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AI & Defense Players Capture Q2 Investor Interest: 2 Stocks to Buy Now
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Key Takeaways
NVIDIA is benefiting from sustained AI infrastructure demand despite higher rates and slower growth.
NVDA reported Q4 data-center revenues of $62.3B, up 75% year over year amid AI expansion.
Howmet Aerospace raised 2026 guidance as defense spending and aircraft demand strengthen backlogs.
Wall Street entered the second quarter of 2026 expecting rate cuts, but by late April and especially after the May inflation data, those expectations have weakened materially. Inflation has remained sticky, labor markets are still resilient and geopolitical tensions have pushed energy prices higher again.
As a result, investors are no longer chasing every growth theme indiscriminately. Capital is now concentrated in sectors that can either sustain earnings growth in a high-rate environment or benefit directly from inflationary and geopolitical pressures.
Against this backdrop, two sectors have become the primary focus of investors — AI-driven Technology and Energy/Defense with stocks like NVIDIA (NVDA - Free Report) and Howmet Aerospace (HWM - Free Report) attracting strong institutional inflows due to earnings visibility, pricing power and long-term demand resilience. Let’s delve deeper.
According to the U.S. Bureau of Labor Statistics (BLS), consumer inflation accelerated in April 2026, with headline CPI (Consumer Price Index) rising 3.8% year over year compared with 3.3% in March. Energy inflation surged 17.9%, becoming one of the biggest factors behind renewed pricing pressure.
At the same time, the labor market has remained firmer than expected. The U.S. economy added 115,000 jobs in April, significantly above economists’ consensus forecasts of roughly 62,000 (Reuters), while unemployment held steady at 4.3%. March payrolls were also revised upward to 185,000. Although hiring has moderated from prior years, labor conditions remain sufficiently stable to prevent the Fed from pivoting aggressively toward monetary easing.
Financial markets reacted sharply after April inflation came in hotter than Reuters’ consensus estimates. U.S. headline CPI rose 3.8% year over year versus economists’ expectations of 3.7%, reinforcing concerns that the Federal Reserve may keep interest rates elevated for longer.
2 AI and Defense Stocks Gaining Focus in Q2
Image Source: Zacks Investment Research
AI-focused technologyremains one of the strongest themes in the second quarter of 2026, with NVIDIA continuing to attract investors seeking earnings resilience in a volatile macro backdrop. Unlike many cyclical technology companies, NVIDIA is benefiting from structural AI spending that remains largely unaffected by elevated interest rates and slowing economic growth. Hyperscalers, sovereign governments and enterprises are still aggressively expanding AI infrastructure, creating sustained demand for advanced GPUs and AI networking systems.
In its last-reported fiscal fourth-quarter 2026 release, NVIDIA reported data-center revenues of $62.3 billion, up 75% year over year. Management also highlighted growing adoption of agentic AI and introduced its next-generation Rubin AI platform, supporting long-term demand visibility. Strong partnerships with Microsoft, Amazon, Meta and OpenAI further position NVIDIA as a direct beneficiary of ongoing global AI-capex expansion.
This Zacks Rank #2 (Buy) stock has gained 28.5% since April 1. In the second quarter of fiscal 2027 (ending July 2026), the company is projected to report earnings growth of 82.9% over the year-ago reported number.
Image Source: Zacks Investment Research
Defense and Energy stocks are also gaining momentum in the April to June quarter, with Howmet Aerospace emerging as a strong beneficiary of rising global aircraft and defense demand. Persistent geopolitical tensions, expanding defense budgets and accelerating commercial-aircraft production have improved long-term order visibility across the aerospace supply chain. Unlike many industrial companies exposed to weaker consumer spending, Howmet benefits from long-cycle aerospace programs and sustained demand for high-performance engine components and fastening systems.
In its first-quarter 2026 earnings release, Howmet raised its full-year guidance after reporting strong growth across both commercial aerospace and defense markets. The company expects continued strength in jet-engine demand and robust aerospace backlog trends, indicating that defense modernization and aircraft-production expansion could continue supporting earnings growth through 2026.
This Zacks Rank #2 stock has gained 14.2% since April 1. In the second quarter of fiscal 2026 (ending June 2026), the company is projected to report earnings growth of 30.8% over the year-ago reported number. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
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AI & Defense Players Capture Q2 Investor Interest: 2 Stocks to Buy Now
Key Takeaways
Wall Street entered the second quarter of 2026 expecting rate cuts, but by late April and especially after the May inflation data, those expectations have weakened materially. Inflation has remained sticky, labor markets are still resilient and geopolitical tensions have pushed energy prices higher again.
As a result, investors are no longer chasing every growth theme indiscriminately. Capital is now concentrated in sectors that can either sustain earnings growth in a high-rate environment or benefit directly from inflationary and geopolitical pressures.
Against this backdrop, two sectors have become the primary focus of investors — AI-driven Technology and Energy/Defense with stocks like NVIDIA (NVDA - Free Report) and Howmet Aerospace (HWM - Free Report) attracting strong institutional inflows due to earnings visibility, pricing power and long-term demand resilience. Let’s delve deeper.
Sticky CPI, Stable Labor Market Drive Q2 Sector Focus
According to the U.S. Bureau of Labor Statistics (BLS), consumer inflation accelerated in April 2026, with headline CPI (Consumer Price Index) rising 3.8% year over year compared with 3.3% in March. Energy inflation surged 17.9%, becoming one of the biggest factors behind renewed pricing pressure.
At the same time, the labor market has remained firmer than expected. The U.S. economy added 115,000 jobs in April, significantly above economists’ consensus forecasts of roughly 62,000 (Reuters), while unemployment held steady at 4.3%. March payrolls were also revised upward to 185,000. Although hiring has moderated from prior years, labor conditions remain sufficiently stable to prevent the Fed from pivoting aggressively toward monetary easing.
Financial markets reacted sharply after April inflation came in hotter than Reuters’ consensus estimates. U.S. headline CPI rose 3.8% year over year versus economists’ expectations of 3.7%, reinforcing concerns that the Federal Reserve may keep interest rates elevated for longer.
2 AI and Defense Stocks Gaining Focus in Q2
Image Source: Zacks Investment Research
AI-focused technologyremains one of the strongest themes in the second quarter of 2026, with NVIDIA continuing to attract investors seeking earnings resilience in a volatile macro backdrop. Unlike many cyclical technology companies, NVIDIA is benefiting from structural AI spending that remains largely unaffected by elevated interest rates and slowing economic growth. Hyperscalers, sovereign governments and enterprises are still aggressively expanding AI infrastructure, creating sustained demand for advanced GPUs and AI networking systems.
In its last-reported fiscal fourth-quarter 2026 release, NVIDIA reported data-center revenues of $62.3 billion, up 75% year over year. Management also highlighted growing adoption of agentic AI and introduced its next-generation Rubin AI platform, supporting long-term demand visibility. Strong partnerships with Microsoft, Amazon, Meta and OpenAI further position NVIDIA as a direct beneficiary of ongoing global AI-capex expansion.
This Zacks Rank #2 (Buy) stock has gained 28.5% since April 1. In the second quarter of fiscal 2027 (ending July 2026), the company is projected to report earnings growth of 82.9% over the year-ago reported number.
Image Source: Zacks Investment Research
Defense and Energy stocks are also gaining momentum in the April to June quarter, with Howmet Aerospace emerging as a strong beneficiary of rising global aircraft and defense demand. Persistent geopolitical tensions, expanding defense budgets and accelerating commercial-aircraft production have improved long-term order visibility across the aerospace supply chain. Unlike many industrial companies exposed to weaker consumer spending, Howmet benefits from long-cycle aerospace programs and sustained demand for high-performance engine components and fastening systems.
In its first-quarter 2026 earnings release, Howmet raised its full-year guidance after reporting strong growth across both commercial aerospace and defense markets. The company expects continued strength in jet-engine demand and robust aerospace backlog trends, indicating that defense modernization and aircraft-production expansion could continue supporting earnings growth through 2026.
This Zacks Rank #2 stock has gained 14.2% since April 1. In the second quarter of fiscal 2026 (ending June 2026), the company is projected to report earnings growth of 30.8% over the year-ago reported number. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research