AI-related stock performance is becoming less concentrated as different parts of the technology and industrial sectors respond to rapidly changing demand. The shift is raising questions about where sustainable earnings growth may emerge.
BNN Bloomberg spoke with Brian Mulberry, chief market strategist at Zacks Investment Management, about evaluating AI exposure and identifying gains that could withstand changes in sentiment.
Key Takeaways
- Memory manufacturers are benefiting from higher demand as AI systems require more capacity to store, process and transfer data.
- Recent declines in some AI-related stocks could reflect profit-taking, geopolitical concerns and a broader shift toward lower-risk assets.
- Targeted semiconductor and power-generation ETFs can offer exposure to AI infrastructure, but elevated interest rates could pressure smaller companies.
- Data centres’ growing electricity requirements are creating lengthy order backlogs for gas turbines and opportunities for additional suppliers.
- TSMC’s earnings, revenue growth and guidance could provide an early indication of the strength of AI capital spending during the second-quarter reporting season.
Read the full transcript below:
ROGER: Well, a new group of AI companies is emerging as a source of market returns beyond the Mag 7. This includes ETFs and power generation. Joining us now to discuss this and more is Brian Mulberry, chief market strategist at Zacks Investment Management. And Brian, thanks, as always, for joining us.
BRIAN: Absolutely. Thank you.
ROGER: Okay, big picture with the tech stocks. What do you—what are your thoughts on it right now?
BRIAN: Well, where we’re seeing stocks get the best treatment from the market right now is where the biggest bottlenecks are, and in the moment, that’s in memory and power. We’re seeing memory stocks go up so much higher, like Micron and SanDisk and Western Digital—all of those names are solving a critical problem, which is, if you want to use more AI, you have to have more compute.
But sitting in the middle of that is memory. Memory is important because it moves the data, once you have a result from the computation, to the user to be able to use it, and it also stores that for training the model for future use. So that’s why memory is such a critical component here. Demand for those chips is up 12 times in the last year, and that’s just creating this gigantic wave for these stocks because the demand is so much higher.
ROGER: Now, one of them you mentioned is SanDisk. Just looking, it’s off by about eight per cent—a little more than eight per cent—today. Is that just a little profit-taking there?
BRIAN: I think so. Micron has had a similar, you know, experience, but we’re also seeing even SK Hynix, which just got added to the U.S. markets on Friday, is down about 13 to 15 per cent on the day as well. Part of this is a risk-off rotation. Obviously, geopolitics over the weekend was very negative, people wanting to kind of get out of the way of that. What might be another inflationary wave? We’ll have to wait and see.
But also, simply the fact that we’ve had two very large debuts in U.S. markets over the last month—that’s a lot of liquidity that gets sucked out of the market, and it just creates this bigger amplitude of volatility. So the profit-taking is on lower volume, if you will, and people are kind of rotating out into risk-off-type assets at this point in time.
ROGER: And some possibilities: ETFs. Are they a decent option right now?
BRIAN: Absolutely. You can find some different baskets that are a little bit more targeted. I think the sweet spot right now is to have diversification, but don’t own too much of this market. One of the biggest stress points that we have seen on earnings growth is that we’ve been in a higher-for-longer rate environment.
The 10-year Treasury is now back over four and a half per cent here domestically. That puts a lot of pressure on small- and mid-caps. They’ve had a nice run year to date, but they might come under pressure here if rates keep going higher, and that could easily happen this week, as we have some pretty important inflation data that comes out in the CPI report. We’ll kind of see where things go from there.
ROGER: All right, and with the ETFs, what should you be looking for in there? Mag 7? Do you want to see them in, or are they—yeah, again, they had their day for them.
BRIAN: Yeah, so we would like the semiconductor indices. I know they’ve been under a lot of pressure, but there’s some really good companies inside there. Again, a critical piece of the tech stack, just from the component perspective, a little bit oversold at this point in time. I think there’s some really good deals in there, and then anything that would be related to power and power generation. So coming back into a little bit of energy, utilities, things of that nature might be fruitful for your portfolio going over the summer.
ROGER: Let’s talk a little bit about power generation. Is it looking like it’s in for a good, long run?
BRIAN: Well, it does. I mean, a lot of the data centres that are being built around the world are having to be power-independent from the grid. They don’t want electricity being drawn away from consumers and increasing the cost on consumers. Now, we all expect to benefit from AI, but it needs to be able to power itself, and so we’re finding that, in the moment, gas turbines are the best way to attach power directly to a data centre.
So this is really natural gas turbines that we know already work effectively around the world. We see, like, GE Vernova has a five-year backlog of orders—they’re sold out for five years. Now we’re starting to find other companies step up and produce the same type of thing. Like, Caterpillar is now actually in the game for gas turbines, so they’re not only helping to build in the actual physical construction. Now they’re getting into the power game as well.
You’re seeing the treatment of these stocks. Each of the charts that were on the screen is going up significantly. Again, another one of these bottlenecks, a backlog, if you will, that’s going to be really critical to what AI compute looks like a year or two from now.
ROGER: And that five-year backlog, how does that compare to normal?
BRIAN: I mean, it’s just huge demand. They normally would be one to one and a half years out, and now they’re three and a half times that at this point. So you can just see how much more demand there usually is for that particular product. Obviously, these are jet engines, right? So they could be used on multiple vehicles, but now they’re pivoting to power production at this point, and the demand is just so significant.
ROGER: And then also, another opportunity you see is with fibre optics, photonics. What—what’s the growth there?
BRIAN: Again, the demand for memory, just the ability to move data from data centres to the end user, is going to require a new generation of technology, and that is really just reusing fibre optics in a different way. Photonics is a way to transfer massive amounts of data without having to rely on the old copper technology, so this is just kind of planting a seed for what comes next in terms of what—how data is consumed.
Obviously, when you think about data centres in space, they’re not going to be connected by wires. That’s going to happen by lasers. So there’s another generation of photonics on top of that, where you can start to see how data is moved through the air rather than it is connected through fibre-optic cables or even copper.
ROGER: All right, we’re almost out of time. I just want to get, before we go, your thoughts on TSMC and what we’re seeing coming out of them. I know their earnings are coming out on Thursday, but revenue looked good.
BRIAN: Yeah, absolutely. I mean, the expectations are absolutely wild at this point in time. You’re looking at, you know, roughly 58 per cent earnings growth. The tech sector at large is at 48 per cent earnings growth. So this is a bellwether coming out of the gate early in the second-quarter earnings season to tell us exactly where we are.
There’s two other key components. We’ve seen the average earnings beat over the last four quarters of around six per cent. So the whisper number isn’t going to be 58. It’s going to be more like 64 per cent in order for the stock to move higher. We also want to know what their revenue gains look like. Margins in the component sector for most of these chipmakers have been going higher. We want to see TSMC participating in that same profitability growth as well.
ROGER: All right, Brian. We’ll wrap it up there. But thanks, as always, for joining us.
BRIAN: Thank you.
ROGER: Brian Mulberry, chief market strategist at Zacks Investment Management.
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This BNN Bloomberg summary and transcript of the July 13, 2026 interview with Brian Mulberry are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
