It’s been a wild market. Just last month, the S&P 500 came within a whisker of a bear market, down 20% from the high on a closing basis. Disaster seemed inevitable. But then everything changed. The market made up all those losses and isn’t far from the all-time high. Why the extreme volatility?
It’s the tariffs. Investors don’t understand the ramifications of tariffs. Nobody really does. Tariffs haven’t been an issue in modern times. That creates uncertainty. Amid the confusion, the financial press is there every day to assure investors that disaster is looming, inflation will soar, and the economy will be ruined. But that isn’t happening.
Uncertainty remains. A negative development could still roil the market on any day. But investors appear at this point to believe that the tariff situation won’t blow up. The fear of Armageddon has been removed from stock prices.
But there’s still the economy. It’s already slowing. GDP hit negative territory in the first quarter. The economy is in a transition phase with the new administration’s policies. After the tariffs, the market could simply graduate to a new problem. What will be waiting when we get to the promised land beyond the tariffs?
We are in a place, at least for a while, where anything can happen. The tariff uncertainty could evaporate tomorrow or drag on for months. Interest rates could go up or down. The Fed could be hawkish or dovish. The economy could boom or bust. It’s tough to pick a horse amid such varying possibilities. Fortunately, there is a trend to bank on that will thrive regardless of the near-term gyrations of the market or economy.
Artificial intelligence is a massive growth catalyst that will endure and thrive in any environment. Technology and, particularly, stocks that benefit from the soaring AI demand had driven this market higher until the last six months. The DeepSeek news in late January and the tariff uncertainty prompted a bear market in those stocks. Such a consolidation was overdue. And now it’s done.
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Investors temporarily forgot all about AI. That became so last year. But it remains a massive catalyst that will drive earnings and stocks higher for years to come. It’s a generational phenomenon that hasn’t gone away. It just took a break. But those stocks are soaring back with a vengeance. The technology sector soared over 20% in the last month. Companies will continue to demand AI products and services, as a matter of survival.
In these uncertain times, there is one thing for sure. AI demand will continue to grow regardless of whether tariff uncertainty continues, interest rates go up or down, the Fed is hawkish or dovish, or the economy booms or busts. Many stocks are still well off the highs and now have momentum.
2 Stocks to Profit from the Return of Artificial Intelligence (AI)
Broadcom Inc. (AVGO)
Broadcom is a global technology infrastructure leader and an industry Goliath, with $51 billion in annual net revenues. It’s an icon of the technology revolution with roots that trace back over 50 years, to the old AT&T/Bell Labs. The company has many category-leading products in semiconductors and infrastructure software solutions.
It’s an established player like few others. It is estimated that 90% of internet traffic uses its systems.
Broadcom benefits from AI in a brilliant way. It makes generative AI chips. These chips don’t provide AI functions per se, but rather the technology that enables AI to connect to all other systems — which it must, to be of any use. The sheer volume increases from the new technology, as well as soaring demand for the next generations of its chips, should enable Broadcom to achieve a much higher level of profit growth for years to come.
The company recently reported that demand for its AI chip (XPU) is booming and expects it to generate revenues between $60 billion and $90 billion by 2027. Revenue from the chip was $12.2 billion in fiscal 2024. The stock got pummeled as the recent market selloff hit previous high-flyers hard. But AVGO was soaring for a very good reason: soaring revenues. It was taken down by the external environment while the company itself continues to thrive.
AVGO is coming alive again. It’s up almost 20% in May and over 57% from the April low. But it still sells at about 10% below the 52-week high
Constellation Energy Corporation (CEG)
Baltimore-based Constellation Energy is the largest nuclear power operator in the U.S. and the nation’s largest producer of carbon-free energy. It is an unregulated utility that supplies electric power to more than 20 million homes and businesses across the country. A diverse mix of hydro, wind, and solar, paired with its industry-leading 21 nuclear reactors, produces energy output that is 90% carbon-free.
Three-quarters of Fortune 100 companies rely on Constellation for electric power. It operates more than a fifth of all the nuclear capacity in the country. Constellation also currently produces 10% of carbon-free power in the United States.
Nuclear provides the carbon-free benefits of solar and wind, but it is also completely reliable 24/7 for 365 days per year. Companies can secure a power source that meets their carbon mandates long term while also not sacrificing any reliability. Nuclear is a highly reliable power source that functions without fail even when the wind stops blowing and it’s raining outside.
This has not escaped the eye of climate-conscious big tech companies in securing energy sources for their data centers. These companies think long term when locking up reliable power sources and achieving their carbon goals. As is logical, big tech companies are zeroing in on nuclear power plants for their massive data center expansions.
With power demand from data centers expected to more than double by 2030, big tech is looking to make collocation deals with nuclear power facilities, whereby data centers are located next to nuclear power plants.
CEG had generated solid returns, but there were two huge recent events that took the stock to another level. Last September, Microsoft (MSFT) made a deal with Constellation to buy electricity generated from a future reopening of the Three Mile Island nuclear plant in Pennsylvania. CEG soared over 22% higher on the day of the announcement. Management at Constellation says it will be the largest electricity purchase in history.
CEG had yet another huge surge higher in January. The stock soared over 25% after the company announced it will acquire natural gas and geothermal electricity giant Calpine Corp. for $16.4 billion. The deal is expected to close in the fourth quarter of this year. Management stated the acquisition will be accretive to earnings by 20% in 2026.
The acquisition will make Constellation the biggest independent electricity provider in the nation at a time when demand for electricity is skyrocketing. The company was already the largest provider of clean energy for electricity, and this puts Constellation even more in the catbird seat of a massive trend.
But the stock got pummeled in the recent market. CEG crashed over 50% from the high in early April while the company itself was thriving. Investors are wising up. The stock is up over 33% in May and over 74% from the April low, yet it still sells 15% below the 52-week high. Meanwhile, management has stated that new power deal announcements, which have caused the stock to soar in the past, are coming in the near future.
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