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The AI Trade Was Never a Bubble
Despite a turbulent quarter marked by geopolitical uncertainty, inflation fears, and broad market selloffs, the fundamental thesis behind AI investment has remained remarkably intact. The recent downturn in tech stocks was not driven by technical weakness or a collapse in AI demand — it was driven by macroeconomic anxiety and geopolitical friction. What we witnessed was a coiled spring effect: significant selling pressure built up for reasons largely external to the technology sector itself. Now, as that pressure eases, the insatiable demand for AI — for energy, for chips, for infrastructure — is reasserting itself.
First-quarter earnings are expected to confirm what the market is beginning to price back in: the AI revolution is not slowing down. It is accelerating.
Microsoft: Unfairly Punished, Fundamentally Strong
Among the Magnificent Seven, Microsoft stands out as a name that was punished well beyond what its fundamentals justified. At one point down roughly 20% year to date, falling from $555 to around $391, the stock traded well below its historic averages. Yet nothing about the company's underlying story changed. Revenue growth remained solid. Margins held up. The cloud business continued to expand, backed by a backlog approaching $600 billion.
Much of the skepticism centered on Microsoft's deep relationship with OpenAI, which accounted for a substantial portion of that backlog. Investors grew uneasy, questioning whether the OpenAI partnership would deliver. But the broader reality is that demand from frontier AI companies — OpenAI, Anthropic, Google — is here to stay. When a quality company trades at a significant discount to its historical average, history has shown time and again that it tends to be a rewarding entry point.
ServiceNow and the Enterprise Software Misconception
The sell-off in enterprise software was largely indiscriminate, and that created opportunity. ServiceNow, in particular, was punished alongside the broader SaaS sector — a classic case of throwing the baby out with the bathwater.
Here is the critical nuance that the market missed: not all enterprise software is created equal. Anyone who has spent time in large enterprises or spoken with the CIOs and CTOs who make purchasing decisions understands a fundamental truth — companies cannot simply replace complex, business-critical systems with a frontier AI model. You cannot just say, "Anthropic is here, we'll use Claude, and we'll replace all the systems that run our business."
What is actually happening is that companies are building with these AI technologies, integrating them into existing platforms. ServiceNow, with its strong leadership and robust product, is positioned to receive a significant tailwind from both generative and agentic AI rather than being disrupted by it.
Intel's Remarkable Comeback
Perhaps no story in tech has been more surprising than Intel's resurgence. The stock posted its best month since 1987, surging over 42% in a matter of weeks and hitting five-year highs on a streak of roughly ten consecutive days of gains.
The thesis was straightforward when the current administration signaled strong support for domestic semiconductor manufacturing. Intel, despite having significant operational work ahead, became the obvious beneficiary of a national priority: the United States needs a chip champion and a leading-edge foundry to produce chips domestically.
Several catalysts converged. Collaboration on Intel's advanced fabrication capabilities accelerated. Google, a company that designs its own CPUs, signaled a need for Intel processors. And perhaps most unexpectedly, data center CPUs — which many had written off as a commodity — became red-hot again. The agentic AI era demands not just GPUs but robust CPU infrastructure, giving a boost to ARM, AMD, and Intel alike. Those who wrote Intel off too soon are now watching a dramatic reversal.
Quantum Computing: The Long-Term Frontier
With World Quantum Day bringing renewed attention to the space, quantum computing remains an important long-term consideration. Among pure-play quantum companies, IonQ stands out with the fastest revenue trajectory in the sector. A fresh DARPA contract announcement sent the stock up roughly 15% in a single session, underscoring the company's growing relevance in defense and national security applications.
IBM presents a different kind of quantum opportunity. As a massive enterprise, its quantum revenue is small relative to the whole, but the underlying technology being developed is among the most advanced in the world. Quantum could represent a compelling long-term call option within a company that has already been performing well under its current leadership.
The Expanding AI Infrastructure Ecosystem
Beyond the headline names, the AI infrastructure ecosystem continues to present compelling opportunities. Nebius has emerged as an intriguing cloud platform purpose-built for AI development, though its rapid appreciation warrants attention to valuation. The data center power space is also drawing interest, with companies that function essentially as AI GPU REITs — providing the critical power infrastructure that hyperscalers like Google depend on to run their massive compute operations.
The AI Debate: Disruption, Not Destruction
Surveys continue to show that more than half the public worries AI does more harm than good, with figures hovering around 55-57% expressing concern. This skepticism, while understandable, misses the bigger picture.
AI is a tool, and its value depends entirely on how it is used. The relationship between humans and AI models is fundamentally collaborative. There is an almost humorous quality to the way people interact with AI — demanding it behave in certain ways, then pointing to its outputs as evidence of its nature. The models themselves exhibit fascinatingly human behaviors; they can become "lazy" over time, requiring users to push back and demand better outputs.
The bottom line is that AI is profoundly disruptive — but disruption is not the same as destruction. The technology is reshaping industries, creating new categories of value, and demanding massive investment in infrastructure. For investors willing to look past the fear and focus on fundamentals, the opportunity set remains extraordinary.
The Frontier Model Race
In the competition among frontier AI models, Anthropic currently stands out as the most valuable player — arguably more valuable than OpenAI despite significantly different valuations. Google cannot be ruled out, given its vast resources and research depth. Meta, despite some early-year turbulence, continues to make serious moves with its super intelligence lab.
The frontier model race is far from decided, but the demand these companies generate — for compute, for cloud services, for chips, for power — is the engine driving the entire AI investment thesis forward. And that engine shows no signs of slowing down.