The U.S. technology sector, especially, the artificial intelligence (AI) space, is crawling back to normalcy after the DeepSeek-led rout on Monday. DeepSeek raised questions particularly on AI infrastructure developers like chipset manufacturers, data center equipment providers and nuclear energy producers.
After the initial knee-jerk expression and panic selling by market participants, several technology experts realized that Chinese supremacy over the U.S. AI ecosystem is yet to be established. Yesterday, two AI application behemoths — Meta Platforms Inc. (META) and Microsoft Corp. (MSFT) — reaffirmed their massive expenditures on AI infrastructure.
At this stage, it will be prudent to invest in beaten-down AI-infrastructure stocks that have strong growth potential but are currently trading at an attractive valuation. Five such stocks are: Constellation Energy Corp. CEG, BWX Technologies Inc. BWXT, Broadcom Inc. AVGO, Innodata Inc. INOD and MasTec Inc. MTZ.
AI Spending Remains Firm
Yesterday, at their fourth-quarter 2024 earnings conference call, both Meta Platforms CEO Mark Zuckerberg and Microsoft CEO Satya Nadella reassured huge spending on AI-infrastructure to remain competitive.
Zuckerberg said "Investing very heavily in capital expenditure and infrastructure is going to be a strategic advantage over time." Nadella said that spending was needed to overcome the capacity constraints that have hampered Microsoft’s ability to capitalize on AI.
The Chinese startup DeepSeek’s R1 large language model ("LLM") undoubtedly explored a new opportunity in the AI space. However, its low-cost LLM is expected to expand the global market size of AI applications in sync with “Jevons paradox” explained by several economists and financial researchers.
Nadella said, "As AI becomes more efficient and accessible, we will see exponentially more demand." Microsoft has decided to invest $80 billion to develop AI-powered data center, while META has decided to spend $65 billion on AI-infrastructure.
Buy 5 AI Infrastructure Stocks on the Dip
These five stocks have solid growth potential for 2025 and have seen positive earnings estimate revisions over the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Zacks Investment Research
Image Source: Zacks Investment Research
Constellation Energy Corp.
Zacks Rank #2 Constellation Energy is a leading energy company in the United States with a significant thrust on clean energy, especially nuclear energy. CEG’s strategic $5.1 billion capital expenditure through 2025 should help acquire nuclear fuel and increase inventory levels. CEG aims to eliminate 100% of greenhouse gas emissions leveraging on innovative technology.
In late 2024, Microsoft entered into a 20-year agreement with CEG to revive the Three Mile Island nuclear plant in Pennsylvania. The $1.6 billion investment aims to restart the reactor, which has been dormant since 2019, to provide carbon-free electricity for Microsoft’s expanding data centers.
Constellation Energy is currently trading at a discount of 20.6% from its 52-week high. It has an expected revenue and earnings growth rate of -7.9% and 10.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.9% in the last 30 days.
BWX Technologies Inc.
Zacks Rank #2 BWX Technologies manufactures and sells nuclear components in the United States, Canada, and internationally. BWXT operates through two segments, Government Operations and Commercial Operations. BWXT supplies precision manufactured components and services to the commercial nuclear power industry. BWXT offers technical, management and site services to governments in complex facilities and environmental remediation activities.
BWXT has landed deals and partnerships with the U.S. Department of Defense to help build a cutting-edge micro-nuclear reactor. It is also working alongside key commercial nuclear energy companies such as GE Vernova and SMR standout TerraPower.
BWX Technologies is currently trading at a discount of 17.7% from its 52-week high. It has an expected revenue and earnings growth rate of 9.9% and 5.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% in the last 60 days.
Broadcom Inc.
Zacks Rank #2 Broadcom benefited from strong demand for Broadcom’s custom AI accelerators (XPUs) and networking. Broadcom experienced four times growth in AI connectivity revenues, driven by global shipments of its Tomahawk and Jericho solutions. AVGO supplies a wide variety of chips and accessories that are critical components in data center infrastructure.
The acquisition of VMware has benefited the infrastructure software solutions of Broadcom. VMware’s expanding clientele, which includes the likes of Alphabet and Meta Platforms, is noteworthy. AVGO’s strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, has been a key catalyst.
Broadcom is currently trading at a discount of 18.1% from its 52-week high. It has an expected revenue and earnings growth rate of 18.3% and 29.6%, respectively, for the current year (ending October 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.5% in the last 30 days.
Innodata Inc.
Zacks Rank #1 Innodata operates as a global data engineering company in the United States, the United Kingdom, the Netherlands, Canada, and internationally. INOD operates through three segments: Digital Data Solutions (“DDS”), Synodex, and Agility.
The DDS segment of Inis OD engaged in the provision of AI data preparation services, collecting or creating training data, annotating training data, and training AI algorithms for its customers, as well as AI model deployment and integration services. DDS also provides a range of data engineering support services, including data transformation, data curation, data hygiene, data consolidation, data extraction, data compliance, and master data management.
INOD is focused on supporting big tech companies in developing generative model models. This strategy paid off in third-quarter 2024 as the company generated revenues of $30.6 million from a single big tech customer.
Innodata is currently trading at a discount of 38.1% from its 52-week high. It has an expected revenue and earnings growth rate of 34.6% and 5.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.5% in the last 60 days.
MasTec Inc.
Zacks Rank #1 MasTec is an infrastructure construction company providing engineering, building, installation, maintenance, and upgrade services for communications, energy, utility, and other infrastructure primarily in the United States and Canada. MTZ operates through five segments: Communications, Clean Energy and Infrastructure, Oil and Gas, Power Delivery, and Other.
MTZ is a major beneficiary of the AI-powered data center boom. It is a leading solution provider for design, construction, and maintenance services in the wireless network space. High-speed wireless network connectivity is of utmost importance as both enterprises and households use more and more AI-driven products.
MasTec is currently trading at a discount of 16.4% from its 52-week high. It has an expected revenue and earnings growth rate of 8.9% and 43.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% in the last 30 days.
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