Prediction: These 2 AI Stocks Will Rebound in the 2nd Half

Globe and Mail

2 days ago

Key Points
One of these stocks finished the first half unchanged, and the other fell in the double-digits.
Both represent great long-term bets, and at today's reasonable prices, are ripe for a rebound.
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Over the past two years, investors put their money into an industry set to become the next big thing in technology: artificial intelligence (AI). This billion-dollar market is set to reach into the trillions in a few years as it potentially changes the way business is done and how our daily lives are organized. All of this is great news for companies that get in early and play a key role, and investors, recognizing this, drove these stocks higher.
But, earlier in the first half, many of these players lost their momentum. Investors worried that President Trump's import tariffs would hurt economic growth -- and that made any high-growth industry, such as AI, vulnerable. AI stocks and other growth players led declines in April on these concerns. In recent weeks, though, signs have emerged that headwinds may not be as strong as expected -- the U.S. has been negotiating tariffs with other countries, for example -- and this has helped optimism return to the stock market. The S&P 500 even reached record highs in recent days.
Now, my prediction is the following two AI stocks -- one that stagnated and another that fell in the double-digits in the first half -- will rebound in the second half of the year.
1. Amazon
Amazon (NASDAQ: AMZN) stock, after rising early in the year and dropping on import tariff concerns in April, then began to rebound -- and finished the first half unchanged. Today, there's reason to believe the positive momentum will continue and this stock will climb in the second half.
It's important to remember that Amazon is a well-established leader in both e-commerce and cloud computing and has delivered earnings growth over many years. So, investors who may have been a bit skittish about investing a few months ago may feel more comfortable with Amazon than with a newer player that hasn't yet proven itself. The company also revamped its cost structure a few years ago, a move that helped it through the challenge of higher inflation and that should help it face other cost challenges in the future -- such as import tariffs.
Amazon also is well positioned to benefit as the AI boom continues as the company is a user and a provider of AI. In e-commerce, Amazon uses AI across its fulfillment network to gain in efficiency, lowering its cost to serve. And Amazon Web Services (AWS), the cloud business, offers customers a wide range of AI products and services -- from chips to a fully managed service that gives users access to AI models they can tailor to their needs. All of this has helped AWS reach a $117 billion annual revenue run rate.
Right now, Amazon trades for 36 times forward earnings estimates, a reasonable price that could attract investors in the second half -- and help this top AI stock to rebound.
2. Apple
Apple (NASDAQ: AAPL) has faced two problems in recent times. The company has been slower than other tech giants to adopt AI, and it also is viewed as a player that may suffer the most from import tariffs due to its reliance on production abroad -- most iPhones have generally been manufactured in China.
All of this has weighed on Apple stock, and in the first half, the shares fell 18%. Though the headwinds haven't disappeared, the situation is improving. Apple is in the early days of its Apple Intelligence growth story, meaning this array of AI features could offer a catalyst for growth in the quarters to come. And, as mentioned above, trade negotiations are happening -- it's also important to note that the U.S. is unlikely to make decisions that would destroy the earnings potential of one of its biggest companies. Apple is the third-largest in market value after Nvidia and Microsoft.
And, like Amazon, Apple is a company that's proved itself over time, delivering many years of earnings growth into the billions of dollars. It also has a solid brand moat, with customers flocking to the iPhone -- the world's No. 1 smartphone -- regardless of the price or wait time for the latest release. Investors looking for a growth pick that doesn't come with a great deal of risk may notice these points.
Finally, this established leader also has a newish growth driver, and that's services revenue. Now that it has more than 2.2 billion devices active worldwide, these devices, are bringing in recurrent revenue through services subscriptions -- from cloud storage to digital content.
All of this could prompt investors to set aside near-term challenges and get into Apple today at a bargain 29 times forward earnings estimates -- and that could power shares of this solid long-term stock higher in the second half.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.