, particularly in companies that provide the underlying infrastructure. The speaker, Mark Chaken, a Wall Street veteran, highlights that while AI has driven significant market growth, recent pullbacks in some related stocks present attractive entry points for long-term investors.

Tech Sector Performance and Market Sentiment

• Strong Earnings: The tech sector, in particular, delivered strong earnings, exceeding analyst expectations. The S&P 500 saw a year-over-year earnings increase of approximately 12%, significantly higher than the expected 5%.
• High Expectations and Corrections: Despite strong earnings, the market's extremely high expectations for AI-related companies have led to significant corrections, with some stocks experiencing drops of 15% to 30%. This is attributed to retail investor enthusiasm and sky-high valuations.
• Skepticism: Recent skepticism, notably from "The Big Short" figure Michael Burry, has cast a shadow on prominent AI infrastructure stocks like Nvidia and Palantir, contributing to market pullbacks.
• Long-Term Outlook: Despite short-term corrections, the speaker maintains a bullish outlook on the tech sector for the remainder of the year and into the first quarter of 2026, citing the historical strength of the market in the first year of a presidential term.

Three AI Infrastructure Stocks to Watch

The discussion identifies three companies that are crucial to the AI revolution and have recently experienced pullbacks, making them attractive for investment. These companies fall into different categories of AI infrastructure: chip producers, data center builders, and companies utilizing AI.

1. Qualcomm (QCOM) - Chip Producer

• Business Focus: Qualcomm is a seasoned player in semiconductor chips. The company announced its entry into the AI chip business on October 27th, which initially caused its stock to spike by over 30-35%.
• Strategic Acquisition: Qualcomm made a significant acquisition 3-4 years prior, costing approximately $1-2 billion, which positions them to compete with Apple in next-generation PC chips. This strategic move has not been fully recognized by the market.
• Recent Performance: After the AI chip announcement spike, the stock pulled back from a high of $210 to a low of around $165, currently trading in the $170-$175 range.
• Investment Rationale: Qualcomm is considered an attractive long-term chip play, offering an alternative to more obvious choices like Nvidia and AMD. The company's chips are used in essential equipment like handheld scanners for warehouses and supermarkets, demonstrating their role in the "nuts and bolts" of AI infrastructure.
• Buying Opportunity: The speaker views a stock that spikes on news, then pulls back but holds its pre-spike level, as an attractive buying opportunity.

2. Vertiv (VRT) - Data Center Infrastructure

• Business Focus: Vertiv provides a suite of infrastructure cooling, thermal management, and power management solutions critical for building data centers.
• Market Challenges and Demand: While there are headlines about potential snags in data center buildouts due to power and steel unavailability, the fundamental need to house AI chips in data centers remains.
• Recent Performance: Vertiv has experienced a significant pullback to long-term support levels, which the speaker considers an ideal entry point, contrasting with buying at new highs when market sentiment is overly exuberant.
• Power Gauge Rating: All three recommended stocks, including Vertiv, have bullish Power Gauge ratings, indicating strong fundamentals and favorable technicals due to recent oversold conditions.
• Competitive Landscape: The demand for data center capacity is significantly outstripping the ability of companies to build them. Therefore, even if a slightly better solution emerges, companies building data centers cannot afford to delay by searching for it. Proven solutions from companies like Vertiv are in high demand for the next five years.
• Investment in Data Centers: Earning season revealed continued, robust investment in data centers. Meta, for example, borrowed $20-30 billion at favorable rates to fund further data center expansion. This commitment of capital, even through borrowing, underscores the long-term growth trajectory for data center infrastructure.

3. Nextracker (NXT) - Renewable Energy Equipment (with Data Center Relevance)

• Business Focus: Nextracker manufactures equipment that enhances the efficiency of solar power delivery.
• Market Reaction to Name Change: The company, previously a strong performer with a bullish Power Gauge rating and making new all-time highs, experienced a significant pullback (15-18%) after changing its name to reflect a broader involvement in the renewable energy market beyond just solar. The market reacted negatively, prioritizing its solar niche.
• Investment Rationale: The speaker finds Nextracker attractive due to this pullback, highlighting how manic the market can be about specific niches like data centers.
• Broader AI Context: The speaker uses Nextracker as an example to illustrate the market's intense focus on data centers.

Contextualizing the AI Boom

• AI as an Extension, Not a Fad: The speaker argues against viewing AI as a fleeting trend like Bitcoin or blockchain. Instead, AI is presented as a natural extension of the digital information revolution that began with personal computers, the internet, and cloud computing.
• Data Crunching and Compute Power: The core of the digital revolution, and by extension AI, is the ability to process more data faster. Large learning models require significant data crunching and heavy compute power, a demand that is projected to continue for the next 5-15 years.
• Long-Term Growth: While market corrections and bear markets are inevitable (occurring every 4-5 years), AI is considered a fundamental and growing aspect of technology that will impact daily lives and require increasing compute power, even on personal devices like phones.
• Excitement for the Future: The speaker expresses significant excitement about the future of technology and investment, more so than at any point in their long investment career.

Conclusion and Actionable Insights

The discussion emphasizes that the AI revolution is a long-term trend, and recent pullbacks in key infrastructure stocks like Qualcomm, Vertiv, and Nextracker present valuable buying opportunities. Investors are encouraged to view AI not as a fad but as the next phase of the digital information revolution, requiring substantial and sustained investment in data center capacity and related technologies. The Power Gauge system is offered as a tool for further research and education on these and other stocks.