The AI trade's next winners

It seems every day there’s a new headline fueling the AI selloff.

First, investors rotated out of hyperscalers as concerns mounted over ballooning AI spending. Then came China: CXMT’s blockbuster IPO stoked fears that it could chip away at US rivals like Micron, while reports of Chinese-built immersion deep-ultraviolet (DUV) lithography machines raised concerns that ASML’s long-held dominance in chipmaking equipment could come under threat.

The result: More than $1 trillion has been erased from the world’s biggest chip stocks since last week’s close, with Nvidia, SK Hynix, Samsung Electronics, Micron, AMD, and TSMC each shedding more than $100 billion in market value.

But big selloffs often bring big opportunities. Let’s take a look at where Wall Street says your money should go next.

What Wall Street is buying

UBS says this selloff shouldn’t come as much of a surprise after months of surging valuations. The bank still expects AI and its supporting infrastructure to remain a major market driver—but says the winners will increasingly come from outside today’s handful of mega-cap tech stocks.

Morgan Stanley agrees, noting that the recent pullback has created an especially attractive buying opportunity across the broader AI ecosystem in the following industries:

• AI infrastructure: Applied Digital, Bloom Energy, SpaceX, Digital Realty, and TeraWulf
• Compute ecosystem: Nvidia, TSMC, ASML, Micron, and Samsung Electronics
• Chinese AI leaders: Alibaba, Tencent, and Kingsoft
• Energy security: Axia, Schneider Electric, Siemens Energy, Vistra, Talen Energy, and X-Energy
• Hyperscalers: Amazon, Meta, Microsoft, Alibaba, and Tencent

HSBC is even more bullish. The bank says it’s now “maximum overweight” equities, arguing investors have become too pessimistic about earnings. In fact, it notes that Big Tech and US stocks are trading at lower valuations than they were before the Iran conflict, suggesting there’s still upside ahead.

MFS Investment Management’s Robert Almeida, on the other hand, makes a different argument. Rather than chasing every AI winner, the chief global investment strategist prefers to focus on companies that consistently generate strong returns on invested capital. That leads him toward “compounders” like industrials (Amphenol, Schneider Electric, Honeywell), software (Salesforce, MongoDB), life sciences (Danaher, Thermo Fisher), and consumer staples (Diageo, Pernod Ricard).

From UBS to Morgan Stanley to HSBC, the broader message is clear: This looks more like a correction than the end of the AI boom. Wall Street is still bullish, and maybe you should be too.—SY