This Is Far Bigger Than Nvidia (3 Stocks Essential to the AI Boom)

All eyes are on NVIDIA's earnings report, but these three stocks could be even bigger. Joining us today is MarketBeat analyst Chris Marcotte with a list of three stocks that are bigger than NVIDIA and are really a huge essential part of that next AI boom. Chris, so glad to have you with us today. Of course, it's NVIDIA earnings day. We are recording this before that earnings report came out, but let's just talk about why this is such a huge day for every investor. It's a huge day because like you saw at the end of July, when many of the hyperscalers announced, and then you saw it with Palantir, NVIDIA is that name that everybody's watching for confirmation of the AI trade. NVIDIA is not only a company that investors are going to be looking at for the headline numbers, like revenue and earnings and profit margin and all of that good stuff. There's also going to be questions about NVIDIA as far as its ability to have the cash on hand to keep doing the financing that it's doing to keep the AI trade going. Yeah, really. NVIDIA is now the financer of a lot of the AI story, and that makes a lot of sense for sure. Let's get to the thesis of this video, and that's that there are plenty of stocks out there that are bigger than NVIDIA. It's not that we as investors should ignore NVIDIA's earnings. There's a lot to pay attention to here that will have ripple effects down the entire market. But there are other stocks out there, and this is something we've heard from viewers time and time again, is that they are turning their attention to other stocks where they're getting much bigger returns this year. Are we seeing that to be very true with NVIDIA, Chris? I think that's absolutely true. And again, I'm not going to say anything on this video that's going to be disparaging NVIDIA. I actually happen to think the stock is a little bit undervalued where it's at right now. But what we're talking about in this video, Bridget, are those companies that are targeting exactly what investor sentiment has been at. It doesn't matter how many chips you have in a data center, how fast those chips are. They're useless if that data can't move between the racks efficiently. If you're not cooling down the data centers, that's the type of infrastructure that is going to be needed right now. And this infrastructure is going to be needed regardless of all the noise that's going on with the data centers. I read a statistic just the other week that even if only one-third of all of the proposed data centers are built between now and, let's say, 2029, 2030, that's still going to represent like $10 trillion of investment money going into the economy. That money has to go somewhere. And for investors, there are some stocks that we're going to be talking about today that look like they're going to be big beneficiaries of that. Now, we're going to get right into those three names here in just a second. But I wanted to focus in on what you said about NVIDIA, that this is still a stock that many, many people are bullish on. You are bullish on it. Our market analyst, Thomas Hughes, is very bullish on NVIDIA, too. He was just on the show yesterday talking about his expectations for a market rally later on this year. And he gave an estimate for NVIDIA of having upwards of 600% returns for investors over the next decade. So he still sees a lot of growth coming down the road for that. If you missed that video, make sure to go back and watch the full interview yesterday. Again, this isn't a video saying NVIDIA is not a great stock. It absolutely is. But there are so many other stocks that are seeing even larger returns for investors in the current market that we're in and the stage of the market that we're in right now. And that's where you want to have your eye out for that next NVIDIA, that next major hyperscaler, the next Google, maybe even that next innovative company like Tesla. And that is a special report we have at Market Beat right now. You can scan the QR code or click the link in the description. This is a report on seven innovative stocks that could be that next giant NVIDIA or Google or Tesla. Companies that have a huge growth trajectory right now, that they're in the middle of that hyper growth phase rather than at the top of that hyper growth phase. So if you want to check out that report and that list of seven stocks that could be bigger than some of the giants we see today, make sure to click the link in the description and get that free report right now. Normally it's $30 in Market Beat. It's free for you today just because you're watching this video. All right, Chris, let's get into the three stocks that you are looking at. And kind of the same thesis here. These are companies that could continue to have outsized returns for investors because of the important role they play in the AI story. What is that first stock that you are looking at? So the first stock that I'm looking at is Arista Networks. Ticker symbol is A-N-E-T. When we're talking about infrastructure, this is about as basic and as boring as it gets, but it's also one of the more essential names on this list. Arista is providing the plumbing between all the racks. So you have to find a way to connect these data center servers to each other. And Arista Networks is critical to providing that connectivity. That's what this company specializes in. They design and distribute the high speed Ethernet switching that connects the servers to each other. And increasingly is not only connecting the servers within a data center to each other, but increasingly connecting data centers to each other. And again, that's just going to be an essential part of whatever this AI transition looks like. Yeah, you can see just how essential this company is in their earnings report. They have had some incredible last few quarters. This last quarter that just came out earlier in August, very impressive beat here in earnings. Absolutely. And it's not just in the last quarter. Over the last couple of quarters, we've seen revenue growth quarter after quarter in the high 20% range. And management's been guiding to continued growth into next year. And it's specifically calling out, obviously, AI networking as being a key source of that revenue. And so they not only expect to keep expanding at that around 20% clip, but they're expecting that that number could go even higher. And what I notice is when you look at the company's earnings estimates, the earnings estimates are projected to be right around that same level, about 22% over the next year. So this is a stock that I think still has a lot of room to run. Let's look at that room to run yet for this stock. I know a lot of investors don't put a lot of stock in what the analysts have to say, but we want to take a quick look at least the trends we're seeing. Are they moving the stock even higher from where it is today? They should be. What you've seen with Arista, which I really like, if I'm looking to get involved with Arista right now, is it's had a nice healthy pullback off of the high of around 210 that it reached just about a week and a half ago. It was up around 210. It's had a nice healthy pullback. It's a nice place for investors to get in, especially when you look at where analysts are taking it. The consensus target right now is $226. That's about a 19% upside. If you look at where some recent targets are, the targets are far higher than that $226. I'm seeing a $258 from UBS Group. I'm seeing a $250 from KeyCorp. You're seeing analysts move that price target up. I understand investors can be skeptical about analysts because analysts do tend to maybe drag their feet a little bit as far as raising their price targets. If you see them raising their price targets now, with a stock that's still up 45% for the year, that's a pretty good sign that they believe that what Arista is projecting in their earnings reports is not fiction. Yeah, there's some real money coming in and there's some real growth projections still very much down the road for this stock. One other thing to point out before we move on here is there's a huge influx of institutional ownership in Q2 this year. I think that goes to show that there's a broad confidence in this stock as well. Absolutely. If investors are maybe skeptical about analysts, institutional ownership should be something that really alleviates that because you're seeing institutions, you're right, this has been the strongest buying they've had since the fourth quarter of 2024. They were piling into the stock and that explains a little bit probably why the stock has a valuation that may have some investors wincing a little bit. There's a lot of institutional money that's flowed into that to support that valuation. The company has to execute, there's no question about it, but by the company's own estimates, you're probably talking about 20% revenue growth or higher over the next several quarters. This looks like a stock that's going to move higher. Yeah, I think one thing to talk about here is that some investors don't like to look at stocks when they're this close to the top of their 52-week range, they're this close to their highs. But I'm wondering if this one is susceptible to any kind of volatility that we might see in the AI market over the next couple of months, especially post that Nvidia earnings report. Sometimes we see a positive market reaction, but so often we see a little bit of a negative market reaction when we see Nvidia reports. If there is that overall broader AI market volatility, could this stock also be impacted and be at a better chance to buy on a dip? I do, and the reason why is because once again, these names that we're talking about today are not alternatives to Nvidia. They're going to be companies that are essential to however the data centers get built out, whatever GPUs they're using, whatever chips they're using, they're going to need a way to connect them. And I can see that a company like Arista that has a high valuation could get, you know, could get sucked down lower if the market sells off because Nvidia doesn't deliver the numbers quite as high as they were expecting or the guidance isn't quite as good as they were expecting. Notice I'm projecting that Nvidia is probably gonna have a very strong report, but that would be a buying opportunity. I think the long-term story is the one you want to watch here, and it's very favorable for a company like Arista. I think this is a really good candidate to add to my purchase buys watch list. I think those projections of future growth and just the essentialness of this company make it a really good and interesting stock to add to this list. I would agree, Chris, that I don't think that it's going to be immune to any ups and down volatility, just on sentiment and the overall AI market. But I think long-term growth story here is very much intact. So I wish it were slightly lower at the price I'm adding it to my list right now, but we're gonna add it and see what happens in the future. Again, this is my paper trading watch list. I try to add a stock for every video we talk about to see how it moves over time. It's been a little while since I've added one to the watch list. So this one is making it today. If you haven't checked that out yet, you can scan the QR code or just go to marketbeat.com slash Bridget, and you can take a look at all of the stocks that we talk about on this channel. All right, Chris, let's get onto the second name on your list. What company are you looking at next? This is one that a lot of our viewers have heard us talk about before. They've asked about it before, but we're gonna bring it up again because it's the story is still there. It's Vertiv Holdings. Ticker symbol is VRT. This is a step away from the semiconductor conversation, but it's equally as important to the idea of AI infrastructure, specifically as it relates to data centers. We all heard the story. You're gonna be running these data centers. They're gonna run 24 seven. They run, they're going to need massive amounts of energy. And those servers and the related equipment get very hot, which means they need equipment that's going to be able to cool them down efficiently. That's where Vertiv comes in. This equipment is essential to keeping those data centers from overheating. And that's become a genuine bottleneck for getting these data centers built, which means that there's more demand than Vertiv can keep up with. But that's a good story for investors. Yeah, this is a name that we have covered quite a bit talking about AI infrastructure for a lot of the reasons you just mentioned, that this one is essential for that cooling piece that is, again, so essential in all of the AI data center build outs happening right now. This stock has had some volatility, though. I want to go back and look at the chart. Also speaking of Bridgespies, this one made it on my Bridgespies watch list back in December. It's up 40% for me from when I added it onto that watch list. But overall, the stock is still up over 100% this year. And that's with a pretty big pullback from the highs that it saw back in May. Yeah, it's pulled back pretty significantly there. I think some of that is just profit taking, to be perfectly honest. I think it may be dressed up in some other language, but I think this is just investors who saw the stock get up around $380 and they might have just been saying, you know what, it's time. It's time to take some off the table. I mean, it's the stock that, like you said, even with this 20% pullback in the last three months, it's still up over 107% in the last year. That's a tremendous growth. It's got a valuation in the 50s as far as current earnings go. It's reasonable to expect that some investors may be looking to take a little bit of that risk off the table. The question is, once they've taken that risk off the table and with the stock down now about 20% in the last three months, is now a convincing time to get in and buy? And I think it still is. Yeah, that was my biggest question is, is now a good buying time for this? Do you have any fears, Chris? That's another question. That when you see investors taking profits at a high like that, they are fearful of an AI bubble and that's why they took profits. Do you ever read into why did so many people take profits and we're seeing this stock pull back? You know, that's a great question, Bridget. And the answer is, I can't read the mind of every investor. I imagine that you're right. I imagine that for some investors, they see the headlines. They can't ignore it. There's going to be a lot of noise in this space as far as is it going to be regulated? How much is it going to be regulated? That you can't really do anything about that. But yes, I imagine that for some investors, they might be wanting to take risk off the table. But I think for a lot of investors, it's just a math situation. If a stock's up over 100% from where you bought it, it's logical. We've talked about it with Palantir. We've talked about it with NVIDIA. We've, you know, we've talked about it with some other names. It's just logical that investors should take some of that profit. You never get broke from taking a profit. Take some of that risk off the table and put it in, either have it sitting in cash or use it and deploy it in other areas of your portfolio. And I really believe that's more what's going on here because there's really nothing that I'm seeing in Vertiv's results that are suggesting that management sees a problem here. Yeah, that's what I really wanted to talk about next is you can't ignore what's happening with the price action, but you also can't ignore what's happening with the actual earnings report. So let's dive into that a little bit too because this is another area where we continue to see a lot of strength and a lot of future growth projections. Yeah, so we just talked about, you know, that 20% sequential growth, 20% year over year growth with a company like Arista. You're seeing the same story in Vertiv. 20% revenue growth. You're seeing strong earnings growth. I mean, the last quarter alone, they came in with adjusted earnings per share of around $1.52. The year prior to that, that was at 95 cents. I mean, that's strong growth. And if I look back over the three prior quarters, the growth was about the same in earnings. And again, earnings are what's going to drive the profits on these companies. And you're seeing just strong growth. And again, that's just because of the demand is going to be there. You're not going to be able to have these data centers built and operating without a way to efficiently cool that infrastructure that's inside the data center. And Vertiv is one of the leaders in providing that. Yeah, and being one of the leaders and really having that hold on the market in such a key area is why we are saying that this is one of those stocks that qualifies as potentially having those even bigger results than the leading companies like NVIDIA because there's so much demand growing for these stocks. And that's why we are covering these today. It's also why it's important for investors to look at some of the other names than just the key giant players out there who might see even larger results. Of course, players like NVIDIA could continue to see slow and steady growth. But these are some of the names that we are looking at that could see even larger outsized results for investors in the next 12 to 18 months ahead. So if you want to look at even more names, make sure to scan the QR code and go back to that report. It's seven different stocks that could be bigger than NVIDIA, Google, or Tesla. They cover a lot of different areas, but these are seven names that are showing the strong growth potential for the next 12 to 18 months to have some good growth results for your portfolio. So make sure to check out that free report today. OK, Chris, let's get on to that last stock that you are looking at today as potentially even bigger results for investors than NVIDIA this year. Yeah, so this is the one of the three names we're talking about. This is the one that I'm not going to say it competes with NVIDIA, but it would be in that category of stocks that you would say if you were going to choose a stock other than NVIDIA, what one might you choose? And the name here is Broadcom. Ticker symbol is ABGO, A-V-G-O. Many investors are familiar with that. Again, this is a name we've talked about a ton on this channel. I know you've talked about this with Thomas quite a bit. ABGO is in the position of building out the custom, what they call the ASIC, the application specific chips for the AI infrastructure. And the specific reason that I would put investors as far as how they should orient themselves to thinking about Broadcom is there's a lot of hyperscalers right now that are using NVIDIA chips or they say we're using AMD chips or they're using a combination of the two. Where the world is moving and where I think these hyperscalers would like to move is a world in which they're creating their own chips and they're creating their own AI infrastructure. And right now, Broadcom is that name. That's why they keep on gaining share as hyperscalers are trying to customize their own AI infrastructure. That's where the story really comes in with Broadcom. And this is a name that is also on quite a bit of a pullback right now. It's seen a lot of volatility, like all of the names, really, that we've talked about today. And essentially, the entire AI sector has seen a lot of sharp ups and downs, even in just the last 90 days or so. And Broadcom absolutely fits that bill. Looking at the high it saw back in May, why are we seeing that kind of sharp increase, sharp drop in a stock like Broadcom? Well, I think a lot of it is customer concentration when it comes to Broadcom. I think there's a lot, there is some concern that Broadcom generates a lot of revenue from just a very few amount of its customers. At least that's the case today. And that means that if demand from any of those customers were to drop, it's going to hit the company's top line and bottom line significantly. I think that's why you're seeing a lot of volatility in the stock. And again, I think it's also part of the overall fatigue about AI is their concerns about, you know, again, you're talking about a stock that's trading around 69 times current earnings, although it's only trading at about, from what I see, it's only trading about 35 times forward earnings. And that's not that big of a premium to where the S&P 500 is today. All right, let's look at what they're doing for earnings. Are we seeing the same kind of growth as the first two stocks that you just mentioned? They are. Again, I mean, I think this is a very similar story for all of these. You look at year over year, I think the revenue has even been stronger. They just reported earnings, it looked like in June, it was the last time they reported earnings. $22 billion in revenue, and that was compared to $15 billion in the prior year. $244 in adjusted earnings per share as opposed to $1.56 the year before that. So again, this is a company that just keeps on beating year over year estimates. And remember, it's really important to remember that this is happening at a time when the comps are becoming more difficult. The bar is being raised higher for these companies, and a company like Broadcom keeps going over it. Yeah, it's that whole theory of price to perfection that we talk about all the time. And this is a company that continues to outperform those expectations. Let's talk a little bit more about just how much the stock has run up, how familiar the stock is to investors. I think sometimes when investors are looking for real growth, they're looking for that hidden name that they've never heard of before. Can you still find those kinds of outsized returns in a stock like Broadcom, especially given where it's trading today? Well, analysts certainly seem to believe that's the case. I mean, the consensus target is $491, which is about a 36% increase from where it's trading right now. And you can see the stock has had a significant pullback since about the beginning of June. And again, I think a lot of this has just been in sympathy with the whole AI is getting overvalued and a stock like Broadcom is going to go down in relation to that. But where the stock is trading at today looks like a very nice pullback from that, you know, from that recent all-time high. I think it can go back to that level. And one of the reasons I believe it is, again, is just like the other two names we've talked about, you're seeing a lot of institutional investing come into the stock and you've been seeing that in the last, in two out of the last three quarters, you've been seeing some nice institutional buying of this name. And so again, you can distrust maybe what the analyst sentiments are saying because that tends to lag. I will agree with that. But sometimes institutions are the tell and they're certainly piling into the stock. Yeah, I think one other thing to look back on in the history of AVGO a little bit is just looking back on what their chart looks like over the last five years and even really the last two years. In 2025, we really saw a very steady up and to the right kind of price action with AVGO after that April downturn that everybody in the market saw in 2025. But then you look at 2026 and it does look a little bit more choppy. It looks a little bit more volatility, even though we have reached those new highs. What do you think accounts for that? Is that just what 2026 has been for most of the AI market? Or is there something specific happening with Broadcom that would lead the stock to be a little bit more choppy in 2026 than it was in 2025? It's part of the AI trade and it's just part of that idea of if you know what happens if any of these core customers start to pull back on their investments, start to pull back on that idea of customizing their own AI infrastructure. But I don't see that as a story that's really going to go away, because I think, again, that's where you're going to want to go. If you're some of these companies, eventually you're going to want to wean yourself off of your dependence on some of the names like NVIDIA, some of the names like AMD. And that's not going to happen overnight. That's why NVIDIA has got a long runway. But eventually, you're going to want that story to happen. And for that story to happen, companies are going to need a name like Broadcom. All right, Chris, thank you for diving into this list today. If you want to hear a very bull outlook on the AI market and where the market could rally into the end of the year, make sure to watch that full interview with Thomas. We just posted it yesterday. He gives his price predictions for where NVIDIA could be heading. And also his exact date of when he thinks that major market rally could happen later on this year. Make sure to watch to the end to see that date and watch that full interview here.