After the first phase of the AI boom, some stocks tied to that craze crashed into investor skepticism. But longtime stock watcher Adam Johnson sees that as an opportunity.
Johnson, portfolio manager of the Bullseye American Ingenuity Fund, said he believes some AI stocks are now on sale because of that mood shift. In his words, AI went from being a priority to a “pariah.”
Why is he bullish?
His big-picture view is that every company will have to become an AI company, just as they once had to figure out e-commerce and then the cloud. He sees that as a driver of stronger profit growth. His framework comes down to the price you pay for the growth you get. And because of the slump in some of these stocks, Johnson notes you can buy businesses trading at lower multiples than the average S&P 500 company.
He joined us on Ticker Take to highlight seven AI stocks he thinks are on sale.
Micron (MU)
Nvidia’s chips do the heavy computing, but that data needs to be stored somewhere. Micron’s memory chips handle that part. Demand is so strong that Micron has basically sold out this year and is already pre-selling next year. Johnson says earnings could grow anywhere from 250 to 400 percent, yet the stock trades at around six times earnings. He calls that valuation “a joke.”
Onto Innovation (ONTO)
AI chips are built in layers, and they’re getting more complex. An error of just one micron can make the whole chip worthless. Onto’s equipment helps prevent that, and Johnson says you’ll find it in the foundries of chipmakers like Intel and Taiwan Semiconductor. The stock trades at 18 to 19 times earnings, with earnings growing 35 to 40 percent.
Applied Digital (APLD)
Applied Digital builds and operates data centres, and Johnson said he thinks its revenue could quadruple by 2030. A lot of investors are betting against the stock, but he’s fine with that. If the growth story plays out, he expects those short sellers will eventually have to buy back in, which could give the stock another boost. The shares have been choppy, and he sees the dips as buying opportunities.
CoreWeave (CRWV)
CoreWeave leases space from Applied Digital and rents out AI computing power over the cloud. Johnson compares it to the rise of software as a service. Businesses that can’t build their own AI infrastructure can rent it instead, in some cases on leases as long as 15 years.
Marvell (MRVL)
Nvidia CEO Jensen Huang has said he thinks Marvell could be a trillion-dollar company. That’s roughly four times its current size. Marvell’s chips move data between all the different parts of an AI system, and Johnson says that makes it a must-have piece of the AI stack.
GE Vernova (GEV)
Data centres need power, and GE Vernova’s approach borrows from jet engines. Instead of running jet fuel through an engine on a plane’s wing, it runs natural gas through a turbine to generate electricity on site. The company is sold out this year and next, with a record backlog. Johnson says the bigger issue is that GE Vernova can’t build turbines fast enough, which is why it’s adding factory capacity.
Sterling Infrastructure (STRL)
Sterling used to build cell towers and telecom relay stations before shifting its focus to data centres. Johnson first bought the stock around $50 and sold all his shares after it topped $1,000. Now that it’s back below $500, he’s buying again. He expects the number of U.S. data centres to double or triple over the next several years, with more of them built near natural gas sources in places like Texas, away from population centres.
The Ticker Take
Johnson isn’t brushing off the concerns about AI. But he thinks the selloff has gone too far. In his view, the companies building the AI ecosystem are tomorrow’s leaders, and right now, some of them are on sale.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.
