The AI trade is here to stay, expert says

Key Concepts

• AI as an Infinite Game: The AI landscape isn’t a race with a single winner, but a continuous cycle of innovation and leadership rotation (leapfrog).
• AI Rotation Story: Investment will shift between AI leaders as technology evolves, rather than a single company dominating indefinitely.
• GPU Importance: Graphics Processing Units (GPUs) remain crucial for AI computing, at least in the short term.
• China Decoupling (Nvidia): Nvidia is forecasting growth independent of the Chinese market.
• Data Centers & AI Infrastructure: Companies like Coreweave and Applied Digital are benefiting from the demand for AI infrastructure.
• Market Broadening: The market is expanding beyond AI and mega-cap tech into sectors like financials, utilities, and healthcare.

AI: Not a Bubble, But the Backbone – A 2026 Outlook

Dale Smothers, President and CEO of RDS Wealth, discussed the current state and future prospects of the Artificial Intelligence (AI) market with Cheryl, framing it as a long-term growth driver rather than a speculative bubble. He posits that AI is “the backbone of the future,” but more specifically, the backbone of a broadening market climb extending into 2026.

AI vs. The Dot-Com Bubble

Smothers directly addresses comparisons to the dot-com bubble of the late 1990s and early 2000s, asserting they are “nowhere close” to the current AI formation. While acknowledging some “air” in the market, he highlights that the AI trade has experienced only “light” corrections since mid-October 2025, unlike the “pop” or “bust” of the dot-com era. This resilience is a “strong sign” of continued growth.

Nvidia’s Position and the “Leapfrog” Dynamic

The discussion turns to Nvidia’s recent acquisition of assets from Groq. Smothers reinforces his “infinite game” analogy, stating that the AI landscape is characterized by a “leapfrog environment” where leadership rotates. While Nvidia is currently a leader, he emphasizes that success isn’t limited to one company. He believes Nvidia provides the essential “tracks” – specifically GPUs – for other AI “horses” (companies like Google and Open AI) to compete on.

Technical Term: GPU (Graphics Processing Unit) – A specialized electronic circuit designed to rapidly manipulate and display computer graphics. Crucially, GPUs are also highly effective for the parallel processing required by many AI algorithms.

Navigating the China Factor

Concerns regarding Nvidia’s exposure to China were addressed. Smothers reported that Jensen Huang, Nvidia’s CEO, is forecasting future performance “with a big zero on China,” effectively excluding any business from the Chinese market in their projections. This strategy positions Nvidia to thrive even without access to the Chinese market, demonstrating a decoupling strategy.

Identifying Opportunities: Coreweave and Applied Digital

Smothers highlighted two specific AI-related companies he favors: Coreweave and Applied Digital.

• Coreweave: He believes Coreweave, which IPO’d in 2025, has a value proposition supporting a stock price of $120-$130 per share, framing it as a “long-term play” benefiting from the AI trade.
• Applied Digital: Acknowledging the volatility surrounding Applied Digital due to retail exposure and short-selling, Smothers still views it favorably due to its focus on data centers, a key component of AI infrastructure. He notes both companies have already absorbed some downside risk.

Technical Term: Data Center – A dedicated space housing computer systems and associated components, such as telecommunications and storage systems. Data centers are essential for powering AI applications due to their massive computing requirements.

Market Broadening and Investment Strategy

Smothers observes a positive trend of market broadening beyond AI and mega-cap tech, with growth emerging in sectors like financials, utilities, and healthcare. He argues that “every story is an AI story at its heart,” but emphasizes the importance of diversification. He advises investors to “stay disciplined and stay the course in their plan, not chasing last year’s winners.”

Notable Quotes

• Dale Smothers: “I think that the A.I. trade is here to stay. And far from a A.I. race, per se, where where there is a definite leader with a definite finish line, this is more like an infinite game of leapfrog.”
• Dale Smothers: “No matter who wins from Google to Open A.I. and all the other horses in this race…I think that NVIDIA lays down one of the best tracks for these horses to try on.”
• Dale Smothers: “JENSEN HUANG HAS SPECIFICALLY TOLD US THAT EVERYTHING HE IS FORECASTING IS WITH A BIG ZERO ON CHINA.”

Synthesis/Conclusion

The interview presents a bullish outlook on AI, positioning it as a fundamental driver of future growth rather than a fleeting bubble. The key takeaway is that the AI landscape is dynamic and evolving, characterized by rotating leadership and a broadening market impact. Investors are advised to focus on long-term plays, diversification, and companies providing the underlying infrastructure for AI development, such as Nvidia, Coreweave, and Applied Digital. The decoupling from the Chinese market, as exemplified by Nvidia’s strategy, is also presented as a positive factor for continued growth.