After enduring last week’s steep selloff, AI stocks are now roaring back to life, driven higher by strengthening fundamental trends. In fact, the Global X Artificial Intelligence ETF (AIQ) is already up about 8% off of last Monday’s lows. And we believe this is just the start of the AI Boom ‘reheating’ and AI stocks getting their winning groove back.
But as the bullishness returns, we suggest that investors focus on a different type of AI stock than what dominated on Wall Street over the past two years.
That is, ever since the AI Boom started in late 2022, a particular type of AI stock – what we like to call the ‘AI Builders’ – have been the biggest winners. These are the stocks involved in building the infrastructure necessary to support the Age of AI. Think things like AI chips, data centers, networking, and related equipment.
Those AI Builders have been all the rage. For example, from late 2022 to mid-2024, AI chipmaker Nvidia (NVDA) saw its stock soar more than 600%. And AI server supplier Super Micro (SMCI) rallied about 800%.
The ‘Builders’ dominated the first phase of the AI Boom.
But now, it looks like we may be moving into this boom’s second phase, wherein the ‘AI Appliers’ will dominate.
Phase 2 of the AI Boom: Ushering in Wall Street’s Next Champions
In our view, the first phase of this boom was all about building the infrastructure necessary to create AI applications. The second phase will be all about applying AI to create real-world value.
And it appears we are entering that phase right now.
Recently, law enforcement tech solutions provider Axon (AXON) launched a new AI product called Draft One, which automatically writes first drafts of police reports using data extracted from police body cameras. That’s hugely value-additive. And the results speak for themselves. Just last week, Axon said Draft One is seeing record demand, building an order pipeline of over $100 million in just three months.
Meanwhile, AI lending firm Upstart (UPST) has forever tried to disrupt the credit lending markets with AI. But the firm has proven unable to do so – until recently. Just last week, Upstart said massive improvements in its AI modeling are improving deal flow and powering big profit margin expansion, offering investors the first-ever sign that maybe… just maybe… Upstart could use AI to redefine the lending markets.
And just yesterday, enterprise software provider Monday.com (MNDY) said that its new general AI (genAI) chatbot is successfully resolving about 50% of the customer service tickets it sees. This is allowing Monday.com to address more customer service tickets without as many customer service agents, driving incremental revenue growth while cutting costs. That’s why the company reported 30%-plus revenue growth and 130%-plus operating profit growth in its most recent quarter.
The Final Word on Winning AI Stocks
Folks, to us, the writing is on the wall. Companies are broadly figuring out how to innovatively deploy new AI applications to create real-world economic value.
And the AI Appliers should reign supreme.
That’s why we think those stocks could be the biggest winners as the AI Boom regains steam over the next few months.
After all, AXON is up more than 40% this year. MNDY stock has rallied almost 40% over the past three months. And UPST has rocketed over 40% in just the past 10 days.
Clearly, the AI Applier stocks are catching fire. And we think they’ll be the leaders on Wall Street for the foreseeable future.
Be sure not to miss out on this big pivot. It will likely prove to be a fantastic way to profit in the Age of AI.
Learn which stocks we expect will be the market’s biggest winners.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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