Longtime investment manager Louis Navellier believes a “dangerous dislocation” is emerging in the artificial intelligence market.
It's one that has appeared in every technology boom of the last 150 years and the way to profit from it is with some “Stage 2 AI Stocks.”
The Teaser
Many already feel it in the air like the Phil Collins song, chaos is looming.
Louis is uniquely qualified to deliver this teaser as he has a long history of spotting market turning points. From the dot-com boom in 1994 to calling the 2020 market bottom in March of that year.
We have reviewed some of his most recent teasers, including his Quantum Partner Stock and Elon (Musk) AI Stocks, among others.
To start things off, host Chris Hurt asks Louis what's really going on in AI and in reply, Louis uses the dreaded ‘C' word, correction.
He may be reading the writing on the wall correctly.
Headlines are emerging that half of all planned data center projects could be delayed and the same goes for some previously announced mega deals.
So will we look back on these in a few years as early warning signs of a bubble getting ready to pop?
Time will tell, but at the very least, Louis believes there will be a “transition.”
This transition could be a lot like China's DeepSeek moment.
If we rewind back to last January, we'll see that the emergence of a cheaper, open source, large language model (LLM), that stood up well against much more expensive, proprietary models caused an instant 17% drop in the price of some AI stocks.
However, from that same wipeout came opportunity.
One investment that Louis identified surged by more than 100% in the immediate aftermath.
Now, Louis says something much bigger and more serious is coming down the pipe.
As he puts it:
AI is no longer a buy signal, it's a warning sign
The trigger, timing, and what to buy during the fallout are what we find out next.
The Pitch
All is revealed in a special report called The AI Boom Stage 2: 6 Stocks for the Next Wave of Artificial Intelligence.
The report comes included in a subscription to Louis' Breakthrough Stocks newsletter.
A subscription costs $1,799 upfront for the first year (normally $4,000) and it comes with a 90-day money-back guarantee.
The Second Phase of the AI Boom
You are probably familiar with the term “priced for perfection.”
It's when absolutely everything has to go right for a business plus a little bit of luck, just to keep pace with it's lofty valuation.
That's where things currently stand with most mega-cap AI stocks, according to Louis.
Valuations have tapered off a bit since the start of the year, with all “Magnificent Seven” stocks down through Q1.
Still, Louis' point holds some weight. Any earnings miss or disappointment could deflate expectations and send multiples crashing.
Personally, Louis thinks it's going to be a quarterly earnings miss by Nvidia on February 25th, which ended up exceeding analyst expectations by 8%. But he says it doesn't matter what it ends up being.
Louis' job “isn't to make predictions for a living. It's to manage risk.”
Risk is still on for AI stocks and this is where the opportunity lays.
The Dangerous Dislocation
A natural transition from the first stage to the second stage of a boom.
This is what Louis calls a time of “dangerous dislocation.”
It happened in 1870 when railroad stocks dominated the market and a major bank failure caused a panic and then again during the dot-com bubble, when one of the popular tech stocks of the day had to issue restated earnings, sending the Nasdaq crashing.
This tends to happen precisely when most investors are still looking at things through a “first stage lens” and millions of investors are in the same position today.
Now that we know the potential trigger and timing (any day now), how do we know whether we're holding a potential stage two winner or a first-stage disaster?
Louis has some recommendations.
Revealing Louis Navellier's Stage 2 AI Stocks
Louis' presentation is long on words and short on clues about Stage 2 AI Stocks.
However, we did get some free recommendations, which gives us insight into his thinking.
Louis number one stock to buy for stage two of the boom is revealed as Krystal Biotech Inc. (Nasdaq: KRYS).
A rare, commercial-stage biotech company that utilizes AI and machine learning to assist in making genetic medicines.
On the flip side, a first stage stock to avoid is also named. It's Advanced Micro Devices Inc. (Nasdaq: AMD). An international semiconductor manufacturer.
After this Louis signs off and the teaser video comes to an anticlimactic end.
However, we can look at the basis on which Louis made his picks as well as the business behind KRYS stock.
An Opportunity for 500% Returns?
Like a turn of the 20th century banker, Louis seems to be betting on both sides and promoting both the Breakout Stocks newsletter and his proprietary Stock Grader System that grades stocks from A to F based on 8 key factors:
His firm's largest holding is still Nvidia, all the while he's getting ahead of a potential downturn in the AI market.
It's easy to say that there will be a reckoning based on similar valuation multiples and market concentration relative to past booms, but hundreds of billions of dollars are still flowing into the AI sector.
The thing that ultimately ends the first stage of AI or delays the start of the second stage is a lack of energy resources.
This is the bigger investment opportunity at this first stage in my humble opinion.
Not businesses that are reliant on ever-more powerful LLM models, but critical minerals, water, energy equipment makers, and suppliers, without which, the servers AI runs on aren't possible.
From this standpoint, semiconductors are next in line in terms of essential, but I agree with Louis that there are better semi picks out there than AMD.
When it comes to Krystal Biotech, the underlying economics look good. Commercial-stage (revenue producing), only $9 million in debt, and a profit margin of 50%. The only thing that isn't good, is the ask price.
At 38x current earnings and 20x sales, KRYS stock is expensive by any standard and it's business is dependent on ever more powerful AI models.
Having said that, a 500% gain is still possible if one of the novel gene therapies in Krystal's pipeline breaks out.
It's a speculation, but an intelligent one, if you understand the bioscience sector.
Quick Recap & Conclusion
- Longtime investment manager Louis Navellier says a “dangerous dislocation” is emerging in the AI market and the way to profit from it is with some “Stage 2 AI Stocks.”
- Louis calls the transition from the first stage to the second stage of a boom the “dangerous dislocation” that we can make 500% or more from.
- Everything, along with several picks, are revealed in a special report called The AI Boom Stage 2: 6 Stocks for the Next Wave of Artificial Intelligence. It takes a subscription to Louis' Breakthrough Stocks newsletter, which costs $1,799 upfront for the first year (normally $4,000).
- No clues were provided on most of Louis' picks, but two were provided for free. Louis number one stock to buy for stage two of the boom: Krystal Biotech Inc. (Nasdaq: KRYS) and a first phase stock to avoid: Advanced Micro Devices Inc. (Nasdaq: AMD).
- Krystal Biotech's underlying economics look good, but it's stock is expensive and there are better semi picks out there than AMD.
What comes next for the AI market? Tell us what you think in the comments.