The Ignored AI Stocks With Explosive Upside | Louis Navellier

AI stocks have reported significant earnings and as a result of it they've been going up significantly. But will this run continue? Today we sit down with Louis Navalier to see what's happening with AI companies and where are the best opportunities. So as I talk to you right now the most acute shortage is memory. Micron's interesting because they are traditionally a low PE stock because memory's been cyclical. Just the demand is so strong now. They're the latest trillion dollar company. There's another narrative out there that this is a bubble. It's kind of like the 2000s. To say we're moving in lockstep is a bit of an understatement. Whatever happened in the go-go 90s is happening again now. I don't see it stopping. I'm Siamak and this is Market Insider. Louis, it's great to have you back on. Welcome back. Well it's an honor to be here. You're a good stock picker and you've been looking at different industries, especially AI. You're being very bullish on AI. We want to talk to you about that. Can you tell us what's happening in AI and how real is this? Oh it's gone from real to surreal I think is the best way to say it. I think what happened this latest earnings announcement season, the first quarter announcement season, is the stock started to take off before the earnings came out because the analysts were raising the earnings estimates. Strongest in five years and then earnings were very good, strongest in seven years, but AI is just, they're all up over 100% earnings growth. But the real big thing was the backlogs. So a stock like Bloom Energy, which makes natural gas fuel cells, Brookfield uses them, Oracle uses them. They had over 9 billion in revenue, but they had over 18 billion orders. So everybody became obsessed with the order backlog. And so when these companies announced that they are beating on sales, they are beating on earnings, they are getting higher, but now everybody wants to know how big is that order backlog. And that is just incredible. And it looks like this is going to go on for another three years. When it's all done, there'll be 60% electricity in America. And of course, Trump told them, don't tap into the grid. So they're just getting their own natural gas lines and hooking up their own turbines and things. They can make a deal with the utility. Like Dominion has deals with the data centers in Virginia and all, but Microsoft has a deal with Constellation Energy. But yeah, we're numb, I guess is the best way to say it. It's just so wonderful. And obviously, the leader of all this is Jensen Wong of NVIDIA. And he said, this couldn't happen if we didn't have Trump approving all the power plants. And we have a natural gas boom in America, and this is fueling all this. So our energy secretary, Chris Wright's a natural gas guy. So most of it's going to be fueled by natural gas. I was talking to somebody in the Permian Basin the other day. They're excited about all the data centers coming in there because they just flare the gas, might as well use it. And the only thing is the data centers have to have really fast internet. And so they have to make sure that's in place. They like deserts because they like to vent and cool themselves at night. But the Permian Basin meets that criteria. But there's a lot of hotspots, Boise, Sioux Falls. I have a home in Reno. Reno's a little different because it's Apple and Google. We have a lot of geothermal. So they're all excited. They want green energy when they can get it. And so we have plenty of hot water if you go down deep enough. So it's really exciting, and it's not going to stop. What sectors are out there for investors to look at? Here's the problem with AI. As the build-out continues, then we hit these shortages. So as I talk to you right now, the most acute shortage is memory. And Samson almost went on strike. They've resolved it, but they're the biggest memory manufacturer. Obviously, in America, we have Micron. And Micron is building in American plants, and Micron makes the fastest RAM. And Micron's interesting because they are traditionally a low PE stock, price earnings ratio stock, because memory's been cyclical. But just the demand is so strong now. They're the latest trillion-dollar company, and they all have stunning sales and earnings. But it's lifted Seagate. It's listed SanDisk. It's lifted Western Digital. Anybody involved in memory is going nuts. These are essentially hardware, right? It's hardware. Yeah. I like the companies that help build the data centers. So we have something called Comfort Systems, which is just HVAC air conditioning. Obviously, we do have Bloom Energy with the natural gas fuel cells and GE Brnovo, which are the turbines. So you can have turbines run on natural gas to power your power plant. I have Quanta Systems. I have optical companies like Sienna. We have the networking companies. You saw even Cisco Systems, which is just networking switches and optical connections. They had very good earnings. There's a smaller one called Ubiquity that makes the switches as you get faster and faster internet. All the data centers are running 10G, 10 gigabytes fiber optic. And Corning's another beneficiary. So it's spreading out. I think the biggest development of AI is not everybody's going to need machine learning, regenerative AI. So there's advanced micro devices that can make chips that do, I wouldn't call it, dumber AI, but it's just not going to look at everything. You can look at things that are correlated. So it does some automation, but it doesn't- Yeah. I have a friend, he was working for Samson, an ex-Micron guy, and he's been bought out. So he can't talk now because he's been bought out. But what he was doing is he was trying to build a smart Alexa. And so in your home, when you buy any new appliances, it comes with Wi-Fi. So the fridge will tell you, oh, you might want to check drawer three if your food's going bad. Or if you drink a beer at five o'clock every day, it'll say, hi, you want a beer? It's a happy hour. The machines start to plot against us. And it's almost like a pet. I mean, are we training the pets, or are they training us? And so that's the other kind of AI we're going to have. And you'll see it with all the robots. I mean, right now, the Optimus 3 robot, which is going to go in the factory, and then Boston Dynamics makes one for Hyundai. But Optimus 3 is going to go in the Tesla factories. It's going to be Optimus 25 before it can walk the dog. It's going to be Optimus 32 before it can do dishes and laundry. Because all the robots on pre-programmed routines, none of them have free will at this moment. So it's going to be interesting to watch how all this develops. So they're pre-programmed, they can do certain functions? Just like the self-driving cars. The self-driving cars have to go on a map. So if you live on a dirt road and your road's not on the map, the self-driving car will not go there. It only goes in pre-mapped areas. And we have the Waymo's and everything on freeways now, and that's a controversy. It was a controversy in San Francisco when the power went out. The Waymo stopped because the lights stopped. The Tesla just kept going. But in theory, when you buy a Tesla, you can make it a robo-taxi in the future. And so it drops you off, and then leaves. It goes off, and it's giving people rides. And it only comes back home when it needs a little charger's battery. So we'll see if we enter this brave new world. And that's what Elon did, is he did this video at Universal Studios showing us the future. The robo-taxis, the robo-bus, Optimus serving his drinks and appetizers. But even if you go to the Tesla diner in Santa Monica, I don't think Optimus is too busy right now. He's just kind of a display thing. So we got a long ways to go. But it's going to slowly invade our lives. Every kid is using AI to do everything. And it's making workers more productive. It's going to show up in the GDP numbers. That's what our new Fed chairman's all excited about, is the productivity gains from AI. And how real is the backlog? So you said there's a significant backlog. Some people may wonder, is this real? And will it last for these kind of companies? It's going to last at least three years. But gee, Vernova's five to seven years for turbines. They make different sized turbines. But the big natural gas turbines are the size of a train. They're actually transported on trains. And then you can get smaller turbines for the peaker power plants. And of course, in aviation, you have smaller turbines. You have an APU to run the power of an airplane before the engines actually start up. So you can have all kinds of turbines. And it's easy to adapt an aviation turbine to a natural gas turbine. But it's better to get them direct from the manufacturer. So there's GE Vernova. There's Siemens. There's Mitsubishi. And we're picking up more international stocks. We picked up Envent, which is a British company. They make all kinds of things for utilities, the lines and the transformers and all kinds of stuff. So it's growing. And as I talk to you, it's in the Financial Times right now. But Europe's proposing they need to get the chips. I guess we're not selling them the chips they want. So they're about to pass some sort of law to demand that we get the chips. So, you know, us in Europe don't get along on tech. You know, there's the Digital Services Act that is very contentious because it wants to open up the software. And the software companies prefer closed software versus open software. So a lot of interesting things are going on. Do you see we are just at the beginning of the build-out? How do you see the build-out? I think we're entering the second inning and it's probably going to go 12 innings or more, extra innings. I don't see it stopping. I just don't see it stopping. We're lucky to have Jensen as our leader. I think the biggest transition is going to be NVIDIA. NVIDIA's big thing is the graphics processing units, the Vera Rubin that they make, they're ramping that up. And their sales earnings will be double in 2027. But they'll have a new chip in 2028. And they've already telegraphed. They don't think they can make the chips much faster after that. And then that would pivot to quantum computing, where you use a one and a zero instead of a one or a zero. You just saw the Trump administration give out $2 billion to nine quantum computing companies. One was D-Wave, which won the NVIDIA quantum computing contest. I think the easiest way to play quantum computing is just to buy Google and NVIDIA because they're going to be the winners. They seem to be mostly obsessed with it. But there's all these people figuring out how to program these machines. So there's IONQ, which makes something called a qubit, and define that. And they're redefining it. Then D-Wave won how to program it. Rigetti wants to encrypt it. So we'll see. None of these companies, I just mentioned the last three, are making money. And I don't think they're going to make money till 2032, if at all. But they have sales. And they just got government money. And the U.S. government has an equity stake in them, kind of like what Trump did with MP Materials for Rare Earth. So it's going to have another life. And it's going to be very exciting. I don't see it stopping. If you like Market Insider, we have a Substack channel that has exclusive content with some of the guests we're interviewing on what they are buying and why and what they are avoiding and why. You can find this channel in the description below. There is going to be a link for you. Make sure to check out this link. And if you like it, follow it to stay in touch with us to see this exclusive content. You look at fundamentals and you have your system of value in these companies. What do you think the valuations look like? Because a lot of these companies you mentioned, they have had significant runs. And they're up, I mean, something like First of all, I've done reports and videos on quantum computing stocks, but I don't buy them until they earn money. So I have a family office and we manage a billion and a half dollars. But when the stocks pass my eight-factor fundamental model, I am looking at forecasted price-to-earnings ratios very carefully. And I'm proud to say that I don't think NVIDIA is overvalued because it's barely 15 times forecasted earnings. Microns, a low-P stock. Palantir is more pricey. It's obviously an AI-applier. They're competing with Anthropic, which is private now. That's trading a little bit more than 32 times forecasted earnings. So there are professional short sellers that anytime a stock goes parabolic, there are professional short sellers that come out and try to prick bubbles and take advantage of the markets. And I think the P argument is bogus. There was an IPO not that long ago of a company that bragged they had more powerful chips than NVIDIA. But NVIDIA dominates the programming language so that those chips aren't going to compete with NVIDIA at all. And NVIDIA can just add more chips to get more power. And there's something called a floating processor that's really the key for AI. And that chip was pretty weak on floating point. So short sellers will come up with these weird arguments like somebody has a better chip. They're always trying to prick these bubbles. And I think I find them to be very unethical people, and I don't like them. You'll see more of them come out in the summertime, like August, September, because people are on vacation. They're not paying attention. Volume tends to drop off. So we have to keep an eye on those guys. But people like me are constantly fighting with short sellers. And is there any sectors of this boom that you're seeing that is safer? Like, is the energy play safer, or is there other plays? I think the actual construction is safer. We have a stock we added called Sterling Infrastructure. It helps to build out data centers. And there's a big contractor. There's one here in California, Tudor Perini. They, at one time, did all the clean rooms when we used to make the chips around San Jose. And I don't know if you remember the history of that, but there was controversy. We were polluting the water table, so everything went to Taiwan or Malaysia. And Tudor Perini knows how to build clean rooms and data centers. And so does Sterling. And I personally love that comfort system, which is just HVAC. I like Qantas services. The data centers, it's unbelievable what they're doing. There's one going in Louisiana that's supposed to use more concrete than the Hoover Dam. It's unbelievable what they're about to do. And obviously, it's going to Louisiana because of the cheap natural gas. What about cloud and Anthropic and those kind of software plays on the system side and Google? Do you look at that as more risky? The only successful AI appliers now, in my opinion, are App Loving and Palantir. But clearly Anthropic is competing now with Palantir. The gentleman that leads Anthropic is a little caustic and had a little run-in with the Trump administration. I think they kissed and made up. But Palantir does have competition now. So I would put Anthropic as a very credible company. Obviously, they're private now, but Cloud is the favorite of most of the favorite AI applications at this time. But they all upgrade. So I don't know if Cloud 12 is going to be better than the current Cloud. We have Gemini, we have Grok, and we still have ChatGPT. I think Microsoft's weakness was they weren't able to monetize ChatGPT the way some people hoped, even though they're investing in it and they'll prosper from it. And Microsoft was one of the weaker stocks in the Magnificent Seven this year because of that. It won't go down much because it has a 3% dividend yield. So that dividend will hold it up. And does this backlog, because some of it is for the build-out, right? Significant amount of build-out. Most of it's hardware, yeah. Is there an element of recurring components in this besides the energy? Well, that's an interesting comment. There is criticism that what Oracle's doing, they may not have pricing power because Oracle's trying to be the biggest Cloud provider. And I actually know Larry Ellison is my neighbor in Florida. But at this time, they have pricing power. The question, will they always have pricing power? So we'll see. I think the Cloud that build for Meta, build for Apple, build for Google, they have more pricing power. But Oracle's just opened the leasing. So you could hit a point where it's like commercial real estate, like, oh, we have too much. Our vacancy rate's too high. So there could be that risk. Oracle has not hit my radar yet, even though they're doing better. So yeah, that could be one of the first weakness points out there, and that would generate bad press. But we're three years from that because the pipeline's just unbelievable. You know, the federal government is investing in some companies. Do you recommend people following them? Do you think people should watch? Yeah, I do. Obviously, it ensures their success. But I can tell you on MP Materials, there were some earnings cuts. So it didn't hit my radar, so I didn't buy it. I think the most exciting thing, it was just disclosed that Trump owns a lot of these stocks. The people he put on Air Force One that went to China apparently owned a lot of them. He owned Eli Lilly, which is very exciting. They're on-shoring the drugs in America, and they've got a good drug pipeline. Obviously, he owned Micron. He's praising the Micron gentlemen because they're building their new plants in America. Obviously, he and Jensen Wang are buddies. He owns Nvidia. So I'm sure he owned Palantir and a lot of these other stocks. I haven't checked the list. We're busy trying to see. But I was shocked how many of my stocks that Trump owned. So I was very grateful he did that. I thought he was a real estate guy. What do you mean Trump owns all these stocks? So this was a big surprise, and I think it helps the whole market. Now, in terms of the general economy, last time we talked to you, you were very bullish. You said GDP would grow significantly. Do you have the same outlook for this year? Yeah. So I was on Maria's show on Fox in December, and I said we would hit 5% GDP growth. And then Howard Lutnick one-upped me. He said we'd hit 6%. And I actually talked to Howard about that at Mar-a-Lago. We just happened to be there at the same time. So I came up, and our kids went to school together, so we knew each other. And Howard assured me we would hit 6%. And I think that's going to happen no later than the third quarter of this year. And that's coming from unbelievable on-shoring. You've done all kinds of wonderful shows about the on-shoring boom in America. So that's definitely underway. Automotive, drugs, everything. Anything we manufacture. There was all this sub-assembly being done in Mexico and Vietnam, and they're trying to bring as much of it here as possible, because China was diverting their orders through different countries. And that's huge. AI could be up to 4% of GDP, because of the productivity gains. The trade deficit is obviously shrinking because of what happened in the Middle East and the Strait of Hormuz. I personally loved it when Trump says, well, you want some oil? Just go to the Gulf of America. And the 121 tankers were going there to fill up. Obviously, we provide Europe with natural gas now. So the problem in Qatar hurt more Asia and stuff, where they've got their gas. So just the energy exports alone. But Howard Lutnick's a fascinating character. He told Mercedes, can you just move to America? Because the EU is hurting all the automotive companies. They're telling them how to make cars. So they're forced to make hybrid cars now that are extra heavy. And they're forcing them to make electric cars, and they can't compete with the Chinese cars. And as I talked to you, we have this big brouhaha over the Ferrari electric car. It's a nice car. It's just $650,000. I think if it was $100,000, we might pay attention to it. It's a beautiful design. It's the Apple designer. But the EU is forcing these companies to do things they don't have to do. They shouldn't have to do. And so the American car companies don't have these rules. The other thing is they have to make the cars quieter. So they're putting all these particulate filters. And so like a Corvette in America has to be quieted when it goes to Europe. Even when it's running around the Nürburgring, it's got filters on it because they don't want to ruin the noise of that forest. Just move your production to America. I'm sorry. Also, we have the cheap electricity. And we've got five southern states that will just throw incentives at you to move here. So BMW's biggest plants in South Carolina. Mercedes is huge in Alabama. Tennessee, Alabama, Georgia, South Carolina, they're just begging for business. So this is part of the onshoring that's going on. The BMW trucks that are made in South Carolina have German parts. So they often replace all those with American parts. I have a friend who's got over 100 UAW workers. He's a big supplier. He thinks it's all great because they all have to onshore now. Does he see the business boom in his company? Oh yeah. He's an injected molding guy. He makes all the speaker grills in almost every car. And they do a lot more than just that. He doesn't work for Volkswagen yet. Volkswagen is a plant in Chattanooga. But he supplies Hyundai and Ford and everything. In fact, his company's in Dearborn. So that's where Ford's headquartered. So there's a lot of exciting things. Ford's also interesting. They took their contacts with CATL. Now they're building big commercial power walls, just like Tesla does. And so that's a booming business for Ford. And their valuation is starting to go up. So it's interesting how companies reinvent themselves. Now, Louis, the consumer. A lot of people still don't feel good about the economy. What are your thoughts on that? Why do you think that's happening, despite all of this activity that you're seeing? Well, that's the K-shape economy. And our Treasury Secretary Scott Bessett said it best. He said 88% of the stock market's in the top 12% of households. He says the other 12% is in the next 38% of households. And he says the other 50% of America has debt. So the only way you can fix the masses is to cut rates. Trump has to do that. Obviously, that's been postponed because we had a little inflation blip, although the inflation's mostly food and energy. And the Fed can't do anything about that. But it did show up in transportation costs. You know, the higher diesel costs obviously made the cost of goods and services go up. So hopefully we will get a rate cut later in the year. Hopefully that will start to fix the housing market, get the consumer going. Most of those people got tax cuts from the new bill, but it's been eaten up by the higher gas prices, obviously, at the pump. So yeah, we just have to fix those people. Economics 101 is the velocity of money, how fast money changes hands. And whoever our leaders are, they have to inspire everybody. And if I was part of the Council of Economic Advisors, this is Kevin Hassert. I think he does a great job. But you just got to inspire everybody to be happy. We got to quit fighting about whatever we fight about and just be happy. They're fighting over the ballroom and the UFC event or whatever's happening at the White House. We just need to be happy and realize America is an oasis. We're the economic engine of the world. We have a better model. We have 50 states that compete with each other. No matter who we elect, we're going to be successful. We assimilate our immigrants. Obviously, Trump wants them legal. That's not a problem, but we're still going to have immigration. We have more household formation than the rest of the world because of the South and the Mountain West. And Davos was so funny because Trump just went over, and I had a friend at Davos in the audience, he just goes over there and says, either you join us or you're a loser. That was so devastating to Davos. It's not going to be a Davos anymore. I think it's going to Dublin. And so we're it. And even China. China had to hitch their horse to us. When he went to China, they were having some export issues, so they have to kiss and make up and do business with America. That was a Chamber of Commerce meeting with President Xi in China. So I think we're the beacon. We're the oasis. If there is a problem in America, sometimes it's just the growth is too concentrated in a few states. And that's obviously going to be Trump's problem to convince everybody things are good. People in Texas and Tennessee and Florida know it's good. There is an element of this, Louis, that I've been told that causes people to worry a lot. Losing your job. Yes. To AI. Do you think that's going to happen in a mass way or do you think it's exaggerated? It's tough for college graduates. It's really tough because their opportunities are limited because as AI was expanding, they were trying to figure out how many people they needed. So that was probably the most depressed sector. But obviously, you want to be a plumber or HVAC technician, there's a shortage of jobs. So obviously, you don't have to go to college to do that. But being an auto mechanic, you have to know computers now. So you do have to go to one of those schools to learn how to work with all the computers on the cars. So yeah, you just have to hit the reset button. But yeah, you got to be careful what kind of degree you got when you go to college. Louis, you're talking about all these stocks and companies. And there's another narrative out there that this is a bubble. It's kind of like the 2000. It's like 99, 2000. What are your thoughts on that? That's an outstanding question. So we address that by showing charts from Bespoke. That's Paul Hickey's firm. And he has phenomenal charts that show the go-go 90s when the internet boom was started by Netscape. And the current AI boom we're in now started by ChatGPT. And to say we're moving in lockstep is a bit of an understatement. He even shows that in the summer months, it can get bumpy and magnifies about where we're about to enter. But I would respectfully argue that whatever happened in the go-go 90s is happening again now. And I think we got another good two to three years of this to enjoy. But obviously, any time money's falling to one sector, they try to prick bubbles. I force myself to read the British media. And they are just so anti-American. It's shocking. I know they have their own problems. Half the Brits can't pay their electric bill without subsidies. And some of the rich Brits left. There's no worldwide tax when you're British. So if you leave, they can't tax you. In America, when we leave, we still have to pay taxes. So obviously, in America, we have the New York Times and other media that cast things in a poor light. And I just tell people to stop watching it. I have a friend who was so depressed when Trump got elected. He stopped eating and he died. He fell. No one found him for five days and had to rehydrate. His kidneys were gone. I have another friend, actually a Mar-a-Lago member, that doesn't like Trump. And he's in a deep depression like my other friend. I had one of my ex-sales guys yelling at me the other day, he's moving to France. And I says, well, Marie Le Pen's pretty conservative. So I hope they like what she's got. So people get delusional. And we keep having all these assassination attempts. It's scary. They keep getting shooters. And there's a bad narrative out there. And I just tell people, please, cheer up. Look around you. Obviously, I'm part of the stock market. Obviously, we're booming from that. Obviously, some people apparently are not. I just think it's important that people cheer up. I think it's not good to have negative people. And I just tell people, please be happy and stop worrying about everything. Louis Navalier, it was great to have you back on Market Insider. Thank you. If you enjoyed this interview with Louis Navalier, we have an exclusive segment where he's going to tell us what he's buying and what he's avoiding and why. And his approach to investing. Make sure to click on the link below. It's going to be on our Substack or Epoch TV. You can watch it there.