Back to top

Image: Bigstock

2 AI Stocks Not Named Nvidia or SMCI to Buy on the Dip

Read MoreHide Full Article

Wall Street bulls pushed the S&P 500 and the Nasdaq to fresh highs again on Thursday following the May CPI release and the Fed’s latest meeting midweek. Investors are comfortable with Jay Powell’s message that the inflation fight isn’t over because the Fed is still expected to start cutting rates in 2024.

The anticipation of lower rates and the impressive earnings outlook for the S&P 500 and the tech sector are fueling the stock market rally.

The bottom-line growth appears stellar, driven by revenue growth and huge margins expansion. The nearby chart highlights the tangible strength of the AI boom on tech stocks and the broader tech-driven market.

Zacks Investment Research
Image Source: Zacks Investment Research

Despite the bullish backdrop, the stock market will no doubt experience a healthy pullback at some point in 2024, and it might come sooner than later with the Nasdaq approaching overheated levels.

Whenever the market experiences its next wave of profit-taking, investors might want to watch their favorite stocks and start buying when they slide to key short-term and long-term moving averages.

Speaking of, the two AI-focused stocks we dive into today not named Nvidia ((NVDA - Free Report) ) or Super Micro Computer, Inc. ((SMCI - Free Report) ) have already experienced pullbacks and might be worth buying on the dip in June.

Vertiv Holdings Co ((VRT - Free Report) )

Vertiv’s power, cooling, and IT infrastructure solutions and services operate across data centers, communication networks, and beyond. Vertiv’s critical digital infrastructure and continuity solutions are helping it transform into a Wall Street star.

VRT will grow alongside the booming world of big data and the AI super-cycle no matter which tech giants, from Alphabet to Nvidia, come to dominate the industry.

Zacks Investment Research

Image Source: Zacks Investment Research

Vertiv’s job is to keep all of the computing power needed to drive the modern economy running as smoothly as possible around the clock.

Vertiv even partnered with Nvidia on a project to help solve future data center efficiency and cooling challenges. Vertiv posted 14% sales growth during its first two years as a public company and 21% top-line expansion last year.

VRT grew its Q1 2024 organic orders by 60% and closed with a record $6.3 billion backlog, “reflecting increasing pipeline velocity and acceleration of AI-driven demand,” according to CEO Giordano Albertazzi. Vertiv is projected to post 13% revenue growth in 2024 and 12% higher sales next year, adding nearly $2 billion to the top-line between FY23 and FY25 to reach $8.61 billion.

Vertiv is projected to boost its adjusted earnings by 37% and 29%, respectively the next two years—after posting over 200% EPS expansion in FY23.

Zacks Investment Research
Image Source: Zacks Investment Research

Vertiv’s earnings outlook has surged over the last year and since its Q1 release to help it land a Zacks Rank #2 (Buy). Vertiv stock has soared 900% in the past two years and 315% during the last 12 months—Nvidia is up 200% in the past year. VRT is trading around 13% below its highs and finding support at its 50-day moving average.

Vertiv pays a dividend and is repurchasing stock. Plus, 10 of the 11 brokerage recommendations Zacks has for Vertiv are “Strong Buys.”

Constellation Energy ((CEG - Free Report) )

Constellation Energy is a nuclear energy titan that produces roughly 10% of all clean and renewable energy in the U.S. Constellation benefits from the energy-focused aspects of the Inflation Reduction Act, helping provide a price floor for nuclear power and put it on a level playing field with other clean energy sources.

Once shunned, nuclear is primed to transform into the powerhouse of the global energy transition. The U.S. co-led in December 2023 a coalition of over 20 countries from four continents that pledged to triple nuclear energy capacity by 2050.

Zacks Investment Research
Image Source: Zacks Investment Research

Nuclear energy will grow as the world attempts to transition away from fossil fuels as energy demand soars to fuel the AI boom. Constellation is already partnering with big tech firms for nuclear power and CEG is attempting to be at the cutting edge of next-gen nuclear reactors.

Constellation plans to expand through mergers and acquisitions and return more capital to shareholders via buybacks and dividends.

Zacks Investment Research
Image Source: Zacks Investment Research

Constellation has soared since its early 2022 IPO following a spinoff. CEG skyrocketed after it announced in February 2024 its plans to grow its dividend per share by 25% in 2024, exceeding its 10% annual growth target. The firm is also targeting long-term base EPS growth of at least 10% through the decade. CEG’s impressive upward earnings revisions help it earn a Zacks Rank #2 (Buy).

Constellation is the fourth-best performer in the S&P 500 in 2024, up 86% to lag only Super Micro, Nvidia, and Vistra. Constellation slipped recently after its massive run to trade around 7% below its highs.

CEG’s downturn didn’t last long, with it back above its 21-day moving average. Constellation appears worth considering as a play on compounding megatrends of nuclear energy and AI.

Published in