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Many AI stocks suffered in the first half as investors fled growth-oriented stocks, but positive momentum has returned in recent weeks.
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These two players are leaders in their industries and are ready to benefit from the AI boom.
The first half of the year was a difficult one for many artificial intelligence (AI) stocks as investors fled high-growth players. The reason? They worried that President Donald Trump's import tariff plan might lift prices for a wide range of goods — and this could hurt the consumer's buying power, weigh on corporate expenses, and eventually stop growth companies in their tracks.
As a result, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite slid in April, but in recent weeks, investor sentiment has improved. Initial trade deals with the U.K. and China helped, as did commentary from tech giants, who reiterated capital spending plans, suggesting that potential tariffs wouldn't stop their momentum.
Though the tariff situation remains uncertain, the market's more sanguine view, as well as certain companies' solid long-term outlooks, make now a fantastic time to get in on AI stocks. And two in particular may be well positioned to soar in the second half.
The best word to describe Amazon‘s (NASDAQ: AMZN) stock performance in the first half is “lackluster.” The company actually finished the half at the same level it started, posting a 0% move for the period. Investors may have been concerned about Amazon getting hit by tariffs in two ways: Higher prices may weigh on e-commerce demand and revenue, and Amazon Web Services (AWS) might see customers rein in spending.
But there's reason to believe those problems won't occur. Amazon has a wide selection of products and sourcing countries, making it easy for the company to be nimble in an import tariff environment. As for AWS, so far, the strong spending message from companies suggests customers are sticking by their AI strategies and aren't slowing down.
I also like the idea that Amazon has proven its ability to handle difficult environments. A few years ago, when inflation was soaring, the company revamped its cost structure. That move had immediate results, helping Amazon recover from its first annual loss in about a decade. This new cost structure should also make it easier for the company to overcome future pressures on costs, such as import tariffs.
Finally, AI infrastructure buildout continues, and AWS, as the world's biggest cloud company, should benefit as its customers seek compute and other AI solutions. This should keep Amazon's billion-dollar earnings growing. And that, as well as a valuation of 35 times forward earnings estimates, down from more than 40 times late last year, could prompt investors to pile into this stock in the second half.
