The $100 Trillion AI Reset (5 Stocks Smart Investors Are Loading Up On)

AI is making a huge comeback this week, but is it still just the beginning of the growth? Joining us today is Louis Navalier with InvestorPlace. So glad to have you back on the show. Louis, you have a brand new report out. You've been talking a ton about the $100 trillion AI reset. And I want to talk about what that means exactly for the market. We're going to get into that. And you have five different stocks that you are looking at, where all of this investment and all this money is going. We're seeing that in the market this week. But let's start with what's happening right now. With the week just wrapped up, it was a wild week in the market with some of these AI stocks seeing almost 50% gains in just five days of trading. So why are we seeing such a comeback in such a short time, especially in these AI and tech-related stocks? Well, two reasons. One is we've had the strongest analyst earnings revisions in five years in the last several days. And that definitely got a lot of excitement. Furthermore, to be just totally honest with you, it's just time to party. And it's gravitating to wherever the earnings are. The order backlogs on all the AI stocks are just nuts. You know, we had Taiwan Semi, as an example, just announced 41% sales growth, 58% earnings growth. So that gets all the other stocks in the sector excited. So this is where the growth in the economy is. Half of the construction in America is now data centers. And the order backlogs are real. So this isn't going to go away. I want to talk about those real numbers that are showing up in the earnings report. We're seeing the demand is wild. The backlogs are wild for so many of these AI companies. But for some reason, for the first start of this year, a lot of these AI names were hit hard. The stocks were on a major downtrend for weeks in a row. And I'm curious to see, you know, what was behind that? And is this why we're seeing such a huge and fast recovery right now? Because what did those stocks even move down on in the first place? Stocks oscillate in a certain pattern. I calculate the range and the risk. And so if a stock goes up 12%, it's got to pull back at least 4%, usually. Usually a third to two thirds. But good stocks always bounce right back. And bad stocks fall like rocks. So I like to say we have fresh tennis balls in our portfolios because the stocks just bounce right back. Market makers out there. So this is Citadel, Jane Street, Hudson Valley, Virtue Financial. These are the rhythmic firms that make markets. And they run a lot of mean reversion programs out there. So if they see stocks gap up, get to the high end of their range, look like they're overbought on an oscillator, they'll often just run a mean reversion program to take the stocks down. This is the mechanics behind the scenes in market making nowadays. And that's why what goes up sometimes has to go down. But if you just stick to the fundamentals and keep your head down, it's fine. I know that fundamental argument is what you were going to make for one of the most controversial AI stocks in the market right now. It's the last stock on your list today. So we're going to dive deeper into Louis's fundamental no worry approach to the market, even with all of the volatility we're seeing right now. There are plenty of investors who are feeling some worries and concern about the future of the AI trade. You also can't deny the amount of money and the amount of capital all going into the sector. There's a lot of people who are cautious about AI, who are fearful of an AI bubble. And yet the fundamental, the cash is flowing there and it shows up everywhere. And that is what your report is. Again, I'm just going to tease this really quick. It's $100 trillion AI impact. It's a reset of the entire market to the tune of $100 trillion, which is an incredible amount of money. And we know we're seeing that money show up at a lot of these stocks. If you want to check out Louis's special report, we have a special offer for you watching today. You can scan the QR code or click the link in the description to learn more from his growth investor newsletter and the special report on the $100 trillion AI reset. But let's get into the five names that you have for our viewers today. We have a lot to talk about. It was hard to narrow down the list because there's so many stocks in the AI sector that are getting a ton of growth right now. But you're going to cover a few different areas where investors should be looking for where all of this investment in AI is showing up in the market. What's that first stock on your list? Well, a new one we're recommending is NVT. That's NVET Electric. It's actually a British company, but they make a lot of the electrical components that go in the data centers. They're also helping with the water cooling to keep the chips cool. They really kind of compete more with Vertiv, the RT, which is another stock we've recommended for years and a very, very popular stock. Yeah, this is a new one. And of course, data centers is a worldwide phenomenon, but they sell those components in America as well. Yeah, this stock has been doing very, very well, much like Vertiv, seen incredible growth in the last year. And it's just a good example of a sector to be looking at in this whole construction field. I feel like right now is the time when most of the money in AI is flowing into the infrastructure build-out for companies like this. How long do you think that growth can last? Is this build-out going to be over in a couple of years or will companies like this one continue to benefit well into the AI story? Most companies have a three-year order backlog, so it's going to continue for some time. There's also an upgrade cycle. Good example is NVIDIA's sales earnings are still accelerating and they announced that they're going to have 100% sales growth in 2027. So what's going on is the Vera Rubin chips will start to replace the Blackwell chips. And then of course, there'll be a successor to Vera Rubin in 2028. The upgrade cycle is also going to drive this, but right now it's mostly just the construction cycle, getting more data centers out there. That's very exciting. And obviously one of the strongest performers has been the companies that generate electricity for the data center. So obviously the grid isn't strong enough to provide electricity for data centers. So what companies do is they get their own natural gas line and they can either hook up a turbine, thanks to GE Vernova, Siemens or Mitsubishi. We own GE Vernova. But the hot one is Bloom Energy, which is natural gas fuel cells and Oracle just upped their contract. So that backlog is just unbelievable. Generating electricity from fuel cells is perceived to be more efficient than spinning a turbine. The tech people do like green energy and they do like natural gas fuel cells. Yeah, Bloom Energy is the second stock on your list today. And this one has been wild. The growth story in the last five days for Bloom Energy has been over 30% and even more in some cases. Why the quick comeback for this stock? I mean, it's already had so much growth this year. What was behind the huge increase we saw just this last week? Just the announcement that Oracle was upping its orders. That's all. Simple as that. We know it has an incredible order backlog. They cater mostly to Oracle, which is trying to be the biggest data center firm in America, and Brookfield, which owns a lot of data centers. And you can always tell when there's a Bloom Energy facility because it doesn't usually have the generators and other things that most data centers have. It's very exciting. And they just bypass the electric grid and generate their electricity. And thank goodness we have lots of natural gas to burn in America. The one thing with Bloom that stands out for most investors, it's grown so far and so fast that it might be hard to look at getting into right now. It's way above where any analysts have an estimate or a price target for this stock as well. And so what do you do specifically when you're looking at stocks like this one that have run up so big so fast? Is it a time to actually be looking at getting into this stock? What's your advice? Well, we are over our skis right now, just to be honest with you. A growth investor has surged well over 20% this year. We are not normally 10 times the S&P at the start of the year, but it just shows you how narrow the market's been. But I'm not worried because I'm only trading at 15 times next year's estimated earnings. In small cap, I'm trading at 4.9 times next year's estimated earnings. So people have to realize when you have this tremendous earnings growth, it shoves the P ratio down. In the fourth quarter, our earnings were up over 100%. And that really compresses the P ratios. So I'm not worried at all, but I'm always looking at forecasted earnings. And I just think a lot of the naysayers out there are basically un-American weenies, to put it lightly. I fight with people all the time that bring that up. And I'd say, what are you scared of? I mean, here's the numbers, here's the accounting, here's the order backlog. What is wrong with you? Yeah, there's definitely some different investment theories out there. And I think a lot of retail investors are scared of looking at a stock that's had such a huge run-up right now. But I think you make a great argument. It's nice to hear different perspectives on what you look for. And that's looking at what money is actually coming in the door in the next year. And the backlogs are a great way to look at that. Let's move on to the third stock on your list. You've got a few more names to cover. What's the third company that you're looking at? Well, as far as the build-out, I mean, the easiest one is Comfort Systems, which is FIX. They're basically a commercial air conditioning company because you have to cool the data centers. And of course, the data centers like to go to dry areas or deserts so they can vent them at night when it's cold. But Comfort Systems just has a booming business and an incredible order backlog as well. So that's FIX. This isn't necessarily an AI-forward company, and you're not looking at a chipmaker or something directly tied to AI. Is this a pure construction play? It is a commercial air conditioning contractor. Interesting, but of course, in high demand with all of the data center build-outs. Are you able to tell, you know, looking at their business and looking at their earnings reports, how much of their business and their growth right now is tied to that data center build-out? Has it become their primary form of income? Yeah, it's over 60%. Yeah, so that's one way to show that AI is making a huge impact on every field, even commercial air conditioning companies. There's a lot of different areas that we could look at when we're talking about all of the money going into AI. Again, you go into that in your report of the different areas to look at in the market on this entire AI reset of the whole market. Really every company is going to be touched by this, but where those dollars might be flowing is what you have in your special report. So you can scan the QR code. Again, there's a link in the description if you want to look at that. We have two more stocks to get into, Louis. I'm really excited for the last one you're talking about on this list because I know it's a controversial take, so that'll be a good discussion too. But what's the fourth name that you're looking at? Well, there's a memory bottleneck. So that's helped both the chip companies and the disk drives, storage companies. Most disk drives are now solid state, but Seagate is my favorite pick there, but all their competitors are also doing very well. So Seagate STX is my favorite. Why is Seagate your favorite? Again, there's so many memory companies to look at right now. They're all doing incredibly well. They've all had tremendous growth. Seagate, talking about a stock being above its skis a little bit, it's grown so much in the last year. We just talked about SanDisk on the show. That one was up over 2,500% in one year. I mean, the growth stories have been wild. Yeah, and I think Western Digital was the best performing stock last year, and that's another competitor. So here's why I like Seagate slightly better. We have an eight-factor fundamental model. We score stocks on sales growth, margin expansion, earnings stability, earnings momentum, cash flow, return on equity, announce earnings revisions, and earnings surprises. And Seagate just scores a bit higher, okay? So what I do is I step in and ride wave after wave of positive announce earnings revisions. Analysts are notorious for underestimating earnings. They're very slow to upgrade. They move in a pack like lemmings. And so our success is really stepping into where the analysts are starting to upgrade stocks and just riding that wave. And we'll ride them as long as they're surprising, okay? And normally, we used to hold stocks 15-plus months or five quarters. Now we're holding stocks two, three, four years because the data center build-out is just not letting up. Even NVIDIA still has accelerating sales earnings momentum. That's unbelievable. For a $5 trillion company, that's unbelievable. But that's where we are at this moment. It's great to hear how you're analyzing these stocks and also see the contrarian approach that you have to the stocks that you're looking at, the stocks that you are bullish on the most. And a contrarian view is the only way to look at your last stock pick and stock recommendation on this list today. This is one that I know our viewers are gonna have something to say about. Let's get into it. Okay, that's Supermicro and I'm still at 500% in it. I got in it way before everybody else. One of the reasons is I have friends in the cloud computing business and they made it very clear that Supermicro makes the best water-cooled rack systems. And you can always tell them at the data centers because their water cooling's on the outside of the building. So their order backlog is ridiculous. And at one time it was approaching five years and then the short sellers went after them, arguing the way they were booking the orders wasn't appropriate. Well, I used to do accounting, okay? So I dug into it. I didn't see anything wrong, okay? And I didn't see any Alice cuts. So I rode through all its trials and tribulations with the auditors quitting, which in my opinion, Ernst & Young was just a weenie. All the short seller, originally shorted, went out of business. Where we are now is there's a life cycle on Wall Street. If somebody starts to beat up a stock or create a narrative, you know, it lasts for a while. A lot of people copy each other. I don't know if it's plagiarism or what it is, but they have a founder. One of their co-founders is a slightly caustic person. Brilliant engineer, but not very patient with the media, the analyst community, and accountants and lawyers. So he got indicted for allegedly selling the water-cooled rack systems. They were built in Taiwan and apparently shipped to China. And he's been indicted on that. And he has resigned from the company. So a lot of us are relieved because we don't have this caustic guy to deal with anymore, even though he's a brilliant engineer. Now, Supermicro is 9% of NVIDIA sales and their order backlog is ridiculous. Their sales are supposed to be up 171% next quarter. So that's why we're holding it because it trades at less than 10 times earnings. I think it's going to get bought out, personally. I mean, there are no analyst cuts. It looks pretty solid to me. Their margins did get squeezed temporarily, but it's still a very profitable company. And the margins look like they're trying to re-expand here. So I'm very encouraged. But I didn't want to sell it because I was at 500% and I didn't want to take the tax hit. And also I had no better stocks to go to. Supermicro has the second strongest sales growth of all the stocks I recommend. So interesting looking at the numbers behind the controversy on this one. Let's talk about the real losses that investors might be dealing with. A lot of retail investors were really interested in S&CI back in 2023 when it started to have that huge surge. We saw that 115, 120 price. It hit back in March of 2024 and it's now a $25 stock. It's had so much volatility. I think there's investors who have lost real money on this stock. They've been burned too much. They're not interested at all because of how badly they've been burned with this stock. What are your thoughts when it comes to a name like this that's been so volatile, that's had so many ups and downs and also the trust issues with the accounting, the issues behind the scenes. Any other thoughts for those investors who might be feeling that way about S&CI? Those are all good points. Normally, when a stock gets hit, rightly or wrongly, it will go into shock and basically sit there and look stupid for two years. Supermicro had that phase for a while but when they guided higher on sales in the previous quarter and beat big time, all was forgiven. I'm just following the fundamentals. I'm keeping my head down. Had analyst cut estimates, I would have got out of the stock but I didn't see any analyst cuts and I just happened to know that their order backlog is ridiculous. So NVIDIA is not giving up on them. NVIDIA has a great relationship with them. Again, they're 9% NVIDIA sales. So we're going to ride through this. And again, had I not been up 500%, it might've been more tempting to sell and step aside for several months but I didn't want to take the capital gain. And so we're sticking with it and there are class action lawsuits against the company for a little whoop-de-doos. They do have a new auditor account and everything's fine. And I think everything would have been fine under Ernst & Young. I think they just quit because that was more of a political decision. All these accounts pack a lot of errors on emissions insurance and they probably didn't want to claim, so they quit. But they got a new auditor and everything's fine. All right, so for you, everything's fine as far as holding this stock but what about investors maybe thinking about adding this to their portfolios where it is right now, given all of the risks and the controversy behind this name, is this an add to your portfolio where it stands today? Officially on my system, we rate it as a whole but I have no problem with somebody wanting to buy it but they should buy it for the fundamentals. They should buy it for the sales growth. They should buy it on the hope that it gets bought out because it trades under 10 times forecast earnings but it is going to be more volatile stock. But I don't see much downside to Supermicro with the incredible sales growth. Again, I'm writing analyst earnings revisions if and when the analysts trim estimates or get more cautious on the stock or downgrade it from a strong buy to a buy, you know, any of those little things, I'll be on top of that and that would cause me to eventually trim the stock. Right now, it's lock and load on this sector. We got to cool the chips and Supermicro makes the best devices. All right, that's a good hot take on SMCI. I'd love to hear what our viewers think in the comments. If you want to hear more from Louis, he was on our show just about a month ago. Make sure to check out our most recent interview here too.