Artificial intelligence stocks tanked on Monday following a potential breakthrough from Chinese AI company DeepSeek.
The news sent Nvidia and the entire AI trade including nuclear energy companies and infrastructure stocks tumbling.
Wall Street quickly started buying some of the hardest-hit AI stocks on Tuesday. The reasons investors might want to start taking advantage of the potential AI stock sale are twofold.
Why It’s Time to Start Buying Beaten-Down AI Stocks
First, soaring artificial intelligence ecosystem stocks were due for a hearty recalibration. The massive one-day selloff helped blow away a ton of the froth, washing away six months-plus worth of gains in many cases.
The selloff offers investors the chance to buy great AI stocks at some of their lowest prices and cheapest valuations since the summer.
Image Source: Zacks Investment Research
Second, Wall Street and the biggest technology companies in the world, who are investing hundreds of billions of dollars into AI, are unlikely to be proven completely wrong.
Investors must ask themselves if the AI boom that Nvidia, Meta, Microsoft, and others have gone all in on is over because one company few had heard of until a few days ago claims to have changed the entire AI industry overnight.
With this in mind, technology investors should start buying some of the best-in-class AI stocks at deep discounts.
Why Vertiv is a Strong AI and Tech Stock to Buy
Vertiv Holdings Co (VRT) is a picks-and-shovels investment in the massive expansion of data centers, AI, and other compute-heavy innovations such as cryptocurrencies. Vertiv helps the computing power needed to drive the modern economy and the AI boom run as smoothly as possible around the clock.
Vertiv’s hardware, software, analytics, and ongoing services portfolio is focused on power, cooling, and IT infrastructure. Vertiv’s product categories include critical power, thermal management, racks & enclosures, monitoring & management, and beyond.
Image Source: Zacks Investment Research
Wall Street has fallen in love with Vertiv’s ability to grow no matter what companies eventually dominate AI. Plus, VRT is working with Nvidia (NVDA) to help solve critical, behind-the-scenes challenges facing the rapid expansion of AI and its sustained growth.
It makes sense that 14 of the 16 brokerage recommendations Zacks has for Vertiv are “Strong Buys.”
Vertiv posted another beat-and-raise quarter in Q3. The company’s upbeat outlook was driven by “robust underlying demand” for its critical digital infrastructure products and services across its entire “AI-enabling portfolio of power, thermal, IT systems, infrastructure solutions and services.”
Vertiv is projected to grow its adjusted earnings per share (EPS) by 53% in FY24 and 33% in FY25 to $3.58 per share. Vertiv’s strong EPS growth outlook comes on top of its 230% expansion last year.
Image Source: Zacks Investment Research
Vertiv has topped our ESP estimates by an average of 10% in the trailing four quarters, and its earnings outlook has continued to improve over the last few years.
Vertiv is projected to boost its sales by 14% in 2024, adding roughly $1 billion to the top-line. VRT is expected to follow that up 17% sales growth in 2025 to $9.12 billion—adding over $2 billion to the top-line vs. 2023’s $6.86 billion.
Time to Buy Vertiv Stock On the Dip
VRT stock has ripped 700% higher in the past two years to blow away Nvidia’s 545% and Tech’s 90%. Vertiv has climbed by 96% in the past 12 months to match Nvidia and crush Tech’s 26%.
This performance includes Vertiv’s roughly 30% drop from its peaks last week. At $110.46 a share, VRT trades around 37% below its average Zacks price target.
Image Source: Zacks Investment Research
The selloff helps Vertiv trade 35% below its highs and closer to the Tech sector at 29.2X forward 12-month earnings.
VRT’s impressive long-term earnings growth outlook helps the stock trade at a 55% discount to Tech, with a 0.8 PEG ratio.
Vertiv stock found support at its 200-day moving average and its late-May heights. The 200-day proved to be the line in the sand earlier this year for VRT. On top of that, VRT is trading at its most oversold RSI levels over the last two years.
— Benjamin Rains
Want the latest recommendations from Zacks Investment Research? [sponsor]Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.
Source: Zacks