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Key takeaways
- The recent sell-off in technology stocks amid concerns about an artificial intelligence bubble could provide investors with an opportunity to buy shares of good companies at a discount, JPMorgan analysts said.
- They listed 15 AI-exposed hardware and networking stocks that they believe are a bargain with “overpriced” concerns, and strong fundamentals that are poised for gains.
Is it time to start buying tech stocks again?
JPMorgan says so, with analysts telling clients in a note on Thursday — a day after Nvidia’s ( NVDA ) blockbuster earnings hit markets — that it may be time to go “bargain hunting” among stocks of hardware and networking companies that have taken big hits in recent weeks amid concerns about an AI bubble.
The analysts listed 15 stocks with particular exposure to AI that they believe represent the biggest bargains, with most of the risks already “overpriced” and strong fundamentals that could see them poised for big gains.
Most of the stocks JPMorgan recommends are down roughly 10% to 30% from their highs in the past four weeks, with one stock down nearly 40%, and one stock down just 5%. Here are the analysts’ thoughts.
Why is this important to investors?
Technology stocks have fallen in recent weeks amid concerns about an artificial intelligence bubble after a big rally earlier this year. JPMorgan notes that some of these concerns may be overblown, leaving shares of many companies with strong financials and healthy companies undervalued.
Personal computer maker Dell (DELL), which saw its stock lose a quarter of its value from its highs in late October, was one of JPMorgan’s picks. “This is despite risks to margins,” JPMorgan wrote, arguing that investors do not appreciate Dell’s record of effectively managing high component prices. Analysts at Morgan Stanley twice downgraded the stock to “underweight” from “overweight” on Sunday, citing concerns about rising prices for components such as memory chips.
JPMorgan highlighted server maker Arista Networks (ANET); Leading electronics manufacturing service providers for Coherent (COHR) Flex (FLEX) and Jabil (JBL) laser systems; And connector maker Amphenol (APH) is among its other options.
These companies, along with Dell, derive most of their AI exposure from larger Big Tech companies that are expected to continue investing in building out their infrastructure in the near term, and are likely to access more stable financing from less established companies, 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 partner Apple (AAPL), smartphone glass maker Corning (GLW), and optical component manufacturers Fabrinet (FN) and Lumentum (LITE).
Data storage provider Pure Storage (PSTG), high-speed networking company 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.
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