Artificial intelligence (AI) has been the predominant investing theme ever since Nvidia (NVDA) released that monstrous beat in its fiscal first-quarter 2024 earnings report in May 2023. Since then, the market, particularly tech companies, has been divided into two halves. The first are companies that are seen as net AI winners and saw their valuations soar.
Nvidia was the flagbearer of this trade until a few months back, and its market cap soared to over $5 trillion. The Jensen Huang-led company became the world's most valuable company in the process, something not many envisioned — at least not so soon — before AI really took off. At the other end are companies perceived to be net losers from AI.
These include software companies and IT services firms relying on "man-hour" models. Basically, these are companies whose very business model is at risk as AI models automate many tasks. Elon Musk, Who Became the World's First Trillionaire, Still Sleeps in a Tiny $50,000 House Where His Mom Uses the Garage — 'It's Kinda Awesome Though' How to Play AMZN Stock as Amazon Unveils Project Mercury JPMorgan Gives Up Forecasting Iran War Endgame as Trump Tells Reporters 'Anything Could Happen With Me' Our exclusive Barchart Brief newsletter is your FREE midday guide to what's moving stocks, sectors, and investor sentiment - delivered right when you need the info most.
Meanwhile, "AI-pocalypse" fears have eased, and names like Accenture (ACN) and Adobe (ADBE) have rebounded from their 2026 lows. However, Adobe has fallen nearly 15% from the highs hit earlier this month. In my previous article, I noted that it would be prudent to take profits off the table after the sharp rally in ADBE stock.
With the stock now coming off those highs, let's explore why it is a "Buy" now, particularly amid the chatter around pausing advanced AI development. To begin with, I believe it is highly unlikely that U.S. companies would pause advanced AI development. First, there is mutual distrust between the various companies building AI, and given how important the technology could become in the years ahead, there would always be suspicions of companies secretly working on advanced models.
AI companies are also competing with Chinese companies, which are often accused of copying U.S. technology. Think of it this way: despite various treaties, the U.S. and the former Soviet Union secretly continued to work on nuclear weapons during the Cold War. We now have a new cold war/tech war between the U.S. and China, and neither would want to lag in advanced AI buildout.
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