Key Takeaways
- JPMorgan analysts said the recent sell-off in tech stocks amid worries about an AI bubble could offer investors an opportunity to buy up shares of good companies at a discount.
- They listed 15 hardware and networking stocks exposed to AI that they believe are a bargain with “overblown” worries priced in, and strong fundamentals poised to drive gains.
Is it time to start buying tech stocks again?
JPMorgan says so, with analysts telling clients in a note Thursday—a day after Nvidia’s (NVDA) blockbuster earnings hit markets—that it could be time to go “bargain hunting” among the shares of hardware and networking companies that have taken big hits in recent weeks amid worries about an AI bubble.
The analysts listed 15 stocks particularly exposed to AI that they believe represent the biggest bargains, with the most “overblown” risk already priced in, and strong fundamentals that could leave them poised for big gains.
Most of the stocks JPMorgan recommends have declined between around 10% to 30% from their highs of the last four weeks, with one down nearly 40%, and one off just about 5%. Here are the analysts’ ideas.
Why This Matters for Investors
Tech stocks have pulled back in recent weeks amid worries about an AI bubble after a big run-up earlier this year. JPMorgan is suggesting some of those worries may be overdone, leaving the shares of many businesses with strong underlying financials and healthy businesses undervalued.
PC maker Dell (DELL), which has seen its stock lose one-quarter of its value from its late October highs, was one of JPMorgan’s picks. “This is despite risks into margins,” JPMorgan wrote, holding that investors under-appreciate Dell’s track record of effectively managing rising component prices. Analysts at Morgan Stanley double-downgraded the stock to “underweight” from “overweight” on Sunday, citing concerns about rising prices for components like memory chips.
JPMorgan highlighted server maker Arista Networks (ANET); laser systems leader Coherent (COHR)’ electronics manufacturing services providers Flex (FLEX) and Jabil (JBL); and connector maker Amphenol (APH) among its other choices.
These companies, along with Dell, derive most of their AI exposure from the largest Big Tech firms that are expected to keep investing in building out their infrastructure in the near term, and are likely to have more stable financing than less established players, JPMorgan said.
Server maker Super Micro Computer (SMCI), which counts leading AI chipmaker Nvidia among its partners, was also on JPMorgan’s list, along with Apple (AAPL) partner and smartphone glassmaker Corning (GLW), and optical components manufacturers Fabrinet (FN) and Lumentum (LITE).
Data storage provider Pure Storage (PSTG), high-speed networking firm Ciena (CIEN), data center supply chain solutions company Celestica (CLS), test equipment maker Teradyne (TER), and connector and sensor maker TE Connectivity (TEL) rounded out the list.
