Why AI Stocks Are Falling (And What to Buy Now)

AI-generated source summary

The market experienced significant downturns over the past two weeks due to concerns about AI spending, higher interest rates, and geopolitical events. Semiconductor stocks, including CRW and NVDA, have been hit hard, with CRW showing a year-to-date drop of 36.2% and NVDA down 4.40% as of the latest data. However, the analysis suggests that the market's fears may be overblown. Despite project delays and some companies like Microsoft pulling back on data center investments, the underlying demand for AI infrastructure is strong. Companies like OpenAI and Anthropic continue to show robust growth, with OpenAI's gross ARR reaching $70 billion and Anthropic's at $74 billion. The combined ARR growth for these two companies is re-accelerating, driven by OpenAI's performance. The analysis highlights that while individual companies may experience slowdowns, the overall AI market pie is growing. The valuation of semiconductor stocks is at its cheapest since ChatGPT launched, trading below previous lows, which presents a potential buying opportunity. Key players in AI networking like Lumentum and Astera Labs are considered attractive due to depressed valuations and strong fundamentals, with earnings reports expected to confirm this strength. The overall thesis is that while the market is currently jittery due to geopolitical sentiment and broader economic concerns, the fundamental demand for AI and related infrastructure remains strong, suggesting a potential rebound in the coming months. The analysis emphasizes a focus on long-term growth, with AI infrastructure spending projected to reach $1.2 trillion by 2030, indicating a significant opportunity despite short-term volatility.

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