Investors Are Looking at AI the Wrong Way
Listen to the audio version of this article (generated by AI).
Investors are chasing yesterday’s winners, but a new chapter has begun
This morning (Friday), when the alarm buzzed, my first instinct wasn’t to get out of bed.
It was to hit snooze.
Outside, it was still dark. The bed was warm. There wasn’t a single part of me that wanted to throw off the covers and start the day.
I already had a decision to make, and I hadn’t been awake for 10 seconds. More sleep or get up and exercise.
So, I got up.
Then came the next decisions. Coffee or not? Eggs or cereal? Which shirt? Which route to take to work?
By the time I sat down at my desk, I’d already made dozens of decisions – and those were only the ones I could remember.
Credit: baona
Researchers estimate we make somewhere between 20,000 and 35,000 decisions every day.
You decided to keep reading this essay, or not. You decided to take a sip of your coffee, or not. You decided to move your foot, or scratch your nose, or shift in your chair.
Or not.
Most decisions happen so quickly and so automatically that we barely notice them. That’s because our brains are designed to conserve energy. If we stopped to carefully analyze every choice, we’d never get anything done. So instead, we rely on mental shortcuts that let us make “good enough” decisions almost instantly.
Most of the time, that’s a remarkable advantage. But it can be a dangerous mistake when investing.
The problem is that our brains are wired to react efficiently rather than to think independently.
The stock market is simply millions of people making decisions with those same kinds of shortcuts.
Investors don’t just react to earnings reports or economic data. They react to headlines. They react to what everyone else is buying. They react to the stories dominating the news.
In other words, the market often reacts first… and thinks later.
Scale those individual decisions up across millions of investors, and those mental shortcuts become market sentiment.
The Market’s Blind Spot
Investing legend Louis Navellier has spent decades reminding investors of a simple truth. To this day, he says it frequently on his podcasts and in his newsletters.
In the short run, markets are driven by emotion and investor sentiment. But over the long run, they’re driven by something much more powerful: fundamentals.
That’s why Louis has never built his investment strategy around the market’s latest sentiment-based obsession. His Stock Grader system was designed to identify fundamentally superior companies that don’t need fickle emotions to drive them higher – instead, their performance is far more durable thanks to superior fundamentals. Which brings us to artificial intelligence.
Investors see ChatGPT. They see Nvidia (NVDA). They see the companies that powered AI’s first great breakthrough.
But that’s exactly what mental shortcuts encourage us to do. We naturally focus on what’s already obvious.
Louis believes that may be causing investors to overlook something far more important: the next phase of AI, one that’s beginning to emerge while most of Wall Street is still fixated on the first.
This week, the market, and AI stocks in particular, experienced outsized volatility. Concerns that the AI trade was overextended, and uncertainty about the Federal Reserve’s interest rate policy had left people feeling edgy. Then reports surfaced that Chinese tech companies would undercut U.S. AI companies.
That sent markets reeling.
As he usually does during times of market volatility, Louis reached out with a podcast exclusive for Growth Investor subscribers. Here was his bottom line:
China is developing AI. They’re pretty good at it, but we’re better. And most of the big U.S. companies will be using the U.S. AI.
So, don’t worry about that. That’s just another thing that people throw out there to try to attack the market.
The bottom line is that order backlogs are growing. The AI boom continues. We can’t stop it.
Either you get on board, or you get left behind. That’s where we are.
Choosing Fundamentals Over Fear
Louis’ system of selecting only fundamentally superior stocks showed up in this week’s earnings.
Bloom Energy Corporation (BE) soared on Tuesday evening and Wednesday after the company achieved record revenue, crushed analysts’ earnings expectations and increased its full-year outlook.
If you’re not familiar, Bloom Energy has been a big beneficiary of the AI boom. The company designs and manufactures solid oxide fuel cells and electrolyzers that provide clean, reliable, on-site electricity generation for data centers without combustion.
The two weeks prior to the report, Bloom had sunk almost 30% as it was caught up in the same AI selloff as the rest of the market. But the earnings story continues to show why it is a quality stock in Louis’ system.
Second-quarter revenue soared 165.5% year-over-year to $1.065 billion, marking the first time that the company achieved revenue more than $1 billion. Earnings surged 680% year-over-year to $0.78 per share. Analysts expected earnings of $0.41 per share on $827.02 million, so Bloom Energy posted a 90.2% earnings surprise and a 28.8% revenue surprise.
Company management boasted, “Bloom is now the standard in AI onsite power.” They noted that all the major hyperscalers in the U.S., as well as neoclouds, AI labs and colocation data centers, utilize Bloom Energy’s fuel cell solutions.
Looking forward, Bloom Energy now expects full-year 2026 revenue between $3.9 billion and $4.2 billion and earnings per share between $2.55 and $2.85. That represents 93% to 108% annual revenue growth and 235.5% to 275% annual earnings growth.
One of Louis’ favorite phrases is that quality stocks “bounce like fresh tennis balls.” You can see the solid earnings reflected in the last few days of trading after the earnings report.
While the AI trade is still under pressure, superior earnings will always fuel a bounce.
Bloom Energy is a reminder that reacting to headlines and understanding what’s happening are often two very different things.
Remember those mental shortcuts we all rely on?
Right now, they may be encouraging millions of investors to ask the wrong question.
They’re asking whether today’s AI winners can keep winning.
Louis is asking a different question:
Which companies stand to benefit from the next evolution of artificial intelligence?
That question and the answers his Stock Grader has uncovered are the focus of his new presentation.
Our brains are wired to react to what’s obvious. Successful investing often comes from seeing what isn’t.
If you’d like to see where Louis believes AI’s story goes from here – and the stocks he believes could benefit most – I encourage you to join him for this special presentation.
Enjoy your weekend,
Luis Hernandez
Editor in Chief, InvestorPlace
